Facts: Joseph Victor G. Ejercito is the owner of Trust Account No.

42. PILIPINAS BANK VS ALFREDO ONG Commented [1]:

858 which was originally opened at Urban Bank but which is now
maintained at Export and Industry Bank, which is the purchaser and
owner now of the former Urban Bank and Urbancorp Investment,
PILIPINAS BANK, petitioner, vs. ALFREDO T. ONG and
Inc. He is also the owner of Savings Account No. 0116-17345-9
LEONCIA LIM, respondents.
which was originally opened at Urban Bank but which is now
maintained at Export and Industry Bank, the purchaser and owner of
Facts:
the former Urban Bank and Urbancorp Investment, Inc.
On April 1991, Baliwag Mahogany Corporation (BMC), through its
Estrada was subsequently charged with Plunder. The Sandiganbayan
president, respondent Alfredo T. Ong, applied for a domestic
a Request for Issuance of Subpoena Duces Tecum for the issuance of
commercial letter of credit with petitioner Pilipinas Bank (hereinafter
a subpoena directing the President of Export and Industry Bank (EIB,
referred to as the bank) to finance the purchase of about 100,000 board
formerly Urban Bank) or his/her authorized representative to produce
feet of "Air Dried, Dark Red Lauan" sawn lumber.
various document related to the investigation.
The Special Prosecution Panel also filed a Request for Issuance of
The bank approved the application and issued Letter of Credit No.
Subpoena Duces Tecum/Ad Testificandum directed to the authorized
91/725-HO in the amount of P3,500,000.00. To secure payment of
representative of Equitable-PCI Bank to produce statements of
the amount, BMC, through respondent Ong, executed two (2) trust
account pertaining to certain accounts in the name of “Jose Velarde”
receipts[3] providing inter alia that it shall turn over the proceeds of
and to testify thereon.
the goods to the bank, if sold, or return the goods, if unsold, upon
The Sandiganbayan granted both requests by Resolution and
maturity on July 28, 1991 and August 4, 1991.
subpoenas were accordingly issued. The Special Prosecution Panel
filed still another Request for Issuance of Subpoena Duces Tecum/Ad
On due dates, BMC failed to comply with the trust receipt
Testificandum for the President of EIB or his/her authorized
agreement. On November 22, 1991, it filed with the Securities and
representative to produce the same documents subject of the first
Exchange Commission (SEC) a Petition for Rehabilitation and for a
Subpoena Duces Tecum and to testify thereon on the hearings
Declaration in a State of Suspension of Payments under Section 6 (c)
scheduled and subsequent dates until completion of the
of P.D. No. 902-A,[4] as amended, docketed as SEC Case No.
testimony. The request was likewise granted by the
4109. On November 27, 1992, the SEC rendered a Decision[7]
Sandiganbayan. A Subpoena Duces Tecum/Ad Testificandum was
approving the Rehabilitation Plan of BMC as contained in the MOA
accordingly issued. Ejercito filed various motions to quash the various
and declaring it in a state of suspension of payments.
Subpoenas Duces Tecum/Ad Testificandum previously issued. In his
Motion to Quash, he claimed that his bank accounts are covered by
However, BMC and respondent Ong defaulted in the payment of their
R.A. No. 1405 (The Secrecy of Bank Deposits Law) and do not fall
obligations under the rescheduled payment scheme provided in the
under any of the exceptions stated therein. He further claimed that the
MOA.
specific identification of documents in the questioned subpoenas,
including details on dates and amounts, could only have been made
Issue: WON respondents Ong and Leoncia Lim (as president
possible by an earlier illegal disclosure thereof by the EIB and the
and treasurer of BMC, respectively) violated the Trust Receipts Law
Philippine Deposit Insurance Corporation (PDIC) in its capacity as
(PD No. 115).
receiver of the then Urban Bank. The disclosure being illegal, he
concluded, the prosecution in the case may not be allowed to make
Held: NO. The execution of the MOA constitutes a novation which
use of the information. Before the motion was resolved by the
"places petitioner Bank in estoppel to insist on the original trust
Sandiganbayan, the prosecution filed another
relation and constitutes a bar to the filing of any criminal information
Issue: Whether or not a Trust Account is covered by the term
for violation of the trust receipts law."
