Professional Documents
Culture Documents
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat)
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat) 3
Compiled by: Sheena Marie S. Ysit
The award of the Appeals Panel became with the debtor does not find support in
final. MWSS, thereafter, submitted a jurisprudence.
written notice to Citicorp Intl Ltd, as Letters of credit were developed for the
agent for the participating banks, that by purpose of insuring to a seller payment
virtue of Maynilads failure to perform its of a definite amount upon the
obligations under the Concession presentation of documents and is thus a
Agreement, it was drawing on the commitment by the issuer that the party
Irrevocable Standby Letter of Credit and in whose favor it is issued and who can
thereby demanded payment. collect upon it will have his credit
against the applicant of the letter, duly
paid in the amount specified in the letter
Prior to this, however, Maynilad had
They are in effect absolute undertakings
filed on a petition for rehabilitation
to pay the money advanced or the
before the RTC of Quezon City which
amount for which credit is given on the
resulted in the issuance of the Stay Order
faith of the instrument. They are primary
and the disputed Order of November 27,
obligations and not accessory contracts
2003.
and while they are security
arrangements, they are not converted
ISSUE: WON the rehabilitation court thereby into contracts of guaranty. What
sitting as such, act in excess of its distinguishes letters of credit from other
authority or jurisdiction when it enjoined accessory contracts, is the engagement
herein petitioner from seeking the of the issuing bank to pay the seller once
payment of the concession fees from the the draft and other required shipping
banks that issued the Irrevocable documents are presented to it. They are
Standby Letter of Credit in its favor definite undertakings to pay at sight once
the documents stipulated therein are
HELD: The petition presented.
for certiorari is granted. The Order of
November 27, 2003 of the RTC of
The prohibition under Sec 6 (b) of Rule
Quezon City 90, is hereby declared null
4 of the Interim Rules does not apply to
and void and set aside.
herein petitioner as the prohibition is on
YES First, the claim is not one against
the enforcement of claims against
the debtor but against an entity that
guarantors or sureties of the debtors
respondent Maynilad has procured to
whose obligations are not solidary with
answer for its non-performance of
the debtor. The participating banks
certain terms and conditions of the
obligation are solidary with respondent
Concession Agreement, particularly the
Maynilad in that it is a primary, direct,
payment of concession fees.
definite and an absolute undertaking to
Secondly, Sec. 6 (b) of Rule 4 of the
pay and is not conditioned on the prior
Interim Rules does not enjoin the
exhaustion of the debtors assets. These
enforcement of all claims against
are the same characteristics of a surety
guarantors and sureties, but only those
or solidary obligor. And being solidary,
claims against guarantors and sureties
the claims against them can be pursued
who are not solidarily liable with the
separately from and independently of the
debtor. Respondent Maynilads claim
rehabilitation case.
that the banks are not solidarily liable
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat)
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat) 5
Compiled by: Sheena Marie S. Ysit
Note: The Uniform Commercial Practice in Benguet and Ilocos. Transfield was
for Documentary Credits allows letters given the sole responsibility for the
of credit to payable to order. design, construction, commissioning,
testing and completion of the Project.
b.) Limited to a fixed or The contract provides for a period for
specified amount or to which the project is to be completed and
one or more amounts, but also allows for the extension of the
with a maximum stated period provided that the extension is
limit. based on justifiable grounds such as
Note: If any of these essential conditions fortuitous event. In order to guarantee
is not present, the instrument is merely performance by Transfield, two stand-by
considered as a letter of letters of credit were required to be
recommendation. opened. During the construction of the
plant, Transfield requested for extension
In case the buyer was not able of time citing typhoon and various
to pay its obligation under the disputes delaying the construction. LHC
letter of credit, can the bank did not give due course to the extension
take possession over the goods of the period prayed for but referred the
covered by the said letter of matter to arbitration committee. Because
credit? of the delay in the construction of the
No. The opening of a Letter of plant, LHC called on the stand-by letters
Credit did not vest ownership of of credit because of default. However,
the goods in the bank in the the demand was objected by Transfield
absence of a trust receipt on the ground that there is still pending
agreement. A letter of credit is a arbitration on their request for extension
mere financial device developed of time.
by merchants as a convenient and
relatively safe mode of dealing Issue: Whether or not LHC can collect
with the sales of goods to satisfy from the letters of credit despite the
the seemingly irreconcilable pending arbitration case
interests of a seller, who refuses to
part with his goods before he is
Held: Transfields argument that any
paid, and a buyer, who wants to
dispute must first be resolved by the
have control of the goods before
parties, whether through negotiations or
paying. (Transfield Philippines,
arbitration, before the beneficiary is
Inc. v. Luzon Hydro Corporation,
entitled to call on the letter of credit in
G.R. No. 146717, Nov. 22, 2004)
essence would convert the letter of credit
CASE: into a mere guarantee.
