Serrano made a time deposit with Overseas Bank of Manila (OBM) including one that was assigned to him by another person without knowing that the Central Bank (CB) already has limited the bank’s activities because of reserve deficiencies. OBM then used Serrano’s deposit among others as collateral for emergency loans and as fulfillment for CB’s requirement for reserve requirements. Serrano then claims that CB is jointly and solidarily liable with OBM to return his deposits with interest because of breach of trust. As a bank, it is entrusted with obligation to protect the interest of depositors (or not to breach that trust and confidence).
Did Central Bank commit a breach of trust because of what it did to Serrano’s deposits? No.
Serrano and CB et al overlooked the fundamental principle that bank deposits are actually loans because they acquire interest. OBM is in reality a debtor of Serrano. The ownership transferred to OBM and OBM’s use of it as collateral with CB and failure to return Serrano’s deposit is not a breach of trust, but a failure to pay obligation as a debtor.
Class discussion. Atty: What should have been filed by Serrano? My answer: An action for specific performance (?) compelling the debtor bank to pay Serrano of his loaned money.