A.

MORTGAGE LAWS
(IN THE EVENT THESE CASES WILL ASKED, THEY FALL UNDER THE GREEN CASES OF THE ANTI-MONEY LAUNDERING
ACT)

2. PHILIPPINE NATIONAL BANK VS. SPS. TAJONERA

FACTS: Respondent Eduarosa Realty Development, Inc. (ERDI) was engaged in realty construction and sale of
condominium buildings. Respondent Ma. Rosario Tajonera (Rosario), as the Vice President of ERDI, also
performed the duties of president and marketing director dealing with banks, suppliers and contractors. ERDI,
through Rosario, obtained loans from petitioner Philippine National Bank (PNB) and entered into several credit
agreements to finance the completion of the construction of their 20-storey Eduarosa Tower Condominium
located in Parañaque City.

Pursuant to the Credit Agreement, dated March 5, 1991, the principal amount of loan extended by PNB to ERDI
was 60 Million Pesos. As security for the initial loan, ERDI executed the REM consisting of 3 parcels of land
covered by Transfer Certificate of Title (TCT) Nos. 38845, 38846 and 38847 with an aggregate area of 1,352
square meters situated in Roxas Boulevard, Tambo, Parañaque City, Metro Manila, registered in the name of
ERDI (Parañaque properties). In addition, the loan was secured by the assignment of proceeds of contract
receivables arising from the sale of condominium units to be constructed on the mortgaged Parañaque
properties.

On January 31, 1992, ERDI executed an amendment to the Credit Agreement and obtained an additional loan
of 40 Million Pesos. As additional security to the increased amounts of loan, the respondent spouses’ 958-
square-meter lot and the improvements thereon, situated in Greenhills, San Juan, Metro Manila (Greenhills
property) and covered by TCT No. 29733, was mortgaged in favor of PNB as evidenced by the Supplement to
REM. On October 28, 1992, a Second Amendment to Credit Agreement was executed by the parties to extend
the repayment dates of the loan and the additional loan subject to the terms set forth in the said agreement.

The following year, or on November 3, 1993, a Third Amendment to the Credit Agreement was entered into by
the parties wherein PNB granted an additional loan of 55 Million Pesos to ERDI, subject to several conditions
stated in the said agreement.

As of September 30, 1994, ERDI’s outstanding loan obligation with PNB amounted to P211,935,067.40.9

ERDI failed to settle its obligation. As a consequence, PNB filed an application for foreclosure of the Greenhills
property. As the highest bidder, PNB was issued the Certificate of Sale, dated October 9, 1997. Upon ERDI’s
failure to redeem the property, PNB consolidated its title and caused the cancellation of TCT No. 29733.11 A
new title, TCT No. 9424-R, was issued in the name of PNB.

This prompted the respondents to file a complaint against PNB for annulment of sale, cancellation of title,
cancellation of mortgage, and damages before the RTC. In the complaint, the respondents alleged that: the title
to the mortgaged property that was transferred to PNB as a consequence of the foreclosure proceedings was
null and void as their mortgage obligation had been novated and no new loans were released to them, in
violation of the provisions of the Supplement to REM; the foreclosure proceedings were defective due to PNB’s
failure to send personal notice to the respondent spouses; PNB’s delay in the release of loan proceeds under
the credit agreements caused the non-completion of the condominium project; and the properties mortgaged
under the original mortgage contract covering the respondents’ condominium titles should now be discharged,
as the property of the respondent spouses had already been foreclosed.

In its Answer with Counterclaim, PNB denied the respondents’ allegations and raised the following defenses: 1)
the mortgage contract was supported by valuable consideration as the loan proceeds under the credit
agreements were fully released to them; 2) there was no novation of the contract; 3) demand letters were given
to and duly received by the respondents; and 4) the sufficiency of the mortgage over the condominium titles
cannot be determined because the court has no jurisdiction over such issue.

RTC annulled the mortgage contract constituted over the Greenhills property on the ground of breach of
contract on the part of PNB by violating the credit agreements. CA Affirmed.

ISSUE: W/N CA erred in annulling the mortgage contract constituted over the Greenhills property of the
respondents

RULING: NO. The Court holds that PNB was indeed guilty of breach of contract of its reciprocal obligation under
the credit agreements.

Considering that there was no sufficient valuable consideration in the execution of the Supplement to REM on
the Third Amendment as the balance of the last approved additional loan in the amount of P39,503,088.54
remained unreleased, the cancellation of the Supplement to REM constituted over the respondents’ Greenhills
property was in order.

It is true that 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. By its nature, however, a mortgage remains an accessory
contract dependent on the principal obligation, such that enforcement of the mortgage contract depends 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 release of the full loan amount.

In this case, to repeat, PNB did not fulfill its principal obligation under the Third Amendment by failing to release
the amount of the last additional loan in full. Consequently, the Supplement to REM covering the Greenhills
property became unenforceable, as the said property could not be entirely foreclosed to satisfy the
respondents’ total debts to PNB. Moreover, the Supplement to REM was no longer necessary because PNB’s
interest was amply protected as the loans had been sufficiently secured by the Parañaque properties. As aptly
found by the RTC, the Parañaque properties together with the 20-storey condominium building to be erected
thereon would have been sufficient security in the execution of the REM even without the Greenhills property
as additional collateral. Thus, under the circumstances, PNB’s actuation in foreclosing the Greenhills property
was legally unfounded.

28. PHILIPPINE COMMERCIAL & INDUSTRIAL BANK (PCIB) v CA

FACTS: The instant case originated from an action8 filed with the NLRC by a group of laborers who obtained
therefrom a favorable judgment for the payment of backwages amounting to P205,853.00 against the private
respondent.
On April 26, 1976, the said Commission issued a writ of execution directing the Deputy Sheriff of Negros
Occidental, one Damian Rojas, to enforce the aforementioned judgment. The pertinent portion of the said writ
reads as follows:

Further, you are to collect from same respondent the total amount of P205,853.00 as their backwage for
12 months and then turn over said amount to this commission for further disposition. In case you fail to
collect said amount in cash, you are to cause the satisfaction of the same on the movable or immovable
properties of the respondent not exempt from execution.

Accordingly, on April 28, 1976, the aforenamed deputy sheriff went to the mining site of the private respondent
and served the writ of execution on the persons concerned, but nothing seemed to have happened thereat.

Thereafter, the Sheriff prepared on his own a Notice of Garnishment dated April 29, 1976 addressed to six (6)
banks, all located in Bacolod City, one of which being the petitioner herein, directing the bank concerned to
immediately issue a check in the name of the Deputy Provincial Sheriff of Negros Occidental in an amount
equivalent to the amount of the garnishment and that proper receipt would be issued therefor.

Incidentally, the house lawyer of the private respondent, Atty. Rexes V. Alejano, acting on a tip regarding the
existence of the said notice of garnishment, communicated with the bank manager, the petitioner Jose Henares,
verbally at first, and later confirmed in a formal letter received by the petitioner Henares of that same day,
requesting the withholding of any release of the deposit of the private respondent with the petitioner bank.

On April 29, 1976, the deputy sheriff presented the Notice of Garnishment and the Writ of Execution attached
therewith to the petitioner Henares and later in the afternoon, demanded from the latter, the release of the
deposit of the private respondent.

The petitioner Henares, upon knowing from the Acting Provincial Sheriff that there was no restraining order
from the NLRC and on the favorable advice of the bank’s legal counsel, issued a debit memo for the full balance
of the private respondent’s account with the petitioner bank. Thereafter, he issued a manager’s check in the
name of the Deputy Provincial Sheriff of Negros Occidental for the amount of P37,466.18, which was the exact
balance of the private respondent’s account as of that day.

On April 30, 1976, the deputy sheriff returned to the bank in order to encash the check but before the actual
encashment, the petitioner Henares once again inquired about any existing restraining order from the NLRC and
upon being told that there was none, the latter allowed the said encashment.

On July 6, 1976, the private respondent, then plaintiff, filed a complaint before the RTC of Manila, against the
petitioners and Damian Rojas, the Deputy Provincial Sheriff of Negros Occidental, then defendants, alleging that
the former’s current deposit with the petitioner bank was levied upon, garnished, and with undue haste
unlawfully allowed to be withdrawn, and notwithstanding the alleged unauthorized disclosure of the said
current deposit and unlawful release thereof, the latter have failed and refused to restore the amount of
P37,466.18 to the former’s account despite repeated demands.

Both the petitioners and the Deputy Sheriff filed their respective answers denying the material averments of
the said complaint and alleged that their actuations were all in accordance with law and likewise filed
counterclaims for damages, including a cross-claim of the former against the latter. The third party complaint
of the petitioners against the forty-nine (49) laborers in the NLRC case was, however, dismissed for failure of
the sheriff to serve summons upon the latter.

On January 23, 1982, after several postponements, the pre-trial was finally conducted and terminated with only
the petitioners and the private respondent participating, through their respective counsel.

The trial court rendered its judgment in favor of the private respondent.

ISSUE: W/N the petitioners had legal basis in releasing the garnished deposit of private respondent to the sheriff

RULING: YES. The Court finds the immediate release of the funds by the petitioners on the strength of the notice
of garnishment and writ of execution, whose issuance, absent any patent defect, enjoys the presumption of
regularity, sufficiently supported by Sec. 41, Rule 39 of the Rules of Court. The Court takes cognizance of the
subject of the judgment sought to be enforced in the writ of execution in question, namely, laborers’ backwages.
It is believed that the petitioners should rather be commended for having acted with urgent dispatch despite
attempts by the private respondent, as with so many scheming employers, to frustrate or unjustifiably delay the
prompt satisfaction of final judgments which often result in undue prejudice to the legitimate claims of labor.

The petitioners are therefore absolved from any liability for the disclosure and release of the private
respondent’s deposit to the custody of the deputy sheriff in satisfaction of the final judgment for the laborers’
backwages.
 B. ANTI-MONEY LAUNDERING ACT
BLACK CASES

1. Republic v Glasgow credit and collection services

Facts: On July 18, 2003, petitioner filed a complaint for civil forfeiture of assets with the RTC of Manila against
the bank deposits in account number CS – 005-10-000121-5 maintained by GLASGOW in CSBI. The case was filed
pursuant to RA 9160 or the Anti-Money Laundering Act of 2001. On July 21, 2003, the RTC of Manila issued a
72-hour TRO. And on August 8, 2003 a writ of preliminary injunction was issued. Meanwhile, summons to
GLASGOW was returned “unserved” as it could no longer be found at its last known address. On October 8,
2003, petitioner filed a verified omnibus motion for a) issuance of alias summons and b) leave of court to serve
summons by publication. On October 15, 2003, the trial court directed the issuance of alias summons. No
mention was made of the motion for leave of court to serve summons by publication. On January 30, 2004, the
trial court archived the case for failure of the Republic to serve alias summons. The Republic filed an ex parte
omnibus motion to reinstate the case and resolve the motion for leave of court to serve summons by
publication. On May 31, 2004, the trial court ordered the reinstatement of the case directing the Republic to
serve the alias summons to Glasgow and CSBI within 15 days. On July 12, 2004, petitioner received a copy of the
sheriff’s return stating that the alias summons was returned “unserved” as GLASGOW was no longer holding
office at the given address since July 2002. On August 11, 2005, petitioner filed a manifestation and ex parte
motion to resolve its motion for leave of court to serve summons by publication. On August 12, 2005, the OSG
received a copy of GLASGOW’s motion to dismiss by way of special appearance alleging that 1) the court had no
jurisdiction over its person as summons had not yet been served on it 2) the complaint was premature and
stated no cause of action and 3) there was failure to prosecute on the part of the Republic. On October 17, 2005,
the trial court dismissed the case on the grounds of 1) improper venue 2) insufficiency of the complaint in form
and substance and 3) failure to prosecute and lifted the writ of preliminary injunction.

ISSUE: Whether or not the complaint for civil forfeiture was properly instituted.

RULING: Yes. Sec. 12 (a) of RA 9160 provides two conditions when applying for civil forfeiture: 1.when there is
suspicious transaction report or a covered transaction report deemed suspicious after investigation by the
AMLC; 2.the court has, in a petition filed for the purpose; ordered the seizure of any monetary instrument or
property, in whole or in part, directly or indirectly, related to said report. The writ of preliminary injuction issued
on August 8, 2003 removed account no. CA-005-10-000121-5 from the effective control of either GLASGOW or
CSBI or their representatives or agents and subjected it to the process of the court. Since this account was
covered by several suspicious reports and placed under the control of the trial court upon the issuance of the
writ, the conditions provided in Section 12 (a) of RA 9160 were satisfied. The petitioner properly instituted the
complaint for civil forfeiture.

Scra: 1. Anti-Money Laundering Act of 2001 (R.A. No. 9160); Civil Forfeiture; Actions; Venue; Motions to
Dismiss; The motu proprio dismissal of a complaint by the trial court on the ground of improper venue is plain
error.—Inasmuch as Glasgow never questioned the venue of the Republic’s complaint for civil forfeiture against
it, how could the trial court have dismissed the complaint for improper venue? In Dacoycoy v. Intermediate
Appellate Court, 195 SCRA 641 (1991), (reiterated in Rudolf Lietz Holdings, Inc. v. Registry of Deeds of Parañaque
City, 344 SCRA 680 (2000)], this Court ruled: The motu propriodismissal of petitioner’s complaint by [the] trial
court on the ground of improper venue is plain error

2. The venue of civil forfeiture cases is 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.

3. A criminal conviction for an unlawful activity is not a prerequisite for the institution of a civil forfeiture
proceeding—a finding of guilt for an unlawful activity is not an essential element of civil forfeiture.

4. Dismissal of Cases; While a court can dismiss a case on the ground of non prosequitur, the real test for the
exercise of such power is whether, under the circumstances, plaintiff is chargeable with want of due diligence
in failing to proceed with reasonable promptitude.

5. Forfeiture proceedings are actions in rem—service may be made by publication; The same principle in
forfeiture proceedings under RA 1379 applies in cases for civil forfeiture under RA 9160, as amended, since both
cases do not terminate in the imposition of a penalty but merely in the forfeiture of the properties either
acquired illegally or related to unlawful activities in favor of the State.

2. LIGOT VS REPUBLIC

Concept: Freeze Orders under Anti-Money Laundering Act (AMLA): assets unfrozen but preserved. A freeze order is
an extraordinary and interim relief issued by the CA to prevent the dissipation, removal, or disposal of
properties that are suspected to be the proceeds of, or related to, unlawful activities as defined in Section 3(i)
of RA No. 9160, as amended. The primary objective of a freeze order is to temporarily preserve monetary
instruments or property that are in any way related to an unlawful activity or money laundering, by preventing
the owner from utilizing them during the duration of the freeze order. The relief is pre-emptive in character,
meant to prevent the owner from disposing his property and thwarting the State’s effort in building its case and
eventually filing civil forfeiture proceedings and/or prosecuting the owner.
FACTS:

This is a petition for certiorari wherein Ligot et al claim that the Court of Appeals (CA) acted with
grave abuse of discretion amounting to lack or excess of jurisdiction when it issued its resolution
extending the freeze order issued against the Ligot’s properties for an indefinite period of time. L t. Gen. Ligot
argues that the appellate court committed grave abuse of discretion amounting to lack or excess of
jurisdiction when it extended the freeze order issued against him and his family even though no
predicate crime had been duly proven or established to support the allegation of money
laundering. He also maintains that the freeze order issued against them ceased to be effective in view of the
6-month extension limit of freeze orders provided under the Rule in Civil Forfeiture Cases. The CA, in
extending the freeze order, not only unduly deprived him and his family of their property, in violation of due
process, but also penalized them before they had been convicted of the crimes they stand accused of.

SSUE: Whether a petition for certiorari is the proper remedy in assailing the said freeze order.

RULING: (Generally) NO. Certiorari not proper remedy to assail freeze order. Section 57 of the Rule in Civil
Forfeiture Cases explicitly provides the remedy available in cases involving freeze orders issued by the
CA:Section 57. Appeal. - Any party aggrieved by the decision or ruling of the court may appeal to the Supreme
Court by petition for review on certiorari under Rule 45 of the Rules of Court. The appeal shall not stay the
enforcement of the subject decision or final order unless the Supreme Court directs otherwise.[italics
supplied]From this provision, it is apparent that the petitioners should have filed a petition for review on
certiorari, and not a petition for certiorari, to assail the CA resolution which extended the effectivity
period of the freeze order over their properties. The Court underscored that the probable cause required for
the issuance of a freeze order under Section 10 of the AMLA: “such facts and circumstances which would lead a
reasonably discreet, prudent or cautious man to believe that an unlawful activity and/or a money laundering
offense is about to be, is being or has been committed and that the account or any monetary instrument or
property subject thereof sought to be frozen is in any way related to said unlawful activity and/or money
laundering offense,” is different from the probable cause required for the institution of a criminal action
3. REPUBLIC VS. CABRINI, GREEN, & ROSS

FACTS:
In the exercise of its power under Section 10 of RA 9160, the Anti-Money Laundering Council (AMLC) issued
freeze orders against various bank accounts of respondents. The frozen bank accounts were previously found
prima facie to be related to the unlawful activities of respondents.
Under RA 9160, a freeze order issued by the AMLC is effective for a period not exceeding 15 days unless
extended “upon order of the court.” Accordingly, before the lapse of the period of effectivity of its freeze orders,
the AMLC2 filed with the Court of Appeals (CA) various petitions for extension of effectivity of its freeze orders.
The AMLC invoked the jurisdiction of the CA in the belief that the power given to the CA to issue a TRO or writ
of injunction against any freeze order issued by the AMLC carried with it the power to extend the effectivity of
a freeze order. In other words, the AMLC interpreted the phrase “upon order of the court” to refer to the CA.
However, the CA disagreed with the AMLC and dismissed the petitions.
ISSUE/S: Which court has jurisdiction to extend the effectivity of a freeze order?

