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DEPOSIT

THE ROMAN CATHOLIC BISHOP OF JARO vs. GREGORIO
DE LA PEÑA

FACTS:
The plaintiff is the trustee of a charitable bequest made
for the construction of a leper hospital and that father
Agustin de la Peña was the duly authorized
representative of the plaintiff to receive the legacy.

The defendant is the administrator of the estate of Father
Dela Peña. In the year 1898 the books Father De la Peña,
as trustee, showed that he had on hand as such trustee
the sum of P6,641, collected by him for the charitable
purposes aforesaid

In the same year he deposited in his personal account
P19,000 in the Hongkong and Shanghai Bank at Iloilo.
Shortly thereafter and during the war of the revolution,
Father De la Peña was arrested by the military authorities
as a political prisoner, and while thus detained made an
order on said bank in favor of the United States Army
officer under whose charge he then was for the sum thus
deposited in said bank.

The arrest of Father De la Peña and the confiscation of
the funds in the bank were the result of the claim of the
military authorities that he was an insurgent and that the
funds thus deposited had been collected by him for
revolutionary purposes.

The money was taken from the bank by the military
authorities by virtue of such order, was confiscated and
turned over to the Government. While there is
considerable dispute in the case over the question
whether the P6,641 of trust funds was included in the
P19,000 deposited as aforesaid, nevertheless, a careful
examination of the case leads us to the conclusion that
said trust funds were a part of the funds deposited and
which were removed and confiscated by the military
authorities of the United States.



ISSUE:
Whether or not Father de la Peña is liable for the loss of
the money in the bank when he mixed the trust fund to
his personal funds

RULINGS:
NO.
The court, therefore, finds and declares that the money
which is the subject matter of this action was deposited
by Father De la Peña in the Hongkong and Shanghai
Banking Corporation of Iloilo; that said money was
forcibly taken from the bank by the armed forces of the
United States during the war of the insurrection; and that
said Father De la Peña was not responsible for its loss.
Father De la Peña's liability is determined by those
portions of the Civil Code which relate to
obligations.(Book 4, Title 1.)

Although the Civil Code states that "a person obliged to
give something is also bound to preserve it with the
diligence pertaining to a good father of a family"
(art.1094), it also provides, following the principle of the
Roman law, major casus est, cui humana infirmitas
resistere non potest , that "no one shall be liable for
events which could not be foreseen, or which having
been foreseen were inevitable, with the exception of the
cases expressly mentioned in the law or those in which
the obligation so declares." (Art. 1105.)

By placing the money in the bank and mixing it with his
personal funds De la Peña did not thereby assume an
obligation different from that under which he would have
lain if such deposit had not been made, nor did he
thereby make himself liable to repay the money at all
hazards.

If the had been forcibly taken from his pocket or from his
house by the military forces of one of the combatants
during a state of war, it is clear that under the provisions
of the Civil Code he would have been exempt from
responsibility. The fact that he placed the trust fund in
the bank in his personal account does not add to his
responsibility. Such deposit did not make hima debtor
who must respond at all hazards.

ROMAN CATHOLIC BISHOP OF JARO V. DE LA PENA 26
PHIL 144 (AQUINO)

Facts:
 This is an appeal by the administrator of the estate of
Father De la Peña (defendant) from a judgment of the
CFI, awarding to the Roman Catholic Bishop of Jaro
(plaintiff) the sum of P6,641, with interest.
 Fr. De la Peña was the representative of plaintiff over
the legacy which it held in trust for the construction of
a leper hospital.
 In 1898, the books Fr. De la Peña, as trustee, had on
hand the sum of P6,641 collected by him for the
charitable purposes aforesaid. Subsequently, he
deposited in his personal account P19,000 in the
Hongkong and Shanghai Bank (Bank) at Iloilo.
 During the war of the revolution, Fr. De la Peña was
arrested by the military authorities as a political
prisoner because they claimed that he was an
insurgent and the funds deposited had been collected
by him for revolutionary purposes.
 A confiscation order was issued to the Bank for the
deposit of Fr. De la Peña in favor of the United States
Army officer and turned over to the Government.

Issue and Ratio:
1. W/N the trust funds was included in the P19,000
deposited in the account of Fr. De la Peña in the bank
Yes. A careful examination of the case leads us to the
conclusion that said trust funds were a part of the funds
deposited and which were removed and confiscated by
the military authorities of the United States.

2. W/N the estate of Fr. De la Peña is liable for the loss
of the trust fund
No. Fr. De la Peña's liability is determined the Civil Code
which states that "a person obliged to give something is
also bound to preserve it with the diligence pertaining to
a good father of a family" (art. 1094), it also provides that
"no one shall be liable for events which could not be
foreseen, or which having been foreseen were inevitable,
with the exception of the cases expressly mentioned in
the law or those in which the obligation so declares." (Art.
1105.)

The fact that he placed the trust fund in the bank in his
personal account does not add to his responsibility. Such
deposit did not make him a debtor who must respond at
all hazards. There was no law prohibiting him from
depositing it as he did and there was no law which
changed his responsibility be reason of the deposit.

While it may be true that one who is under obligation to
do or give a thing is in duty bound, when he sees events
approaching the results of which will be dangerous to his
trust, to take all reasonable means and measures to
escape or, if unavoidable, to temper the effects of those
events, we do not feel constrained to hold that, in
choosing between two means equally legal, he is culpably
negligent in selecting one whereas he would not have
been if he had selected the other.

