DEPOSIT

THE ROMAN CATHOLIC BISHOP OF JARO vs. GREGORIO DE LA PEÑA

FACTS:The plaintiff is the trustee of a charitable bequest made for the construction of a leper hospital and that father Agustin de la Peña was the duly authorized representative of the plaintiff to receive the legacy.

The defendant is the administrator of the estate of Father Dela Peña. In the year 1898 the books Father De la Peña, as trustee, showed that he had on hand as such trustee the sum of P6,641, collected by him for the charitable purposes aforesaid

In the same year he deposited in his personal account P19,000 in the Hongkong and Shanghai Bank at Iloilo. Shortly thereafter and during the war of the revolution, Father De la Peña was arrested by the military authorities as a political prisoner, and while thus detained made an order on said bank in favor of the United States Army officer under whose charge he then was for the sum thus deposited in said bank.

The arrest of Father De la Peña and the confiscation of the funds in the bank were the result of the claim of the military authorities that he was an insurgent and that the funds thus deposited had been collected by him for revolutionary purposes.

The money was taken from the bank by the military authorities by virtue of such order, was confiscated and turned over to the Government. While there is considerable dispute in the case over the question whether the P6,641 of trust funds was included in the P19,000 deposited as aforesaid, nevertheless, a careful examination of the case leads us to the conclusion that said trust funds were a part of the funds deposited and which were removed and confiscated by the military authorities of the United States.

ISSUE:Whether or not Father de la Peña is liable for the loss of the money in the bank when he mixed the trust fund to his personal funds

RULINGS:NO.The court, therefore, finds and declares that the money which is the subject matter of this action was deposited by Father De la Peña in the Hongkong and Shanghai Banking Corporation of Iloilo; that said money was forcibly taken from the bank by the armed forces of the United States during the war of the insurrection; and that said Father De la Peña was not responsible for its loss. Father De la Peña's liability is determined by those portions of the Civil Code which relate to obligations.(Book 4, Title 1.)

Although the Civil Code states that "a person obliged to give something is also bound to preserve it with the diligence pertaining to a good father of a family" (art.1094), it also provides, following the principle of the Roman law, major casus est, cui humana infirmitas resistere non potest , that "no one shall be liable for events which could not be foreseen, or which having been foreseen were inevitable, with the exception of the cases expressly mentioned in the law or those in which the obligation so declares." (Art. 1105.)

By placing the money in the bank and mixing it with his personal funds De la Peña did not thereby assume an obligation different from that under which he would have lain if such deposit had not been made, nor did he thereby make himself liable to repay the money at all hazards.

If the had been forcibly taken from his pocket or from his house by the military forces of one of the combatants during a state of war, it is clear that under the provisions of the Civil Code he would have been exempt from responsibility. The fact that he placed the trust fund in the bank in his personal account does not add to his responsibility. Such deposit did not make hima debtor who must respond at all hazards.

ROMAN CATHOLIC BISHOP OF JARO V. DE LA PENA 26 PHIL 144 (AQUINO)

Facts: This is an appeal by the administrator of the estate of

Father De la Peña (defendant) from a judgment of the CFI, awarding to the Roman Catholic Bishop of Jaro (plaintiff) the sum of P6,641, with interest.

Fr. De la Peña was the representative of plaintiff over the legacy which it held in trust for the construction of a leper hospital.

In 1898, the books Fr. De la Peña, as trustee, had on hand the sum of P6,641 collected by him for the charitable purposes aforesaid. Subsequently, he deposited in his personal account P19,000 in the Hongkong and Shanghai Bank (Bank) at Iloilo.

During the war of the revolution, Fr. De la Peña was arrested by the military authorities as a political prisoner because they claimed that he was an insurgent and the funds deposited had been collected by him for revolutionary purposes.

A confiscation order was issued to the Bank for the deposit of Fr. De la Peña in favor of the United States Army officer and turned over to the Government.

Issue and Ratio:1. W/N the trust funds was included in the P19,000 deposited in the account of Fr. De la Peña in the bankYes. A careful examination of the case leads us to the conclusion that said trust funds were a part of the funds deposited and which were removed and confiscated by the military authorities of the United States.

2. W/N the estate of Fr. De la Peña is liable for the loss of the trust fundNo. Fr. De la Peña's liability is determined the Civil Code which states that "a person obliged to give something is also bound to preserve it with the diligence pertaining to a good father of a family" (art. 1094), it also provides that "no one shall be liable for events which could not be foreseen, or which having been foreseen were inevitable, with the exception of the cases expressly mentioned in the law or those in which the obligation so declares." (Art. 1105.)

