[05]  BANK  OF  AMERICA  NT  &  SA  v  PHILIPPINE  RAING  CLUB,  INC  (PRCI)   PRECEDENTS:  

GR  No.  150228  |  July  30,  2009    

Ponente,  Leonardo-­‐‑De  Castro,  J.   FACTS:  
Rhoda  P.  Reventar   •   PRCI   is   a   domestic   corporation   and   maintains   several   accounts.   Among   the  
  accounts   maintained   was   a   Current   Account   with   Bank   of   America   (Paseo   de  
PETITONERS/PROSECUTORS:  BANK  OF  AMERICA  NT  &  SA   Roxas  Branch).  
RESPONDENTS/DEFENDANTS:  PHILIPPINE  RAING  CLUB,  INC  (PRCI)   •   Authorized  signatories  are  President  Antonia  Reyes  and  Vice-­‐‑President  Gregorio  
  Reyes  
TOPIC:     •   Around  the  2nd  week  of  December  1988,  the  Pres.  and  VP  went  out  of  the  country  
•   Execution  in  blank,  with  delivery   and   left   pre-­‐‑signed   checks   with   the   intention   of   insuring   the   continuity   of   the  
  corporation’s   operations.   The   internal   arrangement   was,   in   the   event   there   was  
CASE  SUMMARY:  RESP  PRCI  had  two  signatories  for  their  current  account  with  PET   need  to  make  use  of  the  checks,  the  accountant  would  prepare  the  corresponding  
Bank  od  America.  Both  went  to  the  USA  for  a  business  trip  and  left  pre-­‐‑signed  checks   voucher  and  thereafter  complete  the  entries  on  the  pre-­‐‑signed  checks.  
in  order  not  to  disrupt  their  business  operations.  Two  checks  were  encashed  despite   •   On  Dec.  16,  1988,  a  John  Doe  presented  to  the  bank  for  encashment.  Two  checks  
having  infirmities  and  irregulaties.  The  space  where  the  name  of  the  payee  should  be   with   110,000php   each   (PRCI   admitted   that   these   2   were   among   the   pre-­‐‑signed  
indicated,  2  typewritten  entries  were  made.  On  the  upper  line,  CASH  and  on  the  lower   checks).  
line,  ONE  HUNDRED  TEN  THOUSAND  PESOS  ONLY.  It  was  later  found  out  that  it   o   2  checks  had  similar  entries  with  similar  infirmities  and  irregularities  
was   RESP’s   clerk   who   completed   the   check   without   authority.   The   clerk   was   o   Space  where  the  name  of  the  payee  should  be  indicated  (Pay  To  the  Order  
subsequently   charged   with   qualified   theft.   RESP   field   an   action   against   the   bank   in   Of),  2-­‐‑line  typewritten  entries  were  made:  
order  to  recover  the  amount  drawn.  RTC  and  CA  ruled  in  favor  of  the  RESP.  Affirmed   §   Upper  Line:  CASH  
with  modification  by  the  SC.  Bank  is  60%  liable  while  RESP  should  bear  the  40%.   §   Lower  Line:  ONE  HUNDRED  TEN  THOUSAND  PESOS  ONLY  
  •   The  checks  were  encashed  despite  the  highly  irregular  entries  on  the  face  of  the  
DOCTRINE:   checks   without   as   much   as   verifying   and/or   confirming   the   legitimacy   of   the  
Although   not   in   the   strict   sense   “material   alterations,”   the   misplacement   of   the   check.  
typewritten   entries   for   the   payee   and   the   amount   on   the   same   blank   and   the   •   PRCI  conducted  an  investigation  and  found  out  that  its  accounting  clerk,  Clarita  
repetition  of  the  amount  using  a  check  writer  were  glaringly  obvious  irregularities   Mesina,  completed  the  check  without  authority.  She  was  subsequently  charged  
on  the  face  of  the  check.   for  qualified  theft.  
