Larrobis, Jr vs Philippine Veterans Bank Facts: Petitioner spouses contracted a monetary loan with respondent Philippine Veterans Bank,

evidenced by a promissory note, due and demandable on February 27, 1981, and secured by a Real Estate Mortgage executed on their lot together with the improvements thereon. On March 23, 1985, the respondent bank went bankrupt and was placed under receivership/liquidation by the Central Bank from April 25, 1985 until August 1992. On August 23, 1985, the bank, through Francisco Go, sent the spouses a demand letter which pertains to the insurance premiums advanced by respondent bank over the mortgaged property of petitioners. On August 23, 1995, more than fourteen years from the time the loan became due and demandable, respondent bank filed a petition for extrajudicial foreclosure of mortgage of petitioners property. On October 18, 1995, the property was sold in a public auction by Sheriff Arthur Cabigon with Philippine Veterans Bank as the lone bidder. On April 26, 1996, petitioners filed a complaint with the RTC, Cebu City, to declare the extra-judicial foreclosure and the subsequent sale thereof to respondent bank null and void. On April 17, 1998, the RTC dismissed the complaint on the ground that defendant bank was placed under receivership by the Central Bank from April 1985 until 1992. The defendant bank was given authority by the Central Bank to operate as a private commercial bank and became fully operational only on August 3, 1992. From April 1985 until July 1992, defendant bank was restrained from doing its business. The defendant banks right to foreclose the mortgaged property prescribes in ten (10) years but such period was interrupted when it was placed under receivership. Article 1154 of the New Civil Code to this effect provides: "The period during which the obligee was prevented by a fortuitous event from enforcing his right is not reckoned against him." Issue: Whether or not the period within which the respondent bank was placed under receivership and liquidation proceedings may be considered a fortuitous event which interrupted the running of the prescriptive period in bringing actions. Held: Respondents claims that because of a fortuitous event, it was not able to exercise its right to foreclose the mortgage on petitioners property; and that since it was banned from pursuing its business and was placed under receivership from April 25, 1985 until August 1992, it could not foreclose the mortgage on petitioners property within such period since foreclosure is embraced in the phrase "doing business," are without merit. While it is true that foreclosure falls within the broad definition of "doing business," that is: a continuity of commercial dealings and arrangements and contemplates to that extent, the performance of acts or words or the exercise of some of the functions normally incident to and in progressive prosecution of the purpose and object of its organization. it should not be considered included, however, in the acts prohibited whenever banks are "prohibited from doing business" during receivership and liquidation proceedings. This we made clear in Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank of the Philippines24 where we explained that: Section 29 of the Republic Act No. 265, as amended known as the Central Bank Act, provides that when a bank is forbidden to do business in the Philippines and placed under receivership, the person designated as receiver shall immediately take charge of the banks assets and liabilities, as expeditiously as possible, collect and gather all the assets and administer the same for the benefit of its creditors, and represent the bank personally or through counsel as he may retain in all actions or proceedings for or against the institution, exercising all

