International Exchange Bank vs. Jose Co Lee

Generally, an appeal is the proper remedy to question the grant of a demurrer to evidence because if the Court of Appeals reverses the dismissal, the case is not remanded for reception of the defendant's evidence; instead, the Court of Appeals renders judgment on the merits based on the plaintiff's evidence. However, when the grant of a demurrer to evidence leaves the main case pending before the trial court (i.e., dismissal only as to some parties while others remain), the plaintiff can resort to a petition under Rule 65 if there is a showing that in granting the demurrer there was grave abuse of discretion. Additionally, courts must act with caution when granting demurrers to evidence; if there is even the slightest doubt as to the defendant's participation or liability, the demurrer should be denied to allow the defendant to present evidence and avoid hasty dismissal on the merits.

The case arose from a fraudulent scheme perpetrated by Christina T. Lee, a treasury products sales associate at International Exchange Bank (iBank, now UnionBank), who diverted millions of pesos from the Forward Foreign Exchange Placement Accounts of bank clients Liu Siu Lang Sy and Spouses Ernesto and Olivia Co. Christina allegedly transferred the funds to her boyfriend Jeffrey R. Esquivel's account, who then distributed portions to accounts belonging to Christina's family members, including her father Jose Co Lee, mother Violeta T. Lee, and sister Angela T. Lee. The bank sought to recover these amounts from the family members who allegedly received the fraudulent proceeds.

• Christina T. Lee, as treasury products sales associate at iBank's Tektite Branch, coordinated instructions from clients regarding money market transactions.
• Christina informed the Bank's Treasury Department that clients Liu Siu Lang Sy and Spouses Ernesto and Olivia Co intended to terminate their Forward Foreign Exchange Placement Accounts amounting to P8,800,000.00 and P8,244,645.27, respectively.
• The Bank's Treasury Department credited these amounts to Settlement Account No. 006100040891, intended for the investment accounts of Sy and Spouses Co.
• Christina allegedly tricked her superior into believing the money belonged to her boyfriend Jeffrey R. Esquivel, causing the amounts to be credited to Jeffrey's account instead.
• The proceeds were subsequently transferred from Jeffrey's account to accounts belonging to Karin Tse Go, Jose Co Lee, and Angela T. Lee, and the amounts were withdrawn.
• Upon discovering the fraud, iBank was forced to reinstate the withdrawn amounts into the clients' accounts.
• Post-audit documents revealed that Jose Co Lee's personal account (013-0-20-010888) was credited with P2,715,000.00 from Sy's investment, and J.C. Lee Construction, Inc.'s account (029-03-0-006188) was credited with P2,020,000.00 from Co's investment.
• The P2,020,000.00 in the corporate account was later transferred to Jose's personal account in multiple batches on January 7 and 13, 2003.
• On February 11, 2002, Jeffrey transferred P1,200,000.00 to Jose's account; on the same day, Jose issued a check for P1,200,000.00 payable to Triangle Ace Corporation.
• Prior to the P1,200,000.00 transfer, Jose's account only contained P25,000.00.
• Christina admitted that the P8,244,645.27 from the Co Investment was transferred to Jeffrey's account, who then distributed amounts to various accounts including those of respondents.
• Jose claimed he was a businessman with total transactions of P84,332,477.71 with the bank, and that the check issuance was not proof of involvement in the fraud.
• No similar evidence showing knowledge or participation in the fraud was presented against Angela T. Lee.

• Certiorari under Rule 65 was the correct remedy because a demurrer to evidence is akin to a motion to dismiss, and the dismissal was only as to Jose and Angela while the main case remained pending against Christina, Jeffrey, and Karin, falling under the exception in Rule 41, Section 1(g).
• The Regional Trial Court's inordinate and unjustifiable delay in acting on the Motion for Leave to file Notice of Appeal, which remained unresolved for over a month, left UnionBank with no plain, speedy, or adequate remedy other than certiorari.
• The Regional Trial Court gravely abused its discretion in granting the demurrer because UnionBank established by sufficient evidence a prima facie case against Jose and Angela, specifically showing that Jose transferred funds to his other accounts and issued a check using the stolen funds, indicating his complicity in the fraudulent scheme.

