BANK OF AMERICA NT & SA vs. G.R. No.

150228 July 30, 2009

PHILIPPINE RACING CLUB INC

Facts:
1. Plaintiff PRCI is a domestic corporation which maintains a current account
with petitioner Bank of America. Its authorized signatories are the company
President and Vice-President. By virtue of a travel abroad for these officers,
they pre-signed checks to accommodate any expenses that may come up
while they were abroad for a business trip. The said pre-signed checks were
left for safekeeping by PRCs accounting officer. Unfortunately, the two (2)
of said checks came into the hands of one of its employees who managed to
encash it with petitioner bank. The said check was filled in with the use of
a check-writer, wherein in the blank for the 'Payee', the amount in words
was written, with the word 'Cash' written above it.
2. Petitioner bank of America contended that since the instrument is
incomplete but delivered or complete but undelivered, it could validly
presume upon presentation of the checks, that the party who filled up the
blanks had authority and that a valid and intentional delivery to the party
presenting the checks had taken place. And the proximate cause of the
encashment was the respondent’s negligent practice of delivering pre-
signed check to its accountant.
3. Clearly there was an irregularity with the filling up of the blank checks as
both showed similar infirmities and irregularities and yet, the petitioner
bank did not try to verify with the corporation and proceeded to encash the
checks.
4. PRC filed an action for damages against the bank. The lower court awarded
actual and exemplary damages. On appeal, the CA affirmed the lower
court's decision and held that the bank was negligent.

Issues& Ruling:
1. Whether or not petitioner bank is obligated to verify said checks to
respondent.
 Anent Petitioner’s contention that it could validly presume that
the check was filled up with authority and intentionally
delivered:

It would have been correct if the subject checks were correctly and
properly filled out by the thief and presented to the bank in good
order. In that instance, there would be nothing to give notice to the
bank of any infirmity in the title of the holder of the checks and it
could validly presume that there was proper delivery to the holder.

The irregularities on the check would have prompted the Bank of

America’s employee to verify it with respondent. Petitioner could
have made a simple phone call to its client to clarify the irregularities
and the loss to respondent due to the encashment of the stolen checks
would have been prevented.
 PROXIMATE CAUSE
On the contention that it was respondent’ act of issuing pre-signed check, the
Supreme Court held that, although the respondent was also negligent, but under
the doctrine of Last clear chance, the law provides that “who had a last clear
opportunity to avoid the impending harm but failed to do so is chargeable
with the consequences thereof. At the most, the respondents liability is meely
contributory

Following established jurisprudential precedents, we believe the allocation of

sixty percent (60%) of the actual damages involved in this case (represented by
the amount of the checks with legal interest) to petitioner is proper under the
premises. Respondent should, in light of its contributory negligence, bear forty
percent (40%) of its own loss.

2. Whether or not the petitioner can be held liable for negligence and thus
should pay damages to PRC

Both parties are held to be at fault but the bank has the last clear chance to prevent
the fraudulent encashment hence it is the one foremost liable .

1. There was no dispute that the signatures in the checks are genuine but the
presence of irregularities on the face of the check should have alerted the bank
to exercise caution before encashing them. It is well-settled that banks are in the
business impressed with public interest that they are duty bound to protect their
clients and their deposits at all times. They must treat the accounts of these
clients with meticulousness and a highest degree of care considering the fiduciary
nature of their relationship. The diligence required of banks are more than that
of a good father of a family.

2. The PRC officers' practice of pre-signing checks is a seriously negligent and

highly risky behavior which makes them also contributor to the loss. It's own
negligence must therefore mitigate the petitioner's liability. Moreover, the person
who stole the checks is also an employee of the plaintiff, a cleck in its accounting
department at that. As the employer, PRC supposedly should have control and
supervision over its own employees.

3. The court held that the petitioner is liable for 60% of the total amount of
damages while PRC should shoulder 40% of the said amount.