G.R. No. L-49353. June 11, 1981
THE OVERSEAS BANK OF MANILA, PETITIONERS, VS. COURT OF APPEALS AND TONY D. TAPIA, IN HIS CAPACITY AS ATTORNEY-IN-FACT OF ENRIQUETA MICHEL DE CHAMPOURCIN, RESPONDENTS.
BARREDO, J.:
Petition for review of the decision of the Court of Appeals in
CA-G.R. No. 44766-R, Tony D. Tapia, etc. vs. The Overseas Bank of Manila and
the denial of the motion for reconsideration thereof. That judgment affirmed in toto the
decision of the Court of First Instance of Manila, Branch IV, in Civil Case No.
69876, for collection of money, reading thus:
“WHEREFORE, judgment is hereby rendered in favor of the
plaintiff against the herein defendant ordering the latter (1) to pay plaintiff
the sum of P100,000.00 representing the value of its time deposit together
with interest thereon at 4-1/2% per annum from November 9, 1964 until the whole
amount shall have been fully paid; (2) to pay attorney’s fees in the amount of
P1,000.00 it appearing that defendant’s unjust and malicious refusal to pay has
compelled plaintiff to litigate and secure services of counsel; and to pay
costs.” (Page 22, Record.)
Actually, this case is simple enough but of undoubtedly great
interest and grave importance to the banking community. It was for this reason that after denying
originally the herein petition, We found it proper to give the same due course
after petitioner filed a forceful and well-reasoned second motion for
reconsideration.
In petitioner’s counsel’s “Statement of the Case and of
Matters Involved”, it is stated that:
“Private respondent TONY D. TAPIA, in his capacity as
attorney-in-fact of ENRIQUETA MICHEL DE CHAMPOURCIN (TAPIA), instituted the
present action in the Court of First Instance of Manila against petitioner, The
Overseas Bank of Manila (TOBM), to enforce collection of the proceeds of a time
deposit for which TOBM had issued a certificate for P100,000.00, with an
interest rate of 4-1/2% per annum (Exh. ‘A’).
“After trial, the trial court rendered judgment for TAPIA the
dispositive portion of which reads:
‘WHEREFORE, judgment is hereby rendered in favor of the plaintiff
against the herein defendant ordering the latter (1) to pay plaintiff the sum
of P100,000.00 representing the value of its time deposit together with
interest thereon at 4-1/2% per annum from November 9, 1964 until the whole
amount shall have been fully paid: x x x
x x x’
Not satisfied, TOBM interposed an appeal.
“In the meantime, during the pendency of this case, certain
developments took place with respect to TOBM which were taken note of by the
Court of Appeals in its resolution dated November 3, 1978, thus:
‘This Court took note of the fact that on July 31, 1968, TOBM was
excluded by the Central Bank under Monetary Board Resolution No. 1263 from
inter-bank clearing; that on August 1, 1968, its operations were suspended
under Central Bank Resolution No. 1290; and that on August 13, 1968, it was
completely forbidden by the Central Bank in its Resolution No. 1333 to do
business preparatory to its forcible liquidation. These Resolutions were, however, annulled
and set aside by the Supreme Court in its decision in Ramos vs. Central Bank,
L-29350, promulgated October 4, 1971. To
assure maximum protection to its depositors, creditors and the public interest,
the rehabilitation, normalization and stabilization thereof was also ordered by
the Supreme Court in its resolution dated February 24, 1972. Pursuant thereto, both TOBM and the Central
Bank submitted a Program of Rehabilitation of TOBM which was approved by the
Supreme Court in its Resolution in L-29353 October 23, 1974 (60 SCRA 278). (C.A. Resolution dated Nov. 3, 1978, Appendix
‘B’, p. XVII.)’
“It must be noted that the said resolutions of the Central
Bank were held by this Honorable Supreme Court to have been ‘adopted in abuse
of discretion equivalent to excess of jurisdiction’ (Ramos vs. Central Bank, 41
SCRA 565). Equally noteworthy, however,
is that the CB resolution suspending TOBM’s business operations had actually
been implemented starting 2 August 1968, (id.) before it was annulled, and that
as of this writing TOBM has yet to resume operations in accordance with the
aforesaid program of rehabilitation approved by this Honorable Supreme Court.
“In the decision it rendered in the instant case, (C.A.
