Philippine National Bank vs. Raymundo

A bank manager who approves the deposit and encashment of checks drawn against a foreign draft before the lapse of the clearing period, resulting in loss to the bank when the foreign check is dishonored, may be held civilly liable for gross negligence despite acquittal in the criminal charge based on reasonable doubt, since civil liability in such acquittal may still be proved by preponderance of evidence.

Pablo V. Raymundo served as Department Manager of the Philippine National Bank (PNB) San Pedro Branch when a group of individuals led by Merry May Juan opened a checking account on July 30, 1993, using a foreign draft check drawn against Morgan Guaranty Company of New York for $172,549.00 as initial deposit. On the same day the account was opened, Raymundo approved the issuance of six checks totaling P4,000,000.00 drawn against the account, without waiting for the foreign check to clear. The foreign draft was subsequently dishonored as fraudulent within the 21-day clearing period, causing the bank to suffer significant financial losses.

• On July 30, 1993, Pablo V. Raymundo, then Department Manager of PNB San Pedro Branch, approved the deposit of a foreign draft check dated June 23, 1993, in the amount of $172,549.00 issued by Solomon Guggenheim Foundation and drawn against Morgan Guaranty Company of New York, payable to Merry May Juan.
• On the same date, Raymundo approved the opening of a peso checking account for Ms. Juan (Account No. 447-810168-1) and issued her a check booklet, despite the foreign check not having cleared.
• Also on July 30, 1993, Ms. Juan drew six PNB checks totaling P4,000,000.00, five payable to C&T Global Futures and one payable to "CASH," which Raymundo approved for payment without waiting for the foreign draft check to be cleared by the PNB Foreign Currency Clearing Unit.
• On August 2, 1993, the PNB Foreign Checks Unit received the foreign draft check for negotiation through the bank's correspondent bank, Banker's Trust Co. of New York (BTCNY).
• On August 6, 1993, within the 21-day clearing period for foreign draft checks, PNB received a telex message from BTCNY stating that the foreign draft check was dishonored for being fraudulent, followed by a letter dated August 20, 1993 to the PNB Corporate Auditor confirming the dishonor.
• Raymundo was administratively charged by PNB for Conduct Prejudicial to the Interest of the Service and/or Gross Violation of Bank's Rules and Regulations.
• Raymundo filed separate criminal and civil cases against Ms. Juan and her cohorts to recover the value of the six checks, wherein he executed affidavits and testified that he was initially hesitant to accommodate the deposit due to the huge amount involved and the fact that it was a foreign check, but was assured by the group that the check was good based on an overseas call confirming its validity.
• The bank's foreign check clearing policy required a 21-day clearing period before funds from foreign checks could be made available to prevent losses from fraudulent or dishonored checks.

• PNB argued that the CA committed serious errors when it ruled that there was lack of malice, bad faith, or negligence on the part of Raymundo in approving the payment of the checks.
• PNB contended that the CA failed to consider Raymundo's gross negligence and entirely disregarded the testimonial and documentary evidence showing his violation of banking regulations and the foreign check clearing policy.
• PNB maintained that Raymundo is civilly liable for the offense charged despite his acquittal in the criminal case, as the acquittal was based merely on reasonable doubt and not on a finding that he did not commit the act.

• Raymundo argued that he acted in good faith in relying upon his subordinates, specifically the bookkeeper and accountant, who were primarily assigned with the task of clearing checks and ensuring they are sufficiently funded.
• He contended that as Branch Manager, he had no duty to go beyond the verification of documents submitted by his subordinates or to personally authenticate the procedures taken, and that the absence of a return slip indicated the checks were good.
• He asserted that it is unreasonable to require him to personally examine the records of each client before affixing his signature, given the volume of responsibilities entailed by his position as Branch Manager.

• Procedural: Whether the Supreme Court may review the factual findings of the RTC and CA in a petition for review on certiorari under Rule 45 when such findings are allegedly unsupported by evidence or glaringly erroneous.
• Substantive Issues:
  • Whether Raymundo may be held civilly liable for the charge of violation of Section 3(e) of RA No. 3019 despite his acquittal in the criminal case.
  • Whether Raymundo was grossly negligent in approving the payment of the six checks drawn against the uncollected foreign deposit.
  • Whether Raymundo's negligence was the proximate cause of the loss suffered by PNB.
  • What is the proper amount of damages recoverable by PNB.

• Procedural: While factual findings of the appellate court are generally conclusive and carry weight when affirming the trial court, the Supreme Court may review them when the findings are totally devoid of support in the records or so glaringly erroneous as to constitute grave abuse of discretion. In this case, both the RTC and CA totally ignored the testimonial and documentary evidence of PNB showing Raymundo's gross negligence, justifying the Supreme Court's review of the factual findings.
• Substantive:
  • The Court recognized two kinds of acquittal: (1) where the accused is found not to be the author of the act or omission complained of, which bars civil liability ex delicto; and (2) where the acquittal is based on reasonable doubt, in which case civil liability may still be established by preponderance of evidence only. Raymundo falls under the second category, thus he can still be held civilly liable.
  • Raymundo was grossly negligent in approving the deposit of the peso conversion of the foreign check to Ms. Juan's account and issuing a check booklet on the same day the account was opened, without waiting for the 21-day clearing period. His reliance on the assurances of Ms. Juan's group and his disregard of the bank's foreign check clearing policy constitute gross negligence characterized by the want of even slight care and conscious indifference to consequences.
  • Raymundo's gross negligence was the proximate cause of PNB's loss, as without his approval of the deposit before clearing, the six checks could not have been encashed, and the bank would not have suffered the loss.
  • PNB is entitled to actual damages of P2,100,882.87, representing the remaining uncollected amount per the accounts receivable ledger, and not P4,000,000.00 as claimed, since actual damages must be proved with reasonable degree of certainty and supported by receipts or documentary evidence, not speculation.
  • Legal interest of 12% per annum is imposed from the filing of the criminal information on May 19, 1997 until June 30, 2013; 6% per annum from July 1, 2013 until finality of the decision; and 6% per annum from finality until fully paid.

