G.R. No.

175350 June 13, 2012

EQUITABLE
EQUITABLE BANKING CORPORATION, INC. Petitioner,
vs.
SPECIAL STEEL PRODUCTS, n! AUGUSTO L. PARDO, Respondents.

Ponen"e# Del Castillo,  J.

Do$"%&ne# A crossed check

check with the notation "account
"account payee only" can only be deposited
deposited in
the named payee’s account. It is ross nelience !or a bank to inore this rule solely on the
basis o! a third party’s oral representations o! havin a ood title thereto.

PI # a private domestic

domestic corporation sellinsteel
sellinsteel products.
products.

Pardo # PI’s President

President and ma$ority stockholder
stockhold er

Interco # reular customer

%y # son&in&law o! its ma$ority stockholder

'(uitable # depository bank

bank o! Interco
Interco and o! %y

'$"(#
PI sold weldin electrodes to Interco, as evidenced by sales invoices. It is due on
)arch *+ ** -!or the rst sales invoice and )ay ** ** !or others/. It also provided that
Interco would pay
pay interest at the rate
rate o! 0+1 per annum in case o! delay
delay.. As payment !or
the products, Interco
Interco issued 0 checks
checks payable to the order
order o! PI. 'ach check was crossed
crossed
with the notation 2account payee only3 and was drawn aainst '(uitable.

 4he records
records do not identi!y the sinatory !or the checks, or e5plain how %y came in
possession o! these checks. 6e claimed that he had ood title thereto. 6e demanded the
deposits in his personal accounts in '(uitable. 4he bank did so relyin on %y’s status as a
valued client and as son&in&law o! Interco’s ma$ority stockholder.

PI reminded Interco o! the unpaid weldin electrodes, e5plainin that its immediate
need !or payment as it was e5periencin some nancial crisis o! its own. It replied that it has
already issued 0 checks payable to PI and drawn aainst '(uitable, which was denied by
PI. 7ater on it was discovered
discovered that it was %y, not PI, who received
received the proceeds
proceeds o! 0
checks. Interco nally
nally paid the value o! 0 checks to PI
PI plus portion o! accrued interests.
interests.
Interco re!used to pay entire accrued interest on the round that it was not responsible !or
the delay. 6ence,
6ence, Pardo
Pardo led a complaint
complaint !or damaes
damaes aainst
aainst %y and '(uitable
'(uitable 8ank’
allein that the 0 crossed checks, all payable to order o! PI could be deposited and
encashedby PI only.
  4rial Court rendered decision in !avor o! Pardo which was a9rmed by CA.

I((ue(#
:hat is the nature o! crossed check;
:hether PI has a cause o! action aainst '(uitable !or (uasi&delict, whereby it can recover
actual damaes !rom '(uitable;

)e*!#
PI’s cause o! action based on (uasi&delict.

PI does not ask '(uitable or %y to deliever to it theproceeds o! the checks as the
riht!ul payee. 4he courts below correctly ruled that PI has a cause o! action !or(uasi&
delict.

 4he checks that Interco issued in !avor o! PI were all crossed, made payable to
PI’s order and contained thenotation 2account payee only.3 4his creates a reasonable
e5pectation that the payee alone would receive the proceeds o! the checks and that
diversion o! the checks would be averted. 4his e5pectation arises !rom the accepted bankin
practice that crossed checks are intended !or deposit in the named payee’s account only
and no other. At the very least, crossed checks should place a bank on notice that it should
e5ercise more caution or e5pend more than a cursory in(uiry, to ascertain whether the
payee on the check has authori<ed the holder to deposit the same in di=erent account.

A crossed check with the notation 2account payee only3 can o nly be deposited in the
named payee’s account. It is ross nelience !or a bank to inore this rule solely on the
basis o! a third party’s oral representations o! havin a ood title there to.