The deposit was forcibly taken by the military forces of
one of the combatants during a state of war, it is clear
that under the provisions of the Civil Code he would be
exempt from responsibility.

The judgment is reversed.

Dissent by Justice TRENT (I think he might ask this but it’s
up to the encoders if they want to include this)

Fr. De la Peña was a trustee or an agent of the plaintiff.
The money was clothed with all the immunities and
protection with which the law seeks to invest trust funds.
But when Fr. De la Peña mixed the trust fund with his
own and deposited the whole in the bank to his personal
account, his act stamped on the said fund his own private
marks and unclothed it of all the protection it had.

If it had been deposited in the name of Fr. De la Peña as
trustee or agent it may be presumed that the military
authorities would not have confiscated it for the reason
that they were looking for insurgent funds only. Again,
the plaintiff had no reason to suppose that De la Peña
would attempt to strip the fund of its identity, nor had he
said or done anything which tended to relieve De la Peña
from the legal responsibility which pertains to the care
and custody of trust funds.

The US SC in the United State vs. Thomas said that
"Trustees are only bound to exercise the same care and
solicitude with regard to the trust property which they
would exercise with regard to their own. Equity will not
exact more of them. They are not liable for a loss by theft
without their fault. But this exemption ceases when they
mix the trust-money with their own, whereby it loses its
identity, and they become mere debtors."

CA-Agro Industrial Devt Corp vs CA, 219 SCRA 426

FACTS:
On July 3, 1979, petitioner (through its President- Sergio
Aguirre) and the Spouses Ramon and Paula Pugao
entered into an agreement whereby the former purchase
two parcel of lands from the latter. It was paid of
downpayment while the balance was covered by there
postdated checks.

Among the terms and conditions embodied in the
agreement were the titles shall be transferred to the
petitioner upon full payment of the price and the owner's
copies of the certificate of titles shall be deposited in a
safety deposit box of any bank. Petitioner and the Pugaos
then rented Safety Deposit box of private respondent
Security Bank and Trust Company.

Thereafter, a certain Margarita Ramos offered to buy
from the petitioner. Mrs Ramos demand the execution of
a deed of sale which necessarily entailed the production
of the certificate of titles. In view thereof, Aguirre,
accompanied by the Pugaos, then proceed to the
respondent Bank to open the safety deposit box and get
the certificate of titles. However, when opened in the
presence of the Bank's representative, the box yielded no
such certificate. Because of the delay in the
reconstitution of the title, Mrs Ramos withdrew her
earlier offer to purchase.

Hence this petition.

ISSUE:
Whether or not the contract of rent between a
commercial bank and another party for the use of safety
deposit box can be considered alike to a lessor-lessee
relationship.

RULING:
The petitioner is correct in making the contention that
the contract for the rent of the deposit box is not a
ordinary contract of lease as defined in Article 1643 of the
Civil Code. However, the Court do not really subscribe to
its view that the same is a contract of deposit that is to be
strictly governed by the provisions in Civil Code on
Deposit; the contract in the case at bar is a special kind of
deposit.

It cannot be characterized as an ordinary contract of lease
under Article 1643 because the full and absolute
possession and control of the safety deposit box was not
given to the joint renters- the petitioner and the Pugaos.
The guard key of the box remained with the respondent
bank; without this key, neither of the renters could open
the box. On the other hand, the respondent bank could
not likewise open the box without the renter's key.

The Court further assailed that the petitioner is correct in
applying American Jurisprudence. Herein, the prevailing
view is that the relation between the a bank renting out
safe deposits boxes and its customer with respect to the
contents of the box is that of a bail or/ and bailee, the
bailment being for hire and mutual benefits. That
prevailing rule has been adopted in Section 72 of the
General Banking Act.

Section 72. In addition to the operations specifically
authorized elsewhere in this Act, banking institutions
other that building and loan associations may perform
the following services:
(a) Receive in custody funds, document and valuable
objects and rents safety deposits taxes for the safeguard
of such effects.
xxx xxx xxx
The bank shall perform the services permitted under
subsections (a) (b) and (c) of this section as depositories
or as agents.

CA AGRO-INDUSTRIAL DEVELOPMENT CORP. v. THE
HONORABLE COURT OF APPEALS and SECURITY BANK
AND TRUST COMPANY
G.R. No. 90027, March 3, 1993, THIRD DIVISION (DAVIDE,
JR., J.)

FACTS:
CA Agro-Industrial Development Corp. (CA Agro)
purchased two (2) parcels of land from the spouses
Ramon and Paula Pugao (Pugaos). CA Agro paid a
downpayment and issued three (3) post-dated checks
covering the balance of the price. It was contracted that
the titles to the lots shall be transferred to CA Agro upon
full payment of the purchase price and that the owner's
copies of the certificates of titles thereto shall be
deposited in a safety deposit box of any bank. The same
could be withdrawn only upon the joint signatures of a
representative of CA Agro and the Pugaos upon full
payment of the purchase price.

Forthwith, CA Agro and the Pugaos rented Safety Deposit
Box of Security Bank and Trust Company (Bank). For this
purpose, they both signed a contract of lease containing
the following conditions:
13. The bank is not a depositary of the contents of the
safe and it has neither the possession nor control of
the same.
14. The bank has no interest whatsoever in said
contents, except herein expressly provided, and it
assumes absolutely no liability in connection
therewith.

