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Gopoco Grocery v. Pacific Coast Biscuit Co. (Simple Loan v. Deposit in Bank Payment of Interest Only in Loans)

This case involved claims by Gopoco Grocery and others (petitioners) that deposits they made into the now liquidated Mercantile Bank of China should be considered preferred credits rather than ordinary credits. [1] The lower court appointed a commissioner who determined the claims should be considered ordinary credits. [2] The petitioners argued their claims were preferred because the deposits were made on current account and should be returned with interest. [3] The court ruled against the petitioners, finding that because the bank paid them interest on the deposits, this changed the nature of the deposits to ordinary loans rather than deposits, so the claims were correctly considered ordinary credits.

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881 views2 pages

Gopoco Grocery v. Pacific Coast Biscuit Co. (Simple Loan v. Deposit in Bank Payment of Interest Only in Loans)

This case involved claims by Gopoco Grocery and others (petitioners) that deposits they made into the now liquidated Mercantile Bank of China should be considered preferred credits rather than ordinary credits. [1] The lower court appointed a commissioner who determined the claims should be considered ordinary credits. [2] The petitioners argued their claims were preferred because the deposits were made on current account and should be returned with interest. [3] The court ruled against the petitioners, finding that because the bank paid them interest on the deposits, this changed the nature of the deposits to ordinary loans rather than deposits, so the claims were correctly considered ordinary credits.

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kjhenyo218502
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Gopoco Grocery v. Pacific Coast Biscuit Co.

G.R. Nos. L-43697 and L-442200, March 31, 1938



FACTS:
Mercantile Bank of China was declared in liquidation as it could not continue operating as such
without running the risk of suffering losses and prejudice its depositors and customers. Creditors
Gopoco Grocery, et. al. alleged that they deposited sum of money in the bank under liquidation on
current account.
To resolve these claims, Fulgencio Borromeo was appointed by the lower court as commissioner
and referee to receive the evidence which the interested parties may desire to present. Borromeo
resolved the claims by recommending that the same be considered as an ordinary credit only, and not
as a preferred credit as Gopoco Grocery, Et Al wanted, because they were at the same time debtors of
the bank. The lower court upheld Borromeos recommendations.
Gopoco Grocery, et. al. contended that their claims are preferred credits because they are
deposits in contemplation of law, and as such, should be returned with the corresponding interest
thereon.

ISSUE: WON the lower court erred in not holding petitioners claims as preferred credits?

RULING:
NO, deposits on current account in the bank now under liquidation are considered ordinary
credits only.
Gopoco Grocery, et. al., themselves, admit that the bank owes them interest which should have
been paid to them before it was declared in a state of liquidation. This fact undoubtedly destroys the
character which they nullifies their contention that the same be considered as irregular deposits,
because the payment of interest only takes place in the case of loans.
The so-called current account and savings deposits have lost their character of deposits and
are convertible into simple commercial loans because, in cases of such deposits, the bank has made
use thereof in the ordinary course of its transactions as an institution engaged in the banking
business, not because it so wishes, but precisely because of the authority deemed to have been
granted to it by Gopoco Grocery, Et Al to enable them to collect the interest which they had been and
they are now collecting, and by virtue further of the authority granted to it by Corporation Law and
Banking Law.
Wherefore, deposits on current account of Gopoco Grocery, Et Al in the bank under liquidation,
with the right on their part to collect interest, have not created and could not create a juridical relation
between them except that of creditors and debtor, they being the creditors and the bank the debtor.

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