Security Bank and Trust Co. v Eric Gan GR No. 150464, June 27, 2006

Facts:

Respondent Gan opened a current account to the petitioner which he can draw check from its fund. Under a special agreement with the petitioner manager Mr. Qui, respondent is allowed to transfer fund from his account to another person’s account. His transaction of transferring fund from his account to another account is covered by a debit memo. In December 14, 1982, he was reportedly to have incurred a negative balance in the amount of P153,757.78. By Sept. 15, 1990 his total obligation to the petitioner allegedly amounted to P297,060.01 inclusive of interest. Petitioner filed a complaint to recover the sum of money from the respondent after his refusal to pay contending that the alleged overdraft was made from transactions without his knowledge and consent. Petitioner presented its bookkeeper, Patricio Mercado who handles the respondent’s account and transactions in a ledger. Records show that a transfer of fund from the respondent’s account was made to another person’s account which was made with authority from Qui which resulted to the overdraft of his account. Respondent denied to have authorized such transaction. The lower court dismissed the case on the ground that the petitioner failed to establish with substantial evidence that the respondent does owe them that sum of money. The CA affirmed the lower court decision upon the court hence this petition.

Issue:

Whether or not petitioner has established substantial evidence that respondent is liable for the overdraft on his account?

Ruling:

The court held that the ledger presented is not competent evidence to prove that the respondent consented to the transaction made on his account. Petitioner invoked Section 43 of Rule 130: “Entries in the course of business – Entries made at, or near the time of the transactions to which they refer, by a person deceased, or unable to testify, who was in a position to know the facts therein stated, may be received as prima facie evidence, if such person made the entries in his professional capacity or in the performance of duty and in the ordinary or regular course of business or duty.” Under this exception to the hearsay rule, the admission in evidence of entries in corporate books required the satisfaction of the following conditions: 1. the person who made the entry must be dead, or unable to testify; 2. the entries were made at or near the time of the transactions to which they refer; 3. the entrant was in a position to know the facts stated in the entries; 4. the entries were made in his professional capacity or in the performance of a duty, whether legal, contractual, moral or religious; and 5. the entries were made in the ordinary or regular course of business or duty.

The ledger entries did not meet the first and third requisites. It was due to Mercado’s testimony that the ledgers were presented thus there is no need to justify its necessity for presentation since the person who made them was available to testify in court. Mercado does not have personal knowledge as to the truthfulness of the entries after stating that the agreement was made between Qui and Gan. It is undeniable that the ledger does contains the transaction records in the ordinary course of business but it cannot be used as a prima facie evidence as to the facts that were recorded therein. Mercado knows the facts of the entry of the check deposits and the withdrawals but he does not have knowledge as to the facts involving the debit memos issued to support the transaction.

Petitioner argues that the respondent is estopped from denying the petitioner’s claim after benefiting from the special agreement accorded to him resulting to the negative balance. The court held that the principle of estoppel is not applicable at the case at bar since it was not established that the respondent received the copy of the ledger to be given the chance to review the entries therein. Respondent did not benefit from the said agreement since the fund transfer was from and not to the respondent’s account. Hence, the benefit goes to another person’s account and not from the respondent’s. The court denied the petition and affirmed the lower courts’ decision.