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BANKING Cases 3.09.17

SECOND DIVISION On October 13, 1966 and December 12, 1966,

petitioner made a time deposit, for one year with 6%
G.R. No. L-30511 February 14, 1980 interest, of One Hundred Fifty Thousand Pesos
(P150,000.00) with the respondent Overseas Bank of
MANUEL M. SERRANO, petitioner, Manila. 3 Concepcion Maneja also made a time
vs. deposit, for one year with 6-% interest, on March 6,
CENTRAL BANK OF THE PHILIPPINES; 1967, of Two Hundred Thousand Pesos
OVERSEAS BANK OF MANILA; EMERITO M. (P200,000.00) with the same respondent Overseas
HORACIO DELA RAMA, ANTONIO B. RAMOS, On August 31, 1968, Concepcion Maneja, married to
FILOMENA RAMOS LEDESMA, RODOLFO Felixberto M. Serrano, assigned and conveyed to
LEDESMA, VICTORIA RAMOS TANJUATCO, and petitioner Manuel M. Serrano, her time deposit of
TEOFILO TANJUATCO, respondents. P200,000.00 with respondent Overseas Bank of
Manila. 5
Rene Diokno for petitioner.
Notwithstanding series of demands for encashment
F.E. Evangelista & Glecerio T. Orsolino for of the aforementioned time deposits from the
respondent Central Bank of the Philippines. respondent Overseas Bank of Manila, dating from
December 6, 1967 up to March 4, 1968, not a single
Feliciano C. Tumale, Pacifico T. Torres and Antonio one of the time deposit certificates was honored by
B. Periquet for respondent Overseas Bank of Manila. respondent Overseas Bank of Manila. 6

Josefina G. Salonga for all other respondents. Respondent Central Bank admits that it is charged
with the duty of administering the banking system of
the Republic and it exercises supervision over all
doing business in the Philippines, but denies the
CONCEPCION, JR., J.: petitioner's allegation that the Central Bank has the
duty to exercise a most rigid and stringent
Petition for mandamus and prohibition, with supervision of banks, implying that respondent
preliminary injunction, that seeks the establishment Central Bank has to watch every move or activity of
of joint and solidary liability to the amount of Three all banks, including respondent Overseas Bank of
Hundred Fifty Thousand Pesos, with interest, against Manila. Respondent Central Bank claims that as of
respondent Central Bank of the Philippines and March 12, 1965, the Overseas Bank of Manila, while
Overseas Bank of Manila and its stockholders, on the operating, was only on a limited degree of banking
alleged failure of the Overseas Bank of Manila to operations since the Monetary Board decided in its
return the time deposits made by petitioner and Resolution No. 322, dated March 12, 1965, to
assigned to him, on the ground that respondent prohibit the Overseas Bank of Manila from making
Central Bank failed in its duty to exercise strict new loans and investments in view of its chronic
supervision over respondent Overseas Bank of reserve deficiencies against its deposit liabilities. This
Manila to protect depositors and the general limited operation of respondent Overseas Bank of
public. 1 Petitioner also prays that both respondent Manila continued up to 1968. 7
banks be ordered to execute the proper and
necessary documents to constitute all properties Respondent Central Bank also denied that it is
fisted in Annex "7" of the Answer of respondent guarantor of the permanent solvency of any banking
Central Bank of the Philippines in G.R. No. L-29352, institution as claimed by petitioner. It claims that
entitled "Emerita M. Ramos, et al vs. Central Bank of neither the law nor sound banking supervision
the Philippines," into a trust fund in favor of petitioner requires respondent Central Bank to advertise or
and all other depositors of respondent Overseas represent to the public any remedial measures it may
Bank of Manila. It is also prayed that the respondents impose upon chronic delinquent banks as such
be prohibited permanently from honoring, action may inevitably result to panic or bank "runs". In
implementing, or doing any act predicated upon the the years 1966-1967, there were no findings to
validity or efficacy of the deeds of mortgage, declare the respondent Overseas Bank of Manila as
assignment. and/or conveyance or transfer of insolvent. 8
whatever nature of the properties listed in Annex "7"
of the Answer of respondent Central Bank in G.R. No. Respondent Central Bank likewise denied that a
29352. 2 constructive trust was created in favor of petitioner
and his predecessor in interest Concepcion Maneja
A sought for ex-parte preliminary injunction against when their time deposits were made in 1966 and
both respondent banks was not given by this Court. 1967 with the respondent Overseas Bank of Manila
as during that time the latter was not an insolvent
Undisputed pertinent facts are: bank and its operation as a banking institution was
being salvaged by the respondent Central Bank. 9
BANKING Cases 3.09.17