the powers necessary for these purposes including, but not limited to, bringing and foreclosing mortgages in the name of the bank. And in Provident Savings Bank vs. Court of Appeals, we further stated that: When a bank is prohibited from continuing to do business by the Central Bank and a receiver is appointed for such bank, that bank would not be able to do new business, i.e., to grant new loans or to accept new deposits. However, the receiver of the bank is in fact obliged to collect debts owing to the bank, which debts form part of the assets of the bank. The receiver must assemble the assets and pay the obligation of the bank under receivership, and take steps to prevent dissipation of such assets. Accordingly, the receiver of the bank is obliged to collect pre-existing debts due to the bank, and in connection therewith, to foreclose mortgages securing such debts. This is consistent with the purpose of receivership proceedings, i.e., to receive collectibles and preserve the assets of the bank in substitution of its former management, and prevent the dissipation of its assets to the detriment of the creditors of the bank. It is not disputed that Philippine Veterans Bank was placed under receivership by the Monetary Board of the Central Bank by virtue of Resolution No. 364 on April 25, 1985, pursuant to Section 29 of the Central Bank Act on insolvency of banks. There is also no truth to respondents claim that it could not continue doing business from the period of April 1985 to August 1992, the time it was under receivership. As correctly pointed out by petitioner, respondent was even able to send petitioners a demand letter, through Francisco Go, on August 23, 1985 for "accounts receivable in the total amount of P6,345.00 as of August 15, 1984" for the insurance premiums advanced by respondent bank over the mortgaged property of petitioners. How it could send a demand letter on unpaid insurance premiums and not foreclose the mortgage during the time it was "prohibited from doing business" was not adequately explained by respondent. As we held in Philippine Veterans Bank vs. NLRC, a labor case which also involved respondent bank, all the acts of the receiver and liquidator pertain to petitioner, both having assumed petitioners corporate existence. Petitioner cannot disclaim liability by arguing that the non-payment of MOLINAs just wages was committed by the liquidators during the liquidation period.36 However, the bank may go after the receiver who is liable to it for any culpable or negligent failure to collect the assets of such bank and to safeguard its assets. Lipana vs. Development Bank of the Philippines G.R. No. 73884, September 24, 1987 Facts: Petitioners opened and maintained both time and savings deposits with the respondent Development Bank of Rizal. When some of the time deposit certificates matured, petitioners were not able to cash them but instead were issued a manager's check which was dishonored upon presentment. Demands for the payment of both time and savings deposits have failed. Hence, petitioners filed with the RTC a collection suit with prayer for issuance of a writ of preliminary attachment which was granted by the court. The RTC rendered judgment in favor of petitioners. Meanwhile, the Monetary Board placed the respondent bank under receivership. Subsequently, the motion for execution pending appeal filed by petitioners was granted by the court but was also stayed by the trial judge. The motion filed by petitioners to lift the stay order having been denied, this petition was filed.

Issue: Whether or not respondent judge could legally stay execution of judgment that has already become final and executor Held: Yes. Petition dismissed. After the Monetary Board has declared that a bank is insolvent and has ordered it to cease operations, the Board becomes the trustee of its assets for the equal benefit of all the creditors, including depositors. The assets of the insolvent banking institution are held in trust for the equal benefit of all creditors, and after its insolvency, one cannot obtain an advantage or a preference over another by an attachment, execution or otherwise. To execute the judgment would unduly deplete the assets of respondent bank to the obvious prejudice of other depositors and creditors. Philippine Veterans Bank vs. NLRC [G.R. No.130439. October 26, 1999] Facts: In 1983, petitioner Philippine Veterans Bank was placed under receivership by the Central Bank (now Bangko Sentral). Petitioner was subsequently placed under liquidation on 15 June 1985. Consequently, its employees, including private respondent Dr. Jose Teodorico V. Molina, were terminated from work and given their respective separation pay and other benefits. To assist in the liquidation, some of petitioners former employees were rehired, among them Molina, whose re-employment commenced on 15 June 1985. On 11 May 1991, MOLINA filed a complaint against members of the liquidation team. The complaint demanded the implementation of Wage Orders Nos. NCR-01 and NCR-02 (hereafter W.O. 1 and W.O. 2) as well as moral damages and attorneys fees in the amount of P300,000. Meanwhile, W.O. 1 took effect on November 1990, prescribing a P17-increase in the daily wage of employees whose monthly salary did not exceed P3,802.08. On the other hand, W.O. 2 became mandated a P12-increase in the daily wage of employees whose monthly salary did not exceed P4,319.16. Molina claimed that his salary should have been adjusted in compliance with said wage orders. The liquidation team countered that MOLINA was not entitled to any salary increase because he was already receiving a monthly salary of P6,654.60. Labor Arbiter rejected the 26.16 factor used by the liquidators in computing the daily wage of MOLINA, adopting instead the factor of 365 days. Consequently, they were ordered to pay Molina the wage differentials due him under W.O. 1 and W.O. 2. On appeal, the NLRC sustained the labor arbiters ruling after concluding that Molina was a regular employee of petitioner with a basic monthly salary of P3,754.60 at the time of his dismissal on 31 January 1992. He was, therefore, entitled to the wage increases mandated by the aforesaid wage orders. Issue: Whether Molina is entitled to wage increase computation that used the 365 days factor. SC Ruling:

