CYCLE 2 – TO BE SUBMITTED 17 FEBRUARY 2019

by: Tainch Marie

THE GENERAL BANKING LAW (R.A. NO.8791)

1. Republic vs. Security Credit & Acceptance Corp., 19 SCRA 58

Facts: The Solicitor General filed a petition for quo warranto to dissolve the Security and Acceptance Corporation, alleging
that the latter was engaging in banking operations without the authority required therefor by the General Banking Act
(Republic Act No. 337). Pursuant to a search warrant issued by MTC Manila, members of Central Bank intelligence division
and Manila police seized documents and records relative to the business operations of the corporation. After examination
of the same, the intelligence division of the Central Bank submitted a memorandum to the then Acting Deputy Governor of
Central Bank finding that the corporation is engaged in banking operations. It was found that Security and Acceptance
Corporation established 74 branches in principal cities and towns throughout the Philippines; that through a systematic
and vigorous campaign undertaken by the corporation, the same had managed to induce the public to open 59,463
savings deposit accounts with an aggregate deposit of P1,689,136.74; Accordingly, the Solicitor General commenced this
quo warranto proceedings for the dissolution of the corporation, with a prayer that, meanwhile, a writ of preliminary
injunction be issued ex parte, enjoining the corporation and its branches, as well as its officers and agents, from
performing the banking operations complained of, and that a receiver be appointed pendente lite. Superintendent of Banks
of the Central Bank was then appointed by the Supreme Court as receiver pendente lite of defendant corporation.

In their defense, Security and Acceptance Corporation averred that the the corporation had filed with the Superintendent
of Banks an application for conversion into a Security Savings and Mortgage Bank, with defendants Zapa, Balatbat,
Tanjutco (Pablo and Vito, Jr.), Soriano, Beltran and Sebastian as proposed directors.

Issue: Whether or not defendant corporation was engaged in banking operations.

Held. An investment company which loans out the money of its customers, collects the interest and charges a
commission to both lender and borrower, is a bank. It is conceded that a total of 59,463 savings account deposits have
been made by the public with the corporation and its 74 branches, with an aggregate deposit of P1,689,136.74, which has
been lent out to such persons as the corporation deemed suitable therefore. It is clear that these transactions partake of
the nature of banking, as the term is used in Section 2 of the General Banking Act. Hence, defendant corporation has
violated the law by engaging in banking without securing the administrative authority required in Republic Act No. 337.

That the illegal transactions thus undertaken by defendant corporation warrant its dissolution is apparent from the fact
that the foregoing misuser of the corporate funds and franchise affects the essence of its business, that it is willful and has
been repeated 59,463 times, and that its continuance inflicts injury upon the public, owing to the number of persons
affected thereby.

2. Bañas vs. Asia Pacific Corp., 343 SCRA 527

Facts:

Teodoro Bañas executed a Promissory Note in favor of C. G. Dizon Construction whereby for value received he promised to
pay to the order of C. G. Dizon Construction the sum of P390,000.00 in installments of “P32,500.00 every 25th day of the
month starting from September 25, 1980 up to August 25, 1981.”Later, C. G. Dizon Construction endorsed with recourse
the Promissory Note to ASIA PACIFIC, and to secure payment thereof, C. G. Dizon Construction, through its corporate
officers, Cenen Dizon, President, and Juliette B. Dizon, Vice President and Treasurer, executed a Deed of Chattel Mortgage
covering three heavy equipment units of Caterpillar Bulldozer Crawler Tractors Moreover, Cenen Dizon executed a
Continuing Undertaking wherein he bound himself to pay the obligation jointly and severally with C. G. Dizon Construction.

In compliance thereof, C. G. Dizon Construction made three installment payments to ASIA PACIFIC for a total of
P130,000.00. Thereafter, however, C. G. Dizon Construction defaulted in the payment of the remaining installments,
prompting ASIA PACIFIC to send a Statement of Account to Cenen Dizon for the unpaid balance of P267,737.50 inclusive
of interests and charges, and P66,909.38 representing attorney’s fees. As the demand was unheeded, ASIA PACIFIC filed a
complaint for a sum of money with prayer for a writ of replevin against Teodoro Bañas, C. G. Dizon Construction and
Cenen Dizon. The trial court issued a writ of replevin against defendant C. G. Dizon Construction for the surrender of the
bulldozer crawler tractors. Of the three bulldozer crawler tractors, only two were actually turned over by defendants which
units were subsequently foreclosed by ASIA PACIFIC to satisfy the obligation. The two bulldozers were sold both to ASIA
PACIFIC as the highest bidder.

Petitioners insist that ASIA PACIFIC was organized as an investment house which could not engage in the lending of funds
obtained from the public through receipt of deposits. The disputed Promissory Note, Deed of Chattel Mortgage and
Continuing Undertaking were not intended to be valid and binding on the parties as they were merely devices to conceal
their real intention which was to enter into a contract of loan in violation of banking laws. The Regional Trial Court ruled in
favor of ASIA PACIFIC holding the defendants jointly and severally liable for the unpaid balance of the obligation under the
Promissory Note. The Court of Appeals affirmed the decision of the trial court
Issues: Whether the disputed transaction between ASIA PACIFIC was engaged in banking activities.

Held: An investment company refers to any issuer which is or holds itself out as being engaged or proposes to engage
primarily in the business of investing, reinvesting or trading in securities. As defined in Revised Securities Act, securities
“shall include commercial papers evidencing indebtedness of any person, financial or non-financial entity, irrespective of
maturity, issued, endorsed, sold, transferred or in any manner conveyed to another with or without recourse, such as
promissory notes” Clearly, the transaction between petitioners and respondent was one involving not a loan but purchase
of receivables at a discount, well within the purview of “investing, reinvesting or trading in securities” which an investment
company, like ASIA PACIFIC, is authorized to perform and does not constitute a violation of the General Banking Act.

What is prohibited by law is for investment companies to lend funds obtained from the public through receipts of deposit,
which is a function of banking institutions. But here, the funds supposedly “lent” to petitioners have not been shown to
have been obtained from the public by way of deposits, hence, the inapplicability of banking laws. Wherefore, the assailed
decision of the Court of Appeals was affirmed.

3. Simex International (Manila), Inc. vs. CA, 183 SCRA 360

Facts: Simex International is a private corporation engaged in the exportation of food products. It buys these products
from various local suppliers and then sells them abroad to the Middle East and the United States. Most of its exports are
purchased by the petitioner on credit. Simex was a depositor of the Far East Savings Bank and maintained a checking
account in its branch in Cubao, Quezon City which issued several checks against its deposit but was surprised to learn later
that they had been dishonored for insufficient funds. As a consequence, several suppliers sent a letter of demand to the
petitioner, threatening prosecution if the dishonored check issued to it was not made good and also withheld delivery of
the order made by the petitioner. One supplier also cancelled the petitioner’s credit line and demanded that future
payments be made by it in cash or certified check. The petitioner complained to the respondent bank. Investigation
disclosed that the sum of P100,000.00 deposited by the petitioner on May 25, 1981, had not been credited to it. The error
was rectified only a month after, and the dishonored checks were paid after they were re-deposited. The petitioner then
filed a complaint in the then Court of First Instance of Rizal against the bank for its gross and wanton negligence.

Issue: Whether or not the bank can be held liable for negligence by reason of its unjustified dishonor of a check

Held:

A bank may be held liable for damages by reason of its unjustified dishonor of a check, which caused damage to its client’s
credit standing.

The depositor expects the bank to treat his account with the utmost fidelity whether such account consists only of a few
hundred pesos or of millions. The bank must record every single transaction accurately, down to the last centavo, and as
promptly as possible. This has to be done if the account is to reflect at any given time the amount of money the depositor
can dispose of as he sees fit, confident that the bank will deliver it as and to whomever he directs. A blunder on the part of
the bank, such as the dishonour of a check without good reason, can cause the depositor not a little embarrassment if not
also financial loss and perhaps even civil and criminal litigation.

Article 2205 of the Civil Code provides that actual or compensatory damages may be received “(2) for injury to the plaintiff
s business standing or commercial credit.” There is no question that the petitioner did sustain actual injury as a result of
the dishonored checks and that the existence of the loss having been established “absolute certainty as to its amount is
not required.” Such injury should bolster all the more the demand of the petitioner for moral damages and justifies the
examination by this Court of the validity and reasonableness of the said claim.

4. Reyes vs. CA, G.R. No.118492, 15 August 2001

Facts: Godofredo, Casheir of the Philippine Racing Club (PCRI), went to respondent bank to apply for a demand draft in
the amount AU$1,610.00 payable to the order of the 20th Asian Racing Conference Secretariat of Sydney, Australia. He
was attended to by respondent bank’s assistant cashier, Mr. Yasis, who at first denied the application for the reason that
respondent bank did not have an Australian dollar account in any bank in Sydney. Godofredo asked if there could be a way
for respondent bank to accommodate PRCI’s urgent need to remit Australian dollars to Sydney. Yasis of respondent bank
then informed Godofredo of a roundabout way of effecting the requested remittance to Sydney thus: the respondent bank
would draw a demand draft against Westpac Bank in Sydney, Australia (Westpac-Sydney) and have the latter reimburse
itself from the U.S. dollar account of the respondent in Westpac Bank in New York, U.S.A. (Westpac-New York).

However, upon due presentment of the foreign exchange demand draft, the same was dishonored, with the notice of
dishonor stating that there is “No account held with Westpac.” Meanwhile, Wespac-New York sent a cable to respondent
bank informing the latter that its dollar account in the sum of AU$ 1,610.00 was debited. In response to PRCI’s complaint
about the dishonor of the said foreign exchange demand draft, respondent bank informed Westpac-Sydney of the issuance
of the said demand draft, drawn against the Wespac-Sydney and informing the latter to be reimbursed from the
respondent bank’s dollar account in Westpac-New York. The respondent bank on the same day likewise informed Wespac-
New York requesting the latter to honor the reimbursement claim of Wespac-Sydney. Upon its second presentment for
payment, the demand draft was again dishonored by Westpac-Sydney for the same reason, that is, that the respondent
bank has no deposit dollar account with the drawee Wespac-Sydney. Gregorio Reyes and Consuelo Puyat-Reyes arrived in
Sydney on a separate date and both were humiliated and embarrassed in the presence of international audience after
being denied registration of the conference secretariat since the foreign exchange draft was dishonored. Petitioners were
only able to attend the conference after promising to pay in cash instead which they fulfilled

Issue: Whether or not respondent bank is liable for damages due to the dishonor of the foreign exchange demand
drafts.

Held: Yes. The evidence also shows that the respondent bank exercised that degree of diligence expected of an ordinary
prudent person under the circumstances obtaining; the respondent bank advised Westpac-New York to honor the
reimbursement claim of Westpac-Sydney and to debit the dollar account of respondent bank with the former. The degree
of diligence required of banks, is more than that of a good father of a family where the fiduciary nature of their
relationship with their depositors is concerned. In other words banks are duty bound to treat the deposit accounts of their
depositors with the highest degree of care. But the said ruling applies only to cases where banks act under their fiduciary
capacity, that is, as depositary of the deposits of their depositors. But the same higher degree of diligence is not expected
to be exerted by banks in commercial transactions that do not involve their fiduciary relationship with their depositors. The
case at bar does not involve the handling of petitioners’ deposit, if any, with the respondent bank. Instead, the relationship
involved was that of a buyer and seller.

5. DBP vs. CA, 331 SCRA 267

FACTS: Spouses Piñedas are registered owners of a parcel of land in Capiz, which they mortgaged to DBP to secure the
loan (P20,000) they obtained from the latter. Piñedas eventually defaulted, prompting DBP to extra-judicially foreclose and
take possession of such property. The Ministry of Justice, then, opined through its Opinion No. 92 (’78) that lands covered
by P.D. No. 27, to which the subject property was included, may not be the object of foreclosure proceedings. The
Piñedas, then, sought to redeem such property (with P10,000 as downpayment) but was denied as the land was allegedly
tenanted. They then sought the cancellation of the title and specific performance, stating that DBP acted in bad faith when
it took possession of the property andcaused the consolidation of its title in spite of the fact that the 5-year redemption
period expressly stated in the Sheriff’s Certificate of Sale had not yet lapsed and that their offer to redeem was within the
redemption period.

ISSUE: Whether or not DBP acted in bad faith when it took possession of the property

RULING: NO.

DBP’s act of consolidating its title and taking possession of the property after the expiration of the redemption period was
in accordance with Sec. 6 of Act No. 3135, which states that if no redemption of a foreclosed property is made within one
year, the purchaser (DBP) is entitled as a matter of right to consolidate and to possess the property. In addition to this, it
was in consonance with Sec. 4 of the mortgage contract between DBP and the Piñedas where they agreed the appointment
of DBP as receiver to take charge and to hold possession of the mortgaged property in case of foreclosure. In fact, without
DBP’s act of consolidating its title, the Piñedas would not be able to assert their right to repurchase the property within 5
years, which would begin to run after the expiration of the one-year period. Thus, its acts cannot be tainted with bad faith
nor did it impair Piñedas’ right to repurchase.

It may also be argued that P.D. No. 27 was already in effect when DBP foreclosed the property. However, the legal
propriety of the foreclosure of the land was questioned only after Opinion No. 92 (’78) was issued, which happened almost
2 months after DBP consolidated its title to the property. By law and jurisprudence, a mistake upon a doubtful or difficult
question of law may properly be the basis of good faith.

Art. 526 of NCC states that “a possessor in good faith is one who is not aware that there exists in his title or mode of
acquisition any flaw, which invalidates it.” Moreover, Art. 527 of NCC provides “good faith is always presumed, and upon
him who alleges bad faith on the part of the possessor rests the burden of proof.” Thus, it is incumbent on the Piñedas to
prove that DBP was aware of the flaw in its title (nullity of the foreclosure), but this they failed to do.

6. UCPB vs. Ramos, G.R. No.147800, November 11, 2003

FACTS:

UCPB granted a loan to Zamboanga Development Corporation (ZDC) with Venicio Ramos and the Spouses Teofilo Ramos,
Sr. and Amelita Ramos as sureties. However, ZDC failed to pay its account to the petitioner despite demands. The latter
filed a complaint with the RTC, Venicio Ramos and the Spouses Teofilo Ramos, Sr. for the collection of the corporations
account. RTC rendered judgment in favor of the petitioner.

Court ordered Deputy Sheriff to levy and attach all the real and personal properties to defendants. But there was mistake
in attaching the property of a certain “Teofilo C. Ramos married to Rebecca Ramos.
”When the corporation of this “Teofilo C. Ramos” applied for a loan with UCPB, they were shocked to learn that the
property was under levy. He then executed an affidavit declaring that he and Teofilo Ramos, Sr. were not one and the
same person.

Subsequently, the credit line application was approved. However, as business did not go well, “Ramos” found it difficult to
pay the loan. When he applied for a loan with another bank, he discovered that the notice of levy annotated had not yet
been canceled. His account therefore in UCPB remained outstanding.

When the respondent went to the petitioner for the cancellation of the notice of levy annotated on his title, the petitioners
counsel suggested to the respondent that he file a motion to cancel the levy on execution to enable the court to resolve
the issue. The court granted the motion. The Register of Deeds complied and canceled the notice of levy.

Despite the cancellation, the respondent filed a complaint for damages against the petitioner and Sheriff before the RTC
which rendered judgment in his favor. The complaint against Sheriff was dismissed on the ground that he was merely
performing his duties. CA affirmed RTC, ruling that the petitioner was negligent in causing the annotation of notice of levy
on the title. Hence, this petition.

ISSUE: Whether or not UCPB was negligent when it caused the levy on the subject property.