Transfield Philippines, Inc. v. Luzon
Hydro Corporation, G.R. No. 146717,
Nov. 22, 2004) The independent nature of the letter of
Facts: Transfield Philippines credit may be: (a) independence in toto
(Transfield) entered into a turn-key where the credit is independent from the
contract with Luzon Hydro Corp. justification aspect and is a separate
(LHC).Under the contract, Transfield obligation from the underlying
were to construct a hydro-electric plants agreement like for instance a typical
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat)
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat) 7
Compiled by: Sheena Marie S. Ysit
2. Confirming bank- bank which, upon one who in compliance with the
the request of the beneficiary, contract of sale ships the goods
confirms the LC issued. to the buyer and delivers the
3. Paying Bank- bank on which the documents of title and draft to
drafts are to be drawn, which may be the issuing bank to recover
the issuing bank or another bank not payment for the goods. Their
in the city of the beneficiary. relationship is governed by the
4. Negotiating bank- bank in the city of contract of sale.
the beneficiary which buys or 2. Between the issuing bank and the
discounts the drafts contemplated by beneficiary/seller/exporter The
the LC, if such draft is to be drawn issuing bank is the one that issues
on the opening bank not in the city of the letter of credit and undertakes
the beneficiary. to pay the seller upon receipt of
the draft and proper documents
Stages of LC of title. On the other hand, the
beneficiary/seller/exporter
1. Contract of sale between the surrenders document of title to
buyer and seller the bank in compliance with the
2. Application for LC by the terms of the LC. Their
buyer with the bank relationship is governed by the
3. Issuance of LC by the bank terms of the LC.
4. Shipping of goods by the 3. Between the issuing bank and the
seller applicant/buyer/importer The
5. Execution of draft and tender applicant/buyer/importer obliges
of documents by the seller himself to reimburse the issuing
6. Redemption of draft bank upon receipt of the
(payment) and obtaining of documents of title. Their
documents by the issuing relationship is governed by the
bank terms of the application for the
7. Reimbursement to the bank issuance of the letter of credit by
and obtaining of documents the bank. (2002 Bar Question)
by the buyer
When is the bank entitled to
e.) Rights and obligations of reimbursement?
parties Once the issuing bank shall
Three (3) distinct but intertwined have paid the beneficiary
contract relationships that are after the latters compliance
indispensable in a letter of credit with the terms of the LC.
transaction. Presentment for acceptance
1. Between the to the customer/applicant is
applicant/buyer/importer and the not a condition sine qua non
beneficiary/seller/exporter- The for reimbursement.
applicant/buyer/importer is the (Prudential Bank v. IAC,
one who procures the letter of G.R. No. 74886, Dec. 8,
credit while the 1992)
beneficiary/seller/exporter is the What is the consequence of
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat)
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat) 9
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat)
Compiled by: Sheena Marie S. Ysit
the sum of $54,000.00, the total purchase price Philippines without informing the Court and his
of the lauan logs. The letter of credit was mailed counsel. Hence, Villaluz, filed an amended
to the Feati Bank and Trust Company (now complaint make the petitioner solidarily liable
City trust) with the instruction to the latter that it with Christiansen.
"forward the enclosed letter of credit to the
beneficiary. The letter of credit further provided ISSUE: Whether or not a correspondent
that the draft to be drawn is on Security bank is to be held liable under the letter
Pacific National Bank and that it be of credit despite non-compliance by the
accompanied by the documents specified beneficiary with the terms thereon.
therein. Also incorporated by reference is the
Uniform Customs and Practice for HELD: Commercial transactions involving
Documentary Credits). The logs were letter of credits are governed by the rule on strict
thereafter loaded on the vessel "Zenlin compliance. It is a settled rule in commercial
Glory" which was chartered by transactions involving letters of credit that the
Christiansen. Before its loading, the logs documents tendered must strictly conform to the
were inspected by custom inspectors, all of terms of the letter of credit. The tender of
whom certified to the good condition and documents by the beneficiary (seller) must
exports ability of the logs, and the loading was include all documents required by the letter. A
completed. However, Christiansen refused correspondent bank which departs from
to issue the certification as required in what has been stipulated under the letter
paragraph 4 of the letter of credit, of credit, as when it accepts a faulty
despite several requests made by the tender, acts on its own risks and it may
private respondent. Because of the not thereafter be able to recover from the
absence of the certification by buyer or the issuing bank, as the case may be,
Christiansen, the Feati Bank and Trust the money thus paid to the beneficiary. Thus the
Company refused to advance the payment on rule of strict compliance. In the United States,
the letter of credit. Meanwhile, the logs commercial transactions involving letters of
arrived at Inchon, Korea and were credit are governed by the rule of strict
received by the consignee, Hanmi Trade compliance. In the Philippines, the same holds
Development Company, to whom true. The-same rule must also be
Christiansen sold the logs and obtained followed. Although in some American
profit. Hanmi Trade Development decisions, banks are granted a little
Company, on the other hand sold the logs to discretion to accept a faulty tender
Taisung Lumber Company at Inchon, Korea. as when the other documents may be
Since the demands by the private considered immaterial or superfluous,
respondent for Christiansen to execute this theory could lead to dangerous
the certification proved futile, Villaluz, precedents. Since a bank deals only with
instituted an action for mandamus and documents, it is not in a position to determine
specific performance against whether or not the documents required by the
Christiansen and the Feati Bank and letter of credit are material or
Trust Company (now City trust). The superfluous. The mere fact that the
petitioner was impleaded as defendant before document was specified therein readily
the lower court only to afford complete relief means that the document is of vital importance
should the court a quo order Christiansen to to the buyer.