“deposit” as used in R.A. 1405;
Held: R.A. 1405 is broad enough to cover Trust Account No.
It has the effect of a compromise agreement, novated BMC’s existing
858. However, the protection afforded by the law is not
obligations under the trust receipt agreement. The novation converted
absolute. There being recognized exceptions thereto, as above-quoted
the parties’ relationship into one of an ordinary creditor and
Section 2 provides. In the present case, two exceptions apply, to
debtor. Moreover, the execution of the MOA precludes any criminal
wit: (1) the examination of bank accounts is upon order of a
liability on their part which may arise in case they violate any
competent court in cases of bribery or dereliction of duty of public
provision thereof.
officials, and (2) the money deposited or invested is the subject matter
of the litigation. Ejercito contends that since plunder is neither bribery
The execution of the MOA extinguished respondents’ obligation
nor dereliction of duty, his accounts are not excepted from the
under the trust receipts. Respondents’ liability, if any, would only be
protection of R.A. 1405.
civil in nature since the trust receipts were transformed into mere loan
Cases of unexplained wealth are similar to cases of bribery or
documents after the execution of the MOA. This is reinforced by the
dereliction of duty and no reason is seen why these two classes of
fact that the mortgage contracts executed by the BMC survive despite
cases cannot be excepted from the rule making bank deposits
its non-compliance with the conditions set forth in the MOA.
confidential. The policy as to one cannot be different from the policy
as to the other. This policy expresses the notion that a public office is
a public trust and any person who enters upon its discharge does so
with the full knowledge that his life, so far as relevant to his duty, is
open to public scrutiny. Undoubtedly, cases for plunder involve
unexplained wealth. The crime of bribery and the overt acts
constitutive of plunder are crimes committed by public officers, noble
43. EJERCITO VS SANDIGANBAYAN idea that “a public office is a public trust and any person who enters Commented [2]:
upon its discharge does so with the full knowledge that his life, so far
as relevant to his duty, is open to public scrutiny” applies with equal
RA 1405 does not provide for the application of this rule. At all force.
events, the Ombudsman is not barred from requiring the production of Also, the plunder case now pending with the Sandiganbayan
documents based solely on information obtained by it from sources necessarily involves an inquiry into the whereabouts of the amount
independentof its previous inquiry. purportedly acquired illegally by former President Joseph
Estrada. Republic Act No. 1405 allows the disclosure of bank
deposits in cases where the money deposited is the subject matter of Exceptions to the Secrecy of Bank Deposits Law based on Republic
the litigation. Hence, these accounts are no longer protected by the Act No. 1405; Requirements Laid Down by the Court Before an In-
Secrecy of Bank Deposits Law, there being two exceptions to the said Camera Inspection may be Allowed; Exceptions to the Absolute
law applicable in this case, namely: (1)the examination of bank Confidentiality of Bank Deposits (Union Bank vs. Court of Appeals);
accounts is upon order of a competent court in cases of bribery or The Ombudsman Wishes Only to Fish for Evidence to Formally
dereliction of duty of public officials, and (2)the money deposited or Charge Lagdameo; Zones of Privacy are Recognized and Protected by
invested is the subject matter of the litigation. Exception (1) applies our Laws
since the plunder case pending against former President Estrada is
analogous to bribery or dereliction of duty, while exception (2) applies Facts:
because the money deposited in Ejercito’s bank accounts is said to In May 1998, petitioner Lourdes Marquez received an order from
form part of the subject matter of the same plunder case. The “fruit of Ombudsman Aniano Desierto to produce several bank documents for
the poisonous tree” doctrine or the exclusionary rule is inapplicable in purposes of inspection in camera relative to various accounts
cases of unlawful examination of bank accounts. maintained at Union Bank of the Philippines, Julia Vargas Branch,
where petitioner was the branch manager. The accounts to be
inspected were involved in a case pending with the Ombudsman,
entitled Fact-Finding and Intelligence Bureau (FFIB) vs. Lagdameo,
et al.
