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24 DIGEST Metrobank v. BA Finance

This case involves a check issued by Malayan Insurance to BA Finance and Bitanga as co-payees for an insurance claim on Bitanga's stolen car. Without BA Finance's endorsement, Bitanga deposited the check into his account with Metrobank. The court ruled that BA Finance has a cause of action against Metrobank because under Section 41 of the Negotiable Instruments Law, all payees must endorse an instrument in order to negotiate it, unless one payee has authority to endorse for the others. By allowing the deposit and release of funds without BA Finance's endorsement, Metrobank is liable for converting the check.

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537 views2 pages

24 DIGEST Metrobank v. BA Finance

This case involves a check issued by Malayan Insurance to BA Finance and Bitanga as co-payees for an insurance claim on Bitanga's stolen car. Without BA Finance's endorsement, Bitanga deposited the check into his account with Metrobank. The court ruled that BA Finance has a cause of action against Metrobank because under Section 41 of the Negotiable Instruments Law, all payees must endorse an instrument in order to negotiate it, unless one payee has authority to endorse for the others. By allowing the deposit and release of funds without BA Finance's endorsement, Metrobank is liable for converting the check.

Uploaded by

Princess Aileen Esplana
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Metrobank v.

BA Finance
December 4, 2009 | Carpio Morales, J. | Section 41 of NIL

Petitioner: Metropolitan Bank and Trust Company (Formerly AsianBank Corporation)

Respondent: BA Finance Corporation and Malayan Insurance Co., Inc.

Summary: Bitanga obtained a loan from BA Finance where he mortgaged his car as a
security. The mortgaged car is insured by Malayan Insurance Company. Because the car
was stolen, Malayan Insurance issued a check payable to the order of BA Finance and
Malayan Insurance drawn against China Bank Corporation. Without the indorsement or
authority of his co-payee BA Finance, Bitanga deposited the check to his account
Asianbank Corporation. Bitanga subsequently withdrew the entire proceeds of the check.
Bitanga’s loan then became past due, but despite demands, he failed to settle it. BA
Finance thereupon demanded the payment of the value of the check from Asianbank but
to no avail, prompting it to file a complaint for sum of money and damages against
Asianbank and Bitanga alleging that it is entitled to the entire proceeds of the check.

Doctrine: Where the instrument is payable to two or more payees, all payees must
each indorse in order to negotiate the instrument. If only one indorses, he passes only his
part of the instrument - such indorsement wouldn't operate as such because it would not
be an indorsement of the whole instrument.

Exceptions to the rule:


1. Where the payee or person indorsing has authority to indorse for the others; and,
2. Where the payee or indorsees are partners.

FACTS: Lamberto Bitanga (Bitanga) obtained from respondent BA Finance Corporation


(BA Finance) a loan to secure which, he mortgaged his car to respondent BA Finance.
Bitanga thus had the mortgaged car insured by respondent Malayan Insurance Co., Inc.
(Malayan Insurance). The car was stolen. On Bitangas claim, Malayan Insurance issued a
check payable to the order of B.A. Finance Corporation and Lamberto Bitanga
for P224,500, drawn against China Banking Corporation (China Bank). The check was
crossed with the notation For Deposit Payees Account Only.

Without the indorsement or authority of his co-payee BA Finance, Bitanga deposited the
check to his account with the Asianbank Corporation (Asianbank), now merged with
petitioner Metropolitan Bank and Trust Company (Metrobank). Bitanga subsequently
withdrew the entire proceeds of the check. In the meantime, Bitangas loan became past
due, but despite demands, he failed to settle it. BA Finance thereupon demanded the
payment of the value of the check from Asianbank but to no avail, prompting it to file a
complaint for sum of money and damages against Asianbank and Bitanga alleging
that, inter alia, it is entitled to the entire proceeds of the check.
On the issue of whether or not BA Finance has a cause of action, Metrobank contends
that Bitanga is authorized to indorse the check as the drawer names him as one of the
payees. Moreover, his signature is not a forgery nor has he or anyone forged the signature
of the representative of BA Finance Corporation. No unauthorized indorsement appears
on the check. Absent the indispensable fact of forgery or unauthorized indorsement, the
payee may not recover from the collecting bank.

ISSUE: Whether or Not BA Finance has a cause of action against Metrobank even if the
subject check had not been delivered to BA Finance by the issuer itself.

RULING: Yes, BA Finance has a cause of action against Metrobank even if the subject
check had not been delivered to BA Finance by the issuer itself.

RATIO: Section 41 of the Negotiable Instruments Law provides:

Where the instrument is payable to two or more payees, all payees must each indorse
in order to negotiate the instrument. Exception to this rule is when the payee or person
indorsing has authority to indorse for the others or where the payee or indorsees are
partners.

Bitanga alone endorsed the crossed check, and petitioner allowed the deposit and release
of the proceeds thereof, despite the absence of authority of Bitanga’s co-payee BA
Finance to endorse it on its behalf. The payment of an instrument over a missing
indorsement is equivalent to payment on a forged indorsement or an unauthorized
indorsement in the case of joint payees.

Accordingly, one who credits the proceeds of a check to the account of the indorsing
payee is liable in conversion to the non-indorsing payee for the entire amount of the
check.

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