G.R. No. L-66826 August 19, 1988 to him (plaintiff) the U.S. $3,000.00 cash left for safekeeping.
BANK OF THE PHILIPPINE ISLANDS, petitioner, Costs against defendant COMTRUST.
vs.
THE INTERMEDIATE APPELLATE COURT and ZSHORNACK respondents.
Pacis & Reyes Law Office for petitioner.
Ernesto T. Zshornack, Jr. for private respondent.
CORTES, J.:
The original parties to this case were Rizaldy T. Zshornack and the
Commercial Bank and Trust Company of the Philippines [hereafter referred
to as "COMTRUST."] In 1980, the Bank of the Philippine Islands (hereafter
referred to as BPI absorbed COMTRUST through a corporate merger, and
was substituted as party to the case.
Rizaldy Zshornack initiated proceedings on June 28,1976 by filing in the
Court of First Instance of Rizal — Caloocan City a complaint against
COMTRUST alleging four causes of action. Except for the third cause of
action, the CFI ruled in favor of Zshornack. The bank appealed to the
Intermediate Appellate Court which modified the CFI decision absolving the
bank from liability on the fourth cause of action. The pertinent portions of
the judgment, as modified, read:
IN VIEW OF THE FOREGOING, the Court renders judgment as follows:
1. Ordering the defendant COMTRUST to restore to the dollar savings
account of plaintiff (No. 25-4109) the amount of U.S $1,000.00 as of October
27, 1975 to earn interest together with the remaining balance of the said
account at the rate fixed by the bank for dollar deposits under Central Bank
Circular 343;
2. Ordering defendant COMTRUST to return to the plaintiff the amount of
U.S. $3,000.00 immediately upon the finality of this decision, without
interest for the reason that the said amount was merely held in custody for
safekeeping, but was not actually deposited with the defendant COMTRUST
because being cash currency, it cannot by law be deposited with plaintiffs
dollar account and defendant's only obligation is to return the same to
plaintiff upon demand;
xxx xxx xxx
5. Ordering defendant COMTRUST to pay plaintiff in the amount of
P8,000.00 as damages in the concept of litigation expenses and attorney's
fees suffered by plaintiff as a result of the failure of the defendant bank to
restore to his (plaintiffs) account the amount of U.S. $1,000.00 and to return
1
SO ORDERED. [Rollo, pp. 47-48.]
Undaunted, the bank comes to this Court praying that it be totally absolved
from any liability to Zshornack. The latter not having appealed the Court of
Appeals decision, the issues facing this Court are limited to the bank's
liability with regard to the first and second causes of action and its liability
for damages.
1. We first consider the first cause of action, On the dates material to this
case, Rizaldy Zshornack and his wife, Shirley Gorospe, maintained in
COMTRUST, Quezon City Branch, a dollar savings account and a peso
current account.
On October 27, 1975, an application for a dollar draft was accomplished by
Virgilio V. Garcia, Assistant Branch Manager of COMTRUST Quezon City,
payable to a certain Leovigilda D. Dizon in the amount of $1,000.00. In the
application, Garcia indicated that the amount was to be charged to Dollar
Savings Acct. No. 25-4109, the savings account of the Zshornacks; the
charges for commission, documentary stamp tax and others totalling P17.46
were to be charged to Current Acct. No. 210465-29, again, the current
account of the Zshornacks. There was no indication of the name of the
purchaser of the dollar draft.
On the same date, October 27,1975, COMTRUST, under the signature of
Virgilio V. Garcia, issued a check payable to the order of Leovigilda D. Dizon
in the sum of US $1,000 drawn on the Chase Manhattan Bank, New York,
with an indication that it was to be charged to Dollar Savings Acct. No. 25-
4109.
When Zshornack noticed the withdrawal of US$1,000.00 from his account,
he demanded an explanation from the bank. In answer, COMTRUST claimed
that the peso value of the withdrawal was given to Atty. Ernesto Zshornack,
Jr., brother of Rizaldy, on October 27, 1975 when he (Ernesto) encashed
with COMTRUST a cashier's check for P8,450.00 issued by the Manila
Banking Corporation payable to Ernesto.
Upon consideration of the foregoing facts, this Court finds no reason to
disturb the ruling of both the trial court and the Appellate Court on the first
cause of action. Petitioner must be held liable for the unauthorized
withdrawal of US$1,000.00 from private respondent's dollar account.
In its desperate attempt to justify its act of withdrawing from its depositor's
savings account, the bank has adopted inconsistent theories. First, it still
maintains that the peso value of the amount withdrawn was given to Atty.
Ernesto Zshornack, Jr. when the latter encashed the Manilabank Cashier's
Check. At the same time, the bank claims that the withdrawal was made
pursuant to an agreement where Zshornack allegedly authorized the bank
to withdraw from his dollar savings account such amount which, when
converted to pesos, would be needed to fund his peso current account. If
indeed the peso equivalent of the amount withdrawn from the dollar
account was credited to the peso current account, why did the bank still
have to pay Ernesto?
At any rate, both explanations are unavailing. With regard to the first
explanation, petitioner bank has not shown how the transaction involving
the cashier's check is related to the transaction involving the dollar draft in
favor of Dizon financed by the withdrawal from Rizaldy's dollar account. The
two transactions appear entirely independent of each other. Moreover,
Ernesto Zshornack, Jr., possesses a personality distinct and separate from
Rizaldy Zshornack. Payment made to Ernesto cannot be considered payment
to Rizaldy.
As to the second explanation, even if we assume that there was such an
agreement, the evidence do not show that the withdrawal was made
pursuant to it. Instead, the record reveals that the amount withdrawn was
used to finance a dollar draft in favor of Leovigilda D. Dizon, and not to fund
the current account of the Zshornacks. There is no proof whatsoever that
peso Current Account No. 210-465-29 was ever credited with the peso
equivalent of the US$1,000.00 withdrawn on October 27, 1975 from Dollar
Savings Account No. 25-4109.
2. As for the second cause of action, the complaint filed with the trial court
alleged that on December 8, 1975, Zshornack entrusted to COMTRUST, thru
Garcia, US $3,000.00 cash (popularly known as greenbacks) for safekeeping,
and that the agreement was embodied in a document, a copy of which was
attached to and made part of the complaint. The document reads:
Makati Cable Address:
Philippines "COMTRUST"
COMMERCIAL BANK AND TRUST COMPANY
of the Philippines
Quezon City Branch
December 8, 1975
MR. RIZALDY T. ZSHORNACK
&/OR MRS SHIRLEY E. ZSHORNACK
2
Sir/Madam:
We acknowledged (sic) having received from you today the sum of US
DOLLARS: THREE THOUSAND ONLY (US$3,000.00) for safekeeping.
Received by:
(Sgd.) VIRGILIO V. GARCIA
It was also alleged in the complaint that despite demands, the bank refused
to return the money.
In its answer, COMTRUST averred that the US$3,000 was credited to
Zshornack's peso current account at prevailing conversion rates.
It must be emphasized that COMTRUST did not deny specifically under oath
the authenticity and due execution of the above instrument.
During trial, it was established that on December 8, 1975 Zshornack indeed
delivered to the bank US $3,000 for safekeeping. When he requested the
return of the money on May 10, 1976, COMTRUST explained that the sum
was disposed of in this manner: US$2,000.00 was sold on December 29,
1975 and the peso proceeds amounting to P14,920.00 were deposited to
Zshornack's current account per deposit slip accomplished by Garcia; the
remaining US$1,000.00 was sold on February 3, 1976 and the peso proceeds
amounting to P8,350.00 were deposited to his current account per deposit
slip also accomplished by Garcia.
Aside from asserting that the US$3,000.00 was properly credited to
Zshornack's current account at prevailing conversion rates, BPI now posits
another ground to defeat private respondent's claim. It now argues that the
contract embodied in the document is the contract of depositum (as defined
in Article 1962, New Civil Code), which banks do not enter into. The bank
alleges that Garcia exceeded his powers when he entered into the
transaction. Hence, it is claimed, the bank cannot be liable under the
contract, and the obligation is purely personal to Garcia.
Before we go into the nature of the contract entered into, an important
point which arises on the pleadings, must be considered.
The second cause of action is based on a document purporting to be signed
by COMTRUST, a copy of which document was attached to the complaint. In
short, the second cause of action was based on an actionable document. It
was therefore incumbent upon the bank to specifically deny under oath the
due execution of the document, as prescribed under Rule 8, Section 8, if it
desired: (1) to question the authority of Garcia to bind the corporation; and
(2) to deny its capacity to enter into such contract. [See, E.B. Merchant v.
International Banking Corporation, 6 Phil. 314 (1906).] No sworn answer
denying the due execution of the document in question, or questioning the
authority of Garcia to bind the bank, or denying the bank's capacity to enter
into the contract, was ever filed. Hence, the bank is deemed to have
admitted not only Garcia's authority, but also the bank's power, to enter
into the contract in question.
In the past, this Court had occasion to explain the reason behind this
procedural requirement.
The reason for the rule enunciated in the foregoing authorities will, we
think, be readily appreciated. In dealing with corporations the public at large
is bound to rely to a large extent upon outward appearances. If a man is
found acting for a corporation with the external indicia of authority, any
person, not having notice of want of authority, may usually rely upon those
appearances; and if it be found that the directors had permitted the agent
to exercise that authority and thereby held him out as a person competent
to bind the corporation, or had acquiesced in a contract and retained the
benefit supposed to have been conferred by it, the corporation will be
bound, notwithstanding the actual authority may never have been granted
... Whether a particular officer actually possesses the authority which he
assumes to exercise is frequently known to very few, and the proof of it
usually is not readily accessible to the stranger who deals with the
corporation on the faith of the ostensible authority exercised by some of the
corporate officers. It is therefore reasonable, in a case where an officer of a
corporation has made a contract in its name, that the corporation should be
required, if it denies his authority, to state such defense in its answer. By
this means the plaintiff is apprised of the fact that the agent's authority is
contested; and he is given an opportunity to adduce evidence showing
either that the authority existed or that the contract was ratified and
approved. [Ramirez v. Orientalist Co. and Fernandez, 38 Phil. 634, 645- 646
(1918).]
Petitioner's argument must also be rejected for another reason. The
practical effect of absolving a corporation from liability every time an officer
enters into a contract which is beyond corporate powers, even without the
proper allegation or proof that the corporation has not authorized nor
ratified the officer's act, is to cast corporations in so perfect a mold that
transgressions and wrongs by such artificial beings become impossible
[Bissell v. Michigan Southern and N.I.R. Cos 22 N.Y 258 (1860).] "To say that
a corporation has no right to do unauthorized acts is only to put forth a very
plain truism but to say that such bodies have no power or capacity to err is
3
to impute to them an excellence which does not belong to any created
existence with which we are acquainted. The distinction between power
and right is no more to be lost sight of in respect to artificial than in respect
to natural persons." [Ibid.]
Having determined that Garcia's act of entering into the contract binds the
corporation, we now determine the correct nature of the contract, and its
legal consequences, including its enforceability.
The document which embodies the contract states that the US$3,000.00
was received by the bank for safekeeping. The subsequent acts of the
parties also show that the intent of the parties was really for the bank to
safely keep the dollars and to return it to Zshornack at a later time, Thus,
Zshornack demanded the return of the money on May 10, 1976, or over five
months later.
The above arrangement is that contract defined under Article 1962, New
Civil Code, which reads:
Art. 1962. A deposit is constituted from the moment a person receives a
thing belonging to another, with the obligation of safely keeping it and of
returning the same. If the safekeeping of the thing delivered is not the
principal purpose of the contract, there is no deposit but some other
contract.
Note that the object of the contract between Zshornack and COMTRUST
was foreign exchange. Hence, the transaction was covered by Central Bank
Circular No. 20, Restrictions on Gold and Foreign Exchange Transactions,
promulgated on December 9, 1949, which was in force at the time the
parties entered into the transaction involved in this case. The circular
provides:
xxx xxx xxx
2. Transactions in the assets described below and all dealings in them of
whatever nature, including, where applicable their exportation and
importation, shall NOT be effected, except with respect to deposit accounts
included in sub-paragraphs (b) and (c) of this paragraph, when such deposit
accounts are owned by and in the name of, banks.
(a) Any and all assets, provided they are held through, in, or with banks or
banking institutions located in the Philippines, including money, checks,
drafts, bullions bank drafts, deposit accounts (demand, time and savings), all
debts, indebtedness or obligations, financial brokers and investment
houses, notes, debentures, stocks, bonds, coupons, bank acceptances,
mortgages, pledges, liens or other rights in the nature of security, expressed
in foreign currencies, or if payable abroad, irrespective of the currency in
which they are expressed, and belonging to any person, firm, partnership,
association, branch office, agency, company or other unincorporated body
or corporation residing or located within the Philippines;
(b) Any and all assets of the kinds included and/or described in
subparagraph (a) above, whether or not held through, in, or with banks or
banking institutions, and existent within the Philippines, which belong to
any person, firm, partnership, association, branch office, agency, company
or other unincorporated body or corporation not residing or located within
the Philippines;
(c) Any and all assets existent within the Philippines including money,
checks, drafts, bullions, bank drafts, all debts, indebtedness or obligations,
financial securities commonly dealt in by bankers, brokers and investment
houses, notes, debentures, stock, bonds, coupons, bank acceptances,
mortgages, pledges, liens or other rights in the nature of security expressed
in foreign currencies, or if payable abroad, irrespective of the currency in
which they are expressed, and belonging to any person, firm, partnership,
association, branch office, agency, company or other unincorporated body
or corporation residing or located within the Philippines.
xxx xxx xxx
4. (a) All receipts of foreign exchange shall be sold daily to the Central Bank
by those authorized to deal in foreign exchange. All receipts of foreign
exchange by any person, firm, partnership, association, branch office,
agency, company or other unincorporated body or corporation shall be sold
to the authorized agents of the Central Bank by the recipients within one
business day following the receipt of such foreign exchange. Any person,
firm, partnership, association, branch office, agency, company or other
unincorporated body or corporation, residing or located within the
Philippines, who acquires on and after the date of this Circular foreign
exchange shall not, unless licensed by the Central Bank, dispose of such
foreign exchange in whole or in part, nor receive less than its full value, nor
delay taking ownership thereof except as such delay is customary; Provided,
further, That within one day upon taking ownership, or receiving payment,
of foreign exchange the aforementioned persons and entities shall sell such
foreign exchange to designated agents of the Central Bank.
xxx xxx xxx
8. Strict observance of the provisions of this Circular is enjoined; and any
person, firm or corporation, foreign or domestic, who being bound to the
4
observance thereof, or of such other rules, regulations or directives as may
hereafter be issued in implementation of this Circular, shall fail or refuse to
comply with, or abide by, or shall violate the same, shall be subject to the
penal sanctions provided in the Central Bank Act.
xxx xxx xxx
Paragraph 4 (a) above was modified by Section 6 of Central Bank Circular
No. 281, Regulations on Foreign Exchange, promulgated on November 26,
1969 by limiting its coverage to Philippine residents only. Section 6 provides:
SEC. 6. All receipts of foreign exchange by any resident person, firm,
company or corporation shall be sold to authorized agents of the Central
Bank by the recipients within one business day following the receipt of such
foreign exchange. Any resident person, firm, company or corporation
residing or located within the Philippines, who acquires foreign exchange
shall not, unless authorized by the Central Bank, dispose of such foreign
exchange in whole or in part, nor receive less than its full value, nor delay
taking ownership thereof except as such delay is customary; Provided, That,
within one business day upon taking ownership or receiving payment of
foreign exchange the aforementioned persons and entities shall sell such
foreign exchange to the authorized agents of the Central Bank.
