Week 6 - Credit Transactions (Deposit) Part 2

Credit Transactions
2nd Year, 2nd Semester (AY 2020-2021)

Week 6 (Deposit) Revised as of March 19, 2021
18. G.R. Nos. 103442-45 May 21, 1993 numerous newspapers of national circulation, as
"Super Howler to hit R.P." Apart from the
NATIONAL POWER CORPORATION, ET AL., newspapers, defendants-appellees learned of
petitioners, typhoon "Kading' through radio announcements
vs.
THE COURT OF APPEALS, GAUDENCIO C. RAYO, ET NPC knew that the Angat Dam can safely hold a normal
AL., respondents. maximum headwater elevation of 217 meters. Yet,
despite such knowledge, defendants-appellees
Facts: This is a consolidated case comprising of four maintained a reservoir water elevation even beyond its
separate complaints filed against NPC and Benjamin maximum and safe level, thereby giving no sufficient
Chavez, being the supervisor at that time of a multi- allowance for the reservoir to contain the rain water that
purpose hydroelectric plant in the Angat River at Hilltop, will inevitably be brought by the coming typhoon.
Norzagaray, Bulacan. Plaintiffs filed a complaint against
respondent for the loss of lives and destruction of Thus, the court is convinced that the flash flood was
properties due to the negligence of the latter in releasing caused not by rain waters but by stored waters suddenly
water from Angat dam during the typhoon “Kading”, as and simultaneously released from the Angat Dam. The
they failed to exercise due diligence in monitoring the appellate court rejected the petitioners' defense that they
water level at the dam. had sent "early warning written notices" to the towns of
Norzagaray, Angat, Bustos, Plaridel, Baliwag and
Issue: Calumpit.
1. WON petitioners observe diligence in exhausting their
duties Said notice is ineffectual, insufficient and inadequate for
2. Whether petitioners can escape civil liability by purposes of the opening of the spillway gates. It did not
invoking force majeure as the proximate cause of the prepare or warn the persons so served, for the volume of
loss and damage water to be released, which turned out to be of such
magnitude, that residents near or along the Angat River,
Ruling: even those one (1) kilometer away, should have been
advised to evacuate.
1. No. NPC knew of the impending onslaught and
imminent danger posed by typhoon "Kading”, the Said notice, addressed "TO ALL CONCERN ( sic)," was
coming of said super typhoon was bannered delivered to a policeman for the municipality of
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Norzagaray. Said notice was not thus addressed and (c) the event must be such as to render it impossible for
delivered to the proper and responsible officials who the debtor to fulfill his obligation in a moral manner; and
could have disseminated the warning to the residents
directly affected. As for the municipality of Sta. Maria, (d) the debtor must be free from any participation in, or
said notice does not appear to have been served. aggravation of the injury to the creditor.
2. No. Petitioners cannot be heard to invoke the act of Thus, if upon the happening of a fortuitous event or an
God or force majeure to escape liability for the loss or act of God, there concurs a corresponding fraud,
damage sustained by private respondents since they, the negligence, delay or violation or contravention in any
petitioners, were guilty of negligence. The event then manner of the tenor of the obligation as provided for in
was not occasioned exclusively by an act of God or force Article 1170 of the Civil Code, which results in loss or
majeure; a human factor — negligence or imprudence — damage, the obligor cannot escape liability.
had intervened. The effect then of the force majeure in
question may be deemed to have, even if only partly, The principle embodied in the act of God doctrine strictly
resulted from the participation of man. Thus, the whole requires that the act must be one occasioned exclusively
occurrence was thereby humanized, as it were, and by the violence of nature and all human agencies are to
removed from the laws applicable to acts of God. be excluded from creating or entering into the cause of
the mischief. When the effect, the cause of which is to be
xxx considered, is found to be in part the result of the
participation of man, whether it be from active
To exempt the obligor from liability under Article 1174 of intervention or neglect, or failure to act, the whole
the Civil Code, for a breach of an obligation due to an occurrence is thereby humanized, as it were, and
"act of God," the following must concur: removed from the rules applicable to the acts of God.
(a) the cause of the breach of the obligation must be

independent of the will of the debtor;
(b) the event must be either unforeseeable or

unavoidable;
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19. G.R. No. L-7097 October 23, 1912 object of hire of services has been fulfilled, the
rice remained as a deposit in the possession of the
VICENTE DELGADO, defendant-appellee, spouses Arandez and they had the obligation to
vs. return them to Delgado.
PEDRO BONNEVIE and FRANCISCO ARANDEZ, 2. The possession of the appellants can in no way
plaintiffs-appellants. amount to prescription, for the thing received on
deposit or for hire of services could not prescribe,
Facts: Pedro Bonnevie and Francisco Arandez a regular since for every prescription of ownership the
general partnership in the business of threshing paddy. possession must be in the capacity of an owner,
Vicente Delgado undertook to deliver to them paddy for public, peaceful, and uninterrupted (Civil Code,
this purpose to be cleaned and returned to him as rice. 1941); there is no adverse character because it is
The paddy received for this purpose was credited by explicitly provided that in the nature of deposit,
receipts. ownership is not transferred and the depositor has
complete knowledge over it.
Vicente Delgado filed a case to demand return of the said
2,003 and a half cavanes of paddy, or in the absence
thereof, of the price of said article. The court decided the
case by sentencing the defendant, Pedro Bonnevie and
Francisco Arandez to pay for compensation with 6
percent interest on said sum reckoned from the date the
defendant demanded to settle.
Issues:
1. WON there was a contract of deposit
2. WON deposit can ripen into ownership through
prescription
Ruling:
1. Yes. In the beginning, there was a contract of
deposit but later on it was converted into a
contract for hire of services. However, after the
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20. G.R. No. 174727 August 12, 2013 Petitioners claimed that they have become the sole
owners of the subject property through Lucimo Sr. who
ANTIPOLO INING vs. LEONARDO R. VEGA acquired the same in good faith by sale from Juan
Enriquez (Enriquez), who in turn acquired the same from
Case concerned on the concept of prescription. Is the Leon, and Leonardo was aware of this fact; that they
respondent’s right to assert its right of ownership on the were in continuous, actual, adverse, notorious and
subject property barred by prescription? Is the exclusive possession of the property with a just title; that
repudiation of co-ownership applicable? they have been paying the taxes on the property; that
Leonardo’s claim is barred by estoppel and laches; and
Facts: Leon Roldan married to Rafaela Menez is the that they have suffered damages and were forced to
owner of a parcel of land. Leon and Rafaela died without litigate as a result of Leonardo’s malicious suit.
issue. Leon was survived by his siblings Romana Roldan
and Gregoria Roldan Ining who are now both deceased. The trial court found the deeds of sale to be spurious. It
Romana was survived by herein respondent Leonardo R. concluded that Leon never sold the property to Enriquez,
Vega. Leonardo in turn is survived the substituted and in turn, Enriquez never sold the property to Lucimo
respondents. Gregoria, on the other hand, was survived Sr., hence, the subject property remained part of Leon’s
by herein petitioners, her grandchildren or spouses estate at the time of his death in 1962. Leon’s siblings,
thereof. Romana and Gregoria, thus inherited the subject
property in equal shares. Leonardo and the respondents
Acting on the claim that one-half of subject property are entitled to Romana’s share as the latter’s successors.
belonged to him as Romana’s surviving heir, Leonardo,
herein respondent, filed for partition, recovery of However, the trial court held that Leonardo had only 30
ownership and possession, with damages, against years from Leon’s death in 1962 – or up to 1992 – within
Gregoria’s heirs. which to file the partition case. Since Leonardo instituted
the partition suit only in 1997, the same was already
Leonardo thus prayed that he be declared the owner of barred by prescription. It held that under Article 1141 of
half of the subject property; that the same be partitioned the Civil Code, an action for partition and recovery of
after collation and determination of the portion to which ownership and possession of a parcel of land is a real
he is entitled. action over immovable property which prescribes in 30
years. In addition, the trial court held that for his long
inaction, Leonardo was guilty of laches as well.
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Consequently, the property should go to Gregoria’s heirs purchase of the property to reinforce their claim over the
exclusively. CA dissented in the prescription. property must be ignored. Since no transfer from Leon to
Lucimo Sr. took place, the subject property clearly
Issues: WON there was a prescription remained part of Leon’s estate upon his passing in 1962.
Petitioners’ Arguments Leon died without issue; his heirs are his siblings
Romana and Gregoria.
Petitioners insist that Lucimo Sr.’s purchase of the
property in 1943 and his possession thereof amounted to Since Leon died without issue, his heirs are his siblings,
a repudiation of the co-ownership, and that Leonardo’s Romana and Gregoria, who thus inherited the property in
admission and acknowledgment of Lucimo Sr.’s equal shares. In turn, Romana’s and Gregoria’s heirs –
possession for such length of time operated to bestow the parties herein – became entitled to the property upon
upon petitioners – as Lucimo Sr.’s successors-in-interest the sisters’ passing. Under Article 777 of the Civil Code,
– the benefits of acquisitive prescription which proceeded the rights to the succession are transmitted from the
from the repudiation. moment of death.
Petitioners contend that Leonardo’s inaction amounted to Gregoria’s and Romana’s heirs are co-owners of the
laches or neglect. They argue that, all this time, subject property.
Leonardo did nothing while Lucimo Sr. occupied the
property and claimed all its fruits for himself. For prescription to set in, the repudiation must be done
by a co-owner.
Ruling: No. The finding that Leon did not sell the
property to Lucimo Sr. had long been settled and had Time and again, it has been held that "a co-owner
become final for failure of petitioners to appeal. Thus, cannot acquire by prescription the share of the other co-
the property remained part of Leon’s estate. owners, absent any clear repudiation of the co-
ownership.
The two deeds of sale are found to be spurious. No such
sale from Leon to Lucimo Sr. ever took place. Despite In order that the title may prescribe in favor of a co-
this finding, petitioners did not appeal. Consequently, any owner, the following requisites must concur:
doubts regarding this matter should be considered
settled. Thus, petitioners’ insistence on Lucimo Sr.’s 1943
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(1) the co-owner has performed unequivocal acts of (4) Among brothers and sisters, whether of the
repudiation amounting to an ouster of the other co- full or half blood.
owners;
(2) such positive acts of repudiation have been made

known to the other co-owners; and In point of law, therefore, Lucimo Sr. is not a co-owner
of the property; Teodora is. Consequently, he cannot
(3) the evidence thereof is clear and convincing." validly effect a repudiation of the co-ownership, which he
was never part of. For this reason, prescription did not
Article 1141 and Article 494 (fifth paragraph) provide that run adversely against Leonardo, and his right to seek a
prescription shall begin to run in favor of a co-owner and partition of the property has not been lost.
against the other co-owners only from the time he
positively renounces the co-ownership and makes known Likewise, petitioners’ argument that Leonardo’s
his repudiation to the other co-owners. admission and acknowledgment in his pleadings – that
Lucimo Sr. was in possession of the property since 1943
What escaped the trial and appellate courts’ notice, – should be taken against him, is unavailing. In 1943,
however, is that while it may be argued that Lucimo Sr. Leon remained the rightful owner of the land, and
performed acts that may be characterized as a Lucimo Sr. knew this very well, being married to
repudiation of the co-ownership, the fact is, he is not a Teodora, daughter of Antipolo, a nephew of Leon. More
co-owner of the property. Indeed, he is not an heir of significantly, the property, which is registered under the
Gregoria; he is merely Antipolo’s son-in-law, being Torrens system and covered by OCT RO-630, is in Leon’s
married to Antipolo’s daughter Teodora. name. Leon’s ownership ceased only in 1962, upon his
death when the property passed on to his heirs by
Under the Family Code, family relations, which is the operation of law.
primary basis for succession, exclude relations by affinity.
Art. 150. Family relations include those: In fine, since none of the co-owners made a valid
(1) Between husband and wife; repudiation of the existing co-ownership, Leonardo could
(2) Between parents and children; seek partition of the property at any time.
(3) Among other ascendants and descendants;
and
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Petitioners also stated that prior to 1966, Ricardo had a
house constructed over the land. Petitioners further
alleged that the signature of Juanita in the Affidavit is
highly questionable because on 15 may 1978 Juanita
executed a written instrument stating that she would be
leaving behind to her children the land which she had
inherited form her parents.
Petitioners sought to declare void the sale of the land by
21. G.R.No.176858 September15, 2010 Ricardo’s daughters to respondent Dominador Magdua.
HEIRS OF JUANITA PADILLA, represented by The sale was made during the lifetime of Ricardo.
CLAUDIO PADILLA, Petitioners, v. DOMINADOR Dominador filed a motion to dismiss on the ground of
MAGDUA, Respondent. prescription. The RTC agreed and ruled that the case was
filed only in 2001 or more than 30 years since the
Facts: Juanita, the mother of the petitioners, owned a Affidavit was executed in 1966.
piece of land. After her death, petitioners as legal heirs,
sought to have the land partitioned. Petitioners were The RTC explained that while the right of an heir to his
surprised to find out that their eldest brother, Ricardo inheritance is imprescriptible, yet when one of the co-
had declared the land for himself, prejudicing their rights heirs appropriates the property as his own to the
as co-heirs. It was then discovered that Juanita had exclusion of all other heirs, then prescription can set in.
allegedly executed a notarized affidavit of transfer of The RTC added that since prescription had set in to
Real Property in favor of Ricardo making him the sole question the transfer of the land under the Affidavit, it
owner of the land. The records do not show that the land would seem logical that no action could also be taken
was registered under the Torrens system. against the deed of sale executed by Ricardo’s daughters
in favor of Dominador.
Petitioners sought to declare void the sale of the land by
Ricardo’s daughters to respondent Dominador Magdua. Issue: WON the action is barred by prescription
The sale was made during the lifetime of Ricardo. Held: No. RTC incorrectly relied on the Affidavit alone in
Dominador filed a motion to dismiss on the ground of order to dismiss the case without considering petitioners’
prescription. Petitioners alleged that Ricardo, through evidence. The facts show that the land was sold to
misrepresentation, had the land transferred in his name Dominador by Ricardo’s daughters, namely Josephine
without the consent and knowledge of his co-heirs. Bahia and Virginia Bahia-Abas, during the lifetime of
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Ricardo. However, the alleged deed of sale was not co-heirs or co-owners absent a clear repudiation of the
presented as evidence and neither was it shown that co-ownership, as expressed in Article 494 of the Civil
Ricardo’s daughters had any authority from Ricardo to Code which states:
dispose of the land. No cogent evidence was ever
presented that Ricardo gave his consent to, acquiesced Art. 494. x x x No prescription shall run in favor of a co-
in, or ratified the sale made by his daughters to owner or co-heir against his co-owners or co-heirs as
Dominador. long as he expressly or impliedly recognizes the co-
ownership
Also, aside from the Affidavit, Dominador did not present
any proof to show that Ricardo’s possession of the land In sum, we find that the Affidavit, as the principal
had been open, continuous and exclusive for more than evidence relied upon by the RTC to dismiss the case on
30 years in order to establish extraordinary acquisitive the ground of prescription, insufficiently established
prescription. Dominador merely assumed that Ricardo Dominador’s rightful claim of ownership to the land.
had been in possession of the land for 30 years based on Thus, we direct the RTC to try the case on the merits to
the Affidavit submitted to the RTC. The petitioners, on determine who among the parties are legally entitled to
the other hand, in their pleading filed with the RTC for the land.
recovery of ownership, possession, partition and
damages, alleged that Ricardo left the land after he
separated from his wife sometime after 1966 and moved
to another place. The records do not mention, however,
whether Ricardo had any intention to go back to the land
or whether Ricardo’s family ever lived there. Further,
Dominador failed to show that Ricardo had the land
declared in his name for taxation purposes from 1966
after the Affidavit was executed until 2001 when the case
was filed. Although a tax declaration does not prove
ownership, it is evidence of claim to possession of the
land.
Moreover, Ricardo and petitioners are co-heirs or co-

