GENERAL BANKING LAW OF 2000 (R.A. No. 8791 A. Defnition and and Ca!!if"ation o# Ban$! RE%&BLIC OF 'E %ILI%%INE)* +etitione,* +etitione,* -!. )EC&RI' CREDI' AND ACCE%'ANCE COR%ORA'ION* RO)ENDO '. RE)&ELLO* %ABLO 'AN/&'CO* AR'&RO )ORIANO* R&BEN BEL'RAN* BEL'RAN* BIENENIDO BIENE NIDO . . A%A* %ILAR %I LAR G. RE)&ELLO* RICARDO D. BALA'BA'* /O)E )EBA)'IAN and I'O 'AN/&'CO /R.* ,e!+ondent!. G.R. No. L20384* /an5a,6 24* 197* J CONCE%CION* C. J Ke6 Do"t,ine Indeed, a bank has been defned as a moneyed institute ounded to acilitate the borrowing, lendin lending g and sae-kee sae-keepin ping g o money money and to deal, deal, in notes, bills o exchange, and credits. An investment company which loans out the money o its customers, collects the interest and charges a commission to both lender and borrower, borrower, is a bank. ... any person engaged in the business business carried carried on by banks o depos deposit, it, o discount, or o circulation is doing a banking business, although but one o these unctions is exercised.
FAC') The Security and Acceptance Corporation is a corp corpor orat atio ion n regi regist ster ered ed Exchange Commission.
with with
the the
Secu Securi riti ties es
and and
Armed with a search warrant, the intelligence division of the Central Bank and of the anila !olice "epartment searched the premises of the corporation and sei#ed documents and records thereof relative to its its $usi $usine ness ss oper operat atio ions. ns. %pon %pon exam examin inat atio ion n and and evalu evaluati ation on of said said docume documents nts and record records, s, it was su$mitted that the corporation is performing $anking funct function ions s withou withoutt re&uis re&uisite ite certi' certi'ca cate te of author authority ity from from the onetar onetary y Board Board of the Central Central Bank, Bank, in violation of Secs. ( and ) of *epu$lic Act ++, particularly, soliciting and accepting deposit rom the public and lending out the unds so received. -t was note noted d that that comp compan any ys s arti artic cles les of incorporation author authori#e i#e it only only to engage engage prima primaril rily y in 'nanc 'nancing ing agricultural, commercial and industrial pro/ects, and secondarily, in $uying and selling stocks and $onds of any corporat corporation, ion, thus the corporati corporation on exceeded exceeded the scope of its powers and authority as granted under its charter. The examinatio examination n disclosed disclosed that the Security Security Cred Credit it and and Acce Accept ptan ance ce Corp Corpor orat atio ion n is regu regula larl rly y lending funds o$tained from the receipt of deposits and0 and0or or the the sale sale of secu securi riti ties es.. The The Corp Corpor orat atio ion n ther theref efor ore e is perf perfor ormi ming ng $an $anki king ng func functi tion ons s as contemplated in *epu$lic Act 1o. ++, without having 'rst complied with the provisions of said Act. The one onetary ary Boar Board d prom romulga ulgate ted d its its *esolution 1o. 2345, declaring that the corporation is performin performing g $anking $anking operation operations, s, without without having having 'rst complied with the provisions of Sections ( and ) of *epu$lic *epu$lic Act 1o. ++. ++. 6owever 6owever,, notwithst notwithstandin anding g its notice of the said resolution, the corporation, as well as the mem$ mem$ers ers of its Board of "irec "irector tors s and the o7ice o7icers rs of the corporat corporation ion,, have have $een $een and still are
perfor performin ming g the funct function ions s and activ activiti ities es which which had had $een declared to constitute illegal $anking operations. -n fact, the corporation had esta$lished 8 $ranches in principal cities and towns throughout the !hilippines9 and that through a systematic and vigorous campaign undertaken $y the corporation, the same had managed to induce the pu$lic to open 54,8)+ savings deposit accounts with an aggregate deposit of !2,):4,2+).8. Accordingly, Accordingly, on "ecem$er "ecem$er ), 24)(, the warranto nto Soli Solici cito torr ;ene ;enera rall comme ommenc nced ed this this quo warra proceedi proceedings ngs for the dissolution dissolution of the corporatio corporation, n, with a prayer that, meanwhile, a writ of preliminary in/ in/unc unction ion $e issu issue ed ex part arte, en/oin /oinin ing g the the corporation and its $ranches, as well as its o7icers and agents, from performing the $anking operations comp compla lain ined ed of, of, and and that that a rece receiv iver er $e appo appoin inte ted d pendente lite. "efendant corporation admitted admitted that it has not secured the re&uisite authority to engage in $anking. 6owe 6oweve verr, defe defend ndan ants ts deny deny that that its its tran transa sact ctio ions ns partake of the nature of $anking operations.
I))& I))&E E A,e A,e te te t,an t,an!a !a"t "tio ion n! :ade ade ;6 te te "o,+o, "o,+o,ati ation on +a,ta$ +a,ta$e e o# te nat5,e nat5,e o# ;an$in ;an$in< < t,an! t,an!a"t a"tion ion!* !* t5! t5! in -ioat -ioation ion o# te te Gene,a Gene,a Ban$in< A"t= R&LING E). Although, admittedly, admittedly, defendant corporation has not secured the re&uisite authority to engage in $anking, defendants deny that its transactions partake of the nature of $anking operations. -t is conceded, howe howeve verr, that that,, in cons conse& e&ue uenc nce e of a prop propag agan anda da campaign therefor, a total of 54,8)+ savings account depo deposi sits ts have have $een $een made made $y the the pu$l pu$lic ic with with the the corporation and its 8 $ranches, with an aggregate deposit of !2,):4,2+).8, which has $een lent out to such such person persons s as the corpor corporati ation on deeme deemed d suita$ suita$le le therefor. -t is clear that these transactions partake of the nature of $anking, as the term is used in Section ( of the ;eneral Banking Act. -ndeed, a $ank has $een de'ned as a :o :one ne6e 6ed d in!t in!tit it5t 5te e #o5n #o5nde ded d to
#a"ii #a"iitat tate e te te ;o,, ;o,,o> o>in in<* <* end endin in< < and and !a#e !a#e $ee+in< o# :one6 and to dea* in note!* ;i! o# e?"an
An in-e!t:ent in-e!t:ent "o:+an6 >i" >i" oan! o5t o5t te :one6 o# it! "5!to:e,!* "oe"t! te inte,e!t and "a,
e,* i! a ;an$. ... an6 +e,!on en
1
administrative authority re&uired in *epu$lic Act 1o. ++.
of Appea Appeals ls a7irm a7irmed ed in toto the decision of the trial court thus.
B. Di!tin"tion o# Ban$! #,o: @5a!iBan$! and ',5!t Entitie!
I!!5e "id "id the the disp disput uted ed tran transa sact ctio ion n $etw $etwee een n petitione petitioners rs and AS-A !AC-=-C !AC-=-C violate violate $anking $anking laws, hence, null and voidG
'EODORO BAA)* C. G. DION CON)'R&C'ION* INC.* and CENEN DION -!. A)IA -!. A)IA %ACIFIC %ACIFIC FINANCE COR%ORA'ION G.R. No. 128704* O"to;e, 18* 2000 hat is prohibited by law is or investment companies to lend lend und unds s obta obtain ined ed rom rom the the publ public ic thro throug ugh h recei receipts pts o depos deposit, it, which which is a uncti unction on o bankin banking g institutions.
-n 24:2 AS-A !AC-=-C 'led a complaint for a sum of mone money y with with pray prayer er for for a writ writ of repl replev evin in agai agains nstt Teodoro, C. ;. "i#on and Cenen "i#on. Sometime in 24:3, Teodoro executed a !romissory "ote in favor of C. ;. "i#on where$y he promised to pay to the order of C. ;. "i#on the sum of !+43,333.33 in installments. >ate >aterr, C. ;. "i#o "i#on n endo endors rsed ed with with reco recour urse se the the !romissory "ote to AS-A AS-A !AC-= AC-=-C -C,, and and to secu secure re paym payment ent thereo thereof, f, C. ;. "i#on, "i#on, throug through h its o7ice o7icers, rs, Cene Cenen, n, !res !resid iden ent, t, and and ?uli ?uliet ette te "i#o "i#on, n, @! and and Trea Treasu sure rerr, exec execut uted ed a #eed o $hattel %ortgage cove coveri ring ng + + heav heavy y e&ui e&uipm pmen entt unit units s of Bull Bulldo do#e #err Crawler Tractors in favor of AS-A !AC-=-C. oreover, &ndertaking wherein he Cenen executed a $ontinuing &ndertaking $oun $ound d hims himsel elff to pay pay the the o$li o$liga gati tion on /oin /ointl tly y and and severally with C. ;. "i#on. C. ;. "i#on Construction defaulted in the payment of the installments, prompting AS-A !AC-=-C to send a 'tatement o Account to Cenen. As the demand was unheeded, AS-A !AC-=-C !AC-=-C sued Teodoro, C. ;. "i#on and Cenen. hile ile petitio ition ners admitted the genu genuin inen enes ess s of the the !romissory "ote, th t he #eed o $hattel $hattel %ortgage %ortgage and th &ndertaking, the $ontinuing &ndertaking they neverthe nevertheless less maintaine maintained d that these documents documents were never intended $y the parties to $e legal, valid and $inding $ut a mere su$terfuge to conceal the loan of !+43,333.33 with usurious interests. !etitioners claimed that since AS-A !AC-=-C could not directly directly engage in $anking $anking $usiness, $usiness, it proposed proposed to them a scheme wherein AS-A !AC-=-C could extend a loan loan to them them withou withoutt violat violating ing $anking $anking laws< frst, Cenen would secure a promissory note from Teodoro BaDas BaDas with a face value of !+43,333 !+43,333.33 .33 paya$le in installments9 second, AS-A !AC-=-C would then make it appear that the !01 was sold to it $y Cenen with the 28 28 usurio usurious us intere interest st on the loan loan or !58,33 !58,333.3 3.33 3 discounted and collected in advance $y AS-A !AC-=-C9 and, and, lastly , Cenen would provide su7icient collateral and execute a continuing guaranty. Fn (2 April April 24:2 24:2 the tria triall cour courtt issu issued ed a writ writ of replevin against C. ;. "i#on for the surrender of the $ulldo#er crawler tractors. Fnly two ( were actually turne urned d ove over $y defe efenda ndants nts whic which h units nits were were su$se&uen su$se&uently tly foreclose foreclosed d $y AS-A !AC-=-C AC-=-C to satisfy satisfy the o$ligation. Fn (5 Septem$er 244( the *TC ruled in favor favor of AS-A AS-A !AC-=-C AC-=-C holdin holding g the defen defendan dants ts /ointly and severally lia$le for the unpaid $alance of the the o$li o$liga gati tion on unde underr the the !romissory "ote in the the amount of !:,)+.53 at 28 interest p.a. The Court
etitio ione ners rs insi insist st that that AS-A AS-A !AC-= AC-=-C -C was was ed !etit organi organi#ed #ed as an invest investme ment nt house house which which could could not engage in the lending lending of funds funds o$tain o$tained ed from from the pu$lic pu$lic throug through h receip receiptt of depos deposits its.. e re/ect re/ect the argument. An investment company refers to any issuer whic which h is or hold holds s itse itself lf out out as $ein $eing g enga engage ged d or prop propos oses es to enga engage ge prim primar aril ily y in the the $usi $usine ness ss of inve invest stin ing, g, rein reinve vest stin ing g or trad tradin ing g in securities. As de'ned de'ned in Sec. Sec. (, par. par. a, a, of the (evised 'ecurities Act, secu securi riti ties es Hsha Hshall ll incl includ ude e comm commer erci cial al pape papers rs evidenci evidencing ng inde$ted inde$tedness ness of any person, person, 'nancial 'nancial or nonI'nancial entity, entity, irrespective of maturity, maturity, issued, endorsed, sold, transferred or in any manner conveyed with or with withou outt reco recour urse se, such as to another with promissory notes H Clearly Clearly,, the transactio transaction n $etween $etween petitione petitioners rs and respondent respondent was one involving involving not a loan $ut purchase of ,e"ei-a;e! at a di!"o5nt , well with within in the the purv purvie iew w of Hinv Hinves esti ting ng,, rein reinve vest stin ing g or trading in securitiesH which an investment company, like AS-A !AC-=-C, is authori#ed to perform and does not constitute a violation of the ;eneral Banking Act. oreover, Sec. ( of the )eneral *anking Act provides in part J Sec. (. Fnly entities duly authori#ed $y the onetary Board of the Central Bank may engage in the lending of funds o$tained from the pu$lic through the receipt of deposits of any kind, and all entities regu regula larl rly y cond conduc ucti ting ng such such oper operat atio ions ns shal shalll $e considered as $anking institutions and shall $e su$/ect to the provisions of this Act, of the Central Bank Act, and of other pertinent laws underscoring supplied. -ndu -ndu$ $ita ita$ly $ly, what hat is proh rohi$it i$ite ed $y law law is for investment companies to lend funds o$tained from the pu$lic through receipts of deposit, which is a function of $anking institutions. But here, the funds supposedly HlentH to petitioners have not $een shown to have $een o$tained from the pu$lic $y way of deposits, hence, the inapplica$ility of $anking laws. !etitioners assertions were $ased mainly on the selfI servin serving g testi testimo mony ny of Cenen Cenen,, and not on any other inde indepe pend nden entt evid eviden ence ce.. 6is 6is test testim imon ony y is not not only only unconvinc unconvincing, ing, $ut also selfIdefea selfIdefeating ting in light of the document documents s presente presented d $y responden respondent, t, i.e., !romissory "ote, #eed o $hattel %ortgage an and $ontinuing the accu accura racy cy,, corr correc ectn tnes ess s and and due due &ndertaking, the execution of which were admitted $y petitioners. Fral evide evidence nce certa certainl inly y cannot cannot prevai prevaill over over the writte written n agreements agreements of the parties. =inall =inally y, while while we empat empathi# hi#e e with with petit petition ioners ers,, we cannot close our eyes to the overriding considerations of the law on o$ligations and contracts which must $e upheld upheld and honore honored d at all times. times. !etitio etitione ners rs have have undou$ undou$ted tedly ly $ene't $ene'ted ed from from the transa transacti ction9 on9 they they canno cannott now $e allowe allowed d to impugn impugn its valid validity ity and legality to escape the ful'llment of a valid and $inding o$ligation.
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FIR)' %LAN'ER) %AWN)O% %AWN)O%** INC.* !etitioner, v. CO COI) I))I )ION ONER ER OF INE' INE'RN RNAL AL REE REEN& N&E E *espondent.
That pawnshops are to $e treated as nonI$ank 'nancial intermediaries is further $olstered $y the fact that pawnshops are
Ke6 Ke6 Do"t,i Do"t,ine ne< -t nee need not not $e ela$o a$orat rated that hat
under the regulatory supervision of the *angko 'entral ng !ilipinas and covered $y its anual of *egulations for 1onIBank
G.R. No. 1714* ?uly +3, (33:, (33:, A&)'RIA AR'INE* J . pawn pawnsh shop ops s are are nonI nonI$a $ank nks0 s0$a $ank nkin ing g inst instit itut utio ions ns.. oreo oreover ver,, the nature nature of their $usiness $usiness activities activities partakes that of a 'nancial intermediary in that its principal function is lending. =irst !lante !lanters rs !awnsho awnshop, p, -nc. -nc. petit petition ioner er Fa"t! =irst contests the de'ciency valueIadded tax imposed upon it $y the Bureau of -nternal of -nternal *evenue B-* for the year (333. The core of petitioners argument is that it is not a lend lendin ing g inve invest stor or with within in the the purv purvie iew w of Sect Sectio ion n 23:A of the 1ational -nternal *evenue Code 1-*C, as amended, and therefore not su$/ect to valueIadded tax @A @AT. T. -n a !reIAssessment 1otice petitioner was informed $y the B-* that it has an existing tax de'ciency on its @AT @AT lia$ilities for the year (333. The de'ciency de'ciency assessme assessment nt was at !582,23( !582,23(.4 .4 for @AT !etitio !etitioner ner protested the assessment for lack of legal and factual $ases. $ases. !etitio etitioner ner su$se& su$se&uen uently tly rece receive ived d a =ormal ormal Assessment 1otice 1otice directing payment. payment. !etitioner !etitioner sought reconsideration $ut this was denied $y the CTA +n *anc. hetherr petit petition ioner er,, engag engaged ed in pawnsh pawnshop op I!!5e hethe $usiness, is lia$le to pay the de'ciency assessment at !582,23(.4 for @ for @ATG ATG
R5in< 1oK !rior to the E@AT E@AT >aw, >aw, pawnshops pawnshops were treated treated as lending lending investors investors su$/ect to lending lending investors investors tax. !awnshops were then treated as @ATIa$le enterprises under the general classi'cation of sale or exchange o services under Section 23:A of the Tax Code of 244, as amended. Fn =e$ruary 2), (338 *.A. 1o. 4(+: took e7ect. e7ect. R.A. No. 9248 fna6 "a!!ifed +a>n!o+!
a! Ote, Non;an$ Finan"ia Inte,:edia,ie!.
The tax treatment of pawnshops as nonI$ank 'nancial intermediaries intermediaries is not without $asis. *.A. 1o. :42 or the ;eneral Banking >aw of (333 provided that banks shall refer to entities engaged in the lending of funds o$tained in the form of deposits. *.A. *.A. 1o. 1o. :42 :42 also also incl includ uded ed coop cooper erat ativ ive e $ank $anks, s, -slamic $anks and other $anks as determined $y the onetary Board of the *angko 'entral ng !ilipinas in the classi'cation of $anks. -t need not $e ela$orated that pawnshops are nonI $anks0$an $anks0$anking king institutio institutions. ns. oreover oreover,, the nature nature of their their $usiness $usiness activities activities partake partakes s that of a 'nancial 'nancial intermediary in that its principal function is lending.
=inancial -nstitutions. The anual includes pawnshops in the list of nonI$ank 'nancial intermediaries, vi .< .< 8232L.2 inancial Intermediaries Intermediaries xxx 1onI$ank 'nancial intermediaries shall include the following< 2 A person or entity licensed and0or regi regist ster ered ed with with any any gove govern rnme ment nt regulat latory $ody as a nonI$ank 'nanc nancia iall inte interrmediar diary y, suc such as investment house, investment comp ompany, 'nancing company, secu securi riti ties es deal dealer er0$ 0$ro roke kerr, lend lendin ing g investor, +a>n!o+ , money $roker x x x. Emphasis supplied Coming now to the issue at hand I Since petitioner is a nonI$ank 'nancial intermediary, it is su$/ect to 23 @AT @AT for the tax years 244) to (33(9 o>e-e,* >it
te e-6* a!!e!!:ent and "oe"tion o# A' #,o: non non;a ;an$ n$ fnan fn an"i "ia a inte inte,: ,:ed edia ia,i ,ie! e! ;ein ;ein< < !+e"if"a6 de#e,,ed ;6 a> , ten +etitione, i! not ia; ia;e e #o, #o, A' d5,i d5,in< n< te! te!e e ta? ta? 6ea, 6ea,!! . And $eginning (338 up to the present, $y virtue of *.A. 1o. 4(+:, petitioner is no longer lia$le for @AT $ut it is su$/ect to percentage tax on gross receipts from 3 to 5 , as the case may $e.
C. Ban$ %o>e,! and Lia;iitie! REGI)' REGI)'ER ER o# DEED) DEED) OF A ANIL NILA* A* +etit +etition ione, e, a++eee* -!. CINA BANKING COR%ORA'ION* ,e!+ondent a++eant. G.R. No. L119* A+,i 28* 192* DION* /.* EN BANC Do"t,ine Although !aragraph !aragraph c/, 'ection 01 o (epublic Act 223 allows a oreign/ commercial bank to purchase and hold such real estate as shall be conveyed to it in satis satisac actio tion n o debts debts previo previousl usly y contra contracte cted d in the course o its dealings. 4owever, the 5debts6 reerred to in this this provis provision ion are only only those those resul resultin ting g rom rom previous loans and other similar transactions made or entered into by a commercial bank in the ordinary course course o its business business as such. such. 7bviously 7bviously,, whatever whatever 5civil 5civil liability6 liability6 arising rom the criminal o8ense o qualifed thet was admitted in avor o appellant bank by its ormer employee, Alonso !angilinan, was not a debt resulting rom a loan or a similar transaction had
3
betwe between en the two partie parties s in the ordina ordinary ry course course o banking business.
Fa"t! Court of =irst -nstance of anila Criminal Case 1o. ((43: ((43: Alfonso !angilin !angilinan an and one ;uillerm ;uillermo o Chua were charged with &uali'ed theft, the money involved amounting amounting to !(5,33 !(5,333.33 3.33.. !angilin !angilinan an and his wife, wife, Belen Sta. Ana, executed a pu$lic instrument entitled "EE" F= T*A1S=E* T*A1S=E* where$y where$y,, after after admittin admitting g his civi civill lia$ lia$il ilit ity y in favo favorr of his his empl employ oyer er,, the the Chin China a Bank Bankin ing g Corp Corpor orat atio ion, n, in rela relati tion on to the the o7en o7ense se aforesaid, he ceded and transferred to the latter, in satisfaction thereof, thereof, a parcel of land located in the City of anila, registered in the name of HBelen Sta. Ana, married to Alfonso !angilinan. !angilinan. The The "eed "eed of Trans Transfe ferr execut executed ed $y !angili angilinan nan was presented for registration $ut the register of deeds, after 'nding that China Banking Corporation, as an alienI alienIown owned ed corpor corporati ation, on, is $arre $arred d from from ac&uir ac&uiring ing lands in the !hilippines under Sec. 5, Art. M--- of the Cons Consti titu tuti tion on,, su$m su$mit itte ted d the the matt matter er to the the >and >and *egistration Commission for resolution which, in turn, denied the registration. The $ank contended that Section (5 of *epu$lic Act ++ allows a commercial $ank to purchase and hold real estate to wit< SEC. (5. Any commercial $ank may purchase, hold, and convey real estate for the following purposes< xxxxxxxxx c Such shall shall $e conveye conveyed d to it in satisfaction satisfaction of de$ts de$ts previously contracted in the course of its dealings9 d d Such Such as it shal shalll purc purcha hase se at sale sales s unde underr /udgments, decrees, decrees, mortgages, or trust deeds held $y it and such as it shall purchase to secure de$ts due to it
I!!5e whethe whetherr appell appellant ant N an alienI alienI owned owned $ank $ank N can ac&uire ac&uire ownership of the residential residential lot covered covered $y Transfer Certi'cate of Title 1o. +((+3 $y virtue of the deed of transfer
R5in< 1o. 1o. China$ China$ank ank is prohi$ prohi$ite ited d from from holdin holding g lands lands $y Sec. 5, Art. M--- of the Constitution. The reason for the prohi$ition is manifestly the desire and purpose of the Consti Constitut tution ion to place place and keep in the hands hands of the people the ownership over private lands in order not to endanger the integrity of the nation.
e 'nd that the case $efore %s does not fall under anyone of them. !aragraph !aragraph c, Section (5 of *epu$lic Act ++ allows a comme commerci rcial al $ank $ank to purch purchase ase and hold hold such such real real estate estate as shall shall $e conve conveyed yed to it in satisf satisfact action ion of previous ously ly contra contracte cted d in the debts previ the cour ourse o its its dealings, e deem it &uite clear and free from dou$t that the Hde$tsH referred to in this provision are only those resulting from previous loans and other similar transactio transactions ns made or entered entered into $y a commercia commerciall $ank in the ordinary course of its $usiness as such. F$viously, whatever Hcivil lia$ilityH N arising from the criminal o7ense of &uali'ed theft N was admitted in favo favorr of appe appell llan antt $ank $ank $y its its form former er empl employ oyee ee,, Alfonso !angilinan, was not a de$t resulting from a loan loan or a simila similarr transa transact ction ion had had $etwe $etween en the two parties in the ordinary course of $anking $usiness. 1either do the provisions of paragraph d of the Same section apply to the present case $ecause the deed of transfer in &uestion can in no sense $e considered as a sale made $y virtue of a /udgment, decree, mortgage, or trust trust deed deed held held $y appell appellant ant $ank. $ank. -n the same manne mannerr it canno cannott $e said that that the real prope property rty in &uestion was purchased $y appellant Hto secure de$ts due to itH, considering that, as stated heretofore, the term term debt employed in the pertinent legal provision can logically refer only to such de$ts as may $ecome paya$le to appellant $ank as a result of a $anking transaction. That the constitu itution ional prohi$iti ition under consideration has for its purpose the preservation of the patrimo patrimony ny of the nation nation cannot cannot $e denied denied,, $ut $ut appellant and the amici curiae claim that it should $e li$erally construed so that the prohi$ition $e limited to the permanent ac&uisition of real estate $y aliens N whether natural or /uridical persons. This, of course, would make legal the ownership ac&uired $y appellant $ank $ank $y virtue virtue of the deed deed of transf transfer er menti mentione oned d heretofore, su$/ect to its o$ligation to dispose of it in accordance with law, within 5 years from the date of its its ac&u ac&uis isit itio ion. n. e cann cannot ot give give asse assent nt to this this contention, in view of the fact that the constitutional prohi$ition in &uestion is a$solute in terms.