RULING: Court of Appeals.

During the pendency of these petitions, or on March 3, 2003, Congress enacted RA 9194 (An Act Amending
Republic Act No. 9160, Otherwise Known as the “Anti-Money Laundering Act of 2001”).6 It amended Section 10
of RA 9160
as follows:
SEC. 7. Section 10 of [RA 9160] is hereby amended to read as follows:
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 Sec. 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.”(emphasis
supplied)

Section 12 of RA 9194 further provides:

SEC. 12. Transitory Provision.—Existing freeze orders issued by the AMLC shall remain in force for a period of
thirty (30) days after theeffectivity of this Act, unless extended by the Court of Appeals.
(emphasis supplied)

The Office of the Solicitor General (OSG) filed a “Very Urgent Motion to Remand Cases to the Honorable
Court of Appeals. The OSG prayed for the remand of these cases to the CA pursuant to RA 9194.

The amendment by RA 9194 of RA 9160 erased any doubt on the jurisdiction of the CA over the extension of
freeze orders. As the law now stands, it is solely the CA which has the authority to issue a freeze order as well
as to extend its effectivity. It also has the exclusive jurisdiction to extend existing freeze orders previously issued
by the AMLC vis-à- vis accounts and deposits related to money-laundering activities.

4. Republic v Eugenio

Facts:

Following the promulgation of Agan, a series of investigations concerning the award of the NAIA 3
contracts to PIATCO were undertaken by the Ombudsman and the Compliance and Investigation Staff (CIS) of
petitioner Anti-Money Laundering Council (AMLC). On 24 May 2005, the Office of the Solicitor General (OSG)
wrote the AMLC requesting the latter’s assistance "in obtaining more evidence to completely reveal the financial
trail of corruption surrounding the [NAIA 3] Project. The CIS conducted an intelligence database search on the
financial transactions of certain individuals involved in the award, including respondent Pantaleon Alvarez
(Alvarez) who had been the Chairman of the Technical Committee, NAIA-IPT3 Project. By this time, Alvarez had
already been charged by the Ombudsman with violation of Section 3(j) of R.A. No. 3019. The search revealed
that Alvarez maintained eight (8) bank accounts with six (6) different banks.

On 27 June 2005, the AMLC issued Resolution No. 75, verify an application to inquire into and/or examine the
[deposits] or investments of Pantaleon Alvarez, Wilfredo Trinidad, Alfredo Liongson, and Cheng Yong, lvarez
alleged that he fortuitously learned of the bank inquiry order, which was issued following an ex
parte application, and he argued that nothing in R.A. No. 9160 “Anti money laundering” authorized the AMLC
to seek the authority to inquire into bank accounts ex parte. Respondents posit that a bank inquiry order under
Section 11 may be obtained only upon the pre-existence of a money laundering offense case already filed before
the courts. The conclusion is based on the phrase "upon order of any competent court in cases of violation of
this Act," the word "cases" generally understood as referring to actual cases pending with the courts

Issue: Whether or not AMLC can inquire into the accounts ex parte by virtue of pre existing case

Ruling:

No. We are unconvinced by this proposition, and agree instead with the then Solicitor General who
conceded that the use of the phrase “in cases of” was unfortunate, yet submitted that it should be interpreted
to mean “in the event there are violations” of the AMLA, and not that there are already cases pending in court
concerning such violations. If the contrary position is adopted, then the bank inquiry order would be limited in
purpose as a tool in aid of litigation of live cases, and wholly inutile as a means for the government to ascertain
whether there is sufficient evidence to sustain an intended prosecution of the account holder for violation of
the AMLA. Should that be the situation, in all likelihood the AMLC would be virtually deprived of its character as
a discovery tool, and thus would become less circumspect in filing complaints against suspect account holders.
After all, under such set-up the preferred strategy would be to allow or even encourage the indiscriminate filing
of complaints under the AMLA with the hope or expectation that the evidence of money laundering would
somehow surface during the trial. Since the AMLC could not make use of the bank inquiry order to determine
whether there is evidentiary basis to prosecute the suspected malefactors, not filing any case at all would not
be an alternative. Such unwholesome setup should not come to pass. Thus Section 11 cannot be interpreted in
a way that would emasculate the remedy it has established and encourage the unfounded initiation of
complaints for money laundering. Still, even if the bank inquiry order may be availed of without need of a pre-
existing case under the AMLA, it does not follow that such order may be availed of ex parte. Of course, 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, certain violations
of the Comprehensive Dangerous Drugs Act of 2002, hijacking and other violations under R.A. No. 6235,
destructive arson and murder.

Addtl about AMLA

In the instances where a court order is required for the issuance of the bank inquiry order, nothing in
Section 11 specifically authorizes that such order may be issued ex parte. Although oriented towards different
purposes, the freeze order under Section 10 and the bank inquiry order under Section 11 are similar in that they
are extraordinary provisional reliefs which the AMLC may avail of to effectively combat and prosecute money
laundering offenses. Crucially, Section 10 uses specific language to authorize an ex parte application for the
provisional relief therein, a circumstance absent in Section 11.

The court receiving the application for inquiry order cannot simply take the AMLC’s word that probable
cause exists that the deposits or investments are related to an unlawful activity. It will have to exercise its own
determinative function in order to be convinced of such fact.

A constitutional warrant requires that the judge personally examine under oath or affirmation the
complainant and the witnesses he may produce, such examination being in the form of searching questions and
answers. 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.
GREEN CASES
1. Banas vs. Asia Pacific Finance Corporation G.R. No. 128703, October 18, 2000

Facts:

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

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

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

Issue: Whether the disputed transaction between ASIA PACIFIC was engaged in banking activities.

Ruling:
No. An investment company refers to any issuer which is or holds itself out as being engaged or proposes to
engage primarily in the business of investing, reinvesting or trading in securities. As defined in Revised Securities
Act, securities “shall include commercial papers evidencing indebtedness of any person, financial or non-
financial entity, irrespective of maturity, issued, endorsed, sold, transferred or in any manner conveyed to
another with or without recourse, such as promissory notes. Clearly, the transaction between petitioners and
respondent was one involving not a loan but purchase of receivables at a discount, well within the purview of
“investing, reinvesting or trading in securities” which an investment company, like ASIA PACIFIC, is authorized
to perform and does not constitute a violation of the General Banking Act.

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

2-REFER TO MORTGAGE LAWS (2)

3. CONSOLIDATED BANK and TRUST CORPORATION vs. COURT OF APPEALS

G.R. No. 138569, Sep 11, 2003.
MAIN POINT: Solidbank’s tellers must exercise a high degree of diligence in insuring that they return the
passbook only to the depositor or his authorized representative. The tellers know, or should know, that the rules
on savings account provide that any person in possession of the passbook is presumptively its owner.

Facts: Solidbank is a domestic banking corporation while private respondent L.C. Diaz and Company,
CPA’s (“L.C. Diaz”), is a professional partnership engaged in the practice of accounting and which opened a
savings account with Solidbank. Diaz through its cashier, Mercedes Macaraya , filled up a savings cash deposit
slip and a savings checks deposit slip. Macaraya instructed the messenger of L.C. Diaz, Ismael Calapre, to deposit
the money with Solidbank and give him the Solidbank passbook. Calapre went to Solidbank and presented to
Teller No. 6 the two deposit slips and the passbook. The teller acknowledged receipt of the deposit by returning
to Calapre the duplicate copies of the two deposit slips. Since the transaction took time and Calapre had to
make another deposit for L.C. Diaz with Allied Bank, he left the passbook with Solidbank. When Calapre
returned to Solidbank to retrieve the passbook, Teller No. 6 informed him that somebody got the passbook.
Calapre went back to L.C. Diaz and reported the incident to Macaraya. The following day,, L.C. Diaz through its
Chief Executive Officer, Luis C. Diaz, called up Solidbank to stop any transaction using the same passbook until
L.C. Diaz could open a new account followed by a formal written request later that day. It was also on the same
day that L.C. Diaz learned of the unauthorized withdrawal the day before of P300,000 from its savings
account. The withdrawal slip bore the signatures of the authorized signatories of L.C. Diaz, namely Diaz and
Rustico L. Murillo. The signatories, however, denied signing the withdrawal slip. A certain Noel Tamayo received
the P300,000.
L.C. Diaz demanded from Solidbank the return of its money but to no avail. Hence, L.C. Diaz filed a Complaint
for Recovery of a Sum of Money against Solidbank with the Regional Trial Court. After trial, the trial court
rendered a decision absolving Solidbank and dismissing the complaint. Court of Appeals reversed the decision
of the trial court.

Issue: W/N Solidbank must be held liable for the fraudulent withdrawal on private respondent’s account.

Held: YES. Solidbank’s tellers must exercise a high degree of diligence in insuring that they return the passbook
only to the depositor or his authorized representative. The tellers know, or should know, that the 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. However, 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.
Hence, the liability of Solidbank for actual damages was reduced to only 60%, the remaining 40% was borne by
private respondent.

The contract between the bank and its depositor is governed by the provisions of the Civil Code on simple loan.
There is a debtor-creditor relationship between the bank and its depositor. The bank is the debtor and the
depositor is the creditor. The law imposes on banks high standards in view of the fiduciary nature of banking. RA
8791 declares that the State recognizes the “fiduciary nature of banking that requires high standards of integrity
and performance.” This new provision in the general banking law, introduced in 2000, is a statutory affirmation
of Supreme Court decisions holding that “the bank is under obligation to treat the accounts of its depositors
with meticulous care, always having in mind the fiduciary nature of their relationship.”

4. Citibank vs Spouses Cabamongan

Spouses Luis and Carmelita Cabamongan opened a joint "and/or" foreign currency time deposit in trust for their
sons at the Citibank, N.A., Makati branch ( $55,216.69 for a term of 182 days or until February 14, 1994, at
2.5625 per cent interest per annum). Prior to maturity, a person claiming to be Carmelita went to the branch
and pre-terminated the said foreign currency time deposit by presenting a passport, a Bank of America Versatele
Card, an ATM card and a Mabuhay Credit Card. She filled up the necessary forms for pre-termination of deposits.
While the transaction was being processed, she was casually interviewed by San Pedro about her personal
circumstances and investment plans. Since the said person failed to surrender the original Certificate of Deposit,
she had to execute a notarized release and waiver document in favor of Citibank, pursuant to Citibank's internal
procedure, before the money was released to her. The release and waiver document was not notarized on that
same day but the money was nonetheless given to the person withdrawing.
After said person left, San Pedro realized that she left behind an identification card. Thus, San Pedro called up
Carmelita's listed address to have the card picked up. Marites, the daughter-in-law, received San Pedro's call
and was stunned by the news because Carmelita was in the United States at that time. The Cabamongan spouses
work and reside in California. It seems that sometime between June 10 and 16, 1993, an unidentified person
broke in at the couple's residence at No. 3268 Baldwin Park Boulevard, Baldwin Park, California. Initially, they
reported that only Carmelita's jewelry box was missing, but later on, they discovered that other items, such as
their passports, bank deposit certificates, including the subject foreign currency deposit, and identification cards
were also missing.

Through various overseas calls, the Cabamongan spouses informed Citibank, thru San Pedro, that Carmelita was
in the United States and did not preterminate their deposit and that the person who did so was an impostor
who could have also been involved in the break-in of their California residence. Citibank concluded nonetheless
that Carmelita indeed preterminated her deposit. Cabamongan spouses, through counsel, made a formal
demand upon Citibank for payment of their preterminated deposit with legal interests. Citibank, through
counsel, refused, asserting that the subject deposit was released to Carmelita upon proper identification and
verification.

The Cabamongan spouses filed a complaint against Citibank before the Regional Trial Court of Makati for Specific
Performance with Damages. RTC ruled in favor of the spouses. CA AFFIRMED with the MODIFICATION that the
legal interest for actual damages awarded.

Issue: W/N the case should be ruled in favor of the bank

Ruling: No

Re negligence
Citibank's assertion that the Cabamongan spouses are guilty of contributory negligence and non-application of
the doctrine of last clear chance cannot pass muster since these contentions were raised for the first time only
in their Supplemental Memorandum. Indeed, the records show that said contention were neither pleaded in
the petition for review and the memorandum nor in Citibank's Answer to the complaint or in its appellant's brief
filed with the CA. To consider the alleged facts and arguments raised belatedly in a supplemental pleading to
herein petition for review at this very late stage in the proceedings would amount to trampling on the basic
principles of fair play, justice and due process

The Court has repeatedly emphasized that, since the banking business is impressed with public interest, of
paramount importance thereto is the trust and confidence of the public in general. Consequently, the highest
degree of diligence40 is expected,41 and high standards of integrity and performance are even required, of it.42
By the nature of its functions, a bank is "under obligation to treat the accounts of its depositors with meticulous
care,43 always having in mind the fiduciary nature of their relationship."44
In this case, it has been sufficiently shown that the signatures of Carmelita in the forms for pretermination of
deposits are forgeries. Citibank, with its signature verification procedure, failed to detect the forgery. Its
negligence consisted in the omission of that degree of diligence required of banks. The Court has held that a
bank is "bound to know the signatures of its customers; and if it pays a forged check, it must be considered as
making the payment out of its own funds, and cannot ordinarily charge the amount so paid to the account of
the depositor whose name was forged."45 Such principle equally applies here.

Re interest rate
Citibank avers that the claim of the Cabamongan spouses does not constitute a loan or forbearance of money
and therefore, the interest rate of 6%, not 12%, applies.
The Court does not agree. The time deposit subject matter of herein petition is a simple loan. The provisions of
the New Civil Code on simple loan govern the contract between a bank and its depositor. Specifically, Article
1980 thereof categorically provides that ". . . savings . . . deposits of money in banks and similar institutions shall
be governed by the provisions concerning simple loan." Thus, the relationship between a bank and its depositor
is that of a debtor-creditor, the depositor being the creditor as it lends the bank money, and the bank is the
debtor which agrees to pay the depositor on demand.

Thus, in a loan or forbearance of money, the interest due should be that stipulated in writing, and in the absence
thereof, the rate shall be 12% per annum counted from the time of demand. Accordingly, the stipulated interest
rate of 2.562% per annum shall apply for the 182-day contract period from August 16, 1993 to February 14,
1994. For the period from the date of extra-judicial demand, September 16, 1994, until full payment, the rate
of 12% shall apply. As for the intervening period between February 15, 1994 to September 15, 1994, the rate of
interest then prevailing granted by Citibank shall apply since the time deposit provided for roll over upon
maturity of the principal and interest.

Re moral damages
In culpa contractual or breach of contract, moral damages are recoverable only if the defendant has acted
fraudulently or in bad faith, or is found guilty of gross negligence amounting to bad faith, or in wanton disregard
of his contractual obligations. The act of Citibank's employee in allowing the pretermination of Cabamongan
spouses' account despite the noted discrepancies in Carmelita's signature and photograph, the absence of the
original certificate of time deposit and the lack of notarized waiver dormant, constitutes gross negligence
amounting to bad faith under Article 2220 of the Civil Code.

5. Comsavings Bank (now GSIS Family Bank) v. Sps. Danilo and Estrella Capistrano

Facts: Respondents were the owners of a residential lot in Bacoor, Cavite. Desirous of building their own house
on the lot, they availed themselves of the UHLP implemented by the National Home Mortgage Finance
Corporation (NHMFC). They executed a construction contract with Carmencita Cruz-Bay, the proprietor of GCB
Builders. To finance the construction, GCB Builders facilitated their loan application with Comsavings Bank, an
NHFMC-accredited originator. They executed in favor of GCB Builders a deed of assignment. Comsavings Bank
informed respondent Estrella Capistrano that she would have to sign various documents as part of the
requirements for the release of the loan. Among the documents was a certificate of house completion and
acceptance. Comsavings Bank informed respondents of the approval of the interim-financing loan which was
given to GCB Builders as construction cost.

Respondents inquired from GCB Builder when their house would be completed considering that their contract
stipulated a completion period of 75 days. Cruz-Bay gave various excuses for the delay. The year 1992 ended
with the construction of the house unfinished. When respondents demanded the completion of the house, GCB
Builder’s asked for an additional construction cost. Respondents received a letter from NHMFC advising that
they should already start paying their monthly amortizations because their loan had been released directly to
Comsavings Bank. Estrella Capistrano went to the construction site and found to her dismay that the house was
still unfinished. Respondents wrote to NHMFC protesting the demand for amortization payments considering
that they had not signed any certification of completion and acceptance, and that even if there was such a
certification of completion and acceptance, it would have been forged.

