1
AVANCEÑA, Pres :
On May 9, 1912, Alejandro F. Callao, mother of defendant John F. Villarroel, obtained from
the spouses Mariano Estrada and Severina a loan of P1, 000 payable after seven
years(Exhibito A). Alejandra died, leaving as sole heir to the defendant. Spouses Mariano
Estradaand Severina also died, leaving as sole heir to the plaintiff Bernardino Estrada. On
August 9,1930, the defendant signed a document (Exhibito B) by which the applicant must
declare in the amount of P1, 000, with an interest of 12 percent per year. This action relates
to the recovery of this amount. The Court of First Instance of Laguna, which was filed in this
action, condemn the defendant to pay the claimed amount of P1, 000 with legal interest of
12 percent per year since the August 9, 1930 until full pay. He appealed the sentence. It will
be noted that the parties in the present case are, respectively, the only heirs and creditors of
the original debtor. This action is brought under the defendant's liability as the only son of
the original debtor in favor of the plaintiff contracted, sole heir of primitive loan creditors. It
is recognized that the amount of P1, 000 to which contracts this obligation is the same debt
of the mother's parents sued the plaintiff. Although the action to recover the original debt
has prescribed and when the lawsuit was filed in this case, the question raised in this appeal
is primarily whether, notwithstanding such requirement, the action taken is appropriate.
However, this action is based on the original obligation contracted by the mother of the
defendant, who has already prescribed, but in which the defendant contracted the August 9,
1930 (Exhibito B) by assuming the fulfillment of that obligation, as prescribed. Being the only
defendant in the original herderodebtor eligible successor into his inheritance, that debt
brought by his mother in law, although it lost its effectiveness by prescription, is now,
however, for a moral obligation, that is consideration enough to create and make effective
and enforceable obligation voluntarily contracted its August 9, 1930 in Exhibito B. The rule
that a new promise to pay a debt prrescrita must be made by the same person obligated or
otherwise legally authorized by it, is not applicable to the present case is not required in
compliance with the mandatory obligation orignalmente but which would give it voluntarily
assumed this obligation. It confirms the judgment appealed from, with costs against the
appellant. IT IS SO ORDERED. Imperial, Diaz, Laurel, and Horrilleno, MM., Concur
JUAN F. VILLARROEL, vs. BERNARDINO ESTRADA
G.R. No. L-47362 December 19, 1940
FACTS:
On May 9 1912, Alejandra F. Callao mother of herein petitioner obtained from the Sps
Mariano Estrada and Severina a loan of 1000 pesos payable in 6 years. Alejandra died leaving
petitioner as the sole heir. The Sps Mariano Estrada and Severina died as well leaving the
respondent as the sole heir. On Aug 9 1930, petitioner signed a document assuming the
obligation to pay the respondent 1000 plus 12% per annum interest. Hence the action filed
to recover said amount.
The CFI ruled in favor of the respondent ordering the petitioner to pay 1000 plus interest of
12% per annum to be counted from Aug 9 1930.
ISSUE: Whether or not the present action may prosper notwithstanding the prescription of
the action to recover the original debt?
HELD:
Yes. The present action is not based on the original debt contracted by petitioner’s mother –
which has already prescribed – but on petitioner’s undertaking on Aug 9 1930 to assume the
original obligation. For the petitioner who is the sole heir of the original debtor with rights to
the latter’s inheritance, the debt legally contracted by his mother even if it has already lost
enforceability due to prescription, has become a moral obligation which is a sufficient
 2

consideration to make the obligation he voluntarily assumedon Aug 9 1930 enforceable and

legally demandable.

EN BANC
G.R. No. L-13667 April 29, 1960
PRIMITIVO ANSAY, ETC., ET AL., plaintiffs-appellants,
vs.
THE BOARD OF DIRECTORS OF THE NATIONAL DEVELOPMENT COMPANY, ET
AL., defendants-appellees.
PARAS, C. J.:
On July 25, 1956, appellants filed against appellees in the Court of First Instance of Manila a
complaint praying for a 20% Christmas bonus for the years 1954 and 1955. The court a
quo on appellees' motion to dismiss, issued the following order:
Considering the motion to dismiss filed on 15 August, 1956, set for this morning;
considering that at the hearing thereof, only respondents appeared thru counsel
and there was no appearance for the plaintiffs although the court waited for
sometime for them; considering, however, that petitioners have submitted an
opposition which the court will consider together with the arguments presented by
respondents and the Exhibits marked and presented, namely, Exhibits 1 to 5, at the
hearing of the motion to dismiss; considering that the action in brief is one to
compel respondents to declare a Christmas bonus for petitioners workers in the
National Development Company; considering that the Court does not see how
petitioners may have a cause of action to secure such bonus because:
(a) A bonus is an act of liberality and the court takes it that it is not within its
judicial powers to command respondents to be liberal;
(b) Petitioners admit that respondents are not under legal duty to give such bonus
but that they had only ask that such bonus be given to them because it is a moral
obligation of respondents to give that but as this Court understands, it has no
power to compel a party to comply with a moral obligation (Art. 142, New Civil
Code.).
IN VIEW WHEREOF, dismissed. No pronouncement as to costs.
A motion for reconsideration of the afore-quoted order was denied. Hence this appeal.
Appellants contend that there exists a cause of action in their complaint because their claim
rests on moral grounds or what in brief is defined by law as a natural obligation.
3
Since appellants admit that appellees are not under legal obligation to give such claimed
bonus; that the grant arises only from a moral obligation or the natural obligation that they
discussed in their brief, this Court feels it urgent to reproduce at this point, the definition and
meaning of natural obligation.
Article 1423 of the New Civil Code classifies obligations into civil or natural. "Civil obligations
are a right of action to compel their performance. Natural obligations, not being based on
positive law but on equity and natural law, do not grant a right of action to enforce their
performance, but after voluntary fulfillment by the obligor, they authorize the retention of
what has been delivered or rendered by reason thereof".
It is thus readily seen that an element of natural obligation before it can be cognizable by the
court is voluntary fulfillment by the obligor. Certainly retention can be ordered but only after
there has been voluntary performance. But here there has been no voluntary performance.
In fact, the court cannot order the performance.
At this point, we would like to reiterate what we said in the case of Philippine Education
Co. vs. CIR and the Union of Philippine Education Co., Employees (NUL) (92 Phil., 381; 48 Off.
Gaz., 5278) —
From the legal point of view a bonus is not a demandable and enforceable
obligation. It is so when it is made a part of the wage or salary compensation.
And while it is true that the subsequent case of H. E. Heacock vs. National Labor Union, et al.,
95 Phil., 553; 50 Off. Gaz., 4253, we stated that:
Even if a bonus is not demandable for not forming part of the wage, salary or
compensation of an employee, the same may nevertheless, be granted on
equitable consideration as when it was given in the past, though withheld in
succeeding two years from low salaried employees due to salary increases.
still the facts in said Heacock case are not the same as in the instant one, and hence the
ruling applied in said case cannot be considered in the present action.
Premises considered, the order appealed from is hereby affirmed, without pronouncement
as to costs.
FACTS: On July 25, 1956, appellants filed against appellees in the Court of First Instance of
Manila a complaint praying for a 20% Christmas bonus for the years 1954 and 1955. The
lower court citing article 142 of the Civil Code granted appellees’ motion to dismiss holding
that the grant of a bonus is not a legal duty but a moral obligation and that the court has no
power to compel a party to comply with a moral obligation.
A motion for reconsideration was denied. Hence this appeal.
 4