owners of the land. Co-heirs or co-owners cannot
acquire by acquisitive prescription the share of the other
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Held: No. There was an implied notification. Actual
notification was not necessary to render the petitioner
as the common carrier liable for the lost personal
belongings of Sesante. By allowing him to board the
vessel with his belongings without any protest, the
petitioner became sufficiently notified of such belongings.
Insofar as belongings were brought inside the vicinity of

the vessel, the petitioner was duty-bound to observe the
required diligence in ensuring the safety of the
22. G.R. no. 172682 July 27, 2016 belongings during the voyage.
Applying Article 2000 of the Civil Code, the petitioner
SULPICIO LINES, INC. vs NAPOLEON SESANTE assumed the liability for loss of the belongings caused by
the negligence of its officers or crew. In view of the
Facts: M/V Princess of the Orient, a passenger vessel
finding that the negligence of the officers and crew of the
owned and operated by the petitioner, sank near Fortune
petitioner was the immediate and proximate cause of the
Island in Batangas. Napoleon Sesante, one of the
sinking of the M/V Princess of the Orient, the petitioners
passengers who survived the sinking sued the petitioner
are liable.
for breach of contract and damages, he sustained
injuries, and had lost money, jewelry, important
Article 1754 of the Civil Code does not exempt the
documents, police uniforms and the 45-caliber pistol.
common carrier from liability in case of loss. The law
Sesante alleged that the vessel left the Port of Manila
requires the common carrier to observe the same
during a stormy weather and witnessed the strong winds
diligence as the hotel keepers in case the baggage
and waves pounding the vessel, the passengers
remains with the passenger; otherwise, extraordinary
panicking, crying for help and frantically scrambling for
diligence must be exercised.
life jackets in the absence of the vessel’s officers and
crew.
The liability of the common carrier attaches even if the
loss or damage to the belongings resulted from the acts
Issue: WON notification is required before the common
of the common carrier's employees, the only exception
carrier becomes liable for lost belongings that remained
being where such loss or damages is due to force
in the custody of the passenger. (Art. 1998 of CC)
majeure.
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and that, on the part of the latter, they take the
precautions which said hotel-keepers or their substitutes
advised relative to the care and vigilance of their effects.
See deposited his vehicle for safekeeping with petitioner,

through the latter’s employee, Justimbaste. In turn,
Justimbaste issued a claim stub to See. Thus, the
contract of deposit was perfected from See’s delivery,
when he handed over to Justimbaste the keys to his
vehicle, which Justimbaste received with the obligation of
safely keeping and returning it.
23. GR No. 179419 January 12, 2011

24. G.R. No. 126780
Durban Apartments Corp. vs Pioneer Insurance & YHT REALTY CORPORATION, ERLINDA LAINEZ
Surety Corp. and ANICIA PAYAM, petitioners VS. THE COURT
OF APPEALS and MAURICE McLoughlin,
Facts: Jeffrey S. See stopped his car in front of a hotel respondents.
to check in. A parking attendant asked for his ignition key
and told him that the latter would park the car for him in Facts: Private Respondent stayed in a suite owned by
front of the hotel. His car was carnapped, his car was the Petitioner. The Private Respondent rented a safety
insured with Pioneer Insurance. deposit box with the said Suite. In Renting the box, he
was asked to sign a waiver which relieves the Hotel, its
Issue: Whether petitioner Durban Apartments Corp. can Management and Employees from liability in case of loss
be held liable to respondent Pioneer Insurance & Surety of the item in the box. The companion of the respondent
Corp. for the loss of See’s vehicle. Tan, while the latter was sleeping with the assistance of
the staff of the Hotel, has the capacity to open the
Held: YES. Pursuant to Article 1998, the keepers of depositary box of Respondent. When the respondent
hotels or inns shall be responsible for them as opened the box, he noticed in a number of occasion that
depositaries, provided that notice was given to them, or the Money he placed in the box was either missing or
to their employees, of the effects brought by the guests lacking. When he confronted the Management of the
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hotel, the latter advised that it was his companion Tan safety deposit box whether or not negligence was
who opened the box. incurred by Tropicana or its employees. Pursuant to
Article 2003, the responsibility of the hotel-keeper shall
The RTC found the Management of the Hotel negligent extend to loss of, or injury to, the personal property of
for allowing a third person to open the box which the the guests even if caused by servants or employees of
Respondent rented from them. The RTC found the Hotel the keepers of hotels or inns as well as by strangers,
and its staff liable for the actual and Moral damages that except as it may proceed from any force majeure.
the Respondent lost. Petitioner went to CA to contest the
decision. However, the CA agreed with the decision of
the RTC and dismissed the petition. Hence, the Petitioner
elevated the issue to the SC.
Issue: WON the waiver admittedly executed by private
respondent is null and void.
25. G.R. No. 134241 August 11, 2003
Held: YES. It would be amiss not to state that as the
nature of the business caters to the public, it is imbued DAVID REYES (Substituted by Victoria R. Fabella),
with public interest, hotelkeepers are bound to provide petitioner,
not only lodging for hotel guests and security to their vs.
persons and belongings. The law in turn does not allow JOSE LIM, CHUY CHENG KENG and HARRISON
such duty to the public to be negated or diluted by any LUMBER, INC., respondents.
contrary stipulation through waivers absolving them of
any future liabilities. Facts: Reyes as seller and Lim as buyer entered into a
contract to sell a parcel of land. Harrison Lumber
As held in numerous jurisprudences, to hold hotelkeepers occupied the Property as lessee.
or innkeeper liable for the effects of their guests, it is not
necessary that they be actually delivered to the Reyes had informed Harrison Lumber to vacate the
innkeepers or their employees. It is enough that such Property before the end of January 1995. Reyes also
effects are within the hotel or inn. Let alone it was informed Keng and Harrison Lumber that if they failed to
deposited and under the control of the depositary. vacate, he would hold them liable for the penalty of
P400,000 a month as provided in the Contract to Sell.
Evidently, the undertaking was intended to bar any claim
against the suite for any loss of the contents of the
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Lim requested a meeting with Reyes through the latter’s Reyes contends that prior to a judgment annulling the
daughter on the signing of the Deed of Absolute Sale and Contract to Sell, he has the "right to use, possess and
the payment of the balance but Reyes kept postponing enjoy" the P10 million as its "owner" unless the court
their meeting. Reyes offered to return the P10 million orders its preliminary attachment.
down payment to Lim because Reyes was having
problems in removing the lessee from the Property. To subscribe to Reyes’ contention will unjustly enrich
Reyes at the expense of Lim. Reyes sold to Line One the
Lim learned that Reyes had already sold the Property to Property even before the balance of P18 million under
Line One Foods Corporation. the Contract to Sell with Lim became.
Reyes is seeking rescission of the Contract to Sell. Lim is Reyes cannot claim ownership of the P10 million down
also seeking cancellation of the Contract to Sell. The trial payment because Reyes had already sold to another
court then ordered Reyes to deposit in court the P10 buyer the Property for which Lim made the down
million down payment that Lim made under the Contract payment. In fact, Reyes reiterated his offer to return to
to Sell. Lim the P10 million down payment.
Lim requested in open court that Reyes be ordered to Since Reyes is demanding to rescind the Contract to Sell,
deposit the P10 million down payment with the cashier of he cannot refuse to deposit the P10 million down
the Regional Trial Court of Parañaque. The trial court payment in court. Such deposit will ensure restitution of
granted this motion. the P10 million to its rightful owner. Lim, on the other
hand, has nothing to refund, as he has not received
Issue: WON the trial court erred in granting Lim’s order anything under the Contract to Sell.
Ruling: Yes. The trial court in the exercise of its equity

jurisdiction may validly order the deposit of the P10
million down payment in court. The purpose of the
exercise of equity jurisdiction in this case is to prevent
unjust enrichment and to ensure restitution.
Reyes admits receipt of the P10 million down payment

but opposes the order to deposit the amount in court.
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All went well until Maysilo Estate asserted its claim of
ownership over the land in question. Confronted with
such conflicting claims, petitioner filed a complaint for
interpleader against Respondent and Maysilo Estate.
Alleging among others that Petitioner was not yet the
owner but a purchaser thereof, and its willingness to pay
to whoever will be declared as owner. Trial Court
granted.
Respondent filed a motion for the placing on judicial