Respondents sued GCB Builders and Comsavings Bank for breach of contract and damages, and amended their
complaint to implead NHMFC as an additional defendant. The RTC rendered a decision in favor of respondents.
The CA promulgated the appealed decision, affirming the RTC subject to the modification that NHMFC was
absolved of liability, and that the moral and exemplary damages were reduced. Hence, Comsavings Bank
appealed the case to the Supreme Court.

Issue: Whether petitioner bank liable with GCB Builders for breach of obligation

Held: Yes. The CA rightfully declared Comsavings Bank solidarily liable with GCB Builders for the damages
sustained by respondents. However, the Court pointed out that such liability did not arise from Comsavings
Bank’s breach of warranties under its purchase of loan agreement with NHMFC. Under the purchase of loan
agreement, it undertook, for value received, to sell, transfer and deliver to NHMFC the loan agreements,
promissory notes and other supporting documents that it had entered into and executed with respondents, and
warranted the genuineness of the loan documents and the “construction of the residential units.” Having made
the warranties in favor of NHMFC, it would be liable in case of breach of the warranties to NHMFC, not
respondents, eliminating breach of such warranties as a source of its liability towards respondents.

Instead, the liability of Comsavings Bank towards respondents was based on Article 20 and Article 1170 of the
Civil Code. Based on the provisions, a banking institution like Comsavings Bank is obliged to exercise the highest
degree of diligence as well as high standards of integrity and performance in all its transactions because its
business is imbued with public interest. Gross negligence connotes want of care in the performance of one’s
duties; it is a negligence characterized by the want of even slight care, acting or omitting to act in a situation
where there is duty to act, not inadvertently but willfully and intentionally, with a conscious indifference to
consequences insofar as other persons may be affected. It evinces a thoughtless disregard of consequences
without exerting any effort to avoid them.

There is no question that Comsavings Bank was grossly negligent in its dealings with respondents because it did
not comply with its legal obligation to exercise the required diligence and integrity. As a banking institution
serving as an originator under the UHLP and being the maker of the certificate of acceptance/completion, it was
fully aware that the purpose of the signed certificate was to affirm that the house had been completely
constructed according to the approved plans and specifications, and that respondents had thereby accepted
the delivery of the complete house. Given the purpose of the certificate, it should have desisted from presenting
the certificate to respondents for their signature without such conditions having been fulfilled. Had Comsavings
Bank been fair towards them as its clients, it should not have made them pre-sign the certificate until it had
confirmed that the construction of the house had been completed.

Comsavings Bank asserts that it submitted the certificate to NHMFC after the construction of the house had
been completed. The assertion could not be true, however, because Atty. Corona of NHMFC testified that he
had inspected the house on August 4, 1993 and had found the construction to be incomplete and defective. Had
Comsavings Bank complied with its duty of observing the highest degree of diligence, it would have checked
first whether the pictures carried the signatures of respondents on their dorsal sides, and whether the house
depicted on the pictures was really the house of respondents, before releasing the proceeds of the loan to GCB
Builders and before submitting the pictures to NHMFC for the reimbursement. Again, this is an indication of
Comsavings Bank’s gross negligence.

6. Land Bank of PH vs Onate

Facts:

LBP is a government financial institution created under RA 3844. From 1978 to 1980, Onate
opened and maintained seven (7) Trust Accounts with LBP, each was covered with an Investment Management
Account (IMA) with full discretion, and Onate appointed LBP as his agent with full powers to hold, invest, and
reinvest the fund.

On October 8, 1981, LBP claims a miscredit of P4M to 5 of Onate’s Trust Account, for as claimed by LBP
the checks deposited to these accounts were issued to LBP by their 4 corporate borrowers, who preterminated
their loans. Such checks were deposited allegedly by Polonio (Onate’s Representative) to Onate’s Trust Account,
and were later withdrawn by him.

Onate refused to return such funds after LBP has demanded it from him. A meeting was held yo settle
such matter, but has failed to reach an agreement. The issue of miscrediting remained unsettled, and on June
21, 1991, LBP unilaterally set-off the outstanding balance in all of Onate’s Accounts, debiting only P1,528,538.48.
 LBP filed a complaint for Sum of Money seeking to recover P8,222,687.89 plus legal interest per annum.
Onate in his answer, asserted that the set-off was without legal and factual basis. Onate further asserted
presence of undocumented withdrawals and such are unauthorized transactions from his accounts and must be
credited back to him.

Upon Onate’s motion, the RTC ordered to create a Board to examine the records of Onate’s 7 trust
accounts. The Board submitted reports of withdrawals without withdrawal slips from Onate’s account. LBP did
not file any comment or objection to the Boards consolidated report.

RTC RULING:

The RTC dismissed LBP’s complaint for failure to establish that P4M was allegedly miscredited to Onate’s
accounts, and ordered to restore the P1.5M set-off amount to Onate’s account On Onate’s counterclaim, RTC
rules that under the IMA’s, LBP had authority to withdraw even without withdrawal slips from Onate’s account.

Motion for reconsideration by LBP was denied. Both parties appealed to the CA.

CA RULING:

CA denied LBP’s appeal and granted Onate’s. CA affirmed RTC ruling and agreed that Onate is entitled
to the unaccounted withdrawals which was reported by the Board which was P60M and $3M. The CA anchored
on the bank’s failure to give full disclosure of the services rendered and should conduct its dealings with
transparency, as mandated in Bangko Sentral ng Pilipinas Manual of Regulation for Banks (MORB).

LBP filed for a Motion for Reconsideration, CA denied, hence LBP filed this Petition for Review on
Certiorari.

Issue: W/N land bank is guilty of negligence

Ruling:

No. As to the conceded inaccuracies in the reports, we cannot allow Land Bank to benefit therefrom.
Time and again, we have cautioned banks to spare no effort in ensuring the integrity of the records of its clients.
And in Philippine National Bank v. Court of Appeals, we held that "as between parties where negligence is
imputable to one and not to the other, the former must perforce bear the consequences of its neglect." In this
case, the Board could have submitted a more accurate report had Land Bank faithfully complied with its duty of
maintaining a complete and accurate record of Oñate’s accounts. But the Board could not find and present the
corresponding slips for the withdrawals reflected in the passbooks. In addition, and as earlier mentioned, Land
Bank was less than cooperative when the Board was examining the records of Oñate’s accounts. It did not give
the Board enough leeway to go over the records systematically or in orderly fashion. Hence, we cannot allow
Land Bank to benefit from possible inaccuracies in the reports.

Neither does Oñate’s failure to exercise his rights to inspect the records and audit his accounts excuse the bank
from sending the required notices, for under the IMAs it behooved upon Land Bank to keep him fully informed
of the status of his investments by sending him regular reports and statements. Oñate’s failure to inspect the
record of his accounts should neither be construed as his waiver to be furnished with updates on his accounts
nor authority for the bank to make undocumented withdrawals
 Had Land Bank maintained an accurate record, it would have readily detected and prevented over
withdrawals. But without any qualms, Land Bank asks for the negative balances, unmindful that such claim is
actually detrimental to its cause because it amounts to an admission that it allowed over withdrawals.
Corollarily, the Court cannot allow Land Bank to recover the negative balances from Oñate’s trust accounts.
Examining the Commissioners’ Report, the Court notes that the funds of Oñate’s trust accounts became
seriously depleted due to the unaccounted withdrawals that Land Bank charged against his accounts. At any
rate, those negative balances on Oñate’s accounts show Land Bank’s inefficient performance in managing his
trust accounts. Reasonable bank practice and prudence [dictate] that Land Bank should not have authorized the
withdrawal of various sums from Oñate’s accounts if it would result to overwithdrawals.

7. Macalinao vs. BPI

Facts:
Ileana Macalinao was an APPROVED cardholder of BPI Mastercard
She made some purchases through the use of the said credit card and defaulted in paying for said purchases.
She subsequently received a demand letter from BPI asking for the payment of PhP 141,518.34.
Terms and Conditions:
The charges or balance thereof remaining unpaid after the payment due date indicated on the monthly
Statement of Accounts shall bear interest at the rate of 3% per month for BPI Express Credit, BPI Gold
Mastercard and an additional penalty fee equivalent to another 3% of the amount due for every month
or a fraction of a months delay.
PROVIDED that if there occurs any change on the prevailing market rates, BCC shall have the option to
adjust the rate of interest and/or penalty fee due on the outstanding obligation with prior notice to the
cardholder. The Cardholder hereby authorizes BCC to correspondingly increase the rate of such interest
[in] the event of changes in the prevailing market rates, and to charge additional service fees as may be
deemed necessary in order to maintain its service to the Cardholder.
Macalinao failed to settle her obligations, and thus BPI filed a complaint for collection of sum of money.
CA Ruling:

The amount of PhP 141,518.34 already incorporated the interest rates in the said amount. Thus, the said amount
should not be made as basis in computing the total obligation of petitioner Macalinao. The CA also held,
however, that the MeTC erred in modifying the amount of interest rate from 3% monthly to only 2%
considering that petitioner Macalinao freely availed herself of the credit card facility offered by respondent
BPI to the general public.

Issue: Whether or not the interest rate and penalty charge of 3% per month impose by CA is iniquitous.

Held:
Yes.
 The interest rate and penalty charge of 3% per month should be equitably reduced to 2% per month or
24% per annum. Indeed, in the Terms and Conditions Governing the Issuance and Use of the BPI Credit Card,
there was a stipulation on the 3% interest rate. But, we held in Chua vs. Timan:

We need not unsettle the principle we had affirmed in a plethora of cases that stipulated interest rates
of 3% per month and higher are excessive, iniquitous, unconscionable and exorbitant. Such stipulations
are void for being contrary to morals, if not against the law. While C.B. Circular No. 905-82, which took
effect on January 1, 1983, effectively removed the ceiling on interest rates for both secured and unsecured
loans, regardless of maturity, nothing in the said circular could possibly be read as granting carte
blanche authority to lenders to raise interest rates to levels which would either enslave their borrowers
or lead to a hemorrhaging of their assets.

Since the stipulation on the interest rate is void, it is as if there was no express contract thereon.
Hence, courts may reduce the interest rate as reason and equity demand.[18]
The same is true with respect to the penalty charge. Pertinently, Article 1229 of the Civil Code states:
Art. 1229. The judge shall equitably reduce the penalty when the principal obligation has
been partly or irregularly complied with by the debtor. Even if there has been no performance,
the penalty may also be reduced by the courts if it is iniquitous or unconscionable.

Thus, under the circumstances, the Court finds it equitable to reduce the interest rate pegged by the CA
at 1.5% monthly to 1% monthly and penalty charge fixed by the CA at 1.5% monthly to 1% monthly or a total of
2% per month or 24% per annum in line with the prevailing jurisprudence and in accordance with Art. 1229 of
the Civil Code.

8. Heirs of Estelita Burgos-Lipat vs Heirs of Eugenio D Trinidad

Facts: Estelita Burgos-Lipat and Alfredo Lipat (spouses Lipat) obtained a P583,854 loan from Pacific Banking
Corporation (PBC), secured by a real estate mortgage. Due to petitioners' failure to pay their loans, PBC
foreclosed on the subject property. Eugenio D. Trinidad was declared the highest bidder during the public
auction and was issued a certificate of sale on January 31, 1989. The certificate of sale was registered on April
12, 1989.

Petitioners filed a complaint for annulment of mortgage, extra-judicial foreclosure and certificate of sale against
PBC, Eugenio D. Trinidad and the Registrar of Deeds and ex-officio sheriff of Quezon City. RTC dismissed the
complaint but granted petitioners five months and 17 days from the finality of the decision to exercise their
right of redemption over the foreclosed property.

Meanwhile, petitioners assigned their rights over the contested property to Partas Transporation Co., Inc. (PTCI).
PTCI exercised the right of redemption and paid the redemption amount computed by the sheriff. However,
respondents refused to claim the redemption money claiming the amount tendered was inadequate, the
interest of 1% per month was computed only for a one-year period. RTC upheld the exercise of redemption and
directed respondents to surrender the certificate of title.

Petitioners subsequently moved for execution, and the RTC granted. Without filing a MR of the order,
respondents immediately filed a petition for certiorari in the CA. CA granted respondents' petition and set aside
the RTC order of execution. It held that the right to redemption should have been exercised within one year
from the date of registration of the certificate of sale.

Issue: W/N the right to redemption should have been exercised within one year from the date of registration of
the certificate of sale.

Ruling: Yes.
The one-year redemption period is the rule that generally applies to foreclosure of mortgage by a bank. The
period of redemption is not tolled by the filing of a complaint or petition for annulment of the mortgage and
the foreclosure sale conducted pursuant to the said mortgage. However, in Lipat, the Supreme Court upheld
the RTC decision giving petitioners five months and 17 days from the finality of the trial court’s decision to
redeem their foreclosed property. Lipat, already final and executory, has therefore become the law of the case
between the parties, even though the said period was beyond one year from the date of registration of the sale.
The CA had no power to reverse the Court’s final and executory judgment.

9. HEIRS OF BURGOS-LIPAT vs HEIRS OF EUGENIO D. TRINIDAD

G.R. No. 185644; March 2, 2010

FACTS: Petitioners Estelita Burgos-Lipat and Alfredo Lipat (spouses Lipat) obtained a P583,854 loan from Pacific
Banking Corporation (PBC), secured by a real estate mortgage on their Quezon City property. The mortgage was
eventually extended to secure additional loans, discounting lines, overdrafts and credit accommodations that
petitioners subsequently obtained from PBC. Due to petitioners’ failure to pay their loans, PBC foreclosed on
the subject property. Eugenio D. Trinidad was declared the highest bidder during the public auction and was
issued a certificate of sale on January 31, 1989. The certificate of sale was registered on April 12, 1989.

Petitioners filed a complaint for annulment of mortgage, extra-judicial foreclosure and certificate of sale in QC
- RTC against PBC, Eugenio D. Trinidad and the Registrar of Deeds and ex-officio sheriff of Quezon City. In its
decision, the RTC dismissed the complaint but granted petitioners five months and 17 days from the finality of
the decision to exercise their right of redemption over the foreclosed property. The Supreme Court affirmed
this decision on April 30, 2003 in Lipat v. Pacific Banking Corporation. Meanwhile, petitioners assigned their
rights over the contested property to Partas Transporation Co., Inc. (PTCI). Within the given period left for
redemption, PTCI exercised the right of redemption and paid the redemption amount computed by the sheriff.
However, Respondent heirs of Trinidad refused to claim the redemption money and refused to surrender the
certificate of title covering the foreclosed property, claiming the amount tendered was inadequate, i.e., the
interest of 1% per month was computed only for a one-year period. Ultimately, the RTC upheld the exercise of
redemption and directed respondents to surrender the certificate of Respondents’ Motion for Reconsideration
was denied. They filed a notice of appeal which was also denied by the RTC. Petitioners subsequently moved for
execution of the order, which the RTC granted. Without filing a motion for reconsideration of the order,
respondents immediately filed a petition for certiorari in the CA. The CA granted respondents’ petition and set
aside the August 22, 2006 RTC order. It held that the right to redemption should have been exercised within one
year from the date of registration of the certificate of sale. Petitioners filed a motion for reconsideration but the
CA denied the same. Hence, this petition.

ISSUES:
1. Whether or not the CA is correct in denying the MR; and
2. Whether or not the Rate of Interest specified in the mortgage contract shall be applied for the one-year
period reckoned from the date of registration of the certificate of sale in accordance with the General
Banking Act.

RULING:

1. NO. Petitioners had five months and 17 days from the finality of Lipat to exercise their right of
redemption, even though this period was beyond one year from the date of registration of the sale. Thus,
the CA erred (and even committed a grave abuse of discretion) when it insisted on a contrary ruling. The
CA had no power to reverse this Court’s final and executory judgment. The CA overstepped its authority
when it held that the right of redemption had already expired one year after the date of the registration
of the certificate of sale. Like all other courts in our judicial system, the CA must take its bearings from
the rulings and decisions of this Court.

2. YES. We note that the amount tendered by petitioners to redeem their foreclosed property was
determined by the sheriff at the rate of one percent per month for only one year. Section 78 of the
General Banking Act requires payment of the amount fixed by the court in the order of execution, with
interest thereon at the rate specified in the mortgage contract, and all the costs and other judicial
expenses incurred by the bank or institution concerned by reason of the execution and sale and as a
result of the custody of said property less the income received from the property. The rate of interest
specified in the mortgage contract shall be applied for the one-year period reckoned from the date of
registration of the certificate of sale in accordance with the General Banking Act.
 10. ADVOCATES FOR TRUTH IN LENDING vs BSP G.R. No. 192986 January 15, 2013
FACTS:
"Advocates for Truth in Lending, Inc." (AFTIL) is a non-profit, non-stock corporation organized to engage
in pro bono concerns and activities relating to money lending issues. It was incorporated on July 9, 2010,and a
month later, it filed this petition, joined by its founder and president, Eduardo B. Olaguer, suing as a taxpayer
and a citizen.

