Banking

1. Register of Deeds Manila vs. China Banking Corporation

G.R. No. L-11964, April 28, 1962

Facts: Alfonso Pangilinan and one Guillermo Chua were charged with qualified
theft, the money involved amounting to P275,000.00 in the Court of First Instance
of Manila. After admitting his civil liability in favor of his employer, the China
Banking Corporation, in relation to the offense, he ceded and transferred to the
latter, in satisfaction thereof, a parcel of land located in the City of Manila,
registered in the name of "Belen Sta. Ana, married to Alfonso Pangilinan”. The Deed
of Transfer executed by Pangilinan was presented for registration but the register of
deeds, after finding that China Banking Corporation, as an alien-owned corporation,
is barred from acquiring lands in the Philippines under Sec. 5, Art. XIII of the
Constitution, submitted the matter to the Land Registration Commission for
resolution which, in turn, denied the registration. Hence, respondent herein filed the
present appeal to question the resolution of the Commission.

Issue: Whether or not respondent — an alien-owned bank — can acquire ownership

of the residential lot by virtue of the deed of transfer executed by Pangilinan to
satisfy his civil liability arising from the crime.

Held: No. Paragraph (c), Section 25 of Republic Act 337 allows a commercial bank
to purchase and hold such real estate as shall be conveyed to it in satisfaction of
debts previously contracted in the course of its dealings. However, the "debts"
referred to in this provision are only those resulting from previous loans and other
similar transactions made or entered into by a commercial bank in the ordinary
course of its business as such. Obviously, whatever "civil liability" — arising from
the criminal offense of qualified theft — was admitted in favor of appellant bank by
its former employee, Alfonso Pangilinan, was not a debt resulting from a loan or a
similar transaction had between the two parties in the ordinary course of banking
business. The resolution was affirmed.

2. Republic of the Philippines vs. Security Credit and Acceptance

Corporation
G.R. No. L-20583, January 23, 1967

Facts: Articles of Incorporation of defendant corporation were registered with the

Securities and Exchange Commission. When they applied with SEC for the
registration and licensing of their securities under the Securities Act, the latter
referred it to the Central Bank which in turn rendered an opinion classifying
defendant corporation as engaged in banking. SEC then advised the corporation to
comply with the requirements under the General Banking Act.
Pursuant to a search warrant issued by MTC Manila, members of Central Bank
intelligence division and Manila police seized documents and records relative to the
business operations of the corporation. After examination of the same, the
intelligence division of the Central Bank submitted a memorandum to the then
Acting Deputy Governor of Central Bank finding that the corporation is engaged in
banking operations. In lieu of the memorandum, the Monetary Board issued a
resolution declaring that the corporation is performing banking operations without
first complying with the provisions of Republic Act No. 337.
Notwithstanding such resolution, the corporation, have been and still are
performing the functions and activities which had been declared to constitute illegal
banking operations; the corporation had established 74 branches in principal cities
and towns throughout the Philippines; that through a systematic and vigorous
campaign undertaken by the corporation, the same had managed to induce the
public to open 59,463 savings deposit accounts with an aggregate deposit of
P1,689,136.74; Accordingly, the Solicitor General commenced this quo warranto
proceedings for the dissolution of the corporation, with a prayer that, meanwhile, a
writ of preliminary injunction be issued ex parte, enjoining the corporation and its
branches, as well as its officers and agents, from performing the banking operations
complained of, and that a receiver be appointed pendente lite. Superintendent of
Banks of the Central Bank was then appointed by the Supreme Court as receiver
pendente lite of defendant corporation.

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

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

3. Damaso Perez vs. Monetary Board

G.R. No. L-23307, June 30, 1967

Facts: Petitioner-appellant Perez, for himself and in a derivative capacity on

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

Issue: Whether or not these respondents may be compelled to prosecute criminally

the alleged violators of banking laws.

Held: No. Petitioners cannot seek by mandamus to compel respondents to

prosecute criminally those alleged violators of the banking laws. Although the
Central Bank and its respondent officials may have the duty under the Central Bank
Act and the General Banking Act to cause the prosecution of those alleged violators,
yet there is nothing in said laws that imposes a clear, specific duty on the former to
do the actual prosecution of the latter. The Central Bank is a government
corporation created principally to administer the monetary and banking system of
the Republic, not a prosecution agency like the fiscal's office. Being an artificial
person, The Central Bank is limited to its statutory powers and the nearest power to
which prosecution of violators of banking laws may be attributed is its power to sue
and be sued. But this corporate power of litigation evidently refers to civil cases
only. Central Bank and its officers have already done what they can by referring the
matter to the special prosecutors of the Department of Justice for prosecution and
investigation. Moreover, it is a settled rule that mandamus will not lie to compel a
prosecuting officer, like the Secretary of Justice, to prosecute a case in court.
Lastly, violations of banking laws constitute a public offense, the prosecution
of which is a matter of public interest and hence, anyone — even private individuals
— can denounce such violations before the prosecuting authorities. Since Perez
himself could cause the filing of criminal complaints against those allegedly
involved in the anomalous loans, if any, then he has a plain, adequate and speedy
remedy in the ordinary course of law, which makes mandamus against respondents
improper. Hence, the order of the lower court dismissing the petition was affirmed.

4. Simex International (Manila) Inc. vs. Court of Appeals

G.R. No. 88013, March 19, 1990

Facts: The petitioner is a private corporation engaged in the exportation of food

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

Issue: Whether or not the bank can be held liable for negligence

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

5. Fidelity Savings and Mortgage Bank vs. Cenzon

G.R. No. L-46208, April 5, 1990

Facts: Timoteo and Olimpia Santiago deposited with the defendant Fidelity Savings
Bank the amount of P50,000.00 under a savings account and another P50,000
under a certificate of time deposit. Hence, the aggregate amount of the spouse’s
deposit is P100,000. However, the Monetary Board subsequently issued a resolution
declaring Fidelity Savings Mortgage Bank insolvent and forbidden the bank from
doing business in the Philippines. Since February 19, 1969, the Superintendent of
Banks has been taking charge of the assets of petitioner bank. Philippine Deposit
Insurance Corporation (PDIC) was only able to pay the spouses the amount of
P10,000, leaving a deposit balance of P90,000. Through another resolution of the
Monetary Board, the liquidation of the bank was ordered and is still pending up to
the present. After demand for the payment of the deposit balance, the spouses filed
an action for sum of money with damages against petitioner bank. The lower court
ruled in favor of spouses and ordered the bank to pay interest on unpaid deposits
even after its closure plus moral and exemplary damages with attorney’s fees and
costs.