Molina is entitled to the wage increase computation using the 365 days as factor. The documents attached show that the Bank has been consistently using the factor of 365 days in computing your equivalent monthly salary prior to its being placed under receivership by the Central Bank. This is evident in the wage and allowance increases granted under previous Presidential Decrees and Wage Orders, which were given by the Bank on monthly basis, i.e., where the rest days are unworked but paid. This is also indicated in the appointment and service records of bank personnel who started out as daily paid employees and were eventually promoted as permanent employees with fixed monthly salaries. However, when R.A. 6640 went into force, the Bank unilaterally reduced the factor to 262 instead of maintaining factor 365 as was the practice/policy long before the effectivity of the Act. And when R.A 6727 took effect, the Bank reverted to the old practice/policy of using factor 365 days in computing your equivalent monthly rate salary. May we add that the old practice of the bank in using factor 365 days in a year in determining equivalent monthly salary cannot unilaterally be changed by your employer without the consent of the employees, such practice being now a part of the terms and conditions of your employment. An employment agreement, whether written or unwritten, is a bilateral contract and as such either party thereto cannot change or amend the terms thereof without the consent of the other party thereto. It is clear that respondent is entitled to the wage increase under R.A. 6440 computed on the basis of 365 paid days and to the corresponding salary differentials as a result of the application of this factor. Evidently, the use of the 365 factor is binding and conclusive, forming as it did part of the employment contract. To abandon such policy and revert to its old practice of using the 26.16 factor would be a diminution of a labor benefit, which is prohibited by the Labor Code. It cannot be doubted that the 365 factor favors petitioners employees because it results in a higher determination of their monthly salary.
Provident Savings Bank v. Court of Appeals, 222 SCRA 125 (1993) FACTS On 16 February 1967, the spouse Lorenzo K. Guarin and Liwayway J. Guarin (Guarins) obtained a loan from provident bank in the amount of P62, 500.00 payable on or before 20 June 1967. As security for the loan, they executed a real estate mortgage in favor of provident bank over aparcel of land. In September, 1972, provident bank was placed under receivership by the Central Bank of the Philippines until 27 July 1981 when the receivership was set aside by the Honorable Supreme Court. On 10 July 1986, the Guarins and respondent Wilson Chua executed a Deed of Absolute Sale With Assumption of Mortgaged whereby the Guarins sold the mortgaged property to Guarins sold the appellant for the sum of P250,000.00 and plaintiff-appellant undertook to assume the mortgaged obligation of the Guarins with defendant-appellant which as of 15 February 1985 amounted to P591,088.80 Wilson Chua wrote to Provident bank that the former had purchased the mortgaged property from the Guarin's and requesting that the owner's copy of TCT in the possession of defendant-appellant be released to him so that he can register the sale and have the title to the property transferred in his name. He likewise, informed defendant-appellant that it had lost whatever right or action had against the Guarins because of prescription. (Defendantreplied on 10 August 1987 stating the reasons why they could not comply with plaintiffappellant's demands Provident bank argues that the prescriptive period was suspended due to the prohibition to do business issued by the Monetary Board.

