BPI vs.

Intermediate Appellate Court

GR No. L-66826, August 19, 1988
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 isNO DEPOSIT but some other contract.

BANK OF THE PHILIPPINE ISLANDS VS. COURT OF APPEALS

232 SCRA302 G.R. NO. 104612 MAY 10, 1994
FACTS:
Private respondents Eastern Plywood Corporation and Benigno Lim as officer of the
corporation, had an AND/OR joint account with Commercial Bank and Trust Co
(CBTC), the predecessor-in-interest of petitioner Bank of the Philippine Islands. Lim
withdraw funds from such account and used it to open a joint checking account (an
AND account) with Mariano Velasco. When Velasco died in 1977, said joint
checking account had P662,522.87. By virtue of an Indemnity Undertaking executed
by Lim and as President and General Manager of Eastern withdrew one half of this
amount and deposited it to one of the accounts of Eastern with CBTC.
Eastern obtained a loan of P73,000.00 from CBTC which was not secured. However,
Eastern and CBTC executed a Holdout Agreement providing that the loan was
secured by the Holdout of the C/A No. 2310-001-42 referring to the joint checking
account of Velasco and Lim.

Meanwhile, a judicial settlement of the estate of Velasco ordered the withdrawal of

the balance of the account of Velasco and Lim.
Asserting that the Holdout Agreement provides for the security of the loan obtained
by Eastern and that it is the duty of CBTC to debit the account of respondents to set
off the amount of P73,000 covered by the promissory note, BPI filed the instant
petition for recovery. Private respondents Eastern and Lim, however, assert that the
amount deposited in the joint account of Velasco and Lim came from Eastern and
therefore rightfully belong to Eastern and/or Lim. Since the Holdout Agreement
covers the loan of P73,000, then petitioner can only hold that amount against the
joint checking account and must return the rest.
ISSUE:
Whether BPI can demand the payment of the loan despite the existence of the
Holdout Agreement and whether BPI is still liable to the private respondents on the
account subject of the withdrawal by the heirs of Velasco.
RULING:
Yes, for both issues. Regarding the first, the Holdout Agreement conferred on CBTC
the power, not the duty, to set off the loan from the account subject of the
Agreement. When BPI demanded payment of the loan from Eastern, it exercised its
right to collect payment based on the promissory note, and disregarded its option
under the Holdout Agreement. Therefore, its demand was in the correct order.
Regarding the second issue, BPI was the debtor and Eastern was the creditor with
respect to the joint checking account. Therefore, BPI was obliged to return the
amount of the said account only to the creditor. When it allowed the withdrawal of
the balance of the account by the heirs of Velasco, it made the payment to the
wrong party. The law provides that payment made by the debtor to the wrong party
does not extinguish its obligation to the creditor who is without fault or negligence.
Therefore, BPI was still liable to the true creditor, Eastern.

Manuel M. Serrano v. Central Bank of the Philippines

G.R. No. L-30511
Facts:
Petitioner made a time deposit, for one year with 6% interest, of One Hundred Fifty
Thousand Pesos (P150,000.00) with the respondent Overseas Bank of Manila.
Concepcion Maneja also made a time deposit, for one year with 6-% interest, on
March 6, 1967, of Two Hundred Thousand Pesos (P200,000.00) with the same
respondent Overseas Bank of Manila.
On August 31, 1968, Concepcion Maneja, married to Felixberto M. Serrano, assigned
and conveyed to petitioner Manuel M. Serrano, her time deposit of P200,000.00 with
respondent Overseas Bank of Manila.
Notwithstanding series of demands for encashment of the aforementioned time
deposits from the respondent Overseas Bank of Manila, dating from December 6,
1967 up to March 4, 1968, not a single one of the time deposit certificates was
honored by respondent Overseas Bank of Manila.

