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Metropolitan Bank and Trust Co V Centro Dev't Consolidated Bank and Trust Corp. v. CA + L.C.

Corp Diaz and Company (2003) / Carpio

Banks; diligence required. Republic Act No. 8971, or

the General Banking Law of 2000, recognizes the
vital role of banks in providing an environment Facts
conducive to the sustained development of the LC Diaz [professional partnership engaged in
national economy and the fiduciary nature of accounting] opened a savings account with
banking; thus, the law requires banks to have high Solidbank. LC Diaz's cashier, Macaraya, filled up two
standards of integrity and performance. The fiduciary savings deposit slips, and she gave them +
nature of banking requires banks to assume a passbook to messenger Calapre and instructed him
degree of diligence higher than that of a good father to deposit the money with Solidbank. Calapre
of a family. In the case at bar, petitioner itself was presented the deposit slips and passbook to the
negligent in the conduct of its business when it teller. He left the passbook with Solidbank first as he
extended unsecured loans to the debtors. Worse, it had to make another deposit at Allied Bank, but
was in serious breach of its duty as the trustee of the when he returned, he was informed that somebody
MTI. It was not able to protect the interests of the got the passbook. Calapre reported this to
parties and was even instrumental in violating the Macaraya. Macaraya + Calapre went back to
terms of the MTI, to the detriment of the parties Solidbank with a deposit slip [P200k check]. When
thereto. Thus, petitioner has only itself to blame for Macaraya asked about the passbook, the teller said
being left with insufficient recourse against petitioner that someone shorter than Calapre got it. Macaraya
under the assailed MTI. Metropolitan Bank and Trust reported this matter.
Company vs. Centro Development Corp., et al., G.R.
No. 180974, June 13, 2012. The following day, CEO Diaz called Solidbank to
stop any transaction using the passbook until the
company could open a new account. It was found
Corporation; corporate approval for appointment of out that learned that P300k was withdrawn from the
trustee. Reading carefully the Secretarys account the previous day. The withdrawal slip bore
Certificate, it is clear that the main purpose of the the signatures of two authorized signatories of LC
directors Resolution was to appoint petitioner as the Diaz but they denied signing it. Noel Tamayo
new trustee of the previously executed and amended received this sum of money.
MTI. Going through the original and the revised MTI, An information for Estafa through Falsification of
we find no substantial amendments to the provisions Commercial Document was filed against one of their
of the contract. We agree with petitioner that the act messengers (Ilagan) and one Roscoe Verdazola
of appointing a new trustee of the MTI was a regular (first time they appeared in the case discussion), but
business transaction. The appointment necessitated the RTC dismissed the criminal case. LC Diaz
only a decision of at least a majority of the directors demanded the return of their money from Solidbank,
present at the meeting in which there was a quorum, but the latter refused and a complaint for recovery of
pursuant to Section 25 of the Corporation Code. a sum of money was filed against them. However,
Metropolitan Bank and Trust Company vs. Centro Solidbank was absolved.
Development Corp., et al., G.R. No. 180974, June
13, 2012. RTC applied rules on savings account written on
the passbook ["Possession of this book shall raise
the presumption of ownership and any payment or
Consolidated Bank v. CA payments made by the bank upon the production of
the said book and entry therein of the withdrawal
shall have the same effect as if made to the
depositor personally."] RTC said that the burden of
proof shifted to LC Diaz to prove that the signatures
are not forged. Also, they applied the rule that the Solidbank's breach of K-tual obligation
holder of the passport is presumed to be the owner.
It was also held that Solidbank did not have any For breach of the savings deposit agreement due to
participation in the custody and care of the passbook negligence, or culpa contractual, the bank is liable to
and as such, their act of allowing the withdrawal was its depositor. When the passbook is in the
not the proximate cause of the loss. The proximate possession of Solidbanks tellers during withdrawals,
cause was LC Diaz negligence. As regards the the law imposes an even higher degree of diligence.
contention that LC Diaz and Solidbank had Likewise, tellers must exercise a high degree of
precautionary procedures (like a secret handshake diligence in insuring that they return the passbook
of sorts) whenever the former withdrew a large sum, only to the depositor or authorized representative.
RTC pointed out that LC Diaz disregarded this in the In culpa contractual, once the plaintiff proves a
past withdrawal. breach of contract, there is a presumption that the
CA, on the other hand, said that the proximate defendant was at fault or negligent. The burden is on
cause of the unauthorized withdrawal is Solidbank's the defendant to prove that he was not at fault or
negligence, applying NCC 2176. CA said the 3 negligent. In culpa aquiliana, the plaintiff has the
elements of QD are present [damages; fault or burden of proof. Solidbank failed to discharge this
negligence; connection of cause and effect]. The burden, after LC Diaz establishing the breach of K-
teller could have called up LC Diaz since the amount tual obligation. Hence, Solidbank is bound by the
being drawn was significant. Proximate cause is negligence of its employees. The defense of
teller's failure to call LC Diaz. CA ruled that while LC exercising required diligence in selecting, supervising
Diaz was negligent in entrusting its deposits to its employees is NOT a complete defense in culpa
messenger and its messenger in leaving the contractual, unlike in culpa aquiliana.
passbook with the teller, Solidbank could not escape
liability because of the doctrine of last clear chance.
Solidbank could have averted the injury had it called Proximate cause of unauthorized withdrawal
up LC Diaz to verify the withdrawal.
Solidbanks negligence in not returning the passbook
to Calapre was the proximate cause. [Definition:
cause which, in natural and continuous sequence,
RATIO unbroken by any efficient intervening cause,
On Solidbank's fiduciary duty under the law produces the injury and without which the result
would not have occurred.]
SC says that Solidbank is liable for breach of K due
to negligence [culpa contractual]. K [savings deposit RTC said that LC Diaz negligence was the
agreement] between bank and depositor governed proximate cause. However, SC says LC Diaz was
by provisions on simple loan; bank is the debtor and not at fault that the passbook landed in the hands of
depositor is the creditor. Banks are under obligation the impostor. In fact, it was in the possession of the
to treat accounts of depositors with meticulous care bank while the deposit was being processed. CA
[higher than diligence of a good father of a family said that teller's failure to call LC Diaz was the
standard], bearing in mind the fiduciary nature of proximate cause. SC says the bank did not have the
their relationship. The bank's obligation to observe duty to call LC Diaz to confirm withdrawal.
high standards of integrity and performance is
deemed written in every deposit agreement.
However, this nature does not convert K from a Doctrine of last clear chance
simple loan to a trust agreement (failure by bank to
pay depositor is failure to pay a simple loan only). "Where both parties are negligent but the negligent
act of one is appreciably later than that of the other,
or where it is impossible to determine whose fault or
negligence caused the loss, the one who had the last
clear opportunity to avoid the loss but failed to do so, January 15, 1983: Canlas wrote a letter informing
is chargeable with the loss." ASB that the mortgage was without their authority.
He also requested the sheriff Contreras to hold or
SC DOES NOT APPLY IT HERE. Solidbank is cancel the auction. Both parties refused.
liable for breach of contract due to negligence in the
performance of its contractual obligation to LC Diaz. The spouses Canlas filed a case for annulment of
This is a case of culpa contractual, where neither the deed of real estate mortgage with prayer for the
contributory negligence of the plaintiff nor his last issuance of a writ of preliminary injunction
clear chance to avoid the loss, would exonerate the
defendant from liability. Since LC Diaz was guilty of RTC: restrained the sheriff from issuing a Certificate
contributory negligence, Solidbank's liability should of Sheriffs Sale and annulled the mortgage
be reduced. CA: reversed holding Canlas estopped for coming to
the bank with Maosca and letting himself be
introduced as Leonardo Rey
ISSUE: W/N the ASB had was negligent due to the
Lessons Applicable: Last Clear Chance (Torts doctrine of last clear chance
and Damages)

Laws Applicable: Article 1173

HELD: YES. Petition is GRANTED

Article 1173. The fault or negligence of the obligor
consist in the omission of that diligence which is
required by the nature of the obligation and
August, 1982: Osmundo S. Canlas executed a corresponds with the circumstances of the persons,
Special Power of Attorney authorizing Vicente of the time and of the place. When negligence shows
Maosca to mortgage 2 parcels of land situated in bad faith, the provisions of articles 1171 and 2201,
BF Homes Paranaque in the name of his wife paragraph 2, shall apply
Angelina Canlas.
The degree of diligence required of banks is more
Subsequently, Osmundo Canlas agreed to sell the than that of a good father of a family
lands to Maosca for P850K, P500K payable within
1 week, and the balance serves as his investment in not even a single identification card was exhibited by
the business. Maosca issued 2 checks P40K and the said impostors to show their true identity
P460K. The P460K lacked sufficient funds.
acted simply on the basis of the residence
September 3, 1982: Maosca mortgage to Atty. certificates bearing signatures which tended to
Manuel Magno the parcels of lands for P100K with match the signatures affixed on a previous deed of
the help of impostors who misrepresented mortgage to Atty. Magno
themselves as the Spouses Canlas.
previous deed of mortgage did not bear the tax
September 29, 1982: Maosca was granted a loan account number of the spouses as well as the
by the respondent Asian Savings Bank (ASB) for Community Tax Certificate of Angelina Canlas
P500K with the parcels of land as security and with
the help of the same impostors. The loan was left doctrine of last clear chance
unpaid resulting in a extrajudicially foreclosure on the where both parties are negligent but the negligent
lots. act of one is appreciably later in point of time than
that of the other, or where it is impossible to
determine whose fault or negligence brought about
the occurrence of the incident, the one who had the involving banking transactions; highest
last clear opportunity to avoid the impending harm degree of diligence is required for
but failed to do so, is chargeable with the banks.
consequences arising therefrom

the antecedent negligence of a person does not Facts:

preclude recovery of damages caused by the
On October 10, 2002, a check in the amount o
supervening negligence of the latter, who had the f P1 ,000,000.00 payable to "Mateo Mgt. Group
last fair chance to prevent the impending harm by International" (MMGI) was presented for deposit and
the exercise of due diligence accepted at petitioner's Kawit Branch. The check,
post-dated "Oct. 9, 2003." Respondent was drawn
Antecedent Negligence: Osmundo Canlas was against the account of Marciano Silva, Jr. (Silva) with
negligent in giving Vicente Maosca the opportunity respondent Bank of the Philippine Islands (BPI) Bel-
to perpetrate the fraud, by entrusting him the owner's Air Branch. Upon receipt, petitioner sent the check
copy of the transfer certificates of title of subject for clearing to respondent through the Philippine
Clearing House Corporation (PCHC).
parcels of land

