Patrick James S.

Dela Cruz [Case Digests: Credit Transactions]

I.
II.

SHORT TITLE:

INTEGRATED REALTY CORP. V. PNB

FULL TITLE: Integrated Realty Corporation and Raul L. Santos versus Philippine
National Bank, Overseas Bank of Manila and the Hon. Court of Appeals G.R. No.
L-60705
June 28, 1989, J. Regalado________________________________

III.
IV.

TOPIC:
CREDIT TRANSACTIONS - DEPOSIT
STATEMENT OF FACTS:_______________________________________________
On January 11, 1967, defendant Raul L. Santos made a time deposit with defendant
OBM in the amount of P 500,000.00 and was issued a Certificate of Time Deposit
No. 2308. On another date, Santos also made a time deposit with defendant OBM in
the amount of P 200,000.00 and was issued certificate of Time Deposit No. 2367.
On February 9, 1967, defendant IRC thru its President Raul L. Santos, applied for a
loan and/or credit line in the amount of P 700,000.00 with plaintiff bank. To secure
the said loan, Santos executed on August 11, 1967 a Deed of Assignment of the two
time deposits in favor of plaintiff. Defendant OBM gave its conformity to the
assignment. On the same date, defendant IRC thru Santos, also executed a Deed of
Conformity to Loan Conditions.
The defendant OBM after the due dates of the time deposit certificates, did not pay
plaintiff PNB. Plaintiff demanded payment from defendants IRC and Santos and from
defendant OBM. Defendants IRC and Santos replied that the obligation (loan) of
defendant IRC was deemed paid with the irrevocable assignment of the time deposit
certificates.

V.

STATEMENT OF THE CASE:

On April 6, 1969, PNB filed a complaint to collect from IRC and Santos the loan of
P700,000.00 with interest as well as attorney's fees. It impleaded OBM as a defendant
to compel it to redeem and pay to it Santos' time deposit certificates with interest,
plus exemplary and corrective damages, attorney's fees, and cost.The trial court ruled
in favor of PNB ordering IRC and Santos to pay PNB the total amount of
P700,000.00 plus interest of 9% per annum, 2% additional interest and 1% per annum
penalty interest. On appeal, the CA ordered OBM to pay IRC and Santos whatever
amounts they will to PNB with interest.IRC and Santos now claim that OBM should
reimburse them for whatever amounts they may be adjudged to pay PNB by way of
compensation for damages incurred.

VI.

ISSUE:
1. Whether or not the claim of Integrated Realty Corp. and Santos will prosper.

VII.

RULING:
Yes, the Court held in the affirmative. The 2 time deposits matured on January 11, 1968
and February 6, 1968, respectively. However, OBM was not allowed and suspended to
operate only on July 31, 1968 and resolved on 2 August 1968. There was yet no obstacle
to the faithful compliance by OBM of its liabilities. For having incurred in delay in the
performance of its obligation, OBM should be held for damages. OBM contends that it
had agreed to pay interest only up to the dates of maturity of the CTD and that Santos is
not entitled to interest after maturity dates had expired.
While it is true that under Article 1956 of the Civil Code, no interest shall be due unless it
has been expressly stipulated in writing, this applies only to interest for the use of money.
It does not comprehend interest paid as damages. OBM is being required to pay such
interest, not as interest income stipulated in the CTD, but as damages for failure and
delay in the payment of its obligations which thereby compelled IRC and Santos to resort

Patrick James S. Dela Cruz [Case Digests: Credit Transactions]

to the courts. The applicable rule is that legal interest, in the nature of damages for noncompliance with an obligation to pay sum of money, is recoverable from the date
judicially or extra-judicially demand is made.
VIII.

