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

Case Summary (G.R. No. 170598)

Procedural Posture

FEBTC sued Chan in the RTC (Civil Case No. 92-61706) to recover P770,488.30 representing the unrecovered portion of P967,000.00 allegedly withdrawn from Chan’s current account through a PNB-MEGALINK ATM via Far East Card No. 05-01120-5-0. The RTC ruled for FEBTC and awarded principal, interest, exemplary damages, and attorney’s fees. The Court of Appeals reversed, ordering FEBTC to return P196,571.30 plus interest and awarding costs to Chan. The Supreme Court reviewed FEBTC’s appeal and affirmed the CA decision.

Facts Relevant to Liability

FEBTC issued to Chan a Do-It-All card (combined credit and ATM card) tagged to his current account and required a six-digit PIN to transact. Between May 4–5, 1992, the MEGALINK journal tapes reflected 242 withdrawals charged to Chan’s card and account totaling P967,000.00, mostly in P4,000.00 increments. Chan’s FEBTC Ongpin Branch account showed an available balance of approximately P198,511.70. FEBTC later discovered a computer program error (“system bug”) during reconciliation on May 7, 1992, and took remedial measures (including repossessing the card when Chan attempted withdrawal at an Ermita branch). FEBTC debited parts of the account under the ATM service agreement and later sought court recovery of the unrecovered portion. Chan denied making the withdrawals, asserting he was at home and suggesting an “inside job” or other forms of technological compromise.

Issues Presented

Whether Chan personally made (or caused the making of) the ATM withdrawals totaling P967,000.00 from his account using his card and PIN.
If so, whether Chan is liable to reimburse FEBTC P770,488.30 (the unrecovered portion) plus damages and costs.
Conversely, whether FEBTC bears responsibility because a system bug and other vulnerabilities permitted the withdrawals without the depositor’s participation.

RTC Ruling and Rationale

The RTC found Chan liable. Its reasoning rested on inferences from Chan’s subsequent conduct (attempting an ATM withdrawal at a nearby branch days later, issuance of checks soon after, failure to immediately report the card capture) and on the journal tapes showing that Chan’s card/PIN and account were used. The RTC regarded opportunistic exploitation of the computer error by Chan as plausible and condemned the alleged taking advantage of the erroneous dispensation. The RTC awarded FEBTC P770,488.30 plus 24% per annum interest from filing, exemplary damages (P100,000), attorney’s fees (P30,000), and costs.

Court of Appeals Ruling and Rationale

The CA reversed. It emphasized the absence of direct evidence that Chan physically made the withdrawals, and it properly analyzed the plaintiff’s burden to prove affirmative allegations by a preponderance of evidence. The CA found the MEGALINK journal tapes internally inconsistent (notably anomalous “ledger balance” versus “available balance” entries that increased despite withdrawals), and it gave weight to the bank’s admission of a program bug and to documented vulnerabilities in ATM systems (including BSP advisories and reported incidents). The CA concluded that the totality of evidence did not preponderantly establish Chan’s personal participation in the withdrawals, that the bank had not established actual cash dispensation at the ATM and had failed to exclude other plausible explanations such as replacement cards, inside manipulation, or exploitation of the system bug. It therefore ordered partial restitution to Chan and assessed costs against FEBTC.

Supreme Court Ruling — Holding

The Supreme Court affirmed the Court of Appeals. It held that FEBTC failed to meet its burden of proving by preponderance of the evidence that Chan personally effected or caused the ATM withdrawals and that the bank, which admitted a system bug, bore the consequences of the failure to secure an error-free system and to present preponderant proof of Chan’s culpability.

Burden of Proof and Standard Applied

The Court carefully restated and applied fundamental principles on burden of proof. The plaintiff (FEBTC) bore the burden of persuasion to prove its affirmative allegation that Chan made the withdrawals. Under Section 1, Rule 133, the requisite quantum was preponderance of evidence — evidence more convincing than that offered by the other side. The Court distinguished between the burden to produce evidence (which may shift during trial) and the ultimate burden of persuasion (which remains on the party asserting the affirmative). FEBTC could not rely on mere ownership/possession of the ATM card or on journal tapes without addressing inconsistencies and alternative plausible explanations.

