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UNION BANK OF PHILIPPINES v. CA

FACTS:

The case involves a dispute between Union Bank and Allied Bank regarding an under-encoding error in a check. A check for One Million Pesos (P1,000,000.00) was drawn against Account No. 0111-01854-8 with Allied Bank and deposited with Union Bank. However, Union Bank's clearing staff erroneously encoded the amount as One Thousand Pesos (P1,000.00) only. Almost a year later, Union Bank discovered the error and notified Allied Bank of the discrepancy, but the latter refused to accept the charge slip. Union Bank then filed a complaint against Allied Bank before the Philippine Clearing House Corporation (PCHC) Arbitration Committee, seeking reimbursement for the losses incurred due to the under-encoding. Union Bank also filed a petition in the Regional Trial Court (RTC) of Makati for the examination of Allied Bank's account. The RTC dismissed the petition, stating that the case did not fall under any exception that would warrant the disclosure of or inquiry into the bank account. The Court of Appeals affirmed the dismissal, ruling that the money deposited in the account was not the subject matter of the litigation. Union Bank now appeals to the Supreme Court, arguing that the money deposited is indeed the subject matter of the case.

ISSUES:

  1. Whether the money deposited in the bank account is the subject matter of the litigation.

  2. Whether the bank should have informed the plaintiff about the under-encoding of the amount.

  3. Whether the petitioner can examine the bank deposits of the private respondent in order to prove its case against the latter.

  4. Whether the necessity of the inquiry is immaterial in determining whether the bank deposits can be examined.

RULING:

  1. The money deposited in the bank account is not the subject matter of the litigation. The "subject matter of the action" refers to the physical facts or things in relation to which the suit is prosecuted, and not the delict or wrong committed by the defendant. In this case, the subject matter of the action is the alleged violation of the rules and regulations of the bank by the defendant.

  2. The bank is not directly liable for the under-encoding of the amount. The bank had a duty to inform the plaintiff about the under-encoding, but the failure to do so does not make the bank directly liable for the loss. The plaintiff's cause of action arises from the defendant's deliberate violation of the provisions of the bank rule book. The plaintiff cannot seek reimbursement from the account of the drawer and must establish the defendant's direct liability for the loss.

  3. The Supreme Court denied the petition to examine the bank deposits of the private respondent. The Court held that the petitioner was not seeking recovery of the money deposited in the bank account, but rather, it wanted to prove the extent of the private respondent's liability. The Court emphasized that the subject matter of the dispute must be the money deposited itself in order to justify the examination of bank deposits. Since the case did not fall under any of the exceptions allowed by the Bank Deposits Secrecy Act, the examination of the bank deposits was not warranted.

PRINCIPLES:

  • "Subject matter of the action" refers to the physical facts, things, or money in relation to which the suit is prosecuted, and not the delict or wrong committed by the defendant.

  • The "cause of action" is the legal wrong threatened or committed, while the "object of the action" is to prevent or redress the wrong by obtaining legal relief. The "subject of the action" is the matter or thing with respect to which the controversy has arisen, and is generally the property, contract, or thing in dispute.

  • Bank deposits can be disclosed in cases where the money deposited is the subject matter of the litigation, as provided by Republic Act No. 1405.

  • The examination of bank accounts can be allowed if it is aimed at recovering an amount unlawfully acquired and extends to whatever is concealed by being held or recorded in the name of another person.

  • The bank has a duty to inform the depositor about any errors or discrepancies in the encoding of the amount, as provided by the bank's rules and regulations. Failure to fulfill this duty may have consequences, but it does not automatically make the bank directly liable for any resulting losses.

  • Responsibility arising from negligence in the performance of every kind of obligation is demandable and the liable party may be regulated by the courts according to the circumstances. (Art. 1172, Civil Code)

  • He who is guilty of negligence in the performance of its duty is liable for damages. (Art. 1170, Civil Code)

  • The money deposited in the bank account should be the subject matter of the litigation in order to justify the examination of bank deposits.