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Nielgem S.

Specom Notes 2016 I Cases| Doctrine| Digest| Outline
Judge Macumbal

the documentary evidence

BANK SECRECY represented by the checks adduced in
support thereof, are not only
incompetent for being excluded by
1. BSB VS GO operation of R.A. No. 1405. They are
likewise irrelevant to the case,
Court noted that the inquiry into bank inasmuch as they do not appear to
deposits allowable under R.A. No. 1405 must have any logical and reasonable
be premised on the fact that the money connection to the prosecution of
deposited in the account is itself the subject respondent for qualified theft. We find
of the action.[51] Given this perspective, we full merit in and affirm respondents
deduce that the subject matter of the action objection to the evidence of the
in the case at bar is to be determined from prosecution
the indictment that charges respondent with
the offense, and not from the evidence sought
by the prosecution to be admitted into the
records. 2. UCPB VS CA

the criminal Information filed with the

Section 2 of the Law on Secrecy of
trial court, respondent, unqualifiedly and in
Bank Deposits,[1] as amended, declares
plain language, is charged with qualified theft bank deposits to be absolutely
by abusing petitioners trust and confidence confidential except:
and stealing cash in the amount
of P1,534,135.50. The said Information makes (1) In an examination made in the
no factual allegation that in some material course of a special or general
way involves the checks subject of the examination of a bank that is
specifically authorized by the Monetary
testimonial and documentary evidence sought
Board after being satisfied that there is
to be suppressed. Neither do the allegations reasonable ground to believe that a
in said Information make mention of the bank fraud or serious irregularity has
supposed bank account in which the funds been or is being committed and that it
represented by the checks have allegedly is necessary to look into the deposit to
been kept. establish such fraud or irregularity,

In other words, it can hardly be (2) In an examination made by an

independent auditor hired by the bank
inferred from the indictment itself that the
to conduct its regular audit provided
Security Bank account is the ostensible that the examination is for audit
subject of the prosecutions inquiry. Without purposes only and the results thereof
needlessly expanding the scope of what is shall be for the exclusive use of the
plainly alleged in the Information, the subject bank,
matter of the action in this case is the money
amounting to P1,534,135.50 alleged to have (3) Upon written permission of the
been stolen by respondent, and not the
money equivalent of the checks which are
(4) In cases of impeachment,
sought to be admitted in evidence. Thus, it is
that, which the prosecution is bound to prove
(5) Upon order of a competent court in cases
with its evidence, and no other. of bribery or dereliction of duty of public
the testimony of Marasigan on the officials,
particulars of respondents supposed
bank account with Security Bank and
Nielgem S. Beja
Specom Notes 2016 I Cases| Doctrine| Digest| Outline
Judge Macumbal

(6) In cases where the money Clearly, the specific provision of R.A.
deposited or invested in the subject 6770, a later legislation, modifies the
matter of the litigation. law on the Secrecy of Bank Deposits
(R.A. 1405) and places the office of the
In short, petitioner is fishing for information so Ombudsman in the same footing as
it can determine the culpability of private the courts of law in this regard
respondent and the amount of damages it can
recover from the latter.

It does not seek recovery of the very money The issue is whether petitioner
contained in the deposit. The subject matter may be cited for indirect contempt for
of the dispute may be the amount of her failure to produce the documents
P999,000.00 that petitioner seeks from requested by the Ombudsman. And
private respondent as a result of the latters whether the order of the Ombudsman
alleged failure to inform the former of the to have an in camerainspection of the
discrepancy; but it is not the P999,000.00 questioned account is allowed as an
deposited in the drawers account. exception to the law on secrecy of
bank deposits (R. A. No. 1405).
The case of the herein petitioner does not fall
under any of the foregoing exceptions to We rule that before an in
warrant a disclosure of or inquiry into the camera inspection may be allowed,
ledgers/books of account of Allied Checking
1. there must be a pending case before
the complaint filed by herein petitioner a court of competent jurisdiction.
against Allied Banking Corporation
before the Philippine Clearing House 2. Further, the account must be clearly
Corporation (PCHC) Arbitration identified, the inspection limited to
Committee is not one for bribery or the subject matter of the pending
dereliction of duty of public officials case before the court of competent
much less is there any showing that jurisdiction.
the subject matter thereof is the
money deposited in the account in 3. The bank personnel and the account
question holder must be notified to be present
during the inspection, and such
inspection may cover only the account
The money depositied in Account No. identified in the pending case.
0111-018548 is not the subject matter
of the litigation in the Arbicom case for In the case at bar, there is yet no
as clearly stated by petitioner itself, it pending litigation before any court of
is the alleged violation by respondent competent authority. What is existing
of the rules and regulations of the is an investigation by the office of the
PCHC Ombudsman.

By the phrase subject matter of the 4. RIZAL VS HI- TRI

action is meant the physical facts, the
things real or personal, the money,
lands, chattels, and the like, in relation Escheat proceedings refer to the
to which the suit is prosecuted, and judicial process in which the state, by
not the delict or wrong committed by virtue of its sovereignty, steps in and
the defendant. claims abandoned, left vacant, or
unclaimed property, without there
being an interested person having a
3. MARQUEZ VS. DESIERTO legal claim thereto.[15] In the case of
Nielgem S. Beja
Specom Notes 2016 I Cases| Doctrine| Digest| Outline
Judge Macumbal

dormant accounts, the state inquires or who have not made

into the status, custody, and further deposits or
ownership of the unclaimed balance to withdrawals during the
determine whether the inactivity was preceding ten years or
brought about by the fact of death or more, arranged in alphabetical
absence of or abandonment by the order according to the names of
depositor.[16] If after the proceedings creditors and depositors,
the property remains without a lawful and showing:
owner interested to claim it, the
property shall be reverted to the state
(a) The names and last
to forestall an open invitation to self-
known place of residence or
service by the first comers
post office addresses of the
persons in whose favor
However, if interested parties have such unclaimed balances
come forward and lain claim to the stand;
property, the courts shall determine
whether the credit or deposit should
pass to the claimants or be forfeited in
favor of the state.[18] We emphasize
that escheat is not a proceeding to
(b) The amount and the date
penalize depositors for failing to of the outstanding
deposit to or withdraw from their
unclaimed balance and
accounts. It is a proceeding whether the same is in
whereby the state compels the
money or in security, and if
surrender to it of unclaimed deposit the latter, the nature of the
balances when there is substantial
ground for a belief that they have been
abandoned, forgotten, or without an

(c) The date when the person

Act No. 3936, as amended, outlines the in whose favor the
proper procedure to be followed by banks and unclaimed balance stands
died, if known, or the date
other similar institutions in filing a sworn when he made his last
statement with the Treasurer concerning deposit or withdrawal; and
dormant accounts:

Sec. 2. Immediately after the (d) The interest due on such

taking effect of this Act and unclaimed balance, if any,
within the month of January of and the amount thereof.
every odd year, all banks,
building and loan associations,
and trust corporations shall A copy of the above sworn
forward to the Treasurer of statement shall be posted in
the Philippines a statement, a conspicuous place in the
under oath, of their respective premises of the bank,
managing officers, of all building and loan association,
credits and deposits held by or trust corporation concerned
them in favor of for at least sixty days from the
persons known to be dead, date of filing
Nielgem S. Beja
Specom Notes 2016 I Cases| Doctrine| Digest| Outline
Judge Macumbal

