G.R. No. 170598 - Far East Bank and Trust Co. vs. Chante

Robert Mar Chante, also known as Robert Mar G. Chan (Chan), was a depositor of Far East Bank & Trust Co. (FEBTC) holding Current Account No. 5012-00340-3 at FEBTC’s Ongpin Branch.
FEBTC issued to Chan a Far East Card (No. 05-01120-5-0), a combined credit card and ATM card, expiring July 1993, linked to his current account.
Access to the account via ATM required a six-digit PIN known only to Chan.

Between 8:52 p.m. on May 4, 1992, and 4:06 a.m. on May 5, 1992, withdrawals totaling P967,000.00 were made from Chan’s account using the Far East Card through the Philippine National Bank (PNB)-MEGALINK ATM facility at the Manila Pavilion Hotel.
The withdrawals occurred over 242 transactions mostly amounting to P4,000.00 each, except one transaction of P3,000.00.
Despite the FEBTC Ongpin Branch being offline and Chan’s account balance being only P198,511.70, the ATM transactions were processed and recorded by PNB and MEGALINK computer systems.
Chan’s account was not debited for these transactions; no withdrawals reflected on his bank statements.
FEBTC discovered a "system bug" in its computer system allowing withdrawals in excess of actual balance and daily withdrawal limit (P50,000/day).

On July 1, 1992, FEBTC filed a complaint in the Regional Trial Court (RTC) seeking recovery of P770,488.30 representing the unrecovered balance of the disputed withdrawals after partial debits by FEBTC.
Chan denied liability, claiming he was at home during the withdrawals and suggested an inside job involving bank employees exploiting the computer bug.
After the incident, Chan attempted further ATM withdrawals on May 6 or 7, 1992, at FEBTC Ermita Branch where his card was retained by the ATM as a hot card.
Thereafter, Chan issued checks covering most of his remaining balance but did not immediately report the card retention incident.
FEBTC conducted an investigation and time-motion study; the system bug was admitted by FEBTC’s own Systems Analyst.

The RTC held that Chan used his card and entered his PIN himself to make the withdrawals.
The court presumed the withdrawals were made by Chan despite the bank branch being offline, because the ATM machine issued authorization messages allowing the withdrawals due to the system bug in the CAPDROTH and SCPUP 900 programs.
The RTC found Chan’s conduct suspicious, especially his attempt to withdraw near the incident site shortly after the transactions, issuance of checks post-card capture, and failure to promptly inquire about his “hot card”.
The RTC ruled in favor of FEBTC, ordering Chan to pay P770,488.30 with 24% per annum interest from filing date, exemplary damages of P100,000.00, attorney’s fees of P30,000.00, and costs of suit.
Chan’s counterclaim was dismissed.

The CA reversed the RTC ruling, holding FEBTC failed to prove Chan made the withdrawals.
The CA noted absence of direct evidence that Chan personally made the transactions; only Chan’s uncorroborated testimony that he was home at the time.
The CA underscored the admitted existence of the system bug that allowed unauthorized withdrawals and referenced banking industry warnings on ATM technological fraud.
It found the PNB MEGALINK ATM journal tapes internally inconsistent, particularly on “available balance” which increased after each withdrawal, contradicting logic and the actual account balance.
The CA considered the possibility of a replacement or cloned card or other technological fraud schemes.
It also found plausible Chan’s denial of liability, noting FEBTC’s failure to prove actual dispensing of cash by the ATM or the exclusivity of Chan’s PIN.
The court ordered FEBTC to return P196,571.30 plus 12% annual interest to Chan and imposed costs against FEBTC.

FEBTC appealed to the SC seeking reversal of the CA decision and enforcement of liability against Chan.
The SC granted the appeal and reversed the CA ruling, affirming the RTC’s decision and holding Chan liable to FEBTC.

Whether FEBTC proved that Chan was liable for the P967,000.00 withdrawn using his ATM card despite the system bug in FEBTC’s computer system.
Whether the system bug and lack of direct evidence of Chan’s personal withdrawal exculpate him from liability.
Whether FEBTC is liable to reimburse Chan for amounts debited to his account without his authorization.