ASSOCIATED BANK V.

CA (208 SCRA 465)

Crane, J. Reyes was engaged in the ready-to-wear garments business under the name Melissa's RTW 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 which the SC sustained.

DOCTRINE

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 merely
accept the check for deposit. The effects of crossing a check are: 1. The check may not be encashed but
only deposited in the bank; 2. The check may be negotiated only once

the one who has an account with the bank 3. 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
pursuant to the same purpose

FACTS

1. Merle V. Reyes (respondent, together with the Court of Appeals) is engaged in the business of ready-
to-wear garments under the name "Melissa's RTW and deals with a number of companies as her clients,
some of which are Robinson's Department Store, Payless Department Store, and the like. 2. Said client
companies issued their payment through crossed checks payable to Melissa's RTW. 3. When Ms. Reyes
went to her client companies to claim what she thought were still unpaid accounts, she was informed
that the said companies have already issued crosschecks. 4. Said checks were apparently deposited with
Associated Bank ("AB") and subsequently paid to one Rafael Sayson, which according to AB was one of
their "trusted depositors." 5. Sayson had not been authorized by Ms. Reyes to deposit and encash the
said checks. 6. Hence, Reyes sued AB in the RTC of Quezon City, which ruled in favor of Reyes. 7.
Subsequently, petitioners appealed to the CA which still upheld the RTC decision, ratiocinating that (in
response to the a. Cause of action of the petitioner arose from the irregular acts of AB in violating
common banking practices. b. Three elements of a cause of action are present c. Such cause of action is
proven by the fact that there is no dispute that the checks were for Melissa's RTW, AB still allowed
Sayson to deposit and benefit from the same. 8. Hence, AB files an appeal with the Supreme Court.
ISSUE with HOLDING

1.

Whether or not the CA erred when it decided against Associated Bank (i.e. said bank was liable to
respondent Reyes).

YES.

a. Crossing a check is done by writing two parallel lines diagonally on the top left portion of the checks
and either: i. 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 that company (special crossing);
or ii. the words written between the two parallel lines are "and Co." or "for payee's account only,"
(general crossing). iii. The case falls under the second kind. b. This means that the drawee bank should
not encash the check but merely accept it for deposit. i. the effects of crossing a check relates to the
mode of tis presentment for payment, hence, who the holder or authorized person is depends on the
instruction stated on the face of the check. ii. The checks in the case at bar were crossed "for payee's
account only." This means that the drawer intended the same for deposit only by the person indicated
in the check (i.e. Melissa's RTW) c. When the Bank paid the checks so endorsed notwithstanding that
title had not passed to the endorser,

it did so at its peril and became liable to the payee for the value of the checks. This liability attached
whether or not the Bank was aware of the unauthorized endorsement.

d. Petitioners also argue that it was Eddie Reyes, the husband of the respondent, who endorsed the
checks. i. Court: Assuming that Eddie Reyes did endorse the crossed checks, the Bank would still be
liable to the private respondent because he was not authorized to make the endorsements. And even if
the endorsements were forged, as alleged, the Bank would still be liable to the private respondent for
not verifying the endorser's authority.

ii. 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.

e. Petitioners argue that the cause of action in the said case may only be invoked by the issuers of the
check and not by the payee, hence they cannot be liable to respondent Reyes. i. Court states: The Bank
stamped thereon its guarantee that "all prior endorsements and/or lack of endorsements (were)
guaranteed." By such deliberate and positive act, the Bank had treated the said checks as negotiable
instruments and, accordingly, assumed the warranty of the endorser. ii. The possession of a check on a
forged or unauthorized indorsement is wrongful, and when the money is collected on the check, the
bank can be held 'for moneys had and received.'" The proceeds are held for the rightful owner of the
payment and may be recovered by him. The position of the bank taking the check on the forged or
unauthorized

indorsement is the same as if it had taken the check and collected without indorsement at all

. The act of the bank amounts to conversion of the check. f. In

Banco de Oro Savings and Mortgage Bank vs. Equitable Banking Corp.,

the Court said that the law imposes a duty of diligence on the collecting bank to scrutinize checks
deposited with it, for the purpose of determining their genuineness and regularity. T

he collecting bank, being primarily engaged in banking, holds itself out to the public as the expert on this
field, and the law thus holds it to a high standard of conduct