The fact that he placed the trust fund in the bank in his personal account does not add to his responsibility. Such deposit did not make him a debtor who must respond at all hazards. There was no law prohibiting him from depositing it as he did and there was no law which changed his responsibility be reason of the deposit.

While it may be true that one who is under obligation to do or give a thing is in duty bound, when he sees events approaching the results of which will be dangerous to his trust, to take all reasonable means and measures to escape or, if unavoidable, to temper the effects of those events, we do not feel constrained to hold that, in choosing between two means equally legal, he is culpably negligent in selecting one whereas he would not have been if he had selected the other.

The deposit was forcibly taken by the military forces of one of the combatants during a state of war, it is clear that under the provisions of the Civil Code he would be exempt from responsibility.

The judgment is reversed. Dissent by Justice TRENT (I think he might ask this but it’s up to the encoders if they want to include this)

Fr. De la Peña was a trustee or an agent of the plaintiff. The money was clothed with all the immunities and protection with which the law seeks to invest trust funds. But when Fr. De la Peña mixed the trust fund with his own and deposited the whole in the bank to his personal account, his act stamped on the said fund his own private marks and unclothed it of all the protection it had.

If it had been deposited in the name of Fr. De la Peña as trustee or agent it may be presumed that the military authorities would not have confiscated it for the reason that they were looking for insurgent funds only. Again, the plaintiff had no reason to suppose that De la Peña would attempt to strip the fund of its identity, nor had he said or done anything which tended to relieve De la Peña from the legal responsibility which pertains to the care and custody of trust funds.

The US SC in the United State vs. Thomas said that "Trustees are only bound to exercise the same care and solicitude with regard to the trust property which they would exercise with regard to their own. Equity will not exact more of them. They are not liable for a loss by theft without their fault. But this exemption ceases when they mix the trust-money with their own, whereby it loses its identity, and they become mere debtors."

CA-Agro Industrial Devt Corp vs CA, 219 SCRA 426

FACTS:On July 3, 1979, petitioner (through its President- Sergio Aguirre) and the Spouses Ramon and Paula Pugao entered into an agreement whereby the former purchase two parcel of lands from the latter. It was paid of downpayment while the balance was covered by there postdated checks.

Among the terms and conditions embodied in the agreement were the titles shall be transferred to the petitioner upon full payment of the price and the owner's copies of the certificate of titles shall be deposited in a safety deposit box of any bank. Petitioner and the Pugaos then rented Safety Deposit box of private respondent Security Bank and Trust Company.

Thereafter, a certain Margarita Ramos offered to buy from the petitioner. Mrs Ramos demand the execution of a deed of sale which necessarily entailed the production of the certificate of titles. In view thereof, Aguirre, accompanied by the Pugaos, then proceed to the respondent Bank to open the safety deposit box and get the certificate of titles. However, when opened in the presence of the Bank's representative, the box yielded no such certificate. Because of the delay in the reconstitution of the title, Mrs Ramos withdrew her earlier offer to purchase.

Hence this petition.

ISSUE:Whether or not the contract of rent between a commercial bank and another party for the use of safety

deposit box can be considered alike to a lessor-lessee relationship.

RULING:The petitioner is correct in making the contention that the contract for the rent of the deposit box is not a ordinary contract of lease as defined in Article 1643 of the Civil Code. However, the Court do not really subscribe to its view that the same is a contract of deposit that is to be strictly governed by the provisions in Civil Code on Deposit; the contract in the case at bar is a special kind of deposit.

It cannot be characterized as an ordinary contract of lease under Article 1643 because the full and absolute possession and control of the safety deposit box was not given to the joint renters- the petitioner and the Pugaos. The guard key of the box remained with the respondent bank; without this key, neither of the renters could open the box. On the other hand, the respondent bank could not likewise open the box without the renter's key.

The Court further assailed that the petitioner is correct in applying American Jurisprudence. Herein, the prevailing view is that the relation between the a bank renting out safe deposits boxes and its customer with respect to the contents of the box is that of a bail or/ and bailee, the bailment being for hire and mutual benefits. That prevailing rule has been adopted in Section 72 of the General Banking Act.

Section 72. In addition to the operations specifically authorized elsewhere in this Act, banking institutions other that building and loan associations may perform the following services:(a) Receive in custody funds, document and valuable objects and rents safety deposits taxes for the safeguard of such effects.xxx xxx xxxThe bank shall perform the services permitted under subsections (a) (b) and (c) of this section as depositories or as agents.

CA AGRO-INDUSTRIAL DEVELOPMENT CORP. v. THE HONORABLE COURT OF APPEALS and SECURITY BANK AND TRUST COMPANYG.R. No. 90027, March 3, 1993, THIRD DIVISION (DAVIDE, JR., J.)

