Philippine National Bank

PHILIPPINE NATIONAL BANK, petitioner, (5) That over neither of them there by any retention or
vs. controversy, commenced by third persons and communicated

THE COURT OF APPEALS in due time to the debtor.
IN CASE AT BAR, requisites from 2 to 5 are present. Apparently, the

This case involves two instances where the petitioner bank requisite which pertains to the relationship between parties is in
mistakenly doubled or duplicate the credits to the defendant’s question.
account.
Analyzing now the relationship between the parties, it appears
The amounts of 2,627.11 and 34,340.38 dollars from remittances that:
of the defndant’s principals abroad.
(a) With respect to the plaintiff's being a depositor of the
1st remittance was made by NBC of Jaddah to the credited to his defendant bank, they are creditor and debtor respectively
account at Citibank.
(b) As to the relationship created by the telexed fund
2nd was from Libya and was intended to be deposited at the transfers from abroad: A contract between a foreign bank
plaintiff’s account. and local bank asking the latter to pay an amount to a
beneficiary is a stipulation pour autrui.
There were two instances where the respondents account was
doubly credited with the equivalents of 5,679.23 and 5,885.38 A stipulation pour autrui is a stipulation in favor of a third person.
which amounted to 87,380.44 sometime in 1980 and 1981
respectively. So, basically between the defendant bank (as local correspondent
bank of the National Commercial Bank of Jeddah) there is created
PNB made a demand upon the plaintiff for refund for the double an implied trust.
credits.
In view of the foregoing, the Court is of the opinion that the
However, the deduction of 34, 340.58 was made by the defendant parties are not both principally bound with respect to the
not without the knowledge and the consent of the plaintiff. $2,627.11 from Jeddah; neither are they at the same time
principal creditor of the other.
The double credit created an extra-contractual obligation on the
part of the plaintiff in favor of the defendant, under the principle Therefore, as matters stand, the parties' obligations are not
of solutio indebiti, as follows: subject to compensation or set off under Art. 1279 of the Civil
Code, for the reason that the defendant is not a principal
If something is received when there is no right to demand debtor nor is the plaintiff a principal creditor insofar as the
it, and it was unduly delivered through (sic) mistake, the amount of $2,627.11 is concerned. They are debtor and
obligation to return it arises. (Article 2154, Civil Code of the creditor only with respect to the double payments; but are
Phil.) trustee-beneficiary as to the fund transfer of $2,627.11.
Thus, while it may be concluded that the plaintiff owes the

defendant the equivalent of the sums of $5,179.23 and $5,885.38
Issue:
erroneously doubly credited to his account, the defendant's
whether the herein petitioner was legally justified in making the actuation in intercepting the amount of $2,627.11 supposed to be
compensation or set-off against the two remittances coursed remitted to another bank is not only improper.
through it in favor of private respondent to recover on the double
It would have been different has the telex advice from NCB of
credits it erroneously made in 1980 and 1981, based on the
Jeddah been for deposit of $2,627.11 to plaintiff's account with the
principle solutio indebiti.
defendant bank.
There was neither any allegation thereof in its pleadings, nor was
RTC: there any evidence to prove such fact. On the contrary, the
defendant admitted that the telex advice was for credit of the
Article 1279 of the Civil Code provides: amount of $2,627.11 to plaintiff's account with Citibank
In order that compensation may prosper, it is necessary: Hence, it is submitted that the set-off or compensation of
$2,627.11 against the double payments to plaintiff's account is not
(1) That each one of the obligors be bound principally, and that in accordance with law.
he be at the same time a principal creditor of the other;
Defendants defense:
(2) That both debts consists in a sum of money, or if the things
due are consumable, they be of the same kind, and also of the At any rate, the plaintiff in his Memorandum, stated that the
same quality if the latter has been stated; subsequent fund transfer from Brega Petroleum Marketing
Company of Libya (from where the P34,340.38 was deducted)
(3) That the two debts be due; was intended for credit and deposit in plaintiff's account at the
defendant's Bank CA No. 830-2410 (per par. 1, page 2,
(4) That they be liquidated and demandable;
Memorandum for the plaintiff). Such being the case, the Court
believes that insofar as the amount of P34,340.38 is
concerned, all the requirements of Art. 1279 of the Civil Code
are present, and the said amount may properly be the subject
of compensation or set-off. And since all the requisites of Art.
1279 of the Civil Code are present (insofar as the amount of
P34,392.38 is concerned), compensation takes place by
operation of law (Art. 1286, Ibid.), albeit only partial with
respect to plaintiff's indebtedness of P7,380.44.
Petitioner’s defense:
On appeal to the respondent Court, petitioner bank continued

to insist that it validly retained the US$2,627.11 in payment of
the private respondent's indebtedness by way of
compensation or set-off, as provided under Art. 1279 of the
Civil Code.
CA:
since the PNB is the NCB's corresponden(t) bank in the Philippines,

there is created between the two banks a sort of communication
exchange for the corresponden(t) bank to transmit and/or remit
and/or pay the value of the telegraphic transfer in accordance with
the dictate of the correspondence exchange.
Court affirmed the trial court's holding in toto.
Issue:
WHILE THE RESPONDENT COURT CORRECTLY FOUND PRIVATE

RESPONDENT LEGALLY BOUND (UNDER THE PRINCIPLE OF
SOLUTIO INDEBITI) TO RETURN TO PNB THE SUM OF US$2,627.11
RULING:
We note that in framing the issue in the manner aforecited, the

petitioner implicity admits the correctness of the respondent
Court's affirmance of the trial court's ruling finding herein
petitioner liable to private respondent for the sum of US$2,627.11
or its peso equivalent.
we find no reversible error whatsoever in either ruling, and see no

need to add to the extensive discussions already made regarding
the non-existence of all the requisites for legal compensation to
take place.

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PHILIPPINE NATIONAL BANK, petitioner, (5) That over neither of them there by any retention or

vs. controversy, commenced by third persons and communicated

IN CASE AT BAR, requisites from 2 to 5 are present. Apparently, the

Thus, while it may be concluded that the plaintiff owes the

On appeal to the respondent Court, petitioner bank continued

since the PNB is the NCB's corresponden(t) bank in the Philippines,

Court affirmed the trial court's holding in toto.

WHILE THE RESPONDENT COURT CORRECTLY FOUND PRIVATE

We note that in framing the issue in the manner aforecited, the

we find no reversible error whatsoever in either ruling, and see no

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