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PHILIPPINE NATIONAL BANK v. CA

FACTS:

Private Respondent B.P. Mata & Co. Inc. (Mata) is a corporation that acts as a crewing agent for foreign shipping companies, including Star Kist Foods, Inc., USA (Star Kist). As part of their agreement, Mata advances funds for the crew's expenses and then sends monthly billings to Star Kist for reimbursement.

On February 21, 1975, Security Pacific National Bank (SEPAC) transmitted a cable message to Philippine National Bank (PNB) instructing them to pay the amount of US$14,000 to Mata's account with the Insular Bank of Asia and America (IBAA), per order of Star Kist. However, PNB noticed an error and instructed SEPAC that the amount should only be US$1,400.

Based on the corrected instruction, Cashier's Check No. 269522 in the amount of US$1,400 was issued to Mata on February 25, 1975. But on March 11, 1975, PNB issued another payment through Cashier's Check No. 270271 in the amount of US$14,000, thinking it was a reimbursement from Star Kist.

Six years later, on May 13, 1981, PNB requested Mata to refund the amount of US$14,000 after discovering the error in the second payment. PNB filed a civil case for collection and refund of the said amount against Mata, arguing that it has the right to recover the mistaken payment under a constructive trust.

The Regional Trial Court dismissed PNB's complaint, ruling that the case falls under the concept of solutio indebiti and not constructive trust. The appellate court affirmed the lower court's decision and further held that PNB's action has already prescribed.

PNB filed a petition for certiorari, seeking to annul the appellate court's decision. PNB argues that Mata's obligation to return the amount can be governed by either constructive trust or solutio indebiti, and that its action is not barred by prescription.

ISSUES:

  1. Whether or not a constructive trust is applicable in the case at bar.

  2. Whether or not the payment made by PNB to Mata constitutes solutio indebiti.

  3. Whether the case involves a constructive trust or solutio indebiti.

  4. Whether the claim for the amount erroneously paid is barred by laches.

RULING:

  1. Yes, a constructive trust is applicable in the case at bar. While Mata did not intend to hold the funds for the benefit of PNB, Article 1456 of the Civil Code construes a constructive trust in favor of the person from whom the property comes, in this case PNB, for reasons of justice and equity.

  2. Yes, the payment made by PNB to Mata constitutes solutio indebiti. The requisites of solutio indebiti, as defined in Article 2154 of the Civil Code, are fulfilled. There was a mistake in the payment, as PNB had already made a payment in the corrected amount prior to the second payment. Therefore, PNB has the right to demand the return of the unduly delivered funds.

  3. The Supreme Court held that the case involves a constructive trust rather than solutio indebiti. The court explained that under Article 1456 of the Civil Code, the law does not make any distinction as to who commits the mistake, and mutual mistake is a possibility on either side - on the side of either the grantor or the grantee. Therefore, it was erroneous to conclude that in a constructive trust, only the person obtaining the property commits a mistake.

  4. The Supreme Court ruled that the claim for the amount erroneously paid is barred by laches. Although the prescriptive period under Article 1144 of the Civil Code had not yet lapsed, the court invoked the principle of laches. It held that the delay of almost seven years in discovering the error was unreasonable and constituted negligence on the part of the petitioner. As between parties where negligence is imputable to one and not to the other, the negligent party must bear the consequences of its neglect. Thus, the petitioner's claim cannot prosper due to laches.

PRINCIPLES:

  • Resulting trusts are trusts raised by implication of law and presumed to have been contemplated by the parties. Examples of resulting trusts are found in Articles 1448 to 1455 of the Civil Code.

  • Constructive trusts are trusts not created by words but by construction of equity to satisfy the demands of justice. An example of a constructive trust is Article 1456 of the Civil Code.

  • A constructive trust does not generate a fiduciary relation and the so-called trustee does not accept any trust or intend to hold the property for the beneficiary.

  • The Civil Code provisions on quasi-contracts are not limited to the enumerated quasi-contracts but can also be applicable in cases where there is no pre-existing relationship and to avoid unjust enrichment.

  • Solutio indebiti is a quasi-contractual relation in which something is received when there was no right to demand it and the same was unduly delivered through mistake.

  • The concept of constructive trust is derived from Civil Law principles and aims to prevent unjust enrichment.

  • Mutual mistake is a possibility on either side in a constructive trust.

  • Prescription concerns the fact of delay, while laches deals with the effect of unreasonable delay.

  • An action to enforce an implied trust may be barred not only by prescription but also by laches.

  • Negligence on the part of a claimant may result in the claim being barred by laches.