As earlier stated, the document and the subsequent acts of the parties show
that they intended the bank to safekeep the foreign exchange, and return it
later to Zshornack, who alleged in his complaint that he is a Philippine
resident. The parties did not intended to sell the US dollars to the Central
Bank within one business day from receipt. Otherwise, the contract of
depositum would never have been entered into at all.
Since the mere safekeeping of the greenbacks, without selling them to the
Central Bank within one business day from receipt, is a transaction which is
not authorized by CB Circular No. 20, it must be considered as one which
falls under the general class of prohibited transactions. Hence, pursuant to
Article 5 of the Civil Code, it is void, having been executed against the
provisions of a mandatory/prohibitory law. More importantly, it affords
neither of the parties a cause of action against the other. "When the nullity
proceeds from the illegality of the cause or object of the contract, and the
act constitutes a criminal offense, both parties being in pari delicto, they
shall have no cause of action against each other. . ." [Art. 1411, New Civil
Code.] The only remedy is one on behalf of the State to prosecute the
parties for violating the law.
We thus rule that Zshornack cannot recover under the second cause of
action.
3. Lastly, we find the P8,000.00 awarded by the courts a quo as damages in
the concept of litigation expenses and attorney's fees to be reasonable. The
award is sustained.
WHEREFORE, the decision appealed from is hereby MODIFIED. Petitioner is
ordered to restore to the dollar savings account of private respondent the
amount of US$1,000.00 as of October 27, 1975 to earn interest at the rate
fixed by the bank for dollar savings deposits. Petitioner is further ordered to
pay private respondent the amount of P8,000.00 as damages. The other
causes of action of private respondent are ordered dismissed.
SO ORDERED.
G.R. No. 4015            August 24, 1908
ANGEL JAVELLANA, plaintiff-appellee,
vs.
JOSE LIM, ET AL., defendants-appellants.
R. Zaldarriaga for appellants.B. Montinola for appellee.
TORRES, J.:
The attorney for the plaintiff, Angel Javellana, file a complaint on the 30th of
October, 1906, with the Court of First Instance of Iloilo, praying that the
defendants, Jose Lim and Ceferino Domingo Lim, he sentenced to jointly and
severally pay the sum of P2,686.58, with interest thereon at the rate of 15
per cent per annum from the 20th of January, 1898, until full payment
should be made, deducting from the amount of interest due the sum of
P1,102.16, and to pay the costs of the proceedings.
Authority from the court having been previously obtained, the complaint
was amended on the 10th of January, 1907; it was then alleged, on the 26th
of May, 1897, the defendants executed and subscribed a document in favor
of the plaintiff reading as follows:
We have received from Angel Javellana, as a deposit without interest, the
sum of two thousand six hundred and eighty-six cents of pesos fuertes,
which we will return to the said gentleman, jointly and severally, on the 20th
of January, 1898. — Jaro, 26th of May, 1897. — Signed Jose Lim. — Signed:
Ceferino Domingo Lim.
That, when the obligation became due, the defendants begged the plaintiff
for an extension of time for the payment thereof, building themselves to
pay interest at the rate of 15 per cent on the amount of their indebtedness,
to which the plaintiff acceded; that on the 15th of May, 1902, the debtors
5
paid on account of interest due the sum of P1,000 pesos, with the exception
of either capital or interest, had thereby been subjected to loss and
damages.
A demurrer to the original complaint was overruled, and on the 4th of
January, 1907, the defendants answered the original complaint before its
amendment, setting forth that they acknowledged the facts stated in Nos. 1
and 2 of the complaint; that they admitted the statements of the plaintiff
relative to the payment of 1,102.16 pesos made on the 15th of November,
1902, not, however, as payment of interest on the amount stated in the
foregoing document, but on account of the principal, and denied that there
had been any agreement as to an extension of the time for payment and the
payment of interest at the rate of 15 per cent per annum as alleged in
paragraph 3 of the complaint, and also denied all the other statements
contained therein.
As a counterclaim, the defendants alleged that they had paid to the plaintiff
sums which, together with the P1,102.16 acknowledged in the complaint,
aggregated the total sum of P5,602.16, and that, deducting therefrom the
total sum of P2,686.58 stated in the document transcribed in the complaint,
the plaintiff still owed the defendants P2,915.58; therefore, they asked that
judgment be entered absolving them, and sentencing the plaintiff to pay
them the sum of P2,915.58 with the costs.
Evidence was adduced by both parties and, upon their exhibits, together
with an account book having been made of record, the court below
rendered judgment on the 15th of January, 1907, in favor of the plaintiff for
the recovery of the sum of P5,714.44 and costs.
The defendants excepted to the above decision and moved for a new trial.
This motion was overruled and was also excepted to by them; the bill of
exceptions presented by the appellants having been approved, the same
was in due course submitted to this court.
The document of indebtedness inserted in the complaint states that the
plaintiff left on deposit with the defendants a given sum of money which
they were jointly and severally obliged to return on a certain date fixed in
the document; but that, nevertheless, when the document appearing as
Exhibits 2, written in the Visayan dialect and followed by a translation into
Spanish was executed, it was acknowledged, at the date thereof, the 15th of
November, 1902, that the amount deposited had not yet been returned to
the creditor, whereby he was subjected to losses and damages amounting
to 830 pesos since the 20th of January, 1898, when the return was again
stipulated with the further agreement that the amount deposited should
bear interest at the rate of 15 per cent per annum, from the aforesaid date
of January 20, and that the 1,000 pesos paid to the depositor on the 15th of
May, 1900, according to the receipt issued by him to the debtors, would be
included, and that the said rate of interest would obtain until the debtors on
the 20th of May, 1897, it is called a deposit consisted, and they could have
accomplished the return agreed upon by the delivery of a sum equal to the
one received by them. For this reason it must be understood that the
debtors were lawfully authorized to make use of the amount deposited,
which they have done, as subsequent shown when asking for an extension
of the time for the return thereof, inasmuch as, acknowledging that they
have subjected the letter, their creditor, to losses and damages for not
complying with what had been stipulated, and being conscious that they
had used, for their own profit and gain, the money that they received
apparently as a deposit, they engaged to pay interest to the creditor from
the date named until the time when the refund should be made. Such
conduct on the part of the debtors is unquestionable evidence that the
transaction entered into between the interested parties was not a deposit,
but a real contract of loan.
Article 1767 of the Civil Code provides that —
The depository can not 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.
When on one of the latter days of January, 1898, Jose Lim went to the office
of the creditor asking for an extension of one year, in view of the fact the
money was scare, and because neither himself nor the other defendant
were able to return the amount deposited, for which reason he agreed to
pay interest at the rate of 15 per cent per annum, it was because, as a
matter of fact, he did not have in his possession the amount deposited, he
having made use of the same in his business and for his own profit; and the
creditor, by granting them the extension, evidently confirmed the express
permission previously given to use and dispose of the amount stated as
having been deposited, which, in accordance with the loan, to all intents
6
and purposes gratuitously, until the 20th of January, 1898, and from that
dated with interest at 15 per cent per annum until its full payment,
deducting from the total amount of interest the sum of 1,000 pesos, in
accordance with the provisions of article 1173 of the Civil Code.
Notwithstanding that it does not appear that Jose Lim signed the document
(Exhibit 2) executed in the presence of three witnesses on the 15th of
November, 1902, by Ceferino Domingo Lim on behalf of himself and the
former, nevertheless, the said document has not been contested as false,
either by a criminal or by a civil proceeding, nor has any doubt been cast
upon the authenticity of the signatures of the witnesses who attested the
execution of the same; and from the evidence in the case one is sufficiently
convinced that the said Jose Lim was perfectly aware of and authorized his
joint codebtor to liquidate the interest, to pay the sum of 1,000 pesos, on
account thereof, and to execute the aforesaid document No. 2. A true
ratification of the original document of deposit was thus made, and not the
least proof is shown in the record that Jose Lim had ever paid the whole or
any part of the capital stated in the original document, Exhibit 1.
If the amount, together with interest claimed in the complaint, less 1,000
pesos appears as fully established, such is not the case with the defendant's
counterclaim for P5,602.16, because the existence and certainty of said
indebtedness imputed to the plaintiff has not been proven, and the
defendants, who call themselves creditors for the said amount have not
proven in a satisfactory manner that the plaintiff had received partial
payments on account of the same; the latter alleges with good reason, that
they should produce the receipts which he may have issued, and which he
did issue whenever they paid him any money on account. The plaintiffs
allegation that the two amounts of 400 and 1,200 pesos, referred to in
documents marked "C" and "D" offered in evidence by the defendants, had
been received from Ceferino Domingo Lim on account of other debts of his,
has not been contradicted, and the fact that in the original complaint the
sum of 1,102.16 pesos, was expressed in lieu of 1,000 pesos, the only
payment made on account of interest on the amount deposited according
to documents No. 2 and letter "B" above referred to, was due to a mistake.
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.
The original joint obligation contracted by the defendant debtor still exists,
and it has not been shown or proven in the proceedings that the creditor
had released Joe Lim from complying with his obligation in order that he
should not be sued for or sentenced to pay the amount of capital and
interest together with his codebtor, Ceferino Domingo Lim, because the
record offers satisfactory evidence against the pretension of Jose Lim, and it
further appears that document No. 2 was executed by the other debtor,
Ceferino Domingo Lim, for himself and on behalf of Jose Lim; and it has also
been proven that Jose Lim, being fully aware that his debt had not yet been
settled, took steps to secure an extension of the time for payment, and
consented to pay interest in return for the concession requested from the
creditor.
In view of the foregoing, and adopting the findings in the judgment
appealed from, it is our opinion that the same should be and is hereby
affirmed with the costs of this instance against the appellant, provided that
the interest agreed upon shall be paid until the complete liquidation of the
debt. So ordered.
G.R. Nos. L-26948 and L-26949             October 8, 1927
SILVESTRA BARON, plaintiff-appellant,
vs.
PABLO DAVID, defendant-appellant.
And
GUILLERMO BARON, plaintiff-appellant,
vs.
PABLO DAVID, defendant-appellant.
Jose Gutierrez David for plaintiff-appellant in case of No. 26948. Gregorio
Perfecto for defendant-appellant in both cases. Francisco, Lualhati & Lopez
and Jose Gutierrez David for plaintiff-appellant in case No. 26949.
STREET, J.:
These two actions were instituted in the Court of First Instance of the
Province of Pampanga by the respective plaintiffs, Silvestra Baron and
Guillermo Baron, for the purpose of recovering from the defendant, Pablo
David, the value of palay alleged to have been sold by the plaintiffs to the
defendant in the year 1920. Owing to the fact that the defendant is the
same in both cases and that the two cases depend in part upon the same
7
facts, the cases were heard together in the trial court and determined in a
single opinion. The same course will accordingly be followed here.
In the first case, i. e., that which Silvestra Baron is plaintiff, the court gave
judgment for her to recover of the defendant the sum of P5,238.51, with
costs. From this judgment both the plaintiff and the defendant appealed.
In the second case, i. e., that in which Guillermo Baron, is plaintiff, the court
gave judgment for him to recover of the defendant the sum of P5,734.60,
with costs, from which judgment both the plaintiff and the defendant also
appealed. In the same case the defendant interposed a counterclaim in
which he asked credit for the sum of P2,800 which he had advanced to the
plaintiff Guillermo Baron on various occasions. This credit was admitted by
the plaintiff and allowed by the trial court. But the defendant also
interposed a cross-action against Guillermo Baron in which the defendant
claimed compensation for damages alleged to have Ben suffered by him by
reason of the alleged malicious and false statements made by the plaintiff
against the defendant in suing out an attachment against the defendant's
property soon after the institution of the action. In the same cross-action
the defendant also sought compensation for damages incident to the
shutting down of the defendant's rice mill for the period of one hundred
seventy days during which the above-mentioned attachment was in force.
The trial judge disallowed these claims for damages, and from this feature
of the decision the defendant appealed. We are therefore confronted with
five distinct appeals in this record.
Prior to January 17, 1921, the defendant Pablo David has been engaged in
running a rice mill in the municipality of Magalang, in the Province of
Pampanga, a mill which was well patronized by the rice growers of the
vicinity and almost constantly running. On the date stated 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, the plaintiff
in the first of the actions before us, is an aunt of the defendant; while
Guillermo Baron, the plaintiff in the other action; is his uncle. In the months
of March, April, and May, 1920, Silvestra Baron placed a quantity of palay in
the defendant's mill; and this, in connection with some that she took over
from Guillermo Baron, amounted to 1,012 cavans and 24 kilos. During
approximately the same period Guillermo Baron placed other 1,865 cavans
and 43 kilos of palay in the mill. No compensation has ever been received by
Silvestra Baron upon account of the palay delivered by Guillermo Baron, he
has received from the defendant advancements amounting to P2,800; but
apart from this he has not been compensated. Both the plaintiffs claim that
the palay which was delivered by them to the defendant was sold to the
defendant; while the defendant, on the other hand, claims that the palay
was deposited subject to future withdrawal by the depositors or subject to
some future sale which was never effected. He therefore supposes himself
to be relieved from all responsibility by virtue of the fire of January 17, 1921,
already mentioned.
The plaintiff further say that their palay was delivered to the defendant at
his special request, coupled with a promise on his part to pay for the same
at the highest price per cavan at which palay would sell during the year
1920; and they say that in August of that year the defendant promised to
pay them severally the price of P8.40 per cavan, which was about the top of
the market for the season, provided they would wait for payment until
December. The trial judge found that no such promise had been given; and
the incredulity of the court upon this point seems to us to be justified. A
careful examination of the proof, however, leads us to the conclusion that
the plaintiffs did, some time in the early part of August, 1920, make demand
upon the defendant for a settlement, which he evaded or postponed leaving
the exact amount due to the plaintiffs undetermined.