After the execution of the contract, two (2) renter's keys
were given to the renters — one to CA Agro and the other
to the Pugaos. A guard key remained in the possession of
the Bank. The safety deposit box has two (2) keyholes,
one for the guard key and the other for the renter's key,
and can be opened only with the use of both keys.

Thereafter, a certain Mrs. Margarita Ramos (Ramos)
offered to buy from CA Agro the two (2) lots at a price
that will yield a profit for the latter. Accordingly, Ramos
demanded the execution of a deed of sale which
necessarily entailed the production of the certificates of
title. In view thereof, CA Agro, accompanied by the
Pugaos, then proceeded to the bank to open the safety
deposit box and get the certificates of title. However,
when opened in the presence of the Bank's
representative, the box yielded no such certificates. As a
result, Ramos withdrew her offer to buy the lots.

As a consequence, CA Agro failed to realize the expected
profit, thus, it filed a complaint for damages against the
Bank. The Bank in its answer with a counterclaim invoked
paragraphs 13 and 14 of the contract of lease for its
defense.

In due course, the trial court rendered a decision against
CA Agro on the ground that the provisions of the contract
of lease are binding on the parties, and that under said
paragraphs, the Bank has no liability for the loss of the
certificates of title.

On Appeal, the Court of Appeals affirmed the appealed
decision principally on the theory that the contract
executed by CA Agro and the Bank is in the nature of a
contract of lease by virtue of which CA Agro and its co-
renter were given control over the safety deposit box and
its contents while the Bank retained no right to open the
said box because it had neither the possession nor control
over it and its contents, thus, the contract is governed by
Article 1643 in relation to Article 1975 of the Civil Code.

Hence, CA Agro elevated the case to the Supreme Court
under Rule 45 of the Rules of Court maintaining that
regardless of nomenclature, the contract for the rent of
the safety deposit box is actually a contract of deposit
governed by Title XII, Book IV of the Civil Code.

ISSUE:
Whether the contractual relation between a commercial
bank and another party in a contract of rent of a safety
deposit box with respect to its contents placed by the
latter one of bailor and bailee or one of lessor and lessee

HELD:
Petition PARTIALLY GRANTED

The contractual relation between a commercial bank and
another party in a contract of rent of a safety deposit box
with respect to its contents placed by the latter is one of
a bailor and bailee, the bailment being for hire and
mutual benefit, and it is not an ordinary deposit but
special kind of deposit.

The contract for the rent of the safety deposit box is not
an ordinary contract of lease as defined in Article 1643 of
the Civil Code. It cannot be characterized as an ordinary
contract of lease under Article 1643 because the full and
absolute possession and control of the safety deposit box
was not given to the joint renters. However, the Court
does not fully subscribe to the view that the same is a
contract of deposit that is to be strictly governed by the
provisions in the Civil Code on deposit; the contract in this
case is a special kind of deposit.

Neither could Article 1975 be invoked as an argument
against the deposit theory. Obviously, the first paragraph
of such provision cannot apply to a depositary of
certificates, bonds, securities or instruments which earn
interest if such documents are kept in a rented safety
deposit box.

The prevailing rule in American Jurisprudence is that the
relation between a bank renting out safe-deposit boxes
and its customer with respect to the contents of the box
is that of a bailor and bailee, the bailment being for hire
and mutual benefit. While, in the context of our laws,
particularly Section 72(a) of the General Banking Act (now
Section 52) which authorizes banking institutions to rent
out safety deposit boxes, it is clear that the prevailing rule
in the United States has been adopted.

Sec. 72. In addition to the operations specifically
authorized elsewhere in this Act, banking institutions
other than building and loan associations may perform
the following services:
(a) Receive in custody funds, documents, and valuable
objects, and rent safety deposit boxes for the
safeguarding of such effects.
xxx xxx xxx
The banks shall perform the services permitted under
subsections (a), (b) and (c) of this section as depositories
or as agents. . . .

Nevertheless, the primary function is still found within
the parameters of a contract of deposit, and, in relation
to Article 1306 of the Civil Code, the parties thereto may
establish such stipulations, clauses, terms and conditions
as they may deem convenient, provided they are not
contrary to law, morals, good customs, public order or
public policy. Thus, the depositary's responsibility for the
safekeeping of the objects deposited in this case is
governed by Title I, Book IV of the Civil Code.

Accordingly, the depositary would be liable if, in
performing its obligation, it is found guilty of fraud,
negligence, delay or contravention of the tenor of the
agreement, and in the absence of any stipulation
prescribing the degree of diligence required, that of a
good father of a family is to be observed. Corollary, any
stipulation exempting the depositary from any liability
arising from the loss of the thing deposited on account of
fraud, negligence or delay would be void for being
contrary to law and public policy.

Furthermore, it is not correct to assert that the Bank has
neither the possession nor control of the contents of the
box since in fact; the safety deposit box itself is located in
its premises and is under its absolute control. Moreover,
the Bank keeps the guard key to the said box and renters
cannot open their respective boxes unless the Bank
cooperates by presenting and using this guard key. Clearly
then, to the extent above stated, conditions 13 and 14 in
the contract in question are void and ineffective.