Issues: Whether or not an insolvent bank may be adjudged to pay interest on

unpaid deposits even after its closure by the Central Bank by reason of insolvency
without violating the provisions of the Civil Code on preference of credits; and
Whether or not an insolvent bank may be adjudged to pay moral and
exemplary damages, attorney's fees and costs when the insolvency is caused
because of the anomalous real estate transactions without violating the provisions
of the Civil Code on preference of credits.

Held: No. Petitioner cannot be held liable for interest on bank deposits which
accrued from the time it was prohibited by the Central Bank to continue with its
banking operations. It is settled jurisprudence that a banking institution which has
been declared insolvent and subsequently ordered closed by the Central Bank of
the Philippines cannot be held liable to pay interest on bank deposits which accrued
during the period when the bank is actually closed and non-operational.
What enables a bank to pay stipulated interest on money deposited with it is
that thru the other aspects of its operation it is able to generate funds to cover the
payment of such interest. Unless a bank can lend money, engage in international
transactions, acquire foreclosed mortgaged properties or their proceeds and
generally engage in other banking and financing activities from which it can derive
income, it is inconceivable how it can carry on as a depository obligated to pay
stipulated interest.
Awards of moral and exemplary damages and attorney's fees are likewise
erroneous. In the absence of fraud, bad faith, malice or wanton attitude, petitioner
bank may, therefore, not be held responsible for damages which may be reasonably
attributed to the non-performance of the obligation. Wherefore, the decision
appealed from was modified. Bank is only liable to pay the deposit balance of
P90,000 with accrued interest until the date it was prohibited from doing business
by the Central Bank with no other damages and costs.

6. Sia vs. Court of Appeals

G.R. No. 102970, May 13, 1990

Facts: Plaintiff Luzon Sia rented a safety deposit box of the defendant bank at its
Binondo Branch wherein he placed his collection of stamps. The said safety deposit
box leased by the plaintiff was at the bottom or at the lowest level of the safety
deposit boxes of the defendant bank.
During the floods that took place in 1985 and 1986, floodwater entered into
the defendant bank's premises, seeped into the safety deposit box leased by the
plaintiff and caused, according damage to his stamps collection. The defendant
bank rejected the plaintiff's claim for compensation for his damaged stamps
collection, so, the plaintiff instituted an action for damages against the defendant
bank.
The defendant bank contended that its contract with the plaintiff over safety
deposit box was one of lease and not of deposit and, therefore, governed by the
lease agreement which should be the applicable law; the destruction of the
plaintiff's stamps collection was due to a calamity beyond obligation on its part to
notify the plaintiff about the floodwaters that inundated its premises at Binondo
branch which allegedly seeped into the safety deposit box leased to the plaintiff.
The trial court rendered in favor of plaintiff Sia and ordered SBTC to pay damages.
In an appeal, the Court of Appeals absolved SBTC from any liability. Hence this
petition.

Issue: Whether or not SBTC is liable for negligence

Held: Yes. Some provisions of the lease agreement which are meant to exempt
SBTC from any liability for damage, loss or destruction of the contents of the safety
deposit box which may arise from its own agents’ fraud, negligence or delay must
be stricken down for being contrary to law and public policy.
As correctly held by the trial court, SBTC was guilty of negligence. SBTC's
negligence aggravated the injury or damage to the stamp collection. SBTC was
aware of the floods of 1985 and 1986; it also knew that the floodwaters inundated
the room where the safe deposit box was located. In view thereof, it should have
lost no time in notifying the petitioner in order that the box could have been opened
to retrieve the stamps, thus saving the same from further deterioration and loss. In
this respect, it failed to exercise the reasonable care and prudence expected of a
good father of a family, thereby becoming a party to the aggravation of the injury or
loss. Accordingly, the aforementioned fourth characteristic of a fortuitous event is
absent. Article 1170 of the Civil Code, which reads “Those who in the performance
of their obligation are guilty of fraud, negligence, or delay, and those who in any
manner contravene the tenor thereof, are liable for damages” is applicable. Hence,
the petition was granted.

7. 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

Issues: Whether the disputed transaction between petitioners and ASIA

PACIFIC violated banking laws, hence, null and void

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

8. Reyes vs. Court of Appeals

G.R. No. 118492, August 15, 2001

Facts: In view of the 20th Asian Racing Conference then scheduled to be held
in Sydney, Australia, the Philippine Racing Club, Inc. (PRCI) sent four delegates to
the said conference. PRCI, through its officers, applied to the respondent bank for a
foreign exchange demand draft in Australian dollars.
Godofredo, club’s chief cashier, went to respondent bank to apply for a
demand draft in the amount AU$1,610.00 payable to the order of the 20 th Asian
Racing Conference Secretariat of Sydney, Australia. He was attended to by
respondent bank's assistant cashier, Mr. Yasis, who at first denied the application
for the reason that respondent bank did not have an Australian dollar account in
any bank in Sydney. Godofredo asked if there could be a way for respondent bank
to accommodate PRCI's urgent need to remit Australian dollars to Sydney. Yasis of
respondent bank then informed Godofredo of a roundabout way of effecting the
requested remittance to Sydney thus: the respondent bank would draw a demand
draft against Westpac Bank in Sydney, Australia (Westpac-Sydney) and have the
latter reimburse itself from the U.S. dollar account of the respondent in Westpac
Bank in New York, U.S.A. (Westpac-New York). This arrangement has been
customarily resorted to since the 1960's and the procedure has proven to be
problem-free. PRCI and the petitioner Gregorio H. Reyes, acting through Godofredo,
agreed to this arrangement or approach in order to effect the urgent transfer of
Australian dollars payable to the Secretariat of the 20th Asian Racing Conference.
Pursuant thereto, respondent bank approved the said application of PRCI and issued
foreign exchange demand draft in the sum applied for payable to the order of the
20th Asian Racing Conference Secretariat of Sydney, Australia, and addressed to
Westpac-Sydney as the drawee bank.
However, upon due presentment of the foreign exchange demand draft, the
same was dishonored, with the notice of dishonor stating that there is “No account
held with Westpac." Meanwhile, Wespac-New York sent a cable to respondent bank
informing the latter that its dollar account in the sum of AU$ 1,610.00 was debited.
In response to PRCI's complaint about the dishonor of the said foreign exchange
demand draft, respondent bank informed Westpac-Sydney of the issuance of the
said demand draft, drawn against the Wespac-Sydney and informing the latter to be
reimbursed from the respondent bank's dollar account in Westpac-New York. The
respondent bank on the same day likewise informed Wespac-New York requesting
the latter to honor the reimbursement claim of Wespac-Sydney. Upon its second
presentment for payment, the demand draft was again dishonored by Westpac-
Sydney for the same reason, that is, that the respondent bank has no deposit dollar
account with the drawee Wespac-Sydney.
Petitioners Gregorio Reyes and Consuelo Puyat-Reyes arrived in Sydney on a
separate date and both were humiliated and embarrassed in the presence of
international audience after being denied registration of the conference secretariat
since the foreign exchange draft was dishonored. Petitioners were only able to
attend the conference after promising to pay in cash instead which they fulfilled
Petitioners filed in the Regional Trial Court a complaint for damages against
the respondent bank. The trial court rendered judgment in favor of the respondent
bank. The appellate court affirmed the decision of the trial court.

