Westmont Bank v Ong; G.R. No. 132560; 30 Jan 2002; 375 SCRA 212

FACTS:
Two manager’s checks in respondent’s name were issued as payment of the shares of stocks he sold. His friend got hold of the checks, forged respondent’s signature and deposited them with petitioner bank, where both are depositors. Petitioner accepted and credited both checks to the forger’s account without verifying the signature indorsements against respondent’s specimen signature. His friend immediately withdrew the money and absconded.

ISSUE(S):
Whether or not petitioner is liable for the payment of the forged check.

RULING:
YES. The collecting bank is liable to the payee and must bear the loss because it is its legal duty to ascertain that the payee’s endorsement was genuine before cashing the check. As a general rule, a bank or corporation who has obtained possession of a check upon an unauthorized or forged indorsement of the payee’s signature and who collects the amount of the check from the drawee, is liable for the proceeds thereof to the payee or other owner, notwithstanding that the amount has been paid to the person from whom the check was obtained.

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Category: Legal Chyme

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