BANCO DE OROE%CI* INC.* %etitione, vs. /A%RL DEELO%EN' COR%ORA'ION* RA%ID FORING COR%ORA'ION and /O)E &. AROLLADO* AROLLADO* Re!+ondent!. Re!+ondent!. J. G.R. No. 179901* A+,i 1* 2008* CORONA* J. Key Doctrine: *anks have the right to annul any cred credit it acco accomm mmod odat atio ion n or loan loan,, and and dema demand nd the the immediate payment thereo, rom borrowers proven to be guilty o raud.
Fa"t! !etitioner Banco de FroIE!C-, -nc. extended credit credit facilities facilities to ?A!*> "evelopm "evelopment ent Corporati Corporation on ?A!*> ?A!*> amountin amounting g to !(+3,333 !(+3,333,333 ,333 after after evaluating evaluating the latterOs 'nancial statements for 'scal years 244:, 2444 444 and (333. *esp *espon ond dents nts *ap *apid =orm orming ing Corporation *=C and ?ose Arollado acted as ?A!*>s
4
sure sureti ties es.. "esp "espit ite e its its seem seemin ingl gly y stro strong ng 'nan 'nanci cial al position, ?A!*> defaulted in the payment of four trust receipts soon after the approval of its loan. B"FI E!Clate laterr lear learne ned d from from * * ana anage gem ment, ent, ?A!* ?A!*>s >s 'nancial adviser, that ?A!*> had altered and falsi'ed its 'nancial statements. -t allegedly $loated its sales revenues to post a $ig income from operations for the conce concerne rned d 'scal 'scal years years to pro/ec pro/ectt itself itself as a via$le via$le investment. The information alarmed petitioner. petitioner. Citing relevant provisions of the Trust *eceipt Agreement, it demanded immediate payment of ?A!*>s outstanding o$ligations amounting to !248,84+,+::.4:. !248,84+,+::.4:. ?A!*> and its su$sidiary, su$sidiary, *=C 'led a petition for reha$ilitation in the *egional Trial Court *TC of Lue#on City and disclosed sed that it had $een experiencing experiencing a decline in sales for the three preceding years and a staggering loss in (33(. As the petition was su7icie su7icient nt in form form and su$stanc su$stance, e, a !ta6 o,de, was issued. 6owever, the proposed reha$ilitation plan for ?A!*> and *=C was eventually re/ected $y the Lue#on City *TC. !etitioner B"FIE!C- 'led a complaint for sum of money with an application for the issuance of a writ of prelim prelimina inary ry attach attachme ment nt agains againstt respon responden dents ts in akati *TC since ?A!*> is ignoring its demand for payment. B"FIE!C- asserted that ?A!*> was guilty of fraud fraud $ecau $ecause se it ?A!*> ?A!*> altere altered d and falsi' falsi'ed ed its 'nancial 'nancial statemen statements. ts. The akati akati *TC su$se&uen su$se&uently tly denied the application for the issuance of a writ of preliminary attachment for lack of merit as petitioner was una$le to su$stantiate its alle llegations. 1evertheless, it ordered the service of summons on resp respon onde dent nts. s. *esp *espon onde dent nts s move moved d to dism dismis iss s the the comp compla lain intt due due to an alle allege gedl dly y inva invalid lid serv servic ice e of summons. Because the o7icers return stated that an administ administrativ rative e assistant assistant had received received the summons, summons, ?A!*> and *=C argued that Section 22, *ule 28 of the *ules of Court contained an exclusive list of persons on whom whom summon summons s agains againstt a corpo corporat ration ion must must $e serve served. d. An admini administr strati ative ve assist assistant ant was not one of them. Arollado, on the other hand, cited Section ), *ule 28 thereof which mandated personal service of summon summons s on an indivi individu dual al defend defendant ant.. akat akatii *TC *TC noted that $ecause corporate o7icers are often $usy, summonses to corporations are usually received only $y admi admini nist stra rati tive ve assi assist stan ants ts or secr secret etar arie ies s of corporate o7icers in the regular course of $usiness. 6ence, it denied the motion for lack of merit. ?A!*> and its su$sidiary, su$sidiary, *=C 'led a petition for reha$i reha$ilit litati ation on in the *TC *TC of Calam Calam$a, $a, >aguna >aguna,, Branch Branch +8 Calam$a Calam$a *TC. =inding =inding ?A!*>s ?A!*>s petition petition su7icient in form and in su$stance, the Calam$a *TC issue issued d a stay stay order order.. respo respond ndent ents s hastil hastily y moved moved to suspen suspend d the proce proceedi eding ngs s in Civil Civil Case Case 1o. 1o. 3+ I442 I442 pending in the akati *TC. akati *TC granted the motio motion n with with regar regard d to ?A!*> ?A!*> and and *=C $ut ordere ordered d Arollado to 'le an answer. answer. -t ruled that, $ecause he was /ointly and solidarily lia$le with ?A!*> and *=C, the the proc procee eedi ding ngs s agai agains nstt him him shou should ld cont contin inue ue.. *espon *esponde dents nts moved moved for recons reconside iderat ration ion $ut it was denied. CA granted the petition and held that $ecause the summonses were served on a mere administrative assistant, the akati *TC never ac&uired /urisdiction
over over respon responden dents. ts. *espon *esponde dents nts 'led 'led a petiti petition on for certiorari in the CA and asserted that the akati *TC commit committed ted grave grave a$use of discr discreti etion on as it did not ac&uire /urisdiction over their persons due to defective service of summons. Thus, the akati *TC could not hear the complaint for sum of money. B"FIE FIE!Casserts that respondents malic malicio ious usly ly evad evaded ed the the serv servic ice e of summ summon onse ses s to prevent prevent the akati akati *TC from ac&uiring ac&uiring /urisdiction /urisdiction over their persons. =urthermore, they employed $ad faith to delay delay proceedi proceedings ngs $y cunningly cunningly exploiting exploiting procedural technicalities to avoid the payment of their o$ligations. !etitioner moved for reconsideration $ut it was denied. 6ence, this petition.
I!!5e het hethe herr or not not the the $ank $ank B!FI B!FIE! E!C- C- may may dem demand and the the imm immediat diate e paym ayment of ?A! ?A!*>Os outstanding o$ligations.
R5in< E). hen respondents moved for the suspension of proceedings in Civil Case 1o. 3+I442 $efore the akati *TC on the $asis of the arch 2+, (33) order of the Calam$a *TC, they waived waived whatever whatever defect defect there was in the service of summons and were deemed to have have su$m su$mit itte ted d them themse selv lves es volu volunt ntar arily ily to the the /urisdiction of the akati *TC. %nder the -nterim *ules of !rocedure on Corporate *eha$ilitation, a !ta6 defers rs all all acti action ons s or clai claims ms agai agains nstt the the o,de, defe corporation seeking reha$ilitation from the date of its issu issuan ance ce unti untill the the dism dismis issa sall of the the peti petiti tion on or termi termina natio tion n of the reha$i reha$ilit litati ation on procee proceedin dings. gs. The akati *TC may proceed to hear Civil Case 1o. 3+I 442 only against Arollado if there is no ground to go after after ?A!*> and *=C as will later later $e discussed discussed. . A
",edito, ",edito, "an de:and de:and +a6:ent +a6:ent #,o: te !5,et6 !oida,i6 ia;e >it te "o,+o,ation !ee$in< ,ea;iitation. *espondents a$used procedural technicalities al$ al$ei eitt unsu unsuc ccess cessfu full lly y for for the the sole sole purp purpos ose e of preventing, or at least delaying, the collection of their legitimat legitimate e o$ligatio o$ligations. ns. Their Their reprehen reprehensi$le si$le scheme scheme impede impeded d the speedy speedy dispen dispensat sation ion of /ustic /ustice. e. ore ore impo import rtan antl tly y, howe howeve verr, cons consid ider erin ing g the the amou amount nt invo involv lve ed, resp respon onde dent nts s utte utterl rly y disr disreg egar arde ded d the the signi'cance of a sta$le and e7icient $anking system to the national economy.
Ban$! a,e entitie! en te +5;i"! +5;i"! e?"e!! :one6 Banks s (i.e.,de+o de+o!i !it! t! and and end end o5t o5t te te !a:e !a:e . Bank therefore redi redist stri ri$u $ute te weal wealth th in the the econ econom omy y $y chann channeli eling ng idle idle saving savings s to pro'ta pro'ta$le $le invest investme ments nts.. Banks operate and earn income $y extending credit facilit facilities ies 'nance 'nanced d prima primaril rily y $y depos deposits its from from the pu$lic. They plough $ack the $ulk of said deposits into the economy in the form of loans. Since $anks deal with the pu$licOs money, money, their via$ility depends largely 5
on their a$ility to return those deposits on demand. =or this reason, $anking is undenia$ly im$ued with pu$lic interest. !rotecting the integrity of the $anking system has $ecome, $y large, the responsi$ility of $anks. The role of the pu$lic, particularly individual $orrowers, has not $een emphasi#ed. 1evertheless, we are not unaware of the rampant and unscrupulous practice of o$taining loans without intending to pay the same. -n this case, petitioner B"FIE!C- alleged that ?A!*> fraudulently altered and falsi'ed its 'nancial statem statemen ents ts in order order to o$tain o$tain its credi creditt facilit facilities ies.. Considerin Considering g the amount of petitioner petitionerOs Os exposure exposure in ?A!*>, /ustice and fairness dictate that the akati *TC hear hear whet whethe herr or not not resp respon onde dent nts s inde indeed ed committed fraud in securing the credit accommodation.
'e +,ote"ti-e ,e:ed6 o# ,ea;iitation >a! ne-e, intended intended to ;e a ,e#5
Gene,a Ban$in< La>
Civil Case 1o. 3+I442 against the three which states< (equirement or )rant Section 83. (equirement o 9oans or 7ther $redit Accommodations. Accommodations. Before granting a loan or other credit acco accomm mmod odat atio ion, n, a $ank $ank must must ascertain that the de$tor is capa$le of ful'lling his commitments to the $ank. Towar owards ds this this end, end, a $ank $ank may may demand from its credit applicants a stat statem emen entt of thei theirr asse assets ts and and lia$ilities and of their income and expenditures and such information as may $e prescri$ed $y law or $y rule rules s and regu regula lattions ions of the one oneta tary ry Boar Board d to ena$ ena$le le the the $ank $ank to prop proper erly ly eval evalua uate te the the credit credit applicati application on which which includes includes the the corre rrespon spondi din ng 'nanc ancial ial statements su$mitted for taxation purposes to the Bureau of -nternal )o5d !5" *evenue.
!tate:ent! +,o-e to ;e #a!e o, in"o,,e"t in an6 :ate,ia detai* te te ;an$ ;an$ :a6 :a6 te,: te,:in inat ate e an6 an6 oan o, ",edit ",edit a""o::o a""o::odatio dation n <,an <,ante ted d on te te ;a!i ;a!i!! o# !aid !aid !tate:ent! and !a a-e te ,i< ,i<tt to de:a de:and nd i: i::e :edi diat ate e ,e+a6:ent o, i5idation o# te o;iaw. >aw.
Ga:e! and Ga,:ent! De-eo+e,!* In".* +etitione, -!. Aied Ban$in< Co,+o,ation* Co,+o,ation* ,e!+ondent. ,e!+ondent. G.R. No. 1812* /56 14* 2013* Leona,dode Ca!to* /. Qey "octrine: 'ection 3; o the )eneral *anking Act, as amended, amended, proscribes proscribes banks rom entering into into 5any contract o guaranty or suretyship6 without providing defnitions o such contracts.
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Spouses Bienvenida and Benedicto !antaleon agreed to purch purchase ase a parce parcell of land land locate located d at Bayana Bayanan, n, unti untinl nlup upa, a, owne owned d $y peti petiti tion oner er,, ;ame ;ames s and and ;arments "evelope "evelopers, rs, -nc. ;;"- for the sums of !28,333,333.33 paya$le to ;;"-, !8,333,333.33 paya$le to the Cosay =amily, and !2,333,333.33 !2,333,333.33 as attorneyOs fees paya$le to ;;"- @!I>egal and counsel Atty. Cesar . >ao >ao. The parties parties executed executed a emorand emorandum um of Agreemen Agreementt FA dated August ((, 244), specifying the terms $y which the payment will $e satis'ed. Fn August ((, 244), ercado, ercado, Branch Branch anager anager of Allied BankI !asong !asong Tamo, Tamo, issued a letter addressed addressed to Atty. Atty. >ao of ;;"- and with BienvenidaOs conforme, printed on the letterhead of Allied Bank, which reads< This is with reference to the real prop proper erty ty loca locate ted d at 1ati 1ation onal al *oad *oad,, Bayanan, untinlupa CityR, a lot covered $y Transfer Certi'cate of Title TCT 1o. (354)5. !lea !lease se $e advis dvise ed that hat Bie Bienve nvenida ida !anta !antaleo leon0S n0Suc ucat at -mpor -mport0E t0Expo xport rt who is purchasing the a$oveImentioned property has an approved real estate loan with us in the amount of !ESFS< E>E@E1 ->>-F ->>-F1 1 F1 F1> > !22,3 !22,333 33,33 ,333.3 3.33, 3, the portion of the proceeds of which shall $e used used to partia partially lly li&uid li&uidate ate the accoun accountt with with you. you. Succe Succeed eding ing releas releases es which which is secured secured $y the su$/ect su$/ect property property will $e made made paya$l paya$le e to ;ame ;ames s and ;arme ;arments nts "evelopers, -nc. After said Transfer Certi'cate of Titl Title e TCT TCT cove coveri ring ng said said prop proper erty ty is already transferred in our clientOs name, our mortgage duly annotated thereon, we guar guaran ante tee e to pay pay dire direct ctly ly to you you the the amou amount nt of !ESF !ESFS< S< E-;6 E-;6T T ->> ->>-F -F1 1 T6*EE T6*EE 6%1"*E 6%1"*E" " S-MT S-MT T6F%SA T6F%SA1" 1" F1> F1> !:,+)3,3 !:,+)3,333.3 33.33 3 ninety ninety days from August (+, 244) or on or $efore 1ovem$er (2, 244).
It i! 5nde,!tood tat ti! <5a,ant6 i! i,,e-o"a;e.
Fn Augu August st (+, (+, 244) 244) ;;";;"-,, thro throug ugh h its its !res !resid iden entt Sunder 6emandas, executed executed a "eed of Sale in favor of the Spouse Spouses s !antale antaleon. on. 6oweve 6oweverr, in the "eed "eed the amount of purchase price for the su$/ect property was reduced to !22,333,333.33. Fn the same day the "eed was executed, *" of akati cancelled the TCT in the name of ;;"- and issued anot anothe herr in the the name name of Bien Bienve veni nida da,, marr marrie ied d to Bene Benedi dict cto o !anta antale leon on.. The The noti notice ce of lis lis pend penden ens s concerning the civil case of the Cosay family against ;;"- was also cancelled and a *eal Estate ortgage in favor of Allied Allied Bank was annota annotate ted d to the TCT issued to Bienvenida. "espite ercadoOs letter dated August ((, 244), and un$eknownst to ;;"-, Allied Bank already released the procee proceeds ds of the approve approved d loan loan to the spouses spouses !antaleon on August (+, 244).
-n a letter dated 1ovem$er (2, 244) to Allied Bank, thru ercado, Atty. >ao re&uested for the immediate paym paymen entt of the the $ala $alanc nce e of the the purc purcha hase se pric price e amoun amountin ting g to !:,+) !:,+)3,3 3,333. 33.33 33 consid consideri ering ng that that the guaranty executed $y the $ank in favor of ;;"- was irrevoca$le and the TCT for the su$/ect property was already transferred in BienvenidaOs name. There $eing no acti action on on his his prev previo ious us lett letter er,, Atty Atty.. >ao >ao wrot wrote e anothe anotherr letter letter dated dated "ecem "ecem$e $err 22, 22, 244) 244) to Allied Allied Bank, thru ercado, to followIup on the re&uest for payment. Bienvenida, in a letter dated ?anuary ), 244, o7ered to pay ;;"- !2,333,333.33 on or $efore ?anuary (8, 244 and the $alance of !,+)3,333.33 plus interest on arch (:, 244. ;;"- received the !2,333,333.33 partial payment from Bienvenida via two checks dated ?anuary 2, 244 and ?anuary ?anuary (8, 244 for the amount of !533,3 !533,333 33.33 .33 each. each. Bienve Bienvenid nida a then then issued issued two Allied Bank postdated checks for arch (:, 244 for the amounts amounts of !,+)3,3 !,+)3,333.3 33.33 3 and !88(,+83 !88(,+83.33, .33, to cover the $alance of the purchase price for the su$/ect property and interest, respectively. ercado ercado executed executed another letter letter dated dated ?anuary ?anuary (, 244 addressed to Atty. >ao, similarly worded as his lett lette er date ated Augu August st ((, 244), except for the pen penulti ultim mate para aragrap graph h whic which h stat state es that hat >e amount of <5a,an <5a,ante tee e to +a6 di,e"t6 di,e"t6 to 6o5 the amount !ESFS< !ESFS< SE@E1 SE@E1 ->>-F1 ->>-F1 E-;6T E-;6T 6%1"*E" 6%1"*E" TF T6F%SA1" T6*EE 6%1"*E" =F*T !,:3(,+83.33 sixty days from ?anuary (, 244 or on or $efore arch (:, 244.U hen hen ;;";;"- depos deposite ited d the two Allied Allied Bank Bank checks checks dated dated arc arch h (:, (:, 244 244 issued issued $y Bienve Bienvenid nida, a, said said check checks s were were dishon dishonore ored d for $eing $eing V"rawn V"rawn Agains Againstt -nsu7icient =unds.U Atty. Atty. >ao sent a letter dated August 25, 244 to the 6ead 6ead F7ic F7ice e of Allie Allied d Bank Bank in aka akati ti City City,, copy copy furnished furnished ercado, ercado, referring referring to ercadoO ercadoOs s letter letter of guaranty dated ?anuary (, 244 and making a 'nal re&ues re&uestt for paymen paymentt of the sum of !,:3 !,:3(,+ (,+83. 83.33 33 within seven days from receipt of the current letter. 6emandas, !resident of ;;"-, sent a fax letter to Aida T. u, @ice !resident of Allied Bank, also re&uesting payment payment $ased $ased on ercadoOs ercadoOs letter of guaranty guaranty,, in response the $ank said, e asked r. ercado a$out this and he said that this letter Rdated ?anuary (, 244 was not really intended as a Rgua Rguara rant nty y for for anyt anythi hing ng $ut $ut was was an accommo accommodatio dation n to a re&uest re&uest of Atty. Cesar >ao, the @ice !resident of ;ames and and ;arm ;armen ents ts "eve "evelo lope pers rs,, -nc. -nc. 6e even emphasi#ed to Atty. >ao that he was was not not auth author ori# i#ed ed to issu issue e such such Rguaranty inasmuch as ;an$! a,e not
ao>ed to do !o 5nde, te Gene,a Ban$in< A"t.
Thus ;;"- 'led Fn April 25, 244:, ;;"- 'led $efo $efore re the the *TC *TC a Comp Compla lain intt for for Brea Breach ch of Cont Contra ract ct *es *esci ciss ssio ion n and and "ama "amage ges s with with 7
prayer for !reliminary Attachment against the spouses !antaleon, ercado, and Allied Bank. *TC ruled in favor of ;;"-. Fn Appeal, CA modi'ed the decision of *TC, a$solving Allied Bank.
I!!5e hether or not Allied Bank is $ound $y the letter of ;uaranty executed $y ercado. es. R5in< es. The The lett letter ers s exec execut uted ed $y erc ercad ado o are are not not cont ontrac racts of guaran aranty ty cove overed red $y the the prohi$ prohi$iti ition on in the ;ener ;eneral al Bankin Banking g Act, Act, as amended. -t is undi undisp sput uted ed that that erc ercad ado o wrot wrote e two two Vletters Vletters of guarantyU guarantyU dated August ((, 244) and ?anuar ?anuary y (, (, 244. 244. Althou Although gh erc ercado adoOs Os lett letter ers s used used the the word words s Vgua Vguara rant ntee eeU U and and Vgua Vguarranty anty,U the the same same do not not cons consti titu tute te cont ontrac racts of guaran aranty ty cove overed red $y the the prohi$itio prohi$ition n under under Section Section 8 of the ;eneral ;eneral Banking Act, as amended. Section 8 of the ;eneral Banking Act, as amended, proscri$es $anks $anks from from enter entering ing into into Vany Vany contra contract ct of guara guaranty nty or surety suretyshi shipU pU withou withoutt provid providing ing de'nitions of such contracts. Conse&uently, Conse&uently, we rely on the general de'nitions of contracts of guaranty and suretyship under Article (38 of the Civil Code< A*T. A*T. (38. By guaranty guaranty a person, called called the guarantor, $inds himself to the creditor to ful'll the o$ligation of the principal de$tor in case the latter should fail to do so. -f a person $inds himself solidarily with the principal de$tor, de$tor, the provisions of Section 8, Chapter +, Title - of this Book shall $e o$served. -n such case the contract is called a suretyship. Ther There e was was no expr expres ess s unde undert rtak akin ing g in erc ercad adoO oOs s letters dated August ((, 244) and ?anuary (, 244 to pay pay Bienve Bienvenid nidaOs aOs de$t de$t to ;;";;"- in case case Bienve Bienvenid nida a fail failed ed to do so. so. -n said said lett letter ers, s, erc ercad ado o mere merely ly acknowled acknowledged ged that Bienvenid Bienvenida a and0or and0or her company company had an approved real estate loan with Allied Bank and guarante guaranteed ed that su$se&uent su$se&uent releases releases from the loan would would $e made made direc directly tly to ;;";;"- provid provided ed that that the certi'cate of title over the su$/ect property would $e transferred to BienvenidaOs name and the real estate mortgage constituted on the su$/ect property in favor of Alli Allie ed Bank Bank woul would d $e anno annota tate ted d on the the said said certi' certi'ca cate. te. erca ercado, do, $y the plain plain langua language ge of his letters, merely committed to the manner $y which the proceed proceeds s of Bienvenid BienvenidaOs aOs approved approved loan from Allied Bank would $e released, $ut did not o$ligate Allied Bank to $e answera$le with its own money to ;;"should should Bienve Bienvenid nida a defaul defaultt on the payme payment nt of the purchase price for the su$/ect property. =or this reason, ercadoOs letters may not $e deemed as cont contra ract cts s of guar guaran anty ty,, alth althou ough gh they they may may $e $inding as innominate contracts. The rule is settled that a contract constitutes the law $etween the parties
who who are are $oun $ound d $y its its stip stipul ulat atio ions ns whic which, h, when when couc couche hed d in clea clearr and and plai plain n lang langua uage ge,, shou should ld $e applied according to their literal tenor. e cannot supply material stipulations, read into the contract words it does not contain or, for that matter, read into it any other intention that would contradict its plain plain import import.. 1eithe 1eitherr can we rewri rewrite te contra contract cts s $ecause they operate harshly or ine&uita$ly as to one of the parties, or alter them for the $ene't of one part party y and and to the the detr detrim imen entt of the the othe otherr, or $y construction, relieve one of the parties from the terms which he voluntarily consented to, or impose on him those which he did not. Fther rulings< 2. Based Based on the doctri doctrine ne of appare apparent nt author authority ity, Allied Bank is $ound $y the undertaking in the letters dated August ((, 244) and ?anuary (, 244 44 exec xecuted ted $y ercad rcado o as Bran ranch anager of Allied BankI !asong Tamo. (. =or its failu failure re to comp comply ly with with its under undertak taking ing under the letters dated August ((, 244) and ?anuary (, 244, Allied Bank is lia$le to ;;"for temperate0moderate, exemplary0corrective damages, and attorneyOs fees. +. Allied Allied Bank Bank is a mortgag mortgagee ee in $ad faith and the the foreclosure on the real estate mortgage and pu$lic auction sale of the su$/ect property are null and void.
