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Neg Negotiab iable Instru strume men nts Law; Cro Crosse ssed Che Checks | Philip ilipp pine ine Merc Merca antile ile Law Rev Review iew
Philippine Mercantile Law Review Notes, Cases and Doctrines in Mercantile Law
Negotiable Instruments Law; Crossed Checks What are the effects of crossing a check? It means that it could only be deposited and could not be converted into cash. Thus, the effect of crossing a check relates to the mode of payment, meaning that the drawer had intended the check for deposit only by the rightful person, i.e., i.e., the payee named therein. (Bank (Bank of America, T & SA, vs. Associated Citizens Bank, G.R. No. 141001, 141018, May 21, 2009, [Carpio, J.] )
In Bataan Cigar v. Court of Appeals , Appeals , the Supreme Court enumerated the effects of crossing a check as follows:
a.)
The check may not be encashed but only deposited in the bank;
b.)
The check may be negotiated only once—to one who has an account wit h a bank; and
c.) The act of crossing the check serves as a warning to the holder that the check has been issued issued for a definite purpose so that he must inquire if he has received the check p ursuant to that purpose; purpose; otherwise, he is not a holder in due course.
The effect therefore of crossing a check relates to the mode of its presentment for payment. Under Section 72 of the Negotiable Instruments Law, presentment for payment to be sufficient must be made (a) by the holder, or by some person authorized to receive payment on his behalf… As to who the holder or authorized person will depend on the instructions stated on the face of the check. (State (State Investment House vs. Intermediate Appellate Court, G.R. No. 72764, July 13, 1989, [Fernan, C.J:]) C.J:])
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Negotiable Instruments Law; Crossed Checks | Philippine Mercantile Law Review
The act of crossing a check serves as a warning to the holder that the check has been issued for a definite purpose so that the holder thereof must inquire if he has received the check pursuant to that purpose; otherwise, he is not a holder in due course. (Dino vs. Loot, G.R. No. 170912, April 19, 2010, [Carpio, J.])
Duty of the collecting bank when dealing with crossed checks In Philippine Commercial International Bank vs. Court of Appeals and Ford Phils., Inc., [1] it was held that: “the crossing of the check with the phrase “Payee’s Account Only,” is a warning that the checks should be deposited only in the account of the CIR. Thus, it is the duty of the collecting bank PCIBank to ascertain that the check be deposited in payee’s account only. Therefore, it is the collecting bank (PCIBank) which is bound to scrutinize the check and to know its depositors before it could make the clearing indorsement “all prior indorsements and/or lack of indorsement guaranteed.
In Banco de Oro and Mortgage Bank vs. Equitable Banking Corporation, [2] we ruled:
“Anent petitioner’s liability on said instruments, this court is in full accord with the ruling of the PCHC’s Board of Directors that:
‘In presenting the checks for clearing and for payment, the defendant made an express guarantee on the validity of “all prior endorsements.” Thus, stamped at the back of the checks are the defendant’s clear warranty: ALL PRIOR ENDORSEMENTS AND/OR LACK OF ENDORSEMENTS GUARANTEED. Without such warranty, plaintiff would not have paid on the checks.’
No amount of legal jargon can reverse the clear meaning of defendant’s warranty. As the warranty has proven to be false and inaccurate, the defendant is liable for any damage arising out of the falsity of its representation.”[3]
What may be the ways of crossing a check? The crossing may be “special” wherein between the two parallel lines is written the name of a bank or business institution, in which case the drawee should pay only with the intervention of that bank or company.
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Negotiable Instruments Law; Crossed Checks | Philippine Mercantile Law Review
It may also be “general” wherein between two parallel diagonal lines are written the words “and Co.” or none at all, in which case the drawee should not encash the same but merely accept the same for deposit. (Bank of America, NT & SA, vs. Associated Citizens Bank, G.R. No. 141001, 141018, May 21, 2009, [Carpio, J.])
[1] G.R. Nos. 121413, 121479, 128604, January 29, 2011 [2] 157 SCRA 188 (1988) [3] Id. at 194
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