Case Digest (G.R. No. 117964)
Facts:
Bank of America NT & SA (Petitioner) maintained Current Account No. 58891-012 of Philippine Racing Club (Respondent). In December 1988 two pre-signed checks (Nos. 401116 and 401117) for P110,000 each were stolen from the respondent’s accountant and were encashed by the petitioner on December 16, 1988 despite irregular entries (typewritten “CASH” and the amount in words on the payee blank). The RTC of Makati, Branch 135 rendered judgment for the respondent ordering payment of P220,000 plus interest, attorney’s fees and litigation expenses; the Court of Appeals affirmed on July 16, 2001 and denied reconsideration on September 28, 2001; the Supreme Court resolved the petition by decision dated July 30, 2009.Issues:
- Was the proximate cause of the loss the alleged failure of Petitioner to verify the checks or the practice of Respondent in pre-signing blank checks?
- Did Petitioner have a duty to inquire or verify the irregular checks under the Negotiable Instruments Law?
- Are t
Case Digest (G.R. No. 117964)
Facts:
- Background of the dispute and parties
- Philippine Racing Club, Inc. (PRCI) was a domestic corporation that maintained several bank accounts in Metro Manila, including Current Account No. 58891-012.
- Bank of America NT & SA (BA) was the drawee bank holding PRCI's Current Account No. 58891-012 at its Paseo de Roxas Branch.
- Authorized signatories and pre-signed checks practice
- PRCI's authorized joint signatories for the account were its President, Antonia Reyes, and its Vice-President for Finance, Gregorio Reyes.
- In the second week of December 1988 the two signatories pre-signed several checks before departing abroad and entrusted the pre-signed checks to the company accountant with instructions that the accountant would prepare vouchers and complete the entries as needs arose.
- Presentation and irregularities of the subject checks
- On December 16, 1988 a person identified as John Doe presented checks Nos. 401116 and 401117 for encashment at BA, each bearing an indicated value of One Hundred Ten Thousand Pesos (P110,000.00).
- The two checks were among those pre-signed by PRCI's authorized signatories and bore conspicuous irregularities: in the payee space the typewritten two-line entries "CASH" above "ONE HUNDRED TEN THOUSAND PESOS ONLY" and the amount in figures was entered by a check writer in the amount space.
- BA encashed the checks without verifying the legitimacy of the checks with PRCI despite the irregularities; a telephone verification would have taken less than ten minutes according to the record.
- Discovery, criminal charge, and demand
- PRCI's investigation established that no corporate transaction justified payment of P220,000.00 and that the pre-signed checks had come into the hands of an employee, Clarita Mesina, who was subsequently criminally charged with qualified theft.
- PRCI demanded payment from BA, which denied liability, prompting PRCI to file civil suit.
- Proceedings and judgments below
- The Regional Trial Court (RTC) of Makati, Branch 135 rendered a Decision dated March 17, 1994 in Civil Case No. 89-5650 ordering BA to pay PRCI: (a) P220,000.00 with legal interest from filing; (b) P20,000.00 attorney's fees; (c) P10,000.00 litigation expenses; and (d) costs of suit.
- The former Second Division of the Court of Appeals affirmed the RTC Decision in a Decision promulgated July 16, 2001 and denied BA's Motion for Reconsideration by Resolution dated September 28, 2001.
- BA filed a petition for review on certiorari under Rule 45 to the Supreme Court (G.R. No. 150228).
- Contentions of the parties as presented to the Supreme Court
- Petitioner Bank of America NT & SA contended that its duty was to pay instruments bearing the genuine signatures of its drawer-cl...(Subscriber-Only)
Issues:
- Primary factual-legal issue
- Whether the proximate cause of PRCI's loss was BA's encashment without verification of the irregular checks or PRCI's practice of pre-signing blank checks entrusted to its employee.
- Bank's duties and applicability of the Negotiable Instruments Law
- Whether BA, as drawee bank, had a duty to verify or inquire before honoring the checks despite genuine signatures and absence of a material alteration under Sec. 125.
- Whether Sec. 14, Sec. 15, and Sec. 16 of the NIL rendered BA's encashment justified by presumption of authority, valid delivery, or completion of blanks.
- Doctrinal allocation of liability and damages
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Ruling:
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Ratio:
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Doctrine:
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