Respondent Central Bank avers no knowledge of By the very nature of the claims and causes of action
petitioner's claim that the properties given by against respondents, they in reality are recovery of
respondent Overseas Bank of Manila as additional time deposits plus interest from respondent Overseas
collaterals to respondent Central Bank of the Bank of Manila, and recovery of damages against
Philippines for the former's overdrafts and emergency respondent Central Bank for its alleged failure to
loans were acquired through the use of depositors' strictly supervise the acts of the other respondent
money, including that of the petitioner and Bank and protect the interests of its depositors by
Concepcion Maneja. 10 virtue of the constructive trust created when
respondent Central Bank required the other
In G.R. No. L-29362, entitled "Emerita M. Ramos, et respondent to increase its collaterals for its overdrafts
al. vs. Central Bank of the Philippines," a case was said emergency loans, said collaterals allegedly
filed by the petitioner Ramos, wherein respondent acquired through the use of depositors money. These
Overseas Bank of Manila sought to prevent claims shoud be ventilated in the Court of First
respondent Central Bank from closing, declaring the Instance of proper jurisdiction as We already pointed
former insolvent, and liquidating its assets. Petitioner out when this Court denied petitioner's motion to
Manuel Serrano in this case, filed on September 6, intervene in G.R. No. L-29352. Claims of these
1968, a motion to intervene in G.R. No. L-29352, on nature are not proper in actions for mandamus and
the ground that Serrano had a real and legal interest prohibition as there is no shown clear abuse of
as depositor of the Overseas Bank of Manila in the discretion by the Central Bank in its exercise of
matter in litigation in that case. Respondent Central supervision over the other respondent Overseas
Bank in G.R. No. L-29352 opposed petitioner Manuel Bank of Manila, and if there was, petitioner here is
Serrano's motion to intervene in that case, on the not the proper party to raise that question, but rather
ground that his claim as depositor of the Overseas the Overseas Bank of Manila, as it did in G.R. No. L-
Bank of Manila should properly be ventilated in the 29352. Neither is there anything to prohibit in this
Court of First Instance, and if this Court were to allow case, since the questioned acts of the respondent
Serrano to intervene as depositor in G.R. No. L- Central Bank (the acts of dissolving and liquidating
29352, thousands of other depositors would follow the Overseas Bank of Manila), which petitioner here
and thus cause an avalanche of cases in this Court. intends to use as his basis for claims of damages
In the resolution dated October 4, 1968, this Court against respondent Central Bank, had been
denied Serrano's, motion to intervene. The contents accomplished a long time ago.
of said motion to intervene are substantially the same
as those of the present petition. 11 Furthermore, both parties overlooked one
fundamental principle in the nature of bank deposits
This Court rendered decision in G.R. No. L-29352 on when the petitioner claimed that there should be
October 4, 1971, which became final and executory created a constructive trust in his favor when the
on March 3, 1972, favorable to the respondent respondent Overseas Bank of Manila increased its
Overseas Bank of Manila, with the dispositive portion collaterals in favor of respondent Central Bank for the
to wit: former's overdrafts and emergency loans, since
these collaterals were acquired by the use of
WHEREFORE, the writs prayed for in the depositors' money.
petition are hereby granted and respondent
Central Bank's resolution Nos. 1263, 1290 Bank deposits are in the nature of irregular deposits.
and 1333 (that prohibit the Overseas Bank of They are really loans because they earn interest. All
Manila to participate in clearing, direct the kinds of bank deposits, whether fixed, savings, or
suspension of its operation, and ordering the current are to be treated as loans and are to be
liquidation of said bank) are hereby annulled covered by the law on loans. 14 Current and savings
and set aside; and said respondent Central deposit are loans to a bank because it can use the
Bank of the Philippines is directed to comply same. The petitioner here in making time deposits
with its obligations under the Voting Trust that earn interests with respondent Overseas Bank of
Agreement, and to desist from taking action Manila was in reality a creditor of the respondent
in violation therefor. Costs against Bank and not a depositor. The respondent Bank was
respondent Central Bank of the Philippines. 12 in turn a debtor of petitioner. Failure of he respondent
Bank to honor the time deposit is failure to pay s
Because of the above decision, petitioner in this case obligation as a debtor and not a breach of trust
filed a motion for judgment in this case, praying for a arising from depositary's failure to return the subject
decision on the merits, adjudging respondent Central matter of the deposit
Bank jointly and severally liable with respondent
Overseas Bank of Manila to the petitioner for the WHEREFORE, the petition is dismissed for lack of
P350,000 time deposit made with the latter bank, with merit, with costs against petitioner.
all interests due therein; and declaring all assets
assigned or mortgaged by the respondents Overseas SO ORDERED.
Bank of Manila and the Ramos groups in favor of the
Central Bank as trust funds for the benefit of Antonio, Abad Santos, JJ., concur.
petitioner and other depositors. 13
BANKING Cases 3.09.17

Barredo (Chairman) J., concur in the judgment on the On March 31, 1982, by virtue of a court resolution
of the concurring opinion of Justice Aquino. issued by this Court on the same date, a temporary
restraining order was duly issued ordering the
Separate Opinions deleted respondents, their officers, agents, representatives
and/or person or persons acting upon their
Footnotes (respondents') orders or in their place or stead to
refrain from proceeding with the preliminary
1 pp. 1-10, rollo. investigation in Case No. 8131938 of the Office of the
City Fiscal of Manila (pp. 47-48, rec.). On January 24,
2 p. 10, Id. 1983, private respondent Clement David filed a
motion to lift restraining order which was denied in
3 pp. 12-13, Id.
the resolution of this Court dated May 18, 1983.
4 pp. 12-13, Id.
As can be gleaned from the above, the instant
5 p. 14, Id. petition seeks to prohibit public respondents from
proceeding with the preliminary investigation of I.S.
6 p. 15, Id. No. 81-31938, in which petitioners were charged by
private respondent Clement David, with estafa and
7 pp- 18-19, Id. violation of Central Bank Circular No. 364 and related
regulations regarding foreign exchange transactions
8 pp, 19-20, Id. principally, on the ground of lack of jurisdiction in that
the allegations of the charged, as well as the
9 pp- 22-24, Id.
testimony of private respondent's principal witness
and the evidence through said witness, showed that
10 pp. 24-25, Id.
petitioners' obligation is civil in nature.
11 pp. 26-27, Id.
For purposes of brevity, We hereby adopt the
12 p. 193, Id. antecedent facts narrated by the Solicitor General in
its Comment dated June 28,1982, as follows: t.hqw

13 pp. 183-187, Id.

On December 23,1981, private respondent
14 Art. 1980, Civil Code, Gullas vs. Phil. National Bank, 62 Phil. David filed I.S. No. 81-31938 in the Office of
the City Fiscal of Manila, which case was
assigned to respondent Lota for preliminary
investigation (Petition, p. 8).