It should be stated that the palay in question was place by the plaintiffs in
the defendant's mill with 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. In view of the nature of the
defendant's activities and the way in which the palay was handled in the
defendant's mill, 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. Considering the fact that the
defendant had thus milled and doubtless sold the plaintiffs' palay prior to
the date of the fire, it result that he is bound to account for its value, and his
liability was not extinguished by the occurence of the fire. In the briefs
before us it seems to have been assumed by the opposing attorneys that in
8
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.
But the case does not depend precisely upon this explicit alternative; for
even supposing that the palay may have been delivered in the character of
deposit, subject to future sale or withdrawal at plaintiffs' election,
nevertheless if it was understood that the defendant might mill the palay
and he has in fact appropriated it to his own use, he is of course bound to
account for its value. Under article 1768 of the Civil Code, when the
depository has permission to make use of the thing deposited, the contract
loses the character of mere deposit and becomes a loan or a commodatum;
and of course by appropriating the thing, the bailee becomes responsible
for its value. In this connection we wholly reject the defendant's pretense
that the palay delivered by the plaintiffs or any part of it was actually
consumed in the fire of January, 1921. Nor is the liability of the defendant in
any wise affected by the circumstance that, by a custom prevailing among
rice millers in this country, persons placing palay with them without special
agreement as to price are at liberty to withdraw it later, proper allowance
being made for storage and shrinkage, a thing that is sometimes done,
though rarely.
In view of what has been said it becomes necessary to discover the price
which the defendant should be required to pay for the plaintiffs' palay.
Upon this point the trial judge fixed upon P6.15 per cavan; and although we
are not exactly in agreement with him as to the propriety of the method by
which he arrived at this figure, we are nevertheless of the opinion that, all
things considered, the result is approximately correct. It appears that the
price of palay during the months of April, May, and June, 1920, had been
excessively high in the Philippine Islands and even prior to that period the
Government of the Philippine Islands had been attempting to hold the price
in check by executive regulation. The highest point was touched in this
season was apparently about P8.50 per cavan, but the market began to sag
in May or June and presently entered upon a precipitate decline. As we have
already stated, the plaintiffs made demand upon the defendant for
settlement in the early part of August; and, so far as we are able to judge
from the proof, the price of P6.15 per cavan, fixed by the trial court, is about
the price at which the defendant should be required to settle as of that
date. It was the date of the demand of the plaintiffs for settlement that
determined the price to be paid by the defendant, and this is true whether
the palay was delivered in the character of sale with price undetermined or
in the character of deposit subject to use by the defendant. It results that
the plaintiffs are respectively entitle to recover the value of the palay which
they had placed with the defendant during the period referred to, with
interest from the date of the filing of their several complaints.
As already stated, the trial court found that at the time of the fire there
were about 360 cavans of palay in the mill and that this palay was
destroyed. His Honor assumed that this was part of the palay delivered by
the plaintiffs, and he held that the defendant should be credited with said
amount. His Honor therefore deducted from the claims of the plaintiffs their
respective proportionate shares of this amount of palay. We are unable to
see the propriety of this feature of the decision. There were many
customers of the defendant's rice mill who had placed their palay with the
defendant under the same conditions as the plaintiffs, and nothing can be
more certain than that the palay which was burned did not belong to the
plaintiffs. That palay without a doubt had long been sold and marketed. The
assignments of error of each of the plaintiffs-appellants in which this feature
of the decision is attacked are therefore well taken; and the appealed
judgments must be modified by eliminating the deductions which the trial
court allowed from the plaintiffs' claims.
The trial judge also allowed a deduction from the claim of the plaintiff
Guillermo Baron of 167 cavans of palay, as indicated in Exhibit 12, 13, 14,
and 16. This was also erroneous. These exhibits relate to transactions that
occurred nearly two years after the transactions with which we are here
concerned, and they were offered in evidence merely to show the character
of subsequent transactions between the parties, it appearing that at the
time said exhibits came into existence the defendant had reconstructed his
mill and that business relations with Guillermo Baron had been resumed.
The transactions shown by these exhibits (which relate to palay withdrawn
by the plaintiff from the defendant's mill) were not made the subject of
controversy in either the complaint or the cross-complaint of the defendant
in the second case. They therefore should not have been taken into account
as a credit in favor of the defendant. Said credit must therefore be likewise
of course be without prejudice to any proper adjustment of the rights of the
parties with respect to these subsequent transactions that they have
heretofore or may hereafter effect.
The preceding discussion disposes of all vital contentions relative to the
9
liability of the defendant upon the causes of action stated in the complaints.
We proceed therefore now to consider the question of the liability of the
plaintiff Guillermo Baron upon the cross-complaint of Pablo David in case R.
G. No. 26949. In this cross-action the defendant seek, as the stated in the
third paragraph of this opinion, to recover damages for the wrongful suing
out of an attachment by the plaintiff and the levy of the same upon the
defendant's rice mill. It appears that about two and one-half months after
said action was begun, the plaintiff, Guillermo Baron, asked for an
attachment to be issued against the property of the defendant; and to
procure the issuance of said writ the plaintiff made affidavit to the effect
that the defendant was disposing, or attempting the plaintiff. Upon this
affidavit an attachment was issued as prayed, and on March 27, 1924, it was
levied upon the defendant's rice mill, and other property, real and personal.
1awph!l.net
Upon attaching the property the sheriff closed the mill and placed it in the
care of a deputy. Operations were not resumed until September 13, 1924,
when the attachment was dissolved by an order of the court and the
defendant was permitted to resume control. At the time the attachment
was levied there were, in the bodega, more than 20,000 cavans of palay
belonging to persons who held receipts therefor; and in order to get this
grain away from the sheriff, twenty-four of the depositors found it
necessary to submit third-party claims to the sheriff. When these claims
were put in the sheriff notified the plaintiff that a bond in the amount of
P50,000 must be given, otherwise the grain would be released. The plaintiff,
being unable or unwilling to give this bond, the sheriff surrendered the
palay to the claimants; but the attachment on the rice mill was maintained
until September 13, as above stated, covering a period of one hundred
seventy days during which the mill was idle. The ground upon which the
attachment was based, as set forth in the plaintiff's affidavit was that the
defendant was disposing or attempting to dispose of his property for the
purpose of defrauding the plaintiff. That this allegation was false is clearly
apparent, and not a word of proof has been submitted in support of the
assertion. On the contrary, the defendant testified that at the time this
attachment was secured he was solvent and could have paid his
indebtedness to the plaintiff if judgment had been rendered against him in
ordinary course. His financial conditions was of course well known to the
plaintiff, who is his uncle. The defendant also states that he had not
conveyed away any of his property, nor had intended to do so, for the
purpose of defrauding the plaintiff. We have before us therefore a case of a
baseless attachment, recklessly sued out upon a false affidavit and levied
upon the defendant's property to his great and needless damage. That the
act of the plaintiff in suing out the writ was wholly unjustifiable is perhaps
also indicated in the circumstance that the attachment was finally dissolved
upon the motion of the plaintiff himself.
The defendant testified that his mill was accustomed to clean from 400 to
450 cavans of palay per day, producing 225 cavans of rice of 57 kilos each.
The price charged for cleaning each cavan rice was 30 centavos. The
defendant also stated that the expense of running the mill per day was from
P18 to P25, and that the net profit per day on the mill was more than P40.
As the mill was not accustomed to run on Sundays and holiday, we estimate
that the defendant lost the profit that would have been earned on not less
than one hundred forty work days. Figuring his profits at P40 per day, which
would appear to be a conservative estimate, the actual net loss resulting
from his failure to operate the mill during the time stated could not have
been less than P5,600. The reasonableness of these figures is also indicated
in the fact that the twenty-four customers who intervened with third-party
claims took out of the camarin 20,000 cavans of palay, practically all of
which, in the ordinary course of events, would have been milled in this plant
by the defendant. And of course other grain would have found its way to
this mill if it had remained open during the one hundred forty days when it
was closed.
But this is not all. When the attachment was dissolved and the mill again
opened, the defendant found that his customers had become scattered and
could not be easily gotten back. So slow, indeed, was his patronage in
returning that during the remainder of the year 1924 the defendant was
able to mill scarcely more than the grain belonging to himself and his
brothers; and even after the next season opened many of his old customers
did not return. Several of these individuals, testifying as witnesses in this
case, stated that, owing to the unpleasant experience which they had in
getting back their grain from the sheriff to the mill of the defendant, though
they had previously had much confidence in him.
As against the defendant's proof showing the facts above stated the plaintiff
submitted no evidence whatever. We are therefore constrained to hold that
the defendant was damaged by the attachment to the extent of P5,600, in
profits lost by the closure of the mill, and to the extent of P1,400 for injury
to the good-will of his business, making a total of P7,000. For this amount
10
the defendant must recover judgment on his cross-complaint.
The trial court, in dismissing the defendant's cross-complaint for damages
resulting from the wrongful suing out of the attachment, suggested that the
closure of the rice mill was a mere act of the sheriff for which the plaintiff
was not responsible and that the defendant might have been permitted by
the sheriff to continue running the mill if he had applied to the sheriff for
permission to operate it. This singular suggestion will not bear a moment's
criticism. It was of course the duty of the sheriff, in levying the attachment,
to take the attached property into his possession, and the closure of the mill
was a natural, and even necessary, consequence of the attachment. For the
damage thus inflicted upon the defendant the plaintiff is undoubtedly
responsible.
One feature of the cross-complaint consist in the claim of the defendant
(cross-complaint) for the sum of P20,000 as damages caused to the
defendant by the false and alleged malicious statements contained in the
affidavit upon which the attachment was procured. The additional sum of
P5,000 is also claimed as exemplary damages. It is clear that with respect to
these damages the cross-action cannot be maintained, for the reason that
the affidavit in question was used in course of a legal proceeding for the
purpose of obtaining a legal remedy, and it is therefore privileged. But
though the affidavit is not actionable as a libelous publication, this fact in no
obstacle to the maintenance of an action to recover the damage resulting
from the levy of the attachment.
Before closing this opinion a word should be said upon the point raised in
the first assignment of error of Pablo David as defendant in case R. G. No.
26949. In this connection it appears that the deposition of Guillermo Baron
was presented in court as evidence and was admitted as an exhibit, without
being actually read to the court. It is supposed in the assignment of error
now under consideration that the deposition is not available as evidence to
the plaintiff because it was not actually read out in court. This connection is
not well founded. It is true that in section 364 of the Code of Civil Procedure
it is said that a deposition, once taken, may be read by either party and will
then be deemed the evidence of the party reading it. The use of the word
"read" in this section finds its explanation of course in the American practice
of trying cases for the most part before juries. When a case is thus tried the
actual reading of the deposition is necessary in order that the jurymen may
become acquainted with its contents. But in courts of equity, and in all
courts where judges have the evidence before them for perusal at their
pleasure, it is not necessary that the deposition should be actually read
when presented as evidence.
From what has been said it result that judgment of the court below must be
modified with respect to the amounts recoverable by the respective
plaintiffs in the two actions R. G. Nos. 26948 and 26949 and must be
reversed in respect to the disposition of the cross-complaint interposed by
the defendant in case R. G. No. 26949, with the following result: In case R.
G. No. 26948 the plaintiff Silvestra Baron will recover of the Pablo David the
sum of P6,227.24, with interest from November 21, 1923, the date of the
filing of her complaint, and with costs. In case R. G. No. 26949 the plaintiff
Guillermo Baron will recover of the defendant Pablo David the sum of
P8,669.75, with interest from January 9, 1924. In the same case the
defendant Pablo David, as plaintiff in the cross-complaint, will recover of
Guillermo Baron the sum of P7,000, without costs. So ordered.
G.R. No. L-60705 June 28, 1989
INTEGRATED REALTY CORPORATION and RAUL L. SANTOS, petitioners,
vs.
PHILIPPINE NATIONAL BANK, OVERSEAS BANK OF MANILA and THE HON.
COURT OF APPEALS, respondents.
G.R. No. L-60907 June 28, 1989
OVERSEAS BANK OF MANILA, petitioner,
vs.
COURT OF APPEALS, INTEGRATED REALTY CORPORATION, and RAUL L.
SANTOS, respondents.
REGALADO, J.:
In these petitions for review on certiorari, Integrated Realty Corporation and
Raul Santos (G.R. No. 60705), and Overseas Bank of Manila (G.R. No. 60907)
appeal from the decision of the Court of Appeals, 1 the decretal portion of
which states:
WHEREFORE, with the modification that appellee Overseas Bank of Manila is
ordered to pay to the appellant Raul Santos the sum of P 700,000.00 due
under the time deposit certificates Nos. 2308 and 2367 with 6 1/2 (sic)
interest per annum from date of issue until fully paid, the appealed decision
is affirmed in all other respects.
11
In G.R. No. 60705, petitioners Integrated Realty Corporation (hereafter, IRC
and Raul L. Santos (hereafter, Santos) seek the dismissal of the complaint
filed by the Philippine National Bank (hereafter, PNB), or in the event that
they be held liable thereunder, to revive and affirm that portion of the
decision of the trial court ordering Overseas Bank of Manila (hereafter,
OBM) to pay IRC and Santos whatever amounts the latter will pay to PNB,
with interest from the date of payment. 2
On the other hand, in G.R. No. 60907, petitioner OBM challenges the
decision of respondent court insofar as it holds OBM liable for interest on
the time deposit with it of Santos corresponding to the period of its closure
by order of the Central Bank. 3
In its assailed decision, the respondent Court of Appeals, quoting from the
decision of the lower court, 4 narrated the antecedents of this case in this
wise:
The facts of this case are not seriously disputed by any of the parties. They
are set forth in the decision of the trial court as follows:
Under date 11 January 1967 defendant Raul L. Santos made a time deposit
with defendant OBM in the amount of P 500,000.00. (Exhibit-10 OBM) and
was issued a Certificate of Time Deposit No. 2308 (Exhibit 1 Santos, Exhibit
D). Under date 6 February 1967 defendant Raul L. Santos also made a time
deposit with defendant OBM in the amount of P 200,000.00 (Exhibit 11
OBM and was issued certificate of Time Deposit No. 2367 (Exhibit 2 Santos,
Exhibit E).
Under date 9 February 1967 defendant IRC thru its President-defendant
Raul L. Santos, applied for a loan and/or credit line (Exhibit A) in the amount
of P 700,000.00 with plaintiff bank. To secure the said loan, defendant Raul
L. Santos executed on August 11, 1967 a Deed of Assignment (Exhibit C) of
the two time deposits (Exhibits 1-Santos and 2 Santos, also Exhibits D and E)
in favor of plaintiff. Defendant OBM gave its conformity to the assignment
thru letter dated 11 August 1967 (Exhibit F). On the same date, defendant
IRC thru its President Raul L. Santos, also executed a Deed of Conformity to
Loan Conditions (Exhibit G).
