CIVREV VOLUNTARY 03.

02 o The fact we believe is undeniable that prior to the mailing of

Paulino Gullas v. PNB
• Atty. Paulino Gullas maintains a current account with PNB.
• He, together with one Pedro Lopez signed as endorsers of a Treaury
Warrant1 issued by the US Veterans Bureau payable to the order of one
Francisco Bacos (their client).
o PNB cashed the check but was subsequently dishonored by the
Insular Treasurer.
o PNB then sent notices to Gullas which could not be delivered
to him at the time because he was in Manila.
o PNB in the letter informed Gullas that the outstanding balance
on his account was applied to the part payment of the
dishonored check.
• Upon Gullas’ return to Cebu, he received the notice of dishonor and
immediately paid the unpaid balance of the warrant.
o As a consequence of these, Gullas was inconvenienced when
his insurance was not paid due to lack of funds and was
publicized widely at his area (newspaper publication).
notice of dishonor, and without waiting for any action by
Gullas, the bank made use of the money standing in his
account to make good for the treasury warrant.
• Gullas was merely an indorser and had issued in good faith. As to an
indorser, the situation is different and notice should actually have been
given him in order that he might protect his interests.
o Negotiable Instruments Law: A notice of dishonor is
necessary in order to charge an indorser and that the right of
action against him will not proceed UNTIL notice is given.
• The action of the bank was prejudicial to Gullas.
o Guillas should be awarded nominal damages because of
PNB’s premature action, which Gullas had no means of
protection, and that amount should be Php 250.00.

W/N PNB HAS THE RIGHT TO APPLY GULLAS’ DEPOSIT TO HIS

DEBT TO THE BANK? YES, but the remedy was not properly enforced.

• As a general rule, a bank has a right of set off of the deposits in its hands
for the payment of any indebtedness to it on the part of a depositor.
o The Civil Code contains provisions regarding compensation
(set off) and deposit.
o The portions of Philippine law provide that compensation
shall take place when two persons are reciprocally creditor and
debtor of each other. In this connection, it has been held that
the relation existing between a depositor and a bank is that of
creditor and debtor. [General Rule]
• Starting, therefore, from the premise that the Philippine National Bank
had with respect to the deposit of Gullas a right of set off, we next
consider if that remedy was enforced properly.

1An order in the form of a check. Through treasury warrants, government disbursements are paid.
With this warrant, a drawer authorizes someone to pay a particular sum of money to another.