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

Held: No. The facts as found by the courts a quo show that respondent bank did not
cause an erroneous transmittal of its SWIFT cable message to Westpac-Sydney. It
was the erroneous decoding of the cable message on the part of Westpac-Sydney
that caused the dishonor of the subject foreign exchange demand draft.
The evidence also shows that the respondent bank exercised that degree of
diligence expected of an ordinary prudent person under the circumstances
obtaining; the respondent bank advised Westpac-New York to honor the
reimbursement claim of Westpac-Sydney and to debit the dollar account of
respondent bank with the former. As soon as the demand draft was dishonored, the
respondent bank, thinking that the problem was with the reimbursement and
without any idea that it was due to miscommunication, re-confirmed the authority of
Westpac-New York to debit its dollar account for the purpose of reimbursing
Westpac-Sydney. Respondent bank also sent two more cable messages to Westpac-
New York inquiring why the demand draft was not honored.
The degree of diligence required of banks, is more than that of a good father
of a family where the fiduciary nature of their relationship with their depositors is
concerned. In other words banks are duty bound to treat the deposit accounts of
their depositors with the highest degree of care. But the said ruling applies only to
cases where banks act under their fiduciary capacity, that is, as depositary of the
deposits of their depositors. But the same higher degree of diligence is not
expected to be exerted by banks in commercial transactions that do not involve
their fiduciary relationship with their depositors. The case at bar does not involve
the handling of petitioners' deposit, if any, with the respondent bank. Instead, the
relationship involved was that of a buyer and seller. Wherefore, the decision of the
Court of Appeals was affirmed.

9. Consolidated Bank and Trust Corporation vs. Court of Appeals

G.R. No. 138569, September 11, 2003

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: Whether or not Solidbank must be held liable for the fraudulent withdrawal on
private respondent’s account.

Held: The petition is partly meritorious. Solidbank is liable for breach of contract
due to negligence, or culpa contractual.
The contract between the bank and its depositor is governed by the
provisions of the Civil Code on simple loan. 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.”
However, the fiduciary nature of a bank-depositor relationship does not
convert the contract between the bank and its depositors from a simple loan to a
trust agreement, whether express or implied. Failure by the bank to pay the
depositor is failure to pay a simple loan, and not a breach of trust.
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.

10. Banco de Oro vs. JAPRL Development Corporation

G.R. No. 179901, April 14, 2008

Facts: Banco de Oro extended financial facilities to respondent JAPRL

amounting to P230,000,000 with co-respondents Rapid Forming Corporation (RFC)
and Jose Arollado acting as sureties. JAPRL defaulted in the payment of four trust
receipts. Petitioner bank subsequently found out that JAPRL altered and falsified its
financial statements to project itself as a viable investment. Because the demand
for payment was unheeded, petitioner bank sued JAPRL and the sureties for
payment of the balance due on the trust receipts in RTC Makati. Respondents then
hastily filed a petition for rehabilitation and stay order in Calamba of RTC which
were granted. As a result, the complaint was dismissed with respect to JAPRL and
RFC. Arollado remained as defendant. Respondents filed a petition for certiorari
before the CA, contending that the trial court did not acquire jurisdiction over them
as the summons were served on a mere administrative assistant. CA granted the
petition and dismissed petitioner’s motion for reconsideration. Hence this petition.

Issues: Whether or not jurisdiction over the defendants was acquired and
whether or not they are liable to pay their obligations

Held: Petition granted. When respondents moved for the suspension of proceedings
of the civil case before the Makati RTC, on the basis of the stay order of the
Calamba RTC, they waived whatever defect there was in the service of summons
and were deemed to have submitted themselves voluntarily to the jurisdiction of
the Makati RTC.
Considering the amount of petitioner's exposure in JAPRL, justice and fairness
dictate that the Makati RTC hear whether or not respondents indeed committed
fraud in securing the credit accomodation. In this event, petitioner can use the
finding of fraud to move for the dismissal of the rehabilitation case in the Calamba
RTC.
Moreover, under Sec. 40 of the General Banking Law, should such statements
(financial) prove to be false or incorrect in any material detail, the bank may
terminate any loan or credit accommodation granted on the basis of said
statements and shall have the right to demand immediate repayment or liquidation
of the obligation.
Meanwhile, trial court should proceed with the case against three defendants.