In I.S. No. 81-31938, David charged petitioners

(together with one Robert Marshall and the
following directors of the Nation Savings and
Loan Association, Inc., namely Homero
Gonzales, Juan Merino, Flavio Macasaet,
Victor Gomez, Jr., Perfecto Manalac, Jaime V.
Paz, Paulino B. Dionisio, and one John Doe)
with estafa and violation of Central Bank
SECOND DIVISION Circular No. 364 and related Central Bank
regulations on foreign exchange transactions,
G.R. No. L-60033 April 4, 1984 allegedly committed as follows (Petition, Annex


and TERESITA SANTOS, petitioners, "From March 20, 1979 to March, 1981,
vs. David invested with the Nation Savings and
THE CITY FISCAL OF MANILA, HON. JOSE B. Loan Association, (hereinafter called NSLA)
FLAMINIANO, ASST. CITY FISCAL FELIZARDO N. the sum of P1,145,546.20 on nine deposits,
LOTA and CLEMENT DAVID, respondents. P13,531.94 on savings account deposits
(jointly with his sister, Denise Kuhne),
US$10,000.00 on time deposit,
US$15,000.00 under a receipt and
MAKASIAR, Actg. C.J.: +.wph!1
guarantee of payment and US$50,000.00
under a receipt dated June 8, 1980 (au
This is a petition for prohibition and injunction with a jointly with Denise Kuhne), that David was
prayer for the immediate issuance of restraining induced into making the aforestated
order and/or writ of preliminary injunction filed by investments by Robert Marshall an
petitioners on March 26, 1982. Australian national who was allegedly a
close associate of petitioner Guingona Jr.,
BANKING Cases 3.09.17

then NSLA President, petitioner Martin, Petitioner, Guingona, Jr., in his counter-
then NSLA Executive Vice-President of affidavit (Petition, Annex' C') stated the
NSLA and petitioner Santos, then NSLA following:t.hqw

General Manager; that on March 21, 1981

N LA was placed under receivership by the "That he had no hand whatsoever in the
Central Bank, so that David filed claims transactions between David and NSLA
therewith for his investments and those of since he (Guingona Jr.) had resigned as
his sister; that on July 22, 1981 David NSLA president in March 1978, or prior to
received a report from the Central Bank that those transactions; that he assumed a
only P305,821.92 of those investments portion o; the liabilities of NSLA to David
were entered in the records of NSLA; that, because of the latter's insistence that he
therefore, the respondents in I.S. No. 81- placed his investments with NSLA because
31938 misappropriated the balance of the of his faith in Guingona, Jr.; that in a
investments, at the same time violating Promissory Note dated June 17, 1981
Central Bank Circular No. 364 and related (Petition, Annex "D") he (Guingona, Jr.)
Central Bank regulations on foreign bound himself to pay David the sums of
exchange transactions; that after demands, P668.307.01 and US$37,500.00 in stated
petitioner Guingona Jr. paid only installments; that he (Guingona, Jr.)
P200,000.00, thereby reducing the amounts secured payment of those amounts with
misappropriated to P959,078.14 and second mortgages over two (2) parcels of
US$75,000.00." land under a deed of Second Real Estate
Mortgage (Petition, Annex "E") in which it
Petitioners, Martin and Santos, filed a joint was provided that the mortgage over one
counter-affidavit (Petition, Annex' B') in which (1) parcel shall be cancelled upon payment
they stated the following.t.hqw of one-half of the obligation to David; that
he (Guingona, Jr.) paid P200,000.00 and
"That Martin became President of NSLA in tendered another P300,000.00 which David
March 1978 (after the resignation of refused to accept, hence, he (Guingona,
Guingona, Jr.) and served as such until Jr.) filed Civil Case No. Q-33865 in the
October 30, 1980, while Santos was Court of First Instance of Rizal at Quezon
General Manager up to November 1980; City, to effect the release of the mortgage
that because NSLA was urgently in need of over one (1) of the two parcels of land
funds and at David's insistence, his conveyed to David under second
investments were treated as special- mortgages."
accounts with interest above the legal rate,
an recorded in separate confidential At the inception of the preliminary investigation
documents only a portion of which were to before respondent Lota, petitioners moved to
be reported because he did not want the dismiss the charges against them for lack of
Australian government to tax his total jurisdiction because David's claims allegedly
earnings (nor) to know his total comprised a purely civil obligation which was
investments; that all transactions with David itself novated. Fiscal Lota denied the motion to
were recorded except the sum of dismiss (Petition, p. 8).
US$15,000.00 which was a personal loan
of Santos; that David's check for But, after the presentation of David's principal
US$50,000.00 was cleared through witness, petitioners filed the instant petition
Guingona, Jr.'s dollar account because because: (a) the production of the Promisory
NSLA did not have one, that a draft of Notes, Banker's Acceptance, Certificates of
US$30,000.00 was placed in the name of Time Deposits and Savings Account allegedly
one Paz Roces because of a pending showed that the transactions between David
transaction with her; that the Philippine and NSLA were simple loans, i.e., civil
Deposit Insurance Corporation had already obligations on the part of NSLA which were
reimbursed David within the legal limits; novated when Guingona, Jr. and Martin
that majority of the stockholders of NSLA assumed them; and (b) David's principal
had filed Special Proceedings No. 82-1695 witness allegedly testified that the duplicate
in the Court of First Instance to contest its originals of the aforesaid instruments of
(NSLA's) closure; that after NSLA was indebtedness were all on file with NSLA,
placed under receivership, Martin executed contrary to David's claim that some of his
a promissory note in David's favor and investments were not record (Petition, pp. 8-9).
caused the transfer to him of a nine and on
behalf (9 1/2) carat diamond ring with a net Petitioners alleged that they did not exhaust
value of P510,000.00; and, that the available administrative remedies because to
liabilities of NSLA to David were civil in do so would be futile (Petition, p. 9) [pp. 153-
nature." 157, rec.].
BANKING Cases 3.09.17

