Banco Filipino Savings and Mortgage Bank vs. Diaz

A debtor may withdraw a consigned deposit as a matter of right before the creditor has accepted the consignation or before a judicial declaration that the consignation has been properly made.

Spouses Antonio and Elsie Diaz secured a loan from Banco Filipino Savings and Mortgage Bank, which was restructured to ₱3,163,000.00. Upon defaulting, the spouses filed suits to enjoin foreclosure and consigned a partial amount. The consignation was declared invalid by the appellate court. Subsequently, the spouses settled the main debt via attorneys-in-fact and sought to withdraw the consigned amount, which the bank opposed, claiming it had accepted the deposit by deducting it from the total obligation during settlement negotiations.

• Loan and Restructuring: Spouses Diaz obtained a ₱400,000.00 loan from Banco Filipino in 1979, restructured in 1982 to ₱3,163,000.00 at 21% interest, secured by a real estate mortgage over two commercial lots and an assignment of rentals.
• Default and Initial Litigation: After defaulting in October 1986, respondents filed a complaint in Davao RTC to enjoin foreclosure and declare interest rates unconscionable. The injunction was denied and affirmed by the CA.
• Consignation Action: Respondents filed a complaint for consignation in Makati RTC, depositing ₱1,034,600.00. Petitioner was declared in default. The RTC declared the obligation fully paid, ruling the bank could not charge interest during its closure by the Central Bank.
• Reversal of Consignation: The CA reversed, lifting the default order and declaring the consignation invalid because the tendered amount excluded accrued interest.
• Settlement and Withdrawal Motion: Upon finality of the CA decision, respondents' attorneys-in-fact (the Gaisano brothers) paid ₱25,100,000.00 to settle the obligation, and the mortgage was cancelled. Respondents moved to withdraw the ₱1,034,600.00 consigned deposit.
• Bank's Opposition: Petitioner opposed the withdrawal, claiming it accepted the consignation by deducting it from the total ₱28,810,330.51 obligation when negotiating the ₱25,100,000.00 settlement.
• Lower Court Rulings: The RTC denied the withdrawal motion, holding the deposit should be applied to the outstanding obligation. The CA reversed via certiorari, finding no acceptance by the bank and affirming the respondents' right to withdraw.

• Propriety of Remedy: Respondents erroneously resorted to certiorari instead of appeal to challenge the RTC orders denying the withdrawal motion.
• Acceptance of Consignation: Petitioner accepted the deposit by deducting it from the total obligation during settlement negotiations with the Gaisanos.
• Application of Deposit: Because the consignation was declared invalid, the deposited amount should be applied to the outstanding obligation rather than withdrawn.
• Validity of Surcharges: Interests and surcharges are distinct and simultaneously collectible; the ballooned obligation resulted from respondents' default, not from bank misconduct.

• Right to Withdraw: Under Article 1260 of the Civil Code, respondents possess the unilateral right to withdraw the deposit before creditor acceptance or judicial declaration of proper consignation.
• Lack of Acceptance: Petitioner performed no unmistakable act of acceptance prior to the withdrawal motion; the claim of acceptance was an afterthought.
• Full Settlement: The underlying obligation was fully settled via the ₱25,100,000.00 payment, as evidenced by the cancellation of the real estate mortgage.

• Propriety of Certiorari: Whether certiorari was the proper remedy to assail the RTC orders denying the motion to withdraw deposit.
• Right to Withdraw Consignation: Whether respondents may withdraw the consigned deposit absent creditor acceptance and a judicial declaration of proper consignation.
• Acceptance by Creditor: Whether petitioner bank's deduction of the consigned amount during settlement negotiations constituted acceptance preventing withdrawal.
• Equitable Reduction of Surcharges: Whether the payment of ₱25,100,000.00 constituted substantial compliance warranting the reduction of unconscionable surcharges.

• Propriety of Certiorari: Certiorari was proper. The RTC orders denying the motion to withdraw were issued after the original judgment and were interlocutory, leaving no plain, speedy, and adequate remedy in the ordinary course of law.
• Right to Withdraw Consignation: The debtor may withdraw the consigned amount as a matter of right before creditor acceptance or judicial declaration of proper consignation. Since the CA previously declared the consignation invalid, and no acceptance was proven, the right to withdraw remained intact.
• Acceptance by Creditor: No acceptance was established. The bank's self-serving statement of account, prepared by employees not presented in court, lacked probative value. The CA's finding of no acceptance was conclusive on the Supreme Court.
• Equitable Reduction of Surcharges: The payment of ₱25,100,000.00 on a restructured loan of ₱3,163,000.00 constituted substantial compliance. The surcharges reaching ₱16,569,534.62 were unconscionable and warranted equitable reduction under Article 1229 of the Civil Code.

• Right to Withdraw Consignation — Under Article 1260 of the Civil Code, before the creditor has accepted the consignation, or before a judicial declaration that the consignation has been properly made, the debtor may withdraw the thing or sum deposited as a matter of right, allowing the obligation to remain in force. The debtor remains the owner of the deposited amount, and other parties liable for the obligation cannot oppose the withdrawal.
• Equitable Reduction of Penalty — Article 1229 of the Civil Code empowers the judge to equitably reduce the civil penalty when the principal obligation has been partly or irregularly complied with, or if the penalty is iniquitous or unconscionable.

• "Before the creditor has accepted the consignation, or before a judicial confirmation that the consignation has been properly made, the debtor may withdraw the thing or the sum deposited, allowing the obligation to remain in force."
• "Before the consignation has been accepted by the creditor or judicially declared as properly made, the debtor is still the owner of the thing or amount deposited, and, therefore, the other parties liable for the obligation have no right to oppose his withdrawal of such thing or amount."

• Medel v. Court of Appeals, 359 Phil. 820 (1998) — Cited by the CA to characterize the effective interest rate of over 60% per annum as excessive, iniquitous, unconscionable, and exorbitant.
• Pabugais v. Sahijwani, G.R. No. 156846, February 23, 2004 — Cited for the definition of consignation and the requisites for its validity.
• Argana v. Republic, G.R. No. 147227, November 19, 2004 — Cited for the definition and requisites of a special civil action for certiorari.

• Article 1260, Civil Code of the Philippines — Governs the right of the debtor to withdraw the thing or sum deposited on consignation before creditor acceptance or judicial declaration of proper consignation. Applied to affirm the respondents' right to withdraw the ₱1,034,600.00 deposit.
• Article 1229, Civil Code of the Philippines — Authorizes the equitable reduction of the penalty when the principal obligation has been partly or irregularly complied with, or if the penalty is iniquitous or unconscionable. Applied to reduce the unconscionable surcharges imposed by the bank, rendering the ₱25,100,000.00 payment as substantial compliance.
• Rule 65, Rules of Court — Governs certiorari. Applied to justify the respondents' recourse to certiorari to challenge the interlocutory RTC orders denying the withdrawal motion.

Artemio V. Panganiban (Chief Justice), Consuelo Ynares-Santiago, Ma. Alicia Austria-Martinez, Minita V. Chico-Nazario