Supervening Negligence: Failing to perform the The check was cleared by respondent and
petitioner credited the account of MMGI. On October
simple expedient of faithfully complying with the 22, 2002, MMGIs account was closed and all the
requirements for banks to ascertain the identity of funds therein were withdrawn. A month later, Silva
the persons transacting with them - ASB bears the discovered the debit of P1,000,000.00 from his
loss account. In response to Silvas complaint,
respondent credited his account with the aforesaid
Canlas went to ASB with Maosca and he was sum.
introduced as Leonardo Rey. He didn't correct
Maosca. However, he did not know that the lots On March 21, 2003, respondent returned a
were being used as a security for he was there to photocopy of the check to petitioner for the reason:
Postdated. Petitioner, however, refused to accept
make sure that Maosca pays his debt so he cannot
and sent back to respondent a photocopy of the
be estopped from assailing the validity of the check. Thereafter, the check, or more accurately, the
mortgage Charge Slip, was tossed several times from
petitioner to respondent, and back to petitioner, until
But being negligent in believing the on May 6, 2003, respondent requested the PCHC to
misrepresentation by Maosca that he had other lots take custody of the check. PCHC likewise
and that the lot were not to be used as a security, encouraged respondent to submit the controversy for
Canlas was negligent and undeserving of Attorney's resolution thru the PCHC Arbitration Mechanism.
However, it was petitioner who filed a complaint
the contract of mortgage sued upon was entered into before the Arbitration Committee, asserting that
and signed by impostors who misrepresented respondent should solely bear the entire face value
of the check due to its negligence in failing to return
themselves as the spouses Osmundo Canlas and the check to petitioner within the 24-hour
Angelina Canlas = complete nullity. reglementary period as provided in Section 20.1 of
the Clearing House Rules and Regulations8 (CHRR)
2000. Petitioner prayed that respondent be ordered
to reimburse the sum of P500,000.00 with 12%
Allied Banking Corporation vs. Bank of the interest per annum, and to pay attorneys fees and
Philippine Islands other arbitration expenses.
G.R. No. 188363. February 27, 2013
In its Answer with Counterclaims, respondent
Tort; Doctrine of Last Clear Chance; charged petitioner with gross negligence for
definition and characteristics; accepting the post-dated check in the first place. It
contributory negligence; definition; contended that petitioners admitted negligence was
effect; apportionment of damages the sole and proximate cause of the loss.
between parties who are both negligent
may be awarded to the private respondent under
Article 2179 of the New Civil Code, to wit:

Ratio: x x x. When the plaintiffs own negligence

was the immediate and proximate cause of his injury,
The doctrine of last clear chance, stated he cannot recover damages. But if his negligence
broadly, is that the negligence of the plaintiff does not was only contributory, the immediate and proximate
preclude a recovery for the negligence of the cause of the injury being the defendants lack of due
defendant where it appears that the defendant, by care, the plaintiff may recover damages, but the
exercising reasonable care and prudence, might courts shall mitigate the damages to be awarded.
have avoided injurious consequences to the plaintiff
notwithstanding the plaintiffs negligence. The
doctrine necessarily assumes negligence on the part In view of this, we believe that the demands
of the defendant and contributory negligence on the of substantial justice are satisfied by allocating the
part of the plaintiff, and does not apply except upon damage on a 60-40 ratio. Thus, 40% of the damage
that assumption. Stated differently, the antecedent awarded by the respondent appellate court, except
negligence of the plaintiff does not preclude him from the award of P25,000.00 attorneys fees, shall be
recovering damages caused by the supervening borne by private respondent RMC; only the balance
negligence of the defendant, who had the last fair of 60% needs to be paid by the petitioners. The
chance to prevent the impending harm by the award of attorneys fees shall be borne exclusively
exercise of due diligence. Moreover, in situations by the petitioners. (Italics in the original; emphasis
where the doctrine has been applied, it was supplied)
defendants failure to exercise such ordinary care,
having the last clear chance to avoid loss or injury, Contributory negligence is conduct on the
which was the proximate cause of the occurrence of part of the injured party, contributing as a legal cause
such loss or injury. to the harm he has suffered, which falls below the
standard to which he is required to conform for his
A collecting bank is guilty of contributory own protection. Admittedly, petitioners acceptance
negligence when it accepted for deposit a post-dated of the subject check for deposit despite the one year
check notwithstanding that said check had been postdate written on its face was a clear violation of
cleared by the drawee bank which failed to return the established banking regulations and practices. In
check within the 24-hour reglementary period. such instances, payment should be refused by the
drawee bank and returned through the PCHC within
the 24-hour reglementary period. As aptly observed
In the cited case of Philippine Bank of by the CA, petitioners failure to comply with this
Commerce v. Court of Appeals, while the Court found basic policy regarding post-dated checks was a
petitioner bank as the culpable party under the telling sign of its lack of due diligence in handling
doctrine of last clear chance since it had, thru its checks coursed through it.
teller, the last opportunity to avert the injury incurred
by its client simply by faithfully observing its own
validation procedure, it nevertheless ruled that the
plaintiff depositor (private respondent) must share in
the loss on account of its contributory negligence. It bears stressing that the diligence required
Thus: of banks is more than that of a Roman paterfamilias
or a good father of a family. The highest degree of
The foregoing notwithstanding, it cannot be diligence is expected, considering the nature of the
denied that, indeed, private respondent was likewise banking business that is imbued with public interest.
negligent in not checking its monthly statements of While it is true that respondents liability for its
account. Had it done so, the company would have negligent clearing of the check is greater, petitioner
been alerted to the series of frauds being committed cannot take lightly its own violation of the long-
against RMC by its secretary. The damage would standing rule against encashment of post-dated
definitely not have ballooned to such an amount if checks and the injurious consequences of allowing
only RMC, particularly Romeo Lipana, had exercised such checks into the clearing system.
even a little vigilance in their financial affairs. This
omission by RMC amounts to contributory Negotiable Instruments Digest: BPI FAMILY
negligence which shall mitigate the damages that BANK v. EDGARDO BUENAVENTURA et al.
BPI FAMILY BANK v. EDGARDO YES. Every bank that issues checks for the
BUENAVENTURA et al. use of its customers should know whether or not the
drawer's signature thereon is genuine, whether there
[G.R. No. 148196, September 30, 2005] (471 SCRA are sufficient funds in the drawers account to cover
431) checks issued, and it should be able to detect
alterations, erasures, superimpositions or
intercalations thereon, for these instruments are
FACTS: prepared, printed and issued by itself, it has control
of the drawer's account, and it is supposed to be
A complaint for Reinstatement of Current familiar with the drawer's signature. It should
Account/Release of Money plus Damages was filed possess appropriate detecting devices for
by the Buenaventuras against BPI Family Bank (BPI- uncovering forgeries and/or alterations on these
FB) in the RTC. Buenaventura, et al. opened a instruments. Unless a forgery or alteration is
Current account with the BPI-FB Branch in Caloocan attributable to the fault or negligence of the drawer
City. They deposited a check from Amado Franco himself, the remedy of the drawee bank that
which was purportedly issued by Eladio Teves and negligently clears a forged and/or altered check for
Joseph Teves. The check was subsequently cleared payment is against the party responsible for the
and the amount of P500, 000.00 was credited to their forgery or alteration, otherwise, it bears the loss.
Current Account.
Having been negligent in detecting the
Petitioners then drew a check amounting to forgery prior to clearing the check, BPI-FB should
P91, 270.00 which was dishonored upon bear the loss and cant shift the blame to
presentment for payment for the reason that the Buenaventura, et al. having failed to show any
account was already closed in spite of the balance in participation on their part in the forgery. BPI-FB fails
their current account. They subsequently learned to point any circumstance which should have put
that the Bank of the Philippine Islands unilaterally Buenaventura, et al. on inquiry as to the why and
freeze their Current account on the ground that the wherefore of the possession of the check by Amado
source of fund was illegal or unauthorized. Franco. Buenaventura, et al. were not privies to any
transaction involving FMIC, Tevesteco or Franco.
BPI-FB refused to reinstate the account even
They thus had no obligation to ascertain from Franco
after demand from the petitioners. It asserted that
what the nature of the latters title to the checks was,
the freezing of the account was triggered by the
if any, or the nature of his possession. They cannot
forgery claim of FMIC and the unauthorized fund
be guilty of gross neglect amounting to legal
transfer to Tevesteco. The check received by
absence of good faith, absent any showing that there
Buenaventura, et al. from Amado Franco was drawn
was something amiss about Francos acquisition or
by Eladio Teves and Joseph Teves against the
possession of the check, which was payable to
Current Account of the Tevesteco Arrastre
Stevedoring Co., Inc. (Tevesteco) by means of
forgery. Thus, BPI-FB has no unilateral right to freeze
the current account of Buenaventura, et al. based on
the suspicion that the funds in the latters account
ISSUE: are illegal or unauthorized having been sourced from
the unlawful transfer of funds from the account of
WON BPI-FB is liable for the loss due to its FMIC to Tevesteco and disallow any withdrawal
negligence to detect forgery prior to clearing the therefrom to allegedly protect its interest.
Needless to stress, the contract between a
bank and its depositor is governed by the provisions
of the Civil Code on simple loan. Thus, there is a
debtor-creditor relationship between a bank and its
depositor. The bank is the debtor and the depositor is 3. To the aghast of the spouses, they only came to
the creditor. The depositor lends the bank money learn of the incident through a daughter-in-law who
and the bank agrees to pay the depositor on called them up in the US. Apparently, a break-in
occurred previously in their US residence and
demand. The savings or current deposit agreement
several important documents were lost to the thief.
between the bank and the depositor is the contract The spouses demanded payment from the bank who
that determines the rights and obligations of the refused. Hence the filing of the suit against petitioner
parties. bank.