The defendant OBM after the due dates of the time deposit certificates, did
not pay plaintiff PNB. Plaintiff demanded payment from defendants IRC and
Raul L. Santos (Exhibit K) and from defendant OBM (Exhibit L). Defendants
IRC and Raul L. Santos replied that the obligation (loan) of defendant IRC
was deemed paid with the irrevocable assignment of the time deposit
certificates (Exhibits 5 Santos, 6 Santos and 7 Santos).
On April 6, 1969 (sic), ** PNB filed a complaint to collect from IRC and
Santos the loan of P 700,000.00 with interest as well as attomey'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.
In their answer to the complaint, IRC and Santos alleged that PNB has no
cause of action against them because their obligation to PNB was fully paid
or extinguished upon the' irrevocable' assignment of the time deposit
certificates, and that they are not answerable for the insolvency of OBM
They filed a counterclaim for damages against PNB and a cross-claim against
OBM alleging that OBM acted fraudulently in refusing to pay the time
deposit certificates to PNB resulting in the filing of the suit against them by
PNB, and that, therefore, OBM should pay them whatever amount they may
be ordered by the court to pay PNB with interest. They also asked that OBM
be ordered to pay them compensatory, moral, exemplary and corrective
damages.
In its answer to the complaint, OBM denied knowledge of the time deposit
certificates because the alleged time deposit of Santos 'does not appear in
its books of account.
Whereupon, IRC and Santos, with leave of court, filed a third-party
complaint against Emerito B. Ramos, Jr., president of OBM and Rodolfo R.
Sunico, treasurer of said bank, who allegedly received the time deposits of
Santos and issued the certificates therefor.
Answering the third-party complaint, Ramos and Sunico alleged that IRC and
Santos have no cause of action against them because they received and
signed the time deposit certificates as officers of OBM that the time
deposits are recorded in the subsidiary ledgers of the bank and are 'civil
liabilities of the defendant OBM
On November 18, 1970, OBM filed an amended or supplemental answer to
the complaint, acknowledging the certificates of time deposit that it issued
to Santos, and admitting its failure to pay the same due to its distressed
financial situation. As affirmative defenses, it alleged that by reason of its
state of insolvency its operations have been suspended by the Central Bank
since August 1, 1968; that the time deposits ceased to earn interest from
that date; that it may not give preference to any depositor or creditor; and
that payment of the plaintiffs claim is prohibited.
On January 30, 1976, the lower court rendered judgment for the plaintiff,
the dispositive portion of which reads as foIlows
12
WHEREFORE, judgment is hereby rendered, ordering:
1. The defendant Integrated Realty Corporation and Raul L. Santos to pay
the plaintiff, jointly and solidarily, the total amount of P 700,000.00 plus
interest at the rate of 9% per annum from maturity dates of the two
promissory notes on January 11 and February 6, 1968, respectively (Exhibits
M and I), plus 1-1/ 2% additional interest effective February 28, 1968 and
additional penalty interest of 1% per annum of the Id amount of P
700,000.00 from the time of maturity of Id loan up to the time the said
amount of P 700,000.00 is actually paid to the plaintiff;
2. The defendants topay l0% of the amount of P 700,000.00 as and for
attorney's fees;
3. The defendant Overseas Bank of Manila to pay cross-plaintiffs Integrated
Realty Corporation and Raul L. Santos whatever amounts the latter will pay
to the plaintiff with interest from date of payment;
4. The defendant Overseas Bank of Manila to pay cross-plaintiffs Integrated
Realty Corporation and Raul L. Santos the amount of P 10,000.00 as and for
attorney's fees;
5. The third-party complaint and cross-claim dismissed;
6. The defendant Overseas Bank of Manila to pay the costs.
SO ORDERED. 5
IRC Santos and OBM all appealed to the respondent Court of Appeals. As
stated in limine, on March 16, 1982 respondent court promulgated its
appealed decision, with a modification and the deletion of that portion of
the judgment of the trial court ordering OBM to pay IRC and Santos
whatever amounts they will pay to PNB with interest from the date of
payment.
Therein defendants-appellants, through separate petitions, have brought
the said decision to this Court for review.
1. The first issue posed before us for resolution is whether the liability of IRC
and Santos with PNB should be deemed to have been paid by virtue of the
deed of assignment made by the former in favor of PNB, which reads:
KNOW ALL MEN BY THESE PRESENTS;
I, RAUL L. SANTOS, of legal age, Filipino, with residence and postal address
at 661 Richmond St., Mandaluyong, Rizal for and in consideration of certain
loans, overdrafts and other credit accommodations granted or those that
may hereafter be granted to me/us by the PHILIPPINE NATIONAL BANK,
have assigned, transferred and conveyed and by these presents, do hereby
assign, transfer and convey by way of security unto said PHILIPPINE
NATIONAL BANK its successors and assigns the following Certificates of Time
Deposit issued by the OVERSEAS BANK OF MANILA, its CONFORMITY issued
on August 11, 1967, hereto enclosed as Annex ' A', in favor of RAUL L.
SANTOS and/or NORA S. SANTOS, in the aggregate sum of SEVEN HUNDRED
THOUSAND PESOS ONLY (P 700,000.00), Philippine Currency, ....
xxx xxx xxx
It is also understood that the herein Assignor/s shall remain hable for any
outstanding balance of his/their obligation if the Bank is unable to actually
receive or collect the above assigned sums , monies or properties resulting
from any agreements, orders or decisions of the court or for any other
cause whatsoever. 6
xxx xxx xxx
Respondent Court of Appeals did not consider the aforesaid assignment as
payment, thus:
The contention of IRC and Santos that the irrevocable assignment of the
time deposit certificates to PNB constituted payment' of their obligation to
the latter is not well taken.
Where a certificate of deposit in a bank, payable at a future day, was
handed over by a debtor to his creditor, it was not payment, unless there
was an express agreement on the part of the creditor to receive it as such,
and the question whether there was or was not such an agreement, was
one of facts to be decided by the jury. (Downey vs. Hicks, 55 U.S. [14 How.]
240 L. Ed. 404; See also Michie, Vol. 5-B Banks and Banking, p. 200). 7
We uphold respondent court on this score.
In Lopez vs. Court of appeals, et al., 8 petitioner Benito Lopez obtained a
loan for P 20,000.00 from the Prudential Bank and Trust Company. On the
same day, he executed a promissory note in favor of the bank and, in
addition, he executed a surety bond in which he, as principal, and Philippine
American General Insurance Co., Inc. (Philamgen), as surety, bound
themselves jointly and severally in favor of the bank for the payment of the
loan. On the same occasion, Lopez also executed in favor of Philamgen an
indemnity agreement whereby he agreed to indemnify the company against
any damages which the latter may sustain in consequence of having become
a surety upon the bond. At the same time, Lopez executed a deed of
assignment of his shares of stock in the Baguio Military Institute, Inc. in
favor of Philamgen. When Lopez' obligation matured without being settled,
Philamgen caused the transfer of the shares of stocks to its name in order
that it may sell the same and apply the proceeds thereof in payment of the
13
loan to the bank. However, when no payment was still made by the
principal debtor or surety, the bank filed a complaint which compelled
Philamgen to pay the bank. Thereafter, Philamgen filed an action to recover
the amount of the loan against Lopez. The trial court therein held that the
obligation of Lopez was deemed paid when his shares of stocks were
transferred in the name of Philamgen. On appeal, the Court of Appeals ruled
that Lopez was still liable to Philamgen because, pending payment,
Philamgen was merely holding the stock as security for the payment of
Lopez' obligation.
In upholding the finding therein of the Court of Appeals, We held that:
Notwithstanding the express terms of the 'Stock Assignment Separate from
Certificate', however, We hold and rule that the transaction should not be
regarded as an absolute conveyance in view of the circumstances obtaining
at the time of the execution thereof.
It should be remembered that on June 2, 1959, the day Lopez obtained a
loan of P 20,000.00 from Prudential Bank, Lopez executed a promissory note
for P 20,000.00, plus interest at the rate of ten (10%) per cent per annum, in
favor of said Bank. He likewise posted a surety bond to secure his full and
faithful performance of his obligation under the promissory note with
Philamgen as his surety. In return for the undertaking of Philamgen under
the surety bond, Lopez executed on the same day not only an indemnity
agreement but also a stock assignment.
The indemnity agreement and stock assignment must be considered
together as related transactions because in order to judge the intention of
the contracting parties, their contemporaneous and subsequent acts shall
be principally considered. (Article 1371, New Civil Code). Thus, considering
that the indemnity agreement connotes a continuing obligation of Lopez
towards Philamgen while the stock assignment indicates a complete
discharge of the same obligation, the existence of the indemnity agreement
whereby Lopez had to pay a premium of P l,000.00 for a period of one year
and agreed at all times to indemnify Philamgen of any and all kinds of losses
which the latter might sustain by reason of it becoming a surety, is
inconsistent with the theory of an absolute sale for and in consideration of
the same undertaking of Philamgen. There would have been no necessity
for the execution of the indemnity agreement if the stock assignment was
really intended as an absolute conveyance. ...
Along the same vein, in the case at bar it would not have been necessary on
the part of IRC and Santos to execute promissory notes in favor of PNB if the
assignment of the time deposits of Santos was really intended as an
absolute conveyance.
There are cogent reasons to conclude that the parties intended said deed of
assignment to complement the promissory notes. In declaring that the deed
of assignment did not operate as payment of the loan so as to extinguish the
obligations of IRC and Santos with PNB, the trial court advanced several
valid bases, to wit:
a. It is clear from the Deed of Assignment that it was only by way of security;
xxx xxx xxx
b. The promissory notes (Exhibits H and I) were executed on August 16,
1967. If defendants IRC and Raul L. Santos, upon executing the Deed of
Assignment on August 11, 1967 had already paid their loan of P 700,000.00
or otherwise extinguished the same, why were the promissory notes made
on August 16, 1967 still executed by IRC and signed by Raul L. Santos as
President?
c. In the application for a credit line (Exhibit A),the time deposits were
offered as collateral. 9
For all intents and purposes, the deed of assignment in this case is actually a
pledge. Adverting again to the Court's pronouncements in Lopez, supra, we
quote therefrom:
The character of the transaction between the parties is to be determined by
their intention, regardless of what language was used or what the form of
the transfer was. If it was intended to secure the payment of money, it must
be construed as a pledge; but if there was some other intention, it is not a
pledge. However, even though a transfer, if regarded by itself, appears to
have been absolute, its object and character might still be qualified and
explained by a contemporaneous writing declaring it to have been a deposit
of the property as collateral security. It has been said that a transfer of
property by the debtor to a creditor, even if sufficient on its face to make an
absolute conveyance, should be treated as a pledge if the debt continues in
existence and is not discharged by the transfer, and that accordingly, the
use of the terms ordinarily importing conveyance, of absolute ownership
will not be given that effect in such a transaction if they are also commonly
used in pledges and mortgages and therefore do not unqualifiedly indicate a
transfer of absolute ownership, in the absence of clear and unambiguous
language or other circumstances excluding an intent to pledge. 10
The facts and circumstances leading to the execution of the deed of
assignment, as found by the court a quo and the respondent court, yield
14
said conclusion that it is in fact a pledge. The deed of assignment has
satisfied the requirements of a contract of pledge (1) that it be constituted
to secure the fulfillment of a principal obligation; (2) that the pledgor be the
absolute owner of the thing pledged; (3) that the persons constituting the
pledge have the free disposal of their property, and in the absence thereof,
that they be legally authorized for the purpose. 11 The further requirement
that the thing pledged be placed in the possession of the creditor, or of a
third person by common agreement 12 was complied with by the execution
of the deed of assignment in favor of PNB.
It must also be emphasized that Santos, as assignor, made an express
undertaking that he would remain liable for any outstanding balance of his
obligation should PNB be unable to actually receive or collect the assigned
sums resulting from any agreements, orders or decisions of the court or for
any other cause whatsoever. The term "for any cause whatsoever" is broad
enough to include the situation involved in the present case.
Under the foregoing circumstances and considerations, the unavoidable
conclusion is that IRC and Santos should be held liable to PNB for the
amount of the loan with the corresponding interest thereon.
2. We find nothing illegal in the interest of one and one-half percent (1-
1/2%) imposed by PNB pursuant to the resolution of its Board which
presumably was done in accordance with ordinary banking procedures. Not
only did IRC and Santos fail to overcome the presumption of regularity of
business transactions, but they are likewise estopped from questioning the
validity thereof for the first time in this petition. There is nothing in the
records to show that they raised this issue during the trial by presenting
countervailing evidence. What was merely touched upon during the
proceedings in the court below was the alleged lack of notice to them of the
board resolution, but not the veracity or validity thereof.
3. On the issue of whether OBM should be held liable for interests on the
time deposits of IRC and Santos from the time it ceased operations until it
resumed its business, the answer is in the negative.
We have held in The Overseas Bank of Manila vs. Court of Appeals and Tony
D. Tapia, 13 that:
It is a matter of common knowledge, which We take judicial notice of, that
what enables a bank to pay stipulated interest on money deposited with it is
that thru the other aspects of its operation it is able to generate funds to
cover the payment of such interest. Unless a bank can lend money, engage
in international transactions, acquire foreclosed mortgaged properties or
their proceeds and generally engage in other banking and financing
activities from which it can derive income, it is inconceivable how it can
carry on as a depository obligated to pay stipulated interest. Conventional
wisdom dictated; 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 petition. 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.
We consider it of trivial consequence that the stoppage of the bank's
operation by the Central Bank has been subsequently declared illegal by the
Supreme Court, for before the Court's order, the bank had no alternative
under the law than to obey the orders of the Central Bank. Whatever be the
juridical significance of the subsequent action of the Supreme Court, the
stubborn fact remained that the petitioner was totally crippled from then on
from earning the income needed to meet its obligations to its depositors. If
such a situation cannot, strictly speaking, be legally denominated as 'force
majeure', as maintained by private respondent, We hold it is a matter of
simple equity that it be treated as such.
The Court further adjured that:
Parenthetically, We may add for the guidance of those who might be
concerned, and so that unnecessary litigations be avoided from further
clogging the dockets of the courts, that in the light of the considerations
expounded in the above opinion, the same formula that exempts petitioner
from the payment of interest to its depositors during the whole period of
factual stoppage of its operations by orders of the Central Bank, modified in
effect by the decision as well as the approval of a formula of rehabilitation
by this Court, should be, as a matter of consistency, applicable or followed
in respect to all other obligations of petitioner which could not be paid
during the period of its actual complete closure.
