# 83

Associated Bank vs. CA (208 SCRA 465 [1992]) Facts of the Case: Melissas RTWs customers issued cross checks payable to Melissas RTW, which its proprietor Merle Reyes did not receive. It was learned that the checks had been deposited with the Associated Bank by one Rafael Sayson. Sayson was not authorized by Reyes to deposit and encash said checks. Reyes filed an action for the recovery of the total value of the checks plus damages. Issue: Whether the bank was negligent for the loss. Held: Crossing a check means that the drawee bank should not encash the check but merely accept it for deposit, that the check may be negotiated only once by one who has an account in a bank, and that the checkserves as warning that it was issued for a definite purpose so that he must inquire if he has received the checkpursuant to that purpose. The effect, thus, relate to the mode of its presentment for payment, in accordancewith Section 72 of the Negotiable Instruments Law. The bank paid the checks notwithstanding that title hadnot passed to the indorser, as the checks had been crossed and issued for payees account only. It does didso in its own peril and became liable to the payee for the value of the checks. The failure of the bank to makean inquiry as to Saysons authority was a breach of its duty. The bank is negligent and is thus liable to Reyes.

Digested by: GAMELZAR P. DEAN