Ramos vs Central Bank (Cristelle) (an estoppel may arise from the making of a promise, even though without
July 22, 1985 | Teehankee, J. | Simple loan or mutuum consideration, if it was intended that the promise should be relied upon and in fact it
PETITIONER: EMERITO M. RAMOS,
RESPONDENTS: CENTRAL BANK OF THE PHILIPPINES
SUMMARY: Central bank promised to rehabilitate overseas bank of manila
“OBM” (now combank) however it tried to evade its promise to help OBM.
Respondent Central Bank of the Philippines was directed by the SC to comply with
its obligations under the voting trust agreement.
CA asked for the enforcement of collection for the sum of 100k representing the
value of its time deposit together with an interest from November 9, 1964. OBM
appealed to the SC insisting that since the suspension of its operations on august 2,
1968, the bank hasn’t resumed its normal operation yet. SC held that OBM is
exempt from the payment of interest because obligation to pay interest on the
deposit ceases the moment the operation of the bank is completely suspended
by the duly constituted authority, the Central Bank.
Central Bank filed for a motion for reconsideration against the Supreme Court’s
resolution dated October 19, 1982 upholding the Tapia ruling of the Supreme Court
which provides that, “the obligation to pay interest on the deposit ceases the
moment the operation of the bank (The Overseas Bank of Manila) is completely
suspended by the duly constituted authority, the Central Bank.” the date of
suspension of its banking operations on 2 August 1968? The 1971 Tapia ruling was
also upheld in the subsequent similar cases such as TOBM v. CA and Vicente
Cordero (March 30, 1982) and TOBM v. CA and Julian Cor-dero (April 27, 1982);
that TOBM is not liable to pay the interests of time deposits during the period of its
closure from August 2, 1968 to January 8, 1981 where its banking operations were
suspended.
W/N petitioner is exempt from the payment of interest time deposits from
In its En Banc Resolution, the Supreme Court once again upheld its prior decision,
citing that the Central Bank has failed to adduce any cogent argument to persuade the
Court to reconsider its prior Resolution.
DOCTRINE: Art. 1956 - No interest shall be due unless it has been expressly
stipulated in writing.
It should be deemed read into every contract of deposit with a bank that the
obligation to pay interest on the deposit ceases the moment the operation of the
bank is completely suspended by the duly constituted authority, the Central
Bank.
History of previous cases: Read this first before going to facts
Ramos v. CB (October 4, 1971): Central Bank, by promising to rehabilitate the
bank, is estopped from closing it down. The conduct of the Central Bank reveals a
calculated attempt to evade rehabilitating OBM despite its promises. CB may not
now renege on its representations and liquidate the OBM, to the detriment of its
stockholders, depositors and other creditors, under the rule of promissory estoppel
was relied upon, and if a refusal to enforce it would be virtually to sanction the
perpetration of fraud or would result in other injustice.) Hence, respondent Central
Bank of the Philippines is directed to comply with its obligations under the
voting trust agreement, and to desist from taking action in violation thereof.
OBM v. CA and Tapia (October 4, 1971):
1. CA affirmed the decision of CFI and ordered the enforcement of collection
for Tapia of sum of P100,000.00 representing the value of its time deposit
together with interest thereon at 4-1/2% per annum from November 9, 1964
until the whole amount shall have been fully paid.
2. OBM appealed to the SC insisting that since the actual suspension of its
operations on August 2, 1968, the bank has yet to resume its operations in
accordance with a resolution by the Supreme Court in February 24, 1972
ordering the rehabilitation, normalization and stabilization of OBM.
3. Issue: Whether or not the petitioner is exempt from the payment of
interest on the private respondent’s time deposit of P100,000.00 for the
period that its business operations were suspended by the Central
Bank.
4. SC Ruling: The complete factual suspension of petitioner’s operation
as a bank disabled it to commit itself to the payment of such interest.
What enables a bank to pay stipulated interest on money deposited
with it is that through the other aspects of its operation it is able to
generate funds to cover the payment of such interest. It is utterly unfair
to award private respondent his prayer for payment of interest on his
deposit during the period that petitioner bank was not allowed by the
Central Bank to operate.
5. It should be deemed read into every contract of deposit with a bank
that the obligation to pay interest on the deposit ceases the moment the
operation of the bank is completely suspended by the duly constituted
authority, the Central Bank.
OBM v. CA and Cordero (March 30, 1982):
1. On July 20, 1967, private respondent opened a one-year time deposit with
petitioner bank in the amount of P80,000.00 to mature on July 20, 1968
with interest at the rate of 6% per annum. However, due to its distressed
financial condition, petitioner was unable to pay Cordero his said time
deposit together with the interest. Cordero, however, acknowledged a
receipt of P73,840.00 representing the principal and interest as computed by
the Commercial Bank of Manila.
 2. Issue: Whether or not the petitioner is exempt from the payment of interest
on the private respondent’s time deposit of P80,000.00 for the period that its
business operations were suspended by the Central Bank.
3. SC Ruling: Same with Tapia Ruling. OBM’s refusal to pay was not due
to a willful and dishonest refusal to comply with its obligation but to
restrictions imposed by the Central Bank.
FACTS:
1. Pending final determination is respondent Central Bank's motion for
reconsideration dated December 28, 1982 of the Court's Resolution of
October 19, 1982 which ruled "applying the Tapia ruling as reaffirmed
by the Court in OBM vs. Vicente Cordero, OBM vs. Julian Cordero,
that the bank is not liable for interest on the Central Bank loans and
advances during the period of its closure from August 21 1968 to
January 8, 1981."
2. The parties have been extensively heard on the pending incident through
their various pleadings and in oral argument on October 23, 1984 as well as
in their memoranda in amplification of oral argument.