FACTS:CA Agro-Industrial Development Corp. (CA Agro) purchased two (2) parcels of land from the spouses Ramon and Paula Pugao (Pugaos). CA Agro paid a downpayment and issued three (3) post-dated checks covering the balance of the price. It was contracted that the titles to the lots shall be transferred to CA Agro upon full payment of the purchase price and that the owner's copies of the certificates of titles thereto shall be deposited in a safety deposit box of any bank. The same could be withdrawn only upon the joint signatures of a representative of CA Agro and the Pugaos upon full payment of the purchase price.

Forthwith, CA Agro and the Pugaos rented Safety Deposit Box of Security Bank and Trust Company (Bank). For this purpose, they both signed a contract of lease containing the following conditions:

13. The bank is not a depositary of the contents of the safe and it has neither the possession nor control of the same.14. The bank has no interest whatsoever in said contents, except herein expressly provided, and it assumes absolutely no liability in connection therewith.

After the execution of the contract, two (2) renter's keys were given to the renters — one to CA Agro and the other to the Pugaos. A guard key remained in the possession of the Bank. The safety deposit box has two (2) keyholes, one for the guard key and the other for the renter's key, and can be opened only with the use of both keys.

Thereafter, a certain Mrs. Margarita Ramos (Ramos) offered to buy from CA Agro the two (2) lots at a price that will yield a profit for the latter. Accordingly, Ramos demanded the execution of a deed of sale which necessarily entailed the production of the certificates of title. In view thereof, CA Agro, accompanied by the

Pugaos, then proceeded to the bank to open the safety deposit box and get the certificates of title. However, when opened in the presence of the Bank's representative, the box yielded no such certificates. As a result, Ramos withdrew her offer to buy the lots.

As a consequence, CA Agro failed to realize the expected profit, thus, it filed a complaint for damages against the Bank. The Bank in its answer with a counterclaim invoked paragraphs 13 and 14 of the contract of lease for its defense.

In due course, the trial court rendered a decision against CA Agro on the ground that the provisions of the contract of lease are binding on the parties, and that under said paragraphs, the Bank has no liability for the loss of the certificates of title.

On Appeal, the Court of Appeals affirmed the appealed decision principally on the theory that the contract executed by CA Agro and the Bank is in the nature of a contract of lease by virtue of which CA Agro and its co-renter were given control over the safety deposit box and its contents while the Bank retained no right to open the said box because it had neither the possession nor control over it and its contents, thus, the contract is governed by Article 1643 in relation to Article 1975 of the Civil Code.

Hence, CA Agro elevated the case to the Supreme Court under Rule 45 of the Rules of Court maintaining that regardless of nomenclature, the contract for the rent of the safety deposit box is actually a contract of deposit governed by Title XII, Book IV of the Civil Code.

ISSUE:Whether the contractual relation between a commercial bank and another party in a contract of rent of a safety deposit box with respect to its contents placed by the latter one of bailor and bailee or one of lessor and lessee

HELD:Petition PARTIALLY GRANTED

The contractual relation between a commercial bank and another party in a contract of rent of a safety deposit box

with respect to its contents placed by the latter is one of a bailor and bailee, the bailment being for hire and mutual benefit, and it is not an ordinary deposit but special kind of deposit.

The contract for the rent of the safety deposit box is not an ordinary contract of lease as defined in Article 1643 of the Civil Code. It cannot be characterized as an ordinary contract of lease under Article 1643 because the full and absolute possession and control of the safety deposit box was not given to the joint renters. However, the Court does not fully subscribe to the view that the same is a contract of deposit that is to be strictly governed by the provisions in the Civil Code on deposit; the contract in this case is a special kind of deposit.

Neither could Article 1975 be invoked as an argument against the deposit theory. Obviously, the first paragraph of such provision cannot apply to a depositary of certificates, bonds, securities or instruments which earn interest if such documents are kept in a rented safety deposit box.

The prevailing rule in American Jurisprudence is that the relation between a bank renting out safe-deposit boxes and its customer with respect to the contents of the box is that of a bailor and bailee, the bailment being for hire and mutual benefit. While, in the context of our laws, particularly Section 72(a) of the General Banking Act (now Section 52) which authorizes banking institutions to rent out safety deposit boxes, it is clear that the prevailing rule in the United States has been adopted.

Sec. 72. In addition to the operations specifically authorized elsewhere in this Act, banking institutions other than building and loan associations may perform the following services:(a) Receive in custody funds, documents, and valuable objects, and rent safety deposit boxes for the safeguarding of such effects.xxx xxx xxxThe banks shall perform the services permitted under subsections (a), (b) and (c) of this section as depositories or as agents. . . .