Appellants contend that there exists a cause of action in their complaint because their claim
rests on moral grounds or what in brief is defined by law as a natural obligation.

ISSUE: Whether or not courts may compel performance of natural obligations?

HELD: No. Article 1423 of the New Civil Code classifies obligations into civil or natural. “Civil
obligations are a right of action to compel their performance. Natural obligations, not being
based on positive law but on equity and natural law, do not grant a right of action to enforce
their performance, but after voluntary fulfillment by the obligor, they authorize the
retention of what has been delivered or rendered by reason thereof“.
It is thus readily seen that an element of natural obligation before it can be cognizable by
the court is voluntary fulfillment by the obligor. Certainly retention can be ordered but only
after there has been voluntary performance. But here there has been no voluntary
performance. In fact, the court cannot order the performance.
From the legal point of view a bonus is not a demandable and enforceable obligation. It is so
when it is made a part of the wage or salary compensation. (Philippine Education Co. vs. CIR
and the Union of Philippine Education Co., Employees (NUL) (92 Phil., 381; 48 Off. Gaz., 5278)

FIRST DIVISION
G.R. No. L-48889 May 11, 1989
DEVELOPMENT BANK OF THE PHILIPPINES (DBP), petitioner,
vs.
THE HONORABLE MIDPAINTAO L. ADIL, Judge of the Second Branch of the Court of First
Instance of Iloilo and SPOUSES PATRICIO CONFESOR and JOVITA
VILLAFUERTE, respondents.
GANCAYCO, J.:
The issue posed in this petition for review on certiorari is the validity of a promissory note
which was executed in consideration of a previous promissory note the enforcement of
which had been barred by prescription.
On February 10, 1940 spouses Patricio Confesor and Jovita Villafuerte obtained an
agricultural loan from the Agricultural and Industrial Bank (AIB), now the Development of the
Philippines (DBP), in the sum of P2,000.00, Philippine Currency, as evidenced by a promissory
note of said date whereby they bound themselves jointly and severally to pay the account in
ten (10) equal yearly amortizations. As the obligation remained outstanding and unpaid even
after the lapse of the aforesaid ten-year period, Confesor, who was by then a member of the
Congress of the Philippines, executed a second promissory note on April 11, 1961 expressly
acknowledging said loan and promising to pay the same on or before June 15, 1961. The new
promissory note reads as follows —
I hereby promise to pay the amount covered by my promissory note on
or before June 15, 1961. Upon my failure to do so, I hereby agree to the
foreclosure of my mortgage. It is understood that if I can secure a
certificate of indebtedness from the government of my back pay I will be
allowed to pay the amount out of it.
Said spouses not having paid the obligation on the specified date, the DBP filed a complaint
dated September 11, 1970 in the City Court of Iloilo City against the spouses for the payment
of the loan.
After trial on the merits a decision was rendered by the inferior court on December 27, 1976,
the dispositive part of which reads as follows:
WHEREFORE, premises considered, this Court renders judgment, ordering
the defendants Patricio Confesor and Jovita Villafuerte Confesor to pay
the plaintiff Development Bank of the Philippines, jointly and severally,
(a) the sum of P5,760.96 plus additional daily interest of P l.04 from
September 17, 1970, the date Complaint was filed, until said amount is
5
paid; (b) the sum of P576.00 equivalent to ten (10%) of the total claim by
way of attorney's fees and incidental expenses plus interest at the legal
rate as of September 17,1970, until fully paid; and (c) the costs of the
suit.
Defendants-spouses appealed therefrom to the Court of First Instance of Iloilo wherein in
due course a decision was rendered on April 28, 1978 reversing the appealed decision and
dismissing the complaint and counter-claim with costs against the plaintiff.
A motion for reconsideration of said decision filed by plaintiff was denied in an order of
August 10, 1978. Hence this petition wherein petitioner alleges that the decision of
respondent judge is contrary to law and runs counter to decisions of this Court when
respondent judge (a) refused to recognize the law that the right to prescription may be
renounced or waived; and (b) that in signing the second promissory note respondent Patricio
Confesor can bind the conjugal partnership; or otherwise said respondent became liable in
his personal capacity. The petition is impressed with merit. The right to prescription may be
waived or renounced. Article 1112 of Civil Code provides:
Art. 1112. Persons with capacity to alienate property may renounce
prescription already obtained, but not the right to prescribe in the future.
Prescription is deemed to have been tacitly renounced when the
renunciation results from acts which imply the abandonment of the right
acquired.
There is no doubt that prescription has set in as to the first promissory note of February 10,
1940. However, when respondent Confesor executed the second promissory note on April
11, 1961 whereby he promised to pay the amount covered by the previous promissory note
on or before June 15, 1961, and upon failure to do so, agreed to the foreclosure of the
mortgage, said respondent thereby effectively and expressly renounced and waived his right
to the prescription of the action covering the first promissory note.
This Court had ruled in a similar case that –
... when a debt is already barred by prescription, it cannot be enforced by
the creditor. But a new contract recognizing and assuming the prescribed
debt would be valid and enforceable ... . 1
Thus, it has been held —
Where, therefore, a party acknowledges the correctness of a debt and
promises to pay it after the same has prescribed and with full knowledge
of the prescription he thereby waives the benefit of prescription. 2