ISSUE Whether a foreclose proceeding falls within the purview of the phrase "doing business"? Whether the prescriptive period for the mortage was suspended? RULING YES to both. Doing business means a continuity of commercial dealings and arrangements, and contemplates to that extent, the exercise of some of the words or the normally incident to, and in progressive prosecution of, the purpose and object of its organizations. With banks it also involves the collection of debts and foreclosure of mortgages. Generally, an appointment of a receiver does not dissolve the corporation nor does it interfere with the exercise of its corporate rights. But this principles is, of course, applicable to a situation where there is no restraint imposed on the corporation, unlike in the case at bar where petitioner Provident Savings Bank was specifically forbidden and immobilized from doing business in the Philippines on September 15, 1972 1981 when the decision in Central Bank vs. Court of Appeals was rendered. Having arrived at the conclusion that the foreclosure is part of bank's business activity which could not have been pursued by the receiver then because of the circumstances discussed in the Central Bank case, we are thus convinced that the prescriptive period was legally interrupted by fuerza mayor in 1972 on account on the prohibition imposed by the Monetary Board against petitioner from transacting business, until the directive of the board was nullified in 1981. Indeed, the period during which the obligee was prevented by a caso fortuito from enforcing his right is not reckoned against him (Article 1154, New Civil Code). When prescription is interrupted, all the benefits acquired so far from the possession cease and when prescription starts anew, it will be entirely a new one. Also when respondent wrote to the Guarins requesting that the former be allowed to pay off the loan of the mortgage, he in turn acknowledged the existing debt thereby suspending the prescriptive period for the second time.

Fidelity Savings and Mortgage Bank vs Cenzon Date: April 5, 1990 Petitioner: Fidelity Savings and Mortgage Bank Respondents: Hon Pedro Cenzon and Spouses Timoteo and Olimpia Santiago Ponente: Regalado Facts: 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. The court dismissed the complaint as against Central Bank of the Philippines, Eusebio Lopez, Jr., Arsenio S. Lopez, Jr., Arsenio M. Lopez, Sr. and Bibiana S. Lacuna. The private respondents deposited with the Fidelity Savings Bank the amount of P50,000 (savings account). Also, private respondents deposited another P50,000 under Certificate of Time Deposit No. 0210. The Monetary Board found the bank insolvent and issued Resolution No. 350, (a) forbidding to do business in the Philippines and (b) instructing the Acting Superintendent of Banks to take charge of the assets. The PDIC paid the private respondents P10,000 on the aggregate deposits of P100,000. The MB later issued its Resolution No. 2124 directing the liquidation of the affairs of the bank. The liquidation proceeding is presently pending in the CFI of Manila.

Issue: WON an insolvent 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 Held: No Ratio: 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. The Overseas Bank of Manila vs. CA: "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." 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, is in line with the doctrine laid down in the jurisprudence above cited. Issue: WON an insolvent bank may be adjudged to pay moral and exemplary damages, attorney's fees and costs when the insolvency is caused by the anomalous real estate transactions without violating the provisions on preference of credits. Held: No Ratio: 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. The 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, the 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 the bank failed to pay private respondents because it was already insolvent. Further, this case is not one of the specified or analogous cases wherein moral damages may be recovered. 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 the bank actually engaged in anomalous real estate transactions. The same were raised only during the testimony of the bank examiner of the Central Bank, but no documentary evidence was ever presented. Hence, it was error for the lower court to impose exemplary damages upon the bank since, in contracts, such sanction requires that the offending party acted in a wanton, fraudulent,

