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BPI FAMILY BANK v. AMADO FRANCO

FACTS:

The case involves an alleged fraud committed by respondent Amado Franco (Franco) in conspiracy with other individuals, wherein they opened and maintained separate accounts with petitioner BPI Family Bank (BPI-FB), San Francisco del Monte (SFDM) branch. The accounts were funded with P2,000,000.00, which came from a check issued by Tevesteco Arrastre-Stevedoring Co., Inc. (Tevesteco) and allegedly in consideration of Franco's introduction of Eladio Teves to Jaime Sebastian, the branch manager of BPI-FB SFDM. However, it was discovered that the signatures on the Authority to Debit were forged. BPI-FB instructed to debit Franco's remaining accounts but due to computer capacity limitations, his time deposit account could not be debited. Franco's current account was garnished by virtue of an Order of Attachment issued by the Regional Trial Court of Makati (Makati RTC) in a separate case. Franco demanded the release of the funds in his savings and current accounts, but BPI-FB had already debited the funds due to FMIC's forgery claim.

The case involves a dispute between Franco and BPI-Family Bank (BPI-FB) regarding the freezing of Franco's accounts and refusal to release his deposits. Franco filed a complaint with the Manila Regional Trial Court (RTC), seeking various reliefs including the payment of interest on his accounts, balance on his savings account, and damages. BPI-FB argued that it had the right to freeze Franco's accounts because the funds were part of the money fraudulently withdrawn from it by another party. The Manila RTC ruled in favor of Franco and ordered BPI-FB to pay him certain amounts. Both parties appealed to the Court of Appeals (CA), which affirmed the decision but modified the amount of damages awarded. BPI-FB filed a petition with the Supreme Court, challenging several issues decided by the CA.

The Bank of the Philippine Islands-Family Bank (BPI-FB) mistakenly debited the account of First Metro Investment Corporation (FMIC) and credited the amount to Tevesteco, Inc's account. The money was then traced to the account of Franco. BPI-FB filed a case against Franco and other defendants to recover the money, arguing that Franco's possession of the money should be equivalent to a title under Article 559 of the Civil Code, thus preventing him from recovering possession. However, the Supreme Court held that Article 559 is not applicable as it pertains to specific or determinate things, while the money in question is generic and fungible. BPI-FB's claim was for the value of the money itself, not for the exact same thing possessed by Franco.

ISSUES:

  1. Whether BPI-FB is entitled to recover the money it mistakenly transferred to Franco's account without reimbursing the price paid for the money.

  2. Whether BPI-FB should be held liable for the unauthorized transfer of funds from FMIC's account to Tevesteco's account.

  3. Whether BPI-FB is liable for interest on Franco's current account.

  4. Whether Franco is entitled to the deposits in Quiaoit's account.

  5. Whether BPI-FB's dishonor of Franco's checks was legally justified.

  6. Whether the Makati RTC had jurisdiction over the person of Franco at the time the garnishment was conducted by BPI-FB.

  7. Whether BPI-FB acted in bad faith in dishonoring the checks issued by Franco.

  8. Whether BPI-FB is liable for the deducted advance interest from Franco's time deposit account.

  9. Whether BPI-FB is liable for moral and exemplary damages.

  10. Whether Franco is entitled to attorney's fees.

  11. Whether BPI-FB is entitled to recover actual damages.

  12. Whether the counter-claim of the petitioner is valid.

  13. Whether the award of unearned interest on the time deposit and moral and exemplary damages is proper.

RULING:

  1. No, BPI-FB is not entitled to recover the money it mistakenly transferred to Franco's account without reimbursing the price paid for the money. The court held that the movable property mentioned in Article 559 of the Civil Code, which allows an owner to recover a lost or unlawfully deprived movable, pertains to a specific or determinate thing. In this case, the money deposited in Franco's account is generic and fungible, and therefore does not fall within the scope of Article 559. Furthermore, the court noted that while BPI-FB owns the deposited monies in Franco's account, its ownership is coupled with an obligation to pay Franco an equal amount on demand. Franco has the right to demand payment from BPI-FB by drawing checks against his account or asking for the release of funds in his savings account. Additionally, BPI-FB cannot unilaterally freeze Franco's account based on mere suspicions. Such actions would erode public trust in the banking industry. The court emphasized the fiduciary obligations of banks towards their depositors, including the duty to detect forgeries and ensure the accuracy of transactions. Therefore, BPI-FB cannot shift liability for the unauthorized transfers to Franco and the other payees of checks issued by Tevesteco without appropriate court writ or a favorable final judgment.