We cannot accept the holding of the respondent Court of Appeals that the
above-cited decisions apply only where the bank is in a state of liquidation.
In the very case aforecited, this issue was likewise raised and We resolved:
Thus, Our task is narrowed down to the resolution of the legal problem of
whether or not, for purposes of the payment of the interest here in
question, stoppage of the operations of a bank by a legal order of
liquidation may be equated with actual cessation of the bank's operation,
not different, factually speaking, in its effects, from legal liquidation the
15
factual cessation having been ordered by the Central Bank.
In the case of Chinese Grocer's Association, et al. vs. American Apothecaries,
65 Phil. 395, this Court held:
As to the second assignment of error, this Court, in G.R. No. 43682, In re
Liquidation of the Mercantile Bank of China, Tan Tiong Tick, claimant and
appellant vs. American Apothecaries, C., et al., claimants and appellees,
through Justice Imperial, held the following:
4. The court held that the appellant is not entitled to charge interest on the
amounts of his claims, and this is the object of the second assignment of
error, 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 bank's operations
were stopped until the date of payment of the deposits. As to the first-class,
we hold that it should be paid because such interest has been earned in the
ordinary course of the bank's businesses and before the latter has been
declared in a state of liquidation. Moreover, the bank being authorized by
law to make use 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
dates of the Id 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, we hold that the said interest should not be paid.
The Court of Appeals considered this ruling inapplicable to the instant case,
precisely because, as contended by private respondent, the said
Apothecaries case had in fact in contemplation a valid order of liquidation of
the bank concerned, whereas here, the order of the Central Bank of August
13, 1968 completely forbidding herein petitioner to do business preparatory
to its liquidation was first restrained and then nullified by this Supreme
Court. In other words, as far as private respondent is concerned, it is the
legal reason for cessation of operations, not the actual cessation thereof,
that matters and is decisive insofar as his right to the continued payment of
the interest on his deposit during the period of cessation is concerned.
In the light of the peculiar circumstances of this particular case, We
disagree. It is Our considered view, after mature deliberation, that it is
utterly unfair to award private respondent his prayer for payment of
interest on his deposit during the period that petitioner bank was not
allowed by the Central Bank to operate.
4. Lastly, IRC and Santos claim that OBM should reimburse them for
whatever amounts they may be adjudged to pay PNB by way of
compensation for damages incurred, pursuant to Articles 1170 and 2201 of
the Civil Code.
It appears that as early as April, 1967, the financial situation of OBM had
already caused mounting concern in the Central Bank. 14 On December 5,
1967, new directors and officers drafted from the Central Bank (CB) itself,
the Philippine National Bank (PNB) and the Development Bank of the
Philippines (DBP) were elected and installed and they took over the
management and control of the Overseas Bank. 15 However, it was only on
July 31, 1968 when OBM was excluded from clearing with the CB under
Monetary Board Resolution No. 1263. Subsequently, on August 2, 1968,
pursuant to Resolution No. 1290 of the CB OBM's operations were
suspended. 16 These CB resolutions were eventually annulled and set aside
by this Court on October 4, 1971 in the decision rendered in the herein cited
case of Ramos.
Thus, when PNB demanded from OBM payment of the amounts due on the
two time deposits which matured on January 11, 1968 and February 6,
1968, respectively, there was as yet no obstacle to the faithful compliance
by OBM of its liabilities thereunder. Consequently, for having incurred in
delay in the performance of its obligation, OBM should be held liable for
damages. 17 When respondent Santos invested his money in time deposits
with OBM they entered into a contract of simple loan or mutuum, 18 not a
contract of deposit.
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. 19 OBM contends that it had agreed to pay interest only up to the
dates of maturity of the certificates of time deposit and that respondent
Santos is not entitled to interest after the maturity dates had expired, unless
the contracts are renewed. This is true with respect to the stipulated
interest, but the obligations consisting as they did in the payment of money,
under Article 1108 of the Civil Code he has the right to recover damages
resulting from the default of OBM and the measure of such damages is
interest at the legal rate of six percent (6%) per annum on the amounts due
and unpaid at the expiration of the periods respectively provided in the
contracts. In fine, OBM is being required to pay such interest, not as interest
income stipulated in the certificates of time deposit, but as damages for
failure and delay in the payment of its obligations which thereby compelled
16
IRC and Santos to resort to the courts.
The applicable rule is that legal interest, in the nature of damages for non-
compliance with an obligation to pay a sum of money, is recoverable from
the date judicial or extra-judicial demand is made, 20 Which latter mode of
demand was made by PNB, after the maturity of the certificates of time
deposit, on March 1, 1968. 21 The measure of such damages, there being no
stipulation to the contrary, shall be the payment of the interest agreed upon
in the certificates of deposit 22 Which is six and onehalf percent (6-1/2%).
Such interest due or accrued shall further earn legal interest from the time
of judicial demand. 23
We reject the proposition of IRC and Santos that OBM should reimburse
them the entire amount they may be adjudged to pay PNB. It must be noted
that their liability to pay the various interests of nine percent (9%) on the
principal obligation, one and one-half percent (1-1/2%) additional interest
and one percent (1%) penalty interest is an offshoot of their failure to pay
under the terms of the two promissory notes executed in favor of PNB.
OBM was never a party to Id promissory notes. There is, therefore, no
privity of contract between OBM and PNB which will justify the imposition
of the aforesaid interests upon OBM whose liability should be strictly
confined to and within the provisions of the certificates of time deposit
involved in this case. In fact, as noted by respondent court, when OBM
assigned as error that portion of the judgment of the court a quo requiring
OBM to make the disputed reimbursement, IRC and Santos did not dispute
that objection of OBM Besides, IRC and Santos are not without fault. They
likewise acted in bad faith when they refuse to comply with their obligations
under the promissory notes, thus incurring liability for all damages
reasonably attributable to the non-payment of said obligations. 24
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 (6-1/2%) 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.
SO ORDERED.
G.R. No. L-43191             November 13, 1935
PAULINO GULLAS, plaintiff-appellant,
vs.
THE PHILIPPINE NATIONAL BANK, defendant-appellant.
Gullas, Lopez, Tuaño and Leuterio for plaintiff-appellant.Jose Delgado for
defendant-appellant.
MALCOLM, J.:
Both parties to this case appealed from a judgment of the Court of First
Instance of Cebu, which sentenced the defendant to return to the account
of the plaintiff the sum of P5098, with legal interest and costs, the plaintiff
to secure damages in the amount of P10,000 more or less, and the
defendant to be absolved totally from the amended complaint. As it is
conceded that the plaintiff has already received the sum represented by the
17
United States treasury, warrant, which is in question, the appeal will thus
determine the amount, if any, which should be paid to the plaintiff by the
defendant.
The parties to the case are Paulino Gullas and the Philippine National Bank.
The first named is a member of the Philippine Bar, resident in the City of
Cebu. The second named is a banking corporation with a branch in the same
city. Attorney Gullas has had a current account with the bank.
It appears from the record that on August 2, 1933, the Treasurer of the
United States for the United States Veterans Bureau issued a Warrant in the
amount of $361, payable to the order of Francisco Sabectoria Bacos. Paulino
Gullas and Pedro Lopez signed as endorsers of this check. Thereupon it was
cashed by the Philippine National Bank. Subsequently the treasury warrant
was dishonored by the Insular Treasurer.
At that time the outstanding balance of Attorney Gullas on the books of the
bank was P509. Against this balance he had issued certain cheeks which
could not be paid when the money was sequestered by the On August 20,
1933, Attorney Gullas left his residence for Manila.
The bank on learning of the dishonor of the treasury warrant sent notices by
mail to Mr. Gullas which could not be delivered to him at that time because
he was in Manila. In the bank's letter of August 21, 1933, addressed to
Messrs. Paulino Gulla and Pedro Lopez, they were informed that the United
States Treasury warrant No. 20175 in the name of Francisco Sabectoria
Bacos for $361 or P722, the payment for which had been received has been
returned by our Manila office with the notation that the payment of his
check has been stopped by the Insular Treasurer. "In view of this therefore
we have applied the outstanding balances of your current accounts with us
to the part payment of the foregoing check", namely, Mr. Paulino Gullas
P509. On the return of Attorney Gullas to Cebu on August 31, 1933, notice
of dishonor was received and the unpaid balance of the United States
Treasury warrant was immediately paid by him.
As a consequence of these happenings, two occurrences transpired which
inconvenienced Attorney Gullas. In the first place, as above indicated,
checks including one for his insurance were not paid because of the lack of
funds standing to his credit in the bank. In the second place, periodicals in
the vicinity gave prominence to the news to the great mortification of
Gullas.lawphil.net
A variety of incidental questions have been suggested on the record which it
can be taken for granted as having been adversely disposed of in this
opinion. The main issues are two, namely, (1) as to the right of Philippine
National Bank, and to apply a deposit to the debt of depositor to the bank
and (2) as to the amount damages, if any, which should be awarded Gullas.
The Civil Code contains provisions regarding compensation (set off) and
deposit. (Articles 1195 et seq., 1758 et seq. The portions of Philippine law
provide that compensation shall take place when two persons are
reciprocally creditor and debtor of each other (Civil Code, article 1195). In
his connection, it has been held that the relation existing between a
depositor and a bank is that of creditor and debtor. (Fulton Iron Works Co.
vs. China Banking Corporation [1933], 59 Phil., 59.)
The Negotiable Instruments Law contains provisions establishing the liability
of a general indorser and giving the procedure for a notice of dishonor. The
general indorser of negotiable instrument engages that if he be dishonored
and the, necessary proceedings of dishonor be duly taken, he will pay the
amount thereof to the holder. (Negotiable Instruments Law, sec. 66.) In this
connection, it has been held a long line of authorities that notice of dishonor
is in order to charge all indorser and that the right of action against him
does not accrue until the notice is given. (Asia Banking Corporation vs. Javier
[1923] 44 Phil., 777; 5 Uniform Laws Annotated.)
As a general rule, a bank has a right of set off of the deposits in its hands for
the payment of any indebtedness to it on the part of a depositor. In
Louisiana, however, a civil law jurisdiction, the rule is denied, and it is held
that a bank has no right, without an order from or special assent of the
depositor to retain out of his deposit an amount sufficient to meet his
indebtedness. The basis of the Louisiana doctrine is the theory of
confidential contracts arising from irregular deposits, e. g., the deposit of
money with a banker. With freedom of selection and after full preference to
the minority rule as more in harmony with modern banking practice. (1
Morse on Banks and Banking, 5th ed., sec. 324; Garrison vs. Union Trust
Company [1905], 111 A.S.R., 407; Louisiana Civil Code Annotated, arts. 2207
et seq.; Gordon & Gomila vs. Muchler [1882], 34 L. Ann., 604; 8 Manresa,
Comentarios al Codigo Civil Español, 4th ed., 359 et seq., 11 Manresa pp.
694 et seq.)
Starting, therefore, from the premise that the Philippine National Bank had
with respect to the deposit of Gullas a right of set off, we next consider if
that remedy was enforced properly. The fact we believe is undeniable that
prior to the mailing of notice of dishonor, and without waiting for any action
by Gullas, the bank made use of the money standing in his account to make
18
good for the treasury warrant. At this point recall that Gullas was merely an
indorser and had issued in good faith.
As to a depositor who has funds sufficient to meet payment of a check
drawn by him in favor of a third party, it has been held that he has a right of
action against the bank for its refusal to pay such a check in the absence of
notice to him that the bank has applied the funds so deposited in
extinguishment of past due claims held against him. (Callahan vs. Bank of
Anderson [1904], 2 Ann. Cas., 203.) The decision cited represents the
minority doctrine, for on principle it would seem that notice is not necessary
to a maker because the right is based on the doctrine that the relationship is
that of creditor and debtor. However this may be, as to an indorser the
situation is different, and notice should actually have been given him in
order that he might protect his interests.
We accordingly are of the opinion that the action of the bank was
prejudicial to Gullas. But to follow up that statement with others proving
exact damages is not so easy. For instance, for alleged libelous articles the
bank would not be primarily liable. The same remark could be made relative
to the loss of business which Gullas claims but which could not be traced
definitely to this occurrence. Also Gullas having eventually been reimbursed
lost little through the actual levy by the bank on his funds. On the other
hand, it was not agreeable for one to draw checks in all good faith, then,
leave for Manila, and on return find that those checks had not been cashed
because of the action taken by the bank. That caused a disturbance in
Gullas' finances, especially with reference to his insurance, which was
injurious to him. All facts and circumstances considered, we are of the
opinion that Gullas should be awarded nominal damages because of the
premature action of the bank against which Gullas had no means of
protection, and have finally determined that the amount should be P250.
Agreeable to the foregoing, the errors assigned by the parties will in the
main be overruled, with the result that the judgment of the trial court will
be modified by sentencing the defendant to pay the plaintiff the sum of
P250, and the costs of both instances.
G.R. No. L-60033 April 4, 1984
TEOFISTO GUINGONA, JR., ANTONIO I. MARTIN, and TERESITA SANTOS,
petitioners,
vs.
THE CITY FISCAL OF MANILA, HON. JOSE B. FLAMINIANO, ASST. CITY
 FISCAL FELIZARDO N. LOTA and CLEMENT DAVID, respondents.
MAKASIAR, Actg. C.J.:ñé+.£ªwph!1
This is a petition for prohibition and injunction with a prayer for the
immediate issuance of restraining order and/or writ of preliminary
injunction filed by petitioners on March 26, 1982.
On March 31, 1982, by virtue of a court resolution issued by this Court on
the same date, a temporary restraining order was duly issued ordering the
respondents, their officers, agents, representatives and/or person or
persons acting upon their (respondents') orders or in their place or stead to
refrain from proceeding with the preliminary investigation in Case No.
8131938 of the Office of the City Fiscal of Manila (pp. 47-48, rec.). On
January 24, 1983, private respondent Clement David filed a motion to lift
restraining order which was denied in the resolution of this Court dated
May 18, 1983.
As can be gleaned from the above, the instant petition seeks to prohibit
public respondents from proceeding with the preliminary investigation of
I.S. No. 81-31938, in which petitioners were charged by private respondent
Clement David, with estafa and violation of Central Bank Circular No. 364
and related regulations regarding foreign exchange transactions principally,
on the ground of lack of jurisdiction in that the allegations of the charged, as
well as the testimony of private respondent's principal witness and the
evidence through said witness, showed that petitioners' obligation is civil in
nature.
For purposes of brevity, We hereby adopt the antecedent facts narrated by
the Solicitor General in its Comment dated June 28,1982, as follows:têñ.
