Nielgem S.

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

BANK SECRECY
1. BSB VS GO
Court noted that the inquiry into bank
deposits allowable under R.A. No. 1405 must
be premised on the fact that the money
deposited in the account is itself the subject
of the action.[51] Given this perspective, we
deduce that the subject matter of the action
in the case at bar is to be determined from
the indictment that charges respondent with
the offense, and not from the evidence sought
by the prosecution to be admitted into the
records.
the criminal Information filed with the
trial court, respondent, unqualifiedly and in
plain language, is charged with qualified theft
by abusing petitioners trust and confidence
and stealing cash in the amount
of P1,534,135.50. The said Information makes
no factual allegation that in some material
way involves the checks subject of the
testimonial and documentary evidence sought
to be suppressed. Neither do the allegations
in said Information make mention of the
supposed bank account in which the funds
represented by the checks have allegedly
been kept.
In other words, it can hardly be
inferred from the indictment itself that the
Security Bank account is the ostensible
subject of the prosecutions inquiry. Without
needlessly expanding the scope of what is
plainly alleged in the Information, the subject
matter of the action in this case is the money
amounting to P1,534,135.50 alleged to have
been stolen by respondent, and not the
money equivalent of the checks which are
sought to be admitted in evidence. Thus, it is
that, which the prosecution is bound to prove
with its evidence, and no other.
the testimony of Marasigan on the
particulars of respondents supposed
bank account with Security Bank and

the documentary evidence

represented by the checks adduced in
support thereof, are not only
incompetent for being excluded by
operation of R.A. No. 1405. They are
likewise irrelevant to the case,
inasmuch as they do not appear to
have any logical and reasonable
connection to the prosecution of
respondent for qualified theft. We find
full merit in and affirm respondents
objection to the evidence of the
prosecution

2. UCPB VS CA

Section 2 of the Law on Secrecy of

Bank Deposits,[1] as amended, declares
bank deposits to be absolutely
confidential except:
(1) In an examination made in the
course of a special or general
examination of a bank that is
specifically authorized by the Monetary
Board after being satisfied that there is
reasonable ground to believe that a
bank fraud or serious irregularity has
been or is being committed and that it
is necessary to look into the deposit to
establish such fraud or irregularity,
(2) In an examination made by an
independent auditor hired by the bank
to conduct its regular audit provided
that the examination is for audit
purposes only and the results thereof
shall be for the exclusive use of the
bank,
(3) Upon written permission of the
depositor,
(4) In cases of impeachment,
(5) Upon order of a competent court in cases
of bribery or dereliction of duty of public
officials,

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

(6) In
cases
where
the
money
deposited or invested in the subject
matter of the litigation.

Clearly, the specific provision of R.A.

6770, a later legislation, modifies the
law on the Secrecy of Bank Deposits
(R.A. 1405) and places the office of the
Ombudsman in the same footing as
the courts of law in this regard

In short, petitioner is fishing for information so

it can determine the culpability of private
respondent and the amount of damages it can
recover from the latter.
It does not seek recovery of the very money
contained in the deposit. The subject matter
of the dispute may be the amount of
P999,000.00 that petitioner seeks from
private respondent as a result of the latters
alleged failure to inform the former of the
discrepancy; but it is not the P999,000.00
deposited in the drawers account.
The case of the herein petitioner does not fall
under any of the foregoing exceptions to
warrant a disclosure of or inquiry into the
ledgers/books of account of Allied Checking
Account.
the complaint filed by herein petitioner
against Allied Banking Corporation
before the Philippine Clearing House
Corporation (PCHC) Arbitration
Committee is not one for bribery or
dereliction of duty of public officials
much less is there any showing that
the subject matter thereof is the
money deposited in the account in
question
The money depositied in Account No.
0111-018548 is not the subject matter
of the litigation in the Arbicom case for
as clearly stated by petitioner itself, it
is the alleged violation by respondent
of the rules and regulations of the
PCHC
By the phrase subject matter of the
action is meant the physical facts, the
things real or personal, the money,
lands, chattels, and the like, in relation
to which the suit is prosecuted, and
not the delict or wrong committed by
the defendant.
3. MARQUEZ VS. DESIERTO

The issue is whether petitioner

may be cited for indirect contempt for
her failure to produce the documents
requested by the Ombudsman. And
whether the order of the Ombudsman
to have an in camerainspection of the
questioned account is allowed as an
exception to the law on secrecy of
bank deposits (R. A. No. 1405).
We
rule
that
before
an in
camera inspection may be allowed,
1. there must be a pending case before
a court of competent jurisdiction.
2. Further, the account must be clearly
identified, the inspection limited to
the subject matter of the pending
case before the court of competent
jurisdiction.
3.

The bank personnel and the account

holder must be notified to be present
during the inspection, and such
inspection may cover only the account
identified in the pending case.
In the case at bar, there is yet no
pending litigation before any court of
competent authority. What is existing
is an investigation by the office of the
Ombudsman.

4. RIZAL VS HI- TRI

Escheat proceedings refer to the
judicial process in which the state, by
virtue of its sovereignty, steps in and
claims abandoned, left vacant, or
unclaimed property, without there
being an interested person having a
legal claim thereto.[15] In the case of

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

dormant accounts, the state inquires

into
the
status,
custody,
and
ownership of the unclaimed balance to
determine whether the inactivity was
brought about by the fact of death or
absence of or abandonment by the
depositor.[16] If after the proceedings
the property remains without a lawful
owner interested to claim it, the
property shall be reverted to the state
to forestall an open invitation to selfservice by the first comers
However, if interested parties have
come forward and lain claim to the
property, the courts shall determine
whether the credit or deposit should
pass to the claimants or be forfeited in
favor of the state.[18] We emphasize
that escheat is not a proceeding to
penalize depositors for failing to
deposit to or withdraw from their
accounts. It
is
a
proceeding
whereby the
state
compels
the
surrender to it of unclaimed deposit
balances when there is substantial
ground for a belief that they have been
abandoned, forgotten, or without an
owner

or who have not made

further deposits or
withdrawals during the
preceding ten years or
more, arranged in alphabetical
order according to the names of
creditors and depositors,
and showing:
(a)

The names and last

known place of residence or
post office addresses of the
persons in whose favor
such unclaimed balances
stand;

(b)

The amount and the date

of the outstanding
unclaimed balance and
whether the same is in
money or in security, and if
the latter, the nature of the
same;

(c)

The date when the person

in whose favor the
unclaimed balance stands
died, if known, or the date
when he made his last
deposit or withdrawal; and

(d)

The interest due on such

unclaimed balance, if any,
and the amount thereof.

Act No. 3936, as amended, outlines the

proper procedure to be followed by banks and
other similar institutions in filing a sworn
statement with the Treasurer concerning
dormant accounts:

Sec. 2. Immediately after the

taking effect of this Act and
within the month of January of
every odd year, all banks,
building and loan associations,
and trust corporations shall
forward to the Treasurer of
the Philippines a statement,
under oath, of their respective
managing officers, of all
credits and deposits held by
them in favor of
persons known to be dead,

A copy of the above sworn

statement shall be posted in
a conspicuous place in the
premises of the bank,
building and loan association,
or trust corporation concerned
for at least sixty days from the
date of filing

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

thereof: Provided,
That immediately before
filing the above sworn
statement, the bank, building
and loan association, and trust
corporation shall
communicate with the
person in whose favor the
unclaimed balance stands at
his last known place of
residence or post office
address.
If the depositor simply does not wish to
touch the funds in the meantime, but
still asserts ownership and dominion
over the dormant account, then the
bank is no longer obligated to include
the account in its sworn statement.
In case the bank complies with the
provisions
of
the
law
and
the unclaimed balances are eventually
escheated to the Republic, the bank
shall not thereafter be liable to any
person for the same and any action
which may be brought by any person
against in any bank xxx for unclaimed
balances so deposited xxx shall be
defended by the Solicitor General
without cost to such bank

An ordinary check refers to a bill of

exchange drawn by a depositor (drawer) on a
bank (drawee),[24] requesting the latter to pay
a person named therein (payee) or to the
order of the payee or to the bearer, a named
sum of money.[25] The issuance of the check
does not of itself operate as an assignment of
any part of the funds in the bank to the credit
of the drawer.[26] Here, the bank becomes
liable only after it accepts or certifies the
check.[27] After the check is accepted for
payment, the bank would then debit the
amount to be paid to the holder of the check
from the account of the depositor-drawer.
There are checks of a special type
called managers or cashiers
checks.