44. DONA ADELA EXPORT INTERNATIONAL
The basis of the Ombudsman in ordering an in camera inspection of
VS TIDCORP AND BPI
the accounts was a trail of managers checks purchased by one George Commented [3]:
Trivinio, a respondent in the case pending with the office of the
Ombudsman. It would appear that Trivino purchased 51 Managers
Facts: Checks at Traders Rlyal Bank, 11 of which were deposited and
Petitioner Dona Adela filed a Petition for Voluntary Insolvency before credited to an account in the aforementioned branch of Union Bank.
the RTC. After finding the petition sufficient in form and substance,
RTC declared petitioner herein as insolvent and stayed all civil Petitioner thereafter wrote the Ombudsman and requested for time to
proceedings against it. Thereafter, Atty. Arlene Gonzales was comply with the order, as the accounts in question cannot readily be
appointed as a receiver and proceeded to make the necessary report, identified. Because of the delay in compliance with the order, the
to engage appraisers and require the creditors to submit proof of their Ombudsman issued another order directing petitioner to produce the
respective claims. Atty. Gonzales then filed a Motion for Parties to bank documents with the possible punishment of being held in Indirect
Enter Into Compromise Agreement incorporating therein her Contempt.
proposed terms of compromise. Then, TIDCORP and BPI also filed a
Joint Motion to Approve Agreement which was approved. Petitioner Petitioner together with Union Bank, filed a petition for declaratory
filed a motion for partial reconsideration claiming that TIDCORP and relief with the Regional Trial Court, Makati City, against the
BPI’s agreement imposes upon it several obligations such as payment Ombudsman. The petition was intended to clear the rights and duties
of expenses and taxes and waiver of confidentiality of bank deposits of petitioner. Thus, petitioner sought a declaration of her rights from
when it is not a party and signatory to the said agreement. RTC denied the court due to the clear conflict between the Secrecy of Bank
the motion. Deposits Law and the Law Governing the Powers of the Ombudsman.
Issue:
Whether or not petitioner is bound by the provision in the BPI- Eventually, the petitioner received a copy of the motion citing her in
TIDCORP Joint Motion to Approve Agreement to waive its rights to contempt. She then filed with the Ombudsman an opposition to the
confidentiality of its bank deposits under R.A. No. 1405. motion to cite her in contempt on the ground that the filing thereof was
Ruling: NO. premature due to the petition pending in the lower court. Despite such,
R.A. No. 1405 provides for exceptions when records of deposits may the hearing of the motion to cite petitioner for indirect contempt was
be disclosed. These are under any of the following instances: (a) upon scheduled.
written permission of the depositor, (b) in cases of impeachment, (c)
upon order of a competent court in the case of bribery or dereliction The issues to be resolved before the Supreme Court was whether
of duty of public officials or, (d) when the money deposited or petitioner may be cited for contempt for her failure to produce the
invested is the subject matter of the litigation, and (e) in cases of documents requested by the Ombudsman and whether the order of the
violation of the Anti-Money Laundering Act, the Anti-Money Ombudsman to have an in camera inspection of the questioned
Laundering Council may inquire into a bank account upon order of account was allowed as an exception to the law on secrecy of bank
any competent court. deposits.