£îhqwâ£
On December 23,1981, private respondent 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 Circular No. 364 and
related Central Bank regulations on foreign exchange transactions, allegedly
committed as follows (Petition, Annex "A"):têñ.£îhqwâ£
"From March 20, 1979 to March, 1981, David invested with the Nation
19
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."
Petitioners, Martin and Santos, filed a joint counter-affidavit (Petition,
Annex' B') in which they stated the following.têñ.£îhqwâ£
"That Martin became President of NSLA in March 1978 (after the resignation
of Guingona, Jr.) and served as such until October 30, 1980, while Santos
was General Manager up to November 1980; that because NSLA was
urgently in need of funds and at David's insistence, his investments were
treated as special- accounts with interest above the legal rate, an recorded
in separate confidential documents only a portion of which were to be
reported because he did not want the Australian government to tax his total
earnings (nor) to know his total investments; that all transactions with David
were recorded except the sum of US$15,000.00 which was a personal loan
of Santos; that David's check for US$50,000.00 was cleared through
Guingona, Jr.'s dollar account because NSLA did not have one, that a draft of
US$30,000.00 was placed in the name of one Paz Roces because of a
pending transaction with her; that the Philippine Deposit Insurance
Corporation had already reimbursed David within the legal limits; that
majority of the stockholders of NSLA had filed Special Proceedings No. 82-
1695 in the Court of First Instance to contest its (NSLA's) closure; that after
NSLA was placed under receivership, Martin executed a promissory note in
David's favor and caused the transfer to him of a nine and on behalf (9 1/2)
carat diamond ring with a net value of P510,000.00; and, that the liabilities
of NSLA to David were civil in nature."
Petitioner, Guingona, Jr., in his counter-affidavit (Petition, Annex' C') stated
the following:têñ.£îhqwâ£
"That he had no hand whatsoever in the transactions between David and
NSLA since he (Guingona Jr.) had resigned as NSLA president in March 1978,
or prior to those transactions; that he assumed a portion o; the liabilities of
NSLA to David because of the latter's insistence that he placed his
investments with NSLA because of his faith in Guingona, Jr.; that in a
Promissory Note dated June 17, 1981 (Petition, Annex "D") he (Guingona,
Jr.) bound himself to pay David the sums of P668.307.01 and US$37,500.00
in stated installments; that he (Guingona, Jr.) secured payment of those
amounts with second mortgages over two (2) parcels of land under a deed
of Second Real Estate Mortgage (Petition, Annex "E") in which it was
provided that the mortgage over one (1) parcel shall be cancelled upon
payment of one-half of the obligation to David; that he (Guingona, Jr.) paid
P200,000.00 and tendered another P300,000.00 which David refused to
accept, hence, he (Guingona, Jr.) filed Civil Case No. Q-33865 in the Court of
First Instance of Rizal at Quezon City, to effect the release of the mortgage
over one (1) of the two parcels of land conveyed to David under second
mortgages."
At the inception of the preliminary investigation before respondent Lota,
petitioners moved to dismiss the charges against them for lack of
jurisdiction because David's claims allegedly comprised a purely civil
obligation which was itself novated. Fiscal Lota denied the motion to dismiss
(Petition, p. 8).
But, after the presentation of David's principal witness, petitioners filed the
instant petition because: (a) the production of the Promisory Notes,
Banker's Acceptance, Certificates of Time Deposits and Savings Account
allegedly showed that the transactions between David and NSLA were
simple loans, i.e., civil obligations on the part of NSLA which were novated
when Guingona, Jr. and Martin assumed them; and (b) David's principal
witness allegedly testified that the duplicate originals of the aforesaid
instruments of indebtedness were all on file with NSLA, contrary to David's
claim that some of his investments were not record (Petition, pp. 8-9).
Petitioners alleged that they did not exhaust available administrative
remedies because to do so would be futile (Petition, p. 9) [pp. 153-157,
20
rec.].
As correctly pointed out by the Solicitor General, the sole issue for
resolution is whether public respondents acted without jurisdiction when
they investigated the charges (estafa and violation of CB Circular No. 364
and related regulations regarding foreign exchange transactions) subject
matter of I.S. No. 81-31938.
There is merit in the contention of the petitioners that their liability is civil in
nature and therefore, public respondents have no jurisdiction over the
charge of estafa.
A casual perusal of the December 23, 1981 affidavit. complaint filed in the
Office of the City Fiscal of Manila by private respondent David against
petitioners Teopisto Guingona, Jr., Antonio I. Martin and Teresita G. Santos,
together with one Robert Marshall and the other directors of the Nation
Savings and Loan Association, will show that from March 20, 1979 to March,
1981, private respondent David, together with his sister, Denise Kuhne,
invested with the Nation Savings and Loan Association the sum of
P1,145,546.20 on time deposits covered by Bankers Acceptances and
Certificates of Time Deposits and the sum of P13,531.94 on savings account
deposits covered by passbook nos. 6-632 and 29-742, or a total of
P1,159,078.14 (pp. 15-16, roc.). It appears further that private respondent
David, together with his sister, made investments in the aforesaid bank in
the amount of US$75,000.00 (p. 17, rec.).
Moreover, the records reveal that when the aforesaid bank was placed
under receivership on March 21, 1981, petitioners Guingona and Martin,
upon the request of private respondent David, assumed the obligation of
the bank to private respondent David by executing on June 17, 1981 a joint
promissory note in favor of private respondent acknowledging an
indebtedness of Pl,336,614.02 and US$75,000.00 (p. 80, rec.). This
promissory note was based on the statement of account as of June 30, 1981
prepared by the private respondent (p. 81, rec.). The amount of
indebtedness assumed appears to be bigger than the original claim because
of the added interest and the inclusion of other deposits of private
respondent's sister in the amount of P116,613.20.
Thereafter, or on July 17, 1981, petitioners Guingona and Martin agreed to
divide the said indebtedness, and petitioner Guingona executed another
promissory note antedated to June 17, 1981 whereby he personally
acknowledged an indebtedness of P668,307.01 (1/2 of P1,336,614.02) and
US$37,500.00 (1/2 of US$75,000.00) in favor of private respondent (p. 25,
rec.). The aforesaid promissory notes were executed as a result of deposits
made by Clement David and Denise Kuhne with the Nation Savings and Loan
Association.
Furthermore, the various pleadings and documents filed by private
respondent David, before this Court indisputably show that he has indeed
invested his money on time and savings deposits with the Nation Savings
and Loan Association.
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:têñ.£îhqwâ£
Article 1980. Fixed, savings, and current deposits of-money in banks and
similar institutions shall be governed by the provisions concerning simple
loan.
In the case of Central Bank of the Philippines vs. Morfe (63 SCRA 114,119
[1975], We said:têñ.£îhqwâ£
It should be noted that fixed, savings, and current deposits of money in
banks and similar institutions are hat true deposits. are considered simple
loans and, as such, are not preferred credits (Art. 1980 Civil Code; In re
Liquidation of Mercantile Batik of China Tan Tiong Tick vs. American
Apothecaries Co., 66 Phil 414; Pacific Coast Biscuit Co. vs. Chinese Grocers
Association 65 Phil. 375; Fletcher American National Bank vs. Ang Chong UM
66 PWL 385; Pacific Commercial Co. vs. American Apothecaries Co., 65 PhiL
429; Gopoco Grocery vs. Pacific Coast Biscuit CO.,65 Phil. 443)."
This Court also declared in the recent case of Serrano vs. Central Bank of the
Philippines (96 SCRA 102 [1980]) that:têñ.£îhqwâ£
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 (Art. 1980 Civil Code Gullas vs. Phil. National Bank, 62 Phil.
519). Current and saving deposits, are loans to a bank because it can use the
same. The petitioner here in making time deposits that earn interests will
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 the respondent Bank to honor the time
deposit is failure to pay its obligation as a debtor and not a breach of trust
arising from a depositary's failure to return the subject matter of the deposit
21
(Emphasis supplied).
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.
WE have already laid down the rule that:têñ.£îhqwâ£
In order that a person can be convicted under the above-quoted provision,
it must be proven that he has the obligation to deliver or return the some
money, goods or personal property that he received Petitioners had no such
obligation to return the same money, i.e., the bills or coins, which they
received from private respondents. This is so because as clearly as stated in
criminal complaints, the related civil complaints and the supporting sworn
statements, the sums of money that petitioners received were loans.
The nature of simple loan is defined in Articles 1933 and 1953 of the Civil
Code.têñ.£îhqwâ£
"Art. 1933. — By the contract of loan, one of the parties delivers to another,
either something not consumable so that the latter may use the same for a
certain time- and return it, in which case the contract is called a
commodatum; or money or other consumable thing, upon the condition
that the same amount of the same kind and quality shall he paid in which
case the contract is simply called a loan or mutuum.
"Commodatum is essentially gratuitous.
"Simple loan may be gratuitous or with a stipulation to pay interest.
"In commodatum the bailor retains the ownership of the thing loaned while
in simple loan, ownership passes to the borrower.
"Art. 1953. — A person who receives a loan of money or any other fungible
thing acquires the ownership thereof, and is bound to pay to the creditor an
equal amount of the same kind and quality."
It can be readily noted from the above-quoted provisions that in simple loan
(mutuum), as contrasted to commodatum the borrower acquires ownership
of the money, goods or personal property borrowed Being the owner, the
borrower can dispose of the thing borrowed (Article 248, Civil Code) and his
act will not be considered misappropriation thereof' (Yam vs. Malik, 94 SCRA
30, 34 [1979]; Emphasis supplied).
But even granting that the failure of the bank to pay the time and savings
deposits of private respondent David would constitute a violation of
paragraph 1(b) of Article 315 of the Revised Penal Code, nevertheless any
incipient criminal liability was deemed avoided, because when the aforesaid
bank was placed under receivership by the Central Bank, petitioners
Guingona and Martin assumed the obligation of the bank to private
respondent David, thereby resulting in the novation of the original
contractual obligation arising from deposit into a contract of loan and
converting the original trust relation between the bank and private
respondent David into an ordinary debtor-creditor relation between the
petitioners and private respondent. Consequently, the failure of the bank or
petitioners Guingona and Martin to pay the deposits of private respondent
would not constitute a breach of trust but would merely be a failure to pay
the obligation as a debtor.
Moreover, while it is true that novation does not extinguish criminal liability,
it may however, prevent the rise of criminal liability as long as it occurs prior
to the filing of the criminal information in court. Thus, in Gonzales vs.
Serrano ( 25 SCRA 64, 69 [1968]) We held that:têñ.£îhqwâ£
As pointed out in People vs. Nery, novation prior to the filing of the criminal
information — as in the case at bar — may convert the relation between the
parties into an ordinary creditor-debtor relation, and place the complainant
in estoppel to insist on the original transaction or "cast doubt on the true
nature" thereof.
Again, in the latest case of Ong vs. Court of Appeals (L-58476, 124 SCRA 578,
580-581 [1983] ), this Court reiterated the ruling in People vs. Nery ( 10
SCRA 244 [1964] ), declaring that:têñ.£îhqwâ£
The novation theory may perhaps apply prior to the filling of the criminal
information in court by the state prosecutors because up to that time the
original trust relation may be converted by the parties into an ordinary
creditor-debtor situation, thereby placing the complainant in estoppel to
insist on the original trust. But after the justice authorities have taken
cognizance of the crime and instituted action in court, the offended party
may no longer divest the prosecution of its power to exact the criminal
liability, as distinguished from the civil. The crime being an offense against
22
the state, only the latter can renounce it (People vs. Gervacio, 54 Off. Gaz.
2898; People vs. Velasco, 42 Phil. 76; U.S. vs. Montanes, 8 Phil. 620).
It may be observed in this regard that novation is not one of the means
recognized by the Penal Code whereby criminal liability can be extinguished;
hence, the role of novation may only be to either prevent the rise of
criminal liability or to cast doubt on the true nature of the original basic
transaction, whether or not it was such that its breach would not give rise to
penal responsibility, as when money loaned is made to appear as a deposit,
or other similar disguise is resorted to (cf. Abeto vs. People, 90 Phil. 581;
U.S. vs. Villareal, 27 Phil. 481).
In the case at bar, there is no dispute that petitioners Guingona and Martin
executed a promissory note on June 17, 1981 assuming the obligation of the
bank to private respondent David; while the criminal complaint for estafa
was filed on December 23, 1981 with the Office of the City Fiscal. Hence, it is
clear that novation occurred long before the filing of the criminal complaint
with the Office of the City Fiscal.
Consequently, as aforestated, any incipient criminal liability would be
avoided but there will still be a civil liability on the part of petitioners
Guingona and Martin to pay the assumed obligation.
Petitioners herein were likewise charged with violation of Section 3 of
Central Bank Circular No. 364 and other related regulations regarding
foreign exchange transactions by accepting foreign currency deposit in the
amount of US$75,000.00 without authority from the Central Bank. They
contend however, that the US dollars intended by respondent David for
deposit were all converted into Philippine currency before acceptance and
deposit into Nation Savings and Loan Association.
Petitioners' contention is worthy of belief for the following reasons:
1. It appears from the records that when respondent David was about to
make a deposit of bank draft issued in his name in the amount of
US$50,000.00 with the Nation Savings and Loan Association, the same had
to be cleared first and converted into Philippine currency. Accordingly, the
bank draft was endorsed by respondent David to petitioner Guingona, who
in turn deposited it to his dollar account with the Security Bank and Trust
Company. Petitioner Guingona merely accommodated the request of the
Nation Savings and loan Association in order to clear the bank draft through
his dollar account because the bank did not have a dollar account.
Immediately after the bank draft was cleared, petitioner Guingona
authorized Nation Savings and Loan Association to withdraw the same in
order to be utilized by the bank for its operations.
2. It is safe to assume that the U.S. dollars were converted first into
Philippine pesos before they were accepted and deposited in Nation Savings
and Loan Association, because the bank is presumed to have followed the
ordinary course of the business which is to accept deposits in Philippine
currency only, and that the transaction was regular and fair, in the absence
of a clear and convincing evidence to the contrary (see paragraphs p and q,
Sec. 5, Rule 131, Rules of Court).
3. Respondent David has not denied the aforesaid contention of herein
petitioners despite the fact that it was raised. in petitioners' reply filed on
May 7, 1982 to private respondent's comment and in the July 27, 1982 reply
to public respondents' comment and reiterated in petitioners'
memorandum filed on October 30, 1982, thereby adding more support to
the conclusion that the US$75,000.00 were really converted into Philippine
currency before they were accepted and deposited into Nation Savings and
Loan Association. Considering that this might adversely affect his case,
respondent David should have promptly denied petitioners' allegation.
In conclusion, considering that the liability of the petitioners is purely civil in
nature and that there is no clear showing that they engaged in foreign
exchange transactions, We hold that the public respondents acted without
jurisdiction when they investigated the charges against the petitioners.
