In Philippine National Bank v. Pablo V. Raymundo, the Supreme Court addressed the civil liability of a bank manager acquitted of violating the Anti-Graft and Corrupt Practices Act. The Court ruled that despite the acquittal, the manager could still be held civilly liable due to gross negligence in approving the encashment of checks against an uncleared foreign deposit, causing financial loss to the bank. This decision underscores the high standard of diligence expected of bank officers and the potential for civil liability even in the absence of criminal culpability.

When Trust Fails: Can a Bank Manager Be Liable for Subordinate Errors?

This case arose from a situation where Pablo V. Raymundo, then a department manager at Philippine National Bank (PNB), approved the deposit of a foreign draft check and subsequently allowed withdrawals against it before the check had cleared. When the foreign draft check turned out to be fraudulent, PNB suffered a loss of P4,000,000.00. Raymundo was charged with violating Section 3(e) of Republic Act (RA) No. 3019, also known as the Anti-Graft and Corrupt Practices Act. While Raymundo was acquitted by the Regional Trial Court (RTC), PNB appealed the civil aspect of the decision, seeking to recover the financial losses. The Court of Appeals (CA) denied PNB’s appeal, leading to this petition before the Supreme Court.

The Supreme Court emphasized that an acquittal in a criminal case does not automatically preclude civil liability. The Court distinguishes between two types of acquittals: one where the accused is found not to be the author of the act or omission, and another where the acquittal is based on reasonable doubt. In the latter, the accused may still be held civilly liable if the civil liability is proven by preponderance of evidence. As the Court stated in Dr. Lumantas v. Sps. Calapiz, Jr.:

Our law recognizes two kinds of acquittal, with different effects on the civil liability of the accused. First is an acquittal on the ground that the accused is not the author of the act or omission complained of…The second instance is an acquittal based on reasonable doubt on the guilt of the accused. In this case, even if the guilt of the accused has not been satisfactorily established, he is not exempt from civil liability which may be proved by preponderance of evidence only.

In Raymundo’s case, the acquittal was based on the prosecution’s failure to prove guilt beyond reasonable doubt. The RTC and CA had erroneously concluded that no civil liability could arise from his actions. The Supreme Court disagreed, finding that Raymundo’s reliance on his subordinates’ verification of the checks, which later proved to be drawn against uncollected deposits, constituted gross negligence.

The Court noted that both the RTC and the CA had overlooked crucial testimonial and documentary evidence presented by PNB. This evidence demonstrated Raymundo’s negligence in approving the payment of six checks without waiting for the foreign draft check to clear. The Court highlighted Raymundo’s own admissions in affidavits, complaints, and testimonies from other cases he had filed against Ms. Juan and her associates. These admissions, while not violating his right against self-incrimination, revealed the extent of his negligence.

Specifically, Raymundo’s complaint for sum of money against Ms. Juan revealed that he was initially hesitant to approve the account opening and issuance of checks. He allowed the transactions only after receiving assurances that the foreign check was good. His affidavit supporting the estafa complaint further emphasized that he permitted the issuance of six checks based on the promise that they would not be negotiated until the Morgan Guaranty Check had cleared.

The Supreme Court also cited Raymundo’s affidavit:

…having been fully assured that the Morgan check is good and trusting on their respective representations that they are top executives of the C&T Global Futures, Inc., I allowed the issuance of six (6) checks…I allowed the aforecited checks to be issued on the strong and collective undertaking of all the accused, that the same would not be traded until after the Morgan Guaranty Check shall have been cleared.

These admissions, while intended to support his claims against Ms. Juan, inadvertently exposed his gross negligence in disregarding the bank’s established policies for clearing foreign checks. The Court stated that while Raymundo’s prompt filing of criminal and civil cases against Ms. Juan and her cohorts for the recovery of the money negates bad faith in causing undue injury to the PNB, it incidentally revealed Raymundo’s gross negligence (1) in allowing the peso conversion of the foreign check to be credited to her newly-opened peso checking account, even before the lapse of the 21-day clearing period, and (2) in issuing her a check booklet, all on the very same day the said account was opened.