HELD: YES. In determining whether or not the petitioner acted negligently, the constant test is: Did the defendant in
doing the negligent act use that reasonable care and caution which an ordinarily prudent person would have used in the
same situation? If not, then he is guilty of negligence. Considering the testimonial and documentary evidence on record,
we are convinced that the petitioner failed to act with the reasonable care and caution which an ordinarily prudent person
would have used in the same situation. The petitioner has access to more facilities in confirming the identity of their
judgment debtors. It should have acted more cautiously, especially since some uncertainty had been reported by the
appraiser whom the petitioner had tasked to make verifications. It appears that the petitioner treated the uncertainty
raised by appraiser Reniva as a flimsy matter. It placed more importance on the information regarding the marketability
and market value of the property, utterly disregarding the identity of the registered owner thereof.In sum, we find that the
petitioner acted negligently in causing the annotation of notice of levy in the title of the herein respondent, and that its
negligence was the proximate cause of the damages sustained by the respondent.

7. GSIS vs. Eduardo Santiago, G.R. No.155206, October 28, 2003

Facts: Deceased spouses Jose C. Zuluetaand Soledad Ramos obtained various loans from herein petitioner GSIS secured
by real estate mortgages over parcels of land. The Zuluetas failed to pay their loans to GSIS and the latter foreclosed the
real estate mortgages. The mortgaged properties were sold at public auction by GSIS submitting a bid price. Not all lots
covered by the mortgaged titles, however, were sold. Ninety-one (91) lots were expressly excluded from the auction since
the lots were sufficient to pay for all the mortgage debts. Thereafter, An Affidavit of Consolidation of Ownership was
executed by GSIS over Zulueta’s lots, including the lots, which were already excluded from the foreclosure and sold the
foreclosed properties to Yorkstown Development Corporation which sale was disapproved by the President. After GSIS had
re-acquired the properties sold to said Corporation, it began disposing the foreclosed lots including the excluded ones.

Eduardo Santiago and Antonio Vic Zulueta executed an agreement whereby Zulueta transferred all his rights and interests
over the excluded lots. They wrote a demand letter to GSIS for the return excluded lots and later filed with the (RTC) a
complaint for re-conveyance of real estate against the GSIS. the petitioner maintains that it did not act in bad faith nor
could fraud or malice be attributed when it erroneously included in its certificate of sale, and subsequently consolidated the
titles in its name over the subject lots despite the fact that these were expressly excluded from the foreclosure sale, and
that its failure to apprise or return to the Zuluetas, the respondent’s predecessors-in-interest, the seventy-eight lots
excluded from the foreclosure sale cannot be imputed against them because the petitioner had no such obligation under
the pertinent loan and mortgage agreement. The RTC rendered judgment ordering the GSIS to re-convey to the
respondent herein, the78 lots excluded from the foreclosure sale. The CA affimed the decision in toto. Hence this petition.

Issue: W/N the GSIS committed an act of negligence amounting to bad faith when it included the subject properties into
the consolidated titles in its name and its failure to apprise or inform the defendant herein of the exclusion of said
properties from the public sale?

Held: Yes. The petitioner is not an ordinary mortgagee. It is a government financial institution and, like banks, is expected
to exercise greater care and prudence in its dealings, including those involving registered lands. Due diligence required of
banks extend even to persons, or institutions like the petitioner, regularly engaged in the business of lending money
secured by real estate mortgages.

Thus, in a case the court ruled that Banks, indeed, should exercise more care and prudence in dealing even with registered
lands, than private individuals, for their business is one affected with public interest, keeping in trust money belonging to
their depositors, which they should guard against loss by not committing any act of negligence which amounts to lack of
good faith by which they would be denied the protective mantle of land registration statute, extended only to purchasers
for value and in good faith, as well as to mortgagees of the same character and description.
In this case, the petitioner executed an affidavit in consolidating its ownership and causing the issuance of titles in its
name over the subject lots despite the fact that these were expressly excluded from the foreclosure sale. By so doing, the
petitioner acted in gross and evident bad faith. It cannot feign ignorance of the fact that the subject lots were excluded
from the sale at public auction. Its act constituted gross negligence amounting to bad faith. Further, the petitioner’s acts of
concealing the existence of these lots, its failure to return them to the Zuluetas and even its attempt to sell them to a third
party is proof of the petitioner’s intent to defraud the Zuluetas and appropriate for itself the subject lots. The petitioner
had the legal duty to return the subject lots to the Zuluetas. The petitioner’s attempts to justify its omission by insisting
that it had no such duty under the mortgage contract is obviously clutching at straw. Article 22 of the Civil Code provides
that "every person who, through an act of performance by another, or any other means, acquires or comes into possession
of something at the expense of the latter without just or legal ground, shall return the same to him."

8. Central Bank vs. CA, 208 SCRA 652

Facts:

Central Bank discovered that certain questionable loans extended by Producer’s Bank of the Philippines (PBP), totalling
approximately P300 million (the paid-in capital of PBP amounting only to P 140.544 million, were fictitious as they were
extended, without collateral, to certain interests related to PBP owners themselves. Subsequently and during the same
year, several blind items about a family-owned bank in Binondo which granted fictitious loans to its stockholders appeared
in major newspapers which triggered a bank-run in PBP and resulted in continuous over-drawings on the bank’s demand
deposit account with the Central Bank; reaching to P 143.955 million. Hence, on the basis of the report submitted by the
Supervision and Examination Sector, the Monetary Board (MB), placed PBP under conservatorship.

PBP submitted a rehabilitation plan to the CB which proposed the transfer to PBP of 3 buildings owned by Producers
Properties, Inc. (PPI), its principal stockholder and the subsequent mortgage of said properties to the CB as collateral for
the bank’s overdraft obligation but which was not approved due to disagreements between the parties. Since no other
rehabilitation program was submitted by PBP for almost 3 years its overdrafts with the CB continued to accumulate and
swelled to a staggering P1.023 billion. Consequently, the CB Monetary Board decided to approve in principle what it
considered a viable rehabilitation program for PBP. There being no response from both PBP and PPI on the proposed
rehabilitation plan, the MB issued a resolution instructing Central Bank management to advise the bank that the
conservatorship may be lifted if PBP complies with certain conditions.

Without responding to the communications of the CB, PBP filed a complaint with the Regional Trial Court of Makati against
the CB, the MB and CB Governor alleging that the resolutions issued were arbitraty and made in bad faith. Respondent
Judge issued a temporary restraining order and subsequently a writ of preliminary injunction. CB filed a motion to dismiss
but was denied and ruled that the MB resolutions were arbitrarily issued. CB filed a petition for certiorari before the Court
of Appeals seeking to annul the orders of the trial court but CA affirmed the said orders. Hence this petition.

Issue: Whether or not the trial court erred in not dismissing the case for lack of cause of action and declaring the MB
resolutions as arbitrary.

Held: The following requisites must be present before the order of conservatorship may be set aside by a court: (1) The
appropriate pleading must be filed by the stockholders of record representing the majority of the capital stock of the bank
in the proper court; (2) Said pleading must be filed within ten (10) days from receipt of notice by said majority
stockholders of the order placing the bank under conservatorship; and (3) There must be convincing proof, after hearing,
that the action is plainly arbitrary and made in bad faith.

In the instant case, the original complaint was filed more than 3 years after PBP was placed under conservator, long after
the expiration of the 10-day period deferred to above. It is also beyond question that the complaint and the amended
complaint were not initiated by the stockholders of record representing the majority of the capital stock.

9. PCIBank vs. CA, 350 SCRA 446

FACTS:

Ford Philippines filed actions to recover from the drawee bank Citibank and collecting bank PCIB the value of several
checks payable to the Commissioner of Internal Revenue which were embezzled allegedly by an organized syndicate. What
prompted this action was the drawing of a check by Ford, which it deposited to PCIB as payment and was debited from
their Citibank account. It later on found out that the payment wasn’t received by the Commissioner. Meanwhile, according
to the NBI report, one of the checks issued by petitioner was withdrawn from PCIB for alleged mistake in the amount to be
paid. This was replaced with manager’s check by PCIB, which were allegedly stolen by the syndicate and deposited in their
own account.

The trial court decided in favor of Ford.

ISSUE: Has Ford the right to recover the value of the checks intended as payment to CIR?

HELD:
The checks were drawn against the drawee bank but the title of the person negotiating the same was allegedly defective
because the instrument was obtained by fraud and unlawful means, and the proceeds of the checks were not remitted to
the payee. It was established that instead paying the
Commissioner, the checks were diverted and encashed for the eventual distribution among members of the syndicate.

Pursuant to this, it is vital to show that the negotiation is made by the perpetrator in breach of faith amounting to fraud.
The person negotiating the checks must have gone beyond the authority given by his principal. If the principal could prove
that there was no negligence in the performance of his duties, he may set up the personal defense to escape liability and
recover from other parties who, through their own negligence, allowed the commission of the crime.

It should be resolved if Ford is guilty of the imputed contributory negligence that would defeat its claim for reimbursement,
bearing in mind that its employees were among the members of the syndicate. It appears although the employees of Ford
initiated the transactions attributable to the organized syndicate, their actions were not the proximate cause of encashing
the checks payable to CIR. The degree of Ford’s negligence couldn’t be characterized as the proximate cause of the injury
to parties. The mere fact that the forgery was committed by a drawer-payor’s confidential employee or agent, who by
virtue of his position had unusual facilities for perpetrating the fraud and imposing the forged paper upon the bank,
doesn’t entitle the bank to shift the loss to the drawer-payor, in the absence of some circumstance raising estoppel against
the drawer.

Note: not only PCIB but also Citibank is responsible for negligence. Citibank was negligent in the performance of its duties
as a drawee bank. It failed to establish its payments of Ford’s checks were made in due course and legally in order.

10. Perez vs. Monetary Board, 20 SCRA 592

Facts: Damaso Perez, for himself and in a derivative capacity on behalf of the Republic Bank, instituted mandamus
proceedings in the Court of First Instance of Manila against the Monetary Board, the Superintendent of Banks, the Central
Bank and the Secretary of Justice. His object was to compel these respondents to prosecute, among others, Pablo Roman
and several other Republic Bank officials for violations of the General Banking Act and the Central Bank Act, and for
falsification of public or commercial documents in connection with certain alleged anomalous loans amounting to
P1,303,400.00 authorized by Roman and the other bank officials.

Respondents, Monetary Board, the Superintendent of Banks, the Central Bank and the Secretary of Justice their respective
answers, the propriety of mandamus. The Secretary of Justice claimed that it was not their specific duty to prosecute the
persons denounced by Perez. The Central Bank and its respondent officials, on the other hand, averred that they had
already done their duty under the law by referring to the special prosecutors of the Department of Justice for criminal
investigation and prosecution those cases involving the alleged anomalous loans.

Issue: Whether or not these respondents may be compelled to prosecute criminally the alleged violators of banking
laws.

Held: As for the Secretary of Justice, while he may have the power to prosecute — through the office of the Solicitor
General — criminal cases, yet it is settled rule that mandamus will not lie to compel a prosecuting officer to prosecute a
criminal case in court.

Perez cannot seek by mandamus to compel respondents to prosecute criminally those alleged violators of the banking
laws. Although the Central Bank and its respondent officials may have the duty under the Central Bank Act and the
General Banking Act to cause the prosecution of those alleged violators, yet there is nothing in said laws that imposes a
clear, specific duty on the former to do the actual prosecution of the latter. The Central Bank is a government corporation
created principally to administer the monetary and banking system of the Republic, not a prosecution agency like the
fiscal’s office. Being an artificial person, The Central Bank is limited to its statutory powers and the nearest power to which
prosecution of violators of banking laws may be attributed is its power to sue and be sued. But this corporate power of
litigation evidently refers to civil cases only. Central Bank and its officers have already done what they can by referring the
matter to the special prosecutors of the Department of Justice for prosecution and investigation. Moreover, it is a settled
rule that mandamus will not lie to compel a prosecuting officer, like the Secretary of Justice, to prosecute a case in court.

Violations of banking laws constitute a public offense, the prosecution of which is a matter of public interest and hence,
anyone even private individuals can denounce such violations before the prosecuting authorities. Since Perez himself could
cause the filing of criminal complaints against those allegedly involved in the anomalous loans, if any, then he has a plain,
adequate and speedy remedy in the ordinary course of law, which makes mandamus against respondents improper.
Hence, the order of the lower court dismissing the petition was affirmed.

11. Central Bank vs. Morfe, 20 SCRA 507

Facts:
This case involves the question of whether a final judgment for the payment of a time deposit in a savings bank
which judgment was obtained after the bank was declared insolvent, is a preferred claim against the bank.
 Prior to the institution of the liquidation proceeding but after the declaration of insolvency, or, specifically,
sometime in March, 1971, the spouses Job Elizes and Marcela P. Elizes filed a complaint in the Court of First Instance of
Manila against the Fidelity Savings Bank for the recovery of the sum of P50, 584 as the balance of their time deposits (Civil
Case No. 82520 assigned to Branch I).

In the judgment rendered in that case on December 13, 1972 the Fidelity Savings Bank was ordered to pay the
Elizes spouses the sum of P50,584 plus accumulated interest.

From the said order, the Central Bank appealed to this Court by certiorari. It contends that the final judgments
secured by the Elizes and Padilla spouses do not enjoy any preference because (a) they were rendered after the Fidelity
Savings Bank was declared insolvent and (b) under the charter of the Central Bank and the General Banking Law, no final
judgment can be validly obtained against an insolvent bank.

It should be noted that fixed, savings, and current deposits of money in banks and similar institutions are not true
deposits. They are considered simple loans and, as such, are not preferred credits (Art. 1980, Civil Code
Issue: WON there can be no final judgment can be validly obtained against an insolvent bank?
Held: The circumstance that the Fidelity Savings Bank, having stopped operations since February 19, 1969, was forbidden
to do business (and that ban would include the payment of time deposits) implies that suits for the payment of such
deposits were prohibited under Sec. 85, General Banking Act, Republic Act No. 337. What was directly prohibited should
not be encompassed indirectly. There is no cogent reason why the Elizes and Padilla spouses should not adhere to the
procedure outlined in the said rules and regulations.
WHEREFORE, the lower court's orders of August 20, 1973 and February 25, 1974 are reversed and set aside. No costs. SO
ORDERED.

12. Serrano vs. CA, 96 SCRA 96

Facts:
On October 13, 1966 and December 12, 1966, petitioner made a time deposit, for one year with 6% interest, of
One Hundred Fifty Thousand Pesos [P150,000.00] with the respondent Overseas Bank of Manila. Concepcion Maneja also
made a time deposit, for one year with 6-.% interest, on March 6, 1967, of Two Hundred Thousand Pesos [P200,000.00]
with the same respondent Overseas Bank of Manila.

On August 31, 1968, Concepcion Maneja, married to Felixberto M. Serrano, assigned and conveyed to petitioner Manuel M.
Serrano, her time deposit of P200,000.00 with respondent Overseas Bank of Manila.

Notwithstanding series of demands for encashment of the aforementioned time deposits from the respondent Overseas
Bank of Manila, dating from December 6, 1967 up to March 4, 1968, not a single one of the time deposit certificates was
honored by respondent Overseas Bank of Manila.

Respondent Central Bank admits that it is charged with the duty of administering the banking system of the Republic and
it exercises supervision over all doing business in the Philippines, but denies the petitioner's allegation that the Central
Bank has the duty to exercise a most rigid and stringent supervision of banks, implying that respondent Central Bank has
to watch every move or activity of all banks, including respondent Overseas Bank of Manila. Respondent Central Bank
claims that as of March 12, 1965, the Overseas Bank of Manila, while operating, was only on a limited degree of banking
operations since the Monetary Board decided in its Resolution No. 322, dated March 12, 1965, to prohibit the Overseas
Bank of Manila from making new loans and investments in view of its chronic reserve deficiencies against its deposit
liabilities. This limited operation of respondent Overseas Bank of Manila continued up to 1968.