11. Philippines National Bank vs. Erlando T. Rodriguez, et al.

G.R. No. 170325, September 26, 2008

Facts: Respondents-spouses maintained a savings and demand/checking accounts

with petitioners Philippines National Bank (PNB). They were engaged in the informal
lending business and had a discounting arrangement with the Philnabank
Employees Savings and Loan Association (PEMSLA), an association of PNB
employees, which likewise maintained current and savings accounts with petitioner
bank. PEMSLA regularly granted loans to its members. Spouses Rodriguez would
rediscount the postdated checks issued to members whenever the association was
short of funds. As was customary, the spouses would replace the postdated checks
with their own checks issued in the name of the members.
It was PEMSLA’s policy not to approve applications for loans of members with
outstanding debts. To subvert this policy, some PEMSLA officers devised a scheme
to obtain additional loans despite their outstanding loan accounts. They took out
loans in the names of unknowing members, without the knowledge or consent of
the latter. The PEMSLA checks issued for these loans were then given to the
spouses for rediscounting. The officers carried this out by forging the indorsement
of the named payees in the checks. In return, the spouses issued their personal
checks (Rodriguez checks) in the name of the members and delivered the checks to
an officer of PEMSLA. The PEMSLA checks, on the other hand, were deposited by the
spouses to their account. Meanwhile, the Rodriguez checks were deposited directly
by PEMSLA to its savings account without any indorsement from the named payees.
This usual irregular procedure is made possible through the facilitation of Edmundo
Palermo, Jr., treasurer of PEMSLA and bank teller in the PNB Branch.
The spouses issued 69 checks, in the total amount of P2,345,804.00, payable
to 47 members of PEMSLA. After finding out such fraudulent act, PNB closed the
current account of PEMSLA. As a result, the PEMSLA checks deposited by the
spouses were returned or dishonored for the reason "Account Closed." The
corresponding Rodriguez checks, however, were deposited as usual to the PEMSLA
savings account. The amounts were duly debited from the Rodriguez account. Thus,
because the PEMSLA checks given as payment were returned, spouses Rodriguez
incurred losses from the rediscounting transactions.
Spouses Rodriguez sued PEMSLA and PNB. They contended that because PNB
credited the checks to the PEMSLA account even without indorsements, PNB
violated its contractual obligation to them as depositors. PNB paid the wrong
payees, hence, it should bear the loss. Trial court ruled in favor of spouses and
ordered PNB to pay. CA affirmed the decision. Hence this petition

Issue: Whether or not PNB can be made liable to pay the amount of checks which
were deposited to the PEMSLA savings account.

Held: Yes. The Rodriguez checks are payable to order since the bank failed to prove
that the named payees therein are fictitious. Hence, the fictitious-payee rule which
will make the instrument payable to bearer does not apply. PNB accepted the 69
checks for deposit to the PEMSLA account even without any indorsement from the
named payees. It bears stressing that order instruments can only be negotiated
with a valid indorsement.
A bank that regularly processes checks that are neither payable to the
customer nor duly indorsed by the payee is apparently grossly negligent in its
operations. This Court has recognized the unique public interest possessed by the
banking industry and the need for the people to have full trust and confidence in
their banks. For this reason, banks are minded to treat their customer’s accounts
with utmost care, confidence, and honesty. In a checking transaction, the drawee
bank has the duty to verify the genuineness of the signature of the drawer and to
pay the check strictly in accordance with the drawer’s instructions, i.e., to the
named payee in the check. It should charge to the drawer’s accounts only the
payables authorized by the latter. Otherwise, the drawee will be violating the
instructions of the drawer and it shall be liable for the amount charged to the
drawer’s account.

12. Bank of America, NT and SA vs. Associated Citizens Bank

G.R. No. 141001, May 21, 2009

Facts: BA-Finance Corporation granted Miller Offset Press, Inc. a credit line facility
through which the latter could assign or discount its trade receivables with the
former. The representatives of Miller (Uy Kiat Chung, Ching Uy Seng, and Uy Chung
Guan Seng) executed a Continuing Suretyship Agreement with BA-Finance whereby
they jointly and severally guaranteed the full and prompt payment of any and all
indebtedness which Miller may incur with BA-Finance.
Miller discounted and assigned several trade receivables to BA-Finance by
executing Deeds of Assignment in favor of the latter. In consideration thereof, BA-
Finance issued four checks payable to the order of Miller with the notation "For
Payee’s Account Only." These checks were drawn against Bank of America. The four
checks were deposited by Ching Uy Seng in Associated Citizens Bank with his joint
account with Uy Chung Seng. Associated Bank stamped the checks and guaranteed
all prior endorsements and/or lack of endorsements and sent them through
clearing. Later, Bank of America as drawee bank honored the checks and paid the
proceeds to Associated Bank as the collecting bank. When Miller failed to deliver to
BA-Finance the proceeds of the assigned trade receivables, BA-Finance filed a
collection suit against Miller and impleaded the three representative of the latter.
Miller, Uy Kiat Chung, and Uy Chung Guan Seng filed a joint answer with
cross-claim against Ching Uy Seng, wherein they denied that (1) they received the
amount covered by the four Bank of America checks, and (2) they authorized their
co-defendant Ching Uy Seng to transact business with BA-Finance on behalf of
Miller. Uy Kiat Chung and Uy Chung Guan Seng also denied having signed the
Continuing Suretyship Agreement with BA-Finance. BA-Finance filed an Amended
Complaint impleading Bank of America as additional defendant for allegedly
allowing encashment and collection of the checks by person or persons other than
the payee named thereon. Ching Uy Seng did not file his Answer to the complaint.
Bank of America filed a third party complaint against Associated Bank. In its
answer to the third party complaint, Associated Bank admitted having received the
four checks for deposit in the joint account of Ching Uy Seng and Uy Chung Guan
Seng, but alleged that Ching Uy Seng, being one of the corporate officers of Miller,
was duly authorized to act for and on behalf of Miller. RTC rendered judgment
ordering Bank of America to pay BA-Finance the value of the four checks. CA
affirmed the trial court’s ruling with modification that Associated Bank should
reimburse Bank of America. Hence this petition.

Issues: Whether or not Bank of America is liable to pay BA-Finance and

whether or not Associated Bank should reimburse Bank of America the amount of
the four checks.