Technical Findings: Nature and Consequence of the System Bug

The Court accepted FEBTC’s admission of a program bug and adopted the technical description supplied by FEBTC’s own systems analyst. Two program modules were implicated: CAPDROTH (which validates account existence, transaction validity, and branch online/offline status) and SCPUP 900 (which processes authorization messages). When CAPDROTH encountered the Ongpin branch being offline, it passed a decision code to SCPUP 900 that SCPUP 900 was not programmed to interpret correctly. SCPUP 900’s logic treated non-error messages that were not explicit authorizations as authorizations, resulting in repeated authorization messages that allowed 242 withdrawals spanning several hours. The bug was thus a function of (1) the current-account nature of the transactions, (2) the account’s branch being off-line, and (3) the transactions originating via MEGALINK. Because of that bug, the account was not properly accessed in real time and withdrawal limits were bypassed; the system permitted disbursements in excess of the available balance and beyond daily maximums.

Assessment of the Evidence and Inferences

The Supreme Court identified multiple evidentiary shortcomings in FEBTC’s case: (1) the MEGALINK journal tapes bore internal inconsistencies that undermined their integrity; (2) FEBTC failed to establish that the PNB-MEGALINK ATM actually dispensed the physical cash in the amounts alleged — it did not establish the ATM’s cash inventory immediately before and after the withdrawals; (3) credible testimony and admissions (inclu

Case Syllabus (G.R. No. 170598)

Procedural Posture and Relief Sought

Petition for certiorari to review the Court of Appeals (CA) decision dated August 1, 2005 (G.R. No. 170598; decision penned by Associate Justice Arturo D. Brion), which reversed the Regional Trial Court (RTC), Branch 51, Manila judgment of May 14, 1998 in Civil Case No. 92-61706.
FEBTC (petitioner/plaintiff in RTC) sought recovery from depositor Robert Mar Chante (respondent/defendant in RTC) of P770,488.30 as the unrecovered balance of allegedly fraudulent ATM withdrawals, plus interest, exemplary damages, attorney’s fees and costs.
CA reversed the RTC and ordered FEBTC to return to Chan Php196,571.30 plus 12% interest per annum from August 7, 1992 (date Chan filed his counterclaim), with costs against FEBTC.
Supreme Court (First Division, Bersamin, J.) resolved appeal by FEBTC; the Court affirmed the CA decision and directed petitioner to pay the costs of suit.

Parties and Status of Accounts / Cards

Plaintiff-petitioner: Far East Bank & Trust Co. (FEBTC), Ongpin Branch.
Defendant-respondent: Robert Mar Chante, also known as Robert Mar G. Chan, current account depositor.
Chan’s current account: No. 5012-00340-3.
Card issued: Far East Card No. 05-01120-5-0 (a Do-It-All card handling credit card and ATM transactions), expiry July 1993, tagged to Chan’s current account.
Security feature: six-digit personal identification number (PIN) required to access account at ATM; PIN was keyed in by Chan upon card issuance and known only to him, per the bank’s procedure.

Facts Alleged by FEBTC (Plaintiff)