Respondent Central Bank also denied that it is guarantor of the permanent solvency of any banking institution as claimed
by petitioner. It claims that neither the law nor sound banking supervision requires respondent

Central Bank to advertise or represent to the public any remedial measures it may impose upon chronic delinquent banks
as such action may inevitably result to panic or bank "runs". In the years 1966-1967, there were no findings to declare the
respondent Overseas Bank of Manila as insolvent.

Respondent Central Bank likewise denied that a constructive trust was created in favor of petitioner and his predecessor in
interest Concepcion Maneja when their time deposits were made in 1966 and 1967 with the respondent Overseas Bank of
Manila as during that time the latter was not an insolvent bank and its operation as a banking institution was being
salvaged by the respondent Central Bank.

Respondent Central Bank avers no knowledge of petitioner's claim that the properties given by respondent Overseas Bank
of Manila as additional collaterals to respondent Central Bank of the Philippines for the former's overdrafts and emergency
loans were acquired through the use of depositors' money, including that of the petitioner and Concepcion Maneja.

Issue: Whether or not Bank deposits are in the nature of irregular deposits.

Held: Bank deposits are in the nature of irregular deposits. They are really loans because they earn interest. All kinds of
bank deposits, whether fixed, savings, or current are to be treated as loans and are to be covered by the law on loans.
Current and savings deposits are loans to a bank because it can use the same. The petitioner here, in making time
deposits that earn interests with respondent Overseas Bank of Manila was, in reality, a creditor of the respondent Bank
and not a depositor. The respondent Bank was in turn a debtor of petitioner. Failure of he respondent Bank to honor the
time deposit is failure to pay its obligation as a debtor and not a breach of trust arising from depositary's failure to return
the subject matter of the deposit

WHEREFORE, the petition is dismissed for lack of merit, with costs against petitioner. SO ORDERED.

13. Vitug vs. CA, March 29, 1990

Facts: This case is a chapter in an earlier suit decided by this Court involving the probate of the two wills of the late
Dolores Luchangco Vitug, who died in New York, U. S.A., on November 10, 1980.

On January 13, 1985, Romarico G. Vitug filed a motion asking for authority from the probate court to sell certain shares of
stock and real properties belonging to the estate to cover allegedly his advances to the estate in the sum of P667,731.66,
plus interests, which he claimed were personal funds. As found by the Court of Appeals, 2 the alleged advances consisted
of P58,147.40 spent for the payment of estate tax, P518,834.27 as deficiency estate tax, and P90,749.99 as "increment
thereto." 3According to Mr. Vitug, he withdrew the sums of P518,834.27 and P90,749.99 from savings account No. 35342-
038 of the Bank of America, Makati, Metro Manila.

On April 12, 1985, Rowena Corona opposed the motion to sell on the ground that the same funds withdrawn from savings
account No. 35342-038 were conjugal partnership properties and part of the estate, and hence, there was allegedly no
ground for reimbursement. She also sought his ouster for failure to include the sums in question for inventory and for
"concealment of funds belonging to the estate."

Vitug insists that the said funds are his exclusive property having acquired the same through a survivorship agreement
executed with his late wife and the bank on June 19, 1970.

The trial courts upheld the validity of this agreement and granted "the motion to sell some of the estate of Dolores L.
Vitug, the proceeds of which shall be used to pay the personal funds of Romarico Vitug in the total sum of P667,731.66.

On the other hand, the Court of Appeals, in the petition for certiorari filed by the herein private respondent, held that the
above-quoted survivorship agreement constitutes a conveyance mortis causa which "did not comply with the formalities of
a valid will as prescribed by Article 805 of the Civil Code," and secondly, assuming that it is a mere donation inter vivos, it
is a prohibited donation under the provisions of Article 133 of the Civil Code.

Issue: Whether or not some funds withdrawn from the savings account no. 35342-038 were conjugal partnership
properties and a part of the estate.?

Held: There is no demonstration here that the survivorship agreement had been executed for such unlawful purposes, or,
as held by the respondent court, in order to frustrate our laws on wills, donations, and conjugal partnership.

The conclusion is accordingly unavoidable that Mrs. Vitug having predeceased her husband, the latter has acquired upon
her death a vested right over the amounts under savings account No. 35342-038 of the Bank of America. Insofar as the
respondent court ordered their inclusion in the inventory of assets left by Mrs. Vitug, we hold that the court was in error.
Being the separate property of petitioner, it forms no more part of the estate of the deceased.

WHEREFORE, the decision of the respondent appellate court, dated June 29, 1987, and its resolution, dated February 9,
1988, are SET ASIDE.

14. Central Bank vs. CA, 106 SCRA 143

Facts:
Isidro Fernandez and Jesus Jayme are the majority and controlling stockholders of Provident Bank. When
Provident Savings Bank experienced bankrun, which was triggered off by adverse publicity in the newspapers, radio and
television of investigations conducted by Congress that some banks were unable to pay deposit withdrawals. The Bank was
forced to borrow funds from other banks and the Central Bank but despite the borrowing, the funds remained insufficient
to satisfy the withdrawals.

Hence, the Isidro Fernandez and Jesus Jayme appealed to Central Bank for further assistance. However, the
Central Bank replied to them stating that they have to relinquish and turnover the management and control of the bank to
Iglesia ni Kristo (INK) affiliated entity Eagle Broadcasting in order for it to assist the distressed provident. Under the
agreement, EB agreed to purchase 52,000 capital stock with provident. The Eagle Broadcasting Corporation, however, did
not comply with its commitment to purchase 53,000 common shares of stock and to convert its deposits into equity.
Instead, the new management of PROVIDENT caused the conversion of the deposits of Iglesia Ni Kristo into “bills payable”
earning 12% interest, which were subsequently withdrawn. 4 PROVIDENT, under the new management, also failed to
comply with the Monetary Board directives relative to the rehabilitation of the bank so that it restored the interest rate of
12% on outstanding loans.
 These acts were made despite the presence of Central Bank examiners. Subsequently, Central Bank Monetary
Board issued a resolution declaring the closure of Provident Savings Bank and ordering its liquidation. Hence, Fernandez
and Jayme filed with the Court of First Instance a petition for certiorari, prohibition, and mandamus against Central Bank
to annul the resolution and restrain CB from proceeding with the liquidation which the court granted.

Issue: Whether or not the closure of the bank may be subject to judicial inquiry and whether or not the resolution was
issued arbitrarily and in bad faith.

Held: Having decided in 1968 that PROVIDENT was salvageable and could be permitted to continue in business with its
support, provided there is change in management and introduction of reforms, the CB should have been vigilant in its
overseeing of the faithful compliance by the parties of the terms of the Memorandum Agreement, as well as in supervising
and controlling the operations of the bank under the management of EAGLE. The persuasive, nay, compulsory, powers of
the CB to accomplish these cannot be doubted. The CB exercises such control of private banks under its broad powers that
it can decree life or death of any bank by simply withholding from it the facilitates that it normally accords banks.

While the closure and liquidation of a bank may be considered an exercise of police power, the validity of such exercise of
police power is subject to judicial inquiry and could be set aside if it is either capricious, discriminatory, whimsical,
arbitrary, unjust, or a denial of due process and equal protection clauses of the Constitution. The arbitrariness and bad
faith of Central Bank is evident from the fact that it pressured Fernandez and Jayme into relinquishing the management
and control of Provident Savings Bank to Iglesia Ni Kristo which did not have any intention of restoring the bank into its
former sound financial condition but whose interest was merely to recover its deposits from the bank and thereafter
allowing INK to mismanage the bank until the bank’s financial deterioration and subsequent closure. Central Bank acted
whimsically and withdrew its commitment to support the bank to the detriment of the latter.

If jurisdiction was already acquired it delve into the validity of Resolutions 1263 and 1290 (and this the Central Bank
admits), there is no cogent reason why, after such jurisdiction had been acquired, the Court should be deprived thereof by
the subsequent adoption of Resolution 1333, particularly because the latter, in relation to the antecedent facts, appears to
be no more than a deliberate effort to evade the jurisdiction of this Court, and have the case thrown back to the Court of
First Instance. The Central Bank, by promising to rehabilitate the bank, is estopped from closing it down. The conduct of
the Central Bank reveals a calculated attempt to evade rehabilitating OBM despite its promises. Hence, respondent Central
Bank of the Philippines is directed to comply with it obligations under the voting trust agreement, and to desist from taking
action in violation thereof.

The Central Bank made express representations to petitioners herein that it would support the OBM, and avoid its
liquidation if the petitioners would execute (a) the voting trust agreement turning over the management of OBM to the
Central Bank or its nominees, and (b) mortgage or assign their properties to the Central Bank to cover the overdraft
balance of OBM. The petitioners having complied with these conditions and parted with value to the profit of the CB (which
thus acquired additional security for its own advances), the Central Bank may not now renege on its representations and
liquidate the OBM, to the detriment of its stockholders, depositors and other creditors, under the rule of promissory
estoppel.

15. Abacus Real Estate Dev’t. Center vs. Manila Bank, G.R. No.162270, 06 April 2005

Facts: Manila Banking Corporation (Manila Bank, for brevity), owns a 1,435-square meter parcel of land located along Gil
Puyat Avenue Extension, Makati City and covered by Transfer Certificate of Title (TCT) No. 132935 of the Registry of
Deeds of Makati. Prior to 1984, the bank began constructing on said land a 14-storey building. Not long after, however,
the bank encountered financial difficulties that rendered it unable to finish construction of the building. Central Bank of
the Philippines, now Bangko Sentral ng Pilipinas, ordered the closure of Manila Bank and placed it under receivership, with
Feliciano Miranda, Jr. being initially appointed as Receiver. The legality of the closure was contested by the bank before
the proper court. Manila Bank’s then acting president, the late Vicente G. Puyat, in a bid to save the bank’s investment,
started scouting for possible investors who could finance the completion of the building earlier mentioned.

A group of investors, represented by Calixto Y. Laureano (hereafter referred to as Laureano group), wrote Vicente G. Puyat
offering to lease the building for ten (10) years and to advance the cost to complete the same, with the advanced cost to
be amortized and offset against rental payments during the term of the lease. Likewise, the letter-offer stated that in
consideration of advancing the construction cost, the group wanted to be given the “exclusive option to purchase” the
building and the lot on which it was constructed. Vicente G. Puyat accepted the Laureano group’s offer and granted it an
“exclusive option to purchase” the lot and building for One Hundred Fifty Million Pesos (P150,000,000.00). Later, or on
October 31, 1989, the building was leased to MEQCO for a period of ten (10) years pursuant to a contract of lease bearing
that date. MEQCO subleased the property to petitioner Abacus Real Estate Development Center, Inc. (Abacus, for short),
a corporation formed by the Laureano group for the purpose, under identical provisions as that of the October 31, 1989
lease contract between Manila Bank and MEQCO.

Issue: Whether or not Vicente Puyat, acting as president of Manila Bank, has the power to sell the disputed properties.

Held: There can be no quibbling that respondent Manila Bank was under receivership, pursuant to Central Bank’s MB
Resolution No. 505 dated May 22, 1987, at the time the late Vicente G. Puyat granted the “exclusive option to purchase”
to the Laureano group of investors. Owing to this defining reality, the appellate court was correct in declaring that Vicente
G. Puyat was without authority to grant the exclusive option to purchase the lot and building in question. The invocation
by the appellate court of the following pronouncement inVillanueva vs. Court of Appeals was apropos, to say the least the
assets of the bank pass beyond its control into the possession and control of the receiver whose duty it is to administer the
assets for the benefit of the creditors of the bank. Thus, the appointment of a receiver operates to suspend the authority
of the bank and of its directors and officers over its property and effects, such authority being reposed in the receiver, and
in this respect, the receivership is equivalent to an injunction to restrain the bank officers from intermeddling with the
property of the bank in any way. With respondent bank having been already placed under receivership, its officers,
inclusive of its acting president, Vicente G. Puyat, were no longer authorized to transact business in connection with the
bank’s assets and property. Clearly then, the “exclusive option to purchase” granted by Vicente G. Puyat was and still is
unenforceable against Manila Bank.

Concededly, a contract unenforceable for lack of authority by one of the parties may be ratified by the person in whose
name the contract was executed. However, even assuming, in gratia argumenti, that Atty. Renan Santos, Manila Bank’s
receiver, approved the “exclusive option to purchase” granted by Vicente G. Puyat, the same would still be of no force and
effect.

16. Manalo vs. CA, 08 October 2002

Facts: Villanueva Enterprises, represented by its president, Therese Villanueva Vargas, obtained a loan of three million
pesos and one million pesos from the respondent PAIC Savings and Mortgage Bank and the Philippine American
Investments Corporation (PAIC), respectively. To secure payment of both debts, Vargas executed in favor of the
respondent and PAIC a joint first mortgage over two parcels of land registered under her name. One of the lots is the
subject of the present case. S. Villanueva Enterprises failed to settle its loan obligation.

Accordingly, respondent instituted extrajudicial foreclosure proceedings over the mortgaged lots and acquired the same as
the highest bidder. After the lapse of one year, title was consolidated in respondent’s name for failure of Vargas to
redeem. The Central Bank of the Philippines filed a petition for assistance in the liquidation of the respondent PAIC with the
Regional Trial Court. After a few years, respondent petitioned the Regional Trial Court of PasayCity for the issuance of a
writ of possession for the subject property. However, during the pendency of civil case for the issuance of a writ of
possession, Vargas executed a deed of absolute sale selling, transferring, and conveying ownership of the disputed lot in
favor of a certain Armando Angsico.

Notwithstanding this sale, Vargas, still representing herself to be the lawful owner of the property, leased the same to
petitioner Domingo R. Manalo. Later, Armando Angsico, as buyer of the property, assigned his rights therein to petitioner.
The court subsequently issued the writ of possession but Villanueva Enterprises and Vargas moved for its quashal.
Petitioner, on the strength of the lease contract and deed of assignment made in his favor, submitted a permission to file
an ex-parte motion to intervene. Both motions were denied by the court. Court of Appeals upheld the order of the lower
court. Hence this petition.

Issue: Whether or not the jurisdiction for the issuance of the writ of possession filed by the respondent bank is vested
solely on the liquidation court.

Held: No. The exclusive jurisdiction of the liquidation court pertains only to the adjudication of claims against the bank. It
does not cover the reverse situation where it is the bank which files a claim against another person or legal entity.

Although the law provides that all claims against the insolvent bank should be filed in the liquidation proceeding, such legal
provision only finds operation in cases where there are claims against an insolvent bank. In fine, the exclusive jurisdiction
of the liquidation court pertains only to the adjudication of claims against the bank. It does not cover the reverse situation
where it is the bank which files a claim against another person or legal entity. Moreover, a bank which had been ordered
closed by the monetary board retains its juridical personality which can sue and be sued through its liquidator. The only
limitation being that the prosecution or defense of the action must be done through the liquidator. Otherwise, no suit for or
against an insolvent entity would prosper. In such situation, banks in liquidation would lose what justly belongs to them
through a mere technicality.

