G.R. No. 104612 - Bank of the Philippine Islands vs. Court of Appeals

In March 1975, Mariano Velasco opened with Commercial Bank and Trust Co. (CBTC) a joint checking account (C/A No. 2310-001-42) with co‐signatory Benigno D. Lim, using funds withdrawn from Eastern Plywood Corporation (Eastern) and/or Lim. Various deposits and withdrawals followed, funds being placed in the money market.
Velasco died on April 7, 1977, when the account balance had grown to ₱662,522.87. On May 5, 1977, pursuant to an Indemnity Undertaking by Lim (for himself and as Eastern’s President and General Manager), one-half of that balance was provisionally transferred to an Eastern account with CBTC.

On August 18, 1978, Eastern obtained a ₱73,000 loan from CBTC (“Additional Working Capital”) at 14% per annum, evidenced by a negotiable promissory note payable on demand, signed by Lim individually and as Eastern’s President.
The Disclosure Statement marked the loan as “unsecured” but typewrote a “Hold-Out on a 1:1 on C/A No. 2310-001-42,” and Eastern, Lim, and CBTC executed a Holdout Agreement giving the bank the power—upon final determination of their interests in the joint account—to retain and apply that balance against the loan, while preserving CBTC’s right to sue for payment.

In Special Proceedings No. 8959, the RTC of Pasig, on September 9, 1986, granted Velasco’s heirs an urgent motion to withdraw the full ₱331,261.44 then claimed as part of his intestate estate from the joint account.
CBTC merged into Bank of the Philippine Islands (BPI) in 1980, making BPI successor-in-interest.

On December 2, 1987, BPI filed Civil Case No. 87-42967 in the RTC of Manila against Eastern and Lim to collect the promissory note; defendants counterclaimed for return of the joint account balance (less the loan).
The RTC (Branch 19) rendered judgment on November 15, 1990: it dismissed BPI’s complaint (holding the note subject to offset under the Holdout Agreement) and denied the counterclaim (because the intestate court’s withdrawal order could not be disturbed).
The Court of Appeals (CA) initially (January 23, 1991) affirmed the dismissal but omitted ruling on the counterclaim; its Amended Decision (March 6, 1992) held that the settlement of Velasco’s estate did not bind Eastern and Lim, ordered BPI to pay them ₱331,261.44, and reaffirmed dismissal of the complaint on set-off grounds.
On April 22, 1992, BPI filed for certiorari, arguing that the Holdout Agreement’s suspensive condition had not been met and that the CA erred in ordering restitution of the withdrawn deposit.

Whether BPI, as successor-in-interest, could enforce the ₱73,000 promissory note by direct suit despite the Holdout Agreement.
Whether BPI remains liable to return the ₱331,261.44 account balance to Eastern and Lim after the heirs of Velasco withdrew the funds under the intestate court’s authorization.