In the case of Ramos vs. Central Bank of the Philippines,petitioner Manuel Serrano
filed on September 6, 1968, a motion to intervene on the ground that Serrano had a
real and legal interest as depositor of the Overseas Bank of Manila in the matter in
litigation in that case. This was denied on the ground that his claim as depositor of
the Overseas Bank of Manila should properly be ventilated in the Court of First
Instance, and if this Court were to allow Serrano to intervene as depositor,
thousands of other depositors would follow and thus cause an avalanche of cases in
this Court.
Issue:
Whether or not plaintiff is entitled to the relief sought.
Held:
This case isfor the recovery of time deposits plus interest from respondent Overseas
Bank of Manila, and recovery of damages against respondent Central Bank for its
alleged failure to strictly supervise the acts of the other respondent Bank and
protect the interests of its depositors by virtue of the constructive trust created
when respondent Central Bank required the other respondent to increase its
collaterals for its overdrafts said emergency loans, said collaterals allegedly
acquired through the use of depositors money.
Claims of these nature are not proper in actions for mandamus and prohibition as
there is no shown clear abuse of discretion by the Central Bank in its exercise of
supervision over the other respondent Overseas Bank of Manila, and if there was,
petitioner here is not the proper party to raise that question, but rather the
Overseas Bank of Manila.
Bank deposits are in the nature of irregular deposits. They are really loans because
they earn interest. All kinds of bank deposits, whether fixed, savings, or current are
to be treated as loans and are to be covered by the law on loans. 14 Current and
savings deposit are loans to a bank because it can use the same. The petitioner
here in making time deposits that earn interests with respondent Overseas Bank of
Manila was in reality a creditor of the respondent Bank and not a depositor. The
respondent Bank was in turn a debtor of petitioner. Failure of he respondent Bank to
honor the time deposit is failure to pay s obligation as a debtor and not a breach of
trust arising from depositary's failure to return the subject matter of the deposit.
Petition is dismissed.

LUA KIAN V. MANILA RAILROAD COMPANY

G.R. No. L-23033 / 19 SCRA 5, 5 January 1967
FACTS:
Manila Port Service, the arrastre operator, is a subsidiary of defendant Manila
Railroad Company.
MPS received in Jan. 1960 shipments of Carnation evaporated milk for two
consignees, Lua Kian and Cebu United. According to their respective bills of lading,
Luan Kian was supposed to receive 2,000 cases but only received 1,829 (171 short
of 2,000) while Cebu United was supposed to receive 3,000 cases but received
3,171. The excess 171 cases were marked "Cebu United".

Accordingly this situation placed the defendant arrastre operator in a dilemma, for
should it deliver them to Lua Kian the goods could be claimed by the consignee
Cebu United Enterprises whose markings they bore, and should it deliver according
to markings, to Cebu United Enterprises, it might be sued by the consignee, Lua
Kian whose bill of lading indicated that it should receive 171 cases more. The
Management Contract even exempts exempts the arrastre operator from
responsibility for misdelivery or non-delivery due to improper or insufficient
marking.
ISSUE:
Is MPS liable for the short-delivery to Lua Kian?
HELD:
Yes.
The legal relationship between an arrastre operator and the consignee is akin to
that of a depositor and warehouseman. As custodian of the goods discharged from
the vessel, it was defendant arrastre operator's duty, like that of any ordinary
depositary, to take good care of the goods and to turn them over to the party
entitled to their possession. Under this particular set of circumstances, said
defendant should have withheld delivery because of the discrepancy between the
bill of lading and the markings and conducted its own investigation, not unlike that
under Section 18 of the Warehouse Receipts Law, or called upon the parties, to
interplead, such as in a case under Section 17 of the same law, in order to
determine the rightful owner of the goods.
Notwithstanding Section 12 of the Management Contract exempting the arrastre
from liability, the court cannot excuse the defendant from liability because the bill
of lading showed that only 3,000 cases were consigned to Cebu United Enterprises.
The fact that the excess of 171 cases were marked for Cebu United Enterprises and
that the consignment to Lua Kian was 171 cases less than the 2,000 in the bill of
lading, should have been sufficient reason for the MPS to withhold the goods
pending determination of their rightful ownership.