This is not a mere case of acknowledgment of a debt that has prescribed but a new promise
to pay the debt. The consideration of the new promissory note is the pre-existing obligation
under the first promissory note. The statutory limitation bars the remedy but does not
discharge the debt.
A new express promise to pay a debt barred ... will take the case from the
operation of the statute of limitations as this proceeds upon the ground
that as a statutory limitation merely bars the remedy and does not
discharge the debt, there is something more than a mere moral
obligation to support a promise, to wit a – pre-existing debt which is a
sufficient consideration for the new the new promise; upon this sufficient
consideration constitutes, in fact, a new cause of action. 3
... It is this new promise, either made in express terms or deduced from
an acknowledgement as a legal implication, which is to be regarded as
reanimating the old promise, or as imparting vitality to the remedy
(which by lapse of time had become extinct) and thus enabling the
creditor to recover upon his original contract. 4
However, the court a quo held that in signing the promissory note alone, respondent
Confesor cannot thereby bind his wife, respondent Jovita Villafuerte, citing Article 166 of the
New Civil Code which provides:
Art. 166. Unless the wife has been declared a non compos mentis or a
spend thrift, or is under civil interdiction or is confined in a leprosarium,
the husband cannot alienate or encumber any real property of the
conjugal partnership without, the wife's consent. If she ay compel her to
refuses unreasonably to give her consent, the court m grant the same.
We disagree. Under Article 165 of the Civil Code, the husband is the administrator of the
conjugal partnership. As such administrator, all debts and obligations contracted by the
husband for the benefit of the conjugal partnership, are chargeable to the conjugal
partnership. 5 No doubt, in this case, respondent Confesor signed the second promissory
note for the benefit of the conjugal partnership. Hence the conjugal partnership is liable for
this obligation.
WHEREFORE, the decision subject of the petition is reversed and set aside and another
decision is hereby rendered reinstating the decision of the City Court of Iloilo City of
December 27, 1976, without pronouncement as to costs in this instance. This decision is
immediately executory and no motion for extension of time to file motion for
reconsideration shall be granted.
SO ORDERED.
6
DBP v. Confessor, 161 SCRA 307 (1988)
Petition for review on certiorari
GANCAYCO, J.
FACTS:
· On February 10, 1940 spouses Patricio Confesor and Jovita Villafuerte obtained an
agricultural loan from DBP, in the sum of P2,000, as evidenced by a promissory note,
whereby they bound themselves jointly and severally to pay the account in ten (10) equal
yearly amortizations.
· After ten years, the debt remained unpaid. Confessor, now a Congressman, executed a
second promissory note acknowledging the loan and promising to pay the same before June
15, 1961.
· Still not having paid the obligation on the specified date, the DBP filed a complaint against
the spouses for the payment of the loan.
ISSUE: W/N prescription had barred the complaint.
HELD:
· No. Prescription was renounced when Confessor signed the second promissory note.
· The right to prescription may be waived or renounced. Prescription is deemed to have been
tacitly renounced when the renunciation results from acts which imply the abandonment of
the right acquired.
· The Court ruled that when a debt is already barred by prescription, it cannot be enforced by
the creditor. But a new contract recognizing and assuming the prescribed debt would be
valid and enforceable.
· The statutory limitation bars the remedy but does not discharge the debt. A new express
promise to pay a debt barred ... will take the case from the operation of the statute of
limitations as this proceeds upon the ground that as a statutory limitation merely bars the
remedy and does not discharge the debt, there is something more than a mere moral
obligation to support a promise, to wit a – pre-existing debt which is a sufficient
consideration for the new the new promise; upon this sufficient consideration constitutes, in
fact, a new cause of action.
FACTS:
 7

On February 10, 1940, spouses Patricio Confesor and Jovita Villafuerte obtained an
agricultural loan from Agricultural and Industrial Bank, now Development Bank of the
Philippines, in the sum of P2,000, as evidenced by a promissory note of said date whereby
they bound themselves jointly and severally to pay the amount in ten equal yearly
amortizations.

As the obligation remained unpaid even after the lapse if the ten-year period, Confesor, who
was then a member of the Congress of the Philippines, executed a second promissory note
on April 11, 1961, expressly acknowledging the said loan and promising to pay the same on
or before June 15, 1961.

The spouses still failed to pay the obligation on the specified date. As a result, the DBP filed a
complaint on September 11, 1970 in the City Court of Iloilo City. The city court ordered
payment from spouses. The CFI of Iloilo reversed the decision. Hence, this petition.

ISSUE: Whether or not a promissory which was executed in consideration of a previous

promissory note which has already been barred by prescription is valid.

HELD: Yes, the second promissory note is valid because the said promissory note is not a
mere acknowledgement of the debt that has prescribed already. Rather, it is a new promise
to pay the debt. A new promise is a new cause of action. Although a debt barred by
prescription is enforceable, a new contract recognizing and assuming the prescribed debt
would be valid and enforceable.