execute the required certification. While the case
was still pending trial, Christiansen left the
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat) 11
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat)
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat) 13
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat)
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat) 15
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat)
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat) 17
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat)
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat) 19
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat)
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat) 21
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat)
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat) 23
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat)
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat) 25
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat)
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat) 27
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat)
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat) 29
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat)
Compiled by: Sheena Marie S. Ysit
named therein as the person to whom the 3. To declare the misuse and/or
goods are to the delivered or misappropriation of goods or proceeds
his transferee; realized from the sale of goods,
documents or instruments released under
"negotiable receipt"-means a receipt in trust receipts as a criminal offense
which it is stated that the goods therein punishable as Estafa.
specified will be delivered to bearer or to
the order of a named person; * DEFINITION/CONCEPT OF A
TRUST RECEIPT TRANSACTION
"non-negotiable receipt"-means a
receipt in which it is stated that the What is a trust receipt
goods therein specified will be delivered transaction?
to the holder thereof; It is any transaction between the
entruster and entrustee:
"purchase"- includes to take as
mortgagee or as pledgee; 1. Whereby the entruster
who owns or holds
"purchaser"- includes mortgagee and absolute title or security
pledgee; interests over certain
specified goods,
"receipt"- means a warehouse receipt; documents or instrument,
releases the same to the
"warehouse receipt"-means an possession of entrustee
acknowledgment in writing by a upon the latters
warehouseman of the receipt for a execution of a TR
storage of goods no this own; agreement.
2. Wherein the entrustee
"warehouseman"-means a person who binds himself to hold the
received goods for storage for reward. designated goods in trust
R.S., c. 333, s. 1. for the entruster and, in
case of default, to sell
such goods, documents or
III. TRUST RECEIPTS LAW instrument with the
(P.D. 115) obligation to turn over to
the entruster the proceeds
* PURPOSE OF THE LAW to the extent of the
1. To encourage and promote the use of amount owing to it or to
trust receipts as an additional and turn over the goods,
convenient aid to commerce and trade; documents or instrument
itself if not sold. (Sec. 4,
2. To provide for the regulation of trust P.D. 115)
receipts transactions in order to assure
the protection of the rights and What is a trust receipt(TR)?
enforcement of obligations of the parties It is the written or printed
involved therein; and, document signed by the entrustee
in favor of the entruster containing
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat) 31
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat)
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat) 33
Compiled by: Sheena Marie S. Ysit
case they could not be sold or upon are the subject of a TR, pending
demand of the entruster; and their disposition, irrespective of
whether or not it was due to the
5. To observe all other conditions of the fault or negligence of the
trust receipts. (Sec. 9, P.D. 115) entrustee, shall not extinguish his
obligation to the entruster for the
value thereof. (Sec. 10, P.D. 115)
A. PAYMENT/DELIVERY OF
PROCEEDS OF SALE OR
DISPOSITION OF GOODS, D. PENAL SANCTION IF
DOCUMENTS OR INSTRUMENTS OFFENDER IS A CORPORATION
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat)
Compiled by: Sheena Marie S. Ysit
What will happen to the The law uses the word "may" in
criminal action if the entrustee granting to the entruster the right to
complied with his obligation cancel the trust and take possession
under the TR agreement? of the goods. Consequently, the
entrustee has the discretion to avail
1. If compliance occurred before the of such right or seek any alternative
criminal charge- there is no criminal action, such as a third party claim or
liability. a separate civil action which it
deems best to protect its right, at any
2. If compliance occurred after the time upon default or failure of the
charge even before conviction- the entrustee to comply with any of the
criminal action will not be terms and conditions of the trust
extinguished. agreement.
