The Supreme Court has cleared a corporate treasurer of any liability arising from a fraudulent check-diversion scheme, ruling that he exercised the required diligence when he signed two altered checks. In G.R. No. 253990, the Court granted the Petition for Review on Certiorari of Hermenegildo P. Manzano, Jr. and dismissed the complaint against him.
The Case
DCCD Engineering Corporation is a domestic corporation that had set up a provident fund for its associates and a retirement fund for its rank-and-file employees. Manzano served as the corporation's treasurer and also acted as trustee and treasurer of both funds, according to the complaint. Buyco functioned as cashier and as Manzano's assistant.
Sometime in June 2003, irregularities surfaced in the records of one of DCCD's bank accounts, prompting the corporation to constitute an audit investigation committee. The inquiry revealed that Buyco had been diverting funds from DCCD's accounts by altering the intended payee in several checks issued by the corporation. To avoid arousing suspicion, she changed the payee to read “DCCD Engineering Corporation,” and then deposited the checks into unauthorized DCCD accounts she had opened with Bankwise.
DCCD initiated a complaint for sum of money and damages against Buyco, including Manzano and Bankwise as co-defendants. The complaint averred that Manzano took part in Buyco's scheme, pointing out that he even countersigned her alterations on SBTC Check Nos. 114066 and 114113, in the amounts of PHP 522,500.00 and PHP 1,045,000.00, respectively.
In his Answer, Manzano disclaimed any participation. He contended that once a check is signed by him, it is immediately turned over to Buyco and remains under her custody until delivered to the intended payee. He asserted he derived no personal benefit from the subject checks and denied any involvement in their misappropriation.
The Regional Trial Court ruled that Buyco alone orchestrated the fraudulent scheme, but found Manzano negligent to some extent because the two subject SBTC checks already carried the alterations when presented to him for signature. By countersigning without inquiry or objection, he was held solidarily liable with Buyco for the two checks. The Court of Appeals echoed the RTC's finding that Manzano was negligent for countersigning without questioning the alterations.
The Issue
The question before the Court was whether Manzano could be held liable for negligence in countersigning the altered SBTC checks, or whether he exercised the required diligence as the company's treasurer and authorized signatory.
The Ruling
The Court found that Manzano exercised the required diligence in signing the subject SBTC checks and relieved him of liability from the fraudulent acts carried out by Buyco. The dispositive portion reads:
“ACCORDINGLY, the Petition for Review on Certiorari is GRANTED. The Decision dated January 22, 2020 and the Resolution dated September 11, 2020 of the Court of Appeals in CA-G.R. CV No. 110451 are REVERSED and SET ASIDE.”
“The Order dated June 30, 2017 of Branch 137 of the Regional Trial Court of Makati City in Civil Case No. 07-511 is MODIFIED, in that the Complaint is DISMISSED as against petitioner HERMENEGILDO P. MANZANO, JR.”
By the Numbers
- G.R. No. 253990
- SBTC Check No. 114066 – PHP 522,500.00
- SBTC Check No. 114113 – PHP 1,045,000.00
- Total for the two SBTC checks – PHP 1,567,500.00
- UCPB Check No. 0000320 – PHP 1,049,690.02
- BPI Check No. 17331 – PHP 693,315.57
- Attorney's fees – PHP 50,000.00
- Irregularities surfaced – June 2003
- CA Decision – January 22, 2020; CA Resolution – September 11, 2020
- RTC Order – June 30, 2017; Civil Case No. 07-511
The Court's Reasoning
The Court noted that DCCD mandated no additional or exceptional audit procedures in the event that a check bore any modification. Nothing in the process required Manzano, as signatory, to act as a second line of scrutiny. He could reasonably rely on the presumption that the accounting department had already conducted the necessary verification of the checks presented to him. Even the RTC recognized that the task of cross-checking the prepared check against the cash disbursement voucher did not fall upon Manzano.
The Court observed that the alteration itself was of a wholly innocuous nature. The payee designation was changed to “DCCD Engineering Corporation,” a modification that, under reasonable foresight, could not have been expected to result in harm or prejudice. As Manzano explained, the alteration appeared no different from a routine transfer of funds from one account to another. Manzano sought clarification on the change, to which Buyco assured him that the funds would be directed to DCCD. The Court held that these circumstances satisfy the prudence test enshrined in Picart, concluding that Manzano had exercised the required diligence.
Source: Supreme Court Decision, G.R. No. 253990.
This report summarizes a public Supreme Court decision and is not legal advice.