D. Ban$in< and In"identa %o>e,! )%O&)E) RA&L and AALIA %ANLILIO -. CI'IBANK* N.A. G.R. No. 13443 No-e:;e, 28* 2007 A&)'RIA AR'INE* /. Investment management management activities may be exercised by a banking institution.
Fa"t! !etitio etitione nerr Amalia Amalia !anlilio anlilio Amali Amalia a phone phoned d Citi$ank saying she wanted to place an investment, for three three millio million n pesos pesos !h!+ !h!+ millio million. n. She spoke spoke with with ?inky >ee, the $ank employee, who introduced her to Citi$ank Citi$anks s various various investme investment nt o7erings. o7erings. "uring "uring the visit, Amalia instructed >ee on what to do with the !h!+ million. >ater, she learned that out of the said amount, !h!(,2+8,)+5.: was placed $y Citi$ank in a >ong >ongIITerm erm Com Commerc mercia iall !aper aper >TC >TC! !,, a de$t de$t instru instrume ment nt that that paid paid a high high intere interest, st, issued issued $y the corp corpor orat atio ion n Cam Camella ella and and !alme almera ra6o 6ome mes s CW CW! 6omes 6omes.. The rest of the money money was placed placed in two !*!1 !*!1 accoun accounts, ts, in trust trust for each of Amali Amalias as two children. =ollowing this investment, respondent claims to have regularly regularly sent con'rmation con'rmations s of investme investment nt CF-s to petitioners. Amalia claims to have called >ee as soon as she received the 'rst CF- in "ecem$er 244, and demanded that the investment in >TC! $e with withdr draw awn n and and plac placed ed in a !*!1 !*!1.. *esp *espon onde dent nt,, howeve howeverr, denies denies this, this, claimi claiming ng that that Amalia Amalia merel merely y
8
calle called d to clarif clarify y provis provision ions s in the CF- and did not demand a withdrawal !etitio !etitioner ner then met with responde respondents nts other other employee, >i##a Colet, to preterminate the >TC! and their other investments. !etitioners were told that as to the >TC!, li&uidation could $e made only if there is a willing $uyer, a prospect which could $e di7icult at that time $ecause of the economic crisis. Amalia, through counsel, sent her 'rst formal, written demand to respondent for a withdrawal of her investment as soon as possi$le. -n reply, respondent wrote a letter stating that despite e7orts to sell the >TC!, no willing $uyers were found and that even if a $uyer would come later, later, the price would $e lower than Amalias original investment. investment. Thus Thus,, peti petiti tion oner ers s 'led 'led with with the the *TC *TC thei theirr complaint against respondent for a sum of money and damages. The *TC uph upheld all the the alle llegatio ation ns of peti petiti tion oner ers s and and conc conclu lude ded d that that Amal Amalia ia neve neverr instructe instructed d Citi$ank Citi$ank to invest invest the money in an >TC!. Thus Thus,, the the *TC *TC foun found d Citi Citi$a $ank nk in viol violat atio ion n of its its contractual and 'duciary duties and held it lia$le to retu return rn the the mone money y inve invest sted ed $y peti petiti tion oner ers s plus plus damages. The CA held that with respect to the amount of !h!(,2+8 !h!(,2+8,)+5 ,)+5.:, .:, the account account opened opened $y Amalia Amalia was an investment management account9 as a result, the the mone money y inve invest sted ed was was the the sole sole and and excl exclus usiv ive e o$ligation of CW! 6omes, the issuer of the >TC!, and was not guaranteed or insured $y herein respondent Citi$a Citi$ank9 nk9 that that Amalia Amalia opened opened such such an accoun accountt as evid eviden ence ced d $y the the docu docume ment nts s she she exec execut uted ed with with Citi$ank.
I))&E hether the transaction can $e legally exercised $y a BankG hether petitioners are entitled to take $ack the money they invested from respondent $ankG The The transa transact ction ion is perfe perfect ctly ly legal, legal, as invest investme ment nt management activities may $e exercised $y a $anking institution, pursuant to *epu$lic Act 1o. ++ or the ;eneral Banking Act of 248:, as amended, which was the law then in e7ect. Section ( of said Act provides< Sec. (. -n addition to the operations speci' speci'ca cally lly author authori#e i#ed d elsew elsewher here e in this this Act, Act, $ankin $anking g instit instituti utions ons other other than than $uild $uilding ing and loan loan associ associati ations ons may perform the following services< a *eceiv *eceive e in custod custody y funds, funds, docume documents nts,, and valua$le o$/ects, and rent safety deposit $oxes for the safeguarding of such e7ects9
(; A"t a! fnan"ia fnan"ia a
!e"5,itie!H c ake collec lections and payments for the account of others and perform such other services for their cust custom omer ers s as are are not not inco incomp mpat ati$ i$le le with $anking $usiness. d %pon prior approval of the one oneta tary ry Boar Board, d, act act as mana managi ging ng agent, adviser, consultant or administrator of investment manage manageme ment0 nt0 advis advisory ory0c 0cons onsult ultanc ancy y accounts.
'e ;an$! !a +e,#o,: te !e,-i"e! +e,:itted 5nde, !5;!e"tion! (a* (; and (" o# ti! !e"tion a! de+o!ito,ie! o, a! ai" i" te6 t5 t5! ,e"ei,e"ei-e e d56 d56 !e+a,a !e+a,ated ted and a+a,t a+a,t #,o: #,o: te te ;an$ ;an$J! J! o>n o>n a!!e a!!et! t! and and ia;iitie!. The onetary Board may regulate the operation operations s authori#e authori#ed d $y this section section in order to insure that said operations do not endanger the interests of the depositors and other creditors of the $anks. Emphasis supplied. while Section 8 prohi$its $anks from guaranteeing o$ligations of any person, thus< 8. No ;an$ o, ;an$in< in!tit5tion !a ente,* di,e"t6* o, indi,e indi,e"t "t66 into into an6 an6 "ont "ont,a ,a"t "t o# <5a,an <5a,ant6 t6 o, !5,et !5,et6! 6!i+* i+* o, !a !a <5a,antee te inte,e!t o, +,in"i+a o# an6 o;i
pro provisi vision ons s of this this sec section tion sha shall, ll, however, not apply to the following< a $or $orrowi rowing ng of mone oney $y $an $ankin king institution institution through through the rediscoun rediscounting ting of receiva$les9 $ acceptance of drafts or $ills of exchange c certi'cation of checks9 d transactions involving the release of documents attached to items received received for collection collection99 e letters letters of credit credit transact transaction, ion, including including standI$y standI$y arrangements9 f repurchase agree agreeme ments nts99 g shipsi shipside de $onds9 $onds9 h ordinary ordinary guarantee guarantees s or indorsem indorsements ents in favor of foreign creditors where the principal o$ligation involves loans and credit credits s exten extended ded direc directly tly $y foreig foreign n invest investmen mentt purpo purposes ses99 and i other other tran transa sact ctio ions ns whic which h the the one oneta tary ry Board Board may, $y regula regulatio tion, n, de'ne de'ne or specify as not covered $y the prohi$ition. Emphasis supplied. 1othing also taints the legality of the >TC! $ought in $ehalf $ehalf of petit petition ioners ers.. CW! CW! 6omes 6omes >TC! was duly duly regi regist ster ered ed with with the the Secu Securi riti ties es and and Exch Exchan ange ge Commission while the issuer was accredited $y the !hilippine Trust Committee. 9
!etitioners may not seek a return of their investment directly from respondent at or prior to maturity. As earlier explained, the investment is not a deposit and is not guaranteed $y respondent. A$sent any fraud or $ad faith, the recourse of petitioners in the >TC! is solely against the issuer, CW! 6omes, and only upon maturity. -t is clear that since the money is committed to CW! 6ome 6omes s via via >TC! TC! for for 've year years, s, or unti untill (33+ (33+,, petitioners may not seek its recovery from respondent prior to the lapse of this period. !etitioners must wait and meanwhile /ust $e content with receiving their interest interest regularly regularly. -f petitione petitioners rs want the immediate immediate return of their investment $efore the maturity date, their only way is to 'nd a willing $uyer to purchase the >TC! at an agreed price, or to go directly against the issuer CW! 6omes, not against the respondent.
E. Dii
The petitioner S-EM was a depositor of the resp respon onde dent nt $ank $ank T*A" T*A"E* E*S S *F *FA> BA1Q BA1Q and and main mainta tain ined ed a chec checki king ng acco accoun untt in its its $ran $ranch ch at *omulo Avenue, Cu$ao, Lue#on City. S-EM deposited to its its acc account ount in the the said said $an $ank the the amou amoun nt of !233,33 !233,333.33 3.33.. Su$se&uen Su$se&uently tly,, S-EM S-EM issued issued several several checks against its deposit $ut was suprised to learn later that they had $een dishonored for insu7icient funds. As a conse&uence, conse&uence, the California anufacturing anufacturing Corporation sent, a letter of demand to S-EM S-EM,, threat threateni ening ng prosec prosecuti ution on if the dishon dishonore ored d check issued to it was not made good. -t also withheld delivery of the order made $y S-EM. Similar letters were sent to S-EM $y the ala$on >ong >ife Trading and $y the ;. and %. Enterprises. S-EM complained to T*A"E*S *FA> *FA> BA1Q on ?une 23, 24:2. -nvestigation disclosed that the sum of !233,333.33 deposited $y S-EM on ay (5, 24:2, had not $een credited to it. The error was recti'ed on
?une 2, 24:2, and the dishonored checks were paid after they were reIdeposited. reIdeposited. S-EM demanded reparation from T*A"E*S *FA> BA1Q for its Hgross and wanton negligence.H This This dema demand nd was was not not met. met. S- S-EM then then 'led 'led a complaint in the then Court of =irst -nstance of *i#al claiming from T*A"E*S *FA> BA1Q moral damages in the sum of !2,333,333.33 and exemplary damages in the sum of !533,333.33, plus (5 attorneys fees, and costs. *FA> BA1Q is I))&E< hether or not T*A"E*S *FA> lia$le for damages
R&LING< ES. -n every case, the depositor expects the $ank to treat his account with the utmost 'delity, whether such account consists only of a few hundred pesos or of mill millio ions ns.. The The $ank $ank must ust reco record rd ever every y sing single le transaction accurately, down to the last centavo, and as promptly as possi$le. This has to $e done if the account is to rePect at any given time the amount of money money the depos deposito itorr can dispose dispose of as he sees sees 't, 't, con' con'de dent nt that that the the $ank $ank will will deli delive verr it as and and to whomever he directs. A $lunder on the part of the $ank, such as the dishonor of a check without good reason, can cause the depositor not a lit little em$arrassment if not also 'nancial loss and perhaps even civil and criminal litigation. The point is that as a $usiness a7ected with pu$l pu$lic ic inte intere rest st and and $eca $ecaus use e of the the natu nature re of its its functions, the $ank is under o$ligation to treat the acco accoun unts ts of its its depo deposit sitor ors s with with meti meticu culo lous us care care,, always always having having in mind mind the 'duciary 'duciary nature of their relationship. -n the case at $ar, it is o$vious that the respondent $ank was remiss in that duty and violated that relationship. hat is especially deplora$le is that, having $een informed of its error in not crediting the deposit in &uestion to the petitioner, the respondent $ank did not immediately correct it $ut did so only one week later or twentyIthree days after the deposit was made. made. -t $ears $ears repeat repeating ing that that the record record does does not contain any satisfactory explanation of why the error was was made made in the the 'rst 'rst plac place e and and why why it was was not not corr correc ecte ted d imme immedi diat atel ely y afte afterr its its disc discov over ery y. Such Such ineptn ineptness ess comes comes under under the conce concept pt of the wanto wanton n manner contemplated in the Civil Code that calls for the imposition of exemplary damages. After deli$erating on this particular matter, matter, the Court, Court, in the exercise exercise of its discre discretio tion, n, here$ here$y y impo impose ses s upon pon the the resp respon onde dent nt $ank $ank exem exempl plar ary y damage damages s in the amount amount of !53,33 !53,333.3 3.33, 3, H$y way of examp example le or corre correcti ction on for the pu$lic pu$lic good,H good,H in the words of the law. -t is expected that this ruling will serv serve e as a warn warnin ing g and and dete deterr rren entt agai agains nstt the the repetition of the ineptness and inde7erence that has
10
$een displayed here, lest the con'dence of the pu$lic in the $anking system $e further impaired. T*A"E* T*A"E*S S *FA> *FA> BA1Q BA1Q is order ordered ed to pay pay S-EM, in lieu of nominal damages, moral damages in the amount of !(3,333.33, and exemplary damages in the amount of !53,333.33 plus the original award of attorneys fees in the amount of !5,333.33, and costs.
)ia -!. Co5,t o# A++ea! G.R. No. 102970* a6 14* 1994* DAIDE* /R.* /. $ontract or the use o saety deposit box is a special kind kind o depos deposit it and the relati relations onship hip betwee between n the parties parties thereto, with respect respect to the contents contents o the box, is that o a bailor and bailee, the bailment being or hire and mutual mutual beneft. $onditions in a 59ease Agreement6 covering a saety deposit box which exempt the bank rom any liability or damage, loss or destruction destruction o the contents thereo arising rom its own or its agent>s raud, negligence or delay are considered null and void, or being contrary to law and public policy. Although ?ooding could be considered a ortuitous event, ailure o the bank to give notice to the renter o suc such act act makes kes it liab iable or dam damage ages, its its negligence caused to aggravate in@ury or damage to the renter
Fa"t! This This is an acti action on for for dama damage ges s aris arisin ing g out out of the the destr destruct uction ion or loss loss of the stamp stamp collec collectio tion n of the plainti7 >%XA1 S-A petitioner herein contained in Safety Safety "eposit "eposit Box 1o. 58 which which had $een rente rented d from from the defend defendant ant SEC%* SEC%*-T -T BA1Q BA1Q A1" T*%ST T*%ST CF!A1 SBTC pursuant to a contract denominated as a 9ease Agreeme 9ease Agreement nt. The plainti7 rented the Safety "eposit Box 1o. 58 of the defendant $ank at its Binondo Branch located at the wherein he placed his collection of stamps. The said safety deposit $ox leased $y the plainti7 was at the $ottom or at the lowest level of the safety deposit $oxes of the defendant $ank at its aforesaid Binondo Branch. "uring the Poods that took place in 24:5 and 24:), Pood Poodwa wate terr ente entere red d into into the the defe defend ndan antt $ank $ankOs Os premises, seeped into the safety deposit $ox leased $y the plainti7 and caused, caused, accordin according g to the plainti7, plainti7, damage to his stamps collection. The defendant $ank re/ected the plainti7Os claim for compensation for his damaged stamps collection, so, the plainti7 instituted an action for damages against the defendant $ank. The defendant $ank also contended 2. that that its contr contract act with with the the plaint plainti7 i7 over over safety safety deposit $ox 1o. 58 was one o lease and not o deposit and, therefore, governed $y the lease agreement agreement which should $e the applica$le law9 (. that th the destruction o the plainti8>s stamps collec collectio tion n was due to a calami calamity ty beyon beyond d its control9 and
+.
obligatio tion n on its part to that t he here w as as no obliga notiy the plainti8 about the ?oodwaters that inundated inundated its prem premis ises es at Binond Binondo o $ranc $ranch h which allegedly seeped into the safety deposit $ox leased to the plainti7.
The defendant also invokes the following provisions in the >ease Agreement of the safety $ox< 2. The bank is not a depositary of of the contents of the safe and it has neither the possession nor control of the same. ;. The $ank has no interest whatsoever in said contents, except as herein expressly provided, assume mes s abso absolu lute tely ly no liab liabili ility ty in and it assu connection therewith.
The trial court ruled in favour of S-A $ut this was reversed on appeal to CA.
I!!5e hether or not the contract $etween S-A and SBTC is one of lease which would exculpate SBTC from lia$ility on account of damage to stamps collection deposited in its safety deposit $ox.
R5in< -n the case of CA AgroI-ndustrial "evelopment Corp. vs. Court of Appeals, this Court explicitly re/ected the conten contentio tion n that that a contra contract ct for the use of a safety safety deposit $ox is a contract of lease governed $y Title @--, Book -@ of the Civil Code. 1or did we fully su$scri$e to the view that it is a contract of deposit to $e strictly governed $y the Civil Code provision on deposit9 it is, as we declared, a special kind of deposit. =urthermore, =urthermore, Section ( of the ;eneral Banking Act R*.A. ++, as amended pertinently pertinently provides< SEC. (. -n addition to the operations speci'cally authori#ed elsewhere in this Act, $anking institutions other than $uilding and loan associations may perform the following services< a *eceive in custody funds, documents, and valua$le o$/ects, and rent saety deposit boxes for the safeguarding of such e7ects. xxx The $anks shall perform the services permitted under su$sections a, $, and c of this section as depositories or as agents. Accordingly, Accordingly, the depositary would $e lia$le if, in performing its o$ligation, it is found guilty of fraud, negligence, delay or contravention of the tenor of the agree agreeme ment nt RArt. RArt. 223 223,, id.. id.. -n the a$sence a$sence of any stip stipul ulat atio ion n pres prescr cri$ i$in ing g the the degr degree ee of dili dilige genc nce e re&uired, that of a good father of a family is to $e o$serv o$served ed RArt. RArt. 22+, 22+, id.. id.. 6ence 6ence,, any stipul stipulati ation on exempting exempting the deposita depositary ry from any lia$ility lia$ility,, arising arising from from the loss of the thing thing depos deposite ited d on accou account nt of fraud, fraud, negligenc negligence e or delay delay would would $e void for $eing cont contra rary ry to law law and and pu$l pu$lic ic poli policy cy and and as such such,, provis provision ions s B2 B2 and ; in the lease lease agreem agreement ent of safety deposit $ox $eing invoked $y SBTC are void. =urtherm =urthermore, ore, said provisions provisions are inconsis tent with
11
the respondent BankOs responsi$ility as a depositary under Section (a of the ;eneral Banking Act. As to lia$ility of SBTC, although Pooding could $e considered a fortuitous event, failure of the $ank to give notice notice to the renter of such fact makes it lia$le lia$le for damages, its negligence caused to aggravate in/ury or damage to the renter. SBTC was aware of the Poods of 24:5 and 24:)9 it also knew that the Poodwaters inundated the room where Safe "eposit Box 1o. 58 was located. -n view thereof, it should have lost no time in notifying the petitioner in order that the $ox could have $een opened to retrieve the stamps, thus saving the same from further deterioration and loss. -n this respect, it failed to exercise the reasona$le care and prudence expected of a good father of a family, there$y $ecoming a party to the aggravation of the in/ury or loss.
REE) ). CO&R' OF A%%EAL) G.R. No. 11892. A5<5!t 13* 2001* DE LEON* /R.* /. /.
Fa"t! -n view view of the (3th Asian Asian *acing *acing Confe Conferen rence ce then then sche schedu dule led d to $e held held in Sydn Sydney ey, Aust Austra rali lia, a, the the !hilippine *acing Clu$, -nc. !*C-, for $revity sent four 8 delegates to the said conference. !etitioner ;rego ;regorio rio 6. *eyes, *eyes, as viceIp viceIpre resid sident ent for 'nanc 'nance, e, racing manager, treasurer, and director of !*C-, sent ;odof ;odofred redo o *eyes, *eyes, the clu$Os clu$Os chief chief cashie cashierr, to the resp respon onde dent nt $ank $ank =A* EAST EAST BA1Q BA1Q A1" A1" T*%S T*%ST T CF!A1 to apply for a foreign exchange demand draft for Fne Thousand Six 6undred Ten Australian "ollars A%Y2,)23.33 A%Y2,)23.33 paya$le to the order of the (3th Asian *acing Conference Secretariat of Sydney, Sydney, Australia. The respondent $ankat 'rst denied the application for the reason that it did not have an Australian dollar account account in any $ank in Sydney Sydney.. ;odofred ;odofredo o asked asked if there here could ould $e a way for for resp respon onde den nt $ank ank to accommodate !*C-Os urgent need to remit Australian dollars dollars to Sydney Sydney.. *esponden *espondentt $ank then informed informed ;odo ;odofr fred edo o of a roun rounda da$o $out ut way way of e7ec e7ecti ting ng the the re&uested remittance to Sydney thus< 2. the the respo respond nden entt $ank woul would d draw draw a dema demand nd draft against estpac Bank in demand draft agains againstt estpac estpac Bank Bank in Sydne Sydney y, Austra Australia lia We!t+a")6dn for $revity and We!t+a")6dne6 e6 for (. have have the latte latterr reim$ur reim$urse se itself itself from from the %.S %.S.. dollar account of the respondent in estpac Bank in 1ew ork, %.S.A We!t+a" We!t+a" Ne> o,$ o,$ for $revity. !*C!*C- and the petit petition ioner er ;regor ;regorio io 6. *eyes, *eyes, actin acting g through ;odofredo, agreed to this arrangement. The respo responde ndent nt $ank $ank approv approved ed the said said applic applicati ation on of
!*C!*C- and issued issued =oreign oreign Exchan Exchange ge "emand "emand "raft "raft =M"" 1o. (344): in the sum applied for, that is, Fne Thou Thousa sand nd Six Six 6und 6undre red d Ten Aust Austra rali lian an "oll "ollar ars s A%Y2,)2 A%Y2,)23.33 3.33, , +a6a;e to te o,de, o# te 20t
A!ian Ra"in< Con#e,en"e )e",eta,iat o# )6dne6* )6dne6* A5!t,aia, and addressed to We!t+a")6dn We!t+a")6dne6 e6 a! te d,a>ee ;an$ .
