View full case

BANK OF PHILIPPINE ISLANDS v. CA

FACTS:

A.A. Salazar Construction and Engineering Services filed a case against Bank of the Philippine Islands (BPI) claiming the recovery of an amount debited by BPI from their account. BPI claimed that the amount was demanded by Julio R. Templonuevo, who alleged that three checks were deposited into Salazar's account without his knowledge or endorsement. Instead of freezing the account where the checks were deposited, BPI froze a different account of Salazar. BPI eventually debited the amount from Salazar's account and paid Templonuevo. After trial, the RTC ruled in favor of Salazar and ordered BPI to pay damages. The Court of Appeals affirmed the decision of the RTC. BPI filed a petition for review seeking the reversal of the decision.

Plaintiff filed a complaint against Templonuevo for the refund of three questioned checks. Plaintiff claimed that there was no arrangement or agreement regarding the checks and that he was entitled to their refund. However, it was noted that Templonuevo only demanded for the refund more than a year after the last check was deposited. The court found it unusual that a prudent person would wait that long before demanding payment for such a significant amount.

ISSUES:

  1. Whether the collecting bank (BPI) has the authority to unilaterally withdraw funds from Salazar's account to rectify an alleged erroneous credit entry stemming from previously deposited checks without the endorsing signatures of the payee.

  2. Whether the arrangement between Templonuevo and Salazar regarding the deposit of checks lacking the payee's endorsement was valid and binding.

  3. The propriety of the awards for actual, moral, and exemplary damages, as well as attorney’s fees against BPI.

RULING:

  1. The Supreme Court ruled that BPI had the right to debit Salazar's account for the amount of the checks previously credited to her. Thus, the order for BPI to return the amount of P267,707.70 was reversed and set aside.

  2. The Court found no evidence to support the finding of a prior arrangement between Templonuevo and Salazar regarding the ownership and deposit of the checks. Therefore, the alleged valid transfer of ownership to the checks was not established.

  3. The CA's award of damages and attorney’s fees against BPI was affirmed, as the bank’s actions in debiting the account without due notice and handling the situation were deemed negligent and prejudicial to Salazar, warranting the damages awarded.

PRINCIPLES:

  1. Negotiable Instruments Law (Sec. 49) - Transfer without endorsement transfers title, but the transferee is subject to defenses and equities available among prior parties.

  2. Civil Code on Legal Compensation (Art. 1278) - Legal compensation takes place when debts are liquidated and demandable.

  3. Banking Fiduciary Responsibility - Banks are obliged to treat depositor accounts with meticulous care, considering the fiduciary nature of their relationship.

  4. Right of Set-off - A bank has the right of set-off over deposits for payment of obligations.

  5. Crossed Checks - Crossed checks are limited to deposit in a bank and negotiation to account holders, serving as a warning to the holder of the intended purpose.

  6. Damages and Compensation - Moral and exemplary damages, as well as attorney’s fees, may be awarded when a depositor suffers undue prejudice due to a bank's negligent actions.