BPI Family Bank v.

Franco

Banks are exhorted to treat the accounts of their depositors with meticulous care and utmost fidelity.
We reiterate this exhortation in the case at bench.

On August 15, 1989, Tevesteco Co. opened a savings and current account with BPI-FB. Soon thereafter,
or on August 25, 1989, First Metro Investment Corporation (FMIC) also opened a time deposit account
with the same branch of BPI-FB with a deposit of P100,000,000.00, to mature one year thence.

Subsequently, on August 31, 1989, Franco opened three accounts, namely, a current,[4] savings,[5] and

time deposit,[6] with BPI-FB. The current and savings accounts were respectively funded with an initial
deposit of P500,000.00 each, while the time deposit account had P1,000,000.00 with a maturity date of
August 31, 1990. The total amount of P2,000,000.00 used to open these accounts is traceable to a check
issued by Tevesteco allegedly in consideration of Franco’s introduction of Eladio Teves,[7] who was
looking for a conduit bank to facilitate Tevesteco’s business transactions, to Jaime Sebastian, who was
then BPI-FB SFDM’s Branch Manager.

In turn, the funding for the P2,000,000.00 check was part of the P80,000,000.00 debited by BPI-FB from
FMIC’s time deposit account and credited to Tevesteco’s current account pursuant to an Authority to
Debit purportedly signed by FMIC’s officers.

It appears, however, that the signatures of FMIC’s officers on the Authority to Debit were forged.
Unfortunately, Tevesteco had already effected several withdrawals from its current account (to which
had been credited the P80,000,000.00 covered by the forged Authority to Debit) amounting to
P37,455,410.54, including the P2,000,000.00 paid to Franco.

On September 8, 1989, impelled by the need to protect its interests in light of FMIC’s forgery claim, BPI-
FB, thru its Senior Vice-President, Severino Coronacion, instructed Jesus Arangorin[10] to debit Franco’s
savings and current accounts for the amounts remaining therein.[11] However, Franco’s time deposit
account could not be debited due to the capacity limitations of BPI-FB’s computer.[12]

In the meantime, two checks[13] drawn by Franco against his BPI-FB current account were dishonored
upon presentment for payment, and stamped with a notation “account under garnishment.”
Apparently, Franco’s current account was garnished by virtue of an Order of Attachment issued by the
Regional Trial Court of Makati (Makati RTC) in Civil Case No. 89-4996 (Makati Case), which had been filed
by BPI-FB against Franco et al.,[14] to recover the P37,455,410.54 representing Tevesteco’s total
withdrawals from its account.

Notably, the dishonored checks were issued by Franco and presented for payment at BPI-FB prior
to Franco’s receipt of notice that his accounts were under garnishment.[15] In fact, at the time the
Notice of Garnishment dated September 27, 1989 was served on BPI-FB, Franco had yet to be impleaded
in the Makati case where the writ of attachment was issued.

It was only on May 15, 1990, through the service of a copy of the Second Amended Complaint in Civil
Case No. 89-4996, that Franco was impleaded in the Makati case.[16] Immediately, upon receipt of such
copy, Franco filed a Motion to Discharge Attachment which the Makati RTC granted on May 16, 1990.
The Order Lifting the Order of Attachment was served on BPI-FB on even date, with Franco demanding
the release to him of the funds in his savings and current accounts. Jesus Arangorin, BPI-FB’s new
manager, could not forthwith comply with the demand as the funds, as previously stated, had already
been debited because of FMIC’s forgery claim. As such, BPI-FB’s computer at the SFDM Branch indicated
that the current account record was “not on file.”

With respect to Franco’s savings account, it appears that Franco agreed to an arrangement, as a favor to

Sebastian, whereby P400,000.00 from his savings account was temporarily transferred to Domingo
Quiaoit’s savings account, subject to its immediate return upon issuance of a certificate of deposit which
Quiaoit needed in connection with his visa application at the Taiwan Embassy. As part of the
arrangement, Sebastian retained custody of Quiaoit’s savings account passbook to ensure that no
withdrawal would be effected therefrom, and to preserve Franco’s deposits.

On May 17, 1990, Franco pre-terminated his time deposit account. BPI-FB deducted the amount of
P63,189.00 from the remaining balance of the time deposit account representing advance interest paid
to him.

