|
BANK OF AMERICA NT & SA,
Petitioner, -versus- PHILIPPINE RACING CLUB,
Respondent. |
G.R. No. 150228 Present: pUNO,
C.J., Chairperson, CARPIO,
LEONARDO-DE CASTRO, and BERSAMIN, JJ. Promulgated: July 30, 2009 |
x-----------------------------------------------------------------------------------------x
LEONARDO-DE
CASTRO, J.:
This is a petition for review on certiorari under Rule 45 of the Rules
of Court from the Decision[1]
promulgated on July 16, 2001 by the former Second Division of the Court of
Appeals (CA), in CA-G.R. CV No. 45371
entitled “Philippine Racing Club, Inc. v.
Bank of America NT & SA,” affirming the Decision[2]
dated March 17, 1994 of the Regional Trial Court (RTC) of Makati, Branch 135 in
Civil Case No. 89-5650, in favor of
the respondent. Likewise, the present
petition assails the Resolution[3]
promulgated on
The facts of this case as narrated in the assailed
CA Decision are as follows:
Plaintiff-appellee PRCI is a domestic corporation which maintains
several accounts with different banks in the Metro Manila area. Among the accounts maintained was Current
Account No. 58891-012 with defendant-appellant BA (Paseo de Roxas Branch). The authorized joint signatories with respect
to said Current Account were plaintiff-appellee’s President (Antonia Reyes) and
Vice President for Finance (Gregorio Reyes).
On or about the 2nd week of December 1988, the President and
Vice President of plaintiff-appellee 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 Current Account No.
58891-012. The intention was to insure
continuity of plaintiff-appellee’s operations by making available cash/money
especially 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. The internal arrangement was, in the event
there was need to make use of the checks, the accountant would prepare the
corresponding voucher and thereafter complete the entries on the pre-signed
checks.
It turned out that on December 16, 1988, a John Doe presented to
defendant-appellant bank for encashment a couple of plaintiff-appellee
corporation’s checks (Nos. 401116 and 401117) with the indicated value of
P110,000.00 each. It is admitted that
these 2 checks were among those presigned by plaintiff-appellee corporation’s
authorized signatories.
The two (2) checks had similar entries with similar infirmities and
irregularities. On the space where the
name of the payee should be indicated (Pay To The Order Of) the following
2-line entries were instead typewritten: on the upper line was the word “CASH”
while the lower line had the following typewritten words, viz: “ONE HUNDRED TEN
THOUSAND PESOS ONLY.” Despite the highly
irregular entries on the face of the checks, defendant-appellant bank, without
as much as verifying and/or confirming the legitimacy of the checks considering
the substantial amount involved and the obvious infirmity/defect of the checks
on their faces, encashed said checks. A
verification process, even by was of a telephone call to PRCI office, would
have taken less than ten (10) minutes. But this was not done by BA. Investigation conducted by plaintiff-appellee
corporation yielded the fact that there was no transaction involving PRCI that
call for the payment of P220,000.00 to anyone. The checks appeared to have come into the
hands of an employee of PRCI (one Clarita Mesina who was subsequently
criminally charged for qualified theft) who eventually completed without
authority the entries on the pre-signed checks. PRCI’s demand for
defendant-appellant to pay fell on deaf ears. Hence, the complaint.[4]
After due proceedings, the trial court rendered a
Decision in favor of respondent, the dispositive portion of which reads:
PREMISES
CONSIDERED, judgment is hereby rendered in favor of plaintiff and against the
defendant, and the latter is ordered to pay plaintiff:
(1)
The sum of Two Hundred Twenty Thousand (P220,000.00)
Pesos, with legal interest to be computed from date of the filing of the herein
complaint;
(2)
The sum of Twenty Thousand (P20,000.00)
Pesos by way of attorney’s fees;
(3)
The sum of Ten Thousand (P10,000.00) Pesos
for litigation expenses, and
(4)
To pay the costs of suit.
