Philippine Commercial and International Bank v. Custodio
REITERATIONFacts
The Antecedents: Respondent Dennis Custodio operated a door-to-door dollar remittance business, with respondent Wilfredo D. Gliane as his agent in Saudi Arabia. They used the services of petitioner Philippine Commercial and International Bank (PCIB) via its Express Padala desk. Respondent Rolando Francisco, a regular client of PCIB, was involved in the remittance process, using his joint accounts with his wife and Erlinda Chua. Francisco and his wife entered into a Foreign Bills Purchase Line Agreement (FBPLA) with PCIB-Greenhills for P70 Million Pesos, allowing PCIB to advance funds on checks without the usual clearing period, with an undertaking to pay immediately for dishonored checks, including interest and penalties, and authorizing PCIB to debit their accounts. Francisco deposited four dollar checks totaling US$651,000, which were initially cleared but later dishonored by Chase Manhattan Bank for insufficient funds. PCIB-Greenhills debited US$85,000 from Francisco and Erlinda's account as partial payment. Subsequently, Gliane remitted US$42,300 to the same joint account. Francisco had previously asked Custodio to stop remittances due to PCIB-Greenhills imposing a higher exchange rate. Upon learning of Gliane's remittance, Custodio instructed Gliane to change the beneficiary to Belarmino Cortez and/or Rhodora Cruz. However, PCIB-Greenhills had already set off the US$42,300 against Francisco's outstanding obligation under the FBPLA (US$566,000). Marilyn Tan, PCIB Area Manager, informed Custodio that the amendment was no longer feasible as the funds were already applied to Francisco's obligation. Procedural History: Custodio and Gliane filed a complaint against PCIB, Marilyn Tan, and Francisco for specific performance and damages, seeking recovery of the US$42,300. The Regional Trial Court (RTC) of Makati found PCIB negligent and Francisco unjustly enriched, holding them jointly and severally liable for actual damages (US$42,300), exemplary damages (P50,000), and attorney's fees (P30,000). PCIB appealed. Francisco filed a Motion for Reconsideration, arguing he could not be held liable as no fault was found against him and the payment was void. Custodio and Gliane also filed a Motion for Partial Reconsideration, seeking legal interest and increased damages. The RTC, in an Order dated April 26, 2002, modified its decision, holding PCIB solely liable to pay Custodio and Gliane but granting PCIB the right of reimbursement from Francisco. PCIB appealed again. The Court of Appeals (CA) reversed the RTC, holding Francisco solely liable for US$42,300, deleting exemplary damages, attorney's fees, and costs. Francisco filed a Motion for Reconsideration, claiming the FBPLA was with ROL-ED Traders Group Corporation (ROL-ED), not him personally, and that no evidence proved the US$42,300 was credited to his account. Custodio and Gliane also filed a Motion for Reconsideration. The CA, in an Amended Decision dated October 25, 2005, set aside its earlier decision and reinstated the RTC's January 30, 2002 decision, as amended by the April 26, 2002 Order, holding both PCIB and Francisco liable, with PCIB having the right of reimbursement from Francisco. PCIB filed a Motion for Reconsideration, which was denied. The Petition: PCIB filed a Petition for Review on Certiorari with the Supreme Court, arguing that the CA erred in issuing an Amended Decision without a motion for reconsideration, in considering new matters raised by Francisco, in ruling PCIB was negligent, in not ruling that compensation took place, and in disregarding the alleged deceitful scheme by Gliane, Custodio, and Francisco against PCIB.
Issue(s)
Whether the Court of Appeals erred in issuing an Amended Decision without a Motion for Reconsideration, and whether the Court of Appeals erred in considering new matters raised by Francisco for the first time on appeal. Whether PCIB was negligent in carrying out its obligations under the Express Padala facility. Whether compensation (set-off) took place between PCIB and Francisco. Whether Francisco was unjustly enriched and liable for the US$42,300 remittance, and whether the separate corporate personality of Francisco and ROL-ED should be disregarded.
Ruling
The Supreme Court granted the petition, reversed the CA's Amended Decision, and reinstated its August 11, 2004 Decision, holding Francisco solely liable for US$42,300, with legal interest from finality of the decision until satisfaction, and deleting awards for exemplary damages, attorney's fees, and costs.
Ratio Decidendi
On the Court of Appeals' Amended Decision and New Matters: The Supreme Court held that while an appellee cannot obtain affirmative relief without appealing, they can advance arguments to defeat the appellant's claim or uphold the disputed decision. However, it found error in the CA considering Francisco's belated invocation of ROL-ED's separate personality, as this argument was raised for the first time in his motion for reconsideration of the CA's original decision. Points of law not adequately brought to the trial court's attention are generally not considered on appeal. Francisco's earlier pleadings admitted that the loan to which the remittance was applied was his, making the set-off valid. On PCIB's Negligence and Set-off: The Court found no negligence on the part of PCIB. The testimonies of Marilyn Tan and Allen Alcantara indicated that the request for amendment of beneficiary was received after the set-off had occurred. PCIB acted promptly in applying the funds to Francisco's outstanding obligation under the FBPLA, which was a valid exercise of its right to compensation or set-off. The bank's actions were consistent with its Express Padala service, which emphasized speed and priority. The Court also found that Gliane and Custodio failed to prove that the request for amendment of the beneficiary was communicated to PCIB within a reasonable time before the set-off. The evidence showed that the amendatory request was received after the funds had already been applied to Francisco's obligation. Therefore, PCIB could not be faulted for proceeding with the set-off. On Compensation (Set-off) and the Applicability of the FBPLA: The Court found that Francisco's argument regarding the FBPLA being with ROL-ED and not him personally was raised for the first time on appeal and contradicted his earlier admissions in his pleadings. He had previously admitted that the funds were applied to 'his loan obligation' with the bank. On Francisco's Liability and Unjust Enrichment: The Court ruled that Francisco was liable for the US$42,300 remittance. His own pleadings admitted that the funds were applied to his loan obligation. The argument that the loan was ROL-ED's was raised too late and contradicted his earlier admissions. The Court also noted that Francisco deposited the US$651,000 checks in his personal account, not ROL-ED's. The veil of separate corporate personality could be lifted when used to evade liability, which was the case here as Francisco invoked ROL-ED's identity to escape his admitted obligation. The Court also noted that Francisco deposited the initial large sum of checks into his personal account, not ROL-ED's, further undermining his claim of separate identity in this context.
Main Doctrine
A bank may validly set-off a depositor's outstanding obligation with funds remitted to the depositor's account, even if the depositor was acting as a conduit for a third party's remittance, provided the set-off is done before a valid amendment of the beneficiary is effected and the depositor's liability is established. The separate corporate personality of an individual and a corporation can be disregarded when used to evade liability.