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat) 35
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat)
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat) 37
Compiled by: Sheena Marie S. Ysit
XPN: Where the after acquired property *What is the right of a subsequent
is in renewal of, or in substitution for, attaching creditor?
goods on hand when the mortgage was A subsequent attaching creditor
executed, or is purchased with the acquired the properties in
proceeds of the sale of such goods. question subject to the creditors
(Torres v. Limjap, G.R. No. 34385, Sept. mortgage lien as it existed
21, 1931) thereon at the time of the
attachment. What may be
attached in this case is only the
E. AFFTER INCURRED equity or right of redemption of
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat)
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat) 39
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat)
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat) 41
Compiled by: Sheena Marie S. Ysit
b. Posting- of the notice of sale for basis of which is the order of court
not less than 20 days in at least confirming the sale.
3public/ conspicuous places in
the province or municipality 10. Petiton for a writ of possession-
where property is located. There is no need to file an ejectment
suit. Here, the mortgagee employs
Note: force to oust the mortgagor from the
A certificate of posting is not property. This writ may be even
indispensible for the validity of an extra issued during redemption period
judicial foreclosure sale of real property. provided the mortgagee issued a
What the law requires is the posting of bond, but the grant of which is
the notice of sale and not the certificate discretionary on the part of the court.
of posting. (DBP v. CA, G.R. No. But if the petition for the writ is filed
125838 June 10, 2003) after the expiration of the redemption
period, the issuance of which is
5. Foreclosure- the remedy available to ministerial on the part of the court.
the mortgagee by which he subjects This writ can be issued without the
the mortgaged property to the issuance of a bond; in fact it can
satisfaction of the obligation to even be issued ex parte. The writ
secure which the mortgage was cannot be suspended even by the
given.(59. C.J.S. 482) filing of the mortgagor of an action
to annul the foreclosure sale.
6. Registration of sale with the RD-
This pertains to the annotation of the * What is meant by once a week for
sale to the TCT on file with the RD. there consecutive week?
A period of 7 days, inclusive of
7. Redemption- The mortgagor the first day of publication. The
reacquires or buys back the property, publication must be made 7 days
which may have passed under the apart. (PNB v. CA, G.R. No.
mortgage. 108870, July 14, 1995)
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat)
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat) 43
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat)
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat) 45
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat)
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat) 47
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat)
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat) 49
Compiled by: Sheena Marie S. Ysit
such rules as the Monetary Board may - If the teller gives the passbook to
promulgate. (Sec. 29) the wrong person, they would be
clothing that person presumptive
* The additional powers given to a ownership of the passbook,
universal bank aside from those facilitating unauthorized
mentioned in section2 withdrawals by that person. For
failing to return the passbook to
-Act as investment house Ability invest authorized representative of the
in non allied enterprises. (Sec 24) depositor, the bank presumptively
failed to observe such high degree
4. DILIGENCE REQUIRED OF of diligence in safeguarding the
BANKS- RELEVANT passbook and insuring its return to
JURISPRUDENCE the party authorized to receive the
* The degree of diligence required same. The banks liability, however,
of banks in handling deposits is mitigated by the depositors
contributory negligence in allowing
- Extraordinary diligence. The
a withdrawal slip signed by
appropriate standard of diligence
authorized signatories to fall into the
must be very high, if not the highest,
hands of an impostor.
degree of diligence; highest degree
of care. This applies only to cases *Did a bank exercise the diligence
where banks are acting in their required when the pre-
fiduciary capacity, that is, as termination of the account is
depository of the deposits of their allowed despite discrepancies in
depositors. the signature and photograph of
the person claiming to be the
*Does the bank need to exercise
depositor and failure to surrender
extra ordinary diligence in all
the original certificate of time
commercial transactions?
deposit?
- No, the degree of diligence
No. The bank is negligent because
required of banks, is more than that
the depositor did not present the
of a good father of the family where
certificate of deposit
the fiduciary nature of their
relationship with their depositors is * Is the bank liable when an
concerned, that is, depositary of employee encashed a check
deposits. But the same higher degree without the requisite of
of diligence is not expected to be endorsement?
exerted by banks in commercial
transactions that do not involve their Yes. The fiduciary nature of the
fiduciary relationship with their relationship between the bank and
depositors, such as sale and issuance the depositors must always be of
of foreign exchange demand draft. paramount concern. (Philippine
Savings Bank vs. Chowking, G.R.
* The effect when the teller gave No. 177526, July 04, 2008).
the passbook to a wrong person.
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat)
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat) 51
Compiled by: Sheena Marie S. Ysit
* Does the fiduciary nature of the the bank may render, deleted reference
bank depositor relationship convert to depository
the contract between banks and
depositors to a trust agreement? 6. STIPULATION ON
INTERESTS
-No, thus, failure by the bank to pay the
depositor is failure to pay simple loan, *The rules on stipulation of interests
and not a breach of trust.