Thus, the fact that the funds in deposit with BPI- 4. The spouses presented a PNP Document
FB under the name of Buenaventura, et al. were Examiner expert who analysed the signature and
allegedly derived exclusively from the alleged concluded that the signature was forged, hence the
P80,000,000.00 unlawfully transferred from the funds discrepancy between the signature of the impostor
of FMIC or that the deposit under the name of and the one written in the signature cards held by the
Tevesteco consisted allegedly exclusively of the said
P80,000,000.00 debited from FMICs account is 4. The trial court ruled in favor of the spouses
immaterial. These circumstances cannot be used Cabamongan, held the bank negligent and awarded
against a party not privy to the forgery. xxx actual, moral and exemplary damages. The bank
appealed to the CA which affirmed the lower court's
decision. Both parties filed a petition for review on
certiorari before the SC where the petitioner insisted
Citybank N.A. vs. Cabamongan 488 SCRA 517 that it Carmela who preterminated the TD despite
Digest claims to the contrary, while the Cabamongan
Citybank v. Cabamongan spouses contended that Citybank's negligence was
488 SCRA 517 established by evidence.
G.R. No. 146918 May 2, 2006
Ponente: Austria-Martinez, J.: Issue: Whether or not the bank is negligent and
therefor should be held liable when it allowed the
Bank negligent pretermination of the TD in favor of the impostor
Facts: HELD:
YES. The bank was indeed negligent as it failed to
1. The Cabamongan spouses Luis and Carmelita are exercise the highest degree of care and diligence
both based in California, USA. The spouses opened required of it. The banking business is impressed
a foreign currency time deposit account for their with public interest and of paramount importance
children with petitioner CityBank with a 180-day thereto is the trust and confidence of the public in
term. An impostor who claimed to be Carmelita (wife) general. The Court has held that the bank "is bound
succeeded to preterminate the time deposit after to know the signatures of its customers; and if it pays
presenting passport, credit card and other a forged check, it must be considered as making
identification. payment out of its own funds, and cannot ordinarily
charge the amount so paid to the account of the
2. The bank personnel who attended to the depositor whose name was forged." (San Carlos
transaction ignored several red flags which could Milling Ltd. vs. BPI)
have alerted the bank as to the real identity of the
person claiming to be 'Carmelita'. For one, she failed It has been sufficiently shown that the signatures of
to present the certificate of time deposit, there was Carmelita in the pretermination were forged. The
also a discrepancy in her signature with that in the petitioner, even with its signature verification
signature cards of the bank. Finally, the photo in the procedure failed to detect the forgeries. Citybank
bank's file did not look like this person claiming to be cannot label its negligence as mere error. For not
Carmelita. Despite all these irregularities, the bank exercising the degree of diligence required of
went through with the transaction, which only took 40 banking institutions, it is liable for damages.
minutes. The document waiver which the impostor
signed was also not notarized, as required under
bank's procedures.
G.R. NO. 165339 AUGUST 23, 2010 down to the last centavo, and as promptly as
possible. This has to be done if the account is to
FACTS: reflect at any given time the amount of money the
Respondent Arcelito B.Tan maintained a depositor can dispose of as he sees fit, confident
current and savings account with petitioner Equitable that the bank will deliver it as and to whomever he
PCI Bank. On May 13, 1992, Tan issued PCIB Check directs.
No. 275100 postdated May 30, 1992 in the amount The bank on which the check is drawn,
of P34,588.72 in favor of Sulpicio Lines, Inc. As of known as the drawee bank, is under strict liability to
May 14, 1992, respondent's balance with PCIB was pay to the order of the payee in accordance with the
P35,147.59. On May 14, 1992, Sulpicio Lines, Inc. drawers instructions as reflected on the face and by
deposited the aforesaid check to its account with the terms of the check. Thus, payment made before
Solid Bank, Carbon Branch, Cebu City. After the date specified by the drawer is clearly against the
clearing, the amount of the check was immediately drawee bank's duty to its client.
debited by PCIB from Tan's account leaving him with
a balance of only P558.87. However, from May 9 to ISSUE: WHETHER OR NOT PCIB ACTED
16, 1992, Tan issued three checks, specifically: PCIB NEGLIGENTLY IN DEALING WITH TANS
Check No. 275080 dated May 9, 1992, payable to ACCOUNT.
Agusan del Sur Electric Cooperative Inc. (ASELCO)
for the amount of P6,427.68; PCIB Check No. DECISION OF THE RTC:
275097 dated May 10, 1992 payable to Agusan del The RTC ruled in favor of PCIB, holding that
Norte Electric Cooperative Inc., (ANECO) for the it did not act negligently and dismissed the
amount of P6,472.01; and PCIB Check No. 314104 complaint. Tan appealed.
dated May 16, 1992 payable in cash for the amount
of P10,000.00. Thus, when presented for payment, DECISION OF THE CA:
the three checks were dishonored for being drawn The CA reversed the decision of RTC and
against insufficient funds. As a result of the directed PCIB to pay respondent the sum of
dishonored checks payable to ASELCO and ANECO, P1,864,500.00 actual damages, P50,000.00 moral
the electric power supply for the two mini-sawmills damages, P50,000.00 exemplary damages and
owned and operated by Tan was cut off and was attorney's fees of P30,000.00.
restored only after several days. This prompted Tan PCIB filed a motion for reconsideration, which
to file with the RTC of Cebu a complaint against the CA denied.
PCIB for the payment of losses consisting of
unrealized income together with other claims, SC RULING:
contending that Check No. 275100 was a postdated The SC affirmed with modifications the
check in payment of Bills of Lading Nos. 15, 16 and decision of CA, holding that PCIB acted negligently.
17, and that his account with PCIB would have had However, the award of moral damages was deleted
sufficient funds to cover payment of the three other and added the award of temperate damages.
checks were it not for the negligence of the bank in The Court had already imposed on banks the
immediately debiting from his account Check No. same high standard of diligence required under R.A.
275100, in the amount of P34,588.72, even as the 8791 at the time of the untimely debiting of Tan's
said check was postdated to May 30, 1992. PCIB, on account by PCIB. In Simex International (Manila),
the other hand, averred that the questioned check Inc. v. Court of Appeals, the Court held that as a
was postdated May 30, 1992 and claimed that it was business affected with public interest and because of
a current check dated May 3, 1992. The bank the nature of its functions, the bank is under
alleged that the disconnection of the electric supply obligation to treat the accounts of its depositors with
to respondent's sawmills was not due to the dishonor meticulous care, always having in mind the fiduciary
of the checks, but for other reasons not attributable nature of their relationship. The diligence required of
to the bank. banks, therefore, is more than that of a good father
of a family. In every case, the depositor expects the
DOCTRINE/LAWS RELATED TO THE CASE: bank to treat his account with the utmost fidelity,
The diligence required of banks is more than whether such account consists only of a few hundred
that of a good father of a family. In every case, the pesos or of millions. The bank must record every
depositor expects the bank to treat his account with single transaction accurately, down to the last
the utmost fidelity, whether such account consists centavo, and as promptly as possible. This has to be
only of a few hundred pesos or of millions. The bank done if the account is to reflect at any given time the
must record every single transaction accurately, amount of money the depositor can dispose of as he
sees fit, confident that the bank will deliver it as and 6. On November 16, 1992, Garin called up Ofelia to
to whomever he directs. inform her that the check had already been
Based on the facts, it is clear that PCIB did cleared. The following day, PNB Buendia, after
not exercise the degree of diligence that it ought to deducting the bank charges, credited $299,248.37 to
have exercised in dealing with its client. the account of the spouses Cheah.
Furthermore, the bank on which the check is drawn,
known as the drawee bank, is under strict liability to
7. Acting on Adelinas instruction to withdraw the
pay to the order of the payee in accordance with the
credited amount. Filipina received all the proceeds.
drawers instructions as reflected on the face and by
the terms of the check. Thus, payment made before
the date specified by the drawer is clearly against the 8. In the meantime, the Cable Division of PNB Head
drawee bank's duty to its client. As such, the Court Office received on November 16, 1992 a
finds that PCIBs negligence is the proximate cause SWIFT message from Philadelphia, informing PNB
of Tans loss. of the return of the check for insufficient
funds. However, the PNB Head Office could not
ascertain to which branch/office it should forward the
same for proper action.
CHEAH CHEE CHONG and OFELIA CAMACHO 9. After a few days, PNB Head Office ascertained
CHEAH that the SWIFT message was intended for PNB
Buendia Branch.
1. On November 4, 1992, Ofelia Cheah and her
friend Adelina Guarin were having a conversation in 10. Informed about the bounced check and upon
the latters office when Adelinas friend, Filipina demand by PNB Buendia to return the money
Tuazon, approached her to ask if she could have withdrawn, Ofelia immediately contacted Filipina to
Filipinas check cleared and encashed for a service get the money back. But the latter told her that all the
fee of 2.5%. money had already been given to several people
who asked for the checks encashment. Criminal
2. The check was Bank of America Check No. 190 charges were then filed against these suspect
drawn by Atty. Rosales against Bank of America beneficiaries.
California, USA, with a face amount of $300,000.00,
payable to cash. 11. Subsequently, PNB sent a demand letter to
spouses Cheah for the return of the amount of the
3. Because Adelina does not have a dollar account, check, froze their peso and dollar deposits, and filed
she asked Ofelia if she could accommodate Filipinas a complaint against them for Sum of Money with the
request since she has a joint dollar savings account RTC. In said complaint, PNB demanded payment of
with her husband Cheah Chee Chong with PNB around P8,202,220.44, plus interests and attorneys
Buendia Branch. fees.

