ASSOCIATED BANK vs. HON. COURT OF APPEALS, and MERLE V.

REYES
G.R. No. 89802, May 7, 1992
Cruz, J.
Facts:
Respondent Reyes, owner of Melissa’s RTW, was issued checks by her customers which
were deposited with Associated Bank without her knowledge. Said bank paid the checks to
Rafael Sayson who was not authorized by Reyes to deposit and encash the checks.
The subject checks were accepted for deposit by the Bank for the account of Rafael
Sayson although they were “crossed checks” or “for payee’s account only” as indicated by two
parallel lines diagonally on the left top portion of the checks.
Reyes filed a case at the RTC of Quezon City for recovery of the total value of the checks
plus damages. Both the RTC and the CA required petitioners to pay Reyes total value of subject
checks as well as damages; however, the petitioner’s argue that Reyes had no cause of action and
that her customer companies, not the Associated Bank, are liable for not giving clear
instructions.
Issues:
1. Did Reyes have cause of action?
2. Is petitioner Bank liable and required to pay for the amount improperly paid to Sayson?

Ruling:
1. Yes, Reyes did have cause of action.
2. Yes, the bank was liable for the amount.
The Bank, by accepting the checks had stamped thereon its guarantee that "all prior
endorsements and/or lack of endorsements (were) guaranteed.", thus they made themselves liable
for said checks.
The banks are also responsible for ascertaining he validity of the checks they were
presented, to inquire to the depositor’s authority and to ensure that the signatures affixed therein
were not forged; however, petitioner bank failed to do all said responsibilities and thus bears the
liability for refunding the amount lost.