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8/20/2019 Comm Cases

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COM. NIL.

7) Bank of America NT & SA v. Philippine Racing Club (PRC)! ".R. No. #$%'! ul*%! %%+

FACTS:

• PRCI maintains several accounts, one of wic is wit !etitioner "A. Te

autori#e$ %oint si&natories wit res!ect to sai$ account were PRCIs Presi$ent'Antonia Re(es) an$ *P for Finance '+re&orio Re(es). "ot of tem weresce$ule$ to &o out of te countr( sometime later in connection wit tecor!orations -usiness.

•

In or$er not to $isru!t o!erations in teir a-sence, te( !resi&ne$ several cec/srelatin& to teir account wit "A. Te intention was to insure continuit( of PRCIso!erations -( ma/in& availa-le cas0mone( es!eciall( to settle o-li&ations tatmi&t -ecome $ue. Tese cec/s were entruste$ to te accountant wit instructionto ma/e use of te same as te nee$ arose. Te internal arran&ement was, in teevent tere was nee$ to ma/e use of te cec/s, te accountant woul$ !re!arete corres!on$in& voucer an$ tereafter com!lete te entries on te !resi&ne$cec/s.

• 1owever, it turne$ out later tat a 2on 3oe 'later foun$ out to -e Clarita Mesina,

an em!lo(ee of PRCI) !resente$ to "A for encasment 4 cec/s of PRCI, eacwit an in$icate$ value of P556,666. Tese cec/s were amon& tose !resi&ne$-( te autori#e$ si&natories of PRCI.

• Te 4 cec/s a$ similar entries wit ,imilar infirmi-ie, an irregulari-ie,. On

te s!ace were te name of te !a(ee soul$ -e in$icate$ te followin& 4line

entries were instea$ t(!ewritten: on te u!!er line was te wor$ 7CAS1 wile telower line a$ te followin& t(!ewritten wor$s, vi#: 7ON8 19N3R83 T8NT1O9SAN3 P8SOS ONL.

CAS1

Pa( To Te Or$er Of:

ON8 19N3R83 T8N T1O9SAN3 P8SOS ONL

• 3es!ite all tese irre&ularities0infirmities an$ te su-stantial amount involve$, "A

never even verifie$ or confirme$ te le&itimac( of te cec/s. Not even averification !rocess or a !one call was ma$e. Neiter was tere a transaction -(

PRCI tat calls for !a(ment of P446,666. 1ence PRCI $eman$e$ !a(ment from"A wic fell to $eafears. 1ence PRCI file$ te com!laint.

ISS98S: weter te !ro;imate cause of te wron&ful encasment of te cec/s in<uestion was $ue to 'a) !etitioners failure to ma/e a verification re&ar$in& te sai$ cec/swit te res!on$ent in view of te mis!lacement of entries on te face of te cec/s or '-)te !ractice of te res!on$ent of !resi&nin& -lan/ cec/s an$ leavin& te same wit itsem!lo(ees.

18L3: Petition is $ismisse$ wit mo$ifactions

Q: Is the bank liable for encashing a check with obvious discrepancies? A: es. Tere is no dispute tat te ,igna-ure, a!!earin& on te su-%ect cec/s weregenuine si&natures of te res!on$ents autori#e$ %oint si&natories. /o0ever , te!resence of te irre&ularities in eac cec/ soul$ ave alerte$ te !etitioner to -e cautious-efore !rocee$in& to encas tem wic it $i$ not $o.

• Altou& not in te strict sense material alterations, te mis!lacement of te

t(!ewritten entries for te !a(ee an$ te amount on te same -lan/ an$ tere!etition of te amount usin& a cec/ writer were &larin&l( o-vious irre&ularities

on te face of te cec/. Clearl(, someone ma$e a mista/e in fillin& u! te cec/san$ te re!etition of te entries was !ossi-l( an attem!t to rectif( te mista/e. Also, if te cec/ a$ -een fille$ u! -( te !erson wo customaril( accom!liseste cec/s of res!on$ent, it soul$ ave occurre$ to !etitioners em!lo(ees tat itwoul$ -e unli/el( suc mista/es woul$ -e ma$e. All tese circumstances soul$ave alerte$ te -an/ to te !ossi-ilit( tat te ol$er or te !erson wo isattem!tin& to encas te cec/s $i$ not ave !ro!er title to te cec/s or $i$ notave autorit( to fill u! an$ encas te same. As note$ -( te CA, !etitioner coul$ave ma$e a sim!le !one call to its client to clarif( te irre&ularities an$ te lossto res!on$ent $ue to te encasment of te stolen cec/s woul$ ave -een!revente$.