Decision, Appendix ‘A’, p. V.) the Court of Appeals affirmed in toto the
trial court’s judgment, which, as aforeseen, orders TOBM, among other things,
‘to pay plaintiff the sum of P100,000.00 representing the value of its time
deposit together with interest thereon at 4-1/2% per annum until the whole
amount shall have been fully paid.’
“TOBM moved respondent Court of Appeals to reconsider its
judgment on two grounds, namely, (a) the suspension of operations of TOBM by
the Central Bank likewise suspends payment of accrued interest, and (b)
respondent Court’s judgment must conform to the program of rehabilitation of
TOBM approved by this Supreme Court. The
Court of Appeals, acting on the motion for reconsideration, issued its
resolution (Appendix ‘B’ hereof) dated November 3, 1978, declaring:
‘Inasmuch as a Program of Rehabilitation of the TOBM has been
approved by the Suprerme Court as above-mentioned, the execution of the
decision in question should be made in accordance with the provision thereof,
especially paragraph 3, sub-paragraph 4, Phase 1 — Rehabilitation.
WHEREFORE, the motion for reconsideration is granted, and the
dispositive portion of the decision, dated September 19, 1978, is hereby
amended, so as to read as follows:
‘WHEREFORE, the judgment appealed from is hereby affirmed in
toto, but the execution thereof should be in accordance with the provision
of the Program of Rehabilitation of TOBM as approved by the Supreme Court in
its resolution in G.R. No. L-29352 dated October 23, 1974 (60 SCRA 278)
especially paragraph 3, Sub-paragraph 4, Phase 1, Rehabilitation, to quote:
‘3.4. Petitioners shall effect an agreement with
OBM’s depositors and creditors, singly or collectively, for the conversion of
their deposits and claims into bills payable under plans mutually acceptable to
the parties concerned, with the end in view that payments of all deposits and
claims against OBM may be made after a period three (3) years from date of
suspension of normal banking operations.’
‘However, in the event that said program of rehabilitation is
revoked or failed to materialize, the execution of the judgment is further
subject to any subsequent development or charge that will be taken and
considered by the Supreme Court and/or Central Bank in the premises, regarding
the payments of deposits and claims against the Overseas Bank of Manila.’ (pp.
XX, Court of Appeals’ Resolution dated Nov. 3, 1978, Appendix ‘B’ hereof).
“Thus, while the resolution purports to grant TOBM’s motion
for reconsideration, actually it reiterates its affirmance of the trial court’s
judgment in toto and rejects TOBM’s prayer to be declared exempt from
liability for interest on the deposit during the suspension of its business
operations by the Central Bank, declaring:
‘Appellant TOBM has not been declared insolvent. The suspension of its operations in 1968 was
merely temporary. Its assets and
properties were intact including its various investments, the management of
which was taken over by the Central Bank to protect its depositors and
creditors. Hence, there could be no
justifiable reason to suspend the payment of the accrued interests on the
appellee’s time deposit of P100,000.00 which has been long overdue. The payment of interest thereon at 4-1/2% per
annum from November 9, 1964 ordered by the lower court as well as this Court
upon the appellant is in accordance with the agreement embodied in the
certificate of deposit, Exhibit ‘A’, issued by the bank in favor of the
appellee. Such agreement is the law
between the parties and it should be complied with (Art. 1159, NCC). The mere suspension of its operation which
was temporary could not excuse the appellant from complying with its
obligation. The effect of the suspension
and declared insolvency of a bank is to make its deposits due and actionable
and a depositor then is entitled to interest on his deposits from the date of
such suspension (10 Am. Jr. 2d. p. 389).
‘The cases cited by the appellant in its motion has no application
in this case for these refer to instances where the bank has been declared
insolvent. This is not the situation
prevailing in the case at bar.’
“Moreover, while the resolution also purports to declare that
the execution of the judgment of the trial court should be in accordance with
the Program of Rehabilitation of TOBM as approved by the Supreme Court, this is
negated by its aforesaid re-affirmance in toto of the trial court’s
judgment, which holds TOBM totally liable to TAPIA.”
On the other hand, private respondent’s brief begins thus:
“Herein respondents respectfully beg leave of Court to adopt
as their own the Statement of the Case and of Matters Involved in the
petitioner’s Brief, the same being in consonance with the records of the case.
