APPLICATION OF SECTION 49
• Applies only to instruments payable to order
• Contemplates a case wherein delivery and payment of value but there was no indorsement
• One element lacking for the negotiation of the instrument
RIGHTS OF TRANSFEREES FOR VALUE
1. The transferee acquires only the rights of the transferor. This means that if a defense is available against the transferor, that defense is also available against the transferees
2. The transferee has also the right to require the transferor to indorse the instrument
BPI V. COURT OF APPEALS
GR 136202, JANUARY 25, 2007
Templonuevo demanded payment from petitioner of a sum of money representing the aggregate value of three checks which were allegedly payable to him but which were deposited with the petitioner to Salazar’s account, without his knowledge and corresponding endorsement. Finding
merit in the demands of Templonuevo, the bank then froze the account of the engineering firm as the account of Salazar was already closed or had insufficient funds. Failure of any settlement between Templonuevo and Salazar, this prompted the bank to debit the account of Salazar and give back the money to Templonuevo through cashier’s check. The account of Salazar was also debited for whatever charges incurred for the issuance of the cashier’s check.
The trial court held in favor of Salazar.
Does a collecting bank, over the objections of its depositor, have the authority to withdraw unilaterally from such depositor’s account the amount it had previously paid upon certain unendorsed order instruments deposited by the depositor to another account that she later closed?
In the present case, the records do not support the finding made by the CA and the trial court that a prior arrangement existed between Salazar and Templonuevo regarding the transfer of ownership of the checks. This fact is crucial as Salazar’s entitlement to the value of the instruments is based on the assumption that she is a transferee within the contemplation of Section 49 of the Negotiable Instruments Law.
Transferees in this situation do not enjoy the presumption of ownership in favor of holders since they are neither payees nor indorsees of such instruments. The weight of authority is that the mere possession of a negotiable instrument does not in itself conclusively establish either the right of the possessor to receive payment, or of the right of one who has made payment to be discharged from liability. Thus, something more than mere possession by persons who are not payees or indorsers of the
instrument is necessary to authorize payment to them in the absence of any other facts from which the authority to receive payment may be inferred.
Even if the delay in the demand for reimbursement is taken in conjunction with Salazar’s possession of the checks, it cannot be said that the presumption of ownership in Templonuevo’s favor as the designated payee therein was sufficiently overcome. This is consistent with the principle that if instruments payable to named payees or to their order have not been indorsed in blank, only such payees or their indorsees can be holders and entitled to receive payment in their own right.
The presumption that a negotiable instrument was given for a sufficient consideration will not inure to the benefit of Salazar because the term “given” does not pertain merely to a transfer of physical possession of the instrument. The phrase “given or indorsed” in the context of a negotiable instrument refers to the manner in which such instrument may be negotiated.
It is an exception to the general rule for a payee of an order instrument to transfer the instrument without indorsement. Precisely because the situation is abnormal, it is but fair to the maker and to prior holders to require possessors to prove without the aid of an initial presumption in
their favor, that they came into possession by virtue of a legitimate transaction with the last holder. Salazar failed to discharge this burden, and the return of the check proceeds to Templonuevo was therefore warranted under the circumstances despite the fact that Templonuevo may
not have clearly demonstrated that he never authorized Salazar to deposit the checks or to encash the same. Noteworthy also is the fact that petitioner stamped on the back of the checks the words: "All prior endorsements and/or lack of endorsements guaranteed," thereby making the assurance that it had ascertained the genuineness of all prior endorsements. Having assumed the liability of a general indorser, petitioner’s liability to the designated payee cannot be denied.
Consequently, petitioner, as the collecting bank, had the right to debit Salazar’s account for the value of the checks it previously credited in her favor. However, the issue of whether it acted judiciously is an entirely different matter. As businesses affected with public interest, and because
of the nature of their functions, banks are under obligation to treat the accounts of their depositors with meticulous care, always having in mind the fiduciary nature of their relationship. In this regard, petitioner was clearly remiss in its duty to private respondent Salazar as its depositor.
To begin with, the irregularity appeared plainly on the face of the checks. Despite the obvious lack of indorsement thereon, petitioner permitted the encashment of these checks three times on three separate occasions. This negates petitioner’s claim that it merely made a mistake in crediting the value of the checks to Salazar’s account and instead bolsters the conclusion of the CA that petitioner recognized Salazar’s claim of ownership of checks and acted deliberately in paying the same, contrary to ordinary banking
policy and practice. It must be emphasized that the law imposes a duty of diligence on the collecting bank to scrutinize checks deposited with it, for the purpose of determining their genuineness and regularity. The collecting bank, being primarily engaged in banking, holds itself out to the public as the expert on this field, and the law thus holds it to a high standard of conduct. The taking and collection of a check without the proper indorsement amount to a conversion of the check by the bank.
More importantly, however, solely upon the prompting of Templonuevo, and with full knowledge of the brewing dispute between Salazar and Templonuevo, petitioner debited the account held in the name of the sole proprietorship of Salazar without even serving due notice upon her. This ran contrary to petitioner’s assurances to private respondent Salazar that the account would remain untouched, pending the resolution of the controversy between her and Templonuevo. For the above reasons, the Court finds no reason to disturb the award of damages granted by the CA against petitioner. This whole incident would have been avoided had petitioner adhered to the standard of diligence expected of one engaged in the banking business. A depositor has the right to recover reasonable moral damages even if the bank’s negligence may not have been attended with malice and bad faith, if the former suffered mental anguish, serious anxiety, embarrassment and humiliation