deposit the amounts due and unpaid from petitioner;
denied. An amended order was issued, still in favor of
petitioner. Trial court passed a resolution reversing the
26. G.R. No. 73794 September 19, 1988 judgment and ruled in favor of respondent ordering the
ETERNAL GARDENS MEMORIAL PARKS judicial deposit and dismissal of the interpleader. The
CORPORATION, petitioner, heirs of the Maysilo Estate moved for reconsideration of
vs. the order of dismissal; granted. Inspite of that
FIRST SPECIAL CASES DIVISION INTERMEDIATE respondent filed a motion for Writ of Execution of the
APPELLATE COURT and NORTH PHILIPPINE resolution; denied. Respondent elevated on certiorari and
UNION MISSION OF THE SEVENTH-DAY mandamus to the Intermediate Appellate; denied. SC-
ADVENTISTS, respondents. denied. Meanwhile the case still pending, PR filed Petition
for Certiorari before Respondent IAC; GRANTED, ordering
Facts: Petitioner and Private Respondent executed a the deposit. Petitioner’s motion for reconsideration-
Land Development Agreement, whereby Petitioner would denied. Hence, this petition.
construct at its own expense a memorial park on the Issue: Whether or not judicial deposit is proper in the
property owned by PR. 40% of the proceeds be remitted complaint for interpleader.
monthly by Petitioner to Respondent through a
designated depositary trustee bank. They also executed a Held: YES. Since Petitioner admitted in its complaint its
Deed of Absolute Sale with Mortgage on said lots. willingness to pay; there is no cogent reason for its
refusal to deposit cogent reason for its refusal to deposit
the amount the amount. As correctly observed by the
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Court of Appeals, the essence of an interpleader, aside parties negligent and held them equally liable for the
from the disavowal of interest in the property in litigation loss. Court of Appeals affirmed the decision.
on the part of the petitioner, is the deposit of the
property or funds in controversy with the court. It is a Issue: Whether or not Citytrust can collect sum of
rule founded on justice and equity: "that the plaintiff may money as damages from the Central Bank.
not continue to benefit from the property or funds
benefit from the property or funds in litigation during the Held: Yes. The fiduciary nature of banking requires
pendency of the suit at the expense of whoever will banks to assume a degree of diligence higher than that
ultimately be decided as entitled thereto." of a good father of a family.
Doctrine: Deposit is proper in interpleader since P may Citytrust’s failure to timely examine its account, cancel
not continue to benefit from the property/funds in the checks and notify petitioner of their alleged loss/theft
litigation during the pendency of the suit at the expense should mitigate petitioner’s liability, in accordance with
of whoever will ultimately be decided as entitled thereto. Article 2179 of the Civil Code which provides that if the
27. CENTRAL BANK OF THE PHILIPPINES v. plaintiff’s negligence was only contributory, the
CITYTRUST BANKING CORPORATION 578 SCRA immediate and proximate cause of the injury being the
27 (2009) defendant’s lack of due care, the plaintiff may recover
damages, but the courts shall mitigate the damages to
Facts: Flores, a roving teller authorized by City Trust, be awarded.
presented two checks to the Central Bank’s Senior Teller
Iluminada dela Cruz and was subsequently approved.
Dela Cruz prepared the cash transfer slip where Flores 28. G.R. No. 156940 December 14, 2004
should sign but instead, he signs as one Rosauro C.
Cayabyab. ASSOCIATED BANK (Now WESTMONT BANK),
petitioner,
Such event occurred under the nose by Dela Cruz. The vs.
Citytrust demanded that the checks be cancelled and the VICENTE HENRY TAN, respondent.
funds taken out be returned because the check was
stolen before. Central Bank did not accede to the order. Facts: Vicente Henry Tan deposited a postdated UCPB
Citytrust filed a complaint to collect the sum of money check with the said Associated Bank in the amount of
with damages against Central Bank. RTC found both P101,000.00 The check was duly entered in his bank
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record thereby making his balance in the amount of Petitioner took upon itself certain obligations as
P297,000.00. Allegedly, upon instruction of the respondent’s agent, consonant with the well-settled rule
Associated Bank that the P101,000.00 check was already that the relationship between the payee or holder of a
cleared and backed up by sufficient funds, Tan, on the commercial paper and the collecting bank is that of
same date, withdrew the sum of P240,000.00 to issue principal and agent. Under Article 1909 of the Civil
several checks to his business partners. Code, such bank could be held liable not only for fraud,
but also for negligence.
However, his suppliers and business partners went back
to him alleging that the checks he issued bounced for The manager of the bank’s Cabanatuan branch,
insufficiency of funds. Consorcia Santiago admittedly breached the policies
when, without clearance from the drawee bank in
Tan informed the BANK to take action regarding the Baguio, they allowed respondent to withdraw on October
matter for he has adequate and sufficient funds to pay 1, 1990, the amount of the check deposited. Santiago
the amount of the subject checks but the BANK did not testified that respondent "was not officially informed
bother nor offer any apology regarding the incident. It about the debiting of the P101,000 from his existing
was later on found that respondent "was not officially balance of P170,000 on October 2, 1990."
informed about the debiting of the P101,000 from his
existing balance of P170,000 on October 2, 1990. Being the branch manager, Santiago clearly acted within
Consequently, TAN, as plaintiff, filed a Complaint for the scope of her authority in authorizing the withdrawal
Damages. RTC and CA ruled in favor of Tan. and the subsequent debiting without notice.
Issue: Whether or not the petitioner, which is acting as Accordingly, what remains to be determined is whether
a collecting bank, has the right to debit the account of its her actions proximately caused respondent’s injury.
client for a check deposit which was dishonored by the
drawee bank. It is undeniable that the bank’s premature authorization
of the withdrawal by respondent on October 1, 1990,
Ruling: No. The Petition has no merit. The liability of triggered in rapid succession and in a natural sequence
petitioner in this case ultimately revolves around the the debiting of his account, the fall of his account
issue of whether it properly exercised its right of setoff. balance to insufficient levels, and the subsequent
dishonor of his own checks for lack of funds.
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Credit Transactions
payment of the custom duties and taxes for the fertilizers
that were imported by the latter.
RTC rendered a Decision finding respondents Security

Bank Corporation, Skyrider Brokerage, Marivic-Jong
Briones, and the Bank of the Philippine Islands (BPI)
jointly and severally liable to petitioners. The appellate
court affirmed the findings of the RTC.
xxx
Thus, petitioners filed a Motion for Execution of the

Decision. Petitioners asserted that in the absence of an
expressed stipulation as to the rate of interest that
should govern the parties, the legal interest should be
compounded annually.
Specifically, the actual damages awarded in their favor

29. G.R. No. 226771, September 16, 2020 should be 12% per annum, compounded annually from
the date of extrajudicial demand up to June 30, 2013.
NORSK HYDRO (PHILIPPINES), INC., AND The legal interest to be imposed from July 1, 2013, until
NORTEAM SEATRANSPORT SERVICES, full payment by the respondents of their obligation
PETITIONERS, VS. PREMIERE should be six percent (6%) per annum, compounded
DEVELOPMENT BANK, BANK OF THE annually, by virtue of Bangko Sentral ng Pilipinas (BSP)
PHILIPPINE ISLANDS, CITIBANK, N.A., Circular No. 799-13, which fixed such legal interest to the
SKYRIDER BROKERAGE INTERNATIONAL, same.
INC. AND MARIVIC - JONG BRIONES,
RESPONDENTS. Security Bank contended that the interest on the actual
damages awarded should only be imposed at 6% per
Petitioners alleged that respondent Skyrider Brokerage annum considering that respondents' obligation did not
did not remit to the Bureau of Customs the 19 crossed arise from a loan or forbearance of money, but as a
manager's check transmitted unto it for the purpose of
16
Credit Transactions
result of fraud and negligence. Furthermore, there is no forbearance of money, the interest due should be
basis to impose compounding interest on the said that which may have been stipulated in writing.
damages, and that decision did not impose interest for Furthermore, the interest due. shall itself earn
the other damages awarded to petitioners, e.g., moral legal interest from the time it is judicially
and exemplary damages, and attorney's fees. demanded. In the absence of stipulation, the rate
of interest shall be 6% per annum (formerly 12%
The RTC found no basis to impose a compounding per annum) to be computed fiom default, i.e.,
interest on the damages awarded in favor of petitioners from judicial or extrajudicial demand under and
because there exists no contract stipulating the same, subject to the provisions of Article 1169 of the
nor was it imposed by the RTC in its Decision. Civil Code.
Issues 2 When an obligation, not constituting a loan or

forbearance of money, is breached, an interest on
1. WON imposable interest is twelve percent (12%) the amount of damages awarded may be imposed
per annum from the date of extrajudicial demand at the discretion of the court at the rate of 6% per
up on 25 June 2003 to 30 June 2013, and six annum. No interest, however, shall be adjudged
percent (6%) per annum from 01 July 2013 until on unliquidated claims or damages, except when
fully satisfied. or until the demand can be established with
2. WON the interest earned and accrued shall be reasonable certainty. Accordingly, where the
compounded annually. demand is established with reasonable certainty,
3. WON awards of costs of suit should also bear the interest shall begin to run from the time the
interests as well. claim is made judicially or extra-judicially (Art.
1169, Civil Code), but when such certainty cannot
Ruling: be so reasonably established at the time the
demand is made, the interest shall begin to run
1. No. Court reiterates the guidelines in computing for only from the date the judgment of the court is
the legal interest to an award of actual and made (at which time the quantification of
compensatory damages, as follows: damages may be deemed to have been
reasonably ascertained). The actual base for the
1 When the obligation is breached, and it consists computation of legal interest shall, in any case, be
in the payment of a sum of money, i.e., a loan or on the amount finally adjudged.
17
Credit Transactions
3. When the judgment of the court awarding a stipulated by the parties should be understood to be
sum of money becomes final and executory, the simple, not compounded.
rate of legal interest, whether the case falls under
paragraph 1 or paragraph 2, above, shall be 6% 3. Finally, petitioners contend that the award of costs of
per annum from such finality until its satisfaction, suit in their favor, should also earn legal interest because
this interim period being deemed to be by then an disregarding the legal interest for costs of suit would be
equivalent to a forbearance of credit.14 to place the prevailing party at a disadvantage as he will
necessarily incur a loss for initiating a legal action to
Given the foregoing, the rate of legal interest to be protect his interest because the cost of his money -
imposed upon the obligation of respondents shall be 6% which is supposed to be approximated by the legal
per annum, at the time of judicial or extra-judicial interest - will never be recouped. This Court finds this
demand by petitioners. (Lara’s Gift and Decors) argument as tenuous. The costs of suit do not partake
the nature of a loan or forbearance of money, or even an
2. No. The interest imposed upon respondents' obligation obligation, in a strict sense, which is demandable by a
to petitioners is simple interest, not compounding party against another. Reimbursement is strictly limited
interest by the rules and in fact, the prevailing party may recover
only the costs provided thereunder, and no other amount
This Court had settled that the payment of monetary may be awarded to the same. Therefore, any costs of
interest shall only be due only if: suit awarded to a winning litigant cannot earn legal
interest, provided for under the rules.
1) there was an express stipulation for the payment of
interest, and; 2) the agreement for such payment was 30. G.R. No. 179901 April 14, 2008
reduced into writing.
BANCO DE ORO-EPCI, INC. petitioner, vs. JAPRL
In this case, since the records are bereft of any indication DEVELOPMENT CORPORATION, RAPID FORMING
that the parties agreed to the imposition of compounding CORPORATION and JOSE U. AROLLADO,
interest, nor was the RTC's decision forthcoming with respondents.
details of the same, in default of any stipulation
regarding the manner of earning the interest, simple Facts: Petitioner extended credit facilities to JAPRL.
interest shall accrue. Therefore, in default of any Respondents Rapid Forming Corporation (RFC) and Jose
equivocal wording in the contract, the legal interest U. Arollado acted as JAPRL's sureties. JAPRL defaulted in
the payment of four trust receipts soon after the
18
Credit Transactions
approval of its loan. Petitioner later learned that JAPRL Section 40. Requirement for Grant of Loans or
had altered and falsified its financial statements. BDO Other Credit Accommodations. Before granting a
demanded immediate payment of JAPRL's outstanding loan or other credit accommodation, a bank must
obligations. ascertain that the debtor is capable of fulfilling his
commitments to the bank.
JAPRL and RPC filed a petition for rehabilitation, it
disclosed that it had been experiencing a decline in sales Towards this end, a bank may demand from its
for the three preceding years and a staggering loss in credit applicants a statement of their assets and
2002. The proposed rehabilitation plan for JAPRL and liabilities and of their income and expenditures
RFC was eventually rejected. and such information as may be prescribed by law
or by rules and regulations of the Monetary Board
Issue: Whether or not petitioner may demand to enable the bank to properly evaluate the credit
immediate payment from the respondent application which includes the corresponding
financial statements submitted for taxation
Ruling: Yes.In this case, petitioner alleged that JAPRL purposes to the Bureau of Internal Revenue.
fraudulently altered and falsified its financial statements Should such statements prove to be false or
in order to obtain its credit facilities. Considering the incorrect in any material detail, the bank
amount of petitioner's exposure in JAPRL, justice and may terminate any loan or credit
fairness dictate that the Makati RTC hear whether or not accommodation granted on the basis of said
respondents indeed committed fraud in securing the statements and shall have the right to
credit accommodation. (Makati RTC’s jurisdiction was demand immediate repayment or liquidation
questioned due to the issuance of summons) of the obligation.
A finding of fraud will change the whole picture. In this In formulating the rules and regulations under this
event, petitioner can use the finding of fraud to move for Section, the Monetary Board shall recognize the
the dismissal of the rehabilitation case in the Calamba peculiar characteristics of microfinancing, such as
RTC. The protective remedy of rehabilitation was never cash flow-based lending to the basic sectors that
intended to be a refuge of a debtor guilty of fraud. are not covered by traditional collateral. (emphasis
supplied)
Section 40 of the General Banking Law which
states:
19
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Under this provision, banks have the right to annul any FACTS: FMIC, opened the current account and deposited
credit accommodation or loan, and demand the METROBANK with BPI Family Bank (BPI FB). Ong made
immediate payment thereof, from borrowers proven to the deposit upon request of his friend, Ador de Asis, a
be guilty of fraud. Petitioner would then be entitled to close acquaintance of Jaime Sebastian, then Branch
the immediate payment of P194,493,388.98 and other Manager of BPI FB. Sebastian’s aim was to increase the
appropriate damages. deposit level in his Branch.
Finally, considering that respondents failed to pay the BPI FB, through Sebastian, guaranteed the payment
four trust receipts, the Makati City Prosecutor should representing 17% per annum interest of P100 million
investigate whether or not there is probable cause to deposited by FMIC. The latter, in turn, assured BPI FB
indict respondents for violation of Section 13 of the Trust that it will maintain its deposit of P100 million for a period
Receipts Law. of one year on condition that the interest of 17% per
annum is paid in advance. This agreement between the
parties was reached through their communications in
writing. Subsequently, BPI FB paid FMIC 17% interest or
P14,667,687.01 upon clearance of the latter’s check
deposit.
However, on the basis of an Authority to Debit signed by

