Legal Liability for Receiving an Erroneous Money Transfer (Philippine Context)

This is practical legal information for the Philippines and not a substitute for specific advice from your counsel.

1) What counts as an “erroneous transfer”?

An erroneous transfer is money that lands in your account (bank, e-wallet, remittance, wire) by mistake—for example:

The sender keyed in the wrong account number or mobile number.
A bank or payment system posted a duplicate or wrong credit.
An employer overpaid salary due to a payroll error.
A refund was processed for the wrong customer.

Whether or not you asked for it, the law treats this as money you are not entitled to keep.

2) Core legal pillars

A. Solutio indebiti (Civil Code quasi-contract). If a person receives something when there is no right to demand it, and it was delivered through mistake, the recipient must return it. This is the most direct civil basis for recovery.

B. Unjust enrichment. No one should be enriched at another’s expense without a legal ground. Keeping mistaken funds is enrichment without cause, so you must restore them.

C. Abuse of rights / damages. Even if you learned of the mistake later, refusing to return or making it difficult to recover may lead to liability for damages (e.g., costs, attorney’s fees, sometimes moral/exemplary damages if bad faith is proven).

D. Criminal exposure (fact-specific). Depending on how you act after you know the funds were a mistake, prosecutors may consider:

Theft (appropriation with intent to gain of property of another) in “misdelivered/found property” type situations; or
Estafa (swindling) by conversion or misappropriation after a duty to return has arisen (especially after demand), potentially qualified by the Cybercrime law if the act was done through ICT. Whether a case fits theft or estafa is intensely factual; what matters is knowledge + intent to gain + refusal or conversion.

E. Payments and e-money rules. Instant retail transfers (e.g., InstaPay/PESONet and e-wallets) are generally push payments and treated as final once posted. “Recalls” are cooperative: the sending and receiving institutions coordinate, but they typically need the recipient’s consent or a lawful order to pull funds back—hence your duty to cooperate.

F. Prescription. Civil actions based on quasi-contract (like solutio indebiti) generally prescribe in six (6) years counted from when the mistake and undue payment could be discovered with reasonable diligence.

G. Donations defense (often fails). Claiming “it was a gift” usually won’t stand unless there’s proof. Donations of personal property exceeding ₱5,000 must be in writing to be valid. Erroneous transfers virtually never meet that standard.

3) The recipient’s legal duties

Do not spend or move the funds. Treat them as not yours.
Notify your bank/e-wallet quickly that you received a mistaken credit.
Cooperate with recall/reversal procedures (sign the bank’s authorization if appropriate).
Return the amount received. If you already moved it in good faith, you still owe restitution.
Interest and fruits:
- In good faith, you typically owe legal interest (currently 6% p.a.) from the date you are formally demanded to return (or from filing of the complaint if no prior demand is proven).
- In bad faith (e.g., you knew it was not yours and still spent/blocked recovery), interest may be counted from receipt, plus possible damages.

Failing to cooperate after notice can escalate the matter to civil suit, account freezes, and—if your conduct shows intent to gain—criminal complaints.

4) The sender’s rights and remedies

Bank/e-wallet route: Report the error immediately (hotline/app/email). Provide reference numbers, screenshots, and proof of the mistake. Ask for a payment recall and to flag/freeze the funds (if still available). Institutions may contact the recipient for consent.
Formal demand: Send a written demand letter to the recipient (and copy the receiving institution). Demand prompt return, give a bank account for refund, and set a clear deadline.
Barangay conciliation: If both parties reside or work in the same city/municipality and no exception applies, barangay conciliation is usually a pre-condition before going to court for money claims.
Small Claims / Civil action: File a sum-of-money case. (The Supreme Court has expanded Small Claims to cover higher amounts than before; check the current cap. For many consumer-scale errors, Small Claims is available and lawyer appearance is optional.)
Criminal complaint: If facts support it (e.g., refusal after clear notice, spending to defeat recovery), consider filing for theft/estafa; if the transaction is online, note possible cybercrime qualification.
Ancillary relief: In stronger cases, apply for freeze/seizure or other provisional remedies through counsel to prevent dissipation.

5) Scenario guide (how liability usually plays out)

Scenario	Civil liability	Interest	Criminal risk
Recipient promptly reports & returns	None (beyond returning the amount)	Usually none	None
Recipient innocently spends before learning	Must restitute	Typically 6% p.a. from demand	Low if promptly cooperates
Recipient refuses after clear notice	Return + damages possible	6% p.a. from receipt or demand (fact-based)	Moderate–High (possible theft/estafa)
Recipient transfers funds away to frustrate return	Return + damages; possible liability of bad-faith transferees	As above	High (conversion/intent to gain)

6) Banking & e-wallet mechanics you should expect

Finality of push payments. Banks/wallets don’t usually yank funds unilaterally once credited. They initiate a recall workflow and seek the recipient’s authorization, or require a court/authority order.
Freezes and STRs. When there’s a credible error report or suspicious pattern (e.g., rapid cash-out after notice), institutions may freeze pending verification and file Suspicious Transaction Reports (AMLA).
Identity sharing limits. Due to bank secrecy/data privacy, the sender may not be given the recipient’s PII. The institution can still relay the demand and facilitate return.