HISTORY OF CENTRAL BANK’S POWER TO FIX MAX INTEREST RATES

1. R.A. No. 265, which created the Central Bank on June 15, 1948, empowered the CB-MB toset the maximum
interest rates which banks may charge for all types of loans and other credit operations.
2. The Usury Law was amended by P.D.1684, giving the CB-MB authority to prescribe different maximum rates
of interest which may be imposed for a loan or renewal thereof or the forbearance of any money, goods or
credits, provided that the changes are effected gradually and announced in advance. Section 1-a of Act No. 2655
now reads:
3. In its Resolution No. 2224 dated December 3, 1982, the CB-MB issued CB Circular No. 905, Series of 1982,
effective on January 1, 1983. It removed the ceilings on interest rates on loans or forbearance of any money,
goods or credits:
Sec. 1. The rate of interest, including commissions, premiums, fees and other charges, on a loan or forbearance
of any money, goods, or credits, regardless of maturity and whether secured or unsecured, that may be charged
or collected by any person, whether natural or juridical, shall not be subject to any ceiling prescribed under or
pursuant to the Usury Law, as amended.
4. R.A. No. 7653 establishing the BSP replaced the CB:
Sec. 135. Repealing Clause. — Except as may be provided for in Sections 46 and 132 of this Act, Republic Act No.
265, as amended, the provisions of any other law, special charters, rule or regulation issued pursuant to said
Republic Act No. 265, as amended, or parts thereof, which may be inconsistent with the provisions of this Act are
hereby repealed. Presidential Decree No. 1792 is likewise repealed.
Note: R.A. 7653 – the law that created BSP to replace CB – Note: this law did not retain the same provision as
that of Section 109 in RA 265.

PETITIONER’S ARGUMENTS
To justify their skipping the hierarchy of courts petitioners contend the transcendental importance of their
Petition:
a) CB-MB statutory or constitutional authority to prescribe the maximum rates of interest for all kinds of credit
transactions and forbearance of money, goods or credit beyond the limits prescribed in the Usury Law;
b) If so, whether the CB-MB exceeded its authority when it issued CB Circular No. 905, which removed all
interest ceilings and thus suspended Act No. 2655 as regards usurious interest rates;
c) Whether under R.A. No. 7653, the new BSP-MB may continue to enforce CB Circular No. 905.
· Petitioners contend that under Section 1-a of Act No. 2655, as amended by P.D. No. 1684, the CB-MB
was authorized only to prescribe or set the maximum rates of interest for a loan or renewal thereof or for the
forbearance of any money, goods or credits, and to change such rates whenever warranted by prevailing
economic and social conditions, the changes to be effected gradually and on scheduled dates; that nothing in
P.D. No. 1684 authorized the CB-MB to lift or suspend the limits of interest on all credit transactions, when it
issued CB Circular No. 905. They further insist that under Section 109 of R.A. No. 265, the authority of the CB-
MB was clearly only to fix the banks’ maximum rates of interest, but always within the limits prescribed by
the Usury Law.
· CB Circular No. 905, which was promulgated without the benefit of any prior public hearing, is void because
it violated NCC 5 which provides that "Acts executed against the provisions of mandatory or prohibitory laws
shall be void, except when the law itself authorizes their validity."
· weeks after the issuance of CB Circular No. 905, the benchmark 91-day Treasury bills shot up to 40% PA, as a
result. The banks followed suit and re-priced their loans to rates which were even higher than those of the
"Jobo" bills.
· CB Circular No. 905 is also unconstitutional in light of the Bill of Rights, which commands that "no person shall
be deprived of life, liberty or property without due process of law, nor shall any person be denied the equal
protection of the laws."
· R.A. No. 7653 did not re-enact a provision similar to Section 109 of RA 265, and therefore, in view of
the repealing clause in Section 135 of R.A. No. 7653, the BSP-MB has been stripped of the power either to
prescribe the maximum rates of interest which banks may charge for different kinds of loans and credit
transactions, or to suspend Act No. 2655 and continue enforcing CB Circular No. 905.

ISSUES: a. WON the Central Bank-Monetary Board exceeded its authority when it issued CB Circular No. 905
which removed all interest ceilings and thus suspended Act. No. 2655 as Usurious interest rates?
b. Whether under R.A. No. 7653 the BSP-MB may continue to enforce CB Circular No. 905?

HELD:
A. No. CB-MB merely suspended the effectivity of the Usury Law when it issued CB Circular No. 905. In
Medel v. CA, it was said that the circular did not repeal nor amend the Usury Law but simply suspended its
effectivity; that a Circular cannot repeal a low; that by virtue of CB the Usury Law has been rendered ineffective;
that the Usury has been legally non-existent in our jurisdiction and interest can now be charged as lender and
borrow may agree upon. Circular upheld the parties’ freedom of contract to agree freely on the rate of interest
citing Art. 1306 under which the contracting parties may establish such stipulations, clauses terms and
conditions as they may deem convenient provided they are not contrary to law, morals, good customs, public
order or public policy.

B. YES. BSP-MB has authority to enforce CB Circular No. 905. RA 265 covered only banks while Section 1-
a of the Usury Law, empowers the Monetary Board, BSP for that matter, to prescribe the maximum rate or rates
of interest for all loans or renewals thereof or the forbearance of any money, good or credits. The Usury Law is
broader in scope than RA 265, now RA 7653, the later merely supplemented the former as it provided regulation
for loans by banks and other financial institutions. RA 7653 was not unequivocally repealed by RA 765. CB
Circular 905 is essentially based on Section 1-a of the Usury Law and the Usury Law being broader in scope than
the law that created the Central Bank was not deemed repealed when the law replacing CB with the Bangko
Sentral was enacted despite the non-reenactment in the BSP Law of a provision in the CB Law which the
petitioners purports to be the basis of Circular 905. Granting that the CB had power to "suspend" the Usury Law,
the new BSP-MB did not retain this power of its predecessor, in view of Section 135 of R.A. No. 7653, which
expressly repealed R.A. No. 265. The petitioners point out that R.A. No. 7653 did not reenact a provision similar
to Section 109 of R.A. No. 265. A closer perusal shows that Section 109 of R.A. No. 265 covered only loans
extended by banks, whereas under Section 1-a of the Usury Law, as amended, the BSP-MB may prescribe the
maximum rate or rates of interest for all loans or renewals thereof or the forbearance of any money, goods or
credits, including those for loans of low priority such as consumer loans, as well as such loans made by
pawnshops, finance companies and similar credit institutions. It even authorizes the BSP-MB to prescribe
different maximum rate or rates for different types of borrowings, including deposits and deposit substitutes,
or loans of financial intermediaries. Act No. 2655, an earlier law, is much broader in scope, whereas R.A. No.
265, now R.A. No. 7653, merely supplemented it as it concerns loans by banks and other financial institutions.
Had R.A. No. 7653 been intended to repeal Section 1-a of Act No. 2655, it would have so stated in unequivocal
terms. Moreover, the rule is settled that repeals by implication are not favored, because laws are presumed
to be passed with deliberation and full knowledge of all laws existing pertaining to the subject.An implied
repeal is predicated upon the condition that a substantial conflict or repugnancy is found between the new and
prior laws. Thus, in the absence of an express repeal, a subsequent law cannot be construed as repealing a prior
law unless an irreconcilable inconsistency and repugnancy exists in the terms of the new and old laws. We find
no such conflict between the provisions of Act 2655 and R.A. No. 7653. n Castro v. Tan, the Court held that the
imposition of unconscionable interest is immoral and unjust. It is tantamount to a repugnant spoliation and an
iniquitous deprivation of property repulsive to the common sense of man. They are struck down for being
contrary to morals, if not against the law, therefore deemed inexistent and void ab initio. However this nullity
does not affect the lender’s right to recover the principal of the loan nor affect the other terms thereof.

Magulo ba? Hahaha. Basta the present set up is: The power of the BSP Monetary Board to determine interest
rates emanates from the Usury Law [which was further specified by Circular 905.

11. Jose Go vs. BSP

Facts:
On August 20, 1999, an Information for violation of Section 83 of Republic Act No. 337 (RA 337) or the General
Banking Act, as amended by Presidential Decree No. 1795, was filed against Go before the RTC
In support of his motion to quash, Go averred that based on the facts alleged in the Information, he was being
prosecuted for borrowing the deposits or funds of the Orient Bank and/or acting as a guarantor, indorser or
obligor for the bank’s loans to other persons and to to the New Zealand Accounts loans in the total amount of
approximately two billion.
Go claimed that the charge was not only vague, but also did not constitute an offense. He posited that Section
83 of RA 337 penalized only directors and officers of banking institutions who acted either as borrower or as
guarantor, but not as both. Go further pointed out that the Information failed to state that his alleged act of
borrowing and/or guarantying was not among the exceptions provided for in the law. According to Go, the
second paragraph of Section 83 allowed banks to extend credit accommodations to their directors, officers,
and stockholders, provided it is "limited to an amount equivalent to the respective outstanding deposits and
book value of the paid-in capital contribution in the bank." Extending credit accommodations to bank
directors, officers, and stockholders is not per se prohibited, unless the amount exceeds the legal limit. Since
the Information failed to state that the amount he purportedly borrowed and/or guarantied was beyond the
limit set by law, Go insisted that the acts so charged did not constitute an offense.
Issue: Whether or not GO is liable for being violation of SEC 83 of R.A 337 as a guarantor and borrower and
for extending such credit accomodations
Ruling:
Yes. 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;
3. the offender has performed any of such acts without the written approval of the majority of the directors
of the bank, excluding the offender, as the director concerned.

A simple reading of the above elements easily rejects Go’s contention that the law penalizes a bank director
or officer only either for borrowing the bank’s deposits or funds or for guarantying loans by the bank, but not
for acting in both capacities. The essence of the crime is becoming an obligor of the bank without securing
the necessary written approval of the majority of the bank’s directors.
The second element merely lists down the various modes of committing the offense. The third mode, by
declaring that "[no director or officer of any banking institution shall xxx] 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 bank’s 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.
Additional Notes
Credit accommodation limit is not an exception nor is it an element of the offense
Contrary to Go’s claims, the second paragraph of Section 83, RA 337 does not provide for an exception to a
violation of the first paragraph thereof, nor does it constitute as an element of the offense charged. Section 83
of RA 337 actually imposes three restrictions: approval, reportorial, and ceiling requirements.
The approval requirement (found in the first sentence of the first paragraph of the law) refers to the written
approval of the majority of the bank’s board of directors required before bank directors and officers can in any
manner be an obligor for money borrowed from or loaned by the bank. Failure to secure the approval renders
the bank director or officer concerned liable for prosecution and, upon conviction, subjects him to the penalty
provided in the third sentence of first paragraph of Section 83.
The reportorial requirement, on the other hand, mandates that any such approval should be entered upon the
records of the corporation, and a copy of the entry be transmitted to the appropriate supervising department.
The reportorial requirement is addressed to the bank itself, which, upon its failure to do so, subjects it to quo
warranto proceedings under Section 87 of RA 337.
The ceiling requirement under the second paragraph of Section 83 regulates the amount of credit
accommodations that banks may extend to their directors or officers by limiting these to an amount equivalent
to the respective outstanding deposits and book value of the paid-in capital contribution in the bank. Again, this
is a requirement directed at the bank. In this light, a prosecution for violation of the first paragraph of Section
83, such as the one involved here, does not require an allegation that the loan exceeded the legal limit. Even
if the loan involved is below the legal limit, a written approval by the majority of the bank’s directors is still
required; otherwise, the bank director or officer who becomes an obligor of the bank is liable. Compliance
with the ceiling requirement does not dispense with the approval requirement.

12. HILARIO P. SORIANO VS. PEOPLE OF THE PHILIPPINES

FACTS: The Office of Special Investigation (OSI) of the Bangko Sentral ng Pilipinas (BSP), through its officers,
transmitted a letter the Chief State Prosecutor of the Department of Justice (DOJ). The said letter were
accompanied with five affidavits which would allegedly serve as basis for filing criminal charges for Estafa thru
Falsification of Commercial Documents, in relation to P.D. No. 1689, and for Violation of Sec. 83 of R.A. 337, as
amended, against the petitioner herein.
The five affidavits, along with other documents stated that Sps. Enrico and Amalia Carlos appeared to have an
outstanding loan of Php 8 million with the Rural Bank of San Miguel (RBSM), but had never applied nor received
such loan; and that it was petitioner, who was the president of RBSM, who had ordered, facilitated, and
received the proceeds of the loans; and that the said Php 8 million loan had never been authorized by the RBSM
Board of Directors and no report thereof had been submitted to the Department of Rural Banks, Supervision and
Examination Sector of the BSP.
ISSUE: Whether or not the petitioner violated the prohibition against DOSRI Loans as provided under Sec. 83
of R.A. 337.
RULING: YES. In this case Soriano was the president of RBSMI, is among those officers prohibited by law to secure loans
from the said bank. Thus, when in his capacity as president of RBSM, indirectly secured an Php 8 Million loan with
RBSM, for his personal use and benefit, without the written consent and approval of RBSM’s Board of Directors,
and without entering the said transaction into the bank’s records, and without transmitting a copy of the
transaction to the supervising department of the BSP, Soriano clearly violated the provision of Sec. 83 of R.A. No.
377 as amended.
13. Koruga vs. Arcenas Jr.

Facts: Ana Maria Koruga filed two petitions before the RTC of Makati City against the Board of Directors of Banco
Filipino and the Members of the Monetary Board of the Bangko Sentral ng Pilipinas (BSP) for violation of the
Corporation Code, for inspection of records of a corporation by a stockholder, for receivership, and for the
creation of a management committee.
Koruga is a minority stockholder of Banco Filipino Savings and Mortgage Bank. Koruga's Complaint charged
defendants with violation of Sections 31 to 34 of the Corporation Code, prohibiting self-dealing and conflict of
interest of directors and officers; invoked her right to inspect the corporation's 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.
Arcenas, et al. argue that Koruga's petition should be dismissed for its defective Verification and Certification
Against Forum-Shopping, since only a facsimile of the same was attached to the Petition. They also claim that
the Verification and Certification Against Forum-Shopping, allegedly executed in Seattle, Washington, was not
authenticated in the manner prescribed by Philippine law and not certified by the Philippine Consulate in the
United States.
Issue: Whether or not the BSP has jurisdiction over Koruga complaint?
Ruling: Yes. BSP has jurisdiction over the case. It is clear that the acts complained of pertain to the conduct of
Banco Filipino's banking business. A bank, as defined in the General Banking Law, refers to an entity engaged in
the lending of funds obtained in the form of deposits. The banking business is properly subject to reasonable
regulation under the police power of the state because of its nature and relation to the fiscal affairs of the
people and the revenues of the state. Banks are affected with public interest because they receive funds from
the general public in the form of deposits. It is the Government's responsibility to see to it that the financial
interests of those who deal with banks and banking institutions, as depositors or otherwise, are protected. In
this country, that task is delegated to the BSP, which pursuant to its Charter, is authorized to administer the
monetary, banking, and credit system of the Philippines. It is further authorized to take the necessary steps
against any banking institution if its continued operation would cause prejudice to its depositors, creditors and
the general public as well. The law vests in the BSP the supervision over operations and activities of banks.
14. BSP Monetary Board v. Hon. Antonio – Valenzuela G.R. No. 184778, Oct. 2, 2009
Facts: On September 2007, the Supervision and Examination Dept. (SED) of BSP conducted examinations of the
books of several banks, including but not limited to Rural Bank of Paranaque (RBPI). After the examinations, the
SED examiners provided the banks with copies of Lists of Findings/Exceptions containing deficiencies discovered
during the examinations. The banks were then required to comment and to undertake the remedial measures
stated in the lists within 30 days from receipt thereof. The remedial measured include the infusion of additional
capital. Though the banks claimed that they have made additional capital infusions, Fonacier, OIC of SED sent
letters to the BOD’s of each bank informing them that they failed to carry out the required remedial measures.
The banks requested that they be given ample time to obtain BSP approval to amend their Articles of
Incorporation and seek for more investors. They also requested that the basis for capital infusion figures be
disclosed and further noted that none of them had received the Report of Examination (ROE) which finalizes the
audit findings. They then requested meetings with BSP audit teams to reconcile audit figures. Fonacier, however,
in response, only reiterated the bank’s failure to comply with the directive foradditional capital infusions.
RBPI, on May 12, 2008 filed a complaint for nullification of the BSP ROE with application for a TRO and writ of
preliminary injunction before the RTC (presided by Valenzuela) against Fonacier, BSP, et. Al. RBPI prayed that
Fonacier and the others acting in her behalf be enjoined from submitting the ROE or any similar report to the
Monetary Board (MB) of if the ROE had been submitted, that the MB be enjoined from acting on the basis of
said ROE, on the allegation that the failure to furnish the bank with a copy of the ROE violated its right to due
process.
The other banks also subsequently filed cases similar to that of RBPI. The RTC granted RBPI’s prayer for
issuance of a TRO. After the cases were consolidated, the RTC also granted the prayer of the issuance of a TRO
in favor of the other banks.
On May 26, 2008, petitioners filed a MTD against all complaints on the grounds that the complaints stated no
cause of action and that a condition precedent for filing the cases had not been complied with.
The RTC, however ruled that the banks were entitled to the writs of preliminary injunction prayed for by the
banks. It held that it had been the practice of the SED to provide the ROE’s to the banks before submission to
the MB. It also mentioned that the banks should be entitled to the copies of the ROE’s and the denial of the
banks’ requests for copies of such was tantamount to denial of their right to due process.
When petitioners brought the matter to the CA via PFC (Rule 65), the CA ruled that the RTC committed no grave
abuse of discretion. The CA held that the principles of fairness and transparency dictate that the banks are
entitled to copes of the ROE.
On Nov 24, 2008, a TRO was issued by the SC restraining the CA, RTC and respondents from implementing and
enforcing the CA Decision. Because of this TRO, the SED was able to submittheir ROEs to the MB. The MB then
prohibited the respondent banks from transacting business and placed them under receivership under Sec. 53
of RA 8791 and Sec 30 of RA 7653.
Issue: Whether injunction was proper due to the failure by SED to furnish banks copies of the respective ROE’s.
Ruling: NO.It had been previously held that the requisites for preliminary injunction are: the invasion of right
sought to be protected is material and substantial; the right of the complainant is clear and unmistakable; and
there is an urgent and paramount necessity for the writ to prevent serious damage.
Hence, a writ of preliminary injunction may be issued only upon clear showing of an actual existing right to be
protected during the pendency of the principal action. The twin requirements of a valid injunction are the
existence of a right and its actual or threatened violations. Thus, to be entitled to an injunctive writ, the right to
be protected and the violation against that right must be shown.
In the present case, the above requirements are absent. The lower courts held that the submission of the ROEs
to the MB before the banks would violate the right to due process of said banks. However, contrary to their
assertions, the banks are not entitled to copies of the ROEs. None of the provisions of the New Central Bank Act
provides that the banks are recipients of the ROE.