EN BANC
G.R. No. L-3756 June 30, 1952
SAGRADA ORDEN DE PREDICADORES DEL SANTISMO ROSARIO DE FILIPINAS, plaintiff-
appellee,
vs.
NATIONAL COCONUT CORPORATION, defendant-appellant.
First Assistant Corporate Counsel Federico C. Alikpala and Assistant Attorney Augusto Kalaw
for appellant.
Ramirez and Ortigas for appellee.
LABRADOR, J.:
This is an action to recover the possession of a piece of real property (land and warehouses)
situated in Pandacan Manila, and the rentals for its occupation and use. The land belongs to
the plaintiff, in whose name the title was registered before the war. On January 4, 1943,
during the Japanese military occupation, the land was acquired by a Japanese corporation by
the name of Taiwan Tekkosho for the sum of P140,00, and thereupon title thereto issued in
its name (transfer certificate of title No. 64330, Register of Deeds, Manila). After liberation,
more specifically on April 4, 1946, the Alien Property Custodian of the United States of
America took possession, control, and custody thereof under section 12 of the Trading with
the Enemy Act, 40 Stat., 411, for the reason that it belonged to an enemy national. During
the year 1946 the property was occupied by the Copra Export Management Company under
a custodianship agreement with United States Alien Property Custodian (Exhibit G), and
when it vacated the property it was occupied by the defendant herein. The Philippine
Government made representations with the Office Alien Property Custodian for the use of
property by the Government (see Exhibits 2, 2-A, 2-B, and 1). On March 31, 1947, the
defendant was authorized to repair the warehouse on the land, and actually spent thereon
the repairs the sum of P26,898.27. In 1948, defendant leased one-third of the warehouse to
one Dioscoro Sarile at a monthly rental of P500, which was later raised to P1,000 a month.
Sarile did not pay the rents, so action was brought against him. It is not shown, however, if
the judgment was ever executed.
Plaintiff made claim to the property before the Alien Property Custodian of the United States,
but as this was denied, it brought an action in court (Court of First Instance of Manila, civil
case No. 5007, entitled "La Sagrada Orden Predicadores de la Provinicia del Santisimo Rosario
de Filipinas," vs. Philippine Alien Property Administrator, defendant, Republic of the
Philippines, intervenor) to annul the sale of property of Taiwan Tekkosho, and recover its
possession. The Republic of the Philippines was allowed to intervene in the action. The case
did not come for trial because the parties presented a joint petition in which it is claimed by
plaintiff that the sale in favor of the Taiwan Tekkosho was null and void because it was
executed under threats, duress, and intimidation, and it was agreed that the title issued in
the name of the Taiwan Tekkosho be cancelled and the original title of plaintiff re-issued;
8
that the claims, rights, title, and interest of the Alien Property Custodian be cancelled and
held for naught; that the occupant National Coconut Corporation has until February 28, 1949,
to recover its equipment from the property and vacate the premises; that plaintiff, upon
entry of judgment, pay to the Philippine Alien Property Administration the sum of P140,000;
and that the Philippine Alien Property Administration be free from responsibility or liability
for any act of the National Coconut Corporation, etc. Pursuant to the agreement the court
rendered judgment releasing the defendant and the intervenor from liability, but reversing to
the plaintiff the right to recover from the National Coconut Corporation reasonable rentals
for the use and occupation of the premises. (Exhibit A-1.)
The present action is to recover the reasonable rentals from August, 1946, the date when the
defendant began to occupy the premises, to the date it vacated it. The defendant does not
contest its liability for the rentals at the rate of P3,000 per month from February 28, 1949
(the date specified in the judgment in civil case No. 5007), but resists the claim therefor prior
to this date. It interposes the defense that it occupied the property in good faith, under no
obligation whatsoever to pay rentals for the use and occupation of the warehouse. Judgment
was rendered for the plaintiff to recover from the defendant the sum of P3,000 a month, as
reasonable rentals, from August, 1946, to the date the defendant vacates the premises. The
judgment declares that plaintiff has always been the owner, as the sale of Japanese
purchaser was void ab initio; that the Alien Property Administration never acquired any right
to the property, but that it held the same in trust until the determination as to whether or
not the owner is an enemy citizen. The trial court further declares that defendant can not
claim any better rights than its predecessor, the Alien Property Administration, and that as
defendant has used the property and had subleased portion thereof, it must pay reasonable
rentals for its occupation.
Against this judgment this appeal has been interposed, the following assignment of error
having been made on defendant-appellant's behalf:
The trial court erred in holding the defendant liable for rentals or compensation for
the use and occupation of the property from the middle of August, 1946, to
December 14, 1948.
1. Want to "ownership rights" of the Philippine Alien Property Administration did
not render illegal or invalidate its grant to the defendant of the free use of
property.
2. the decision of the Court of First Instance of Manila declaring the sale by the
plaintiff to the Japanese purchaser null and void ab initio and that the plaintiff was
and has remained as the legal owner of the property, without legal interruption, is
not conclusive.
3. Reservation to the plaintiff of the right to recover from the defendant
corporation not binding on the later;

4. Use of the property for commercial purposes in itself alone does not justify
payment of rentals.
5. Defendant's possession was in good faith.
6. Defendant's possession in the nature of usufruct.
In reply, plaintiff-appellee's counsel contends that the Philippine Allien Property
Administration (PAPA) was a mere administrator of the owner (who ultimately was decided
to be plaintiff), and that as defendant has used it for commercial purposes and has leased
portion of it, it should be responsible therefore to the owner, who had been deprived of the
possession for so many years. (Appellee's brief, pp. 20, 23.)
We can not understand how the trial court, from the mere fact that plaintiff-appellee was
the owner of the property and the defendant-appellant the occupant, which used for its own
benefit but by the express permission of the Alien Property Custodian of the United States,
so easily jumped to the conclusion that the occupant is liable for the value of such use and
occupation. If defendant-appellant is liable at all, its obligations, must arise from any of the
four sources of obligations, namley, law, contract or quasi-contract, crime, or negligence.
(Article 1089, Spanish Civil Code.) Defendant-appellant is not guilty of any offense at all,
because it entered the premises and occupied it with the permission of the entity which had
the legal control and administration thereof, the Allien Property Administration. Neither was
there any negligence on its part. There was also no privity (of contract or obligation) between
the Alien Property Custodian and the Taiwan Tekkosho, which had secured the possession of
the property from the plaintiff-appellee by the use of duress, such that the Alien Property
Custodian or its permittee (defendant-appellant) may be held responsible for the supposed
illegality of the occupation of the property by the said Taiwan Tekkosho. The Allien Property
Administration had the control and administration of the property not as successor to the
interests of the enemy holder of the title, the Taiwan Tekkosho, but by express provision of
law (Trading with the Enemy Act of the United States, 40 Stat., 411; 50 U.S.C.A., 189). Neither
is it a trustee of the former owner, the plaintiff-appellee herein, but a trustee of then
Government of the United States (32 Op. Atty. Gen. 249; 50 U.S.C.A. 283), in its own right, to
the exclusion of, and against the claim or title of, the enemy owner. (Youghioheny & Ohio
Coal Co. vs. Lasevich [1920], 179 N.W., 355; 171 Wis., 347; U.S.C.A., 282-283.) From August,
1946, when defendant-appellant took possession, to the late of judgment on February 28,
1948, Allien Property Administration had the absolute control of the property as trustee of
the Government of the United States, with power to dispose of it by sale or otherwise, as
though it were the absolute owner. (U.S vs. Chemical Foundation [C.C.A. Del. 1925], 5 F. [2d],
191; 50 U.S.C.A., 283.) Therefore, even if defendant-appellant were liable to the Allien
Property Administration for rentals, these would not accrue to the benefit of the plaintiff-
appellee, the owner, but to the United States Government.
But there is another ground why the claim or rentals can not be made against defendant-
appellant. There was no agreement between the Alien Property Custodian and the
defendant-appellant for the latter to pay rentals on the property. The existence of an implied
9
agreement to that effect is contrary to the circumstances. The copra Export Management
Company, which preceded the defendant-appellant, in the possession and use of the
property, does not appear to have paid rentals therefor, as it occupied it by what the parties
denominated a "custodianship agreement," and there is no provision therein for the
payment of rentals or of any compensation for its custody and or occupation and the use.
The Trading with the Enemy Act, as originally enacted, was purely a measure of conversation,
hence, it is very unlikely that rentals were demanded for the use of the property. When the
National coconut Corporation succeeded the Copra Export Management Company in the
possession and use of the property, it must have been also free from payment of rentals,
especially as it was Government corporation, and steps where then being taken by the
Philippine Government to secure the property for the National Coconut Corporation. So that
the circumstances do not justify the finding that there was an implied agreement that the
defendant-appellant was to pay for the use and occupation of the premises at all.
The above considerations show that plaintiff-appellee's claim for rentals before it obtained
the judgment annulling the sale of the Taiwan Tekkosho may not be predicated on any
negligence or offense of the defendant-appellant, or any contract, express or implied,
because the Allien Property Administration was neither a trustee of plaintiff-appellee, nor a
privy to the obligations of the Taiwan Tekkosho, its title being based by legal provision of the
seizure of enemy property. We have also tried in vain to find a law or provision thereof, or
any principle in quasi contracts or equity, upon which the claim can be supported. On the
contrary, as defendant-appellant entered into possession without any expectation of liability
for such use and occupation, it is only fair and just that it may not be held liable therefor. And
as to the rents it collected from its lessee, the same should accrue to it as a possessor in good
faith, as this Court has already expressly held. (Resolution, National Coconut Corporation vs.
Geronimo, 83 Phil. 467.)
Lastly, the reservation of this action may not be considered as vesting a new right; if no right
to claim for rentals existed at the time of the reservation, no rights can arise or accrue from
such reservation alone.
Wherefore, the part of the judgment appealed from, which sentences defendant-appellant
to pay rentals from August, 1946, to February 28, 1949, is hereby reversed. In all other
respects the judgment is affirmed. Costs of this appeal shall be against the plaintiff-appellee.
]FACTS:
The land in question belongs to plaintiff Sagrada Orden in whose name the title was
registered before the war