Ong and Ma. Theresa David, Senior Manager of FMIC,
BPI FB transferred P80 million from FMIC’s current
account to the savings account of Tevesteco Arrastre –
Stevedoring, Inc. FMIC denied having authorized the
transfer of its funds to Tevesteco, claiming that the
signatures of Ong and David were falsified.
31. G.R. No. 132390 May 21, 2004
Thereupon, to recover immediately its deposit, FMIC, on
BPI FAMILY SAVINGS BANK, INC., petitioner, issued BPI FB check payable to itself and drawn on its
vs. deposit with BPI FB SFDM branch. But upon presentation
FIRST METRO INVESTMENT CORPORATION, for payment BPI FB dishonored the check as it was
respondent. “drawn against insufficient funds. Consequently, FMIC
20
Credit Transactions
filed a complaint against BPI FB. FMIC filed an fiduciary duty to treat its account with the highest degree
Information for estafa against Ong, de Asis, Sebastian of care.
and four others.
Under this circumstance, the withdrawal of deposit by
ISSUES: respondent FMIC before the one-year maturity date did
not change the nature of its time deposit to one of
1. Whether or not the transaction between FMIC and demand deposit. If a corporation knowingly permits its
BPI, a time deposit or an interest-bearing current officer, or any other agent, to perform acts within the
account which, under existing bank regulations, was an scope of an apparent authority, holding him out to the
illegal transaction? public as possessing power to do those acts, the
corporation will, as against any person who has dealt in
good faith with the corporation through such agent, be
2. Is the bank liable for the unauthorized transfer of
estopped from denying such authority.
respondent’s funds to Tevesteco?
2. Yes. We uphold the finding of both lower courts that

RULING:
petitioner failed to exercise that degree of diligence
required by the nature of its obligations to its depositors.
1. Interest-earning time deposit not withdrawable A bank is under obligation to treat the accounts of its
anytime. When respondent FMIC invested its money with depositors with meticulous care, whether such account
petitioner BPI FB, they intended the P100 million as a consists only of a few hundred pesos or of million of
time deposit, to earn 17% per annum interest and to pesos. Here, petitioner cannot claim it exercised such a
remain intact until its maturity date one year thereafter. degree of care required of it and must, therefore, bear
the consequence.
While it may be true that barely one month and seven
days from the date of deposit, respondent FMIC
demanded the withdrawal of P86,057,646.72 through the
issuance of a check payable to itself, the same was made
32. G.R. No. 138967 April 24, 2007
as a result of the fraudulent and unauthorized transfer by
petitioner BPI FB of its P80 million deposit to Tevesteco’s
savings account. Certainly, such was a normal reaction of LEIDEN E. FERNANDEZ, GLORIA B. ADRIANO,
respondent as a depositor to petitioner’s failure in its EMELDA A. NEGAPATAN, JESUS P. TOMONGHA,
21
Credit Transactions
ELEONOR A. QUIÑANOLA, ASTEMA C. CAMPO, Herein public respondent Labor Arbiter Nicasio C. Aniñon
FLORIDA VILLACERAN, FLORIDA B. TALLEDO AND issued a writ of execution commanding the Deputy
BRENDA GADIANO, Petitioners, Sheriff to:
vs.
NICASIO C. ANIÑON, the Labor Arbiter of the REINSTATE the complainants [petitioners] at the
Regional Arbitration Branch VII-Cebu City; respondent Agencia Cebuana and to proceed to the
MARGUERITE LHUILLIER; and ALVAREZ CAÑETE premises of the respondent located at Calderon St., Cebu
LOPEZ PANGANDOYON AHAT & PAREDES LAW City or wherever the same could be found and collect
OFFICES, represented by ATTY. WILFREDO S. from the respondent the sum of P3,505,092.33
PANGANDOYON, JR., Respondents. representing complainants award plus execution fee of
P34,550.92 and the deposit fee of P17,535.46 or a total
FACTS: The case stemmed from a labor case involving sum of P3,556,178.71 and thereafter turn over the said
the illegal dismissal. Via the present recourse, sum to this Office for appropriate disposition.
petitioners pray the Court to hold the respondents guilty
of civil and criminal contempts for failure to comply with Should you fail to collect said sum in cash, you are
and implement the Decision of the Court. They also hereby authorized to cause the satisfaction of the same
seek the inhibition of respondent Labor Arbiter Nicasio on the movable or immovable properties of the
C. Aniñon from taking part in further execution respondent not exempt from execution.
proceedings relative to the same case, and request that
a final computation be made by the Court of the exact Thus, Deputy Sheriff, garnished the Citibank and
amount of the monetary awards due them under the Metrobank accounts of respondent Marguerite Lhuillier
same Decision. and levied on a parcel of land belonging to her located in
Mandaue City.
Petitioners filed their respective complaints against
respondent Marguerite Lhuillier and/or Agencia Cebuana The motion further claims that the writ of execution was
for illegal dismissal, service incentive pay, reinstatement directed only against Agencia Cebuana, hence, not even
with full back wages, and damages. In the end, the Court Marguerite Lhuillier can be made personally liable
ruled in favor of Petitioners. thereunder.
Moreover, petitioners claim in the same opposition that

the garnished bank accounts are not joint accounts but
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Credit Transactions
are accounts only in the name of Marguerite Lhuillier, accounts that anyone of the depositors has access to the
who, contrary to the allegations in the motion, is just as entire funds therein. If, afterwards, there should be
liable under the writ as Agencia Cebuana. squabbling amongst the supposed joint depositors as to
the share of each, they can sort it out amongst
First off, it greatly saddens the Court that petitioner themselves.
employees, who were illegally dismissed way back in
1990 -- seventeen (17) years before this date -- have yet Her co-respondent Agencia Cebuana is a sole
to be fully compensated for the injustice that had proprietorship without a juridical personality of its own.
befallen them almost two decades ago despite the final But while the position taken by the public and private
and executory judgment of this very Court in their favor. respondents that the judgment in question is not
It is in the interests of justice, therefore, that the Court enforceable against respondent Marguerite Lhuillier, but
must make conclusive clarifications as to the execution of solely against Agencia Cebuana is wrong, they are not
its final Decision against respondent Marguerite Lhuillier. liable for contempt.
In an individual proprietorship, the owner has unlimited

personal liability for all the debts and obligations of the
business.6 As sole proprietor of Agencia Cebuana, from
whose employment the petitioners were unlawfully
removed, Marguerite Lhuillier is the party against whom
the Court’s final and executory Decision in G.R. No.
105892 is enforceable. Put differently, Marguerite
Lhuillier is personally liable under the same Decision.
Garnishment and levy over her property are proper in the
dispensation of justice.
What they opposed was the garnishment of the bank

accounts allegedly jointly owned by respondent
Marguerite Lhuillier and two others, not the writ of
execution itself. We hold, however, that such accounts,
even if joint as claimed by the private respondents, are
subject to garnishment. It is in the nature of joint
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Credit Transactions
claims, suits and damages, and interest and attorney’s
fees are not included.
33. G.R. No. L-33582 March 30, 1982
THE OVERSEAS BANK OF MANILA, petitioner,

ISSUE: Whether or not Cordero is entitled to interest
vs.
and attorney’s fees
VICENTE CORDERO and COURT OF APPEALS,
respondents. RULING: The obligation to pay interest on the deposit
ceases the moment the operation of the bank is
FACTS: Private respondent, Vicente Cordero opened a 1- completely suspended by the Central Bank. Neither can
year time deposit with petitioner bank, Overseas Bank of respondent Cordero recover attorney’s fees. Overseas
Manila amounting to P80,000, with interest of 6% per Bank’s refusal to pay was not due to a willful and
annum. dishonest refusal to comply with its obligation but to
restrictions imposed by Central Bank. Hence, Cordero is
Due to its distressed financial condition, the bank was
not entitled to recover interest and attorney’s fees.
unable to pay. Cordero instituted an action. Overseas
Bank contends that Cordero’s recovery of his time
deposit is barred or abated by its state of insolvency as
found by the Monetary Board of the Central Bank of the
Philippines and judgment in favor of Cordero is
prejudicial to other creditors of the bank.
Certain supervening events rendered the issue moot and

academic. First, Julian, Vicente Cordero’s brother and
attorney-in-fact sent a letter to the Commercial Bank of
Manila (Overseas Bank’s successor-in-interest),
acknowledging receipt of P10,000 from Philippine Deposit
Insurance Company (PDIC), and second, his
manifestation for the receipt of P73,840, with waiver of
damages. Julian submitted the SPA, with explanatory
comment that the waiver applies only to third party
24
Credit Transactions
Sta. Cruz, in said City, to the effect that the
following checks, to wit:
or all in the total amount of P575,504.00, are