These are bills of exchange drawn by

the banks manager or cashier, in the
name of the bank, against the bank
itself.[28] Typically, a managers or a
cashiers check is procured from the
bank by allocating a particular amount
of funds to be debited from the
depositors account or by directly
paying or depositing to the bank the
value of the check to be drawn. Since
the bank issues the check in its name,
with itself as the drawee, the check is
deemed
accepted
in
advance.
[29]
Ordinarily, the check becomes the
primary obligation of the issuing bank
and constitutes its written promise to
pay upon demand
Nevertheless, the mere issuance of a
managers
check
does
not ipso
facto work as an automatic transfer of
funds to the account of the payee. In
case the procurer of the managers or
cashiers check retains custody of the
instrument, does not tender it to the
intended payee, or fails to make an
effective delivery,
Sec. 16. Delivery; when effectual;
when presumed. Every contract on a
negotiable instrument is incomplete
and revocable until delivery of the
instrument for the purpose of
giving effect thereto. As between
immediate parties and as regards a
remote party other than a holder in
due course, the delivery, in order to
be effectual, must be made either
by or under the authority of the
party making, drawing, accepting,
or indorsing, as the case may be;
and, in such case, the delivery may be
shown to have been conditional, or for
a special purpose only, and not for the
purpose of transferring the property in
the instrument. But where the
instrument is in the hands of a holder
in due course, a valid delivery thereof
by all parties prior to him so as to
make them liable to him is conclusively
presumed. And where the instrument
is no longer in the possession of a
party
whose
signature
appears
thereon, a valid and intentional

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

delivery by him is presumed until the

contrary
is
proved.
(Emphasis
supplied.)

The doctrine that the

deposit represented by a
managers check automatically
passes to the payee is
inapplicable, because the
instrument although accepted
in advance remains
undelivered. Hence,
respondents should have been
informed that the deposit had
been left inactive for more than
10 years, and that it may be
subjected to escheat
proceedings if left unclaimed.
5. SALVACION VS. CENTRAL BANK

any portion of the monetary instrument,

property or proceeds is located outside the
Philippines, the petition may be filed in the
regional trial court in Manila or of the judicial
region where any portion of the monetary
instrument, property, or proceeds is located,
at the option of the petitioner.
Sec. 4. Contents of the
petition for civil forfeiture. - The
petition for civil forfeiture shall
be verified and contain the
following allegations:
(a) The name and
address of the respondent;
(b) A description
with reasonable
particularity of the
monetary instrument,
property, or proceeds,
and their location; and
(c) The acts or
omissions prohibited by
and the specific
provisions of the AntiMoney Laundering Act,
as amended, which are
alleged to be the
grounds relied upon for
the forfeiture of the
monetary instrument,
property, or proceeds;
and

____________________________
____________________________
________________
AMLA
1. REP VS. GLASGOW

[(d)] The reliefs prayed

for.

Section 3, Title II (Civil Forfeiture in

the Regional Trial Court) of the Rule of
Procedure in Cases of Civil Forfeiture
provides:
Sec. 3. Venue of cases cognizable by the
regional trial court. A petition for civil
forfeiture shall be filed in any regional trial
court of the judicial region where the
monetary instrument, property or
proceeds representing, involving, or
relating to an unlawful activity or to a
money laundering offense are
located; provided, however, that where all or

2. AMLC VS EUGENIO
SEC. 11. Authority to
Inquire into Bank
Deposits. Notwithstanding
the provisions of Republic Act
No. 1405, as amended,
Republic Act No. 6426, as
amended, Republic Act No.
8791, and other laws, the AMLC
may inquire into or examine
any particular deposit or
investment with any banking

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

institution or non bank financial

institution upon order of any
competent court in cases of
violation of this Act, when it
has been established that
there is probable cause that
the deposits or investments
are related to an unlawful
activity as defined in
Section 3(i) hereof or a
money laundering offense
under Section 4 hereof,
except that no court order
shall be required in cases
involving unlawful activities
defined in Sections 3(i)1, (2)
and (12).
To ensure compliance with this Act, the
Bangko Sentral ng Pilipinas (BSP) may inquire
into or examine any deposit of investment
with any banking institution or non bank
financial institution when the examination is
made in the course of a periodic or special
examination, in accordance with the rules of
examination of the BSP
Section 11 also allows the AMLC to inquire
into bank accounts without having to obtain a
judicial order in cases where there is probable
cause that the deposits or investments are
related to kidnapping for ransom,[71] certain
violations of the Comprehensive Dangerous
Drugs Act of 2002,[72] hijacking and other
violations under R.A. No. 6235, destructive
arson and murder.
SEC. 10. Freezing of Monetary
Instrument or Property. The Court of
Appeals, upon application ex parte by the
AMLC and after determination that probable
cause exists that any monetary instrument or
property is in any way related to an unlawful
activity as defined in Section 3(i) hereof, may
issue a freeze order which shall be
effective immediately. The freeze order
shall be for a period of twenty (20) days
unless extended by the court
On the other hand, a bank inquiry order under
Section 11 does not necessitate any form of
physical seizure of property of the account
holder.

The Constitution and the Rules of Court

prescribe particular requirements attaching to
search warrants that are not imposed by the
AMLA with respect to bank inquiry orders. A
constitutional warrant requires that the judge
personally examine under oath or affirmation
the complainant and the witnesses he may
produce,[82] such examination being in the
form of searching questions and answers.
[83]

Those are impositions which the legislative

did not specifically prescribe as to the bank

inquiry order under the AMLA, and we cannot
find sufficient legal basis to apply them to
Section 11 of the AMLA. Simply put, a bank
inquiry order is not a search warrant or
warrant of arrest as it contemplates a direct
object but not the seizure of persons or
property.