On January 4, 1943, during the Japanese military occupation, the land was acquired by a
Japanese corporation by the name of Taiwan Tekkosho
After liberation on April 4, 1946, the Alien Property Custodian of the United States of
America took possession, control, and custody of the property pursuant to the Trading with
the Enemy Act
The property was occupied by the Copra Export Management Company under a custodian
agreement with US Alien Property Custodian. When it vacated the property, it was occupied
by defendant National Coconut Corporation
The plaintiff made claim to the said property before the Alien Property Custodian. Alien
Property Custodian denied such claim
It bought an action in court which resulted to the cancellation of the title issued in the name
of Taiwan Tekkosho which was executed under threats, duress, and intimidation; reissuance
of the title in favor of the plaintiff; cancellation of the claims, rights, title, interest of the Alien
property Custodian; and occupant National Coconut Corporation’s ejection from the
property. A right was also vested to the plaintiff to recover from the defendants rentals for
its occupation of the land from the date it vacated.
Defendant contests the rental claims on the defense that it occupied the property in good
faith and under no obligation to pay rentals.
ISSUE: Whether or not the defendant is obliged to pay rentals to the plaintiff
10
HELD: No. Nacoco is not liable to pay rentals prior the judgment. If defendant-appellant is
liable at all, its obligations, must arise from any of the four sources of obligations, namley,
law, contract or quasi-contract, crime, or negligence. (Article 1089, Spanish Civil Code.)
Defendant-appellant is not guilty of any offense at all, because it entered the premises and
occupied it with the permission of the entity which had the legal control and administration
thereof, the Allien Property Administration. Neither was there any negligence on its part.
FACTS
Plaintiff Sagrada Orden owned a piece of real property in Pandacan, Manila.
During the Japanese occupation, the land was acquired by a Japanese corporation
Taiwan Tekkoshho. After the liberation, the Alien Property Custodian of the United
States took possession, control, and custody of the real property. During the year 1946,
the property was occupied by the Copra Export Management Company under the
custodianship agreement with United States Alien Property Custodian, and when it
vacated, the property
occupied by defendant National Coconut Corporation. Sagrada Orden made claim to
the property before the Alien Property Custodian of the United States but was denied.
So plaintiff brought an action in court to annul the sale of property of Taiwan Tekkosho,
and recover its possession. The case did not come for trial because the parties
presented a joint petition in which it is claimed by Sagrada Orden that the sale in favor
of Taiwan Tekkosho was null and void because it was executed under threats, duress,
and intimidation, and that the title be re-issued to Sagrada Orden. The court rendered
judgment releasing the defendant from liability, but reversing to the plaintiff the right
to recover from the defendant reasonable rentals for the use and occupation of the
premises. The present action to recover the reasonable rentals from August 1946, the
date when defendant began to occupy, to the date it vacated it. The defendant did not
contest its liability for the rentals at the rate of P3, 000 per month from February 28,
1949, but resisted the claim therefore prior to that date. Defendant contends that it
occupied the property in good faith, under no obligation to pay rentals for the use and
occupation. Judgment rendered for the plaintiff to recover from the defendant the sum
of P3, 000 a month, from August, 1946, to the date the defendant vacates the
premises. Thus this appeal made by defendant.
ISSUE
Can the defendant company be held liable to pay rentals from August 1946 to the
date it vacated?
RULING
No. If defendant-appellant is liable at all, its obligations, must arise from any of the
four sources of obligations, namely, law, contract or quasi-contract, crime, or negligence.
Defendant-appellant is not guilty of any offense at all, because it entered the premises and
occupied it with the permission of the entity which had the legal control and administration
thereof, the Alien Property Administration. Neither was there any negligence on its part.
 11

There was also no privity between the Alien Property Custodian and the Taiwan Tekkosho,
which had secured the possession of the property from the plaintiff-appellee by the use of
duress, such that the Alien Property Custodian or its permittee (defendant-appellant) may be
held responsible for the supposed illegality of the occupation of the property by the said
Taiwan Tekkosho. The Alien Property Administration had the control and administration of
the property not as successor to the interests of the enemy holder of the title, the Taiwan
Tekkosho. Neither is it a trustee of the former owner, the plaintiff-appellee herein, but a
trustee of then Government of the United States, in its own right, to the exclusion of, and
against the claim or title of, the enemy owner. From August, 1946, when defendant-
appellant took possession, to the late of judgment on February 28, 1948, Alien Property
Administration had the absolute control of the property as trustee of the Government of the
United States, with power to dispose of it by sale or otherwise, as though it were the
absolute owner. Therefore, even if defendant-appellant were liable to the Alien Property
Administration for rentals, these would not accrue to the benefit of the plaintiff-appellee, the
owner, but to the United States Government.