  •   PRCI   demands   for   the   bank   to   pay   the   amounts   drawn.   RTC   and   CA   ruled   in  
TERMS:  (technical/legal  terms)   favor  of  PRCI.  
•   Material  alteration  (§125,  NIL)  –  one  which  changes  the  date,  the  sum  payable,    
the  time  or  place  of  payment,  the  number  or  relations  of  the  parties,  the  currency   ISSUES  and  RULING:  (Doctrine  in  bold  letters)  
in  which  payment  is  to  be  made  or  one  which  adds  a  place  of  payment  where  no   •   Whether  the  proximate  case  of  the  wrongful  encashment  of  the  checks  was  due  
place   of   payment   is   specified,   or   any   other   change   or   addition   which   alters   the   to   the   bank’s   failure   to   make   a   verification   or   PRCI’s   practice   of   pre-­‐‑signing  
effect  of  the  instrument  in  ay  respect   blank   checks   and   leaving   it   with   its   employees?   –   BOTH   are   liable,   Bank   for  
•   Last   clear   chance   (Westmont   Bank   v.   Ong)   -­‐‑   the   one   who   had   a   last   clear   60%  of  the  amount  and  PRCI  for  40%.  
opportunity  to  avoid  the  impending  harm  but  failed  to  do  so  is  chargeable  with   o   There  is  no  dispute  that  the  signature  on  the  checks  were  genuine  signatures  
the  consequences  thereof.     of   the   authorized   signatories.   It   is   likewise   admitted   that   neither   the   of   the  
  checks  contains  any  material  alteration  or  erasure.  
o   However,   on   the   blank   space   of   each   check   reserved   for   the   payee,   the   and  a  highly  risky  means  of  purportedly  ensuring  the  efficient  operation  of  
following   typewritten   word   appear:   ONE   HUNDRED   TEN   THOUSAND   businesses.    
PESOS  ONLY.  Above  the  same  is  the  typrewritten  word,  CASH.   o   Nevertheless,  even  if  we  assume  that  both  parties  were  guilty  of  negligent  acts  
o   On  the  blank  reserved  for  the  amount,  the  same  amount  of  One  Hundred  Ten   that  led  to  the  loss,  petitioner  will  still  emerge  as  the  party  foremost  liable  in  
Thousand  Pesos  was  indicated  with  the  use  of  a  check  writer.     this   case.   In   instances   where   both   parties   are   at   fault,   this   Court   has  
o   The   presence   of   these   irregularities   in   each   check   should   have   alerted   the   consistently   applied   the   doctrine   of   last   clear   chance   in   order   to   assign  
petitioner  to  be  cautious  before  proceeding  to  encash  them  which  it  did  not   liability.    
do.     o   In   the   case   at   bar,   petitioner   cannot   evade   responsibility   for   the   loss   by  
§   It  is  well-­‐‑settled  that  banks  are  engaged  in  a  business  impressed  with   attributing  negligence  on  the  part  of  respondent  because,  even  if  we  concur  
public   interest,   and   it   is   their   duty   to   protect   in   return   their   many   that  the  latter  was  indeed  negligent  in  pre-­‐‑signing  blank  checks,  the  former  
clients  and  depositors  who  transact  business  with  them.  They  have  the   had  the  last  clear  chance  to  avoid  the  loss.    
obligation   to   treat   their   client’s   account   meticulously   and   with   the   o   Petitioner’s  negligence  has  been  undoubtedly  established  and,  thus,  pursuant  
highest   degree   of   care,   considering   the   fiduciary   nature   of   their   to  Art.  1170  of  the  NCC,  it  must  suffer  the  consequence  of  said  negligence.    
relationship.  The  diligence  required  of  banks,  therefore,  is  more  than   o   In   the   interest   of   fairness,   however,   we   believe   it   is   proper   to   consider  
that  of  a  good  father  of  a  family.     respondent’s  own  negligence  to  mitigate  petitioner’s  liability.    