reckless, oppressive or malevolent manner. Neither does this case present the situation where attorney's fees may be awarded. 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. Consequently, we reiterate that under the premises and pursuant to the 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 have 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.
People vs. Dick Ong204 SCRA 942 (1991) Facts: Accused Dick Ong, one of the depositors of the Home Savings Bank and Trust Company (HSBTC) opened a savings account with HSBTC with an initial deposit of P22.14 in cash and P10, 000.00 in check. Ong was allowed to withdraw from his savings account with the Bank the sum of P5,000.00, without his check undergoing the usual and reglementary clearance. The withdrawal slip was signed and approved by Lino Morfe, then the Branch Manager, and accused Lucila Talabis, the Branch Cashier. Subsequently, Ong deposited eleven checks in his savings account with the Bank and against which he made withdrawals against its amount. Again, the withdrawal of the amount by Ong was made before said checks were cleared and the Bank had collected their amounts and with the approval of Talabis. However, when the Bank presented the eleven checks issued, deposited and against which Ong made withdrawals against its amounts, to their respective drawee banks for payment, they were all dishonored for lack or insufficiency of funds. Because of this, the Bank filed a criminal action for Estafa against Ong, and the Banks officer in charge Villaran and Talabis. Talabis testified that the approval of the withdrawals of Ong against his uncleared checks was in accordance with the instruction of their then bank manager and that it is a kind of accommodation given to Ong and also a common practice of the Bank.RTC ruled Ong as guilty for the crime of estafa but acquitted Villarin and Talabis as their guilt were not proven beyond reasonable doubt. CA affirmed RTCs decisions. Issue: 1. What is the nature of bank deposits? 2. WON Ong is guilty of Estafa. No. Ruling: 1. The Supreme Court held that bank deposits are in the nature of irregular deposits.Bank deposits are really loans because they earn interest. Whether fixed, savings, or current, all bank Adepositsare to be treated as loans and are to be covered by the law on loans. 2. The elements of this kind of estafa are the following: (1) postdating or issuance of a check in payment of an obligation contracted at the time the check was issued; (2) lack or insufficiency of funds to cover the check; and(3) damage to the payee thereof. In this case, the fact was established that Ong either issued or indorsed the subject checks. However, it must be remembered that the reason for the conviction of an accused of the crime of estafa is his guilty knowledge of the fact that he had no funds in the bank when he negotiated the spurious check. In the present case, however, the prosecution failed to prove that Ong had knowledge with respect to the check she indorsed. Moreover, it has also been proven that it was the Bank which granted him a drawn against uncollected deposit (DAUD) privilege without need of any pretensions on his part. The privilege this privilege was not only for the subject checks, but for other past transactions. If ever, he indeed acted fraudulently, he could not have done so without the active cooperation of the Banks employees. Since Talabis and Villaran were declared innocent of the crimes charged against them, the same should be said for the Ong.

Thus, Ong cannot be held criminally liable against the Bank. He can only be held civilly liable as the Bank incurred damages BPI v. CA, 232 SCRA 302 (1994) DOCTRINE: A bank is under no duty or obligation to make the application. To apply the deposit to the payment of the loan is a privilege, a right to set- off which the bank has the option to exercise. FACTS Benigno Lim had 2 accounts at CBTC (BPI's predecessor): One jointly with Eastern Plywood Corporation, of which he was an officer, and another joint checking account with Mariano Velasco. Subsequently, Velasco died in April 1977. In August 1977, Eastply and Lim obtained a loan from CBTC for P73,000 evidenced by a promissory note and secured by a Holdout Agreement giving CBTC the power to take funds from the joint account with Velasco (approx P331,000) and apply the same as payment for the loan. In the meantime, a case for the settlement of Velasco's estate was filed wherein the whole balance in the joint account of Velasco and Lim was claimed as part of Velasco's estate. The intestate court granted the urgent motion of the heirs of Velasco to withdraw the deposit under the joint account. In 1980, CBTC merged with BPI. In 1987, BPI filed a complaint against Lim and Eastern demanding payment of the promissory note for P73,000.00. Lim and Eastern, in turn, filed a counterclaim against BPI for the return of the balance in the disputed account subject of the Holdout Agreement. The Court of Appeals rendered a decision stating: 1) On the claim: It was the duty of BPI to debit the account of the defendants under the promissory note to set off the loan even though the same has no fixed maturity. 2) On the counterclaim: The settlement of Velasco's estate had nothing to do with the claim of the defendants for the return of the balance of their account with BPI as they were not privy to that case, and that the defendants, as depositors of CBTC/BPI, are the latter's creditors; hence, BPI should have protected the defendants' interest in the case when the said account was claimed by Velasco's estate. It then ordered BPI to pay defendants the amount of representing the outstanding balance in the bank account of defendants. ISSUES 1) Whether BPI was duty-bound to debit the account of the defendants to set off the loan because of the Holdout Agreement, and 2) Whether the counterclaim for the amount in the joint account can be awarded despite the same being given to the heirs of Velasco already. RULING 1) NO. It is clear from the Holdout Agreement that BPI had every right to demand that Eastern and Lim settle their liability under the promissory note. It cannot be compelled to retain and apply the deposit in Lim and Velasco's joint account to the payment of the note. What the agreement conferred on CBTC was a power, not a duty. Generally, a bank is under no duty or obligation to make the application. To apply the deposit to the payment of a loan is a privilege, a right of set-off which the bank has the option to exercise. 2) YES. In Serrano vs. Central Bank of the Philippines it was held that bank deposits are in the nature of irregular deposits; they are really loans because they earn interest. The relationship then between a depositor and moreover, the order of the court in the intestate case merely authorized the heirs of Velasco to withdraw the account. BPI was not specifically ordered to release the account to the said heirs; hence, it was under no judicial compulsion to do so. The authorization given to the heirs of Velasco cannot be construed as a final determination or adjudication that the account belonged to Velasco. We have ruled that when the ownership of