15. CENTRAL BANK VS CA GR 88353

Facts:
Petitioner Central Bank and conservator claims that during the regular examination of herein respondent
Producers Bank of the Philippines (PBP) it stumbled upon some highly questionable loans which the latter
extended to PBP owners themselves without collateral. At the height of controversy of discovering these
anomalous loans, it triggered a bank-run in PBP which resulted in continuous over-drawings on the bank’s
demand deposit account with the CB. The over-drawings’ continued increase prompted the MB to place PBP
under conservatorship. PBP failing to submit a rehabilitation plan, the MB proposed its own which it considers
as viable but PBP made no response. A few days later, PBP filed a complaint before the RTC contending that its
placement under conservatorship was unwarranted, ill-motivated, illegal, utterly unnecessary and unjustified
and that the appointed conservators committed bank frauds and abuses. RTC ruled all the way in favor of PBP.
Hence petitioners filed separate petitions which were then consolidated before the Court.
Issue: Whether or not PBP was deprived of due process before being placed under conservatorship
Ruling: NO.
The fact that PBP is grossly overdrawn on its reserve account with the CB (up to P1.233 billion as of 13 February
1990) is not disputed by PBP. This enormous overdraft evidences the patent inability of the bank’s management
to keep PBP liquid. This fact alone sufficiently justifies the remedial measures taken by the Monetary Board.
MB Resolutions Nos. 649 and 751 were not promulgated to arbitrarily divest the present stockholders of control
over PBP, as is claimed by the latter. The same contemplates an effective and viable plan to revive and restore
PBP. It is to be noted that before issuing these resolutions, the MB gave the management of PBP ample
opportunity to submit a viable rehabilitation plan for the bank. MB Resolution Nos. 751 merely reiterated the
requirement set forth in Resolution No. 649 for PBP to identify and submit the list of new stockholders who will
infuse new capital into the bank for CB approval. In this Resolution, the MB gave PBP’s stockholders one (1)
week from notice within which to signify their acceptance or rejection of the proposed rehabilitation plan.
The foregoing resolutions refer to a recommended rehabilitation plan. What was conveyed to PBP was a mere
proposal. There was nothing in the resolutions to indicate that the plan was mandatory. On the contrary, PBP
was given a specific period within which to accept or reject the plan. And, as petitioners correctly pointed out,
the plan was not self-implementing. The warning given by the MB that should said proposal be rejected, the CB
“will take appropriate alternative actions on the matter,” does not make the proposed rehabilitation plan
compulsory. Whether or not there is a rehabilitation plan agreed upon between PBP and the MB, the CB is
authorized under R.A. No. 265 to take appropriate measures to protect the interest of the bank’s depositors as
well as of the general public.
There is nothing objectionable to the actions of the MB. We, therefore, find to be completely without legal or
evidentiary basis the contention that the impugned resolutions are arbitrary, illegal and made in bad faith.

16. First Philippine International Bank (Formerly Producer Bank) vs Court of Appeals

Facts: In the course of its banking operations, the Producer Bank of the Philippines acquired 6 parcels of land
with a total area of 101 hectares located at Don Jose, Sta. Rosa, Laguna and covered by TCT No. T-106932 to T-
106937. The property used to be owned by BYME Investment and Development Corporation which hd them
mortgaged with the bank as collateral for a loan. The plaintiff originals, Demetrio Demetria and Jose Janolo
wanted to purchase the property and thus initiated negotiations for that purpose. In the early part of August
1987 said plaintiffs, upon the suggestion of BYME investment’s legal counsel, Fajardo met with defendant
Mercurio Rivera, manager of the property management department of the defendant bank. The meeting was
held in pursuant to plaintiffs’ plan to buy the property. After the meeting, plaintiff Janolo, following the advice
of defendant Rivera made a formal purchase offer to the Bank through a letter dated August 30,1987.
Negotiations took place and an offer price was fixed at P5.5million. During the course of the negotiations, the
defendant bank was placed under conservatorship and a new conservator was appointed to which the name
has been refused to recognize. A derivative suit has been filed against Rivera for the damages suffered from the
alleged perfect contract of sale involving the 6 parcels of land.

Issue: Whether or not a derivative suit may lie involving the bank and its stockholders.

Held: No. An individual stockholder is permitted to institute a derivative suit on behalf of the corporation
wherein he hold stock in order to protect or vindicate corporate rights, whenever the officials of the corporation
refuse to sue, or are the ones, to be sued or hold the control of the corporation. In such actions, the suing
stockholder is regarded as a nominal party with the corporation as the real party in interest.
In the face of the damaging admissions taken from the complaint in the second case, petitioners, quite strangely,
sought to deny that the second case was a derivative suit, reasoning that it was brought not by the minority
shareholders, but by Henry Co. etal. who not only hold or control over 80% of the outstanding capital stock, but
also constitute the majority in the board of directors of petitioners bank. That being so, then they really
represent the bank, so whether they sued derivatively or directly, there is undeniably an identity of
interest/entity represented.

In addition to the many cases, where the corporate fiction has been regarded, we now add the instant case, and
declare herewith that the corporate veil cannot be used to shield an otherwise blatant violation of the
prohibition against forum shopping. Shareholders, whether suing as the majority in direct actions or as the
minority in a derivative suit, cannot be allowed to trifle with court processes particularly where, as in this case,
the corporation itself has not been remiss in vigorously prosecuting or defending corporate causes and in using
and applying remedies available to it. To rule otherwise would be to encourage corporate litigants to use their
shareholders as fronts to circumvent the stringent rules against forum shopping.

From the facts, the official bank price, at any rte, the bank placed its official, Rivera is a position of authority to
accept offers to buy and negotiate the sale by having the offer officially acted upon by the bank. The bank cannot
turn around and say, as it now does, that what Rivera states as the bank’s action on the matter is not in fact so.
It is a familiar doctrine, the doctrine of ostensible authority, that if a corporation on knowingly permits one of
its officers, or any other agent, to do acts within the scope of apparent authority, and thus holds him out to the
public as possessing power to do those acts, the corporation will, as against any one who has in good faith dealt
with the corporation through such agent, he estopped from denying his authority.

A bank is liable for wrongful acts of its officers done in the interest of the bank or in he course of dealings of the
officers in their representative capacity but not for acts outside the scope of their authority. A bank holding out
its officers and agents as worthy of confidence will not be permitted to profit by the frauds they my thus be
enabled to perpetrate in the apparent scope of their employment; nor will it be permitted to shrink its
responsibility for such fraud even through no benefit may accrue to the bank therefrom. Accordingly, a banking
corporation is liable to innocent third persons where the representation is made in the course of its business by
an agent acting within the general scope of its authority even though, in the particular case, the agent is secretly
abusing his authority and attempting to perpetrate fraud upon his principal or some other person, for his own
ultimate benefit.
Section 28-A of BP 68 merely gives the conservator power to revoke contracts that are, under existing law,
deemed not to be effective – i.e void, voidable, unenforceable or rescissible. Hence, the conservator merely
takes the place of a bank’s board of directors. What the said board cannot do – such as repudiating a contract
validly entered into under the doctrine of implied authority – the conservator cannot do either.

17. RURAL BANK OF SAN MIGUEL VS MONETARY BOARD (2007)

FACTS:

Respondent Monetary Board (MB) issued Resolution No. 105 prohibiting Petitioner from doing business in
the Philippines, placing it under receivership and designating respondent Philippine Deposit Insurance
Corporation (PDIC) as receiver.

Petitioners filed a petition to nullify and set aside Resolution No. 105. However, they filed a notice of withdrawal
in the RTC and, on the same day, filed a special civil action for certiorari and prohibition in the CA. The RTC
dismissed the case pursuant to Section 1, Rule 17 of the Rules of Court.

The CA’s findings of facts were as follows; To assist its impaired liquidity and operations, the RBSM was granted
emergency loans on different occasions. Land Bank of the Philippines (LBP) advised RBSM that it will terminate
the clearing of RBSM’s checks in view of the latter’s frequent clearing losses and continuing failure to replenish
its Special Clearing Demand Deposit with LBP. The BSP interceded with LBP not to terminate the clearing
arrangement of RBSM to protect the interests of RBSM’s depositors and creditors.

The MB approved the release of ₱26.189 [million] which is the last tranche of the ₱375 million emergency loan
for the sole purpose of servicing and meeting the withdrawals of its depositors. RBSM failed to comply.

On January 4, 2000, RBSM declared a bank holiday. RBSM and all of its 15 branches were closed from doing
business. Alarmed and disturbed by the unilateral declaration of bank holiday, [BSP] wanted to examine the
books and records of RBSM but encountered problems.

Meanwhile, RBSM’s designated comptroller, Ms. Zenaida Cabais of the BSP, submitted to the Department of
Rural Banks, BSP, a Comptrollership Report on her findings on the financial condition and operations of the
bank.
Based on these comptrollership reports, the MB, after evaluating and deliberating on the issued Resolution
No. 105. Thereafter, PDIC implemented the closure order and took over the management of RBSM’s assets
and affairs.

Pertinently, on the basis of reports prepared by PDIC stating that RBSM could not resume business with
sufficient assurance of protecting the interest of its depositors, creditors and the general public, the MB
passed Resolution No. 966 directing PDIC to proceed with the liquidation of RBSM under Section 30 of RA
7653.

ISSUE: W/N Section 30 of RA 7653 (also known as the New Central Bank Act) and applicable jurisprudence
require a current and complete examination of the bank before it can be closed and placed under receivership.

RULING: YES

It is well-settled that the closure of a bank may be considered as an exercise of police power. The action of the
Monetary Board (MB) on this matter is final and executory. 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.

Thus an “examination [conducted] by the head of the appropriate supervising or examining department or his
examiners or agents into the condition of the bank” is necessary before the MB can order its closure. However,
RA 265, including Section 29 thereof, was expressly repealed by RA 7653. Hence, petitioners’ reliance on Banco
Filipino which was decided under RA 265 was misplaced. In RA 7653, only a “report of the head of the supervising
or examining department” is necessary. It is an established rule in statutory construction that where the words
of a statute are clear, plain and free from ambiguity, it must be given its literal meaning and applied without
attempted interpretation.

This Court cannot look for or impose another meaning on the term “report” or to construe it as synonymous
with “examination.” From the words used in Section 30, it is clear that RA 7653 no longer requires that an
examination be made before the MB can issue a closure order. We cannot make it a requirement in the absence
of legal basis.

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

18. Abacus Real Estate Development v Manila Banking Corp

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

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

When Abacus expressed its desire to exercise its exclusive option to purchase the building, Manila Bank refused
to honor it. Abacus insists that the option to purchase the lot and building granted to it by Puyat was
binding upon Manila Bank. On the other hand, the bank insists that Puyat had no authority to act for Manila
bank, as it was already placed under receivership by the Central Bank at the time of the granting of the exclusive
option to purchase.

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

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

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

19. Vivas vs. Monetary Board of the Bangko Sentral ng Pilipinas

Facts: The corporate life of RBFI expired on May 31, 2005. Notwithstanding, petitioner Alfeo D. Vivas and his
principals acquired the controlling interest in RBFI sometime in January 2006.. Certain measures calculated to
revitalize the bank were introduced.2 On December 8, 2006, the Bangko Sentral issued the Certificate of
Authority extending the corporate life of RBFI for another 50 years as well as its change of its corporate name
to EuroCredit Community Bank, Incorporated. Pursuant to Section 28 of RA No. 7653, otherwise known as The
New Central Bank Act, the Integrated Supervision Department II of the BSP conducted a general examination
on ECBI. Sometime in April 2008, the examiners from the Department of Loans and Credit of the BSP arrived at
the ECBI and cancelled the rediscounting line of the bank. Vivas appealed the cancellation to BSP. 5Thereafter,
the Monetary Board issued Resolution No. 1255, placing ECBI under Prompt Corrective Action framework
because of the negative findings during the general examination. Vivas claimed that the BSP took the above
courses of action due to the joint influence exerted by a certain hostile shareholder and a former BSP examiner.
Vivas moved for a reconsideration of Resolution No. 1255 on the grounds of non-observance of due process and
arbitrariness. In its letter, dated February 20, 2009, the BSP directed ECBI to explain why it transferred the
majority shares of RBFI without securing the prior approval of the MB in apparent violation of Subsection X126.2
of the Manual of Regulation for Banks.Also, the scheduled March 31, 2009 general examination of the books,
records and general condition of ECBI did not push through. According to Vivas, ECBI asked for the deferment
of the examination pending resolution of its appeal before the MB as Vivas believed that he was being treated
unfairly because the letter of authority to examine allegedly contained a clause which pertained to the Anti-
Money Laundering Law and the Bank Secrecy Act. The MB, on the other hand, posited that ECBI unjustly refused
to allow the BSP examiners from examining and inspecting its books and records, in violation of Sections 25 and
34 of R.A. No. 7653.
In view of ECBI’s refusal to comply with the required examination, the MB issued Resolution No. 726, dated
May 14, 2009, imposing monetary penalty on ECBI, and referred the matter to the Office of the Special
Investigation for the filing of appropriate legal action.
On March 4, 2010, the MB issued Resolution No. 27623 placing ECBI under receivership in accordance with the
recommendation of the ISD II which reads:
Issue: Whether or not the MB may place ECBI under receivership
Held: Yes. The MB issued Resolution No. 276, dated March 4, 2010, in the exercise of its power under. Under
Section 30 R.A. No. 7653 The New Central Bank Act, any act of the MB placing a bank under conservatorship,
receivership or liquidation may not be restrained or set aside except on a petition for certiorari. The Monetary
Board, under R.A. No. 7653, has been invested with more power of closure and placement of a bank under
receivership for insolvency or illiquidity, or because the bank’s continuance in business would probably result in
the loss to depositors or creditors. In the case of Bangko Sentral Ng Pilipinas Monetary Board v. Hon. Antonio-
Valenzuela, 602 SCRA 698 (2009), the Court reiterated the doctrine of “close now, hear later,” stating that it was
justified as a measure for the protection of the public interest. Thus: The “close now, hear later” doctrine has
already been justified as a measure for the protection of the public interest. Swift action is called for on the
part of the BSP when it finds that a bank is in dire straits. Unless adequate and determined efforts are taken by
the government against distressed and mismanaged banks, public faith in the banking system is certain to
deteriorate to the prejudice of the national economy itself, not to mention the losses suffered by the bank
depositors, creditors, and stockholders, who all deserve the protection of the government. To address the
growing concerns in the banking industry, the legislature has sufficiently empowered the Monetary Board to
effectively monitor and supervise banks and financial institutions and, if circumstances warrant, to forbid
them to do business, to take over their management or to place them under receivership. The MB was given
a wide discretion and latitude only as to how the law should be implemented in order to attain its objective of
protecting the interest of the public, the banking industry and the economy.

