Case Summary (G.R. No. L-19309)
Petitioner
Yon Mitori International Industries (single proprietorship of Rodriguez Ong Tan)
Respondent
Union Bank of the Philippines
Key Dates
• November 12, 2007 – Deposit of PHP 420,000.00 via BPI Check No. 0180724
• November 14, 2007 – Withdrawal of PHP 480,000.00 prior to notice of dishonor
• November 20, 2007 – Extrajudicial demand by Union Bank
• February 24, 2014 – RTC Decision in Pasig City, Branch 166
• February 3, 2016 & July 5, 2016 – CA Decision and Resolution
• October 14, 2020 – Supreme Court Decision
Applicable Law
• 1987 Constitution (post-1990 decision)
• Civil Code: Articles 22 (unjust enrichment), 1980 (deposits as loans), 2154 (solutio indebiti), 2179 (negligence), 1909 (agent’s liability)
• Rules of Court: Rule 45 (petition for review), Rule 3, Section 1 (real party in interest), Rule 10, Section 4 (formal amendments)
• Jurisprudence: Nacar v. Gallery Frames, PNB v. Cheah Chee Chong, Metropolitan Bank & Trust Co. v. CA
Background of the Petition
Tan, through Yon Mitori, filed a Rule 45 petition challenging the CA’s affirmation (with modification) of the Pasig RTC’s holding that he must return PHP 385,299.40, representing the net proceeds of a dishonored check erroneously credited to his account, plus legal interest. The RTC had also awarded attorney’s fees and costs, which the CA deleted and reduced interest from 12% to 6%.
Facts
Tan maintained Current Account No. 027-03-000181-8 with Union Bank. On November 12, 2007, he deposited a PHP 420,000 check drawn on a closed BPI account. Union Bank’s system inadvertently credited his account before the check cleared. Unaware of dishonor, Tan withdrew PHP 480,000 on November 14. Upon return of the check marked “Account Closed,” the bank demanded reimbursement; Tan refused, claiming a valid business transaction. Union Bank then set off Tan’s remaining balance of PHP 34,700.60 and sued for the shortfall of PHP 385,299.40.
RTC Proceedings
The RTC found:
- Solutio indebiti under Article 2154 applies, as the bank was not obliged to credit the dishonored check and did so by mistake.
- Legal compensation under Article 1980 allowed set-off of Tan’s remaining deposit.
- Awarded PHP 385,299.40, 12% interest from June 13, 2008, attorney’s fees of PHP 100,000.00, and costs of PHP 14,954.20.
Reconsideration was denied.
CA Proceedings
The CA affirmed the RTC with the following modifications:
- Deleted attorney’s fees and costs, finding no bad faith by Tan though the bank was negligent.
- Reduced legal interest rate to 6% per annum in line with Nacar v. Gallery Frames.
A motion for reconsideration was denied.
Issue
Whether Tan must return the proceeds of the dishonored check with legal interest, notwithstanding the bank’s technical error or alleged negligence.
Real Party in Interest and Formal Defect
A single proprietorship lacks separate juridical personality. The petition named Yon Mitori instead of Tan. Under Rule 3, Sec. 1 and Rule 10, Sec. 4, the Supreme Court permitted substitution of Tan as the real party in interest without prejudice.
Unjust Enrichment and Solutio Indebiti
Under Article 22, a person who acquires something at another’s expense without legal ground must return it. The requisites—(i) unjust benefit and (ii) at another’s expense—are met: Tan knowingly received and used funds to which he was not entitled. Union Bank, as collecting bank, had no obligation to credit the dishonored check until actual clearance. Allowing retention would constitute unjust enrichment.
Inapplicability of PNB v. Cheah Chee Chong
Tan’s reliance on Philippine National Bank v. Cheah Chee Chong fails because:
• PNB involved gross negligence in contravention of an express 15-banking-day clearing rule; Tan did not identify any comparable internal rule violated by Union Bank.
• In PNB, the accommodated party did not benefit; here, Tan directly withdrew and enjoyed the proceeds.
• Gross negligence precludes solutio indebiti only when mistake is inexcusable; Union Bank’s system error was not equivalent to PNB’s gross procedural breach.
Inapplicability of Article 1909 and Metrobank v. CA
Article 1
Case Syllabus (G.R. No. L-19309)
Case Title and Citation
- G.R. No. 225538; 888 Phil. 159 (First Division, October 14, 2020).
- Petitioner: Yon Mitori International Industries, a single proprietorship owned and operated by Rodriguez Ong Tan.
- Respondent: Union Bank of the Philippines.
- Ponente: Associate Justice Caguioa.
Facts
- Rodriguez Ong Tan, trading as Yon Mitori International Industries, maintained Current Account No. 027-03-000181-8 at Union Bank’s Commonwealth, Quezon City branch.
- On November 12, 2007, Tan deposited a Bank of the Philippine Islands (BPI) Check No. 0180724 worth ₱420,000.00, drawn on the closed account of Angli Lumber & Hardware, Inc.
- Union Bank’s system erroneously credited Tan’s account with ₱420,000.00, raising his balance from ₱93,700.60 to ₱513,700.60.
- On November 14, 2007, Tan withdrew ₱480,000.00; later that day the BPI Check was returned dishonored for “Account Closed.”
- Union Bank discovered the mistake, demanded reimbursement on November 20, 2007, and, upon Tan’s refusal, debited the remaining balance of ₱34,700.60.
- Union Bank filed a Complaint for Sum of Money to recover the unreturned balance of ₱385,299.40 plus consequential damages.
RTC Proceedings
- Union Bank’s Complaint alleged a technical error led to the mistaken credit of ₱420,000.00 and sought ₱385,299.40 plus interest, attorney’s fees, and costs.
- Tan’s defense: he received the check in good faith, relied on the bank’s updated balance, and contested the debit of ₱34,700.60.
- February 24, 2014 RTC Decision: granted Union Bank’s claim, applying solutio indebiti under Art. 2154 (Civil Code), ordering Tan to pay:
• ₱385,299.40 (mistaken withdrawal)
• 12% per annum legal interest from judicial demand (June 13, 2008)
• ₱100,000 attorney’s fees
• ₱14,954.20 costs of suit - May 19, 2014 RTC Order denied Tan’s reconsideration, holding that mere bank negligence did not bar recovery of fu