3. LIGOT VS REP.

______________________________________________
___

General Banking LAW

1. Baas vs Asia Pacific finance Corp.
Facts:
-

Asia Pacific filed a complaint for a

sum of money

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

o
o
o
o
-

At some time before, Baas

executed a PROMISSORY NOTE in
favour of CG dizon
o Whereby for value received
o He promises to pay to the
order of CG DIzon the sum
of 390K
o In instalments
CG dizon then endorsed w/
recourse the Promissory note to
o Asia Pacific
o To secure payment- CG
executed a Deed of Chattel
Mortgage
o Covering 3 heavy
equipments
o Cenen dizon(officer), then
executed a Continuing
undertaking
He bound himself to
pay the obligation
jointly and severally
w/ CG
CG made some instalments
o Worth 130k
o But was not able to fulfil the
whole amount

Hence, asia pacific filed a case

Asia Pacific/CG admitted the

genuineness of the PN and
Undertaking
o
o

RTC:

w/ prayer of writ of replevin

against
Teodoro Baas
CG Construction and
Cenen Dizon

But: alleged that they never

intended it to be legal
But a mere ploy to conceal
the loan w/ usurious interest

Issued a writ of replevin against CG

Dizon
For the surrender of the heavy
equipments
o These are the subject of the
chattel mortgage

RTC

Out of 3 , only 2 were turned over

by the defendants
o Defendants alleged that the
value of the 2 equipments
are sufficient to pay the
value of the loan

During the pendency of the case

o Baas died
o Hence, the case against him
was dismissed

Asia Pacific was substituted by

International Corporate bank
o ICB then merged w/ Union
Bank of PH

Ruled in favour of ASIA PACIFIC

Defendants were held jointly and
severally liable for the unpaid
balance of obligation under the PN
Plus interest

CA affirmed in toto

ISSUES
1. WON the disputed transaction between
Asia P. Violated banking laws , hence
null and void
2. Won the surrender of the 2
equipments, resulted in
extinguishment of Cgs obligation
SC:
1. Baas et.al allege that Asia P. was an
investment house
- And could not engage in the
lending of funds obtained from the
public through receipt of deposits
- The PN/Deed of CK and
Undertaking
o WERE NOT INTENDED to be
valid and binding
o They were devices to
conceal their real intention
o To enter into a contract of
loan in violation of Banking
Laws
1. SC :
- Investment company

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

Refers to any entity w/c is or

holds itself out as being
engaged or proposes to
engage primarily in the
business of investing,
reinvesting or trading in
securitites
- Securities
o This shall include ...
commercial papers
evidencing
indebtedness
of any person,
financial or
non-financial
entity
irrespective of
maturity
issue,
endorsed,
sold,
transferred or
in any
manner
conveyed to
another
o w/ or
w/o
recour
se
o such
as PN
- Hence, the transaction between
the parties is not of LOAN but
purchase of
o RECIEVABLES AT A
DISCOUNT
o W/c is w/in the purview of
Investing,
reinvesting or
trading in securities
w/c is an
INVESTMENT
COMPANY
- Asia Pacific is authorized to
perform
o And does not constitute a
violation of the gen.
Banking act
Sec.2. Only entities duly authorized by
the Monetary Board of the Central
Bank may engage in the lending of
funds obtained from the public through

the receipt of deposits of any kind, and

all entities regularly conducting such
operations shall be considered as
banking institutions and shall be
subject to the provisions of this Act, of
the Central Bank Act, and of other
pertinent laws

What is prohibited by law?

- For investment companies to lend
funds
o Obtained from the public
through receipts of deposit
o w/c is a function of banking
institutions
Case at bar:
- the funds supposedly lent
- have not been shown to have been
obtained from the public by way of
deposits
- hence, the banking law does not
apply
Promissory note
- no proof that the PN was just a ploy
The deed of CM and continuing undertaking
- were duly acknowledged before the
notary public
- no evidence re that the
transactions entered were ploys

2. The surrender of 2 heavy equipments

- Question of fact
Baas et.als allegations
- Parties already had a verbal
understanding
- Wherein Asia pacific actually
agreed to consider the petitioners
account closed
- And the principal obligation fully
paid
- In exchange for the ownership of
the two equipments
SC
-

These are mere allegations

No evidence

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

It is unbelievable that the parties

entirely neglected to write down
such important agreement
Cenen dizon is a seasoned
businessman

There was no binding and

perfected contract between
petitioners re the settlement

The sale of the two equipments

were not sufficient
o

Petitioners are still liable

Banco de Oro filed a complaint for a sum of

money
- w/ application for the issuance of a
writ of preliminary attachment
- it asserted that JP was guilty of
fraud
- JP assailed the jurisdiction of the
court
- But withdrew their motion for
reconsideration
- Hence, the order of the court
became final
RTC denied the prelim. Attachment

2. BDO-EPCI vs JAPRL
Facts:
-

In 2003-

Banco de Oro extended credit

facilities to JAPRL
230,000,000
RFC and Arollado acted as JAPRLs
sureties
Despite its seemingly strong
financial position
o JP defaulted in paying the 4
trust receipts
o Soon after the approval of
its loans
Banco deoro then discovered that
JP
Altered and falsified its financial
statements
o Allegations:
It bloated its sales
revenues to post a
big income from
operations for the
concerned fiscal
years
To project its self as
a viable investment
JP and its subsidiary RFC
Filed a petition for Rehabilitation
Then a stay order was issued
But the supposed rehabilitation
plan was rejected by the RTC

In 2006, JP filed rehabilitation

- Then a stay order was issued
Due to the stay order, JP moved to suspend
the proceeding re the case filed by banco de
oro
- RTC granted JPs motion
- But ordered arollado to file an
answer
The respondents ;
- Filed a certiorari before the ca
- Alleging grave abuse of discretion
- Claiming that the RTC did not
acquire jurisdiction over their
persons
- Because of the defective summons
CA
-

Since the summons were served in

mere administrative assistants
The RTC did not acquire jurisdiction
over the respondents
Hence, the petition was granted

Petitioners
- Asserts that the respondents
maliciously evaded the service of
summons to prevent the RTC from
acquiring jurisdiction over their
persons
- And that they employed bad faith
to exploit procedural technicalities
SC

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

The respondents withdrew their motion for

reconsideration in 2005
- Hence, it has already become final
- The latest petition was filed 10
months after the assailed order
was issued
- Only 60 days is allowed
In addition, when respondents moved for the
suspension of proceedings in the RTC on the
basis of the 2006 decision for the
rehabilitation
- They waived the defects there was
in the service if summons
- And were deemed to have
submitted themselves voluntarily
to the jurisdiction of the RTC
The stay order
- Defers all actions or claims against
the corporation
- From the date of its issuance
- Until the dismissal of the petition or
termination of the rehab
proceedings
The RTC may proceed to hear the civil case
filed by banco in so far as Arollado is
concerned
- -if there is no ground to go after JP
- Note: that a creditor can demand
payment from the surety solidarily
liable w/ the corporation seeking
rehabilitation

Protective remedy of
rehabilitation was never
intended to be a refuge of a
debtor guilty of fraud

RTC must continue to the proceedings against

the 3 respndents against section 40 of the
Gen. Banking law
Section 40 requirement for grant of loans or
other credit accommodations
Should such statements prove to be
false or incorrect in any material detail,
the bank may terminate any loan or
credit accommodation granted on the
basis of said statements and shall have
the right to demand immediate
repayment or liquidation of the
obligation.
According to section 40
Banks have the right to annul any credit
accommodation or load
- And demand the immediate
payment
- From borrowers proven to be guilty
of fraud
- Petitioners are entitles to the
immediate payment of the 194M
and damages
RTC should also see if JP is liable against the
Trust receipts law
3. Spouses Panlilio vs Citibank NA

Respondents abused the procedural

technicalities
They disregarded the significance of a stable
and efficient banking system
- Since the money involved is very
big

Facts :

BANKS

On the same day

- amalia opened a current or
checking account
- w/c interest earnings of the Citihi
account will be credited

Operate by extending credit

facilities
Financed primarily by deposits from
the public

Re : FRUAD AND FALSIFICATION

o Can be a ground for Banco
de oro to ask the dismissal
of the rehabilitation case

Amalia deposited 1M in the banks CITIHI

account
- A fixed term savings account
- w/ a higher than average interest

CB assigned Lee (employee)

- to personally transact w/ amalia
Amalia opened the accounts as
- ITF or IN TRUST FOR ACCOUNTS