20. Jerry Ong v Court of Appeals GR No. 112830

Facts:
On 5 February 1991 Jerry Ong filed with the Regional Trial Court of Quezon City a petition for the
surrender of two TCTs pursuant to the provisions of Secs. 63(b) and 107 of P.D. 1529 against Rural Bank of
Olongapo, Inc. (RBO), represented by its liquidator Guillermo G. Reyes, Jr., and deputy liquidator Abel Allanigue.
RBO was the owner in fee simple of two parcels of land including the improvements thereon situated in
Tagaytay City these were duly mortgaged by RBO in favor of Jerry Ong on December 29, 1983 to guarantee the
payment of Omnibus Finance, Inc., which is likewise now undergoing liquidation proceedings of its money
market obligations to Jerry Ong.
Jerry Ong proceeded to effect the extrajudicial foreclosure of said mortgages, for Omnibus Finance, Inc.,
failure to seasonably settle its obligations to petitioner. On March 23, 1984, the City Sheriff of Tagaytay City
issued a Certificate of Sale in favor of petitioner. It was duly registered with the Registry of Deeds.
Respondents failed to seasonably redeem said parcels of land, for which reason, petitioner has executed
an Affidavit of Consolidation of Ownership which, to date, has not been submitted to the Registry of Deeds of
Tagaytay City, in view of the fact that possession of the aforesaid titles or owner’s duplicate certificates of title
remains with the RBO.
Respondent RBO filed a motion to dismiss on the ground of res judicata alleging that petitioner had
earlier sought a similar relief from Br. 18 of the Regional Trial Court of Tagaytay City, which case was dismissed
with finality on appeal before the Court of Appeals.
 In a supplemental motion to dismiss, respondent RBO contended that it was undergoing liquidation and,
pursuant to prevailing jurisprudence, it is the liquidation court which has exclusive jurisdiction to take
cognizance of petitioner’s claim.
On 7 May 1991 the trial court denied the motion to dismiss because it found that the causes of action in
the previous and present cases were different although it was silent on the jurisdictional issue.
The CA reversed the TC and ordered the case to be dismissed without prejudice to the petitioner’s right
to file his claim in the liquidation proceedings.
Issue:
Whether or not the liquidation court has jurisdiction over the claim of petitioner for the surrender of the
transfer certificates of titles
Ruling:
Yes.
1. COMMERCIAL LAW; INSOLVENCY; CENTRAL BANK ACT (R.A. 265 AS AMENDED BY P.D. 1827); JUDICIAL
LIQUIDATION; PURPOSE THEREOF. — Judicial liquidation is intended to prevent multiplicity of actions against
the insolvent bank. It is a pragmatic arrangement designed to establish due process and orderliness in the
liquidation of the bank, to obviate the proliferation of litigations and to avoid injustice and arbitrariness. The
lawmaking body contemplated that for convenience only one court. if possible, should pass upon the claims
against the insolvent bank and that the liquidation court should assist the Superintendent of Banks and regulate
his operations.
2. ID.; ID.; ID.; LIQUIDATION COURT; HAS JURISDICTION OVER ALL CLAIMS AGAINST INSOLVENT BANK; CASE
AT BENCH. — The phrase" (T)he court shall have jurisdiction in the same proceedings to adjudicate disputed
claims against the bank" appears to have misled petitioner. He argues that to the best of his personal knowledge
there is no pending action filed before any court or agency which contests his right over subject properties. Thus
his petition before the Regional Trial Court of Quezon City cannot be considered a "disputed claim" as
contemplated by law. It is not necessary that a claim be initially disputed in a court or agency before it is filed
with the liquidation court. Petitioner must have overlooked the fact that since respondent RBO is insolvent other
claimants not privy to their transaction may be involved. As far as those claimants are concerned, in the absence
of certificates of title in the name of petitioner, subject lots still form part of the assets of the insolvent bank.
On the basis of the Hernandez case as well as Sec. 29, par. 3, of R.A. 265 as amended by P.D. 1827, respondent
Court of Appeals was correct in holding that the Regional Trial Court of Quezon City, Br. 79, did not have
jurisdiction over the petition, much less in ordering the dismissal of petitioner’s complaint, without prejudice to
petitioner’s right to file his claim in the liquidation court.
21. Domingo R. Manalo v. CA and PAIC Savings and Mortgage Bank [GR. 141297, Oct. 8, 2001]

FACTS: S. Villanueva Enterprises [SVE], represented by its President, Therese Villanueva Vargas, secured two
loans: P3M from PR, and P1M from Philippine American Investments Corporation [PAIC]. To secure the payment
of both loans, Vargas executed a Joint First Mortgage over two parcels of land under her name in favor of
respondent and PAIC. SVE defaulted in payment of its amortizations and failed to settle its loan obligations
despite repeated demands. Respondent instituted an extrajudicial foreclosure. Subject property were sold to
respondent at a public auction for being the highest bidder(Aug. 22, 1984). Vargas failed to exercise right of
redemption. On Oct. 29, 1986, the Central Bank of PH, as the liquidator of PR, filed a petition for assistance in
the liquidation of PR bank. It was found that Vargas tried to repurchase the subject property by negotiating with
the Central Bank from 1986-1991. Vargas couldn’t pay the repurchase price based on the appraised value of the
time, so negotiations fizzled out.

Later, Vargas sold the lots in question to Armando Angsico, representing herself to be its lawful owner. She
leased it to Manalo for a period of 10 years. Angsico assigned his rights to Manalo. Vargas, SVE, and any and all
persons claiming rights or title over the subject lots were ordered to surrender its possession to the respondent
bank. Manalo filed a motion to intervene, which was denied by the lower court and the CA. Hence this petition.

ISSUE: WON the power to hear the case at bar is exclusively vested in the Liquidation Court.

HELD: No. Sec. 29 of the Central Bank Act states that “The liquidator designated as hereunder provided shall, by
the Solicitor General, file a petition in the Regional Trial Court reciting the proceedings which have been taken
and praying the assistance of the court in the liquidation of such institution. The court shall have jurisdiction in
the same proceedings to assist in the adjudication of disputed claims against the bank or non-bank financial
intermediary performing quasi-banking functions and the enforcement of individual liabilities of the
stockholders and do all that is necessary to preserve the assets of such institution and to implement the
liquidation plan approved by the Monetary Board.”

However, the legal provision only finds operation in cases where there are claims against an insolvent bank. In
fine, the exclusive jurisdiction of the liquidation court pertains only to the adjudication of claims against the
bank. It does not cover the reverse situation where it is the bank which files a claim against another person
or legal entity. Sec. 29 is intended to avoid multiplicity of claims.

Manalo casts doubt on the capacity of the respondent to continue litigating the petition for the issuance of the
writ. He asserts that, being under liquidation, respondent bank is already a "dead" corporation that cannot
maintain the suit in the RTC. Hence, no writ may be issued in its favor.
The argument is devoid of merit. A bank which had been ordered closed by the monetary board retains its
juridical personality which can sue and be sued through its liquidator. The only limitation being that the
prosecution or defense of the action must be done through the liquidator. Otherwise, no suit for or against an
insolvent entity would prosper. In such situation, banks in liquidation would lose what justly belongs to them
through a mere technicality.

22. Miranda v PDIC

Facts: Miranda was a depositor of Prime Savings Bank. (june 3) She withdrew substantial amounts but instead
of cash she opted to be issued a crossed cashier’s check (cashier’s check no. 0000000518) worth 2.5M and worth
3.002M - Miranda deposited the two checks into her account in another bank however, Bangko Sentral ng
Pilipinas (BSP) suspended the clearing privileges of Prime Savings Bank effective 2:00 p.m. of June 3, 1999. Prime
Savings Bank declared a bank holiday. - The two checks of petitioner were returned to her unpaid. - 2000 the
BSP placed Prime Savings Bank under the receivership of the Philippine Deposit Insurance Corporation (PDIC) -
Miranda filed a civil action for sum of money to recover the funds from her unpaid checks against Prime Savings
Bank, PDIC and the BSP. (TC – MIRANDA WON) - CA - Reversed the TC and ruled in favor of the PDIC and BSP,
dismissing the case against them

Issue: (1) Whether the two cashier’s checks operate as an assignment of funds in the hands of the petitioner;

(2) Whether the claim lodged by the petitioner is a disputed claim under Section 30 of Republic Act (R.A.) No.
7653, and therefore, under the jurisdiction of the liquidation court; and

(3) Whether the respondents are solidarily liable to the petitioner.

Ruling: 1. No. The two cashier’s checks issued by Prime Savings Bank do not constitute an assignment of funds
in the hands of the petitioner as there were no funds to speak of in the first place. The bank was financially
insolvent for sometime, even before the issuance of the checks on June 3, 1999.

2. Yes. The claim lodged by the petitioner qualifies as a disputed claim subject to the jurisdiction of the
liquidation court. Regular courts do not have jurisdiction over actions filed by claimants against an insolvent
bank, unless there is a clear showing that the action taken by the BSP, through the Monetary Board in the closure
of financial institutions was in excess of jurisdiction, or with grave abuse of discretion. The power and authority
of the Monetary Board to close banks and liquidate them thereafter when public interest so requires is an
exercise of the police power of the State. “Disputed claims” refer to all claims, whether they be against the
assets of the insolvent bank, for specific performance, breach of contract, damages, or whatever. Miranda’s
claim which involved the payment of the two cashier’s checks that were not honored by Prime Savings Bank due
to its closure falls within the ambit of a claim against the assets of the insolvent bank. The issuance of the
cashier’s checks by Prime Savings Bank to the petitioner created a debtor/creditor relationship between them.
This disputed claim should therefore be lodged in the liquidation proceedings by the petitioner as creditor, since
the closure of Prime Savings Bank has rendered all claims subsisting at that time moot which can best be
threshed out by the liquidation court and not the regular courts. It is well-settled in both law and jurisprudence
that the Central Monetary Authority, through the Monetary Board, is vested with exclusive authority to assess,
evaluate and determine the condition of any bank, 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.

3. No. it is only Prime Savings Bank that is liable to pay for the amount of the two cashier’s checks. Solidary
liability cannot attach to the BSP, in its capacity as government regulator of banks, and the PDIC as statutory
receiver under R.A. No. 7653, because they are the principal government agencies mandated by law to
determine the financial viability of banks and quasi-banks, and facilitate receivership and liquidation of closed
financial institutions, upon a factual determination of the latter’s insolvency.

Extra: MIRANDA argues She is an assignee of the funds of Prime Savings Bank as drawer thereof and entitled to
its immediate payment. (because of checks) The disputed claims refer to all claims She cannot be placed on the
same footing with the ordinary creditors of the bank because Section 30 of R.A. No. 7653 is for equality among
creditors.

PDIC alleges the mere issuance of the cashier’s checks did not operate as assignment of funds in favor of the
petitioner. cashier’s checks issued to petitioner were not certified but crossed, hence, there was no assignment
of funds instant case involves a disputed claim of sum of money against a closed financial institution. Sections
30 and 31 of R.A. No. 7653, exclusively vests the authority to assess, evaluate and determine the condition of
any bank with the BSP, while the PDIC has the primary responsibility of acting as receiver or liquidator of the
closed financial institution. it was impleaded in its representative capacity as the receiver/liquidator of the
closed institution, therefore, it has no direct, personal and solidary liability for the payment of the two cashier’s
checks.
23. Onate vs. Abrogar

Facts:

On December 23, 1991, respondent Sun Life filed a complaint for a sum of money with a prayer for the
immediate issuance of a writ of attachment against petitioners Onate and Dino. Respondent Judge granted the
prayer and the writ was correspondingly issued. After the summons were eventually served upon petitioners,
the latter filed motions to discharge/dissolve the attachment. Meanwhile, Sun Life filed motions for examination
of petitioners’ bank accounts. this time seeking the examination of Account No. 0041-0277-03 with the Bank of
Philippine Islands (BPI) — which, incidentally, petitioners claim not to be owned by them — and the records of
Philippine National Bank (PNB) with regard to checks payable to Brunner. Sun Life asked the court to order both
banks to comply with the notice of garnishment. Respondent judge ruled in all the motions in favor of Sun Life.
Petitioners moved for reconsideration but were denied.

Issue:

Whether or not respondent judge erred in allowing the examination of the bank accounts of herein petitioners.

Ruling:

No. We find both petitions unmeritorious.

It is clear from the foregoing provision that notice need only be given to the garnishee, but the person who is
holding property or credits belonging to the defendant. The provision does not require that notice be furnished
the defendant himself, except when there is a need to examine said defendant “for the purpose of giving
information respecting his property.

Furthermore, Section 10 Rule 57 is not incompatible with Republic Act No. 1405, as amended, “An Act
Prohibiting Disclosure or Inquiry Into, Deposits With Any Banking Institution and Providing Penalty Therefore,”
for Section 2 therefore provides an exception “in cases where the money deposited or invested is the subject
matter of the litigation.”

The examination of the bank records is not a fishing expedition, but rather a method by which Sun Life could
trace the proceeds of the check it paid to petitioners.
24. INTENGAN vs. COURT OF APPEALS
FACTS:
On September 21, 1993, Citibank filed a complaint for violation of section 31 in relation to section 144 of the
Corporation Code against two (2) of its officers, Dante L. Santos and Marilou Genuino.
The complaint was attached with the affidavit of Vic Lim, VP of Citibank, who was then instructed by the higher
management of the bank to investigate the anomalous/highly irregular activities of the said officers.
As evidence, Lim annexed bank records purporting to establish the deception practiced by Santos and Genuino.
Some of the documents pertained to the dollar deposits of petitioners Carmen Ll. Intengan, Rosario Ll. Neri, and
Rita P. Brawner.
In turn, private respondent Joven Reyes, vice-president/business manager of the Global Consumer Banking
Group of Citibank, admits to having authorized Lim to state the names of the clients involved and to attach the
pertinent bank records, including those of petitioners’

Petitioners aver that respondents violated RA 1405 (Bank Secrecy Law).

ISSUES: Whether or not Respondents are liable for violation of Secrecy of Bank Deposits Act, RA 1405.

RULING:
NO. The accounts in question are U.S. dollar deposits; consequently, the applicable law is not Republic Act No.
1405, but Republic Act (R.A.) No. 6426, known as the “Foreign Currency Deposit Act of the Philippines,”section
8 of which provides: Sec. 8. Secrecy of Foreign Currency Deposits.—All foreign currency deposits authorized
under this Act, as amended by Presidential Decree No. 1035, as well as foreign currency deposits authorized
under Presidential Decree No. 1034, are hereby declared as and considered of an absolutely confidential nature
and, except upon the written permission of the depositor, in no instance shall such foreign currency deposits be
examined, inquired or looked into by any person, government official bureau or office whether judicial or
administrative or legislative or any other entity whether public or private: Provided, however, that said foreign
currency deposits shall be exempt from attachment, garnishment, or any other order or process of any court,
legislative body, government agency or any administrative body whatsoever.

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

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

Facts:

Special Prosecution Panel filed on January 20, 2003 before the Sandiganbayan a Request for Issuance of
Subpoena Duces Tecum for the issuance of a subpoena directing the President of Export and Industry Bank (EIB,
formerly Urban Bank) or his/her authorized representative to produce the bank account of the petitioner Victor
Ejercito for examination for the alleged violation of RA 7080 “plunder”. The Sandiganbayan granted the request
by Resolution of January 21, 2003 and subpoenas were accordingly issued.

Petitioner, claiming to have learned from the media that the Special Prosecution Panel had requested
for the issuance of subpoenas for the examination of bank accounts belonging to him, attended the hearing of
the case on January 27, 2003 and filed before the Sandiganbayan a letter of even date expressing his concerns
that it is in violation of the banking secrecy laws RA 1405 hence any evidences gathered thereto should be
rendered illegal. Petitioner’s request was denied hence this present petition on certiorari under rule 65.

Issue: Whether or not examination of the bank of account of the petitioner was valid

Ruling:

Yes. we go back to the original provision of Section 2 of R.A. No. 1405 allowing deposits to be "examined,
inquired or looked into" under the following exceptions: (1) upon written permission of the depositor; (2) in
cases of impeachment; (3) upon order of a competent court in cases of bribery or dereliction of duty of public
officials; or (4) in cases where the money deposited or invested is the subject matter of the litigation.

Additional exceptions are provided in other laws, such as:

(c) Republic Act No. 9160, the Anti-Money Laundering Law of 2001, where the Anti-Money Laundering Council
is allowed to examine deposit or investment with any banking institution or non-bank financial institution upon
order of any competent court, when it has been established that there is probable cause that the deposits or
investments are in any way related to a money laundering offense (Section 11).
26. Mellon Bank, N.A. v. Magsino, G.R. No. 71479, Oct. 18, 1990

Facts:

Mellon Bank filed a complaint docketed as No. 148056 in the Superior Court of California, County of Kern, against
Melchor Javier, Jane Doe Javier, Honorio Poblador, Jr., and Does I through V. In its first amended complaint to
impose constructive trust dated July 14, 1977,1 Mellon Bank alleged that it had mistakenly and inadvertently
caused the transfer of the sum of $999,000.00 to Jane Doe Javier; that it believes that the defendants had
withdrawn said funds; that "the defendants and each of them have used a portion of said funds to purchase real
property located in Kern County, California"; and that because of defendants' knowledge of Mellon Bank's
mistake and inadvertence and their use of the funds to purchase the property, they and "each of them are
involuntary or constructive trustees of the real property and of any profits therefrom, with a duty to convey the
same to plaintiff forthwith." It prayed that the defendants and each of them be declared as holders of the
property in trust for the plaintiff; that defendants be compelled to transfer legal title and possession of the
property to the plaintiff; that defendants be made to pay the costs of the suit, and that other reliefs be granted
them.

Issue: In an action filed by the bank to recover the money transmitted by mistake, can the bank be allowed to
present the accounts which it believed were responsible for the acquisition of the money?

Ruling:

Yes, R.A. 1405 allows the disclosure of bank deposits in cases where the money deposited is the subject
matter of litigation. In an action filed by the bank to recover the money transmitted by mistake, necessarily,
an inquiry into the whereabouts of the amount extends to whatever is concealed by being held or recorded
in the name of the persons other than the one responsible for the illegal acquisition.