As correctly pointed out by the Solicitor General, the money on time and savings deposits with the Nation
sole issue for resolution is whether public Savings and Loan Association.
respondents acted without jurisdiction when they
investigated the charges (estafa and violation of CB It must be pointed out that when private respondent
Circular No. 364 and related regulations regarding David invested his money on nine. and savings
foreign exchange transactions) subject matter of I.S. deposits with the aforesaid bank, the contract that
No. 81-31938. was perfected was a contract of simple loan
or mutuum and not a contract of deposit. Thus, Article
There is merit in the contention of the petitioners that 1980 of the New Civil Code provides that: t.hqw

their liability is civil in nature and therefore, public

respondents have no jurisdiction over the charge of Article 1980. Fixed, savings, and current
estafa. deposits of-money in banks and similar
institutions shall be governed by the
A casual perusal of the December 23, 1981 affidavit. provisions concerning simple loan.
complaint filed in the Office of the City Fiscal of
Manila by private respondent David against In the case of Central Bank of the Philippines vs.
petitioners Teopisto Guingona, Jr., Antonio I. Martin Morfe (63 SCRA 114,119 [1975], We said: t.hqw

and Teresita G. Santos, together with one Robert

Marshall and the other directors of the Nation It should be noted that fixed, savings, and
Savings and Loan Association, will show that from current deposits of money in banks and
March 20, 1979 to March, 1981, private respondent similar institutions are hat true deposits. are
David, together with his sister, Denise Kuhne, considered simple loans and, as such, are
invested with the Nation Savings and Loan not preferred credits (Art. 1980 Civil Code; In
Association the sum of P1,145,546.20 on time re Liquidation of Mercantile Batik of China
deposits covered by Bankers Acceptances and Tan Tiong Tick vs. American Apothecaries
Certificates of Time Deposits and the sum of Co., 66 Phil 414; Pacific Coast Biscuit Co. vs.
P13,531.94 on savings account deposits covered by Chinese Grocers Association 65 Phil. 375;
passbook nos. 6-632 and 29-742, or a total of Fletcher American National Bank vs. Ang
P1,159,078.14 (pp. 15-16, roc.). It appears further Chong UM 66 PWL 385; Pacific Commercial
that private respondent David, together with his Co. vs. American Apothecaries Co., 65 PhiL
sister, made investments in the aforesaid bank in the 429; Gopoco Grocery vs. Pacific Coast
amount of US$75,000.00 (p. 17, rec.). Biscuit CO.,65 Phil. 443)."

Moreover, the records reveal that when the aforesaid This Court also declared in the recent case
bank was placed under receivership on March 21, of Serrano vs. Central Bank of the Philippines (96
1981, petitioners Guingona and Martin, upon the SCRA 102 [1980]) that: t.hqw

request of private respondent David, assumed the

obligation of the bank to private respondent David by Bank deposits are in the nature of irregular
executing on June 17, 1981 a joint promissory note in deposits. They are really 'loans because they
favor of private respondent acknowledging an earn interest. All kinds of bank deposits,
indebtedness of Pl,336,614.02 and US$75,000.00 (p. whether fixed, savings, or current are to be
80, rec.). This promissory note was based on the treated as loans and are to be covered by the
statement of account as of June 30, 1981 prepared law on loans (Art. 1980 Civil Code Gullas vs.
by the private respondent (p. 81, rec.). The amount of Phil. National Bank, 62 Phil. 519). Current
indebtedness assumed appears to be bigger than the and saving deposits, are loans to a bank
original claim because of the added interest and the because it can use the same. The petitioner
inclusion of other deposits of private respondent's here in making time deposits that earn
sister in the amount of P116,613.20. interests will respondent Overseas Bank of
Manila was in reality a creditor of the
Thereafter, or on July 17, 1981, petitioners Guingona respondent Bank and not a depositor. The
and Martin agreed to divide the said indebtedness, respondent Bank was in turn a debtor of
and petitioner Guingona executed another petitioner. Failure of the respondent Bank to
promissory note antedated to June 17, 1981 whereby honor the time deposit is failure to pay its
he personally acknowledged an indebtedness of obligation as a debtor and not a breach of
P668,307.01 (1/2 of P1,336,614.02) and trust arising from a depositary's failure to
US$37,500.00 (1/2 of US$75,000.00) in favor of return the subject matter of the
private respondent (p. 25, rec.). The aforesaid deposit (Emphasis supplied).
promissory notes were executed as a result of
deposits made by Clement David and Denise Kuhne Hence, the relationship between the private
with the Nation Savings and Loan Association. respondent and the Nation Savings and Loan
Association is that of creditor and debtor;
Furthermore, the various pleadings and documents consequently, the ownership of the amount deposited
filed by private respondent David, before this Court was transmitted to the Bank upon the perfection of
indisputably show that he has indeed invested his the contract and it can make use of the amount
BANKING Cases 3.09.17

deposited for its banking operations, such as to pay borrowed (Article 248, Civil Code) and his act
interests on deposits and to pay withdrawals. While will not be considered misappropriation
the Bank has the obligation to return the amount thereof' (Yam vs. Malik, 94 SCRA 30, 34
deposited, it has, however, no obligation to return or [1979]; Emphasis supplied).
deliver the same money that was deposited. And, the
failure of the Bank to return the amount deposited will But even granting that the failure of the bank to pay
not constitute estafa through misappropriation the time and savings deposits of private respondent
punishable under Article 315, par. l(b) of the Revised David would constitute a violation of paragraph 1(b)
Penal Code, but it will only give rise to civil liability of Article 315 of the Revised Penal Code,
over which the public respondents have no- nevertheless any incipient criminal liability was
jurisdiction. deemed avoided, because when the aforesaid bank
was placed under receivership by the Central Bank,
WE have already laid down the rule that: t.hqw petitioners Guingona and Martin assumed the
obligation of the bank to private respondent David,
In order that a person can be convicted thereby resulting in the novation of the original
under the above-quoted provision, it must be contractual obligation arising from deposit into a
proven that he has the obligation to deliver contract of loan and converting the original trust
or return the some money, goods or personal relation between the bank and private respondent
property that he received Petitioners had no David into an ordinary debtor-creditor relation
such obligation to return the same money, between the petitioners and private respondent.
i.e., the bills or coins, which they received Consequently, the failure of the bank or petitioners
from private respondents. This is so because Guingona and Martin to pay the deposits of private
as clearly as stated in criminal complaints, respondent would not constitute a breach of trust but
the related civil complaints and the would merely be a failure to pay the obligation as a
supporting sworn statements, the sums of debtor.
money that petitioners received were loans.
Moreover, while it is true that novation does not
The nature of simple loan is defined in extinguish criminal liability, it may however, prevent
Articles 1933 and 1953 of the Civil Code. t.hqw
the rise of criminal liability as long as it occurs prior to
the filing of the criminal information in court. Thus,
"Art. 1933. By the contract of loan, one in Gonzales vs. Serrano ( 25 SCRA 64, 69 [1968])
of the parties delivers to another, either We held that: t.hqw