o    Although  not  in  the  strict  sense  “material  alterations,”  the  misplacement  of   o   As   the   employer   of   the   “thief,”   respondent   supposedly   had   control   and  
the  typewritten  entries  for  the  payee  and  the  amount  on  the  same  blank  and   supervi sion   over   its   own   employee.   This   gives   the   Court   more   reason   to  
the  repetition  of  the  amount  using  a  check  writer  were  glaringly  obvious   allocate  part  of  the  loss  to  respondent.    
irregularities  on  the  face  of  the  check.      
o   Clearly,  someone  made  a  mistake  in  filling  up  the  checks  and  the  repetition  of   •   WON  there  was  delivery?  NO  
the  entries  was  possibly  an  attempt  to  rectify  the  mistake.  Also,  if  the  check   o   PET:  following  American  jurisprudence,  the  gross  negligence  of  respondent’s  
had  been  filled  up  by  the  person  who  customarily  accomplishes  the  checks  of   accountant   in   safekeeping   the   subject   checks   which   resulted   in   their   theft  
respondent,  it  should  have  occurred  to  petitioner’s  employees  that  it  would   should  be  treated  as  a  voluntary  delivery  by  the  maker  who  is  estopped  from  
be  unlikely  such  mistakes  would  be  made.     claiming  non-­‐‑delivery  of  the  instrument.    
o   All  these  circumstances  should  have  alerted  the  bank  to  the  possibility  that   o   SC:  Petitioner’s  contention  would  have  been  correct  if  the  subject  checks  were  
the  holder  or  the  person  who  is  attempting  to  encash  the  checks  did  not  have   correctly  and  properly  filled  out  by  the  thief  and  presented  to  the  bank  in  good  
proper  title  to  the  checks  or  did  not  have  authority  to  fill  up  and  encash  the   order.    
same.     o   In   that   instance,   there   would   be   nothing   to   give   notice   to   the   bank   of   any  
o   As   noted   by   the   CA,   petitioner   could   have   made   a   simple   phone   call   to   its   infirmity  in  the  title  of  the  holder  of  the  checks  and  it  could  validly  presume  
client   to   clarify   the   irregularities   and   the   loss   to   respondent   due   to   the   that  there  was  proper  delivery  to  the  holder.  The  bank  could  not  be  faulted  if  
encashment  of  the  stolen  checks  would  have  been  prevented.     it  encashed  the  checks  under  those  circumstances.    
o   In   the   case   at   bar,   extraordinary   diligence   demands   that   petitioner   should   o   However,   the   undisputed   facts   plainly   show   that   there   were   circumstances  
have  ascertained  from  respondent  the  authenticity  of  the  subject  checks  or  the   that  should  have  alerted  the  bank  to  the  likelihood  that  the  checks  were  not  
accuracy   of   the   entries   therein   not   only   because   of   the   presence   of   highly   properly  delivered  to  the  person  who  encashed  the  same.    
irregular  entries  on  the  face  of  the  checks  but  also  of  the  decidedly  unusual    
circumstances  surrounding  their  encashment.     DISPOSITIVE:  WHEREFORE,  the  Decision  of  the  Court  of  Appeals  dated  July  16,  
o   However,  we  do  agree  with  petitioner  that  respondent’s  officers’  practice  of   2001  and  its  Resolution  dated  September  28,  2001  are  AFFIRMED  with  the  following  
pre-­‐‑signing  of  blank  checks  should  be  deemed  seriously  negligent  behavior   MODIFICATIONS:  (a)  petitioner  Bank  of  America  NT  &  SA  shall  pay  to  respondent  
Philippine   Racing   Club   sixty   percent   (60%)   of   the   sum   of   Two   Hundred   Twenty   4)   In  case  of  a  clearly  unfounded  civil  action  or  proceeding  against  the  
Thousand  Pesos  (P220,000.00)  with  legal  interest  as  awarded  by  the  trial  court  and   plaintiff;  
(b)  the  awards  of  attorney’s  fees  and  litigation  expenses  in  favor  of  respondent  are   5)   Where  the  defendant  acted  in  gross  and  evident  bad  faith  in  refusing  to  
satisfy  the  plaintiff'ʹs  plainly  valid,  just  and  demandable  claim;  
deleted.    