Complaint filed July 1, 1992 in RTC to recover unpaid balance of P770,488.30 representing unrecovered ATM withdrawals claimed to have been fraudulently withdrawn from Chan’s account with use of Far East Card No. 05-01120-5-0.
Alleged withdrawals occurred between 8:52 p.m. May 4, 1992 and 4:06 a.m. May 5, 1992 at the PNB-MEGALINK ATM facility at the Manila Pavilion Hotel.
Total withdrawals alleged: P967,000.00, effected in a series of 242 transactions at P4,000.00 each except one transaction No. 108 which dispensed P3,000.00.
MEGALINK journal tapes recorded Far East Card No. 05-01120-5-0 used in all 242 transactions; transactions processed and recorded by PNB and MEGALINK systems.
FEBTC pointed out anomalous circumstances: FEBTC Ongpin branch was offline at the time; account balance per bank statement was only P198,511.70; ATM maximum withdrawal limit was P50,000.00/day (which was exceeded); withdrawals were not reflected as debits in Chan’s FEBTC account records at time of withdrawals.
FEBTC alleged there was a computer “system bug” in its system that allowed excess withdrawals and that Chan took advantage of this bug to effect the withdrawals.
FEBTC debited Chan’s account P192,517.20 on May 14, 1992 pursuant to Chan’s ATM Service Agreement, and debited P3,000.00 on May 18, 1992, leaving an alleged unrecovered balance of P770,488.30. FEBTC sent demand letters on May 14 and May 18, 1992 for reimbursement of the unrecovered balance; Chan did not comply, prompting the July 1, 1992 suit.

Depositor’s (Chan’s) Position and Defense

Chan admitted possession of the Far East Card on May 4–5, 1992 but denied making the alleged withdrawals totaling P967,000.00; asserted he was at home during the time of the withdrawals.
Raised possibility of an “inside job,” referring to a newspaper report that a FEBTC employee admitted debiting depositors’ accounts using computer knowledge and information.
Argued physical impossibility or implausibility of standing long hours at an ATM to withdraw the contested sums; maintained the withdrawals were not his.
Claimed debiting of his account harmed his business and caused humiliation when his checks were dishonored by FEBTC.
Filed counterclaim in RTC; CA reversed and ordered FEBTC to return amounts debited; Supreme Court affirmed CA on appeal.

Bank’s Discovery, Investigation and Corrective Actions

FEBTC discovered the system bug on May 7, 1992 during routine reconciliation of ATM-MEGALINK transactions.
FEBTC immediately adopted remedial and corrective measures to protect interests and prevent recurrence.
One measure under ATM Service Agreement: program its system to repossess depositor’s ATM cards; Chan’s card was repossessed at FEBTC Ermita Branch when he again attempted to withdraw; ATM retained the card until recovery by bank.
FEBTC conducted an in-depth investigation and a time-and-motion study of the questioned withdrawals.
FEBTC witnesses included Systems Analyst Edgar Munarriz (who admitted the bug facilitated withdrawals), employee Manuel Del Castillo (testified about prior problems and storage of “opposite numbers” corresponding to PINs), and PNB employee Erwin Arellano who validated the MEGALINK journal tapes but did not state exact cash levels in the ATM.

Issues Framed in the RTC Pre-Trial Order

(1) Whether Chan had himself withdrawn the total sum of P967,000.00 using his Far East Card at the PNB-MEGALINK ATM facility.
(2) If so, whether he was liable to reimburse FEBTC the amount of P770,488.30 as actual damages, plus interest.

RTC Findings, Reasoning and Judgment (May 14, 1998)

RTC found in favor of FEBTC and held Chan liable.
RTC’s factual narrative: described a scenario where the machine, after failing to get a signal from the bank branch of account, proceeded via another path and due to computer error dispensed P967,000.00 over many hours.
RTC inferred guilt from Chan’s subsequent conduct: attempted withdrawal at Ermita branch two days after the withdrawals (card was captured), issuance of a check for nearly whole balance, failure to immediately inquire about card capture, and other acts which court read as consciousness of guilt and attempts to take advantage of machine behavior.
RTC held that, irrespective of computer error causation, Chan’s failure to return monies taken in excess of his legal right constituted wrongdoing.
RTC applied Civil Code Articles 19, 21, 22, 23 (cited) to find Chan liable.
RTC judgment ordered Chan to pay:
- P770,488.30 as actual damages (unrecovered balance),
- interest at 24% per annum from July 1, 1992 until fully paid,
- P100,000.00 exemplary damages,
- P30,000.00 attorney’s fees,
- costs of suit.
RTC dismissed Chan’s counterclaim.

CA Ruling and Reasoning (August 1, 2005)

CA reversed and set aside the RTC decision, granting Chan’s appeal.
CA recognized evidentiary dilemma: no direc