1. Central Bank Circular 416 12% per
* After procuring a checking account, annum in cases of:
the depositor issued several checks. He
was surprised to learn later that they a. Loans;
had been dishonored for insufficient
funds. Investigation disclosed that b. Forbearance of money, goods
deposits made by the depositor were and credits;
not credited to its account. Is the bank
liable for damages? c. Judgement involving such loan
or forbearance, in the absence
-Yes, the depositor expects the bank to of express agreement as to such
treat his account with utmost fidelity, rate of interest
whether such account consist only of a
few hundred pesos or of millions. The Note: During the interim period from the
bank must record every single date of judgment until actual payment.
transaction accurately, down to the last Pursuant to P.D. No. 116 amending Act
centavo, and as promptly as possible. No. 2655 (Usury Law), the Central Bank
This has to be done if the account is to of the Philippines issued Circular No.
reflect at any given time the amount of 416 raising the legal rate of interest from
money the depositor can dispose of as he 6% to 12% per annum.
sees fit, confident that the bank will
In the absence of a stipulation as to
deliver it as and to whomever he directs.
interest, the loan due will now earn
A blunder on the part of the bank, such
interest at the legal rate of 12% per
as the dishonor of the check without
annum.
good reason, can cause the depositor not
a little embarrassment if not also 2. Interest accruing from unpaid
financial loss and perhaps even civil and interest interest due shall earn interest
criminal litigation. from the time it is judicially demanded
although the obligation may be silent
* Is a safety deposit box a form of
upon this point.N ON INTERESTS
deposit or lease?
* If the bank was forbidden by
- The contract for the use of a safe
Central Bank to do business, does it
deposit box should be governed by the
still have the obligation to pay interest
law on lease. Under the old banking law,
on deposit?
a safety deposit box is a special deposit.
However, the new General Banking - No, because a bank lends money,
Law, while retaining the renting of safe engages in international transactions,
deposit box as one of the services that acquires foreclosed mortgaged
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat)
Compiled by: Sheena Marie S. Ysit
-The total of the unimpaired paid in * The limitations imposed upon banks
surplus, retained earnings and undivided with respect to its loan function?
profit, net of valuation reserves and
other adjustments as may be required by 1. G.R: Single borrowers limit- The
the BSP. (Sec.24.2) total amount of the loans, credit
accomodations and guarantees that the
* Risked based capital bank could grant should at no time
exceed 25% of the banks net worth.
- The minimum ratio prescribed by the
Monetary Board which the net worth of XPN:
a bank must bear to its total risk assets
which may include contingent accounts. a. As the Monetary Board may
otherwise prescribe for reasons
Note: However, the Monetary Board of national interest
may require or suspend compliance with
such ratio whenever necessary for a b. Deposits of rural banks with
maximum period of one year and that government owned or controlled
such ratio shall be applied uniformly to financial institutions like LBP,
banks of the same category (Sec.34). DBP, and PNB.
* The effect of non compliance with 2. The total amount of loans, credit
the ratio? accommodations and guarantees
prescribed in (a) may be increased by an
1. Distribution of net profits may be additional 10% of the net worth of such
limited or prohibited and MB may bank provided that additional liabilities
require that part or all of the net profits are adequately secured by trust receipt,
be used to increase the capital accounts shipping documents, warehouse receipts
of the bank until the minimum and other similar documents which must
requirement has been met; or be fully covered by an insurance. (Sec.
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat) 53
Compiled by: Sheena Marie S. Ysit
. Stockholder, which should at least 1% *In case of DOSRI accounts, what are
(if below 1% not the requirements that must be
anymore covered) complied with?
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat)
Compiled by: Sheena Marie S. Ysit
not exceed the paid in contribution and * The arms length rule:
unencumbered deposits. (Not to exceed
15% of the portfolio or 100% of the net - It provides that any dealings of a bank
worth, whichever is lower.) (Sec. 36 [4]) with any of its DOSRI shall be upon
terms not less favorable to the bank than
*The effect of non-compliance with those offered to others. [Sec. 36 (2)]
the foregoing requirements
* Can the bank terminate the loan and
- Violations of DOSRI is a crime and demand immediate payment if the
carries with it penal sanctions. borrower used the funds for purposes
other than that agreed upon?
* What are excluded from such loan
limitations? If the bank finds that the borrower has
not employed the funds borrowed for the
Non-risk loans, such as: purpose agreed upon between the bank
and the borrower, the bank may
1. Loans secured by obligations of the terminate the loan and demand
Bangko Sentral ng Pilipinas or the immediate payment. (Banco de Oro v.
Philippine Government Bayuga, G.R. No. L 49568, Oct.
17,1979)
2. Loans fully guaranteed by the
Government
8. PENALTIES FOR
3. Loans covered by assignment of VIOLATIONS- SECTIONS 5-
deposits maintained in the lending bank 57
and held in the Philippines;
* What are the acts that may be
4. Loans, credit accommodations and
penalized of fine and
acceptances under letters of credit to the
imprisonment as provided in the
extent covered by margin deposits; and
New Central Bank Act (NCBA)?