10

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

For it is for the benefit of her minor

children

To open the ITF, Amalia had to sign the ff.:

1. Relationship opening form
2. Investor Profiling questionnaire
After a month,
- Amalia called lee
- Telling lee that he wanted to invest
worth 3M
After deciding where to invest
- Amalia brought to CB a PCIB check
- Worth 3M
- Amalia learned that 2.1 M of the
3M
- Was placed by CB in a LONG TERM
COMMERCIAL PAPER (LTCP)
o A debt instrument that paid
a high interest
o Issued by the coporation
C&P homes
o The rest of the money was
placed in two PRPN (peso
repriceable Prom. Note: CB
product)
In trust for Amalias
children

the gross interest rate was 16.25%

per annum at the time Amalia
made her investment

1. Amalia signed some documents when

she made the investment (Directional
Investment management agreement
(DIMA) and Term investment
application (TIA)
-

key features of what she signed

was that CITIBANK is clear from any
obligation to guarantee the
principal and interest of the
investment
absent fraud or negligence of the
CB
it also stated that the risks shall be
assumed by the investor (amalia)

CB
-

claims that it sent regular

confirmations of investment (COI)
o one page computer
generated doc
o informing the customer of
the investment earlier made
w/ the bank

But allegations defer as to whether amalia

instructed lee to place the money in the LTCP
of C&P

LTCP

claims that after she recievd the

first coi
she demanded the investment in
the LTCP be withdrawn
and be placed in a PRPN
w/c CB denies that Amalia made
such demands

Is an evidence of indebtedness
w/ a maturity of period of more
than 365 days
issued by a corporation to any
person or entity
it is in effect a loan obtained by a
corporation (as borrower)
from the investing public (as
lender)
this is an instrument that
investment banks can legally buy
on behalf of their clients
upon the clients express
instructions
for investment purposes
they usually have higher yields
than most investment inst.

Case at bar:
The LTCP issued by C&P

Amalia
-

then, amalia talked w/ Colet (another ee)

- to sell the LTCP
- and their other investments
- despite the knowledge that selling
will be difficult due to crisis
- the spouses signed 3 Sales order
slip w/c they left to Colet
Amalia made some formal demands for the
withdrawal of her investment (1998)
- the investment was made in 1997
- CB denied stating that the maturity
date is on 2003
- And that it was not a deposit
- Hence, its return to investors was
not guaranteed by the bank

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But it informed amalia that it may

be sold
But CB did not find any buyer
Hence, amalia made another
formal demand
CB replied that if there are any
buyers, it would be for a lesser
amount

Hence, a complaint for sum of money was

filed
Amalia claims
- She did not instruct that her money
be put on a LTCP
- Her inst. Was to return it w/ a term
of 91 days
- w/ 16.25% interest
- that it was only after she received
the 1st COI that he learned about
the LTCP
- that she called lee and lee told her
to ignore the COI
- that C&P is an ayala company
- and that her investment was
secure
- hence, she did not withdrew her
money immediately
RTC:
- decided in favour of AMALIA
CA: reversed
The CA held that with respect to the amount
of PhP2,134,635.87, the account opened
by Amalia was an investment management
account; as a result, the money invested was
the sole and exclusive obligation of C&P
Homes, the issuer of the LTCP, and was not
guaranteed or insured by herein respondent
Citibank
Issues
2. WON petitioners are bound by the
terms and conditions of the Directional
Investment management agreement
(DIMA) , COI and Term investment
application (TIA)
3. WON petitioners are entitled to take
back their money

SC:
Affirmed CA
Issue 1:
Amalia is bound
- Contracts have force of law
between the parties
- UNDER DIMA
o The agreement is an agency
not a trust agreement
o Exemption from liability
o The transaction is legal
Investment management activities may be
exercised by a banking institution
Sec 72 of Gen. Banking law
Banks may
(b) Act as financial agent and buy and sell, by
order of and for the account of their
customers, shares, evidences of indebtedness
and all types of securities
The banks shall perform the services
permitted under subsections (a), (b) and
(c) of this section as depositories or as
agents. Accordingly, they shall keep the
funds, securities and other effects which
they thus receive duly separated and
apart from the bank's own assets and
liabilities.
SECTION 74
No bank or banking institution shall
enter, directly, or indirectly into any
contract of guaranty or suretyship, or
shall guarantee the interest or principal
of any obligation of any
person, copartnership, association,
corporation or other entity.
-

Nothing also taints the legality of

the LTCP bought in behalf of
petitioners.
C&P Homes' LTCP was duly
registered with the Securities and
Exchange Commission
while the issuer was accredited by
the Philippine Trust Committee

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Bangko Sentral ng Pilipinas (BSP) regulations,

specifically the Manual of Regulations for
Banks (MORB), which groups a bank's trust,
and other fiduciary and investment
management activities under the same set of
regulations, to wit:
Investment Management Activities shall
apply to banks without trust authority
but with authority to engage in
investment management activities
Other fiduciary business shall
refer to any activity of a trustlicensed bank resulting from a
contract or agreement whereby
the bank binds itself to render
services or to act in a
representative capacity such as in
an agency,
guardianship, administratorship of
wills, properties and estates,
executorship, receivership, and
other similar services which do
not create or result in a
trusteeship. It shall exclude
collecting or paying agency
arrangements and similar
fiduciary services which are
inherent in the use of the facilities
of the other operating
departments of said bank.
Investment management
activities, which are considered as
among other fiduciary business,
shall be separately defined in the
succeeding item to highlight its
being a major source of fiduciary
business.
c. Investment management
activity shall refer to any activity
resulting from a contract or
agreement primarily for financial
return whereby the bank (the
investment manager) binds itself
to handle or
manage investible funds or any
investment portfolio in a
representative capacity as
financial or managing agent,
adviser, consultant or
administrator of financial or
investment management,

advisory, consultancy or any

similar arrangement which does
not create or result in a
trusteeship.
CONTRACT OF ADHESION
- Petitioners were free to read
- They did not have to sign the
contract immediately
The Court gives credence to respondent's
explanation that the word TRUST appearing
on the TIA simply means that the account is
to be handled by the bank's trust department,
Which handles not only the trust business but
also the other fiduciary business and
investment management activities of the
bank, while the ITF or in trust for appearing on
the other documents
Only signifies that the money was invested
by Amalia in trust for her two children, a
device that she uses even in her ordinary
deposit accounts with other banks
According to the contract, should there be any
deviation, they must inform the bank w/in 7
days after the receipt of the COI
- But it took petitioners 8 months
Issue 2:
-

Petitioners cannot seek return of

their investment from CB
But from C&P
Since, what they made was an
investment and not a deposit

Absent any fraud or bad faith, the recourse of

petitioners in the LTCP is solely against the
issuer, C&P Homes, and only upon
maturity. The DIMA states, thus:
11. Withdrawalof
Income/Principal Subject to
availability of funds and
taking into consideration
the commitment of this
account to third parties, the

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PRINCIPAL may withdraw

the income/principal of the
Portfolio or portion thereof
upon request or application
thereof from the Bank.
Held:
Petition denied for lack of evidence
4. Reyes vs CA
Godfredo went to Far East Bank to apply for a
demand draft in Australian dollars
- Payable to the 20th Asian Racing
Conference , Australia
At first the bank denied his application stating
that the bank has no AU dollars account in
Sydney
- But the bank offered another way
to accommodate Godfredos needs.
- Far East would draw a DEMAND
DRAFT against Westpac Bank in
Sydney
o And have Westpac
reimburse itself from the US
dollar account of FAR EAST
in West Bank NY
The parties agreed to this plan
- The said plan is not illegal
- This has been used in the banking
world since 60s
But upon presentment by the persons of the
AU Convention
- It was dishonoured
- The Far east was given due notice
by the Westpac NY
- No account held with west pac
- It also informed Far east that the
AU Dollar account was debited
worth 1.6k (amount subject re
Godfredo)
On the other hand Godfredo, assuming that
everything is settled went to the AU
convention
- But the officials informed them that
their draft was dishonoured
Hence the petition:

The petitioners contend that due to the

fiduciary nature of the relationship between
therespondent bank and its clients, the
respondent bank should have exercised a
higher degree of diligence than that expected
of an ordinary prudent person in the handling
of its affairs as in the case at bar.
SC:
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.