• It is wellsettle$ tat -an/s are en&a&e$ in a -usiness im!resse$ wit !u-lic

interest, an$ it is teir $ut( to !rotect in return teir man( clients an$ $e!ositorswo transact -usiness wit tem. Te( ave te o-li&ation to treat teir clientsaccount meticulousl( an$ wit te i&est $e&ree of care, consi$erin& te fi$uciar(nature of teir relationsi!. Te $ili&ence re<uire$ of -an/s, terefore, is more tantat of a &oo$ fater of a famil(.

Q: In defense of its cashier/tellers questionable action, petitioner insists that pursuant to Sections 14 and 1 of the !I", it could validl# presu$e, upon presentation of the checks, that the part# who filled up the blanks had authorit# and that a valid and intentional deliver# to the part# presenting the checks had taken

place% &hus, in petitioners view, the sole bla$e for this debacle should be shifted torespondent for having its signatories pre'sign and deliver the sub(ect checks%)etitioner argues that there was indeed deliver# in this case because, following

*$erican (urisprudence, the gross negligence of respondents accountant insafekeeping the sub(ect checks which resulted in their theft should be treated as avoluntar# deliver# b# the $aker who is estopped fro$ clai$ing non'deliver# of theinstru$ent% Is this contention correct?

A: No. Petitioners 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 . Te-an/ coul$ not -e faulte$ if it encase$ te cec/s un$er tose circumstances. 1owever,te un$is!ute$ facts !lainl( sow tat tere were circumstances tat soul$ ave alerte$te -an/ to te li/elioo$ tat te cec/s were not !ro!erl( $elivere$ to te !erson woencase$ te same.

1



COM. NIL.

• In all, we see no reason to $e!art from te fin$in& in te assaile$ CA 3ecision tat

te su-%ect cec/s are !ro!erl( caracteri#e$ as incomple-e an unelivereinstruments tus ma/in& Section 5= of te NIL a!!lica-le in tis case.

Q: )etitioner insists that respondents are to take bla$e because of their carelessacts of leaving with their accountant pre'signed blank checks% +orrect?

A: Not entirel(. 1owever, we $o a&ree wit !etitioner tat res!on$ents officers !ractice of !resi&nin& of -lan/ cec/s soul$ -e $eeme$ seriousl( ne&li&ent -eavior an$ a i&l(ris/( means of !ur!orte$l( ensurin& te efficient o!eration of -usinesses. It soul$ ave

occurre$ to res!on$ents officers an$ mana&ers tat te !resi&ne$ -lan/ cec/s coul$ fallinto te wron& an$s as te( $i$ in tis case were te sai$ cec/s were stolen from tecom!an( accountant to wom te cec/s were entruste$.

• Neverteless, even if we assume tat -ot !arties were &uilt( of ne&li&ent acts tat

le$ to te loss, !etitioner will still emer&e as te !art( foremost lia-le in tis case.In instances were -ot !arties are at fault, tis Court as consistentl( a!!lie$ te$octrine of last clear cance in or$er to assi&n lia-ilit(.

• In te case at -ar, !etitioner cannot eva$e res!onsi-ilit( for te loss -( attri-utin&

ne&li&ence on te !art of res!on$ent -ecause, even if we concur tat te latter was in$ee$ ne&li&ent in !resi&nin& -lan/ cec/s, te former a$ te last clear cance to avoi$ te loss. To reiterate, !etitioners own o!erations mana&er a$mitte$ tat te( coul$ ave calle$ u! te client for verification or confirmation-efore onorin& te $u-ious cec/s. *eril(, !etitioner a$ te final o!!ortunit( toavert te in%ur( tat -efell te res!on$ent.