thereof: Provided, These are bills of exchange drawn by

That immediately before the banks manager or cashier, in the
filing the above sworn name of the bank, against the bank
statement, the bank, building itself.[28] Typically, a managers or a
and loan association, and trust cashiers check is procured from the
corporation shall bank by allocating a particular amount
communicate with the of funds to be debited from the
person in whose favor the depositors account or by directly
unclaimed balance stands at paying or depositing to the bank the
his last known place of value of the check to be drawn. Since
residence or post office the bank issues the check in its name,
address. with itself as the drawee, the check is
If the depositor simply does not wish to deemed accepted in advance.
touch the funds in the meantime, but [29]
Ordinarily, the check becomes the
still asserts ownership and dominion primary obligation of the issuing bank
over the dormant account, then the and constitutes its written promise to
bank is no longer obligated to include pay upon demand
the account in its sworn statement.
Nevertheless, the mere issuance of a
In case the bank complies with the managers check does not ipso
provisions of the law and facto work as an automatic transfer of
the unclaimed balances are eventually funds to the account of the payee. In
escheated to the Republic, the bank case the procurer of the managers or
shall not thereafter be liable to any cashiers check retains custody of the
person for the same and any action instrument, does not tender it to the
which may be brought by any person intended payee, or fails to make an
against in any bank xxx for unclaimed effective delivery,
balances so deposited xxx shall be
defended by the Solicitor General Sec. 16. Delivery; when effectual;
without cost to such bank when presumed. Every contract on a
negotiable instrument is incomplete
and revocable until delivery of the
instrument for the purpose of
An ordinary check refers to a bill of giving effect thereto. As between
exchange drawn by a depositor (drawer) on a immediate parties and as regards a
remote party other than a holder in
bank (drawee),[24] requesting the latter to pay
due course, the delivery, in order to
a person named therein (payee) or to the be effectual, must be made either
order of the payee or to the bearer, a named by or under the authority of the
party making, drawing, accepting,
sum of money.[25] The issuance of the check
or indorsing, as the case may be;
does not of itself operate as an assignment of and, in such case, the delivery may be
any part of the funds in the bank to the credit shown to have been conditional, or for
a special purpose only, and not for the
of the drawer.[26] Here, the bank becomes purpose of transferring the property in
liable only after it accepts or certifies the the instrument. But where the
check.[27] After the check is accepted for instrument is in the hands of a holder
in due course, a valid delivery thereof
payment, the bank would then debit the by all parties prior to him so as to
amount to be paid to the holder of the check make them liable to him is conclusively
from the account of the depositor-drawer. presumed. And where the instrument
There are checks of a special type is no longer in the possession of a
called managers or cashiers checks. party whose signature appears
thereon, a valid and intentional
Nielgem S. Beja
Specom Notes 2016 I Cases| Doctrine| Digest| Outline
Judge Macumbal

delivery by him is presumed until the any portion of the monetary instrument,
contrary is proved. (Emphasis property or proceeds is located outside the
supplied.) Philippines, the petition may be filed in the
regional trial court in Manila or of the judicial
region where any portion of the monetary
instrument, property, or proceeds is located,
The doctrine that the at the option of the petitioner.
deposit represented by a
managers check automatically Sec. 4. Contents of the
passes to the payee is petition for civil forfeiture. - The
inapplicable, because the petition for civil forfeiture shall
instrument although accepted be verified and contain the
in advance remains following allegations:
undelivered. Hence,
respondents should have been
(a) The name and
informed that the deposit had
address of the respondent;
been left inactive for more than
10 years, and that it may be
(b) A description
subjected to escheat
with reasonable
proceedings if left unclaimed.
particularity of the
monetary instrument,
property, or proceeds,
and their location; and

(c) The acts or

omissions prohibited by
and the specific
provisions of the Anti-
Money Laundering Act,
____________________________ as amended, which are
____________________________ alleged to be the
grounds relied upon for
________________ the forfeiture of the
monetary instrument,
AMLA property, or proceeds;
[(d)] The reliefs prayed
Section 3, Title II (Civil Forfeiture in
the Regional Trial Court) of the Rule of
Procedure in Cases of Civil Forfeiture
SEC. 11. Authority to
provides: Inquire into Bank
Sec. 3. Venue of cases cognizable by the Deposits. Notwithstanding
regional trial court. A petition for civil the provisions of Republic Act
forfeiture shall be filed in any regional trial No. 1405, as amended,
court of the judicial region where the Republic Act No. 6426, as
monetary instrument, property or amended, Republic Act No.
proceeds representing, involving, or 8791, and other laws, the AMLC
relating to an unlawful activity or to a may inquire into or examine
money laundering offense are any particular deposit or
located; provided, however, that where all or investment with any banking
Nielgem S. Beja
Specom Notes 2016 I Cases| Doctrine| Digest| Outline
Judge Macumbal

institution or non bank financial The Constitution and the Rules of Court
institution upon order of any
competent court in cases of prescribe particular requirements attaching to
violation of this Act, when it search warrants that are not imposed by the
has been established that
AMLA with respect to bank inquiry orders. A
there is probable cause that
the deposits or investments constitutional warrant requires that the judge
are related to an unlawful personally examine under oath or affirmation
activity as defined in
the complainant and the witnesses he may
Section 3(i) hereof or a
money laundering offense produce,[82] such examination being in the
under Section 4 hereof, form of searching questions and answers.
except that no court order [83]
shall be required in cases Those are impositions which the legislative
involving unlawful activities did not specifically prescribe as to the bank
defined in Sections 3(i)1, (2) inquiry order under the AMLA, and we cannot
and (12).
find sufficient legal basis to apply them to
To ensure compliance with this Act, the Section 11 of the AMLA. Simply put, a bank
Bangko Sentral ng Pilipinas (BSP) may inquire inquiry order is not a search warrant or
into or examine any deposit of investment
with any banking institution or non bank warrant of arrest as it contemplates a direct
financial institution when the examination is object but not the seizure of persons or
made in the course of a periodic or special
examination, in accordance with the rules of
examination of the BSP

Section 11 also allows the AMLC to inquire

into bank accounts without having to obtain a 3. LIGOT VS REP.
judicial order in cases where there is probable
cause that the deposits or investments are
related to kidnapping for ransom,[71] certain
violations of the Comprehensive Dangerous
Drugs Act of 2002,[72] hijacking and other
violations under R.A. No. 6235, destructive
arson and murder.

SEC. 10. Freezing of Monetary

Instrument or Property. The Court of
Appeals, upon application ex parte by the
AMLC and after determination that probable
cause exists that any monetary instrument or
property is in any way related to an unlawful ______________________________________________
activity as defined in Section 3(i) hereof, may ___
issue a freeze order which shall be
effective immediately. The freeze order General Banking LAW
shall be for a period of twenty (20) days
unless extended by the court 1. Baas vs Asia Pacific finance Corp.
On the other hand, a bank inquiry order under
Section 11 does not necessitate any form of Facts:
physical seizure of property of the account
holder. - Asia Pacific filed a complaint for a
sum of money

Nielgem S. Beja
Specom Notes 2016 I Cases| Doctrine| Digest| Outline
Judge Macumbal

o w/ prayer of writ of replevin - Out of 3 , only 2 were turned over

against by the defendants
o Teodoro Baas o Defendants alleged that the
o CG Construction and value of the 2 equipments
o Cenen Dizon are sufficient to pay the
value of the loan
- At some time before, Baas
executed a PROMISSORY NOTE in - During the pendency of the case
favour of CG dizon o Baas died
o Whereby for value received o Hence, the case against him
o He promises to pay to the was dismissed
order of CG DIzon the sum
of 390K - Asia Pacific was substituted by
o In instalments International Corporate bank
o ICB then merged w/ Union
- CG dizon then endorsed w/ Bank of PH
recourse the Promissory note to
o Asia Pacific RTC
o To secure payment- CG - Ruled in favour of ASIA PACIFIC
executed a Deed of Chattel - Defendants were held jointly and
Mortgage severally liable for the unpaid
o Covering 3 heavy balance of obligation under the PN
equipments - Plus interest
o Cenen dizon(officer), then
executed a Continuing CA affirmed in toto
He bound himself to
pay the obligation
jointly and severally
1. WON the disputed transaction between
w/ CG
Asia P. Violated banking laws , hence
- CG made some instalments
null and void
o Worth 130k
2. Won the surrender of the 2
o But was not able to fulfil the
equipments, resulted in
whole amount extinguishment of Cgs obligation
- Hence, asia pacific filed a case SC:
- Asia Pacific/CG admitted the 1. Baas allege that Asia P. was an
genuineness of the PN and
investment house
Undertaking - And could not engage in the
lending of funds obtained from the
o But: alleged that they never public through receipt of deposits
intended it to be legal - The PN/Deed of CK and
o But a mere ploy to conceal Undertaking
the loan w/ usurious interest o WERE NOT INTENDED to be
RTC: valid and binding
- Issued a writ of replevin against CG o They were devices to
Dizon conceal their real intention
- For the surrender of the heavy
o To enter into a contract of
loan in violation of Banking
o These are the subject of the
chattel mortgage
1. SC :
- Investment company
Nielgem S. Beja
Specom Notes 2016 I Cases| Doctrine| Digest| Outline
Judge Macumbal

