FACTS: Tan, doing business under the name and style of [Yon Mitori], deposited in Union Bank account, the amount of P420,000.00 through BPI Check, drawn against the account of Angli Lumber. Subsequently, Tan withdrew from the said account the amount of P480,000.00. Union Bank found out as the account against which the P480,000.00 was drawn had been closed; and Tan’s account had been mistakenly credited.
The branch manager of Union Bank immediately called Tan to recover the funds mistakenly released. However, Tan refused to return the said amount. Union Bank then debited the available balance reflected in [Tan’s] account amounting to P34,700.60 and thereafter instituted [a Complaint for Sum of Money before the RTC, for the recovery of [the remaining balance amounting to] P385,299.40 plus consequential damages.
The RTC ruled in favor of Union Bank holding that all the requisites for the application of solutio indebiti under Article 2154 of the Civil Code are present. It held that since Union Bank mistakenly released the amount of P480,000.00 in favor of Tan without being obligated to do so, Tan must be ordered to return said amount to preclude unjust enrichment at Union Bank’s expense. Moreover, under Article 1980 of the Civil Code, “fixed, savings, and current deposits of money in banks and similar institutions shall be governed by the provisions concerning [simple] loan.” By reason of the erroneous payment made in Tan’s favor, Tan and Union Bank became mutual debtors and creditors of each other. This gave rise to Union Bank’s right to set-off the erroneous payment made against Tan’s remaining deposit, consistent with the principle of legal compensation under the Civil Code.
The CA affirmed the RTC’s findings and held that Tan would be unjustly enriched at Union Bank’s expense if he were permitted to derive benefit from the funds erroneously credited to his account. As well, the CA upheld the application of legal compensation in the case.
ISSUE: Whether Tan is bound to return the proceeds of the dishonored BPI Check based on the principle of unjust enrichment.
RULING: Yes, under Article 22 of the Civil Code, also known as the principle of unjust enrichment, every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him. There is unjust enrichment when a person unjustly retains a benefit to the loss of another, or when a person retains money or property of another against the fundamental principles of justice, equity, and good conscience.
For the principle to apply, the following requisites must concur: (i) a person is unjustly benefited; and (ii) such benefit is derived at the expense of or with damages to another. The requisites for the application of the principle of unjust enrichment are clearly present in this case.
Here, it was unequivocally established that Tan withdrew and utilized the proceeds of the BPI Check fully knowing that he was not entitled thereto.