However, the Court reached the same conclusion which
the Court of Appeals arrived at but on grounds quite
different from those relied upon by the latter. The Bank's
exoneration cannot be based on or proceed from a
characterization of the impugned contract as a contract
of lease, but rather on the fact that no competent proof
was presented to show that Bank was aware of the
agreement between CA Agro and the Pugaos to the effect
that the certificates of title were withdrawable from the
safety deposit box only upon both parties' joint
signatures, and that no evidence was submitted to reveal
that the loss of the certificates of title was due to the
fraud or negligence of the Bank.

Since both CA Agro and the Pugaos agreed that each
should have one (1) renter's key, it was obvious that
either of them could ask the Bank for access to the safety
deposit box and, with the use of such key and the Bank's
own guard key, could open the said box, without the
other renter being present.

Since, however, CA Agro cannot be blamed for the filing
of the complaint and no bad faith on its part had been
established, the trial court erred in condemning the CA
Agro to pay the Bank attorney's fees. To this extent, the
Decision of Court of Appeals was modified.

Teofisto Guingona, Jr., Antonio Martin, and Teresita
Santos vs. The City Fiscal of Manila, Hon. Jose
Flaminiano, Asst. City Fiscal Felizardo Lota and

Facts:
From March 1979 to March 1981, Clement David made
several investments with the National Savings and Loan
Association. On March 21, 1981, the bank was placed
under receivership by the Bangko Sentral. Upon David’s
request, petitioners Guingona and Martin issued a joint
promissory note, absorbing the obligations of the bank.
On July 17, 1981, they divided the indebtedness. David
filed a complaint for estafa and violation of Central Bank
Circular No. 364 and related regulations regarding foreign
exchange transactions before the Office of the City Fiscal
of Manila. Petitioners filed the herein petition for
prohibition and injunction with a prayer for immediate
issuance of restraining order and/or writ of preliminary
injunction to enjoin the public respondents to proceed
with the preliminary investigation on the ground that the
petitioners’ obligation is civil in nature.
Issue:
(1) Whether the contract between NSLA and David is a
contract of depositor a contract of loan, which answer
determines whether the City Fiscal has the jurisdiction to
file a case for estafa
(2) Whether there was a violation of Central Bank Circular
No. 364
Held:
(1) When private respondent David invested his money
on nine. and savings deposits with the aforesaid bank, the
contract that was perfected was a contract of simple loan
or mutuum and not a contract of deposit. Hence, the
relationship between the private respondent and the
Nation Savings and Loan Association is that of creditor
and debtor; consequently, the ownership of the amount
deposited was transmitted to the Bank upon the
perfection of the contract and it can make use of the
amount deposited for its banking operations, such as to
pay interests on deposits and to pay withdrawals. While
the Bank has the obligation to return the amount
deposited, it has, however, no obligation to return or
deliver the same money that was deposited. And, the
failure of the Bank to return the amount deposited will
not constitute estafa through misappropriation
punishable under Article 315, par. l(b) of the Revised
Penal Code, but it will only give rise to civil liability over
which the public respondents have no jurisdiction.
But even granting that the failure of the bank to pay the
time and savings deposits of private respondent David
would constitute a violation of paragraph 1(b) of Article
315 of the Revised Penal Code, nevertheless any incipient
criminal liability was deemed avoided, because when the
aforesaid bank was placed under receivership by the
Central Bank, petitioners Guingona and Martin assumed
the obligation of the bank to private respondent David,
thereby resulting in the novation of the original
contractual obligation arising from deposit into a contract
of loan and converting the original trust relation between
the bank and private respondent David into an ordinary
debtor-creditor relation between the petitioners and
private respondent. Consequently, the failure of the bank
or petitioners Guingona and Martin to pay the deposits of
private respondent would not constitute a breach of trust
but would merely be a failure to pay the obligation as a
debtor. Moreover, while it is true that novation does not
extinguish criminal liability, it may however, prevent the
rise of criminal liability as long as it occurs prior to the
filing of the criminal information in court. In the case at
bar, there is no dispute that petitioners Guingona and
Martin executed a promissory note on June 17, 1981
assuming the obligation of the bank to private
respondent David; while the criminal complaint for estafa
was filed on December 23, 1981 with the Office of the
City Fiscal. Hence, it is clear that novation occurred long
before the filing of the criminal complaint with the Office
of the City Fiscal. Consequently, as aforestated, any
incipient criminal liability would be avoided but there will
still be a civil liability on the part of petitioners Guingona
and Martin to pay the assumed obligation.
(2) Petitioner Guingona merely accommodated the
request of the Nation Savings and loan Association in
order to clear the bank draft through his dollar account
because the bank did not have a dollar account.
Immediately after the bank draft was cleared, petitioner
Guingona authorized Nation Savings and Loan Association
to withdraw the same in order to be utilized by the bank
for its operations. It is safe to assume that the U.S. dollars
were converted first into Philippine pesos before they
were accepted and deposited in Nation Savings and Loan
Association, because the bank is presumed to have
followed the ordinary course of the business which is to
accept deposits in Philippine currency only, and that the
transaction was regular and fair, in the absence of a clear
and convincing evidence to the contrary.
In conclusion, considering that the liability of the
petitioners is purely civil in nature and that there is no
clear showing that they engaged in foreign exchange
transactions, We hold that the public respondents acted
without jurisdiction when they investigated the charges
against the petitioners. Consequently, public respondents
should be restrained from further proceeding with the
criminal case for to allow the case to continue, even if the
petitioners could have appealed to the Ministry of Justice,
would work great injustice to petitioners and would
render meaningless the proper administration of justice.