something not consumable so that the latter

may use the same for a certain time- and As pointed out in People vs. Nery, novation
return it, in which case the contract is called prior to the filing of the criminal information
a commodatum; or money or other as in the case at bar may convert the
consumable thing, upon the condition that relation between the parties into an ordinary
the same amount of the same kind and creditor-debtor relation, and place the
quality shall he paid in which case the complainant in estoppel to insist on the
contract is simply called a loan or mutuum. original transaction or "cast doubt on the true
nature" thereof.
"Commodatum is essentially gratuitous.
Again, in the latest case of Ong vs. Court of
"Simple loan may be gratuitous or with a Appeals (L-58476, 124 SCRA 578, 580-581 [1983] ),
stipulation to pay interest. this Court reiterated the ruling in People vs. Nery ( 10
SCRA 244 [1964] ), declaring that: t.hqw

"In commodatum the bailor retains the

ownership of the thing loaned while in The novation theory may perhaps apply prior
simple loan, ownership passes to the to the filling of the criminal information in court
borrower. by the state prosecutors because up to that
time the original trust relation may be
"Art. 1953. A person who receives a loan converted by the parties into an ordinary
of money or any other fungible thing creditor-debtor situation, thereby placing the
acquires the ownership thereof, and is complainant in estoppel to insist on the original
bound to pay to the creditor an equal trust. But after the justice authorities have
amount of the same kind and quality." taken cognizance of the crime and instituted
action in court, the offended party may no
It can be readily noted from the above-quoted longer divest the prosecution of its power to
provisions that in simple loan (mutuum), as exact the criminal liability, as distinguished
contrasted to commodatum the borrower from the civil. The crime being an offense
acquires ownership of the money, goods or against the state, only the latter can renounce
personal property borrowed Being the owner, it (People vs. Gervacio, 54 Off. Gaz. 2898;
the borrower can dispose of the thing People vs. Velasco, 42 Phil. 76; U.S. vs.
Montanes, 8 Phil. 620).
BANKING Cases 3.09.17

It may be observed in this regard that novation to accept deposits in Philippine currency only, and
is not one of the means recognized by the that the transaction was regular and fair, in the
Penal Code whereby criminal liability can be absence of a clear and convincing evidence to the
extinguished; hence, the role of novation may contrary (see paragraphs p and q, Sec. 5, Rule 131,
only be to either prevent the rise of criminal Rules of Court).
habihty or to cast doubt on the true nature of
the original basic transaction, whether or not it 3. Respondent David has not denied the aforesaid
was such that its breach would not give rise to contention of herein petitioners despite the fact that it
penal responsibility, as when money loaned is was raised. in petitioners' reply filed on May 7, 1982
made to appear as a deposit, or other similar to private respondent's comment and in the July 27,
disguise is resorted to (cf. Abeto vs. People, 90 1982 reply to public respondents' comment and
Phil. 581; U.S. vs. Villareal, 27 Phil. 481). reiterated in petitioners' memorandum filed on
October 30, 1982, thereby adding more support to
In the case at bar, there is no dispute that petitioners the conclusion that the US$75,000.00 were really
Guingona and Martin executed a promissory note on converted into Philippine currency before they were
June 17, 1981 assuming the obligation of the bank to accepted and deposited into Nation Savings and
private respondent David; while the criminal Loan Association. Considering that this might
complaint for estafa was filed on December 23, 1981 adversely affect his case, respondent David should
with the Office of the City Fiscal. Hence, it is clear have promptly denied petitioners' allegation.
that novation occurred long before the filing of the
criminal complaint with the Office of the City Fiscal. In conclusion, considering that the liability of the
petitioners is purely civil in nature and that there is no
Consequently, as aforestated, any incipient criminal clear showing that they engaged in foreign exchange
liability would be avoided but there will still be a civil transactions, We hold that the public respondents
liability on the part of petitioners Guingona and Martin acted without jurisdiction when they investigated the
to pay the assumed obligation. charges against the petitioners. Consequently, public
respondents should be restrained from further
Petitioners herein were likewise charged with proceeding with the criminal case for to allow the
violation of Section 3 of Central Bank Circular No. case to continue, even if the petitioners could have
364 and other related regulations regarding foreign appealed to the Ministry of Justice, would work great
exchange transactions by accepting foreign currency injustice to petitioners and would render meaningless
deposit in the amount of US$75,000.00 without the proper administration of justice.
authority from the Central Bank. They contend
however, that the US dollars intended by respondent While as a rule, the prosecution in a criminal offense
David for deposit were all converted into Philippine cannot be the subject of prohibition and injunction,
currency before acceptance and deposit into Nation this court has recognized the resort to the
Savings and Loan Association. extraordinary writs of prohibition and injunction in
extreme cases, thus: t.hqw

Petitioners' contention is worthy of behelf for the

following reasons: On the issue of whether a writ of injunction can
restrain the proceedings in Criminal Case No.
1. It appears from the records that when respondent 3140, the general rule is that "ordinarily,
David was about to make a deposit of bank draft criminal prosecution may not be blocked by
issued in his name in the amount of US$50,000.00 court prohibition or injunction." Exceptions,
with the Nation Savings and Loan Association, the however, are allowed in the following
same had to be cleared first and converted into instances: t.hqw