  2. BPI-FB is held liable for the unauthorized transfer of funds. Since there is no evidence establishing Franco's participation in the forgery, he remains an innocent party. BPI-FB, which facilitated the transfer, must bear the resulting loss or inconvenience.

  3. BPI-FB is liable for interest on Franco's current account. BPI-FB's non-compliance with the court's order to release the deposits in Franco's current account constitutes a breach of their contractual obligation. Interest started to accrue from the time BPI-FB refused Franco's demand for the release of the deposits.

  4. Franco is entitled to the deposits in Quiaoit's account. Quiaoit testified that the deposits actually belonged to Franco and that Franco had temporarily transferred the funds to Quiaoit's account. BPI-FB's argument that Franco did not specifically allege this arrangement in his complaint is not valid, as BPI-FB impliedly consented to the trial of this issue through extensive cross-examination.

  5. BPI-FB's dishonor of Franco's checks was not legally justified. BPI-FB's freezing of Franco's accounts without awaiting service of the Notice of Garnishment violated the requirements of due process. The enforcement of a writ of attachment must be preceded or contemporaneously accompanied by service of summons and a copy of the complaint to the defendant.

  6. The Makati RTC did not have jurisdiction over the person of Franco at the time of the garnishment. Therefore, BPI-FB had no legal basis to dishonor Franco's checks.

  7. BPI-FB did not act in bad faith in dishonoring the checks issued by Franco.

  8. BPI-FB is not liable for the deducted advance interest from Franco's time deposit account.

  9. BPI-FB is not liable for moral and exemplary damages, except for nominal damages in the amount of P10,000.00.

  10. Franco is entitled to attorney's fees in the amount of P75,000.00.

  11. BPI-FB is not entitled to recover actual damages.

  12. The counter-claim of the petitioner is denied.

  13. The award of unearned interest on the time deposit and moral and exemplary damages is deleted.

PRINCIPLES:

  • Article 559 of the Civil Code allows an owner who has lost or been unlawfully deprived of a specific or determinate movable to recover it from the current possessor.

  • Money, being fungible, does not fall within the scope of Article 559.

  • In a debtor-creditor relationship between a bank and its depositor, the bank ultimately acquires ownership of the deposits but is obligated to pay the depositor an equal amount on demand.

  • Banks have a fiduciary duty to treat their depositors' accounts with meticulous care and accuracy.

  • Banks cannot unilaterally freeze accounts based on mere suspicions or allegations of illegal activity without appropriate court orders.

  • Banks must exercise due diligence in preventing unauthorized transfers of funds and should be held liable for losses resulting from their negligence.

  • Failure to comply with a court order to release funds may result in liability for interest on the delayed payment.

  • In cases where issues not raised in the pleadings are tried with the consent of the parties, they shall be treated as if they had been raised in the pleadings.

  • The enforcement of a writ of attachment requires the inclusion of the owner of the attached property as a party in the main suit.

  • The court must have jurisdiction over the person of the defendant for garnishment to be valid.

  • Bad faith requires a dishonest purpose or moral obliquity, and it is different from mere negligence or error.

  • Damages for breach of contract must be the natural and probable consequences of the breach, and damages for fraud or bad faith are those reasonably attributed to the non-performance of the obligation.

  • Moral damages require injury sustained by the claimant, a culpable act or omission by the defendant, proximate cause, and must fall under the cases stated in Article 2219 of the Civil Code.

  • Exemplary damages may be granted if there is basis for moral, temperate, or compensatory damages.

  • Attorney's fees may be awarded when a party is compelled to litigate or incur expenses to protect their interest, or when deemed just and equitable by the court.

  • The party claiming actual damages must show that it is not of their own making.

  • A counter-claim may be denied if it is of the petitioner’s own making.

  • Unearned interest on a time deposit and moral and exemplary damages may be deleted if not properly warranted or supported.