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GR No. 150228
Date: July 30, 2009
 Philippine Racing Club, Inc. (PRCI) is a corporation which maintains several accounts with different banks, among
which was a Current Account with Bank of America (BA). The authorized joint signatories were PRCI’s President
and VP for Finance.
 While PRCI’s President and VP were scheduled to go out of the country for a business trip, they pre-signed several
checks so as to ensure continuity of the operations. The checks were entrusted to the accountant with instruction to
complete the entries on the pre-signed checks when needed.
 Thereafter, a John Doe presented two (2) of the pre-signed checks to BA for encashment, amounting to P110k each.
Both checks have similar entries 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
typewritten: on the upper line was the word “CASH” while the lower line was “ONE HUNDRED TEN THOUSAND
 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.
 BA, without verifying the legitimacy and despite the irregularities, encashed the said checks.
 Upon PRCI’s investigation, it was concluded that an employee completed without authority the entries of the pre-
signed checks.
 PRCI’s demand for BA to pay fell on deaf ears. Hence, the complaint.
 RTC rendered a decision against BA, and is ordered to pay PRCI the value of the checks.
 BA argued that Section 14 and 16 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, the proximate cause of the encashment was when PRCI’s signatories pre-sign and deliver the checks
to its accountant.
 CA affirmed the RTC. Subsequently, the Motion for Reconsideration was denied.

Whether or not the checks should be characterized as incomplete and undelivered instruments


Yes. 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 clients 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.

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 checks. All these circumstances should have altered
the bank to the possibility that the holder who is attempting to encash the checks did not have proper authority to fill up and
encash the same. As noted by the CA, petitioner should have made a simple phone call to its clients to clarify the irregularities.
In all, the Court see no reason to depart from the finding of the CA that the subject checks are properly characterized as
incomplete and undelivered instruments thus making Sec. 15 of NIL applicable in this case.

However, the Court also considered that PRCI knowingly took the risk that the pre-signed black checks might fall into the
hands of the wrongdoers, thus, it is but just that respondent shares in the responsibility of the loss. The Court allocated 60% of
the actual damages involve in the case to the petitioner while respondent, in light of its contributory negligence, bears 40% of
its own loss.
Doctrine Notes

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.