17. Sps. Larrobis, Jr. vs. Phil. Veterans Bank, G.R. No.135706, 01 October 2004

Facts:
Petitioner spouses contracted a monetary loan with herein respondent bank secured by a REM executed on their
lot. Respondent bank then went bankrupt and was placed under receivership/liquidation by the Central Bank. Sometime
after, respondent bank sent a demand letter for the amount of the insurance premiums advanced by it over the mortgaged
property of petitioners. More than 14 years from the time the loan became due and demandable, respondent bank moved
for the extrajudicial foreclosure of the mortgaged property and was sold to it as being the lone bidder. Petitioners moved
to declare the foreclosure null and void contending that the respondent bank being placed under receivership did not
interrupt the running of the prescriptive period. RTC ruled in favor of respondents.

Issues:

(1) Whether or not foreclosure of mortgage is included in the acts prohibited during receivership/liquidation proceedings.
(2) Whether or not the period within which the respondent bank was placed under receivership and liquidation proceedings
interrupted the running of the prescriptive period in bringing actions.
Ruling: NO.

(1) While it is true that foreclosure falls within the broad definition of “doing business,” it should not be considered
included, however, in the acts prohibited whenever banks are “prohibited from doing business” during receivership and
liquidation proceedings. This is consistent with the purpose of receivership proceedings, i.e., to receive collectibles and
preserve the assets of the bank in substitution of its former management, and prevent the dissipation of its assets to the
detriment of the creditors of the bank.

There is also no truth to respondent’s claim that it could not continue doing business from the time it was under
receivership. As correctly pointed out by petitioner, respondent was even able to send petitioners a demand letter, through
Francisco Go, for the insurance premiums advanced by respondent bank over the mortgaged property of petitioners. How
it could send a demand letter on unpaid insurance premiums and not foreclose the mortgage during the time it was
“prohibited from doing business” was not adequately explained by respondent

(2) A close scrutiny of the Provident case shows that the Court arrived at said conclusion, which is an exception to the
general rule, due to the peculiar circumstances of Provident Savings Bank at the time. The Superintendent of Banks, which
was instructed to take charge of the assets of the bank in the name of the Monetary Board, had no power to act as a
receiver of the bank and carry out the obligations specified in Sec. 29 of the Central Bank Act.

In this case, it is not disputed that Philippine Veterans Bank was placed under receivership by the Monetary Board of the
Central Bank pursuant to Section 29 of the Central Bank Act on insolvency of banks. Unlike Provident Savings Bank, there
was no legal prohibition imposed upon herein respondent to deter its receiver and liquidator from performing their
obligations under the law. Thus, the ruling laid down in the Provident case cannot apply in the case at bar.
(In contrast to Provident Savings Bank v. CA, this is the General Rule)

18. Lipana vs. Dev’t. Bank of Rizal, 154 SCRA 257

Facts: Petitioners opened and maintained both time and savings deposits with the respondent Development Bank of
Rizal. When some of the time deposit certificates matured, petitioners were not able to cash them but instead were issued
a manager’s check which was dishonored upon presentment. Demands for the payment of both time and savings deposits
have failed. Hence, petitioners filed with the RTC a collection suit with prayer for issuance of a writ of preliminary
attachment which was granted by the court. The RTC rendered judgment in favor of petitioners. Meanwhile, the Monetary
Board placed the respondent bank under receivership. Subsequently, the motion for execution pending appeal filed by
petitioners was granted by the court but was also stayed by the trial judge. The motion filed by petitioners to lift the stay
order having been denied, this petition was filed.

Issue: Whether or not respondent judge could legally stay execution of judgment that has already become final and
executor

Held: In the instant case, the stay of the execution of judgment is warranted by the fact that respondent bank was placed
under receivership. To execute the judgment would unduly deplete the assets of respondent bank to the obvious prejudice
of other depositors and creditors, since, as aptly stated in Central Bank of the Philippines vs. Morfe (63 SCRA 114), after
the Monetary Board has declared that a bank is insolvent and has ordered it to cease operations, the Board becomes the
trustee of its assets for the equal benefit of all the creditors, including depositors. The assets of the insolvent banking
institution are held in trust for the equal benefit of all creditors, and after its insolvency, one cannot obtain an advantage
or a preference over another by an attachment, execution or otherwise.
After the Monetary Board has declared that a bank is insolvent and has ordered it to cease operations, the Board becomes
the trustee of its assets for the equal benefit of all the creditors, including depositors. The assets of the insolvent banking
institution are held in trust for the equal benefit of all creditors, and after its insolvency, one cannot obtain an advantage
or a preference over another by an attachment, execution or otherwise. To execute the judgment would unduly deplete
the assets of respondent bank to the obvious prejudice of other depositors and creditors.
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19. Phil.Veterans Bank vs. NLRC, G.R. NO.13039, 26 October 1999

Facts: In 1983, petitioner Philippine Veterans Bank was placed under receivership by the Central Bank (now Bangko
Sentral). Petitioner was subsequently placed under liquidation on 15 June 1985. Consequently, its employees, including
private respondent Dr. Jose Teodorico V. Molina, were terminated from work and given their respective separation pay and
other benefits. To assist in the liquidation, some of petitioner’s former employees were rehired, among them Molina,
whose re-employment commenced on 15 June 1985.

On 11 May 1991, MOLINA filed a complaint against members of the liquidation team. The complaint demanded the
implementation of Wage Orders Nos. NCR-01 and NCR-02 (hereafter W.O. 1 and W.O. 2) as well as moral damages and
attorney’s fees in the amount of P300,000.

Meanwhile, W.O. 1 took effect on November 1990, prescribing a P17-increase in the daily wage of employees whose
monthly salary did not exceed P3,802.08. On the other hand, W.O. 2 became mandated a P12 increase in the daily wage
of employees whose monthly salary did not exceed P4,319.16. Molina claimed that his salary should have been adjusted in
compliance with said wage orders. The liquidation team countered that MOLINA was not entitled to any salary increas
because he was already receiving a monthly salary of P6,654.60.

Labor Arbiter rejected the 26.16 factor used by the liquidators in computing the daily wage of MOLINA, adopting instead
the factor of “365 days.” Consequently, they were ordered to pay Molina the wage differentials due him under W.O. 1 and
W.O. 2. On appeal, the NLRC sustained the labor arbiter’s ruling after concluding that Molina was a regular employee of
petitioner with a basic monthly salary of P3,754.60 at the time of his dismissal on 31 January 1992. He was, therefore,
entitled to the wage increases mandated by the aforesaid wage orders.

Issue: Whether Molina is entitled to wage increase computation that used the 365 days factor.

Held: Molina is entitled to the wage increase computation using the 365 days as factor.

The documents attached show that the Bank has been consistently using the factor of 365 days in computing your
equivalent monthly salary prior to its being placed under receivership by the Central Bank. This is evident in the wage and
allowance increases granted under previous Presidential Decrees and Wage Orders, which were given by the Bank on
monthly basis, i.e., where the rest days are unworked but paid. This is also indicated in the appointment and service
records of bank personnel who started out as daily paid employees and were eventually promoted as permanent
employees with fixed monthly salaries. However, when R.A. 6640 went into force, the Bank unilaterally reduced the factor
to 262 instead of maintaining factor 365 as was the practice/policy long before the effectivity of the Act. And when R.A
6727 took effect, the Bank reverted to the old practice/policy of using factor 365 days in computing your equivalent
monthly rate salary.

May we add that the old practice of the bank in using factor 365 days in a year in determining equivalent monthly salary
cannot unilaterally be changed by your employer without the consent of the employees, such practice being now a part of
the terms and conditions of your employment.

An employment agreement, whether written or unwritten, is a bilateral contract and as such either party thereto cannot
change or amend the terms thereof without the consent of the other party thereto. It is clear that respondent is entitled to
the wage increase under R.A. 6440 computed on the basis of 365 paid days and to the corresponding salary differentials
as a result of the application of this factor. Evidently, the use of the 365 factor is binding and conclusive, forming as it did
part of the employment contract. To abandon such policy and revert to its old practice of using the 26.16 factor would be a
diminution of a labor benefit, which is prohibited by the Labor Code. It cannot be doubted that the 365 factor favors
petitioner’s employees because it results in a higher determination of their monthly salary.

20. Provident Savings Bank vs. CA, 222 SCRA 125

Facts: Spouses Guarin obtained a loan from petitioner bank and as a security, executed a REM in its favor over a parcel of
land. Then petitioner bank was placed under receivership until it was set aside. Guarin signified its willingness to pay its
obligation in exchange for the mortgaged title. Petitioner bank could not release said title as it also served as security for
another loan obtained by Guarin for his corporation. Private respondent Chua wrote petitioner bank saying that the
mortgaged property was offered to him as payment of judgment he obtained against the Guarins. The Guarins sold the
property to Chua with the latter assuming the obligations. Chua tried to pay the loan but petitioner would not release the
title unless the second loan of Guarin was also settled.

Issue: Whether or not a bank being placed under receivership interrupts the prescription of actions it may institute.

Ruling: YES. When a bank is prohibited to do business by the Central Bank and a receiver is appointed for such bank, that
bank would not be able to do new business, i.e., to grant new loans or to accept new deposits.

Having arrived at the conclusion that the foreclosure is part of bank’s business activity which could not have been pursued
by the receiver then because of the circumstances discussed in the Central Bank case, we are thus convinced that the
prescriptive period was legally interrupted by fuerza mayor in 1972 on account on the prohibition imposed by the Monetary
Board against petitioner from transacting business, until the directive of the board was nullified in 1981. Indeed, the period
during which the obligee was prevented by a caso fortuito from enforcing his right is not reckoned against him (Article
1154, New Civil Code). When prescription is interrupted, all the benefits acquired so far from the possession cease and
when prescription starts anew, it will be entirely a new one. This concept should not be equated with suspension where the
past period is included in the computation being added to the period after prescription is resumed. Consequently, when the
closure of was set aside in 1981, the period of ten years within which to foreclose under Article 1142 of the New Civil Code
began to run again and, therefore, the action filed on August 21, 1986 to compel petitioner to release the mortgage
carried with it the mistaken notion that petitioner’s own suit foreclosure had prescribed.

(In contrast to Larrobis v. Phil Veterans Bank, this is an exception to the general rule because of peculiar circumstances)

21. Fidelity Savings vs. Cenzon, 184 SCRA 141

Facts: Respondent spouses Santiago maintained a savings and time deposit with petitioner bank. The Monetary Board
found petitioner bank to be insolvent and ordered for its assets to be taken charged of by the Acting Superintendent. The
PDIC paid spouses for their deposits with petitioner bank but there was still a remaining balance. The Monetary Board then
directed the liquidation of the affairs of petitioner bank and a subsequent petition for assistance and supervision in
liquidation was filed in the court. The liquidation proceedings still pending, respondent spouses sent demand letters to
petitioner bank for the payment of their deposits. The court found in favor of respondent spouses.

Issue: Whether or not petitioner bank may be adjudged to pay interest on unpaid deposits even after its closure by the
Central Bank by reason of insolvency.

Ruling: NO. It is settled jurisprudence that a banking institution which has been declared insolvent and subsequently
ordered closed by the Central Bank of the Philippines cannot be held liable to pay interest on bank deposits which accrued
during the period when the bank is actually closed and non-operational. In The Overseas Bank of Manila vs. Court of
Appeals and Tony D. Tapia, we held that:

It is a matter of common knowledge, which We take judicial notice of, that what enables a bank to pay stipulated interest
on money deposited with it is that thru the other aspects of its operation it is able to generate funds to cover the payment
of such interest. Unless a bank can lend money, engage in international transactions, acquire foreclosed mortgaged
properties or their proceeds and generally engage in other banking and financing activities from which it can derive
income, it is inconceivable how it can carry on as a depository obligated to pay stipulated interest. Conventional wisdom
dictates this inexorable fair and just conclusion. And it can be said that all who deposit money in banks are aware of such
a simple economic proposition. Consequently, it should be deemed read into every contract of deposit with a bank that the
obligation to pay interest on the deposit ceases the moment the operation of the bank is completely suspended by the duly
constituted authority, the Central Bank.

From the aforecited authorities, it is manifest that petitioner cannot be held liable for interest on bank deposits which
accrued from the time it was prohibited by the Central Bank to continue with its banking operations. The order, therefore,
of the Central Bank as receiver/liquidator of petitioner bank allowing the claims of depositors and creditors to earn interest
up to the date of its closure is in line with the doctrine laid down in the jurisprudence above cited.

22. People vs. Ong, 204 SCRA vs. 942

23. BPI vs. CA, 232 SCRA 302

Facts: Private respondents Eastern Plywood Corporation and Benigno Lim as officer of the corporation, had an “AND/OR”
joint account with Commercial Bank and Trust Co (CBTC), the predecessor-in-interest of petitioner Bank of the Philippine
Islands. Lim withdraw funds from such account and used it to open a joint checking account (an “AND” account) with
Mariano Velasco. When Velasco died in 1977, said joint checking account had P662,522.87. By virtue of an Indemnity
Undertaking executed by Lim and as President and General Manager of Eastern withdrew one half of this amount and
deposited it to one of the accounts of Eastern with CBTC.

Eastern obtained a loan of P73,000.00 from CBTC which was not secured. However, Eastern and CBTC executed a Holdout
Agreement providing that the loan was secured by the “Holdout of the C/A No. 2310-001-42” referring to the joint
checking account of Velasco and Lim.

Meanwhile, a judicial settlement of the estate of Velasco ordered the withdrawal of the balance of the account of Velasco
and Lim.

Asserting that the Holdout Agreement provides for the security of the loan obtained by Eastern and that it is the duty of
CBTC to debit the account of respondents to set off the amount of P73,000 covered by the promissory note, BPI filed the
instant petition for recovery. Private respondents Eastern and Lim, however, assert that the amount deposited in the joint
account of Velasco and Lim came from Eastern and therefore rightfully belong to Eastern and/or Lim. Since the Holdout
Agreement covers the loan of P73,000, then petitioner can only hold that amount against the joint checking account and
must return the rest.

Issue: Whether BPI can demand the payment of the loan despite the existence of the Holdout Agreement and whether
BPI is still liable to the private respondents on the account subject of the withdrawal by the heirs of Velasco.

Ruling: Yes, for both issues. Regarding the first, the Holdout Agreement conferred on CBTC the power, not the duty, to
set off the loan from the account subject of the Agreement. When BPI demanded payment of the loan from Eastern, it
exercised its right to collect payment based on the promissory note, and disregarded its option under the Holdout
Agreement. Therefore, its demand was in the correct order.

Regarding the second issue, BPI was the debtor and Eastern was the creditor with respect to the joint checking account.
Therefore, BPI was obliged to return the amount of the said account only to the creditor. When it allowed the withdrawal of
the balance of the account by the heirs of Velasco, it made the payment to the wrong party. The law provides that
payment made by the debtor to the wrong party does not extinguish its obligation to the creditor who is without fault or
negligence. Therefore, BPI was still liable to the true creditor, Eastern.

24. Tan Tiong Tick vs. American Apothecaries, 65 Phil. 417

Facts: In the proceedings for the liquidation of the Mercantile Bank of China, the appellant presented a written claim
alleging: that when this bank ceased to operate on September 19, 1931, his current account in said bank showed a
balance of P9,657.50 in his favor; that on the same date his savings account in the said bank also showed a balance in his
favor of P20,000 plus interest then due amounting to P194.78; that on the other hand, he owed the bank in the amount of
P13,262.58, the amount of the trust receipts which he signed because of his withdrawal from the bank of certain
merchandise consigned to him without paying the drafts drawn upon him by the remittors thereof; that the credits thus
described should be set off against each other according to law, and on such set off being made it appeared that he was
still the creditor of the bank in the sum of P16,589.70. And he asked that the court order the Bank Commissioner to pay
him the aforesaid balance and that the same be declared as preferred credit. The claim was referred to the commissioner
appointed by the court, who at the same time acted as referee, and this officer recommended that the balance claimed be
paid without interest and as an ordinary credit. The court approved the recommendation and entered judgment in the
accordance therewith. The claimant took an appeal.

