BANK OF THE PHILIPPINE ISLANDS VS.

COURT OF APPEALS
232 SCRA302
G.R. NO. 104612
MAY 10, 1994

DOCTRINE:
Article 1980 of the Civil Code expressly provides that "[f]ixed, savings, and current deposits of
money in banks and similar institutions shall be governed by the provisions concerning simple
loan." In Serrano vs. Central Bank of the Philippines, 21we held that bank deposits are in the
nature of irregular deposits; they are really loans because they earn interest. The relationship
then between a depositor and a bank is one of creditor and debtor. The deposit under the
questioned account was an ordinary bank deposit; hence, it was payable on demand of the
depositor.
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.