• The matters raised by UnionBank were questions of fact, not questions of law, and were already thoroughly discussed by the Court of Appeals.
• The proper remedy to assail the grant of a demurrer to evidence was an ordinary appeal under Rule 41, not a petition for certiorari under Rule 65.
• There was no grave abuse of discretion on the part of the Regional Trial Court in granting the demurrer because the evidence clearly showed that only Christina perpetrated the fraud, and there was no substantial evidence proving that Jose and Angela participated in or were even aware of the fraudulent acts.

• Procedural:
  • Whether a petition for certiorari under Rule 65 was the proper remedy to contest the Regional Trial Court's grant of the demurrer to evidence, considering that the dismissal was only as to respondents Jose and Angela while the main case remained pending against the other defendants.
  • Whether the Regional Trial Court's delay in resolving the Motion for Leave to file Notice of Appeal justified the withdrawal of the appeal and the filing of certiorari.
• Substantive Issues:
  • Whether the Regional Trial Court gravely abused its discretion in granting the demurrer to evidence filed by respondents Jose Co Lee and Angela T. Lee.
  • Whether petitioner established by sufficient evidence a prima facie case entitling it to the relief sought against respondents.

• Procedural:
  • The Court held that certiorari under Rule 65 was the proper remedy. While Section 1 of Rule 33 provides that an order granting a demurrer to evidence may be appealed, and Rule 41 states that an appeal may be taken from a judgment completely disposing of the case, Rule 41, Section 1(g) provides an exception for "a judgment or final order for or against one or more of several parties or in separate claims, counterclaims, cross-claims and third-party complaints, while the main case is pending."
  • The dismissal of the complaint against Jose and Angela, while the case remained pending against Christina, Jeffrey, and Karin, squarely falls under this exception, making certiorari the appropriate special civil action.
  • Furthermore, the Regional Trial Court's refusal to rule on the Motion for Leave to File Notice of Appeal for over a month, despite petitioner's follow-up motion, constituted an unreasonable delay that deprived UnionBank of a plain, speedy, and adequate remedy, justifying the withdrawal of the appeal and the filing of certiorari to prevent the loss of substantive rights.
• Substantive:
  • As to respondent Jose Co Lee: The Court found that the Regional Trial Court gravely abused its discretion in granting the demurrer. The evidence on record, including post-audit documents showing transfers of fraudulent proceeds to Jose's personal and corporate accounts, and the suspicious timing of his issuance of a P1,200,000.00 check on the same day his account (which previously only held P25,000.00) received the same amount from Jeffrey, established a prima facie case of his participation in or benefit from the fraud. The Court emphasized that if there is even the slightest doubt as to a defendant's participation, the trial court should deny the demurrer to allow the defendant to present evidence rather than dismiss the case on the merits.
  • As to respondent Angela T. Lee: The Court affirmed the grant of the demurrer. No evidence was presented showing that Angela knew of the fraudulent scheme or participated in it; the mere fact that funds were transferred to her account without more does not establish liability. Thus, there was no grave abuse of discretion in dismissing the case against her.
  • The Court rendered judgment on the merits against Jose Co Lee, ordering him to return the amounts fraudulently transferred into his account, without remanding the case for further trial, in accordance with the rationale of Rule 33, Section 1 that a defendant who successfully moves for dismissal but is reversed on appeal is deemed to have waived the right to present evidence.