4. Ofelia agreed. They met with the Loans 12. The RTC ruled in PNBs favor. It held that
Department who referred them to PNB Division Chief spouses Cheah were guilty of contributory
Garin. Garin discussed with them the process of negligence. While the CA recognized the spouses
clearing the check and they were told that it normally Cheah as victims of a scam who nevertheless have
takes 15 days. Assured that the deposit and to suffer the consequences of Ofelias lack of care
subsequent clearance of the check is a normal and prudence in immediately trusting a stranger, the
transaction, Ofelia deposited Filipinas check. appellate court did not hold PNB scot-free. It
declared both parties equally negligent and should
5. PNB then sent it for clearing through its suffer and shoulder the loss.
correspondent bank, Philadelphia National Bank. 5
days later, PNB received a credit advice from ISSUE: Whether PNB should be held liable.
Philadelphia that the proceeds of the subject check
had been temporarily credited to PNBs account as HELD: PNBs act of releasing the proceeds of the
of November 6, 1992. check prior to the lapse of the 15-day clearing period
was the proximate cause of the loss.
Ofelia deposited the subject check on November 4, engaged in banking, holds itself out to the public as
1992. Hence, the 15th banking day from the date of the expert on this field, and the law thus holds it to a
said deposit should fall on November 25, 1992. high standard of conduct." A bank is expected to be
However, what happened was that PNB Buendia, an expert in banking procedures and it has the
upon calling up Ofelia that the check had been necessary means to ascertain whether a check, local
cleared, allowed the proceeds thereof to be or foreign, is sufficiently funded.
withdrawn on November 17 and 18, 1992, a week
before the lapse of the standard 15-day clearing Incidentally, PNB obliges the spouses Cheah to
period. return the withdrawn money under the principle of
solutio indebiti.
This Court already held that the payment of the
amounts of checks without previously clearing them In the case at bench, PNB cannot recover the
with the drawee bank especially so where the proceeds of the check under the principle it invokes.
drawee bank is a foreign bank and the amounts 1st, the gross negligence of PNB, can never be
involved were large is contrary to normal or ordinary equated with a mere mistake of fact, which must be
banking practice. Also, in Associated Bank v. something excusable and which requires the
Tan, wherein the bank allowed the withdrawal of the exercise of prudence. No recovery is due if the
value of a check prior to its clearing, we said that mistake done is one of gross negligence.
"[b]efore the check shall have been cleared for
deposit, the collecting bank can only assume at its The spouses Cheah are guilty of contributory
own risk x x x that the check would be cleared and negligence and are bound to share the loss with the
paid out." bank. "Contributory negligence is conduct on the part
of the injured party, contributing as a legal cause to
The delay in the receipt by PNB Buendia of the the harm he has suffered, which falls below the
SWIFT message notifying it of the dishonor is of no standard to which he is required to conform for his
moment, because had PNB Buendia waited for the own protection."
expiration of the clearing period and had never
released during that time the proceeds of the check, The fact that the check was cleared after only eight
it would have already been duly notified of its banking days from the time it was deposited or
dishonor. Clearly, PNBs disregard of its preventive contrary to what Garin told her that clearing takes 15
and protective measure against the possibility of days should have already put Ofelia on guard. She
being victimized by bad checks had brought upon should have first verified the regularity of such hasty
itself the injury of losing a significant amount of clearance considering that if something goes wrong
money. with the transaction, it is she and her husband who
would be put at risk and not the accommodated
It bears stressing that "the diligence required of party. Thus, we are one with the CA in ruling that
banks is more than that of a Roman pater familias or Ofelias prior consultation with PNB officers is not
a good father of a family. The highest degree of enough to totally absolve her of any liability
diligence is expected." PNB miserably failed to do its
duty of exercising extraordinary diligence and In any case, the complaint against the spouses
reasonable business prudence. The disregard of its Cheah could not be dismissed. As PNBs client,
own banking policy amounts to gross negligence, Ofelia was the one who dealt with PNB and
which the law defines as "negligence characterized negotiated the check such that its value was credited
by the want of even slight care, acting or omitting to in her and her husbands account. Being the ones in
act in a situation where there is duty to act, not privity with PNB, the spouses Cheah are therefore
inadvertently but wilfully and intentionally with a the persons who should return to PNB the money
conscious indifference to consequences in so far as released to them.
other persons may be affected." With regard to
collection or encashment of checks, suffice it to say All told, the Court concurs with the findings of the CA
that the law imposes on the collecting bank the duty that PNB and the spouses Cheah are equally
to scrutinize diligently the checks deposited with it for negligent and should therefore equally suffer the
the purpose of determining their genuineness and loss. The two must both bear the consequences of
regularity. "The collecting bank, being primarily their mistakes.
WHEREFORE, premises considered, the Petitions favors the plaintiff Poblete. Hence, this petition.
for Review on Certiorari in G.R. No. 170865 and in ISSUE: WON the CA erred in upholding the finding
G.R. No. 170892 are both DENIED. The assailed of the trial court declaring the TCT No. T-20151 as
August 22, 2005 Decision and December 21, 2005 null and void. Held : The petition is meritorious. It is
Resolution of the Court of Appeals in CA-G.R. CV well-entrenched rule, as applied, by the CA, that a
No. 63948 are hereby AFFIRMED in toto. forged or fraudulent deed is a nullity and conveys no
title. Moreover, where the deed of sale states that the
purchase price has been paid but in fact has never
been, the deed is void ab initio for lack of
Land Bank of the Philippines v. Barbara Sampaga consideration. Since the deed, is void, the title is also
Poblete; G.R. No. 196577. February 25, 2013 On void. Since the land title has been declared void by
October 1997, respondent Poblete obtained a loan final judgment, the Real Estate Mortgage over it is
worth P300k from Kapantay Multi-Purpose. She also void. It is essential that the mortgagor be the
mortgaged her Lot No.29 located in Buenavista, absolute owner of the mortgage; otherwise, the
Sablayan, Occidental Mindoro, under OCT No. P- mortgage is void. The doctrine the mortgagee in
12026. Kapantay, in turn, used OCT No. P-12026 as good faith as a rule does not apply to banks which
collateral under its Loan Account No. 97-OC-013 are required to observe a higher standard of
with Land Bank-Sablayan Branch. After a year, diligence. A bank cannot assume that, simply
Poblete instructed her son-in-law Domingo Balen to because the title offered as security is on its face,
look for a buyer for the Lot No. 29 in order to pay her free of any encumbrances or lien, it is relieved of the
loan and he referred Angelito Joseph Maniego. Both responsibility of taking further steps to verify the title
parties agreed that the lot shall amount to P 900k but and inspect the properties to be mortgage. The
in order to reduce taxes they will execute a P 300k records do not even show that Land Bank
agreed price appearing in the Deed of Absolute Sale investigated and inspected the actual occupants.
dated November 9, 1998. In the Deed, Poblete Land Bank merely mentioned Maniegos loan
specifically described herself as a widow. Balen, application upon his presentation of OCT No. P-
then, delivered the Deed to Maniego. Instead of 12026, which was still under the name of Poblete.
paying the price, Maniego promised in an affidavit Land Bank even ignored the fact that Kapantay
dated November 19, 1998 stating that the said previously used Pobletes title as collateral in its loan
amount will be deposited to her Land Bank Savings account with Land Bank. Furthermore, only one day
Account but he failed to do so. On August 1999, after Maniego obtained TCT No. P-20151 under his
Maniego paid Kapantays Loan Account for name, Land Bank and Maniego executed a Credit
P448,202.08 and on subsequent year he applied for Line Agreement and Real Mortgage. It appears that
a loan worth P1M from Land Bank using OCT No. P- Maniegos loan was already completely processed
12026 as a collateral with a condition that the title while the collateral was still in the name of Poblete.
must be first transferred on his name. On August 14, Where said mortgagee acted with haste in granting
2000, the Registry of Deeds issued TCT No. T-20151 the mortgage loan and did not ascertain the
in Maniegos name pursuant to a Deed of Absolute ownership of the land being mortgaged, it cannot be
Sale with the signatures of Mrs. Poblete and her considered innocent mortgagee. The pari delicto rule
husband dated August 11, 2000 and Maniego provides when two parties are equally at fault, the
successfully availed the Credit Line Agreement for law leaves them as they are and denies recovery by
P1M and a Real Estate Mortgage over TCT No. T- either one of them. This court adopt the decisions of
20151 on August 15, 2000. On November 2002, RTC and CA that only Maniego is at fault. Finally, on
Land Bank filed an Application for an Extra-judicial the issue of estoppels and laches, such question
Foreclosure against the said Mortgage stating that were not raised before the trial court. It is settled that
Maniego failed to pay his loan. Poblete filed a an issue which are neither alleged in the complaint
complaint for nullification of the Deed of Sale dated nor raised during the trial cannot be raised for the
August 11, 2000 and TCT No. T-20151, time on appeal. The issue on the nullity of Maniegos
Reconveyance of the Title and Damages with a title had already been foreclosed when this Court
Prayer for Temporary Restraining Order and/or denied Maniegos petition for review in the
Issuance of Writ of Preliminary Injunction against Resolution dated 13 July 2011, which became final
Maniego, Landbank and the Register of Deeds. The and executory on 19 January 2012. It is settled that a
judgment of RTC, affirmed by the CA upon appeal, decision that has acquired finality becomes
immutable and unalterable and may no longer be but they gave written authority
modified in any respect, even if the modification is
to Citytrust to automatically transfer funds from
meant to correct erroneous conclusions of fact or law
and whether it will be made by the court that their Savings Account to their Current Account at
rendered it or by the highest court of the land. This is any time whenever the funds in their current
without prejudice, however, to the right of Maniego to account were insufficient to meet withdrawals
recover from Poblete what he paid to Kapantay for from said current account = pre-authorized
the account of Poblete, otherwise there will be unjust
enrichment by Poblete. transfer (PAT) agreement
December 12, 1983: Librada Moran drew a
check for P50,576.00 payable to
Petrophil Corporation
December 13, 1983: Librada Moran, issued
Negotiable Instruments Case Digest: Moran V. CA another check in the amount of P56,090.00 in
favor of the same corporation
And Citytrust Bank (1994) December 14, 1983: Petrophil Corporation
deposited the 2 checks to its account with the
G.R. No. 105836 March 7, 1994
Pandacan branch of the Philippine National Bank
Lessons Applicable: Promissory notes and checks (PNB), the collecting bank.
(Negotiable Instruments Law) PNB presented them for clearing with
the Philippine Clearing House Corporation in the
afternoon of the same day
Records shows:
FACTS: Current Account had a zero