Issues:

1. WON the current account and savings deposits are preferred credits in cases involving insolvency and liquidation of the
bank.
2. WON the deposits could be offset with the debt of the depositor with the bank.
3.WON the deposits should earn interest from the time the bank ceased to operate.

Ruling:

1. The SC ruled that, these deposits are essentially mercantile contracts and should, therefore, be governed by the
provisions of the Code of Commerce. In accordance with article 309, the so-called current account and savings deposits
have lost the character of deposits properly so-called, and are converted into simple commercial loans, because the bank
disposed of the funds deposited by the claimant for its ordinary transactions and for the banking business in which it was
engaged. That the bank had the authority of the claimant to make use of the money deposited on current and savings
account is deducible from the fact that the bank has been paying interest on both deposits, and the claimant himself asks
that he be allowed interest up to the time when the bank ceased its operations. Moreover, according to section 125 of the
Corporation Law and 9 of Act No. 3154, said bank is authorized to make use of the current account, savings, and fixed
deposits provided it retains in its treasury a certain percentage of the amounts of said deposits.

2. It appears that even after the enactment of the Insolvency Law there was no law in this jurisdiction governing the order
or preference of credits in case of insolvency and liquidation of a bank. But the Philippine Legislature subsequently enacted
Act No. 3519, amended various sections of the Revised Administrative Code, which took effect on February 20, 1929, and
section 1641 of this latter Code. as amended by said Act provides:

SEC. 1641. Distribution of assets. — In the case of the liquidation of a bank or banking institution, after payment of the
costs of the proceeding, including reasonable expenses, commissions and fees of the Bank Commissioner, to be allowed by
the court, the Bank Commissioner shall pay the debts of the institution, under of the court in the order of their legal
priority.

From this section 1641 we deduce that the intention of the Philippine Legislature, in providing that the Bank Commissioner
shall pay the debts of the company by virtue of an order of the court in the order of their priority, was to enforce the
provisions of section 48, 49 and 50 of the Insolvency Law in the sense that they are made applicable to cases of
insolvency or bankruptcy and liquidation of banks. No other deduction can be made from the phrase “in the order of their
legal priority” employed by the law, for there being no law establishing any priority in the order of payment of credits, the
legislature could not reasonably refer to any legislation upon the subject, unless the interpretation above stated is
accepted.

Examining now the claims of the appellant, it appears that none of them falls under any of the cases specified by section
48, 49 and 50 of the Insolvency Law; wherefore, we conclude that the appellant’s claims, consisting of his current and
savings account, are not preferred credits.

3. “It may be stated as a general rule that when a depositor is indebted to a bank, and the debts are mutual — that is,
between the same parties and in the same right — the bank may apply the deposit, or such portion thereof as may be
necessary, to the payment of the debt due it by the depositor, provided there is no express agreement to the contrary and
the deposit is not specially applicable to some other particular purposes.”

The situation referred to by the appellees is inevitable because section 1639 of the Revised Administrative Code, as
amended by Act No. 3519, provides that the Bank Commissioner shall reduce the assets of the bank into cash and this
cannot be done without first liquidating individually the accounts of the debtors of said bank, and in making this individual
liquidation the debtors are entitled to set off, by way of compensation, their claims against the bank.

4. Upon this point a distinction must be made between the interest which the deposits should earn from their existence
until the bank ceased to operate, and that which they may earn from the time the bank’s operations were stopped until
the date of payment of the deposits. As to the first class, it should be paid because such interest has been earned in the
ordinary course of the bank’s business and before the latter has been declared in a state or liquidation. Moreover, the bank
being authorized by law to make us of the deposits, with the limitation stated, to invest the same in its business and other
operations, it may be presumed that it bound itself to pay interest to the depositors as in fact it paid interest prior to the
date of the said claims.

As to the interest which may be charged from the date the bank ceased to do business because it was declared in a state
of liquidation, SC held that the said interest should not be paid. Under articles 1101 and 1108 of the Civil Code, interest is
allowed by way of indemnity for damages suffered, in the cases wherein the obligation consists in the payment of money.
In view of this, SC held that in the absence of any express law or any applicable provision of the Code of Commerce, it is
not proper to pay this last kind of interest to the appellant upon his deposits in the bank, for this would be anomalous and
unjustified in a liquidation or insolvency of a bank. This rule should be strictly observed in the instant case because it is
understood that the assets should be prorated among all the creditors as they are insufficient to pay all the obligations of
the bank. In view of all the foregoing considerations, SC affirmed the part of the appealed decision for the reasons stated
herein, and it is ordered that the net claim of the appellant, amounting to P13,611.21, is an ordinary and not a preferred
credit, and that he is entitled to charge interest on said amount up to September 19, 1931.

25. Guingona vs. City Fiscal, 128 SCRA 577

Facts: Private respondent Clement David invested with the National Savings and Loan Association (NSLA) placed on 9
deposits through the inducement of an Australian national who was allegedly a close associate of petitioners herein. NSLA
was then placed under receivership by the Central Bank. David filed claims for his and his sister’s investments and
received a report that only a portion of the investments they claim were entered in the records of NSLA. David alleged that
there was misappropriation of funds and violation of Central Bank circulars, hence charged petitioners herein with estafa.
Petitioners moved to dismiss the charges on the ground that David’s claims comprised a purely civil obligation which was
itself novated.

Issue: Whether or not the criminal complaint for estafa will prosper.

Ruling: NO.

It must be pointed out that when private respondent David invested his money on nine and savings deposits with the
aforesaid bank, the contract that was perfected was a contract of simple loan or mutuum and not a contract of deposit.

Hence, the relationship between the private respondent and the Nation Savings and Loan Association is that of creditor
and debtor; consequently, the ownership of the amount deposited was transmitted to the Bank upon the perfection of the
contract and it can make use of the amount deposited for its banking operations, such as to pay interests on deposits and
to pay withdrawals. While the Bank has the obligation to return the amount deposited, it has, however, no obligation to
return or deliver the same money that was deposited. And, the failure of the Bank to return the amount deposited will not
constitute estafa through misappropriation punishable under Article 315, par. l(b) of the Revised Penal Code, but it will
only give rise to civil liability over which the public respondents have no- jurisdiction.

But even granting that the failure of the bank to pay the time and savings deposits of private respondent David would
constitute a violation of paragraph 1(b) of Article 315 of the Revised Penal Code, nevertheless any incipient criminal
liability was deemed avoided, because when the aforesaid bank was placed under receivership by the Central Bank,
petitioners Guingona and Martin assumed the obligation of the bank to private respondent David, thereby resulting in the
novation of the original contractual obligation arising from deposit into a contract of loan and converting the original trust
relation between the bank and private respondent David into an ordinary debtor-creditor relation between the petitioners
and private respondent. Consequently, the failure of the bank or petitioners Guingona and Martin to pay the deposits of
private respondent would not constitute a breach of trust but would merely be a failure to pay the obligation as a debtor.

26. PBCOM vs. CA, 269 SCRA 695

Facts: Rommel’s Marketing Corporation (RMC) maintained two separate current accounts with PBC in connection with its
business of selling appliances. The RMC General Manager Lipana entrusted to his secretary, Irene Yabut, RMC funds
amounting to P300,000+ for the purpose of depositing the same to RMC’s account with PBC. However, it turned out that
Yabut deposited the amounts in her husband’s account instead of RMC. Lipana never checked his monthly statement of
accounts regularly furnished by PBC so that Yabut’s modus operandi went on for the span of more than one year.

Issue: What is the proximate cause of the loss – Lipana’s negligence in not checking his monthly statements or the bank’s
negligence through its teller in validating the deposit slips?

HELD: The bank teller was negligent in validating, officially stamping and signing all the deposit slips prepared and
presented by Yabut, despite the glaring fact that the duplicate copy was not completely accomplished contrary to the self-
imposed procedure of the bank with respect to the proper validation of deposit slips, original or duplicate.

The bank teller’s negligence, as well as the negligence of the bank in the selection and supervision of its bank teller, is the
proximate cause of the loss suffered by the private respondent, not the latter’s entrusting cash to a dishonest employee.
Xxx Even if Yabut had the fraudulent intention to misappropriate the funds, she would not have been able to deposit those
funds in her husband’s current account, and then make plaintiff believe that it was in the latter’s accounts wherein she had
deposited them, had it not been for the bank teller’s aforesaid gross and reckless negligence.
Doctrine of Last Clear Chance – where both parties are negligent, but the negligent act of one is appreciably later in time
than that of the other, or when it is impossible to determine whose fault or negligence should be attributed to the incident,
the one who had the last clear opportunity to avoid the impending harm and failed to do so is chargeable with the
consequences thereof. It means that the antecedent negligence of a person does not preclude the recovery of damages for
the supervening negligence of, or bar a defense against liability sought by another, if the latter, who had the last fair
chance, could have avoided the impending harm by exercise of due diligence. (Phil. Bank of Commerce v. CA, supra)

27. BPI vs. CA, 326 SCRA 641

Facts: A certain Henry Chan owned a Continental Bank Manager’s Check payable to "cash" in the amount of Two
Thousand Five Hundred Dollars ($2,500.00). Chan went to the office of Benjamin Napiza and requested him to deposit the
check in his dollar account by way of accommodation and for the purpose of clearing the same. Private respondent
acceded, and agreed to deliver to Chan a signed blank withdrawal slip, with the understanding that as soon as the check is
cleared, both of them would go to the bank to withdraw the amount of the check upon private respondent’s presentation
to the bank of his passbook. Napiza thus endorsed the check and deposited it in a Foreign Currency Deposit Unit (FCDU)
Savings Account he maintained with BPI. Using the blank withdrawal slip given by private respondent to Chan, one Ruben
Gayon, Jr. was able to withdraw the amount of $2,541.67 from Napiza's FCDU account. It turned out that said check
deposited by private respondent was a counterfeit check.

When BPI demanded the return of $2,500.00, private respondent claimed that he deposited the check "for clearing
purposes" only to accommodate Chan.

Petitioner claims that private respondent, having affixed his signature at the dorsal side of the check, should be liable for
the amount stated therein in accordance with the provision of the Negotiable Instruments Law on the liability of a general
indorser (Sec. 66).

Issue:
1. Whether private respondent is obliged to return the money paid out by BPI on a counterfeit check even if he deposited
the check "for clearing purposes" only to accommodate Chan.
2. Whether or not respondent Napiza is liable under his warranties as a general indorser.

Ruling:
Ordinarily private respondent may be held liable as an indorser of the check or even as an accommodation party.
However, petitioner BPI, in allowing the withdrawal of private respondent’s deposit, failed to exercise the diligence of a
good father of a family. BPI violated its own rules by allowing the withdrawal of an amount that is definitely over and
above the aggregate amount of private respondent’s dollar deposits that had yet to be cleared. The proximate cause of
the eventual loss of the amount of $2,500.00 on BPI's part was its personnel’s negligence in allowing such withdrawal in
disregard of its own rules and the clearing requirement in the banking system. In so doing, BPI assumed the risk of
incurring a loss on account of a forged or counterfeit foreign check and hence, it should suffer the resulting damage.

28. Citytrust Banking vs. IAC, 232 SCRA 559

Facts: Emme Herrero, businesswoman, made regular deposits with Citytrust Banking Corp. at its Burgoa branch in
Calamba, Laguna. She deposited the amount of P31, 500 in order to amply cover 6 postdated checks she issued. All
checks were dishonored due to insufficiency of funds upon the presentment for encashment. Citytrust banking Corp.
asserted that it was due to Herrero’s fault that her checks were dishonored, for he inaccurately wrote his account number
in the deposit slip. RTC dismissed the complaint for lack of merit. CA reversed the decision of RTC.

Issue: Whether or not Citytrust banking Corp. has the duty to honor checks issued by Emme Herrero despite the failure
to accurately stating the account number resulting to insufficiency of funds for the check.

Held: Yes, even it is true that there was error on the account number stated in the deposit slip, its is, however, indicated
the name of “Emme Herrero.” This is controlling in determining in whose account the deposit is made or should be posted.
This is so because it is not likely to commit an error in one’s name than merely relying on numbers which are difficult to
remember. Numbers are for the convenience of the bank but was never intended to disregard the real name of its
depositors. The bank is engaged in business impressed with public trust, and it is its duty to protect in return its clients
and depositors who transact business with it. It should not be a matter of the bank alone receiving deposits, lending out
money and collecting interests. It is also its obligation to see to it that all funds invested with it are properly accounted for
and duly posted in its ledgers.

29. BPI vs. IAC, 206 SCRA 408

Facts: When the respondent spouses opened their joint current account, the “new accounts” teller of the bank by mistake,
placed the old existing separate personal account number of Arthur Canlas on the deposit slip for the new joint checking
account of the spouses so that the initial deposit for the joint checking account was miscredited to Arthur’s personal
account .

Because of this, one of the checks issued by one of the spouse was dishonoured for insufficient funds prompting private
respondents to file a complaint for damages against petitioner bank. Petitioner bank argues that it is not considered
negligent and liable for damages on account of the inadvertence of its bank employee considered that it was an honest
mistake and not tainted with malice and bad faith.

Issue: WON the petitioner bank was guilty of gross negligence in the handling of private respondents’ bank account.

Held: There is no merit in petitioner’s argument that it should not be considered negligent, much less held liable for
damages on account of the inadvertence of its bank employee for Article 1173 of the Civil Code only requires it to exercise
the diligence of a good father of a family.

As a business affected with public interest and because of the nature of its functions, the bank is under obligation to treat
the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship (Simex
vs CA, 183 SCRA 360).

30. Go vs. IAC, 197 SCRA 22

Go vs. Intermediate Appellate CourtG.R. No. L-68138May 31, 1991

Facts: Floverto Jazmin, a visitor residing at Maravilla St. Mangatarem, Pangasinan, is an American citizen and a retiree of
the United States Federal Government. Being a pensionado of the US Government, he received annuity checks through
Mangatarem Post Office and used to encash it at the Prudential Bank Branch at Clark Air Base,Pampanga. However, there
was a time that he was not able to receive the checks ontime, thus prompted him to write a complaint due to the delay.

Thereafter he received a substitute check and encashed it at the Prudential Bank. Meanwhile, Agustin Go in his capacity as
the manager of the Solid bank (now Consolidated Bank and Trust Corporation), allowed a person, in the name of Flover to
Jasmin, to open a savings account thereby depositing two US Treasury Checks. Deposited checks were sent to the drawee
bank (First National City Bank). Having no reply from the drawee bank, the Solidbank allowed the depositor to withdraw
the amount indicated in the checks.

A year later, the two dollar checks were returned to Solidbank with the notation that there was an alteration. With that,
Jazmin received radio messages requiring him to appear before the Philippine Constabulary regarding the complaint filed
by Go against him for estafa. It was then found out that the depositor who withdrew the amount from Solidbank was an
impostor. Thus, Jazmin filed a case against Go at the CFI Pangasinan for moral and exemplary damages. The lower court
ruled in favor of the plaintiff. Defendants appealed to the IAC. Like the lower court, IAC ruled in favor of the plaintiff but
awarded nominal damages instead of moral and exemplary damages. Thus, the case was elevated to the Supreme Court.

Issue: Whether or not Go and the Solidbank are liable for nominal damages.