In this case, the Joint Motion to Approve Agreement was executed by
BPI and TIDCORP only. There was no written consent given by Held:
petitioner or its representative, Epifanio Ramos, Jr., that petitioner is
waiving the confidentiality of its bank deposits. The provision on the Exceptions to the Secrecy of Bank Deposits Law based on
waiver of the confidentiality of petitioner’s bank deposits was merely Republic Act No. 1405
inserted in the agreement. It is clear therefore that petitioner is not
bound by the said provision since it was without the express consent 1. An examination of the secrecy of bank deposits law (R. A. No.
of petitioner who was not a party and signatory to the said agreement. 1405) would reveal the following exceptions:
Clearly, the waiver of confidentiality of petitioner’s bank deposits in
the BPI-TIDCORP Joint Motion to Approve Agreement lacks the (1) Where the depositor consents in writing;
required written consent of petitioner and conformity of the receiver. (2) Impeachment case;
We, thus, hold that petitioner is not bound by the said provision. (3) By court order in bribery or dereliction of duty cases against public
officials;
(4) Deposit is subject of litigation;
(5) Sec. 8, R. A. No. 3019, in cases of unexplained wealth as held in
45. MARQUEZ VS DESIERTO Commented [4]:
the case of PNB vs. Gancayco.
Subject:
Requirements Laid Down by the Court Before an In-Camera
Inspection may be Allowed
46. MELLON BANK VS MAGSINO Commented [5]:
2. Before an in camera inspection may be allowed, there must be a
pending case before a court of competent jurisdiction. Further, the
account must be clearly identified, the inspection limited to the subject
Section 2 of said law allows the disclosure of bank deposits in cases
matter of the pending case before the court of competent jurisdiction.
where the money deposited is the subject matter of the
litigation. Inasmuch as Civil Case No. 26899 is aimed at recovering
3. The bank personnel and the account holder must be notified to be
the amount converted by the Javiers for their own benefit, necessarily,
present during the inspection, and such inspection may cover only the
an inquiry into the whereabouts of the illegally acquired amount
account identified in the pending case.
extends to whatever is concealed by being held or recorded in the
name of persons other than the one responsible for the illegal
4. The order of the Ombudsman to produce for in camera inspection
acquisition.
the subject accounts with the Union Bank is based on a pending
Facts: On May 27, 1977, Dolores Ventosa requested the transfer of
investigation at the Office of the Ombudsman against Amado
$1,000 from the First National Bank of Moundsville, West Virginia,
Lagdameo, et. al. for violation of R. A. No. 3019 relative to the Joint
U.S.A. to Victoria Javier in Manila through the Prudential Bank.
Venture Agreement between the Public Estates Authority and
Accordingly, the First National Bank requested the petitioner, Mellon
AMARI.
Bank, to effect the transfer. Unfortunately the wire sent by Mellon
Bank to Manufacturers Hanover Bank, a correspondent of Prudential
Exceptions to the Absolute Confidentiality of Bank Deposits
Bank, indicated the amount transferred as “US$1,000,000.00” instead
(Union Bank vs. Court of Appeals)
of US$1,000.00. Hence Manufacturers Hanover Bank transferred one
million dollars less bank charges of $6.30 to the Prudential Bank for
the account of Victoria Javier.
Javier withdrew $475,000 from account No. 343 and converted it into
5. In Union Bank of the Philippines v. Court of Appeals, we held that
eight cashier’s checks made out to the following: (a) F.C. Hagedorn
"Section 2 of the Law on Secrecy of Bank Deposits, as amended,
& Co., Inc., two cheeks for the total amount of P1,000,000; (b) Elnor
declares bank deposits to be "absolutely confidential" except: (1)
Investment Co., Inc., two checks for P1,000,000; (c) Paramount
examination made in the course of a special or general examination of
Finance Corporation, two checks for P1,000,000; and (d) M. Javier,
a bank that is specifically authorized by the Monetary Board; (2)
Jr., two checks for P496,000. Javier also brought several properties in
examination made by an independent auditor hired by the bank to
the United States including the one of his lawyer, Poblador.