Spouses George and Librada Moran are the balance

Savings Account had an
owners of the Wack-Wack Petron gasoline
available balance of P26,104.30 and Savings
station located at Shaw Boulevard, corner Old
Account had an available balance of P43,268.39
Wack-Wack Road, Mandaluyong, Metro Manila.
December 15, 1983 10 a.m.: George Moran
They regularly purchased bulk fuel and other
went to the bank, as was his regular practice, to
related products from Petrophil Corporation on
personally oversee their daily transactions with
cash on delivery (COD) basis. Orders for bulk
the bank
fuel and other related products were made by
deposited in their Savings Account the
telephone and payments were effected by
amounts of P10,874.58 and P6,754.25
personal checks upon delivery.
deposited in their Savings Account
Petitioners maintained 3 joint accounts,
No. 1037001372 the amounts of P5,900.00,
namely 1 current account and 2 savings
P35,100.00 and 30.00
accounts with the Shaw Boulevard branch of
P40,000.00 was then transferred by
Citytrust Banking Corporation.
As a special privilege to the Morans, him from Saving Account No. 1037002387 to
their current account by means of a pro
whom it considered as valued clients, the bank
forma withdrawal form (a debit memorandum),
allowed them to maintain a zero balance in their
which was provided by the bank, authorizing the
current account.
Transfers from Saving Account to their latter to make the necessary transfer.
P66,666.00 was transferred from
current account could be made only with their
Savings Account No. 1037001372 to the same
prior authorization
current account through the pre-authorized certification clearing their name and paid them
transfer (PAT) agreement. P1,000,000.00 as moral damages
December 15 or 16, 1983: George Moran CA affirmed RTC's dismissal
was informed by his wife Librada, that Petrophil W/N: Spouses Moran can sue Citytrust for damages
refused to deliver their orders on a credit basis for negligence
because the 2 checks they had previously issued
were dishonored upon presentment for payment
due to "insufficiency of funds."
The non-delivery of gasoline forced HELD: NO. Affirmed
them to temporarily stop business operations,
Spouses Moran had no reason to complain,
allegedly causing them to suffer loss of
for they alone were at fault.
A drawer must remember his
In addition, Petrophil cancelled their
responsibilities every time he issues a check. He
credit accommodation, forcing them to pay for
must personally keep track of his available
their purchases in cash.
balance in the bank and not rely on the bank to
George Moran, furious and upset, demanded
notify him of the necessity to fund certain check
an explanation from Raul Diaz, the branch
she previously issued
manager. Failing to get a sufficient explanation,
A bank is under no obligation to make part
he talked to a certain Villareal, a bank officer,
payment on a check
who allegedly told him that Amy Belen Ragodo,
actions taken by the bank after the incident
the customer service officer, had committed a
clearly show that there was neither malice nor
"grave error".
bad faith, but rather a clear intent to mollify an
December 16 or 17, 1983: Diaz went to the
obviously agitated client
Moran residence to get the signatures of the
letter was sent by respondent bank to
petitioners on an application for a manager's
Petrophil explaining that the dishonor of the
check so that the dishonored checks could be
checks was due to "operational error." - NOT an
admission of guilt
Diaz then went to Petrophil to
bank may not be held responsible for such
personally present the checks in payment for the
damages in the absence of fraud, bad faith,
2 dishonored checks.
malice, or wanton attitude
May or June, 1984: George Moran learned
from Constancio Magno, credit manager of
Petrophil, that the he received on January 4,
174134 July 30, 2008 FACTS: In a Pre-assessment
1984 from Citytrust, through Diaz, a letter dated Notice, petitioner was informed by the BIR that it has
December 16, 1983, notifying them that the 2 an existing tax deficiency on its VAT and
checks were "inadvertently dishonored . . . due to Documentary Stamp Tax (DST) liabilities for the year
2000. Petitioner protested the assessment for lack of
operational error."
legal and factual bases. Petitioner subsequently
July 24, 1984: Moran, through counsel, wrote received a Formal Assessment Notice, directing
Citytrust claiming that the bank's dishonor of the payment of VAT deficiency and DST deficiency,
checks caused them besmirched business and inclusive of surcharge and interest. Petitioner filed a
personal reputation, shame and anxiety, hence protest, which was denied by the Acting Regional
Director. Petitioner then filed a petition for review
they were contemplating the filing of the
with the CTA, which upheld the deficiency
necessary legal actions unless the bank issued a assessment. Petitioner filed an MR which was
denied. Petitioner appealed to the CTA En Banc gross receipts from 0% to 5 %, as the case may be.
which denied the Petition for Review. Petitioner YES Applying jurisprudence, it was ruled that the
sought reconsideration but this was denied by the subject of DST is not limited to the document alone.
CTA.. Hence, the present petition for review under Pledge, which is an exercise of a privilege to transfer
Rule 45 of the ROC. The core of petitioners obligations, rights or properties incident thereto, is
argument is that it is not a lending investor within the also subject to DST, thus xx.. the subject of a DST
purview of Section 108(A) of the NIRC, as amended, is not limited to the document embodying the
and therefore not subject to VAT. Petitioner also enumerated transactions. A DST is an excise tax on
contends that a pawn ticket is not subject to DST the exercise of a right or privilege to transfer
because it is not proof of the pledge transaction, and obligations, rights or properties incident thereto xx
even assuming that it is so, still, it is not subject to Pledge is among the privileges, the exercise of which
tax since a DST is levied on the document issued is subject to DST. A pledge may be defined as an
and not on the transaction. ISSUE: is petitioner in accessory, real and unilateral contract by virtue of
this case liable for: VAT DST HELD: 1. NO The which the debtor or a third person delivers to the
determination of petitioners tax liability depends on creditor or to a third person movable property as
the tax treatment of a pawnshop business. It was the security for the performance of the principal
CTAs view that the services rendered by pawnshops obligation, upon the fulfillment of which the thing
fall under the general definition of sale or exchange pledged, with all its accessions and accessories,
of services under Section 108(A) of the Tax Code of shall be returned to the debtor or to the third person
1997. The Court finds that pawnshops should have True, the law does not consider said ticket as an
been treated as non-bank financial intermediaries evidence of security or indebtedness. However, for
from the very beginning, subject to the appropriate purposes of taxation, the same pawn ticket is proof
taxes provided by law. At the time of the disputed of an exercise of a taxable privilege of concluding a
assessment, that is, for the year 2000, pawnshops contract of pledge. At any rate, it is not said ticket
were not subject to 10% VAT under the general that creates the pawnshops obligation to pay DST
provision on sale or exchange of services as but the exercise of the privilege to enter into a
defined under Section 108(A) of the Tax Code of contract of pledge. There is therefore no basis in
1997. Instead, due to the specific nature of its petitioners assertion that a DST is literally a tax on a
business, pawnshops were then subject to 10% VAT document and that no tax may be imposed on a
under the category of non-bank financial pawn ticket. Also, Section 195 of the NIRC
intermediaries, as provided in the same Section unqualifiedly subjects all pledges to DST. It states
108(A), which reads: SEC. 108. Value-added Tax on that [o]n every x x x pledge x x x there shall be
Sale of Services and Use or Lease of Properties. collected a documentary stamp tax x x x. It is clear,
(A) xx The phrase sale or exchange of services categorical, and needs no further interpretation or
means the performance of all kinds or services in the construction. In the instant case, there is no law
Philippines for others for a fee, remuneration or specifically and expressly exempting pledges
consideration, including x x x services of banks, non- entered into by pawnshops from the payment of
bank financial intermediaries and finance companies; DST. Section 199 of the NIRC enumerated certain
and non-life insurance companies (except their crop documents which are not subject to stamp tax; but a
insurances), including surety, fidelity, indemnity and pawnshop ticket is not one of them. Hence,
bonding companies..xx Coming now to the issue at petitioners nebulous claim that it is not subject to
hand Since petitioner is a non-bank financial DST is without merit.
intermediary, it is subject to 10% VAT for the tax
years 1996 to 2002; however, with the levy,
assessment and collection of VAT from non-bank ANA MARIA A. KORUGA v TEODORO O.
financial intermediaries being specifically deferred by ARCENAS, JR., ALBERT C. AGUIRRE, CESAR S.
law, then petitioner is not liable for VAT during these PAGUIO, and FRANCISCO A. RIVERA
tax years. But with the full implementation of the VAT
system on non-bank financial intermediaries starting TC: In an Order dated October 18, 2004, the trial
January 1, 2003, petitioner is liable for 10% VAT for
court denied the Manifestation and Motion, ruling thus:
said tax year. And beginning 2004 up to the present,
by virtue of R.A. No. 9238, petitioner is no longer
liable for VAT but it is subject to percentage tax on
The result of the procedure sought by facsimile copy of the Verification and
defendants Arcenas, et al. (sic) is for the Certification Against Forum-Shopping
Court to conduct a preliminary hearing on duly signed by the Petitioner and
the affirmative defenses raised by them in notarized by Stephanie N. Goggin, a
their Answer. This [is] proscribed by the Notary Public for the Sate (sic)
Interim Rules of Procedure on of Washington. Upon arrival of the
Intracorporate (sic) Controversies because original copy of the Verification and
when a preliminary hearing is conducted Certification as certified by the Office of
it is as if a Motion to Dismiss was filed the Philippine Consul, the undersigned
(Rule 16, Section 6, 1997 Rules of Civil counsel shall immediately provide
Procedure). A Motion to Dismiss is a duplicate copies thereof to the Honorable
prohibited pleading under the Interim Court.[17]
Rules, for which reason, no favorable
consideration can be given to the
Manifestation and Motion of defendants, Thus, in a Compliance[18] filed with the Court on
Arcenas, et al.
September 5, 2005, petitioner submitted the original copy
The Court finds no merit to (sic) the claim of the duly notarized and authenticated Verification and
that the instant case is a nuisance or
harassment suit. Certification Against Forum-Shopping she had executed.
This Court noted and considered the Compliance
WHEREFORE, the Court defers
satisfactory in its Resolution dated November 16, 2005.
resolution of the affirmative defenses
raised by the defendants Arcenas, et al. [4] There is, therefore, no need to further belabor this issue.

