G.R. No.

150228

July 30, 2009

BANK OF AMERICA NT & SA, Petitioner, vs. PHILIPPINE RACING CLUB, Respondent Facts: Philippine Racing Club Inc. (PRCI) a domestic corporation maintains an account with Bank of America (BA). The joint signatories were President Antonia Reyes and VP for Finance Gregorio Reyes. The said signatories were scheduled to go out of the country and in order not to disrupt business, the pre-signed several checks to insure continuity of their operations by making available cash to settle due obligations. Thereafter, a John Doe presented to BA 2 of the said checks for 110,000. The two (2) checks had similar entries with similar infirmities and irregularities. On the space where the name of the payee should be indicated (Pay To The Order Of) the following 2-line entries were instead typewritten: on the upper line was the word "CASH". The check was encashed but no telephone verification was done by the bank. As it turned out, the checks came into the hands of Mesina who was an employee of PRCI. A demand for payment from the bank was made but it was unheeded. A complaint was filed and the RTC ruled in favor of the plaintiff. This was affirmed by the CA. Issue: 1. WON petitioners failure to verify the checks in view of the misplacement of entries makes them liable. 2. WON the pre-signing of blank checks by the respondent makes them liable. Held: 1. Yes. Banks are impressed with public interest and have the obligation to treat their clients account meticulously and with highest degree of care. In this case, since there was an obvious irregularity on the face of the check, it should have alerted the bank to the possibility that the holder or the person who is attempting to encash the checks did not have proper title to the checks or did not have authority to fill up and encash the same. Petitioner should have ascertained the authenticity of the checks with regard to the irregularities and the unusual circumstances surrounding the check. 2. Yes. Practice of pre-signing of blank checks should be deemed seriously negligent behavior and a highly risky means of purportedly ensuring the efficient operation of businesses. It should have occurred to respondents officers and managers that the pre-signed blank checks could fall into the wrong hands as they did in this case where the said checks were stolen from the company accountant to whom the checks were entrusted. In this case, both parties are equally negligent that resulted to the fraudulent encashment of the checks. However, the bank had the last clear chance to avoid

the impending harm and it failed to do so and is therefore chargeable with the consequences thereof. In view of the negligence of both parties, the court allocated 60% of the damages to the bank and 40% to PRCI in lieu of its contributory negligence.