SO
ORDERED.[5]
Petitioner appealed the aforesaid trial court
Decision to the CA which, however, affirmed said decision in toto in its July 16, 2001 Decision. Petitioner’s Motion for Reconsideration of the CA Decision was
subsequently denied on September 28, 2001.
Petitioner now comes before this Court arguing
that:
I.
The Court of Appeals gravely erred in holding that
the proximate cause of respondent’s loss was petitioner’s encashment of the
checks.
A. The
Court of Appeals gravely erred in holding that petitioner was liable for the
amount of the checks despite the fact that petitioner was merely fulfilling its
obligation under law and contract.
B. The Court
of Appeals gravely erred in holding that petitioner had a duty to verify the
encashment, despite the absence of any obligation to do so.
C. The
Court of Appeals gravely erred in not applying Section 14 of the Negotiable
Instruments Law, despite its clear applicability to this case;
II.
The Court of Appeals gravely erred in not holding
that the proximate cause of respondent’s loss was its own grossly negligent
practice of pre-signing checks without payees and amounts and delivering these
pre-signed checks to its employees (other than their signatories).
III.
The Court of Appeals gravely erred in affirming the
trial court’s award of attorney’s fees despite the absence of any applicable
ground under Article 2208 of the Civil Code.
IV.
The Court of Appeals gravely erred in not awarding
attorney’s fees, moral and exemplary damages, and costs of suit in favor of
petitioner, who clearly deserves them.[6]
From the discussions of both parties in their
pleadings, the key issue to be resolved in the present case is 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.
Petitioner insists that it merely fulfilled its
obligation under law and contract when it encashed the aforesaid checks. Invoking Sections 126[7]
and 185[8]
of the Negotiable Instruments Law (NIL), petitioner claims that its duty as a
drawee bank to a drawer-client maintaining a checking account with it is to pay
orders for checks bearing the drawer-client’s genuine signatures. The genuine signatures of the client’s duly
authorized signatories affixed on the checks signify the order for payment. Thus, pursuant to the said obligation, the
drawee bank has the duty to determine whether the signatures appearing on the
check are the drawer-client’s or its duly authorized signatories. If the signatures are genuine, the bank has
the unavoidable legal and contractual duty to pay. If the signatures are forged and falsified,
the drawee bank has the corollary, but equally unavoidable legal and
contractual, duty not to pay.[9]
Furthermore, petitioner maintains that there exists
a duty on the drawee bank to inquire from the drawer before encashing a check
only when the check bears a material alteration. A material alteration is defined in Section
125 of the NIL to be one which changes the date, the sum payable, the time or
place of payment, the number or relations of the parties, the currency in which
payment is to be made or one 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. With
respect to the checks at issue, petitioner points out that they do not contain
any material alteration.[10] This is a fact which was affirmed by the
trial court itself.[11]
There
is no dispute that the signatures appearing on the subject checks were genuine
signatures of the respondent’s authorized joint signatories; namely, Antonia
Reyes and Gregorio Reyes who were respondent’s President and Vice-President for
Finance, respectively. Both pre-signed
the said checks since they were both scheduled to go abroad and it was
apparently their practice to leave with the company accountant checks signed in
black to answer for company obligations that might fall due during the
signatories’ absence. It is likewise
admitted that neither of the subject checks contains any material alteration or
erasure.
However,
on the blank space of each check reserved for the payee, the following
typewritten words appear: “ONE
HUNDRED TEN THOUSAND PESOS ONLY.” Above
the same is the typewritten word, “CASH.”
On the blank reserved for the amount, the same amount of One Hundred Ten
Thousand Pesos was indicated with the use of a check writer. The presence of these irregularities in each
check should have alerted the petitioner to be cautious before proceeding to
encash them which it did not do.