Consequently, public respondents should be restrained from further
proceeding with the criminal case for to allow the case to continue, even if
the petitioners could have appealed to the Ministry of Justice, would work
great injustice to petitioners and would render meaningless the proper
administration of justice.
While as a rule, the prosecution in a criminal offense cannot be the subject
of prohibition and injunction, this court has recognized the resort to the
extraordinary writs of prohibition and injunction in extreme cases, thus:têñ.
£îhqwâ£
On the issue of whether a writ of injunction can restrain the proceedings in
Criminal Case No. 3140, the general rule is that "ordinarily, criminal
prosecution may not be blocked by court prohibition or injunction."
Exceptions, however, are allowed in the following instances:têñ.£îhqwâ£
"1. for the orderly administration of justice;
"2. to prevent the use of the strong arm of the law in an oppressive and
vindictive manner;
"3. to avoid multiplicity of actions;
23
"4. to afford adequate protection to constitutional rights;
"5. in proper cases, because the statute relied upon is unconstitutional or
was held invalid" ( Primicias vs. Municipality of Urdaneta, Pangasinan, 93
SCRA 462, 469-470 [1979]; citing Ramos vs. Torres, 25 SCRA 557 [1968]; and
Hernandez vs. Albano, 19 SCRA 95, 96 [1967]).
Likewise, in Lopez vs. The City Judge, et al. ( 18 SCRA 616, 621-622 [1966]),
We held that:têñ.£îhqwâ£
The writs of certiorari and prohibition, as extraordinary legal remedies, are
in the ultimate analysis, intended to annul void proceedings; to prevent the
unlawful and oppressive exercise of legal authority and to provide for a fair
and orderly administration of justice. Thus, in Yu Kong Eng vs. Trinidad, 47
Phil. 385, We took cognizance of a petition for certiorari and prohibition
although the accused in the case could have appealed in due time from the
order complained of, our action in the premises being based on the public
welfare policy the advancement of public policy. In Dimayuga vs. Fajardo,
43 Phil. 304, We also admitted a petition to restrain the prosecution of
certain chiropractors although, if convicted, they could have appealed. We
gave due course to their petition for the orderly administration of justice
and to avoid possible oppression by the strong arm of the law. And in
Arevalo vs. Nepomuceno, 63 Phil. 627, the petition for certiorari challenging
the trial court's action admitting an amended information was sustained
despite the availability of appeal at the proper time.
WHEREFORE, THE PETITION IS HEREBY GRANTED; THE TEMPORARY
RESTRAINING ORDER PREVIOUSLY ISSUED IS MADE PERMANENT. COSTS
AGAINST THE PRIVATE RESPONDENT.
SO ORDERED.
G.R. No. 116792 March 29, 1996
BANK OF THE PHILIPPINES ISLAND and GRACE ROMERO, petitioners,
vs.
 COURT OF APPEALS and EDVIN F. REYES, respondents.
 
PUNO, J.:p
Petitioners seek a review of the Decision 1 of respondent Court of Appeals in
CA-G.R. CV No. 41543 reversing the Decision 2 of the Regional Trial Court of
Quezon City, Branch 79, and ordering petitioners to credit private
respondent's Savings Account No. 3185-0172-56 with P10,556,00 plus
interest.
The facts reveal that on September 25, 1985, private respondent Edvin F.
Reyes opened Savings Account No. 3185-0172-56 at petitioner Bank of the
Philippine Islands (BPI) Cubao, Shopping Center Branch. It is a joint
"AND/OR" account with his wife, Sonia S. Reyes.
Private respondent also held a joint "AND/OR" Savings Account No. 3185-
0128-82 with his grandmother, Emeteria M. Fernandez, opened on February
11, 1986 at the same BPI branch. He regularly deposited in this account the
U.S. Treasury Warrants payable to the order of Emeteria M. Fernandez as
her monthly pension.
Emeteria M. Fernandez died on December 28, 1989 without the knowledge
of the U.S. Treasury Department. She was still sent U.S. Treasury Warrant
No. 21667302 dated January 1, 1990 in the amount of U.S. $377.003 or
P10,556.00. On January 4, 1990, private respondent deposited the said U.S.
treasury check of Fernandez in Savings Account No. 3185-0128-82. The U.S.
Veterans Administration Office in Manila conditionally cleared the check.4
The check was then sent to the United States for further clearing. 5
Two months after or on March 8, 1990, private respondent closed Savings
Account No. 3185-0128-82 and transferred its funds amounting to
P13,112.91 to Savings Account No. 3185-0172-56, the joint account with his
wife.
On January 16, 1991, U.S. Treasury Warrant No. 21667302 was dishonored
as it was discovered that Fernandez died three (3) days prior to its issuance.
The U.S. Department of Treasury requested petitioner bank for a refund.6
For the first time petitioner bank came to know of the death of Fernandez.
On February 19, 1991, private-respondent received a PT&T urgent telegram
from petitioner bank requesting him to contact Manager Grace S. Romero
or Assistant Manager Carmen Bernardo. When he called up the bank, he
was informed that the treasury check was the subject of a claim by Citibank
NA, correspondent of petitioner bank. He assured petitioners that he would
drop by the bank to look into the matter. He also verbally authorized them
24
to debit from his other joint account the amount stated in the dishonored
U.S. Treasury Warrant.7 On the same day, petitioner bank debited the
amount of P10,556.00 from private respondent's Savings Account No. 3185-
0172-56.
On February 21, 1991, private respondent with his lawyer Humphrey
Tumaneng visited the petitioner bank and the refund documents were
shown to them. Surprisingly, private respondent demanded from petitioner
bank restitution of the debited amount. He claimed that because of the
debit, he failed to withdraw his money when he needed them. He then filed
a suit for Damages8 against petitioners before the Regional Trial Court of
Quezon City, Branch 79.
Petitioners contested the complaint and counter claimed, for moral and
exemplary damages. By way of Special and Affirmative Defense, they
averred that private respondent gave them his express verbal authorization
to debit the questioned amount. They claimed that private respondent later
refused to execute a written authority.9
In a Decision dated January 20, 1993, the trial court dismissed the complaint
of private respondent for lack of cause of action.10
Private respondent appealed to the respondent Court of Appeals. On August
16, 1994, the Sixteenth Division of respondent court in AC-G.R. CV No.
41543 reversed the impugned decision, viz:
WHEREFORE, the judgement appealed from is set aside, and another one
entered ordering defendant (petitioner) to credit plaintiff's (private
respondent's) S.A. No. 3185-0172-56 with P10,556.00 plus interest at the
applicable rates for express teller savings accounts from February 19, 1991,
until compliance herewith. The claim and counterclaim for damages are
dismissed for lack of merit.
SO ORDERED.11
Petitioners now contend that respondent Court of Appeals erred:
I
RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT
RESPONDENT REYES GAVE EXPRESS AUTHORITY TO PETITIONER BANK TO
DEBIT HIS JOINT ACCOUNT WITH HIS WIFE FOR THE VALUE OF THE
RETURNED U.S. TREASURY WARRANT.
II
RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT
PETITIONER BANK HAS LEGAL RIGHT TO APPLY THE DEPOSIT OF
RESPONDENT REYES TO HIS OUTSTANDING OBLIGATION TO PETITIONER
BANK BROUGHT ABOUT BY THE RETURN OF THE U.S. TREASURY WARRANT
HE EARLIER DEPOSITED UNDER THE PRINCIPLE OF "LEGAL COMPENSATION."
III
RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NOT APPLYING
CORRECTLY THE PRINCIPLES ENUNCIATED BY THE SUPREME COURT IN THE
CASE OF GULLAS V. PNB, 62 PHIL. 519.
IV.
RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NOT APPRECIATING
THE FACT THAT THE MONEY DEBITED BY PETITIONER BANK WAS THE SAME
MONEY TRANSFERRED BY RESPONDENT REYES FROM HIS JOINT "AND/OR"
ACCOUNT WITH HIS GRANDMOTHER TO HIS JOINT "AND/OR" ACCOUNT
WITH HIS WIFE.12
We find merit in the petition.
The first issue for resolution is whether private respondent verbally
authorized petitioner bank to debit his joint account with his wife for the
amount of the returned U.S. Treasury Warrant. We find that petitioners
were able to prove this verbal authority by preponderance of evidence. The
testimonies of Bernardo and Romero deserve credence. Bernardo testified:
x x x           x x x          x x x
Q After that, what happened?
A . . . Dr. Reyes Called me up and I informed him about the return of the U.S.
Treasury Warrant and we are requested to reimburse for the amount.
Q What was his response if any?
A Don't you worry about it, there is no personal problem.
x x x           x x x          x x x
Q And so what was his response?
A He said that don' t you worry about.
x x x           x x x          x x x
Q You said that you asked him the advice and he did not answer, what
advice are you referring to?
A In our conversation, he promised me that he will give me written
confirmation or authorization.13
The conversation was promptly relayed to Romero who testified:
x x x           x x x          x x x
Q . . . Was there any opportunity where in said Mrs. Bernardo was able to
convey to you the contents of their conversation?
A This was immediately relayed to me as manager of the Bank of the
Philippine Islands, sir.
25
Q What, any was the content of her conversation, if you know?
A Mr. Reyes instructed Mrs. Bernardo to debit his account with the bank. His
account was maintained jointly with his wife then he promised to drop by to
give us a written confirmation, sir.
x x x           x x x          x x x
Q You said that you authorized the debiting of the account on February 19,
1991, is that correct?
A I did not authorize, we merely followed the instruction of Mr. Reyes, sir.14
We are not disposed to believe private respondent's allegation that he did
not give any verbal authorization. His testimony is uncorroborated. Nor does
he inspire credence. His past and fraudulent conduct is an evidence against
him.15 He concealed from petitioner bank the death of Fernandez on
December 28, 1989. 16 As of that date, he knew that Fernandez was no
longer entitled to receive any pension. Nonetheless, he-still received the
U.S. Treasury Warrant of Fernandez, and on January 4, 1990 deposited the
same in Savings Account No. 3185-0128-82. To pre-empt a refund, private
respondent closed his joint account with Fernandez (Savings Account No.
31-85-0128-82) on March 8, 1990 and transferred its balance to his joint
account with his wife (Savings Account No. 3185-0172-56). Worse, private
respondent declared under the penalties of perjury in the withdrawal slip 17
dated March 8, 1990 that his co-depositor, Fernandez, is still living. By his
acts, private respondent has stripped himself of credibility.
More importantly, the respondent court erred when it failed to rule that
legal compensation is proper. Compensation shall take place when two
persons, in their own right, are creditors and debtors of each other. 18 Article
1290 of the Civil Code provides that "when all the requisites mentioned in
Article 1279 are present, compensation takes effect by operation of law, and
extinguishes both debts to the concurrent amount, even though the
creditors and debtors are not aware of the compensation." Legal
compensation operates even against the will of the interested parties and
even without the consent of them. 19 Since this compensation takes place
ipso jure, its effects arise on the very day on which all its requisites concur. 20
When used as a defense, it retroacts to the date when its requisites are
fulfilled.21
Article 1279 states that in order that compensation may be proper, it is
necessary:
(1) That each one of the obligors be bound principally, and that he be at the
same time a principal creditor of the other;
(2) That both debts consist in a sum of money, or if the things due are
consumable, they be of the same kind, and also of the same quality if the
latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy,
commenced by third persons and communicated in due time to the debtor.
The elements of legal compensation are all present in the case at bar. The
obligors bound principally are at the same time creditors of each other.
Petitioner bank stands as a debtor of the private respondent, a depositor. At
the same time, said bank is the creditor of the private respondent with
respect to the dishonored U.S. Treasury Warrant which the latter illegally
transferred to his joint account. The debts involved consist of a sum of
money. They are due, liquidated, and demandable. They are not claimed by
a third person.
It is true that the joint account of private respondent and his wife was
debited in the case at bar. We hold that the presence of private
respondent's wife does not negate the element of mutuality of parties, i.e.,
that they must be creditors and debtors of each other in their own right.
The wife of private respondent is not a party in the case at bar. She never
asserted any right to the debited U.S. Treasury Warrant. Indeed, the right of
the petitioner bank to make the debit is clear and cannot be doubted. To
frustrate the application of legal compensation on the ground that the
parties are not all mutually obligated would result in unjust enrichment on
the part of the private respondent and his wife who herself out of honesty
has not objected to the debit. The rule as to mutuality is strictly applied at
law. But not in equity, where to allow the same would defeat a clear right or
permit irremediable injustice.22
In VIEW HEREOF, the Decision of respondent Court of Appeals in CA-G.R. CV
No. 41543 dated August 16, 1994 is ANNULLED and SET ASIDE and the
Decision of the trial court in Civil Case No. Q-91-8451 dated January 20,
1993 is REINSTATED. Costs against private respondent.
SO ORDERED.
G.R. No. 159794             December 19, 2006
26
MACLARING M. LUCMAN, in his capacity as the Manager of the LAND
BANK OF THE PHILIPPINES, Marawi City, petitioner,
vs.
ALIMATAR MALAWI, ABDUL-KHAYER PANGCOGA, SALIMATAR SARIP,
LOMALA CADAR, ALIRIBA S. MACARAMBON and ABDUL USMAN,
respondents.
DECISION
TINGA, J.:
This is a petition for review challenging the decision of the trial court,
affirmed by the Court of Appeals, granting the petition for mandamus filed
by herein respondents, Barangay Chairmen (or Punong Barangay) of several
barangays in the province of Lanao del Sur.
The petition for mandamus filed by respondents before the trial court is
rooted in their claim that they were deprived of their Internal Revenue
Allotment (IRA) for the 2nd and 3rd quarters of 1997. Respondents further
alleged that these same funds were released by petitioner as Manager of
Land Bank of the Philippines (LBP), the depositary bank, to third persons.
There were originally six (6) petitioners when the Petition for Mandamus
with Prayer for Writ of Preliminary Mandatory Injunction was filed by now
respondents before the court of origin. They were Alimatar Malawi,
Abdulkhayr Pangcoga, Salimatar Sarip, Lomala Cadar, Aliriba S. Macarambon
and Abdul Usman who were the incumbent barangay chairmen of Bubong
Ngingir (Kabasaran), Ilian, Linindingan, Mapantao-Ingod, Paigoay and
Rangiran, respectively, all from the Municipality of Pagayawan, Lanao del
Sur.1 All of them were the incumbent barangay chairmen of their respective
barangays prior to the 12 May 1997 barangay elections. The elections on 12
May 1997 in the aforesaid barangays resulted in a failure of elections.
