BANK OF AMERICA NT & SA vs.PHILIPPINE RACING CLUB INCG.R. No.

150228 July 30, 2009Facts:

1.

Plaintiff PRCI is a domestic corporation which maintains a current accountwith petitioner Bank of
America. Its authorized signatories are the companyPresident and Vice-President. By virtue of a travel
abroad for these officers,they pre-signed checks to accommodate any expenses that may come upwhile
they were abroad for a business trip. The said pre-signed checks wereleft for safekeeping by PRCs
accounting officer. Unfortunately, the two (2)of said checks came into the hands of one of its employees
who managed toencash it with petitioner bank. The said check was filled in with the use ofa check-
writer, wherein in the blank for the 'Payee', the amount in wordswas written, with the word 'Cash'
written above it.2.

Petitioner bank of America contended that since the instrument isincomplete 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 thechecks.4.

PRC filed an action for damages against the bank. The lower court awardedactual and exemplary
damages. On appeal, the CA affirmed the lowercourt's decision and held that the bank was negligent.

Issues& Ruling:1.

Whether or not petitioner bank is obligated to verify said checks torespondent.

Anent Petitioner’s contention that it could validly presume that

the check was filled up with authority and intentionallydelivered

:It would have been correct if the subject checks were correctly and properly filled out by the thief and
presented to the bank in goodorder. 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 itcould 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 couldhave made a simple phone call to its client to clarify the irregularitiesand
the loss to respondent due to the encashment of the stolen checkswould have been prevented.

PROXIMATE CAUSE

On the contention that it was respondent

’ act of issuing pre

-signed check, theSupreme 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 clearopportunity to avoid the impending harm but failed to do so is chargeablewith the
consequences thereof

. At the most, the respondents liability is meelycontributoryFollowing established jurisprudential

precedents, we believe the allocation ofsixty percent (60%) of the actual damages involved in this case
(represented bythe 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 thusshould pay damages to PRC

Both parties are held to be at fault but the bank has the last clear chance to preventthe 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 bankto
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 theirclients and their deposits at all times. They must
treat the accounts of theseclients with meticulousness and a highest degree of care considering the
fiduciarynature of their relationship. The diligence required of banks are more than thatof a good father
of a family.2. The PRC officers' practice of pre-signing checks is a seriously negligent andhighly risky
behavior which makes them also contributor to the loss. It's ownnegligence must therefore mitigate the
petitioner's liability. Moreover, the personwho stole the checks is also an employee of the plaintiff, a
cleck in its accountingdepartment at that. As the employer, PRC supposedly should have control
andsupervision over its own employees.3. The court held that the petitioner is liable for 60% of the total
amount ofdamages while PRC should shoulder 40% of the said amoun