conduct its regular audit; (3) Upon written permission of the depositor;
Mellon Bank filed a complaint docketed as No. 148056 in the Superior
(4) In cases of impeachment; (5) Upon order of a competent court in
Court of California, County of Kern, against Melchor Javier, Jane Doe
cases of bribery or dereliction of duty of public officials; or (6) In
Javier, Honorio Poblador, Jrn, and Does I through V. In its first
cases where the money deposited or invested is the subject matter of
amended complaint to impose constructive trust. The testimonies of
the litigation.
these witnesses were objected to by the defense on the grounds of res
inter alios acta, immateriality, irrelevancy and confidentiality due to
The Ombudsman Wishes Only to Fish for Evidence to Formally
RA 1405. The Javier spouses also contend that inasmuch as the
Charge Lagdameo
Mellon Bank had filed in California an action to impose constructive
trust on the California property and to recover the same.
6. In the case at bar, there is yet no pending litigation before any court
Issue:1) Whether or not an account deposit which is relevant and
of competent authority. What is existing is an investigation by the
material to the resolution of the case may be covered under R.A. No.
office of the Ombudsman. In short, what the Office of the Ombudsman
1405.
would wish to do is to fish for additional evidence to formally charge
2) Whether or not the principle of election of remedies bars
Amado Lagdameo, et. al., with the Sandiganbayan.
recovery of Mellon Bank
7. Clearly, there was no pending case in court which would warrant
Held:
the opening of the bank account for inspection. The Supreme Court
1) Whether or not an account deposit which is relevant and material
granted the petition and ordered the Ombudsman to stop requiring
to the resolution of the case may be covered under R.A. No. 1405.
petitioner to comply with the order.
Yes. Section 2 of said law allows the disclosure of bank deposits in
cases where the money deposited is the subject matter of the litigation.
Zones of Privacy are Recognized and Protected by our Laws
24 Inasmuch as Civil Case No. 26899 is aimed at recovering the
amount converted by the Javiers for their own benefit, necessarily, an
8. The Civil Code provides that every person shall respect the dignity,
inquiry into the whereabouts of the illegally acquired amount extends
personality, privacy and peace of mind of his neighbors and other
to whatever is concealed by being held or recorded in the name of
persons and punishes as actionable torts several acts for meddling and
persons other than the one responsible for the illegal acquisition.
prying into the privacy of another.
2) Whether or not the principle of election of remedies bars recovery
of Mellon Bank
9. It also holds a public officer or employee or any private individual
The spouses Javier’s reliance on the procedural principle of election
liable for damages for any violation of the rights and liberties of
of remedies as part of their ploy to terminate Civil Case No. 26899
another person, and recognizes the privacy of letters and other private
prematurely. With the exception of the Javiers, respondents failed to
communications.
raise it as a defense in their answers and therefore, by virtue of Section
2, Rule 9 of the Rules of Court, such defense is deemed
10. The Revised Penal Code makes a crime of the violation of secrets
waived. 26 Notwithstanding its lengthy and thorough discussion
by an officer, the revelation of trade and industrial secrets, and trespass
during the hearing and in pleadings subsequent to the answers, the
to dwelling.
issue of election of remedies has not, contrary to the lower court’s
assertion, been elevated to a “substantive one.” Having been waived
11. Invasion of privacy is an offense in special laws like the Anti-
as a defense, it cannot be treated as if it has been raised in a motion to
Wiretapping Law, the Secrecy of Bank Deposits Act, and the
dismiss based on the nonexistence of a cause of action.
Intellectual Property Code.
