[G.R. NO.

153134 : June 27, 2006]

BANCO FILIPINO SAVINGS AND MORTGAGE BANK, Petitioner, v. ANTONIO G. DIAZ and ELSIE B.
DIAZ, Respondents.

Facts:

Spouse Antonio and Elsie Diaz secured a loan from petitioner Banco Filipino the amount of P400,000
with 16% interest per annum. The loan was restructured in the amount of P3,163,000payable
within a period of 20 yrs at an interest of 22% per annum. The obligation was to be paid in equal
monthly amortization & secured by a real estate mortgage (properties found at Bolton and
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 RTC a
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
with prayer for issuance of a preliminary injunction & TRO.

Based on the ex-parte evidence, the respondents had a remaining balance of P1,034,600, which the
respondent tendered the amount to petitioner bank. However, petitioner bank refused to
accept it because the amount due is P 10,160,649. The respondent then consign it with the RTC,
a manager’s 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 settled
with 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
said amount.

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 of Makati
City. When they filed their motion to withdraw the deposit, they did so in the exercise of their
right.

Under Art. 1260, the debtor may withdraw as a matter of right, the thing or amount deposited 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 properly made.

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

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

Petitioner bank’s allegation has failed to establish by convincing evidence that it had made such
acceptance of the deposit in question prior to the respondents filing of their motion to withdraw
the amount deposited.

To prove this claim, petitioner bank relies on the statement of account prepared by its employees
purportedly showing that the deposit in question was deducted from the respondents'
outstanding obligation as of December 31, 1998. This statement of account, however, is self-
serving and has no probative value especially considering 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 of
opposing the deposit withdrawal.

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 debtor’s withdrawal. However, creditor may
prevent the withdrawal by accepting the consignation even with reservation. Thus, when the
amount consigned does not cover the entire obligation, the creditor may accept it, reserving his
right to the balance. But in this case, petitioner bank did not do so.