4 At that time Gullas had P509 in the bank He had issued certain checks against

4 at that time gullas had p509 in the bank he had

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4. At that time, Gullas had P509 in the bank. He had issued certain checks against this balance. These checks couldn’t be paid when the money was sequestered by PNB. 5. PNB, upon learning of the dishonor of the treasury warrant sent notices to Mr. Gullas, but this couldn’t be delivered to him because he wasn’t in Manila. 6. The bank sent a letter to Gulla and Lopez informing them that the US Treasury Warrant in the name of Bacos for $361 or P722, the payment for it which has been received has been returned with the notation that the payment of his check has been stopped by the Insular Treasurer. Thus, they have applied the outstanding balance in Gullas’ current account to as partial payment for the check. (The P509). Upon Gullas’ return, he received the notice and pay the warrant. 7. However, because of this, 2 happenings inconvenienced Gullas: a. The checks including one for his insurance wasn’t paid becaue of lack of funds. b. The periodicals in the area took note of Gullas’ inability to pay, much to his embarrassment. 8. CFI – sentenced PNB to return to Gullas the sum of P509 + legal interest + cost + 10k damages. PNB opposed this claiming that Gullas had already received the sum presented by the treasury warrant. ISSUE: 1. WON PNB can apply a deposit to the debt of a depositor to the bank? YES 2. WON Gullas is entitled to damages? How much? YES, P250. 1. The relationship between the despositor and the bank is one of creditor and debtor, thus compensation is applicable since two persons are reciprocally creditor and debtor of each other. 2. According to the NIL, if the general indorser is dishonored and the necessary proceedings of dishonor is taken, the general indorser will pay the amount thereof to the holder. Thus, a notice of dishonor is necessary in order to charge an indorser and that the right of action against him doesn’t accrue until the notice is given. 3. As a general rule, a bank has a right of set off of the deposit in the hands for the payment of any indebtedness to it on the part of the depositor a. However, according to the Luiousiana doctrine, a bank has no right, without an order from or an assent of the depositor to get out of his deposit an amount wsufficient to pay for his indebtedness. 4. SC has decided to adopt the general rule (a bank has a right to retain the amount of the deposit of a depositor to pay off his outstanding debt) instead of the Louisiana one, being in harmony more with modern banking practices. 5. Thus, with the premise that PNB has such right to retain, the question is whether the remedy was enforced properly. a. SC held that no, it was not done properly. The bank, prior to the mailing of the notice of dishonor, and without waiting for any action by Gullas, made use of the money. Remember that Gullas was only an indorser who issued the checks in good faith. b. As to the depositor, SC held that he has a right of action against the bank for its refusal to pay such check in the absence of notice to him.
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