G.R. No. 30982 , January 31, 1930
THE PHILIPPINE NATIONAL BANK, plaintiff-appellant, vs. OLUTANGA LUMBER COMPANY, defendant-appellee.

FACTS

The Philippine National Bank (PNB) obtained a writ of attachment against the funds of the Olutanga Lumber Company (Olutanga) held by the Bank of the Philippine Islands (BPI). The sheriff of Manila served the writ on BPI’s central office in Manila on January 10, 1928, and BPI acknowledged the garnishment, setting aside the specified amount. Concurrently, the provincial sheriff of Zamboanga was attempting to execute a final judgment in favor of Olutanga against BPI from a separate case. Despite being informed of the Manila garnishment, the Zamboanga sheriff compelled BPI’s Zamboanga branch to pay the judgment amount to Olutanga. BPI, having been forced to pay under legal compulsion, moved for the release of the funds it had deposited with the Manila sheriff pursuant to PNB’s garnishment. The trial court granted BPI’s motion, ruling that PNB, by subsequently appearing as an ordinary creditor in Olutanga’s involuntary insolvency proceedings, had waived its lien from the garnishment. PNB appealed.

ISSUE

1. Whether the Philippine National Bank waived its lien from the garnishment by appearing as an ordinary creditor in the insolvency proceedings of Olutanga Lumber Company.
2. Whether the Bank of the Philippine Islands, having been judicially compelled to pay the attached funds to the judgment creditor (Olutanga), is relieved of its liability under the garnishment to the attaching creditor (PNB).

RULING

1. On the waiver issue: The Supreme Court found it unnecessary to resolve whether PNB’s act constituted a waiver of its garnishment lien. The disposition of the case was decided on other grounds.
2. On the liability of BPI: The Supreme Court affirmed the trial court’s order for the Manila sheriff to return the garnished funds to BPI, minus sheriff’s fees. The Court held that when a person (BPI) holding funds of a debtor (Olutanga) is garnished by a creditor (PNB), but is subsequently judicially compelled to deliver those same funds to the debtor or another creditor (via the Zamboanga execution), that person is relieved of responsibility to the garnishing creditor. Since BPI had employed all legal means to resist the Zamboanga execution but was ultimately forced by court process to pay, it was released from its obligation under the Manila garnishment. The garnishment did not create an absolute liability but was subject to the garnishee’s defenses, including payment under legal compulsion.