DISPOSITIVE PORTION
WHEREFORE, judgment is hereby rendered, ordering:
1. Integrated Realty Corporation and Raul L. Santos to pay Philippine National Bank,
jointly and severally, the total amount of seven hundred thousand pesos (P
700,000.00), with interest thereon at the rate of nine percent (9%) per annum from the
maturity dates of the two promissory notes on January 11 and February 6, 1968,
respectively, plus one and one-half percent (1-1/2%) additional interest per annum
effective February 28, 1968 and additional penalty interest of one percent (1%) per
annum of the said amount of seven hundred thousand pesos (P 700,000.00) from the
time of maturity of said loan up to the time the said amount of seven hundred
thousand pesos (P 700,000.00) is fully paid to Philippine National Bank.
2. Integrated Realty Corporation and Raul L. Santos to pay solidarily Philippine
National Bank ten percent (10%) of the amount of seven hundred thousand pesos (P
700,000.00) as and for attorney's fees.
3. Overseas Bank of Manila to pay Integrated Realty Corporation and Raul L. Santos the
sum of seven hundred thousand pesos (P 700,000.00) due under Time Deposit
Certificates Nos. 2308 and 2367, with interest thereon of six and one-half percent (61/2%) per annum from their dates of issue on January 11, 1967 and February 6, 1967,
respectively, until the same are fully paid, except that no interest shall be paid during
the entire period of actual cessation of operations by Overseas Bank of Manila;
4. Overseas Bank of Manila to pay Integrated Realty Corporation and Raul L. Santos six
and one-half per cent (6-1/2%) interest in the concept of damages on the principal
amounts of said certificates of time deposit from the date of extrajudicial demand by
PNB on March 1, 1968, plus legal interest of six percent (6%) on said interest from
April 6, 1968, until fifth payment thereof, except during the entire period of actual
cessation of operations of said bank.
5. Overseas Bank of Manila to pay Integrated Realty Corporation and Raul L. Santos ten
thousand pesos (P l0,000.00) as and for attorney's fees.

I. SHORT TITLE:

FIDELITY SAVINGS AND MORTGAGE BANK V. CENZON

Patrick James S. Dela Cruz [Case Digests: Credit Transactions]

II.

FULL TITLE: Fidelity Savings and Mortgage Bank versus Hon. Pedro D.
Cenzon, in his capacity as Presiding Judge of the Court of First Instance of
Manila (Branch XL) and Spouses Timoteo and Olimpia Santiago G.R. No. L46208
April 5, 1990, J. Regalado.________________________________
III.
IV.

TOPIC:
CREDIT TRANSACTIONS - DEPOSIT
STATEMENT OF FACTS:____________________________________________
That sometime on May 16, 1968, here in plaintiffs deposited with the defendant
Fidelity Savings Bank the amount of P50,000.00 under Savings Account No. 160536; that likewise, sometime on July 6, 1968, herein plaintiff,- deposited with the
defendant Fidelity Savings and Mortgage Bank the amount of P50,000.00 under
Certificate of Time Deposit No. 0210; that the aggregate amount of deposits of the
plaintiffs with the defendant Fidelity Savings and Mortgage Bank is P100,000.00.
On February 18, 1969, the Monetary Board, after finding the report of the
Superintendent of Banks, that the condition of the defendant Fidelity Savings and
Mortgage Bank is one of insolvency, to be true, issued Resolution No. 350 deciding,
among others, as follows: 1) To forbid the Fidelity Savings Bank to do business in the
Philippines; 2) To instruct the Acting Superintendent of Banks to take charge, in the
name of the Monetary Board, of the Bank's assets.
That sometime on October 10, 1969 the Philippine Deposit Insurance Corporation
(PDIC) paid the plaintiffs the amount of P10,000.00on the aggregate deposits of
P100,000.00 pursuant to Republic Act No. 5517, thereby leaving a deposit balance of
P90,000.00. On December 9, 1969, the Monetary Board issued its Resolution No.
2124 directing the liquidation of the affairs of defendant Fidelity Savings Bank. That
the liquidation proceedings has not been terminated and is still pending up to the
present. That herein plaintiffs, through their counsel, sent demand letters to herein
defendants, demanding the immediate payment of the aforementioned savings and
time deposits.

V.

STATEMENT OF THE CASE:

Private respondents instituted this present action for a sum of money with
damages against Fidelity Savings and Mortgage Bank, Central Bank of the
Philippines, Eusebio Lopez, Jr., Arsenio M. Lopez, Sr., Arsenio S. Lopez, Jr.,
Bibiana E. Lacuna, Jose C. Morales, Leon P. Cusi, Pilar Y. Pobre-Cusi and Ernani
A. Pacana. On motion of herein private respondents, as plaintiffs, the amended
complaint was dismissed without prejudice against defendants Jose C. Morales,
Leon P. Cusi, Pilar Y. Pobre-Cusi and Ernani A. Pacana. In its aforesaid decision
of December 3, 1976, the court a quo dismissed the complaint as against
defendants Central Bank of the Philippines, Eusebio Lopez, Jr., Arsenio S. Lopez,
Jr., Arsenio M. Lopez, Sr. and Bibiana S. Lacuna.

VI.

ISSUES:
1. Whether or not an insolvent bank like the Fidelity Savings and Mortgage
Bank may be adjudged to pay interest on unpaid deposits even after its closure
by the Central Bank by reason of insolvency without violating the provisions
of the Civil Code on preference of credits; and
2. Whether or not an insolvent bank like the Fidelity Savings and Mortgage
Bank may be adjudged to pay moral and exemplary damages, attorney's fees
and costs when the insolvency is caused by the anomalous real estate
transactions without violating the provisions of the Civil Code on preference
of credits.