Held: Yes. The bank on which a check is drawn, known as the drawee bank, is
under strict liability, based on the contract between the bank and its customer
(drawer), to pay the check only to the payee or the payee’s order. The drawer’s
instructions are reflected on the face and by the terms of the check. When the
drawee bank pays a person other than the payee named on the check, it does not
comply with the terms of the check and violates its duty to charge the drawer’s
account only for properly payable items.
On the part of Associated Bank, the law imposes a duty of diligence on the
collecting bank to scrutinize checks deposited with it for the purpose of determining
their genuineness and regularity. The collecting bank being primarily engaged in
banking holds itself out to the public as the expert and the law holds it to a high
standard of conduct. In presenting the checks for clearing and for payment, the
defendant [collecting bank] made an express guarantee on the validity of "all prior
endorsements." Thus, stamped at the back of the checks are the defendant’s clear
warranty. As the warranty has proven to be false and inaccurate, Associated Bank is
liable for any damage arising out of the falsity of its representation.

Closure of Banks

1. Ramos vs. Central Bank of the Philippines

G.R. No. L-29352, October 4, 1971
Facts: Petitioners are the majority and controlling stockholders of Overseas Bank of
Manila (OBM), a commercial banking corporation. The OBM had been suspended by
respondent from clearing with the CB and from lending operations for various
violations of the banking laws and implementing regulations. Petitioners charged
that the OBM became financially distressed because of this suspension and the
deprivation by the CB of all the usual credit facilities and accommodations accorded
to the other banks.
Because the financial situation of the OBM had caused mounting concern in the CB,
petitioner Ramos and the OBM management met with respondent CB on the
necessity and urgency of rehabilitating the OBM through the extension of necessary
financial assistance. In lieu thereof, the Monetary Board issued a resolution
demanding the stockholders to mortgage their properties or assign the same to the
CB and to execute a voting trust agreement whereby they will pass the
management to Philippine National Bank in order “to stave of liquidation”.
Hence, the petitioners executed the voting trust agreement prepared by CB
with petitioners as cestuis que trust and respondent CB's Superintendent of Banks
as the Trustee. Petitioners likewise conveyed by way of mortgage to the CB all their
private properties and holdings to secure the obligations of the OBM to the CB.
Accordingly, new directors and officers were elected and installed and they took
over the management and control of the Overseas bank.
However, after 8 months, the Central Bank did not make any positive action
to reorganize and resume OBM’s normal operations. Instead, CB issued a resolution
excluding OBM from clearing with it and authorizing the nominee board of directors
to suspend operations. Worse, CB Monetary Board issued a resolution ordering the
liquidation the bank. Hence this petition for certiorari, prohibition and mandamus
with prayer for the issuance of a writ of preliminary injunction to restrain
respondent Central Bank of the Philippines from enforcing and implementing the
Monetary Board Resolutions.

Issue: Whether or not the CB had agreed to rehabilitate, normalize and stabilize
OBM and whether or not the CB resolutions were adopted in abuse of discretion.
Held: Yes. Petition granted. CB did agree and commit itself to the continued
operation of, and rehabilitation of, the OBM. CB made express representations to
petitioners herein that it would support the OBM, and avoid its liquidation if the
petitioners would execute (a) the voting trust agreement turning over the
management of OBM to the CB or its nominees, and (b) mortgage or assign their
properties to the Central Bank to cover the overdraft balance of OBM. The
petitioners having complied with these conditions and parted with value to the
profit of the CB (which thus acquired additional security for its own advances), the
CB may not now renege on its representations and liquidate the OBM, to the
detriment of its stockholders, depositors and other creditors, under the rule of
promissory estoppels.
The conduct of the CB reveals a calculated attempt to evade rehabilitating
OBM despite its promises. Hence, respondent Central Bank of the Philippines is
directed to comply with it obligations under the voting trust agreement, and to
desist from taking action in violation thereof.

2. Central Bank vs. Court of Appeals

106 SCRA 143, 1981

Facts: Plaintiffs Isidro Fernandez and Jesus Jayme are the majority and controlling
stockholders of Provident Bank. When Provident Savings Bank experienced bankrun,
it was forced to borrow funds from other banks and the Central Bank. Despite the
borrowing, the funds remained insufficient to satisfy the withdrawals. Hence, the
plaintiffs appealed to Central Bank for further assistance. However, CB replied to
them stating that they have to relinquish and turnover the management and control
of the bank to Iglesia ni Kristo (INK) in order for it to assist the distressed provident.
Because plaintiffs were left with no other choice, they agreed to the proposal and
executed a memorandum of agreement with Eagle Broadcasting Corporation (EBC),
a company identified with INK.
However, EBC did not comply with its obligation to organize the bank.
Instead, it made several irregularities in managing the bank. These acts were made
despite the presence of CB examiners. Subsequently, CB Monetary Board issued a
resolution declaring the closure of Provident Savings Bank and ordering its
liquidation. Hence, Fernandez and Jayme filed with the Court of First Instance a
petition for certiorari, prohibition, and mandamus against Central Bank to annul the
resolution and restrain CB from proceeding with the liquidation which the court
granted. Court of Appeals affirmed lower court’s decision. Hence this appeal.

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

Held: Yes. Decision affirmed. While the closure and liquidation of a bank may be
considered an exercise of police power, the validity of such exercise of police power
is subject to judicial inquiry and could be set aside if it is either capricious,
discriminatory, whimsical, arbitrary, unjust, or a denial of due process and equal
protection clauses of the Constitution.

The arbitrariness and bad faith of Central Bank is evident from the fact that it
pressured Fernandez and Jayme into relinquishing the management and control of
Provident Savings Bank to Iglesia Ni Kristo which did not have any intention of
restoring the bank into its former sound financial condition but whose interest was
merely to recover its deposits from the bank and thereafter allowing INK to
mismanage the bank until the bank’s financial deterioration and subsequent
closure. Central Bank acted whimsically and withdrew its commitment to support
the bank to the detriment of the latter.

3. Salud vs. Central Bank

G.R. No. L-17620, August 19, 1986

Facts: The Monetary Board adopted 2 resolutions forbidding the Muntinlupa Bank to
do business, designating a statutory receiver, and ordering the liquidation of the
same bank after confirmation that it is insolvent. Muntinlupa bank opposed the
liquidation and alleged that the action of the Monetary Board was premature and
void since there was no prior effort to reorganize the management of the bank and
restore its viability and that it was made arbitrarily and in bad faith. The Regional
Trial Court, treating the opposition of the bank as a motion to dismiss, ruled in favor
of it and declared the action of the Monetary Board arbitrary after finding that the
bank had more assets than liabilities. The Intermediate Appellate Court reversed
the decision and gave due course to the petition for liquidation. Hence this petition

Issue: Whether or not the action of the Monetary Board is within the jurisdiction of
the Regional Trial Court and may rule on its validity based on arbitrariness and bad
faith.

