G.R. No. 141001 - Bank of America, NT and SA vs. Associated Citizens Bank

The case involves consolidated petitions (G.R. Nos. 141001 and 141018) reviewing decisions rendered by the Court of Appeals and the RTC of Makati.
The litigants include:

Bank of America, NT & SA (petitioner/respondent),
BA-Finance Corporation (plaintiff/appellee),
Miller Offset Press, Inc.,
Uy Kiat Chung, Ching Uy Seng, and Uy Chung Guan Seng (individual defendants and cross-claimants),
Associated Citizens Bank (now United Overseas Bank Phils.)—involved in both roles as defendant and third-party defendant.

The consolidated nature of the case arises from disputes involving the collection, endorsement, and encashment of checks issued in a commercial credit transaction.

On 6 October 1978, BA-Finance Corporation entered into a credit transaction with Miller Offset Press, Inc.
Miller was granted a credit line facility through which it could discount or assign its trade receivables with BA-Finance.
On 20 October 1978, representatives Uy Kiat Chung, Ching Uy Seng, and Uy Chung Guan Seng executed a continuing suretyship agreement, guaranteeing Miller’s indebtedness under a joint and several liability arrangement.
Miller executed deeds of assignment to discount several trade receivables, securing BA-Finance’s issuance of four checks in favor of Miller.

BA-Finance issued four checks drawn on Bank of America with the notation “For Payee’s Account Only” and crossing, indicating deposit only by the named payee.
The check details were as follows:

Ching Uy Seng, acting as the corporate secretary of Miller, deposited the checks in a joint bank account (Account No. 989) held with Uy Chung Guan Seng at Associated Citizens Bank.
Associated Bank endorsed the checks with the statement “all prior endorsements and/or lack of endorsements guaranteed” before forwarding them for clearance.
Bank of America, as the drawee bank, honored the checks upon presentation, mistakenly paying the collected amount to Associated Bank.

BA-Finance filed a collection complaint against Miller and the three sureties for the non-delivery of proceeds from the discounted trade receivables.
Miller, along with Uy Kiat Chung and Uy Chung Guan Seng, filed a joint answer denying receipt of the funds and denying authorization for Ching Uy Seng to transact on behalf of Miller.
BA-Finance amended its complaint to include Bank of America as an additional defendant for allegedly disbursing funds to an unauthorized party.
Bank of America, in turn, filed a third-party complaint against Associated Citizens Bank.
The RTC rendered a decision in 1994, ordering Bank of America to pay BA-Finance and directing Associated Bank to reimburse Bank of America.
The Court of Appeals affirmed, with modifications, the RTC decision, deleting the award for attorney’s fees and adjusting relevant amounts.

Whether the Court of Appeals erred in holding Bank of America liable for disbursing the amount of the four checks despite its reliance on the endorsement guarantee by Associated Bank.
Whether strict liability applies to the drawee bank when it pays a check that has been presented by a party other than the designated payee.

Whether Associated Bank should be held liable to reimburse Bank of America for disbursing the check amounts, given its endorsement stamp which assumed the warranty of all prior endorsements.
Whether the bank’s negligence in accepting and processing the checks deposited into a joint account (instead of the payee corporation's account) contributed to its liability.

Liability of the Individual Defendants (Ching Uy Seng and/or Uy Chung Guan Seng)

Whether Ching Uy Seng and/or Uy Chung Guan Seng, by depositing the checks into their personal joint account, unjustly enriched themselves and should be responsible for reimbursing Associated Bank.
Whether these individuals’ actions deprived BA-Finance of its rightful proceeds under the underlying assignment agreement.