Michael Albert Echague FIVE (5) Cases

Case Digest (Obligation and Contracts & Credit transaction

Cases)

1. THE ROMAN CATHOLIC BISHOP OF JAROvs .GREGORIO

DE LA PEN A

Facts: The plaintiff is the trustee of a charitable bequest made for the
construction of a leper hospital and that Father Agustin de la Pena
was the duly authorized representative of the plaintiff to receive the
legacy. The defendant is the administrator of the estate of Father De
laPena. During the war of the revolution, Father De laPena was
arrested by the military authorities as a political prisoner. The arrest
of Father De laPena and the confiscation of the funds in the bank
were the result of the claim of the military authorities that he was an
insurgent and that the funds deposited had been collected by him is
for revolutionary purposes. The money was taken from the bank by
the military authorities by virtue of such order, was confiscated and
turned over to the Government.

ISSUE: Whether or not Father De laPena is liable for the loss of the
funds?

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

> The Supreme Court finds and declares that the money which is the
subject matter of the action was deposited by Father De la Pena in
the Hongkong and Shanghai Banking Corporation of Iloilo; that said
money was forcibly taken from the bank by the armed forces of the
United States during the war of the insurrection; and that said Father
De la Pena was not responsible for its loss.

> Further, one who, having in his possession trust funds, deposits
them in his personal account in a bank and mixes them with his own
funds, does not thereby assume an obligation different from that
under which he would have lain in such deposit had not been made;
not does he thereby become liable to repay the money at all hazards;
and where such funds are taken from the bank by fuerza mayor, he is
relieved from responsibility in relation thereto.

2. BPI vs. Intermediate Appellate Court GR# L-66826, August 19,

1988

Facts: Rizaldy T. Zshornack and his wife maintained in COMTRUST

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

Issue: Whether the contract between petitioner and respondent bank

is a deposit?

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

Note:

The above arrangement is that contract defined under Article 1962,

New Civil Code, which reads:

Art. 1962. A deposit is constituted from the moment a person

receives a thing belonging to another, with the obligation of safely
keeping it and of returning the same. If the safekeeping of the thing
delivered is not the principal purpose of the contract, there is no
deposit but some other contract.

*With regard to the liability of the bank, are as follows:

Issue: WON BPI is liable. YES

Held: Comtrust failed to show how the transaction involving the check
is related to the transaction involving the dollar draft in favor of Dizon
financed by the account. They are two separate transactions. There
is no evidence that the withdrawal was made in pursuant to the
agreement. The document which embodies the contract states that
the US$3,000.00 was received by the bank for safekeeping. The
subsequent acts of the parties also show that the intent of the parties
was really for the bank to safely keep the dollars and to return it to
Zshornack at a later time. Parties did not intend to sell the US dollars
to the Central Bank within one day from receipt.

The above arrangement is that contract of deposit defined under

NCC 1962. However, the contract is covered by Central Bank
Circular No. 20 on restrictions on gold and foreign exchange
transactions. Safekeeping of foreign currency without selling them to
the Central Bank is a prohibited transaction. Pursuant to NCC 5, it is
void. Hence, Zshornack, under the principal of in pari delicto, cannot
recover.

SC modified the decision of the IAC, ordered BPI to restore the dollar
savings account $1000, to earn interest rate fixed by the bank from
Oct 27, 1975 + pay damages P8k.

3. CA-Agro Industrial Development Corporations vs Court of

Appeals

Facts: On July 3, 1979, petitioner (through its President- Sergio

Aguirre) and the Spouses Ramon and Paula Pugao entered into an
agreement whereby the former purchase two parcel of lands from the
latter for a consideration of P350,625.00. Of this amount, P75,725
was paid as downpayment while the balance was covered by three
(3) postdated checks. Among the terms and conditions embodied in
the agreement were the titles shall be transferred to the petitioner
upon full payment of the price and the owner's copies of the
certificate of titles shall be deposited in a safety deposit box of any
bank. Petitioner and the Pugaos then rented Safety Deposit box of
private respondent Security Bank and Trust Company.

Thereafter, a certain Margarita Ramos offered to buy from the

petitioner the two (2) lots at a price of P225.00 per square meter. Mrs
Ramos demand the execution of a deed of sale which necessarily
entailed the production of the certificate of titles. In view thereof,
Aguirre, accompanied by the Pugaos, then proceed to the respondent
Bank to open the safety deposit box and get the certificate of titles.
However, when opened in the presence of the Bank's representative,
the box yielded no such certificate. Because of the delay in the
reconstitution of the title, Mrs Ramos withdrew her earlier offer to
purchase.
Hence this petition.