Our Ruling We now discuss the substantive issues in this case.

Initially, we will discuss the procedural issue. First, we resolve the prayer to nullify the CAs
April 18, 2005 Resolution.
Arcenas, et al. argue that Korugas petition should We hold that the Petition in G.R. No. 168332 has
be dismissed for its defective Verification and become moot and academic. The writ of preliminary
Certification Against Forum-Shopping, since only a injunction being questioned had effectively been dissolved
facsimile of the same was attached to the Petition. They by the CAs July 20, 2005 Decision. The dispositive
also claim that the Verification and Certification Against portion of the Decision reads in part:
Forum-Shopping, allegedly executed
in Seattle, Washington, was not authenticated in the The case is REMANDED to the
court a quo for further proceedings and to
manner prescribed by Philippine law and not certified by
resolve with deliberate dispatch the intra-
the Philippine Consulate in the United States. corporate controversies and determine
whether there was actually a valid service
of summons. If, after hearing, such
This contention deserves scant consideration. service is found to have been improper,
then new summons should be served
On the last page of the Petition in G.R. No.
168332, Korugas counsel executed an Undertaking, which
reads as follows: Accordingly, there is no necessity to restrain the
implementation of the writ of preliminary injunction
In view of that fact that the issued by the CA on April 18, 2005, since it no longer
Petitioner is currently in the United
States, undersigned counsel is attaching a exists.
Governments responsibility to see to it that the financial
However, this Court finds that the CA erred in interests of those who deal with banks and banking
upholding the jurisdiction of, and remanding the case to, institutions, as depositors or otherwise, are protected. In
the RTC. this country, that task is delegated to the BSP, which
pursuant to its Charter, is authorized to administer the
The resolution of these petitions rests mainly on monetary, banking, and credit system of the Philippines. It
the determination of one fundamental issue: Which body is further authorized to take the necessary steps against
has jurisdiction over the Koruga Complaint, the RTC or any banking institution if its continued operation would
the BSP? cause prejudice to its depositors, creditors and the general
public as well.[23]
We hold that it is the BSP that has jurisdiction
over the case. The law vests in the BSP the supervision over
operations and activities of banks. The New Central Bank
A reexamination of the Complaint is in order. Act provides:

Korugas Complaint charged defendants with Section 25. Supervision and

Examination. - The Bangko Sentral shall
violation of Sections 31 to 34 of the Corporation Code, have supervision over, and conduct
prohibiting self-dealing and conflict of interest of directors periodic or special examinations of,
banking institutions and quasi-banks,
and officers; invoked her right to inspect the corporations including their subsidiaries and affiliates
records under Sections 74 and 75 of the Corporation engaged in allied activities.[24]
Code; and prayed for Receivership and Creation of a
Management Committee, pursuant to Rule 59 of the Rules
Specifically, the BSPs supervisory and regulatory
of Civil Procedure, the Securities Regulation Code, the
powers include:
Interim Rules of Procedure Governing Intra-Corporate
Controversies, the General Banking Law of 2000, and the 4.1 The issuance of rules of conduct or
New Central Bank Act. She accused the directors and the establishment of standards of
operation for uniform application
officers of Banco Filipino of engaging in unsafe, unsound, to all institutions or functions
and fraudulent banking practices, more particularly, acts covered, taking into consideration
the distinctive character of the
that violate the prohibition on self-dealing. operations of institutions and the
substantive similarities of specific
functions to which such rules,
It is clear that the acts complained of pertain to the
modes or standards are to be
conduct of Banco Filipinos banking business. A bank, as applied;
defined in the General Banking Law,[21] refers to an entity
4.2 The conduct of examination to
engaged in the lending of funds obtained in the form of determine compliance with laws
deposits.[22] The banking business is properly subject to and regulations if the
circumstances so warrant as
reasonable regulation under the police power of the state determined by the Monetary
because of its nature and relation to the fiscal affairs of the Board;
people and the revenues of the state. Banks are affected
4.3 Overseeing to ascertain that laws
with public interest because they receive funds from the and Regulations are complied
general public in the form of deposits. It is the with;
receiver to immediately take charge of its
4.4 Regular investigation which shall assets and liabilities.[27]
not be oftener than once a
year from the last date of
examination to determine Correlatively, the General Banking Law of
whether an institution is
conducting its business on a 2000 specifically deals with loans contracted by bank
safe or sound directors or officers, thus:
basis: Provided, That
the deficiencies/irregularities
found by or discovered by an SECTION 36. Restriction on
audit shall be Bank Exposure to Directors, Officers,
immediately addressed; Stockholders and Their Related
Interests. No director or officer of any
4.5 Inquiring into the solvency bank shall, directly or indirectly, for
and liquidity of the institution himself or as the representative or agent
(2-D); or of others, borrow from such bank nor
shall he become a guarantor, indorser or
4.6 Enforcing prompt corrective action. surety for loans from such bank to others,
[25] or in any manner be an obligor or incur
any contractual liability to the bank
except with the written approval of the
majority of all the directors of the bank,
Koruga alleges that the dispute in the trial court excluding the director concerned:
involves the manner with which the Directors (sic) have Provided, That such written approval shall
not be required for loans, other credit
handled the Banks affairs, specifically the fraudulent loans accommodations and advances granted to
and dacion en pago authorized by the Directors in favor of officers under a fringe benefit plan
several dummy corporations known to have close ties and approved by the Bangko Sentral. The
required approval shall be entered upon
are indirectly controlled by the Directors. [26] Her the records of the bank and a copy of such
allegations, then, call for the examination of the allegedly entry shall be transmitted forthwith to the
appropriate supervising and examining
questionable loans. Whether these loans are covered by department of the Bangko Sentral.
the prohibition on self-dealing is a matter for the BSP to
Dealings of a bank with any of its
determine. These are not ordinary intra-corporate matters;
directors, officers or stockholders and
rather, they involve banking activities which are, by law, their related interests shall be upon terms
regulated and supervised by the BSP. As the Court has not less favorable to the bank than those
offered to others.
previously held:
After due notice to the board of
It is well-settled in both law and directors of the bank, the office of any
jurisprudence that the Central Monetary bank director or officer who violates the
Authority, through the Monetary Board, is provisions of this Section may be declared
vested with exclusive authority to assess, vacant and the director or officer shall be
evaluate and determine the condition of subject to the penal provisions of the New
any bank, and finding such condition to Central Bank Act.
be one of insolvency, or that its
continuance in business would involve a The Monetary Board may
probable loss to its depositors or creditors, regulate the amount of loans, credit
forbid bank or non-bank financial accommodations and guarantees that
institution to do business in the may be extended, directly or indirectly,
Philippines; and shall designate an official by a bank to its directors, officers,
of the BSP or other competent person as stockholders and their related interests,
as well as investments of such bank in
enterprises owned or controlled by said
directors, officers, stockholders and danger to the safety,
their related interests. However, the stability, liquidity or
outstanding loans, credit accommodations solvency of the
and guarantees which a bank may extend institution;
to each of its stockholders, directors, or
officers and their related interests, shall be 56.2. The act or omission has
limited to an amount equivalent to their resulted or may result in
respective unencumbered deposits and material loss or damage
book value of their paid-in capital or abnormal risk to the
contribution in the bank: Provided, institution's depositors,
however, That loans, credit creditors, investors,
accommodations and guarantees secured stockholders or to the
by assets considered as non-risk by the Bangko Sentral or to the
Monetary Board shall be excluded from public in general;
such limit: Provided, further, That loans,
credit accommodations and advances to 56.3. The act or omission has
officers in the form of fringe benefits caused any undue injury,
granted in accordance with rules as may or has given any
be prescribed by the Monetary Board unwarranted benefits,
shall not be subject to the individual limit. advantage or preference
to the bank or any party
The Monetary Board shall define in the discharge by the
the term related interests. director or officer of his
duties and responsibilities
The limit on loans, credit through manifest
accommodations and guarantees partiality, evident bad
prescribed herein shall not apply to loans, faith or gross inexcusable
credit accommodations and guarantees negligence; or
extended by a cooperative bank to its
cooperative shareholders.[28] 56.4. The act or omission
involves entering into any
contract or transaction
Furthermore, the authority to determine whether a manifestly and grossly
disadvantageous to the
bank is conducting business in an unsafe or unsound bank, quasi-bank or trust
manner is also vested in the Monetary entity, whether or not the
director or officer
Board. The General Banking Law of 2000 provides: profited or will profit
SECTION 56. Conducting
Business in an Unsafe or Unsound Whenever a bank, quasi-bank or
Manner. In determining whether a trust entity persists in conducting its
particular act or omission, which is not business in an unsafe or unsound manner,
otherwise prohibited by any law, rule or the Monetary Board may, without
regulation affecting banks, quasi-banks or prejudice to the administrative sanctions
trust entities, may be deemed as provided in Section 37 of the New Central
conducting business in an unsafe or Bank Act, take action under Section 30 of
unsound manner for purposes of this the same Act and/or immediately exclude
Section, the Monetary Board shall the erring bank from clearing, the
consider any of the following provisions of law to the contrary
circumstances: notwithstanding.