Q: In light of respondents contributor# negligence, $ust the# bear a certain percentage of the loss? A: es. >6? soul$ -e soul$ere$ -( te res!on$ents

• @e also cannot i&nore te fact tat te !erson wo stole te !resi&ne$ cec/s

su-%ect of tis case from res!on$ents accountant turne$ out to -e anoter em!lo(ee, !ur!orte$l( a cler/ in res!on$ents accountin& $e!artment. As teem!lo(er of te tief, res!on$ent su!!ose$l( a$ control an$ su!ervision over itsown em!lo(ee. Tis &ives te Court more reason to allocate !art of te loss tores!on$ent.

• In$ee$, if not for te fortunate a!!enstance tat te tief faile$ to !ro!erl( fill u!

te su-%ect cec/s, res!on$ent woul$ e;!ecte$l( ta/e te -lame for te entire losssince te $efense of for&er( of a $rawers si&nature's) woul$ -e unavaila-le to it.Consi$erin& tat res!on$ent /nowin&l( too/ te ris/ tat te !resi&ne$ -lan/

cec/s mi&t fall into te an$s of wron&$oers, it is -ut %ust tat res!on$ent saresin te res!onsi-ilit( for te loss.

') /i1Cemen- Corp. 2. n,ular Bank ".R. No. #*3%* (%%7)Facts:

• S!ouses 8nri<ue an$ Lilia Tan were controllin& stoc/ol$er of 8.T. 1enr( Co.,

Inc. '8.T. 1enr() wic was en&a&e$ in te -usiness of !rocessin& an$ $istri-utin&bunker fuel. Amon& te com!an(Bs cu,-omer, were 1iCement Cor!oration '/i1

Cemen-), Riversi$e Mills Cor!oration 'River,ie), an$ ane-o CosmeticsPili!!ines, Inc. '4anebo).

o For teir !urcases, tese cor!oration issue$ !ost$ate$ cec/s.

• Insular "an/ of Asia an$ America 'te "an/) &rante$ 8.T. 1enr( a cre$it facilit(

/nown as DPurcase of Sort Term Receiva-les.Do In tis arran&ement, 8.T. 1enr( an$ te -an/ were into Dre'discounting-

of checks. Ea/a: to encas, wit !re$e$ucte$ interest, te !ost$ate$cec/s of its clients

o For ever( transaction, te -an/ re<uire$ 8.T. 1enr( to e;ecute a

!romissor( note an$ a $ee$ of assi&nment -earin& te conformit( of teclient to te re$iscountin&.

o From 5GHG to 5G5, 8.T. 1enr( was a-le to re$iscount its clientsB cec/s

'wit $ee$ of assi&nment) wit te -an/.

• .owever , ALL T18 C18CS were $isonore$

o 46 cec/s of 1iCement 'wic were crosse$ an$ wic -ore te

restriction D$e!osit to !a(eeBs account onl(D) were $isonore$.o So were the checks of Riverside and Kanebo.

• Te -an/ file$ a com!laint for sum of mone( a&ainst 8.T. 1enr(, te s!ouses Tan/,

1iCement 'inclu$in& its &eneral mana&er an$ treasurer), Riversi$e an$ ane-o.

• 1iCement file$ an answer alle&in& tat:

a. its &eneral mana&er an$ treasurer were not autori#e$ to issue te!ost$ate$ crosse$ cec/sJ

-. tat te $ee$ of assi&nment -ore onl( te si&nature of te treasurerJ an$

c. tat te -an/ was not a ol$er in $ue course as it soul$ not ave$iscounte$ tem for -ein& Dcrosses cec/s.D

• Te lower court $eci$e$ in favor of te -an/ an$ a&ainst 8.T. 1enr(, 1iCement,

Riversi$e an$ ane-o.

• 9!on a!!eal, te Court of A!!eals affirme$ te $ecision of te lower court in toto.

ISS98: 3i$ CA err in affirmin& RTCK

18L3: @18R8FOR8, te assaile$ $ecision of te Court of A!!eals in CA+.R. C* No.566 is ere-( AFFIRM83 wit MO3IFICATION. Accor$in&l(, !etitioner 1iCementCor!oration is $iscar&e$ from an( lia-ilit(. Onl( !etitioner 8.T. 1enr( Co. is OR38R83to !a(.

Q: oes the general $anager and treasurer of hi'ce$ents have authorit# to issue the

postdated crossed checks? A: es. "ot te trial court an$ te CA conclu$e$ tat 1iCement autori#e$ its &eneralmana&er an$ treasurer to issue te su-%ect !ost$ate$ crosse$ cec/s. Te( -ot el$ tat1iCement was alrea$( e,-oppe from ening ,uch au-hori- since it never o-%ecte$ tote si&natoriesB issuance of all !revious cec/s to 8.T. 1enr( wic te latter, in turn, wasa-le to re$iscount wit res!on$ent. @e a&ree wit te lower courts tat -ot te &eneralmana&er an$ treasurer of 1iCement were autori#e$ to issue te su-%ects cec/s.owever, notwithstanding such fact, respondent could not be considered a holder in duecourse.

2



COM. NIL.

Q: Is the respondent bank a .+? 0with regard to the discounting arrange$ent A: No.

• A-sent an( of te elements set fort in Section =4, te ol$er is not a ol$er in $ue

course. In te case at -ar, te la,- -0o re5uiremen-, 0ere no- me-. To wit:'c) e too/ it in &oo$ fait an$ for value

Since, te su-%ect checks were crossed an$ -ore restrictions

tat te( were for $e!osit to !a(eeBs account onl(J ence, te(coul$ not -e furter ne&otiate$ to it)

'$) at te time it was ne&otiate$ to im, e a$ no notice of an( infirmit( in

te instrument or $efect in te title of te !erson ne&otiatin& it Since res!on$ent com!letel( $isre&ar$e$ a tellin& si&n of

irre&ularit( in te re$iscountin& of te cec/s wen te &eneralmana&er $i$ not ac<uiesce to it as onl# the treasurer2ssignature appeared on the deed of assign$ent .

• In te case at -ar, res!on$entBs claim tat it acte$ in &oo$ fait wen it acce!te$

an$ $iscounte$ 1iCements !ost$ate$ crosse$ cec/s from 8.T. 1enr( 'as !a(eeterein) fails to convince us. !ood faith becomes inconse"uential amidst proof of respondent#s grossly negligent conduct in dealing with the subject checks.

• As a -an/in& institution, it -eoove$ res!on$ent to act wit e;traor$inar( $ili&ence

in ever( transaction. Its -usiness is im!resse$ wit !u-lic interest, tus, it was note;!ecte$ to -e careless an$ ne&li&ent, s!eciall( so were te cec/s it $ealt witwere crosse$.

Q: .ow can a person who receives a cross'check be a .+? A: 3etermine te !ur!ose for wic te crosscec/ was &iven.

• "ataan Ci&ar Case 'case were cross cec/s sol$ on $iscount as well): In or$er to

!reserve te cre$it wortiness of cec/s, %uris!ru$ence as !ronounce$ tatcrossin& of a cec/ soul$ ave te followin& effects: 'a) te cec/ ma( not -eencase$ -ut onl( $e!osite$ in te -an/J '-) te cec/ ma( -e ne&otiate$ onl(once to one wo as an account wit a -an/ Ean$J 'c) te act of crossin& tecec/s serves as warnin& to te ol$er tat te cec/ as -een issue$ for aefini-e purpo,e so tat e must in<uire if e as receive$ te cec/ !ursuant totat !ur!ose, o-her0i,e! he i, no- a holer in ue cour,e.

o It is ten settle$ tat crossin& of cec/s soul$ !ut te ol$er on in<uir(

an$ u!on im $evolves te $ut( to ascertain te in$orsers title to tecec/ or te nature of is !ossession. Failin& in tis res!ect, te ol$er is$eclare$ &uilt( of &ross ne&li&ence amountin& to le&al a-sence of &oo$

faitan$ as suc, te consensus of autorit( is to te effect tat te ol$er of te cec/ is not a ol$er in $ue course.