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.[12]
Petitioner asserts that it was not duty-bound to
verify with the respondent since the amount below the typewritten word “CASH,”
expressed in words, is the very same amount indicated in figures by means of a
check writer on the amount portion of the check. The amount stated in words is, therefore, a
mere reiteration of the amount stated in figures. Petitioner emphasizes that a
reiteration of the amount in words is merely a repetition and that a repetition
is not an alteration which if present and material would have enjoined it to
commence verification with respondent.[13]
We do not agree with petitioner’s myopic view and
carefully crafted defense. Although not
in the strict sense “material alterations,” the misplacement of the typewritten
entries for the payee and the amount on the same blank and the repetition of
the amount using a check writer were glaringly obvious irregularities on the
face of the check. Clearly, someone made
a mistake in filling up the checks and the repetition of the entries was
possibly an attempt to rectify the mistake.
Also, if the check had been filled up by the person who customarily
accomplishes the checks of respondent, it should have occurred to petitioner’s
employees that it would be unlikely such mistakes would be made. All these circumstances should have alerted
the bank to the possibility that the holder or the person who is attempting to
encash the checks did not have proper title to the checks or did not have
authority to fill up and encash the same.
As noted by the CA, petitioner could have made a simple phone call to
its client to clarify the irregularities and the loss to respondent due to the
encashment of the stolen checks would have been prevented.
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. Respondent’s witness testified that for checks
in amounts greater than Twenty Thousand Pesos (P20,000.00) it is the
company’s practice to ensure that the payee is indicated by name in the check.[14]
This was not rebutted by petitioner.
Indeed, it is highly uncommon for a corporation to make out checks payable to
“CASH” for substantial amounts such as in this case. If each irregular circumstance in this case
were taken singly or isolated, the bank’s employees might have been justified
in ignoring them. However, the
confluence of the irregularities on the face of the checks and circumstances
that depart from the usual banking practice of respondent should have put
petitioner’s employees on guard that the checks were possibly not issued by the
respondent in due course of its business.
Petitioner’s subtle sophistry cannot exculpate it from behavior that
fell extremely short of the highest degree of care and diligence required of it
as a banking institution.
Indeed, taking this with the testimony of
petitioner’s operations manager that in case of an irregularity on the face of
the check (such as when blanks were
not properly filled out) the bank may or may not call the client depending on
how busy the bank is on a particular day,[15]
we are even more convinced that petitioner’s safeguards to protect clients from
check fraud are arbitrary and subjective.
Every client should be treated equally by a banking institution
regardless of the amount of his deposits and each client has the right to
expect that every centavo he entrusts to a bank would be handled with the same
degree of care as the accounts of other clients. Perforce, we find that petitioner plainly
failed to adhere to the high standard of diligence expected of it as a banking
institution.
In defense of its cashier/teller’s questionable
action, petitioner insists that pursuant to Sections 14[16]
and 16[17]
of the NIL, it could validly presume, upon presentation of the checks, that the
party who filled up the blanks had authority and that a valid and intentional
delivery to the party presenting the checks had taken place. Thus, in petitioner’s view, the sole blame
for this debacle should be shifted to respondent for having its signatories
pre-sign and deliver the subject checks.[18] Petitioner argues that there was indeed
delivery in this case because, following American jurisprudence, the gross negligence
of respondent’s accountant in safekeeping the subject checks which resulted in
their theft should be treated as a voluntary delivery by the maker who is
estopped from claiming non-delivery of the instrument.[19]
Petitioner’s contention would have been correct if
the subject checks were correctly and properly filled out by the thief and
presented to the bank in good order. In
that instance, there would be nothing to give notice to the bank of any
infirmity in the title of the holder of the checks and it could validly presume
that there was proper delivery to the holder.
The bank could not be faulted if it encashed the checks under those
circumstances. However, the undisputed
facts plainly show that there were circumstances that should have alerted the
bank to the likelihood that the checks were not properly delivered to the
person who encashed the same. In all, we
see no reason to depart from the finding in the assailed CA Decision that the
subject checks are properly characterized as incomplete and undelivered
instruments thus making Section 15[20]
of the NIL applicable in this case.
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 as they did in this
case where the said checks were stolen from the company accountant to whom the
checks were entrusted.