34. G.R. No. 93849 December 20, 1991
good and covered with sufficient funds in the
THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee, banks, and by means of other similar deceits with
vs. the conspiracy of his co-accused Lino Morfe y
DICK ONG y CHAN, LINO MORFE y GUTIERREZ, Gutierrez, Ricardo Villaran and Lucila Talabis, in
RICARDO VILLARAN and LUCILA TALABIS, their capacities as officer-in-charge, branch
accused, DICK ONG y CHAN, accused-appellant. accountant and bank branch cashier, respectively,
of said bank (Home Savings Bank), induced and
The accused, Dick Ong y Chan, Lino Morfe y Gutierrez, succeeded in inducing the management of the
Ricardo Villaran and Lucila Talabis, were charged with said bank to accept said checks as deposits, all the
the crime of estafa in Criminal Case No. 44080 before the said accused well knowing that his (Dick Ong y
Regional Trial Court of Manila, Branch 35. The Chan's) representations and manifestations are
information filed in said case reads, as follows (pp. 8- false and untrue and were made solely for the
9, Rollo): purpose of defrauding the said bank, and, in
accordance with the conspiracy, his co-accused
That in (sic) or about and during the period Lino Morfe y Gutierrez, Ricardo Villara and Lucila
comprised between December 6, 1978 and Talabis, facilitated the opening of a savings
January 31, 1979, both dates inclusive, in the City account in the name of accused Dick Ong y Chan
of Manila, Philippines, the said accused, conspiring and, thereafter, approved said deposits; that on
and confederating together and helping one the strength of such deposits made and the
another, did then and there wilfully, unlawfully opening of an account, the said accused were able
and feloniously defraud the Home Savings Bank in to withdraw the total amount of P575,504.00,
the following manner, to wit: the said accused which once in their possession, with intent
Dick Ong y Chan, by means of false manifestations defraud, they thereafter wilfully, unlawfully and
and fraudulent representations which he made to feloniously misappropriated, misapplied and
the management of the Home Savings Bank, converted to their own personal use and benefit,
Aurea Annex Branch, located at 640 Rizal Avenue, to the damage and prejudice of said Home
25
Credit Transactions
Savings Bank in the said amount of P575,504.00, ordering accused Dick Ong to pay the Home
Philippine Currency. Saving Bank and Trust Company the sum of
P559,381.34 as partial reparation of the damage
Contrary to law. caused to said Bank; (4) ordering forfeited in favor
of the Home Savings Bank and Trust Company the
On October 15, 1979, the prosecution moved for the sum of P16,122.66 the positive balance remaining
dismissal of the case, insofar as accused Lino Morfe y outstanding in Savings Account No. 6-1981 of
Gutierrez is concerned, on the ground that after a accused Dick Ong with, and in the possession of,
reinvestigation, it was found that the evidence against said Bank to complete the reparation of the
him is not sufficient to sustain the allegations contained damage caused by Dick Ong to the Bank; (5)
in the information (p. 54, Records). On October 31, ordering accused Dick Ong to pay one-third (1/3)
1979, the trial court granted the motion (p. 6 Records). of the costs; and (6) ordering two-thirds (2/3) of
the costs charged de oficio.
Upon being arraigned, the remaining three (3) accused
entered the plea of not guilty to the crime charged. After SO ORDERED.
trial on the merits, the trial court rendered its decision on
January 11, 1990, the dispositive portion of which reads, On February 15, 1990, the accused-appellant filed a
as follows (p. 26, Rollo): motion for reconsideration. On March 22, 1990, he filed a
supplemental memorandum in support of the motion for
WHEREFORE, judgment is rendered: (1) reconsideration. On April 3, 1990, said motion was
pronouncing accused DICK ONG y CHAN guilty denied for lack of merit (pp. 575-576, Records). Hence,
beyond reasonable doubt, as principal, of ESTAFA the present appeal by Dick Ong y Chan.
defined under No. 2 (d) of Article 315 of the
Revised Penal Code, as amended by Republic Act The facts of this case were summarized by the trial court,
4885, and penalized under the lst paragraph of as follows (pp. 18-20, Rollo):
the same Code as amended by Presidential Decree
No. 818, and sentencing said accused to Accused Dick Ong was one of the depositors of
RECLUSION PERPETUA; (2) ACQUITTING accused the Home Savings Bank and Trust Company in its
Lucila Talabis and Ricardo Villaran, their guilt of Aurea Annex Branch at Rizal Avenue, Sta. Cruz,
(sic) the felony charged against them not having Manila, hereafter, to be referred to as the Bank.
been established beyond reasonable doubt; (3) He opened his savings account on December 6,
26
Credit Transactions
1978, under the Bank's Saving Account No. 6- On January 30, 1979, Dick Ong issued and
1981, with an initial deposit of P22.14 in cash and deposited in his savings account with the Bank the
P10,000.00 in (a) check. following checks:
On the same date, December 6, 1978, without his Afterwards but before these checks could be
check undergoing the usual and reglamentary (sic) cleared and the Bank could collect their amounts
clearance, which normally takes about five from the drawee banks, Lucila Talabis allowed and
working days, Dick Ong was allowed to withdraw approved the withdrawal of Dick Ong against the
from his savings account with the Bank the sum of amounts of said checks. (TSN, Mar. 18, 1981, pp.
P5,000.00. The corresponding withdrawal slip was 47-48.)
signed and approved by Lino Morfe, then the
Branch Manager, and accused Lucila Talabis, the On the following day, January 31, 1979, Dick Ong
Branch Cashier. also issued and deposited in his savings account
with the Bank the following check;
That initial transaction was followed by other
similar transactions where Dick Ong, upon Subsequently, but before said seven checks were
depositing checks in his savings account with the cleared and the Bank had collected their amounts,
Bank, was allowed to withdraw against those Lucila Talabis and then officer in charge of the
uncleared checks and uncollected deposits. The Bank Grace Silao allowed and approved the
withdrawals were authorized and approved by withdrawals of Dick Ong against the amounts of
accused Ricardo Villaran and Lucila Talabis, these seven checks. (TSN, lbid., pp. 47-48.)
sometimes jointly, sometimes by aither (aic) of
them alone, and at other times by one of them However, when the Bank presented those eleven
together with another official of the Bank. But all checks issued and deposited by Dick Ong on
of those uncleared checks deposited by Dick Ong January 30, 1979 and January 3l, 1979 and
prior to January 3, 1979 and against which he was against which he made withdrawals against (sic)
allowed to withdraw were subsequently honored their amounts, to their respective drawee banks
and paid by the drawee banks. (TSN, Mar. 9, for payment, they were all dishonored for lack or
1981, pp. 101-104; TSN, Mar. 18, 1981, pp. 144 insufficiency of funds. (TSN, Jan. 7, 1981, pp. 90-
-146.) 101; TSN, May 8, 1981, pp. 74-75.)
27
Credit Transactions
The accused-appellant neither took the witness stand to 4. Exhibit 4 — Ong. — The sworn statement of
testify in his behalf, nor presented any witness to testify Lino Morfe before the METROCOM taken on
in his favor. Instead, he offered the following documents February 11, 1979.
(p. 20, Rollo):
5. Exhibit 5 — Ong. — The letter dated July 6,
1. Exhibit 1 — Ong. — The letter dated June 27, 1979, of Lino Morfe to the Assistant Fiscal of
1980 of the Central Bank Governor to all banks Manila, transmitting his (Morfe's) affidavit.
authorized to accept demand deposits, enjoining
strict compliance with Monetary Board Resolution 6. Exhibits 5-a — Ong to 5-a-3-Ong. — Affidavit of
No. 2202 dated December 21, 1979, prohibiting, Lino Morfe sworn on June 28, 1979.
as a matter of policy, drawing against uncollected
deposits effective July 1, 1980. 7. Exhibit 5-b — Ong. — The Bank's Memorandum
dated January 31, 1979, to all Branch
2. Exhibit 2 — Ong. — The Memorandum of the Manager/Extension Office O.I.C. (sic) requiring
Central Bank Governor dated July 9, 1980, to all them to furnish the Head Office of the Bank every
banks for their guidance, that Monetary Board Monday and Thursday with a list of all "drawn
Resolution No. 2202 dated December 21, 1979, against" and "encashment" acommodations (sic)
prohibiting, as a matter of policy, drawing against of P1,000.00 and above granted by the Branch
uncollected deposits effective July 1, 1980, covers during the week.
drawing against demand deposits as well as
withdrawals from savings deposits. 8. Exhibit 6 — Ong. — The sworn statement of
accused Dick Ong.
3. Exhibits 3 — Ong. — and 3-a. — Clippings from
the Bulletin Today issue on July 25, 1980 On the other hand, accused Lucila Talabis admitted that
regarding on (sic) ban on DAUD (drawn against she approved the withdrawals of the accused-appellant
uncollected deposits) effective July 1, 1980, and against uncleared checks. However, she explained that
the one-day loan which replaced the DAUD her approval thereof was in accordance with the
arrangement. instruction of then bank manager Lino Morfe; that this
accommodation given or extended to the accused-
appellant had been going on even before she started
giving the same accommodation; that this was common
28
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practice in the bank; that she approved those 1) it concluded that the withdrawals against the amounts
withdrawals together with one other bank official, of the subject checks before clearance and collection of
namely, either the bank manager, the bank accountant, the corresponding amounts thereof by the depository
the other bank cashier, or the bank assistant cashier; and bank from the drawee banks is deceit or fraud
that they reported those withdrawals against, and the constituting estafa under Article 315, paragraph 2(d) of
dishonor of, the subject checks always sending copies of the Revised Penal Code, in the total absence of evidence
their reports to the head office. showing criminal intent to defraud the depository bank;
and not a case which is civil in nature governed solely by
Accused Ricardo Villaran testified on his behalf that the the Negotiable Instruments Law;
accused-appellant was able to withdraw against his
uncleared checks because of the accommodations 2) it stated that he issued and deposited the subject
extended to him by bank officials Lino Morfe, co-accused checks when he is not the issuer, maker, nor drawer
Lucila Talabis, Grace Silao, Precy Salamat, and Cora thereof but merely an indorser; hence, his liability, if any,
Gascon; that this practice of drawing against uncollected is that of a general indorser under the Negotiable
deposits was a common practice in branches of the Bank; Instruments Law;
that on December 14, 1978, the accused-appellant
withdrew the sum of P75,000.00 against his uncleared 3) it convicted him on mere presumption, without any
checks; that on December 21, 1978, the accused- evidence that he had prior knowledge of the lack or
appellant deposited several checks in the total amount of insufficiency of funds in the drawee banks to cover the
P197,000.00 and withdrew on the same date the sum of amounts of the subject checks; and
P120,000.00; that on January 23, 1979, the accused-
appellant again deposited several checks in the 4) it failed to consider that a general indorser under the
aggregate sum of P260,000.00 and withdrew also on the Negotiable Instruments Law warrants payment of the
same date, the amount of P28,000.00; and that he value of the checks indorsed by him; no damage could
(Villaran) approved these three withdrawals of the have been suffered by the depository bank because he
accused-appellant against his uncollected deposits. had offered payment thereof.
In this appeal, the accused-appellant assigns the To support the aforementioned assignment of errors, the
following errors committed by the trial court: accused-appellant alleges that based on the testimonies
of co-accused Lucila Talabis and Ricardo Villaran, he did
not employ any deceit or fraud on the Bank because the
29
Credit Transactions
practice of deposit and withdrawal against uncleared savings account. As drawer of the subject checks, the
checks and uncollected deposits was tolerated by it. As accused-appellant had the obligation to maintain funds in
soon as he learned of the dishonor of the subject checks, his current account in the drawee banks sufficient to
he offered to pay the amounts thereof (see pp. 48-49, cover the amounts thereof or, in case of dishonor, to
tsn of Felix Hocson, May 8, 1981) and put up as security deposit within three (3) days from receipt notice of
his property. The subject checks were not in payment of dishonor, the amounts necessary to cover the check. The
an obligation but were deposited in his savings account. testimony of Felix Hocson, Senior Vice President and
He was merely a general indorser of the subject checks Treasurer of the Bank, apart from being hearsay, does
and this being the case, his obligations as such, if any, not prove that the accused-appellant made an offer to
should be governed by Section 66 of the Negotiable pay the amounts covered by the subject checks. Even
Instruments Law. * The subject checks were issued or assuming arguendo that accused-appellant made an offer
drawn by his customers and paid to him. He could not to pay the amounts covered by the subject checks, said
have had any knowledge as to the sufficiency of their offer is not sufficient to rebut the prima facie evidence of
funds in the drawee banks. deceit. There is no showing that the accused-appellant
deposited the amounts necessary to cover the subject
The Office of the Solicitor General disputes the checks within three (3) days from receipt of notice from
allegations of the accused-appellant. According to it, by Bank and/or the payee or holder that said checks have
reason of the accused-appellant's antecedent acts of been dishonored. The damage suffered by the Bank
issuing and depositing check and withdrawing the consists in its inability to make use of the P575,504.00 it
amounts thereof before clearing by the drawee banks, had delivered to the accused-appellant.
which checks were later honored and paid by drawee
banks, he was able to gain the trust and confidence the We are convinced that the accused-appellant is innocent
Bank, such that the practice, albeit contrary to sound of the crime charged against him.
banking policy, was tolerated by the Bank. After thus
having gained the trust and confidence of the Bank, the Article 315, paragraph 2(d) of the Revised Penal Code, as
accused-appellant issued and deposited the subject amended by Republic Act No. 4885, provides:
checks, the amounts of which he later withdrew, fully
aware that he had no sufficient funds to cover the Art. 315. Swindling (estafa) — Any person who
amounts of said checks in the drawee banks. Contrary to shall defraud another by any of the means
the accused-appellant's allegation, the trial court found mentioned hereinbelow shall be punished by:
that he issued and deposited the subject checks in his
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Credit Transactions
..., provided that in the four cases SCRA 717; People v. Sabio, Sr., etc., et al., G.R.
mentioned, the fraud be committed by any No. L-45490, November 20, 1978, 86 SCRA 568).
of the following means: Based thereon, the trial court concluded that the
guilt of the accused-appellant has "been duly
2. By means of any of the following false established by the required quantum of evidence
pretenses or fraudulent acts executed prior adduced by the People against (him)" (p.
to or simultaneously with the commission of 22, Rollo). We shall confine Our discussion only on
the fraud: the first element because there is no argument
that the second and third elements are present in
(d) By post-dating a check, or issuing a this case. For an orderly discussion of this
check in payment of an obligation when the element, We will divide it into two (2) parts: first,
offender had no funds in the bank, or his "postdating or issuance of a check," and second,
funds deposited therein were not sufficient "in payment of an obligation contracted at the
to cover the amount of the check. The time the check was issued."
failure of the drawer of the check to deposit
the amount necessary to cover his check Inasmuch as the first part of the first element of
within three (3) days from receipt of notice Article 315 paragraph 2(d) of the Revised Penal
from the bank and/or the payee or holder Code is concerned with the act of "postdating
that said check has been dishonored for or issuance of a check," the accused-appellant
lack or insufficiency of funds shall be prima raises the defense that he was neither the issuer
facie evidence of deceit constituting false nor drawer of the subject checks, but only an
pretense or fraudulent act. indorser thereof. Thus, his liability, if any, should
be governed by the provision of the Negotiable
The following are the elements of this kind of Instruments Law, particularly Section 66
estafa: (1) postdating or issuance of a check in thereof, supra. Also, he could not have had any
payment of an obligation contracted at the time knowledge as to the sufficiency of the drawers'
the check was issued; (2) lack or insufficiency of funds in their respective banks. The Office of the
funds to cover the check; and (3) damage to the Solicitor General contend's that the trial court
payee thereof (People v. Tugbang, et al;, G.R. No. found as a fact that the accused-appellant issued
76212, April 26, 1991; Sales v. Court of Appeals, the subject checks.
et al., G.R. No. L-47817, August 29, 1988, 164
31
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The contention of the Office of the Solicitor A: Yes, Your Honor. Our Vice-
General is accurate only in part. In the trial court's President for Bank Operations
disquisition on the liability of the accused- verified said checks and found out
appellant, it said (p. 22, Rollo): that one of or rather, two of those
checks are in the account of Mr. Dick
There is no question that on January 30, Ong but the other checks are not in
1979, accused Dick Ong issued or used and his account.
indorsed, and deposited in his Savings
Account No. 6-1981 with the Bank the four Court —
checks ... .
Q: In other words, there are checks
There is likewise no dispute that on the where the depositor himself was also
following date, January 31, 1979, Dick Mr. Dick Ong?
Ong issued or used and indorsed, and
deposited in his savings account with the A: Could I go over the checks, Your
Bank seven checks ... . (emphasis supplied) Honor.
On this subject matter, Fernando Esguerra, Q: Is it indicated there?