Nevertheless, the primary function is still found within the parameters of a contract of deposit, and, in relation to Article 1306 of the Civil Code, the parties thereto may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order or public policy. Thus, the depositary's responsibility for the safekeeping of the objects deposited in this case is governed by Title I, Book IV of the Civil Code.

Accordingly, the depositary would be liable if, in performing its obligation, it is found guilty of fraud, negligence, delay or contravention of the tenor of the agreement, and in the absence of any stipulation prescribing the degree of diligence required, that of a good father of a family is to be observed. Corollary, any stipulation exempting the depositary from any liability arising from the loss of the thing deposited on account of fraud, negligence or delay would be void for being contrary to law and public policy.

Furthermore, it is not correct to assert that the Bank has neither the possession nor control of the contents of the box since in fact; the safety deposit box itself is located in its premises and is under its absolute control. Moreover, the Bank keeps the guard key to the said box and renters cannot open their respective boxes unless the Bank cooperates by presenting and using this guard key. Clearly then, to the extent above stated, conditions 13 and 14 in the contract in question are void and ineffective.

However, the Court reached the same conclusion which the Court of Appeals arrived at but on grounds quite different from those relied upon by the latter. The Bank's exoneration cannot be based on or proceed from a characterization of the impugned contract as a contract of lease, but rather on the fact that no competent proof was presented to show that Bank was aware of the agreement between CA Agro and the Pugaos to the effect that the certificates of title were withdrawable from the safety deposit box only upon both parties' joint signatures, and that no evidence was submitted to reveal that the loss of the certificates of title was due to the fraud or negligence of the Bank.

Since both CA Agro and the Pugaos agreed that each should have one (1) renter's key, it was obvious that either of them could ask the Bank for access to the safety deposit box and, with the use of such key and the Bank's own guard key, could open the said box, without the other renter being present.

Since, however, CA Agro cannot be blamed for the filing of the complaint and no bad faith on its part had been established, the trial court erred in condemning the CA Agro to pay the Bank attorney's fees. To this extent, the Decision of Court of Appeals was modified.

Teofisto Guingona, Jr., Antonio Martin, and Teresita Santos vs. The City Fiscal of Manila, Hon. Jose Flaminiano, Asst. City Fiscal Felizardo Lota and

Facts:From March 1979 to March 1981, Clement David made several investments with the National Savings and Loan Association. On March 21, 1981, the bank was placed under receivership by the Bangko Sentral. Upon David’s request, petitioners Guingona and Martin issued a joint promissory note, absorbing the obligations of the bank. On July 17, 1981, they divided the indebtedness. David filed a complaint for estafa and violation of Central Bank Circular No. 364 and related regulations regarding foreign exchange transactions before the Office of the City Fiscal of Manila. Petitioners filed the herein petition for prohibition and injunction with a prayer for immediate issuance of restraining order and/or writ of preliminary injunction to enjoin the public respondents to proceed with the preliminary investigation on the ground that the petitioners’ obligation is civil in nature.Issue:(1) Whether the contract between NSLA and David is a contract of depositor a contract of loan, which answer determines whether the City Fiscal has the jurisdiction to file a case for estafa(2) Whether there was a violation of Central Bank Circular

No. 364Held:(1) 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. 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.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. 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.(2) 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. 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.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.

G.R. No. L-46208 April 5, 1990FIDELITY SAVINGS AND MORTGAGE BANK, petitioner, vs.HON. PEDRO D. CENZON, in his capacity as Presiding Judge of the Court of First Instance of Manila (Branch XL) and SPOUSES TIMOTEO AND OLIMPIA SANTIAGO, respondents.Agapito S. Fajardo and Marino E. Eslao for petitioner.Leovillo C. Agustin Law Offices for private respondents. REGALADO, J.:The instant petition seeks the review, on pure questions of law, of the decision rendered by the Court of First Instance of Manila (now Regional Trial Court), Branch XL,

on December 3, 1976 in Civil Case No. 84800, 1 ordering herein petitioner to pay private respondents the following amounts:

(a) P90,000.00 with accrued interest in accordance with Exhibits A and B until fully paid;(b) P30,000,00 as exemplary damages; and(c) P10,000.00 as and for attorney's fees.The payment by the defendant Fidelity Savings and Mortgage Bank of the aforementioned sums of money shall be subject to the Bank Liquidation Rules and Regulations embodied in the Order of the Court of First Instance of Manila, Branch XIII, dated October 3, 1972, Civil Case No. 86005, entitled, "IN RE: Liquidation of the Fidelity Savings Bank versus Central Bank of the Philippines, Liquidator."With costs against the defendant Fidelity Savings and Mortgage Bank.SO ORDERED.

