Title
Equitable PCIBank vs. Spouses Lacson
Case
G.R. No. 256144
Decision Date
Mar 6, 2023
EPCIB accused the Lacsons of check kiting, claiming P20M in damages. Courts ruled no actual loss occurred; claims dismissed due to lack of evidence.
check kiting scheme
dismissal of case
bank fraud

Case Summary (G.R. No. 256144)

Factual Background: The Alleged Check Kiting Scheme

EPCIB alleged that sometime in 2002, the Lacsons encountered serious difficulties in collections and resorted to a fraudulent and malicious practice of check kiting in connivance with Yuching, who served as Branch Manager of EPCIB’s C.M. Recto branch. EPCIB described check kiting as the act of securing temporary use of money through issuing or negotiating worthless paper and then redeeming it with proceeds from similar paper, repeatedly, until the scheme collapses. EPCIB explained that a depositor with accounts in two banks could inflate working balances by depositing checks drawn on a different bank, making those checks good before presentation for collection, and thus using the bank’s credit in the interim.

EPCIB further asserted that banks could prevent kiting by refusing to credit deposits until collection, but that account owners could still perpetrate the fraud through privileges that allowed checks to be deposited even without actual collection, facilitated by a participating bank officer who deliberately violated the limitations of those privileges. Based on EPCIB’s investigation, from November 2002 to January 2003, the Lacsons allegedly repeatedly and interchangeably drew checks from one account and deposited the proceeds to the other despite insufficient funds. EPCIB emphasized that many checks were “on us” or “same branch” checks, which allegedly made the transfers easy even without actual deposits in both accounts. EPCIB stated that during this period, the Lacsons issued and drew 214 checks that proved to be Drawn Against Insufficient Funds (DAIF). EPCIB claimed that the scheme only ended when two checks, each allegedly with a face value of P10 Million, were dishonored because they were drawn against a closed account.

EPCIB narrated that on January 7, 2003, Yuching reported the alleged kiting to her superiors. That same day, EPCIB’s Senior Vice President Annie H. Ngo allegedly stopped all activities involving the Lacsons’ accounts. Yuching then purportedly contacted EPCIB’s Senior Vice President and Head of the Retail Banking Group Dennis Velasquez, stating that the Lacsons promised to sign a real estate mortgage (REM) to settle obligations. EPCIB alleged that the Lacsons reneged and failed to execute the REM.

EPCIB’s Complaint and the Parties’ Denials

On June 4, 2003, EPCIB filed a Complaint for Sum of Money and Damages with Prayer for Preliminary Attachment before the RTC in Civil Case No. 03-618, against the Lacsons and Yuching. Yuching filed an Answer with Compulsory Counterclaim, denying conspiracy and asserting that she discovered the kiting scheme only in December 2002. She admitted calling SVP Velasquez but claimed she did so merely to facilitate settlement negotiations after SVP Ngo refused to talk to her. She also asserted that the Lacsons turned over eight Transfer Certificates of Title and endorsed several post-dated checks for settlement.

The Lacsons denied using their EPCIB current accounts for fraudulent and malicious practices. They contended that their accounts were subjected to deductions not supported by debit memos and that EPCIB accepted checks for negotiation despite variations between the spelled words and written figures. They also insisted that there was no actual withdrawal of P20 Million from either account.

RTC Ruling: Damages Awarded

On June 11, 2018, the RTC ruled in favor of EPCIB after finding preponderance of evidence to sustain the complaint. The RTC ordered the Spouses Lacson to pay EPCIB P20,000,000.00 as actual damages plus interest of six percent (6%) per annum from finality of the decision. The RTC also held the Spouses Lacson and Yuching solidarily liable to pay P500,000.00 as exemplary damages, P300,000.00 as attorney’s fees, and costs of suit. The RTC denied reconsideration in an Order dated January 22, 2019.

Court of Appeals: Dismissal and Lifting of Attachment

The Lacsons appealed to the Court of Appeals. On January 25, 2021, the CA reversed and set aside the RTC Decision and Order. The CA entered a new judgment dismissing EPCIB’s case and lifted the writ of attachment issued by the RTC against real properties registered in the names of the Lacsons. EPCIB later moved for reconsideration, but the CA denied the motion on March 10, 2021.