o Refers to any entity w/c is or the receipt of deposits of any kind, and
holds itself out as being all entities regularly conducting such
engaged or proposes to operations shall be considered as
engage primarily in the banking institutions and shall be
business of investing, subject to the provisions of this Act, of
reinvesting or trading in the Central Bank Act, and of other
securitites pertinent laws
- Securities
o This shall include ...
commercial papers What is prohibited by law?
evidencing - For investment companies to lend
indebtedness funds
of any person, o Obtained from the public
financial or through receipts of deposit
non-financial o w/c is a function of banking
entity institutions
irrespective of
maturity Case at bar:
issue, - the funds supposedly lent
endorsed, - have not been shown to have been
sold, obtained from the public by way of
transferred or deposits
in any - hence, the banking law does not
manner apply
conveyed to
another Promissory note
o w/ or - no proof that the PN was just a ploy
recour The deed of CM and continuing undertaking
se - were duly acknowledged before the
o such notary public
as PN - no evidence re that the
- Hence, the transaction between transactions entered were ploys
the parties is not of LOAN but
purchase of
2. The surrender of 2 heavy equipments
- Question of fact
o W/c is w/in the purview of
Baas et.als allegations
reinvesting or - Parties already had a verbal
trading in securities understanding
w/c is an - Wherein Asia pacific actually
INVESTMENT agreed to consider the petitioners
COMPANY account closed
- Asia Pacific is authorized to - And the principal obligation fully
perform paid
o And does not constitute a - In exchange for the ownership of
violation of the gen. the two equipments
Banking act
Sec.2. Only entities duly authorized by SC
the Monetary Board of the Central - These are mere allegations
Bank may engage in the lending of - No evidence
funds obtained from the public through
Nielgem S. Beja
Specom Notes 2016 I Cases| Doctrine| Digest| Outline
Judge Macumbal

- It is unbelievable that the parties

entirely neglected to write down
such important agreement Banco de Oro filed a complaint for a sum of
- Cenen dizon is a seasoned money
businessman - w/ application for the issuance of a
writ of preliminary attachment
- There was no binding and - it asserted that JP was guilty of
perfected contract between fraud
petitioners re the settlement - JP assailed the jurisdiction of the
- The sale of the two equipments - But withdrew their motion for
were not sufficient reconsideration
- Hence, the order of the court
o Petitioners are still liable became final

RTC denied the prelim. Attachment

In 2006, JP filed rehabilitation

2. BDO-EPCI vs JAPRL - Then a stay order was issued

Facts: Due to the stay order, JP moved to suspend

the proceeding re the case filed by banco de
- Banco de Oro extended credit oro
facilities to JAPRL - RTC granted JPs motion
- 230,000,000 - But ordered arollado to file an
- RFC and Arollado acted as JAPRLs answer
The respondents ;
- Filed a certiorari before the ca
- Despite its seemingly strong - Alleging grave abuse of discretion
financial position - Claiming that the RTC did not
o JP defaulted in paying the 4 acquire jurisdiction over their
trust receipts persons
o Soon after the approval of - Because of the defective summons
its loans

- Banco deoro then discovered that CA

JP - Since the summons were served in
- Altered and falsified its financial mere administrative assistants
statements - The RTC did not acquire jurisdiction
o Allegations: over the respondents
It bloated its sales - Hence, the petition was granted
revenues to post a
big income from
operations for the Petitioners
concerned fiscal - Asserts that the respondents
years maliciously evaded the service of
To project its self as summons to prevent the RTC from
a viable investment acquiring jurisdiction over their
In 2003- JP and its subsidiary RFC persons
- Filed a petition for Rehabilitation - And that they employed bad faith
- Then a stay order was issued to exploit procedural technicalities
- But the supposed rehabilitation
plan was rejected by the RTC SC
Nielgem S. Beja
Specom Notes 2016 I Cases| Doctrine| Digest| Outline
Judge Macumbal

o Protective remedy of
The respondents withdrew their motion for rehabilitation was never
reconsideration in 2005 intended to be a refuge of a
- Hence, it has already become final debtor guilty of fraud
- The latest petition was filed 10
months after the assailed order RTC must continue to the proceedings against
was issued the 3 respndents against section 40 of the
- Only 60 days is allowed Gen. Banking law

In addition, when respondents moved for the Section 40 requirement for grant of loans or
suspension of proceedings in the RTC on the other credit accommodations
basis of the 2006 decision for the Should such statements prove to be
rehabilitation false or incorrect in any material detail,
- They waived the defects there was the bank may terminate any loan or
in the service if summons credit accommodation granted on the
- And were deemed to have basis of said statements and shall have
submitted themselves voluntarily the right to demand immediate
to the jurisdiction of the RTC repayment or liquidation of the
The stay order
- Defers all actions or claims against According to section 40
the corporation Banks have the right to annul any credit
- From the date of its issuance accommodation or load
- Until the dismissal of the petition or - And demand the immediate
termination of the rehab payment
proceedings - From borrowers proven to be guilty
of fraud
The RTC may proceed to hear the civil case - Petitioners are entitles to the
filed by banco in so far as Arollado is immediate payment of the 194M
concerned and damages
- -if there is no ground to go after JP RTC should also see if JP is liable against the
- Note: that a creditor can demand Trust receipts law
payment from the surety solidarily
liable w/ the corporation seeking
rehabilitation 3. Spouses Panlilio vs Citibank NA

Respondents abused the procedural Facts :

They disregarded the significance of a stable Amalia deposited 1M in the banks CITIHI
and efficient banking system account
- Since the money involved is very - A fixed term savings account
big - w/ a higher than average interest

BANKS On the same day

- Operate by extending credit - amalia opened a current or
facilities checking account
- Financed primarily by deposits from - w/c interest earnings of the Citihi
the public account will be credited

Re : FRUAD AND FALSIFICATION CB assigned Lee (employee)

o Can be a ground for Banco - to personally transact w/ amalia
de oro to ask the dismissal
of the rehabilitation case Amalia opened the accounts as
Nielgem S. Beja
Specom Notes 2016 I Cases| Doctrine| Digest| Outline
Judge Macumbal

- For it is for the benefit of her minor - the gross interest rate was 16.25%
children - per annum at the time Amalia
made her investment
To open the ITF, Amalia had to sign the ff.:
1. Relationship opening form 1. Amalia signed some documents when
2. Investor Profiling questionnaire she made the investment (Directional
Investment management agreement
After a month, (DIMA) and Term investment
- Amalia called lee application (TIA)
- Telling lee that he wanted to invest
worth 3M - key features of what she signed
After deciding where to invest was that CITIBANK is clear from any
- Amalia brought to CB a PCIB check obligation to guarantee the
- Worth 3M principal and interest of the
- Amalia learned that 2.1 M of the investment
3M - absent fraud or negligence of the
- Was placed by CB in a LONG TERM CB
COMMERCIAL PAPER (LTCP) - it also stated that the risks shall be
o A debt instrument that paid assumed by the investor (amalia)
a high interest
o Issued by the coporation CB
C&P homes - claims that it sent regular
o The rest of the money was confirmations of investment (COI)
placed in two PRPN (peso o one page computer
repriceable Prom. Note: CB generated doc
product) o informing the customer of
In trust for Amalias the investment earlier made
children w/ the bank
But allegations defer as to whether amalia - claims that after she recievd the
instructed lee to place the money in the LTCP first coi
of C&P - she demanded the investment in
the LTCP be withdrawn
LTCP - and be placed in a PRPN
- Is an evidence of indebtedness - w/c CB denies that Amalia made
- w/ a maturity of period of more such demands
than 365 days
- issued by a corporation to any then, amalia talked w/ Colet (another ee)
person or entity - to sell the LTCP
- it is in effect a loan obtained by a - and their other investments
corporation (as borrower) - despite the knowledge that selling
- from the investing public (as will be difficult due to crisis
lender) - the spouses signed 3 Sales order
- this is an instrument that slip w/c they left to Colet
investment banks can legally buy
on behalf of their clients Amalia made some formal demands for the
- upon the clients express withdrawal of her investment (1998)
instructions - the investment was made in 1997
- for investment purposes - CB denied stating that the maturity
- they usually have higher yields date is on 2003
than most investment inst. - And that it was not a deposit
- Hence, its return to investors was
Case at bar: not guaranteed by the bank
The LTCP issued by C&P
Nielgem S. Beja
Specom Notes 2016 I Cases| Doctrine| Digest| Outline
Judge Macumbal