Ruling: Yes, Go and the Solidbank are solidarily liable for nominal damages. Under the law, quasi-delict cases are one of
the sources of obligation. In this case, the defendant shall be liable for all damages which are the natural and probable
consequences of the act or omission complained of. It is not necessary that such damages have been foreseen or could
have reasonably been foreseen by the defendant. Go has the obligation to pay nominal damages because of the Jazmin’s
right being violated and invaded in the case of estafa instituted at the Philippine Constabulary. Nominal damages are
awarded instead of moral and exemplary damages

31. Prudential Bank vs. CA, 328 SCRA 264

Facts: Private respondent Leticia Tupasi-Valenzuela opened anaccount in the Petitioner Prudential bank. On June 1, 1988,
herein private respondent deposited P35,271.60 drawn against the Philippine Commercial International Bank (PCIB).
Thereafter, private respondent issued Prudential Bank check in the amount of P11,500 post-dated June 20, 1988 in favor
of one Belen Legaspi. Legaspi, who was in jewelry trade, endorsed the check to Philip Lhuiller, a businessman in the same
field. When the check was deposited with the PCIB, it was dishonored for being drawn against insufficient funds. Private
respondent asked why her check was dishonored where there was sufficient funds. The bank officer told her there was no
need to review the passbook because the bank ledger was the best proof that she did not have sufficient funds. Then he
abruptly faced his typewriter and started typing. Later, it was found out that the bank misposted private respondent’s
check deposit to another account anddelayed the posting of the same to the proper account. The bank admitted that it was
at fault. But since it is not the first time that private respondent experienced this scenario, she commenced a suit for
damages.

Issue: Can damages be awarded to private respondent on accountof the bank’s negligence ?

HELD: Yes. The trial court found “that the misposting is a clear proof of lack of supervision on the part of the defendant
bank”. The appellatecourt also found out that “while it may be true that the bank’s negligence in dishonoring the properly
funded check might not have been attended with malice and bad faith, as appellee submits, nevertheless, it is the result of
lack of due care and caution expected of an employee of a firm engaged in so sensitive and accurately demanding task as
banking”.

In Simex International vs. CA, 183 SCRA 360,367 (1990), and BPI vs. IAC, 206 SCRA 408, this court had occasion to
stress the fiduciary nature of the relationship between a bank and its depositors and the extent of diligence expected from
the former in handling the accounts entrusted to its care.

In the case of PNB vs. CA, we held that “a bank is under obligation to treat the accounts of its depositors with meticulous
care whether suchaccount consists only of a few hundred pesos or millions of pesos. Responsibility arising from negligence
in the performance of every kind of obligation is demandable. While petitioner’s negligence in this case may not have been
attended with malice and bad faith, nevertheless, it caused serious anxiety, embarrassment and humiliation”.

32. Moran vs. CA, 230 SCRA 799

Facts: M who regularly purchased bulk fuel from P maintained 3 joint accounts with Citytrust Bank, namely: Current
Account No. 1 (CA1), Savings Account No. 1 (SA1), and Savings Account No. 2 (SA2).
M had a pre-authorized transfer (PAT) agreement with Citytrust wherein the former have written authority to the latter to
automatically transfer funds from their SA1 to their CA1 at any time whenever the funds in their current account were
insufficient to meet withdrawals from said current account.

On December 12, 1983, M drew a check for P50, 576.00 payable to P.

On December 13, 1983, M issued another check in the amount of P56, 090.00 in favor of the same.
On December 14, 1983, P deposited the 2 aforementioned check to its account with the PNB. In turn, PNB presented them
for clearing and the record shows that on December 14, 1983, the accounts has insufficient funds (CA1 had a zero
balance, while SA1 [covered by PAT] had an available balance of P26, 104.30 and SA2 had an available balance of P43,
268.39). Hence the checks were dishonoured.

On December 15, 1983 at 10:00 AM, M went to the bank as was his regular practice and deposited in their SA2 the
amounts of P10, 874.58 and P6, 754.25, and he deposited likewise in the SA1 the amounts of P5, 900.00, P35, 100.00
and 30.00. The amount of P40,000.00 was then transferred by him from SA2 to their CA1. At the same time, the amount
of P66,666.00 was transferred from SA1 to the same current account through PAT agreement.
Sometime on December 15 or 16, 1983 M was informed that that P refused to deliver their orders on a credit basis
because the two checks they had previously issued were dishonored upon presentment for payment due to “insufficiency
of funds.” The non-delivery of orders forced petitioners to stop business operations, allegedly causing them to suffer loss
of earnings.

On December 16 or 17, 1983, P got the signature of M on an application for a manager’s check so that the dishonoured
checks could be redeemed and presented the checks in payment for the two dishonoured checks.
On July 24, 1984, claimed P1,000,000.00 for moral damages.

Issue: WON the bank is liable for damages for its refusal to pay a check on account of insufficient funds considering the
fact that a deposit may be made later in the day.

Held: No, Petitioners had no sufficient funds in their accounts when the bank dishonored the checks in question.

First, a check is a bill of exchange drawn on a bank payable on demand. Thus, a check is a written order addressed to a
bank or persons carrying on the business of banking, by a party having money in their hands, requesting them to pay on
presentment, to a person named therein or to bearer or order, a named sum of money.

Second, the relationship between the bank and the depositor is that of a debtor and creditor. By virtue of the contract of
deposit between the banker and its depositor, the banker agrees to pay checks drawn by the depositor provided that said
depositor has money in the hands of the bank.

Thirdly, where the bank possesses funds of the depositor, it is bound to honor his checks to the extent of the amount
deposits. The failure of a bank to pay the check of a merchant or a trader, when the deposit is sufficient, entitles the
drawer to substantial damages without any proof of actual damages. Conversely, a bank is not liable for its refusal to pay
a check on account of insufficient funds, notwithstanding the fact that a deposit may be made later in the day. Before a
bank depositor may maintain a suit to recover a specific amount form his bank, he must first show that he had on deposit
sufficient funds to meet demand.

Considering the clearing process adopted, it is clear that the available balance on December 14, 1983 was used by the
bank in determining whether or not there was sufficient cash deposited to fund the two checks. When M’s checks were
dishonored due to insufficiency of funds, the available balance of SA1 which was the subject of the PAT agreement was not
enough to cover either of the two checks. On December 14, 1983, when PNB presented the checks for collection, the
available balance for SA1 was only P26, 104.30 while CA1had no available balance. It was only on December 15, 1983 at
around 10:00 AM that the necessary funds were deposited, which unfortunately was too late to prevent the dishonour of
the checks.

33. Philbank vs. CA, 269 SCRA 695 same as number 26

34. Citytrust vs. IAC, 232 SCRA 559 same as number 28

35. BPI Family Savings Bank vs. First Metro Investment Corp., 429 SCRA 30(G.R. No. 132390) Date: October 16, 2016
Facts:
Respondent FMIC an investment house, through its EVP Ong, opened a current account amounting P100M with
petitioner’s San Francisco Del Monte branch upon the request of his friend which is a close acquaintance of said bank’s
branch manager with the latter’s aim of increasing the deposit level in his branch. Petitioner through its SFDM branch
manager guaranteed the payment of deposit by the FMIC with interest on the condition that the interest is to be paid in
advance. An agreement was reached between the parties and subsequently petitioner paid FMIC upon clearance of the
latter’s check deposit. However, on the basis of an Authority to Debit signed by the EVP and Senior Manager of FMIC,
petitioner transferred P80M from FMCI’s current account to the savings account of one Tevesteco, a stevedoring company.
FMIC denied having authorized the transfer of its funds claiming that the signatures were falsified. In order to recover
immediately its deposit, FMCI issued a check payable to itself and drawn on its deposit but was dishonored upon upon
presentation for payment. Thus, FMIC filed a complaint with the RTC which then ruled in their favor. CA affirmed.

Issue: Whether petitioner was remiss in its fiduciary duty.

Ruling: YES.

Petitioner maintains that respondent should have first inquired whether the deposit of P100 Million and the fixing of the
interest rate were pursuant to its (petitioner’s) internal procedures. Petitioner’s stance is a futile attempt to evade an
obligation clearly established by the intent of the parties. What transpires in the corporate board room is entirely an
internal matter. Hence, petitioner may not impute negligence on the part of respondent’s representative in failing to find
out the scope of authority of petitioner’s Branch Manager. Indeed, the public has the right to rely on the trustworthiness of
bank managers and their acts. Obviously, confidence in the banking system, which necessarily includes reliance on bank
managers, is vital in the economic life of our society.

Thus, we uphold the finding of both lower courts that petitioner failed to exercise that degree of diligence required by the
nature of its obligations to its depositors. A bank is under obligation to treat the accounts of its depositors with meticulous
care, whether such account consists only of a few hundred pesos or of million of pesos. Here, petitioner cannot claim it
exercised such a degree of care required of it and must, therefore, bear the consequence.

CYCLE 3 – TO BE SUBMITTED 17 FEBRUARY 2019

CYCLE 3– TO BE SUBMITTED 17 FEBRUARY 2019

THE FOREIGN CURRENCY DEPOSIT ACT (R.A. 6426)

1. Benedicto vs. CA, 364 SCRA 334

Petitioners correctly point out that Section 10(q) of Circular No. 960 exempts from the reporting requirement foreign
currency eligible for deposit under the Philippine Foreign Exchange Currency Deposit System, pursuant to Republic Act No.
6426, as amended. But, in order to avail of the aforesaid exemption, petitioners must show that they fall within its scope.

Petitioners must satisfy the requirements for eligibility imposed by Section 2, Republic Act No. 6426.50 Not only do we
find the record bare of any proof to support petitioners’ claim of falling within the coverage of Republic Act No. 6426, we
likewise find from a reading of Section 2 of the Foreign Currency Deposit Act that said law is inapplicable to the foreign
currency accounts in question. Section 2, Republic Act No. 6426 speaks of "deposit with such Philippine banks in good
standing, as may…be designated by the Central Bank for the purpose."51 The criminaln cases filed against petitioners for
violation of Circular No. 960 involve foreign currency accounts maintained in foreign banks, not Philippine banks. By
invoking the confidentiality guarantees provided for by Swiss banking laws, petitioners admit such reports made. The rule
is that exceptions are strictly construed and apply only so far as their language fairly warrants, with all doubts being
resolved in favor of the general proviso rather than the exception.52 Hence, petitioners may not claim exemption under
Section 10(q).

2. Chinabank vs. CA, G.R. No.140687, 18 December 2006

Facts: A Complaint for recovery of sums of money and annulment of sales of real properties and shares of stock docketed
as CEB-21445 was filed by Jose “Joseph” Gotianuy against his son-inlaw, George Dee, and his daughter, Mary Margaret
Dee, before the Regional Trial Court (RTC) of Cebu City. Jose Gotianuy accused his daughter Mary Margaret Dee of
stealing, among his other properties, US dollar deposits with Citibank N.A. amounting to not less than P35,000,000.00
and US$864,000.00. Mary Margaret Dee received these amounts from Citibank N.A. through checks which she allegedly
deposited at China Banking Corporation (China Bank). He likewise accused his son-in-law, George Dee, husband of his
daughter, Mary Margaret, of transferring his real properties and shares of stock in George Dee’s name without any
consideration. Jose Gotianuy, died during the pendency of the case before the trial court. He was substituted by his
daughter, Elizabeth Gotianuy Lo. The latter presented the US Dollar checks withdrawn by Mary Margaret Dee from his US
dollar placement with Citibank.

Under the above provision, the law provides that all foreign currency deposits authorized under Republic Act No. 6426, as
amended by Sec. 8, Presidential Decree No. 1246, Presidential Decree No. 1035, as well as foreign currency deposits
authorized under Presidential Decree No. 1034 are considered absolutely confidential in nature and may not be inquired
into. There is only one exception to the secrecy of foreign currency deposits, that is, disclosure is allowed upon the written
permission of the depositor. Upon motion of Elizabeth Gotianuy Lo, the trial court issued a subpoena to Cristota Labios and
Isabel Yap, employees of China Bank, to testify on the case.

Issue: Whether or not the subpoena issued by the court violates PD No. 1035, and further
amended by PD No. 1246, prom. Nov. 21, 1977

Held: As the owner of the funds unlawfully taken and which are undisputably now deposited with China Bank, Jose
Gotianuy has the right to inquire into the said deposits.A depositor, in cases of bank deposits, is one who pays money into
the bank in the usual course of business, to be placed to his credit and subject to his check or the beneficiary of the funds
held by the bank as trustee. Furthermore, it is indubitable that the Citibank checks were drawn against the foreign
currency account with Citibank, NA. The monies subject of said checks originally came from the late Jose Gotianuy, the
owner of the account. Thus, he also has legal rights and interests in the CBC account where said monies were deposited.
More importantly, the Citibank checks readily demonstrate (sic) that the late Jose Gotianuy is one of the payees of said
checks.

Being a co-payee thereof, then he or his estate can be considered as a co-depositor of said checks. Ergo, since the late
Jose Gotianuy is a co-depositor of the CBC account, then his request for the assailed subpoena is tantamount to an
express permission of a depositor for the disclosure of the name of the account holder. The April 16, 1999 Order perforce
must be sustained.

3. Intengan vs. CA, 377 SCRA 63

Facts: Citibank filed a complaint for violation of the Corporation Code against 2 of its officers. The complaint was attached
with the affidavit of Vic Lim, VP of Citibank, who was then instructed by the higher management of the bank to investigate
the anomalous/highly irregular activities of the said officers. As evidence, Lim annexed bank records purporting to
establish the deception practiced by the officers. Some of the documents pertained to the dollar deposits of petitioners. As
an incident to the foregoing, petitioners filed respective motions for the exclusion and physical withdrawal of their bank
records that were attached to Lim’s affidavit.

The filing of Informations against private respondents was recommended for alleged violation of Republic Act No. 1405.
Private respondents appealed before the DOJ which ruled in their favor. Resort to the Court, referred the matter to the CA
which then held that the disclosure was proper and falls under the exception under R.A. No. 1405.

Issue: Whether or not the disclosure falls under the exception under R.A. No. 1405.

Ruling: NO. Actually, this case should have been studied more carefully by all concerned. The finest legal minds in the
country – from the parties’ respective counsel, the Provincial Prosecutor, the Department of Justice, the Solicitor General,
and the Court of Appeals – all appear to have overlooked a single fact which dictates the outcome of the entire
controversy. A circumspect review of the record shows us the reason. The accounts in question are U.S. dollar deposits;
consequently, the applicable law is not Republic Act No. 1405 but Republic Act (RA) No. 6426, known as the “Foreign
Currency Deposit Act of the Philippines.”

Thus, under R.A. No. 6426 there is only a single exception to the secrecy of foreign currency deposits, that is, disclosure is
allowed only upon the written permission of the depositor.

Incidentally, the acts of private respondents complained of happened before the enactment on September 29, 2001 of R.A.
No. 9160 otherwise known as the Anti-Money Laundering Act of 2001.

A case for violation of Republic Act No. 6426 should have been the proper case brought against private respondents.
Private respondents Lim and Reyes admitted that they had disclosed details of petitioners’ dollar deposits without the
latter’s written permission. It does not matter if that such disclosure was necessary to establish Citibank’s case against
Dante L. Santos and Marilou Genuino. Lim’s act of disclosing details of petitioners’ bank records regarding their foreign
currency deposits, with the authority of Reyes, would appear to belong to that species of criminal acts punishable by
special laws, called malum prohibitum.

*The decision however was still unfavorable to the petitioners since there is an issue as to prescription. The action to assail
the disclosure of herein private respondents for them to be liable for violating RA 6426 had already prescribed.

