G.R. No. 153134 ; June 27, 2006
BANCO FILIPINO SAVINGS AND MORTGAGE BANK, Petitioner, vs. ANTONIO G. DIAZ and ELSIE B. DIAZ, Respondents.

FACTS

Spouses Antonio and Elsie Diaz obtained a loan from Banco Filipino, which was later restructured. They defaulted, leading the bank to initiate foreclosure. The spouses filed a complaint challenging the interest rates. The RTC of Davao denied their application for a preliminary injunction, a decision affirmed by the CA, ruling the bank could rightfully foreclose. Subsequently, the spouses filed a separate complaint for consignation with the RTC of Makati, tendering P1,034,600.00 as full payment after the bank refused their settlement offer. The Makati RTC, declaring the bank in default, accepted the consignation and ruled the obligation fully paid, stating the bank could not charge interest during its closure by the Central Bank.
The CA reversed the Makati RTC’s decision. It held the consignation invalid for excluding accrued interest and distinguished a bank’s obligation to pay interest on deposits from its right to collect interest on loans, even during closure. However, in a later related proceeding (CA-G.R. SP No. 64475), the CA allowed the spouses to withdraw the consigned amount. It found that the spouses had, in fact, already paid a total of P25.1 million against a principal obligation of only P3.163 million, and the bank’s claimed surcharges of over P16.5 million were iniquitous.

ISSUE

Whether the Court of Appeals correctly allowed the respondents to withdraw the consigned deposit.

RULING

Yes. The Supreme Court affirmed the CA’s decision. The legal logic rests on the equitable reduction of penalties under Article 1229 of the Civil Code and the principle against unjust enrichment. The Court emphasized that while the CA in a prior case correctly ruled that the initial consignation was invalid for failing to include interest, the factual landscape had evolved. The subsequent finding that the Diaz spouses had paid P25.1 million against a P3.163 million principal obligation demonstrated substantial, albeit irregular, compliance. The surcharges imposed by the bank, ballooning to over P16 million, were deemed unconscionable. Applying Article 1229, the Court held the penalty must be equitably reduced. The total payments made far exceeded the core debt, and allowing the bank to retain the consigned fund while also claiming massive surcharges would result in unjust enrichment. Thus, permitting the withdrawal of the consigned amount was a proper equitable remedy to prevent such an outcome, rendering a detailed re-examination of the interest issues unnecessary as they were settled in prior final judgments between the parties.