Held: Yes. Resolutions of the Monetary Board forbidding banking institutions to do

business; or appointing a receiver to take charge of the bank's assets and liabilities;
or determining whether the banking institutions may be rehabilitated, or should be
liquidated and appointing a liquidator towards this end are by law final and
executory. But they can be set aside by the court on one specific ground, and that
is, if there is convincing proof that the action is plainly arbitrary and made in bad
faith. The Central Bank concedes this power in the court, but insists that that setting
aside cannot be done in the same proceeding for assistance in liquidation, but in a
separate action instituted specifically for the purpose. However, there is no
provision of law which expressly or even by implication imposes the requirement for
a separate proceeding exclusively occupied with adjudicating this issue. Hence,
such action may be asserted as an affirmative defense of a counterclaim in the
proceeding for assistance in liquidation that the Central Bank has filed in the
Regional Trial Court. The case is remanded back to the RTC for further proceeding.

4. Lipana vs. Development Bank of the Philippines

G.R. No. 73884, September 24, 1987

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

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

Held: Yes. Petition dismissed. After the Monetary Board has declared that a bank is
insolvent and has ordered it to cease operations, the Board becomes the trustee of
its assets for the equal benefit of all the creditors, including depositors. The assets
of the insolvent banking institution are held in trust for the equal benefit of all
creditors, and after its insolvency, one cannot obtain an advantage or a preference
over another by an attachment, execution or otherwise. To execute the judgment
would unduly deplete the assets of respondent bank to the obvious prejudice of
other depositors and creditors,

5. Overseas Bank of Manila vs. Court of Appeals

G.R. No. L-45866, April 19, 1989

Facts: In relation to a contract of sale between NAWASA, as vendor and a certain

Bonifacio Regalado, as vendee, the amount corresponding to the first payment by
Regalado was placed on a time deposit with the Overseas Bank by the NAWASA
Treasurer for a period of 6 months. A second payment having been made by
Regalado, another time deposit was made by the NAWASA Treasurer with the
Overseas Bank, this time in the amount respresenting the balance of the purchase
price due from Regalado. The period of this second deposit was fixed 1 year.
Subsequently, NAWASA's Acting General Manager wrote to the Overseas
Bank advising that (1) as regards the first time deposit which had already matured,
NAWASA wished to withdraw it immediately, and (2) with respect to the second time
deposit of, it intended to withdraw it 60 days thereafter as authorized by the
parties' agreement set forth in the certificate of the deposit. Despite several letter
request, nothing was heard from the Overseas Bank. It did however pay to
NAWASA interest on its time deposits.
After maturity of the second time deposit and Overseas Bank not responding
to the letter request of NAWASA for the remittance of the time deposits, NAWASA
then wrote to the Central Bank Governor about the matter. Apparently, even the
Central Bank was ignored by Overseas Bank. One last letter was written by NAWASA
to the Overseas Bank, reiterating its demand for the return of its money. Again the
letter went unheeded.
NAWASA thus brought suit to recover its deposits and damages. CFI Manila
rendered judgment in favor of NAWASA and ordered the bank to pay. CA affirmed
the trial court’s ruling. Hence this petition.

Issue: Whether or not Overseas Bank is liable to pay.

Held: Yes. Judgment affirmed. The bank’s contention that the punitive actions
taken by the Central Bank prevented the bank from conducting its business is
devoid of merit. There is absolutely no evidence of these facts in the record.
Moreover, the suspension of operations in 1968 could not possibly excuse non-
compliance with the obligations in question which matured in 1966. Again, the claim
that the Central Bank, by suspending the Overseas Bank's banking operations, had
made it impossible for the Overseas Bank to pay its debts, whatever validity might
be accorded thereto, or the further claim that it had fallen into a distressed financial
situation, cannot in any sense excuse it from its obligation to the NAWASA, which
had nothing whatever to do with the Central Bank's actuations or the events leading
to the bank's distressed state.

6. Banco Filipino Savings and Mortgage Bank vs. Central Bank

G.R. No. 70054, December 11, 1911

Facts: Petitioners Top Management Programs Corporation and Pilar Development

Corporation are corporations engaged in the business of developing residential
subdivisions.Top Management and Pilar Development obtained several loans from
Banco Filipino all secured by real estate mortgage in their various properties in
Cavite.
The Monetary Board issued a resolution finding Banco Filipino insolvent and
placing it under receivership. Subsequently, the Monetary Board issued another
resolution placing the bank under liquidation and designated a liquidator. By virtue
of her authority as liquidator, Valenzuela appointed the law firm of Sycip, Salazar, et
al. to represent Banco Filipino in all litigations.
Banco Filipino filed the petition for certiorari questioning the validity of the
resolutions issued by the Monetary Board authorizing the receivership and
liquidation of Banco Filipino.A temporary restraining order was issued enjoining the
respondents from executing further acts of liquidation of the bank. However, acts
and other transactions pertaining to normal operations of a bank are not enjoined.
Subsequently, Top Management and Pilar Development failed to pay their
loans on the due date. Hence, the law firm of Sycip, Salazar, et al. acting as counsel
for Banco Filipino under authority of the liquidator, applied for extra-judicial
foreclosure of the mortgage over Top Management and Pilar Development’s
properties. Thus, the Ex-Officio Sheriff of the Regional Trial Court of Cavite issued a
notice of extra-judicial foreclosure sale of the properties. Top Management and Pilar
Development filed 2 separate petitions for injunction and prohibition with the
respondent appellate court seeking to enjoin the Regional Trial Court of Cavite, the
ex-officio sheriff of said court and Sycip, Salazar, et al. from proceeding with
foreclosure sale which were subsequently dismissed by the court. Hence this
petition

Issue: Whether or not the liquidator has the authority to prosecute as well as to
defend suits and to foreclose mortgages for and behalf of the bank while the issue
on the validity of the receivership and liquidation is still pending resolution

Held: Yes. Section 29 of the Republic Act No. 265, as amended known as the
Central Bank Act, provides that when a bank is forbidden to do business in the
Philippines and placed under receivership, the person designated as receiver shall
immediately take charge of the bank's assets and liabilities, as expeditiously as
possible, collect and gather all the assets and administer the same for the benefit of
its creditors, and represent the bank personally or through counsel as he may retain
in all actions or proceedings for or against the institution, exercising all the powers
necessary for these purposes including, but not limited to, bringing and foreclosing
mortgages in the name of the bank. Pendency of the case did not diminish the
powers and authority of the designated liquidator to effectuate and carry on the
administration of the bank.
However, the assailed order of the Monetary Board liquidating the bank was
annulled and set aside. Central Bank and the Monetary Board were ordered to
reorganize petitioner bank and allow the latter to resume business under their
comptrollership.

