PNB vs. CA and BP Mata and Co.

This is a case wherein a well-known financial institution had an internal problem and they only realized and took action to regularize it, seven years too late

I. CASE FACTS


· A US company, Star Kist Foods, Inc. USA (Star Kist) engaged local B.P. Mata Co. Inc (Mata) in providing manning and crewing services for their company located in the United States. Payment is settled through telegraphic transfer involving several banks namely Security Pacific National Bank (SEPAC) of Los Angeles as the bank of Star Kist, Philippine National Bank (PNB) as the bank with the agency arrangement with Star Kist, and Insular Bank of Asia and America (IBAA) as the bank of Mata.
· February 24, 1975: PNB issued a Cashier’s Check amounting to $1,400 for the account of Mata representing payment for services rendered by Mata to Star Kist.
· March 11, 1975: PNB effected another payment amounting to $14,000, which was said to be another payment made by Star Kist. Prior February 24, the PNB International Department received notice for payment for $14,000 to Mata but they returned the missive to SEPAC Bank noting an error. It was cleared by SEPAC Bank that the notice should only be for $1,400 and NOT $14,000.
· May 31, 1981: PNB requested Mata for refund of $14,000, which was mistakenly paid to them.
· February 4, 1982: PNB filed a civil case for collection and refund of $14,000 against Mata using Article 14561 as basis for their argument.


II. DECISION OF THE COURTS


Regional Trial Court

The RTC dismissed the complaint stating that the case falls under Article 21542 instead of Article 1456. They ruled that the trust code does not apply in this case by using the technical definition of trust that is “a right of property, real or personal, held by one party for the benefit of another, that there is a fiduciary relation between a trustee and a cestui que trust as regards certain property, real, personal, money or chooses in action.”

Court of Appeals

PNB elevated the case to the Court of Appeals wherein said court affirmed the decision of the lower court. The appellate court also added that the case would not prosper due to the prescription provided in Article 1145 that states:
Art. 1145. The following actions must be commenced within six years:
(1) Upon an oral contract;
(2) Upon a quasi-contract. (n)

Supreme Court

The Supreme Court applied both Art. 1456 which is on constructive trust and Art. 2154 which is on solutio indebiti to the case.

They determined that there is constructive trust involved enforcing Art. 1456. A constructive trust is a form of implied trust. Implied trusts are “those which, without being expressed, are deducible from the nature of the transaction as matters of the intent or which are superinduced on the transaction by operation of the law as matters of equity, independently of the particular intention of the parties.” Constructive trusts occur when “there is neither a promise nor any fiduciary relation to speak of and the so-called trustee neither accepts any trust nor intends holding the property for the beneficiary.” Following the aforementioned definitions, there is trust involved. There was no expression or contract stipulating that Mata and PNB have a fiduciary relationship, however, the point that there was a transaction that would infer such an arrangement (payment), constructive trust has been established.

The Supreme Court also adapted Art. 2154 for the case clearly falls in this article. Mata received money, which had not right to demand it, and there was also a mistake of delivery.

. However, due to the prescription of Art. 2154, quasi-contract can no longer be an alternative leaving constructive trust as the applicable option.

As for the issue whether or not PNB can still claim the $14,000, the Supreme Court ruled that it couldn’t be possible. Even though the case is still within the prescription period, the petitioner cannot do so because they were proved to be negligent in exercising their legal right. It took them seven years to realize their error and for a big bank such as PNB, that is very remarkable. Banks are subject to audits and an error such as that should have been spotted within the year. The bank should, therefore, bear the cost of their own negligence.


III. ANALYSIS

It is becoming clear to me that the law does not tolerate negligence. It maybe argued that it is not just nor equitable for PNB not be able to claim the money that they mistakenly paid Mata, but they have to suffer the cost of their own negligence.

Working for a bank for the past 4 years, we have been taught to be meticulous and careful in every transaction that we undertake. Audit, spot checks and counter checkings have been established to prevent erroneous entries and mitigate possible mistakes. Fear motivates us actually. Fear that we’ll lose our jobs or that we’ll find ourselves defendants in a civil case.

That’s why I find it really unbelievable that a big bank, such as PNB, should only spot its error 7 years after the transaction.

There also is a thing, not only for banks, but also for companies, called a fiscal year. At the end of a fiscal year, everything and I mean EVERYTHING should be balanced. $14,000 is a big amount, which should have been easily traced.


Footnotes:
1 Art. 1456: If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes.

2Art. 2154: If something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises.