G.R. No. 195341. August 28, 2019.
ALLIED BANKING CORPORATION (NOW PHILIPPINE NATIONAL BANK), PETITIONER, VS. ELIZABETH SIA, RESPONDENT.

FACTS

Respondent Elizabeth Sia maintained two accounts with the defunct Orient Commercial Banking Corporation (Orient Bank): one solely in her name and another a joint “and/or” account with her father, See Sia. Upon Orient Bank’s closure, the total uninsured deposits amounted to P5,228,883.71. Petitioner Allied Banking Corporation (Allied Bank) assumed Orient Bank’s uninsured deposit liabilities with PDIC assistance. On December 13, 1999, See Sia executed a Special Power of Attorney (SPA) authorizing Elizabeth to claim payment from PDIC and to assign his claim to Allied Bank. On the same date, Elizabeth and Allied Bank executed a Deed of Assignment, wherein Elizabeth assigned a portion of the uninsured deposits (P4,470,825.22) to Allied Bank, which undertook to pay said amount in installments over five years. Payments were to be credited to Allied Bank Savings Account (SA) No. 0570231382, opened under Elizabeth’s name at Allied Bank’s Fuente Osmeña Branch, for which she was issued Passbook No. SAL 782654-AB. On December 14, 2000, Allied Bank received a letter from Atty. Rolando M. Lim, counsel for the heirs of See Sia (who died on May 4, 2000), requesting that any transaction relating to See Sia’s account be withheld pending estate settlement. Allied Bank acceded and temporarily froze SA No. 0570231382. When Elizabeth attempted to withdraw from the account on January 3 and 5, 2001, she was not allowed. Allied Bank formally informed Elizabeth of the freeze on January 15, 2001. Elizabeth filed a complaint for specific performance, breach of contract, and damages against Allied Bank, asserting that as the sole named depositor of the savings account, she should be allowed to withdraw, and that the bank’s refusal was malicious and without basis. Allied Bank defended its action, arguing the freeze was proper because a portion of the funds originated from the joint account with See Sia and thus formed part of his estate, and it acted legally upon the heirs’ claim.

ISSUE

Whether the Court of Appeals committed reversible error in ruling that Allied Bank had no legal basis to temporarily freeze the subject savings account.

RULING

The Supreme Court GRANTED the petition, REVERSED and SET ASIDE the Decision and Resolution of the Court of Appeals, and DISMISSED the complaint for lack of merit. The Court held that Allied Bank had legal basis and acted in good faith when it temporarily froze the savings account. The bank’s obligation was not merely contractual but was also governed by the nature of the funds deposited. The source of the funds was the PDIC settlement for the two Orient Bank accounts, one of which was a joint account with See Sia. Upon See Sia’s death, the funds attributable to his share became part of his estate, and the bank was notified of an adverse claim by his heirs. The bank was legally bound to exercise due diligence and prudence, and its temporary freeze of the account to avoid potential liability was justified. The Court emphasized that the principal issue was the legal basis for the freeze, not the final determination of ownership over the funds. Since Allied Bank acted within its rights and in good faith, no breach of contract occurred, and it could not be held liable for damages.