G.R. No. L-46208 April 5, 1990
FIDELITY SAVINGS AND MORTGAGE BANK, petitioner,
vs.
HON. PEDRO D. CENZON, in his capacity as Presiding
Judge of the Court of First Instance of Manila (Branch XL)
and SPOUSES TIMOTEO AND OLIMPIA SANTIAGO,
respondents.
Agapito S. Fajardo and Marino E. Eslao for petitioner.
Leovillo C. Agustin Law Offices for private respondents.

REGALADO, J.:
The instant petition seeks the review, on pure questions
of law, of the decision rendered by the Court of First
Instance of Manila (now Regional Trial Court), Branch XL,
on December 3, 1976 in Civil Case No. 84800,
1
ordering
herein petitioner to pay private respondents the
following amounts:
(a) P90,000.00 with accrued
interest in accordance with Exhibits
A and B until fully paid;
(b) P30,000,00 as exemplary
damages; and
(c) P10,000.00 as and for attorney's
fees.
The payment by the defendant
Fidelity Savings and Mortgage Bank
of the aforementioned sums of
money shall be subject to the Bank
Liquidation Rules and Regulations
embodied in the Order of the Court
of First Instance of Manila, Branch
XIII, dated October 3, 1972, Civil
Case No. 86005, entitled, "IN RE:
Liquidation of the Fidelity Savings
Bank versus Central Bank of the
Philippines, Liquidator."
With costs against the defendant
Fidelity Savings and Mortgage
Bank.
SO ORDERED.
Private respondents instituted this present action for a
sum of money with damages against Fidelity Savings and
Mortgage Bank, Central Bank of the Philippines, Eusebio
Lopez, Jr., Arsenio M. Lopez, Sr., Arsenio S. Lopez, Jr.,
Bibiana E. Lacuna, Jose C. Morales, Leon P. Cusi, Pilar Y.
Pobre-Cusi and Ernani A. Pacana. On motion of herein
private respondents, as plaintiffs, the amended complaint
was dismissed without prejudice against defendants Jose
C. Morales, Leon P. Cusi, Pilar Y. Pobre-Cusi and Ernani A.
Pacana.
2
In its aforesaid decision of December 3, 1976,
the court a quo dismissed the complaint as against
defendants Central Bank of the Philippines, Eusebio
Lopez, Jr., Arsenio S. Lopez, Jr., Arsenio M. Lopez, Sr. and
Bibiana S. Lacuna.
Back on August 10, 1973, the plaintiffs (herein private
respondents) and the defendants Fidelity Savings and
Mortgage Bank (petitioner herein), Central Bank of the
Philippines and Bibiana E. Lacuna had filed in said case in
the lower court a partial stipulation of facts, as follows:
COME NOW herein plaintiffs,
SPOUSES TIMOTEO M. SANTIAGO
and OLIMPIA R. SANTIAGO, herein
defendants FIDELITY SAVINGS AND
MORTGAGE BANK and the
CENTRAL BANK OF THE
PHILIPPINES, and herein defendant
BIBIANA E. LACUNA, through their
respective undersigned counsel,
and before this Honorable Court
most respectfully submit the
following Partial Stipulation of
Facts:
1. That herein plaintiffs are
husband and wife, both of legal
age, and presently residing at No.
480 C. de la Paz Street, Sta. Elena,
Marikina, Rizal;
2. That herein defendant Fidelity
Savings and Mortgage Bank is a
corporation duly organized and
existing under and by virtue of the
laws of the Philippines; that
defendant Central Bank of the
Philippines is a corporation duly
organized and existing under and
by virtue of the laws of the
Philippines;
3. That herein defendant Bibiana E.
Lacuna is of legal age and a resident
of No. 42 East Lawin Street,
Philamlife Homes, Quezon City, said
defendant was an assistant Vice-
President of the defendant fidelity
Savings and Mortgage Bank,
4. That sometime on May 16, 1968,
here in plaintiffs deposited with the
defendant Fidelity Savings Bank the
amount of FIFTY THOUSAND PESOS
(P50,000.00) under Savings Account
No. 16-0536; that likewise,
sometime on July 6, 1968, herein
plaintiff,- deposited with the
defendant Fidelity Savings and
Mortgage Bank the amount of
FIFTY THOUSAND PESOS
(P50,000.00) under Certificate of
Time Deposit No. 0210; that the
aggregate amount of deposits of
the plaintiffs with the defendant
Fidelity Savings and Mortgage Bank
is ONE HUNDRED THOUSAND
PESOS (P100,000.00);
5. That on February 18, 1969, the
Monetary Board, after finding the
report of the Superintendent of
Banks, that the condition of the
defendant Fidelity Savings and
Mortgage Bank is one of insolvency,
to be true, issued Resolution No.
350 deciding, among others, as
follows:
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6. That pursuant to the above-cited
instructions of the Monetary Board,
the Superintendent of Banks took
charge in the name of the
Monetary Board, of the assets of
defendant Fidelity Savings Bank on
February 19, 1969; and that since
that date up to this date, the
Superintendent of Banks (now
designated as Director, Department
of Commercial and Savings Banks)
has been taking charge of the
assets of defendant Fidelity Savings
and Mortgage Bank;
7. That sometime on October 10,
1969 the Philippine Deposit
Insurance Corporation paid the
plaintiffs the amount of TEN
THOUSAND PESOS (P10,000.00) on
the aggregate deposits of
P100,000.00 pursuant to Republic
Act No. 5517, thereby leaving a
deposit balance of P90,000.00;
8. That on December 9, 1969, the
Monetary Board issued its
Resolution No. 2124 directing the
liquidation of the affairs of
defendant Fidelity Savings Bank;
9. That on January 25, 1972, the
Solicitor General of the Philippines
filed a "Petition for Assistance and
Supervision in Liquidation" of the
affairs of the defendant Fidelity
Savings and Mortgage Bank with
the Court of First Instance of
Manila, assigned to Branch XIII and
docketed as Civil Case No. 86005;
10. That on October 3, 1972, the
Liquidation Court promulgated the
Bank Rules and Regulations to
govern the liquidation of the affairs
of defendant Fidelity Savings and
Mortgage Bank, prescribing the
rules on the conversion of the
Bank's assets into money,
processing of claims against it and
the manner and time of distributing
the proceeds from the assets of the
Bank;
11. That the liquidation
proceedings has not been
terminated and is still pending up
to the present;
12. That herein plaintiffs, through
their counsel, sent demand letters
to herein defendants, demanding
the immediate payment of the
aforementioned savings and time
deposits.
WHEREFORE, it is respectfully
prayed that the foregoing Partial
Stipulation of Facts be approved by
this Honorable Court, without
prejudice to the presentation of
additional documentary or
testimonial evidence by herein
parties.
Manila, Philippines, August 10,
1973.
3