Private respondents instituted this present action for a sum of money with damages against Fidelity Savings and Mortgage Bank, Central Bank of the Philippines, Eusebio Lopez, Jr., Arsenio M. Lopez, Sr., Arsenio S. Lopez, Jr., Bibiana E. Lacuna, Jose C. Morales, Leon P. Cusi, Pilar Y. Pobre-Cusi and Ernani A. Pacana. On motion of herein private respondents, as plaintiffs, the amended complaint was dismissed without prejudice against defendants Jose C. Morales, Leon P. Cusi, Pilar Y. Pobre-Cusi and Ernani A. Pacana. 2 In its aforesaid decision of December 3, 1976, the court a quo dismissed the complaint as against defendants Central Bank of the Philippines, Eusebio Lopez, Jr., Arsenio S. Lopez, Jr., Arsenio M. Lopez, Sr. and Bibiana S. Lacuna.Back on August 10, 1973, the plaintiffs (herein private respondents) and the defendants Fidelity Savings and Mortgage Bank (petitioner herein), Central Bank of the Philippines and Bibiana E. Lacuna had filed in said case in the lower court a partial stipulation of facts, as follows:

COME NOW herein plaintiffs, SPOUSES TIMOTEO M. SANTIAGO and OLIMPIA R. SANTIAGO, herein defendants FIDELITY SAVINGS AND MORTGAGE BANK and the CENTRAL BANK OF THE PHILIPPINES, and herein defendant BIBIANA E. LACUNA, through their respective undersigned counsel, and before this Honorable Court most respectfully submit the following Partial Stipulation of Facts:1. That herein plaintiffs are husband and wife, both of legal age, and presently residing at No. 480 C. de la Paz Street, Sta. Elena, Marikina, Rizal;2. That herein defendant Fidelity Savings and Mortgage Bank is a corporation duly organized and existing under and by virtue of the laws of the Philippines; that defendant Central Bank of the Philippines is a corporation duly organized and existing under and by virtue of the laws of the Philippines;3. That herein defendant Bibiana E. Lacuna is of legal age and a resident of No. 42 East Lawin Street, Philamlife Homes, Quezon City, said defendant was an assistant Vice-President of the defendant fidelity Savings and Mortgage Bank,4. That sometime on May 16, 1968, here in plaintiffs deposited with the defendant Fidelity Savings Bank the amount of FIFTY THOUSAND PESOS (P50,000.00) under Savings Account No. 16-0536; that likewise, sometime on July 6, 1968, herein plaintiff,- deposited with the defendant Fidelity Savings and Mortgage Bank the amount of

FIFTY THOUSAND PESOS (P50,000.00) under Certificate of Time Deposit No. 0210; that the aggregate amount of deposits of the plaintiffs with the defendant Fidelity Savings and Mortgage Bank is ONE HUNDRED THOUSAND PESOS (P100,000.00);5. That on February 18, 1969, the Monetary Board, after finding the report of the Superintendent of Banks, that the condition of the defendant Fidelity Savings and Mortgage Bank is one of insolvency, to be true, issued Resolution No. 350 deciding, among others, as follows:

1) To forbid the Fidelity Savings Bank to do business in the Philippines; 2) To instruct the Acting Superintendent of Banks to take charge, in the name of the Monetary Board, of the Bank's assets

6. That pursuant to the above-cited instructions of the Monetary Board, the Superintendent of Banks took charge in the name of the Monetary Board, of the assets of defendant Fidelity Savings Bank on February 19, 1969; and that since that date up to this date, the Superintendent of Banks (now designated as Director, Department of Commercial and Savings Banks) has been taking charge of the assets of defendant Fidelity Savings and Mortgage Bank;7. That sometime on October 10, 1969 the Philippine Deposit Insurance Corporation paid the plaintiffs the amount of TEN THOUSAND PESOS (P10,000.00) on the aggregate deposits of P100,000.00 pursuant to Republic Act No. 5517, thereby leaving a deposit balance of P90,000.00;8. That on December 9, 1969, the Monetary Board issued its Resolution No. 2124 directing the liquidation of the affairs of defendant Fidelity Savings Bank;9. That on January 25, 1972, the Solicitor General of the Philippines filed a "Petition for Assistance and Supervision in Liquidation" of the affairs of the defendant Fidelity Savings and Mortgage Bank with the Court of First Instance of Manila, assigned to Branch XIII and docketed as Civil Case No. 86005;10. That on October 3, 1972, the Liquidation Court promulgated the Bank Rules and Regulations to govern the liquidation of the affairs of defendant Fidelity Savings and Mortgage Bank, prescribing the rules on the conversion of the Bank's assets into money,

processing of claims against it and the manner and time of distributing the proceeds from the assets of the Bank;11. That the liquidation proceedings has not been terminated and is still pending up to the present;12. That herein plaintiffs, through their counsel, sent demand letters to herein defendants, demanding the immediate payment of the aforementioned savings and time deposits.WHEREFORE, it is respectfully prayed that the foregoing Partial Stipulation of Facts be approved by this Honorable Court, without prejudice to the presentation of additional documentary or testimonial evidence by herein parties.Manila, Philippines, August 10, 1973. 3