%pon %pon due due pres presen entm tmen entt of the the fore foreig ign n exch exchan ange ge demand draft, denominated as =M"" 1o. (344):, the same was dishonore dishonored, d, with the notice notice of dishonour dishonour statin stating g the followin following< g< Vx x x 1o accoun accountt held held with with estpac.U Fn -n response to !*C-Os complaint a$out the dishon dishonor or of the said said foreig foreign n excha exchange nge demand demand draft, draft, responden respondentt $ank informed informed estpacISy estpacISydney dney of the the issu issuan ance ce of the the said said dema demand nd draf draftt =M"" =M"" 1o. 1o. (344) (344):, :, drawn drawn agains againstt the estpa estpacIS cISyd ydney ney and info inform rmin ing g the the latt latter er to $e reim reim$u $urs rsed ed from from the the responde respondent nt $ankOs $ankOs dollar dollar account account in estpacI1 estpacI1ew ew ork. ork. The respondent $ank on the same day likewise informed estpacI1ew ork re&uesting the latter to honor the reim$ursement claim of estpacISydney. Fn Septem$er 28, 24::, upon its second presentment for payment, =M"" 1o. (344): was again dishonored $y estpacISydney for the same reason, that is, that the respondent $ank has no deposit dollar account with the drawee dra wee estpacI Sydney. %pon arrival of the petitioners in Australia to attend the racing conference, they were denied registration in fron frontt of othe otherr dele delega gate tes s $eca $ecaus use e the the fore foreig ign n exchange exchange demand demand draft draft for his registrat registration ion fee had $een dishonored for the second time. The petition petitioner ers s 'led 'led in the *egion *egional al Trial Trial Court Court of akat akati, i, etro etro anil anila, a, a compla complaint int for dama damages ges,, dock docket eted ed as Civi Civill Case Case 1o. 1o. ::I( ::I(8) 8):, :, agai agains nstt the the resp respon onde dent nt $ank $ank due due to the the dish dishon onor or of the the said said fore foreig ign n exc exchang hange e dem demand and draf draftt issu issued ed $y the the respondent $ank. The petitioners claim that as a result of the dishonor of the said demand draft, they were exposed to unnecessary shock, social humiliation, and deep mental anguish in a foreign country, and in the presence of an international audience. Both the trial court and court of appeals dismiss the claim for damages in favour of the respondent $ank. -n so ruling, CA said that the standard of diligence for the transa transacti ction on under under consid considera eratio tion n is that that of an Vordinary prudent personU and that there is no $asis to hold the respondent $ank lia$le for damages for the reason reason that that it exerte exerted d every every e7ort e7ort for the su$/ec su$/ectt fore foreig ign n exch exchan ange ge e7or e7ortt for for the the su$/ su$/ec ectt fore foreig ign n exchange demand draft to $e honored.
I!!5e hether or not respondent $ank should $e held lia$le for damages.
R5in< The The fact facts s as foun found d $y the cour courts ts a &uo &uo show show that that resp respon onde dent nt bank bank did did not not caus cause e an erro errone neou ous s transmittal o its 'I< cable message to estpac'ydney . -t was the e,,oneo5! e,,oneo5! de"odin< o# te "a;e :e!! :e!!a< a
12
ca$le message as a format for a letter of credit, and not for a demand draft. The evidence evidence also shows that the responde respondent nt $ank exerc exercise ised d that that degre degree e o dilige diligenc nce e expec expected ted o an ordinary prud pruden entt pers person on under under the circumst circumstance ances s o$taining. !rior to the 'rst dishonor of the su$/ect foreign exchange demand draft, the respondent $ank advised estpacI1ew ork to honor the reim$ursement claim of estpacISydney and to de$it the dollar account of respondent $ank with the former. As soon as the demand draft was dishonored, the respondent $ank, thinking that the pro$lem was with the reim$ursement and without any idea that it was due to miscommunication, reIcon'rmed the authority of estpacI1ew ork to de$it its dollar account for the purpose of reim$ursing estpacISydney. -n !hilippine Bank of Commerce v. Court of Appeals upholding a long standing doctrine, we ruled that the degree of diligence re&uired of $anks, is more than that of a good father of a family where the 'duciary nature nature of their relationship relationship with their depositor depositors s is concerned. -n other words $anks are duty $ound to treat the deposit accounts of their depositors with the highest degree of care. But the said ruling applies only to case cases s wher where e $ank $anks s act act unde underr thei theirr 'duc 'ducia iary ry capacity, that is, as depositary of the deposits of their depositors. But the same higher degree of diligence is not expected to $e exerted $y $anks in commercial tran transa sact ctio ions ns that that do not not invo involv lve e thei theirr 'duc 'ducia iary ry relationship with their depositors. Considerin Considering g the foregoing, foregoing, the respondent bank was not require required d to exert exert more than the diligenc diligence e o a good ather ather o a ami amily ly in rega regard rd to the the sale sale and and issuan issuance ce o the sub@e sub@ect ct oreig oreign n excha exchange nge deman demand d drat. The case at $ar does not involve the handling o petitioners> deposit, if any, with the respondent $ank. -nstead, the relationship involved was that of a buyer and seller , that is, $etween the respondent $ank as the seller of the su$/ect foreign exchange demand draft, and !*C- as the $uyer of the same, with the (3th Asian *acing Conference Secretariat in Sydney, Sydney, Australia as the payee payee thereof. thereof. The The evide evidence nce shows shows that that the respo respond ndent ent $ank $ank did everything within its power to prevent the dishonor of the su$/ec su$/ectt foreig foreign n excha exchange nge deman demand d draft. draft. The erroneous reading of its ca$le message to estpacI Sydney $y an employee of the latter could not have $een foreseen $y the respondent $ank. -n any event, it was esta$l esta$lish ished ed that that the respon responden dentt $ank $ank acted acted in good faith and that it did not cause the em$arrassment em$arrassment of the petitioners i n Sydney, Sydney, Australia. 6enc 6ence, e, the the Cour Courtt of Appe Appeals als did did not not comm commit it any any reversi$le error.
%ILI%%INE )AING) BANK -. COWKING FOOD COR%ORA'ION G.R. No. 17732 /&L * 2008 REE)* R.'.* J. 'IRD DII)ION
Fa"t! ?oe Quan =ood Coporation issued in favor of Chowking 've 5 !SBank checks. The total amount of the su$/ect checks reached !55),4:2.:). ChowkingOs acting accounting manager, *ino T. an#ano, endorsed and encashed said checks with the Bustos Bustos $ranc $ranch h of !SBank !SBank.. All 've checks checks were were honored $y Santos, the $ranch head, even with only the endorsement endorsement of an#ano an#ano approving approving them. The sign signat atur ures es of the the othe otherr auth author ori# i#ed ed o7ic o7icer ers s of Chowki Chowking ng were were a$sent a$sent,, contra contrary ry to usual usual $ankin $anking g practice. %nexpectedly, an#ano a$sconded with and misappropriated misappropriated the check proceeds. hen Chowking found out an#ano scheme, it dema demand nded ed reim reim$u $urs rsem emen entt from from !SBa !SBank nk.. hen hen !SBank refused to pay, pay, Chowking 'led a complaint for a sum of money with damages $efore *TC. !SBa !SBank nk deni denied ed lia$ lia$il ilit ity y for for the the enca encash shed ed checks and maintained that it exercised due diligence in the the supe superv rvis isio ion n of all all its its empl employ oyee ees. s. -t even even dism dismiss issed ed Sant Santos os afte afterr she she was was foun found d guil guilty ty of negligence in the performance of her duties. -t also averre averred d that that Chowk Chowking ing is stoppe stopped d from from claimi claiming ng reim$ursement and damages since it was negligent in allowing an#ano to take hold, endorse, and encash its checks. -t pointed out that the proximate cause of ChowkingOs loss was its own negligence. *TC rendered /udgment in favor of Chowking. !SBank then 'led a motion for reconsideration and *TC reversed its earlier ruling and held that it was ChowkingOs ChowkingOs own negligenc negligence e that was the proximate proximate cause of the loss. The CA set aside the order of *TC and held that $oth !SBank and Santos should $ear the loss.
I!!5e F1 !SBank o$served the due diligence re&uired of $anks under the law.
R5in< 1F. !SBa !SBan nk faile ailed d to prov prove e tha that it has has o$served the due diligence re&uired of $anks under the law l aw.. -t cannot $e over emphasi#ed that the $anking $usi $usine ness ss is impr impres esse sed d with with pu$l pu$lic ic inte intere rest st.. Ff paramount importance is the trust and con'dence of the the pu$l pu$lic ic in gene genera rall in the the $ank $ankin ing g indu indust stry ry. Conse&uently, the diligence re&uired of $anks is more than that of a *oman pater amilias or a good father of a family. The highest degree of diligence is expected. -n its its decl declar arat atio ion n of polic policy y, the the ;ene ;enera rall Banking >aw of (333 re&uires of $anks the highest 13
standards of integrity and performance. 1eedless to say, a $ank is Vunder o$ligation to treat the accounts of its depositors with meticulous care.U The 'duciary nature of the relationship $etween the $ank and the depositors must always $e of paramount concern. !SBank, through Santos, was clearly negligent when when it honore honored d Chowki ChowkingO ngOs s check checks s with with the lone lone endorsement of an#ano. The proximate cause of the loss is not ChowkingOs alleged negligence in allowing an#ano to take hold and encash ChowkingOs checks. The proximate cause id !SBankOs own negligence in the supervision of its employees when it overlooked the irregular practice of encashing checks without the re&uisite endorsements. endorsements. -n B!- v. Casa ontessori -nternationale, the Court similarly held< 5pursuant to its prime duty to ascertain well the the genu genuin inen enes ess s o the the sign signat atur ures es o its its clie client nt-deposi posittors ors on chec hecks bein being g encas ncashe hed d, *!I *!I is 5expected to use reasonable business prudence.6 In the perormance o that obligation, it is bound by its internal banking rules and regulation that orm part o the contract it enters into with its depositors. &nortunately &nortunately,, it ailed in that regard. ithout exerc exercisi ising ng the requir required ed prude prudence nce on its part, part, *!I accepted and encashed the checks presented to it. As a result, it proximately contributed to the raud and should be held primarily liable or the negligence o its o8icers or agents when acting within the course and scope o their employment. It must bear the loss.6
%ILI%%INE NA'IONAL BANK -. ERLANDO '. RODRIG&E and NORA RODRIG&E G.R. No. 170423 )E%'EBER 2* 2008 REE)* R.' R. '.* J. J. 'IRD DII)ION A bank that regularly processes checks that are neither payable to the customer nor duly indorsed by the payee payee is appare apparentl ntly y grossly grossly negligen negligentt in its operations. In a checking transaction, the drawee bank has the duty to veriy the genuineness o the signature o the the draw drawer er and and to pay pay the the chec check k stri strict ctly ly in accordance with the drawer>s instructions, i.e., to the named payee in the check.
Fa"t! Sps. *odrigue# *odrigue# were clients of !1B, Amelia Avenue Branch, Ce$u City. City. They maintained savings and demand0c demand0chec hecking king accounts. accounts. The spouses spouses were engaged in the informal lending $usiness. -n line with their their $usiness, $usiness, they had a discountin discounting g arrangeme arrangement nt with with the !hilna !hilna$an $ank k Emplo Employee yees s Saving Savings s and and >oan >oan Association !ES>A, an association of !1B employees. 1aturally, !ES>A was likewise a client of !1B Ame Amelia lia Aven venue Bra Branch. nch. The assoc ssocia iattion ion maintained current and savings accounts with !1B. !ES !ES>A >A regu regula larl rly y gran grante ted d loan loans s to its its mem$ mem$er ers. s. Sps Sps *odr *odrig igue ue# # woul would d redi redisc scou ount nt the the postdate postdated d checks checks issued issued to mem$ers mem$ers whenever whenever the association was short of funds. As was customary, the spouses would replace the postdated checks with their own checks issued in the name of the mem$ers.
-t was was !ES !ES>A >AOs Os poli policy cy not not to appr approv ove e applicati applications ons for loans of mem$ers mem$ers with outstandin outstanding g de$ts. To su$vert this policy, some !ES>A o7icers devised a scheme to o$tain additional loans despite their outstanding loan accounts. They took out loans in the the name names s of unkn unknow owin ing g mem$ mem$er ers, s, with withou outt the the knowle knowledge dge or conse consent nt of the latter latter.. The !ES>A !ES>A checks issued for these loans were then given to the spouses for rediscounting. The o7icers carried this out $y forging the indorsement of the named payees in the checks. -n return, return, the spouses issued their personal personal chec checks ks *od *odri rigu gue# e# chec checks ks in the the nam name of the the mem$ mem$ers ers and deliv delivere ered d the checks checks to an o7ice o7icerr of !ES>A !ES>A.. The !ES>A !ES>A check checks, s, on the other other hand, hand, were deposited $y the spouses to their account. ean eanwh whil ile, e, the the *odr *odrig igue ue# # chec checks ks were were deposited directly $y !ES>A to its savings account >ito5t an6 indo,!e:ent indo,!e:ent from the named payees. This This was was an irre irregu gula larr proc proced edur ure e made made poss possi$ i$le le through through the facilitat facilitation ion of Edmundo Edmundo !alerm !alermon, on, ?r., ?r., trea treasu sure rerr of !ES !ES>A >A and and $ank $ank tell teller er in the the !1B !1B Branch. -t appears that this $ecame the usual practice for the parties. =or the period 1ovem$e 1ovem$err 244: 244: to =e$ruary e$ruary 2444, the spouses issued sixtyInine )4 checks, in the total amount of !(,+85,:38.33. these were paya$le to fort fortyI yIse seve ven n 8 8 indi indivi vidu dual al paye payees es who who were were all all mem$ers of !ES>A. !1B even ventua tually lly foun ound out out a$ou $out the these fraudulent acts. To put a stop to this scheme, !1B closed the current account of !ES>A. As a result, the !ES>A checks deposited $y the spouses were returned or dishonored for reason VAccount Closed.U The corresponding *odrigue# checks, however, were deposited as usual to the !ES>A savings account. Thus, $ecause the !ES>A checks given as payment were were return returned, ed, spouse spouses s *odrig *odrigue# ue# incurr incurred ed losses losses from the rediscounting transactions. The spouses *odrigue# 'led a civil complaint for damage damages s again against st !ES>A !ES>A,, the ulti ultiI!u I!urpo rpose se Cooper Cooperati ative ve of !hil$a !hil$anke nkers rs C!, C!, and !1B. !1B. They They sought to recover the value of their checks that were depo deposi site ted d to the the !ES !ES>A >A savi saving ngs s acco accoun unt. t. The The spouse spouses s conte contende nded d that that $ecaus $ecause e !1B !1B credit credited ed the checks ecks to the the !ES ES>A accoun ount even witho ithou ut indorsements, !1B violated its contractual o$ligation to them as depositors. !1B paid the wrong payees, hence, it should $ear the loss. !1B moved to dismiss the complaint on the ground of lack of cause of action. !1B argued that the claim for damages should come from the payees of the checks, and not from spouses *odrigue#. Since there was no demand from the said payees, the o$ligation should $e considered as discharged. The *TC rendered ?udgment in favor of spouses *odrigue#. The The CA reve revers rsed ed and and set set asid aside e the the *TC disposition. The CA concluded that the checks were o$viously meant $y the spouses to $e really paid to !ES>A. 6owever, upon the motion for reconsideration of the spouses, the CA reversed itself 14
and ruled that !1B failed to present su7icient proof to defeat the claim of spouses *odrigue#. Thus, !1B is lia$le lia$le for the value value of the check checks s which which it paid paid to !ES !ES>A >A with withou outt indo indors rsem emen ents ts from from the the name named d payees.
I!!5e F1 !1B was remiss in its duty as the drawee $ank.
R5in< ES. !1B was was remiss in its duty as the drawee $ank. -t does not dispute the fact that its teller or telle tellers rs acce accepte pted d the )4 check checks s for depos deposit it to the !ES>A account even without any indorsement from the the name named d paye payees es.. -t $ear $ears s stre stressi ssing ng that that orde orderr inst instru rume ment nts s can can only only $e nego negoti tiat ated ed with with a vali valid d indorsement. A $ank that regularly processes checks that are neither paya$le to the customer nor duly indorsed $y the payee payee is appare apparentl ntly y grossly grossly negligen negligentt in its operat operation ions. s. This This Court Court has recogn recogni#e i#ed d the uni&ue uni&ue pu$lic interest possessed $y the $anking industry and the the need need for for the the peop people le to have have full full trus trustt and and con'dence in their $anks. =or this reason, $anks are minded to treat their customerOs accounts with utmost care, con'dence, and honesty. -n checking transaction, the drawee $ank has the duty to verify the genuineness of the signature of the drawer and to pay the check strictly in accordance with with the drawerO drawerOs s instru instruct ction ions, s, i.e the name named d i.e., to the payee in the check. -t should charge to the drawerOs accounts only the paya$les authori#ed $y the latter. Fthe therwis rwise e, the the drawe rawee e will ill $e viola iolati ting ng the the instructions of the drawer and it shall $e lia$le for the amount charged to the drawerOs account. oreover, !1B was negligent in the selection and supervision of its employees. The trustworthiness of $ank employees is indispensa$le to maintain the sta$il sta$ility ity of the $ankin $anking g indust industry ry.. Thus, Thus, $anks $anks are en/oined to $e extra vigilant in the management and supervision of their employees. !1BO !1BOs s tell teller ers s and and o7ic o7icer ers, s, in viol violat atio ion n of $ankin $anking g rules rules of proce procedur dure, e, permit permitte ted d the invali invalid d deposits of checks to the !ES>A account. -ndeed, when it is the gross negligence of the $ank employees that caused the loss, the $ank should $e held lia$le. A $ank that has $een remiss in its duty must su7er su7er the conse conse&ue &uence nces s of its negli negligen gence. ce. Being Being issued to named payees, !1B was dutyI$ound $y law and $y $anking rules and procedure to re&uire that the check checks s $e proper properly ly indors indorsed ed $efore $efore accept accepting ing them for deposit and payment. -n 'ne, !1B should $e held lia$le for the amounts of the checks.
BANK OF AERICA* N' M )A ). A))OCIA'ED CI'IEN) BANK ;.*. 1os. 282332 W 28232:, ay (2, (334, Carpio, ?. s payee>s order. s instructions are re?ected on the
ace and by the terms o the check. hen the drawee bank pays a person other than the payee named on the check, check, it does not comply comply with the terms terms o the check check and violat violates es its duty duty to charge charge the drawe drawer>s r>s account only or properly payable items.
FAC') BAI=inance Corporation BAI=inance entered into a transaction with iller F7set !ress, -nc. iller, through the latterOs authori#ed representatives, representatives, i.e., %y Qiat Chung, Ching %y Seng, and %y Chung ;uan Seng. BAI= BAI=in inan ance ce gran grante ted d ill iller er a ",edit ",edit in ine e #a"iit #a"iit6 6 through which the latter could assign or discount its trade receiva$les with the former. %y Qiat Chung, Ching %y Seng, and %y Chung ;uan Seng executed executed a Continuing Continuing Suretysh Suretyship ip Agreeme Agreement nt with BAI=inanc BAI=inance e where$y where$y they /ointly and severally severally guaranteed the full and prompt payment of any and all inde$tedness which iller may incur with BAI=inance. ill iller er disc discou ount nted ed and and assi assign gned ed seve severa rall trad trade e receiv receiva$l a$les es to BAI=in BAI=inanc ance e $y execu executin ting g "eeds "eeds of Assignment in favor of the latter. latter. -n consideration of the the assi assign gnme ment nt,, BAI= BAI=in inan ance ce issu issued ed four four chec checks ks amounting to ! 82,((.: paya$le to the HFrder of iller F7set !ress, -nc.H with the notation H=or !ayeeOs Account Fnly.H The four checks were deposited deposited $y Ching %y Seng Seng a.k.a. *o$ert Ching, then the corporate secretary of iller, iller, in Account 1o. 4:4 in Associated Citi#ens Bank Associated Bank. Account 1o. 4:4 is a /oint $ank account under the names of Ching %y Seng and %y Chung ;uan Seng. Associated Bank stamped stamped the checks with the notation Hall prior endorsements and0or lack of endorsements guaranteed,H and sent them through clearing. >ater, the the draw drawee ee $ank $ank,, Bank Bank of Amer Americ ica, a, hono honore red d the the checks and paid the proceeds to Associated Bank as the collecting $ank. iller failed to deliver to BAI=inance the proceeds of the assigned assigned trade trade receiva$l receiva$les. es. Conse&uen Conse&uently tly,, BAI =inance 'led a Complaint against iller for collection of the amoun amountt of !+2,+ !+2,+(4. (4.)+ )+ which which BAI=in BAI=inanc ance e allegedly paid in consideration of the assignment, plus interest at the rate of 2) per annum and penalty charges. %y Qiat Qiat Chun Chung g and and %y Chun Chung g ;uan ;uan Seng Seng deni denied ed having signed the Continuing Suretyship Agreement with BAI=inance. -n view thereof, BAI=inance 'led an
A:ended Co:+aint Co:+aint i:+eadin< i:+eadin< Ban$ o# A:e,i"a a! additiona de#endant de#endant #o, aei >in< n< en"a en"a! !:e :ent nt and and "o "oe" e"ti tion on o# te te "e" "e"$! $! ;6 +e,! +e,!on on o, +e,! +e,!on on!! ote ote,, tan tan te te +a6ee na:ed te,eon . The *TC and CA ruled against Associated Bank.
I))&E I))&E hether or not Associated Bank is lia$le to reim$urse Bank of America for the amount of the four checks for $eing negligent. 15
R&LING es. es. Associated Bank is lia$le to reim$urse Bank of America for the amount of the four checks for $eing negligent. A collecting $ank where a check is deposited, and which endorses the check upon presentment with the draw rawee $ank $ank,, is an endor ndorse serr. This This Cour Courtt has repe repeat ated edly ly held held that that in chec check k tran transa sact ctio ions ns,, the the collecting $ank or last endorser generally su7ers the loss loss $ecause ause it has has the the dut duty to asce scerta rtain the the genuinen genuineness ess of all prior prior endorseme endorsements nts consideri considering ng that the act of presenting the check for payment to the drawee is an assertion that the party making the pres presen entm tmen entt has has done done its its duty duty to asce ascert rtai ain n the the genuineness of the endorsements. endorsements. hen Associated Bank stamped the $ack of the four checks with the phrase Hall prior endorsements and0or lack of endorsement guaranteed,H that $ank had for all intents and purposes treated the checks as negotia$le instruments and, accordingly, assumed the warranty of an endorser. Being so, Associated Bank cannot deny lia$ility on the checks -n *anco de 7ro 'avings and %ortgage *ank v. +quitable *anking $orporation, it was held that, the law impose imposes s a d5t6 o# dii
;an$ to !",5tinie "e"$! de+o!ited >it it #o, te +5,+o!e +5,+o!e o# dete,:in dete,:inin< in< tei, tei, > !*-F* !*-F* E1"F*S E1"F*SE EE1T E1TS S A1"0F* A1"0F* >ACQ F= E1"F*SEE1TS ;%A*A1TEE". ;%A*A1TEE". ithout such warranty, Bank of America would not have paid on the checks. As the warranty has proven to $e false and inaccurate, inaccurate, Associated Bank is lia$le for for any damage arising arising out of the falsity of i ts representation.
E@&I'ABLE %CI BANK ). 'AN ;.*. 1o. 2)5++4. August (+, (323, ?. !eralta, Second "ivision As a business a8ected with public interest and becau because se o the nature nature o its unction unctions, s, the bank is under obligation to treat the accounts o its depositors with wit h metic meticulo ulous us care, care, always always having having in mind mind the fduciary nature o their relationship.