ANGEL JAVELLANA vs. JOSE LIM, ET AL.

FACTS:
Jose, Ceverino and Domingo Lim, defendants, executed a document in favor of
Angel Javellana, plaintiff-appellee, wherein it states that:
they, defendants, have received, as a deposit, without interest, money from
plaintiff-appellee and agreed upon a date when they will return the money. Upon the
stipulated due date, defendants asked for an extension to pay and binding
themselves to pay 15% interest per annum on the amount of their indebtedness, to
which the plaintiff-appellee acceded.

The defendants were not able to pay the full amount of their indebtedness
notwithstanding the request made by plaintiff-appellee. As they were able to pay
P1,000,on May 15, 1900 while the plaintiff incurred damages amounting to P830
since Jaunary 20, 1898.
The lower court ruled in favor of plaintiff-appellee for the recovery of the amount of
P5,714.44. While a motion for new trial was granted.
ISSUE:
Whether the agreement entered into by the parties is one of loan or of deposit?
HELD:
The document executed was a contract of loan. The court affirmed the trial courts
decision and favoredJavellana, and directed the defendants to pay the debt and
interest.
Moreover, for the reason above set forth it may, as a matter of course, be inferred
that there was no renewal of the contract deposited converted into a loan, because,
as has already been stated, the defendants received said amount by virtue of real
loan contract under the name of a deposit, since the so-called bailees were
forthwith authorized to dispose of the amount deposited. This they have done, as
has been clearly shown.
Where money, consisting of coins of legal tender, is deposited with a person and the
latter is authorized by the depositor to use and dispose of the same, the agreement
is not a contract of deposit, but a loan. A subsequent agreement between the
parties as to interest on the amount said to have been deposited, because the same
could not be returned at the time fixed therefor, does not constitute a renewal of an
agreement of deposit, but it is the best evidence that the original contract entered
into between therein was for a loan under the guise of a deposit. In this case, the
appleants were lawfully authorized to make use of the amount deposited, which
they have done. Jose Lim came to the plaintiff to be able to ask for an extension of
payment since he have used the amount deposited to him, with the condition that
15% interest shall we included in the contract.
The law provides:
Article 1767 of the Civil Code provides that
The depository cannot make use of the thing deposited without the express
permission of the depositor.
Otherwise he shall be liable for losses and damages.
Article 1768 also provides that
When the depository has permission to make use of the thing deposited, the
contract loses the character of a deposit and becomes a loan or bailment.
The permission shall not be presumed, and its existence must be proven.

SILVESTRA BARON V. PABLO DAVID

G.R. Nos. L-26948 and L-26949
October 8, 1927
FACTS:
The defendant owns a rice mill, which was well patronized by the rice growers of the
vicinity.
On January 17, 1921, a fire occurred that destroyed the mill and its contents, and it
was some time before the mill could be rebuilt and put in operation again.
Silvestra Baron (P1) and Guillermo Baron (P2) each filed an action for the recovery
of the value of their palay (P5,238 and P5,734, respectively) from the defendant,
and alleged that: the cavans of palay have been sold by both plaintiffs to the David
in the year 1920 and the palay was delivered to him at his special request, with a
promise of compensation at the highest price per cavan.
David claims that the palay was deposited subject to future withdrawal by the
depositors or to some future sale, which was never effected. He also contended that
in order for the plaintiffs to recover, it is necessary that they should be able to
establish that the plaintiffs' palay was delivered in the character of a sale, and that
if, on the contrary, the defendant should prove that the delivery was made in the
character of deposit, the defendant should be absolved.
ISSUE:
WON there was deposit.
HELD:
NO. Art. 1978 states that when the depositary has permission to use the thing
deposited, the contract loses the concept of a deposit and becomes a loan or
commodatum, except where safekeeping is still the principal purpose of the
contract. The permission shall not be presumed, and its existence must be proved.
When the palay in question was placed by the plaintiffs in the defendant's mill there
was the understanding that the defendant was at liberty to convert it into rice and
dispose of it at his pleasure. The mill was actively running during the entire season,
and as palay was daily coming in from many customers and as rice was being
constantly shipped by the defendant to Manila, or other rice markets, it was
impossible to keep the plaintiffs' palay segregated. In fact the defendant admits
that the plaintiffs' palay was mixed with that of others.
It is quite certain that all of the plaintiffs' palay, which was put in before June 1,
1920, been milled and disposed of long prior to the fire of January 17, 1921.
Furthermore, the proof shows that when the fire occurred there could not have been
more than about 360 cavans of palay in the mill, none of which by any reasonable
probability could have been any part of the palay delivered by the plaintiffs.
The defendant then is bound to account for the value of the subject palay, and his
liability was not extinguished by the occurence of the fire.