The Court reiterated that banks are required to exercise extraordinary diligence due to the public interest nature of their business. This includes exercising the highest degree of diligence in the selection and supervision of their employees. Bank employees and officials are expected to demonstrate a higher degree of responsibility, care, and trustworthiness than ordinary clerks and employees. By disregarding the bank’s foreign check clearing policy, Raymundo was grossly negligent.

The Supreme Court defined gross negligence as:

negligence characterized by the want of even slight care, acting or omitting to act in a situation where there is duty to act, not inadvertently but willfully and unintentionally with a conscious indifference to consequences insofar as other persons may be affected.

The Court concluded that Raymundo’s actions were the proximate cause of the bank’s losses. Had he adhered to the bank’s clearing policy, the six checks would not have been encashed, and PNB would not have suffered financial injury. However, the Court also clarified that actual damages must be proven with a reasonable degree of certainty. While PNB initially claimed damages of P4,000,000.00, the Court found that the bank had only proven losses amounting to P2,100,882.87, based on the accounts receivable ledger and PNB’s own witness testimonies.

The Court ordered Raymundo to pay PNB actual damages of P2,100,882.87, along with legal interest rates. These rates include 12% per annum from the filing of the criminal information until June 30, 2013, and 6% per annum from July 1, 2013, until the finality of the decision. Additionally, a 6% per annum interest rate would be applied from the finality of the decision until the amount is fully paid.

FAQs

What was the key issue in this case?	The key issue was whether a bank manager, acquitted of violating the Anti-Graft and Corrupt Practices Act, could still be held civilly liable for losses incurred by the bank due to his actions. The court examined if the manager’s actions constituted gross negligence.
What is the difference between criminal and civil liability in this context?	Criminal liability requires proof beyond reasonable doubt, while civil liability only requires a preponderance of evidence. An acquittal in a criminal case does not automatically preclude civil liability if negligence is proven.
What standard of care is expected of bank employees?	Banks are required to exercise extraordinary diligence, more than that of a good father of a family, in handling transactions. This extends to the selection and supervision of employees, who are expected to demonstrate a high degree of responsibility and trustworthiness.
What constituted gross negligence in this case?	Gross negligence was found in the bank manager’s approval of the deposit and subsequent withdrawals against a foreign check before it had cleared. This was a violation of the bank’s foreign check clearing policy.
How did the court determine the amount of damages?	The court relied on the accounts receivable ledger and the bank’s witness testimonies to determine the actual losses incurred. The initial claim of P4,000,000.00 was reduced to P2,100,882.87 due to lack of sufficient proof for the higher amount.
What is proximate cause?	Proximate cause is the direct cause, in natural and continuous sequence, unbroken by any efficient intervening cause, produces injury and without which the result would not have occurred. In this case, the manager’s failure to adhere to clearing policies was deemed the proximate cause.
What interest rates apply to the damages awarded?	The court applied varying legal interest rates: 12% per annum from the filing of the criminal information until June 30, 2013, 6% per annum from July 1, 2013, until the finality of the decision, and 6% per annum from the finality of the decision until full payment.
Is reliance on subordinates a valid defense against negligence?	Generally, no. While managers may delegate tasks, they cannot blindly rely on subordinates without exercising due diligence. In this case, the manager’s reliance on subordinates without ensuring compliance with bank policies was deemed negligent.

The Supreme Court’s decision in Philippine National Bank v. Pablo V. Raymundo serves as a reminder of the high standards of care expected of bank officers and the potential for civil liability even in cases where criminal guilt is not established. It underscores the importance of adhering to established banking policies and exercising due diligence in all transactions.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Philippine National Bank v. Pablo V. Raymundo, G.R. No. 208672, December 07, 2016