SECOND DIVISION
G.R. No. 183204 January 13, 2014
THE METROPOLITAN BANK AND TRUST COMPANY, Petitioner,
vs.
ANA GRACE ROSALES AND YO YUK TO, Respondents.
DECISION
DEL CASTILLO, J.:
Bank deposits, which are in the nature of a simple loan or mutuum,1 must be paid upon
demand by the depositor.2
This Petition for Review on Certiorari3 under Rule 45 of the Rules of Court assails the April 2,
2008 Decision4 and the May 30, 2008 Resolution5 of he Court of Appeals CA) in CA-G.R. CV
No. 89086.
Factual Antecedents
Petitioner Metropolitan Bank and Trust Company is a domestic banking corporation duly
organized and existing under the laws of the Philippines.6 Respondent Ana Grace Rosales
(Rosales) is the owner of China Golden Bridge Travel Services,7 a travel agency.8 Respondent
Yo Yuk To is the mother of respondent Rosales.9
In 2000, respondents opened a Joint Peso Account10 with petitioner’s Pritil-Tondo
Branch.11 As of August 4, 2004, respondents’ Joint Peso Account showed a balance of
₱2,515,693.52.12
In May 2002, respondent Rosales accompanied her client Liu Chiu Fang, a Taiwanese National
applying for a retiree’s visa from the Philippine Leisure and Retirement Authority (PLRA), to
petitioner’s branch in Escolta to open a savings account, as required by the PLRA.13 Since Liu
Chiu Fang could speak only in Mandarin, respondent Rosales acted as an interpreter for
her.14
On March 3, 2003, respondents opened with petitioner’s Pritil-Tondo Branch a Joint Dollar
Account15 with an initial deposit of US$14,000.00.16
On July 31, 2003, petitioner issued a "Hold Out" order against respondents’ accounts.17
On September 3, 2003, petitioner, through its Special Audit Department Head Antonio Ivan
Aguirre, filed before the Office of the Prosecutor of Manila a criminal case for Estafa through
12
False Pretences, Misrepresentation, Deceit, and Use of Falsified Documents, docketed as I.S.
No. 03I-25014,18 against respondent Rosales.19 Petitioner accused respondent Rosales and an
unidentified woman as the ones responsible for the unauthorized and fraudulent withdrawal
of US$75,000.00 from Liu Chiu Fang’s dollar account with petitioner’s Escolta
Branch.20Petitioner alleged that on February 5, 2003, its branch in Escolta received from the
PLRA a Withdrawal Clearance for the dollar account of Liu Chiu Fang;21 that in the afternoon
of the same day, respondent Rosales went to petitioner’s Escolta Branch to inform its Branch
Head, Celia A. Gutierrez (Gutierrez), that Liu Chiu Fang was going to withdraw her dollar
deposits in cash;22 that Gutierrez told respondent Rosales to come back the following day
because the bank did not have enough dollars;23 that on February 6, 2003, respondent
Rosales accompanied an unidentified impostor of Liu Chiu Fang to the bank;24 that the
impostor was able to withdraw Liu Chiu Fang’s dollar deposit in the amount of
US$75,000.00;25 that on March 3, 2003, respondents opened a dollar account with
petitioner; and that the bank later discovered that the serial numbers of the dollar notes
deposited by respondents in the amount of US$11,800.00 were the same as those withdrawn
by the impostor.26
Respondent Rosales, however, denied taking part in the fraudulent and unauthorized
withdrawal from the dollar account of Liu Chiu Fang.27 Respondent Rosales claimed that she
did not go to the bank on February 5, 2003.28Neither did she inform Gutierrez that Liu Chiu
Fang was going to close her account.29 Respondent Rosales further claimed that after Liu
Chiu Fang opened an account with petitioner, she lost track of her.30 Respondent Rosales’
version of the events that transpired thereafter is as follows:
On February 6, 2003, she received a call from Gutierrez informing her that Liu Chiu Fang was
at the bank to close her account.31 At noon of the same day, respondent Rosales went to the
bank to make a transaction.32 While she was transacting with the teller, she caught a glimpse
of a woman seated at the desk of the Branch Operating Officer, Melinda Perez
(Perez).33 After completing her transaction, respondent Rosales approached Perez who
informed her that Liu Chiu Fang had closed her account and had already left. 34 Perez then
gave a copy of the Withdrawal Clearance issued by the PLRA to respondent Rosales. 35 On
June 16, 2003, respondent Rosales received a call from Liu Chiu Fang inquiring about the
extension of her PLRA Visa and her dollar account.36 It was only then that Liu Chiu Fang found
out that her account had been closed without her knowledge.37 Respondent Rosales then
went to the bank to inform Gutierrez and Perez of the unauthorized withdrawal.38 On June
23, 2003, respondent Rosales and Liu Chiu Fang went to the PLRA Office, where they were
informed that the Withdrawal Clearance was issued on the basis of a Special Power of
Attorney (SPA) executed by Liu Chiu Fang in favor of a certain Richard So.39 Liu Chiu Fang,
however, denied executing the SPA.40 The following day, respondent Rosales, Liu Chiu Fang,
Gutierrez, and Perez met at the PLRA Office to discuss the unauthorized withdrawal.41 During
the conference, the bank officers assured Liu Chiu Fang that the money would be returned to
her.42

