SC: Banks can’t demand money back if loss was caused by own negligence

Metro Manila, Philippines –  The Supreme Court has ruled that banks cannot force depositors to return money they withdrew if the bank’s own gross negligence caused the mistaken release of the funds, reinforcing the high standard of diligence required of financial institutions.

In a decision released on Monday, Aug. 24,  penned by Associate Justice Japar Dimaampao, the SC’s Third Division denied a petition filed by BDO Unibank, holding that the bank’s failure to follow its own banking procedures amounted to gross negligence.

The case stemmed from Cristina Barcellano’s deposit of a ₱151,200 regional Land Bank check into her BDO account in Lucena City. A BDO teller mistakenly processed the check as a local check instead of a regional one, allowing the amount to be credited after three banking days instead of the required seven.

Believing the funds had already been cleared, Barcellano withdrew ₱76,000. BDO later received a stop-payment order on the check, demanded that she return the money, withheld the remaining balance in her account, and eventually filed an estafa complaint against her.

The Regional Trial Court acquitted Barcellano, finding no fraud, deceit or abuse of confidence on her part, while the Court of Appeals upheld the ruling. BDO then elevated the civil aspect of the case to the Supreme Court, arguing that Barcellano should still be required to return the money under the principles of unjust enrichment or repayment of money received by mistake.

The Supreme Court disagreed.

The high court said BDO failed to prove that Barcellano knowingly received or kept money to which she was not entitled. Instead, the evidence showed she withdrew the funds in good faith after the bank itself made the money available in her account.

The SC also found that BDO’s own actions caused its loss. According to the ruling, the bank prematurely credited the check before it had properly cleared, incorrectly treated a regional check as a local check, and failed to detect the mistake until after receiving the stop-payment order. The court said these lapses showed a failure to observe basic safeguards meant to protect banks from invalid checks.

The court further rejected BDO’s reliance on solutio indebiti, explaining that while the doctrine generally requires the return of money paid by mistake, it does not apply when the mistake resulted from the payor’s gross negligence.

The Supreme Court emphasized that banking is a business imbued with public interest and that banks are required to exercise the highest degree of diligence in handling their customers’ transactions. It said paying out funds before a deposited check has properly cleared falls below that standard.