3. Facts from the Plana’s dissent: Wanting to adopt practical solutions for the
OBM problems, the Central Bank and OBM submitted a Rehabilitation
Program which, among others, stipulated the payment by OBM of 6%
interest per annum on its obligations to the Central Bank. (These were the
CB loans and advances to OBM before the Central Bank closure of OBM,
which were used by the latter to meet its liquidity problems.) The
Rehabilitation Program was approved by the Supreme Court in its
Resolution dated October 23,1974.
4. In 1981, OBM reopened business under its new corporate name,
Commercial Bank of Manila (COMBANK). On April 13, 1981,
COMBANK paid Central Bank partial interests from August 1, 1968 to
January 7, 1981 on the P63 M advances of the Central Bank to OBM.
However, it refused further payment of interest when the Supreme
Court rendered its decision in OBM vs. CA and Tony Tapia, which
held that OBM was not liable for interest on deposits during the time of
its actual closure. COMBANK claimed coverage by the said decision, as
against the contrary position of the Central Bank.
ISSUES: Whether or not The Overseas Bank of Manila is exempt from paying
interest on time deposits from the date of suspension of its banking operations
on 2 August 1968? The Overseas Bank of Manila is not liable to the Central Bank
for loans and advances made during its closure from Aug. 2, 1968 to Jan. 8, 1981.
RULING: In its En Banc Resolution, the Supreme Court once again upheld its prior
decision, citing that the Central Bank has failed to adduce any cogent argument to
persuade the Court to reconsider its prior Resolution.
RATIO:
1. In the Tapia ruling the Court held that "the obligation to pay interest on
the deposit ceases the moment the operation of the bank is completely
suspended by the duly constituted authority, the Central Bank," and that
"for the guidance of those who might be concerned, and so that unnecessary
litigations may be avoided from further clogging the dockets of the courts,
that in the light of the considerations expounded in the above opinion, the
same formula that exempts petitioner from the payment of interest to its
depositors during the whole period of factual stoppage of its operations by
orders of the Central Bank, modified in effect by the decision as well as the
approval of a formula of rehabilitation by this Court, should be, as a matter
of consistency, applicable or followed in respect to all other obligations of
petitioner which could not be paid during the period of its actual complete
closure."
2. Respondents have failed to adduce any cogent argument to persuade the
Court to reconsider its Resolution at bar that the Tapia ruling as
reaffirmed by the aforecited cases is fully applicable to the non-payment
of interest, during the period of the bank's forcible closure, on loans and
advances made by respondent Central Bank. Respondent Central Bank
itself when it was then managing the Overseas Bank of Manila (Commercial
Bank of Manila) under a holding trust agreement. "(I)n a suit against the
receiver of a national bank for money loaned to the Bank while it was a going
concern, it was error to permit plaintiff to recover interest on the loan after
the bank's suspension" "to force the Republic Bank to liquidate as an
insolvent."
3. It should be further noted that the respondent Central Bank when called upon
to deal with commercial banks and extend to them emergency loans and
advances, deals with them not as an ordinary creditor engaged in business,
but as the ultimate monetary authority of government charged with the
supervision and preservation of the banking system.
4. Court’s decision that OBM should not be made to pay interest to the
Central Bank during period of closure of OBM as COMBANK, its
successor, has been acquired by GSIS. The Court’s Resolution of October
19, 1982 manifestly redounds to the benefit of Government Service Insurance
System (GSIS) which has acquired 99.93% of the outstanding capital stock
of the COMBANK and to the preservation of the banking system.
5. The COMBANK in its said manifestation makes of record that it has likewise
entered into an agreement with its sister government banking institution, the
Philippine National Bank, that "both banks have agreed to abide by the final
resolution of this Honorable Court on the CB's pending Motion for
Reconsideration," and that "COMBANK is represented in the above-
captioned case by its General Counsel, the Government Corporate Counsel
who is also the legal counsel for the PNB and whose services were recently
retained by CB in connection with the controversy involving Banco Filipino
and Governor Jose B. Fernandez, Jr." This certainly makes moot any previous
 doubts raised during the oral argument that then Central Bank Governor
Jaime Laya may not have had the authority to enter into such agreement.

Dissenting Opinions:
1. MELENCIO-HERRERA, J., dissenting: I agree with the Solicitor General
that loans and advances made by the Central Bank to the then Overseas
Bank of Manila OBM cannot be treated in the same manner as deposits
made by ordinary depositors. The Tapia ruling, to my mind, is doctrinal
only insofar as it holds that payment of interest on deposits ceases the
moment the operation of the bank is completely suspended by the
Central Bank, but not when it applies said ruling to interest on loans
and advances made by the Central Bank, that point not having been in
issue since the Central Bank was not a party therein. As a matter of fact,
the paragraph extending its application "to all other obligations of OBM
which could not be paid during the period of its complete closure"
Moreover, interest payment on the loans and advances "made by the Central
Bank was the subject of explicit agreement between the parties at a time
when the OBM had already closed.
2. PLANA, J., dissenting: Ramos vs. CB was limited to the issue of the
legality of the CB order stopping the operations of OBM It did not involve
any question as to the liability of OBM to pay interest on deposits. Court
has no jurisdiction to resolve. OBM (now COMBANK) should be held
liable for the payment of interests on CB loans and advances.
a. The loans and advances in question were granted by the
Central Bank to OBM before the latter's closure in 1968
to enable it to meet its obligations to its depositors whose
money (deposits) it had been able to use in the generation
of income.
b. For the period during which OBM stopped banking
operations, it collected interests on loans granted by it to
its clients.
c. Money does not come gratuitously to the Central Bank.