Intemal Auditor of the Bank and a witness for the
prosecution, testified that (pp. 101-103, tsn, A: Yes, Your Honor, it.is.
January 7, 1981):
Q: All right, go over the checks.
Court —
A: There is one check, Your Honor.
Q: You mentioned these checks, Mr. It is a China Banking Corporation
Witness. Did you or anybody for that check in the amount of P69,850.00
matter ever verify the actual (Witness referring to Exhibit "Z").
depositors of these checks whether it
is Mr. Dick Ong himself.? Q: Now, why do you say that the
current checking account or current
account was opened by Mr. Dick Ong
himself.
32
Credit Transactions
A: Because he is the drawer of the such knowledge with respect to the subject
check, Your Honor.(emphasis checks that he indorsed. In applying Our
supplied) decisions, it is not enough that courts take
into account only the facts and the
Thus, the fact established by the dispositive portions thereof. It is imperative
prosecution and adopted by the trial court that the rationale of these decisions be read
is that the subject checks were and comprehended thoroughly.
either issued or indorsed by the accused-
appellant. It goes without saying that with respect to
the subject checks wherein the accused-
In the case of People v. Isleta, et al., 61 appellant was the issuer/drawer, the first
Phil. 332, which was recently reiterated in part of the first element of Article 315,
the case of Zagado v. Court of Appeals, paragraph 2(d) of the Revised Penal Code
G.R. No. 76612, September 29, 1989, 178 is applicable. However, this statement will
SCRA 146, We declared the accused- lose its significance in Our next discussion.
appellant, who only negotiated the check
drawn by another, guilty of estafa. This Regarding the second part of the first
case of People v. Isleta, et al. was relied element of Article 315, paragraph 2(d) of
upon by the trial court in its order dated the Revised Penal Code, the accused-
April 3, 1990, which denied the accused- appellant alleges that when he deposited
appellant's motion for reconsideration the subject checks in his savings account, it
based on the same defense. The trial court was clearly not in payment of an obligation
erred in doing so. It must have overlooked to the Bank. The Office of the Solicitor
the ratio decidendi of the aforementioned General misses this point of the accused-
case. We held the accused-appellant appenant.
therein guilty of estafa because he "had
guilty knowledge of the fact that (the This single argument of the accused-
drawer) had no funds in the bank when he appellant spells tilting the scale to his
negotiated the (subject) check" (at p. 334). advantage. In several cases, We were
In the present case, the prosecution failed categorical that bank deposits are in the
to prove that the accused-appellant had nature of irregular deposits. They are really
33
Credit Transactions
loans because they earn interest. All kinds al., G.R. No. 75079, January 26, 1989, 169
of bank deposits, whether fixed, savings, or SCRA 471).
current are to be treated loans and are to
be covered by the law on loans. Current In this connection, the Office of the
and savings deposits are loans to a bank Solicitor General advances the view that by
because it can use the same (Serrano v. reason of the accused-appellant's
Central Bank of the Philippines, et al., G.R. antecedent acts of issuing and depositing
No. 30511, February 14, 1980, 96 SCRA 96; checks, and withdrawing the amounts
Gullas v. Philippine National Bank, 62 Phil. thereof before clearing by the drawee
519; Central Bank of the Philippines v banks, which checks were later honored
Morfe, etc., et al., G.R. No. L-38427, March and paid by the drawee banks, he was able
12, 1975, 63 SC 114; Guingona, Jr., et al. to gain the trust and confidence of the
v. The City Fiscal of Manila, et al. G.R. No. Bank, such that the practice, albeit contrary
60033, April 4, 1984, 128 SCRA 577). to sound banking policy, was tolerated by
the Bank. After thus having gained the trust
The elements of estafa in general are: (1) and confidence of the Bank, he issued and
that the accused defrauded another (a) by deposited the subject checks, the amounts
abuse of confidence, or (b) by means of of which he later withdrew, fully aware that
deceit; and (2) that damage or prejudice he had no sufficient funds to cover the
capable of pecuniary estimation is caused amounts of said checks in the drawee
to the offended party or third person. Aside banks.
from the elements that We have discussed
earlier, in the crime of estafa by postdating This view is not supported by the facts of
or issuing a bad check, deceit and damage this case. Rather, the evidence for the
are essential elements of the offense and prosecution proved that the Bank on its
have to be established with satisfactory own accorded him a drawn against
proof to warrant conviction (U.S v. Rivera, uncollected deposit (DAUD) privilege
23 Phil. 383; People, et al. v. Grospe, etc., without need of any pretensions on his part
et al., G.R No. 74053-54, January 20, (pp. 7-8, supra). Moreover, this privilege
1988,157 SCRA 154; Buaya v. Polo etc., et was not only for the subject checks, but for
other past transactions. Fernando Esguerra
34
Credit Transactions
and Felix Hocson even testified that in or holder of such fact, are sufficient to
some instances prior to July 1, 1980, make him liable for estafa" (p. 23, Rollo).
especially where the depositor is an This statement is no longer controlling. We
important client, the Bank relaxed its rule have clarified in the case of People v.
and internal policy against uncleared checks Sabio, Sr., etc., et al., supra, that Republic
and uncollected deposits, and allowed such Act No. 4885 has eliminated the
depositor to withdraw against his uncleared requirement under the old provision for the
checks and uncollected deposits. drawer to inform the payee that he had no
Admittedly, the accused-appellant was one funds in the bank or the funds deposited by
of the important depositors of the Bank him were not sufficient to cover the amount
(pp. 24-25, Rollo). Granting, in of the check.
gratia argumenti, that he had in fact acted
fraudulently, he could not have done so We, therefore, find that the guilt of the
without the active cooperation of the Banks accused-appellant for the crime of estafa
employees. Therefore, since Lucila Talabis under Article 315, paragraph 2(d) of the
and Ricardo Villaran were declared innocent Revised Penal Code has not been proven
of the crimes charged against them, the beyond reasonable doubt. However, We
same should be said for the accused- find him civilly liable to the bank in the
appellant (see People v. Jalandoni, G.R. No. amount of P575,504.00, less the balance
57555, May 30, 1983, 122 SCRA 588). True remaining in his savings account with it (p.
it is that the Bank suffered damage in the 26, Rollo), with legal interest from the date
amount of P575,504.00 but the accused- of the filing of this case until full payment.
appellant's liability thereon is only civil.
ACCORDINGLY, the decision and order
One additional statement made by the trial appealed from are hereby SET ASIDE. The
court in its decision requires correction. It accused-appellant is ACQUITTED of the
said that "[t]he circumstances that the crime charged against him but ordered to
drawer of a check had insufficient or no pay the aforementioned amount. No costs.
funds in the drawee bank to cover the SO ORDERED.
amount of his check at the time of its
issuance and he did not inform the payee
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FLORENCIO O. VILLARIN AND FIRST
CARGOMASTERS CORPORATION, CEBU ARRASTRE
& STEVEDORING SERVICES CORPORATION AND
GUERRERO G. DAJAO, RESPONDENTS.
The Facts
Lorenzo Shipping Corporation (LSC) is a domestic
corporation which operates interisland shipping vessels in
the Philippines. On the other hand, Cebu Arrastre and
Stevedoring Services Corporation (CASSCOR) provides
arrastre and stevedoring services for LSC’s ships calling
at the Port of Cebu under a Cargo Handling Contract
dated March 8, 1997.
On February 20, 1997, Guerrero G. Dajao (Dajao), as

President and General Manager of CASSCOR, entered
into a Memorandum of Agreement (MOA) with Serafin
Cabanlit (Cabanlit) and Florencio Villarin (Villarin).
Under the MOA, Villarin and Cabanlit undertook to