!+5,28 !+5,28.5 .54. 4. Fn ay 28, 28, 244(, 244(, Sulpic Sulpicio io >ines, >ines, -nc. -nc. deposited the aforesaid check to its account with Solid Bank, Car$on Branch, Ce$u City. After clearing, the amoun amountt of the check check was immed immediat iately ely de$it de$ited ed $y E&ui E&uita ta$l $le e !C!C- Bank Bank from from Tans ans acco accoun untt ther there$ e$y y leaving him with a $alance of only !55:.:. eanwhile, Tan issued three checks from ay 4 to ay ay 2), 2), 244( 244(,, paya$l paya$le e to Agusan Agusan del Sur Elect Electric ric Cooper Cooperati ative ve -nc. -nc. ASE>C ASE>CF, F, to Agusan Agusan del del 1orte 1orte Electric Electric Cooperative Cooperative -nc., -nc., A1ECF A1ECF and paya$le paya$le in cash for the amount of !23,333.33. Wen +,e!ented
#o, +a6:ent* te t,ee "e"$! >e,e di!ono,ed #o, ;ein< #o, ;ein< d,a>n a
As a result of the dishonor of Check which were paya$l paya$le e to ASE>CF ASE>CF and A1ECF A1ECF,, respec respectiv tively ely, the electric power supply for the two miniIsawmills owned and operated $y Tan, located in Talacogon, Agusan del Sur9 and in ;olden *i$$on, Butuan City, City, was cut o7 on ?une 2, 244( and ay (:, 244(, respectively, respectively, and it was restored only on ?uly (3 and August (8, 244(, respectively. "ue to the foregoing, Tan 'led with *TC of Ce$u City a complaint against E&uita$le !C- Bank, praying for payment of losses consisting of unreali#ed income in the amoun amountt of !2,:) !2,:)8,5 8,533. 33.33. 33. 6e also also prayed prayed for payme payment nt of moral moral damag damages, es, exemp exemplar lary y damage damages, s, attorneys fees and litigation expenses. Tan claimed that Check 1o. (5233 was a postdated check in payment of Bills of >ading 1os. 25, 2) and 2, 2, and and that that his accou account nt with with E&uita E&uita$le $le !C- Bank would have had su7icient funds to cover payment of the three other checks were it not for the negligence of E&uita$le !C- Bank in immediately de$iting from his his acco accoun untt Chec Check k 1o. 1o. (52 (5233 33,, in the the amou amount nt of !+8,5::.(, even as the said check was postdated to a6 40* 1992 . As a conse&uence of E&uita$le !CBank s error, which $rought a$out the dishonor of the two checks paid to ASE>CF and A1ECF, the electric supp supply ly to his his two two mini miniIs Isaw awmi mills lls was was cut cut o7, o7, the the $usi $usine ness ss oper operat atio ions ns ther thereo eoff were were stop stoppe ped, d, and and purc purcha hase se orde orders rs were were not not duly duly serv served ed caus causin ing g tremendous losses to him. -n its defens defense, e, E&uit E&uita$l a$le e !C- Bank Bank denie denied d that that the &uestione &uestioned d check check was postdated postdated a6 40* 1992 and claime claimed d that that it was was a curren currentt check check dated dated a6 4* 1992. -t alleged further that the disconnection of the electric supply to Tans sawmills was not due to the dishon dishonor or of the checks, checks, $ut $ut for other reasons reasons not attri$uta$le to the $ank. *TC ruled in favor of E&uita$le !C- Bank $ut the *TC ruling was reversed $y the CA. 6ence this petition.
I))&E hether or not E&uita$le !C- Bank exercised the re&uired degree of diligence for $anks.
FAC' AC') Arcelito B.Tan B.Tan maintained a current and savi saving ngs s acco accoun untt with with !hil !hilip ippi pine ne Com Commerc mercia iall -nternational Bank !C-B, now E&uita$le !C- Bank. Fn ay 2+, 244(, Tan issued !C-B Check 1o. (5233 postdated ay +3, 244( in the amount of !+8,5::.( in favor of Sulpicio >ines, -nc. As of ay 28, 244(, responde respondents nts $alance with E&uita$le E&uita$le !C- Bank was
law impo impose ses s on $ank anks high igh R&LING ING 1o. The law standards in view of the 'duciary nature of $anking. Although *.A. :42 took e7ect only in the year (333, the Court had alrea already dy impose imposed d on $anks $anks the same same high standard of diligence re&uired under *.A. :42 at the time time of the untime untimely ly de$iti de$iting ng of respon responden dents ts account $y petition ioner in ay 244(. -n 'imex 16
International %anila/, Inc. v. $ourt o Appeals o Appeals, the Court Court held held that that as a $usine $usiness ss a7ecte a7ected d with with pu$lic pu$lic interest and $ecause of the nature of its of its functions, the $ank is under o$ligation to treat the accounts of its depos deposito itors rs with with metic meticulo ulous us care, care, always always having having in mind the 'duciary nature of their relationship.
The proximate cause of the loss is not Tans manner of writing the date of the check, as it was very clear that he intended Check 1o. (5233 to $e dated ay +3, 244( and not ay +, 244(. The proximate cause is E&uita$le !C- BankOs own negligence in de$iting the account of the Tan prior to the date as appearing in the check, which resulted in the su$se&uent dishonor of several checks issued $y Tan and the disconnection $y ASE>CF and A1ECF of his electric supply. The $ank on which the check is drawn, known as the drawe drawee e $ank, $ank, is under under strict strict lia$ili lia$ility ty to pay pay to the order of the payee in accordance with the drawers instructions as rePected on the face and $y the terms of the check. check. Thus, Thus, payme payment nt made made $efor $efore e the date date speci'ed $y the drawer is clearly against the drawee $anks duty to its client. E&uita$le !C- Bank su$mits that Tan caused confusion on the true date of the check $y writing the date of the check check as 34092. I#* indeed* E5ita;e %CI Ban$
>a! "on#5!ed "on#5!ed on >ete, te "e"$ >a! dated a6 4 o, a6 40 ;e"a5!e o# te >i" aee d,a>e,, ;e#o,e ;e#o,e ono, ono,in< in< te "e"$ . As a matter of practice, $ank tellers would not receive nor nor hono honorr such such chec checks ks whic which h they they $eli $eliev eve e to $e unclear, without the counterIsignature of its drawer. E&uita$le !C- Bank should have exercised the highest degree of diligence re&uired of it $y ascertaining from the respondent the accuracy of the entries therein, in order to settle the confusion, instead of proceeding to honor and receive the check.
The diligence diligence re&uired re&uired of $anks, $anks, therefor therefore, e, is more than that of a good father of a family. -n every case, the depositor expects the $ank to treat his account with the utmost 'delity, 'delity, whether such account consists only of a few hundred pesos or of millions. The $ank must record every single transaction accurately, accurately, down to the last centavo, and as promptly as possi$le. This has to $e done if the account is to rePect at any given time the amount of money the depositor can dispose of as he sees 't, con'dent that the $ank will deliver it as and to whomever he directs. =rom the foregoing, it is clear clear that E&uita$le E&uita$le !C- Bank did not exercise exercise the degree of diligence that it ought to have exercised in dealing with its client.
CO)AING) BANK ). )%O&)E) DANILO AND E)'RELLA CA%I)'RANO G.R. No. 17094, ! "#$#st 01%, &ers'(in
DOC' DO C'RI RINE NE A banking institution is obliged to exercise the highest degree o diligence as well as high standards o integrity and perormance in all its
transa transacti ctions ons becaus because e its busin business ess is imbue imbued d wit with h public interest
FAC' Spouses Capistrano were the owners of a residential lot in Bacoor, Cavite who availed of the %ni'ed 6ome >ending !rogram %6>! $eing implemented $y the 1ati 1ation onal al 6ome 6ome ort ortga gage ge =ina =inanc nce e Corp Corpor orat atio ion n 16= 16=C C for the constr construct uction ion of their their house. house. The The spouses Capistrano then entered into a construction contr ontrac actt with ith ;CB Build uilde ers whic which h the the latte atterr committed committed to undertak undertake e the construc construction tion within 5 days. By virtue of this agreement, ;CB su$mitted its loan application with Comsavings Bank to 'nance the const onstru ruc ction ion cost osts wit with und underst ersta anding ding that that Coms Comsav avin ings gs Bank Bank will will then then reim reim$u $urs rsed ed it from from 16=C. As re&uired prior to the release of the loan, Comsaving Comsavings s Bank asked that Spouses Spouses Capistran Capistrano o to sign sign the nece ecessa ssary doc docume uments nts inc includi ludin ng the the Certi'cation of 6ouse Completion despite the fact that the the cons constr truc ucti tion on of the the hous house e was was in fact fact not not yet yet 'nis 'nishe hed. d. ore oreov over er,, it was was also also re&u re&uir ired ed that that for for 16=C to reim$urse the loan, a photo of the fully constructed house $earing the signatures of the owner at the dorsal sides must $e su$mitted. The $ank did so $ut the photo photo su$mi su$mitte tted d was not the house house of the Spouses Capistrano $ut of anotherOs and no signature, as re&uired, was a7ixed to it. *ely *elyin ing g on the the su$m su$mit itte ted d docu docum ments ents,, 16 16= =C C demand demanded ed payme payment nt of the amorti amorti#at #ation ion.. 6oweve 6oweverr, Spouses Capistrano protested and raised the defense that the construction was not yet completed and that they did not sign the certi'cation of completion. -SS%E< hether or not Comsavings Bank was negligent for failure to exercise the diligence re&uired of BanksG *%>-1;< es. es. The court held that the $usiness of $ank is a7ected with pu$lic interest9 thus, it makes a sworn profession of diligence and meticulousness in giving irrep irreproa roach cha$l a$le e servic service. e. =or this this reason reason,, the $ank $ank should guard against in/ury attri$uta$le to negligence or $ad faith. faith. The $anking $anking sector sector must must at all times times maintain a high level of meticulousness. -n this case, had the Comsavings Bank complied with its duty of o$serve the highest degree of diligence, it woul would d have have chec checke ked d 'rst 'rst whet whethe herr the the phot photos os repres represent ent the actual actual prope property rty of its clien clientt and the same carried their signature signatures s $efore $efore releasing releasing the loan. Also, the act of the $ank of not giving the option not to preIsi preIsign gn the Certi' Certi'cat cate e of Comple Completio tion n and and asking the client to sign the same despite the fact that the the actu actual al cons constr truc ucti tion on of the the hous house e is not not yet yet completed showed negligence and irregularity in the exercise of standard operation procedure in $anking.
17
ith this, Comsavings Bank was held to $e negligent in exercising the highest degree of diligence re&uired of a $ank.
DEELO%EN' BANK OF 'E %ILI%%INE) v. G&ARIA AGRIC&L'&RAL AND REAL' DEELO%EN' COR%ORA'ION G.R. No. 10738* /an5a,613* 2013* Be,!a:in* /. DOC'RINE *eing a banking institution, it should exercise the highest degree o diligence, as well as to observe the high standards o integrity and perormance in all its transa transact ction ions s becaus because e its busine business ss is imbue imbued d wit with h public interest.
FAC') ;uariDa Corporation applied for a loan from "B! to 'nance the development of its resort complex in -loilo -loilo.. As re&ui re&uired red for the approva approvall of the loan application, ;uariDa executed executed a promissory note and a real real estate estate mortgag mortgage e in favor favor of "B!. !rior !rior to the release of the loan, "B! re&uired ;uariDa Corporation to put up a cash e&uity for the construction of the $uildings and other improvements. ;uariDa used the proceeds of the loan to defray the cost of additional improvem improvements ents in the resort complex. complex. The loan was appro approved ved and it was agree agreed d upon upon that that the release release shall shall $e in an instal installme lment nt $asis. $asis. >ater >ater on, ;uariD ;uariDa a deman demanded ded the releas release e of the $alance $alance of the loan, however, "B! refused and instead paid direcly some suppliers of ;uariDa despite its o$/ection. %pon ocular visit, "B! found out that ;uariDa had not comple completed ted the const construc ructio tion n hence hence deman demandin ding g to expedite expedite its completio completion. n. 6owever 6owever,, ;uariDa ;uariDa did not heed heed the the dema demand nd and and ther theref efor ore e "B! "B! init initia iate ted d extra/udicial foreclosure proceedings. ;uariDa 'led for speci'c performance of "B!Os o$ligations under the loan loan agree agreeme ment nt and to stop stop the foreclos foreclosure ure of the mortgage mortgages. s. 6owever 6owever,, "B! moved moved for the dismissal dismissal stating stating that the mortgage mortgaged d propertie properties s were already sold. Thus, ;uariDa sought to nullify the foreclosure proceedings and the cancellation of the certi'cate of sale.
I))&E hethe hetherr "B!Os "B!Os forec foreclos losure ure and sale sale of the mortgaged properties were premature and therefore violated its duty to maintain highest degree of diligence of a $ankG
R&LING ES. Being a $anking institution, "B! owed it to ;uariDa Corporation to exercise the highest degree of diligence, as well as to o$serve the high standards of inte integr grit ity y and and perf perfor orma manc nce e in all all its its tran transa sact ction ions s $ecause its $usiness was im$ued with pu$lic interest. The The high high stand standard ards s were were also also neces necessar sary y to ensure ensure pu$l pu$lic ic con' con'de denc nce e in the the $ank $ankin ing g syst system em,, for for the the sta$ility of $anks largely depends on the con'dence of
the people in the honesty and e7iciency of $anks. "B! had to act with great care in applying the stipulations of its agree agreeme ment nt with with ;uari ;uariDa Da Corpor Corporati ation, on, lest lest it erodes such pu$lic con'dence. -n this this case, case, "B! failed failed in its duty to exerc exercise ise the highest degree of diligence $y prematurely foreclosing the the mort mortga gage ges s and and unwa unwarr rran ante tedl dly y caus causin ing g the the foreclosure sale of the mortgaged properties despite ;uar ;uariD iDa a Corp Corpor orat atio ion n not not $ein $eing g yet yet in defa defaul ult. t. Considerin Considering g that "B! had yet to release the entire entire proce proceeds eds of the loan, "B! could could not yet make make an e7ective demand for ;uariDa to perform its o$ligation under the loan.
F. Nat5,e o# Ban$ F5nd! and Ban$ De+o!it! 'E CON)OLIDA'ED BANK and 'R&)' COR%ORA'ION vs. CO&R' OF A%%EAL) and L.C. DIA and a nd CO%AN* CO%AN* C%A! G.R. No. 14839 )e+te:;e, 11* 2004 Ca,+io* /.
>.C. "ia# "ia#,, an acco account untin ing g 'rm 'rm has has $een $een FAC') C') >.C. maintaini maintaining ng a savings savings account account with Solid$ank. Solid$ank. Fn August 28, 2442, >.C. "ia# through its cashier acaray acaraya, a, instructe instructed d its messenger messenger Calapre Calapre,, to deposit $y virtue of two deposit slips the amount of !443 and !53 with Solid$ank. acaraya gave Calapre the Solid$ank pass$ook together with the money. Calapre went to Solid$ank and presented to Teller Teller 1o. ) the two deposit slips and the pass$ook. The teller acknowledged receipt of the deposit $y returning to Calapre the duplicate copies of the two deposit slips. Since the transaction took time and Calapre had to make another deposit for >.C. "ia# with Allied Bank, he left the pass$ook pass$ook with Solid$ank. Solid$ank. hen Calapre Calapre returned to Solid$ank to retrieve the pass$ook, Teller 1o. ) informed him that some$ody got the pass$ook. After learning of the incident, acaraya went $ack to Solid$ank together with Calapre and con'rmed that indeed the pass$ook was missing and that someone shorter shorter than Calapre got the pass$ook. pass$ook. Teller 1o.) even even handed handed to acar acaraya aya a depos deposit it slip slip dated dated 28 August 2442 for the deposit of a check for !43,333 drawn on !BC. This !BC check of >.C. "ia# was a check that it had long closed. =ailing to get $ack the pass pass$o $ook ok,, aca acara raya ya went went $ack $ack to her her o7ic o7ice e and and reported the matter to the !ersonnel anager of >.C. "ia#, Emmanuel Alvare#. 25 August 2442, >uis C. "ia# >.C. "ia#O CEF, called up Solid$ank to stop any transaction using the same pass$ook until >.C. "ia# could open a new account. 6owever, on the same day >.C. "ia# was informed of the the unau unauth thor ori# i#ed ed with withdr draw awal al the the day day $efo $efore re,, of !+33,333 !+33,333 from its savings savings account. account. The withdrawal withdrawal slip slip for for the the !+33 !+33,3 ,333 33 $ore $ore the the signa signatu ture res s of the the authori#ed signatories of >.C. "ia#, namely "ia# and 18
*ustico >. urillo. The signatories, however, denied signing signing the withdrawal withdrawal slip. A certain certain 1oel Tamayo Tamayo received the !+33,333. An -nformation of Estafa through =alsi'cation of Commercial "ocument against its messengers, -lagan and @erda#ola was 'led $y >.C. "ia# in the *TC of anila $ut it was dismissed for lack of pro$a$le cause. Fn (8 August August 244( 244(,, >.C. >.C. "ia# "ia# throug through h its couns counsel el demande demanded d from Solid$ank Solid$ank the return of its money money. Soli Solid$ d$an ank k refu refuse sed d prom prompt ptin ing g >.C. >.C. "ia# "ia# to 'le 'le a comp compla lain intt for for reco recove very ry of sum sum of mone money y agai agains nstt Solid$ank with the *TC. The *TC a$solved Solid$ank while CA reversed the decision of the *TC. 6ence, this petition.
I))&E hether or not Solid$ank has $een negligent and should $e made lia$le for the loss incurred $y >.C. "ia# on account of the unauthori#ed withdrawal from its lost pass$ookG es, Solid$ank is lia$le for $reach of R&LING LING es, contract due to negligence, or culpa contractual. The cont contra ract ct $etw $etwee een n the the $ank $ank and and its its depo deposi sito torr is governed $y the provisions of the Civil Code on simple loan. Art. 24:3 of the Civil Code expressly provides that x x x savings x x x deposits of money in $anks and similar institutions shall $e governed $y the provisions concerni concerning ng simple simple loan. There is a de$torIc de$torIcredit reditor or relationship $etween the $ank and its depositor. The $ank is the de$tor and the depositor is the creditor. The The depos deposito itorr lends lends the $ank money money and the $ank $ank agrees to pay the depositor on demand. 'e !a-in
de+o!it a<,ee:ent ;et>e ;et>een en te ;an$ and te te de+o de+o!it !ito, o, i! te "ont, "ont,a"t a"t tat tat dete,: dete,:ine ine!! te ,i<t! and o;i
The law imposes on $anks high standards in view of the 'duciary nature of $anking. Sec. ( of *A :42, declares that the State recogni#es the 'duciary nature of $anking that re&uires high standards of integrity and performance. This new provision is an a7irmation of the decisio decision n in )i(e* Intern'tion'+ v. Co#rt o "--e'+s, holding that the $ank is under o$ligation to treat the accounts of its depositors with meticulous care, always having in mind the 'duciary nature of their relationship. 6owever 6owever,, the 'duciary 'duciary nature nature of a $ankIde $ankIdeposito positorr relationship does not convert the contract $etween the $ank and its depositors from a simple loan to a trust agreement, agreement, whether express or implied. =ailure =ailure $y the $ank to pay the depositor is failure to pay a simple loan loan,, and and not not a $rea $reach ch of trus trust. t. The The law law simp simply ly impos imposes es on the $ank $ank a i$er st'n/'r/ of integrity and perfor performa mance nce in compl complyin ying g with with its o$liga o$ligatio tions ns unde underr the the cont contra ract ct of simp simple le loan loan,, $eyo $eyond nd thos those e re&uired of nonI$ank de$tors under a similar contract of simple loan. Solid$anks rules on savings account re&uire that the depo deposi sitt $ook $ook shou should ld $e care carefu fully lly guar guarde ded d $y the the depositor depositor and kept under lock and key, key, if possi$le. possi$le. hen the pass$ook is in the possession of Solid$anks telle tellers rs duri during ng with withdr draw awal als, s, the the law law impo impose ses s on Solid$ Solid$ank ank and its teller tellers s an even even higher higher degre degree e of diligence in safeguarding the pass$ook.
-n this case, the failure of Solid$ank and Teller 1o. ) to return return the pass$ pass$ook ook to Calapr Calapre, e, the author authori#e i#ed d represen representativ tative e of >.C. >.C. "ia#, "ia#, raises raises the presumpt presumption ion that it failed to o$serve such high degree of diligence in safegu safeguard arding ing the pass$o pass$ook, ok, and and in insuri insuring ng its return to the party authori#ed to receive the same. Solid$ank is $ound $y the negligence of its employees under the principle of respondeat superior or command responsi$ility. The defense of exercising the re&uired diligence in the selection and supervision of employe loyee es is not not a comp omplete lete defens fense e in culpa contractual, unlike in culpa aquiliana. 6owev 6owever er,, the court court also also found found that that >.C. >.C. "ia# "ia# was guil guilty ty of cont contri ri$u $uto tory ry negl neglig igen ence ce in allo allowi wing ng a withdrawal slip signed $y its authori#ed signatories to fall into the hands of an impostor. Thus, the lia$ility of Solid$ Solid$ank ank should $e reduce reduced d to )3 )3 of the actual actual damages while the other 83 must $e shouldered $y >.C. "ia#.
R&FA C. )&AN vs. A''. RICARDO D. GONALE A.C. NO. NO. 477 a," 12* 12* 2007 NARE) NARE) )AN'IAGO* J. J. s *'!>s super supervis visory ory powers powers over over bankin banking g oper operat atio ions ns wh whic ich h does does not not amou amount nt to a @udi @udici cial al proceeding, does not constitute orum shopping.
FAC') FA C') Complainant Suan is a "irector and @! of *ural *ural ;reen ;reen Bank of Caraga Caraga,, -nc., -nc., a rural rural $anking corpor corporati ation on at onti ontilla lla Blvd., Blvd., Butuan Butuan City City, while while respondent ;on#ales is one of its stockholders. Fn =e$rua e$ruary ry 22, 22, (338, (338, respon responden dentt 'led 'led a case case for %andamus, $omputation o Interests, +norcemen Interests, +norcementt o Inspection, #ividend and Appraisal (ights, #amages and AttorneyFs ees ees against the *ural ;reen Bank of Caraga, -nc. and the mem$ers of its Board of "irectors $efore the *TC of Butuan City, City, Br, praying, that a T*F $e issu issued ed en/o en/oin inin ing g the the cond conduc uctt of the the annu annual al stockholders meeting and the holding of the election of the Board of "irectors. Fn =e$ruary 28, (338, the trial court issued a T*F condit condition ioned ed upon upon respon responden dents ts postin posting g of a $ond. $ond. Thereaft Thereafter er,, responden respondentt su$mitte su$mitted d a $ond issued issued $y Stronghold -nsurance Company, Company, -ncorporated S-C- toget together her with with a Certi' Certi'ca catio tion n issued issued $y then then Court Court Administrator, Administrator, now Associate ?ustice, !res$itero ?. @elasco, @elasco, ?r. ?r. that, according to the Clerk of Court of the unicipal Trial Court in Cities TCC of Butuan City, S-C- has no pending o$ligation and0or lia$ility to the government insofar as con'scated $onds in civil and criminal cases are concerned. Based on the foregoing, Suan 'led this complaint alleging that< 2. *espon *esponden dentt engag engaged ed in unlawf unlawful, ul, dishon dishonest est,, imm immoral ral or deceit ceitfful condu nduct whe when he su$mitted the certi'cation to the *TC despite knowing that the same is applica$le only for transactions $efore the TCC9
19
(. The The $ond ond was was defec fective tive $ec $ecause use it was was released $y S-C- despite respondents failure to put up the re&uired !233,333.33 collateral. collateral. +. *es *espondent committ itted per/ury in the comp compla lain intt it 'led 'led $efo $efore re the the BS! BS! agai agains nstt -smael Andaya and the mem$ers of the Board of the *ural ;reen ;reen Bank Bank for alleged alleged gross gross violation of the principles of good corporate governanc governance, e, as they represen represented ted themselve themselves s as the $anks $anks minori minority ty stockh stockhold olders ers with with a total total holdin holdings gs amount amounting ing to more more or less less !1 million while the controlling stockholders own GDH of the authori#ed capital approximately GD stoc stock. k. Cont Contra rary ry to the the actu actual al 'gur 'gures es of ) millio million n for the minori minority ty stockh stockhold olders ers stake stake and and 3 3 of the the outs outsta tand ndin ing g capi capita tall stoc stock k owned $y ma/ority stockholders. 8. *es *espond ponde ent is guilt uilty y of forum orum shopp hoppin ing g $ecause the causes of action of the cases he 'led 'led $efore $efore the *TC and the *angko 'entral ng !ilipinas are the same.
the intraIcorporate controversies pending $efore the trial court. "7<+:
G. )ti+5ation on Inte,e!t! FIDE FIDELI LI' ' )A )AI ING NG) ) AN AND D O OR R'GAG 'GAGE E BANK BANK**
petitioner , vs.
