BPI vs CA Case Digest

BANK OF THE PHILIPPINE ISLANDS VS. COURT OF APPEALS

232 SCRA302
G.R. NO. 104612
MAY 10, 1994

FACTS: Private respondents Eastern Plywood Corporation and Benigno Lim as officer of the
corporation, had an “AND/OR” joint account with Commercial Bank and Trust Co (CBTC), the
predecessor-in-interest of petitioner Bank of the Philippine Islands. Lim withdraw funds from such
account and used it to open a joint checking account (an “AND” account) with Mariano Velasco. When
Velasco died in 1977, said joint checking account had P662,522.87. By virtue of an Indemnity
Undertaking executed by Lim and as President and General Manager of Eastern withdrew one half of
this amount and deposited it to one of the accounts of Eastern with CBTC.

Eastern obtained a loan of P73,000.00 from CBTC which was not secured. However, Eastern and
CBTC executed a Holdout Agreement providing that the loan was secured by the “Holdout of the C/A
No. 2310-001-42” referring to the joint checking account of Velasco and Lim.

Meanwhile, a judicial settlement of the estate of Velasco ordered the withdrawal of the balance of the
account of Velasco and Lim.

Asserting that the Holdout Agreement provides for the security of the loan obtained by Eastern and
that it is the duty of CBTC to debit the account of respondents to set off the amount of P73,000 covered
by the promissory note, BPI filed the instant petition for recovery. Private respondents Eastern and
Lim, however, assert that the amount deposited in the joint account of Velasco and Lim came from
Eastern and therefore rightfully belong to Eastern and/or Lim. Since the Holdout Agreement covers
the loan of P73,000, then petitioner can only hold that amount against the joint checking account and
must return the rest.

ISSUE: Whether BPI can demand the payment of the loan despite the existence of the Holdout
Agreement and whether BPI is still liable to the private respondents on the account subject of the
withdrawal by the heirs of Velasco.

RULING: Yes, for both issues. Regarding the first, the Holdout Agreement conferred on CBTC the
power, not the duty, to set off the loan from the account subject of the Agreement. When BPI
demanded payment of the loan from Eastern, it exercised its right to collect payment based on the
promissory note, and disregarded its option under the Holdout Agreement. Therefore, its demand was
in the correct order.

Regarding the second issue, BPI was the debtor and Eastern was the creditor with respect to the joint
checking account. Therefore, BPI was obliged to return the amount of the said account only to the
creditor. When it allowed the withdrawal of the balance of the account by the heirs of Velasco, it made
the payment to the wrong party. The law provides that payment made by the debtor to the wrong party
does not extinguish its obligation to the creditor who is without fault or negligence. Therefore, BPI was
still liable to the true creditor, Eastern.