On December 15, 2003, the Office of the City Prosecutor of Manila issued a Resolution
dismissing the criminal case for lack of probable cause.43 Unfazed, petitioner moved for
reconsideration.
On September 10, 2004, respondents filed before the Regional Trial Court (RTC) of Manila a
Complaint44 for Breach of Obligation and Contract with Damages, docketed as Civil Case No.
04110895 and raffled to Branch 21, against petitioner. Respondents alleged that they
attempted several times to withdraw their deposits but were unable to because petitioner
had placed their accounts under "Hold Out" status.45 No explanation, however, was given by
petitioner as to why it issued the "Hold Out" order.46 Thus, they prayed that the "Hold Out"
order be lifted and that they be allowed to withdraw their deposits.47 They likewise prayed
for actual, moral, and exemplary damages, as well as attorney’s fees.48
Petitioner alleged that respondents have no cause of action because it has a valid reason for
issuing the "Hold Out" order.49 It averred that due to the fraudulent scheme of respondent
Rosales, it was compelled to reimburse Liu Chiu Fang the amount of US$75,000.0050 and to
file a criminal complaint for Estafa against respondent Rosales.51
While the case for breach of contract was being tried, the City Prosecutor of Manila issued a
Resolution dated February 18, 2005, reversing the dismissal of the criminal complaint.52 An
Information, docketed as Criminal Case No. 05-236103,53 was then filed charging respondent
Rosales with Estafa before Branch 14 of the RTC of Manila.54
Ruling of the Regional Trial Court
On January 15, 2007, the RTC rendered a Decision55 finding petitioner liable for damages for
breach of contract.56The RTC ruled that it is the duty of petitioner to release the deposit to
respondents as the act of withdrawal of a bank deposit is an act of demand by the
creditor.57 The RTC also said that the recourse of petitioner is against its negligent employees
and not against respondents.58 The dispositive portion of the Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering [petitioner]
METROPOLITAN BANK & TRUST COMPANY to allow [respondents] ANA GRACE ROSALES and
YO YUK TO to withdraw their Savings and Time Deposits with the agreed interest, actual
damages of ₱50,000.00, moral damages of ₱50,000.00, exemplary damages of ₱30,000.00
and 10% of the amount due [respondents] as and for attorney’s fees plus the cost of suit.
The counterclaim of [petitioner] is hereby DISMISSED for lack of merit.
SO ORDERED.59
Ruling of the Court of Appeals
13
Aggrieved, petitioner appealed to the CA.
On April 2, 2008, the CA affirmed the ruling of the RTC but deleted the award of actual
damages because "the basis for [respondents’] claim for such damages is the professional fee
that they paid to their legal counsel for [respondent] Rosales’ defense against the criminal
complaint of [petitioner] for estafa before the Office of the City Prosecutor of Manila and not
this case."60 Thus, the CA disposed of the case in this wise:
WHEREFORE, premises considered, the Decision dated January 15, 2007 of the RTC, Branch
21, Manila in Civil Case No. 04-110895 is AFFIRMED with MODIFICATION that the award of
actual damages to [respondents] Rosales and Yo Yuk To is hereby DELETED.
SO ORDERED.61
Petitioner sought reconsideration but the same was denied by the CA in its May 30, 2008
Resolution.62
Issues
Hence, this recourse by petitioner raising the following issues:
A. THE [CA] ERRED IN RULING THAT THE "HOLD-OUT" PROVISION IN THE
APPLICATION AND AGREEMENT FOR DEPOSIT ACCOUNT DOES NOT APPLY IN THIS
CASE.
B. THE [CA] ERRED WHEN IT RULED THAT PETITIONER’S EMPLOYEES WERE
NEGLIGENT IN RELEASING LIU CHIU FANG’S FUNDS.
C. THE [CA] ERRED IN AFFIRMING THE AWARD OF MORAL DAMAGES, EXEMPLARY
DAMAGES, AND ATTORNEY’S FEES.63
Petitioner’s Arguments
Petitioner contends that the CA erred in not applying the "Hold Out" clause stipulated in the
Application and Agreement for Deposit Account.64 It posits that the said clause applies to any
and all kinds of obligation as it does not distinguish between obligations arising ex contractu
or ex delictu.65 Petitioner also contends that the fraud committed by respondent Rosales was
clearly established by evidence;66 thus, it was justified in issuing the "Hold-Out"
order.67 Petitioner likewise denies that its employees were negligent in releasing the
dollars.68 It claims that it was the deception employed by respondent Rosales that caused
petitioner’s employees to release Liu Chiu Fang’s funds to the impostor.69

Lastly, petitioner puts in issue the award of moral and exemplary damages and attorney’s
fees. It insists that respondents failed to prove that it acted in bad faith or in a wanton,
fraudulent, oppressive or malevolent manner.70
Respondents’ Arguments
Respondents, on the other hand, argue that there is no legal basis for petitioner to withhold
their deposits because they have no monetary obligation to petitioner.71 They insist that
petitioner miserably failed to prove its accusations against respondent Rosales.72 In fact, no
documentary evidence was presented to show that respondent Rosales participated in the
unauthorized withdrawal.73 They also question the fact that the list of the serial numbers of
the dollar notes fraudulently withdrawn on February 6, 2003, was not signed or
acknowledged by the alleged impostor.74Respondents likewise maintain that what was
established during the trial was the negligence of petitioner’s employees as they allowed the
withdrawal of the funds without properly verifying the identity of the
depositor.75Furthermore, respondents contend that their deposits are in the nature of a loan;
thus, petitioner had the obligation to return the deposits to them upon demand.76 Failing to
do so makes petitioner liable to pay respondents moral and exemplary damages, as well as
attorney’s fees.77
Our Ruling
The Petition is bereft of merit.
At the outset, the relevant issues in this case are (1) whether petitioner breached its contract
with respondents, and (2) if so, whether it is liable for damages. The issue of whether
petitioner’s employees were negligent in allowing the withdrawal of Liu Chiu Fang’s dollar
deposits has no bearing in the resolution of this case. Thus, we find no need to discuss the
same.
The "Hold Out" clause does not apply
to the instant case.
Petitioner claims that it did not breach its contract with respondents because it has a valid
reason for issuing the "Hold Out" order. Petitioner anchors its right to withhold respondents’
deposits on the Application and Agreement for Deposit Account, which reads:
Authority to Withhold, Sell and/or Set Off:
The Bank is hereby authorized to withhold as security for any and all obligations with the
Bank, all monies, properties or securities of the Depositor now in or which may hereafter
come into the possession or under the control of the Bank, whether left with the Bank for
14
safekeeping or otherwise, or coming into the hands of the Bank in any way, for so much
thereof as will be sufficient to pay any or all obligations incurred by Depositor under the
Account or by reason of any other transactions between the same parties now existing or
hereafter contracted, to sell in any public or private sale any of such properties or securities
of Depositor, and to apply the proceeds to the payment of any Depositor’s obligations
heretofore mentioned.
xxxx
JOINT ACCOUNT
xxxx
The Bank may, at any time in its discretion and with or without notice to all of the
Depositors, assert a lien on any balance of the Account and apply all or any part thereof
against any indebtedness, matured or unmatured, that may then be owing to the Bank by
any or all of the Depositors. It is understood that if said indebtedness is only owing from any
of the Depositors, then this provision constitutes the consent by all of the depositors to have
the Account answer for the said indebtedness to the extent of the equal share of the debtor
in the amount credited to the Account.78
Petitioner’s reliance on the "Hold Out" clause in the Application and Agreement for Deposit
Account is misplaced.
The "Hold Out" clause applies only if there is a valid and existing obligation arising from any
of the sources of obligation enumerated in Article 115779 of the Civil Code, to wit: law,
contracts, quasi-contracts, delict, and quasi-delict. In this case, petitioner failed to show that
respondents have an obligation to it under any law, contract, quasi-contract, delict, or quasi-
delict. And although a criminal case was filed by petitioner against respondent Rosales, this is
not enough reason for petitioner to issue a "Hold Out" order as the case is still pending and
no final judgment of conviction has been rendered against respondent Rosales. In fact, it is
significant to note that at the time petitioner issued the "Hold Out" order, the criminal
complaint had not yet been filed. Thus, considering that respondent Rosales is not liable
under any of the five sources of obligation, there was no legal basis for petitioner to issue the
"Hold Out" order. Accordingly, we agree with the findings of the RTC and the CA that the
"Hold Out" clause does not apply in the instant case.
In view of the foregoing, we find that petitioner is guilty of breach of contract when it
unjustifiably refused to release respondents’ deposit despite demand. Having breached its
contract with respondents, petitioner is liable for damages.
Respondents are entitled to moral and
exemplary damages and attorney’s fees.1âwphi1
 15