EPCIB’s Petition and Respondents’ Opposition

EPCIB filed a petition under Rule 45, insisting that the RTC committed serious reversible error. It argued that the CA improperly reversed the RTC’s findings despite EPCIB’s alleged proof by preponderance of evidence, that the CA erred in ruling EPCIB suffered no loss or damage because it dishonored the checks, and that the CA wrongly held EPCIB was not entitled to exemplary damages and attorney’s fees.

The respondents opposed the petition, contending principally that EPCIB’s petition was procedurally defective and that EPCIB failed to prove its cause of action by preponderance of evidence. They also argued EPCIB was not entitled to actual damages, and they opposed exemplary damages, attorney’s fees, and costs of suit. Yuching reiterated that she did not participate, connive, or collude with any kiting activities and that EPCIB was not entitled to any claimed damages.

Legal Issues: Actual Damage, Exemplary Damages, and Attorney’s Fees

The Court addressed whether EPCIB was entitled to actual damages under Art. 2199 based on the dishonor of the checks and whether the RTC’s awards of exemplary damages, attorney’s fees, and costs of suit were legally justified. It also examined, in the light of the CA’s findings, the evidentiary basis for EPCIB’s claimed loss and the requisites for exemplary damages and attorney’s fees.

Legal Basis and Reasoning: No Presumed Actual Damages and No Proven Compensable Loss

The Court reiterated the governing principle that actual or compensatory damages are those awarded to compensate for loss or injury sustained and to repair the wrong done rather than to impose a penalty. It stressed that actual damages cannot be presumed. A claimant must prove two elements: the fact of injury or loss and the actual amount of loss with reasonable certainty, supported by competent proof and the best evidence available. The Court emphasized that compensatory damages cannot be anchored on conjecture and that claims must be supported, in appropriate cases, by receipts and credible evidence.

Applying these standards, the Court agreed with the CA that EPCIB did not establish a compensable injury to support the RTC’s award of P20 Million. The amount awarded by the RTC represented the value of checks issued by the Lacsons that were later dishonored as DAIF. The Court noted that the dishonor was uncontroverted. However, it held that EPCIB did not suffer damage or loss when the checks were dishonored, because dishonor meant that EPCIB did not actually collect on the checks and did not charge expenses against itself. The Court explained the concepts of dishonor under the Negotiable Instruments Law: a check is dishonored by non-payment when duly presented for payment and payment is refused or cannot be obtained, or when presentment is excused and the instrument is overdue and unpaid; and it is dishonored by non-acceptance when duly presented for acceptance and the required acceptance is refused or cannot be obtained, or when presentment is excused and the check is not accepted. In either instance, the Court reasoned that no actual collection occurred and no disbursement resulted from dishonor.

The Court further held that EPCIB’s evidence, as reflected in the petition, did not show that the P20 Million (or any amount) left EPCIB’s coffers through collection, withdrawal, or any other disbursement connected to the dishonored checks. Even assuming arguendo that check kiting occurred, the Court ruled that EPCIB was still required to prove injury caused by the fraudulent scheme. The Court observed that EPCIB acknowledged that the checks’ proceeds totaling P20 Million were drawn from one Lacson account and credited to another account before clearance, but the checks were ultimately dishonored due to account closure. That factual posture raised the question whether EPCIB actually suffered injury, because the Court found that no cash was paid out by the bank or received by the Lacsons by virtue of the dishonored checks.

At most, the Court reasoned, any actual damages EPCIB might have suffered would have been the time value of money, such as interest on the amounts reflected in the Lacsons’ accounts during the period from when credited until discovery and/or reversal. The Court noted that before EPCIB uncovered the alleged fraud, the amounts reflected in the accounts were technically under the control and custody of the Lacsons, and the Lacsons derived benefits in the form of business credit and loan integrity. Thus, any compensable loss would have required proof concerning time value, but the Court found that the petition did not address any interest on the amounts. Consequently, the Court sustained the CA’s ruling that the RTC’s award of actual damages lacked adequate factual and evidentia

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