Assigning error in the judgment of the lower court quoted
ab antecedents, petitioner raises two questions of law, to
wit:
1. Whether or not an insolvent bank like the Fidelity
Savings and Mortgage Bank may be adjudged to pay
interest on unpaid deposits even after its closure by the
Central Bank by reason of insolvency without violating the
provisions of the Civil Code on preference of credits; and
2. Whether or not an insolvent bank like the Fidelity
Savings and Mortgage Bank may be adjudged to pay
moral and exemplary damages, attorney's fees and costs
when the insolvency is caused b the anomalous real
estate transactions without violating the provisions of the
Civil Code on preference of credits.
There is merit in the petition.
It is settled jurisprudence that a banking institution which
has been declared insolvent and subsequently ordered
closed by the Central Bank of the Philippines cannot be
held liable to pay interest on bank deposits which accrued
during the period when the bank is actually closed and
non-operational.
In The Overseas Bank of Manila vs. Court of Appeals and
Tony D. Tapia,
4
we held that:
It is a matter of common
knowledge, which We take judicial
notice of, that what enables a bank
to pay stipulated interest on money
deposited with it is that thru the
other aspects of its operation it is
able to generate funds to cover the
payment of such interest. Unless a
bank can lend money, engage in
international transactions, acquire
foreclosed mortgaged properties or
their proceeds and generally
engage in other banking and
financing activities from which it
can derive income, it is
inconceivable how it can carry on
as a depository obligated to pay
stipulated interest. Conventional
wisdom dictates this inexorable fair
and just conclusion. And it can be
said that all who deposit money in
banks are aware of such a simple
economic proposition.
Consequently, it should be deemed
read into every contract of deposit
with a bank that the obligation to
pay interest on the deposit ceases
the moment the operation of the
bank is completely suspended by
the duly constituted authority, the
Central Bank.
This was reiterated in the subsequent case of The
Overseas Bank of Manila vs. The Hon. Court of Appeals
and Julian R. Cordero.
5
and in the recent cases of
Integrated Realty Corporation, et al. vs. Philippine
National Bank, et al. and the Overseas Bank of Manila vs.
Court of appeals, et al.
6

From the aforecited authorities, it is manifest that
petitioner cannot be held liable for interest on bank
deposits which accrued from the time it was prohibited
by the Central Bank to continue with its banking
operations, that is, when Resolution No. 350 to that
effect was issued on February 18, 1969.
The order, therefore, of the Central Bank as
receiver/liquidator of petitioner bank allowing the claims
of depositors and creditors to earn interest up to the date
of its closure on February 18, 1969,
7
in line with the
doctrine laid down in the jurisprudence above cited.
Although petitioner's formulation of the second issue that
it poses is slightly inaccurate and defective, we likewise
find the awards of moral and exemplary damages and
attorney's fees to be erroneous.
The trial court found, and it is not disputed, that there
was no fraud or bad faith on the part of petitioner bank
and the other defendants in accepting the deposits of
private respondents. Petitioner bank could not even be
faulted in not immediately returning the amount claimed
by private respondents considering that the demand to
pay was made and Civil Case No. 84800 was filed in the
trial court several months after the Central Bank had
ordered petitioner's closure. By that time, petitioner bank
was no longer in a position to comply with its obligations
to its creditors, including herein private respondents.
Even the trial court had to admit that petitioner bank
failed to pay private respondents because it was already
insolvent.
8
Further, this case is not one of the specified or
analogous cases wherein moral damages may be
recovered.
9

There is no valid basis for the award of exemplary
damages which is supposed to serve as a warning to
other banks from dissipating their assets in anomalous
transactions. It was not proven by private respondents,
and neither was there a categorical finding made by the
trial court, that petitioner bank actually engaged in
anomalous real estate transactions. The same were raised
only during the testimony of the bank examiner of the
Central Bank,
10
but no documentary evidence was ever
presented in support thereof. Hence, it was error for the
lower court to impose exemplary damages upon
petitioner bank since, in contracts, such sanction requires
that the offending party acted in a wanton, fraudulent,
reckless, oppressive or malevolent manner.
11
Neither
does this case present the situation where attorney's fees
may be awarded.
12