56.1. The act or omission has

resulted or may result in
material loss or damage,
or abnormal risk or
Finally, the New Central Bank Act grants the (d) suspension of interbank
clearing privileges; and/or
Monetary Board the power to impose administrative
sanctions on the erring bank: (e) revocation of quasi-banking
Section 37. Administrative Resignation or termination from
Sanctions on Banks and Quasi-banks. - office shall not exempt such director or
Without prejudice to the criminal officer from administrative or criminal
sanctions against the culpable persons sanctions.
provided in Sections 34, 35, and 36 of this
Act, the Monetary Board may, at its The Monetary Board may,
discretion, impose upon any bank or whenever warranted by circumstances,
quasi-bank, their directors and/or preventively suspend any director or
officers, for any willful violation of its officer of a bank or quasi-bank pending an
charter or by-laws, willful delay in the investigation: Provided, That should the
submission of reports or publications case be not finally decided by the Bangko
thereof as required by law, rules and Sentral within a period of one hundred
regulations; any refusal to permit twenty (120) days after the date of
examination into the affairs of the suspension, said director or officer shall
institution; any willful making of a false be reinstated in his position: Provided,
or misleading statement to the Board or further, That when the delay in the
the appropriate supervising and disposition of the case is due to the fault,
examining department or its examiners; negligence or petition of the director or
any willful failure or refusal to comply officer, the period of delay shall not be
with, or violation of, any banking law or counted in computing the period of
any order, instruction or regulation issued suspension herein provided.
by the Monetary Board, or any order,
instruction or ruling by the Governor; or The above administrative
any commission of irregularities, sanctions need not be applied in the order
and/or conducting business in an of their severity.
unsafe or unsound manner as may be
determined by the Monetary Board, the Whether or not there is an
following administrative sanctions, administrative proceeding, if the
whenever applicable: institution and/or the directors and/or
officers concerned continue with or
(a) fines in amounts as may be otherwise persist in the commission of the
determined by the Monetary indicated practice or violation, the
Board to be appropriate, but in no Monetary Board may issue an order
case to exceed Thirty thousand requiring the institution and/or the
pesos (P30,000) a day for each directors and/or officers concerned to
violation, taking into cease and desist from the indicated
consideration the attendant practice or violation, and may further
circumstances, such as the nature order that immediate action be taken to
and gravity of the violation or correct the conditions resulting from such
irregularity and the size of the practice or violation. The cease and desist
bank or quasi-bank; order shall be immediately effective upon
service on the respondents.
(b) suspension of rediscounting
privileges or access to Bangko The respondents shall be afforded
Sentral credit facilities; an opportunity to defend their action in a
hearing before the Monetary Board or any
(c) suspension of lending or committee chaired by any Monetary
foreign exchange operations or Board member created for the purpose,
authority to accept new deposits upon request made by the respondents
or make new investments; within five (5) days from their receipt of
the order. If no such hearing is requested trustees shall be liable jointly and
within said period, the order shall be final. severally for all damages resulting
If a hearing is conducted, all issues shall therefrom suffered by the corporation, its
be determined on the basis of records, stockholders or members and other
after which the Monetary Board may persons.
either reconsider or make final its order. When a director, trustee or officer
attempts to acquire or acquires, in
The Governor is hereby violation of his duty, any interest adverse
authorized, at his discretion, to impose to the corporation in respect of any matter
upon banking institutions, for any failure which has been reposed in him in
to comply with the requirements of law, confidence, as to which equity imposes a
Monetary Board regulations and policies, disability upon him to deal in his own
and/or instructions issued by the behalf, he shall be liable as a trustee for
Monetary Board or by the Governor, fines the corporation and must account for the
not in excess of Ten thousand pesos profits which otherwise would have
(P10,000) a day for each violation, the accrued to the corporation.
imposition of which shall be final and
executory until reversed, modified or Section 32. Dealings of directors,
lifted by the Monetary Board on appeal.[29] trustees or officers with the corporation. -
A contract of the corporation with one or
more of its directors or trustees or officers
is voidable, at the option of such
Koruga also accused Arcenas, et al. of violation of
corporation, unless all the following
the Corporation Codes provisions on self-dealing and conditions are present:
conflict of interest. She invoked Section 31 of the
1. That the presence of such
Corporation Code, which defines the liability of directors, director or trustee in the board meeting in
trustees, or officers of a corporation for, among others, which the contract was approved was not
necessary to constitute a quorum for such
acquiring any personal or pecuniary interest in conflict
with their duty as directors or trustees, and Section 32,
which prescribes the conditions under which a contract of 2. That the vote of such director
or trustee was not necessary for the
the corporation with one or more of its directors or approval of the contract;
trustees the so-called self-dealing directors [30] would be
3. That the contract is fair and
valid. She also alleged that Banco Filipinos directors reasonable under the circumstances; and
violated Sections 33 and 34 in approving the loans of
4. That in case of an officer, the
corporations with interlocking ownerships, i.e., owned,
contract has been previously authorized
directed, or managed by close associates of Albert C. by the board of directors.
Where any of the first two
conditions set forth in the preceding
Sections 31 to 34 of the Corporation Code paragraph is absent, in the case of a
provide: contract with a director or trustee, such
contract may be ratified by the vote of the
stockholders representing at least two-
Section 31. Liability of directors, thirds (2/3) of the outstanding capital
trustees or officers. - Directors or trustees stock or of at least two-thirds (2/3) of the
who wilfully and knowingly vote for or members in a meeting called for the
assent to patently unlawful acts of the purpose: Provided, That full disclosure of
corporation or who are guilty of gross the adverse interest of the directors or
negligence or bad faith in directing the trustees involved is made at such meeting:
affairs of the corporation or acquire any Provided, however, That the contract is
personal or pecuniary interest in conflict
with their duty as such directors or
fair and reasonable under the
circumstances. Consequently, it is not the Interim Rules of
Section 33. Contracts between Procedure on Intra-Corporate Controversies, [32] or Rule 59
corporations with interlocking directors. - of the Rules of Civil Procedure on Receivership, that
Except in cases of fraud, and provided the
contract is fair and reasonable under the would apply to this case. Instead, Sections 29 and 30 of
circumstances, a contract between two or the New Central Bank Act should be followed, viz.:
more corporations having interlocking
directors shall not be invalidated on that
Section 29. Appointment of
ground alone: Provided, That if the
Conservator. - Whenever, on the basis of
interest of the interlocking director in one
a report submitted by the appropriate
corporation is substantial and his interest
supervising or examining department, the
in the other corporation or corporations is
Monetary Board finds that a bank or a
merely nominal, he shall be subject to the
quasi-bank is in a state of continuing
provisions of the preceding section
inability or unwillingness to maintain a
insofar as the latter corporation or
condition of liquidity deemed adequate to
corporations are concerned.
protect the interest of depositors and
creditors, the Monetary Board may
Stockholdings exceeding twenty
appoint a conservator with such powers as
(20%) percent of the outstanding capital
the Monetary Board shall deem necessary
stock shall be considered substantial for
to take charge of the assets, liabilities, and
purposes of interlocking directors.
the management thereof, reorganize the
management, collect all monies and debts
Section 34. Disloyalty of a
due said institution, and exercise all
director. - Where a director, by virtue of
powers necessary to restore its viability.
his office, acquires for himself a business
The conservator shall report and be
opportunity which should belong to the
responsible to the Monetary Board and
corporation, thereby obtaining profits to
shall have the power to overrule or revoke
the prejudice of such corporation, he must
the actions of the previous management
account to the latter for all such profits by
and board of directors of the bank or
refunding the same, unless his act has
been ratified by a vote of the stockholders
owning or representing at least two-thirds
(2/3) of the outstanding capital stock. This
provision shall be applicable,
The Monetary Board shall
notwithstanding the fact that the director
terminate the conservatorship when it is
risked his own funds in the venture.
satisfied that the institution can continue
to operate on its own and the
conservatorship is no longer necessary.
Korugas invocation of the provisions of the The conservatorship shall likewise be
terminated should the Monetary Board, on
Corporation Code is misplaced. In an earlier case with the basis of the report of the conservator
similar antecedents, we ruled that: or of its own findings, determine that the
continuance in business of the institution
would involve probable loss to its
The Corporation Code, however, is a depositors or creditors, in which case the
general law applying to all types of provisions of Section 30 shall apply.
corporations, while the New Central Bank
Act regulates specifically banks and other Section 30. Proceedings in
financial institutions, including the Receivership and Liquidation. -
dissolution and liquidation thereof. As Whenever, upon report of the head of the
between a general and special law, the supervising or examining department, the
latter shall prevail generalia specialibus Monetary Board finds that a bank or
non derogant.[31] quasi-bank:
(a) is unable to pay its petition for certiorari may only be filed
liabilities as they become by the stockholders of record representing
due in the ordinary course the majority of the capital stock within ten
of business: Provided, (10) days from receipt by the board of
That this shall not include directors of the institution of the order
inability to pay caused by directing receivership, liquidation or
extraordinary demands conservatorship.
induced by financial
panic in the banking The designation of a conservator
community; under Section 29 of this Act or the
appointment of a receiver under this
(b) has insufficient section shall be vested exclusively with
realizable assets, as the Monetary Board. Furthermore, the
determined by the designation of a conservator is not a
Bangko Sentral, to meet precondition to the designation of a
its liabilities; or receiver.[33]

