Negotiable Instruments; Crossed-Checks

What is the nature of a crossed-check?

ANSWER:

The nature of crossed checks should place a bank on notice that it should exercise more caution or expand more than a cursory inquiry, to ascertain whether the payee on the check has authorized the holder to deposit the same in a different account.  It is well to remember that “[t]he banking system has become an indispensable institution in the modern world and plays a vital role in the economic life of every civilized society.  Whether as mere passive entities for the safe-keeping and saving of money or as active instruments of business and commerce, banks have attained an [sic] ubiquitous presence among the people, who have come to regard them with respect and even gratitude and, above all, trust and confidence.  In this connection, it is important that banks should guard against injury attributable to negligence or bad faith on its part.  As repeatedly emphasized, since the banking business is impressed with public interest, the trust and confidence of the public in it is of paramount importance.  Consequently, the highest degree of diligence is expected, and high standards of integrity and performance are required of it. (Equitable Banking Corporation, Inc. vs. Special Steel Products, G.R. No. 175350, June 13, 2012, [Del Castillo, J.]) (emphasis supplied)

Negotiable Instruments; the mere issuance of a Manager’s Check does notipso facto work as an automatic transfer of funds to the account of thepayee

In the case of Rizal Commercial Banking Corporation vs. Hi-Tri Development Corporation, et al,[1], the Court speaking through Justice Sereno held that: “the mere issuance of a manager’s check does not ipso fact work as an automatic transfer of funds to the account of the payee.  In case the procurer of the manager’s or cashier’s check retains custody of the instrument, does not tender it to the intended payee, or fails to make an effective delivery, we find the following provision on undelivered instruments under the Negotiable Instruments Law applicable:

Sec. 16.  Delivery; when effectual; when presumed.—Every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purposes of giving effect thereto.  As between immediate parties and as regards a remote party other than a holder in due course, the delivery, in order to be effectual, must be made either by or under the authority of the party making, drawing, accepting, or indorsing, as the case may be; and, in such case, the delivery may be shown to have been conditional, or for a special purpose only, and not for the purpose of transferring the property in the instrument.  But where the instrument is in the hands of a holder in due course, a valid delivery thereof by all parties prior to him so as to make them liable to him is conclusively presumed.  And where the instrument is no longer in the possession of a party whose signature appears thereon, a valid and intentional delivery by him is presumed until the contrary is proved.

            Since there was no delivery, presentment of the check for payment did no occur.  An order to debit the accout x x x was never made. x x x  As a result, the assigned fund is deemed to remain part of the account of x x x [the one] which procured the Manager’s Check.  The doctrine that the deposit represented by a manager’s check automatically passes to the payee is inapplicable, because the instrument—although accepted in advance—remains undelivered.”

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[1] supra (June 13, 2012)