ON. %EDRO D. CENON* in i! "a+a"it6 a! %,e!idin< /5d
The -B! dismissed the case of dis$arment against the respondent. 6ence, this petition.
It is settled @urisprudence that a banking instit instituti ution on which which has been been declar declared ed insolv insolvent ent and subsequently ordered closed by the $entral *ank o the !hilippines cannot be held liable to pay interest on bank deposits which accrued during the period when the bank is actually closed and non-operational.
I))&E hether or not respondent should $e held
FAC')
guilty of the acts alleged $y Suan.
-n 24):, Spouses Santiago deposited with the =ide =ideli lity ty Savi Saving ngs s and and ort ortga gage ge Bank Bank =S =SB B an aggregate amount of !233,333. Fn =e$ruary 2:, 24)4, the onetary Board, after 'nding that the condition of =SB is one of insolvency issued *esolution 1o. +53 directing its closure and having all its assets $e taken charge charge $y the onetary onetary Board. Board. Su$se&ue Su$se&uently ntly,, !"-C paid paid the the spou spouse ses s !23, !23,33 333 3 leav leavin ing g a $ala $alanc nce e of !43,333. Thereafter, the onetary Board directed the li&uidation of the $ank. !ending li&uidation, spouses Santiago sent demand letters to the $ank demanding the immediate payment of the aforementioned deposit $ut remained unheeded. This prompted the spouses to 'le 'le an acti action on for for a sum sum of mone money y with with dama damage ges s against the $ank.
R&LING 1o, Atty. ;on#ales is not guilty of any of the acts alleged against him.
On te t aeikewise, a ruling $y the BS! concerning the soundness of the $ank operations will not adversely or directly a7ect the resolution of
C=- anila, in its decision ordered the $ank to pay the following amounts< a !43,333 with accrued intere interest st until until fully fully paid9 paid9 $ !+3,3 !+3,333 33 as exemp exemplar lary y damages9 and c !23,333 for attorneys fees, hence the instant petition for review to the Supreme Court.
I))&E) 2. F1 F1 an insol insolven ventt $ank $ank like like the =SB =SB may may $e ad/udged to pay interest on unpaid deposits even after its closure $y the Central Bank $y reason of insolvency9 (. F1 F1 an inso insolv lven entt $ank $ank may $e ad/u ad/udg dged ed to pay moral and exemplary damages, attorneys fees and costs9
R&LING settle led d /uri /urisp spru rude denc nce e that that a 1!t i!! i!!5e NO. NO. -t is sett
$anking institution which has $een declared insolvent and su$se&uently ordered closed $y the Central Bank of the !hilippines cannot $e held lia$le to pay interest on $ank $ank depos deposits its which which accru accrued ed during during the period period when the $ank is actually closed and nonIoperational. -n
20
..wh ..what at ena$ ena$le les s a $ank $ank to pay pay stip stipul ulat ated ed intere interest st on money money depos deposite ited d with with it is the other aspects of its operation from which it generates funds to cover the payment of such interest. %nless a $ank can engage in other $anking and 'nancing activities from which it can derive income, it is inconceiva$le how it can carry on as a depository o$ligated to pay stipulate stipulated d interestZ interestZ.Con .Conse&ue se&uently ntly,, it should should $e deemed read into every contract of deposit with a $ank that the o$ligation to pay interest on the depo deposi sitt ceases ses the mome oment the the operation of the $ank is completely suspended $y the duly constituted authority, the Central Bank. =rom the aforecited authorities, it is manifest that petitioner $ank cannot $e held li a$le for interest on deposits which accrued from the time it was prohi$ited $y the Central Bank to continue continue with its $anking $anking operations, operations, that is, when *eso *esolu luti tion on 1o. 1o. +53 +53 to that that e7ec e7ectt was was issu issued ed on =e$ruary 2:, 24)4. Thus, the !43,333 deposit of the spouses should only earn interest up to =e$ruary 2:, 24)4. The inso insolv lven entt $ank $ank may may not not $e 2nd i!!5e i!!5e NO. The
ad/u ad/udg dged ed to pay pay mora moral, l, exem exempl plar ary y dama damage ges s and and attorneys fees.
There was no fraud or $ad faith on the part of $ank in accepting the deposits. The $ank could not even even $e faulte faulted d in not immed immediat iately ely retur returnin ning g the amount claimed considering that the demand to pay was made and the collection suit was 'led in the trial court several months after its closure where it was no longer in a position to comply with its o$ligations to its creditors, hence moral damages cannot $e awarded. The award award of exem exempla plary ry damage damages s which which is supposed to serve as a warning to other $anks from dissipating their assets in anomalous transactions was like likewi wise se with withou outt $asi $asis. s. -t was was not not prov proven en that that petitione petitionerr $ank actually engaged engaged in anomalous anomalous real estate transactions. 6ence, it was error for the lower court to impose exemplary damages upon petitioner $ank since, in contracts, such sanction re&uires that the o7endi o7ending ng party party acted acted in a wanton wanton,, fraud fraudule ulent, nt, reckless reckless,, oppressive oppressive or malevolen malevolentt manner manner.. 1either 1either does this case present the situation where attorneys fees may $e awarded. agreed ed with with the the $ank $ank that that the the spousesO "ote: SC agre claim laims s shoul hould d have have $ee $een 'led led in the the pen pending ing li&uidation proceedings, nevertheless it held that the decision rendered in the instant case would not $e violative of the legal provisions on preference preference and concurrence of credits. As the trial court puts it, Vthe order of payment should not $e understood as raising the deposits to the category of preferred credits of the $ank $ut shall $e paid in accordance with the Bank >i&uidation *ules and *egulationsU.
ILEANA DR. ACALINAO* petitioner * -!. BANK OF 'E %ILI%%INE I)LAND)* respondent. G.R. No. 17390* )e+te:;e, 17* 2009* ELA)CO* J. /R.* J.
FAC') -leana acalinao was an approved cardholder of B!- astercard. She made some purchases through the use of the said credit card and defaulted in paying for said purchases. purchases. %nder the
I))&E F1 the interest rate and penalty charge of + per month is ini&uitous as the same translates to +) per annum or thrice the legal rate of interest and hence should $e reduced to ( per month.
R&LING E). The interest rate and penalty charge of + per month or +) per annum although stipulated in the
maturity, maturity, nothing in the said circular could possi$ly $e read as granting carte $lanche authority to lenders to raise interest rates to levels which would either enslave their $orrow $orrowers ers or lead lead to a hemorr hemorrhag haging ing of their assets.U Since the stipulation on the interest rate is void, it is as if there was no no express contract contract thereon. 6ence, courts may reduce the interest rate as reason and e&uity demand. The same is true with respect to the penalty charge. !ertinently, Article 2((4 of the Civil Code states< Art. 2((4. The /udge shall e&uita$ly reduce reduce the penalt penalty y when when the princi principal pal o$ligation o$ligation has $een partly or irregularl irregularly y complied with $y the de$tor. Even if there has $een no performance, the penalty may also also $e redu reduce ced d $y the the cour courts ts if it is ini&uitous or unconsciona$le. -n exercising exercising this power to determine determine what is ini&uitous and unconsciona$le, courts must consider the circumst circumstanc ances es of each each case case since since what what may may $e ini&uitous and unconsciona$le in one may $e totally /ust and e&uita$le in another. another. -n the instant case, the recor records ds would would revea reveall that that acal acalina inao o made made partia partiall payme yments nts to B!-, !-, as ind indica icated ted in her her Billi illing ng Stat Statem emen ents ts.. This This,, coup couple led d with with the the fact fact that that the the stipulated penalty charge of + per month or +) per annum annum,, in additi addition on to regul regular ar intere interests sts is indee indeed d ini&uitous and unconsciona$le /usti'es the reduction of such penalty charge.
EIR) OF E)'ELI'A B&RGO) LI%A'* LI%A'* NAEL NAEL ALAN B. LI%A' LI%A' AND AND ALFREDO B. LI%A' LI%A'** /R. -. -. EIR) OF E&GENIO D. 'RINIDAD* NAEL A)&NCION R. 'RINIDAD* 'RINIDAD* IC'OR IC'OR R. 'RINIDAD* IAC&LADA '. ALFON)O* CELE)'INA '. NAG&IA'* FERNANDO R. 'RINIDAD* ICAEL R. 'RINIDAD AND /O)EFINA '. '. NAG&IA' NAG&IA' G.R. NO. 183. ARC 2* 2010* CORONA* /.
FAC') Este Esteli lita ta Burg Burgos osI> I>ip ipat at and and Alfr Alfred edo o >ipa >ipatt spouses >ipat o$tained a !5:+,:58 loan from !aci'c Banking Corporation !BC, secured $y a real estate mortg ortgag age e on thei theirr Lue# Lue#on on City City prop proper erty ty. The The mortg ortgag age e was was even eventu tual ally ly exte extend nde ed to secu secure re addit addition ional al loans, loans, discou discounti nting ng lines, lines, overdr overdraft afts s and
credit accommodations that petitioners su$se&uently o$tained from !BC. "ue to petitioners failure to pay their loans, !BC foreclosed on the su$/ect property. Eugenio ". Trinidad was declared the highest $idder during the pu$lic auction and was issued a certi'cate of sale. !etitioners 'led a complaint for annulment of mortgage, extraI/udicial foreclosure and certi'cate of sale sale.. *TC *TC dism dismis isse sed d the the comp compla lain intt $ut $ut gran grante ted d petitioners 've months and 2 days from the 'nality of the decision to exercise their right of redemption over the foreclosed property. eanwhile, eanwhile, petitioner petitioners s assigned assigned their rights rights over the contested property to !artas Transporation Co., Co., -nc. -nc. !TC !TC- -.. 6owe 6oweve verr, resp respon onde dent nt heir heirs s of Trinidad refused to claim the redemption money and surr surren ende derr the the cert certi' i'ca cate te of titl title e cove coveri ring ng the the foreclose foreclosed d property property, claiming claiming the amount amount tendered tendered was inade&uate, i.e., the interest of 2 per month was computed only for a oneIyear period. %ltimately, the *TC upheld the exercise of redemption and directed respon responde dents nts to surren surrender der the certi certi'c 'cate ate of title. title. *espondents motion for reconsideration was denied. 1otice 1otice of Appeal Appeal was denied. denied. !etitioners !etitioners moved for execution which was granted $y the *TC. 1o * was 'led and went directly to the CA. CA set aside the order of *TC. * was denied.
I))&E Should the 2 per month interest for one year $e applied as stated in the mortgage contractG
R&LING NO The oneIyear redemption period applied $y the CA is the rule that generally applies to foreclosure of mortgage $y a $ank. The period of redemption is not tolle tolled d $y the the 'lin 'ling g of a comp compla lain intt or peti petiti tion on for for annulment of the mortgage and the foreclosure sale conducted pursuant to the said mortgage. 6owever, consi onsid dering ring the the excep xcepti tion ona al circ ircumst umsta ance nces surrounding this case, we will not apply the rule in this instance pro hac vice. -n >ipat, this Court upheld the *TC decision giving petitioners 've months and 2 days from the 'nality of the trial courts decision to redeem their foreclosed property. >ipat, already 'nal and executory, has therefore $ecome the law of the case $etween the parties, including their heirs who are petitioners and resp respon onde dent nts s in this this case case.. -n %nio %nion n Bank Bank of the the !hilip !hilippin pines es v. ASB "eve "evelop lopme ment nt Corpor Corporati ation, on, we explained< >aw >aw of the case case has has $een $een de'n de'ned ed as Hthe Hthe opin opinio ion n deli delive verred on a form ormer appe ppeal. al. ore ore spec speci' i'ca cally lly, it mean means s that that what whatev ever er is alre alread ady y irrevoca$ly esta$lished as the controlling legal rule or decision $etween the same parties in the same case continues to $e the law of the case, whether correct on general principles or not, so long as the facts on 22
which such decision was predicated continue to $e the facts of the case $efore the court.H Conse&uently, petitioners had 've months and 2 days from from the 'nality 'nality of >ipat >ipat to exerci exercise se their their right right of redem redempti ption, on, even even though though this this period period was was $eyond one year from the date of registration of the sale. Thus, Thus, the CA erred erred and and even even commit committed ted a grav grave e a$us a$use e of disc discre reti tion on when when it insi insist sted ed on a contrary ruling. The CA had no power to reverse this Cour Court ts s 'nal 'nal and and exec execut utor ory y /udg /udgme ment nt.. The The CA overstepped overstepped its authority when it held that the right of redempti redemption on had already expired one year after the date of the registration of the certi'cate of sale. >ike all other courts in our /udicial system, the CA must take its $earings from the rulings and decisions of this Court. 1eve 1evert rthe hele less ss,, we note note that that the the amou amount nt tendered tendered $y petitioner petitioners s to redeem redeem their foreclosed foreclosed property was determined $y the sheri7 at the rate of one percent per month for only one year. Section : of the ;ener ;eneral al Bankin Banking g Act re&uir re&uires es payme payment nt of the amount 'xed $y the court in the order of execution, with with intere interest st thereo thereon n at the rate speci speci'ed 'ed in the mortgage contract, and all the costs and other /udicial expe expens nses es incu incurr rred ed $y the the $ank $ank or inst instit itut utio ion n concerned $y reason of the execution and sale and as a result of the custody of said property less the income recei received ved from from the prope property rty.. 'e 'e ,ate ,ate o# inte,e inte,e!t !t
!+e" !+e"if ifed ed in te te :o :o,t< ,tit >it te Gene,a Gene,a Ban$i Ban$in< n< A"t. A"t. o>e-e,* !in"e +etitione,! ee"ti-e6 ad :o,e tan one 6ea, to e?e,"i!e te ,i<t o# ,ede:+tion* P5!ti"e* #ai,ne!! and e5it6 ,e5i,e tat te6 +a6 12Q +.a. inte,e!t ;e6ond te one 6ea, +e,iod 5+ to /5ne 1* 200 >en %a,ta! "on!iit te R'C. A)IA'R&)' A)IA'R&)' DEELO%EN' BANK v. CARELO '&BLE G.R. No. 184987* /56 23* 2012* )ECOND DII)ION ()e,eno* J . . Key Doctrine: 5(edemption is by orce o law, and the purchaser at public auction is bound to accept it.
Tu$le, viceIpresident of Asiatrust, availed the "a, in"enti-e +an I ac&uiring a 1issan @anette I and oan +,i-ie
328( secured $y a mortgage over his property with no intere interest st indica indicate ted. d. The !e"ond was a consumpt consumption ion loan evidenced $y !1 328+ with an interest of 2: per annum. Tu$le allegedly o$tained a salary loan, his loan. >ater >ater,, he resig resigned ned and was given the ti,d loan. opti option on to retu return rn the the vehi vehicl cle e with withou outt any any furt furthe herr o$liga o$ligatio tion n or retain retain the unit unit and pay its remainin remaining g $ook value. -n turn, Asiatrust owed Tu$le 2 his proI rata share in the "-!9 and ( 'nal salary and 2+ th month month pay. pay. Tu$le Tu$le claimed claimed o7setting o7setting of loans could take take plac place e whic which h was was allo allowe wed d $y the the $ank $ank.. 6is 6is lia$ lia$il ilit itie ies s were were redu reduce ced d to !43 !43,) ,)42 42.8 .8) ) plus plus the the unretu unreturne rned d value value of the vehicle. vehicle. The $ank 'led 'led a complaint for replevin of the vehicle and was granted. -t also 'led a !etition for ExtraI/udicial =oreclosure of real estate mortgage over his property $ased only on his real estate estate loan loan amount amounting ing to %21*800. Tu$le redeemed redeemed the property property with the increased increased price price of !2,+2:,8 !2,+2:,832.4 32.42 2 $ecause $ecause the $ank imposed imposed additiona additionall inte intere rest st and and char charge ges. s. Tu$l Tu$le e &ues &uesti tion oned ed how how the the forec foreclos losure ure $asis $asis $alloo $allooned ned to !2,+2 !2,+2:,8 :,832. 32.42 42 in a matter of 2 year. The $ank explained that it included the cars $ook value, the salary loan, car insurance,
18Q 18Q ann5a ann5a inte,e inte,e!t !t on te te ;an$J! ,ede:+tion +,i"e o# %21*800 , penalty and inte,e!t "a,
I))&E -s the $ank $ank entitl entitled ed to includ include e the interest interest charges on the promissory note of the loans and the 2: annual interest on the $id price of !8(2,:33G
ELD No. -n foreclosures, the mortgaged property is su$/ected to the proceedings for the satisfaction of the o$li o$liga gati tion on.. As a resu result lt,, paym paymen entt is e7ec e7ecte ted d $y a$normal means where$y the de$tor is forced $y a /udicial proceeding to comply with the presentation or to pay indemnity. Fnce the proceeds from the sale of the the prop proper erty ty are are appl applie ied d to the the paym paymen entt of the the o$liga o$ligatio tion, n, the o$liga o$ligatio tion n is alread already y exting extinguis uished hed.. 'pouses (omero v. v. $ourt o Appeals, we held Thus, Thus, in 'pouses (omero that the mortgage inde$tedness was extinguished with the foreclosure and sale of the mortgaged property, and that what remained was the right of redemption granted $y law. Conse&uently, since the *eal Estate ortgage Contract Contract is already already extinguis extinguished, hed, petitione petitionerr can no longer rely on it or invoke its provisions, including the dragnet clause stipulated therein. -t follows that the $ank cannot refer to the 2: annual interest charged in !romissory 1ote 1o. 328+, an o$ligation allegedly covered $y the terms of the Contract.
23
The righ ight of redem demption tion of for foreclo eclose sed d prop proper erti ties es was was a stat statut utor ory y priv privil ileg ege e he en/o en/oye yed. d. *edemption is $y force of law, and the purchaser at pu$lic auction is $ound to accept it. Thus, it is the law that provides the terms of the right9 the mortgagee cannot dictate them. The terms of this right, $ased on Section 8 of the ;eneral Banking >aw, >aw, are as follows< 2 The redemptioner shall have the right within one year after the sale of the real estate, to redeem the property. ( The redemptioner shall pay the amount due under the mortgage deed, with interest thereon at rate speci'ed in the mortgage, and all the costs and expenses incurred $y the $ank or institution from the sale sale and custody custody of said said proper property ty less less the income income derived therefrom. + -n case of redemptioners who are considered $y law as /uridical persons, they shall have the right to redeem not after the registration of the certi'cate of foreclosure sale with the applica$le *egister of "eeds which in no case shall $e more than thre three e + + mont months hs afte afterr fore forecl clos osur ure, e, whic whiche heve verr is earlier. Conse&uently, the $ank cannot alter that right $y imposing imposing additional additional charges charges and including including other other loans. @erily, the freedom to stipulate the terms and conditions of an agreement is limited $y law. -n any event, assuming that the *eal Estate ortgage Contract su$sists, we rule that the dragnet clause therein does not /ustify the imposition of an 2: annual interest interest on the redemption redemption price. This Court has recogni#ed that, through a dragnet clause, a real real esta estate te mort mortga gage ge cont contra ract ct may may e?"e+tiona6 secu secure re futu future re loan loans s or adva advanc ncem emen ents ts.. But But an o$ligation is not secured $y a mortgage, unless, that mortg ortgag age e come comes s fair fairly ly with within in the the term terms s of the the mortgage contract. -n additi addition on to the 2: 2: annua annuall inter interest est,, the $ank $ank also also claims claims a 2( 2( intere interest st per annum on the consumpti consumption on loan. 1otwithst 1otwithstandin anding g that !romissory !romissory 1ote 1ote 1o. 1o. 328( 328( conta contains ins no stipul stipulati ation on on intere interest st payments, the $ank still claims that Tu$le is lia$le to pay the legal interest. This interest is currently at 2( per annum per annum, pursuant to Central Bank Circular 1o. 82) and Article ((34 of the Civil Code, which provides< V-f the o$ligation consists in the payment of a sum of money, and the de$tor incurs in delay, the indemnity for for dama damage ges, s, te,e te,e ;ein< ;ein< no !ti+5 !ti+5at ation ion to te te
"ont, "ont,a,6 a,6** !a !a ;e te +a6:en +a6:entt o# te inte, inte,e!t e!t a<,eed 5+on* and in te a;!en"e o# !ti+5ation , the legal interest, which is six per cent per annum.U Thus, a default must exist $efore the $ank can collec collectt the compe compensa nsator tory y legal legal intere interest st of 2( 2( per annum. -n this regard, Tu$le denies $eing in default since since,, $y way of ei&uidated >i&uidated de$ts de$ts are those whose exact exact amount amount has already already $een determin determined. ed. -n this case, the receiva$le of Tu$le, including his "-! share, was not yet determined9 it was the petitioners policy to compute and issue the computation only after the
retired employee had $een cleared $y the $ank. Thus, Tu$l Tu$le e inco incorr rrec ectl tly y invo invoke ked d lega legall comp compen ensa sati tion on in addressing this issue of default. 1evertheless, 1evertheless, $ased on the 'ndings of the *TC and the CA, the o$ligation of Tu$le as evidenced $y !romis !romissor sory y 1ote 1ote 1o. 1o. 328( 328(,, was set to mature mature on 1 /an5a,6 1999. But then, he had already settled his lia$ilities on 17 a," 1997 $y paying !-,+2:,832.42 !-,+2:,832.42 as redemption price. Then, in 2444, the $ank issued his Clearance and share in the "-! in view of the full settle settleme ment nt of his o$liga o$ligatio tions. ns. Thus, Thus, there there $eing $eing no su$stantial delay on his part, the CA did not grievously err in not declaring him to $e in default. =rom =rom all all the the fore forego goin ing, g, we rule rule that that the the appell appellate ate court court correc correctly tly delet deleted ed the 2: 2: annual annual interest charges, al$eit for di7erent reasons. =irst, the interest cannot $e imposed, $ecause any reference to it unde underr the the *eal *eal Esta Estate te ort ortga gage ge Cont Contra ract ct is misplace misplaced, d, as the contract contract is already already extinguish extinguished. ed. Second, the said interest cannot $e collected without any $asis in terms of Tu$les redemption rights. Third, assumi assuming ng that that the *eal *eal Estate Estate ortg ortgage age Contra Contract ct su$sists, the $ank cannot collect the interest $ecause of the contracts am$iguity. =ourth, the dragnet clause refer referred red to in the contract contract cannot cannot $e presum presumed ed to incl includ ude e the the 2: 2: annu annual al inte intere rest st spec speci' i'ed ed in the the consu onsum mptio ption n loan loan.. =ifth ifth,, with ith respe espec ct to the the compensatory interest claimed $y the $ank, we hold that neither is the interest due, $ecause Tu$le cannot $e deemed to $e in default of his o$ligations.
ADOCA'E) ADOCA'E) FOR 'R&' 'R&' IN LENDING* INC. INC. and ED&ARDO OLAG&ER -. BANGKO )EN'RAL ONE'AR BOARD* ,e+,e!ented ;6 GOERNOR ARANDO 'E'ANGCO 'E'ANGCO et a. G.R. G.R. No. 19298* 19298* 13 /an5a,6 2014* Re6e!* J.