In the absence of fraud, bad faith, malice or wanton
attitude, petitioner bank may, therefore, not be held
responsible for damages which may be reasonably
attributed to the non-performance of the obligation.
13

Consequently, we reiterate that under the premises and
pursuant to the aforementioned provisions of law, it is
apparent that private respondents are not justifiably
entitled to the payment of moral and exemplary damages
and attorney's fees.
While we tend to agree with petitioner bank that private
respondents' claims should he been filed in the
liquidation proceedings in Civil Case No. 86005, entitled
"In Re: Liquidation of the Fidelity Savings and Mortgage
Bank," pending before Branch XIII of the then Court of
First Instance of Manila, we do not believe that the
decision rendered in the instant case would be violative
of the legal provisions on preference and concurrence of
credits. As the trial court puts it:
. . . But this order of payment
should not be understood as raising
these deposits to the category of
preferred credits of the defendant
Fidelity Savings and Mortgage Bank
but shall be paid in accordance with
the Bank Liquidation Rules and
Regulations embodied in the Order
of the. Court of First Instance of
Manila, Branch XIII dated October
3, 1972 (Exh. 3). . . .
14

WHEREFORE, the judgment appealed from is hereby
MODIFIED. Petitioner Fidelity Savings and Mortgage Bank
is hereby declared liable to pay private respondents
Timoteo and Olimpia Santiago the sum of P90,000.00,
with accrued interest in accordance with the terms of
Savings Account Deposit No. 16-0536 (Exhibit A) and
Certificate of Time Deposit No. 0210 (Exhibit B) until
February 18, 1969. The awards for moral and exemplary
damages, and attorney's fees are hereby DELETED. No
costs.
SO ORDERED.
G.R. No. L-7593 March 27, 1913
THE UNITED STATES, plaintiff-appellee,
vs.
JOSE M. IGPUARA, defendant-appellant.
W. A. Kincaid, Thos. L. Hartigan, and Jose Robles Lahesa
for appellant.
Office of the Solicitor-General Harvey for appellee.
ARELLANO, C.J.:
The defendant therein is charged with the crime of
estafa, for having swindled Juana Montilla and Eugenio
Veraguth out of P2,498 Philippine currency, which he had
take on deposit from the former to be at the latter's
disposal. The document setting forth the obligation reads:
We hold at the disposal of Eugenio Veraguth the sum of
two thousand four hundred and ninety-eight pesos
(P2,498), the balance from Juana Montilla's sugar. —
Iloilo, June 26, 1911, — Jose Igpuara, for Ramirez and Co.
The Court of First Instance of Iloilo sentenced the
defendant to two years of presidio correccional, to pay
Juana Montilla P2,498 Philippine currency, and in case of
insolvency to subsidiary imprisonment at P2.50 per day,
not to exceed one-third of the principal penalty, and the
costs.
The defendant appealed, alleging as errors: (1) Holding
that the document executed by him was a certificate of
deposit; (2) holding the existence of a deposit, without
precedent transfer or delivery of the P2,498; and (3)
classifying the facts in the case as the crime of estafa.
A deposit is constituted from the time a
person receives a thing belonging to another
with the obligation of keeping and returning it.
(Art. 1758, Civil Code.)
That the defendant received P2,498 is a fact proven. The
defendant drew up a document declaring that they
remained in his possession, which he could not have said
had he not received them. They remained in his
possession, surely in no other sense than to take care of
them, for they remained has no other purpose. They
remained in the defendant's possession at the disposal of
Veraguth; but on August 23 of the same year Veraguth
demanded for him through a notarial instrument
restitution of them, and to date he has not restored
them.
The appellant says: "Juana Montilla's agent voluntarily
accepted the sum of P2,498 in an instrument payable on
demand, and as no attempt was made to cash it until
August 23, 1911, he could indorse and negotiate it like
any other commercial instrument. There is no doubt that
if Veraguth accepted the receipt for P2,498 it was
because at that time he agreed with the defendant to
consider the operation of sale on commission closed,
leaving the collection of said sum until later, which sum
remained as a loan payable upon presentation of the
receipt." (Brief, 3 and 4.)
Then, after averring the true facts: (1) that a sales
commission was precedent; (2) that this commission was
settled with a balance of P2,498 in favor of the principal,
Juana Montilla; and (3) that this balance remained in the
possession of the defendant, who drew up an instrument
payable on demand, he has drawn two conclusions, both
erroneous: One, that the instrument drawn up in the
form of a deposit certificate could be indorsed or
negotiated like any other commercial instrument; and the
other, that the sum of P2,498 remained in defendant's
possession as a loan.
It is erroneous to assert that the certificate of deposit in
question is negotiable like any other commercial
instrument: First, because every commercial instrument is
not negotiable; and second, because only instruments
payable to order are negotiable. Hence, this instrument
not being to order but to bearer, it is not negotiable.
It is also erroneous to assert that sum of money set forth
in said certificate is, according to it, in the defendant's
possession as a loan. In a loan the lender transmits to the
borrower the use of the thing lent, while in a deposit the
use of the thing is not transmitted, but merely possession
for its custody or safe-keeping.
In order that the depositary may use or dispose oft he
things deposited, the depositor's consent is required, and
then:
The rights and obligations of the depositary
and of the depositor shall cease, and the rules
and provisions applicable to commercial loans,
commission, or contract which took the place
of the deposit shall be observed. (Art. 309,
Code of Commerce.)
The defendant has shown no authorization whatsoever or
the consent of the depositary for using or disposing of the
P2,498, which the certificate acknowledges, or any
contract entered into with the depositor to convert the
deposit into a loan, commission, or other contract.
That demand was not made for restitution of the sum
deposited, which could have been claimed on the same or
the next day after the certificate was signed, does not
operate against the depositor, or signify anything except
the intention not to press it. Failure to claim at once or
delay for sometime in demanding restitution of the things
deposited, which was immediately due, does not imply
such permission to use the thing deposited as would
convert the deposit into a loan.
Article 408 of the Code of Commerce of 1829, previous to
the one now in force, provided:
The depositary of an amount of money cannot
use the amount, and if he makes use of it, he
shall be responsible for all damages that may
accrue and shall respond to the depositor for
the legal interest on the amount.
Whereupon the commentators say:
In this case the deposit becomes in fact a loan,
as a just punishment imposed upon him who
abuses the sacred nature of a deposit and as a
means of preventing the desire of gain from
leading him into speculations that may be
disastrous to the depositor, who is much
better secured while the deposit exists when
he only has a personal action for recovery.
According to article 548, No. 5, of the Penal
Code, those who to the prejudice of another
appropriate or abstract for their own use
money, goods, or other personal property
which they may have received as a deposit, on
commission, or for administration, or for any
other purpose which produces the obligation
of delivering it or returning it, and deny having
received it, shall suffer the penalty of the
preceding article," which punishes such act as
the crime of estafa. The corresponding article
of the Penal Code of the Philippines in 535, No.
5.
In a decision of an appeal, September 28, 1895, the
principle was laid down that: "Since he commits the crime
of estafa under article 548 of the Penal Code of Spain
who to another's detriment appropriates to himself or
abstracts money or goods received on commission for
delivery, the court rightly applied this article to the
appellant, who, to the manifest detriment of the owner
or owners of the securities, since he has not restored
them, willfully and wrongfully disposed of them by
appropriating them to himself or at least diverting them
from the purpose to which he was charged to devote
them."
It is unquestionable that in no sense did the P2,498 which
he willfully and wrongfully disposed of to the detriments
of his principal, Juana Montilla, and of the depositor,
Eugenio Veraguth, belong to the defendant.
Likewise erroneous is the construction apparently at
tempted to be given to two decisions of this Supreme
Court (U. S. vs. Dominguez, 2 Phil. Rep., 580, and U. S. vs.
Morales and Morco, 15 Phil. Rep., 236) as implying that
what constitutes estafa is not the disposal of money
deposited, but denial of having received same. In the first
of said cases there was no evidence that the defendant
had appropriated the grain deposited in his possession.
On the contrary, it is entirely probable that,
after the departure of the defendant from
Libmanan on September 20, 1898, two days
after the uprising of the civil guard in Nueva
Caceres, the rice was seized by the
revolutionalists and appropriated to their own
uses.
In this connection it was held that failure to return the
thing deposited was not sufficient, but that it was
necessary to prove that the depositary had appropriated
it to himself or diverted the deposit to his own or
another's benefit. He was accused or refusing to restore,
and it was held that the code does not penalize refusal to
restore but denial of having received. So much for the
crime of omission; now with reference to the crime of
commission, it was not held in that decision that
appropriation or diversion of the thing deposited would
not constitute the crime of estafa.
In the second of said decisions, the accused "kept none of
the proceeds of the sales. Those, such as they were, he
turned over to the owner;" and there being no proof of
the appropriation, the agent could not be found guilty of
the crime of estafa.
Being in accord and the merits of the case, the judgment
appealed from is affirmed, with costs.

