GR 150228; (July, 2009) (Digest)
G.R. No. 150228 ; July 30, 2009
BANK OF AMERICA NT & SA, Petitioner, vs. PHILIPPINE RACING CLUB, INC., Respondent.
FACTS
Philippine Racing Club, Inc. (PRCI) maintained a current account with Bank of America (BA). Before traveling abroad, PRCI’s authorized signatories pre-signed several blank checks and entrusted them to an accountant for use as needed. Two of these checks, later completed without authority by an employee, were presented for encashment at BA. The checks were irregular on their face: the payee line contained the word “CASH” typed above the amount in words (“ONE HUNDRED TEN THOUSAND PESOS ONLY”). BA encashed the checks for a total of P220,000.00 without any verification. PRCI later discovered the fraudulent encashment, as no corporate transaction justified the payments. PRCI demanded reimbursement from BA, which refused, prompting PRCI to file a complaint.
ISSUE
Whether the proximate cause of the loss was BA’s negligence in encashing the irregular checks or PRCI’s negligence in pre-signing blank checks and entrusting them to an employee.
RULING
The Supreme Court affirmed the lower courts’ rulings, holding BA liable. The proximate cause of the loss was BA’s failure to exercise the diligence of a good father of a family in performing its contractual obligation to its depositor. While PRCI was negligent in pre-signing blank checks, this act merely furnished the condition for the loss. The efficient intervening cause was BA’s failure to detect the glaring irregularities on the face of the checks and to make a simple verification. The checks were not “complete and regular” upon their presentment, as the placement of “CASH” on the payee line was highly irregular and should have alerted the bank. BA’s duty of care required it to act with extraordinary diligence, and its omission to verify the legitimacy of the checks, given the obvious facial defects and substantial amounts, constituted gross negligence. This negligence severed any causal connection between PRCI’s earlier act and the loss. The award of attorney’s fees was sustained as PRCI was compelled to litigate to protect its interest.