G.R. No.

150464 June 27, 2006

SECURITY BANK AND TRUST COMANY, Petitioner,
vs.
ERIC GAN, Respondent.
!ACTS" In 1981, respondent Eric Gan opened a current account with petitioner at its
Soler Branch in Santa Cruz, anila. Petitioner alle!ed that it had an a!ree"ent with
respondent wherein the latter would deposit an initial a"ount in his current account and
he could draw chec#s on said account provided there were su$$icient $unds to cover
the". %urther"ore, under a special arran!e"ent with petitioner&s 'ranch "ana!er then,
r. (ui, respondent was allowed to trans$er $unds $ro" his account to another person&s
account also within the sa"e 'ranch. Respondent availed o$ such arran!e"ent several
ti"es ') depositin! chec#s in his account and even 'e$ore the) cleared, he withdrew
the proceeds thereo$ and trans$erred the" to the other account. *hese transactions
were covered ') what were #nown as +de'it "e"os+ since respondent had no su$$icient
$unds to cover the a"ounts he trans$erred.
,ater on, respondent purportedl) incurred an overdra$t or ne!ative 'alance in his
account. -s o$ .ece"'er 1/, 1980, the overdra$t 'alance ca"e up to P112,313.38.
In 1991, petitioner $iled a co"plaint $or su" o$ "one) a!ainst respondent to recover the
P093,454.41 with 106 interest per annu" $ro" Septe"'er 15, 1994 until $ull) paid,
attorne)&s $ees, liti!ation e7penses and costs o$ suit.
*o prove its clai", petitioner presented Patricio ercado who was the 'oo##eeper who
handled the account o$ respondent and recorded his transactions in a led!er. Based on
the led!er, the overdra$t resulted $ro" trans$ers o$ $unds $ro" respondent&s current
account to another person&s account. *hese trans$ers were "ade under the authorit) o$
(ui. Respondent cate!oricall) denied that he ever authorized these 8$unds trans$ers.9
ISSUE" :;< the led!er cards and the testi"on) o$ Patricio ercado constituted the
'est evidence o$ the transactions "ade ') the respondent relative to his account.
RU#ING" <;. Both the trial court and the C- $ound that petitioner $ailed to su'stantiate
its clai" that respondent #nowin!l) incurred an overdra$t a!ainst his account. :e see
no reason to distur' this $indin!.
*he entries in the led!er, as testi$ied to ') ercado were not co"petent evidence to
prove that respondent consented to the trans$ers o$ $unds. *hese entries "erel)
showed that the trans$ers were indeed "ade and that (ui approved the". <either can
we accept petitioner&s ar!u"ent that the entries "ade ') ercado in the led!er were
co"petent evidence to prove how and when the ne!ative 'alance incurred. Petitioner
invo#es Section /2 o$ Rule 124 =Entries in the course o$ 'usiness>.
?nder this e7ceptions to the hearsa) rule, the ad"ission in evidence o$ entries in
corporate 'oo#s re@uired the satis$action o$ the $ollowin! conditionsA
1. *he person who "ade the entr) "ust 'e dead, or una'le to testi$)B
0. *he entries were "ade at or near the ti"e o$ the transactions to which the) re$erB
2. *he entrant was in a position to #now the $acts stated in the entriesB
/. *he entries were "ade in his pro$essional capacit) or in the per$or"ance o$ a
dut), whether le!al, contractual, "oral or reli!iousB and
1. *he entries were "ade in the ordinar) or re!ular course o$ 'usiness or dut).
*he led!er entries did not "eet the $irst and third re@uisites.
ercado, petitioner&s 'oo##eeper who prepared the entries, was presented to testi$) on
the transactions pertainin! to the account o$ respondent. It was in the course o$ his
testi"on) that the led!er entries were presented. *here was, there$ore, neither
Custi$ication nor necessit) $or the presentation o$ the entries as the person who "ade
the" was availa'le to testi$) in court.
oreover, ercado had no personal #nowled!e o$ the $acts constitutin! the entries,
particularl) those entries which resulted in the ne!ative 'alance. De had no #nowled!e
o$ the truth or $alsit) o$ these entries.
C-A *here is !ood reason wh) evidence o$ this nature is incorri!i'l) hearsa). Entries in
'usiness records which sprun! $ro" the dut) o$ other e"plo)ees to co""unicate $acts
occurrin! in the ordinar) course o$ 'usiness are pri"a $acie ad"issi'le, the dut) to
co""unicate 'ein! itsel$ a 'ad!e o$ trustworthiness o$ the entries, 'ut not when the)
purport to record what were independent a!ree"ents arrived at ') so"e 'an# o$$icials
and a client. In this case, the entries 'eco"e "ere casual or voluntar) reports o$ the
o$$icial concerned. *o per"it the led!ers, prepared ') the 'an# at its own instance, to
su'stitute the contract as proo$ o$ the a!ree"ents with third parties, is to set a
dan!erous precedent. Business entries are allowed as an e7ception to the hearsa) rule
onl) under certain conditions speci$ied in Section /2, which "ust 'e scrupulousl)
o'served to prevent the" $ro" 'ein! used as a source o$ undue advanta!e $or the part)
preparin! the".