Dissenting:
Johns dissented to the weight given by the court on the perjured statements of
David than those against the proofs of two elderly individuals as to the price of the
palay and who reposed their trust and confidence to their nephew.

SPOUSES TIRSO I. VINTOLA and LORETO DY VINTOLA, defendants-appellants,

vs.
INSULAR BANK OF ASIA AND AMERICA, plaintiff-appellee.
FACTS:
Spouses Vintola (VINTOLAS) applied for and were granted a domestic letter of credit
by the Insular Bank of Asia and America (IBAA). The Letter of Credit authorized the
bank to negotiate for their account drafts drawn by their supplier, one Stalin Tan, on
Dax Kin International for the purchase of puka and olive seashells. VINTOLAS
received from Stalin Tan the puka and olive shells and executed a Trust Receipt
agreement with IBAA. Under that Agreement, the VINTOLAS agreed to hold the
goods in trust for IBAA as the "latter's property with liberty to sell the same for its
account, and "incase of sale" to turn over the proceeds. Having defaulted on their
obligation, IBAA demanded payment from the VINTOLAS.
The VINTOLAS, who were unable to dispose of the shells, responded by offering to
return the goods. IBAA refused to accept the merchandise, and due to the continued
refusal of the VINTOLAS to make good their undertaking, IBAA charged them with
Estafa for having misappropriated, misapplied and converted for their own personal
use and benefit the aforesaid goods.
The trial court acquitted the VINTOLAS of the offense charged as they turned over
the seashells to the custody of the trial court to disproved the claim of
misappropriation. IBAA commenced a civil action to recover the value of the goods.
At first court dismissed the case holding that the complaint was barred by the
judgment of acquittal in the criminal but was granted through reconsideration. The
CFI-Cebu certified the case to the SC as the issue involves a question of law.
Contention of Vintolas:
(1) The obligation to IBAA has been extinguished since they were unable to dispose the
seashells and they have relinguished possession thereof to IBAA, as owner of the
goods, by depositing them to court.
(2) The acquittal from the estafa case, also extinguishes civil liability since the IBAA did
not reserved their right to enforce a separate civil action.
ISSUE :
Whether or not the Vintolas can return the goods/ merchandise to IBAA as payment
for the trust receipt?
RULINGS :