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.
Considering the foregoing, the
respondent bank was not required to
exert more than the diligence of a
good father of a family in regard to the
sale and issuance of the subject
foreign exchange demand draft.
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, that is, between the respondent
bank as the seller of the subject
foreign exchange demand draft, and
PRCI as the buyer of the same, with
the 20th Asian Racing Conference
Secretariat in Sydney, Australia as the
payee thereof.
As earlier mentioned, the said
foreign exchange demand draft was
intended for the payment of the
registration fees of the petitioners as

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Judge Macumbal

delegates of the PRCI to the 20th Asian

Racing Conference in Sydney.
The evidence shows that the respondent bank
did everything within its power to prevent the
dishonor of the subject foreign exchange
demand draft. The erroneous reading of its
cable message to Westpac-Sydney by an
employee of the latter could not have been
foreseen by the respondent bank. Being
unaware that its employee erroneously read
the said cable message, Westpac-Sydney
merely stated that the respondent bank has
no deposit account with it to cover for the
amount of One Thousand Six Hundred Ten
Australian Dollar (AU$1610.00) indicated in
the foreign exchange demand draft.
5. Citibank vs Spouses Cabamongan
Cabamongan had a trust account for his
son
But prior to the maturity date a person
claiming to be Carmelita Cabamongan preterminated the said time deposit
- By presenting a passport
- She filled up the required forms
- w/ the assistance of an Account
officer of the bank
- the person failed to surrender the
ORIGINAL CERTIFICATE OF DEPOSIT
- The release and waiver document
was notarized
o Even though it was required
to be notarized
- But the money was still released
But Carmelita is domiciled or living in the US
a.

the said person did not present the

certificate of deposit issued to
Carmelita Cabamongan. This would not
have been an insurmountable obstacle
as the bank, in the absence of such
certificate, allows the termination of
the deposit for as long as the depositor
executes a notarized release and
waiver document in favor of the
bank. However, this simple procedure
was not followed by the bank

b. the bank had on file pictures of its

depositors
-

the account officer admitted that

the person did not resemble
Carmelita
- but he relied on the passport
presented
- both persons had moles
the BANK WAS NEGLIGENT
A bank is bound to know the signature of their
customers
- and if it pays a forged check
- it is as if the bank is making a
payment out of its own funds
The mistake is not a mere mistake or human
error
- the degree of diligence expected
from their employees are greater
than those of ordinary
clerks/employees
- banks must exercise highest
degree of diligence in the selection
of their employees
6. Central Bank vs City Trust
City trust filed a complaint for recovery of
sum of money against BSP
- For encashing checks
- And charging proceeds thereof to
its account
- Despite lack of authority of
Cayabyab
o Who was in fact Flores
o Citybank employee who
stole the checks
BSP teller encashed the check on reliance that
Flores has been doing business w/ them as
Citibanks rep.
SC:
BSPs teller Iluminada did not verify Flores
signature on the flimsy excuse that Flores had
had previous transactions with it for a number
of years.
That circumstance did not excuse the teller
from focusing attention to or at least glancing

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at Flores as he was signing, and to satisfy

herself that the signature he had just affixed
matched that of his specimen signature
There is a debtorcreditor relationship between
the bank and its
depositor. Thebank 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.
This fiduciary relationship means
that the banks 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

On Citytrust: CONTRIBUTORY
NEGLIGENCE
CT failed to timely examine its account
-

It is guilty OF
CONTRIBUTORY
NEGLIGENCE

the immediate and proximate

cause of the injury being the
defendants lack of due care,
the plaintiff may recover
damages, but the courts shall
mitigate the damages to be
awarded
It was only after nine months
did City checked their records
or informed BSP

7. DBP vs. Guarina

The foreclosure of a mortgage prior to
the mortgagor's default on the
principal obligation is premature,
-

and should be undone for

being void and ineffectual.

The mortgagee who has been

meanwhile given possession of the
mortgaged property by virtue of a writ
of possession issued to it as the
purchaser at the foreclosure sale
-

may be required to restore

the possession of the
property to the mortgagor
and to pay reasonable rent
for the use of the property
during the intervening
period.

Guatina obtained a loan from DBP

-

it mortgaged its resort

G obtained the loan for the
improvement of the
mortgaged resort.

DBP did not release the whole amount

-

Upon inspection to the

resort
DBP saw that the
improvements promised by
G was not completely
complied with
Hence, it demanded that it
will foreclose the resort
unless the improvements
were done

Eventually, DBP foreclosed and sold

the property into a public auction

Hence, the petition

Loans are often secured by a
mortgage constituted on real or
personal property to protect the
creditor's interest in case of the default
of the debtor.

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By its nature, however, a

mortgage remains an
accessory contract
dependent on the principal
obligation,33
such that enforcement of
the mortgage contract will
depend on whether or not
there has been a violation of
the principal obligation.

While a creditor and a debtor could

regulate the order in which they should
comply with their reciprocal
obligations,
-

it is presupposed that in a
loan the lender should
perform its obligation

The Messenger left the passbook to

the teller. With the intent of return to
claim the passbook, since he still has
somewhere to go.

But upon return , the teller

told the messenger that it
already gave it to somebody
else w/c the teller could not
recognize

Solidbank is liable for

breach of contract due to
negligence, or culpa
contractual

SC

- the release of the full loan

amount - before it could
demand that the borrower
repay the loaned amount.

The contract between the bank and its

depositor is governed by the provisions
of the Civil Code on simple loan.

- In other words, Guaria

Corporation would not incur in
delay before DBP fully
performed its reciprocal
obligation

the fiduciary nature of a bankdepositor relationship does not convert

the contract between the bank and its
depositors from a simple loan to a trust
agreement, whether express or
implied.

DBP could not yet make an effective

demand for payment upon Guaria
Corporation to perform its obligation
under the loan
it would only be when a demand to
pay had been made and was
subsequently refused that a borrower
could be considered in default,
-

and the lender could obtain

the right to collect the debt
or to foreclose the
mortgage.1wphi1 Hence,
Guaria Corporation would
not be in default without the
demand.

8. Consolidated bank vs CA

LC diaz instructed its messenger to

withdraw from solid bank.

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. The
law allows banks to offer the lowest
possible interest rate to depositors
while charging the highest possible
interest rate on their own
borrowers. The interest spread or
differential belongs to the bank and

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Judge Macumbal

not to the depositors who are

not cestui que trust of banks. If
depositors are cestui que trust of
banks, then the interest spread or
income belongs to the depositors, a
situation that Congress certainly did
not intend in enacting Section 2 of RA
8791.
Solidbanks rules on savings account
require that the deposit book should
be carefully guarded by the depositor
and kept under lock and key, if
possible. When the passbook is in the
possession of Solidbanks tellers during
withdrawals, the law imposes on
Solidbank and its tellers an even
higher degree of diligence in
safeguarding the passbook.