“To begin with, we wish to call the attention of this
Honorable Tribunal that the only ground upon which the present petition is
predicated reads as follows:
‘The suspension of operations of the Overseas Bank of Manila on
August 1, 1968 by the Monetary Board likewise suspends payment of accrued
interest contrary to the decision of this Honorable Court affirming in toto
the decision of the Court of First Instance ordering defendant-appellant to pay
plaintiff-appellee the sum of P100,000.00 representing the value of its time
deposit together with interest thereon at 4-1/2% per annum from November 9,
1964 until the whole amount shall have been fully paid despite the suspension
of operations and closing of the Bank by the Monetary Board on August 1, 1968
and August 13, 1968, respectively (Petition, p. 10).’
“Apparently, the only issue in this case is whether or not the
petitioner is exempt from the payment of interest on the private respondent’s
time deposit of P100,000.00 for the period that its business operations were
suspended by the Central Bank. We respectfully
submit that under the facts of the case, the petitioner should be required to
pay the accrued interest. And since the
payment of the principal time deposit of P100,000.00 by the petitioner to the
private respondent is no longer at issue, we shall focus our discussion on the
subject of accrued interests as raised by the petitioner in its Assignment of
Errors. ” (Pages 1-2)
Briefly then, the general and main issue submitted for Our
resolution is: When a bank is excluded
by the Central Bank from inter-bank clearing, and a day later further suspended
from operation, and thirteen days afterwards completely forbidden by the same
(Central Bank) to do business preparatory to its forcible liquidation, but
subsequently, the Supreme Court temporarily restrains the mentioned Central
Bank’s orders and ultimately renders a decision nullifying the same, (41 SCRA
565) with subsequent directives for the rehabilitation, normalization and
stabilization thereof, under a formula approved by the Court, (60 SCRA 276) and
the process of such rehabilitation, normalization and stabilization is
considerably delayed, thru no fault of the bank, but due to usually difficult
and lengthy procedures and transactions directed towards such end, is a person
who has deposited money in said bank before the Central Bank’s orders were
issued, entitled to the payment of interest on his deposit that accrues during
all the period from the bank’s factual closure to its actual reopening for
normal business? To make this statement
of the issue more complete, it may be added that although private respondent
does not dispute that there was complete paralization of the bank from August
13, 1968, he insists that since technically the bank was not placed under
liquidation because of the decision of the Supreme Court, its obligation,
contractual in nature, to pay him interest may not be deemed excused and should
be enforced. Private respondent admits
though that in cases of actual liquidation of a bank, it is justifiable for it
not to pay interest of the nature here in dispute.
Thus, Our task is narrowed down to the resolution of the legal
problem of whether or not, for purposes of the payment of the interest here in
question, stoppage of the operations of a bank by a legal order of liquidation may
be equated with actual cessation of the bank’s operation, not different
factually speaking, in its effects, from legal liquidation, the factual
cessation having been ordered by the Central Bank.
In the case of Chinese Grocer’s Association, et al. vs. American
Apothecaries, 65 Phil. 395, this Court held:
“As to the second assignment of error, this court, in G.R. No.
43682, In re Liquidation of the Mercantile Bank of China, Tan Tiong Tick,
claimant and appellant, vs. American Apothecaries, C., et al., claimants and
appellees, through Justice Imperial, held the following:
‘4. The court held
that the appellant is not entitled to charge interest on the amounts of his
claims, and this is the object of the second assignment of error.
Upon this point a distinction must be made
between the interest which the deposits should earn from their existence until
the bank ceased to operate, and that which they may earn from the time the
bank’s operations were stopped until the date of payment of the deposits. As to the first class, we hold that it should
be paid because such interest has been earned in the ordinary course of the
bank’s business and before the latter has been declared in a state of
liquidation. Moreover, the bank
being authorized by law to make use of the deposits, with the limitation
stated, to invest the same in its business and other operations, it may be
presumed that it bound itself to pay interest to the depositors as in fact it
paid interest prior to the dates of the said claims. As to the interest which may be charged from
the date the bank ceased to do business because it was declared in a state of
liquidation, we hold that the said interest should not be paid.’”
