Melva Gonzales was an employee of RCBC who encashed a $7,500 check drawn from a foreign bank and payable to her mother Eva Alviar. RCBC was unable to collect from the foreign drawee bank, which dishonored the check twice for irregular endorsement and finally returned it as the account was closed. RCBC demanded payment from Gonzales and Alviar. The Supreme Court ruled that Gonzales was not liable as the check was made useless due to a defect introduced by the qualified endorsement of an RCBC employee, which was the cause of the dishonor. Under the Negotiable Instruments Law, a subsequent party that causes a defect cannot have recourse against prior endorsers who endorsed in good faith
Melva Gonzales was an employee of RCBC who encashed a $7,500 check drawn from a foreign bank and payable to her mother Eva Alviar. RCBC was unable to collect from the foreign drawee bank, which dishonored the check twice for irregular endorsement and finally returned it as the account was closed. RCBC demanded payment from Gonzales and Alviar. The Supreme Court ruled that Gonzales was not liable as the check was made useless due to a defect introduced by the qualified endorsement of an RCBC employee, which was the cause of the dishonor. Under the Negotiable Instruments Law, a subsequent party that causes a defect cannot have recourse against prior endorsers who endorsed in good faith
Melva Gonzales was an employee of RCBC who encashed a $7,500 check drawn from a foreign bank and payable to her mother Eva Alviar. RCBC was unable to collect from the foreign drawee bank, which dishonored the check twice for irregular endorsement and finally returned it as the account was closed. RCBC demanded payment from Gonzales and Alviar. The Supreme Court ruled that Gonzales was not liable as the check was made useless due to a defect introduced by the qualified endorsement of an RCBC employee, which was the cause of the dishonor. Under the Negotiable Instruments Law, a subsequent party that causes a defect cannot have recourse against prior endorsers who endorsed in good faith
G.R. No. 156294. November 29, 2006 GARCIA, J. Facts: Gonzales was an employee of Rizal Commercial Banking Corporation (RCBC) as New Accounts Clerk in the Retail Banking Department at its Head Office. A foreign check in the amount of $7,500 was drawn by Dr. Don Zapanta against the drawee bank Wilshire Center Bank(WCB), payable to Gonzales’ mother, defendant Eva Alviar (or Alviar) then endorsed this check to RCBC Gonzales got the check encashed and received its peso equivalent. RCBC then tried to collect the check amount from First Interstate Bank of California but the check was dishonored on 2 occasions because of irregular indorsement before finally getting returned because the account had been closed. Unable to collect, RCBC demanded from Gonzales the payment of the peso equivalent of the check that she received. Gonzales agreed to have the amount deducted from her salary. RCBC demanded for the payment of Alviar’s obligation but did not receive any response. RCBC sent a letter to Gonzales reminding her of her liability as an indorser of the subject check; but, Gonzales resigned from RCBC. Issue: Is Alviar Gonzales liable for the instrument? Ruling: No. WCB dishonored the check because of a defect and it is undeniable that only the signature of Olivia Gomez, an RCBC employee, was a qualified endorsement because of the phrase "up to ₱17,500.00 only." There can be no other acceptable explanation for the dishonor of the foreign check than this signature of Olivia Gomez with the phrase "up to ₱17,500.00 only" accompanying it. The foreign drawee bank would not have dishonored the check had it not been for this signature of Gomez; thus, WCB refused to pay the bearer because of a defect introduced by the RCBC employee. The Check is therefore a useless piece of paper if returned in that state to its original payee, Eva Alviar. A subsequent party which caused the defect in the instrument cannot have any recourse against any of the prior endorsers in good faith as according to Sec. 66 of NIL, every indorser who indorses without qualification, warrants to all subsequent holders in due course, that the instrument is, at the time of his indorsement, valid and subsisting.