G.R. No. 112214 - Security Bank and Trust Co. vs. Court of Appeals

A.T. Diaz Realty, through Anita Diaz, entered into an agreement involving the sale of Ricardo Lorenzo’s undivided share in a parcel of land he owned in common with Servando Solomon.
The payment arrangement involved the issuance of a check to Crispulo Arboleda, acting as Ricardo Lorenzo’s agent, for the amount of P60,000.00 as part of the purchase price.
It was agreed that the funds would be used partly for paying the capital gains tax incurred on the transaction and partly to reimburse Solomon for delinquent real estate tax payments.

On November 7, 1983, Anita Diaz issued the P60,000.00 check payable to Crispulo Arboleda from the current account of A.T. Diaz Realty in the Marikina branch of Security Bank & Trust Co. (SBTC).
In addition, on November 8, 1983, when Solomon indicated that he had not yet been reimbursed, Diaz arranged to make further payments by issuing two additional checks—a P20,000.00 check payable to Solomon for reimbursement and a P40,000.00 check payable to bearer for the payment of the capital gains tax.

After these transactions, Anita Diaz directed the bank to stop payment on the P60,000.00 check and reportedly informed Arboleda of the order, requesting its return.
Due to an operational error, bank personnel overlooked the stop payment order because they checked the savings account ledger (which did not reflect the stop order) rather than the current account ledger where the order was posted.
Consequently, despite the stop order, the check was encashed on November 24, 1983.

The banking error was discovered on November 25, 1983, after which the bank recredited the P60,000.00 to A.T. Diaz Realty’s account.
Bank officials attempted to recover the P60,000.00 by contacting respondent Arboleda, who directed them to Amador Libongco. When approached, Libongco acknowledged having received the funds but refused to return the money without a receipt from Diaz proving payment for the capital gains tax.

Petitioner (Security Bank & Trust Co.) filed an action to recover the P60,000.00 from private respondents, asserting that the funds were erroneously paid out due to the stop payment order.
In their answer, respondents Arboleda and Libongco maintained that the funds were due as part of the purchase price (P45,000.00) and as commission (P15,000.00), respectively, and denied any obligation to return the funds.
The trial court, on May 21, 1990, dismissed the complaint by holding that:

Arboleda was entitled to a commission of P15,000.00 so that amount was not subject to reimbursement.
Anita Diaz could not recover the reimbursement for the capital gains tax without sufficient documentary receipts, casting doubt on her claim that the tax had been paid.
The stop payment order’s explanation of an “incomplete transaction” was deemed a misrepresentation because the transaction was effectively completed by the annotation on the title on November 22, 1983, prior to the check’s encashment.

The Court of Appeals affirmed the trial court’s decision, leading to the present appeal.
Petitioner contended that:

The decision erred in failing to order respondent Arboleda to return the proceeds of the P60,000.00 check.
Interest, exemplary damages, attorney’s fees, and costs should have been awarded.
The claim under Art. 2154 of the Civil Code (regarding undue delivery of money) was applicable, arguing that since there was no right to receive the funds, the obligation to return them should arise.

Whether there exists any privity or contractual relationship between the petitioner (the bank) and respondent Arboleda that would obligate the latter to return the proceeds of the encashed check.
Whether the bank’s error in not detecting the stop payment order, due to checking the wrong account ledger, incurs liability on the bank or affects the obligation of the respondent to return the funds.
Whether the funds paid (and subsequently recredited) to A.T. Diaz Realty can be recovered from Arboleda considering that the check was originally issued for, and in furtherance of, Anita Diaz’s payment obligations in connection with the property sale.
Whether the application of Art. 2154 of the Civil Code, which imposes an obligation to return money received by mistake, is appropriate in the context of the present dispute given the absence of a proper contractual nexus between the petitioner and the respondent.
Whether defenses arising from the relationship and transactions between Anita Diaz and Arboleda should bar the petitioner’s recovery claim.