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BANCO FILIPINO SAVING & MORTGAGE BANK VS DIAZGR No. 153134 June 27, 2009

Facts:

Spouse Antonio and Elsie Diaz secured a loan from petitioner Banco Filipino the amount ofP400,000 with 16% interest per annum. The loan was restructured in the amount of P3,163,000

payable within a period of 20 yrs at an interest of 22% per annum. The obligation was to be paidin equal monthly amortization & secured by a real estate mortgage (properties found at Boltonand Bonifacio Sts., Davao City) & additional collateral (the rentals on the mortgage properties).

Despite repeated demands made on them, the respondents defaulted.

Before petitioner bank could institute the foreclosure proceedings, respondent filed with the RTCa complaint but it denied such application, which the CA also affirmed said order. Thereafter,respondent filed another complaint for consignation & declaration of cancellation of obligation withprayer for issuance of a preliminary injunction & TRO.

Based on the ex-parte evidence, the respondents had a remaining balance of P1,034,600, whichthe respondent tendered the amount to petitioner bank. However, petitioner bank refused toaccept it because the amount due is P 10,160,649. The respondent then consign it with the RTC,a managers check as full payment of their loan obligation.

The RTC ruled that the consignation is valid because Banco Filipino could not charge any interest

during the time it was closed by the Central Bank. The C.A, however, declared that it failed to effect a valid consignation because it did not include

all interest due. Its decision because final & executory.

Thereafter, respondent filed a motion to withdraw deposit alleging that their obligation was settledwith the payment of P25 M by Gaisano brothers.

Petitioner bank opposed & asserted that the deposit be released to it as part of the full payment &maintained that it accepted the said consignation & respondent could no longer withdraw the saidamount.

Issue:

WON respondent Diaz may still withdraw the amount deposited with the RTC? YES

HELD:

The respondents remain the owners of the sum of P1,034,600.00 deposited with the RTC ofMakati City. When they filed their motion to withdraw the deposit, they did so in the exercise oftheir right.

Under Art. 1260, the debtor may withdraw as a matter of right, the thing or amountdeposited on consignation in the following instances:

a) before the creditor has accepted the consignation or

b) before a judicial declaration that the consignation has been properlymade.

In this case, there was no judicial declaration that the consignation had been properly made. Onthe contrary, the C.A declared that there was no valid consignation. What remains to bedetermined is whether petitioner bank had already accepted the respondent from exercising theirrights to withdraw the same.

Before the consignation has been judicially declared proper, the creditor may prevent thewithdrawal by the debtor, by accepting the consignation, even with reservations. Thus, when theamount consigned does not cover the entire obligation, the creditor may accept it, reserving hisright to the balance.

Petitioner banks allegation has failed to establish by convincing evidence that it hadmade such acceptance of the deposit in question prior to the respondents filing of theirmotion to withdraw the amount deposited. To prove this claim, petitioner bank relies on thestatement of account prepared by its employees purportedly showing that the deposit in questionwas deducted from the respondents' outstanding obligation as of December 31, 1998. Thisstatement of account, however, is self-serving and has no probative value especially considering

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that the persons who prepared the same were not presented in court. The claimed"acceptance" was obviously an afterthought, and proffered for the sole purpose ofopposing the deposit withdrawal.

Before the consignation has been accepted by the creditor or judicially declared as properlymade, the debtor is still the owner of the thing or amount deposited, and therefore, the otherparties liable for the obligation have no right to oppose debtors withdrawal. However, creditor

may prevent the withdrawal by accepting the consignation even with reservation. Thus, when theamount consigned does not cover the entire obligation, the creditor may accept it, reserving hisright to the balance. But in this case, petitioner bank did not do so.