operate and manage the arrastre and stevedoring
operations of CASSCOR with respect to LSC’s vessels.
CASSCOR was entitled to 5% of the proceeds of the
operation, while Dajao was entitled to a 2% royalty. 10%
was allocated for taxes, wages and other necessary
expenses; and another 10% was earmarked for the
35. G.R. No. 175727, March 06, 2019 share of the Philippine Ports Authority. Villarin and
LORENZO SHIPPING CORPORATION, Cabanlit alleged that the rest of the proceeds, amounting
PETITIONER, to 73%, were due to them.
v. The Attachment Case
36
Credit Transactions
Alleging failure on the part of CASSCOR and Dajao to Caminade issued an order granting LSC’s motion to post
remit their shares from July 1999 onwards, Villarin, a counter-bond. Hence, LSC and CASSCOR both posted
Cabanlit, and FCC (Villarin, et al.) filed a Complaint for counter-bonds worth Php 150,000.00 each, resulting in
specific performance and accounting against CASSCOR the discharge of the writ of attachment.
and Dajao. The Complaint was subsequently amended on On June 16, 2004, Judge Caminade, ruling on LSC’s
June 20, 2000 to implead LSC as a nominal defendant; to Motion for Clarification/Reconsideration, issued an
include a prayer for a writ of preliminary attachment Order clarifying that the writ of attachment issued under
against CASSCOR and Dajao; and to include a prayer for the Order dated May 11, 2004 is directed at all the
mandatory injunction against LSC. The case was defendants, including LSC. The pertinent portion of the
docketed as Civil Case No. CEB-25283 and raffled to order states that:
Branch 5 of the RTC of Cebu City. A writ of preliminary It is the opinion of the Court as already stated that all
attachment was thereafter issued by the RTC against the defendants including the defendant-movant appear
CASSCOR and Dajao on June 21, 2000. to be guilty of fraud in the performance of the obligation.
CASSCOR and Dajao filed their Answer on June 27, 2000, It is not true that the plaintiffs and defendant-movant
while LSC filed its Answer on August 27, 2001. However, have no contract. Plaintiff has contract with the shipping
on September 22, 2003, Villarin, et al. filed a Second corporation in view of the fact that the defendant
Amended Complaint. The case was then re-raffled to shipping corporation is a beneficiary of the services of
Branch 6 of the RTC of Cebu City. plaintiffs as alleged in the contract between plaintiffs and
On January 26, 2004, Villarin, et al. filed a motion for other defendants. The rule on privity of contract applies.
issuance of a writ of preliminary attachment. On May 11,
2004, Judge Anacleto Caminade (Judge Caminade) of Aggrieved, LSC filed a petition for certiorari with the CA
RTC Branch 6 granted the motion and ordered the claiming that Judge Caminade committed grave abuse of
issuance of a writ of preliminary attachment upon the discretion in subjecting LSC to the attachment writ since
posting by Villarin, et al. of a Php 150,000.00 bond. On it had no contract or juridical relation with Villarin and
May 17, 2004, LSC filed a Motion for the other plaintiffs. LSC further argued that it cannot be
Clarification/Reconsideration, arguing that it cannot be subjected to the attachment writ because it was only
subjected to the attachment writ. However, before the impleaded as a nominal party.
court can act on LSC’s Motion for Judge Caminade subsequently inhibited himself from the
Clarification/Reconsideration, a Notice of Garnishment case, which was then re-raffled to RTC Branch 20.
was served on LSC on May 20, 2004, prompting it to file
a motion to post a counter-bond. On June 1, 2004, Judge The Deposit Case
37
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On November 23, 2004, Villarin, et al. filed a Verified SO ORDERED.
Motion to Require Defendant LSC to Deposit in Court
Money Held in Trust. To support the motion, Villarin, et The Order noted that the counsels for Villarin, et al. and
al. presented an audit report and a letter dated January CASSCOR and Dajao have subsequently agreed and
5, 2004 from LSC Vice-President for Finance Julita’ jointly manifested that the money requested to be
Valeros (Valeros) which contains a statement from LSC’s deposited will be so deposited in court.
external auditor stating that the unpaid account of LSC to On September 6, 2005, Villarin, et al. moved for the
CASSCOR amounts to Php 10,297,499.59. issuance of a writ of execution to enforce Judge Saniel’s
On August 12, 2005, Judge Bienvenido R. Saniel, Jr. Order to Deposit. On the other hand, LSC moved for
(Judge Saniel) of RTC Branch 20 issued an Order (Order reconsideration of the Order to Deposit on October 4,
to Deposit) granting the November 23, 2004 motion, 2005.
which reads as follows:
On March 9, 2006, Judge Saniel issued an Order granting
When this case was called today, Atty. Bernardito Florido LSC’s motion for reconsideration and denying Villarin’s
and Atty. Florencio Villarin agreed and jointly manifested motion for execution. The pertinent portions of the order
that the money requested to be deposited in the are as follows:
plaintiffs’ motion shall be deposited in court under the
joint account/name of the plaintiffs and defendant Cebu The motion to require the deposit was concurred in, with
Arrastre and Stevedoring Services Corporation. No one condition, by defendant Cebu Arrastre and Stevedoring
shall withdraw the money without the knowledge and Services Corporation (CASSCOR). The apparent purpose
conformity of the other, and the approval of the court. of the plaintiffs in securing the deposit of the above-
mentioned amount is to have an assurance that the
Accordingly, the verified motion to require defendant money – which the plaintiff claims to be owing from
Lorenzo Shipping Corporation to deposit in court the defendant Lorenzo Shipping and payable to CASSCOR-
money held in trust is hereby granted. Defendant [LSC] will be available for payment to the prevailing party
is directed to deposit the amount of Php10,297,499.59 when this case shall be finally terminated or disposed of.
with the Clerk of Court of this Court in the joint The court has noted however that earlier the court had
account/name of the plaintiffs and Cebu Arrastre and issued a writ of preliminary attachment but the same
Stevedoring Services Corporation, the same to be was discharged when the defendants put up a
withdrawn only with the knowledge and conformity of counterbond of P300,000.00. In approving the
the said parties and the approval of the court. counterbond, the court had thereby determined that the
counterbond was sufficient to protect the interests of the
38
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plaintiff. To still require the deposit of the amount in Rulings of the CA
court would be unnecessary and oppressive. Besides, CA Ruling in the Deposit Case
whether or not there is privity of contract between the On September 7, 2006, the CA rendered its Decision in
plaintiffs and Lorenzo Shipping is an issue that is yet to favor of Villarin, et al., thusly:
be determined and resolved in this case.
WHEREFORE, in view of the foregoing premises,
WHEREFORE, without needing to discuss the other
judgment is hereby rendered by us GRANTING the
matters and arguments raised in the motion for
petition filed in this case, ANNULLING and SETTING
reconsideration and other pleadings of the parties, the
ASIDE, as they are hereby annulled and set aside, the
court resolves to reconsider, as it does hereby reconsider
Orders elated March 9, 2006 and May 30, 2006 of the
and set aside, the order of August 12, 2005.
respondent judge and REINSTATING his Order elated
The plaintiffs motion for issuance of a writ of execution August 12, 2005. Further, the respondent judge is
to enforce the 12 August 2005 order is hereby denied. hereby ordered to ENFORCE his Order dated August 12,
2005 which requires the deposit in court the amount of
Villarin, et al. moved for reconsideration but was denied. P10, 297, 499.59.
In denying the motion, the trial court noted that the SO ORDERED.
grant of LSC and CASSCOR’s motions to post
counterbond was not questioned by the plaintiffs and The CA ruled that Judge Saniel committed grave abuse of
that the issue of LSC’s liability to Villarin, et al. is still in discretion in granting LSC’s motion on the ground that
dispute. It also held that the Order to Deposit has no the counterbond was sufficient to protect the interests of
basis in the Rules of Court. the plaintiffs. Taking the Valeros letter as a judicial
Aggrieved, Villarin, et al. filed a petition for certiorari with admission on the part of CASSCOR and Dajao, the
the CA (the Deposit Case), asserting that Judge Saniel appellate court concluded that the Php 300,000.00
committed grave abuse of discretion in granting LSC’s counterbond would not suffice to secure a liability of
motion for reconsideration. They raised the following more than Php 10,000,000.00. The appellate court also
contentions in their petition: (1) the Order to Deposit is upheld Villarin, et al.’s contention regarding the
sanctioned by Rule 135, Section 6, which authorizes grounding of the Order to Deposit in Rule 135, Section 6.
courts to issue writs and processes to carry their Finally, it ruled that the Order to Deposit does not
jurisdiction into effect; (2) the Php 300,000.00 amount to a prejudgment of the case because the
counterbond is insufficient to protect their interest; and deposited amount remains in the control of the court as a
(3) the letter dated January 5, 2004 amounts to an measure to ensure that LSC will not unjustly benefit from
admission of liability on the part of LSC.
39
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the funds to the prejudice of whoever may be ultimately LSC thus filed a petition for review on certiorari with this
declared entitled thereto. Court, docketed as G.R. No. 178713. In a
LSC filed a motion for reconsideration which was denied Resolution dated September 16, 2009, the Com1ordered
by the appellate court in a Resolution dated May 30, the consolidation of G.R. No. 178713 with G.R. No.
2006. Aggrieved, LSC filed a petition for review 175727. Thereafter, the parties were directed to file their
on certiorari with this Court which was docketed as G.R. respective memoranda.
No. 175727 The Issues
CA Ruling in the Attachment Case G.R. No. 178713
On April 24, 2007, the CA rendered its Decision in favor LSC ascribes the following error to the appellate court in
of Villarin, et al., disposing thus: G.R. No. 178713:
WHEREFORE, the present petition is hereby
DISMISSED for want of merit. THE CA SERIOUSLY ERRED IN AFFIRMING THE ORDER
SO ORDERED. OF THE COURT A QUO IN EXTENDING THE WRIT OF
PRELIMINARY ATTACHMENT AS TO INCLUDE LSC,
The CA, in upholding the trial court, ruled that the WHICH WAS MERELY DESCRIBED AS A NOMINAL
complaint contained averments which allege fraud on the DEFENDANT, BY CHARGING IT AS GUILTY OF FRAUD IN
part of all the defendants, including LSC. As regards CONTRACTING THE OBLIGATION, WHEN THE
LSC’s assertion of the absence of privity of contract, the APPLICATION FOR THE WRIT OF PRELIMINARY
CA ruled that LSC is a beneficiary of the contract ATTACHMENT WAS ONLY DIRECTED TO CO-
between Villarin and CASSCOR; and that Section 1(d) of DEFENDANTS CASSCOR AND DAJAO.
Rule 57 does not require the existence of a contractual According to LSC, the Order dated May 11, 2004
obligation. Citing Sta. Ines Melale Forest Products subjecting it to the attachment writ contravenes
Corporation v. Macaraig, the CA noted that Section 1(d) jurisprudence which requires the writ to contain concrete
also contemplates other sources of obligation, such as and specific grounds to justify the attachment. LSC also
law, crime, or quasi-delict, without stating the precise points out that the CA did not uphold the trial court’s
nature of the obligation involved in the case at bar. The finding with regard to privity of contract; instead it held
CA further held that the admission cited by LSC in its that an existing contractual relation is not a requirement
petition was not an admission of the absence of privity of for the issuance of an attachment writ, without specifying
contract between LSC and Villarin but is instead an the nature of the obligation of LSC to Villarin. LSC further
admission by Villarin that LSC has payables to FCC. asserts that the allegations in Villarin, et al.’s complaint
LSC sought reconsideration of the decision but was cited by the CA are not badges of fraud but legal
denied by the CA in its Resolution dated July 6, 2007.
40
Credit Transactions
justifications for LSC’s refusal to pay Villarin directly. LSC 4. THE THEORY OF VILLARIN, ET AL. THAT THE MONEY
faults the CA for subjecting it to the attachment writ on IS HELD IN TRUST IS A LEGAL CONCLUSION WHICH
the basis of the general prayer for relief despite its NEEDS TO BE THRESHED OUT IN THE DECISION OF
impleader in the case as a mere nominal party. Lastly, THE MAIN CASE AND CANNOT BE PASSED UPON AS A
LSC points out that the trial court had already issued a MERE INCIDENCE OF THE CASE. THERE IS NO TRUST,
writ of attachment on June 21, 2000, making the writ of EXPRESS OR IMPLIED, CREATED UNDER THE FACTS OF
attachment issued under the Order dated May 11, 2004 a THE CASE.
superfluity.
5. THE ORDER TO DEPOSIT IS OVER AND ABOVE THE
G.R. No. 175727
RELIEFS IN THE COMPLAINT AND IS OUTSIDE THE
LSC ascribes the following errors to the appellate court in
JURISDICTION OF THE COURT A QUO DUE TO NON-
G.R. No. 175727:
PAYMENT OF DOCKET FEES THEREFOR.
THE CA SERIOUSLY ERRED IN REVERSING THE ORDERS 6. LSC, BEING A NOMINAL DEFENDANT AS DESCRIBED
OF THE COURT A QUO AND ORDERING THE BY VILLARIN, ET AL., CANNOT BE BURDENED MORE
IMPLEMENTATION OF THE ORDER DATED AUGUST 12, THAN THE PRINCIPAL DEFENDANTS WHICH IS THE
2005 REQUIRING LSC, A NOMINAL DEFENDANT AT DAJAO GROUP.
THAT, TO DEPOSIT TO COURT THE AMOUNT OF PHP
7. THE ORDER SOUGHT TO BE ENFORCED AGAINST LSC
10,297,499.59 UNDER THE JOINT ACCOUNT OF
IS IN THE NATURE OF A MANDATORY INJUNCTION AND
CASSCOR AND VILLARIN, ET AL. FOR THE FOLLOWING
THE VILLARIN AND DAJAO GROUPS MISERABLY FAILED
REASONS, NAMELY:
TO PROVE THEIR ENTITLEMENT THERETO.
1. THE ORDER DATED AUGUST 12, 2005, IF ENFORCED,
IS TANTAMOUNT TO A PREJUDGMENT OF THE MAIN 8. IN LEGAL CONTEMPLATION, NO ADMISSION WAS
CASE AS AGAINST LSC. MADE BY LSC THAT IT OWES DAJAO OR CASSCOR THE
AMOUNT OF PHP 10,297,499.59. DEFINITELY, LSC DID
2. AFTER TWO (2) WRITS OF ATTACHMENT ISSUED
NOT ADMIT ANY LIABILITY TO VILLARIN, ET AL.
AND COUNTERBONDS POSTED, REQUIIUNG LSC TO
DEPOSIT ITS MONEY IN COURT IS AN OVERKILL AS IT LSC insists that the Order to Deposit amounts to a
IS TANTAMOUNT TO A THIRD WRIT OF ATTACHMENT. prejudgment of the case, a third attachment writ, and a
3. THE ORDER TO DEPOSIT IS NOT SANCTIONED BY mandatory injunction, since it would be compelled to turn
THE RULES ON THE PROVISIONAL REMEDIES. over control of the amount deposited. It also claims that
the fixing of the amount of the deposit at Php
10,297,499.59 is misleading because it fails to take
41
Credit Transactions
possible counterclaims and cross-claims into account. security for the satisfaction of any judgment that may be
LSC likewise assails the CA’s application of Rule 135, recovered in the following cases: x x x
Section 6 to the case, asserting that there is neither basis (b) In an action for money or property embezzled or
nor need for the Order to Deposit because the rules on fraudulently misapplied or converted to his own use by a
preliminary attachment adequately govern the case at public officer, or an officer of a corporation, or an
bar. In the same vein, it submits that the listing of attorney, factor, broker, agent, or clerk, in the course of
provisional remedies in Rules 57 to 61 of the Revised his employment as such, or by any other person in a
Rules of Court is exclusive. It also contends that the trial fiduciary capacity, or for a willful violation of duty;
court had no jurisdiction to issue the Order to Deposit in xxx
the amount of more than Php 10,000,000.00 considering
that Villarin, et al. only paid Php 300,000.00 in docket (d) In an action against a party who has been guilty of
fees. It also maintains that it could not be subjected to a fraud in contracting the debt or incurring the
the Order to Deposit since it was originally impleaded as obligation upon which the action is brought, or in
a mere nominal party. Finally, LSC challenges the the performance thereof;
appellate court’s acceptance of the Valeros letter as a The Court does not agree.
judicial admission of its liability to CASSCOR.
Ruling of the Court A writ of preliminary attachment is a provisional remedy
Both petitions are meritorious. issued upon order of the court where an action is
pending to be levied upon the property or properties of
G.R. No. 178713 the defendant therein, the same to be held thereafter by
The CA, in upholding the trial court’s order in favor of the Sheriff as security for the satisfaction of whatever
Villarin, et al., ruled that all the defendants, including judgment might be secured in said action by the
LSC, are guilty of fraud in the performance of their attaching creditor against the defendant. It is governed
obligation. The courts a quo anchored the issuance the by Rule 57 of the Revised Rules of Court.
writ of preliminary attachment prayed for on Sections
1(b) and 1(d) of Rule 57 of the Rules of Court, which The provisional remedy of attachment is available in
state: order that the defendant may not dispose of his property
SEC. 1. Grounds upon which attachment may issue. – At attached, and thus secure the satisfaction of any
the commencement of the action or at any time before judgment that may be secured by plaintiff from
entry of judgment, a plaintiff or any proper party may defendant. The purpose and function of an attachment or
have the property of the adverse party attached as garnishment is two-fold. First, it seizes upon property of
42
Credit Transactions
an alleged debtor in advance of final judgment and holds against the applicant, such that if the requisites for its
it subject to appropriation thus preventing the loss or grant are not shown to be all present, the court shall
dissipation of the property by fraud or otherwise, Second, refrain from issuing it, for, otherwise, the court which
it subjects .to the payment of a creditor’s claim property issues it acts in excess of its jurisdiction.” This standard
of the debtor in those cases where personal service of construction of the rules on preliminary attachment is
cannot be obtained upon the debtor. reiterated in the. 2015 case of Watercraft Venture
Corporation v. Wolfe.
In Ng Wee v. Tankiansee, the Court, interpreting Section Tested against these jurisprudential standards, the CA’s
1(d), ruled that: decision upholding Judge Caminade’s Order dated June
To sustain an attachment [under this section], it must be 16, 2004 against LSC must be reversed.
shown that the debtor in contracting the debt or
incurring the obligation intended to defraud the It must be borne in mind that Villarin’s action is for
creditor. The fraud must relate to the execution of the specific performance. The main thrust of his complaint is
agreement and must have been the reason which to compel Dajao and CASSCOR to observe the provisions
induced the other party into giving consent which he of the MOA. All the other remedies sought by the
would not have otherwise given. To constitute a ground complaint are merely ancillary to this primary relief. The
for attachment in Section 1 (d), Rule 57 of the Rules of MOA, therefore, is the obligation upon which Villarin’s
Court, fraud should be committed upon contracting the action is brought; hence the obligation sought to be
obligation sued upon. A debt is fraudulently contracted if upheld in this case is ex contractu.
at the time of contracting it the debtor has a Pertinently, Article 1311 of the New Civil Code provides
preconceived plan or intention not to pay, as it is in this that “[c]ontracts take effect only between the parties,
case. Fraud is a state of mind and need not be proved by their assigns and heirs, except in case where the rights
direct evidence but may be inferred from the and obligations arising from the contract are not
circumstances attendant in each case. (Underscoring transmissible by their nature, or by stipulation or by
Ours) provision of law.” In the case at bar, the MOA was
entered into by Dajao (as CASSCOR President) on one
The Court, speaking through Associate Justice Antonio hand, and Villarin, et al. on the other. LSC cannot be
Eduardo B. Nachura, reiterated the long-standing guilty of fraud within the contemplation of Section 1(d),
doctrine that “[t]he provisional remedy of preliminary Rule 57 of the Rules of Court because it did not enter
attachment is harsh and rigorous for it exposes the into any agreement or contract with Villarin. In the
debtor to humiliation and annoyance. The rules absence of any assignment of rights to LSC, the MOA can
governing its issuance are, therefore, strictly construed
43
Credit Transactions
only bind the parties thereto. Not being a party to the to create a trust but by the construction of equity in
MOA, LSC cannot be subjected to an attachment writ on order to satisfy the demands of justice and prevent
the basis of Section 1(d). unjust enrichment. It does not arise by agreement or
Villarin admits that he has no express or written contract intention but by operation of law against one who, by
with LSC. He nevertheless asserts in his Memorandum fraud, duress, or abuse of confidence obtains or holds
the existence of an implied trust relation among himself, the legal right to property which he ought not, in equity
LSC, and CASSCOR. He alleges in the Second Amended and good conscience, to hold.”
Complaint that LSC was aware of the arrangement under
the MOA for CASSCOR to subcontract its LSC arrastre In the case at bar, it appears that LSC has a legal
operations to Villarin. He asserts that the relation justification for refusing to yield to Villarin’s demands,
between them was “a business relation that requires based on the law on privity of contract. Thus, it cannot
them to repose trust and confidence in each other and be said that LSC is withholding payment for fraudulent
exercise a corresponding degree of fairness and good reasons. Nevertheless, assuming without conceding that
faith pursuant to an existing quasi-contract or implied a constructive trust relation does exist in this case, it has
contract created by law.” He then denominates this already been held in Philippine National Bank v. CA that,
relation as an implied constructive trust, where LSC holds “in a constructive trust, there is neither a promise nor
73% of the amount payable to CASSCOR in trust for any fiduciary relation to speak of and the so-called
payment to him. trustee neither accepts any trust nor intends holding the
At this point, the Court emphasizes that it cannot make property for the beneficiary.” This takes the case out of
an authoritative characterization of the juridical relation the purview of Section l(b), since there would be no
between LSC and Villarin, so as to not preempt any ruling fiduciary relation between LSC and Villarin.
of the RTC Branch 20 in Cebu City in the main The appellate court’s reliance on the ruling in Sta. Ines is
controversy. Be that as it may, the Court shall make an misplaced. In that case, the Court found that a juridical
initial determination herein if only to resolve the issue on relation between the attachment plaintiff and the
the propriety of the issuance of provisional remedies by attachment defendant was created by virtue of the
the trial court. attachment defendant’s cutting of logs within the
attachment plaintiffs timber license area, which
In this regard, the Court cannot sustain the finding a amounted to a wrongful act committed by the former
quo that constructive trust relation obtains in this case. causing damage to the latter. The Court then held that
A constructive trust is “a trust not created by any words, the term “creditors” as used in Rule 57 should be
either expressly or impliedly, evincing a direct intention construed broadly to contemplate all classes of creditors
44
Credit Transactions
regardless of the source of obligation. In other words, a other property is placed in custodia legis to ensure
juridical tie is still required, which is not present in the restitution to whichever party is declared entitled thereto
case at bar between Villarin and LSC. LSC’s refusal to after court proceedings. It is extraordinary because its
directly remit its payables to Villarin cannot be considered basis is not found in Rules 57 to 61 of the Rules of Court
wrongful, because LSC contracted only with CASSCOR on Provisional Remedies but rather, under Sections 5(g)
and not with Villarin; and such refusal is justified by the and 6 of Rule 135 of the same Rules pertaining to the
legal principle of privity of contract. inherent power of every court “[t]o amend and control its
G.R. No. 175727 process and orders so as to make them conformable to
The pivotal issue in this petition is the propriety of the law and justice;” as well as to issue “all auxiliary writs,
issuance of the Order to Deposit. processes and other means necessary” to carry its
jurisdiction into effect.
Deposit as a provisional remedy To elucidate further, provisional deposit orders can be
While deposit may not be included in the provisional seen as falling under two general categories. In the first
remedies stated in Rules 57 to 61 of the Rules of Court, category, the demandability of the money or other
this does not mean, however, that its concept as a property to be deposited is not, or cannot – because of
provisional remedy is nonexistent. As correctly pointed the nature of the relief sought – be contested by the
out by the appellate court, Rule 135 gives courts wide party-depositor. In the second category, the party-
latitude in employing means to carry their jurisdiction depositor regularly receives money or other property
into effect. Thus, this Court has upheld deposit orders from a non-party during the pendency of the case, and
issued by trial courts in cases involving actions for the court deems it proper to place such money or other
partition, recovery of possession, and even annulment of property in custodia legis pending final determination of
contract. In The Province of Bataan v. Hon. Villafuerte, the party truly entitled to the same.
Jr., the Court sustained an escrow order over the lease The cases of Eternal Gardens Memorial Parks Corp. v.
rentals of the subject properties therein pending the First Special Cases Division, Intermediate Appellate
resolution of the main action for annulment of sale and Court and Reyes v. Lim fall under the first
reconveyance; while in Reyes v. Lim, the Court upheld an category. Eternal Gardens involved an interpleader case
order to deposit the down payment for the purchase where the plaintiff-buyer (Eternal), who was seeking to
price of a parcel of land after the buyer sought the compel the litigation of the two conflicting claims to the
rescission of the contract to sell. property in question, refused to comply with an order to
Based on jurisprudence, a deposit order is an deposit in custodia legis the installment payments for the
extraordinary provisional remedy whereby money or disputed property. In upholding the provisional deposit
45
Credit Transactions
order, the Court ruled that Eternal’s disavowal of interest transfer of such sums to whoever would be adjudged
in the disputed property, and the deposit of such properly entitled thereto. In Go v. Go, Bustamante v.
disputed money or property with the court, are essential CA, and Province of Bataan, the Court upheld the trial
elements of an interpleader suit. Thus, Eternal was court’s order directing the depositor-parties therein, who
ordered to deposit the installment payments with the trial regularly received rental payments from the lessees of
court. In Reyes, the Court upheld a provisional deposit the disputed properties, to deposit such rental payments
order covering the down payment for a parcel of land with the court pending the resolution of the issue of
pending the resolution of the case for annulment of ownership of the disputed properties.
contract, viz.: A common thread running through these cases is the
[S]ince Reyes is demanding to rescind the Contract to existence of an agreement or a juridical tie, which either
Sell, he cannot refuse to deposit the P10 million down binds the depositor-party and the party to be benefited
payment in court. Such deposit will ensure restitution of by the deposit; or forms the basis for the regular receipt
the P10 million to its rightful owner. Lim, on the other of payments by the depositor-party. In Eternal Gardens,
hand, has nothing to refund, as he has not received Eternal had a contract of sale with one of the
anything under the Contract to Sell. interpleading parties; while in Reyes, Reyes had a
contact to sell with Lim; and in Go, Bustamante,
In both Eternal Gardens and Reyes, the nature of the and Province of Bataan, the regular payments received
relief sought precluded the depositor-party from by the depositor-parties are based on lease agreements.
contesting the demandability of the amounts sought to Jurisprudence on provisional deposit orders as applied to
be deposited. Stated differently, the depositor-parties the case at bar
effectively resigned their respective interests over the Shorn of the minor details, the case at bar involves a
amounts deposited. The most equitable solution to situation where the creditor seeks to attach properties of
prevent unjust enrichment in such cases, therefore, is a his debtor’s debtor, without establishing a juridical link
provisional deposit order, so that the amount deposited between the two debts. The question arises: can the
may easily be turned over to whoever would be adjudged provisional remedy of deposit, as established under the
properly entitled thereto. Rules of Court and jurisprudence, be availed of in such a
The second category of cases involve provisional deposit situation? To answer this query, the Court now
orders covering sums regularly received from non-parties determines if the case at bar falls under any of the two
to the case by the depositor-party during the pendency categories established by the jurisprudence on
of the proceedings. These are turned over to the custody provisional deposit orders.
of the court since the entitlement of the depositor-party
thereto remains disputed, and to ensure the timely
46
Credit Transactions
The principal relief sought in respondent’s complaint is liability whatsoever, there being no juridical tie between
for specific performance to compel CASSCOR and Dajao them. Moreover, even assuming arguendo that LSC did
to observe the provisions of the MOA. The deposit order concede the existence of any liability on its part in favor
was applied for by Villarin, et al. and directed at LSC as of CASSCOR or Villarin, et al., the demandability of the
the depositor-party, with Villarin, et al. as the beneficiary amount covered by the deposit order against LSC is still
of the deposit order. Essentially, the situation involves in dispute since LSC has its own claims against
two contracts: the cargo handling contract between LSC CASSCOR. Such claims can possibly compensate for
and CASSCOR, and the MOA between Dajao (as whatever amounts CASSCOR may be entitled to receive
CASSCOR President) and Villarin, et al. – which is the from LSC under their contract, which in turn, may be
contract sought to be enforced by Villarin, et al. It must sought from CASSCOR by Villarin, et al. Clearly, the case
be pointed out however, that LSC is not a party to the at bar cannot be subsumed under the first category of
MOA entered into by Dajao and Villarin, et al. As such, provisional deposit orders.
the deposit order cannot be directed at LSC since it is not The second category of provisional deposit cases is
privy to the contract sought to be enforced. To do so likewise inapplicable. The amount covered by the deposit
would violate the civil law principle that a contract can order against LSC comes from its own account and is not
only bind the parties who entered into it, and it cannot regularly received from non-parties to the case. There is
favor or prejudice a third person, even if he is aware of no regular flow of incoming amounts from non-parties
such contract and has acted with knowledge thereof. which must be properly received and kept
Furthermore, the nature of the relief sought in the case in custodia legis in favor of the party who will ultimately
at bar does not preclude the depositor-party, i.e., LSC, be adjudged entitled thereto. Furthermore, it has already
from contesting the demandability of the amount been established that the actual liability of LSC to
deposited. In a specific performance case, the defendant CASSCOR is still in dispute.
can put in issue the existence of any liability on her part At this juncture, it would not be amiss to reiterate that
to the plaintiff. In contrast, in provisional deposit orders LSC has no juridical tie or agreement with Villarin, et
of the first category, the depositor-party does not, or al.1âшphi1 which would suffice as basis for the issuance·
is precluded, from contesting the demandability of the of a deposit order against the former in favor of the
money or property sought to be deposited – a situation latter.
which presumes some resignation of interest in the It is therefore clear from the foregoing disquisition that a
money or property deposited on the part of the provisional deposit order, while available under our
depositor-party. Here, LSC does not resign any interest in procedural law, cannot be granted in this case; the
favor ofVillarin, et al.; but instead asserts that it has no
47
Credit Transactions
factual and legal circumstances herein being inconsistent d. The Regional Trial Court of Cebu City is ordered to
with the parameters established by jurisprudence. return any and all amounts deposited to it by petitioner
Lorenzo Shipping Corporation pursuant to the aforesaid
The Court concludes by enjoining courts from Decision and Resolution in CA-G.R. CEB-SP No. 01855.
indiscriminately resorting to deposit orders when the
remedy of preliminary attachment is not available. The 2. In G.R. No. 178713:
Court reiterates our pronouncement in Province of a. The petition is GRANTED.
Bataan, that the provisional remedy of deposit is a “fair b. The Decision dated April 24, 2007 and the Resolution
response to the exigencies and equities of the situation”, dated July 6, 2007 of the Court of Appeals in CA-G.R. SP
when the factual circumstances of the case call for its No. 86333 are hereby REVERSED and SET ASIDE.
application. Thus, when there is no juridical tie between c. The Order dated June 16, 2004 issued by Judge
the obligee-plaintiff and the beneficiary of the services he Anacleto Caminade in Civil Case No. CEB-25283; and the
has rendered; and the obligor-defendant failed to set up writ of attachment issued thereunder, are
a cross-claim to connect the two parties with whom it hereby ANNULLED and SET ASIDE insofar as it
had separate contracts, a deposit order would only pertains to petitioner Lorenzo Shipping Corporation.
amount to a circumvention of the rules on preliminary d. The counter-bond posted by Lorenzo Shipping
attachment and an unjust imposition on the alleged Corporation in connection with the aforesaid writ of
beneficiary who is not a party to the contract sought to attachment is ordered returned.
be enforced.
WHEREFORE, premises considered, the Court hereby 3. The Regional Trial Court of Cebu City is hereby
rules as follows: ordered to try the merits of Civil Case No. CEB-25283
1. In G.R. No. 175727: with utmost dispatch.
a. The petition is GRANTED.
b. The Decision dated September 7, 2006 and the SO ORDERED.
Resolution dated November 28, 2006 of the Court of
Appeals in CA-G.R. CEB-SP No. 01855 are
hereby REVERSED and SET ASIDE.
c. The Orders dated March 9, 2006 and May 30, 2006
issued by Judge Bienvenido R. Saniel, Jr. in Civil Case No.
CEB-25283 are hereby REINSTATED.
48