Rules on savings account provide that

any person in possession of the
passbook is presumptively its owner. If
the tellers give the passbook to the
wrong person, they would be clothing
that person presumptive ownership of
the passbook, facilitating unauthorized
withdrawals by that person. 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.

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

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.
[31]
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.
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.

9. Go. Vs BSP
A case was filed against go alleging
that
-

Go unlawfully borrowed for

himself or for his other
companies the
Deposits or funds of the
bank
In w/c he is a director/
officer
Or he is the
guarantor/indorser/obligor

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Judge Macumbal

w/o the written approval of

the majority of the board of
directors of the said Bank

Gos claim:
-

the information is defective

Under Section 83, RA 337, the

following elements must be present to
constitute a violation of its first
paragraph:
1.

the offender is a director or officer of

any banking institution;

2.

the offender, either directly or

indirectly,
for
himself
or
as
representative or agent of another,
performs any of the following acts:
a.

he borrows any of the deposits

or funds of such bank; or

b.

he becomes a guarantor,
indorser, or surety for loans
from such bank to others, or

c.

he
becomes
in
any
manner
an
obligor
for
money borrowed from bank
or loaned by it;

The essence of the crime is

becoming an obligor of the bank
without securing the necessary
written approval of the majority of
the banks directors.
in any manner be an obligor for
money borrowed from the bank or
loaned by it,
-

in fact serves a catch-all

phrase that covers any
situation when a director or

officer of the bank becomes

its obligor.
The prohibition is
directed against a bank
director or officer who
becomes in any manner
an obligor for money
borrowed from or loaned
by the bank without the
written approval of the
majority of the banks
board of directors.
To make a distinction
between the act of
borrowing and guarantying
is therefore unnecessary
because in either situation,
the director or officer
concerned becomes an
obligor of the bank against
whom the obligation is
juridically demandable.
The language of the law is
broad enough to encompass
either act of borrowing or
guaranteeing, or both
Section 83 of RA 337
actually imposes three
restrictions:
1. approval,
2. reportorial,
3. and ceiling
requirements.

1. Approval
Requirement
written approval of the
majority of the banks board
of directors
2. Reportorial
Requirement
That any of its approval
must be entered into the
records of the corporation
The copy of which must be
given to the appropriate
supervising department

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Judge Macumbal

The reportorial requirement

is addressed to the Bank
itself
It must be the bank who
must comply this
requirement
3. Ceiling requirement
The regulation of the
amount of credit
accommodations that the
bank may extend to their
directors or officers
This is limited to the amount
equivalent to the respective
outstanding deposits and
book value of the paid in
capital contribution in the
bank
This must be complied by
the bank

A prosecution under SEC 83 1st

par.
-

Does not require an

allegation that the load
exceeded the legal limit
It is the WRITTEN APPROVAL
BY THE MAJORITY OF THE
DIRECTORS
Compliance of the ceiling
requirement does not
dispense the approval
requirement

The 3 requirements
-

may 2 separate offenses

each w/ its own elements
success in proving that the
approval requirement has
not been complied with,
does not mean that the
other 2 has not been
complied with

Allegedly, Cojuangco purchased a

block of 33,000,000 shares of SMC
stock through the 14 holding
companies owned by the CIIF Oil Mills.
For this reason, the block of
33,133,266 shares of SMC stock shall
be referred to as the CIIF block of
shares.
Other defendants include the
companies of Cojuangco alleged to be
used by him to acquire the shares

11. Nacar vs. Gallery of frames

12. Oliver vs PSB

Oliver loaned from PSBank

-

This is thru Castro

For months their transactions went

smoothly
Hence, Oliver even entrusted Castro
with her Passbook

Eventually, Oliver discover that they

were other loans incurred by Castro
w/o her consent or knowledge
-

Hence, he demanded the

return of the passbook
Upon return of the passbook
o There were
alteration or
erasures or other
discrepancies

Eventually PSB asked for payment

from Oliver
10.RP VS SB

w/c Oliver refused to pay

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Judge Macumbal

SC

SC :
-

there was an implied sgency

between oliver and Castro

Oliver claims that the P4.5 million loan,

released on December 21, 1998, and
the P1,396,310.45 loan, released on
January 5, 1999, were not acquired
with her consent. Castro and PSBank,
on the other hand, countered that
these loans were obtained with Olivers
full consent. The Court finds that the
said loans were acquired with Olivers
authority.

_______________________________________
_______________________________________
________

Central Bank Act

1. Busuego vs Ca
CB conducted its examination to
PESALA
it found out the following:
a. Questionable
investments
b. Conflicts of interest
c. Unwarranted declaration
and payment of
dividends
d. Commission of unsound
and Unsafe business
practices

The Monetary Board ordered PESALA,

among others, to include Mr. Banez ,
Busuego, Renato in the Sectors watch
list
-

To prevent them from

holding responsible
positions in instutions under
the CB supervision
To file civil and criminal
cases against them

Issue 1 Right to Due Process

-

MB Director invited the

petitioners to a conference
o But they did not
attend
They written explanations/
answers were considered in
adopting the MB Resolution
The letter re the companys
side was also taken into
consideration

Hence, their right to due process was

not violated
The following are the things to
be followed re due process in
the MB
The right to a hearing, which
includes the right to present one's
case and submit evidence in support
thereof;
2.
The tribunal must
consider the evidence presented;
3.
The decision must have
something to support itself;
4.
substantial;

The evidence must be

5.
The decision must be
rendered on the evidence presented at
the hearing, or at least contained in
the record and disclosed to the parties
affected;
6.
The tribunal or body or
any of its judges must act on its or his
own independent consideration of the
law and facts of the controversy and
not simply accept the view of a
subordinate in arriving at a decision;
7.
The board or body
should, in all controversial question,
renders its decision in such manner
that the parties to the proceedings can

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Judge Macumbal

know the various issues involved and

the reason for the decision rendered.
Note : all of these were
complied

Issue 2 : Procedural Due

process
Admin. Tribunals w/ quasijudicial functions are free from
the rigidity of certain
procedural requirements
-

Hearing and Notice

o Most basic
requirement for
procedural due
process
The prior notice rule is
relaxed provided
o

What is important is
that the parties were
given the
opportunity to be
HEARD

The petitioners were not deprived of

their lawful calling
-

2. Koruga vs Arcenas
BSPS Jurisdiction | BASED on Karugas
Complaint
-

ISSUE 3 : WATCH LIST

the Central Bank of the Philippines
(now Bangko Sentral ng Pilipinas),
through the Monetary Board,
- is the government agency charged
with the responsibility of administering
the monetary, banking and credit
system of the country 19 and is
granted the power of supervision and
examination over banks and non-bank
financial institutions performing quasibanking functions of which savings and
loan associations, such as PESALA

If upon investigation/examination the

CB thru MB has the authority to
impose sanctions, suspend officials/
employees and include them in the
watchlist

They are still free to look for

another employment
As long as , the company
involved is not subject ot CB
control and supervision

violation of Sections 31 to 34 of the

Corporation Code, prohibiting selfdealing and conflict of interest of
directors and officers;
invoked her right to inspect the
corporations records under
Sections 74 and 75 of the
Corporation Code;
and prayed for Receivership and
Creation of a Management
Committee, pursuant to Rule 59 of
the Rules of Civil Procedure, the
Securities Regulation Code, the
Interim Rules of Procedure
Governing Intra-Corporate
Controversies, the General Banking
Law of 2000, and the New Central
Bank Act.
She accused the directors and
officers of Banco Filipino of
engaging in unsafe, unsound, and
fraudulent banking practices, more
particularly, acts that violate the
prohibition on self-dealing.