• Demurrer to Evidence (Rule 33, Section 1) — A motion filed by the defendant after the plaintiff completes presentation of evidence, questioning the sufficiency of the evidence to establish a right to relief. If granted but reversed on appeal, the movant is deemed to have waived the right to present evidence, and the appellate court renders judgment based on the plaintiff's evidence alone.
• Exception to Appeal Rule (Rule 41, Section 1(g)) — While an appeal is generally the proper remedy from an order granting a demurrer to evidence, when the dismissal is only as to one or more of several parties while the main case is still pending, the aggrieved party may file a special civil action for certiorari under Rule 65.
• Grave Abuse of Discretion in Demurrers — Trial courts must act with caution when granting demurrers to evidence. If there is even the slightest doubt as to the defendant's participation or liability, or if the evidence is capable of supporting a judgment for the plaintiff, the demurrer should be denied to allow the defendant the opportunity to present evidence and to avoid hasty dismissal on the merits.
• Preponderance of Evidence — In civil cases, the party having the burden of proof must establish its case by a preponderance of evidence, meaning the evidence as a whole is superior to that of the other side. A demurrer to evidence tests whether the plaintiff has met this burden based on the evidence presented.

• "Generally, an appeal is the proper remedy to question the grant of a demurrer to evidence because if the Court of Appeals reverses the dismissal, the case is not remanded for reception of the defendant's evidence. Instead, the Court of Appeals has to render judgment on the merits based on the plaintiff's evidence. However, when the grant of a demurrer to evidence leaves the main case pending before the trial court, the plaintiff can resort to a petition under Rule 65 if there is a showing that in granting the demurrer there was grave abuse of discretion."
• "The court cannot arbitrarily disregard evidence especially when resolving a demurrer to evidence which tests the sufficiency of the plaintiff's evidence."
• "Accordingly, if there was even the slightest doubt as to the participation of respondent Jose in the grand scheme of Christina, the trial court should have denied the demurrer to evidence. It would have been more prudent for the lower court to receive evidence to dispel any doubt than to dismiss the case on merits through a demurrer to evidence, only to have it reversed."

• Jan-Dec Construction Corp. v. Court of Appeals (517 Phil. 96, 2006) — Cited for the proposition that when a judgment dismisses the complaint against one of several defendants while the case remains pending against others, the dismissal falls under Rule 41, Section 1(g) exception, making certiorari the proper remedy.
• D.M. Ferrer v. University of Santo Tomas (680 Phil. 805, 2012) — Held that a petition for certiorari under Rule 65 is the proper remedy to question the dismissal of an action against one of the parties while the main case is still pending.
• Republic v. Spouses Gimenez (776 Phil. 233, 2016) — Emphasized that courts must act with caution when granting demurrers to evidence and distinguished between admissibility of evidence and determination of its probative weight.
• BP Oil and Chemicals International Philippines, Inc. v. Total Distribution & Logistics Systems, Inc. (805 Phil. 244, 2017) — Established that the denial of a demurrer to evidence shifts the burden of proof to the defendant to controvert the plaintiff's prima facie case.
• Siayngco v. Costibolo (136 Phil. 475, 1969) — Explained the rationale behind Rule 33, Section 1: that a defendant who succeeds in having the case dismissed on demurrer but is reversed on appeal is deemed to have waived the right to present evidence.
• Century Iron Works, Inc. v. Bañas (711 Phil. 576, 2013) — Distinguished between questions of law (doubt as to what the law is on certain facts) and questions of fact (doubt as to truth or falsity of alleged facts).

• Rule 33, Section 1 of the Rules of Civil Procedure — Governs demurrer to evidence, providing that after plaintiff completes presentation of evidence, defendant may move for dismissal on the ground that plaintiff has shown no right to relief; if motion is granted but reversed on appeal, defendant waives right to present evidence.
• Rule 41, Section 1 of the Rules of Civil Procedure — Governs subject of appeal, specifically the exception in paragraph (g) allowing special civil actions under Rule 65 for judgments against one or more of several parties while the main case is pending.
• Rule 65 of the Rules of Civil Procedure — Provides for the remedy of certiorari when any tribunal, board or officer exercising judicial or quasi-judicial functions has acted without or in excess of jurisdiction or with grave abuse of discretion.