Moreover, granting that the defense was properly raised, it is Revenue (CIR). The check represents Ford’s tax payment for the third
inapplicable in this case. In its broad sense, election of remedies refers quarter of 1977. On the face of the check was written “Payee’s account
to the choice by a party to an action of one of two or more coexisting only” which means that the check cannot be encashed and can only be
remedial rights, where several such rights arise out of the same facts, deposited with the CIR’s savings account (which is with Metrobank).
but the term has been generally limited to a choice by a party between The said check was however presented to PCIB and PCIB accepted
inconsistent remedial rights, the assertion of one being necessarily the same. PCIB then indorsed the check for clearing to Citibank.
repugnant to, or a repudiation of, the other. In its technical and more Citibank cleared the check and paid PCIB P4,746,114.41. CIR later
restricted sense, election of remedies is the adoption of one of two or informed Ford that it never received the tax payment.
more coexisting remedies, with the effect of precluding a resort to the An investigation ensued and it was discovered that Ford’s accountant
others. Godofredo Rivera, when the check was deposited with PCIB, recalled
the check since there was allegedly an error in the computation of the
tax to be paid. PCIB, as instructed by Rivera, replaced the check with
47. CHINA BANK VS ORTEGA
two of its manager’s checks. Commented [6]:
It was further discovered that Rivera was actually a member of a
Facts:
syndicate and the manager’s checks were subsequently deposited with
the Pacific Banking Corporation by other members of the syndicate.
Vicente Acaban won in a civil case for sum of money against B & B
Thereafter, Rivera and the other members became fugitives of justice.
Forest Development Corporation. To satisfy the judgment, the Acaban
G.R. No. 128604
sought the garnishment of the bank deposit of the B & B Forest
In July 1978 and in April 1979, Ford drew two checks in the amounts
Development Corporation with the China Banking Corporation
of P5,851,706.37 and P6,311,591.73 respectively. Both checks are
(CBC). Accordingly, a notice of garnishment was issued by the
again for tax payments. Both checks are for “Payee’s account only” or
Deputy Sheriff of the trial court and served on said bank through its
for the CIR’s bank savings account only with Metrobank. Again, these
cashier, Tan Kim Liong. Liong was ordered to inform the Court
checks never reached the CIR.
whether or not there is a deposit in the CBC of B & B Forest
In an investigation, it was found that these checks were embezzled by
Development Corporation, and if there is any deposit, to hold the same
the same syndicate to which Rivera was a member. It was established
intact and not allow any withdrawal until further order from the Court.
that an employee of PCIB, also a member of the syndicate, created a
CBC and Liong refuse to comply with a court process garnishing the
PCIB account under a fictitious name upon which the two checks,
bank deposit of a judgment debtor by invoking the provisions of
through high end manipulation, were deposited. PCIB unwittingly
Republic Act No. 1405 ( Secrecy of Bank Deposits Act) which
endorsed the checks to Citibank which the latter cleared. Upon
allegedly prohibits the disclosure of any information concerning to
clearing, the amount was withdrawn from the fictitious account by
bank deposits.
syndicate members.
Issue:
ISSUE: What are the liabilities of each party?
Whether or not a banking institution may validly refuse to comply
HELD: G.R. No. 121413/G.R. No. 121479
with a court processes garnishing the bank deposit of a judgment
PCIB is liable for the amount of the check (P4,746,114.41). PCIB, as
debtor, by invoking the provisions of Republic Act No. 1405.
a collecting bank has been negligent in verifying the authority of
Rivera to negotiate the check. It failed to ascertain whether or not
Held:
Rivera can validly recall the check and have them be replaced with
PCIB’s manager’s checks as in fact, Ford has no knowledge and did
No. The lower court did not order an examination of or inquiry into
not authorize such. A bank (in this case PCIB) which cashes a check
deposit of B & B Forest Development Corporation, as contemplated
drawn upon another bank (in this case Citibank), without requiring
in the law. It merely required Tan Kim Liong to inform the court
proof as to the identity of persons presenting it, or making inquiries
whether or not the defendant B & B Forest Development Corporation
with regard to them, cannot hold the proceeds against the drawee when
had a deposit in the China Banking Corporation only for the purposes
the proceeds of the checks were afterwards diverted to the hands of a
of the garnishment issued by it, so that the bank would hold the same
third party. Hence, PCIB is liable for the amount of the embezzled
intact and not allow any withdrawal until further order. It is
check.
