Banking, Mercantile Law

BANK OF AMERICA NT & SA v. PHILIPPINE RACING CLUB G.R. No. 150228 July 30, 2009 Last Clear Chance Doctrine


The President and Vice President of respondent PRCI corporation were scheduled to go out of the country in connection with the corporation’s business. In order not to disrupt operations in their absence, they pre-signed several checks relating to the corporation’s  Current Account with BA to insure continuity of plaintiff-appellee’s operations by making available cash/money to settle obligations that might become due. These checks were entrusted to the accountant with instruction to make use of the same as the need arose.

A John Doe presented to BA for encashment a couple of PRCI’s presigned checks.

The two checks had similar entries with similar infirmities and irregularities. On the space where the name of the payee should be indicated, appeared 2-lines, on the upper line was the word “CASH” while the lower line had the following typewritten words: “ONE HUNDRED TEN THOUSAND PESOS ONLY.” Appellant bank encashed said checks.

The checks actually came into the hands of an employee of PRCI who completed the pre-signed checks without authority. PRCI’s demand for defendant-appellant to pay fell on deaf ears. Hence, the complaint.

The trial court rendered a Decision in favor of PRCI, and ordered BA to pay plaintiff.

Petitioner appealed to the CA which, however, affirmed said decision in toto. After denial of the MR,

Petitioner now comes before this Court.


Whether the proximate cause of the wrongful encashment of the checks in question was due to (a) petitioner’s failure to make a verification regarding the said checks with the respondent in view of the misplacement of entries on the face of the checks or (b) the practice of the respondent of pre-signing blank checks and leaving the same with its employees.


It is well-settled that banks are engaged in a business impressed with public interest, and it is their duty to protect in return their many clients and depositors who transact business with them. They have the obligation to treat their client’s account meticulously and with the highest degree of care, considering the fiduciary nature of their relationship. The diligence required of banks, therefore, is more than that of a good father of a family.

In the case at bar, extraordinary diligence demands that petitioner should have ascertained from respondent the authenticity of the subject checks or the accuracy of the entries therein not only because of the presence of highly irregular entries on the face of the checks but also of the decidedly unusual circumstances surrounding their encashment.

Perforce, we find that petitioner plainly failed to adhere to the high standard of diligence expected of it as a banking institution.

However, we do agree with petitioner that respondent’s officers’ 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 respondent’s officers and managers that the pre-signed blank checks could fall into the wrong hands.

Nevertheless, even if we assume that both parties were guilty of negligent acts that led to the loss, petitioner will still emerge as the party foremost liable in this case. In instances where both parties are at fault, this Court has consistently applied the doctrine of last clear chance in order to assign liability.

In Westmont Bank v. Ong, we ruled:

…[I]t is petitioner [bank] which had the last clear chance to stop the fraudulent encashment of the subject checks had it exercised due diligence and followed the proper and regular banking procedures in clearing checks. As we had earlier ruled, the one who had a last clear opportunity to avoid the impending harm but failed to do so is chargeable with the consequences thereof.

In the case at bar, petitioner cannot evade responsibility for the loss by attributing negligence on the part of respondent because, even if we concur that the latter was indeed negligent in pre-signing blank checks, the former had the last clear chance to avoid the loss.

Verily, petitioner had the final opportunity to avert the injury that befell the respondent.

In the interest of fairness, however, we believe it is proper to consider respondent’s own negligence to mitigate petitioner’s liability.

Following established jurisprudential precedents, we believe the allocation of sixty percent (60%) of the actual damages involved in this case to petitioner is proper under the premises. Respondent should, in light of its contributory negligence, bear forty percent (40%) of its own loss.

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