Thereafter, the special elections held in these barangays likewise resulted in
a failure of elections.2 Consequently, respondents remained in office in a
holdover capacity pursuant to the provisions of Sec. 1 of R.A. No. 6679 3 and
Comelec Resolution No. 2888 dated February 5, 1997. 4
Beginning with the second quarter of 1997, LBP was selected as the
government depository bank for the IRAs of the abovementioned
barangays.5 Being a new government depositary bank for the IRA funds, the
authorized public officials had to open new accounts in behalf of their
government units with the proper LBP branch from which they could
withdraw the IRAs.6
After the failed 12 May 1997 elections, respondents attempted to open
their respective barangays' IRA bank accounts but were refused by
petitioner because respondents needed to show their individual
certifications showing their right to continue serving as Barangay Chairmen
and the requisite Municipal Accountant's Advice giving respondents the
authority to withdraw IRA deposits.7 The requirement for the Accountant's
Advice stemmed from Commission on Audit Circular No. 94-004. 8
Respondents were eventually allowed to open accounts for their barangays
except for Lomala Cadar and Abdul Usman of barangays Mapantao-Ingud
and Rangiran, respectively, because the accounts for these barangays were
previously opened by two persons who presented themselves as the duly
proclaimed Barangay Chairmen for these same barangays. 9
In any event, all respondents were not allowed to withdraw the IRA funds
from the opened accounts, owing to the absence of the requisite
Accountant's Advice.10
Then on 4 August 1997, five (5) other persons presented themselves before
petitioner as the newly proclaimed Punong Barangays of the five barangays
concerned,11 each of them presenting a certification of his election as
Punong Barangay issued by the provincial director of the DILG-ARMM and
another Certification issued by the Local Government Operations Officer
attesting, among others, to the revocation of the certification previously
issued to respondents.12 Without verifying the authenticity of the
certifications presented by these third persons, petitioner proceeded to
release the IRA funds for the 2nd and 3rd quarters of 1997 to them.13
Respondents thus filed on 11 August 1997 a special civil action for
Mandamus with Application for Preliminary Mandatory Injunction docketed
as Civil Case No. 11-106, to compel petitioner to allow them to open and
maintain deposit accounts covering the IRAs of their respective barangays
and to withdraw therefrom.14 The case was raffled to the Regional Trial
Court (RTC) of Lanao del Sur, Branch 11. 15
At the trial respondents Sarip, Cadar, Pangcoga and Usman testified that
they were duly elected chairpersons of their respective barangays and
continued as such in a holdover capacity until their re-election on 30 August
1997. They testified further that despite presenting the corresponding
documents, petitioner refused to allow the withdrawal of the funds. 16
Respondent Macarambon testified that he was the incumbent chairperson
of Barangay Paigoay prior to the 12 May 1997 elections and that due to the
27
failure of elections, he continued to occupy his position in a holdover
capacity until he was succeeded by his wife upon the latter's election to the
same post. He testified on petitioner's refusal to release the money to him
despite his submission of the Accountant's Advice. 17
For failure to appear at the scheduled hearing on 20 April 1999, petitioner
was held as in default and respondents were allowed to present evidence
ex parte. Petitioner's Motion for Reconsideration of the Order declaring him
as in default was granted.18
After failing again to appear on the given time for him to adduce evidence,
another Order was issued wherein petitioner was deemed to have waived
his right to present evidence. The Order was lifted on petitioner's Motion for
Reconsideration. Instead of presenting evidence, petitioner filed on 10
November 1999 a Motion to Dispense or Waive Presentation of Evidence
wherein he represented that the prayers in the complaint had already been
complied with.19 The RTC granted petitioner's motion through an Order
dated 24 September 1999.20
Thereafter, the RTC rendered a Decision21 dated 8 October 1999
commanding petitioner to pay respondents, except respondent Alimatar
Malawi who failed to testify, the IRAs of their respective barangays "even
without the Accountant's Advice."22 The dispositive portion of the Decision
reads, to wit:
WHEREFORE, premises all considered, the instant petition is hereby granted.
Accordingly, Mr. Maclaring M. Lucman, Manager of the Land Bank of the
Philippines, Marawi City branch, is hereby ordered to pay the following: 23
1. Aliriba Macarambon, the 2nd Quarter IRA of Paigoay, Pagayawan in the
sum of P48,200.00;
2. Salimatar Sarip of Linindingan the
2nd Quarter IRA - - - P54,220.00
3rd Quarter IRA - - - P54,220.00
3. Lomala S. Cadar of Mapantao the
2nd Quarter IRA - - - P54,320.00
3rd Quarter IRA - - - P54,320.00
4. Abdulkhay Pangcoga of Ilian the
2nd Quarter IRA - - - P53, 361.00
3rd Quarter IRA - - - P53,361.00
5. Abdul Usman of Rangiran the
2nd Quarter IRA - - - P51,185.00
3rd Quarter IRA - - - P51,185.00
even without the Accountant's Advice and the subsequent IRAs until their
term of office shall have expired.
SO ORDERED.24
The RTC gave no credence to petitioner's assertion of payment to the
rightful barangay officers, there having been no testimonial or documentary
evidence proferred in substantiation thereof. 25 It considered petitioner's
refusal to present evidence as a "silence" that equates to an admission of
respondents' allegations.26 Furthermore, the RTC relied on the testimonies
and certifications adduced by respondents in holding that they were
occupying their positions in a holdover capacity 27and that by virtue thereof,
they had "the perfect right to continue performing the duties and functions
of their positions including the withdrawal of funds of their respective
barangays."28
The Court of Appeals29 affirmed the RTC's Decision in toto. Hence, this
petition.
Petitioner argues that respondents have no cause of action against him
since they failed to present valid certifications showing their respective right
to continue serving as Punong Barangay as well as the requisite Municipal
Accountant's Advice. Petitioner also asserts that the LBP Marawi Branch had
already released the contested IRAs to the Barangay Treasurers who were
acting in conjunction with the duly recognized Punong Barangays, thereby
making the petition for mandamus moot and academic. 30 These are factual
issues that are generally beyond the review of this Court.
Petitioner adds that respondents have no legal personality to institute the
petition for mandamus in their own names since the IRAs rightfully belong
to the respective barangays and not to them and that their respective
barangays already received the claimed IRAs in this instant case. 31
For the proper adjudication of the present petition, two related core issues
have to be resolved. First, what is the cause of action alleged in the
initiatory pleading filed by respondents before the trial court? Second, are
there indispensable parties which were not impleaded?
Although the pleading filed before the lower court was denominated as a
Petition for Mandamus With Prayer For Writ of Preliminary Injunction, the
allegations thereof indicate that it is an action for specific performance,
particularly to compel petitioner to allow withdrawal of funds from the
accounts of the barangays headed by respondents with the LBP, Marawi
Branch. Thus, the Petition alleged:
"12. Despite the opening of deposit accounts for the barangays mentioned
28
in the preceding paragraph, respondent, without any valid or lawful cause,
failed and refused, and still fails and refuses, to allow the withdrawal of the
funds or IRA of the said barangays as evidenced by the WITHDRAWAL
CHECKS (attached as Annexes "D" to "D-3" hereof) of said barangays which
were refused payment when presented to the Land Bank on August 4,
1997."32
From the records of the case, it appears that the shares of the barangays in
the IRA had already been remitted by the Department of Budget and
Management (DBM) to the LBP Marawi Branch where they were kept in the
accounts opened in the names of the barangays.
By virtue of the deposits, there exists between the barangays as depositors
and LBP a creditor-debtor relationship. Fixed, savings, and current deposits
of money in banks and similar institutions are governed by the provisions
concerning simple loan.33 In other words, the barangays are the lenders
while the bank is the borrower.
This Court elucidated on the matter in Guingona, Jr., et al. v. The City Fiscal
of Manila, et al.,34 citing Serrano v. Central Bank of the Philippines,35 thus:
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 (Art. 1980, Civil Code; Gullas v. Phil. National Bank, 62 Phil.
519). Current and savings deposits are loans to a bank because it can use
the same. The petitioner here in making time deposits that earn interest
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 the respondent Bank to honor the time
deposit is failure to pay its obligation as a debtor and not a breach of trust
arising from a depository's failure to return the subject matter of the
deposit. (Emphasis supplied.)36
The relationship being contractual in nature, mandamus is therefore not an
available remedy since mandamus does not lie to enforce the performance
of contractual obligations.37
This brings us to the second core issue.
The IRA funds for which the bank accounts were created belong to the
barangays headed by respondents. The barangays are the only lawful
recipients of these funds. Consequently, any transaction or claim involving
these funds can be done only through the proper authorization from the
barangays as juridical entities.
The determination, therefore, of whether or not the IRA funds were
unlawfully withheld or improperly released to third persons can only be
determined if the barangays participated as parties to this action. These
questions cannot be resolved with finality without the involvement of the
barangays. After all, these controversies involve funds rightfully belonging to
the barangays. Hence, the barangays are indispensable parties in this case.
An indispensable party is defined as parties-in-interest without whom there
can be no final determination of an action. 38 The nature of an indispensable
party was thoroughly discussed in Arcelona v. Court of Appeals,39 to quote:
An indispensable party is a party who has such an interest in the
controversy or subject matter that a final adjudication cannot be made, in
his absence, without injuring or affecting that interest, a party who has not
only an interest in the subject matter of the controversy, but also has an
interest of such nature that a final decree cannot be made without affecting
his interest or leaving the controversy in such a condition that its final
determination may be wholly inconsistent with equity and good conscience.
It has also been considered that an indispensable party is a person in whose
absence there cannot be a determination between the parties already
before the court which is effective, complete, or equitable. Further, an
indispensable party is one who must be included in an action before it may
properly go forward.
A person is not an indispensable party, however, if his interest in the
controversy or subject matter is separable from the interest of the other
parties, so that it will not necessarily be directly or injuriously affected by a
decree which does complete justice between them. Also, a person is not an
indispensable party if his presence would merely permit complete relief
between him and those already parties to the action, or if he has no interest
in the subject matter of the action. It is not a sufficient reason to declare a
person to be an indispensable party that his presence will avoid multiple
litigation.40
In Arcelona, the Court also dwelt on the consequences of failure to include
indispensable parties in a case, categorically stating that the presence of
indispensable parties is a condition for the exercise of juridical power 41 and
when an indispensable party is not before the court, the action should be
dismissed.42 The absence of an indispensable party renders all subsequent
actions of the court null and void for want of authority to act, not only as to
the absent parties but even as to those present. 43
The joinder of indispensable parties is mandatory. Without the presence of
29
indispensable parties to the suit, the judgment of the court cannot attain
real finality. Strangers to a case are not bound by the judgment rendered by
the court.44
Clearly, this case was not initiated by the barangays themselves. Neither did
the barangay chairmen file the suit in representation of their respective
barangays. Nothing from the records shows otherwise. On this score alone,
the case in the lower court should have been dismissed.
Even if the barangays themselves had filed the case, still it would not
prosper. The case involves government funds and as such, any release
therefrom can only be done in accordance with the prevailing rules and
procedures.
The Government Accounting and Auditing Manual (GAAM) provides that the
local treasurers shall maintain the depositary accounts in the name of their
respective local government units with banks. 45 Under the Local
Government Code, the treasurer is given the power, among others, to: (1)
keep custody of barangay funds and properties; and (2) disburse funds in
accordance with the financial procedures provided by the Local Government
Code.46 The same manual defines disbursements as constituting all cash paid
out during a given period either in currency or by check. 47
Sec. 344 of the Local Government Code further provides for the following
requirements in cases of disbursements, to wit:
Sec. 344. No money shall be disbursed unless the local budget officer
certifies to the existence of appropriation that has been legally made for the
purpose, the local accountant has obligated said appropriation, and the
local treasurer certifies to the availability of funds for the purpose. Vouchers
and payrolls shall be certified to and approved by the head of the
department or office who has administrative control of the fund concerned,
as to the validity, propriety, and legality of the claim involved. Except in
cases of disbursements involving regularly recurring administrative
expenses xxx approval of the disbursement voucher by the local chief
executive himself shall be required whenever local funds are disbursed.
Thus, as a safeguard against unwarranted disbursements, certifications are
required from: (a) the local budget officer as to the existence and validity of
the appropriation; (b) the local accountant as to the legal obligation
incurred by the appropriation; (c) the local treasurer as to the availability of
funds; and (d) the local department head as to the validity, propriety and
legality of the claim against the appropriation. 48
Further, the GAAM provides for the basic requirements applicable to all
classes of disbursements that shall be complied with, to wit:
a) Certificate of Availability of Fund.–Existence of lawful appropriation, the
unexpended balance of which, free from other obligations, is sufficient to
cover the expenditure, certified as available by an accounting officer or any
other official required to accomplish the certificate.
3rd Quarters of 1997 of the barangays concerned from the Land Bank of the Philippines, Marawi
Branch, are referred to the DILG for investigation and appropriate action. The DILG is hereby
DIRECTED to INFORM the Court of the result of its investigation within thirty (30) days from the
completion thereof.
No pronouncement as to costs.
SO ORDERED.

Use of moneys appropriated solely for the specific purpose for which
appropriated, and for no other, except when authorized by law or by a
corresponding appropriating body.
b) Approval of claim or expenditure by head of office or his duly
authorized representative.
c) Documents to establish validity of claim. – Submission of documents and
other evidences to establish the validity and correctness of the claim for
payment.
d) Conformity of the expenditure to existing laws and regulations.
e) Proper accounting treatment.49
This prescribed legal framework governing the release and disbursement of
IRA funds to the respective barangays disabuses from the notion that a
barangay chairman, relying solely on his authority as a local executive, has
the right to demand physical possession of the IRA funds allocated by the
national government to the barangay. The right to demand for the funds
belongs to the local government itself through the authorization of their
Sanggunian.50
One final note. There is no conclusive proof from the records showing that
the IRA funds for the 2nd and 3rd quarters of the barangays concerned
remitted by the DBM had already been withdrawn from the LBP Marawi
Branch. Considering the implications of this action of possibly depriving
several local government units of their IRAs, the Court took the initiative to
request the COMELEC to issue certifications on who were the duly elected
chairmen of the barangays concerned. The COMELEC issued to this Court a
list of the elected barangay chairmen which confirmed the re-election of
respondents as barangay chairmen of their respective barangays. 51 If
withdrawals were indeed made, whether by the respondents or by
impostors, the matter deserves to be investigated since public funds are
involved. Accordingly, we refer the matter to the Department of Interior and
Local Government (DILG) for investigation and appropriate action.
WHEREFORE, premises considered, the petition is GRANTED. The assailed Decisions of the Court of
Appeals and the Regional Trial Court are REVERSED and SET ASIDE. The Petition for Mandamus
filed before the Regional Trial Court is ordered DISMISSED.
The alleged withdrawals of deposits representing the Internal Revenue Allotments for the 2 nd and
30