Issue: Whether or not the contractual relation between a commercial

bank and another party in a contract of rent of a safety deposit box
with respect to its contents placed by the latter is one of a bailor and
bailee?

Ruling: Yes, the contract in the case at bar is a special kind of

deposit. It cannot be characterized as an ordinary contract of lease
under Article 1643 because the full and absolute possession and
control of the safety deposit box was not given to the joint renters
the petitioner and Pugaos.
The guard key of the box remained with the respondent bank; without
this key, neither of the renters could open the box. On the other hand,
the respondent bank could not likewise open the box without the
renter's key. The Court further assailed that the petitioner is correct in
applying American Jurisprudence. Herein, the prevailing view is that
the relation between the bank renting out safe deposits boxes and its
customer with respect to the contents of the box is that of a bail or/
and bailee, the bailment being for hire and mutual benefits. That
prevailing rule has been adopted in Section 72 of the General
Banking Act.

Section 72. In addition to the operations specifically authorized

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

4. ANGEL JAVELLANA vs. JOSE LIM, ET AL.

FACTS: The attorney for the plaintiff, Angel Javellana, filed a

complaint in 1906 with the CFI Iloilo, for the defendants Lim to pay
him the sum owed him with interest. The complaint alleged that in
1897 the Lims executed and subscribed a document in favor of
Javellana reading as follows:

We have received from Angel Javellana, as a deposit without interest,

the sum of two thousand six hundred and eighty-six cents of pesos
fuertes (P2600.86), which we will return to the said gentleman, jointly
and severally, on the 20th of January, 1898. - Jaro, 26th of May,
1897. - Signed Jose Lim. - Signed: Ceferino Domingo Lim.

The document of indebtedness stated that Javellana left on deposit

with the Lims a given sum of money which they were jointly and
severally obliged to return on the date fixed in the document. When
the obligation became due, the Lims begged Javellana for an
extension of time for the payment to which the plaintiff acceded. The
debtors paid, on account of interest due, the sum of P1,000 in 1900.
In 1902, the parties executed another document, written in the
Visayan dialect and followed by a translation into Spanish, where it
was acknowledged that the amount deposited had not been returned
to Javellana on the stipulated date, for which reason he was
subjected to losses and damages amounting to P830. The return of
the amount was again stipulated in that later document, with the
further agreement that the amount deposited should bear interest at
the rate of 15% per annum, less the 1,000 pesos paid. The document
was called a deposit, and stated that they could accomplish its return
by the delivery of a sum equal to the one received by them.

The Lims answered acknowledging the facts stated in the complaint,

and admitted that they paid P1,102.16. However, they denied that
payment was made on account of the interest, instead alleging that it
was for the account of the principal. They also denied that there had
been any agreement as to an extension of the time for payment and
the payment of interest. As a counterclaim, the defendants alleged
that they had paid to the plaintiff sums which, together with the
P1,102.16 acknowledged in the complaint, came up to the total sum
of P5,602.16, and that, deducting therefrom the total sum of
P2,686.58 stated in the document transcribed in the complaint, the
plaintiff still owed the defendants P2,915.58
ISSUE: WON THE TRANSACTION WAS ONE OF DEPOSIT OR
LOAN?

RULING: The debtors were lawfully authorized to make use of the

amount deposited, which they have done, as shown by the fact that
they asked for an extension of the time for the return thereof, and
acknowledged that they have subjected their creditor to losses and
damages for not complying with what had been stipulated. Also, the
Lims were conscious that they had used for their own profit and gain
the money that they received apparently as a deposit, which was why
they engaged to pay interest. Such conduct on the part of the debtors
is unquestionable evidence that the transaction entered into between
the interested parties was not a deposit, but a real contract of
loan.

Article 1767 CC: The depository cannot make use of the thing
deposited without the express permission of the depositor. Otherwise
he shall be liable for losses and damages.

Article 1768 CC: When the depository has permission to make use of
the thing deposited, the contract loses the character of a deposit and
becomes a loan or bailment. The permission shall not be presumed,
and its existence must be proven.
When in 1898, Jose Lim went to the office of Javellana and asked for
an extension of one year to pay return the money, it was because he
did not have in his possession the amount deposited, he having
made use of the same. In turn, the creditor, by granting them the
extension, evidently confirmed the express permission previously
given to use and dispose of the amount stated as having been
deposited. There was no renewal of the contract deposited converted
into a loan, because, as has already been stated, the defendants
received said amount by virtue of real loan contract under the name
of a deposit, since the so-called bailees were forthwith authorized to
dispose of the amount deposited.