a particular property is disputed, the determination by a probate court of whether that property is included in the estate of a deceased is merely provisional in character and cannot be the subject of execution. Because the ownership of the deposit remained undetermined, BPI, as the debtor with respect thereto, had no right to pay to persons other than those in whose favor the obligation was constituted or whose right or authority to receive payment is indisputable. The payment of the money deposited with BPI that will extinguish its obligation to the creditor-depositor is payment to the person of the creditor or to one authorized by him or by the law to receive it. Payment made by the debtor to the wrong party does not extinguish the obligation as to the creditor who is without fault negligence, even if the debtor acted in utmost good faith and by mistake as to the person of the creditor, or through error induced by fraud of a third person. The payment then by BPI to the heirs of Velasco, even if done in good faith, did not extinguish its obligation to the true depositor, Eastern.

TAN TIONG TICK, claimant-appellant, vs. AMERICAN APOTHECARIES CO., ET AL., claimants-appellees. DOCTRINES: 1.The bank can make use as its own the money deposited. 2.Current account and savings deposits are not preferred credits in case of insolvency and liquidation. 3.The bank can offset the deposit of the client who has a debt with the bank. 4.Deposits should not earn interest from the time the bank cease to do business. IMPERIAL, J.: Facts: In the proceedings for the liquidation of the Mercantile Bank of China, the appellant presented a written claim alleging: that when this bank ceased to operate on September 19, 1931, his current account in said bank showed a balance of P9,657.50 in his favor; that on the same date his savings account in the said bank also showed a balance in his favor of P20,000 plus interest then due amounting to P194.78; that on the other hand, he owed the bank in the amount of P13,262.58, the amount of the trust receipts which he signed because of his withdrawal from the bank of certain merchandise consigned to him without paying the drafts drawn upon him by the remittors thereof; that the credits thus described should be set off against each other according to law, and on such set off being made it appeared that he was still the creditor of the bank in the sum of P16,589.70. And he asked that the court order the Bank Commissioner to pay him the aforesaid balance and that the same be declared as preferred credit. The claim was referred to the commissioner appointed by the court, who at the same time acted as referee, and this officer recommended that the balance claimed be paid without interest and as an ordinary credit. The court approved the recommendation and entered judgment in the accordance therewith. The claimant took an appeal ISSUES: 1.Whether or not the current account and savings deposits are preferred credits in cases involving insolvency and liquidation of the bank.

