FACTS:

The private respondent is engaged in the business of ready-to-wear garments under the firm name "Melissa's RTW." Several companies, including Robinson's Department Store, Payless Department Store, Rempson Department Store, and the Corona Bazaar, issued crossed checks payable to Melissa's RTW for their respective accounts. The private respondent later discovered that these crossed checks had been deposited and paid to a certain Rafael Sayson by the Associated Bank, without authorization. The private respondent filed a lawsuit against the petitioners in the Regional Trial Court of Quezon City for the recovery of the total value of the crossed checks, damages, and attorney's fees. The trial court ruled in favor of the private respondent and ordered the petitioners to pay. The petitioners appealed to the Court of Appeals, arguing that the private respondent should have proceeded against the companies that issued the checks. The Court of Appeals affirmed the trial court's ruling, stating that the private respondent had a cause of action against the petitioners for violating common banking practices and allowing the crossed checks to be deposited and encashed by an improper party. The court found that the private respondent had never authorized anyone to deposit or encash the checks, and the petitioners' actions caused damage to the private respondent. The Supreme Court affirmed the decision, stating that crossed checks are not to be encashed but only accepted for deposit, and the act of crossing serves as a warning to the holder.

ISSUES:

1. The sole issue raised in this case is whether or not the private respondent has a cause of action against the petitioners for their encashment and payment to another person of certain crossed checks issued in her favor.

RULING:

1. The Court of Appeals upheld the validity of the private respondent's cause of action against the petitioners. It ruled that the petitioners violated common banking practices by allowing the crossed checks to be deposited and encashed by another person without the knowledge, consent, authority, or endorsement of the private respondent. The court affirmed the lower court's judgment, ordering the petitioners to pay the total value of the checks plus damages to the private respondent.

PRINCIPLES:

• Crossing a check is done by writing two parallel lines diagonally on the left top portion of the check. The crossing can be special, where the name of a bank or a business institution is written between the lines, or general, where the words "and Co." or "for payee's account only" are written.

• A special crossing means that the drawee should pay only with the intervention of the specified company. A general crossing means that the drawee bank should not encash the check but merely accept it for deposit.

• When a check is crossed, the effects are: (1) it may not be encashed but only deposited in the bank, (2) it may be negotiated only once - to one who has an account with a bank, and (3) the act of crossing serves as a warning to the holder that the check has been issued for a specific purpose, requiring inquiry if received for a different purpose.