Associated Bank v Court of Appeals; G.R. No. 89802; 07 May 1992; 208 SCRA 465

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When private respondent went to collect on what she thought were still unpaid accounts, she was informed that six crossed checks payable to her garment shop had already been issued. Further inquiry revealed that the said checks had been deposited with petitioner bank and subsequently paid by it to one of the bank’s “trusted depositors.”

Whether or not petitioner bank was negligent and therefore liable for the value of the checks.

YES. The possession of 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. 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.

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