5.Other loans or credit accommodations
1. Refusal to Make Reports or
which the MB may specify as non risk
Permit Examination (Sec. 34 NCBA)
items.
2. False Statement (Sec. 35. NCBA)
* The transactions covered by the
DOSRI regulation? 3. Other acts that violates any
banking laws (Sec. 36, NCBA)
-The transaction covered are loan and
credit accommodation. Not being a loan, * What are the administrative
the ceiling will not apply to lease and sanctions that the monetary board
sale. However, it should still comply may impose notwithstanding with
with the procedural requirement. sanctions 34-36 0f NCBA?
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat) 55
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat)
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat) 57
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat)
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat) 59
Compiled by: Sheena Marie S. Ysit
repudiate contract entered into by the than 30 days (Sec 53, GBL).
bank.
. Persisting in conducting its business in
* Conservatorship is terminated: an unsafe or unsound manner
(Sec 56, GBL).
=> When Monetary Board is satisfied
that the institution can continue to *The close now hear later doctrine?
operate on its own and the
conservatorship is no longer necessary. => The law does not contemplate prior
notice and hearing before the bank may
Note: When the Monetary Board, on the be directed to stop operations and placed
basis of the report of the conservator or under receivership. The purpose is to
of its own findings, determine that the prevent unwarranted dissipation of the
continuance in business of the institution banks assets and as a valid exercise of
would involve probable losses to its police power to protect the depositors,
depositors or creditors, the bank will go creditors, stockholders and the general
under receivership. public. (Central Bank of the Philippines
v. CA, G.R. No. 76118 Mar. 30, 1993)
*The Monetary Board close a bank or
quasi bank? *Can the closure and liquidation of a
bank, which is considered an exercise
. Cash Flow test- Inability to pay of police power, be the subject of
liabilities as they become due in judicial inquiry?
the ordinary course of business
(Sec.30[a]NCBA). A: Yes. While the closure and
liquidation of a bank may be considered
. Balance sheet test Insufficiency of an exercise of police power, the validity
realizable assets to meet its of such exercise of police power is
liabilities (Sec 30 [b] NCBA). subject to judicial inquiry and could be
set aside if it is either capricious,
. Inability to continue business without discriminatory, whimsical, arbitrary,
involving probable losses to its unjust or a denial or due process and
depositors and creditors (Sec 30 equal protection clauses of the
[c] NCBA). Constitution (Central Bank v. CA, G.R.
No. L 5003132,July27,1981).
. Willful violation of a cease and desist
order under Section 37 that has * Upon maturity of the time deposit,
become final, involving acts or the bank failed to remit. By reason of
transactions which amount to punitive action taken by Central
fraud or a dissipation of the Bank, the bank has been prevented
assets (Sec 30 [d] NCBA). from performing banking operations.
Is the bank still obligated to pay the
. Notification to the BSP or public time deposits despite the fact that its
announcement of a bank holiday operations were suspended by the
(Sec 53,GBL). Central Bank?
. Suspension of payment of its deposit A: The suspension of operations of a
liabilities continuously for more
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat)
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat) 61
Compiled by: Sheena Marie S. Ysit
case the liquidator can continue case where the SC held that the CB
prosecution suits for collection and may not thereafter renege on its
foreclosure of mortgages, as they are representation and liquidate the bank
acts done in the usual course of after majority stockholders of the
administration of the bank. (Banco bank complied with the conditions
Filipino v. Central Bank, G.R.No. and parted with value to the profit of
70054,Dec.11, 1991) CB, which thus acquired additional
security for its own advances, to the
* An intra corporate case was filed detriment of the banks
before RTC. On the other hand, stockholders, depositors and other
another complaint was filed before creditors.
BSP to compel a bank to disclose
its stockholdings invoking the * Can a final and executory
supervisory power of the latter. Is judgment against an insolvent
there a forum shopping? bank be stayed?
- None. The two proceedings are of -Yes, after the Monetary Bank has
different nature praying for different declared that a bank is insolvent and
relief. The complaint filed with the has ordered it to cease operations,
BSP was an invocation of its the assets of the insolvent bank are
supervisory powers over banking held in trust for the equal benefit of
operations which does not amount to all creditors.
a judicial proceeding.
One cannot obtain an advantage or
*Where will the claims against the preference over another by
insolvent bank be filed? attachment, execution or otherwise.