4. Perla Compania de Seguros vs. Ramulete, 203 SCRA 487

Facts: On June 1976, a Cimarron PUJ owned by Nelia Enriquez, and driven by Cosme Casas, was travelling from Cebu City
to Danao City. While passing through Liloan, Cebu, the Cimarron PUJ collided with a private jeep owned by the late Calixto
Palmes (husband of private respondent Primitiva Palmes) who was then driving the private jeep. The impact of the
collision was such that the private jeep was flung away to a distance of about thirty (30) feet and then fell on its right side
pinning down Calixto Palmes. He died as a result of cardio-respiratory arrest due to a crushed chest. The accident also
caused physical injuries on the part of 2-year-old AdeudatusBorbon.

Private respondents Primitiva and Honorato Borbon, Sr. (father of Adeudatus) filed a complaint against Cosme and Nelia
before the then Cebu CFI claiming actual, moral, nominal and exemplary damages as a result of the accident. The claim of
Borbon, Sr. was excluded from the complaint due to jurisdiction.

The CFI ruled in favor of Primitiva, ordering common carrier Nelia to pay her damages and attorney’s fees. The judgment
of the trial court became final and executory and a writ of execution was issued, which however, returned unsatisfied,
prompting the court to summon and examine Nelia. She declared that the Cimarron PUJ was covered by a third-party
liability insurance policy issued by petitioner Perla.

Palmes then filed a motion for garnishment praying that an order of garnishment be issued against the insurance policy
issued by petitioner in favor of the judgment debtor. Respondent Judge then issued an Order directing the Provincial
Sheriff or his deputy to garnish the thirdparty liability insurance policy. Petitioner filed for MR and quashal of the writ of
garnishment on the ground that Perla was not a party to the case and that jurisdiction over its person had never been
acquired by the trial court by service of summons or by any process. The trial court denied petitioner’s motion.An Order for
issuance of an alias writ of garnishment was subsequently issued.

More than two (2) years later, the present Petition for Certiorari and Prohibition was filed with this Court alleging grave
abuse of discretion on the part of respondent Judge Ramolete in ordering garnishment of the third-party liability insurance
contract issued by petitioner Perla in favor of the judgment debtor, Nelia Enriquez. The Petition should have been
dismissed
forthwith for having been filed way out of time but, for reasons which do not appear on the record, was nonetheless
entertained.

Issue:
W/N there is GADALEJ on the part of the respondent judge
W/N there insurance policy may be subject to garnishment

Held:

1. No. The SC found no grave abuse of discretion or act in excess of or without jurisdiction on the part of respondent Judge
Ramolete in ordering the garnishment of the judgment debtor’s third-party liability insurance.

2. Yes. Garnishment has been defined as a species of attachment for reaching any property or credits pertaining or
payable to a judgment debtor. In legal contemplation, it is a forced novation by the substitution of creditors: the judgment
debtor, who is the original creditor of the garnishee is, through service of the writ of garnishment, substituted by the
judgment
creditor who thereby becomes creditor of the garnishee. Garnishment has also been described as a warning to a person
having in his possession property or credits of the judgment debtor, not to pay the money or deliver the property to the
latter, but rather to appear and answer the plaintiff’s suit.

In order that the trial court may validly acquire jurisdiction to bind the person of the garnishee, it is not necessary that
summons be served upon him. The garnishee need not be impleaded as a party to the case. All that is necessary for the
trial court lawfully to bind the person of the garnishee or any person who has in his possession credits belonging to the
judgment debtor is service upon him of the writ of garnishment.

Rule 39, Section 15 and Rule 57, Section 7(e) of the ROC themselves do not require that the garnishee be served with
summons or impleaded in the case in order to make him liable.

In the present case, there can be no doubt, therefore, that the trial court actually acquired jurisdiction over petitioner Perla
when it was served with the writ of garnishment of the third-party liability insurance policy it had issued in favor of
judgment debtor Nelia Enriquez. Perla cannot successfully evade liability thereon by such a contention.

In a third-party liability insurance contract, the insurer assumes the obligation of paying the injured third party to whom
the insured is liable. The insurer becomes liable as soon as the liability of the insured to the injured third person attaches.
Prior payment by the insured to the injured third person is not necessary in order that the obligation of the insurer may
arise. From the moment that the insured became liable to the third person, the insured acquired an interest in the
insurance contract, which interest may be garnished like any other credit. A separate action is not necessary to establish
petitioner’s liability.

Petition for Certiorari and Prohibition is hereby DISMISSED for having been filed out of time and for lack of merit.
Judgment AFFIRMED.

5. RCBC vs. De Castro, 168 SCRA 49

Facts: Badoc Planters, Inc. filed an action for recovery of unpaid tobacco deliveries against PVTA. Hon. Lourdes P. San
Diego, then Presiding Judge, ordering the defendants therein to pay jointly and severally, the plaintiff Badoc Planters, Inc.
(hereinafter referred to as “BADOC”) within 48 hours the aggregate amount of P206,916.76, with legal interests thereon.

Accordingly, the Branch Clerk of Court on the very same day, issued a Writ of Execution addressed to Special Sheriff
Faustino Rigor, who then issued a Notice of Garnishment addressed to the General Manager and/or Cashier of Rizal
Commercial Banking Corporation (hereinafter referred to as RCBC). However, PVTA filed a Motion for Reconsideration. The
Judge set aside the Orders of Execution and of Payment and the Writ of Execution and ordering petitioner and BADOC “to
restore, jointly and severally, the account of PVTA with the said bank in the same
condition and state it was before.

Issues:
1) Whether or not PVTA funds are public funds not subject to garnishment
2) Whether or not the respondent Judge correctly ordered the herein petitioner to reimburse the amount paid to the
Special Sheriff by virtue of the execution issued pursuant to the Order/Partial Judgment dated January 15, 1970.

Held:
1) Republic Act No. 2265 created the PVTA as an ordinary corporation with all the attributes of a corporate entity subject
to the provisions of the Corporation Law. Hence, it possesses the power “to sue and be sued” and “to acquire and hold
such assets and incur such liabilities resulting directly from operations authorized by the provisions of this Act or as
essential to the proper conduct of such operations.” Among the specific powers vested in the PVTA are:

1) to buy Virginia tobacco grown in the Philippines for resale to local bona fide tobacco manufacturers and leaf tobacco
dealers [Section 4(b), R.A. No. 2265];

2) to contracts of any kind as may be necessary or incidental to the attainment of its purpose with any person, firm or
corporation, with the Government of the Philippines or with any foreign government, subject to existing laws [Section
4(h), R.A. No. 22651; and

3) generally, to exercise all the powers of a corporation under the Corporation Law, insofar as they are not inconsistent
with the provisions of this Act [Section 4(k), R.A. No. 2265.]

From the foregoing, it is clear that PVTA has been endowed with a personality distinct and separate from the government
which owns and controls it. Accordingly, this Court has heretofore declared that the funds of the PVTA can be garnished
since “funds of public corporation which can sue and be sued were not exempt from garnishment. Inasmuch as the
Tobacco Fund, a special fund, was by law, earmarked specifically to answer obligations incurred by PVTA in connection
with its proprietary and commercial operations authorized under the law, it follows that said funds may be proceeded
against by ordinary judicial processes such as execution and garnishment. Garnishment is considered as a specie of
attachment for reaching credits belonging to the judgment debtor and owing to him from a stranger to the litigation.

Under the above-cited rule, the garnishee [the third person] is obliged to deliver the credits, etc. to the proper officer
issuing the writ and “the law exempts from liability the person having in his possession or under his control any credits or
other personal property belonging to the defendant, …, if such property be delivered or transferred, …, to the clerk, sheriff,
or other officer of the court in which the action is pending.

2) No. The bank was in no position to question the legality of the garnishment since it was not even a party to the case.
As correctly pointed out by the petitioner, it had neither the personality nor the interest to assail or controvert the orders
of respondent Judge. It had no choice but to obey the same inasmuch as it had no standing at all to impugn the validity of
the partial judgment rendered in favor of the plaintiff or of the processes issued in execution of such judgment. RCBC
cannot therefore be compelled to make restitution solidarily with the plaintiff BADOC. Plaintiff BADOC alone was
responsible for the issuance of the Writ of Execution and Order of Payment and so, the plaintiff alone should bear the
consequences of a subsequent annulment of such court orders; hence, only the plaintiff can be ordered to restore the
account of the PVTA.

6. Ansaldo vs. Sheriff, 6 Phil.115

FACTS: Romarico Agcaoili obtained a loan from the Philippine Trust Company upon the express guaranty of the appellant
Fidelity & Surety Company. Appellee Angel A. Ansaldo, in turn, agreed to indemnify the Fidelity for any and all losses and
damages that it might sustain by reason of having guaranteed Agcaoili's obligations.

Agcaoili defaulted so Fidelity paid the Philippine Trust Company the sum of P19,065.17. Fidelity then sued Angel A,
Ansaldo for the recovery of the said sum of P19,065.17, and after obtaining a judgment in its favor, caused the sheriff of
the City of Manila to levy on the joint savings account in the name of Angel A. Ansaldo and Margarita Quintos de Ansaldo
in the Bank of the Philippine Islands amounting to a total of P 636.80.

Margarita and Angel filed with him a third party claim alleging that the money on which he levied execution was the
property of the conjugal partnership and not liable for the payment of personal obligations of the appellee Angel A.
Ansaldo. but upon execution of an indemnity bond by the appellant Luzon Surety Company, the sheriff retained the money
in his possession. They also instituted an action against the respondents to have the execution levied by the sheriff
declared null and void.

The court below granted the relief prayed for and sentenced the appellants, jointly and severally, to pay the appellees the
sum of P636.80 with interest thereon at the rate of ten per centum per annum from June 6,1934 until paid, and the costs
of suit. Hence this appeal.
Issue: WON a joint savings account and a joint current account, in a bank, of a husband and his wife are liable for the
payment of the obligation of the husband.

Ruling: No. It is undisputed that the sum of P636.80 which is now in controversy was derived from the paraphernal
property of Margarita and Angel A. Ansaldo. It therefore belongs to the conjugal partnership of the said spouses. (Civil
Code, art. 1401.)

The provision of article 1408 of the Civil Code to the effect that the conjugal partnership shall be liable for all the debts and
obligations contracted during the marriage by the husband must be understood as subject to the qualifications established
by article 1386 of the same Code, which provides that: "The fruits of the paraphernal property cannot be subject to the
payment of personal obligations of the husband, unless it be proved that such obligations were productive of some benefit
to the family."

The meaning of this article is clarified by reference to the first paragraph of the preceding article 1385 which reads as
follows: "The fruits of the paraphernal property form part of the assets of the conjugal partnership, and are subject to the
payment of the debts and expenses of the spouses."

Construing the two articles together, it seems clear that the fruits of the paraphernal property which become part of the
assets of the conjugal partnership are not liable for the payment of personal obligations of the husband, unless it be
proved that such obligations were productive of some benefit to the family.

7. Luzon Surety vs. Garcia, 30 SCRA 111

FACTS: Ladislao Chavez, as principal, and petitioner Luzon Surety Co., Inc., executed a surety bond in favor of the PNB,
Victorias Branch, to guaranty a crop loan to Chavez in the sum of P9,000.00. Vicente Garcia, together with the Ladislao
Chavez and one Ramon B. Lacson, as guarantors, signed an indemnity agreement wherein they bound themselves, jointly
and severally, to indemnify now petitioner Luzon Surety Cagainst any and all damages, losses, costs, of whatever kind and
nature in consequence of having become guarantor.

PNB filed a complaint before the CFI of Negros Occidental against Ladislao Chavez and Luzon Surety to recover the
amount of P4,577.95, in interest, attorney's fees, and costs of the suit. A third-party complaint against Ladislao Chavez,
Ramon B. Lacson and Vicente Garcia, based on the indemnity agreement, was instituted by Luzon Surety.

The lower court rendered a decision condemning Ladislao Chavez and Luzon Surety to pay the plaintiff jointly and severally
the amount of P4,577.95 representing the principal and accrued interest of the obligation from January 6, 1956, until fully
paid, plus attorney's fees, and to pay the costs. The same decision likewise ordered the third party defendants, Ladislao
Chavez, Vicente Garcia, and Ramon B. Lacson, to pay Luzon Surety the total amount to be paid by it to the plaintiff
Philippine National Bank.

The CFI issued a writ of execution against Vicente Garcia for the satisfaction of the claim of petitioner in the sum of
P8,839.97. Thereafter, a writ of garnishment was issued by the Provincial Sheriff of Negros Occidental dated August 9,
1960, levying and garnishing the sugar quedans of the now respondent-spouses, the Garcias, from their sugar plantation,
registered in the names of both of them. The Garcia spouses file a suit for injunction.

The lower court found in their favor. It declared that the garnishment in question was contrary to Article 161 of the Civil
Code and granted their petition, making the writ of preliminary injunction permanent. Luzon Surety, Inc. elevated the
matter to the CA which ikewise reached the same result. Hence this petition for review.

Issue: Whether or not a conjugal partnership, in the absence of any showing of benefits received, could be held liable on
an indemnity agreement executed by the husband to accommodate a third party in favor of a surety company.

Ruling: No. It is true that the husband is the administrator of the conjugal property pursuant to the provisions of Art.163
of the new Civil Code. However, as such administrator the only obligations incurred by the husband that are chargeable
against the conjugal property are those incurred in the legitimate pursuit of his career, profession or business with the
honest belief that he is doing right for the benefit of the family.

The husband in acting as guarantor or surety for another in an indemnity agreement as that involved in this case did not
act for the benefit of the conjugal partnership. Such inference is more emphatic in this case, when no proof is presented
that Vicente Garcia in acting as surety or guarantor received consideration therefor, which may redound to the benefit of
the conjugal partnership.

8. Salvacion vs. CB, 278 SCRA 27

FACTS: Greg Bartelli, an American tourist, was arrested for committing four counts of rape and serious illegal detention
against Karen Salvacion. Police recovered from him several dollar checks and a dollar account in the China Banking Corp.
He was, however, able to escape from prison. In a civil case filed against him, the trial court awarded Salvacion moral,
exemplary and attorney’s fees amounting to almost P1,000,000.00.
Salvacion tried to execute the judgment on the dollar deposit of Bartelli with the China Banking Corp. but the latter
refused arguing that Section 11 of Central Bank Circular No. 960 exempts foreign currency deposits from attachment,
garnishment, or any other order or process of any court, legislative body, government agency or any administrative body
whatsoever. Salvacion therefore filed this action for declaratory relief in the Supreme Court.

ISSUE: Should Section 113 of Central Bank Circular No. 960 and Section 8 of Republic Act No. 6426, as amended by PD
1246, otherwise known as the Foreign Currency Deposit Act be made applicable to a foreign transient?

HELD: NO.

The provisions of Section 113 of Central Bank Circular No. 960 and PD No. 1246, insofar as it amends Section 8 of
Republic Act No. 6426, are hereby held to be INAPPLICABLE to this case because of its peculiar circumstances.
Respondents are hereby required to comply with the writ of execution issued in the civil case and to release to petitioners
the dollar deposit of Bartelli in such amount as would satisfy the judgment.

Supreme Court ruled that the questioned law makes futile the favorable judgment and award of damages that Salvacion
and her parents fully deserve. It then proceeded to show that the economic basis for the enactment of RA No. 6426 is not
anymore present; and even if it still exists, the questioned law still denies those entitled to due process of law for being
unreasonable and oppressive. The intention of the law may be good when enacted. The law failed to anticipate the
iniquitous effects producing outright injustice and inequality such as the case before us.