NO. The return or non disposal of the thing secured by the letter of credit dies not
extinguish the liability of the borrower to pay. The court affirmed the ruling of CFICebu that favored the payment of 72,982.27 plus 14% interest.
A letter of credit-trust receipt arrangement is endowed with its own distinctive
features and characteristics. Under that set-up, a bank extends a loan covered by
the Letter of Credit, with the
trust receipt as a security for the loan. In other words, the transaction
involves a loan feature represented by the letter of credit, and a security feature
which is in the covering trust receipt.
A trust receipt, therefore, is a security agreement, pursuant to which a bank
acquires a "security interest" in the goods. "It secures an indebtedness and there
can be no such thing as security interest that secures no obligation.
DEFINITION:
"Security Interest" means a property interest in goods, documents or instruments to
secure performance of some obligations of the entrustee or of some third persons to
the entruster and includes title, whether or not expressed to be absolute, whenever
such title is in substance taken or retained for security only.
As elucidated in Samo vs. People "a trust receipt is considered as a security
transaction intended to aid in financing importers and retail dealers who
do not have sufficient funds or resources to finance the importation or
purchase of merchandise, and who may not be able to acquire credit except
through utilization, as collateral of the merchandise imported or purchased."
The trust receipt arrangement did not convert the IBAA into an investor; the latter
remained a lender and creditor. IBAA was merely the holder of a security title for the
advances in made to Vintolas. The property acquired shall remain to be owned by
the Vintolas and should be disposed on their own risk. The IBAA is not the factual
owner of the goods, the VINTOLAS cannot justifiably claim that because they have
surrendered the goods to IBAA and subsequently deposited them in the custody of
the court, they are absolutely relieved of their obligation to pay their loan because
of their inability to dispose of the goods. The fact that they were unable to sell the
seashells in question does not affect IBAA's right to recover the advances it had
made under the Letter of Credit.

Ramon Gonzales v. Go Tiong,

G.R. No. L-11776
FACTS:
Go Tiong owned a rice mill and warehouse, located at Mabini, Urdaneta, Pangasinan.
He obtained a license of a bonded businessman with Luzon Surety Co., with
conditions he failed to fulfill. The warehouse and palay deposited therein were
insured with the Alliance Surety and Insurance Company. Ramon Gonzales
deposited palay to Go Tiong even before he got the license who later demanded the
value of his deposits. But Go Tiong failed to give him his value until fire burned
down the warehouse, with sacks in excess of that was authorized under his license.

The receipts issued to Gonzales were ordinary receipts and not the warehouse
receipts as defined by Warehouse receipts act. Plaintiff filed their claims with the
Bureau of Commerce and with the proceeds of the insurance policy, BOC paid off
some claims. Plaintiffs counsel withdrew the claims, because according to court
nothing came from plaintiff's efforts to have his claim paid, inconsistent with what
Go Tiong claimed that it was denied. Gonzales filed claims both against Gonzales
and Luzon Surety, and renewed his claim with BOC. Gonzales and Go Tiong entered
into a contract of amicable settlement to the effect that upon the settlement of all
accounts, but upon failure to comply, Gonzales prosecuted his court action. Court
ruled in favor of Gonzales.
Hence, this appeal.
ISSUE:
Is the plaintiffs claim covered by the Civil Law, and not Bonded Warehouse Act for
the reason that, Go Tiong issued to plaintiff were ordinary receipts, not the
warehouse receipts contemplated by the Warehouse Receipts Law, and because the
deposits of palay of plaintiff were gratuitous?
RULING:
Consequently, any deposit made with him as a bonded warehouseman must
necessarily be governed by the provisions of Act No. 3893. Though it is desirable
that receipts issued by a bonded warehouseman should conform to the provisions of
the Warehouse Receipts Law, said provisions are not mandatory and indispensable
in the sense that if they fell short of the requirements of the Warehouse Receipts
Act, then the commodities delivered for storage become ordinary deposits and will
not be governed by the provisions of the Bonded Warehouse Act. As the trial court
well observed, as far as Go Tiong was concerned, the fact that the receipts issued
by him were not "quedans" is no valid ground for defense because he was the
principal obligor. Furthermore, as found by the trial court, Go Tiong had repeatedly
promised plaintiff to issue to him "quedans" and had assured him that he should not
worry; and that Go Tiong was in the habit of issuing ordinary receipts (not
"quedans") to his depositors. Considering the fact, as already stated, that prior to
the burning of the warehouse, plaintiff demanded the payment of the value of his
palay from Go Tiong on two occasions but was put off without any valid reason, it is
illogical and unreasonable to hold that the presumption of negligence in case of this
kind is rebutted by the bailee by simply proving that the property bailed was
destroyed by an ordinary fire which broke out on the bailee's own premises, without
regard to the care exercised by the latter to prevent the fire, or to save the property
after the commencement of the fire. Besides, as observed by the trial court, the
defendant violated the terms of his license by accepting for deposit palay in excess
of the limit authorized by his license, which fact must have increased the risk.
Appealed decision affirmed.