- But it informed amalia that it may SC:

be sold
- But CB did not find any buyer Affirmed CA
- Hence, amalia made another
formal demand Issue 1:
- CB replied that if there are any Amalia is bound
buyers, it would be for a lesser - Contracts have force of law
amount between the parties
Hence, a complaint for sum of money was o The agreement is an agency
filed not a trust agreement
o Exemption from liability
Amalia claims o The transaction is legal
- She did not instruct that her money
be put on a LTCP Investment management activities may be
- Her inst. Was to return it w/ a term exercised by a banking institution
of 91 days
- w/ 16.25% interest Sec 72 of Gen. Banking law
- that it was only after she received Banks may
the 1st COI that he learned about (b) Act as financial agent and buy and sell, by
the LTCP order of and for the account of their
- that she called lee and lee told her customers, shares, evidences of indebtedness
to ignore the COI and all types of securities
- that C&P is an ayala company
- and that her investment was The banks shall perform the services
secure permitted under subsections (a), (b) and
- hence, she did not withdrew her (c) of this section as depositories or as
money immediately agents. Accordingly, they shall keep the
funds, securities and other effects which
they thus receive duly separated and
RTC: apart from the bank's own assets and
- decided in favour of AMALIA liabilities.
CA: reversed
The CA held that with respect to the amount
of PhP2,134,635.87, the account opened SECTION 74
by Amalia was an investment management No bank or banking institution shall
account; as a result, the money invested was enter, directly, or indirectly into any
the sole and exclusive obligation of C&P contract of guaranty or suretyship, or
Homes, the issuer of the LTCP, and was not shall guarantee the interest or principal
guaranteed or insured by herein respondent of any obligation of any
Citibank person, copartnership, association,
corporation or other entity.

Issues - Nothing also taints the legality of

2. WON petitioners are bound by the the LTCP bought in behalf of
terms and conditions of the Directional petitioners.
Investment management agreement - C&P Homes' LTCP was duly
(DIMA) , COI and Term investment registered with the Securities and
application (TIA) Exchange Commission
3. WON petitioners are entitled to take - while the issuer was accredited by
back their money the Philippine Trust Committee

Nielgem S. Beja
Specom Notes 2016 I Cases| Doctrine| Digest| Outline
Judge Macumbal

Bangko Sentral ng Pilipinas (BSP) regulations, advisory, consultancy or any

specifically the Manual of Regulations for similar arrangement which does
Banks (MORB), which groups a bank's trust, not create or result in a
and other fiduciary and investment trusteeship.
management activities under the same set of
regulations, to wit:
Investment Management Activities shall - Petitioners were free to read
apply to banks without trust authority - They did not have to sign the
but with authority to engage in contract immediately
investment management activities
The Court gives credence to respondent's
Other fiduciary business shall explanation that the word TRUST appearing
refer to any activity of a trust- on the TIA simply means that the account is
licensed bank resulting from a to be handled by the bank's trust department,
contract or agreement whereby
the bank binds itself to render Which handles not only the trust business but
services or to act in a also the other fiduciary business and
representative capacity such as in investment management activities of the
an agency, bank, while the ITF or in trust for appearing on
guardianship, administratorship of the other documents
wills, properties and estates,
executorship, receivership, and Only signifies that the money was invested
other similar services which do by Amalia in trust for her two children, a
not create or result in a device that she uses even in her ordinary
trusteeship. It shall exclude deposit accounts with other banks
collecting or paying agency
arrangements and similar
fiduciary services which are According to the contract, should there be any
inherent in the use of the facilities deviation, they must inform the bank w/in 7
of the other operating days after the receipt of the COI
departments of said bank. - But it took petitioners 8 months
Investment management
activities, which are considered as Issue 2:
among other fiduciary business,
shall be separately defined in the - Petitioners cannot seek return of
succeeding item to highlight its their investment from CB
being a major source of fiduciary - But from C&P
business. - Since, what they made was an
investment and not a deposit
c. Investment management
activity shall refer to any activity Absent any fraud or bad faith, the recourse of
resulting from a contract or
agreement primarily for financial petitioners in the LTCP is solely against the
return whereby the bank (the issuer, C&P Homes, and only upon
investment manager) binds itself
to handle or maturity. The DIMA states, thus:
manage investible funds or any
investment portfolio in a 11. Withdrawalof
representative capacity as Income/Principal Subject to
financial or managing agent, availability of funds and
adviser, consultant or taking into consideration
administrator of financial or the commitment of this
investment management, account to third parties, the

Nielgem S. Beja
Specom Notes 2016 I Cases| Doctrine| Digest| Outline
Judge Macumbal

PRINCIPAL may withdraw The petitioners contend that due to the

the income/principal of the fiduciary nature of the relationship between
Portfolio or portion thereof therespondent bank and its clients, the
upon request or application respondent bank should have exercised a
thereof from the Bank. higher degree of diligence than that expected
of an ordinary prudent person in the handling
Held: of its affairs as in the case at bar.
Petition denied for lack of evidence
the degree of diligence required of banks, is
4. Reyes vs CA more than that of a good father of a
family where the fiduciary nature of their
Godfredo went to Far East Bank to apply for a relationship with their depositors is
demand draft in Australian dollars concerned.
- Payable to the 20th Asian Racing
Conference , Australia
But the said ruling applies only to
At first the bank denied his application stating cases where banks act under their
that the bank has no AU dollars account in fiduciary capacity, that is, as
Sydney depositary of the deposits of their
- But the bank offered another way depositors.
to accommodate Godfredos needs.
- Far East would draw a DEMAND But the same higher degree of
DRAFT against Westpac Bank in diligence is not expected to be exerted
Sydney by banks in commercial transactions
o And have Westpac that do not involve their fiduciary
reimburse itself from the US relationship with their depositors.
dollar account of FAR EAST
in West Bank NY
Considering the foregoing, the
The parties agreed to this plan
respondent bank was not required to
- The said plan is not illegal
exert more than the diligence of a
- This has been used in the banking
good father of a family in regard to the
world since 60s
sale and issuance of the subject
foreign exchange demand draft.
But upon presentment by the persons of the
AU Convention
- It was dishonoured The case at bar does not involve
- The Far east was given due notice the handling of petitioners deposit, if
by the Westpac NY any, with the respondent
- No account held with west pac bank. Instead, the relationship
- It also informed Far east that the involved was that of a buyer and
AU Dollar account was debited seller, that is, between the respondent
worth 1.6k (amount subject re bank as the seller of the subject
Godfredo) foreign exchange demand draft, and
PRCI as the buyer of the same, with
On the other hand Godfredo, assuming that the 20th Asian Racing Conference
everything is settled went to the AU Secretariat in Sydney, Australia as the
convention payee thereof.
- But the officials informed them that
their draft was dishonoured As earlier mentioned, the said
foreign exchange demand draft was
intended for the payment of the
Hence the petition: registration fees of the petitioners as