Luis Wong VS Court of Appeals and People of the PhilippinesG.R. No.117857February 2, 2001FACTS:
Petitioner Wong was an agent of Limtong Press. Inc. (LPI), amanufacturer of calendars. After
printing the calendars, LPI would ship thecalendars directly to the customers. Thereafter, the agents
would comearound to collect the payments. Petitioner, however, had a history ofunremitted
collections. Hence, petitioner’s customers were required to issue post-datedchecks before LPI would
accept theirpurchase orders.In early December 1985, Wong issued six (6) postdated checks
totalingP18,025.00, intended to guarantee the calendar orders of customers whofailed to issue post-
dated checks. However, following companypolicy, LPIrefused to accept the checks as guarantees.
Instead, the parties agreed toapply the checks to the payment of petitioner’s unremitted
collections.Before the maturity of the checks, petitioner prevailed upon LPI not todeposit the checks and
promised to replace them within 30 days. However,petitioner reneged on his promise. Hence, on June 5,
1986, LPI deposited thechecks with Rizal Commercial Banking Corporation (RCBC). The checks
werereturned for the reason "account closed." Petitioner failed to makearrangements for
payment within five (5) banking days. Petitioner wascharged with three (3) counts of violation of B.P.
Blg.22 and was found guiltyby the trial court, to which the CA affirmed.Issue:Whether or not LPI
deposited the checks within a reasonable time.Held:Yes. Petitioner avers that since the
complainant deposited thechecks on June 5, 1986, or 157days after the December 30, 1985maturity
date, the presumption of knowledge of lack of funds under Section2 of B.P. Blg. 22 should not apply to
him. He further claims that he should notbe expected to keep his bank account active and funded
beyond the ninety-day period. Under Section 186 of the Negotiable Instruments Law, "a checkmust be
presented for payment withina reasonable time after itsissue or the drawer will be discharged from
liability thereon to theextent of the loss caused by the delay." By current banking practice, a
checkbecomes stale after more thansix (6) months, or 180 days. Privaterespondent herein deposited the
checks 157 days after thedate ofthe check. Hence said checks cannot be considered stale. Only
thepresumption of knowledge of insufficiency of funds was lost, but suchknowledge could still be
proven by direct or circumstantial evidence. As foundby the trial court, private respondent did not
deposit the checks because ofthe reassurance of petitioner that he would issue new checks. Upon
hisfailure to do so, LPI was constrained to deposit the said checks. After thechecks were dishonored,
petitioner was duly notified of such fact but failed tomake arrangements for full payment within five (5)
banking days thereof.There is, on record, sufficient evidence that petitioner had knowledge of
theinsufficiency of his funds in or credit with the drawee bank at the time ofissuance of the checks.

G.R. No. L-43191 November 13, 1935PAULINO GULLAS,

plaintiff-appellant,vs.

THE PHILIPPINE NATIONAL BANK,

defendant-appellant. The Treasurer of the United States issued a Warrant payable to the order of
Francisco Bacos. Atty. Paulino Gullas and Pedro Lopez signed as endorsers of thischeck. It was cashed by
PNB, but was dishonored by the Insular Treasurer.At that time, the outstanding balance of Atty. Gullas
on the books of the bank wasP509. Against this balance he had issued certain checks which could not be
paidwhen the money was sequestered by the bank. The bank, upon learning of the dishonor of the
treasury warrant, sent notices bymail to Atty. Gullas, but these could not be delivered to him at that
time because hewas in Manila.In the bank's letter addressed to Gullas and Lopez, they were informed
that the US Treasury warrant has been returned due to the stop payment order by the Insular Treasurer.
They were also informed that PNB applied the outstanding balances of Atty. Gullas in his current
account for the payment of the foregoing check.Because of what PNB did (it applied Gullas’s deposit to
pay for the unpaid check),the checks issued by Atty. Gullas including one for his insurance were not
paidbecause of the lack of funds. Certain publications also published articles regardingthe matter, to the
prejudice of Atty. Gullas.

ISSUE:

W/N PNB had the right to apply Gullas’s deposit for the payment of theindorsed check

HELD:

No.

RATIO:

The NIL establishes the liability of a general indorser and giving theprocedure for a notice of dishonor.
The general indorser of negotiable instrumentengages that if he be dishonored and the, necessary
proceedings of dishonor beduly taken, he will pay the amount thereof to the holder. (Negotiable
InstrumentsLaw, sec. 66.)