Consolidated Terminals Inc. vs Artex Development Co.

G.R. No. L-25748 March 10, 1975

FACTS:
Consolidated Terminals, Inc. (CTI) CTI was the operator of a customs bonded
warehouse located at Port Area, Manila. It received on deposit one hundred ninetythree (193) bales of high density compressed raw cotton valued at P99,609.76. It
was understood that CTI would keep the cotton in behalf of Luzon Brokerage
Corporation until the consignee thereof, Paramount Textile Mills, Inc., had opened
the corresponding letter of credit in favor of shipper, Adolph Hanslik Cotton of
Corpus Christi, Texas.
Allegedly by virtue of a forged permit to deliver imported goods, purportedly issued
by the Bureau of Customs, Artex was able to obtain delivery of the bales of cotton
on November 5 and 6, 1964 after paying CTI P15,000 as storage and handling
charges. At the time the merchandise was released to Artex, the letter of credit had
not yet been opened and the customs duties and taxes due on the shipment had
not been paid.
CTI, in its original complaint, sought to recover possession of the cotton by means of
a writ of replevin. The writ could not be executed. CTI then filed an amended
complaint by transforming its original complaint into an action for the recovery from
Artex of P99,609.76 as compensatory damages, P10,000 as nominal and exemplary
damages and P20,000 as attorney's fees.
The trial judge ruled in favor of the motion to dismiss by Artex.
CTI in this appeal contends that, as warehouseman, it was entitled to the possession
(should be repossession) of the bales of cotton; that Artex acted wrongfully in
depriving CTI of the possession of the merchandise because Artex presented a
falsified delivery permit, and that Artex should pay damages to CTI.
The only statutory rule cited by CTI is section 10 of the Warehouse Receipts Law
which provides that "where a warehouseman delivers the goods to one who is not in
fact lawfully entitled to the possession of them, the warehouseman shall be liable as
for conversion to all having a right of property or possession in the goods.
Issue:
Whether or not CTI is entitled to the possession of the bales of cotton, as a
warehouseman.
HELD:
No. CTI's appeal has not merit. Its amended complaint does not clearly show that,
as warehouseman, it has a cause of action for damages against Artex. The real
parties interested in the bales of cotton were Luzon Brokerage Corporation as
depositor, Paramount Textile Mills, Inc. as consignee, Adolph Hanslik Cotton as
shipper and the Commissioners of Customs and Internal Revenue with respect to
the duties and taxes. These parties have not sued CTI for damages or for recovery
of the bales of cotton or the corresponding taxes and duties.

The case might have been different if it was alleged in the amended complaint that
the depositor, consignee and shipper had required CTI to pay damages, or that the
Commissioners of Customs and Internal Revenue had held CTI liable for the duties
and taxes. In such a case, CTI might logically and sensibly go after Artex for having
wrongfully obtained custody of the merchandise.
In other words, on the basis of the allegations of the amended complaint, the lower
court could not render a valid judgment in accordance with the prayer thereof. It
could not render such valid judgment because the amended complaint did not
unequivocally allege what right of CTI was violated by Artex, or, to use the familiar
language of adjective law, what delict or wrong was committed by Artex against CTI
which would justify the latter in recovering the value of bales of cotton even if it was
not the owner thereof.