Republic Bank v CA; G.R. No. 42725; 22 Apr 1991; 196 SCRA 100

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A check was drawn against an account with respondent bank. After it was delivered to the payee, the amount on its face was fraudulently altered and increased. Respondent bank learned of the material alteration in the amount of the check a month after it was paid, and only informed petitioner bank of it two months later.

Whether or not petitioner as collecting bank is relieved of liability to refund the amount paid by respondent drawee bank.

YES. It is true that when an endorsement is forged, the collecting bank or last endorser, as a general rule, bears the loss. But the unqualified endorsement of the collecting bank on the check should be read together with the 24-hour regulation on clearing house operation. Thus, when the drawee bank fails to return a forged or altered check to the collecting bank within the 24-hour clearing period, the collecting bank is absolved from liability.

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