Private respondents' protestations that to allow the questioned testimonies to remain on record would be in
violation of the provisions of Republic Act No. 1405 on the secrecy of bank deposits, is unfounded. Section 2 of
said law allows the disclosure of bank deposits in cases where the money deposited is the subject matter of the
litigation. Inasmuch as Civil Case No. 26899 is aimed at recovering the amount converted by the Javiers for their
own benefit, necessarily, an inquiry into the whereabouts of the illegally acquired amount extends to whatever
is concealed by being held or recorded in the name of persons other than the one responsible for the illegal
acquisition.
27. Marquez v Desierto

Facts: Petitioner Lourdes Marquez received an Order from respondent Ombudsman Aniano Desierto to produce
several bank documents for purposes of inspection in camera relative to various accounts maintained at the
bank where petitioner is the branch manager. The accounts to be inspected are involved in a case pending with
the Ombudsman entitled, Fact-Finding and Intelligence Bureau (FFIB) v. Amado Lagdameo. It appears that a
certain George Trivinio purchased trail managers check and deposited some of it to an account maintained at
petitioner’s branch. Petitioner after meeting with the FFIB Panel to ensure the veracity of the checks agreed to
the in camera inspection. Petitioner being unable to readily identify the accounts in question, the Ombudsman
issued an order directing petitioner to produce the bank documents. Thus, petitioner sought a declaration of
her rights from the court due to the clear conflict between RA 6770 and RA 1405. Meanwhile, FFIB moved to
cite petitioner in contempt before the Ombudsman.

Issue: Whether or not the order of Ombudsman to have an in camera inspection of the accounts is an allowable
exception of R.A. No. 1405.

Ruling: NO. The order of the Ombudsman to produce for in camera inspection the subject accounts with the
Union Bank of the Philippines, Julia Vargas Branch, is based on a pending investigation at the Office of the
Ombudsman against Amado Lagdameo, et. al. for violation of R.A. No. 3019, Sec. 3 (e) and (g) relative to the
Joint Venture Agreement between the Public Estates Authority and AMARI.

We rule that before an in camera inspection may be allowed, there must be a pending case before a court of
competent jurisdiction. Further, the account must be clearly identified, the inspection limited to the subject
matter of the pending case before the court of competent jurisdiction. 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. In short, what the office of the ombudsman would wish to do
is to fish for additional evidence to formally charge Amado Lagdameo, et. al., with the Sandiganbayan. Clearly,
there was no pending case in court which would warrant the opening of the bank account for inspection.

*In contrast to Ejercito v. Sandiganbayan. Interestingly, time is of the essence. A different ruling in Ejercito was
enunciated because there was already a pending investigation months before the ruling made in this case as to
the exemption in the power of the Ombudsman.

28 - REFER TO THE MORTGAGE LAW (A)

29. Salvacion vs Central Bank

Greg Bartelli y Northcott, an American tourist, coaxed and lured petitioner Karen Salvacion, then 12 years old
to go with him to his apartment. He detained her for 4 days, and was able to rape the child once on February 4,
and three times each day on February 5, 6, and 7, 1989. On February 7, 1989, after policemen and people living
nearby, rescued Karen, Greg Bartelli was arrested and detained at the Makati Municipal Jail. The policemen
recovered the following items: 1.) Dollar Check No. 368, Control No. 021000678-1166111303, US 3,903.20; 2.)
COCOBANK Bank Book No. 104-108758-8 (Peso Acct.); 3.) Dollar Account — China Banking Corp.,
US$/A#54105028-2; 4.) ID-122-30-8877; 5.) Philippine Money (P234.00) cash; 6.) Door Keys 6 pieces; 7.) Stuffed
Doll (Teddy Bear) used in seducing the complainant.

Makati Investigating Fiscal Edwin G. Condaya filed against Greg Bartelli, a case for Serious Illegal Detention and
4 cases for (4) counts of Rape. Petitioners filed with the RTC Civil Case No. 89-3214 for damages with preliminary
attachment against Greg Bartelli. On the day there was a scheduled hearing for Bartelli's petition for bail, the
latter escaped from jail.

The court granted the fiscal's Urgent Ex-Parte Motion for the Issuance of Warrant of Arrest and Hold Departure
Order. Meanwhile, in Civil Case No. 89-3214, the Judge issued an Order the application of herein petitioners, for
the issuance of the writ of preliminary attachment. After petitioners gave Bond by FGU Insurance Corporation
in the amount of P100,000.00, a Writ of Preliminary Attachment was issued by the trial court.

Deputy Sheriff of Makati served a Notice of Garnishment on China Banking Corporation. China Banking
Corporation invoked Republic Act No. 1405 as its answer to the notice of garnishment served on it. Deputy
Sheriff his reply to China Banking Corporation saying that the garnishment did not violate the secrecy of bank
deposits since the disclosure is merely incidental to a garnishment properly and legally made by virtue of a court
order which has placed the subject deposits in custodia legis. China Banking Corporation invoked Section 113 of
Central Bank Circular No. 960 to the effect that the dollar deposits or defendant Greg Bartelli are exempt from
attachment, garnishment, or any other order or process of any court, legislative body, government agency or
any administrative body, whatsoever.

This prompted the counsel for petitioners to make an inquiry with the Central Bank on whether Section 113 of
CB Circular No. 960 has any exception or whether said section has been repealed or amended since said section
has rendered nugatory the substantive right of the plaintiff to have the claim sought to be enforced by the civil
action secured by way of the writ of preliminary attachment as granted to the plaintiff under Rule 57 of the
Revised Rules of Court. The Central Bank replied “The cited provision is absolute in application. It does not admit
of any exception, nor has the same been repealed nor amended.”

Meanwhile, the trial court granted petitioners' motion for leave to serve summons by publication in the Civil
Case No. 89-3214 entitled "Karen Salvacion, et al. vs. Greg Bartelli y Northcott." Summons with the complaint
was a published in the Manila Times once a week for three consecutive weeks. Greg Bartelli failed to file his
answer to the complaint and was declared in default. After hearing the case ex-parte, the court rendered
judgment in favor of petitioners .

Petitioners aver as heretofore stated that Section 113 of Central Bank Circular No. 960 providing that "Foreign
currency deposits shall be exempt from attachment, garnishment, or any other order or process of any court,
legislative body, government agency or any administrative body whatsoever." should be adjudged as
unconstitutional on the grounds that: 1.) it has taken away the right of petitioners to have the bank deposit of
defendant Greg Bartelli y Northcott garnished to satisfy the judgment rendered in petitioners' favor in violation
of substantive due process guaranteed by the Constitution; 2.) it has given foreign currency depositors an undue
favor or a class privilege in violation of the equal protection clause of the Constitution; 3.) it has provided a safe
haven for criminals like the herein respondent Greg Bartelli y Northcott since criminals could escape civil liability
for their wrongful acts by merely converting their money to a foreign currency and depositing it in a foreign
currency deposit account with an authorized bank;

Issue: W/N Section 113 of Central Bank Circular No. 960 should be strictly complied with
Ruling: No.

It is worth mentioning that R.A. No. 6426 was enacted in 1983 or at a time when the country's economy was in
a shambles; when foreign investments were minimal and presumably, this was the reason why said statute was
enacted. But the realities of the present times show that the country has recovered economically; and even if
not, the questioned law still denies those entitled to due process of law for being unreasonable and oppressive.
The intention of the questioned law may be good when enacted. The law failed to anticipate the iniquitous
effects producing outright injustice and inequality such as the case before us.

In fine, the application of the law depends on the extent of its justice. Eventually, if we rule that the questioned
Section 113 of Central Bank Circular No. 960 which exempts from attachment, garnishment, or any other order
or process of any court, legislative body, government agency or any administrative body whatsoever, is
applicable to a foreign transient, injustice would result especially to a citizen aggrieved by a foreign guest like
accused Greg Bartelli. This would negate Article 10 of the New Civil Code which provides that "in case of doubt
in the interpretation or application of laws, it is presumed that the lawmaking body intended right and justice
to prevail. "Ninguno non deue enriquecerse tortizeramente con dano de otro." Simply stated, when the statute
is silent or ambiguous, this is one of those fundamental solutions that would respond to the vehement urge of
conscience. (Padilla vs. Padilla, 74 Phil. 377).
It would be unthinkable, that the questioned Section 113 of Central Bank No. 960 would be used as a device by
accused Greg Bartelli for wrongdoing, and in so doing, acquitting the guilty at the expense of the innocent.
30. REPUBLIC v. GLASGOW

FACTS: The Republic filed a complaint in the RTC for civil forfeiture of assets against the bank deposits in an
account maintained by Glasgow in CSBI. The case was filed pursuant to the Anti-Money Laundering Act.

Summons to Glasgow was returned "unserved" as it could no longer be found at its last known address.

The Republic filed a motion for (a) issuance of alias summons and (b) leave of court to serve summons by
publication.

The trial court archived the case for the Republic’s failure to serve the alias summons. The Republic filed a
motion to (a) reinstate the case and (b) resolve its pending motion for leave of court to serve summons by
publication.

The trial court reinstated the case and directed the Republic to serve the alias summons on Glasgow and CSBI
within 15 days. However, it did not resolve the Republic’s motion for leave of court to serve summons by
publication declaring:

The Republic received a copy of the sheriff’s return stating that the alias summons was returned "unserved" as
Glasgow was no longer holding office at the given address since July 2002 and left no forwarding address.

Glasgow filed a Motion to Dismiss alleging that (1) the court had no jurisdiction over its person as summons had
not yet been served on it; (2) the complaint was premature and stated no cause of action as there was still no
conviction for estafa or other criminal violations implicating Glasgow.

ISSUE: Whether the complaint was correctly dismissed on grounds of improper venue, insufficiency in form and
substance.
RULING: NO.

On issue of venue: the complaint was filed in the proper venue.

Under Section 3, Title II of the Rule of Procedure in Cases of Civil Forfeiture, “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 xxx”
In this case, RTC Manila, as one of the RTCs of the NCR Judicial Region was a proper venue of the Republic’s
complaint for civil forfeiture of Glasgow’s account since the account sought to be forfeited was in Pasig City,
which is likewise situated within the NCR Judicial Region.

1. On issue of sufficiency of complaint: the complaint was sufficient in form and in substance
Under Section 4 of the aforementioned Rules, “the petition for civil forfeiture shall be verified and shall contain
the following allegations: (a) the name and address of the respondent; a description with reasonable
particularity of the monetary instrument, property xxx; and (c) the acts or omissions prohibited by the specific
provisions of the AMLA, which are alleged to be the grounds relied upon for the forfeiture of the monetary
instrument, property xxx.”

In this case, the verified complaint contained the name and address of Glasgow (principal office at Unit 703, 7th
floor, Citystate Center, No 709, Shaw Boulevard, Pasig City); a description of the proceeds of Glasgow’s unlawful
activities in the amount of P21,301,430.28 maintained with CSBI; and the acts prohibited by RA 9160 (AMLA),
particularly suspicious transaction reports showed that Glasgow engaged in unlawful activities of estafa and
violation of the Securities Regulation Code, the proceeds were transacted and deposited with CSBI, thereby
making them appear to have originated from legit sources and the AMLC subjected the account to a freeze
order.

Pertinent provisions of RA 9160 also provide two conditions when applying for civil forfeiture:
a. When there is a suspicious transaction report or a covered transaction report deemed suspicious
after investigation by the AMLC and
b. The court has, in a petition filed for the purpose, ordered the seizure of any monetary instrument or
property, in whole or in part, directly or indirectly, related to said report.

The account of Glasgow in CSBI complies with the above conditions since it was covered by several suspicious
reports and it was placed under control of the trial court upon issuance of the writ of preliminary injunctions.

Also, there need not be any prior charge, pendency or conviction necessary for the commencement of a petition
for civil forfeiture.
31. Republic vs Cabrini

FACTS: In the exercise of its power under Section 10 of RA 9160, the Anti-Money Laundering Council (AMLC)
issued freeze orders against various bank accounts of respondents. The frozen bank accounts were previously
found prima facie to be related to the unlawful activities of respondents.
Under RA 9160, a freeze order issued by the AMLC is effective for a period not exceeding 15 days unless
extended “upon order of the court.” Accordingly, before the lapse of the period of effectivity of its freeze orders,
the AMLC2 filed with the Court of Appeals (CA) various petitions for extension of effectivity of its freeze orders.
The AMLC invoked the jurisdiction of the CA in the belief that the power given to the CA to issue a TRO or writ
of injunction against any freeze order issued by the AMLC carried with it the power to extend the effectivity of
a freeze order. In other words, the AMLC interpreted the phrase “upon order of the court” to refer to the CA.
However, the CA disagreed with the AMLC and dismissed the petitions.

ISSUE: Which court has jurisdiction to extend the effectivity of a freeze order?

RULING: Court of Appeals.

During the pendency of these petitions, or on March 3, 2003, Congress enacted RA 9194 (An Act Amending
Republic Act No. 9160, Otherwise Known as the “Anti-Money Laundering Act of 2001”).6 It amended Section 10
of RA 9160 as follows:
SEC. 7. Section 10 of [RA 9160] is hereby amended to read as follows:
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 Sec. 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.”(emphasis
supplied)
Section 12 of RA 9194 further provides:
SEC. 12. Transitory Provision.—Existing freeze orders issued by the AMLC shall remain in force for a period of
thirty (30) days after theeffectivity of this Act, unless extended by the Court of Appeals.
The Office of the Solicitor General (OSG) filed a “Very Urgent Motion to Remand Cases to the Honorable
Court of Appeals. The OSG prayed for the remand of these cases to the CA pursuant to RA 9194.
The amendment by RA 9194 of RA 9160 erased any doubt on the jurisdiction of the CA over the extension of
freeze orders. As the law now stands, it is solely the CA which has the authority to issue a freeze order as well
as to extend its effectivity. It also has the exclusive jurisdiction to extend existing freeze orders previously issued
by the AMLC vis-à- vis accounts and deposits related to money-laundering activities.
32. LIGOT v. REPUBLIC

Facts:
In 2005, the Republic, represented by the Anti-Money Laundering Council (AMLC), filed an Urgent Ex-
Parte Application for the issuance of a freeze order with the CA against certain monetary instruments and
properties of the petitioners, pursuant to Section 104 of RA 9160, (Anti-Money Laundering Act of 2001).
Lt. Gen. Ligot declared in his SALN that as of 2003, he had assets in the total amount of almost 4m. In
contrast, his declared assets in his 1982 SALN amounted to only 105k.
Ombudsman’s investigation revealed that Lt. Gen. Ligot and his family had other properties and bank
accounts, not declared in his SALN, amounting to at least 54m. These were declared to be illegally obtained and
unexplained wealth, pursuant to the provisions of RA No. 1379 (An Act Declaring Forfeiture in Favor of the State
Any Property Found to Have Been Unlawfully Acquired by Any Public Officer or Employee and Providing for the
Proceedings Therefor). Furthermore, the Ombudsman concluded that Yambao (Mrs. Ligot’s brother) acted as a
dummy and/or nominee of the Ligot spouses, and all the properties registered in Yambao’s name actually belong
to the Ligot family. Yambao did not have a substantial salary during his employment yet the records show that
he has real properties and vehicles registered in his name amounting to almost 9m, which he acquired from
1993 onwards.
April 2005 - Ombudsman for the Military and Other Law Enforcement Officers issued a resolution
holding that probable cause exists that Lt. Gen. Ligot violated Section 8, in relation to Section 11, of RA No. 6713,
as well as Article 183 (False testimony in other cases and perjury in solemn affirmation) of the Revised Penal
Code.
On May 25, 2005, the AMLC issued Resolution No. 52, Series of 2005, directing the Executive Director
of the AMLC Secretariat to file an application for a freeze order against the properties of Lt. Gen. Ligot and the
members of his family with the CA. Subsequently, on June 27, 2005, the Republic filed an Urgent Ex-Parte
Application with the appellate court for the issuance of a Freeze Order against the properties of the Ligots and
Yambao.

On July 2005- CA ruled that probable cause existed that an unlawful activity and/or money laundering
offense had been committed by Lt. Gen. Ligot and his family, including Yambao, and that the properties
sought to be frozen are related to the unlawful activity or money laundering offense. Accordingly, the CA
issued a freeze order against the Ligots’ and Yambao’s various bank accounts, web accounts and vehicles, valid
for a period of 20 days from the date of issuance.

In September 2005 – CA extended the freeze order over the Ligots’ various bank accounts and personal
properties "until after all the appropriate proceedings and/or investigations being conducted are terminated."

The Ligots have not been able to access the properties subject of the freeze order for six years or so
simply on the basis of the existence of probable cause to issue a freeze order, which was intended mainly as
an interim preemptive remedy.

Issue:
Whether or not a freeze order may be issued for an indefinite period
Held:
No.
The Court fixed the maximum allowable extension on the freeze order’s effectivity at six months. In doing so,
the Court sought to balance the State’s interest in going after suspected money launderers with an individual’s
constitutionally-protected right not to be deprived of his property without due process of law, as well as to be
presumed innocent until proven guilty.