Notice of dishonor is in order to charge all indorser and that the right of action against him does not
accrue until the notice is given.

Prior to the mailing of notice of dishonor, and without waiting for any action byGullas, the bank made
use of the money standing in his account to make good forthe treasury warrant. At this point, Gullas was
merely an indorser and had issued ingood faith.Atty. Gullas should be awarded nominal damages
because of the premature actionof the bank against which Atty. Gullas had no means of protection.

G.R. No. L-43191 November 13, 1935

PAULINO GULLAS,

plaintiff-appellant, vs.

THE PHILIPPINE NATIONAL BANK,

defendant-appellant.

SUMMARY:

Petitioner Gullas maintains a current account with herein respondent PNB. He together with one Pedro
Lopez signed as endorsers of a Warrant issued by the US Veterans Bureau payable to the order of one
Francisco Bacos. PNB cashed the check but was subsequently dishonored by the Insular Treasurer. PNB
then sent notices to petitioner which could not be delivered to him at the time because he was in
Manila. PNB in the letter informed the petitioner the outstanding balance on his account was applied to
the part payment of the dishonored check. Upon

petitioner’s return, he received the notice of dishonor and immediately paid the unpaid balance of the
warrant. As a

consequence of these, petitioner was inconvenienced when his insurance was not paid due to lack of
funds and was publicized widely at his area to his mortification.

FACTS:

On August 2, 1933, the Treasurer of the United States for the United States Veterans Bureau issued a
Treasury Warrant in the amount of $361, payable to the order of Francisco Sabectoria Bacos. Paulino
Gullas and Pedro Lopez signed as endorsers of this check. Thereupon it was cashed by the Philippine
National Bank. Subsequently the treasury warrant was dishonored by the Insular Treasurer. At that
time, the outstanding balance of Attorney Gullas on the books of the bank was P509. Against this
balance he had issued certain checks which could not be paid when the money was sequestered. On
August 20, 1933, Attorney Gullas left his residence for Manila. The bank on learning of the dishonor of
the treasury warrant sent notices by mail to Mr. Gullas which could not be delivered to him at that time
because he was in Manila. In the bank's letter of, addressed to Messrs. Paulino Gulla and Pedro Lopez,
they were informed that the United States Treasury warrant No. 20175 in the name of Francisco
Sabectoria Bacos for $361 or P722, the payment for which had been received has been returned by our
Manila office with the notation that the payment of his check has been stopped by the Insular
Treasurer. "In view of this therefore we have applied the outstanding balances of your current accounts
with us to the part payment of the foregoing check", namely, Mr. Paulino Gullas P509. On the return of
Attorney Gullas to Cebu on August 31, 1933, notice of dishonor was received and the unpaid balance of
the United States Treasury warrant was immediately paid by him. As a consequence of these
happenings, two occurrences transpired which inconvenienced Attorney Gullas. In the first place, checks
including one for his insurance were not paid because of the lack of funds standing to his credit in the
bank. In the second place, periodicals in the vicinity gave prominence to the news to the great
mortification of Gullas.

ISSUE:

Whether or not PNB has the right to apply petitioner’s deposit

to his debt to the bank.

HELD:

NO. In this case, Gullas acted as an indorser. As such, notice should actually have been given to him. The
Civil Code contains provisions regarding compensation (set off) and deposit. The portions of Philippine
law provide that compensation shall take place when two persons are reciprocally creditor and debtor
of each other (Civil Code, article 1195). In his connection, it has been held that

the relation existing between a depositor and a bank is that of creditor and debtor.

The Negotiable Instruments Law contains provisions establishing the liability of a general indorser and
giving the procedure for a notice of dishonor. The general indorser of negotiable instrument engages
that if he be dishonored and the, necessary proceedings of dishonor be duly taken, he will pay the
amount thereof to the holder. (Negotiable Instruments Law, sec. 66.) In this connection, it has been held
a long line of authorities that notice of dishonor is in order to charge all indorser and that the right of
action against him does not accrue until the notice is given. As a

general rule

, a bank has a right of set off of the deposits in its hands for the payment of any indebtedness to it on
the part of a depositor. In Louisiana, however, a civil law jurisdiction, the rule is denied, and it is held
that a bank has no right, without an order from or special assent of the depositor to retain out of his
deposit an amount sufficient to meet his indebtedness. The basis of the Louisiana doctrine is the theory
of confidential contracts arising from irregular deposits,

e. g.,

the deposit of money with a banker. With freedom of selection and after full preference to the minority
rule as more in harmony with modern banking practice
Paulino Gullas v. PNB (G.R. No. L-43191)