The final judgment against the bank
-Where liquidation is undertaken should be stayed as to execute the
with judicial intervention, all claims judgment would unduly deplete the
against the insolvent bank should be assets of the banks to the obvious
filed in the liquidation proceeding. It prejudice of other depositors and
is not necessary that a claim be creditors.
initially disputed in a court or agency
before it is filed with the liquidation
court. 6. HOW BSP HANDLES
EXCHANGE CRISIS- SECTIONS
Note: The judicial liquidation is 61-80
intended to prevent multiplicity of
actions against the insolvent bank. * Legal Tender
Where it is the bank that files a claim
against another person or legal - All notes and coins issued by the
entity, the claim should be filed in Bangko Sentral are fully guaranteed by
the regular courts. the Republic and shall be legal tender in
the Philippines for all debts, both public
*Rule of promissory estoppel and private (Sec.52)
-The doctrine was applied in one
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat)
Compiled by: Sheena Marie S. Ysit
* Legal tender power of coins? 2. After that period, they shall cease to
be legal tender during the following year
1. 1 Peso, 5 Peso and 10 Peso coins: In or for such longer period as MB may
amounts not exceeding P1,000.00 determine.
2. 25 centavo coin or less: In amounts 3. After the expiration of this latter
not exceeding P100.00 (Circular No. period, the notes and coins which have
537, 2006) not been exchanged shall cease to be a
liability of BSP and shall be
demonetized. (Sec. 57)
*The rules on BSPs Authority to Note: Checks representing demand
replace legal tender: deposits do not have legal tender power
and their acceptance in the payment of
1. Notes for any series or denomination debts, both public and private, is at the
More than 5 years old option of the creditor. However, a
check which has been cleared and
2. Coins- More than 10 years old
credited to the account of the creditor
* The Power to determine Rates of shall be equivalent to a delivery to the
Exchange exercised creditor of cash in an amount equal to
the amount credited to his account (Sec.
-The Monetary Board shall determine 60).
the rates at which the Bangko Sentral
shall buy and sell spot exchange, and *The period of replacement
shall establish deviation limits from the
1. Notes for any series or denomination-
effective exchange rate or rates as it may
More than 5 years old.
deem proper.
2.Coins- More than 10 years.
-The Monetary Board shall similarly
determine the rates for other types of * What actions does the Bangko
foreign exchange transactions by the Sentral take when international
Bangko Sentral, including purchases and stability of Peso is threatened?
sales of foreign notes and coins, but the
margins between the effective exchange - Whenever the international reserve of
rates and the rates thus established may the Bangko Sentral falls to a level which
not exceed the corresponding margins the Monetary Board considers
for spot exchange transactions by more inadequate to meet the prospective
that the additional costs or expenses demands on the Bangko Sentral for
involved in each type of transactions. foreign currencies, or whenever the
international reserve appears to be in
* The rules on BSPs Authority to imminent danger of falling to such a
replace legal tender? level, or whenever the international
reserve is falling as a result of payments
1. Notes and coins called in for
or remittances abroad which, in the
replacement shall remain legal tender for
opinion of the Monetary Board, are
a period of one year from the date of
contrary to the national welfare, the
call.
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat) 63
Compiled by: Sheena Marie S. Ysit
Monetary Board shall: Note: In order that the Bangko Sentral may
at all times have foreign exchange resources
1. Take such remedial measures as are sufficient to enable it to maintain the
appropriate and within the powers stability and convertibility of the peso, or in
granted to the Monetary Board, and the order to promote the domestic investment of
Bangko Sentral bank resources, the Monetary Board may
require the banks to sell to the Bangko
Sentral or to other banks all or part of their
2. Submit to the President of the
surplus holdings of foreign exchange. (Sec.
Philippines and the Congress, and make
76)
public a detailed report which shall
includes, as a minimum, a description
LAW ON SECRECY OF BANK
and analysis of:
DEPOSIT (R.A 1045, AS
a. The nature and causes of the existing AMMENDED)
or imminent decline; 1. PURPOSE
A. To encourage deposit in
b. The remedial measures already taken banking institutions; and
or to be taken by the Monetary Board B. To discourage private
hoarding so that banks may
c. The monetary, fiscal or administrative lend such funds and assist in
measures further proposed The character the economic development
and extent of the cooperation required of the country.
from other government agencies for the
successful execution of the policies of 2. PROHIBITION ACTS
the Monetary Board (Sec. 67). -Examination/inquiry/looking into all
deposits of whatever nature with
* What are the emergency restrictions banks or banking institutions in the
on the foreign exchange operations? Philippines (including investment in
bonds issued by the government) by
1. Temporarily suspending and any person, government official or
restricting sales of foreign exchange by office (Sec. 2)
the Bangko Sentral;
-Disclosure by any official or
2. Subjecting all transactions in gold and employee of any banking institution
foreign exchange to license by the to any authorized person of any
Bangko Sentral; information concerning said deposit
(Sec. 3)
3. Requiring that any foreign exchange
thereafter obtained by any person 3. DEPOSITS COVERED
residing or entity operating in the
Philippines be delivered to the Bangko * Kinds of Deposits that are covered:
Sentral or to any bank or agent
designated by the Bangko Sentral for the 1. All deposits of whatever nature with
purpose, at the effective exchange rate or banks or banking institutions found in
rates (Sec. 72) the Philippines; or
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat)
Compiled by: Sheena Marie S. Ysit
* Trust funds are covered by the term e. In cases where the money deposited or
deposit- The money deposited under invested is the subject matter of the
the trust agreement is intended not litigation. (Sec.2)
merely to remain with the bank but to be
invested by it elsewhere. To hold that
this type of account is not protected by f. Upon the order of the Commissioner
R.A. 1405 would encourage private of Internal Revenue in respect of bank
hoarding of funds that could otherwise deposits of a taxpayer who has filed an
be invested by banks in other ventures, application for compromise of his tax
contrary to the policy behind the law. liability by reason of financial incapacity
to pay his tax liability. (Sec.