• Two Kinds of Acquittal and Civil Liability — The law recognizes two kinds of acquittal: (1) where the accused is found not to be the author of the act or omission complained of, which bars civil liability ex delicto; and (2) where the acquittal is based on reasonable doubt, in which case civil liability may still be established by preponderance of evidence. This case illustrates the second type, where the acquittal of Raymundo in the criminal case for violation of Section 3(e) of RA 3019 did not extinguish his civil liability.
• Extraordinary Diligence Required of Banks — Banks are required to exercise extraordinary diligence, which is more than that of a Roman pater familias or a good father of a family, in handling their transactions. They must exercise the highest degree of diligence in the selection and supervision of employees. This doctrine was applied to hold Raymundo, as a bank manager, to a higher standard of care.
• Gross Negligence — Defined as negligence characterized by the want of even slight care, acting or omitting to act in a situation where there is duty to act, not inadvertently but willfully and unintentionally with a conscious indifference to consequences insofar as other persons may be affected. Raymundo's disregard of the bank's foreign check clearing policy and his approval of checks against uncollected deposits constituted gross negligence.
• Proximate Cause — That cause which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces injury and without which the result would not have occurred. The Court found that Raymundo's approval of the deposit before the foreign check cleared was the proximate cause of the bank's loss.
• Proof of Actual Damages — Actual damages must not only be capable of proof, but must actually be proved with a reasonable degree of certainty. Claims must be duly supported by receipts, and courts cannot rely on speculation, conjecture, or guesswork. This doctrine limited PNB's recovery to the amount actually proved by its accounts receivable ledger.

• "Our law recognizes two kinds of acquittal, with different effects on the civil liability of the accused. First is an acquittal on the ground that the accused is not the author of the act or omission complained of. This instance closes the door to civil liability, for a person who has been found to be not the perpetrator of any act or omission cannot and can never be held liable for such act or omission. There being no delict, civil liability ex delicto is out of the question, and the civil action, if any, which may be instituted must be based on grounds other than the delict complained of. This is the situation contemplated in Rule 111 of the Rules of Court. The second instance is an acquittal based on reasonable doubt on the guilt of the accused. In this case, even if the guilt of the accused has not been satisfactorily established, he is not exempt from civil liability which may be proved by preponderance of evidence only."
• "Since their business and industry are imbued with public interest, banks are required to exercise extraordinary diligence, which is more than that of a Roman pater familias or a good father of a family, in handling their transactions."
• "A bank's disregard of its own banking policy amounts to gross negligence, which is described as 'negligence characterized by the want of even slight care, acting or omitting to act in a situation where there is duty to act, not inadvertently but willfully and unintentionally with a conscious indifference to consequences insofar as other persons may be affected.'"
• "Payment of the amounts of checks without previously clearing them with the drawee bank, especially so where the drawee bank is a foreign bank and the amounts involved were large, is contrary to normal or ordinary banking practice."

• Dr. Lumantas v. Sps. Calapiz, Jr. — Cited for the rule that the Rules of Court requires that in case of an acquittal, the judgment shall state whether the evidence of the prosecution absolutely failed to prove the guilt of the accused or merely failed to prove his guilt beyond reasonable doubt.
• Manantan v. Court of Appeals — Cited for the same rule regarding the two kinds of acquittal and their effects on civil liability.
• Salazar v. People — Cited for the definition of "drawn against uncollected deposit."
• Navaja v. De Castro — Cited for the rule that factual findings of the appellate court are generally conclusive absent any showing that the findings are totally devoid of support in the records or so glaringly erroneous as to constitute grave abuse of discretion.
• Philippine National Bank v. Sps. Cheah — Cited for the standard of extraordinary diligence required of banks and the definition of gross negligence.
• Equitable PCI Bank v. Tan and Citibank, N.A. v. Cabamongan — Cited for the requirement that banks exercise the highest degree of diligence in the selection and supervision of employees.
• Banco Atlantico v. Auditor General — Cited for the rule that payment of checks without previously clearing them with the drawee bank is contrary to normal banking practice.
• Associated Bank v. Tan — Cited for the rule that before a check is cleared for deposit, the collecting bank can only assume at its own risk that the check would be cleared and paid out.
• Allied Banking Corporation v. Lim Sio Wan — Cited for the definition of proximate cause.
• Bacolod v. People of the Philippines — Cited for the rule that actual damages must be proved with a reasonable degree of certainty and supported by competent proof.
• Nacar v. Gallery Frames and Secretary of the Department of Public Works and Highways v. Spouses Tecson — Cited for the proper computation of legal interest on forbearance of money.

• Rule 45 of the Rules of Court — Governs petitions for review on certiorari to the Supreme Court.
• Section 3(e) of Republic Act No. 3019 (Anti-Graft and Corrupt Practices Act) — The criminal provision violated by causing undue injury to any party, including the Government, or giving any private party any unwarranted benefits, advantage or preference in the discharge of his official administrative or judicial functions through manifest partiality, evident bad faith or gross inexcusable negligence.
• Rule 111 of the Rules of Court — Governs the effect of the institution of criminal and civil actions, specifically regarding the extinction of civil liability ex delicto when the accused is found not to be the author of the act or omission complained of.