These transactions spawned a number of cases, some of which we had already resolved.

FMIC filed a complaint against BPI-FB for the recovery of the amount of P80,000,000.00 debited from its
account.[17] The case eventually reached this Court, and in BPI Family Savings Bank, Inc. v. First Metro
Investment Corporation,[18] we upheld the finding of the courts below that BPI-FB failed to exercise the
degree of diligence required by the nature of its obligation to treat the accounts of its depositors with
meticulous care. Thus, BPI-FB was found liable to FMIC for the debited amount in its time deposit. It was
ordered to pay P65,332,321.99 plus interest at 17% per annum from August 29, 1989 until fully restored.
In turn, the 17% shall itself earn interest at 12% from October 4, 1989 until fully paid.
In a related case, Edgardo Buenaventura, Myrna Lizardo and Yolanda Tica (Buenaventura, et al.),
[19] recipients of a P500,000.00 check proceeding from the P80,000,000.00 mistakenly credited to
Tevesteco, likewise filed suit. Buenaventura et al., as in the case of Franco, were also prevented from
effecting withdrawals[20] from their current account with BPI-FB, Bonifacio Market, Edsa, Caloocan City
Branch. Likewise, when the case was elevated to this Court docketed as BPI Family Bank v.
Buenaventura,[21] we ruled that BPI-FB had no right to freeze Buenaventura, et al.’s accounts and
adjudged BPI-FB liable therefor, in addition to damages.

Meanwhile, BPI-FB filed separate civil and criminal cases against those believed to be the perpetrators
of the multi-million peso scam.[22] In the criminal case, Franco, along with the other accused, except for
Manuel Bienvenida who was still at large, were acquitted of the crime of Estafa as defined and penalized
under Article 351, par. 2(a) of the Revised Penal Code.[23] However, the civil case[24] remains under
litigation and the respective rights and liabilities of the parties have yet to be adjudicated.

Consequently, in light of BPI-FB’s refusal to heed Franco’s demands to unfreeze his accounts and release
his deposits therein, the latter filed on June 4, 1990 with the Manila RTC the subject suit. In his
complaint, Franco prayed for the following reliefs: (1) the interest on the remaining balance[25] of his
current account which was eventually released to him on October 31, 1991; (2) the balance[26] on his
savings account, plus interest thereon; (3) the advance interest[27] paid to him which had been
deducted when he pre-terminated his time deposit account; and (4) the payment of actual, moral and
exemplary damages, as well as attorney’s fees.

BPI-FB traversed this complaint, insisting that it was correct in freezing the accounts of Franco and
refusing to release his deposits, claiming that it had a better right to the amounts which consisted of
part of the money allegedly fraudulently withdrawn from it by Tevesteco and ending up in Franco’s
accounts. BPI-FB asseverated that the claimed consideration of P2,000,000.00 for the introduction
facilitated by Franco between George Daantos and Eladio Teves, on the one hand, and Jaime Sebastian,
on the other, spoke volumes of Franco’s participation in the fraudulent transaction.

On August 4, 1993, the Manila RTC rendered judgment in favor of Franco.

Unsatisfied with the decision, both parties filed their respective appeals before the CA. CA affirmed.
Franco confined his appeal to the Manila RTC’s denial of his claim for moral and exemplary damages,
and the diminutive award of attorney’s fees. In affirming with modification the lower court’s decision,
the appellate court decreed, to wit:

WHEREFORE, foregoing considered, the appealed decision is hereby AFFIRMED with modification
ordering [BPI-FB] to pay [Franco] P63,189.00 representing the interest deducted from the time deposit
of plaintiff-appellant. P200,000.00 as moral damages and P100,000.00 as exemplary damages, deleting
the award of nominal damages (in view of the award of moral and exemplary damages) and increasing
the award of attorney’s fees from P30,000.00 to P75,000.00.

Cost against [BPI-FB].

SO ORDERED.[29]

In this recourse, BPI-FB ascribes error to the CA when it ruled that: (1) Franco had a better right to the
deposits in the subject accounts which are part of the proceeds of a forged Authority to Debit;
(2) Franco is entitled to interest on his current account; (3) Franco can recover the P400,000.00 deposit
in Quiaoit’s savings account; (4) the dishonor of Franco’s checks was not legally in order; (5) BPI-FB is
liable for interest on Franco’s time deposit, and for moral and exemplary damages; and (6) BPI-FB’s
counter-claim has no factual and legal anchor.