Q: 3as there a proper present$ent to respondent bank to $ake .i'+e$ent liable? 0inother words, is the drawer of the postdated crossed checks liable to the holder whowas dee$ed not a holder in due course?

A: No, te $rawer of te !ost$ate$ crosse$ cec/s was not lia-le to te ol$er wo was$eeme$ not a ol$er in $ue course.

• In State Investment 1ouse, Inc. 'SI1I) v. Interme$iate A!!ellate Court, SI1I re

$iscounte$ crosse$ cec/s an$ was $eclare$ not a ol$er in $ue course. As a

result, wen it !resente$ te cec/s for $e!osit, we $eeme$ tat its !resentmentto te $rawee -an/ was not !ro!er, ence, te lia-ilit( $i$ not attac to te $rawer of te cec/s. @e rule$ tat: Te tree su-%ect cec/s in te case at -ar a$ -eencrosse$ wic coul$ onl( mean tat te $rawer a$ inten$e$ te same for $e!ositonl( -( te ri&tful !erson, i.e., te !a(ee name$ terein. A!!arentl(, it was not te!a(ee wo !resente$ te same for !a(ment an$ terefore, tere was no !ro!er !resentment, an$ te lia-ilit( $i$ not attac to te $rawer. Tus, in te a-sence of $ue !resentment, te $rawer $i$ not -ecome lia-le.

Q: oes this $ean that a person who is not a .+ cannot recover at all? In this case,who can the bank, the holder 0although not a .+ of the checks, go after?

A: Te NIL $oes not a-solutel( -ar a ol$er wo is not a ol$er in $ue course fromrecoverin& on te cec/s. Suc !art( ma( recover from te !art( wo in$orse$0encase$te cec/s if the latter has no valid e$cuse for refusing payment .

• 1ere, tere was no $ou-t tat it was 8.T. 1enr( tat re$iscounte$ 1iCementBs

cec/s an$ receive$ teir value from res!on$ent. Since 8.T. 1enr( a$ no %ustification to refuse !a(ment, it soul$ !a( res!on$ent.

+) S-elco 6arke-ing Coprora-ion v. CA une #++Facts:

• ST8C9 sol$ <uantities of steel -ars an$ rolls of +.I. wire to R:8 Construction,

Inc. for P54,=G.5

o -ut te la--er faile -o pa for tese• Later, owever, te Presi$ent of R:8 'Lim) as/e$ is frien$ '8im,on) to

accommoa-e te former -( issuin& a cec/, wic was ma$e out in te amountte same as te o-li&ation $ue to Stelco

• Te check was a com!an( cec/ 'S-eel0el Cor!oration of te Pil.) were

Limson was te !resi$ent.

• Later, RL &ave te cec/ to Arm,-rong In$ustries, wic is $escri-e$ as te

sister co!roration an$ manufacturin& arm of Stelco

• In$orse$ -( Armstron& an$ RL, Armstron& $e!osite$ te cec/ at its -an/ -ut

tis was $isonore$ $ue to insufficienc( of fun$s

• Te $rawers were car&e$ -( Armstron& wit a violation of "P 44 .

o Te( were ac<uitte$ on te &roun$ tat te cec/ in <uestion was not

issue$ -( te $rawer Dto a!!l( on account for value,D it -ein& merel( for accommo$ation !ur!oses. Te %u$&ment owever con$itione$ te

ac<uittal wit te followin& !ronouncement: Tis is not owever to releaseSteelwel$ Cor!oration from its lia-ilit( un$er Sec. 4G of te Ne&otia-leInstruments Law for avin& issue$ it for te accommo$ation of RomeoLim.

• our #ears after the issuance of the check , one wa( or anoter, te cec/ came

to te an$s of Stelco, w0c sou&t to enforce !a(ment, claimin& tat it was a ol$er for value -ecause it a$ !ossession of te cec/.

• Stelco file$ a com!laint for recover( of a sum of mone( a&ainst RL an$ Steelwel$

• RL coul$ no lon&er -e locate$ so Steelwel$ was te onl( one tat file$ an Answer

3



COM. NIL.