Philippine currency. Accordingly, the bank draft was

endorsed by respondent David to petitioner "1. for the orderly administration of justice;
Guingona, who in turn deposited it to his dollar
account with the Security Bank and Trust Company. "2. to prevent the use of the strong arm of
Petitioner Guingona merely accommodated the the law in an oppressive and vindictive
request of the Nation Savings and loan Association in manner;
order to clear the bank draft through his dollar
account because the bank did not have a dollar "3. to avoid multiplicity of actions;
account. Immediately after the bank draft was
cleared, petitioner Guingona authorized Nation "4. to afford adequate protection to
Savings and Loan Association to withdraw the same constitutional rights;
in order to be utilized by the bank for its operations.
"5. in proper cases, because the statute
2. It is safe to assume that the U.S. dollars were relied upon is unconstitutional or was held
converted first into Philippine pesos before they were invalid" ( Primicias vs. Municipality of
accepted and deposited in Nation Savings and Loan Urdaneta, Pangasinan, 93 SCRA 462, 469-
Association, because the bank is presumed to have 470 [1979]; citing Ramos vs. Torres, 25
followed the ordinary course of the business which is
BANKING Cases 3.09.17

SCRA 557 [1968]; and Hernandez vs. The immigrants Yu Chi Ay and Chua Seng, applied
Albano, 19 SCRA 95, 96 [1967]). on April, 1927, for admission into the Philippines as
daughter and wife, respectively, of Yu Ak. The board
of special inquiry, and later, the Insular Collector of
Likewise, in Lopez vs. The City Judge, et al. ( 18
Customs, denied their application for lack of proof
SCRA 616, 621-622 [1966]), We held that: t.hqw

that Yu Ak was a merchant.

The writs of certiorari and prohibition, as The petitioners resorted to the Court of First Instance
extraordinary legal remedies, are in the of Manila for a writ of habeas corpus, which was
ultimate analysis, intended to annul void granted by said court. The Insular Collector of
proceedings; to prevent the unlawful and Customs appealed to this court from the judgment
oppressive exercise of legal authority and to granting said relief, and now contends that the lower
court erred in holding, in view of the facts of record,
provide for a fair and orderly administration of
that Yu Ak is entitled to bring in his aforesaid
justice. Thus, in Yu Kong Eng vs. Trinidad, 47 daughter and wife, without the proper certificate.
Phil. 385, We took cognizance of a petition for
certiorari and prohibition although the accused This resident, Yu Ak, was not a merchant on April 1,
in the case could have appealed in due time 1927, when the appellees arrived and filed their
from the order complained of, our action in the application, although he then had a certificate of
premises being based on the public welfare customs wherein he was classified as a person other
policy the advancement of public policy. than laborer. Such a certificate does not place him
among the exempted class, which comprises
In Dimayuga vs. Fajardo, 43 Phil. 304, We also
government officials, ministers or teachers of religion,
admitted a petition to restrain the prosecution missionaries, attorneys, physicians, chemists, civil
of certain chiropractors although, if convicted, engineers, teachers, students, writers, artists,
they could have appealed. We gave due merchants, travellers for curiosity or pleasure
course to their petition for the orderly (Singh vs. Collector of Customs, 38 Phil., 867),
administration of justice and to avoid possible without including those persons classified under the
oppression by the strong arm of the law. And general negative denomination of "persons other
than laborers."
in Arevalo vs. Nepomuceno, 63 Phil. 627, the
petition for certiorari challenging the trial
Counsel for the appellees cites the case of
court's action admitting an amended Tan vs. Collector of Customs (G. R. No. 15465)1; but
information was sustained despite the it must be taken into account that in that case the
availability of appeal at the proper time. court said:

WHEREFORE, THE PETITION IS HEREBY We think it must be held that the petitioner is
GRANTED; THE TEMPORARY RESTRAINING a merchant, and that as such he is fully
ORDER PREVIOUSLY ISSUED IS MADE authorized to bring his wife and infant
daughter into the country.
It follows, therefore, that said decision was based on
the finding that the petitioner was a merchant, while
SO ORDERED. 1wph1.t

in the present case, neither the appellees nor their

father and husband, respectively, upon whose
Concepcion, Jr., Guerrero, De Castro and Escolin, qualifications for admissibility they depend, are
JJ., concur. merchants.

It has been proved, however, that said Yu Ak became

Abad Santos, J., concur in the result.
a merchant after the appellees arrived in the Islands.
Although this character of merchant does not support
Aquino, J., took no part. the admission of said appellees into the Philippine on
April 1, 1927, because that condition did not then
exist, it would now be sufficient ground for granting a
petition for admission, should they desire to file it,
provided, however, that said condition exists at the
time of said petition.

EN BANC Wherefore, the judgment appealed from is reversed,

without prejudice to the appellees' right to reiterate
G.R. No. L-32075 February 17, 1930 their petition for admission into the Philippines.
Without express pronouncement of costs. So
YU CHI AY and CHUA SENG, petitioners-appellees, ordered.
THE INSULAR COLLECTOR OF Johnson, Malcolm, Villamor, Ostrand, Johns and
CUSTOMS, respondent-appellant. Villa-Real, JJ., concur.

