Bank of America vs.

Associated Citizens Bank

J. Carpio
May 21, 2009

FACTS
 BA-Finance Corp. (BA) granted Miller Offset Press, Inc. a credit line facility
o Miller is represented by Uy Kiat Chung, Ching Uy Seng, Uy Ching Guan Seng (3REPS)
 Miller would assign/discount its trade receivables with BAF
 3REPS executed a Continuing Surety Agreement with BAF
 Miller discounted and assigned several trade receivables to BAF
o Executed Deed of Assignment
o BAF issued 4 CROSSED CHECKS payable to the “Order of Miller Offset Press, Inc.”
 Drawee: Bank of America
 “For Payee’s Account Only”
 ₱741,227.78
 4 checks were deposited by Ching, the corporate secretary, in his joing bank account with the
2REPS in Associated Bank.
o Associated Bank stamped the check with the guarantee clause at the bank and sent
them for clearing
o Bank of America honored the checks and paid the proceeds to Associated Bank
 Miller failed to deliver the proceeds of the assigned receivables.
o BAF filed a collection case against Miller, impleading 3REPS
o Miller, Uy and Uy filed a cross-claim against Ching
 Denied that they received the amount and that they gave him authority to act
on behalf of Miller
 Denied signing Continuing Surety Agreement
o Impleaded Bank of America
o Bank of America filed third party complaint against Associated Bank

ISSUES/RATIO
1. W/N Bank of America is liable to pay BA-Finance the amount of the 4 checks – YES
a. Bank is under strict liability to pay the check only to the payee or the payee’s order
i. Crossed check was issued with the note, “For Payee’s Account Only”
ii. Intent only to deposit the check to Miller’s account, since Miller was the payee
iii. Ching was able to deposit the same to his own account
b. Bank of America violated the drawer’s instructions
2. W/N Bank of America may recover from Associated Bank - YES
a. Associated Bank is liable for warranties under Sec. 66 of the NIL
i. Collecting bank or last indorser had the duty to ascertain the genuineness of all
prior indorsements
ii. Act of presenting the check for payment to the drawee is an assertion that it has
done its duty to ascertain the genuineness of the indorsement
iii. Stamping of the check = liability as indorser
b. Negligent for depositing the check of Miller to Ching’s personal account
i. Miller was a corporation, Ching’s account was personal
3. W/N Associated Bank may recover from 3REPS? – YES
a. No one should be unjustly enriched at the expense of another