• Te RTC rule$ in favor of Stelco -ut te CA reverse$ tis

ISS98: @ON ST8LCO ever -ecame a ol$er in $ue course

18L3: No. @18R8FOR8, te !etition is 38NI83 an$ te 3ecision of te Court of A!!ealsaffirme$

Q: +an a person be a .+ despite knowing that the part# is onl# an acco$$odation part#?

A: es. As re&ar$s an accommo$ation !art( 'suc as ST88L@8L3), te fourt con$ition,i.e., lac/ of notice of an( infirmit( in te instruments or $efect in title of te !ersonsne&otiatin& it, as no a!!lication. Tis is -ecause Section 4G of te NIL !reserves te ri&tof recourse of a Dol$er for valueD a&ainst te accommo$ation !art( notwitstan$in& tatDsuc ol$er, at te time of ta/in& te instrument, /new im to -e onl( an accommo$ation!art(.D

• In tis case, te $efen$ant Steelwel$ tru its Presi$ent Peter Rafael Limson

a$mitte$ to ave issue$ a cec/ !a(a-le to cas in favor of is frien$ Romeo Limwo was te Presi$ent of RL Construction -( wa( of accommo$ation. 9n$er teNIL an accommo$ation !art( is lia-le.

Q: Is S&5"+6 a .+? A: No. ST8LCO cannot -e $eeme$ a ol$er of te cec/ for value. It $oes not meet two of te essential re<uisites !rescri-e$ -( te statute. It $i$ not -ecome Dte ol$er of it -efore itwas over$ue, an$ witout notice tat it a$ -een !reviousl( $isonore$,D an$ it $i$ not ta/ete cec/ Din &oo$ fait an$ for value.D

• @at te recor$ sows is tat: '5) te ST88L@8L3 com!an( cec/ in <uestion

was &iven -( its !resi$ent to R.. LimJ '4) it was &iven onl( -( wa( of accommo$ation, to -e Duse$ as collateral for anoter o-li&ationJD ') in -reac of te a&reement, owever, R.. Lim in$orse$ te cec/ to Armstron& in !a(ment of o-li&ationJ '>) Armstron& $e!osite$ te cec/ to its account, after in$orsin& itJ '=)

te cec/ was $isonore$. Te recor$ $oes not sow an( intervention or !artici!ation -( ST8LCO in an( manner of form watsoever in tese transactions,or an( communication of an( sort -etween ST88L@8L3 an$ ST8LCO, or -etween eiter of tem an$ Armstron& In$ustries, at an( time -efore te $isonor of te cec/.

o Te trou-le is, tere is no evi$ence watever tat ST8LCOBs !ossession

of Cec/ No. H=6 ever $ate$ -ac/ to an( time before te instrumentBs presentment and dishonor .

o Tere is no evience watsoever tat te check 0a, ever given -o i-, or

inor,e to it in an( manner or form in !a(ment of an o-li&ation or assecurit( for an o-li&ation, or for an( oter !ur!ose -efore it was !resente$for !a(ment.

o Nowere in te cec/ itself $oes te name of Stelco Mar/etin& a!!ear as

!a(ee, in$orsee or $e!ositor tereof o The recor does show tat after te cec/ a$ -een $e!osite$ an$

$isonore$, ST8LCO came into !ossession of it in some wa(, an$ wasa-le, several (ears after te $isonor of te cec/.

• In sum, Stelco never -ecame a ol$er for valueJ te cec/s inten$e$ in$orsee

was Armstron&. Stelco was never a !art( to te instrument. It is also neiter aol$er for value, nor a ol$er in $ue course -ecause '5) te cec/ was alrea$(over$ue several (ears -ac/, '4) te( a$ notice tat it a$ alrea$( -een$isonore$, an$ ') te( $i$ not ta/e te cec/ in &oo$ fait an$ for value.

Q: 3hat is the effect of possession of a negotiable instru$ent after present$ent and dishonor? A: Possession of a ne&otia-le instrument after !resentment an$ $isonor, or !a(ment, isutterl( inconse<uential or insi&nificantJ it $oes not ma/e te !ossessor a ol$er for valuewitin te meanin& of te lawJ it &ives rise to no lia-ilit( on te !art of te ma/er or $rawer an$ in$orsers.

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