7. Central Bank of the Philippines vs. Court of Appeals

G.R. No. 88353, May 8, 1992

Facts: Central Bank discovered that certain questionable loans extended by

Producer’s Bank of the Philippines (PBP), totalling approximately P300 million (the
paid-in capital of PBP amounting only to P 140.544 million), were fictitious as they
were extended, without collateral, to certain interests related to PBP owners
themselves.
Subsequently and during the same year, several blind items about a family-
owned bank in Binondo which granted fictitious loans to its stockholders appeared
in major newspapers which triggered a bank-run in PBP and resulted in continuous
over-drawings on the bank's demand deposit account with the Central Bank;
reaching to P 143.955 million. Hence, on the basis of the report submitted by the
Supervision and Examination Sector, the Monetary Board (MB), placed PBP under
conservatorship.
PBP submitted a rehabilitation plan to the CB which proposed the transfer to
PBP of 3 buildings owned by Producers Properties, Inc. (PPI), its principal stockholder
and the subsequent mortgage of said properties to the CB as collateral for the
bank's overdraft obligation but which was not approved due to disagreements
between the parties.
Since no other rehabilitation program was submitted by PBP for almost 3
years its overdrafts with the CB continued to accumulate and swelled to a
staggering P1.023 billion. Consequently, the CB Monetary Board decided to approve
in principle what it considered a viable rehabilitation program for PBP. There being
no response from both PBP and PPI on the proposed rehabilitation plan, the MB
issued a resolution instructing Central Bank management to advise the bank that
the conservatorship may be lifted if PBP complies with certain conditions.
Without responding to the communications of the CB, PBP filed a complaint
with the Regional Trial Court of Makati against the CB, the MB and CB Governor
alleging that the resolutions issued were arbitraty and made in bad faith.
Respondent Judge issued a temporary restraining order and subsequently a writ of
preliminary injunction. CB filed a motion to dismiss but was denied and ruled that
the MB resolutions were arbitrarily issued. CB filed a petition for certiorari before
the Court of Appeals seeking to annul the orders of the trial court but CA affirmed
the said orders. Hence this petition.
Issue: Whether or not the trial court erred in not dismissing the case for lack of
cause of action and declaring the MB resolutions as arbitrary.

Held: Yes. Assailed decisions are annulled and set aside. The following requisites
must be present before the order of conservatorship may be set aside by a court:
(1) The appropriate pleading must be filed by the stockholders of record
representing the majority of the capital stock of the bank in the proper court; (2)
Said pleading must be filed within ten (10) days from receipt of notice by said
majority stockholders of the order placing the bank under conservatorship; and (3)
There must be convincing proof, after hearing, that the action is plainly arbitrary
and made in bad faith. In the instant case, the original complaint was filed more
than 3 years after PBP was placed under conservator, long after the expiration of
the 10-day period deferred to above. It is also beyond question that the complaint
and the amended complaint were not initiated by the stockholders of record
representing the majority of the capital stock.

8. First Philippine National Bank vs. Court of Appeals

9. Ong vs. Court of Appeals

G.R. No. 112830, February 1, 1996

Facts: Jerry Ong filed with the Regional Trial Court of Quezon City a petition for the
surrender of 2 TCTs against Rural Bank of Olongapo, Inc. (RBO), represented by its
liquidator Guillermo G. Reyes, Jr. and deputy liquidator Abel Allanigue. According to
the petition, said 2 parcels of land were duly mortgaged by RBO in favor of
petitioner to guarantee the payment of Omnibus Finance, Inc., which is likewise now
undergoing liquidation proceedings of its money market obligations to petitioner.
Omnibus Finance, Inc., not having seasonably settled its obligations to petitioner,
the latter proceeded to effect the extrajudicial foreclosure of said mortgages and
the city sheriff of Tagaytay City issued a certificate of sale in favor of petitioner
which were duly registered.
Respondents failed to seasonably redeem said parcels of land, for which
reason, petitioner has executed an affidavit of consolidation of ownership which 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. To date, petitioner has not been able to effect the
registration of said parcels of land in his name in view of the persistent refusal of
respondentsto surrender RBO's copies of its owner's certificates of title for the
parcels of land covered by the two TCTs.
Respondent RBO filed a motion to dismiss on the ground of res judicata and
that it was undergoing liquidation and it is the liquidation court which has exclusive
jurisdiction to take cognizance of petitioner's claim. 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. RBO filed a motion
for reconsideration but was similarly rejected. The Court of Appeals, through a
certiorari filed by RBO, annulled the challenged orders of the trial court which
sustained the jurisdiction of the trial court and denied reconsideration thereof.
Moreover, the trial judge was ordered to dismiss the civil case without prejudice to
the right of petitioner to file his claim in the liquidation proceedings pending before
the Regional Trial Court of Olongapo City.

Issue: Whether or not the civil case against RBO may proceed independently from
the liquidation proceedings.

Held: No.Petition denied. All claims against the insolvent bank should be filed in the
liquidation proceeding. The 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. It is not necessary
that a claim be initially disputed in a court or agency before it is filed with the
liquidation court.

