BPI Family Bank v.

Franco
NACHURA, J. | November 23, 2007
Topic 1: Simple Loan - Object
Nature: Appeal from judgement

PARTIES:
BPI FAMILY BANK, petitioner, vs.
AMADO FRANCO and COURT OF APPEALS, respondents.

Other parties: Tevesteco Arrastre-Stevedoring Co., Inc. (Tevesteco), First Metro Investment Corporation
(FMIC) – opened bank accounts under BPI

DISPUTED MATTER:
Right to deposits in subject accounts

FACTS:
1. 15 Aug 1989: Tevesteco Arrastre-Stevedoring Co., Inc. (Tevesteco) opened a savings and current
account with BPI Family Savings Bank (BPI-FB) San Francisco Del Monte (SFDM) branch.
2. 25 Aug 1989: First Metro Investment Corporation (FMIC) also opened a time deposit account at
BPI-FB with a deposit of P1M to mature one year after.
3. 31 Aug 1989: Franco opened three accounts at BPI-FB:
a. current account: P500k deposit
b. savings account: P500k deposit
c. time deposit account: P1M deposit + maturity date one year after
4. Franco’s total deposit of P2M used to open these accounts is traceable to a check issued by Te-
vesteco
a. Check was issued allegedly in consideration of Franco’s introduction of Eladio Teves, who
was looking for a conduit bank to facilitate Tevesteco’s business transactions, to BPI-FB
SFDM’s then-Branch Manager Jaime Sebastian.
5. Funding of P2M check was part of the P80M 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.
6. Signatures in the Authority to Debit turned out to be forged.
a. 4 Sept 1989: FMIC Executive VP Antonio Ong, personally declared his signature therein
to be a forgery.
7. Unfortunately, Tevesteco had already effected several withdrawals from its current account
amounting to P37,455,410.54 (which had been credited from FMIC’s P80M deposit), including the
P2M paid to Franco.
8. 8 Sept 1989: Wanting to protect the bank’s interest in light of FMIC’s forgery claim, BPI-FB debited
Franco’s savings and current accounts for the amounts remaining therein.
a. Franco’s time deposit could not be debited due to capacity limitations of BPI-FB’s computer
9. Franco drew 2 checks which were dishonored and stamped with “account for garnishment” in view
of an Order of Attachment issued by Makati RTC in a civil case
a. the case was filed by BPI-FB against Franco et al., to recover the P37,455,410.54
withdrawn by Tevesteco’s from its account.
10. Franco’s accounts were garnished prior to: 1. his receipt of Notice of Garnishment, and 2. his being
impleaded in the Makati civil case where the writ of attachment was issued
11. 15 May 1990: Franco was impleaded in the Makati civil case, filed Motion to Discharge Attachment
 12. 16 May 1990: Makati RTC granted Motion to Discharge Attachment, Order Lifting the Order of
Attachment served to BPI-FB on the same date. Franco demanded release of funds in his savings
and current accounts.
a. BPI-FB Manager Jesus Arangorin could not comply as the funds had already been debited
due to FMIC’s forgery claim. Thus, their computer indicated that the current account record
was “not on file”.
13. re Franco’s savings account: as a favor to Sebastian, he agreed that P400K from his savings
account was to be temporarily transferred to Domingo Quiaoit’s savings account, subject to its
immediate return upon issuance of a certificate of deposit to Quiaoit for his visa application at the
Taiwan Embassy.
a. Sebastian retained custody of Quiaoit’s savings account passbook to ensure that no
withdrawal would be effected therefrom, and to preserve Franco’s deposits
14. 17 May 1990: Franco pre-terminated his time deposit account, causing BPI-FB to deduct the
P63,189.00 from his time deposit account’s remaining balance, representing advance interest paid
to him.
15. Meanwhile, BPI-FB filed separate civil and criminal cases against the accused. Estafa case
acquitted.
16. 4 June 1990: Franco filed with Manila RTC the subject suit. Court ruled in favor of Franco. BPI-FB
to pay Franco the ff amounts:
a. P76,500.00 as legal rate of interest on the amount of P450k from May 18, 1990 to October
31, 1991 (current account);
b. P498,973.23 as balance on [Franco’s] savings account as of May 18, 1990, together with
the interest thereon in accordance with the bank’s guidelines on the payment therefor;
c. P30k way of attorney’s fees and P10k nominal damages.
17. Both parties unsatisfied, they filed their respective appeals to CA. CA affirmed Manila RTC decision
with modification: ordered BPI-FB to pay P63,189 representing the interest deducted from Franco’s
time deposit, P200k moral damages, P100k exemplary damages, deleted nominal damages, and
increased attorney’s fees to P75k
18. BPI-FB’S CONTENTIONS
a. right on the deposits in the subject accounts which are part of the proceeds of a
forged Authority to Debit: avers that its position is similar to an owner of personal
property who regains possession after it is stolen.
i. cited Art 559, CC to support its claim:
“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.”
ii. re interest on Franco’s current account: argues that Makati RTC has jurisdiction
on the matter (and not in Manila RTC) as it is the court that issued the Order Lifting
the Order of Attachment
b. re Franco’s deposit on Quiaoit’s savings account: insists that the transaction with Quiaoit
was not specifically alleged in Franco’s complaint.
c. re legality of the dishonoring of Franco’s checks: insists that it is legally in order in view of
the Makati RTC’s supplemental writ of attachment issued on September 14, 1989 + as the
party that applied for the writ of attachment before the Makati RTC, it need not be served
with the Notice of Garnishment before it could place Franco’s accounts under garnishment.
i. avers that it is not liable for interest on Franco’s time deposit, and for moral and
exemplary damage
ii. insists that its counter-claim has factual and legal anchor