2.Whether or not the deposits could be offset with the debt of the depositor with the bank. 3.Whether or not the deposits should earn interest from the time the bank ceased to operate. RULING: 1.The SC ruled that, these deposits are essentially merchantile contracts and should, therefore, be governed by the provisions of the Code of Commerce. In accordance with article 309, the socalled current account and savings deposits have lost the character of deposits properly socalled, and are converted into simple commercial loans, because the bank disposed of the funds deposited by the claimant for its ordinary transactions and for the banking business in which it was engaged. That the bank had the authority of the claimant to make use of the money deposited on current and savings account is deducible from the fact that the bank has been paying interest on both deposits, and the claimant himself asks that he be allowed interest up to the time when the bank ceased its operations. Moreover, according to section 125 of the Corporation Law and 9 of Act No. 3154, said bank is authorized to make use of the current account, savings, and fixed deposits provided it retains in its treasury a certain percentage of the amounts of said deposits. 2. It appears that even after the enactment of the Insolvency Law there was no law in this jurisdiction governing the order or preference of credits in case of insolvency and liquidation of a bank. But the Philippine Legislature subsequently enacted Act No. 3519, amended various sections of the Revised Administrative Code, which took effect on February 20, 1929, and section 1641 of this latter Code. as amended by said Act provides: SEC. 1641. Distribution of assets. In the case of the liquidation of a bank or banking institution, after payment of the costs of the proceeding, including reasonable expenses, commissions and fees of the Bank Commissioner, to be allowed by the court, the Bank Commissioner shall pay the debts of the institution, under of the court in the order of their legal priority. From this section 1641 we deduce that the intention of the Philippine Legislature, in providing that the Bank Commissioner shall pay the debts of the company by virtue of an order of the court in the order of their priority, was to enforce the provisions of section 48, 49 and 50 of the Insolvency Law in the sense that they are made applicable to cases of insolvency or bankruptcy and liquidation of banks. No other deduction can be made from the phrase in the order of their legal priority employed by the law, for there being no law establishing any priority in the order of payment of credits, the legislature could not reasonably refer to any legislation upon the subject, unless the interpretation above stated is accepted. Examining now the claims of the appellant, it appears that none of them falls under any of the cases specified by section 48, 49 and 50 of the Insolvency Law; wherefore, we conclude that the appellants claims, consisting of his current and savings account, are not preferred credits. 3. It may be stated as a general rule that when a depositor is indebted to a bank, and the debts are mutual that is, between the same parties and in the same right the bank may apply the deposit, or such portion thereof as may be necessary, to the payment of the debt due it by the depositor, provided there is no express agreement to the contrary and the deposit is not specially applicable to some other particular purposes. (7 Am. Jur., par. 629, p.455; United States vs. Butterworth-Judson Corp., 267 U.S., 387; National Bank vs. Morgan, 207 Ala.., 65;

Bank of Guntersville vs. Crayter, 199 Ala., 699; Tatum vs. Commercial Bank & T. Co., 193 Ala., 120; Desha Bank & T. Co. vs. Quilling, 118 Ark., 114; Holloway vs. First Nat. Bank, 45 Idaho, 746; Wyman vs. Ft. Dearborn Nat Bank, 181 Ill., 279; Niblack vs. Park Nat. Bank, 169 Ill., 517; First Nat Bank vs. Stapf., 165 Ind., 162; Bedford Bank vs. Acoam, 125 Ind., 584.) The situation referred to by the appellees is inevitable because section 1639 of the Revised Administrative Code, as amended by Act No. 3519, provides that the Bank Commissioner shall reduce the assets of the bank into cash and this cannot be done without first liquidating individually the accounts of the debtors of said bank, and in making this individual liquidation the debtors are entitled to set off, by way of compensation, their claims against the bank. 4. Upon this point a distinction must be made between the interest which the deposits should earn from their existence until the bank ceased to operate, and that which they may earn from the time the banks operations were stopped until the date of payment of the deposits. As to the first class, it should be paid because such interest has been earned in the ordinary course of the banks business and before the latter has been declared in a state or liquidation. Moreover, the bank being authorized by law to make us of the deposits, with the limitation stated, to invest the same in its business and other operations, it may be presumed that it bound itself to pay interest to the depositors as in fact it paid interest prior to the date of the said claims. As to the interest which may be charged from the date the bank ceased to do business because it was declared in a state of liquidation, SC held that the said interest should not be paid. Under articles 1101 and 1108 of the Civil Code, interest is allowed by way of indemnity for damages suffered, in the cases wherein the obligation consists in the payment of money. In view of this, SC held that in the absence of any express law or any applicable provision of the Code of Commerce, it is not proper to pay this last kind of interest to the appellant upon his deposits in the bank, for this would be anomalous and unjustified in a liquidation or insolvency of a bank. This rule should be strictly observed in the instant case because it is understood that the assets should be prorated among all the creditors as they are insufficient to pay all the obligations of the bank. In view of all the foregoing considerations, SC affirmed the part of the appealed decision for the reasons stated herein, and it is ordered that the net claim of the appellant, amounting to P13,611.21, is an ordinary and not a preferred credit, and that he is entitled to charge interest on said amount up to September 19, 1931.
GUINGONA, JR. v. CITY FISCAL OF MANILA, 128 SCRA 577 (1984) DOCTRINE: The relationship between the depositor and the bank 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. FACTS From March 20,1979 to March, 1981, David invested with the Nation Savings and Loan Association, (hereinafter called NSLA) the sum of P1,145,546.20 on nine deposits, 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 guarantee of payment and US$50,000.00 under a receipt dated June 8, 1980 (au jointly with Denise Kuhne), that David was induced into making the aforestated investments by Robert Marshall an Australian national who was allegedly a close associate of petitioner Guingona Jr., then NSLA President, petitioner Martin, then NSLA Executive Vice-President of NSLA and petitioner Santos, then NSLA General Manager; that on March 21,1981 N LA was placed under receivership by the Central Bank, so that David filed

