Case Digest: Equitable PCIBank v. Spouses Maximo and Soledad Lacson and Marietta F. Yuching G.R. No. 256144, March 6, 2023 Supreme Court, First Division Ponente: Justice Ricardo R. Rosario

 

FACTS

Equitable PCIBank (EPCIB), now BDO Unibank, Inc., filed a complaint for damages against Spouses Maximo and Soledad Lacson and Marietta F. Yuching, the former branch manager of its C.M. Recto Branch. The bank alleged that the spouses, with the cooperation of Yuching, engaged in a check-kiting scheme, a fraudulent practice whereby worthless checks are continuously funded by deposits from other unfunded checks to create the false appearance of available funds. As a result of the scheme, EPCIB claimed to have suffered losses amounting to ₱20 million.

The Regional Trial Court (RTC) found that the evidence established the existence of the fraudulent scheme and held the spouses liable for actual damages. It likewise held the spouses and Yuching solidarily liable for exemplary damages, attorney's fees, and costs of suit. On appeal, however, the Court of Appeals (CA) reversed the RTC, ruling that EPCIB failed to establish by preponderance of evidence that the spouses participated in the alleged fraud. The CA likewise lifted the writ of attachment issued against the properties of the spouses.

Aggrieved, EPCIB filed a Petition for Review on Certiorari under Rule 45 of the Rules of Court, arguing that the CA erred in disregarding the evidence presented during trial. It maintained that the documentary and testimonial evidence sufficiently established that the spouses knowingly participated in the check-kiting scheme in conspiracy with Yuching, thereby causing substantial losses to the bank.

ISSUE

Whether or not the Court of Appeals erred in reversing the RTC and ruling that Equitable PCIBank failed to prove by preponderance of evidence that the spouses participated in the alleged check-kiting scheme.

Whether or not the evidence presented was sufficient to establish the civil liability of the spouses and Marietta Yuching for the damages allegedly suffered by Equitable PCIBank.

Whether or not the RTC correctly awarded actual damages, exemplary damages, attorney's fees, and costs of suit against the respondents.

HELD

The Supreme Court denied the petition and affirmed the Decision and Resolution of the Court of Appeals. The Court held that EPCIB failed to establish by preponderance of evidence that the spouses knowingly participated in the alleged fraudulent check-kiting scheme. In civil cases, the plaintiff bears the burden of proving its cause of action through evidence that is more convincing than that presented by the opposing party. Mere suspicion or inference cannot substitute for competent proof.

The Court explained that while check kiting is recognized as a fraudulent banking practice, EPCIB failed to prove that the spouses acted in bad faith or conspired with Yuching in carrying out the transactions. The evidence showed irregularities in the handling of the accounts, but these were insufficient to establish that the spouses deliberately participated in the fraud. The Court stressed that fraud is never presumed and must be proved by clear and convincing evidence before liability may be imposed.

The Court likewise ruled that the awards of actual damages, exemplary damages, and attorney's fees could not stand. Under the Civil Code, actual damages must be supported by competent proof of the loss suffered, exemplary damages may be awarded only when the defendant acted in a wanton, fraudulent, or malevolent manner, and attorney's fees may be recovered only in the instances provided under Article 2208 of the Civil Code. Since EPCIB failed to establish the respondents' civil liability, there was no legal basis for the awards granted by the RTC.

Accordingly, the Supreme Court affirmed the dismissal of the complaint and sustained the lifting of the writ of attachment over the spouses' properties. The Court emphasized that regardless of the seriousness of the allegations, liability cannot rest on speculation but must be established by the quantum of evidence required by law