Security Bank v. Gan
REITERATIONFacts
The Antecedents: Petitioner Security Bank and Trust Company (SBTC) alleged that respondent Eric Gan opened a current account and, under a special arrangement with the branch manager, was allowed to transfer funds from his account to another even before deposited checks cleared, using "debit memos" for transactions where funds were insufficient. SBTC claimed Gan incurred an overdraft balance of P153,757.78 as of December 14, 1982, which grew to P297,060.01 by September 15, 1990, inclusive of interest, despite repeated demands for payment. Procedural History: SBTC filed a complaint for sum of money against Gan. The Regional Trial Court (RTC) dismissed the complaint, holding that SBTC failed to prove the claimed amount due to the ledger cards being hearsay. The Court of Appeals (CA) affirmed the RTC's decision. The Petition: SBTC filed a petition for review on certiorari, arguing that the CA erred in not ruling that its cause of action was sufficiently proved by the ledger cards and the testimony of its bookkeeper, Patricio Mercado, and in not applying the principle of estoppel against Gan.
Issue(s)
Whether the Court of Appeals erred in not ruling that petitioner has sufficiently proved its cause of action against respondent, and whether the ledger cards and the testimony of Mr. Patricio Mercado constituted the best evidence of the transactions made by the respondent relative to his account. Whether the Court of Appeals erred in not applying the principle of estoppel against respondent. Whether the Court of Appeals erred in affirming the decision of the trial court.
Ruling
The petition is denied for lack of merit. The assailed decision of the Court of Appeals is affirmed in toto.
Ratio Decidendi
On the sufficiency of proof and the admissibility of ledger cards: The Supreme Court reiterated that it is not a trier of facts, and factual findings of the CA, especially when affirmed by the RTC, are conclusive. The Court found that both lower courts correctly determined that SBTC failed to substantiate its claim that Gan knowingly incurred an overdraft. The ledger entries, as testified to by bookkeeper Patricio Mercado, were not competent evidence to prove Gan's consent to the fund transfers. Mercado had no personal knowledge of the alleged special arrangement or the truth of the entries concerning the transfers, as he merely recorded what was reported to him by the branch manager, Mr. Qui. The Court emphasized that for entries in the course of business to be admissible as prima facie evidence under Section 43 of Rule 130, the entrant must be in a position to know the facts stated, and the person who made the entry must be unavailable to testify. In this case, Mercado was available, and he lacked personal knowledge of the crucial transactions, rendering the ledger entries hearsay. The Court noted that SBTC failed to present Mr. Qui, who allegedly allowed the special arrangement, and that the ledger entries could not substitute for competent testimonial or documentary evidence of loan accommodations. On the application of estoppel: The Court also rejected SBTC's argument that Gan was estopped from denying liability. The Court found that the alleged special arrangement was never established, and there was no evidence that Gan benefited from it. The CA correctly pointed out that the ledger entries showed fund transfers from Gan's account to other accounts, not to Gan's benefit. Furthermore, there was no proof that Gan received copies of the ledgers and had the opportunity to review the entries, which is a prerequisite for applying estoppel in such a scenario. The infirmity in SBTC's documentation of its transactions with clients could not be overlooked at the expense of the client. The Court of Appeals did not err in affirming the decision of the trial court because the petitioner failed to prove its cause of action and the principle of estoppel does not apply.
Main Doctrine
Entries in ledger cards, even if made in the ordinary course of business, are inadmissible as evidence to prove the existence of loan accommodations or special arrangements if the entrant has no personal knowledge of the facts stated therein and the person who entered into the transaction is available to testify.