Bank of America v.

PRC Digest
Bank of America vs. Philippine Racing Club
G.R. 150228 July 30, 2009
Ponente: Leonardo-De Castro, J:

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. 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.

3. 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. Hence this appeal. Petitioner contends that it was merely doing its
obligation under the law and contract in encashing the checks, since the signatures in the
checks are genuine.

Issue: 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.



G.R. No. L-26001 October 29, 1968
Lessons Applicable:

Forgery (Negotiable Instruments Law)

Liabilities of the parties (Negotiable Instruments Law)

FACTS:
January 15, 1962: Augusto Lim deposited in his current account with the PCIB
branch at Padre Faura, Manila a GSIS Check of P57,415.00 drawn against the PNB

PCIB stamped the following on the back of the check: "All prior indorsements and/or
Lack of Endorsement Guaranteed, Philippine Commercial and Industrial Bank,"
Padre Faura Branch, Manila

Same date: following an established banking practice in the Philippines, the check
was forwarded for clearing through the Central Bank to the PNB

did not return said check the next day, or at any other time, but retained it and paid
its amount to the PCIB, as well as debited it against the account of the GSIS in the
PNB

PNB received a formal notice from the GSIS that the check had been lost, with the
request that payment thereof be stopped

January 31, 1962: Upon demand from the GSIS, the P57,415.00 was re-credited to
them bec. the signatures of its officers on the check were forged

signatures of the General Manager and the Auditor of the GSIS on the check, as
drawer, are forged

payee Mariano D. Pulido indorsed it to Manuel Go and then indorsed by Manuel Go

to Augusto Lim

February 2, 1962: PNB demanded from the PCIB the refund

 PNB filed against the PCIB

CA affirmed CFI: dismissed

ISSUE: W/N PCIB as indorser is liable despite the fact that the check is forged when
PNB is also negligent

HELD: NO. Affirmed

PCIB stamped on the back of the check: "All prior indorsements and/or Lack of
Endorsement Guaranteed, Philippine Commercial and Industrial Bank," Padre Faura
Branch, Manila

indorsements falsified is immaterial to the PNB's liability as a drawee, or to its right

to recover from the PCIB, for, as against the drawee, the indorsement of an
intermediate bank does not guarantee the signature of the drawer, since the forgery
of the indorsement is not the cause of the loss.

Guaranteed not the authenticity of the signatures of the officers of the GSIS who
signed because the GSIS is not an indorser of the check, but its drawer

warranty is irrelevant to the PNB's alleged right to recover from the PCIB

in general, "acceptance" is not required for checks since they are payable on
demand

acceptance

promise to perform an act

the acceptance of a bill is the signification by the drawee of his assent to the order
of the drawer

payment

actual performance

compliance with obligation

PNB had been guilty of a greater degree of negligence, because it had a previous
and formal notice from the GSIS that the check had been lost, with the request that
payment thereof be stopped

PNB's negligence was the main or proximate cause for the corresponding loss

PNB did not return the check

when 1 of 2 innocent persons must suffer by the wrongful act of a third person, the
loss must be borne by the one whose negligence was the proximate cause of the
loss or who put it into the power of the third person to perpetrate the wrong
 where the collecting (PCIB) and the drawee (PNB) banks are equally at fault, the
court will leave the parties where it finds them

applies in the case of a drawee who pays a bill without having previously accepted it

Section 62 of Act No. 2031 provides

The acceptor by accepting the instrument engages that he will pay it according to the
tenor of hisacceptance; and admits:
(a) The existence of the drawer, the genuineness of his signature, and his capacity and
authority to
draw the instrument; and
(b) The existence of the payee and his then capacity to indorse.




G.R. No. L-56169 June 26, 1992
Lessons Applicable: Consideration and Accomodation Party (Negotiable Instruments)

FACTS:
Arturo S. Miranda
had a revolving credit line with Travel-On. Inc. (Travel-On), a travel agency selling airline tickets on
commission basis for and in behalf of different airline companies
procured tickets from Travel-On on behalf of airline passengers and derived commissions therefrom.
June 14 1972: Travel-On filed bef. the CFI to collect 6 checks issued by
Miranda totaling P115,000.00
August 5 1969 - January 16 1970: Travel-On sold and delivered airline tickets to Miranda w/ total
price of P278,201.57
paid in cash and 6 checks = P115,000 - all dishonored by the drawee banks
March 1972: paid P10,000.00 reducing his debts to P105,000
Miranda: checks were issued for to "accommodate" Travel-On's General Manager to show the BOD of
Travel-On that their receivables were still good
Travel-On's witness, Elita Montilla: related to situations where its passengers needed money in Hongkong,
and upon request of Travel-On, Miranda would contact his friends in Hongkong to advance Hongkong
money to the passenger
CA affirmed CFI: ordered Travel-On to pay Miranda P8,894.91 representing net overpayments by private
respondent, moral damages of P10,000.00 (later increased to P50,000 by CFI and reduced by CA to
P20,000) for the wrongful issuance of the writ of attachment and for the filing of this case, P5,000.00 for
attorney's fees and the costs of the suit - decision was because Travel-On did not show that Miranda had
an outstanding balance of P115,000.00
ISSUE: W/N Miranda is liable for the 6 dishonored checks because there was no accomodation

HELD: YES. GRANT due course to the Petition for Review on Certiorari and to REVERSE and SET ASIDE
the Decision of the CA and trial court
failed to give due importance the checks themselves as evidence of the debt
check which is regular on its face is deemed prima facie to have been issued for a valuable consideration
and every person whose signature appears thereon is deemed to have become a party thereto for value.
 negotiable instrument is presumed to have been given or indorsed for a sufficient consideration unless
otherwise contradicted and overcome by other competent evidence
Those checks in themselves constituted evidence of indebtedness of Miranda, evidence not successfully
overturned or rebutted by private respondent.
While the Negotiable Instruments Law does refer to accommodation transactions, no such transaction was
here shown
Sec. 29. Liability of accommodation party. An accommodation party is one who has signed the
instrument as maker, drawer, acceptor, or indorser, without receiving value therefor, and for the purpose
of lending his name to some other person. Such a person is liable on the instrument to a holder for value,
notwithstanding such holder, at the time of taking the instrument, knew him to be only an accommodation
party.
Having issued or indorsed the check, the accommodating party has warranted to the holder in due course
that he will pay the same according to its tenor.
Travel-On obviously was not an accommodated party; it realized no value on the checks which bounced.