Nielgem S. Beja
Specom Notes 2016 I Cases| Doctrine| Digest| Outline
Judge Macumbal

delegates of the PRCI to the 20th Asian b. the bank had on file pictures of its
Racing Conference in Sydney. depositors

The evidence shows that the respondent bank -

the account officer admitted that
did everything within its power to prevent the the person did not resemble
dishonor of the subject foreign exchange Carmelita
demand draft. The erroneous reading of its - but he relied on the passport
cable message to Westpac-Sydney by an presented
employee of the latter could not have been - both persons had moles
foreseen by the respondent bank. Being the BANK WAS NEGLIGENT
unaware that its employee erroneously read
the said cable message, Westpac-Sydney A bank is bound to know the signature of their
merely stated that the respondent bank has customers
no deposit account with it to cover for the - and if it pays a forged check
amount of One Thousand Six Hundred Ten - it is as if the bank is making a
Australian Dollar (AU$1610.00) indicated in payment out of its own funds
the foreign exchange demand draft.
The mistake is not a mere mistake or human
5. Citibank vs Spouses Cabamongan error
- the degree of diligence expected
from their employees are greater
Cabamongan had a trust account for his than those of ordinary
son clerks/employees
- banks must exercise highest
But prior to the maturity date a person degree of diligence in the selection
claiming to be Carmelita Cabamongan pre- of their employees
terminated the said time deposit
- By presenting a passport 6. Central Bank vs City Trust
- She filled up the required forms
- w/ the assistance of an Account City trust filed a complaint for recovery of
officer of the bank sum of money against BSP
- the person failed to surrender the - For encashing checks
ORIGINAL CERTIFICATE OF DEPOSIT - And charging proceeds thereof to
- The release and waiver document its account
was notarized - Despite lack of authority of
o Even though it was required Cayabyab
to be notarized o Who was in fact Flores
- But the money was still released o Citybank employee who
stole the checks
But Carmelita is domiciled or living in the US
BSP teller encashed the check on reliance that
a. the said person did not present the Flores has been doing business w/ them as
certificate of deposit issued to Citibanks rep.
Carmelita Cabamongan. This would not
have been an insurmountable obstacle SC:
as the bank, in the absence of such
certificate, allows the termination of
the deposit for as long as the depositor BSPs teller Iluminada did not verify Flores
executes a notarized release and signature on the flimsy excuse that Flores had
waiver document in favor of the had previous transactions with it for a number
bank. However, this simple procedure of years.
was not followed by the bank
That circumstance did not excuse the teller
from focusing attention to or at least glancing
Nielgem S. Beja
Specom Notes 2016 I Cases| Doctrine| Digest| Outline
Judge Macumbal

at Flores as he was signing, and to satisfy 7. DBP vs. Guarina

herself that the signature he had just affixed
matched that of his specimen signature The foreclosure of a mortgage prior to
the mortgagor's default on the
principal obligation is premature,
There is a debtor-
creditor relationship between - and should be undone for
the bank and its being void and ineffectual.
depositor. Thebank is the The mortgagee who has been
debtor and the depositor is the meanwhile given possession of the
creditor. The depositor lends mortgaged property by virtue of a writ
the bank money and the bank of possession issued to it as the
agrees to pay the depositor on purchaser at the foreclosure sale
demand. The savings deposit
agreement between the bank - may be required to restore
and the depositor is the the possession of the
contract that determines the property to the mortgagor
rights and obligations of the - and to pay reasonable rent
parties. for the use of the property
during the intervening
This fiduciary relationship means period.
that the banks obligation to
observe high standards of
integrity and performance is
Guatina obtained a loan from DBP
deemed written into every deposit
agreement between a bank and its - it mortgaged its resort
depositor. - G obtained the loan for the
improvement of the
The fiduciary nature of banking
mortgaged resort.
requires banks to assume a
degree of diligence higher than DBP did not release the whole amount
that of a good father of a family
- Upon inspection to the
- DBP saw that the
improvements promised by
G was not completely
CT failed to timely examine its account complied with
- Hence, it demanded that it
- It is guilty OF will foreclose the resort
CONTRIBUTORY unless the improvements
NEGLIGENCE were done
the immediate and proximate
cause of the injury being the
defendants lack of due care, Eventually, DBP foreclosed and sold
the plaintiff may recover the property into a public auction
damages, but the courts shall
mitigate the damages to be
awarded Hence, the petition
It was only after nine months Loans are often secured by a
did City checked their records mortgage constituted on real or
or informed BSP personal property to protect the
creditor's interest in case of the default
of the debtor.

Nielgem S. Beja
Specom Notes 2016 I Cases| Doctrine| Digest| Outline
Judge Macumbal

- By its nature, however, a The Messenger left the passbook to

mortgage remains an the teller. With the intent of return to
accessory contract claim the passbook, since he still has
dependent on the principal somewhere to go.
- such that enforcement of
the mortgage contract will - But upon return , the teller
depend on whether or not told the messenger that it
there has been a violation of already gave it to somebody
the principal obligation. else w/c the teller could not
While a creditor and a debtor could recognize
regulate the order in which they should SC
comply with their reciprocal
obligations, - Solidbank is liable for
breach of contract due to
- it is presupposed that in a negligence, or culpa
loan the lender should contractual
perform its obligation
- the release of the full loan
amount - before it could The contract between the bank and its
demand that the borrower depositor is governed by the provisions
repay the loaned amount. of the Civil Code on simple loan.

- In other words, Guaria the fiduciary nature of a bank-

Corporation would not incur in depositor relationship does not convert
delay before DBP fully the contract between the bank and its
performed its reciprocal depositors from a simple loan to a trust
obligation agreement, whether express or
DBP could not yet make an effective
demand for payment upon Guaria Failure by the bank to pay the
Corporation to perform its obligation depositor is failure to pay a simple
under the loan loan, and not a breach of trust.

it would only be when a demand to The law simply imposes on the bank
pay had been made and was a higher standard of integrity and
subsequently refused that a borrower performance in complying with its
could be considered in default, obligations under the contract of
simple loan, beyond those required of
- and the lender could obtain non-bank debtors under a similar
the right to collect the debt contract of simple loan.
or to foreclose the
mortgage.1wphi1 Hence,
Guaria Corporation would
The fiduciary nature of banking does
not be in default without the
not convert a simple loan into a trust
agreement because banks do not
accept deposits to enrich depositors
but to earn money for themselves. The
8. Consolidated bank vs CA law allows banks to offer the lowest
possible interest rate to depositors
while charging the highest possible
LC diaz instructed its messenger to interest rate on their own
withdraw from solid bank. borrowers. The interest spread or
differential belongs to the bank and
Nielgem S. Beja
Specom Notes 2016 I Cases| Doctrine| Digest| Outline
Judge Macumbal

not to the depositors who are was negligent in not returning the
not cestui que trust of banks. If passbook to Calapre. The burden was
depositors are cestui que trust of on Solidbank to prove that there was
banks, then the interest spread or no negligence on its part or its
income belongs to the depositors, a employees.
situation that Congress certainly did
not intend in enacting Section 2 of RA
8791. Solidbank is bound by the negligence
Solidbanks rules on savings account of its employees under the principle
require that the deposit book should of respondeat superior or command
be carefully guarded by the depositor responsibility. The defense of
and kept under lock and key, if exercising the required diligence in the
possible. When the passbook is in the selection and supervision of employees
possession of Solidbanks tellers during is not a complete defense in culpa
withdrawals, the law imposes on contractual, unlike in culpa aquiliana
Solidbank and its tellers an even
higher degree of diligence in
safeguarding the passbook.
This is a case of culpa contractual,
where neither the contributory
Rules on savings account provide that negligence of the plaintiff nor his last
any person in possession of the clear chance to avoid the loss, would
passbook is presumptively its owner. If exonerate the defendant from liability.
the tellers give the passbook to the [31]
Such contributory negligence or last
wrong person, they would be clothing clear chance by the plaintiff merely
that person presumptive ownership of serves to reduce the recovery of
the passbook, facilitating unauthorized damages by the plaintiff but does not
withdrawals by that person. For failing exculpate the defendant from his
to return the passbook to Calapre, the breach of contract.
authorized representative of L.C. Diaz,
Solidbank and Teller No. 6 then the courts may reduce the award
presumptively failed to observe such of damages. In this case, L.C. Diaz was
high degree of diligence in guilty of contributory negligence in
safeguarding the passbook, and in allowing a withdrawal slip signed by its
insuring its return to the party authorized signatories to fall into the
authorized to receive the same. hands of an impostor. Thus, the liability
of Solidbank should be reduced.