Date: October 16, 2016Author: jaicdn

0 Comments

Facts:

Petitioner Gullas maintains a current account with herein respondent PNB. He together with one Pedro
Lopez signed as endorsers of a Warrant issued by the US Veterans Bureau payable to the order of one
Francisco Bacos. PNB cashed the check but was subsequently dishonored by the Insular Treasurer. PNB
then sent notices to petitioner which could not be delivered to him at the time because he was in
Manila. PNB in the letter informed the petitioner the outstanding balance on his account was applied to
the part payment of the dishonored check. Upon petitioner’s return, he received the notice of dishonor
and immediately paid the unpaid balance of the warrant. As a consequence of these, petitioner was
inconvenienced when his insurance was not paid due to lack of funds and was publicized widely at his
area to his mortification.

Issue:

Whether or not PNB has the right to apply petitioner’s deposit to his debt to the bank.

Ruling: NO.

As a general rule, a bank has a right of set off of the deposits in its hands for the payment of any
indebtedness to it on the part of a depositor. The Civil Code contains provisions regarding compensation
(set off) and deposit. The portions of Philippine law provide that compensation shall take place when
two persons are reciprocally creditor and debtor of each other. In this connection, it has been held that
the relation existing between a depositor and a bank is that of creditor and debtor. [General Rule]

Starting, therefore, from the premise that the Philippine National Bank had with respect to the deposit
of Gullas a right of set off, we next consider if that remedy was enforced properly. The fact we believe is
undeniable that prior to the mailing of notice of dishonor, and without waiting for any action by Gullas,
the bank made use of the money standing in his account to make good for the treasury warrant.
Gullas was merely an indorser and had issued in good faith. As to an indorser, the situation is different
and notice should actually have been given him in order that he might protect his interests. We
accordingly are of the opinion that the action of the bank was prejudicial to Gullas.

policies, standards, rules and regulations, as wells as Police Records Management and preparation of
police personnel reports.

II. Weekly Hours/Units

3 hours per week for 18 weeks / 3 units

III. Pre-Requisite

None

IV. General Objectives

At the end of the course, students should be able to: 1. Familiarize the procedures of Police Personnel
Management from recruitment to retirement. 2. Understand the functions of NAPOLCOM and PNP in
Police Personnel Management. 3. Obtain knowledge on Police Records Management as well as the
preparation of the different kinds of Police Personnel Reports.

No. of Hours V. Course Contents 1 hour

ORIENTATION Vision and Mission of Holy Spirit College Foundation in Leyte, Inc. Vision, Mission, Goals
and Objectives of the Criminology Department Course Outline and Classroom Rules

Chapter I: Police Personnel Management 27 hours

Specific Objectives: At the end of the unit, students are expected to: 1. Know and understand the
definition of Police Personnel Management.

You're reading a preview. Unlock full access with a free trial. Pages 2 to 3 are not shown in this preview.

Download With Free Trial

2. 2. 2. Know and understand the purpose and objectives of Police Personnel Know and understand
the purpose and objectives of Police Personnel Know and understand the purpose and objectives of
Police Personnel Management, its operative functions, programs, policies and procedures.
Management, its operative functions, programs, policies and procedures. Management, its operative
functions, programs, policies and procedures. 3. 3. 3. Learn the process from police recruitment to
retirement and the police Learn the process from police recruitment to retirement and the police Learn
the process from police recruitment to retirement and the police disciplinary mechanism. disciplinary
mechanism. disciplinary mechanism. 4. 4. 4. Know and understand the role of the NAPOLCOM in
policing. Know and understand the role of the NAPOLCOM in policing. Know and understand the role of
the NAPOLCOM in policing.