BPI vs. Intermediate Appellate Court GR# L-66826,
August 19, 1988
CORTES, J:

Facts:

Rizaldy T. Zshornack and his wife maintained in
COMTRUST a dollar savings account and a peso current
account. An application for a dollar drat was
accomplished by Virgillo Garcia branch manager of
COMTRUST payable to a certain Leovigilda Dizon. In the
PPLICtion, Garcia indicated that the amount was to be
charged to the dolar savings account of the Zshornacks.
There wasa no indication of the name of the purchaser of
the dollar draft. Comtrust issued a check payable to the
order of Dizon. When Zshornack noticed the withdrawal
from his account, he demanded an explainaiton from the
bank. In its answer, Comtrust claimed that the peso value
of the withdrawal was given to Atty. Ernesto Zshornack,
brother of Rizaldy. When he encashed with COMTRUST a
cashiers check for P8450 issued by the manila banking
corporation payable to Ernesto.

Issue: Whether the contract between petitioner and
respondent bank is a deposit?

Held: The document which embodies the contract states
that the US$3,000.00 was received by the bank for
safekeeping. The subsequent acts of the parties also show
that the intent of the parties was really for the bank to
safely keep the dollars and to return it to Zshornack at a
later time. Thus, Zshornack demanded the return of the
money on May 10, 1976, or over five months later.

The above arrangement is that contract defined under
Article 1962, New Civil Code, which reads:
Art. 1962. A deposit is constituted from the moment a
person receives a thing belonging to another, with the
obligation of safely keeping it and of returning the same.
If the safekeeping of the thing delivered is not the
principal purpose of the contract, there is no deposit but
some other contract.