The law vests in the BSP the supervision over

operations and activities of banks. The New
Central Bank Act provides:
Section 25. Supervision and Examination. The Bangko Sentral shall have supervision
over, and conduct periodic or special
examinations of, banking institutions and
quasi-banks, including their subsidiaries and
affiliates engaged in allied activities.[24]
-

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

Specifically, the BSPs supervisory

and regulatory powers include:
4.1 The issuance of rules of
conduct or the establishment of
standards of operation for uniform
application to all institutions or
functions covered, taking into
consideration the distinctive
character of the operations of
institutions and the substantive
similarities of specific functions to
which such rules, modes or
standards are to be applied;
4.2 The conduct of examination to
determine compliance with laws
and regulations if the
circumstances so warrant as
determined by the Monetary Board;

Her allegations, then, call for the

examination of the allegedly
questionable loans. Whether these
loans are covered by the prohibition on
self-dealing is a matter for the BSP to
determine.
- These are not ordinary intracorporate matters; rather, they
involve banking activities which
are, by law, regulated and
supervised by the BSP

the Central Monetary Authority,

through the Monetary Board, is vested
with exclusive authority to assess,
evaluate and determine the condition
of any bank,
-

4.3 Overseeing to ascertain that

laws and Regulations are complied
with;
4.4 Regular investigation which
shall not be oftener than once a
year from the last date of
examination to determine whether
an institution is conducting its
business on a safe or sound basis:
Provided, That the
deficiencies/irregularities found by
or discovered by an audit shall be
immediately addressed;
4.5 Inquiring into the solvency
and liquidity of the institution (2D); or
4.6 Enforcing prompt corrective
action.[25]
Koruga alleges that the dispute in the
trial court involves the manner with
which the Directors (sic) have handled
the Banks affairs, specifically the
fraudulent loans and dacion en pago
authorized by the Directors in favor of
several dummy corporations known to
have close ties and are indirectly
controlled by the Directors.

and finding such condition

to be one of insolvency, or
that its continuance in
business would involve a
probable loss to its
depositors or creditors,
forbid bank or non-bank
financial institution to do
business in the Philippines;
and shall designate an
official of the BSP or other
competent person as
receiver to immediately
take charge of its assets
and liabilities

The Monetary Board may regulate the

amount of loans, credit
accommodations and guarantees that
may be extended, directly or indirectly,
by a bank to its directors, officers,
stockholders and their related
interests, as well as investments of
such bank in enterprises owned or
controlled by said directors, officers,
stockholders and their related
interests.
However, the outstanding loans, credit
accommodations and guarantees
which a bank may extend to each of its
stockholders, directors, or officers and
their related interests,

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

shall be limited to an
amount equivalent to their
respective unencumbered
deposits and book value of
their paid-in capital
contribution in the bank:
Provided, however, That
loans, credit
accommodations and
guarantees secured by
assets considered as nonrisk by the Monetary Board
shall be excluded from such
limit:
Provided, further, That
loans, credit
accommodations and
advances to officers in the
form of fringe benefits
granted in accordance with
rules as may be prescribed
by the Monetary Board shall
not be subject to the
individual limit.

MB may impose the following

sanctions in case of violation
-

Sec. 37
The admin sanctions need
not be applied in their order
of severity

Whether or not there is an

administrative proceeding,
if the institution and/or the
directors and/or officers concerned
continue with or otherwise persist
in the commission of the indicated
practice or violation,
-

the Monetary Board may issue an

order requiring the institution
and/or the directors and/or officers
concerned to cease and desist from
the indicated practice or violation,

and may further order that

immediate action be taken to
correct the conditions resulting
from such practice or violation.

The cease and desist order shall

be immediately effective upon
service on the respondents.

The MB has the exclusive jurisdiction

on receivership re Banks
-

Actions under sec 30 are

final and executor
Except upon a petition of
Certiorari
o For lack of juris
o Or in excess of it
chu chu

The petition for certiorari may only be filed by

the stockholders of record representing the
majority of the capital stock within ten (10)
days from receipt by the board of directors of
the institution of the order directing
receivership, liquidation or conservatorship.
Koruga is only a minority share/stock
holder
3. BSP vs Hon. Antonio
Valenzuela

BSP conducted examinations to some

banks
-

During the exit interview

They were advised to infuse
additional capital
The recommendations must
be complied with w/in 30
days

The Banks asked the court to stop the

BSP-SED from submitting its ROE
(report of examination) to the MB
-

And if ever that it has

already been submitted
o The MB should not
act upon it
o On the ground that
the banks were not
given copied of the
ROE

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

Hence, there is a
violation of due
process

The respondent banks cannot claim a

violation of their right to due process if
they are not provided with copies of
the ROEs.

by preventing the MB from acting

on such ROEs.

It is well-settled that the closure of a bank

may be considered as an exercise of police
power. The action of the MB on this matter is
final and executory.

The same ROEs are based on the lists

of findings/exceptions containing the
deficiencies found by the SED
examiners when they examined the
books of the respondent banks

Such exercise may nonetheless be subject to

judicial inquiry and can be set aside if found
to be in excess of jurisdiction or with such
grave abuse of discretion as to amount to lack
or excess of jurisdiction.

The Banks have already been

informed/given the lists of
findings/exceptions during their exit
interview

The threat of the imposition of

sanctions, even that of closure, does not
violate their right to due process, and
cannot be the basis for a writ of
preliminary injunction.
- Judicial Review is improper if
the MB has not taken any
actions yet

Hence, the ROE are

superfluous
Transparency and fairness is
not violated

4. Central Bank vs CA
The respondent banks have shown no
necessity for the writ of preliminary
injunction to prevent serious damage. - The serious damage contemplated by
the trial court was the possibility of the
imposition of sanctions upon
respondent banks, even the sanction
of closure.
- Under the law, the sanction of
closure could be imposed upon a
bank by the BSP even without
notice and hearing.
- The apparent lack of procedural
due process would not result in the
invalidity of action by the MB.
- close now, hear later scheme is
grounded on practical and legal
considerations to prevent
unwarranted dissipation of the
banks assets and as a valid
exercise of police power to protect
the depositors, creditors,
stockholders,
- and the general public.
The writ of preliminary injunction
cannot, thus, prevent the MB from
taking action, by preventing the
submission of the ROEs and worse,

PBP bank filed a complaint before the RTC

- Against CB
- the conservatorship was
unwarranted, ill-motivated, illegal,
utterly unnecessary and
unjustified; that the appointment of
the conservator was arbitrary;
- that herein petitioners acted in bad
faith; that the CB-designated
conservators committed bank
frauds and abuses;
- that the CB is guilty of promissory
estoppel; and that by reason of the
conservatorship, it suffered losses

RTC: issued injunction/tro against CB

PBP
Asked the court to LIFT the
conservatorship
-

the actions of the Monetary Board under this

Section, Section 28-A, and the second paragraph of
section 34 of this Act shall be final and executory,

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Nielgem S. Beja
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Judge Macumbal

and can be set aside by a court only if

there is convincing proof, after hearing,
that the action is plainly arbitrary and
made in bad faith:
Provided, That the same is raised in an
appropriate pleading filed by the
stockholders of record representing the
majority of the capital stock
within ten (10) days from the date the
receiver takes charge of the assets and
liabilities of the bank or non-bank
financial intermediary performing
quasi-banking functions or,
in case of conservatorship or
liquidation, within ten (10) days from
receipt of notice by the said majority
stockholders of said bank or non-bank
financial intermediary of the order of its
placement under conservatorship or
liquidation

The following requisites, therefore, 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
4.