Assigning error in the judgment of the lower court quoted ab antecedents, petitioner raises two questions of law, to wit:1. Whether or not an insolvent bank like the Fidelity Savings and Mortgage Bank may be adjudged to pay interest on unpaid deposits even after its closure by the Central Bank by reason of insolvency without violating the provisions of the Civil Code on preference of credits; and2. Whether or not an insolvent bank like the Fidelity Savings and Mortgage Bank may be adjudged to pay moral and exemplary damages, attorney's fees and costs when the insolvency is caused b the anomalous real estate transactions without violating the provisions of the Civil Code on preference of credits.There is merit in the petition.It is settled jurisprudence that a banking institution which has been declared insolvent and subsequently ordered closed by the Central Bank of the Philippines cannot be held liable to pay interest on bank deposits which accrued during the period when the bank is actually closed and non-operational.

In The Overseas Bank of Manila vs. Court of Appeals and Tony D. Tapia, 4 we held 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 dictates this inexorable fair and just conclusion. And it can be said that all who deposit money in banks are aware of such a simple economic proposition. Consequently, it should be deemed read into every contract of deposit with a bank that the obligation to pay interest on the deposit ceases the moment the operation of the bank is completely suspended by the duly constituted authority, the Central Bank.

This was reiterated in the subsequent case of The Overseas Bank of Manila vs. The Hon. Court of Appeals and Julian R. Cordero. 5 and in the recent cases of Integrated Realty Corporation, et al. vs. Philippine National Bank, et al. and the Overseas Bank of Manila vs. Court of appeals, et al. 6

From the aforecited authorities, it is manifest that petitioner cannot be held liable for interest on bank deposits which accrued from the time it was prohibited by the Central Bank to continue with its banking operations, that is, when Resolution No. 350 to that effect was issued on February 18, 1969.

The order, therefore, of the Central Bank as receiver/liquidator of petitioner bank allowing the claims of depositors and creditors to earn interest up to the date of its closure on February 18, 1969, 7 in line with the doctrine laid down in the jurisprudence above cited.Although petitioner's formulation of the second issue that it poses is slightly inaccurate and defective, we likewise find the awards of moral and exemplary damages and attorney's fees to be erroneous.The trial court found, and it is not disputed, that there was no fraud or bad faith on the part of petitioner bank and the other defendants in accepting the deposits of private respondents. Petitioner bank could not even be faulted in not immediately returning the amount claimed by private respondents considering that the demand to pay was made and Civil Case No. 84800 was filed in the trial court several months after the Central Bank had ordered petitioner's closure. By that time, petitioner bank was no longer in a position to comply with its obligations to its creditors, including herein private respondents. Even the trial court had to admit that petitioner bank failed to pay private respondents because it was already insolvent. 8 Further, this case is not one of the specified or analogous cases wherein moral damages may be recovered. 9

There is no valid basis for the award of exemplary damages which is supposed to serve as a warning to other banks from dissipating their assets in anomalous transactions. It was not proven by private respondents, and neither was there a categorical finding made by the trial court, that petitioner bank actually engaged in anomalous real estate transactions. The same were raised only during the testimony of the bank examiner of the Central Bank, 10 but no documentary evidence was ever presented in support thereof. Hence, it was error for the lower court to impose exemplary damages upon petitioner bank since, in contracts, such sanction requires that the offending party acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. 11 Neither does this case present the situation where attorney's fees may be awarded. 12

In the absence of fraud, bad faith, malice or wanton attitude, petitioner bank may, therefore, not be held responsible for damages which may be reasonably attributed to the non-performance of the obligation. 13

Consequently, we reiterate that under the premises and pursuant to the aforementioned provisions of law, it is apparent that private respondents are not justifiably entitled to the payment of moral and exemplary damages and attorney's fees.While we tend to agree with petitioner bank that private respondents' claims should he been filed in the liquidation proceedings in Civil Case No. 86005, entitled "In Re: Liquidation of the Fidelity Savings and Mortgage Bank," pending before Branch XIII of the then Court of First Instance of Manila, we do not believe that the decision rendered in the instant case would be violative of the legal provisions on preference and concurrence of credits. As the trial court puts it:

. . . But this order of payment should not be understood as raising these deposits to the category of preferred credits of the defendant Fidelity Savings and Mortgage Bank but shall be paid in accordance with the Bank Liquidation Rules and Regulations embodied in the Order of the. Court of First Instance of Manila, Branch XIII dated October 3, 1972 (Exh. 3). . . . 14

WHEREFORE, the judgment appealed from is hereby MODIFIED. Petitioner Fidelity Savings and Mortgage Bank is hereby declared liable to pay private respondents Timoteo and Olimpia Santiago the sum of P90,000.00, with accrued interest in accordance with the terms of Savings Account Deposit No. 16-0536 (Exhibit A) and Certificate of Time Deposit No. 0210 (Exhibit B) until February 18, 1969. The awards for moral and exemplary damages, and attorney's fees are hereby DELETED. No costs.SO ORDERED.G.R. No. L-7593 March 27, 1913THE UNITED STATES, plaintiff-appellee, vs.JOSE M. IGPUARA, defendant-appellant. W. A. Kincaid, Thos. L. Hartigan, and Jose Robles Lahesa for appellant. Office of the Solicitor-General Harvey for appellee. ARELLANO, C.J.:

The defendant therein is charged with the crime of estafa, for having swindled Juana Montilla and Eugenio Veraguth out of P2,498 Philippine currency, which he had take on deposit from the former to be at the latter's disposal. The document setting forth the obligation reads: We hold at the disposal of Eugenio Veraguth the sum of two thousand four hundred and ninety-eight pesos (P2,498), the balance from Juana Montilla's sugar. — Iloilo, June 26, 1911, — Jose Igpuara, for Ramirez and Co.The Court of First Instance of Iloilo sentenced the defendant to two years of presidio correccional, to pay Juana Montilla P2,498 Philippine currency, and in case of insolvency to subsidiary imprisonment at P2.50 per day, not to exceed one-third of the principal penalty, and the costs.The defendant appealed, alleging as errors: (1) Holding that the document executed by him was a certificate of deposit; (2) holding the existence of a deposit, without precedent transfer or delivery of the P2,498; and (3) classifying the facts in the case as the crime of estafa.

A deposit is constituted from the time a person receives a thing belonging to another with the obligation of keeping and returning it. (Art. 1758, Civil Code.)

That the defendant received P2,498 is a fact proven. The defendant drew up a document declaring that they remained in his possession, which he could not have said had he not received them. They remained in his possession, surely in no other sense than to take care of them, for they remained has no other purpose. They remained in the defendant's possession at the disposal of Veraguth; but on August 23 of the same year Veraguth demanded for him through a notarial instrument restitution of them, and to date he has not restored them. The appellant says: "Juana Montilla's agent voluntarily accepted the sum of P2,498 in an instrument payable on demand, and as no attempt was made to cash it until August 23, 1911, he could indorse and negotiate it like any other commercial instrument. There is no doubt that if Veraguth accepted the receipt for P2,498 it was because at that time he agreed with the defendant to consider the operation of sale on commission closed, leaving the collection of said sum until later, which sum

remained as a loan payable upon presentation of the receipt." (Brief, 3 and 4.) Then, after averring the true facts: (1) that a sales commission was precedent; (2) that this commission was settled with a balance of P2,498 in favor of the principal, Juana Montilla; and (3) that this balance remained in the possession of the defendant, who drew up an instrument payable on demand, he has drawn two conclusions, both erroneous: One, that the instrument drawn up in the form of a deposit certificate could be indorsed or negotiated like any other commercial instrument; and the other, that the sum of P2,498 remained in defendant's possession as a loan. It is erroneous to assert that the certificate of deposit in question is negotiable like any other commercial instrument: First, because every commercial instrument is not negotiable; and second, because only instruments payable to order are negotiable. Hence, this instrument not being to order but to bearer, it is not negotiable. It is also erroneous to assert that sum of money set forth in said certificate is, according to it, in the defendant's possession as a loan. In a loan the lender transmits to the borrower the use of the thing lent, while in a deposit the use of the thing is not transmitted, but merely possession for its custody or safe-keeping. In order that the depositary may use or dispose oft he things deposited, the depositor's consent is required, and then:

The rights and obligations of the depositary and of the depositor shall cease, and the rules and provisions applicable to commercial loans, commission, or contract which took the place of the deposit shall be observed. (Art. 309, Code of Commerce.)

The defendant has shown no authorization whatsoever or the consent of the depositary for using or disposing of the P2,498, which the certificate acknowledges, or any contract entered into with the depositor to convert the deposit into a loan, commission, or other contract. That demand was not made for restitution of the sum deposited, which could have been claimed on the same or the next day after the certificate was signed, does not operate against the depositor, or signify anything except the intention not to press it. Failure to claim at once or delay for sometime in demanding restitution of the things

deposited, which was immediately due, does not imply such permission to use the thing deposited as would convert the deposit into a loan. Article 408 of the Code of Commerce of 1829, previous to the one now in force, provided:

The depositary of an amount of money cannot use the amount, and if he makes use of it, he shall be responsible for all damages that may accrue and shall respond to the depositor for the legal interest on the amount.

Whereupon the commentators say: In this case the deposit becomes in fact a loan, as a just punishment imposed upon him who abuses the sacred nature of a deposit and as a means of preventing the desire of gain from leading him into speculations that may be disastrous to the depositor, who is much better secured while the deposit exists when he only has a personal action for recovery. According to article 548, No. 5, of the Penal Code, those who to the prejudice of another appropriate or abstract for their own use money, goods, or other personal property which they may have received as a deposit, on commission, or for administration, or for any other purpose which produces the obligation of delivering it or returning it, and deny having received it, shall suffer the penalty of the preceding article," which punishes such act as the crime of estafa. The corresponding article of the Penal Code of the Philippines in 535, No. 5.

In a decision of an appeal, September 28, 1895, the principle was laid down that: "Since he commits the crime of estafa under article 548 of the Penal Code of Spain who to another's detriment appropriates to himself or abstracts money or goods received on commission for delivery, the court rightly applied this article to the appellant, who, to the manifest detriment of the owner or owners of the securities, since he has not restored them, willfully and wrongfully disposed of them by appropriating them to himself or at least diverting them from the purpose to which he was charged to devote them."

It is unquestionable that in no sense did the P2,498 which he willfully and wrongfully disposed of to the detriments of his principal, Juana Montilla, and of the depositor, Eugenio Veraguth, belong to the defendant. Likewise erroneous is the construction apparently at tempted to be given to two decisions of this Supreme Court (U. S. vs. Dominguez, 2 Phil. Rep., 580, and U. S. vs. Morales and Morco, 15 Phil. Rep., 236) as implying that what constitutes estafa is not the disposal of money deposited, but denial of having received same. In the first of said cases there was no evidence that the defendant had appropriated the grain deposited in his possession.

On the contrary, it is entirely probable that, after the departure of the defendant from Libmanan on September 20, 1898, two days after the uprising of the civil guard in Nueva Caceres, the rice was seized by the revolutionalists and appropriated to their own uses.

In this connection it was held that failure to return the thing deposited was not sufficient, but that it was necessary to prove that the depositary had appropriated it to himself or diverted the deposit to his own or another's benefit. He was accused or refusing to restore, and it was held that the code does not penalize refusal to restore but denial of having received. So much for the crime of omission; now with reference to the crime of commission, it was not held in that decision that appropriation or diversion of the thing deposited would not constitute the crime of estafa. In the second of said decisions, the accused "kept none of the proceeds of the sales. Those, such as they were, he turned over to the owner;" and there being no proof of the appropriation, the agent could not be found guilty of the crime of estafa. Being in accord and the merits of the case, the judgment appealed from is affirmed, with costs.

BPI vs. Intermediate Appellate Court GR# L-66826, August 19, 1988 CORTES, J:

Facts:

Rizaldy T. Zshornack and his wife maintained in COMTRUST a dollar savings account and a peso current account. An application for a dollar drat was accomplished by Virgillo Garcia branch manager of COMTRUST payable to a certain Leovigilda Dizon. In the PPLICtion, Garcia indicated that the amount was to be charged to the dolar savings account of the Zshornacks. There wasa no indication of the name of the purchaser of the dollar draft. Comtrust issued a check payable to the order of Dizon. When Zshornack noticed the withdrawal from his account, he demanded an explainaiton from the bank. In its answer, Comtrust claimed that the peso value of the withdrawal was given to Atty. Ernesto Zshornack, brother of Rizaldy. When he encashed with COMTRUST a cashiers check for P8450 issued by the manila banking corporation payable to Ernesto.

Issue: Whether the contract between petitioner and respondent bank is a deposit?

Held: The document which embodies the contract states that the US$3,000.00 was received by the bank for safekeeping. The subsequent acts of the parties also show that the intent of the parties was really for the bank to safely keep the dollars and to return it to Zshornack at a later time. Thus, Zshornack demanded the return of the money on May 10, 1976, or over five months later.

The above arrangement is that contract defined under Article 1962, New Civil Code, which reads:Art. 1962. A deposit is constituted from the moment a person receives a thing belonging to another, with the obligation of safely keeping it and of returning the same. If the safekeeping of the thing delivered is not the principal purpose of the contract, there is no deposit but some other contract.