FAC'). *.A. 1o. ()5 which created the Central Bank of the !hilippines empowered the CBIB to, among others, set the maximum interest rates which $anks may may charg charge e for all types types of loans loans and other other credi creditt operations, within limits prescri$ed $y the %sury >aw. >ater >ater on, the %sury >aw was amended amended $y !.". 1o. 2):8 giving the CBIB authority to prescri$e di7erent maximum rates of interest which may $e imposed for a loan loan or renew renewal al thereo thereoff or the for$eara for$earance nce of any money, goods, or credits, provided that the changes are e7ected gradually and announced in advance. -n its *esolution 1o. (((8, the CBIB issued CB Circular 1o. 435, Series of 24:(. Section 2 thereof removed the ceilings on interest rates on l oans and for$earance of any money, goods or credits.
24
!resident =idel @. *amos then signed into law *.A. 1o. )5+ esta$lishing the BS! to replace the CB. The repealing clause thereof provides that VExcept as may $e provided for in Sections 8) and 2+( of this Act, *.A. 1o. ()5, as amended, the provisions of any other law law, spec specia iall char charte ters rs,, rule rule or regu regula lati tion on issue issued d pursuant to said *.A. 1o. ()5, as amended, or parts thereof, thereof, which may $e inconsistent with the provisions of this Act are here$y repealed.U !etit !etition ioner er A=T-> A=T-> is a nonpro nonpro't, 't, nonIst nonIstock ock corporation organi#ed to engage in pro $ono concerns and activities relating to money lending issues. -t 'led this this petit petition ion,, /oined /oined $y its founde founderr and presid president ent,, Eduardo B. Flaguer, suing as a taxpayer and a citi#en. !etitio !etitioners ners,, claiming claiming that they are raising raising issues issues of transcendental importance to the pu$lic, 'led directly with this Court this !etition for Certiorari under *ule )5, seeking to declare that the BS!IB, replacing the CBIB, CBIB, has no author authority ity to contin continue ue enfor enforcin cing g CB Circ Circul ular ar 1o. 1o. 435, 435, issu issued ed $y the the CBI CBIB, B, whic which h VsuspendedU the %sury >aw.
I))&E. 2 "id the CBI CBIB exceeded ded its its aut author hority ity in issuing CB Circular 1o. 435 which removed all interest ceilingsG 1F ( ay ay the new new BS!I BS!IB B contin continue ue to enfor enforce ce CB Circular 1o. 435G ES
ELD. 2 1F. 1F. -t did not engag engage e in selfI selfIle legi gisl slat atio ion n when when it issu issued ed the the said said Circ Circul ular ar.. The The CBI CBIB B mere merely ly suspended the e7ectivity of the %sury >aw when it issued CB Circular 1o. 435, this has long $een reco recogn gni# i#ed ed and and uphe upheld ld in many many case cases. s. As the the Court explained in the landmark case of edel v. CA, citing several cases, CB Circular 1o. 435 Vdid not repeal nor in anyway amend the %sury >aw $ut simply suspended the latterOs e7ectivity.U A Central Bank Circular cannot repeal a law. Fnly a law can repeal another law. ( ES, ES, the BS!IB BS!IB has has the author authority ity to enfor enforce ce CB Circul Circular ar 1o. 1o. 435. 435. A closer closer perusa perusall shows shows that that Section 234 of *.A. 1o. ()5 covered only loans extended $y $anks, whereas under Section 2Ia of the %sury %sury >aw, >aw, as amende amended, d, the BS!IB BS!IB may may prescri$e the maximum rate or rates of interest for all loa loans or renewals thereof or the for$ for$ea eara ranc nce e of any any mone money y, good goods s or cred credit its, s, including those for loans of low priority such as consumer loans, as well as such loans made $y pawnshops, 'nance companies and similar credit instit instituti utions ons.. -t even even author authori#e i#es s the BS!I BS!IB B to presc prescri$ ri$e e di7ere di7erent nt maxim maximum um rate rate or rates rates for
di7erent types of $orrowings, including deposits and and depo deposit sit su$s su$sti titu tute tes, s, or loan loans s of 'nan 'nanci cial al intermediaries.
It i! !etted tat notin< in CB Ci,"5a, No. 903 <,ant! ende,! a "a,te ;an"e a5to,it6 to ,ai!e inte,e!t ,ate! to e-e! >i" >i eite, en!a-e tei, tei, ;o,,o> ;o,,o>e,! e,! o, ead ead to a e:o, e:o,,a ,an #o, ;ein< "ont,a,6 to :o,a!* i# not a. a>. -ndeed, under Article 2834 of the Civil Code, these contracts are deemed inexistent and void a$ initio, and therefore cannot $e rati'ed, nor may the right to set up their illegality as a defense $e waived. waived. 1onethele 1onetheless, ss, the nullity nullity of the stipulation stipulation of usurious interest does not a7ect the lenderOs right to recover the principal of a loan, nor a7ect the other terms thereof. Thus, in a usurious loan with mortgage, the right to foreclose the mortgage su$sists, and this right can $e exercised $y the creditor upon failure $y the the de$t de$tor or to pay pay the the de$t de$t due. due. The The de$t de$t due due is cons consid ider ered ed as with withou outt the the stip stipul ulat ated ed exce excess ssiv ive e interest, and a legal interest of 2( per annum will $e added added in place place of the exces excessiv sive e intere interest st forme formerly rly impose imposed, d, follow following ing the guide guideline lines s laid laid down down in the 9ines, Inc. v. v. $ourt landmark case of +astern 'hipping 9ines, Inc. o Appeals.
. G,ant o# Loan! and )e"5,it6 Re5i,e:ent! Re5i,e:ent! BANCO DE ORO* %E'I'IONERA%%ELLAN'* ). /AIE . BA&GA BA&GA AND ROBER'O ROBER'O %. %. 'OLEN'INO* 'OLEN'INO* RE)%ONDEN')A%%ELLEE RE)%ONDEN')A%%ELLEE)* )* 'E CO&R' OF A%%EAL) AND ON. FRANCI)CO DE LA RO)A IN I) CA%ACI' A) /&DGE OF 'E CFIRIAL* BRANC II %A)A CI'* RE)%ONDEN') G.R. No. L938* O"to;e, 17* 1979* FIR)' DII)ION* DII)ION* ELENCIOERRERA Fa"t! Fn ( 1ovem$er 24), as security for a loan of !+5Q !+5Q,, respon responden dentt Bayuga Bayuga,, as attorn attorneyI eyIinI inIfac factt of respondent Tolentino, and Xa$allero, executed a *eal Estate ortgage *E in favor of the Acme Savings Bank now Banco de Fro I Bank over a parcel of land in Calam$a, >aguna under the names of Tolentino and Xa$a Xa$all ller ero o. The The purp purpos ose e of the the loan loan was was for for the the ac&u ac&uis isit itio ion n of a prop proper erty ty loca locate ted d in Tagay agayta tay y registered in the name of Algue Corporation. Fn 25 1ove 1ovem$ m$er er 24) 24),, the the Bank Bank made made a partial release of !(33Q less charges of !)Q, which amount was credited to the account of Tolentino. Fn the same same date, date, out of the $alanc $alance e of !248,3 !248,333. 33.33 33,, Tolentino olentino purchase purchased d from the BA1Q a certi'ca certi'cate te of time deposit in the amount of !53Q. 6e also withdrew on the the said said date date !233 !233Q Q and and !88Q !88Q the the next next day day. Tolentino then purchased from the BA1Q a anagers check in the total amount of !288Q, !2+5Q of which he deposited in his savings account, and !4Q in his
25
check checking ing accou account, nt, $oth $oth with with the =ar East Bank Bank W Trus Trustt Comp Compan any y. Ther Therea eaft fter er,, clai claimi ming ng that that the the $orrowers showed no indication of complying with his o$ligation to pay the amount of the loan to the vendor Algue Algue,, -nc. -nc. of the Tagayta agaytay y City City prope property rty, which which constituted diversion in violation of Sec. , *epu$lic Act 1o. ++2, the the BA1Q BA1Q stop stoppe ped d paym paymen entt of its its anagers check at the same time that it refused to rele releas ase e the the $ala $alanc nce e of the the loan loan.. That That acti action on was was necessary, according to the Bank, in order to prevent private respondent from perpetrating a fraud against it. Therea Thereafte fterr, Tolenti olentino no and Bayug Bayuga a 'led 'led an actio action n for speci' speci'c c perfor performa mance nce agains againstt the Bank Bank $efore the C=- of *i#al. -n ruling in favor of private responde respondents, nts, the C=- reasoned reasoned that denying private resp respon onde dent nts s relie relieff woul would d have have $een $een to deny deny the the $orrowers $orrowers relief from the su$stanti su$stantial al in/ustice in/ustice with which they have $een $urdened considering that their land land had had $een $een mort mortga gage ged d the the >agu >aguna na prop proper erty ty withou withoutt the BA1Q havin having g paid paid any centavo centavo for the loan. -n a7irming the trial court, the CA reasoned that it was was most most persu persuade aded d $y the fact fact that that the loan is intend intended ed to $uy real real estate estate proper property ty,, the price price of which varies as days go $y. The $ank maintains that BA1Q maintains that the issuance of the rit would patently work violence with /ustice and e&uity $ecause the property given as collateral( as well well as the the $ond $onds s whic which h have have $een $een posted are inade&uate, and petitioner would $e made to violate the Sec. of *A ++.
I!!5e as the $ank correct in unilaterally cancelling the loanG
R5in< es. es. hile, prima facie, execution pending appeal + seemed seemed /usti' /usti'ed ed $ecaus $ecause e of the unilat unilater eral al cancellation of the release of the loan $y the $ank witho ithou ut not notice, ice, and the a$se a$senc nce e of compl omple ete supporting documents to the !etition, disclosures $y the parti parties es during during the hearin hearing g and pleadi pleadings ngs and documents su$se&uently 'led uphold a contrary view. -n his comment, Tolentino Tolentino contended that he is not a party to the mortgage which was executed only $etween the $ank and Bayuga9 that he $ecame a party only $ecause he was Hin/ured and damaged $y the $ad faith of the $ank9H that he is not willing to coIsign a promissory note in the BA1Qs favor for the amount of !+:4,333.33, alleging that Bayuga had already signed a promissory note in 1ovem$er, 24) in the sum of !(33 !(33,33 ,333.3 3.339 39 and that that neithe neitherr he nor Bayuga Bayuga had o$ligated himself to put up any additional collateral. Bayuga, for his part, during the hearing, assumed a very passive role admitting that he was $ut an employee of Tolentino Tolentino who was the prime mover in the entire transaction. The lack of good faith and of a sense of fair play on the part of private respondents was all too evident. They were treating the release of the amount of !+:4 !+:4,3 ,333 33.3 .33 3 in thei theirr favo favorr more more as a mone money y
/udgment, which it is not, rather than as a loan which it is. They want to avail of the full $ene'ts of the loan without assumption of the corresponding o$ligations, or very very mini minima mall lly y at that that.. Sinc Since e rece receip iptt of the the aforestated amount, they have even refused to make any monthly amorti#ations even upon demand $y the BA1Q, contending that Hno amount of the said loan is due. due. -t will will only only $e paid paid ten ten 23 23 year years s afte afterr the the execution of the mortgage contract as interpreted $y our Courts Courts.H .H =urth =urther er,, there there is a gross gross inade& inade&uac uacy y $etween the value of the loan and the collateral given $y the private respondents. The special reason cited $y the trial Court and upheld $y the Court of Appeals, i.e., the Hsu$stantial in/usticeH wrought on private respondents whose land had $een mortgaged without any centavo paid for the loan, does not exist in law. As pointed out $y the $ank, the Calam$a property need not have remained su$/ect to the mortgage, the mortgage $eing $ut an accessory contract to the contrast of loan which is the principal o$li o$liga gati tion on and and whic which h has has $een $een canc cancel elle led. d. The The consid considera eratio tion n of the mortg mortgage age is the same same consiI consiI derati deration on of the princi principal pal contra contract ct withou withoutt which which it cann cannot ot exis existt as an inde indepe pend nden entt cont contra ract ct.. The The HpersuasiveH factor considered considered $y the Court of Appeals Hthat the loan is intended to $uy real estate property, the price of which varies as days go $yH was disproved $y the fact that Tolentino utili#ed the amount initially released to purchase a certi'cate of time deposit and to open $ank accounts ( nd paragraph of the facts in his name rather than pay for the Algue property. The unfairness and ine&uity of this posture to the the $ank $ankin ing g $usi $usine ness ss is too too evid eviden entt to re&u re&uir ire e ela$oration. =unds of a $ank are, in a sense held in trust. trust. There There are the interest interests s of depos deposito itors rs to $e protected. "ecision of TC and CA reversed. 2. Sec. I The purpose of all loans shall $e stated in the contract $etween the $ank and the $orrower. -f the $ank 'nds that the funds have $een employed, without without its approval approval,, for purposes other than those agreed upon with the $ank, the $ank shall have the right to terminate terminate the loan and demand demand immediate immediate repayment of the o$ligation. [note this is under the old law. law. Sec. is now in the second paragraph of Sec. +4 of the ;en. Banking Act of (333 which is worded< VThe purpose of all loans and other credit accommodations shall $e stated in the application and in the contract $etween the $ank and the $orrower. -f the $ank 'nds that the proceeds of the loan or other credit credit accommo accommodatio dation n have $een employed, employed, without without its appro approva val, l, for purpos purposes es other other than than those those agree agreed d upon with the $ank, it shall have the right to terminate the loan or other credit accommodation and demand immediate repayment repayment of the o$ligationU (.
The >aguna property was valued at around !25.:k compared to the loan that was !+5Q. The property sought to $e ac&uired was supposed to $e added as coll collat ater eral al $ut $ut give given n the the alle allega gati tion on that that priv privat ate e respondents had no intention of using the loan to pay
26
the Tagaytay property9 the $ank stopped paying the loan. +
The issue stated in this case was the propriety of the TCOs grant of the writ of execution 'led $y private respondents $ut the legal issue as stated in this digest are essentially the same.
/O)E C. GO -! BANGKO BANGKO )EN'RAL )EN'RAL NG %ILI%INA) G.R. No. 17829* O"to;e, 24* 2009* BRION* J . K+L #7$<(I"+: #7$<(I"+: &nder 'ection 'ection G2, (A 223, 223, the ollowing elements elements must be present present to constitute a violation o its frst paragraph: . the o8e o8ende nderr is a direct director or or o8ice o8icerr o any bank banking ing institutionC 0. the o8ender, o8ender, either directly or indirectly, indirectly, or himsel or as representative or agent o another, perorms any o the ollowing acts: a. he borr borrow ows s any o the the depos deposit its s or unds unds o such bankC or b. he becom becomes es a guaran guarantor tor,, indorser indorser,, or suret surety y or loans rom such bank bank to others, or c. he beco become mes s in any mann manner er an oblig obligor or or or money borrowed rom bank or loaned by itC 2. the o8ender has perormed perormed any o such acts without the written approval o the ma@ority o the directors o the bank, bank, exclud excluding ing the o8ende o8enderr, as the direct director or concerned.
An -nformation for violation of Section :+ now Section +) of *A ++ or the ;eneral Banking Act, as amended $y !" 245, was 'led against ;o $efore the *TC. *TC. The charge charge alleged alleged that that he, $eing then the director and the president and chief executive o7icer of the Frient Bank, taking advantage of his position as such, unlawfully and knowingly $orrow, $orrow, either directly or indirectly, indirectly, for himself or as the representative of his other related companies, the deposits or funds of the said $anking $anking institutio institution n and0or and0or $ecome $ecome a guaranto guarantorr, indorser or o$ligor for loans from the said $ank to othe others rs,, $y then then and and ther there e usin using g said said $orr $orrow owed ed depos deposits its0fu 0funds nds of the said said $ank $ank in facilit facilitati ating ng and and granting and0or caused the facilitating and granting of credi creditt lines0 lines0loa loans ns and, and, among among others others,, to the 1ew 1ew Xealand Accounts loans in the total amount of !(.8 $illion, said accused knowing fully well that the same has $een done $y him >ito5t te >,itten a++,o-a of the ma/ority of the Board of "irectors of said Frient Bank and which approval the said accused deli$erately failed to o$tain and enter the same upon the records of said $anking institution and to transmit a copy of which to the supervising department of the said $ank, as re&uired $y law. ;o 'led a motion to &uash the -nformation. 6e insists that that the the -nfo -nform rmat atio ion n fail failed ed to alle allege ge the the acts acts or omissions complained of with su7icient particularity to ena$l ena$le e him to know know the o7ense o7ense $eing $eing charged charged.. ;o averred that $ased on the facts alleged therein, he was $eing prosecuted for $orrowing the deposits or funds of the Frient Bank and0or acting as a guarantor, indo in dors rser er or o$ o$li ligo gorr fo forr th the e $a $ank nks s lo loan ans s to ot othe herr persons. The use of the word Hand0orH meant that he was wa s ch char arge ged d fo forr $e $ein ing g ei eith ther er a $o $orr rrow ower er or a guarantor, or for $eing $oth a $orrower and guarantor. ;o claimed that the charge was not only vague, $ut also als o did not co const nstitut itute e an o7e o7ense nse.. 6e pos posite ited d tha thatt Secti Se ction on :+ of *A ++ ++ pe penal nali#e i#ed d onl only y dir direc ector tors s and
o7icers of $ank o7icers $anking ing institutions institutions who acted eithe eitherr as $orrower $orro wer or as guar guarantor antor,, $ut not as $oth. The *TC granted granted ;oOs motion motion to &uash. &uash. The The CA rever reversed sed it. 6ence, this petition for certiorari. ;o $asically reiterated the argument he raised in his motion to &uash. Additionally, he reiterates his claim that th at cr cred edit it ac acco com mmo moda dati tion ons s $y $a $ank nks s to th thei eirr directors direc tors and o7ic o7icers ers are lega legall and valid, prov provided ided that these are limited to their outstanding deposits and $ook value of the paidIin capital contri$ution in the th e $a $ank nk.. Th The e fa failu ilure re to st stat ate e th that at he $o $orr rrow owed ed deposits depo sits and0 and0or or guar guarante anteed ed loans $eyond this limit rendered the -nformation defective.
I))&E -s ;o lia$le for violation of Sec. :+ of the ;eneral Banking ActG
R&LING ES. A simple reading of the a$ove elements easily re/ects ;os contention that the law penali#es a $ank director or o7icer only either for $orrowing the $anks deposits or funds or for guarantying loans $y the $ank, $ut not for acting acting in $ot $oth h cap capac aciti ities. es. 'e e!!en"e o# te
",i:e i! ;e"o:in< an o;iito5t !e"5,in< te ne"e!!a,6 >,itten a++,o-a o# te :aPo,it6 o# te ;an$J! di,e"to,! .
The sec second ond ele elemen mentt me merel rely y lis lists ts dow down n the va vario rious us modes of committing the o7ense. The third mode, $y declaring that Vno director or o7icer of any $anking inst in stit itut utio ion n sh shal alll in an any y ma mann nner er $e an o$ o$lig ligor or fo forr money $orrowed from the $ank or loaned $y it,H in fact serves a catchIall phrase that covers any situation when a director or o7icer of the $ank $ecomes its o$ligor. Section :+ of *A ++, as well as other $anking laws adopting the same prohi$ition, was enacted to ensure that loans $y $anks and similar 'nancial institutions to their the ir own dir direc ector tors, s, o7i o7ice cers, rs, and sto stock ckhol holder ders s are a$ove $oard. Banks were not created for the $ene't of their directors and o7icers9 they cannot use the assets of the $ank for their own $ene't, except as may $e permitted $y law. Contrary Contra ry to ;o ;os s cla claims ims,, the sec second ond par paragr agraph aph of Section :+, *A ++ does not provide for an exception to a violation of the 'rst paragraph thereof, nor does it cons co nsti titu tute te as an el elem emen entt of th the e o7 o7en ense se ch char arge ged. d. Sec Se cti tion on :+ of *A ++ ac acttua uall lly y im impo pose ses s th thre ree e rest re stric ricti tion ons< s< ap appr prov oval al,, re repo port rtor oria ial, l, an and d ce ceili iling ng re&uirements. The ap The appr prov oval al re re&u &uir irem emen entt re refe fers rs to th the e wr writ itte ten n appr ap prov oval al of th the e ma ma/o /ori rity ty of th the e $a $ank nks s $o $oar ard d of directors re&uired $efore $ank directors and o7icers can in any manner $e an o$ligor for money $orrowed from fro m or loa loaned ned $y the $ank. $ank. =ail ailure ure to sec secure ure the appr ap prov oval al re rend nder ers s th the e $a $ank nk di dire rect ctor or or o7 o7ic icer er concerned lia$le for prosecution and, upon conviction, su$/ec su$ /ects ts him to the penalty penalty provide provided d in the third sent se nten enc ce of 'r 'rst st pa para ragr grap aph h of Se Sect ctio ion n :+ :+.. Th The e reportorial re&uirement, on the other hand, mandates that any such approval should $e entered upon the records of the corporation, and a copy of the entry $e tra rans nsm mit ittted to the appro ropr pria iate te sup su perv rvis isin ing g 27
department. The reportorial re&uirement is addressed to the $ank itself, which, upon its failure to do so, su$/ects it to &uo warranto proceedings under Section : of *A ++ ++. . The ceiling ceiling re re&ui &uire remen mentt und under er the second paragraph of Section :+ regulates the amount of credit accommodations that $anks may extend to their the ir dir direc ector tors s or o7i o7ice cers rs $y lim limiti iting ng the these se to an amoun am ountt e&u e&uiva ivalen lentt to the res respec pectiv tive e out outsta stand nding ing depo de posi sits ts an and d $o $ook ok va valu lue e of th the e pa paid idIi Iin n ca capi pita tall contri$ution in the $ank. Again, this is a re&uirement directed at the $ank. -n this light, a prosecution for violation of the 'rst paragraph of Section :+, such as the one involved here, does not re&uire an allegation that the loan exceeded the legal limit. Even if the loan involved is $elow the legal limit, a written approval $y the ma/ority of the $anks directors is still re&uired9 otherwise, the $ank director or o7icer who $ecomes an o$ligor of the $ank is lia$le. Compliance with the ceili ce iling ng re re&u &uir irem emen entt do does es no nott di disp spen ense se wi with th th the e approval re&uireme re&uirement. nt. Evidently, the failure to o$serve the three re&uirements under Section :+ paves the way for the prosecution of three di7erent o7enses, each with its own set of ele eleme ments nts.. A suc succes cessfu sfull ind indict ictme ment nt for failing to comply with the approval re&uirement will not necessitate proof that the other two were likewise not o$served.
ILA ILARIO %. )O )OR RIANO IANO -. %EO% %EO%L LE OF 'E %ILI%%INE)* B)%* %DIC* %&BLIC %RO)EC&'OR AN'ONIO B&AN and )'A'E )'A'E %RO)EC&'OR ALBER'O ALBER'O FONACIER G.R. No. 1244* 1 Fe;,5a,6 2010* /. De Ca!tio QE "FCT*-1E. A $ank o7icer violates violates the "FS*- law when he a"5i,e! ;an$ #5nd! #o, i! +e,!ona ;eneft , even if such ac&uisition was facilitated $y a fraudulent loan application. "irectors, o7icers, stockholders, and their related interests cannot $e allowed to interpose i nterpose the fraudulent nature of the loan as a defense to escape culpa$ility for their circumvention of Section :+ of *.A. 1o. ++. =ACTS. A7idavits were su$mitted $efore the !rosec !rosecuto utorOs rOs o7ice o7ice charg charging ing 6ilari 6ilario o Sorian Soriano o with with
E!ta#a t,o t,o5< 5< #a! #a!if if"a "ati tion on o# "o:: "o::e, e,"i "ia a relati tion on to !.". .". 1o. 1o. 2):4 2):4 and and for for do"5 do"5:e :ent nt!! in rela
violation of Section of Section :+ of *.A. 1o. ++, where$y it was alleged that the spouses Carlos appeared to have an outstanding loan of !: million with the *ural Bank of San iguel Bulacan, -nc., $ut had ne-e, a++ied ne-e, a++ied #o, no, ,e"ei-ed !5" oanH that it >a! +etitione,* >o >a! ten +,e!ident of the Bank, who had ordered, facilit facilitate ated, d, and receiv received ed the proce proceeds eds of the loan. loan.