The Court of Appeals considered this ruling inapplicable to the
instant case, precisely because, as contended by private respondent, the said
Apothecaries case had in fact in contemplation a valid order of liquidation of
the bank concerned, whereas here, the order of the Central Bank of August 13,
1968 completely forbidding herein petitioner to do business preparatory to its
liquidation was first restrained and then nullified by this Supreme Court. In other words, as far as private respondent
is concerned, it is the legal reason for cessation of operations, not the
actual cessation thereof, that matters and is decisive insofar as his right to
the continued payment of the interest on his deposit during the period of
cessation is concerned.
In the light of the peculiar circumstances of this particular
case, We disagree. It is Our considered
view, after mature deliberation, that it is utterly unfair to award private
respondent his prayer for payment of interest on his deposit during the period
that petitioner bank was not allowed by the Central Bank to operate.
It is a matter of common knowledge, which We take judicial notice
of, that what enables a bank to pay stipulated interest on money deposited with
it is that thru the other aspects of its operation it is able to generate funds
to cover the payment of such interest.
Unless a bank can lend money, engage in international transactions
acquire foreclosed mortgaged properties or their proceeds and generally engage
in other banking and financing activities from which it can derive income, it
is inconceivable how it can carry on as a depository obligated to pay
stipulated interest. Conventional wisdom
dictates this inexorable fair and just conclusion. And it can be said that all who deposit money
in banks are aware of such a simple economic proposition. Consequently, it should be deemed read into
every contract of deposit with a bank that the obligation to pay interest on
the deposit ceases the moment the operation of the bank is completely suspended
by the duly constituted authority, the Central Bank.
We consider it of trivial consequence that the stoppage of the
bank’s operation by the Central Bank has been subsequently declared illegal by
the Supreme Court, for before the Court’s order, the bank had no alternative
under the law than to obey the orders of the Central Bank. Whatever be the juridical significance of the
subsequent action of the Supreme Court, the stubborn fact remained that the
petitioner was totally crippled from then on from earning the income needed to
meet its obligations to its depositors.
If such a situation cannot, strictly speaking, be legally denominated as
“force majeure”, as maintained by private respondent, We hold it is a
matter of simple equity that it be treated as such.
What is more, private respondent overlooks the fact that as noted
in the very resolution of the Court of Appeals of November 3, 1978 granting
petitioner’s motion for reconsideration, said Court could not but take into
account that petitioner’s manner or mode of rehabilitation, normalization and
stabilization was placed by the resolution of the Supreme Court of February 24,
1972 in the hands of the Central Bank, for it “to seek practical solutions
in all good faith for such rehabilitation.” Pursuant to said resolution,
a “Program of Rehabilitation of TOBM (herein petitioner)” was
submitted to this Court and We approved said program only on October 23,
1974. But that approval did not yet put
petitioner back on its feet. The Central
Bank, evidently in accordance with law, continued to refuse to allow it to
operate until the program approved by the Court could materialize. Thus, after October 23, 1976, steps were
continuously taken along that direction, and, as it is now of public knowledge,
it was only this year 1981, that petitioner, with another name and another
management has been allowed to reopen.
In the aforementioned resolution of the Court of Appeals of
November 3, 1978, it revised the dispositive portion of its original decision
in the following manner:
“WHEREFORE, the motion for reconsideration is granted, and the
dispositive portion of the decision dated September 19, 1978, is hereby
amended, so as to read, as follows:
‘WHEREFORE, the judgment appealed from is hereby affirmed in
toto, but the execution thereof should be in accordance with the provision
of the Program of Rehabilitation of TOBM as approved by the Supreme Court in
its resolution in G.R. No. L-29352 dated October 23, 1974 (60 SCRA 278)
especially paragraph 3, sub-paragraph 4, Phase I, Rehabilitation, to quote:
‘3.4. Petitioners shall effect an agreement with
OBM’s depositors and creditors, singly or collectively, for the conversion of
their deposits and claims into bills payable under plans mutually acceptable to
the parties concerned, with the end in view that payments of all deposits and
claims against OBM may be made after a period of three (3) years from date of
resumption of normal banking operations.’
“However, in the event that said program of rehabilitation is
revoked or failed to materialize, the execution of the judgment is further
subject to any subsequent development or change that will be taken and
considered by the Supreme Court and/or Central Bank in the premises, regarding
the payments of deposits and claims against the Overseas Bank of Manila.”
(Pp. 33-34, Record.)