Note: Despite such pronouncement that 6[f][1],NIRC)
trust funds are considered deposits, trust
funds remain not covered by PDIC. g. In case of dormant accounts/deposits
for at least 10 years under the Unclaimed
* Is foreign currency deposits covered Balances Act. (Sec.2,Act No. 3936).
by the Secrecy in Bank Deposits(R.A.
1405) h. When the examination is made by the
BSP to insure compliance with the AML
-No. Foreign currency deposits are Law in the course of a periodic or
covered by R.A. 6426 otherwise known special examination
as the Foreign Currency Act. Under the
same law, all authorized foreign i. With court order:
currency deposits are considered of an
absolutely confidential nature and, . In cases of unexplained wealth under
except upon the written permission of the Sec. 8 of the Anti Graft and
depositors, in no instance shall be Corrupt Practices Act
examined, inquired or looked into by
any person, government official, bureau . In cases filed by the Ombudsman and
or office whether judicial or upon the latters authority to
administrative private. examine and have access to bank
accounts and records
4. EXCEPTIONS
j. Without court order:
*Disclosing an information is allowed
If the AMLC determines that a
when:
particular deposit or
a. upon a written consent of a depositor
b. In cases of impeachment
Investment with any banking
c. Upon order of competent court in
institution is relted to the following:
cases of bribery or dereliction of duty of
HK-MAD
public officials. (Sec.2)
d. Upon order of the Commissioner of -Hijacking,
Internal Revenue in respect of the bank
deposits of a decedent for the purpose of -Kidnapping,
determining such decedents gross
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat) 65
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat)
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat) 67
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat)
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat) 69
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat)
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat) 71
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat)
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat) 73
Compiled by: Sheena Marie S. Ysit
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat)
Compiled by: Sheena Marie S. Ysit
immediately for a period not when used as the only basis to deny
exceeding fifteen (15) days. these persons access to the services
provided by the covered persons.
Whenever a bank, or quasi-bank,
5. May a court issue TRO or writ financial institution or whenever any
of injunction to extend a freeze person or entity commits said
order? discriminatory act, the person or persons
Answer: responsible for such violation shall be
Only the CA and SC. No court subject to sanctions as may be deemed
shall issue a temporary restraining order appropriate by their respective
or writ of injunction against any freeze regulators.
order issued by the AMLC or any court
order extending period of effectivity of 8. Is personal knowledge
the freeze order except the Court of necessary that the monetary
Appeals or the Supreme Court.(Rule 3, instrument is the proceed of
Sec. 3 (par.h), IRR) unlawful activity to be
qualified as an offender?
6. Are institutions required to Answer:
verify the identity of their Yes, Money laundering is
clients through face-to-face committed by any person who, knowing
contracts? that any monetary instrument or
Answer: property represents, involves, or relates
To the extent and through such to the proceeds of any unlawful activity.
means allowed under existing laws and Sec. 4, RA 10365.
applicable rules and regulations of the
BSP, the SEC and the IC, covered 9. What are the exemptions on
institutions may create new accounts the authority of the AMLC to
without face-to-face contract. (Rule 5, inquire into bank deposits of
Sec. 1, par. D, IRR) the offender?
Answer:
7. How should the AMLA be There is no need of acquiring a
construed or implemented? court order in cases of kidnapping,
Answer: Hijacking, Drugs, Arson and
It shall not be construed or Murder. Because they are acts or
implemented in a manner that will omissions that involves direct relation to
discriminate against certain customer the offended party.
types, such as politically-exposed
persons, as well as their relatives, or 10. What are the compositions of
against a certain religion, race or ethnic the Anti-money laundering
origin, or such other attributes or profiles council?
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew Umayat) 75
Compiled by: Sheena Marie S. Ysit
Answer:
The following are the compositions of
the AMLC:
A: Governor of Bangko Sentral ng
Pilipinas as Chairman;
B: Insurance Commissioner;
C: Chairman of Security and Exchange
Commissioner.
SPECIAL COMMERCIAL LAWS (Atty. Susana C. Gapla-ew- Umayat) 76
Compiled By Sheena Marie S. Ysit