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Credit Transactions

2nd Year, 2nd Semester (AY 2020-2021)

(a) the cause of the breach of the obligation must be

(b) the event must be either unforeseeable or

(2) such positive acts of repudiation have been made

Moreover, Ricardo and petitioners are co-heirs or co-

Insofar as belongings were brought inside the vicinity of

See deposited his vehicle for safekeeping with petitioner,

23. GR No. 179419 January 12, 2011

Ruling: Yes. The trial court in the exercise of its equity

Reyes admits receipt of the P10 million down payment

Respondent filed a motion for the placing on judicial

RTC rendered a Decision finding respondents Security

Thus, petitioners filed a Motion for Execution of the

Specifically, the actual damages awarded in their favor

Issues 2 When an obligation, not constituting a loan or

However, on the basis of an Authority to Debit signed by

2. Yes. We uphold the finding of both lower courts that

Moreover, petitioners claim in the same opposition that

In an individual proprietorship, the owner has unlimited

What they opposed was the garnishment of the bank

THE OVERSEAS BANK OF MANILA, petitioner,

Certain supervening events rendered the issue moot and

or all in the total amount of P575,504.00, are

On this subject matter, Fernando Esguerra, Q: Is it indicated there?

On February 20, 1997, Guerrero G. Dajao (Dajao), as

Under the MOA, Villarin and Cabanlit undertook to

v. The Attachment Case

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