10. Manalo vs. Court of Appeals

G.R. No. 141297, October 8, 2001

Facts: S. Villanueva Enterprises, represented by its president, Therese Villanueva

Vargas, obtained a loan of three million pesos and one million pesos from the
respondent PAIC Savings and Mortgage Bank and the Philippine American
Investments Corporation (PAIC), respectively. To secure payment of both debts,
Vargas executed in favor of the respondent and PAIC a joint first mortgage over two
parcels of land registered under her name. One of the lots is the subject of the
present case. S. Villanueva Enterprises failed to settle its loan obligation.
Accordingly, respondent instituted extrajudicial foreclosure proceedings over the
mortgaged lots and acquired the same as the highest bidder. After the lapse of one
year, title was consolidated in respondent's name for failure of Vargas to redeem.
Subsequently, Central Bank of the Philippines filed a petition for assistance in
the liquidation of the respondent PAIC with the Regional Trial Court. After a few
years, respondent petitioned the Regional Trial Court of Pasay City for the issuance
of a writ of possession for the subject property. However, during the pendency of
civil case for the issuance of a writ of possession, Vargas executed a deed of
absolute sale selling, transferring, and conveying ownership of the disputed lot in
favor of a certain Armando Angsico. Notwithstanding this sale, Vargas, still
representing herself to be the lawful owner of the property, leased the same to
petitioner Domingo R. Manalo. Later, Armando Angsico, as buyer of the property,
assigned his rights therein to petitioner.
The court subsequently issued the writ of possession but Villanueva
Enterprises and Vargas moved for its quashal. Petitioner, on the strength of the
lease contract and deed of assignment made in his favor, submitted a permission to
file an ex-parte motion to intervene. Both motions were denied by the court. Court
of Appeals upheld the order of the lower court. Hence this petition.

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

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

11. Rural Bank of Sta. Catalina vs. Land Bank of the Philippines
G.R. No. 148019, July 26, 2004

Facts: Respondent Land Bank of the Philippines filed a complaint against the
petitioner, Sta. Catalina Rural Bank, Inc., in the Regional Trial Court for the
collection of sum of money. For its failure to file its answer to the complaint, the trial
court declared the petitioner bank in default. Despite its receipt of the copy of the
said order, the petitioner bank failed to file a motion to set aside the order of
default.
Respondent bank presented 2 witnesses. The first witness, Mr. Mervin Sison,
the chief loans and creditor of the Land Bank of the Philippines, testified that he
knows of the rediscounting line agreements entered into by and between the
plaintiff and the defendant. Said agreements were identified by him in court for P
3,500,000.00. In case of defendant's default, the availments shall be subject to 3%
penalty per month from due date of note as agreed upon. During the effectivity of
the first and second rediscounting line agreement, defendant made several
separate availments, each is subject to a certain interest per annum and with a
term of 180 days. The second witness, Ms. Elenita del Castillo, corroborated the
testimony of Mr. Sison. The grand total of all the availments plus corresponding
penalties amounted more than P 5 million.
In the meantime, the Monetary Board approved the placement of the
petitioner bank's assets under receivership. The Philippine Deposit Insurance
Corporation (PDIC) was designated as receiver (conservator) of the petitioner, and
the latter was prohibited from doing business in the Philippines. Unaware of the
action of the CB, the trial court rendered judgment by default against the petitioner
bank ordering the bank to pay its obligation to respondent LBP plus interests and
damages.
The petitioner, through the PDIC, appealed the decision to the Court of
Appeals. The petitioner bank claim that since it was placed under receivership and
prohibited from doing business in the Philippines it should no longer be held liable
for interests and penalties on its account to the respondent bank. However, CA
rendered judgment affirming the decision of the RTC.

Issue: Whether or not an insolvent bank placed under receivership and prohibited
from doing business in the Philippines may be held liable to pay interests and
penalties after being declared in default.
Held. Yes. Petition dismissed. Petitioner was served with a copy of summons and
the complaint, but failed to file its answer thereto. It also failed to file a verified
motion to set aside the order of default despite its receipt of a copy thereof. We
note that the trial court rendered judgment only on April 7, 1998 or more than a
year after the issuance of the default order; yet, the petitioner failed to file any
verified motion to set aside the said order before the rendition of the judgment of
default. The PDIC was designated by the Central Bank of the Philippines as receiver
(conservator) as early as January 14, 1998, and in the course of its management of
the petitioner bank's affairs, it should have known of the pendency of the case
against the latter in the trial court. Moreover, the petitioner, through the PDIC,
received a copy of the decision of the trial court but did not bother filing a motion
for partial reconsideration appending thereto the orders of the Monetary Board or a
motion to set aside the order of default. Instead, the petitioner appealed the
decision, and even failed to assign as an error the default order of the trial court.
The petitioner is, thus, barred from relying on the orders of the Monetary Board of
the Central Bank of the Philippines placing its assets and affairs under receivership
and ordering its liquidation.

12. Miranda vs. Court of Appeals

G.R. No. 169334, September 8, 2006
Facts: Petitioner Leticia G. Miranda was a depositor of Prime Savings Bank. She
withdrew substantial amounts from her account, but instead of cash she opted to be
issued a crossed cashier's check in the sum of P2,500,000 and cashier's check in
the amount of P3,002,000. Petitioner deposited the two checks into her account in
another bank on the same day, however, Bangko Sentral ng Pilipinas (BSP)
suspended the clearing privileges of Prime Savings Bank effective 2:00 p.m. of June
3, 1999. The two checks of petitioner were returned to her unpaid.
On June 4, 1999, Prime Savings Bank declared a bank holiday. On January 7,
2000, the BSP placed Prime Savings Bank under the receivership of the Philippine
Deposit Insurance Corporation (PDIC).
Petitioner filed a civil action for sum of money in the Regional Trial Court to
recover the funds from her unpaid checks against Prime Savings Bank, PDIC and the
BSP. The court rendered judgment against defendants and ordered them to pay the
plaintiff. On appeal, the Court of Appeals reversed the trial court and ruled in favor
of the PDIC and BSP, dismissing the case against them, without prejudice to the
right of petitioner to file her claim before the court designated to adjudicate on
claims against Prime Savings Bank. Petitioner's motion for reconsideration was
denied. Hence, this petition.

Issue: Whether or not the respondents are solidarily liable to pay the petitioner.

Held: No. 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. However, in a situation involving the
element of fraud, where a cashier's check is purchased from a bank at a time when
it is insolvent, as its officers know or are bound to know by the exercise of
reasonable diligence, it has been held that the purchase is entitled to a preference
in the assets of the bank on its liquidation before the check is paid. Hence, the CA
decision is affirmed with modification that the claim of petitioner Miranda is entitled
to preference in the assets of PSB in its liquidation.