Philippine National Bank (PNB) vs. Court of Appeals and B.P. Mata & Co., Inc.

G.R. No. 97995 DATE:

PETITIONERS RESPONDENTS
Philippine National Bank (PNB) Court of Appeals
B.P. Mata and Co., Inc.

DOTRINE
Constructive Trust (Art. 1456, Civil Code): When property is acquired through mistake or fraud, the
recipient is deemed, by force of law, a trustee of an implied trust for the donor's benefit

Solutio Indebiti (Art. 2154, Civil Code): If something is received without right and delivered by
mistake, the obligation to return it arises.

Prescription (Art. 1145, Civil Code): Actions upon quasi-contracts (e.g., solutio indebiti) must be
commenced within 6 years.

Laches (Equitable Doctrine): Even if prescription has not run (as with constructive trust having
10-year prescriptive period), unreasonable delay may bar relief—especially when the claimant is a bank
with capacity to detect errors.

FACTS
In March 1976, PNB erroneously paid B.P. Mata & Co. US$14,000 upon instructions—but later
received a correction that only US$1,400 was meant

Fourteen days later, PNB still processed the full US$14,000 payment.

Over six years later, PNB discovered the error and demanded refund, filing suit for collection and refund
on February 4, 1982

The RTC dismissed, classifying it as solutio indebiti—not constructive trust. The CA affirmed, citing
prescription under Art. 1145 for quasi-contracts

RTC: Dismissed the [Link] trial court found that the case was one of solutio indebiti
(quasi-contract under Art. 2154), not constructive trust, and thus the 6-year prescriptive period under
Art. 1145, Civil Code had already expired when PNB filed suit. PNB’s action was therefore
time-barred.

CA: Affirmed the RTC’s dismissal. It agreed that PNB’s claim was grounded in solutio indebiti,
therefore prescribed under Art. 1145. Even though Mata had a duty to return mistaken payment,
PNB’s demand came well after the allowed six years.

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 SC: Held / Affirmed dismissal of PNB’s petition. PNB may properly characterize the obligation
as a constructive trust under Art. 1456, not just solutio indebiti. This provides a 10-year prescriptive
period (Art. 1144), meaning the action had not yet prescribed. Also, The Court dismissed the claim
on ground of laches due to PNB’s unjustifiable delay—it discovered the error nearly seven years
later despite being a universal bank with duty and capability to detect such errors. Equity thus bars
recovery regardless of prescription.

ISSUES

W/N Was PNB correct in arguing that, under constructive trust (Art. 1456), it could still recover the
US$14,000 even after more than six years had passed?
HELD:

PNB was correct that they could invoke constructive trust (or alternately solutio indebiti) to recover
the mistaken payment

However, the claim was barred by laches due to the unreasonable delay of nearly seven years before
discovering the mistake and asserting the claim—even though they were still within the prescriptive
period for constructive trust

RATIO:

1. A constructive trust arises when one acquires property through mistake or fraud.

a) Under Article 1456 of the Civil Code, if property is acquired by mistake, the person obtaining it is
deemed to hold it in trust for the benefit of the rightful owner.
b) In this case, PNB erroneously paid US$14,000 instead of US$1,400 to B.P. Mata & Co., and the
company had no legal right to the excess amount.
c) Thus, Mata’s obligation to return the money is not only based on solutio indebiti (Article 2154),
but also gives rise to a constructive trust, which has a 10-year prescriptive period under Article
1144.

2. Despite the legal basis under constructive trust, the claim is barred by laches.

a) The Supreme Court held that while the action was technically still within the 10-year prescriptive
period, PNB's nearly seven-year delay in discovering the error was inexcusable.
b) The Court emphasized that PNB is a universal bank, expected to maintain a system of internal
checks and conduct regular audits of its foreign currency transactions.
c) Because of this capacity, PNB had the means and duty to discover the mistake much earlier.
d) The doctrine of laches, which applies when a party “sleeps on its rights,” bars recovery even when
a claim is not yet prescribed under statute.
e) The Court invoked equity, stating that it will not assist a party who, through negligence or

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 inaction, failed to assert its right in a timely manner.

RULING/DISPOSITORY
WHEREFORE, the decision of the Court of Appeals dismissing petitioner's claim against private
respondent is AFFIRMED.

Costs against petitioner.

SO ORDERED.

OTHER NOTES/IMPORTANT CONCEPTS

Bank’s responsibility: As a universal bank regularly auditing its accounts, PNB’s delay was
inexcusable.

Alternative remedies: PNB could have pursued solutio indebiti, but that avenue was closed by
prescription, leaving only constructive trust—yet equity still denied relief.

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