THE METROPOLITAN BANK AND TRUST COMPANY v Rosales

G.R. No. 183204. January 13, 2014

Ponente: Del Castillo

Topic: Simple Loan or Mutuum

Facts:

This case is a petition assailing the decision of the CA which affirmed the trial courts decision
that petitioner breached its contract with respondent.

Petitioner Metropolitan Bank and Trust Company (Metrobank) is a domestic banking

corporation while Respondent Rosales is the owner of China Golden Bridge Travel Services, a travel
agency and respondent Yo Yuk To is the mother of respondent Rosales.

In May 2002, Respondent Rosales had a Taiwanese National client named Liu Chiu Fang whom
she accompanied in opening a savings account in one of Petitioner Metrobanks branches. Rosales acted
as Lius interpreter since Liu could only speak Mandarin. In June 2003, Liu called Rosales to inquire about
extending her account. It was then found that Lius account had been closed without Lius knowledge.
There were unauthorized withdrawals issued on the basis of a Special Power of Attorney which Liu
denied executing in favour of one Richard So. In a conference, the petitioner, through its officers
assured Liu that her money would be returned.

In July 2003, petitioner issued a Hold Out order against respondents accounts in one of their
branches. Petitioner accused respondent and an unidentified woman as the ones responsible for the
unauthorized and fraudulent withdrawals from Lius account. In September 2003, petitioner filed a case
for Estafa against respondent Rosales which was later dismissed due to lack of probable cause.

In September 2004, respondents filed before the RTC a Complaint for Breach of Obligation and
Contract with Damages against petitioner. Respondents alleged that they attempted several times to
withdraw their deposits but failed due to the Hold Out status placed on their account by the petitioner.
Also, respondent claimed that petitioner did not explain why it issued the said status. Respondents
prayed that the Hold Out order be lifted and that they be allowed to withdraw their deposits. While the
case for breach of contract was being tried, the dismissal of the Estafa complaint against Rosales was
reversed. The trial court rendered judgment in favour of respondent and decided that petitioner is liable
for breach of contract when they issued the Hold Out order against respondents account. The RTC ruled
that it is the duty of the petitioner to release the deposit to respondents as the act of withdrawal of a
bank deposit is an act of demand by the creditor. On appeal, the CA affirmed the lower courts decision.

Problem Arise: When respondent cannot withdraw from their account due to the Hold Out order
issued by petitioner.

Issue:
Whether petitioner breached its contract with respondents when petitioner refused to release
respondents deposit.

Held:
 Yes. Petition was denied. Petitioner is liable for breach of contract when it unjustifiably refused
to release respondents deposit despite demand through the Hold out status.

Ruling:

The Supreme Court ruled that petitioners 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 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 of these sources. 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.

In the case of Allied Banking Corporation v. Lim Sio Wan, the SC held that Bank deposits, which are
in the nature of a simple loan or mutuum, must be paid upon demand by the depositor.

In the present case, respondents bank deposit is a simple loan to the petitioner where
respondent is lending money to the petitioner bank. The said deposit must be paid upon demand by the
respondent. Hence, when respondent attempted to withdraw her deposit but failed due to petitioners
refusal that had no legal basis, the contract of loan was breached by the petitioner.

Doctrine:
Bank deposits, which are in the nature of a simple loan or mutuum, must be paid upon demand
by the depositor. When a person deposits an amount to his bank account, he is in legal effect, lending
money to the bank. The bank deposit must be paid upon demand by the depositor.

xxx
Copy of the Application and Agreement for Deposit Account between petitioner and respondent:

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 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
Depositors obligations heretofore mentioned