SC: Bank’s gross negligence bars recovery of released funds

A recent Supreme Court ruling stated that banking institutions cannot compel depositors to return money withdrawn due to the bank’s own gross negligence, as it rejected claims of unjust enrichment when the financial loss stems from a failure to follow standard internal procedures.

In a decision penned by Associate Justice Japar B. Dimaampao dated 12 February 2026, the SC’s Third Division denied the petition filed by a bank and held that the bank’s disregard for its clearing policies constituted gross negligence that barred it from recovering funds from a client.

The case stemmed from depositor Cristina Barcellano’s deposit of a P151,200 regional check from a LandBank branch in Albay into her savings account at the bank’s Lucena City branch.

A teller mistakenly validated the regional check as a local check and released the credited funds after only three banking days instead of the required seven-day clearing period.

Relying on the available balance reflected in her account, Barcellano withdrew P76,000.

The bank, however, received a stop-payment order on the check and demanded that Barcellano return the withdrawn amount.

Although the depositor initially agreed, she ultimately did not repay the sum.

The bank then withheld her remaining account balance and initiated a criminal complaint for estafa.

Barcellano was acquitted by the Regional Trial Court of the criminal charges after finding no evidence of fraud, deceit or abuse of confidence and ruled that the premature withdrawal was caused entirely by the bank’s operational lapse.

Subsequently, the Court of Appeals affirmed the trial court’s ruling, prompting the bank to bring the civil aspect of the case before the SC.

The bank argued that despite Barcellano’s criminal acquittal, she remained obligated to return the P76,000 under the principle of solutio indebiti, a legal doctrine dictating the return of payments made by mistake and intended to prevent unjust enrichment.

But the high court rejected the bank’s argument after ruling that while civil liability can persist under civil law concepts even after a criminal acquittal, the Court stressed that the bank failed to demonstrate that Barcellano acted in bad faith or had knowledge that the check would ultimately be dishonored.

The justices instead found that she withdrew the funds in good faith after the bank made the balance accessible.

The bank’s own gross negligence, the SC said, produced the loss when it prematurely credited the regional check, misclassified its clearing status and overlooked basic security safeguards until the stop-payment order arrived.

The court ruled that the doctrine of solutio indebiti cannot be invoked when the payor’s error directly arises from a failure to exercise extraordinary diligence.

The SC reiterated, citing the fiduciary nature of the banking sector, that banks are businesses imbued with public interest and are bound to observe the highest degree of care.

It said that prematurely disbursing funds from an uncleared check and bypassing established banking protocols fall well short of this legal standard.