7) Defenses commonly raised by recipients (and why they struggle)

“Bank’s negligence, not my problem.” Unjust enrichment rules override this—you still must return.
“It was payment for a debt.” Then show the underlying obligation (invoice/contract). Otherwise, solutio indebiti applies.
“It was a gift.” For sums over ₱5,000, gifts must be in writing; absent that, the defense is weak.
“I already spent it.” Spending doesn’t erase the duty to restitute.

8) Damages, fees, and computations

Principal: The amount erroneously credited.
Legal interest: Typically 6% per annum simple interest, computed from demand (good faith) or possibly receipt (bad faith), until fully paid.
Attorney’s fees / costs: May be awarded if the recipient’s unjustified refusal forced litigation or if bad faith is shown.
Moral/exemplary damages: Possible where bad faith or oppressive conduct is proven (e.g., stonewalling after clear proof of error).

9) Prescription, venue, and jurisdiction

When to sue: Actions based on solutio indebiti/unjust enrichment generally within 6 years from discovery/knowledge of the undue payment.
Where: Usually where the defendant resides or where the cause of action arose.
What court: Depends on amount and rules in force. Many consumer-scale disputes can proceed via Small Claims for speed and reduced cost.

10) Special fact patterns

Salary overpayments. Employers may recover. Wage deductions must comply with the Labor Code/DOLE rules (typically requiring written authorization or legal basis). A simple “netting” without process can be challenged—HR should document and secure consent or use legal demand.
Onward transfers. The sender can sue the original recipient. They may also pursue subsequent transferees who were in bad faith (e.g., knew of the error) or didn’t give value; good-faith transferees of money may be shielded, so focusing on the original recipient is often more practical.
Deceased or unreachable recipient. Claim may be filed against the estate; if identity is unknown, work through the bank/e-wallet and counsel to obtain lawful process.

11) What to do (checklists)

If you received the mistaken funds

Freeze: Don’t spend, transfer, or withdraw.
Screenshot the credit and your balance.
Report to your bank/e-wallet; ask for the recall form and cooperate.
Reply to any demand letter; propose a clear return timeline and method.
If you need to verify, request documented proof of the error (reference numbers, amount, date).
If already spent in good faith, propose repayment terms (lump sum or written plan).

If you’re the sender

Report immediately to your bank/e-wallet (include transaction ID, time, amount, correct intended account).
Ask them to flag/freeze and contact the recipient for recall consent.
Send a Demand Letter (email + courier), with a clear deadline and bank details for the return.
If no cooperation: Barangay (if required), then Small Claims/Civil action; assess criminal complaint with counsel.
Preserve all evidence: app logs, reference numbers, calls, chats.

12) Simple demand letter template

Subject: Demand to Return Erroneously Credited Funds

[Date] [Recipient Name / Address or Email]

Dear [Name],

On [date/time], the amount of ₱[amount] was erroneously transferred to your [bank/e-wallet] account ([last 4 digits or identifier]) due to a posting/keying error. You have no legal entitlement to these funds.

Under the Civil Code (solutio indebiti/unjust enrichment), you are obliged to return the full amount. Please remit ₱[amount] to the following account: [bank, account name/number] on or before [deadline date].

If we do not receive payment by that date, we will be compelled to pursue legal action to recover the principal, legal interest, costs, and damages, and consider appropriate criminal remedies.

We remain willing to coordinate with your bank/e-wallet for a straightforward reversal.

Sincerely, [Sender Name / Company] [Contact details]

13) Quick answers (FAQ)

Can my bank just take the money back? Not usually without your consent or a lawful order, but they can freeze and facilitate a recall. You’re still legally obliged to return it.
I thought it was mine when I spent it. Am I safe? You still owe restitution. If you promptly cooperate once notified, you reduce risk to civil interest only.
Is this taxable income to the recipient? No—there is no income because there’s no legal right to it. It must be returned.
How much interest could I owe? Often 6% per annum from demand (good faith) or from receipt (bad faith), until paid.

14) Key takeaways

Erroneously received money is not yours; the law compels return.
Cooperate early to avoid interest, damages, and criminal exposure.
Senders should act immediately, document everything, and escalate in orderly steps: bank → demand → barangay (if needed) → court (civil, and where warranted, criminal).

If you want, I can tailor a step-by-step plan (letters, scripts with your bank/e-wallet, and a repayment schedule) based on your exact facts and amounts.