In cases of breach of contract, moral damages may be recovered only if the defendant acted \FACTS:
fraudulently or in bad faith,80 or is "guilty of gross negligence amounting to bad faith, or in
wanton disregard of his contractual obligations."81

In this case, a review of the circumstances surrounding the issuance of the "Hold Out" order Petitioner Metrobank is a domestic banking corporation duly organized and existing
reveals that petitioner issued the "Hold Out" order in bad faith. First of all, the order was under the laws of the Philippines. Respondent Rosales is the owner of a travel agency while
issued without any legal basis. Second, petitioner did not inform respondents of the reason Yo Yuk To is her mother.
for the "Hold Out."82 Third, the order was issued prior to the filing of the criminal complaint.
Records show that the "Hold Out" order was issued on July 31, 2003,83 while the criminal
complaint was filed only on September 3, 2003.84 All these taken together lead us to
conclude that petitioner acted in bad faith when it breached its contract with respondents. In 2000, respondents opened a Joint Peso Account10 with petitioner’s Pritil-Tondo
As we see it then, respondents are entitled to moral damages.
Branch.

As to the award of exemplary damages, Article 222985 of the Civil Code provides that
exemplary damages may be imposed "by way of example or correction for the public good, in
addition to the moral, temperate, liquidated or compensatory damages." They are awarded In May 2002, respondent Rosales accompanied her client Liu Chiu Fang, a Taiwanese
only if the guilty party acted in a wanton, fraudulent, reckless, oppressive or malevolent
National applying for a retiree’s visa from the Philippine Leisure and Retirement Authority
manner.86
(PLRA), to petitioner’s branch in Escolta to open a savings account. Since Liu Chiu Fang could
speak only in Mandarin, respondent Rosales acted as an interpreter for her.
In this case, we find that petitioner indeed acted in a wanton, fraudulent, reckless,
oppressive or malevolent manner when it refused to release the deposits of respondents
without any legal basis. We need not belabor the fact that the banking industry is impressed
with public interest.87 As such, "the highest degree of diligence is expected, and high
On March 3, 2003, respondents opened with petitioner’s Pritil-Tondo Branch a Joint
standards of integrity and performance are even required of it."88 It must therefore "treat
the accounts of its depositors with meticulous care and always to have in mind the fiduciary Dollar Account with an initial deposit of US$14,000.00.
nature of its relationship with them."89 For failing to do this, an award of exemplary damages
is justified to set an example.

On July 31, 2003, petitioner issued a “Hold Out” order against respondents’
The award of attorney's fees is likewise proper pursuant to paragraph 1, Article 220890 of the
Civil Code. accounts.

In closing, it must be stressed that while we recognize that petitioner has the right to protect
itself from fraud or suspicions of fraud, the exercise of his right should be done within the
On September 3, 2003, petitioner, through its Special Audit Department Head
bounds of the law and in accordance with due process, and not in bad faith or in a wanton
disregard of its contractual obligation to respondents. Antonio Ivan Aguirre, filed before the Office of the Prosecutor of Manila a criminal case for
Estafa through False Pretences, Misrepresentation, Deceit, and Use of Falsified Documents.
WHEREFORE, the Petition is hereby DENIED. The assailed April 2, 2008 Decision and the May
30, 2008 Resolution of the Court of Appeals in CA-G.R. CV No. 89086 are hereby AFFIRMED.
SO ORDERED.
Respondent Rosales, however, denied taking part in the fraudulent and
unauthorized withdrawal from the dollar account of Liu Chiu Fang.
MARIANO C. DEL CASTILLO
Associate Justice

WE CONCUR:
 16

On December 15, 2003, the Office of the City Prosecutor of Manila issued a
Resolution dismissing the criminal case for lack of probable cause. On September 10, 2004,
respondents filed before the RTC of Manila a complaint for Breach of Obligation and Contract
with Damages.
In fact, it is significant to note that at the time petitioner issued the “Hold Out”
order, the criminal complaint had not yet been filed. Thus, considering that respondent
Rosales is not liable under any of the five sources of obligation, there was no legal basis for
petitioner to issue the “Hold Out” order. Accordingly, we agree with the findings of the RTC
and the CA that the “Hold Out” clause does not apply in the instant case.

In view of the foregoing, the Court found that petitioner is guilty of breach of
contract when it unjustifiably refused to release respondents’ deposit despite demand.
Having breached its contract with respondents, petitioner is liable for damages.
ISSUE:

Whether Metrobank breached its contract with respondents.

FALLO:
HELD:

WHEREFORE, the Petition is hereby DENIED. The assailed April 2, 2008 Decision and
YES. The Court held that Metrobank’s reliance on the “Hold Out” clause in the
the May 30, 2008 Resolution of the Court of Appeals in CA-G.R. CV No. 89086 are hereby
Application and Agreement for Deposit Account is misplaced.
AFFIRMED.

Bank deposits, which are in the nature of a simple loan or mutuum, must be paid
upon demand by the depositor.

The “Hold Out” clause applies only if there is a valid and existing obligation arising
from any of the sources of obligation enumerated in Article 1157 of the Civil Code, to wit:
law, contracts, quasi-contracts, delict, and quasi-delict. In this case, petitioner failed to show
that respondents have an obligation to it under any law, contract, quasi-contract, delict, or
quasi-delict. And although a criminal case was filed by petitioner against respondent Rosales,
this is not enough reason for petitioner to issue a “Hold Out” order as the case is still pending
and no final judgment of conviction has been rendered against respondent Rosales.