sufficiently clear that the prohibition against examination of or inquiry
G.R. No. 128604
into bank deposit under RA 1405 does not preclude its being garnished
PCIB and Citibank are liable for the amount of the checks on a 50-50
to insure satisfaction of a judgment. Indeed there is no real inquiry in
basis.
such a case, and the existence of the deposit is disclosed the disclosure
As a general rule, a bank is liable for the negligent or tortuous act of
is purely incidental to the execution process. It is hard to conceive that
its employees within the course and apparent scope of their
it was ever within the intention of Congress to enable debtors to evade
employment or authority. Hence, PCIB is liable for the fraudulent act
payment of their just debts, even if ordered by the Court, through the
of its employee who set up the savings account under a fictitious name.
expedient of converting their assets into cash and depositing the same
Citibank is likewise liable because it was negligent in the performance
in a bank. (China Banking Corporation vs Ortega, G.R. No. L-34964,
of its obligations with respect to its agreement with Ford. The checks
31 January 1973)
which were drawn against Ford’s account with Citibank clearly states
that they are payable to the CIR only yet Citibank delivered said
payments to PCIB. Citibank however argues that the checks were
48. PHIL COMMERCIAL AND indorsed by PCIB to Citibank and that the latter has nothing to do but
to pay it. The Supreme Court cited Section 62 of the Negotiable
INTERNATIONAL BANK VS CA Instruments Law which mandates the Citibank, as an acceptor of the Commented [7]:
checks, to engage in paying the checks according to the tenor of the
There are three cases consolidated here: G.R. No. 121413 (PCIB vs
acceptance which is to deliver the payment to the “payee’s account
CA and Ford and Citibank), G.R. No. 121479 (Ford vs CA and
only”.
Citibank and PCIB), and G.R. No. 128604 (Ford vs Citibank and PCIB
But the Supreme Court ruled that in the consolidated cases, that PCIB
and CA).
and Citibank are not the only negligent parties. Ford is also negligent
G.R. No. 121413/G.R. No. 121479
for failing to examine its passbook in a timely manner which could
In October 1977, Ford Philippines drew a Citibank check in the
have avoided further loss. But this negligence is not the proximate
amount of P4,746,114.41 in favor of the Commissioner of the Internal
cause of the loss but is merely contributory. Nevertheless, this
mitigates the liability of PCIB and Citibank hence the rate of interest, both debts to the concurrent amount. Unjust
with which PCIB and Citibank is to pay Ford, is lowered from 12% to
6% per annum. enrichment.

50B. G.R. No. 114286 (April 19, 2001)

THE COSOLIDATED BANK AND
TRUST CORPORATION (SOLIDBANK),
vs.
THE COURT OF APPEALS,
CONTINENTAL CEMENT
CORPORATION, GREGORY T. LIM
and SPOUSE
FACTS
Continental Cement Corp obtained
from Consolidated Bank letter of credit used to
purchased 500,000 liters of bunker fuel oil.
Respondent Corporation made a marginal
deposit to petitioner. A trust receipt was
executed by respondent corporation, with
respondent Gregory Lim as signatory.
Claiming that respondents failed to turn over
the goods or proceeds, petitioner filed a
complaint for sum of money before the RTC
of Manila. In their answer, respondents aver
that the transaction was a simple loan and not
a trust receipt one, and tht the amount claimed
by petitioner did not take into account
payments already made by them. The court
dismissed the complaint, CA affirmed the
same.

ISSUE
Whether or not the marginal deposit
should not be deducted outright from the
amount of the letter of credit.

HELD
No. petitioner argues that the marginal
deposit should be considered only after
computing the principal plus accrued interest
and other charges. It could be onerous to
compute interest and other charges on the face
value of the letter of credit which a bank
issued, without first crediting or setting off the
marginal deposit which the borrower paid to it-
compensation is proper and should take effect
by operation of law because the requisited in
Art. 1279 are present and should extinguish