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Facts:
Philippine Racing Club filed an action for damages against the bank. On appeal, the CA
affirmed the lower court's decision and held that the bank was negligent. Hence, this
appeal. Petitioner claimed that it is merely doing its obligation under the law and contract
in encashing the checks since the signatures in the said checks appeared to be genuine.
Issue: Whether or not the petitioner can be held liable for negligence and thus should pay
damages to PRC
Ruling:
Both parties are held to be at fault but the bank has the last clear chance to prevent the
fraudulent encashment hence it is the one foremost liable.
There was no dispute that the signatures in the checks are genuine but the presence of
irregularities on the face of the check should have alerted the bank to exercise caution
before encashing them. It is well-settled that banks are in the business impressed with
public interest that they are duty bound to protect their clients and their deposits at all
times. They must treat the accounts of these clients with meticulousness and a highest
degree of care considering the fiduciary nature of their relationship. The diligence
required of banks are more than that of a good father of a family.
The PRC officers' practice of pre-signing checks is a seriously negligent and highly risky
behavior which makes them also contributor to the loss. Its own negligence must
therefore mitigate the petitioner's liability. Moreover, the person who stole the checks is
also an employee of the plaintiff, a check in its accounting department at that. As the
employer, PRC supposedly should have control and supervision over its own employees.
Therefore, the court held that the petitioner bank is liable for 60% of the total amount of
damages while PRC should shoulder 40% of the said amount.