Topics: Topics: Topics:

A. A. A. Introduction to Police Personnel Management Introduction to Police Personnel Management

Introduction to Police Personnel Management B. B. B. Purpose and Objectives of Police Personnel
Management Purpose and Objectives of Police Personnel Management Purpose and Objectives of Police
Personnel Management C. C. C. Police Personnel Programs, Policies and Procedures Police Personnel
Programs, Policies and Procedures Police Personnel Programs, Policies and Procedures D. D. D. Police
Recruitment, Selection and Placement Police Recruitment, Selection and Placement Police Recruitment,
Selection and Placement E. E. E. Police Appointment Police Appointment Police Appointment F. F.
F. Police Training Police Training Police Training G. G. G. Police Appraisal, Promotion and
Assignment Police Appraisal, Promotion and Assignment Police Appraisal, Promotion and Assignment H.
H. H. Police Salaries, Benefits and Privileges Police Salaries, Benefits and Privileges Police Salaries,
Benefits and Privileges I. I. I. Police Inspection and Disciplinary Mechanism Police Inspection and
Disciplinary Mechanism Police Inspection and Disciplinary Mechanism

CHAPTER CHAPTER CHAPTER II: II: II: Police Police Police Records Records Records Management
Management Management 27 27 27 hours hours hours

Specific Objectives: Specific Objectives: Specific Objectives: At the end of the unit, students are expected
to: At the end of the unit, students are expected to: At the end of the unit, students are expected to: 1.
1. 1. Understand the need for Police records. Understand the need for Police records. Understand the
need for Police records. 2. 2. 2. Learn the different classification and types of police records, its
functions Learn the different classification and types of police records, its functions Learn the different
classification and types of police records, its functions and uses. and uses. and uses. 3. 3.
3. Understand the contents of police records. Understand the contents of police records. Understand
the contents of police records. 4. 4. 4. Understand how police records are managed. Understand how
police records are managed. Understand how police records are managed.

Topics: Topics: Topics:

A. A. A. Introduction to Police Records Management Introduction to Police Records Management

Introduction to Police Records Management B. B. B. Types of Police Records Types of Police Records
Types of Police Records C. C. C. Classification of Police Records Classification of Police Records
Classification of Police Records D. D. D. Police Records System Police Records System Police Records
System E. E. E. Internal Processing and Storage of Information Internal Processing and Storage of
Information Internal Processing and Storage of Information F. F. F. Retrieval of Stored Information
Retrieval of Stored Information Retrieval of Stored Information G. G. G. Administrative Reports
Procedure Administrative Reports Procedure Administrative Reports Procedure H. H. H. Detention
Records Detention Records Detention Records I. I. I. Court-related Records Court-related Records
Court-related Records J. J. J. Property Control Records and Procedures Property Control Records and
Procedures Property Control Records and Procedures

Suggested Activities: Suggested Activities: Suggested Activities:

Lecture/Discussion Lecture/Discussion Lecture/Discussion

Audio-visual Presentation Audio-visual Presentation Audio-visual Presentation

Graded Recitations Graded Recitations Graded Recitations

Evaluation/Grading System: Evaluation/Grading System: Evaluation/Grading System:

Examinations Examinations Examinations (Major) (Major) (Major) 40% 40% 40%

Quizzes 20% Quizzes 20% Quizzes 20%

Graded Graded Graded Recitations Recitations Recitations 20% 20% 20%

Attendance 10% Attendance 10% Attendance 10%

Students’ behavior/Attitude Students’ behavior/Attitude Students’ behavior/Attitude 10%

10% 10% Total 100% Total 100% Total 100%

Instructional Materials: Instructional Materials: Instructional Materials:

Textbooks Textbooks Textbooks Laptop Laptop Laptop LCD Projector LCD Projector LCD Projector
Pamphlets/Modules Pamphlets/Modules Pamphlets/Modules

References: References: References:

Par, Zethsayo C., and Com. Agas Juan L., Handbook on Police Personnel and Par, Zethsayo C., and Com.
Agas Juan L., Handbook on Police Personnel and Par, Zethsayo C., and Com. Agas Juan L., Handbook on
Police Personnel and Records Management. Records Management. Records Management.

Manwong, Rommel and San Diego Gilbert, dynamics of Law Enforcement and Manwong, Rommel and
San Diego Gilbert, dynamics of Law Enforcement and Manwong, Rommel and San Diego Gilbert,
dynamics of Law Enforcement and Public Safety Administration, 2010 Edition. Public Safety
Administration, 2010 Edition. Public Safety Administration, 2010 Edition.
Prepared by: