Republic of the Philippines

SUPREME COURT
Baguio City

FIRST DIVISION

G.R. No. 114286 April 19, 2001

THE COSOLIDATED BANK AND TRUST CORPORATION (SOLIDBANK), petitioner

vs.
THE COURT OF APPEALS, CONTINENTAL CEMENT CORPORATION, GREGORY T. LIM and
SPOUSE, respondents.

YNARES-SANTIAGO, J.:

The instant petition for review seeks to partially set aside the July 26, 1993 Decision1 of respondent
Court of Appeals in CA-GR. CV No. 29950, insofar as it orders petitioner to reimburse respondent
Continental Cement Corporation the amount of P490, 228.90 with interest thereon at the legal rate
from July 26, 1988 until fully paid. The petition also seeks to set aside the March 8, 1994
Resolution2 of respondent Court of Appeals denying its Motion for Reconsideration.

The facts are as follows:

On July 13, 1982, respondents Continental Cement Corporation (hereinafter, respondent

Corporation) and Gregory T. Lim (hereinafter, respondent Lim) obtained from petitioner Consolidated
Bank and Trust Corporation Letter of Credit No. DOM-23277 in the amount of P 1,068,150.00 On the
same date, respondent Corporation paid a marginal deposit of P320,445.00 to petitioner. The letter
of credit was used to purchase around five hundred thousand liters of bunker fuel oil from Petrophil
Corporation, which the latter delivered directly to respondent Corporation in its Bulacan plant. In
relation to the same transaction, a trust receipt for the amount of P 1,001,520.93 was executed by
respondent Corporation, with respondent Lim as signatory.

Claiming that respondents failed to turn over the goods covered by the trust receipt or the proceeds
thereof, petitioner filed a complaint for sum of money with application for preliminary
attachment3 before the Regional Trial Court of Manila. In answer to the complaint, respondents
averred that the transaction between them was a simple loan and not a trust receipt transaction, and
that the amount claimed by petitioner did not take into account payments already made by them.
Respondent Lim also denied any personal liability in the subject transactions. In a Supplemental
Answer, respondents prayed for reimbursement of alleged overpayment to petitioner of the amount
of P490,228.90.

At the pre-trial conference, the parties agreed on the following issues:

1) Whether or not the transaction involved is a loan transaction or a trust receipt transaction;

2) Whether or not the interest rates charged against the defendants by the plaintiff are proper
under the letter of credit, trust receipt and under existing rules or regulations of the Central
Bank;

3) Whether or not the plaintiff properly applied the previous payment of P300,456.27 by the
defendant corporation on July 13, 1982 as payment for the latter’s account; and
 4) Whether or not the defendants are personally liable under the transaction sued for in this
case.4

On September 17, 1990, the trial court rendered its Decision,5 dismissing the Complaint and ordering
petitioner to pay respondents the following amounts under their counterclaim: P490,228.90
representing overpayment of respondent Corporation, with interest thereon at the legal rate from
July 26, 1988 until fully paid; P10,000.00 as attorney's fees; and costs.

Both parties appealed to the Court of Appeals, which partially modified the Decision by deleting the
award of attorney's fees in favor of respondents and, instead, ordering respondent Corporation to
pay petitioner P37,469.22 as and for attorney's fees and litigation expenses.

Hence, the instant petition raising the following issues:

1. WHETHER OR NOT THE RESPONDENT APPELLATE COURT ACTED INCORRECTLY

OR COMMITTED REVERSIBLE ERROR IN HOLDING THAT THERE WAS
OVERPAYMENT BY PRIVATE RESPONDENTS TO THE PETITIONER IN THE AMOUNT
OF P490,228.90 DESPITE THE ABSENCE OF ANY COMPUTATION MADE IN THE
DECISION AND THE ERRONEOUS APPLICATION OF PAYMENTS WHICH IS IN
VIOLATION OF THE NEW CIVIL CODE.

2. WHETHER OR NOT THE MANNER OF COMPUTATION OF THE MARGINAL DEPOSIT

BY THE RESPONDENT APPELLATE COURT IS IN ACCORDANCE WITH BANKING
PRACTICE.

3. WHETHER OR NOT THE AGREEMENT AMONG THE PARTIES AS TO THE FLOATING

OF INTEREST RATE IS VALID UNDER APPLICABLE JURISPRUDENCE AND THE
RULES AND REGULATIONS OF THE CENTRAL BANK.

4. WHETHER OR NO THE RESPONDENT APPELLATE COUR GRIEVOUSLY ERRED IN

NOT CONSIDERING THE TRANSACTION AT BAR AS A TRUST RECEIPT
TRANSACTION ON THE BASIS OF THE JUDICIAL ADMISSIONS OF THE PRIVATE
RESPONDENTS AND FOR WHICH RESPONDENTS ARE LIABLE THEREFOR.

5. WHETHER OR NOT THE RESPONDENT APPELLATE COURT GRIEVOUSLY ERRED

IN NOT HOLDING PRIVATE RESPONDENT SPOUSES LIABLE UNDER THE TRUST
RECEIPT TRANSACTION.6

The petition must be denied.

On the first issue respecting the fact of overpayment found by both the lower court and respondent
Court of Appeals, we stress the time-honored rule that findings of fact by the Court of Appeals
especially if they affirm factual findings of the trial court will not be disturbed by this Court, unless
these findings are not supported by evidence.7

Petitioner decries the lack of computation by the lower court as basis for its ruling that there was an
overpayment made. While such a computation may not have appeared in the Decision itself, we
note that the trial court's finding of overpayment is supported by evidence presented before it. At any
rate, we painstakingly reviewed and computed the payments together with the interest and penalty
charges due thereon and found that the amount of overpayment made by respondent Bank to
petitioner, i.e., P263,070.13, was more than what was ordered reimbursed by the lower court.
However, since respondents did not file an appeal in this case, the amount ordered reimbursed by
the lower court should stand.

Moreover, petitioner's contention that the marginal deposit made by respondent Corporation should
not be deducted outright from the amount of the letter of credit is untenable. Petitioner argues that
the marginal deposit should be considered only after computing the principal plus accrued interest
and other charges. However, to sustain petitioner on this score would be to countenance a clear
case of unjust enrichment, for while a marginal deposit earns no interest in favour of the debtor-
depositor, the bank is not only able to use the same for its own purposes, interest-free, but is also
able to earn interest on the money loaned to respondent Corporation. Indeed, it would be onerous to
compute interest and other charges on the face value of the letter of credit which the petitioner
issued, without first crediting or setting off the marginal deposit which the respondent Corporation
paid to it. Compensation is proper and should take effect by operation of law because the requisites
in Article 1279 of the Civil Code are present and should extinguish both debts to the concurrent
amount.8

Hence, the interests and other charges on the subject letter of credit should be computed only on the
balance of P681,075.93, which was the portion actually loaned by the bank to respondent
Corporation.

Neither do we find error when the lower court and the Court of Appeals set aside as invalid the
floating rate of interest exhorted by petitioner to be applicable. The pertinent provision in the trust
receipt agreement of the parties fixing the interest rate states:

I, WE jointly and severally agree to any increase or decrease in the interest rate which may
occur after July 1, 1981, when the Central Bank floated the interest rate, and to pay
additionally the penalty of 1% per month until the amount/s or instalments/s due and unpaid
under the trust receipt on the reverse side hereof is/are fully paid.9

We agree with respondent Court of Appeals that the foregoing stipulation is invalid, there being no
reference rate set either by it or by the Central Bank, leaving the determination thereof at the sole
will and control of petitioner.
1âwphi1.nêt

While it may be acceptable, for practical reasons given the fluctuating economic conditions, for
banks to stipulate that interest rates on a loan not be fixed and instead be made dependent upon
prevailing market conditions, there should always be a reference rate upon which to peg such
variable interest rates. An example of such a valid variable interest rate was found in Polotan, Sr. v.
Court of Appeals. 10 In that case, the contractual provision stating that "if there occurs any change in
the prevailing market rates, the new interest rate shall be the guiding rate in computing the
interest due on the outstanding obligation without need of serving notice to the Cardholder other
than the required posting on the monthly statement served to the Cardholder"11 was considered valid.
The aforequoted provision was upheld notwithstanding that it may partake of the nature of an
escalation clause, because at the same time it provides for the decrease in the interest rate in case
the prevailing market rates dictate its reduction. In other words, unlike the stipulation subject of the
instant case, the interest rate involved in the Polotan case is designed to be based on the prevailing
market rate. On the other hand, a stipulation ostensibly signifying an agreement to "any increase or
decrease in the interest rate," without more, cannot be accepted by this Court as valid for it leaves
solely to the creditor the determination of what interest rate to charge against an outstanding loan.

Petitioner has also failed to convince us that its transaction with respondent Corporation is really a
trust receipt transaction instead of merely a simple loan, as found by the lower court and the Court of
Appeals.
The recent case of Colinares v. Court of Appeals 12 appears to be foursquare with the facts obtaining
in the case at bar. There, we found that inasmuch as the debtor received the goods subject of the
trust receipt before the trust receipt itself was entered into, the transaction in question was a simple
loan and not a trust receipt agreement. Prior to the date of execution of the trust receipt, ownership
over the goods was already transferred to the debtor. This situation is inconsistent with what
normally obtains in a pure trust receipt transaction, wherein the goods belong in ownership to the
bank and are only released to the importer in trust after the loan is granted.

In the case at bar, as in Colinares, the delivery to respondent Corporation of the goods subject of the
trust receipt occurred long before the trust receipt itself was executed. More specifically, delivery of
the bunker fuel oil to respondent Corporation's Bulacan plant commenced on July 7, 1982 and was
completed by July 19, 1982.13 Further, the oil was used up by respondent Corporation in its normal
operations by August, 1982.14 On the other hand, the subject trust receipt was only executed nearly
two months after full delivery of the oil was made to respondent Corporation, or on September 2,
1982.

The danger in characterizing a simple loan as a trust receipt transaction was explained
in Colinares, to wit:

The Trust Receipts Law does not seek to enforce payment of the loan, rather it punishes the
dishonesty and abuse of confidence in the handling of money or goods to the prejudice of
another regardless of whether the latter is the owner. Here, it is crystal clear that on the part
of Petitioners there was neither dishonesty nor abuse of confidence in the handling of money
to the prejudice of PBC. Petitioners continually endeavored to meet their obligations, as
shown by several receipts issued by PBC acknowledging payment of the loan.

The Information charges Petitioners with intent to defraud and misappropriating the money
for their personal use. The mala prohibita nature of the alleged offense notwithstanding,
intent as a state of mind was not proved to be present in Petitioners' situation. Petitioners
employed no artifice in dealing with PBC and never did they evade payment of their
obligation nor attempt to abscond. Instead, Petitioners sought favorable terms precisely to
meet their obligation.

Also noteworthy is the fact that Petitioners are not importers acquiring the goods for re-sale,
contrary to the express provision embodied in the trust receipt. They are contractors who
obtained the fungible goods for their construction project. At no time did title over the
construction materials pass to the bank, but directly to the Petitioners from CM Builders
Centre. This impresses upon the trust receipt in question vagueness and ambiguity, which
should not be the basis for criminal prosecution in the event of violation of its provisions.

The practice of banks of making borrowers sign trust receipts to facilitate collection of loans
and place them under the threats of criminal prosecution should they be unable to pay it may
be unjust and inequitable if not reprehensible. Such agreements are contracts of adhesion
which borrowers have no option but to sign lest their loan be disapproved. The resort to this
scheme leaves poor and hapless borrowers at the mercy of banks, and is prone to
misinterpretation, as had happened in this case. Eventually, PBC showed its true colors and
admitted that it was only after collection of the money, as manifested by its Affidavit of
Desistance.

Similarly, respondent Corporation cannot be said to have been dishonest in its dealings with
petitioner. Neither has it been shown that it has evaded payment of its obligations. Indeed, it
continually endeavored to meet the same, as shown by the various receipts issued by petitioner
acknowledging payment on the loan. Certainly, the payment of the sum of P1,832,158.38 on a loan
with a principal amount of only P681,075.93 negates any badge of dishonesty , abuse of confidence
or mishandling of funds on the part of respondent Corporation, which are the gravamen of a trust
receipt violation. Furthermore, Respondent Corporation is not an importer, which acquired the
bunker fuel oil for re-sale; it needed the oil for its own operations. More importantly, at no time did
title over the oil pass to petitioner, but directly to respondent Corporation to which the oil was directly
delivered long before the trust receipt was executed. The fact that ownership of the oil belonged to
respondent Corporation, through its President, Gregory Lim, was acknowledged by petitioner's own
account officer on the witness stand, to wit:

Q -After the bank opened a letter of credit in favor of Petrophil Corp. for the account of the
defendants thereby paying the value of the bunker fuel oil what transpired next after that?

A -Upon purchase of the bunker fuel oil and upon the requests of the defendant possession
of the bunker fuel oil were transferred to them.

Q -You mentioned them to whom are you referring to?

A -To the Continental Cement Corp. upon the execution of the trust receipt acknowledging
the ownership of the bunker fuel oil this should be acceptable for whatever disposition he
may make.

Q - You mentioned about acknowledging ownership of the bunker fuel oil to whom by whom?

A - By the Continental Cement Corp.

Q – So by your statement who really owns the bunker fuel oil?

A TTY. RACHON:

Objection already answered,

COURT:

Give time to the other counsel to object.

A TTY. RACHON :

He has testified that ownership was acknowledged in favor of Continental Cement Corp. so
that question has already been answered.

A TTY. BANAGA:

That is why I made a follow up question asking ownership of the bunker fuel oil.

COURT:

Proceed.

A TTY .BANAGA:
 Q - Who owns the bunker fuel oil after purchase from Petrophil Corp. ?

A - Gregory Lim.15

By all indications, then, it is apparent that there was really no trust receipt transaction that took
place. Evidently, respondent Corporation was required to sign the trust receipt simply to facilitate
collection by petitioner of the loan it had extended to the former.

Finally, we are not convinced that respondent Gregory T. Lim and his spouse should be personally
liable under the subject trust receipt. Petitioner's argument that respondent Corporation and
respondent Lim and his spouse are one and the same cannot be sustained. The transactions sued
upon were clearly entered into by respondent Lim in his capacity as Executive Vice President of
respondent Corporation. We stress the hornbook law that corporate personality is a shield against
personal liability of its officers. Thus, we agree that respondents Gregory T. Lim and his spouse
cannot be made personally liable since respondent Lim entered into and signed the contract clearly
in his official capacity as Executive Vice President. The personality of the corporation is separate
and distinct from the persons composing it.16

WHEREFORE, in view of all the foregoing, the instant Petition for Review is DENIED. The Decision
of the Court of Appeals dated July 26, 1993 in CA-G.R. CY No.29950 is AFFIRMED.

SO ORDERED.

Davide Jr., Puno, Pardo, Pardo, JJ., concur.

Footnotes

1
penned by Associate Justice Cezar D. Francisco and concurred in by Associate Justices
Gloria C. Paras and Buenaventura J. Guerrero; Petition for Review, Annex "B"; Rollo, pp. 76-
93.

2
Petition for Review, Annex "C"; Rollo, p. 95.

3
Docketed as Civil Case No. 86-38396; Record, pp. 1-11.

4
Pre-trial Order, p. 3; Record, p. 236.

5
Penned by then Presiding Judge Bernardo P. Pardo, now Associate Justice of this Court;
Record, pp. 435-438.

6
Petition for Review, pp. 10-11; Rollo, pp. 17-18.

7
Bañas, jr. v. Court of Appeals, G.R. No. 102967, 10 February 2000, citing Guerrero v. Court
of Appeals, 285 SCRA 670 [1998] and Sta. Maria v. Court of Appeals, 285 SCRA 351 [1998].

8
Civil Code, Art. 1290; Abad v. Court of Appeals, 181 SCRA 191 [1990].

9
Exhibit "A.".
 10
296 SCRA 247 [1998].

11
Emphasis ours.

12
G.R. No. 90828, 5 September 2000.

13
TSN, 19 April 1989, p. 9; Exhibits "9" and "10"; record, pp. 301-302.

14
Ibid., p. 12.

15
TSN, 12 April 1989, pp. 4-5.

Penned Construction Group, Inc. v. Court of Appeals, 324 SCRA 270 [2000], citing Rustan
16

Pulp and Paper Mills, Inc. vs. Intermediate Appellate Court, 214 SCRA 665, 672 [1992].

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-30511 February 14, 1980

MANUEL M. SERRANO, petitioner,

vs.
CENTRAL BANK OF THE PHILIPPINES; OVERSEAS BANK OF MANILA; EMERITO M. RAMOS,
SUSANA B. RAMOS, EMERITO B. RAMOS, JR., JOSEFA RAMOS DELA RAMA, HORACIO
DELA RAMA, ANTONIO B. RAMOS, FILOMENA RAMOS LEDESMA, RODOLFO LEDESMA,
VICTORIA RAMOS TANJUATCO, and TEOFILO TANJUATCO, respondents.

Rene Diokno for petitioner.

F.E. Evangelista & Glecerio T. Orsolino for respondent Central Bank of the Philippines.

Feliciano C. Tumale, Pacifico T. Torres and Antonio B. Periquet for respondent Overseas Bank of
Manila.

Josefina G. Salonga for all other respondents.

CONCEPCION, JR., J.:

Petition for mandamus and prohibition, with preliminary injunction, that seeks the establishment of
joint and solidary liability to the amount of Three Hundred Fifty Thousand Pesos, with interest,
against respondent Central Bank of the Philippines and Overseas Bank of Manila and its
stockholders, on the alleged failure of the Overseas Bank of Manila to return the time deposits made
by petitioner and assigned to him, on the ground that respondent Central Bank failed in its duty to
exercise strict supervision over respondent Overseas Bank of Manila to protect depositors and the
general public.1 Petitioner also prays that both respondent banks be ordered to execute the proper
and necessary documents to constitute all properties fisted in Annex "7" of the Answer of respondent
Central Bank of the Philippines in G.R. No. L-29352, entitled "Emerita M. Ramos, et al vs. Central
Bank of the Philippines," into a trust fund in favor of petitioner and all other depositors of respondent
Overseas Bank of Manila. It is also prayed that the respondents be prohibited permanently from
honoring, implementing, or doing any act predicated upon the validity or efficacy of the deeds of
mortgage, assignment. and/or conveyance or transfer of whatever nature of the properties listed in
Annex "7" of the Answer of respondent Central Bank in G.R. No. 29352.2

A sought for ex-parte preliminary injunction against both respondent banks was not given by this
Court.

Undisputed pertinent facts are:

On October 13, 1966 and December 12, 1966, petitioner made a time deposit, for one year with 6%
interest, of One Hundred Fifty Thousand Pesos (P150,000.00) with the respondent Overseas Bank
of Manila. 3 Concepcion Maneja also made a time deposit, for one year with 6-½% interest, on March
6, 1967, of Two Hundred Thousand Pesos (P200,000.00) with the same respondent Overseas Bank
of Manila.4

On August 31, 1968, Concepcion Maneja, married to Felixberto M. Serrano, assigned and conveyed
to petitioner Manuel M. Serrano, her time deposit of P200,000.00 with respondent Overseas Bank of
Manila. 5

Notwithstanding series of demands for encashment of the aforementioned time deposits from the
respondent Overseas Bank of Manila, dating from December 6, 1967 up to March 4, 1968, not a
single one of the time deposit certificates was honored by respondent Overseas Bank of Manila. 6

Respondent Central Bank admits that it is charged with the duty of administering the banking system
of the Republic and it exercises supervision over all doing business in the Philippines, but denies the
petitioner's allegation that the Central Bank has the duty to exercise a most rigid and stringent
supervision of banks, implying that respondent Central Bank has to watch every move or activity of
all banks, including respondent Overseas Bank of Manila. Respondent Central Bank claims that as
of March 12, 1965, the Overseas Bank of Manila, while operating, was only on a limited degree of
banking operations since the Monetary Board decided in its Resolution No. 322, dated March 12,
1965, to prohibit the Overseas Bank of Manila from making new loans and investments in view of its
chronic reserve deficiencies against its deposit liabilities. This limited operation of respondent
Overseas Bank of Manila continued up to 1968.7

Respondent Central Bank also denied that it is guarantor of the permanent solvency of any banking
institution as claimed by petitioner. It claims that neither the law nor sound banking supervision
requires respondent Central Bank to advertise or represent to the public any remedial measures it
may impose upon chronic delinquent banks as such action may inevitably result to panic or bank
"runs". In the years 1966-1967, there were no findings to declare the respondent Overseas Bank of
Manila as insolvent. 8

Respondent Central Bank likewise denied that a constructive trust was created in favor of petitioner
and his predecessor in interest Concepcion Maneja when their time deposits were made in 1966 and
1967 with the respondent Overseas Bank of Manila as during that time the latter was not an
insolvent bank and its operation as a banking institution was being salvaged by the respondent
Central Bank. 9

Respondent Central Bank avers no knowledge of petitioner's claim that the properties given by
respondent Overseas Bank of Manila as additional collaterals to respondent Central Bank of the
Philippines for the former's overdrafts and emergency loans were acquired through the use of
depositors' money, including that of the petitioner and Concepcion Maneja. 10

In G.R. No. L-29362, entitled "Emerita M. Ramos, et al. vs. Central Bank of the Philippines," a case
was filed by the petitioner Ramos, wherein respondent Overseas Bank of Manila sought to prevent
respondent Central Bank from closing, declaring the former insolvent, and liquidating its assets.
Petitioner Manuel Serrano in this case, filed on September 6, 1968, a motion to intervene in G.R.
No. L-29352, on the ground that Serrano had a real and legal interest as depositor of the Overseas
Bank of Manila in the matter in litigation in that case. Respondent Central Bank in G.R. No. L-29352
opposed petitioner Manuel Serrano's motion to intervene in that case, on the ground that his claim
as depositor of the Overseas Bank of Manila should properly be ventilated in the Court of First
Instance, and if this Court were to allow Serrano to intervene as depositor in G.R. No. L-29352,
thousands of other depositors would follow and thus cause an avalanche of cases in this Court. In
the resolution dated October 4, 1968, this Court denied Serrano's, motion to intervene. The contents
of said motion to intervene are substantially the same as those of the present petition. 11

This Court rendered decision in G.R. No. L-29352 on October 4, 1971, which became final and
executory on March 3, 1972, favorable to the respondent Overseas Bank of Manila, with the
dispositive portion to wit:

WHEREFORE, the writs prayed for in the petition are hereby granted and
respondent Central Bank's resolution Nos. 1263, 1290 and 1333 (that prohibit the
Overseas Bank of Manila to participate in clearing, direct the suspension of its
operation, and ordering the liquidation of said bank) are hereby annulled and set
aside; and said respondent Central Bank of the Philippines is directed to comply with
its obligations under the Voting Trust Agreement, and to desist from taking action in
violation therefor. Costs against respondent Central Bank of the Philippines. 12

Because of the above decision, petitioner in this case filed a motion for judgment in this case,
praying for a decision on the merits, adjudging respondent Central Bank jointly and severally liable
with respondent Overseas Bank of Manila to the petitioner for the P350,000 time deposit made with
the latter bank, with all interests due therein; and declaring all assets assigned or mortgaged by the
respondents Overseas Bank of Manila and the Ramos groups in favor of the Central Bank as trust
funds for the benefit of petitioner and other depositors. 13

By the very nature of the claims and causes of action against respondents, they in reality are
recovery of time deposits plus interest from respondent Overseas Bank of Manila, and recovery of
damages against respondent Central Bank for its alleged failure to strictly supervise the acts of the
other respondent Bank and protect the interests of its depositors by virtue of the constructive trust
created when respondent Central Bank required the other respondent to increase its collaterals for
its overdrafts said emergency loans, said collaterals allegedly acquired through the use of depositors
money. These claims shoud be ventilated in the Court of First Instance of proper jurisdiction as We
already pointed out when this Court denied petitioner's motion to intervene in G.R. No. L-29352.
Claims of these nature are not proper in actions for mandamus and prohibition as there is no shown
clear abuse of discretion by the Central Bank in its exercise of supervision over the other respondent
Overseas Bank of Manila, and if there was, petitioner here is not the proper party to raise that
question, but rather the Overseas Bank of Manila, as it did in G.R. No. L-29352. Neither is there
anything to prohibit in this case, since the questioned acts of the respondent Central Bank (the acts
of dissolving and liquidating the Overseas Bank of Manila), which petitioner here intends to use as
his basis for claims of damages against respondent Central Bank, had been accomplished a long
time ago.

Furthermore, both parties overlooked one fundamental principle in the nature of bank deposits when
the petitioner claimed that there should be created a constructive trust in his favor when the
respondent Overseas Bank of Manila increased its collaterals in favor of respondent Central Bank
for the former's overdrafts and emergency loans, since these collaterals were acquired by the use of
depositors' money.

Bank deposits are in the nature of irregular deposits. They are really loans because they earn
interest. All kinds of bank deposits, whether fixed, savings, or current are to be treated as loans and
are to be covered by the law on loans. 14 Current and savings deposit are loans to a bank because it
can use the same. The petitioner here in making time deposits that earn interests with respondent
Overseas Bank of Manila was in reality a creditor of the respondent Bank and not a depositor. The
respondent Bank was in turn a debtor of petitioner. Failure of he respondent Bank to honor the time
deposit is failure to pay s obligation as a debtor and not a breach of trust arising from depositary's
failure to return the subject matter of the deposit

WHEREFORE, the petition is dismissed for lack of merit, with costs against petitioner.

SO ORDERED.

Antonio, Abad Santos, JJ., concur.

Barredo (Chairman) J., concur in the judgment on the of the concurring opinion of Justice Aquino.

Separate Opinions

AQUINO, J., concurring:

The petitioner prayed that the Central Bank be ordered to pay his time deposits of P350,000, plus
interests, which he could not recover from the distressed Overseas Bank of Manila, and to declare
all the assets assigned or mortgaged by that bank and the Ramos group to the Central Bank as trust
properties for the benefit of the petitioner and other depositors.

The petitioner has no causes of action agianst the Central Bank to obtain those reliefs. They cannot
be granted in petitioner's instant original actions in this Court for mandamus and prohibition. It is not
the Central Bank's ministerial duty to pay petitioner's time deposits or to hold the mortgaged
properties in trust for the depositors of the Overseas Bank of Manila. The petitioner has no cause of
action for prohibition, a remedy usually available against any tribunal, board, corporation or person
exercising judicial or ministerial functions.
Since the Overseas Bank of Manila was found to be insolvent and the Superintendent of Banks was
ordered to take over its assets preparatory to its liquidation under section 29 of Republic Act No. 265
(p. 197, Rollo, Manifestation of September 19, 1973), petitioner's remedy is to file his claim in the
liquidating proceeding (Central Bank vs. Morfe, L-38427, March 12, 1975, 63 SCRA 114; Hernandez
vs. Rural Bank of Lucena, Inc., L-29791, January 10, 1978, 81 SCRA 75).

Separate Opinions

AQUINO, J., concurring:

The petitioner prayed that the Central Bank be ordered to pay his time deposits of P350,000, plus
interests, which he could not recover from the distressed Overseas Bank of Manila, and to declare
all the assets assigned or mortgaged by that bank and the Ramos group to the Central Bank as trust
properties for the benefit of the petitioner and other depositors.

The petitioner has no causes of action agianst the Central Bank to obtain those reliefs. They cannot
be granted in petitioner's instant original actions in this Court for mandamus and prohibition. It is not
the Central Bank's ministerial duty to pay petitioner's time deposits or to hold the mortgaged
properties in trust for the depositors of the Overseas Bank of Manila. The petitioner has no cause of
action for prohibition, a remedy usually available against any tribunal, board, corporation or person
exercising judicial or ministerial functions.

Since the Overseas Bank of Manila was found to be insolvent and the Superintendent of Banks was
ordered to take over its assets preparatory to its liquidation under section 29 of Republic Act No. 265
(p. 197, Rollo, Manifestation of September 19, 1973), petitioner's remedy is to file his claim in the
liquidating proceeding (Central Bank vs. Morfe, L-38427, March 12, 1975, 63 SCRA 114; Hernandez
vs. Rural Bank of Lucena, Inc., L-29791, January 10, 1978, 81 SCRA 75).

Footnotes

1 pp. 1-10, rollo.

2 p. 10, Id.

3 pp. 12-13, Id.

4 pp. 12-13, Id.

5 p. 14, Id.

6 p. 15, Id.

7 pp- 18-19, Id.

8 pp, 19-20, Id.

9 pp- 22-24, Id.

10 pp. 24-25, Id.

11 pp. 26-27, Id.

12 p. 193, Id.

13 pp. 183-187, Id.

14 Art. 1980, Civil Code, Gullas vs. Phil. National Bank, 62 Phil. 519