Issue: Whether or not Franco had a better right to deposits in the subject accounts which are part of the
proceeds of a forged Authority to Debit

Ruling: Yes

BPI-FB cannot unilaterally freeze Franco’s accounts and preclude him from withdrawing his deposits.

First. On the issue of who has a better right to the deposits in Franco’s accounts, BPI-FB urges us that the
legal consequence of FMIC’s forgery claim is that the money transferred by BPI-FB to Tevesteco is its
own, and considering that it was able to recover possession of the same when the money was
redeposited by Franco, it had the right to set up its ownership thereon and freeze Franco’s accounts.

BPI-FB contends that its position is not unlike that of an owner of personal property who regains
possession after it is stolen, and to illustrate this point, BPI-FB gives the following example: where X’s
television set is stolen by Y who thereafter sells it to Z, and where Z unwittingly entrusts possession of
the TV set to X, the latter would have the right to keep possession of the property and preclude Z from
recovering possession thereof. To bolster its position, BPI-FB cites Article 559 of the Civil Code, which
provides:
Article 559. The possession of movable property acquired in good faith is equivalent to a title.
Nevertheless, one who has lost any movable or has been unlawfully deprived thereof, may recover it
from the person in possession of the same.

If the possessor of a movable lost or of which the owner has been unlawfully deprived, has acquired it in
good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid
therefor.

BPI-FB’s argument is unsound. To begin with, the movable property mentioned in Article 559 of the Civil
Code pertains to a specific or determinate thing.[30] A determinate or specific thing is one that is
individualized and can be identified or distinguished from others of the same kind.[31]

In this case, the deposit in Franco’s accounts consists of money which, albeit characterized as a movable,
is generic and fungible.[32] The quality of being fungible depends upon the possibility of the property,
because of its nature or the will of the parties, being substituted by others of the same kind, not having
a distinct individuality.[33]

Significantly, while Article 559 permits an owner who has lost or has been unlawfully deprived of a
movable to recover the exact same thing from the current possessor, BPI-FB simply claims ownership of
the equivalent amount of money, i.e., the value thereof, which it had mistakenly debited from FMIC’s
account and credited to Tevesteco’s, and subsequently traced to Franco’s account. In fact, this is
what BPI-FB did in filing the Makati Case against Franco, et al. It staked its claim on the money itself
which passed from one account to another, commencing with the forged Authority to Debit.

It bears emphasizing that money bears no earmarks of peculiar ownership,[34] and this characteristic is
all the more manifest in the instant case which involves money in a banking transaction gone awry. Its
primary function is to pass from hand to hand as a medium of exchange, without other evidence of its
title.[35] Money, which had passed through various transactions in the general course of banking
business, even if of traceable origin, is no exception.

Thus, inasmuch as what is involved is not a specific or determinate personal property, BPI-FB’s

illustrative example, ostensibly based on Article 559, is inapplicable to the instant case.

There is no doubt that BPI-FB owns the deposited monies in the accounts of Franco, but not as a legal
consequence of its unauthorized transfer of FMIC’s deposits to Tevesteco’s account. Deposit of money
in banks is governed by the Civil Code provisions on simple loan or mutuum. As there is a debtor-
creditor relationship between a bank and its depositor, BPI-FB ultimately acquired ownership of Franco’s
deposits, but such ownership is coupled with a corresponding obligation to pay him an equal amount on
demand. Although BPI-FB owns the deposits in Franco’s accounts, it cannot prevent him from
demanding payment of BPI-FB’s obligation by drawing checks against his current account, or asking for
the release of the funds in his savings account. Thus, when Franco issued checks drawn against his
current account, he had every right as creditor to expect that those checks would be honored by BPI-FB
as debtor.

More importantly, BPI-FB does not have a unilateral right to freeze the accounts of Franco based on its
mere suspicion that the funds therein were proceeds of the multi-million peso scam Franco was
allegedly involved in. To grant BPI-FB, or any bank for that matter, the right to take whatever action it
pleases on deposits which it supposes are derived from shady transactions, would open the floodgates
of public distrust in the banking industry.

