G.R. No. L-34548 - Rizal Commercial Banking Corp. vs. De Castro

The case involves Rizal Commercial Banking Corporation (RCBC), the petitioner, and the Philippine Virginia Tobacco Administration (PVTA) along with other respondents.
The controversy centers on whether a bank, by releasing its depositor’s funds in compliance with a court order under a writ of garnishment, should be held solidarily liable in the event that the court later sets aside that order.
The underlying action arose from a partial judgment in Civil Case No. Q-12785 (Badoc Planters, Inc. vs. PVTA and others) for the recovery of unpaid tobacco deliveries amounting to P206,916.76 plus legal interest.

On January 15, 1970, Judge Lourdes P. San Diego issued a Partial Judgment ordering the defendants to pay Badoc Planters, Inc.
Badoc filed an Urgent Ex-Parte Motion for a Writ of Execution on January 26, 1970. The motion was granted by a respondent judge who was acting in lieu of Judge San Diego.

The Branch Clerk of Court issued the writ the same day.
Sheriff Faustino Rigor was instructed to serve a Notice of Garnishment to RCBC regarding any funds or credits belonging to PVTA held by the bank.

Directed RCBC to deliver in check the garnished amount (P206,916.76) to Sheriff Rigor.
Ordered the sheriff to encash the check and deliver the proceeds to the plaintiff’s representative or counsel.

RCBC complied with the Order by delivering a certified check to the sheriff.
On February 26, 1970, PVTA filed a Motion for Reconsideration which resulted in an Order dated April 6, 1970:

Setting aside the earlier execution orders and the notice.
Directing RCBC and Badoc Planters, Inc. to restore the PVTA’s account by reimbursing the garnished amount plus interest.

RCBC appealed these Orders, and the case was elevated to the Supreme Court for review of questions of law.

PVTA accused RCBC of breach of trust and dereliction of duty for releasing the funds immediately upon the court’s order.
The contention arose that by delivering the funds:

RCBC failed to wait for the five-day period allowed for reply to the Notice of Garnishment.
The bank acted without prior authorization from its depositor (PVTA), allegedly compromising the protection of government funds.

The funds in dispute belonged to PVTA, which, though government‑owned, was treated as a separate corporate entity under Republic Act No. 2265.
The nature of the transaction meant that the funds, earmarked for operational and financial obligations, were susceptible to garnishment.
Prior cases, such as those involving government-controlled entities, were discussed to draw distinctions between the treatment of funds belonging directly to the government and those held by public corporations.

Whether funds belonging to the PVTA are to be treated as public funds, and thus cannot be garnished, or whether they are qualify as funds of a corporate entity subject to judicial process.

Whether RCBC, having complied with a mandatory court order to release the garnished funds to the sheriff, should be held solidarily liable for reimbursing the funds to PVTA even after the court later set aside the order.
Whether the bank’s immediate and prompt compliance with the order exempts it from liability, despite subsequent judicial actions modifying the compulsory restitution order.