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,[21] 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.[22]
(emphasis ours)
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. To reiterate, petitioner’s own operations
manager admitted that they could have called up the client for verification or
confirmation before honoring the dubious checks. Verily, petitioner had the final opportunity
to avert the injury that befell the respondent.
Failing to make the necessary verification due to the volume of banking
transactions on that particular day is a flimsy and unacceptable excuse,
considering that the “banking business is so impressed with public interest
where the trust and confidence of the public in general is of paramount
importance such that the appropriate standard of diligence must be a high
degree of diligence, if not the utmost diligence.”[23] Petitioner’s negligence has been undoubtedly
established and, thus, pursuant to Art. 1170 of the NCC,[24]
it must suffer the consequence of said negligence.
In the interest of fairness, however,
we believe it is proper to consider respondent’s own negligence to mitigate
petitioner’s liability. Article 2179 of the Civil Code provides:
Art.
2179. When the plaintiff’s 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’s lack of due care, the
plaintiff may recover damages, but the courts shall mitigate the damages to be
awarded.
Explaining this provision in Lambert v. Heirs of Ray Castillon,[25]
the Court held:
The
underlying precept on contributory negligence is that a plaintiff who is partly
responsible for his own injury should not be entitled to recover damages in
full but must bear the consequences of his own negligence. The defendant must
thus be held liable only for the damages actually caused by his negligence.
xxx xxx xxx
As we previously stated, respondent’s practice of
signing checks in blank whenever its authorized bank signatories would travel
abroad was a dangerous policy, especially considering the lack of evidence on
record that respondent had appropriate safeguards or internal controls to
prevent the pre-signed blank checks from falling into the hands of unscrupulous
individuals and being used to commit a fraud against the company. We cannot believe that there was no other
secure and reasonable way to guarantee the non-disruption of respondent’s
business. As testified to by
petitioner’s expert witness, other corporations would ordinarily have another
set of authorized bank signatories who would be able to sign checks in the
absence of the preferred signatories.[26] Indeed, if not for the fortunate happenstance
that the thief failed to properly fill up the subject checks, respondent would
expectedly take the blame for the entire loss since the defense of forgery of a
drawer’s signature(s) would be unavailable to it. Considering that respondent knowingly took
the risk that the pre-signed blank checks might fall into the hands of
wrongdoers, it is but just that respondent shares in the responsibility for the
loss.
We also cannot ignore the fact that the person who
stole the pre-signed checks subject of this case from respondent’s accountant
turned out to be another employee, purportedly a clerk in respondent’s
accounting department. As the employer
of the “thief,” respondent supposedly had control and supervision over its own
employee. This gives the Court more
reason to allocate part of the loss to respondent.
Following established jurisprudential precedents,[27]
we believe the allocation of sixty percent (60%) of the actual damages involved
in this case (represented by the amount of the checks with legal interest) to
petitioner is proper under the premises.
Respondent should, in light of its contributory negligence, bear forty
percent (40%) of its own loss.
Finally, we find that the awards of attorney’s fees
and litigation expenses in favor of respondent are not justified under the
circumstances and, thus, must be deleted.
The power of the court to award attorney’s fees and litigation expenses under
Article 2208 of the NCC[28]
demands factual, legal, and equitable justification.
An adverse decision does not ipso facto justify
an award of attorney’s fees to the winning party.[29] Even when a claimant is compelled to litigate
with third persons or to incur expenses to protect his rights, still attorney’s
fees may not be awarded where no sufficient showing of bad faith could be
reflected in a party’s persistence in a case other than an erroneous conviction
of the righteousness of his cause.[30]
WHEREFORE, the Decision of the Court of Appeals dated July
16, 2001 and its Resolution dated September 28, 2001 are AFFIRMED with the
following 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 Thousand Pesos (P220,000.00) with legal interest as
awarded by the trial court and (b) the awards of attorney’s fees and litigation
expenses in favor of respondent are deleted.
Proportionate
costs.
SO ORDERED.