)o,iano o>e-e, "ontend! tat te "o::i!!ion ith the o# e!ta# e!ta#a a i! in ine,e e,ent nt6 6 in"o: in"o:+at +ati; i;e with
violation of the "FS*- law, law, as petitioner contends. Esse Essent ntia iall lly y, the the peti petiti tion oner er theo theori ri#e #ed d that that the the characteri#ation of possession is di7erent in the two o7enses. -f petitioner ac&uired the loan as "FS*-, he owne owned d the the loan loaned ed mone money y and and ther theref efor ore, e, cann cannot ot misappropriate or convert it as contemplated in the o7ense of estafa. Conversely, if petitioner committed estaf estafa, a, then then he merely merely held held the money money in trust trust for
someone else and therefore, did not ac&uire a loan in violation of "FS*- rules. rules. -SS%E. -s a loan transaction within the am$it of the "FS*- law su$/ect to Estafa under the *evised !enal CodeG ES. *%>-1;. !etit etitio ione nerO rOs s theo theory ry is $ase $ased d on the the fals false e premises that the loan was extended to him $y the $ank in his own name, and that he $ecame the owner of the loan proceeds. Both premises are wrong. The $ank money amounting to!: million which came to Sorian SorianoOs oOs posses possessio sion n was money money held held in trust trust or administration $y him for the $ank, in his 'duciary capa capaci city ty as the the !res !resid iden entt of said said $ank $ank.. Sori Sorian ano, o, through falsi'cation, made it appear that said Enrico Carlos applied for the loan when in fact he did not. Through such fraudulent device, petitioner o$tained the loan proceeds proceeds and converte converted d the same. %nder these circumstances, it cannot $e said that petitioner $eca $ecame me the the lega legall owne ownerr of the the !: mill millio ion. n. Thus Thus,, petitioner remained the $anks 'duciary with respect to that money, which makes it capa$le of misappropriation or conversion in his hands. The prohi$ition in Section :+ is $road enough to cover various modes of $orrowing. -t covers loans $y a $ank director or o7icer which are made either< 2 directly, ( indirectly, + for himself, 8 or as the representative representative or agent of others. -t applies even if the director director or o7icer o7icer is a mere guarantor guarantor,, indorser indorser or surety surety for someone someone elses loanor is in any manner manner an o$ligor for money $orrowed from the $ank or loaned $y it. -ndirect $orrowing applies in the instant case, the -nformation descri$es the manner of securing the loan as indirect9 names petitioner as the $enefactor of the indirect loan9 and states that the re&uirements of the law were not complied with. -t contains all the re&uired elements elements for a violation of Section :+, even if petitioner did not secure the loan in his own name. -n sum, sum, the inform informati ations ons 'led 'led agains againstt Sorian Soriano o do not negate each other. [=rom "C.
RE%&BLIC OF 'E %ILI%%INE) v. )"NDIG"N&"Y"N * et '+. G.R. No!. 1839* 19204 and 180702* 12 A+,i 2011* EN &"NC (Be,!a:in* J . . DOC'RINE OF 'E CA)E
FAC') -n 24:, 24:, the *epu$ *epu$lic lic comme commence nced d t$e civil civil case $efore the 'andiganbayan, impl implea eadi ding ng as defendants Eduardo . Co/uangco, ?r. and )2 other individuals. ore than three years later, the *epu$lic 28
once more amended the complaint apparently to avert the nulli'cation of the writs of se&uestration issued agai agains nstt prop proper erti ties es of Co/u Co/uan angc gco. o. -n 2444 2444,, the the 'andiganbayan allo allowe wed d the su$ su$divi divisi sion on of the complaint in the civil case into eight complaints, each pertaining to distinct transactions and properties and impleading as defendants only the parties alleged to have participate participated d in the relevant relevant transact transactions ions or to have owned the speci'c properties involved. 6owever, 6owever, the writs writs of se&ue se&uestr strati ation on were were lifte lifted d for violat violating ing !C;; *ule *ules s re&uiring approval of ( !C;; commissioners. Allegedly, Allegedly, Co/uangco purchased a $lock of ++,3 ++,333 33,3 ,333 33 shar shares es of SC SC stoc stock k thro throug ugh h the the 28 holding companies owned $y the C--= Fil ills. Also impleaded as defendants in the civil case were several corporations alleged to have $een under Co/uangcoOs control and used $y him to ac&uire the $lock of shares of San iguel Corporation SC. The The com complai plaint nt mate materi rial ally ly aver averre red d that that Co/uan Co/uangco gco,, as a pu$lic pu$lic o7icer o7icer during during the arco arcos s admini administr strati ation, on, ac&ui ac&uire red d assets assets,, funds, funds, and other other property property grossly grossly and manifest manifestly ly disproport disproportionat ionate e to his sala alaries ies, lawf lawful ul inc income ome and inc income ome from from legi legiti tim matel ately y ac&u ac&uir ired ed prop proper erty ty and, and, $ein $eing g the the undispute undisputed d coconut coconut king, with unlimited unlimited powers powers to deal deal with with the coconu coconutt levy levy funds9 funds9 that that Co/uan Co/uangco gco en/oyed the privilege of appointing his nominees to the SC Board, to which he appointed key mem$ers of the ACC*A >aw =irm =irm instea instead d of coconu coconutt farme farmers rs whose money money really really funded the sale. Co/uanco, Co/uanco, et al. plotted, devised, schemed, conspired and confederated with each other in setting up, through the the use use of coco coconu nutt levy levy fund funds, s, the the 'nan 'nanci cial al and and corporat corporate e framework framework and structure structures s that led to the esta esta$l $lis ishm hmen entt of %C!B %C!B,, %1-C %1-CF F,, CFCF CFCF>>-=E =E,, CFCFA*Q. CFCFA*Q. C-C, and more than (3 other other coconut coconut levyIfunded corporations. 6owever, ACC*A >aw =irm was excluded in the case $y virtue of an SC decision. After su$mission of various pleadings, the 'andiganbayan, in order to conform with the ruling in !residential $ommission on )ood )overnment v. $o@uan $o@uangco gco,, et al., gran grante ted d CFCF CFCF=E =E" " Os 7mnibus %otion wit with h pray prayer er for for prel prelim imin inar ary y in/u in/unc ncti tion on relative to who should vote the %C!B shares under se&uestration. But, when the *epu$lic 'led a %otion or udgment on the !leadings andNor or !artial !artial 'ummary udgment, the 'andiganbayan granted it as to the C--= Block of shares. "uring the pendency of the *epu$licOs motion for execution on the C--= $lock of shares, Co/uangco, et al. 'led a %otion or Authority to 'ell 'an %iguel $orporation '%$/ shares, praying for leave to allow the sale of SC shares to proceed. The 'andiganbayan granted. Co/uangco, Co/uangco, et al. manifested to the 'andiganbayan that the shares would $e sold to the San iguel iguel Corpor Corporati ation on *etire *etireme ment nt !lan. !lan. The llowe ed the sale ale of the the shar share es 'andiganbayan allow provided provided that Co/uanco, Co/uanco, et al. hold themselves lia$le to their their transf transfere ereesI esI$uy $uyer ers, s, espec especial ially ly if they they are $uyers $uyers in good faith and for value. Co/uangco, Co/uangco, et al. later rendered a complete accounting of the proceeds from the sale of the Co/uangco $lock of shares of SC
stock, informing that a total amount of ! 8,:),23,8(:.+8 had $een paid to the %C!B as loan repayment. -n its its last last atte attem mpt to pin pin Co/u Co/uan anco co,, the the *epu$licOs lack of proof on the source of the funds $y which which Co/uangco, Co/uangco, et al. had ac&uired their $lock of SC shares has made it shift its position, that it now suggests that Co/uangco had $een ena$led to o$tain the loans $y the issuance of >F- 4() exempting the %C!B from the "FS*- and the Single Borrowers >imit restrictions.
I))&E) +. ere ere 4 writ writs s of se&ue se&uest stra rati tion on FS FS lifted lifted with with grave a$use of discretionG 8. "id "id the the *epu *epu$l $lic ic adduce adduce su7ic su7icie ient nt evid eviden ence ce to su$stantia su$stantiate te its allegation allegations s against against Co/uanco, Co/uanco, et al., warranting summary /udgmentG
3. Did Did LOI 92* 92* e?e:+ e?e:+ti tin< n< te te &C%B #,o: #,o: te te DO)R DO )RII and and te te )in< )in<e e Bo,, Bo,,o> o>e, e,!! Li:i Li:itt ,e!t ,e!t,i ,i"t "tio ion! n!** in-a in-ai id* d* > >i" i" a!o a!o :a$e :a$e!! CoP5an"o! oan ;e#o,e te &C%B in-aid= R&LING
2. 1F. The a$sence of a prior determination $y the !C;; of a prima se&uestration on prima acie acie $asis for the se&uestrati order order is, unavoida$ unavoida$ly ly,, a fatal defect which which rendered rendered the se&uestrat se&uestration ion of responde respondent nt corporati corporation on and its properties void ab initio. !lainly enough, the irregularities in'rming the issuance of the several FS could not $e ignored in favor of the *epu$lic and resolved against the persons whose properties were su$/ect of the FS. here the *ules of the !C;; instituted safeguards under Section +, $y re&u re&uir irin ing g the the conc concur urre rent nt signa signatu ture res s of two two Commissioners to every FS issued and the existence of a prima acie case of illIgotten wealth to support the issu issuan ance ce,, the the nonI nonIco comp mpli lian ance ce with with eith either er of the the safeguards nulli'ed the FS thus issued. -t is already settle settled d that that se&ues se&uestra tratio tion, n, due to its tende tendency ncy to impede or limit the exercise of proprietary rights $y private citi#ens, is construed strictly against against the State, confor conforma ma$ly $ly with with the legal legal maxim maxim that that statut statutes es in derogatio derogation n of common common rights rights are generally generally strictly strictly construed construed and rigidly rigidly con'ned con'ned to the cases clearly clearly within their scope and purpose. 1or did did the 'andiganbayan gravely a$use its disc discre reti tion on in redu reduci cing ng from from four four to only only two two the the condit condition ions s impos imposed ed for the liftin lifting g of the FS. FS. The 'andiganbayan the there$ re$y acte acted d with ith the the $est est of intentions, $eing all too aware that the claim of the *epu$ *epu$lic lic to the se&ues se&uester tered ed asset assets s and prope properti rties es might might $e pre/udic pre/udiced ed or harmed harmed pendente lite unless the the prot protec ecti tive ve cond condit ition ions s were were anno annota tate ted d in the the corporate $ooks of SC. oreover, the issue $ecame academic following the 'andiganbayanOs promulgation of its decision decision dismis dismissin sing g the *epu$li *epu$licOs cOs Amended $omplaint, which there$y removed the stated reason the (epublic continues to hold a claim on the shares which is yet to be resolved underlying the need for the annotation of the conditions whether four or two.
29
(. 1F. The *epu$lic did not discharge its $urden as plainti7 plainti7 to esta$lish esta$lish $y preponde preponderanc rance e of evidence evidence that the Co/uanco, Co/uanco, et al.Os SC shares were illegally ac&uired with coconutIlevy funds. Even assuming that, as the *epu$lic prayed for, the Court takes /udicial notice of the evidence it o7ered with respect to the Co/uangco $lock of SC shar shares es of stoc stock, k, as cont contai aine ned d in the the *epu *epu$l $lic icOs Os manifest manifestation ation of purposes, purposes, still its evidence evidence do not su7i su7ice ce to prov prove e the the mate materi rial al alle allega gati tion ons s in the the comp compla lain intt that that Co/u Co/uan angc gco o took took adva advant ntag age e of his his positions in %C!B and !CA in order to ac&uire the said shares. Besides, the Court found that there are genuine factual issues raised $y Co/uanco, et al. that need to $e threshed out in a fullI$lown trial, and which plainti7 had the $urden to su$stantially prove, such as sources of funds, determination of whether the funds ac&u ac&uir ired ed from from alle allege ged d vari variou ous s sour source ces s can can $e considered coconut levy funds, proof that Co/uangco was servi serving ng the governm government ent at the time the funds funds used to purchase the SC shares were o$tained, and the he took advantage of his position and close ties with then !resident arcos. -t was plain, indeed, that Co/uangco, et al. had tende tendere red d genuin genuine e issues issues throug through h their their respon responsiv sive e pleadings and did not admit that the ac&uisition of the Co/uangco $lock of SC shares had $een illegal, or had $een made with pu$lic pu$lic funds. funds. As a result result,, the *epu$l *epu$lic ic needed needed to esta$l esta$lish ish its alleg allegati ations ons with with preponderant preponderant competent evidence, $ecause, as earlier stated, the fact that property was ill gotten could not $e presum sumed $ut $ut must ust $e su$ su$sta stantia ntiatted with ith compe ompete ten nt proo roof add adduce uced in pro proper /ud /udicia iciall proceedings. ith the *epu$lic nonetheless choosing not to adduc adduce e evide evidence nce provin proving g the factua factuall alleg allegati ations ons,, particularly the aforementioned matters, and instead opting opting to pursue pursue its claims claims $y %otion or 'ummary udgment, the 'andiganbayan $ecame $ecame complete completely ly depri deprived ved of the means means to know know the necessa necessary ry $ut crucial details of the transactions on the ac&uisition of the contested $lock of shares. The *epu$licOs failure to adduce evidence shifted no $urden to Co/uanco, et al. to esta$lish anything, for it was $asic that the party who asserts, not the party who denies, must prove. Thus, the 'andiganbayan correctly dismissed the civil case for failure of the *epu$lic to prove its case $y preponderant evidence.
4. NO. Fi,!t6* a! ea,ie, +ointed o5t* te Re+5;i" add5"ed no e-iden"e on te !i o>e, e,** te te a++, a++,oo-in in< < oi"ia* etc. It did not a!o e!ta;i! >ete, o, not te oan! >e,e DO)RI o, i!!5ed in -ioation o# te te )in )in<e <e Bo,,o Bo,,o>e, >e,!! Li:it. Li:it. )e"on )e"ond6 d6** te Re+5 Re+5; ;i" i" "o5 "o5d d not not o5t, o5t,i< i<t t6 6 a!!5 a!!5:e :e tat tat %,e!id %,e!ident ent a,"o! a,"o! ad i!!5e i!!5ed d LOI 92 92 #o, #o, te +5,+o!e o# ao>in< te oan! ;6 te &C%B in #a-o, #a-o, o# CoP5an CoP5an<"o <"o.. 'e,e 'e,e :5 :5!t !t ;e "o:+e "o:+eten tentt e-iden"e to tat ee"t. And* fna6* te oan!* a!!5:in< tat te6 >e,e o# a DO)RI nat5,e o, >ito5t te ;eneft o# te ,e5i,ed a++,o-a! o,
in e?"e!! o# te )in<e Bo,,o>e,! Li:it* >o5d not ;e -oid #o, tat ,ea!on. In!tead* te ;an$ o, te oi"e oi"e,! ,! ,e!+on ,e!+on!i; !i;e e #o, te a++,oa++,o-a a and <,ant o# te DO)RI oan >o5d ;e !5;Pe"t on6 to !an"tion! 5nde, te a>. %ILI%%INE AANA BANK (NOW ALAANA I)LAIC INE)'EN' BANK OF 'E %IL %ILI% I%%I %INE NE) )* AL)O AL)O KN KNOW OWN N A) I)LA I)LAI IC C BANK* %etitione,* -!. EANGELI)'A CON'R CON'RERA ERA)* )* Re!+o Re!+ond nden ent. t. G.R. G.R. No No.. 1741 17418 8** )e+te:;e, 29* 201* BRION* J . S Any private arrangement arrangement between $alinico and the respondent regarding the proceeds o the loan was not the concern o the petitioner bank, as it was not a privy to this agreement. I $alinico violated the terms o his agreement with the respondent on the turnover o the proceeds o the loan, then the latterFs proper recourse was to fle the appropriate criminal action in court. inally, inally, we point out that the petitioner bank is a governme government nt owned or controlle controlled d corporati corporation. on. hile 7$< "o. !-0D2; issued in avor o $alinico by virtue o the the deed deed o conf confrm rmat atio ion n o sale sale// cont contain ained ed a prohibition against the alienation and encumbrance o the sub@ect land within fve 1/ years rom the date o the the pate patent nt,, the the $A aile ailed d to ment mentio ion n that that by the the express express wordings o the 7$< itsel, itsel, the prohibition prohibition does not cover cover the alienation alienation and encumbrance encumbrance Oin avor o the )overnment or any o its branches, units or institutions.O
Evangelista Contreras, the respondent, 'led a compla complaint int for annulm annulment ent of real real estate estate mortga mortgage ge,, cance ncella llation tion of orig origin inal al certi' rti'c cate of title itle,, reconvey reconveyance ance,, recovery recovery of possession possession and damages damages $efore the *TC. The respondent alleged that he was the owner of a )83 s&uare meter cadastral lot located in Cagayan de Fro City. *espondent *espondent went to the house of his his $rot $rothe herI rIin inIl Ilaw aw,, Cali Calini nico co -log -logon on,, to seek seek assistance in o$taining a loan from the petitioner $ank since Calinico is a friend of the $ankOs Chief of the >oan "ivision. Calinico told the respondent that the petitioner $ank could grant a loan up to !(33,333.33 if the su$/ect property would $e titled. Su$se&uently, Su$se&uently, respondent and Calinico, upon the suggestion of the Chief of the petitioner $ankOs >oan "ivision, entered into a "eed of Con'rmation of Sale under which they transferred the title of the land to Calinico who, in turn, mortgaged it to the petitioner $ank. Calinico and the respondent then executed an Agreement stating, among others, that the deed of sale they executed was for the purpose of securing a loan with the petitioner $ank. The respondent wrote a letter and went to the petitioner $ank directing the latterOs manager not to release the loan to Calinico. 6owever, on the next day, day, he was informed that the loaned amount had already $een given to Calinico earlier that morning That petitioner $ank su$se&uently extra extra/ud /udici iciall ally y forecl foreclose osed d the mortg mortgage age due to the -logon spousesO failure to pay the loan. The mortgaged 30
property was sold at pu$lic auction to the petitioner $ank as the highest $idder. Thereafter, the Certi'cate of Sale was issued in favor of the petitioner $ank. The mortgagor failed to redeem the mortgaged property within the period prescri$ed $y law, thus, the title to the property was consolidated in the petitione petitionerr $anks $anks name. name. Conse&uent Conse&uently ly,, Friginal Friginal Cert Certi' i'ca cate te of Titl Title e was was canc cancel elle led d and and Tran Transf sfer er Certi'cate of Title was issued in the petitioner $anks name. *TC dismissed the complaint for lack of merit. -t held that the petitioner $ank was not aware of the agreeme agreement nt $etween $etween the responde respondent nt and the -logon spouses, and that the respondent failed to present any evidence as $asis to annul the mortgage contract. *TCOs *TCOs decision decision $ecame $ecame 'nal and executory executory. Accordingly, Accordingly, respondent 'led a petition for relief. *espondent claimed that the petitioner $ank was not a lender in good faith since it knew that the mortgaged land was not owned $y the -logon spouses. 6e added that that the the peti petiti tion oner er $ank $ank and and the the -log -logon on spou spouse ses s conn conniv ived ed with with each each othe otherr to rele releas ase e the the loan loan to Calinico. *TC *TC denie denied d the said petiti petition on for relief relief for $eing 'led out of time. Fn appeal, CA set aside *TCOs decision, declaring the real estate mortgage as null and void. Accord According ing to the CA, the petition petitioner er $ank $ank knew that there were conPicting claims over the land, and that the FCT of this land carried a prohi$ition of any encum$rance on the lot for 've 5 years. -t added that the petitioner $ank failed to exercise diligence in ascertaining the ownership of the land, and ignored the respondentOs representations that CalinicoOs title was defective and was only for loan purposes. Thus, this this petiti petition on for review review on certi certiora orari. ri. -n the said petition, the $ank maintained that it is exempted from the 5Iyear prohi$itory period since it is a ;overnment $ranch, unit or institution.
I))&E I! te ,ea e!tate :o,t
-n the present case, however, nothing in the document documents s presente presented d $y Calinico Calinico would arouse the suspic suspicion ion of the petition petitioner er $ank $ank to promp promptt a more more extensive in&uiry. in&uiry. hen the -logon spouses applied for a loan, they presented as collateral a parcel of land evidenced $y FCT 1o. !I(3+8 issued $y the F7ice of the the *egi *egist ster er of "eed "eeds s of Caga Cagaya yan n de Fro, Fro, and and registered in the name of Calinico. This document did not contain contain any inscription inscription or annotation annotation indicating indicating that the respondent was the owner or that he has any interest interest in the su$/ect su$/ect land. -n fact, fact, the respondent respondent admitted that there was no encum$rance annotated on Cali Calini nico coOs Os titl title e at the the time time of the the latt latter erOs Os loan loan appl applic icat atio ion. n. An6 +,i-ate a,,aneen
Cai Caini ni"o "o and and te te ,e!+ ,e!+on onde dent nt ,ea! not te "on"e,n o# te +eti +etiti tion one, e, ;an$ ;an$** a! it >a! >a! not not a +,i+,i-66 to ti! ti! a<,ee:ent. I# Caini"o -ioated te te,:! o# i! a<,ee:ent >it te ,e!+ondent on te t5,no-e, o# te +,o"ee +,o"eed! d! o# te oan* ten ten te te atte, atte,J! J! +,o+ +,o+e, e, ,e"o ,e"o5, 5,!e !e >a! >a! to fe fe te te a++, a++,o+ o+,ia ,iate te ",i:ina a"tion in "o5,t.
The The resp respon onde dent nt also also fail failed ed to prov prove e its its allegation that the petitioner $ank knew, thru a letter sent $y the formerOs lawyer, Atty. Crisanto utya, ?r., that that the sale of the su$/ect su$/ect land $etwe $etween en him and Calinico was made only for loan purposes, and that failure of Calinico to turn over the proceeds of the loan loan will will invali invalida date te the sale. sale. -n his testim testimony ony,, the respondent admitted that it was his son who gave the lett lette er to the the manag anage er of the the petiti tition oner er $an $ank. Corollarily, the respondentOs son was never presented in court. Even assuming, for the sake of argument, that that the petiti petitione onerr $ank $ank receiv received ed a copy copy of Atty Atty.. utyaOs letter, it was still wellIwithin its discretion to grant or deny the loan application after evaluating the document documents s su$mitte su$mitted d for loan applicant applicant.. A! ea,ie,
!tated* OC' No. %204 i!!5ed in Caini"o! #a-o, >a! #,ee #,o: an6 en"5:;,an"e!. en"5:;,an"e!. 'e +etitione, ;an$ i! not an6:o,e +,i-6 to >ate-e, a,,anne, ente,ed into ,ee +oint +oint o5t tat te +etitione, +etitione, ;an$ ;an$ i! a ne o>ned d o, "ont "ont,o ,o ed ed "o,+o,atio "o,+o,ation. n. Wie Wie OC' No. %204 %204 (i!!5ed (i!!5ed in #a-o #a-o,, o# Cai Cain ni"o i"o ;6 -i,t5 i,t5e e o# te te dee deed o# "onf,: "onf,:ati ation on o# !ae !ae "onta "ontaine ined d a +,oi; +,oi;iti ition on aitin f-e (3 6ea,! #,o: te date o# te +atent* te CA #aied to :ention tat ;6 te e?+,e!! >o,din
31