ISSUES/HELD:
1. W/N BPI-FB has a better right to the deposits in the subject accounts which are part of the proceeds
of a forged Authority to Debit – NO
a. BPI-FB does not have a better right to the deposits in the subject accounts which
are part of the proceeds of a forged Authority to Debit.
 The movable property mentioned in Article 559 of the Civil Code pertains to
a specific or determinate thing.
o Money deposited in Franco’s accounts which, albeit characterized as a
movable, is generic and fungible thing.
 FUNGIBLE THING: Quality 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.
 Art 559 contemplates the exact same thing from the current
possessor. BPI-FB is simply claiming the equivalent value
money it had mistakenly debited from FMIC’s account and
credited to Tevesteco’s, and subsequently traced to Franco’s
account.
 PRIMARY FUNCTION OF MONEY: to pass from hand to hand as
a medium of exchange, without other evidence of its title
 There is a debtor-creditor relationship between a bank and its depositor.
o 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 (i.e., upon withdrawal).
b. BPI-FB has no right to freeze Franco’s accounts on mere suspicion of a scam. To grant a
bank 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.
c. BPI-FB, as the trustee in the fiduciary relationship, is duty bound to know the signatures of
its customers. It cannot shift the blame for its failure to detect forgery.
 BPI-FB effected the transfer of P80,000,000.00 from FMIC’s to Tevesteco’s
account despite not checking the authenticity of the signatures.
o FMIC’s account was a time deposit and it had already paid advance
interest to FMIC.

2. W/N Franco is entitled to earn interest on his current account – YES

a. Franco is entitled to earn interest on his current account.
 While Makati RTC is vested with authority to determine the legal consequences of
BPI-FB’s noncompliance with the Order Lifting the Order of Attachment, such
authority does not preclude the Manila RTC from ruling on BPI-FB’s liability to
Franco for payment of interest based on its continued and unjustified refusal to
perform a contractual obligation upon demand.

3. W/N Franco can receive the P400,000 deposit in Quiaoit’s savings account – YES
a. Franco can receive the P400,000 deposit in Quiaoit’s savings account.
 Quiaoit himself testified that the deposits in his account are actually owned by
Franco.
o Franco simply accommodated Jaime Sebastian’s request to temporarily
transfer P400,000.00 from Franco’s savings account to Quiaoit’s account.
 BPI-FB had impliedly consented to the trial of this issue given its extensive cross-
examination of Quiaoit.
o Section 5, Rule 10 of the Rules of Court provides:
When issues not raised by the pleadings are tried with the express or
implied consent of the parties, they shall be treated in all respects as if
they had been raised in the pleadings. Such amendment of the pleadings
as may be necessary to cause them to conform to the evidence and to
raise these issues may be made upon motion of any party at any time,
 even after judgment; but failure to amend does not affect the result of
the trial of these issues.

4. W/N the dishonor of Franco’s checks was legally in order – NO

a. The dishonor of Franco’s checks was not legally in order.
 Franco received a copy of the Notice of Garnishment only after his checks have
been dishonored by BPI-FB
o 11 and 18 SEPT 1989: date of checks issued by FrancO
o 14 SEPT 1989: Makati RTC issued supplemental writ of attachment
o 20 and 21 SEPT 2019: BPI-FB dishonored checks
o 27 SEPT 1989: Franco received Notice of Garnishment only by this time
 Enforcement of a writ of attachment cannot be made without including in the main
suit the owner of the property.
o Section 5, Rule 13 of the Rules of Court specifically provides that “no levy
or attachment pursuant to the writ issued x x x shall be enforced unless it
is preceded, or contemporaneously accompanied, by service of summons,
together with a copy of the complaint, the application for attachment, on
the defendant within the Philippines.”
 Franco was impleaded as party-defendant only on May 15, 1990: Makati RTC had
no jurisdiction yet over the person of Franco when BPI-FB-FB garnished his
accounts.

5. W/N BPI-FB is liable for interest on Franco’s time deposit, and for moral and exemplary damage –
NO
a. BPI-FB is not liable for interest on Franco’s time deposit, and for moral and
exemplary damage.
 SC reinstated trial court ruling as regards to the award of interests and damages.
 time deposit interest: Franco pre-terminated his time deposit account thus he
cannot claim the interest deducted by BPI-FB ( P63,189.00) from the remaining
balance of his time deposit account.
 moral damages: BPI-FB acted out of the impetus of self-protection and not out of
malevolence or ill will. BPI-FB was not in the corrupt state of mind contemplated in
Article 2201.
o There was no denial whatsoever by BPI-FB of the existence of the
accounts.
o The computer-generated document which indicated that the current
account was “not on file” resulted from the prior debit by BPI-FB of the
deposits.
o The remedy of freezing the account, or the garnishment, or even the
outright refusal to honor any transaction thereon was resorted to solely for
the purpose of holding on to the funds as a security for its intended court
action, and with no other goal but to ensure the integrity of the accounts
 exemplary damages: As there is no basis for the award of moral damages, neither
can exemplary damages be granted.
 attorney’s fees: granted as the 2-decade long litigation -- due to BPI-FB’s refusal
to unfreeze Franco’s deposits -- resulted to Franco incurring expenses.

6. W/N BPI-FB’s counter-claim has factual and legal anchor – NO

a. BPI-FB’s counter-claim has no factual and legal anchor.
 BPI-FB is not entitled to recover P3,800,000.00 as actual damages. BPI-FB-FB’s
alleged loss of profit as a result of Franco’s suit is, of its own making.

DISPOSITIVE:
PARTIALLY GRANTED. CA decision affirmed with modification: award of unearned interest on the time
deposit and of moral and exemplary damages is deleted.

OPINIONS: NO SEPARATE OPINIONS

____________________________________________________________________________