In culpa contractual, once the plaintiff

proves a breach of contract, there is a 9. Go. Vs BSP
presumption that the defendant was at
A case was filed against go alleging
fault or negligent. The burden is on the
defendant to prove that he was not at
fault or negligent. In contrast, in culpa - Go unlawfully borrowed for
aquiliana the plaintiff has the burden himself or for his other
of proving that the defendant was companies the
negligent. In the present case, L.C. - Deposits or funds of the
Diaz has established that Solidbank bank
breached its contractual obligation to - In w/c he is a director/
return the passbook only to the officer
authorized representative of L.C. - Or he is the
Diaz. There is thus a presumption that guarantor/indorser/obligor
Solidbank was at fault and its teller
Nielgem S. Beja
Specom Notes 2016 I Cases| Doctrine| Digest| Outline
Judge Macumbal

- w/o the written approval of officer of the bank becomes

the majority of the board of its obligor.
directors of the said Bank - The prohibition is
directed against a bank
Gos claim: director or officer who
- the information is defective becomes in any manner
an obligor for money
borrowed from or loaned
by the bank without the
written approval of the
majority of the banks
Under Section 83, RA 337, the board of directors.
following elements must be present to
constitute a violation of its first
paragraph: To make a distinction
between the act of
borrowing and guarantying
1. the offender is a director or officer of is therefore unnecessary
any banking institution; because in either situation,
the director or officer
2. the offender, either directly or concerned becomes an
indirectly, for himself or as obligor of the bank against
whom the obligation is
representative or agent of another, juridically demandable.
performs any of the following acts:
The language of the law is
a. he borrows any of the deposits broad enough to encompass
or funds of such bank; or either act of borrowing or
guaranteeing, or both
b. he becomes a guarantor, Section 83 of RA 337
indorser, or surety for loans actually imposes three
from such bank to others, or restrictions:
1. approval,
c. he becomes in any 2. reportorial,
3. and ceiling
manner an obligor for
money borrowed from bank
or loaned by it;
1. Approval
- written approval of the
The essence of the crime is
majority of the banks board
becoming an obligor of the bank
of directors
without securing the necessary
written approval of the majority of
2. Reportorial
the banks directors.
in any manner be an obligor for - That any of its approval
money borrowed from the bank or must be entered into the
loaned by it, records of the corporation
- The copy of which must be
- in fact serves a catch-all given to the appropriate
phrase that covers any supervising department
situation when a director or
Nielgem S. Beja
Specom Notes 2016 I Cases| Doctrine| Digest| Outline
Judge Macumbal

- The reportorial requirement Allegedly, Cojuangco purchased a

is addressed to the Bank block of 33,000,000 shares of SMC
itself stock through the 14 holding
- It must be the bank who companies owned by the CIIF Oil Mills.
must comply this For this reason, the block of
requirement 33,133,266 shares of SMC stock shall
be referred to as the CIIF block of
3. Ceiling requirement shares.
- The regulation of the
amount of credit Other defendants include the
accommodations that the companies of Cojuangco alleged to be
bank may extend to their used by him to acquire the shares
directors or officers
- This is limited to the amount
equivalent to the respective
outstanding deposits and
11. Nacar vs. Gallery of frames
book value of the paid in
capital contribution in the
- This must be complied by
the bank

A prosecution under SEC 83 1st 12. Oliver vs PSB

- Does not require an
allegation that the load Oliver loaned from PSBank
exceeded the legal limit
- This is thru Castro
BY THE MAJORITY OF THE For months their transactions went
DIRECTORS smoothly
- Compliance of the ceiling
requirement does not Hence, Oliver even entrusted Castro
dispense the approval with her Passbook

Eventually, Oliver discover that they

The 3 requirements were other loans incurred by Castro
w/o her consent or knowledge
- may 2 separate offenses
- each w/ its own elements - Hence, he demanded the
- success in proving that the return of the passbook
approval requirement has - Upon return of the passbook
not been complied with, o There were
does not mean that the alteration or
other 2 has not been erasures or other
complied with discrepancies
Eventually PSB asked for payment
from Oliver
- w/c Oliver refused to pay
Nielgem S. Beja
Specom Notes 2016 I Cases| Doctrine| Digest| Outline
Judge Macumbal

- there was an implied sgency Issue 1 Right to Due Process
between oliver and Castro
- MB Director invited the
Oliver claims that the P4.5 million loan, petitioners to a conference
released on December 21, 1998, and o But they did not
the P1,396,310.45 loan, released on attend
January 5, 1999, were not acquired - They written explanations/
with her consent. Castro and PSBank, answers were considered in
on the other hand, countered that adopting the MB Resolution
these loans were obtained with Olivers - The letter re the companys
full consent. The Court finds that the side was also taken into
said loans were acquired with Olivers consideration
Hence, their right to due process was
not violated
The following are the things to
be followed re due process in
the MB
________ The right to a hearing, which
includes the right to present one's
Central Bank Act case and submit evidence in support

1. Busuego vs Ca 2. The tribunal must

consider the evidence presented;
CB conducted its examination to
PESALA 3. The decision must have
it found out the following: something to support itself;
a. Questionable
4. The evidence must be
b. Conflicts of interest
c. Unwarranted declaration
5. The decision must be
and payment of
rendered on the evidence presented at
the hearing, or at least contained in
d. Commission of unsound
the record and disclosed to the parties
and Unsafe business
6. The tribunal or body or
any of its judges must act on its or his
The Monetary Board ordered PESALA, own independent consideration of the
among others, to include Mr. Banez , law and facts of the controversy and
Busuego, Renato in the Sectors watch not simply accept the view of a
list subordinate in arriving at a decision;
- To prevent them from
holding responsible 7. The board or body
positions in instutions under should, in all controversial question,
the CB supervision renders its decision in such manner
- To file civil and criminal that the parties to the proceedings can
cases against them
Nielgem S. Beja
Specom Notes 2016 I Cases| Doctrine| Digest| Outline
Judge Macumbal

know the various issues involved and

the reason for the decision rendered.
The petitioners were not deprived of
Note : all of these were their lawful calling
- They are still free to look for
another employment
- As long as , the company
Issue 2 : Procedural Due involved is not subject ot CB
process control and supervision
Admin. Tribunals w/ quasi-
judicial functions are free from
the rigidity of certain 2. Koruga vs Arcenas
procedural requirements
BSPS Jurisdiction | BASED on Karugas
- Hearing and Notice Complaint
o Most basic
- violation of Sections 31 to 34 of the
requirement for
Corporation Code, prohibiting self-
procedural due
dealing and conflict of interest of
directors and officers;
- The prior notice rule is
- invoked her right to inspect the
relaxed provided
corporations records under
Sections 74 and 75 of the
o What is important is
Corporation Code;
that the parties were
- and prayed for Receivership and
given the
Creation of a Management
opportunity to be
Committee, pursuant to Rule 59 of
the Rules of Civil Procedure, the
Securities Regulation Code, the
Interim Rules of Procedure
Governing Intra-Corporate
Controversies, the General Banking
Law of 2000, and the New Central
the Central Bank of the Philippines - She accused the directors and
(now Bangko Sentral ng Pilipinas), officers of Banco Filipino of
through the Monetary Board, engaging in unsafe, unsound, and
- is the government agency charged fraudulent banking practices, more
with the responsibility of administering particularly, acts that violate the
the monetary, banking and credit prohibition on self-dealing.
system of the country 19 and is -
granted the power of supervision and The law vests in the BSP the supervision over
examination over banks and non-bank operations and activities of banks. The New
financial institutions performing quasi- Central Bank Act provides:
banking functions of which savings and
loan associations, such as PESALA Section 25. Supervision and Examination. -
The Bangko Sentral shall have supervision
over, and conduct periodic or special
examinations of, banking institutions and
If upon investigation/examination the quasi-banks, including their subsidiaries and
CB thru MB has the authority to affiliates engaged in allied activities.[24]
impose sanctions, suspend officials/ -
employees and include them in the -

