UNDEPOSITABLE CHECK

Once upon a time, a couple sold a condo through a bank-financed transaction.

The seller was a Filipina married to a Foreigner. The complicated sale process took six months to complete. After a long wait, the mortgagee bank finally released the Manager's Check (MC), which was payable to "Spouses A & B."

The wife tried depositing the check to their "and/or" savings account. However, the bank insisted that they needed the endorsement of both spouses to deposit (by signing the back of the check).

The problem is that the couple badly needed the funds that very week. Her husband's employer assigned him to another country, so getting him to sign the check would take some time.

Why wasn't the wife able to deposit the check? Wasn't the account an "and/or" account?

+ It seems that in 2022, the bank followed the BSP's mandate and converted all "and/or" accounts into an "or" account.

+ In a 2022 circular, the BSP said, "Under both types of joint accounts, deposits may be placed in the account even without the authority of the other depositors named in the account."

+ However, the bank still insisted that the deposit required the endorsement of both spouses. The bank's internal rules are in the image above.

Is the bank wrong for refusing the deposit?

+ After much thought, I now understand the predicament the bank faced.

+ The check is payable to Spouses A and B, meaning both spouses share 50% ownership of the money.

+ Let's assume the check was deposited in an "or" account. One spouse can withdraw the total amount, leaving the other spouse with nothing (like if they broke up). The next obvious event is likely for that spouse to sue the bank.

Can the couple request the MC to be changed to an "or"?

By default, the mortgagee bank will not allow this if the property is named after both spouses.

Lesson:

Something to consider when opening bank accounts and choosing between an "and" and "or" account. Better yet, just open both types of accounts.