Attorney-General Jaranilla for appellant. Footnotes

Juan Alcazaren for appellees.
Promulgated May 29, 1919, not reported.
BANKING Cases 3.09.17


G.R. No. L-46208 April 5, 1990 SANTIAGO, herein defendants FIDELITY
and herein defendant BIBIANA E. LACUNA,
BANK, petitioner,
through their respective undersigned
counsel, and before this Honorable Court
HON. PEDRO D. CENZON, in his capacity as
most respectfully submit the following Partial
Presiding Judge of the Court of First Instance of
Stipulation of Facts:
Manila (Branch XL) and SPOUSES TIMOTEO AND
OLIMPIA SANTIAGO, respondents.
1. That herein plaintiffs are husband and
wife, both of legal age, and presently residing
Agapito S. Fajardo and Marino E. Eslao for
at No. 480 C. de la Paz Street, Sta. Elena,
Marikina, Rizal;
Leovillo C. Agustin Law Offices for private
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
The instant petition seeks the review, on pure Central Bank of the Philippines is a
questions of law, of the decision rendered by the corporation duly organized and existing
Court of First Instance of Manila (now Regional Trial under and by virtue of the laws of the
Court), Branch XL, on December 3, 1976 in Civil Philippines;
Case No. 84800, ordering herein petitioner to pay

private respondents the following amounts:

3. That herein defendant Bibiana E. Lacuna
is of legal age and a resident of No. 42 East
(a) P90,000.00 with accrued interest in Lawin Street, Philamlife Homes, Quezon
accordance with Exhibits A and B until fully City, said defendant was an assistant Vice-
paid; President of the defendant fidelity Savings
and Mortgage Bank,
(b) P30,000,00 as exemplary damages; and
4. That sometime on May 16, 1968, here in
(c) P10,000.00 as and for attorney's fees. plaintiffs deposited with the defendant
Fidelity Savings Bank the amount of FIFTY
The payment by the defendant Fidelity Savings and THOUSAND PESOS (P50,000.00) under
Mortgage Bank of the aforementioned sums of Savings Account No. 16-0536; that likewise,
money shall be subject to the Bank Liquidation Rules sometime on July 6, 1968, herein plaintiff,-
and Regulations embodied in the Order of the Court deposited with the defendant Fidelity Savings
of First Instance of Manila, Branch XIII, dated and Mortgage Bank the amount of FIFTY
October 3, 1972, Civil Case No. 86005, entitled, "IN THOUSAND PESOS (P50,000.00) under
RE: Liquidation of the Fidelity Savings Bank versus Certificate of Time Deposit No. 0210; that the
Central Bank of the Philippines, Liquidator." aggregate amount of deposits of the plaintiffs
with the defendant Fidelity Savings and
With costs against the defendant Fidelity Savings and Mortgage Bank is ONE HUNDRED
Mortgage Bank. THOUSAND PESOS (P100,000.00);

SO ORDERED. 5. That on February 18, 1969, the Monetary

Board, after finding the report of the
Superintendent of Banks, that the condition
Private respondents instituted this present action for
of the defendant Fidelity Savings and
a sum of money with damages against Fidelity
Mortgage Bank is one of insolvency, to be
Savings and Mortgage Bank, Central Bank of the
true, issued Resolution No. 350 deciding,
Philippines, Eusebio Lopez, Jr., Arsenio M. Lopez,
among others, as follows:
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 1) To forbid the Fidelity Savings Bank
respondents, as plaintiffs, the amended complaint to do business in the Philippines;
was dismissed without prejudice against defendants
Jose C. Morales, Leon P. Cusi, Pilar Y. Pobre-Cusi 2) To instruct the Acting
and Ernani A. Pacana. In its aforesaid decision of
2 Superintendent of Banks to take
December 3, 1976, the court a quo dismissed the charge, in the name of the Monetary
complaint as against defendants Central Bank of the Board, of the Bank's assets
Philippines, Eusebio Lopez, Jr., Arsenio S. Lopez, Jr.,
Arsenio M. Lopez, Sr. and Bibiana S. Lacuna. 6. That pursuant to the above-cited
instructions of the Monetary Board, the
Back on August 10, 1973, the plaintiffs (herein private Superintendent of Banks took charge in the
respondents) and the defendants Fidelity Savings name of the Monetary Board, of the assets of
and Mortgage Bank (petitioner herein), Central Bank defendant Fidelity Savings Bank on February
of the Philippines and Bibiana E. Lacuna had filed in 19, 1969; and that since that date up to this
said case in the lower court a partial stipulation of date, the Superintendent of Banks (now
facts, as follows: designated as Director, Department of
Commercial and Savings Banks) has been
BANKING Cases 3.09.17

taking charge of the assets of defendant There is merit in the petition.

Fidelity Savings and Mortgage Bank;
It is settled jurisprudence that a banking institution
7. That sometime on October 10, 1969 the which has been declared insolvent and subsequently
Philippine Deposit Insurance Corporation ordered closed by the Central Bank of the Philippines
paid the plaintiffs the amount of TEN cannot be held liable to pay interest on bank deposits
THOUSAND PESOS (P10,000.00) on the which accrued during the period when the bank is
aggregate deposits of P100,000.00 pursuant actually closed and non-operational.
to Republic Act No. 5517, thereby leaving a
deposit balance of P90,000.00; In The Overseas Bank of Manila vs. Court of Appeals
and Tony D. Tapia, we held that:

8. That on December 9, 1969, the Monetary

Board issued its Resolution No. 2124 It is a matter of common knowledge, which
directing the liquidation of the affairs of We take judicial notice of, that what enables
defendant Fidelity Savings Bank; a bank to pay stipulated interest on money
deposited with it is that thru the other aspects
9. That on January 25, 1972, the Solicitor of its operation it is able to generate funds to
General of the Philippines filed a "Petition for cover the payment of such interest. Unless a
Assistance and Supervision in Liquidation" of bank can lend money, engage in international
the affairs of the defendant Fidelity Savings transactions, acquire foreclosed mortgaged
and Mortgage Bank with the Court of First properties or their proceeds and generally
Instance of Manila, assigned to Branch XIII engage in other banking and financing
and docketed as Civil Case No. 86005; activities from which it can derive income, it
is inconceivable how it can carry on as a
10. That on October 3, 1972, the Liquidation depository obligated to pay stipulated
Court promulgated the Bank Rules and interest. Conventional wisdom dictates this
Regulations to govern the liquidation of the inexorable fair and just conclusion. And it can
affairs of defendant Fidelity Savings and be said that all who deposit money in banks
Mortgage Bank, prescribing the rules on the are aware of such a simple economic
conversion of the Bank's assets into money, proposition. Consequently, it should be
processing of claims against it and the deemed read into every contract of deposit
manner and time of distributing the proceeds with a bank that the obligation to pay interest
from the assets of the Bank; on the deposit ceases the moment the
operation of the bank is completely
suspended by the duly constituted authority,
11. That the liquidation proceedings has not
the Central Bank.
been terminated and is still pending up to the
This was reiterated in the subsequent case of The
Overseas Bank of Manila vs. The Hon. Court of
12. That herein plaintiffs, through their
Appeals and Julian R. Cordero. and in the recent