Nielgem S. Beja
Specom Notes 2016 I Cases| Doctrine| Digest| Outline
Judge Macumbal

- Specifically, the BSPs supervisory Her allegations, then, call for the
and regulatory powers include: examination of the allegedly
- questionable loans. Whether these
- 4.1 The issuance of rules of loans are covered by the prohibition on
conduct or the establishment of self-dealing is a matter for the BSP to
standards of operation for uniform determine.
application to all institutions or - These are not ordinary intra-
functions covered, taking into corporate matters; rather, they
consideration the distinctive involve banking activities which
character of the operations of are, by law, regulated and
institutions and the substantive supervised by the BSP
similarities of specific functions to
which such rules, modes or
standards are to be applied;
- the Central Monetary Authority,
- 4.2 The conduct of examination to through the Monetary Board, is vested
determine compliance with laws with exclusive authority to assess,
and regulations if the evaluate and determine the condition
circumstances so warrant as of any bank,
determined by the Monetary Board; - and finding such condition
to be one of insolvency, or
4.3 Overseeing to ascertain that that its continuance in
laws and Regulations are complied business would involve a
with; probable loss to its
depositors or creditors,
4.4 Regular investigation which - forbid bank or non-bank
shall not be oftener than once a financial institution to do
year from the last date of business in the Philippines;
examination to determine whether - and shall designate an
an institution is conducting its official of the BSP or other
business on a safe or sound basis: competent person as
Provided, That the receiver to immediately
deficiencies/irregularities found by take charge of its assets
or discovered by an audit shall be and liabilities
immediately addressed;

4.5 Inquiring into the solvency

The Monetary Board may regulate the
and liquidity of the institution (2-
amount of loans, credit
D); or
accommodations and guarantees that
may be extended, directly or indirectly,
4.6 Enforcing prompt corrective
by a bank to its directors, officers,
stockholders and their related
interests, as well as investments of
such bank in enterprises owned or
Koruga alleges that the dispute in the
controlled by said directors, officers,
trial court involves the manner with
stockholders and their related
which the Directors (sic) have handled
the Banks affairs, specifically the
fraudulent loans and dacion en pago However, the outstanding loans, credit
authorized by the Directors in favor of accommodations and guarantees
several dummy corporations known to which a bank may extend to each of its
have close ties and are indirectly stockholders, directors, or officers and
controlled by the Directors. their related interests,

Nielgem S. Beja
Specom Notes 2016 I Cases| Doctrine| Digest| Outline
Judge Macumbal

- shall be limited to an - The cease and desist order shall

amount equivalent to their be immediately effective upon
respective unencumbered service on the respondents.
deposits and book value of
their paid-in capital
contribution in the bank: The MB has the exclusive jurisdiction
- Provided, however, That on receivership re Banks
loans, credit
accommodations and - Actions under sec 30 are
guarantees secured by final and executor
assets considered as non- - Except upon a petition of
risk by the Monetary Board Certiorari
shall be excluded from such o For lack of juris
limit: o Or in excess of it
- Provided, further, That chu chu
loans, credit
accommodations and
advances to officers in the The petition for certiorari may only be filed by
form of fringe benefits the stockholders of record representing the
granted in accordance with majority of the capital stock within ten (10)
rules as may be prescribed days from receipt by the board of directors of
by the Monetary Board shall the institution of the order directing
not be subject to the receivership, liquidation or conservatorship.
individual limit.
Koruga is only a minority share/stock
MB may impose the following 3. BSP vs Hon. Antonio
sanctions in case of violation Valenzuela
- Sec. 37
- The admin sanctions need
not be applied in their order BSP conducted examinations to some
of severity banks
- During the exit interview
- They were advised to infuse
Whether or not there is an additional capital
administrative proceeding, - The recommendations must
- if the institution and/or the be complied with w/in 30
directors and/or officers concerned days
continue with or otherwise persist
in the commission of the indicated The Banks asked the court to stop the
practice or violation, BSP-SED from submitting its ROE
(report of examination) to the MB
- the Monetary Board may issue an
- And if ever that it has
order requiring the institution
already been submitted
and/or the directors and/or officers
o The MB should not
concerned to cease and desist from
act upon it
the indicated practice or violation,
o On the ground that
the banks were not
- and may further order that
given copied of the
immediate action be taken to
correct the conditions resulting
from such practice or violation.

Nielgem S. Beja
Specom Notes 2016 I Cases| Doctrine| Digest| Outline
Judge Macumbal

o Hence, there is a by preventing the MB from acting

violation of due on such ROEs.
process -
It is well-settled that the closure of a bank
The respondent banks cannot claim a may be considered as an exercise of police
violation of their right to due process if power. The action of the MB on this matter is
they are not provided with copies of final and executory.
the ROEs.
The same ROEs are based on the lists Such exercise may nonetheless be subject to
of findings/exceptions containing the judicial inquiry and can be set aside if found
deficiencies found by the SED to be in excess of jurisdiction or with such
examiners when they examined the grave abuse of discretion as to amount to lack
books of the respondent banks or excess of jurisdiction.

The Banks have already been The threat of the imposition of

informed/given the lists of sanctions, even that of closure, does not
findings/exceptions during their exit violate their right to due process, and
interview cannot be the basis for a writ of
preliminary injunction.
- Hence, the ROE are - Judicial Review is improper if
superfluous the MB has not taken any
- Transparency and fairness is actions yet
not violated

4. Central Bank vs CA
The respondent banks have shown no
necessity for the writ of preliminary PBP bank filed a complaint before the RTC
injunction to prevent serious damage. - - Against CB
- The serious damage contemplated by - the conservatorship was
the trial court was the possibility of the unwarranted, ill-motivated, illegal,
imposition of sanctions upon utterly unnecessary and
respondent banks, even the sanction unjustified; that the appointment of
of closure. the conservator was arbitrary;
- Under the law, the sanction of - that herein petitioners acted in bad
closure could be imposed upon a faith; that the CB-designated
bank by the BSP even without conservators committed bank
notice and hearing. frauds and abuses;
- The apparent lack of procedural - that the CB is guilty of promissory
due process would not result in the estoppel; and that by reason of the
invalidity of action by the MB. conservatorship, it suffered losses
- close now, hear later scheme is
grounded on practical and legal
considerations to prevent RTC: issued injunction/tro against CB
unwarranted dissipation of the
banks assets and as a valid PBP
exercise of police power to protect
Asked the court to LIFT the
the depositors, creditors,
stockholders, conservatorship
- and the general public. -
- The writ of preliminary injunction the actions of the Monetary Board under this
Section, Section 28-A, and the second paragraph of
cannot, thus, prevent the MB from
section 34 of this Act shall be final and executory,
taking action, by preventing the
submission of the ROEs and worse,
Nielgem S. Beja
Specom Notes 2016 I Cases| Doctrine| Digest| Outline
Judge Macumbal