6)   In  actions  for  legal  support;  
 
7)    In  actions  for  the  recovery  of  wages  of  household  helpers,  laborers  and  
PROVISIONS:   skilled  workers;  
8)   In  actions  for  indemnity  under  workmen'ʹs  compensation  and  employer'ʹs  
•   NIL:  §126.      Bill  of  exchange,  defined.  -­‐‑  A  bill  of  exchange  is  an  unconditional  order  
liability  laws;  
in   writing   addressed   by   one   person   to   another,   signed   by   the   person   giving   it,   9)   In  a  separate  civil  action  to  recover  civil  liability  arising  from  a  crime;  
requiring  the  person  to  whom  it  is  addressed  to  pay  on  demand  or  at  a  fixed  or   10)  When  at  least  double  judicial  costs  are  awarded;  
determinable  future  time  a  sum  certain  in  money  to  order  or  to  bearer.     11)  In  any  other  case  where  the  court  deems  it  just  and  equitable  that  
•   NIL:  §185.      Check,  defined.  -­‐‑  A  check  is  a  bill  of  exchange  drawn  on  a  bank  payable   attorney'ʹs  fees  and  expenses  of  litigation  should  be  recovered.  
on   demand.   Except   as   herein   otherwise   provided,   the   provisions   of   this   Act    
applicable  to  a  bill  of  exchange  payable  on  demand  apply  to  a  check.  
•    NIL:  §125.  What  constitutes  a  material  alteration.  -­‐‑  Any  alteration  which  
1)  
The  date;  
2)  
The  sum  payable,  either  for  principal  or  interest;    
3)  
The  time  or  place  of  payment;  
4)  
The  number  or  the  relations  of  the  parties;  
5)  
The  medium  or  currency  in  which  payment  is  to  be  made;    
6)  
Or  which  adds  a  place  of  payment  where  no  place  of  payment  is  specified,  
or  any  other  change  or  addition  which  alters  the  effect  of  the  instrument  in  
any  respect,  is  a  material  alteration.  
•   NIL,   Sec.   15.   Incomplete   instrument   not   delivered.   -­‐‑   Where   an   incomplete  
instrument   has   not   been   delivered,   it   will   not,   if   completed   and   negotiated  
without  authority,  be  a  valid  contract  in  the  hands  of  any  holder,  as  against  any  
person  whose  signature  was  placed  thereon  before  delivery.    
•   NCC,  Art  1170.  Those  who  in  the  performance  of  their  obligations  are  guilty  of  
fraud,  negligence,  or  delay,  and  those  who  in  any  manner  contravene  the  tenor  
thereof,  are  liable  for  damages.  
•   NCC,  Art  2179.  Art.  2179.  When  the  plaintiff'ʹs  own  negligence  was  the  immediate  
and  proximate  cause  of  his  injury,  he  cannot  recover  damages.  But  if  his  negligence  
was  only  contributory,  the  immediate  and  proximate  cause  of  the  injury  being  the  
defendant'ʹs   lack   of   due   care,   the   plaintiff   may   recover   damages,   but   the   courts  
shall  mitigate  the  damages  to  be  awarded.  (n)  
•    NCC,  Art  2208.  Art.  2208.  In  the  absence  of  stipulation,  attorney'ʹs  fees  and  
expenses  of  litigation,  other  than  judicial  costs,  cannot  be  recovered,  except:  
1)   When  exemplary  damages  are  awarded;  
2)   When  the  defendant'ʹs  act  or  omission  has  compelled  the  plaintiff  to  litigate  
with  third  persons  or  to  incur  expenses  to  protect  his  interest;  
3)    In  criminal  cases  of  malicious  prosecution  against  the  plaintiff;