Peculiarly, however, while the Appellate Court resolved to
“grant” petitioner’s motion for reconsideration, it still maintained
its judgment affirming in toto the decision of the trial court, albeit
it made the execution thereof subject to the conditions aforequoted. Naturally, petitioner could not be contented
with such modification, hence the present petition before Us asking, in effect,
for the reversal of the foregoing resolution of the Court of Appeals which left
it with the obligation to pay the interest private respondent is demanding, as
if it were legally possible for the Court of Appeals to ignore or modify the
“Program of Rehabilitation” approved by this Court, which provides inter
alia that:
“3.4
Petitioners shall effect an agreement with OBM’s depositors and creditors,
singly or collectively, for the conversion of their deposits and claims into
bills payable under plans mutually acceptable to the parties concerned, with
the end in view that payments of all deposits and claims against OBM may be
made after a period of three (3) years from date of resumption of normal banking
operations.[1]
x x x
“PHASE II
NORMALIZATION AND STABILIZATION
“This phase shall be undertaken only when all the conditions
for rehabilitation of OBM as specified in Phase I have been fulfilled and/or complied
with by petitioners. Banking operations
and transactions which OBM may be allowed to perform shall be in accordance
with such authority as the Monetary Board, upon recommendation of the Director,
Department of Commercial & Savings Banks, may deem proper to extend OBM.
“OBM may be allowed to resume normal banking operations only
when, in addition to standard conditions prevailing in normal banking
institutions:
“1. It has reduced
its loans/accounts receivable by at least 75% of the aggregate amount
outstanding as of the start of the rehabilitation phase;
“2. A program of
paying depositors and creditors has been accepted singly or collectively by all
such depositors and creditors, including Government instrumentalities and the
Philippine National Bank;
“3. The issues
relative to penalties and interests mentioned in paragraph 3.8 hereof have been
resolved either judicially or extrajudicially.
“The Comptroller-designate and the committee-of-three
mentioned in paragraph 2.7 herein shall continue to function for as long as OBM
has not been allowed to resume normal banking operations.” (Pp. 283-285,
60 SCRA.)
Nowhere in the above program is there anything indicating that
depositors are entitled to interest.
Paragraph 3.4 of the same refers to deposits exclusively. If the Central Bank authorities or the
Supreme Court had in mind the payment also of interest on such deposits, either
of those authorities would have required clear language to such effect be
included in the program. It is
understandable why nothing of that sort was required. As We have explained earlier, the complete
factual suspension of petitioner’s operation as a bank disabled it to commit
itself to the payment of such interest.
Hopefully, petitioner may be able to resume operations and recover its
standing as a normal bank. But it is
almost vain to expect that within the forseeable future, it would be in a
position to pay in full even at least the deposits themselves, not to mention
the interest thereon. In justice and
equity, having been subjected to what the Supreme Court has found to be an
unfortunate excess or abuse by the Central Bank of the exercise of its
authority under the law, it would be, to put it tritely, “squeezing blood
out of turnip” for Us to grant private respondent’s demand.
Parenthetically, We may add for the guidance of those who might
be concerned, and so that unnecessary litigations may be avoided from further
clogging the dockets of the courts, that in the light of the considerations
expounded in the above opinion, the same formula that exempts petitioner from
the payment of interest to its depositors during the whole period of factual
stoppage of its operations by orders of the Central Bank, modified in effect by
the decision as well as the approval of a formula of rehabilitation by this
Court, should be, as a matter of consistency, applicable or followed in respect
to all other obligations of petitioner which could not be paid during the
period of its actual complete closure.
PREMISES CONSIDERED, judgment is hereby rendered modifying
the decision of the Court of Appeals under review in the sense that the
judgment of the trial court requiring petitioner to pay interest on private
respondent’s deposit from August 13, 1968 up to the reopening for normal
operations of petitioner is reversed, and petitioner is declared free from any
liability therefor, and that with regard to his deposit of P100,000.00, it is
Our judgment that he secure payment thereof by negotiating with petitioner in
accordance with the terms of the Rehabilitation Program of TOBM approved by
this Court on October 23, 1974.
No costs.
Abad Santos and De
Castro, JJ., concur.
Fernandez and Guerrero,
JJ., concur and members of the First Division,
designated to sit in the Second Division.
Aquino, J., did not take part.
Concepcion, Jr., J., on
official leave of absence.
[1]
Notably, the Appellate Court did quote this paragraph in its amendatory
resolution but evidently failed to grasp its full import.