counsel, sent demand letters to herein

cases of Integrated Realty Corporation, et al. vs.
defendants, demanding the immediate
Philippine National Bank, et al. and the Overseas
payment of the aforementioned savings and
Bank of Manila vs. Court of appeals, et al. 6

time deposits.

From the aforecited authorities, it is manifest that

WHEREFORE, it is respectfully prayed that
petitioner cannot be held liable for interest on bank
the foregoing Partial Stipulation of Facts be
deposits which accrued from the time it was
approved by this Honorable Court, without
prohibited by the Central Bank to continue with its
prejudice to the presentation of additional
banking operations, that is, when Resolution No. 350
documentary or testimonial evidence by
to that effect was issued on February 18, 1969.
herein parties.

The order, therefore, of the Central Bank as

Manila, Philippines, August 10, 1973. 3

receiver/liquidator of petitioner bank allowing the

claims of depositors and creditors to earn interest up
Assigning error in the judgment of the lower court to the date of its closure on February 18, 1969, in7

quoted ab antecedents, petitioner raises two line with the doctrine laid down in the jurisprudence
questions of law, to wit: above cited.

1. Whether or not an insolvent bank like the Fidelity Although petitioner's formulation of the second issue
Savings and Mortgage Bank may be adjudged to pay that it poses is slightly inaccurate and defective, we
interest on unpaid deposits even after its closure by likewise find the awards of moral and exemplary
the Central Bank by reason of insolvency without damages and attorney's fees to be erroneous.
violating the provisions of the Civil Code on
preference of credits; and
The trial court found, and it is not disputed, that there
was no fraud or bad faith on the part of petitioner
2. Whether or not an insolvent bank like the Fidelity bank and the other defendants in accepting the
Savings and Mortgage Bank may be adjudged to pay deposits of private respondents. Petitioner bank
moral and exemplary damages, attorney's fees and could not even be faulted in not immediately
costs when the insolvency is caused b the returning the amount claimed by private respondents
anomalous real estate transactions without violating considering that the demand to pay was made and
the provisions of the Civil Code on preference of Civil Case No. 84800 was filed in the trial court
credits. several months after the Central Bank had ordered
BANKING Cases 3.09.17

petitioner's closure. By that time, petitioner bank was believe that the decision rendered in the instant case
no longer in a position to comply with its obligations would be violative of the legal provisions on
to its creditors, including herein private respondents. preference and concurrence of credits. As the trial
Even the trial court had to admit that petitioner bank court puts it:
failed to pay private respondents because it was
already insolvent. Further, this case is not one of the
. . . But this order of payment should not be
specified or analogous cases wherein moral understood as raising these deposits to the
damages may be recovered. 9
category of preferred credits of the defendant
Fidelity Savings and Mortgage Bank but shall
There is no valid basis for the award of exemplary be paid in accordance with the Bank
damages which is supposed to serve as a warning to Liquidation Rules and Regulations embodied
other banks from dissipating their assets in in the Order of the. Court of First Instance of
anomalous transactions. It was not proven by private Manila, Branch XIII dated October 3, 1972
respondents, and neither was there a categorical (Exh. 3). . . . 14

finding made by the trial court, that petitioner bank

actually engaged in anomalous real estate WHEREFORE, the judgment appealed from is
transactions. The same were raised only during the hereby MODIFIED. Petitioner Fidelity Savings and
testimony of the bank examiner of the Central Mortgage Bank is hereby declared liable to pay
Bank, but no documentary evidence was ever
private respondents Timoteo and Olimpia Santiago
presented in support thereof. Hence, it was error for the sum of P90,000.00, with accrued interest in
the lower court to impose exemplary damages upon accordance with the terms of Savings Account
petitioner bank since, in contracts, such sanction Deposit No. 16-0536 (Exhibit A) and Certificate of
requires that the offending party acted in a wanton, Time Deposit No. 0210 (Exhibit B) until February 18,
fraudulent, reckless, oppressive or malevolent 1969. The awards for moral and exemplary damages,
manner. Neither does this case present the situation
and attorney's fees are hereby DELETED. No costs.
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 Melencio-Herrera, Paras, Padilla and Sarmiento, JJ.,
responsible for damages which may be reasonably concur.
attributed to the non-performance of the
obligation. Consequently, we reiterate that under the

premises and pursuant to the aforementioned 1
Annex A, Petition; Rollo, 42-67.
provisions of law, it is apparent that private 2
Rollo, 46.
respondents are not justifiably entitled to the payment 3
Ibid., 52-53.
of moral and exemplary damages and attorney's
105 SCRA 49 (1981).
113 SCRA 778 (1982).
fees. 6
G.R. Nos. 60705 and 60907, jointly decided on June 28, 1989.
Rollo, 33.
While we tend to agree with petitioner bank that
Ibid., 61-64.
Art. 2219, Civil Code.
private respondents' claims should he been filed in 10
Ibid., 57.
the liquidation proceedings in Civil Case No. 86005, 11
Art. 2232, Civil Code.
entitled "In Re: Liquidation of the Fidelity Savings and 12
Art. 2208, Id.
Mortgage Bank," pending before Branch XIII of the
Art. 2201, Id.
Rollo, 65.
then Court of First Instance of Manila, we do not