Patrick James S. Dela Cruz [Case Digests: Credit Transactions]

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

DISPOSITIVE PORTION
WHEREFORE, the judgment appealed from is hereby MODIFIED. Petitioner
Fidelity Savings and Mortgage Bank is hereby declared liable to pay private
respondents Timoteo and Olimpia Santiago the sum of P90,000.00, with accrued
interest in accordance with the terms of Savings Account Deposit No. 16-0536
(Exhibit A) and Certificate of Time Deposit No. 0210 (Exhibit B) until February
18, 1969. The awards for moral and exemplary damages, and attorney's fees are
hereby DELETED. No costs.

Patrick James S. Dela Cruz [Case Digests: Credit Transactions]

I. SHORT TITLE:
II.

III.
IV.

SERFINO V. FAR EAST BANK AND TRUST CO., INC.

FULL TITLE: Spouses Godfrey and GerardinaSerfino versus Far East Bank and
Trust Company, Inc., now Bank of the Philippine Islands G.R. No. 171845
October 10, 2012, J. Carpio._______________________________
TOPIC:
CREDIT TRANSACTIONS - DEPOSIT
STATEMENT OF FACTS:____________________________________________
By way of settlement approved by the RTC of Bacolod City, the Spouses Serfino and
Spouses Cortez executed a compromise agreement where the spouses Cortez,
acknowledged their debt of P108,245.71, eventually reduced to P155,000.00 with the
promise that they would pay in full the judgment debt not later than April 23, 1996.
To satisfy their debt, Magdalena Cortez bound herself to pay the debt in full out of
her retirement benefits from the GSIS. In case of default, the debt may be executed
against any of their properties.
No payment was made on that date as promised. Instead, Godfrey discovered that
Magdalena deposited her retirement benefits in the savings account of her daughterin-law, Grace Cortez, with the respondent, Far East Bank and Trust Company, Inc.
(FEBTC). That same day, the spouses Serfinos counsel sent 2 letters to FEBTC
informing the bank that the deposit in Graces name was owned by the spouses
Serfino by virtue of an assignment made in their favor by the spouses Cortez. The
letter requested FEBTC to prevent the delivery of the deposit to either Grace or the
spouses Cortez until its actual ownership has been resolved in court.

V.

STATEMENT OF THE CASE:

An action to recover the money on deposit and payment for damages was filed by
Serfino, with a prayer for preliminary attachment, but the next day, Grace withdrew
P150,000.00 from her account. The RTC ruled that the spouses Cortez and Grace
liable for fraudulently diverting the amount due, but absolved FEBTC from any
liability, declaring that the bank was not party to the compromise judgment. The
spouses Serfino contend this ruling, on the grounds of the virtue of the assignment of
credit, they claim ownership of the deposit, and that FEBTC was duty bound to
protect their right by preventing the withdrawal of the deposit since the bank had been
notified of the assignment and of their claim.

VI.
ISSUE:
1. Whether or not FEBTC is obligated to a third party who claims rights over a bank deposit
standing in the name of another person who is their depositor.
VII. RULING:
1. No. The terms of the compromise judgment between them did not convey an intent to
equate the assignment of Magdalenas retirement benefits (the credit) as the
equivalent of the payment of the debt due the Spouses Serfino (the obligation). There
was actually no assignment of credit as the compromise judgment merely identified
the fund from which payment for the judgment debt would be sourced. That the
compromise agreement authorizes recourse in case of default on other executable
properties of the Spouses Cortez, to satisfy the judgment debt, further supports our
conclusion that there was no assignment of Magdalenas credit with the GSIS that
would have extinguished the obligation.
The Bank is also not liable for damages as there is no law or legal right abused it.
Absent a law or a legal ruling of the Court, it has no option but to uphold the existing
policy that recognizes the fiduciary nature of banking. It likewise rejects the adoption

Patrick James S. Dela Cruz [Case Digests: Credit Transactions]

of a judicially imposed rule giving third parties with unverified claims against the
deposit of another a better right over the deposit. As current laws provide, the banks
contractual relations are with its depositor, not with the third party. In the absence of
any positive duty of the bank to an adverse claimant, there could be no breach that
entitles the latter to moral damages.
VIII.

DISPOSITIVE PORTION
WHEREFORE, in view of the foregoing, the petition for review on certiorari is
DENIED, and the decision dated February 23, 2006 of the Regional Trial Court of
Bacolod City, Branch 41, in Civil Case No. 95-9344 is AFFIRMED. Costs against
the petitioners.