In every case, the depositor expects the bank to treat his account with the utmost fidelity, whether such
account consists only of a few hundred pesos or of millions. The bank must record every single
transaction accurately, down to the last centavo, and as promptly as possible. This has to be done if the
account is to reflect at any given time the amount of money the depositor can dispose of as he sees fit,
confident that the bank will deliver it as and to whomever directs. A blunder on the part of the bank,
such as the dishonor of the check without good reason, can cause the depositor not a little
embarrassment if not also financial loss and perhaps even civil and criminal litigation.

The point is that as a business affected with public interest and because of the nature of its functions,
the bank is under obligation to treat the accounts of its depositors with meticulous care, always having
in mind the fiduciary nature of their relationship. x x x.

Ineluctably, BPI-FB, as the trustee in the fiduciary relationship, is duty bound to know the signatures of
its customers. Having failed to detect the forgery in the Authority to Debit and in the process
inadvertently facilitate the FMIC-Tevesteco transfer, BPI-FB cannot now shift liability thereon
to Franco and the other payees of checks issued by Tevesteco, or prevent withdrawals from their
respective accounts without the appropriate court writ or a favorable final judgment.

Further, it boggles the mind why BPI-FB, even without delving into the authenticity of the signature in
the Authority to Debit, effected the transfer of P80,000,000.00 from FMIC’s to Tevesteco’s account,
when FMIC’s account was a time deposit and it had already paid advance interest to FMIC. Considering
that there is as yet no indubitable evidence establishing Franco’s participation in the forgery, he remains
an innocent party. As between him and BPI-FB, the latter, which made possible the present
predicament, must bear the resulting loss or inconvenience.
WHEREFORE, the petition is PARTIALLY GRANTED. The Court of Appeals Decision dated November 29,
1995 is AFFIRMED with the MODIFICATION that the award of unearned interest on the time deposit and
of moral and exemplary damages

BPI Family Bank v. Franco

Banks are exhorted to treat the accounts of their depositors with meticulous care and utmost fidelity.

Franco opened three accounts, namely, a current, savings, and time deposit, with BPI-FB. He was

allegedly involved in a multi-million scam which had its transaction with the BPI-FB.

BPI-FB filed separate civil and criminal cases against those believed to be the perpetrators of the multi-
million peso scam, including Franco. In the criminal case, Franco was acquitted of the crime of Estafa.
However, the civil case remains under litigation and the respective rights and liabilities of the parties
have yet to be adjudicated.

In the meantime, two checks drawn by Franco against his BPI-FB current account were dishonored.
Apparently, Franco’s current account was garnished by virtue of an Order of Attachment issued by the
RTC in a civil case which had been filed by BPI-FB against Franco.

 Franco filed a Motion to Discharge Attachment which the Makati RTC granted on May 16, 1990. The
Order Lifting the Order of Attachment was served on BPI-FB on even date, with Franco demanding the
release to him of the funds in his savings and current accounts. Jesus Arangorin, BPI-FB’s new manager,
could not forthwith comply with the demand as the funds, as previously stated, had already been
debited because of FMIC’s forgery claim. As such, BPI-FB’s computer at the SFDM Branch indicated that
the current account record was “not on file.”

With respect to Franco’s savings account, it appears that Franco agreed to an arrangement, as a favor to

Sebastian, whereby P400,000.00 from his savings account was temporarily transferred to Domingo
Quiaoit’s savings account, subject to its immediate return upon issuance of a certificate of deposit which
Quiaoit needed in connection with his visa application at the Taiwan Embassy. As part of the
arrangement, Sebastian retained custody of Quiaoit’s savings account passbook to ensure that no
withdrawal would be effected therefrom, and to preserve Franco’s deposits.
On May 17, 1990, Franco pre-terminated his time deposit account. BPI-FB deducted the amount of
P63,189.00 from the remaining balance of the time deposit account representing advance interest paid
to him.

BPI-FB filed separate civil and criminal cases against those believed to be the perpetrators of the multi-
million peso scam.[22] In the criminal case, Franco, along with the other accused, except for Manuel
Bienvenida who was still at large, were acquitted of the crime of Estafa as defined and penalized under
Article 351, par. 2(a) of the Revised Penal Code.[23] However, the civil case[24] remains under litigation
and the respective rights and liabilities of the parties have yet to be adjudicated.