There must be convincing

proof, after hearing, that the
action is plainly arbitrary and
made in bad faith.

- In other words, the same must be filed within

ten (10) days from receipt of notice of the
order placing the bank under conservatorship.
Otherwise, the provision of the fifth paragraph
of Section 29 of the Central.
(2) As to actions for the second kind of damages
and for injunction to restrain the enforcement of
the CB's implementing resolutions, said fifth
paragraph of Section 29 of the Central Bank Act,
as amended, equally applies because the
questioned acts are but incidental to the
conservatorship. The purpose of the law in
requiring that only the stockholders of record
representing the majority of the capital stock
may bring the action to set aside a resolution to
place a bank under conservatorship is to ensure
that it be not frustrated or defeated by the
incumbent Board of Directors or officers who
may immediately resort to court action to
prevent its implementation or enforcement. It is
presumed that such a resolution is directed
principally against acts of said Directors and
officers which place the bank in a state of
continuing inability to maintain a condition of
liquidity adequate to protect the interest of
depositors and creditors

The bank being in conservatorship

- Does not deprive the stockholders
from its rights
- The bank still retains its juridical
personality even if under
conservatorship
- The consent or approval of the
conservatorship is not required
when the filing of the action is done
by the majority stockholders
There was grave abuse in the issuance of the
preliminary injunction
- One important measure adopted by the

DAMAGES
whether an action for damages arising from the
(1)MB's act of placing the PBP under
conservatorship and (2) the acts of the
conservator, and to enjoin the MB from
implementing resolutions related or incident to, or
in connection with the conservatorship, may be
brought only for and in behalf of the PBP by the
stockholders on record representing the majority of
the capital stock thereof or simply upon authority
of its Board of Directors, or by its Chairman.

(1) may be claimed only if the MB's action is

plainly arbitrary and made in bad faith, and

that the action therefor is inseparable from
an action to set aside the conservatorship.

government to protect the public

against unscrupulous practices of some
bankers
is to require banking institutions
to set up reserves against their
deposit liabilities.
These reserves, pegged at a certain
percentage of the volume of deposit
liability, is that portion of the deposit
received by a banking institution which
it cannot use for loans and
investments.
The reserve requirement, which
ordinarily takes the form of a deposit
with the Central Bank, is one means by
which the government ensures the
liquidity of banking institutions

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

- These reserve accounts maintained by banking

institutions with the Central Bank also serve as a

basis for the clearing of checks and the settlement
of interbank balances

MB was correct: not in bad faith or was not

ARBITRARY

5. Spouses Lipana vs DBP

Lipana was able to obtain a judgement
ordering the DB of Rizal to pay Lipanas their
deposit
After a month
- MB found out that DB was in the
verge of insolvency
- And continuance in the business
would result loss for its clients
- Hence, MB decided to place it
under receivership
Subsequently Lipanas was able to able to
obtain a writ of execution
The rule that once a decision becomes final
and executory, it is the ministerial duty of the
court to order its execution,
- admits of certain exceptions as in
cases of special and exceptional
nature
- where it becomes imperative in the
higher interest of justice to direct
the suspension of its execution
- or certain facts/events happened
after the judgement has become
final
o that will render it unjust to
execute the said judgement
The stay order of the execution is valid
- since the 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
While on receivership the board
becomes the trustee for the equal
benefit of all the depositors and
creditors
o One cannot obtain
preference by attachment
or execution of judgment

The time of the filing of the complaint is

immaterial. It is the execution that win
obviously prejudice the other depositors and
creditors. Moreover, as stated in the said
Morfe case, the effect of the judgment is only
to fix the amount of the debt, and not give
priority over other depositors and creditors.

The stay order is not a form of deprivation

of their property
- It according to the law
- Stay order has a time limit
- The staying of the writ of execution

will be lifted after approval by the

liquidation court of the project of
distribution,
and the liquidator or his deputy will
authorize payments to all claimants
concerned in accordance with the
approved project of distribution

6. Vivas vs Monetary
Board
RBFI is a bank whose corporate life ended
on 2005
But Vivas and others was able to obtain
the controlling interest in 2006.
With VIVAS the corporate life was
extended to 50 yrs
From RBFI is was changed to Euro Credit
community
After the examination conducted by the
BSP
- It cancelled the rediscounting
line of the bank
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Nielgem S. Beja
Specom Notes 2016 I Cases| Doctrine| Digest| Outline
Judge Macumbal

MB ordered an examination and checking

of the books
But VIVAS failed to comply
On the ground that there was still a
pending appeal re MBs order placing it
under PCA framework (as a sanction)
MB issued Resolution No. 823,19 dated June 4,
2009,
- approving the issuance of a cease
and desist order against ECBI,
which enjoined it from pursuing
certain acts and transactions that
were considered unsafe or unsound
banking practices,
- and from doing such other acts or
transactions constituting fraud or
might result in the dissipation of its
assets.
Subsequently ECBI
- was placed under receivership
- due to its fraudulent transactions

caused by extraordinary demands

induced by financial panic in the
banking community;
(b) has insufficient realizable
assets, as determined by the [BSP] to
meet its liabilities; or
(c) cannot continue in business
without involving probable losses to its
depositors or creditors; or
(d) has willfully violated a cease
and desist order under Section 37 that
has become final, involving acts or
transactions which amount to fraud or
a dissipation of the assets of the
institution; in which cases, the
Monetary Board may summarily and
without need for prior hearing forbid
the institution from doing business in
the Philippines and designate the
Philippine Deposit Insurance
Corporation as receiver of the banking
institution.

Order of the MB to place a BANK under

receivership cannot be stopped or restrained
Exception : petition for certiorari
w/c vivas failed to do.
7. Rural Bank vs. MB

In 2000, MB ordered that The Bank be

prohibited from doing business and be
placed under receivership
Subsequently, MB ordered for its
liquidation
Section 30 of RA 7653 provides:
SECTION 30. Proceedings in
Receivership and Liquidation.
Whenever, upon report of the head of
the supervising or examining
department, the Monetary Board finds
that a bank or quasi-bank:
(a) is unable to pay its liabilities
as they become due in the ordinary
course of business: Provided, That this
shall not include inability to pay

under Section 29 of the Central Bank

Act, the following are the mandatory
requirements to be complied with
before a bank found to be insolvent
is ordered closed and forbidden to do
business in the Philippines:
1.

an examination
shall be
conducted by
the head of the
appropriate
supervising or
examining
department or
his examiners
or agents into
the condition of
the bank;
2. it shall be
disclosed in the
examination
that the
condition of the
bank is one of

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

insolvency, or
that its
continuance in
business would
involve
probable loss to
its depositors or
creditors;
3. the department
head concerned
shall inform the
Monetary Board
in writing, of
the facts;
4. the Monetary
Board shall find
the statements
of the
department
head to be true.

In RA 7653, only a "report of the

head of the supervising or
examining department" is
necessary.
-

The purpose of the law is to

make the closure of a bank
summary and expeditious in
order to protect public
interest.
This is also why prior notice
and hearing are no longer
required before a bank can
be closed.

The absence of an examination before

the closure of RBSM did not mean that
there was no basis for the closure
order.
Needless to say, the decision of the
MB and BSP, like any other
administrative body, must have
something to support itself and its
findings of fact must be supported by
substantial evidence.
But it is clear under RA 7653 that
the basis need not arise from an
examination as required in the old
law.

Not examination
Using the literal meaning of
"report" does not lead to
absurdity, contradiction or
injustice.
Neither does it defeat the
intent of the legislators.

29