- and can be set aside by a court only if - In other words, the same must be filed within
there is convincing proof, after hearing, ten (10) days from receipt of notice of the
that the action is plainly arbitrary and order placing the bank under conservatorship.
made in bad faith: Otherwise, the provision of the fifth paragraph
- Provided, That the same is raised in an of Section 29 of the Central.
appropriate pleading filed by the
stockholders of record representing the (2) As to actions for the second kind of damages
majority of the capital stock and for injunction to restrain the enforcement of
- within ten (10) days from the date the the CB's implementing resolutions, said fifth
receiver takes charge of the assets and paragraph of Section 29 of the Central Bank Act,
as amended, equally applies because the
liabilities of the bank or non-bank
questioned acts are but incidental to the
financial intermediary performing conservatorship. The purpose of the law in
quasi-banking functions or, requiring that only the stockholders of record
- in case of conservatorship or representing the majority of the capital stock
liquidation, within ten (10) days from may bring the action to set aside a resolution to
receipt of notice by the said majority place a bank under conservatorship is to ensure
stockholders of said bank or non-bank that it be not frustrated or defeated by the
financial intermediary of the order of its incumbent Board of Directors or officers who
may immediately resort to court action to
placement under conservatorship or
prevent its implementation or enforcement. It is
liquidation presumed that such a resolution is directed
principally against acts of said Directors and
officers which place the bank in a state of
The following requisites, therefore, must be present continuing inability to maintain a condition of
before the order of conservatorship may be set liquidity adequate to protect the interest of
aside by a court: depositors and creditors

1. The appropriate pleading

must be filed by the stockholders of record The bank being in conservatorship
representing the majority of the capital - Does not deprive the stockholders
stock of the bank in the proper court; from its rights
- The bank still retains its juridical
2. Said pleading must be filed personality even if under
within ten (10) days from receipt of notice
by said majority stockholders of the order
placing the bank under conservatorship;
- The consent or approval of the
and conservatorship is not required
when the filing of the action is done
4. There must be convincing by the majority stockholders
proof, after hearing, that the
action is plainly arbitrary and There was grave abuse in the issuance of the
made in bad faith. preliminary injunction
- One important measure adopted by the
government to protect the public
DAMAGES against unscrupulous practices of some
whether an action for damages arising from the - is to require banking institutions
(1)MB's act of placing the PBP under to set up reserves against their
conservatorship and (2) the acts of the deposit liabilities.
conservator, and to enjoin the MB from
- These reserves, pegged at a certain
implementing resolutions related or incident to, or
percentage of the volume of deposit
in connection with the conservatorship, may be
liability, is that portion of the deposit
brought only for and in behalf of the PBP by the
received by a banking institution which
stockholders on record representing the majority of
it cannot use for loans and
the capital stock thereof or simply upon authority
of its Board of Directors, or by its Chairman.
- The reserve requirement, which
ordinarily takes the form of a deposit
(1) may be claimed only if the MB's action is with the Central Bank, is one means by
plainly arbitrary and made in bad faith, and
which the government ensures the
that the action therefor is inseparable from
liquidity of banking institutions
an action to set aside the conservatorship.
Nielgem S. Beja
Specom Notes 2016 I Cases| Doctrine| Digest| Outline
Judge Macumbal

prejudice of other depositors and

- These reserve accounts maintained by banking creditors
institutions with the Central Bank also serve as a - While on receivership the board
basis for the clearing of checks and the settlement becomes the trustee for the equal
of interbank balances benefit of all the depositors and
MB was correct: not in bad faith or was not o One cannot obtain
preference by attachment
or execution of judgment

The time of the filing of the complaint is

immaterial. It is the execution that win
obviously prejudice the other depositors and
creditors. Moreover, as stated in the said
5. Spouses Lipana vs DBP
Morfe case, the effect of the judgment is only
to fix the amount of the debt, and not give
Lipana was able to obtain a judgement
priority over other depositors and creditors.
ordering the DB of Rizal to pay Lipanas their
The stay order is not a form of deprivation
After a month
- MB found out that DB was in the of their property
verge of insolvency - It according to the law
- And continuance in the business - Stay order has a time limit
would result loss for its clients - The staying of the writ of execution
- Hence, MB decided to place it will be lifted after approval by the
under receivership liquidation court of the project of
Subsequently Lipanas was able to able to - and the liquidator or his deputy will
obtain a writ of execution authorize payments to all claimants
concerned in accordance with the
approved project of distribution
The rule that once a decision becomes final
and executory, it is the ministerial duty of the
court to order its execution, 6. Vivas vs Monetary
- admits of certain exceptions as in Board
cases of special and exceptional
RBFI is a bank whose corporate life ended
- where it becomes imperative in the
on 2005
higher interest of justice to direct
the suspension of its execution But Vivas and others was able to obtain
- or certain facts/events happened the controlling interest in 2006.
after the judgement has become
final With VIVAS the corporate life was
o that will render it unjust to extended to 50 yrs
execute the said judgement
From RBFI is was changed to Euro Credit
The stay order of the execution is valid community
- since the bank was placed under
receivership After the examination conducted by the
- To execute the judgment would BSP
unduly deplete the assets of - It cancelled the rediscounting
respondent bank to the obvious line of the bank

Nielgem S. Beja
Specom Notes 2016 I Cases| Doctrine| Digest| Outline
Judge Macumbal

caused by extraordinary demands

MB ordered an examination and checking induced by financial panic in the
of the books banking community;
But VIVAS failed to comply
(b) has insufficient realizable
- On the ground that there was still a
assets, as determined by the [BSP] to
pending appeal re MBs order placing it meet its liabilities; or
under PCA framework (as a sanction)
(c) cannot continue in business
MB issued Resolution No. 823,19 dated June 4, without involving probable losses to its
2009, depositors or creditors; or
- approving the issuance of a cease
and desist order against ECBI, (d) has willfully violated a cease
- which enjoined it from pursuing and desist order under Section 37 that
certain acts and transactions that has become final, involving acts or
were considered unsafe or unsound transactions which amount to fraud or
banking practices, a dissipation of the assets of the
- and from doing such other acts or institution; in which cases, the
transactions constituting fraud or Monetary Board may summarily and
might result in the dissipation of its without need for prior hearing forbid
assets. the institution from doing business in
the Philippines and designate the
Subsequently ECBI Philippine Deposit Insurance
- was placed under receivership Corporation as receiver of the banking
- due to its fraudulent transactions institution.

Order of the MB to place a BANK under

receivership cannot be stopped or restrained
Exception : petition for certiorari
under Section 29 of the Central Bank
w/c vivas failed to do. Act, the following are the mandatory
7. Rural Bank vs. MB requirements to be complied with
before a bank found to be insolvent
In 2000, MB ordered that The Bank be is ordered closed and forbidden to do
prohibited from doing business and be business in the Philippines:
placed under receivership 1. an examination
shall be
Subsequently, MB ordered for its conducted by
liquidation the head of the
Section 30 of RA 7653 provides: supervising or
SECTION 30. Proceedings in department or
Receivership and Liquidation. his examiners
Whenever, upon report of the head of or agents into
the supervising or examining the condition of
department, the Monetary Board finds the bank;
that a bank or quasi-bank: 2. it shall be
disclosed in the
(a) is unable to pay its liabilities examination
as they become due in the ordinary that the
course of business: Provided, That this condition of the
shall not include inability to pay bank is one of

Nielgem S. Beja
Specom Notes 2016 I Cases| Doctrine| Digest| Outline
Judge Macumbal

insolvency, or - The purpose of the law is to

that its make the closure of a bank
continuance in summary and expeditious in
business would order to protect public
involve interest.
probable loss to - This is also why prior notice
its depositors or and hearing are no longer
creditors; required before a bank can
3. the department be closed.
head concerned
shall inform the
Monetary Board The absence of an examination before
in writing, of the closure of RBSM did not mean that
the facts; there was no basis for the closure
4. the Monetary order.
Board shall find
the statements Needless to say, the decision of the
of the MB and BSP, like any other
department administrative body, must have
head to be true. something to support itself and its
findings of fact must be supported by
substantial evidence.
In RA 7653, only a "report of the But it is clear under RA 7653 that
head of the supervising or the basis need not arise from an
examining department" is examination as required in the old
necessary. law.
- Not examination
- Using the literal meaning of
"report" does not lead to
absurdity, contradiction or
- Neither does it defeat the
intent of the legislators.