Consequently, in light of BPI-FB’s refusal to heed Franco’s demands to unfreeze his accounts and release
his deposits therein, the latter filed on June 4, 1990 with the Manila RTC the subject suit. In his
complaint, Franco prayed for the following reliefs: (1) the interest on the remaining balance[25] of his
current account which was eventually released to him on October 31, 1991; (2) the balance[26] on his
savings account, plus interest thereon; (3) the advance interest[27] paid to him which had been
deducted when he pre-terminated his time deposit account; and (4) the payment of actual, moral and
exemplary damages, as well as attorney’s fees.

On August 4, 1993, the Manila RTC rendered judgment in favor of Franco.

Unsatisfied with the decision, both parties filed their respective appeals before the CA. CA affirmed.

Issue: Whether or not Franco had a better right to deposits in the subject accounts which are part of the
proceeds of a forged Authority to Debit

Ruling: Yes

BPI-FB cannot unilaterally freeze Franco’s accounts and preclude him from withdrawing his deposits.

First. On the issue of who has a better right to the deposits in Franco’s accounts, BPI-FB urges us that the
legal consequence of FMIC’s forgery claim is that the money transferred by BPI-FB to Tevesteco is its
own, and considering that it was able to recover possession of the same when the money was
redeposited by Franco, it had the right to set up its ownership thereon and freeze Franco’s accounts.
There is no doubt that BPI-FB owns the deposited monies in the accounts of Franco, but not as a legal
consequence of its unauthorized transfer of FMIC’s deposits to Tevesteco’s account. Deposit of money
in banks is governed by the Civil Code provisions on simple loan or mutuum. As there is a debtor-
creditor relationship between a bank and its depositor, BPI-FB ultimately acquired ownership of Franco’s
deposits, but such ownership is coupled with a corresponding obligation to pay him an equal amount on
demand. Although BPI-FB owns the deposits in Franco’s accounts, it cannot prevent him from
demanding payment of BPI-FB’s obligation by drawing checks against his current account, or asking for
the release of the funds in his savings account. Thus, when Franco issued checks drawn against his
current account, he had every right as creditor to expect that those checks would be honored by BPI-FB
as debtor.

More importantly, BPI-FB does not have a unilateral right to freeze the accounts of Franco based on its
mere suspicion that the funds therein were proceeds of the multi-million peso scam Franco was
allegedly involved in. To grant BPI-FB, or any bank for that matter, the right to take whatever action it
pleases on deposits which it supposes are derived from shady transactions, would open the floodgates
of public distrust in the banking industry.

In every case, the depositor expects the bank to treat his account with the utmost fidelity, whether such
account consists only of a few hundred pesos or of millions. The bank must record every single
transaction accurately, down to the last centavo, and as promptly as possible. This has to be done if the
account is to reflect at any given time the amount of money the depositor can dispose of as he sees fit,
confident that the bank will deliver it as and to whomever directs. A blunder on the part of the bank,
such as the dishonor of the check without good reason, can cause the depositor not a little
embarrassment if not also financial loss and perhaps even civil and criminal litigation.

The point is that as a business affected with public interest and because of the nature of its functions,
the bank is under obligation to treat the accounts of its depositors with meticulous care, always having
in mind the fiduciary nature of their relationship. x x x.

Ineluctably, BPI-FB, as the trustee in the fiduciary relationship, is duty bound to know the signatures of
its customers. Having failed to detect the forgery in the Authority to Debit and in the process
inadvertently facilitate the FMIC-Tevesteco transfer, BPI-FB cannot now shift liability thereon
to Franco and the other payees of checks issued by Tevesteco, or prevent withdrawals from their
respective accounts without the appropriate court writ or a favorable final judgment.
Further, it boggles the mind why BPI-FB, even without delving into the authenticity of the signature in
the Authority to Debit, effected the transfer of P80,000,000.00 from FMIC’s to Tevesteco’s account,
when FMIC’s account was a time deposit and it had already paid advance interest to FMIC. Considering
that there is as yet no indubitable evidence establishing Franco’s participation in the forgery, he remains
an innocent party. As between him and BPI-FB, the latter, which made possible the present
predicament, must bear the resulting loss or inconvenience.

WHEREFORE, the petition is PARTIALLY GRANTED. The Court of Appeals Decision dated November 29,
1995 is AFFIRMED with the MODIFICATION that the award of unearned interest on the time deposit and
of moral and exemplary damages