TERESITA
J. LEONARDO-DE CASTRO
Associate
Justice
WE
CONCUR:
REYNATO S. PUNO
Chief Justice Chairperson |
|
|
ANTONIO T. CARPIO Associate
Justice |
RENATO C. CORONA Associate
Justice |
|
LUCAS P. BERSAMIN Associate
Justice |
|
Chief Justice
[1] Rollo, pp. 80-87.
[2] Id. at 122-126.
[3]
[4] Id. at 81-82.
[5]
[6]
[7] Sec. 126. Bill of exchange defined. – A bill of exchange is an unconditional order in writing addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to order or to bearer.
[8] Sec. 185. Check defined. — A check is a bill of
exchange drawn on a bank payable 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.
[9] Rollo, pp. 296-297.
[10]
[11]
[12] Samsung Construction Company Philippines, Inc. v. Far East Bank and Trust Company, Inc., G.R. No. 129015, August 13, 2004, 436 SCRA 402, 421.
[13]
[14] TSN, testimony of Carlos H. Reyes, October 1, 1991, p. 3.
[15] TSN, testimony of Rose Acuban, August 20, 1991, pp. 8-9.
[16] Sec. 14. Blanks, when may be filled. – Where the instrument is wanting in any material particular, the person in possession thereof has a prima facie authority to complete it by filling up the blanks therein. And a signature on a blank paper delivered by the person making the signature in order that the paper may be converted into a negotiable instrument operates as a prima facie authority to fill it up as such for any amount. In order, however, that any such instrument when completed may be enforced against any person who became a party thereto prior to its completion, it must be filled up strictly in accordance with the authority given and within a reasonable time. But if any such instrument, after completion, is negotiated to a holder in due course, it is valid and effectual for all purposes in his hands, and he may enforce it as if it had been filled up strictly in accordance with the authority given and within a reasonable time.
[17] Sec. 16, Delivery; when effectual; when presumed. – Every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. As between immediate parties, and as regards a remote party other than a holder in due course, the delivery in order to be effectual, must be made either by or under the authority of the party making, drawing, accepting, or indorsing as the case may be; and in such case the delivery may be shown to have been conditional, or for a special purpose only, and not for the purpose of transferring the property in the instrument. But where the instrument is in the hands of a holder of a due course, a valid delivery thereof by all parties prior to him so as to make them liable to him is conclusively presumed. And where the instrument is no longer in the possession of a party whose signature appears thereon, a valid and intentional delivery by him is presumed until the contrary is proved.
[18] Rollo, p. 304.
[19]
[20] 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.
[21] G.R. No. 132560, January 30, 2002, 375 SCRA 212.
[22]
[23] Gempesaw
v. CA, G.R. No. 92244,
[24] 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.
[25] G.R. No. 160709, February 23, 2005, 452 SCRA 285, 293.
[26] TSN, testimony of Gerardo Martin, a certified public accountant/auditor from Sycip Gorres & Velayo, February 25, 1992, p. 6.
[27] Philippine Bank of Commerce v. Court of Appeals, G.R. No. 97626, March 14, 1997, 269 SCRA 695; Consolidated Bank and Trust Corporation v. Court of Appeals, G.R. No. 138569, September 11, 2003, 410 SCRA 562.
[28] Art. 2208. In the absence of stipulation, attorney’s fees and expenses of litigation, other than judicial costs, cannot be recovered, except:
(1) When exemplary damages are awarded;
(2) When the defendant’s 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;
(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;
(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff’s plainly valid, just and demandable claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers, laborers and skilled workers;
(8) In actions for indemnity under workmen’s compensation and employer’s liability laws;
(9) In a separate civil action to recover civil liability arising from a crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and equitable that attorney’s fees and expenses of litigation should be recovered.
In all cases, the attorney’s fees and expenses of litigation must be reasonable.
[29] “J” Marketing Corp. v. Sia, Jr., G.R. No. 127823, January 29, 1998, 285 SCRA 580, 584.
[30] Felsan Realty & Development Corporation v. Commonwealth of Australia, G.R. No. 169656, October 11, 2007, 535 SCRA 618, 632.