The case for the Lims' counterclaim for P5,602.16 is defeated,

because the existence and certainty of said indebtedness imputed to
Javellana had not been proven, and the Lims had failed to show that
Javellana had received partial payments and failed to issue a receipt,
which he had consistently done.

5. ANGEL JAVELLANA vs. JOSE LIM, ET AL.

FACTS: The attorney for the plaintiff, Angel Javellana, filed a

complaint in 1906 with the CFI Iloilo, for the defendants Lim to pay
him the sum owed him with interest. The complaint alleged that in
1897 the Lims executed and subscribed a document in favor of
Javellana reading as follows:

We have received from Angel Javellana, as a deposit without interest,

the sum of two thousand six hundred and eighty-six cents of pesos
fuertes (P2600.86), which we will return to the said gentleman, jointly
and severally, on the 20th of January, 1898. - Jaro, 26th of May,
1897. - Signed Jose Lim. - Signed: Ceferino Domingo Lim.

The document of indebtedness stated that Javellana left on deposit

with the Lims a given sum of money which they were jointly and
severally obliged to return on the date fixed in the document. When
the obligation became due, the Lims begged Javellana for an
extension of time for the payment to which the plaintiff acceded. The
debtors paid, on account of interest due, the sum of P1,000 in 1900.
In 1902, the parties executed another document, written in the
Visayan dialect and followed by a translation into Spanish, where it
was acknowledged that the amount deposited had not been returned
to Javellana on the stipulated date, for which reason he was
subjected to losses and damages amounting to P830. The return of
the amount was again stipulated in that later document, with the
further agreement that the amount deposited should bear interest at
the rate of 15% per annum, less the 1,000 pesos paid. The document
was called a deposit, and stated that they could accomplish its return
by the delivery of a sum equal to the one received by them.

The Lims answered acknowledging the facts stated in the complaint,

and admitted that they paid P1,102.16. However, they denied that
payment was made on account of the interest, instead alleging that it
was for the account of the principal. They also denied that there had
been any agreement as to an extension of the time for payment and
the payment of interest. As a counterclaim, the defendants alleged
that they had paid to the plaintiff sums which, together with the
P1,102.16 acknowledged in the complaint, came up to the total sum
of P5,602.16, and that, deducting therefrom the total sum of
P2,686.58 stated in the document transcribed in the complaint, the
plaintiff still owed the defendants P2,915.58

ISSUE: WON THE TRANSACTION WAS ONE OF DEPOSIT OR

LOAN?

RULING: The debtors were lawfully authorized to make use of the

amount deposited, which they have done, as shown by the fact that
they asked for an extension of the time for the return thereof, and
acknowledged that they have subjected their creditor to losses and
damages for not complying with what had been stipulated. Also, the
Lims were conscious that they had used for their own profit and gain
the money that they received apparently as a deposit, which was why
they engaged to pay interest. Such conduct on the part of the debtors
is unquestionable evidence that the transaction entered into between
the interested parties was not a deposit, but a real contract of
loan.

Article 1767 CC: The depository cannot make use of the thing
deposited without the express permission of the depositor. Otherwise
he shall be liable for losses and damages.

Article 1768 CC: When the depository has permission to make use of
the thing deposited, the contract loses the character of a deposit and
becomes a loan or bailment. The permission shall not be presumed,
and its existence must be proven.

When in 1898, Jose Lim went to the office of Javellana and asked for
an extension of one year to pay return the money, it was because he
did not have in his possession the amount deposited, he having
made use of the same. In turn, the creditor, by granting them the
extension, evidently confirmed the express permission previously
given to use and dispose of the amount stated as having been
deposited. There was no renewal of the contract deposited converted
into a loan, because, as has already been stated, the defendants
received said amount by virtue of real loan contract under the name
of a deposit, since the so-called bailees were forthwith authorized to
dispose of the amount deposited.

The case for the Lims' counterclaim for P5,602.16 is defeated,

because the existence and certainty of said indebtedness imputed to
Javellana had not been proven, and the Lims had failed to show that
Javellana had received partial payments and failed to issue a receipt,
which he had consistently done.