claims therewith for his investments and those of his sister; that on July 22, 1981 David received a report from the Central Bank that only P305,821.92 of those investments were entered in the records of NSLA; that, therefore, the respondents in I.S. No. 81- 31938 misappropriated the balance of the investments, at the same time violating Central Bank Circular No. 364 and related Central Bank regulations on foreign exchange transactions; that after demands, petitioner Guingona Jr. paid only P200,000.00, thereby reducing the amounts misappropriated to P959, 078.14 and US$75,000.00. Guingona, Martin and Santos were charged with estafa before the City Fiscal of Manila. The herein petitioners (Guingona et al) contend that the Fiscal has no authority to conduct a preliminary investigation and to prosecute them because the acts alleged by David was only civil in nature and not criminal. ISSUE Whether the charges against Guingona (estafa and violation of CB Circular No. 364 and related regulations regarding foreign exchange transactions) is within the jurisdiction of the City Fiscal? RULING Fiscal has no jurisdiction over the subject matter. It must be pointed out that 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. Thus, Article 1980 of the New Civil Code provides that: Article 1980. Fixed, savings, and current deposits of-money in banks and similar institutions shall be governed by the provisions concerning simple loan. 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. SERRANO v. CENTRAL BANK, 96 SCRA 96 (1980) DOCTRINE: 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. Current and savings deposits are loans to a bank because it can use the same. FACTS Manuel Serrano made a time deposit (TD) for 1 year with 6% interest of P150,000 with the Overseas Bank of Manila, while Concepcion Maneja made a similar deposit for 1 year with 6.5% interest of P200,000 with the same bank. When Concepcion Maneja married Felixberto Serrano (presumably the brother of Manuel Serrano), she assigned and conveyed to Manuel her TD of P200, 000. When Serrano presented the TD certificates for encashment to Overseas Bank of Manila, none was honored by said bank. Serrano alleged that the Central Bank failed to strictly supervise the acts of Overseas Bank of Manila and protect the interests of its depositors by virtue of the constructive trust created when Central Bank required the bank to increase its collaterals for its overdrafts and emergency loans, said collaterals allegedly acquired through the use of depositors money. Hence, Serrano prayed for Central Banks solidary liability with Overseas Bank of Manila to him for the P350,000 TDs made, among others. ISSUE Whether Central Bank should be held solidarily liable

RULING NO. Serranos claims of mandamus and prohibition are not proper as there is no shown clear abuse of discretion by the Central Bank in its exercise of supervision over the bank. If there was, the proper party to invoke in this case was Overseas Bank of Manila, not the Central Bank. Furthermore, both parties overlooked one fundamental principle in the nature of bank deposits when Serrano claimed that there should be created a constructive trust in his favor when Overseas Bank of Manila increased its collaterals in favor of Central Bank for its overdrafts and emergency loans, since these collaterals were acquired by the use of depositors money. 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. Current and savings deposits are loans to a bank because it can use the same. Serrano, in making TDs that earn interests with the bank, was in reality its creditor. Failure of the bank to honor the TD is failure to pay its obligation as debtor and not a breach of trust arising from a depositarys failure to return the subject matter of the deposit.