The SC adopted the comment of the Solicitor General who argued that the Offshore Banking System and the Foreign
Currency Deposit System were designed to draw deposits from foreign lenders and investors and, subsequently, to give
the latter protection. However, the foreign currency deposit made by a transient or a tourist is not the kind of deposit
encouraged by PD Nos. 1034 and 1035 and given incentives and protection by said laws because such depositor stays
only for a few days in the country and, therefore, will maintain his deposit in the bank only for a short time. Considering
that Bartelli is just a tourist or a transient, he is not entitled to the protection of Section 113 of Central Bank Circular No.
960 and PD No. 1246 against attachment, garnishment or other court processes.

Further, the SC said: “In fine, the application of the law depends on the extent of its justice. Eventually, if we rule that the
questioned Section 113 of Central Bank Circular No. 960 which exempts from attachment, garnishment, or any other order
or process of any court, legislative body, government agency or any administrative body whatsoever, is applicable to a
foreign transient, injustice would result especially to a citizen aggrieved by a foreign guest like accused Greg Bartelli. This
would negate Article 10 of the New Civil Code which provides that “in case of doubt in the interpretation or application of
laws, it is presumed that the lawmaking body intended right and justice to prevail.”

THE TRUTH IN LENDING ACT (R.A. NO.3765)

1. Consolidated Bank vs. CA, 246 SCRA 193 G.R. No. 138569, Sep 11, 2003.

FACTS:
Petitioner Solidbank is a domestic banking corporation organized and existing under Philippine laws. Private respondent
L.C. Diaz and Company, CPA’s, is a professional partnership engaged in the practice of accounting.

In March 1976, L.C. Diaz opened a savings account with Solidbank. On 14 August 1991, L.C. Diaz through its cashier,
Mercedes Macaraya, filled up a savings (cash) deposit slip for P990 and a savings (checks) deposit slip for P50. Macaraya
instructed the messenger of L.C. Diaz, Ismael Calapre, to deposit the money with Solidbank. Macaraya also gave Calapre
the Solidbank passbook.

Calapre went to Solidbank and presented to Teller No. 6 the two deposit slips and the passbook. The teller acknowledged
the receipt of the deposit by returning to Calapre the duplicate copies of the two deposit slips. Teller No. 6 stamped the
deposit slips with the words “DUPLICATE” and “SAVING TELLER 6 SOLIDBANK HEAD OFFICE.” Since the transaction took
time and Calapre had to make another deposit for L.C. Diaz with Allied Bank, he left the passbook with Solidbank. Calapre
then went to Allied Bank. When Calapre returned to Solidbank to retrieve the passbook, Teller No. 6 informed him that
“somebody got the passbook.” Calapre went back to L.C. Diaz and reported the incident to Macaraya.

Macaraya immediately prepared a deposit slip in duplicate copies with a check of P200,000. Macaraya and Calapre went to
Solidbank and presented to Teller No. 6 the deposit slip and check. The teller stamped the words “DUPLICATE” and
“SAVING TELLER 6 SOLIDBANK HEAD OFFICE” on the duplicate copy of the deposit slip. When Macaraya asked for the
passbook, Teller No. 6 told Macaraya that someone got the passbook but she could not remember to whom she gave the
passbook. When Macaraya asked Teller No. 6 if Calapre got the passbook, Teller No. 6 answered that someone shorter
than Calapre got the passbook. Calapre was then standing beside Macaraya.

The following day L.C. Diaz learned of the unauthorized withdrawal the day before (14 August 1991) of P300,000 from its
savings account. The withdrawal slip for the P300,000 bore the signatures of the authorized signatories of L.C. Diaz,
namely Diaz and Rustico L. Murillo. The signatories, however, denied signing the withdrawal slip. A certain Noel Tamayo
received the P300,000.

L.C. Diaz demanded from Solidbank the return of its money. Solidbank refused. L.C. Diaz filed a Complaint for Recovery of
a Sum of Money against Solidbank. The trial court absolved Solidbank. L.C. Diaz appealed to the CA. CA reversed the
ecision of the trial court. CA denied the motion for reconsideration of Solidbank. But it modified its decision by deleting the
award of exemplary damages and attorney’s fees. Hence this petition.

ISSUE: WON petitioner Solidbank is liable.

RULING: Yes. Solidbank is liable for breach of contract due to negligence, or culpa contractual.

The contract between the bank and its depositor is governed by the provisions of the Civil Code on simple loan. Article
1980 of the Civil Code expressly provides that “x x x savings x x x deposits of money in banks and similar institutions shall
be governed by the provisions concerning simple loan.” There is a debtor-creditor relationship between the bank and its
depositor. The bank is the debtor and the depositor is the creditor. The depositor lends the bank money and the bank
agrees to pay the depositor on demand. The savings deposit agreement between the bank and the depositor is the
contract that determines the rights and obligations of the parties.

The law imposes on banks high standards in view of the fiduciary nature of banking. The bank is under obligation to treat
the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship.

This fiduciary relationship means that the bank’s obligation to observe “high standards of integrity and performance” is
deemed written into every deposit agreement between a bank and its depositor. The fiduciary nature of banking requires
banks to assume a degree of diligence higher than that of a good father of a family. Article 1172 of the Civil Code states
that the degree of diligence required of an obligor is that prescribed by law or contract, and absent such stipulation then
the diligence of a good father of a family. Section 2 of RA 8791 prescribes the statutory diligence required from banks –
that banks must observe “high standards of integrity and performance” in servicing their depositors.

However, the fiduciary nature of a bank-depositor relationship does not convert the contract between the bank and its
depositors from a simple loan to a trust agreement, whether express or implied. Failure by the bank to pay the depositor is
failure to pay a simple loan, and not a breach of trust. The law simply imposes on the bank a higher standard of integrity
and performance in complying with its obligations under the contract of simple loan, beyond those required of non-bank
debtors under a similar contract of simple loan.

The fiduciary nature of banking does not convert a simple loan into a trust agreement because banks do not accept
deposits to enrich depositors but to earn money for themselves.

Solidbank’s Breach of its Contractual Obligation

Article 1172 of the Civil Code provides that “responsibility arising from negligence in the performance of every kind of
obligation is demandable.” For breach of the savings deposit agreement due to negligence, or culpa contractual, the bank
is liable to its depositor.

Calapre left the passbook with Solidbank because the “transaction took time” and he had to go to Allied Bank for another
transaction. The passbook was still in the hands of the employees of Solidbank for the processing of the deposit when
Calapre left Solidbank. When the passbook is in the possession of Solidbank’s tellers during withdrawals, the law imposes
on Solidbank and its tellers an even higher degree of diligence in safeguarding the passbook.

Solidbank’s tellers must exercise a high degree of diligence in insuring that they return the passbook only to the depositor
or his authorized representative. For failing to return the passbook to Calapre, the authorized representative of L.C. Diaz,
Solidbank and Teller No. 6 presumptively failed to observe such high degree of diligence in safeguarding the passbook, and
in insuring its return to the party authorized to receive the same.

In culpa contractual, once the plaintiff proves a breach of contract, there is a presumption that the defendant was at fault
or negligent. The burden is on the defendant to prove that he was not at fault or negligent. In contrast, in culpa aquiliana
the plaintiff has the burden of proving that the defendant was negligent. In the present case, L.C. Diaz has established
that Solidbank breached its contractual obligation to return the passbook only to the authorized representative of L.C.
Diaz. There is thus a presumption that Solidbank was at fault and its teller was negligent in not returning the passbook to
Calapre. The burden was on Solidbank to prove that there was no negligence on its part or its employees. But Solidbank
failed to discharge its burden. Solidbank did not present to the trial court Teller No. 6, the teller with whom Calapre left the
passbook and who was supposed to return the passbook to him. Solidbank also failed to adduce in evidence its standard
procedure in verifying the identity of the person retrieving the passbook, if there is such a procedure, and that Teller No. 6
implemented this procedure in the present case.

Solidbank is bound by the negligence of its employees under the principle of respondeat superior or command
responsibility. The defense of exercising the required diligence in the selection and supervision of employees is not a
complete defense in culpa contractual, unlike in culpa aquiliana. The bank must not only exercise “high standards of
integrity and performance,” it must also insure that its employees do likewise because this is the only way to insure that
the bank will comply with its fiduciary duty

Proximate Cause of the Unauthorized Withdrawal

Proximate cause is that cause which, in natural and continuous sequence, unbroken by any efficient intervening cause,
produces the injury and without which the result would not have occurred. Proximate cause is determined by the facts of
each case upon mixed considerations of logic, common sense, policy and precedent.

L.C. Diaz was not at fault that the passbook landed in the hands of the impostor. Solidbank was in possession of the
passbook while it was processing the deposit. After completion of the transaction, Solidbank had the contractual obligation
to return the passbook only to Calapre, the authorized representative of L.C. Diaz. Solidbank failed to fulfill its contractual
obligation because it gave the passbook to another person.

Had the passbook not fallen into the hands of the impostor, the loss of P300,000 would not have happened. Thus, the
proximate cause of the unauthorized withdrawal was Solidbank’s negligence in not returning the passbook to Calapre.

Doctrine of Last Clear Chance

The doctrine of last clear chance states that where both parties are negligent but the negligent act of one is appreciably
later than that of the other, or where it is impossible to determine whose fault or negligence caused the loss, the one who
had the last clear opportunity to avoid the loss but failed to do so, is chargeable with the loss. The antecedent negligence
of the plaintiff does not preclude him from recovering damages caused by the supervening negligence of the defendant,
who had the last fair chance to prevent the impending harm by the exercise of due diligence.

We do not apply the doctrine of last clear chance to the present case. This is a case of culpa contractual, where neither the
contributory negligence of the plaintiff nor his last clear chance to avoid the loss, would exonerate the defendant from
liability. Such contributory negligence or last clear chance by the plaintiff merely serves to reduce the recovery of damages
by the plaintiff but does not exculpate the defendant from his breach of contract

Mitigated Damages
Under Article 1172, “liability (for culpa contractual) may be regulated by the courts, according to the circumstances.” This
means that if the defendant exercised the proper diligence in the selection and supervision of its employee, or if the
plaintiff was guilty of contributory negligence, then the courts may reduce the award of damages. In this case, L.C. Diaz
was guilty of contributory negligence in allowing a withdrawal slip signed by its authorized signatories to fall into the hands
of an impostor. Thus, the liability of Solidbank should be reduced.

In PBC v. CA where the Court held the depositor guilty of contributory negligence, we allocated the damages between the
depositor and the bank on a 40-60 ratio. Applying the same ruling to this case, we hold that L.C. Diaz must shoulder 40%
of the actual damages awarded by the appellate court. Solidbank must pay the other 60% of the actual damages.

THE PHILIPPINE DEPOSIT INSURANCE CORP. ACT (R.A. 3591 as amended)

2. PDIC vs. CA, 402 SCRA 194

Philippine Deposit Insurance Corporation vs. Court of Appeals G.R. No. 126911 April 30, 2003

FACTS:

Prior to May 22, 1997, respondents had 71 certificates of time deposits denominated as "Golden Time Deposits" (GTD)
with an aggregate face value of P1,115,889.96. May 22, 1987, a Friday, the Monetary Board (MB) of the Central Bank of
the Philippines, now BSP, issued Resolution 5052 prohibiting Manila Banking Corporation to do business in the Philippines,
and placing its assets and affairs under receivership.

The Resolution, however, was not served on MBC until Tuesday the following week, or on May 26, 1987, when the
designated Receiver took over. The next banking day following the issuance of the MB Resolution, respondent Jose Abad
was at the MBC at 9:00 am for the purpose of pre-terminating the aforementioned GTDs and re-depositing the fund
represented thereby into 28 new GTDs in denominations of P40,000.00 or less under the names of herein respondents
individually or jointly with each others Of the 28 new GTDs, Jose Abad pre-terminated 8 and withdrew the value thereof in
the total amount of P320,000.00. Respondents thereafter filed their claims with the PDIC for the payment of the remaining
20 insured GTDs.

February 11,1988, PDIC paid respondents the value of 3 claims in the total amount of P120,000.00.PDIC, however,
withheld payment of the 17 remaining claims after Washington Solidum, Deputy Receiver of MBC-Iloilo, submitted a report
to the PDIC that there was massive conversion and substitution of trust and deposit accounts on May 25, 1987 at MBC-
Iloilo. Because of the report, PDIC entertained serious reservation in recognizing respondents' GTDs as deposit liabilities of
MBC-Iloilo. Thus, PDIC filed a petition for declaratory relief against respondents with the RTC of Iloilo City, for a judicial
declaration determination of the insurability of respondents' GTD sat MBC-Iloilo. In their Answer respondents set up
acounter claim against PDIC whereby they asked for payment of their insured deposits.

The Trial Court ordered petitioners to pay the balance of the deposit insurance to respondents. The Court of Appeals
affirmed the decision of the lower court. Petitioner posits that thetrial court erred in ordering it to pay the balance of the
deposit insurance to respondents, maintaining that the instant petition stemmed from a petition for declaratory relief
which does not essentially entail an executory process, and the only relief that should have been granted by the trial court
is a declaration of the parties' rights and duties. As such, petitioner continues, no order of payment may arise from the
case as this is beyondthe office of declaratory relief proceedings.
ISSUE: Whether or not the trial court order the payment of the balance even if the petition stemmed from a petition for
declaratory relief which does not essentially entail an executor process.

HELD: YES. Without doubt, a petition for declaratory relief does not essentially entail an executory process. There is
nothing in its nature, however, that prohibits a counter claim from being set-up in the same action. There is nothing in the
nature of a special civil action for declaratory relief that prescribes the filing of a counterclaim based on the same
transaction, deed or contract subject of the complaint. A special civil action is after all not essentially different from an
ordinary civil action, which is generally governed by Rules 1to 56 of the Rules of Court, except that the former deals with a
special subject matter which makes necessary some special regulation. But the identity between their fundamental nature
is such that the same rules governing ordinary civil suits may and do apply tospecial civil actions if not inconsistent with or
if they may serve to supplement the provisions of the peculiar rules governing special laws.

3. PDIC vs. CA G.R. No. 118917. December 22, 1997

Facts: On September 22, 1983, plaintiffs-appellees invested in money market placements with the Premiere Financing
Corporation (PFC) in the sum of P10,000.00 each for which they were issued by the PFC corresponding promissory notes
and checks. When they went to the PFC to encash the promissory notes and checks, but the PFC referred him to the
Regent Saving Bank (RSB). Instead of paying the promissory notes and checks, the RSB, issued the subject 13 certificates
of time deposit each stating that the same certifies that the bearer thereof has deposited with the RSB the sum of
P10,000.00; that the certificate is insured up to P15,000.00 with the PDIC; and that the maturity date thereof is on
November 3, 1983. RSB still failed to pay the value of the certificates due to insolvency. Instead, RSB advised Cotaoco to
file a claim with the PDIC.

PDIC refused the aforesaid claims on the ground that the checks issued by PFC for the aforementioned certificates was
returned due to insufficient funds; and said check was not replaced by the PFC, resulting in the cancellation of the
certificates as indebtedness or liabilities of RSB.

Issue: WON PDIC is liable for the plaintiffs claim?

Ruling: The fact that the certificates state that the certificates are insured by PDIC does not ipso facto make the latter
liable for the same should the contingency insured against arise. The deposit liability of PDIC is determined by the
provisions of R.A. No. 3519, and statements in the certificates that the same are insured by PDIC are not binding upon the
latter.

x x x The mere fact that a certificate recites on its face that a certain sum has been deposited, or that officers of the bank
may have stated that the deposit is protected by the guaranty law, does not make the guaranty fund liable for payment, if
in fact a deposit has not been made xxx. The banks have nothing to do with the guaranty fund as such. It is a fund raised
by assessments against all state banks, administered by officers of the state to protect deposits in banks. x x x