We GRANT the petition and LIFT the freeze order issued by the Court of Appeals in CA G.R. SP No. 90238. This
lifting is without prejudice to, and shall not affect, the preservation orders that the lower courts have ordered
on the same properties in the cases pending before them. Pursuant to Section 56 of A.M. No. 05-11-04-SC, the
Court of Appeals is hereby ordered to remand the case and to transmit the records to the Regional Trial Court
of Manila, Branch 22, where the civil forfeiture proceeding is pending, for consolidation therewith as may be
appropriate.

RATIO:
1. Nothing in the law grants the owner of the "frozen" property any substantive right to demand that the freeze
order be lifted, except by implication, i.e., if he can show that no probable cause exists or if the 20-day period
has already lapsed without any extension being requested from and granted by the CA. Notably, the Senate
deliberations on RA No. 9160 even suggest the intent on the part of our legislators to make the freeze order
effective until the termination of the case, when necessary.
2. The silence of the law, does not in any way affect the Court’s own power under the Constitution to
"promulgate rules concerning the protection and enforcement of constitutional rights xxx and procedure in all
courts."
 Court created A.M. No. 05-11-04-SC which limits the effectivity of an extended freeze order to six
months – to otherwise leave the grant of the extension to the sole discretion of the CA, which may
extend a freeze order indefinitely or to an unreasonable amount of time – carries serious implications
on an individual’s substantive right to due process.
 This right demands that no person be denied his right to property or be subjected to any governmental
action that amounts to a denial. The right to due process, under these terms, requires a limitation or at
least an inquiry on whether sufficient justification for the governmental action.
3. As a rule, the effectivity of a freeze order may be extended by the CA for a period not exceeding six months.
Before or upon the lapse of this period, ideally, the Republic should have already filed a case for civil forfeiture
against the property owner with the proper courts and accordingly secure an asset preservation order or it
should have filed the necessary information. Otherwise, the property owner should already be able to fully enjoy
his property without any legal process affecting it. However, should it become completely necessary for the
Republic to further extend the duration of the freeze order, it should file the necessary motion before the
expiration of the six-month period and explain the reason or reasons for its failure to file an appropriate case
and justify the period of extension sought. The freeze order should remain effective prior to the resolution by
the CA, which is hereby directed to resolve this kind of motion for extension with reasonable dispatch.

Enumeration in the case:

I. 2 requisites for the issuance of a freeze order
1. Application ex parte by the AMLC
2. Determination of probable cause by the CA
II. What the 2 laws are saying about freeze orders
1. Anti-Money Laundering Act of 2001, Sec 10 – “the freeze order shall be for a period of 20 days unless extended
by the court”
2. Rule in Civil Forfeiture Cases, Sec 55 qualifies grant for extension “for a period not exceeding six months” “for
good cause” shown.
III. A freeze order is both.
1. Preservatory remedy
2. Preemptive remedy

33. Dona Adela Export International, Inc. vs Trade and Investment Development Corporation
Facts: Petitioner Doña Adela filed a Petition for Voluntary Insolvency and was declared to be insolvent. Atty.
Arlene Gonzales was appointed as receiver. Creditors TIDCORP and BPI filed a Joint Motion to Approve
Agreement which contained a Waiver of Confidentiality clause that states that the petitioner and its BOD waive
all rights to confidentiality provided under the provisions of Law on Secrecy of Bank Deposits, and The General
Banking Law of 2000. RTC approved the said motion.

Petitioner filed a motion for partial reconsideration and claimed that TIDCORP and BPI’s agreement imposes on
it several obligations such as payment of expenses and taxes and waiver of confidentiality of its bank deposits
but it is not a party and signatory to the said agreement. RTC denied the motion and held that petitioner’s
silence and acquiescence to the joint motion to approve compromise agreement while it was set for hearing by
creditors BPI and TIDCORP is tantamount to admission and acquiescence thereto.

Petitioner asserts that express and written waiver from the depositor concerned is required by law before any
third person or entity is allowed to examine bank deposits or bank records.

Issue: W/N the petitioner is bound by the provision in the BPI-TIDCORP Joint Motion to Approve Agreement
regarding the Waiver of Confidentiality?

Ruling: No

In this case, the Joint Motion to Approve Agreement was executed by BPI and TIDCORP only. There was no
written consent given by petitioner or its representative, Epifanio Ramos, Jr., that petitioner is waiving the
confidentiality of its bank deposits. The provision on the waiver of the confidentiality of petitioner’s bank
deposits was merely inserted in the agreement. It is clear therefore that petitioner is not bound by the said
provision since it was without the express consent of petitioner who was not a party and signatory to the said
agreement.

Neither can petitioner be deemed to have given its permission by failure to interpose its objection during the
proceedings. It is an elementary rule that the existence of a waiver must be positively demonstrated since a
waiver by implication is not normally countenanced. The norm is that a waiver must not only be voluntary, but
must have been made knowingly, intelligently, and with sufficient awareness of the relevant circumstances and
likely consequences.

In addition, since petitioner is declared insolvent, hence Atty. Gonzales, as the receiver is the one handling the
petitioner’s propertoes. In this case, while it was Atty. Gonzales who filed the Motion for Parties to Enter Into
Compromise Agreement, she did not sign or approve the Joint Motion to Approve Agreement submitted by
TIDCORP and BPI. There is no showing that Atty. Gonzales signified her conformity to the waiver of
confidentiality of petitioner’s bank deposits. Clearly, the waiver of confidentiality of petitioner’s bank deposits
in the BPI-TIDCORP Joint Motion to Approve Agreement lacks the required written consent of petitioner and
conformity of the receiver. We, thus, hold that petitioner is not bound by the said provision.
 C. FOREIGN INVESTMENTS ACTS
1. ALFRED HAHN vs COURT OF APPEALS
G. R. No. 113074; January 22, 1997

FACTS: Petitioner is a Filipino citizen doing business under the name of “Hahn-Manila”. Private respondent BMW
is a non-resident corporation incorporated in Germany. Petitioner executed in favor of private respondent a
“Deed of Assignment with a Special Power of Attorney” which constituted petitioner as the exclusive dealer of
private respondent as long as the assignment of its trademark and device subsisted. However, no formal contract
was drawn between the two parties. Thereafter, petitioner was informed that BMW was arranging to grant the
exclusive dealership of BMW cars and products to Columbia Motors Corp. (CMC). BMW expressed dissatisfaction
with various aspect of petitioner’s business but nonetheless also expressed willingness to continue business
relations with petitioner on the basis of a standard BMW contract otherwise, if said offer was unacceptable to
petitioner then BMW would terminate petitioner’s exclusive dealership. Petitioner refused BMW’s offer, in which
case, BMW withdrew its alternative offer and terminated petitioner’s exclusive dealership.

Petitioner therefore filed an action for specific performance and damages against BMW to compel it to continue
the exclusive dealership. BMW moved to dismiss the case contending that the trial court did not acquire
jurisdiction over it through the service of summons on DTI because BMW is a foreign corporation and is not doing
business in the Philippines. The trial court deferred the resolution of the motion for dismissal until after trial on
the merits for the reason that the grounds advanced by BMW did not seem indubitable. BMW appealed said
order to the CA. The CA resolved that BMW was not doing business in the country and therefore jurisdiction over
it could not have been acquired through the service of summons on DTI and it dismissed the petition.

ISSUE: Whether or not BMW is doing business in the Philippines so as to enable the court to acquire jurisdiction
over it through the service of summons on the DTI.

HELD: YES! BMW is doing business in the Philippines. RA 7042 enumerates what acts are considered as “doing
business”. Section 3(d) enumerating such acts includes the phrase “appointing representatives or distributors in
the Philippines” but not when the representative or distributor “transacts” business in his own name for his own
account.
In the case at bar, petitioner is private respondent BMW’s agent and not merely a broker. The record reveals that
private respondent exercised control over petitioner’s activities as a dealer and made regular inspections of
petitioner’s premises to enforce its standards. Since BMW is considered as doing business in the Philippines, the
trial court validly acquired jurisdiction over it by virtue of the service of summons on the DTI.

2. CARGILL, INC vs INTRA STRATA ASSURANCE CORPORATION G.R. No. 168266 March 15, 2010
FACTS:
Cargill is a corporation organized and existing under the laws of the State of Delaware, USA. Petitioner
and Northern Mindanao Corporation executed a contract whereby NMC agreed to sell to petitioner 20,000 to
24,000 metric tons of molasses. The contract provides that petitioner would open a Letter of Credit with the
Bank of Philippine Islands. Under the "red clause" of the Letter of Credit, NMC was permitted to draw up to
$500,000 representing the minimum price of the contract upon presentation of some documents. The contract
was amended three times; the third amendment provided for the shipment of 5,250 metric tons of molasses on
the last half of December 1990 through the first half of January 1991, and the balance of 5,250 metric tons on
the last half of January 1991 through the first half of February 1991. The third amendment also required NMC
to put up a performance bond equivalent to $451,500, which represents the value of 10,500 metric tons of
molasses computed at $43 per metric ton. The performance bond was intended to guarantee NMC’s
performance to deliver the molasses during the prescribed shipment periods according to the terms of the
amended contract.

In compliance with the terms of the third amendment of the contract, respondent Intra Strata Assurance
Corporation issued a performance bond to guarantee NMC’s delivery of the 10,500 tons of molasses, and a
surety bond to guarantee the repayment of downpayment as provided in the contract.. NMC was only able to
deliver 219.551 metric tons of molasses out of the agreed 10,500 metric tons. Thus, petitioner sent demand
letters to respondent claiming payment under the performance and surety bonds. When respondent refused to
pay, petitioner filed on 12 April 1991 a complaint for sum of money against NMC and respondent. Petitioner,
NMC, and respondent entered into a compromise agreement which provides that NMC would pay petitioner
₱3,000,000 upon signing of the compromise agreement and would deliver to petitioner 6,991 metric tons of
molasses from 16-31 December 1991. However, NMC still failed to comply with its obligation under the
compromise agreement. Hence, trial proceeded against respondent. RTC= CARGILL. CA= REVERSED because
petitioner does not have the capacity to file this suit since it is a foreign corporation doing business in the
Philippines without the requisite license. The Court of Appeals held that petitioner’s purchases of molasses were
in pursuance of its basic business and not just mere isolated and incidental transactions.

ISSUE: Whether petitioner is doing or transacting business in the Philippines in contemplation of the law and
established jurisprudence?

HELD:
NO. Republic Act No. 7042 (RA 7042), otherwise known as the Foreign Investments Act of 1991, which
repealed Articles 44-56 of Book II of the Omnibus Investments Code of 1987, enumerated not only the acts or
activities which constitute "doing business" but also those activities which are not deemed "doing business."
Section 3(d) of RA 7042 states:
 [T]he phrase "doing business" shall include "soliciting orders, service contracts, opening offices, whether
called ‘liaison’ offices or branches; appointing representatives or distributors domiciled in the Philippines or who
in any calendar year stay in the country for a period or periods totalling one hundred eighty (180) days or more;
participating in the management, supervision or control of any domestic business, firm, entity or corporation in
the Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements, and
contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally
incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business
organization: Provided, however, That the phrase ‘doing business’ shall not be deemed to include mere
investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or
the exercise of rights as such investor; nor having a nominee director or officer to represent its interests in such
corporation; nor appointing a representative or distributor domiciled in the Philippines which transacts business
in its own name and for its own account.

The determination of whether a foreign corporation is doing business in the Philippines must be based
on the facts of each case. In the case at bar, the transactions entered into by the respondent with the petitioners
are not a series of commercial dealings which signify an intent on the part of the respondent to do business in
the Philippines but constitute an isolated one which does not fall under the category of "doing business." The
records show that the only reason why the respondent entered into the second and third transactions with the
petitioners was because it wanted to recover the loss it sustained from the failure of the petitioners to deliver
the crude coconut oil under the first transaction and in order to give the latter a chance to make good on their
obligation. The three seemingly different transactions were entered into by the parties only in an effort to fulfill
the basic agreement and in no way indicate an intent on the part of the respondent to engage in a continuity of
transactions with petitioners which will categorize it as a foreign corporation doing business in the Philippines.

In this case, the contract between petitioner and NMC involved the purchase of molasses by petitioner
from NMC. It was NMC, the domestic corporation, which derived income from the transaction and not
petitioner. To constitute "doing business," the activity undertaken in the Philippines should involve profit-
making. Besides, under Section 3(d) of RA 7042, "soliciting purchases" has been deleted from the
enumeration of acts or activities which constitute "doing business."

3. Agilent Technologies Singapore vs. Integrated Silicon Technology

Facts:
A 5-year Value Added Assembly Services Agreement ("VAASA") was entered into between Integrated Silicon (a
private domestic corporation, 100% foreign owned, which is engaged in the business of manufacturing and
assembling electronics components) and the Hewlett-Packard Singapore (Pte.) Ltd., Singapore Components
Operation ("HP-Singapore"). Under the terms of the VAASA, Integrated Silicon was to locally manufacture and
assemble fiber optics for export to HP-Singapore. HP-Singapore, for its part, was to consign raw materials to
Integrated Silicon; transport machinery to the plant of Integrated Silicon; and pay Integrated Silicon the
purchase price of the finished products. The VAASA had a five-year term, beginning on April 2, 1996, with a
provision for annual renewal by mutual written consent. With the consent of Integrated Silicon, HP-Singapore
assigned all its rights and obligations in the VAASA to Agilent, (a foreign corporation, which, by its own
admission, is not licensed to do business in the Philippine).
Integrated Silicon filed a complaint for "Specific Performance and Damages" against Agilent and its officers Tan
Bian Ee, Lim Chin Hong, Tey Boon Teck and Francis Khor, docketed as Civil Case No. 3110-01-C. It alleged that
Agilent breached the parties’ oral agreement to extend the VAASA.
Agilent filed a separate complaint against Integrated Silicon for "Specific Performance, Recovery of Possession,
and Sum of Money with Replevin, Preliminary Mandatory Injunction, and Damages", before the Regional Trial
Court, Calamba, Laguna, Branch 92, docketed as Civil Case No. 3123-2001-C. Agilent prayed that a writ of
replevin or, in the alternative, a writ of preliminary mandatory injunction, be issued ordering defendants to
immediately return and deliver to plaintiff its equipment, machineries and the materials to be used for fiber-
optic components which were left in the plant of Integrated Silicon.
Respondents argue that since Agilent is an unlicensed foreign corporation doing business in the Philippines, it
lacks the legal capacity to file suit. CA ruled that the assailed acts of petitioner Agilent, purportedly in the nature
of "doing business" in the Philippines, makes them incapable of filing said suit.
Issue: Whether or not the acts of petitioner constitutes doing business in the Philippines
Ruling:
NO. The Foreign Investments Act of 1991 (the "FIA"; Republic Act No. 7042, as amended), defines "doing
business" as follows:
Sec. 3, par. (d). The phrase "doing business" shall include soliciting orders, service contracts, opening offices,
whether called "liaison" offices or branches; appointing representatives or distributors domiciled in the
Philippines or who in any calendar year stay in the country for a period or periods totaling one hundred eighty
(180) days or more; participating in the management, supervision or control of any domestic business, firm,
entity, or corporation in the Philippines; and any other act or acts that imply a continuity of commercial
dealings or arrangements, and contemplate to that extent the performance of acts or works, or the exercise
of some of the functions normally incident to, and in the progressive prosecution of, commercial gain or of
the purpose and object of the business organization.

An analysis of the relevant case law, in conjunction with Section 1 of the Implementing Rules and Regulations
of the FIA (as amended by Republic Act No. 8179), would demonstrate that the acts enumerated in the VAASA
do not constitute "doing business" in the Philippines.
Section 1 of the Implementing Rules and Regulations of the FIA (as amended by Republic Act No. 8179)
provides that the following shall not be deemed "doing business":
(1) Mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do
business, and/or the exercise of rights as such investor;
(2) Having a nominee director or officer to represent its interest in such corporation;
(3) Appointing a representative or distributor domiciled in the Philippines which transacts business in the
representative’s or distributor’s own name and account;
(4) The publication of a general advertisement through any print or broadcast media;
(5) Maintaining a stock of goods in the Philippines solely for the purpose of having the same processed by
another entity in the Philippines;
(6) Consignment by a foreign entity of equipment with a local company to be used in the processing of
products for export;
(7) Collecting information in the Philippines; and
(8) Performing services auxiliary to an existing isolated contract of sale which are not on a continuing basis,
such as installing in the Philippines machinery it has manufactured or exported to the Philippines, servicing
the same, training domestic workers to operate it, and similar incidental services.
By and large, to constitute "doing business", the activity to be undertaken in the Philippines is one that is for
profit-making

By the clear terms of the VAASA, Agilent’s activities in the Philippines were confined to (1) maintaining a stock
of goods in the Philippines solely for the purpose of having the same processed by Integrated Silicon; and (2)
consignment of equipment with Integrated Silicon to be used in the processing of products for export. As such,
we hold that, based on the evidence presented thus far, Agilent cannot be deemed to be "doing business" in
the Philippines. Respondents’ contention that Agilent lacks the legal capacity to file suit is therefore devoid of
merit. As a foreign corporation not doing business in the Philippines, it needed no license before it can sue
before our courts.
.