(c) cannot continue in

business without On the strength of these provisions, it is the
involving probable losses
to its depositors or Monetary Board that exercises exclusive jurisdiction over
creditors; or proceedings for receivership of banks.
(d) has willfully violated
a cease and desist order Crystal clear in Section 30 is the provision that
under Section 37 that has
says the appointment of a receiver under this section shall
become final, involving
acts or transactions which be vested exclusively with the Monetary Board. The term
amount to fraud or a exclusively connotes that only the Monetary Board can
dissipation of the assets
of the institution; in resolve the issue of whether a bank is to be placed under
which cases, the receivership and, upon an affirmative finding, it also has
Monetary Board may
summarily and without authority to appoint a receiver. This is further affirmed by
need for prior hearing the fact that the law allows the Monetary Board to take
forbid the institution
action summarily and without need for prior hearing.
from doing business in
the Philippines and
designate the Philippine And, as a clincher, the law explicitly provides that
Deposit Insurance
Corporation as receiver actions of the Monetary Board taken under this section or
of the banking under Section 29 of this Act shall be final and executory,
and may not be restrained or set aside by the court except
xxxx on a petition for certiorari on the ground that the action
taken was in excess of jurisdiction or with such grave
The actions of the Monetary
Board taken under this section or abuse of discretion as to amount to lack or excess of
under Section 29 of this Act shall be jurisdiction.
final and executory, and may not be
restrained or set aside by the court
except on petition for certiorari on the From the foregoing disquisition, there is no doubt
ground that the action taken was in
excess of jurisdiction or with such that the RTC has no jurisdiction to hear and decide a suit
grave abuse of discretion as to amount that seeks to place Banco Filipino under receivership.
to lack or excess of jurisdiction. The
Koruga herself recognizes the BSPs power over among other dealings. On July 24, 2003, the Monetary
the allegedly unlawful acts of Banco Filipinos directors. Board passed Resolution No. 1034 furnishing Banco
The records of this case bear out that Koruga, through her Filipino a copy of the ROE with instructions for the bank
legal counsel, wrote the Monetary Board[34] on April 21, to file its comment or explanation within 30 to 90 days
2003 to bring to its attention the acts she had enumerated under threat of being fined or of being subjected to other
in her complaint before the RTC. The letter reads in part: remedial actions. The ROE, the BSP said, covers
substantially the same matters raised in Korugas
Banco Filipino and the current
members of its Board of Directors should complaint. At the time of the filing of Korugas complaint
be placed under investigation for on August 20, 2003, the period for Banco Filipino to
violations of banking laws, the
commission of irregularities, and for submit its explanation had not yet expired.[38]
conducting business in an unsafe or
unsound manner. They should likewise be
Thus, the courts jurisdiction could only have been
placed under preventive suspension by
virtue of the powers granted to the invoked after the Monetary Board had taken action on the
Monetary Board under Section 37 of the matter and only on the ground that the action taken was in
Central Bank Act. These blatant violations
of banking laws should not go by without excess of jurisdiction or with such grave abuse of
penalty. They have put Banco Filipino, its discretion as to amount to lack or excess of jurisdiction.
depositors and stockholders, and the
entire banking system (sic) in jeopardy.
Finally, there is one other reason why Korugas
complaint before the RTC cannot prosper. Given her own
We urge you to look into the admission and the same is likewise supported by evidence
matter in your capacity as regulators. Our that she is merely a minority stockholder of Banco
clients, a minority stockholders, (sic) and
many depositors of Banco Filipino are Filipino, she would not have the standing to question the
prejudiced by a failure to regulate, and Monetary Boards action. Section 30 of the New Central
taxpayers are prejudiced by
accommodations granted by the BSP to Bank Act provides:
Banco Filipino[35]
The petition for certiorari may only be
filed by the stockholders of record
In a letter dated May 6, 2003, BSP Supervision representing the majority of the capital
and Examination Department III Director Candon B. stock within ten (10) days from receipt by
the board of directors of the institution of
Guerrero referred Korugas letter to Arcenas for comment. the order directing receivership,
On June 6, 2003, Banco Filipinos then Executive Vice liquidation or conservatorship.
President and Corporate Secretary Francisco A. Rivera
submitted the banks comments essentially arguing that
All the foregoing discussion yields the inevitable
Korugas accusations lacked legal and factual bases. [37]
conclusion that the CA erred in upholding the jurisdiction
of, and remanding the case to, the RTC. Given that the
On the other hand, the BSP, in its Answer before
RTC does not have jurisdiction over the subject matter of
the RTC, said that it had been looking into Banco
the case, its refusal to dismiss the case on that ground
Filipinos activities. An October 2002 Report of
amounted to grave abuse of discretion.
Examination (ROE) prepared by the Supervision and
Examination Department (SED) noted
certain dacion payments, out-of-the-ordinary expenses,
WHEREFORE, the foregoing premises Petition for mandamus and prohibition, with
preliminary injunction that pursues the creation of
considered, the Petition in G.R. No. 168332 joint and solidary liability against the respondent.
is DISMISSED, while the Petition in G.R. No. 169053 FACTS Serrano filed a case against Overseas Bank
is GRANTED. The Decision of the Court of Appeals and Central bank so that they may jointly separately
liable, because, the P350K worth of time deposits by
dated July 20, 2005 in CA-G.R. SP No. 88422 is Serrano in overseas bank of Manila is not successful
hereby SET ASIDE. The Temporary Restraining Order when he made a series of encashment, because on
issued by this Court on March 13, 2006 is the alleged failure of the Overseas Bank of Manila to
return the time deposits made by petitioner and
made PERMANENT. Consequently, Civil Case No. 03- assigned to him, because respondent Central Bank
985, pending before failed in its duty to exercise strict supervision over
the Regional Trial Court of Makati City, is DISMISSED. respondent Overseas Bank of Manila to protect
depositors and the general public. ISSUE Whether
the Central Bank is Liable for the case filed? HELD
SO ORDERED. No, Bank deposits are in the nature of irregular
deposits. They are really loans because they earn
interest. All kinds of bank deposits, whether fixed,
savings, or current are to be treated as loans and are
to be covered by the law on loans. Current and
Serrano vs Central Bank savings deposit are loans to a bank because it can
use the same. The petitioner here in making time
deposits that earn interests with respondent
Overseas Bank of Manila was in reality a creditor of
the respondent Bank and not a depositor. The
respondent Bank was in turn a debtor of petitioner.
Failure of the respondent Bank to honor the time
deposit is failure to pay s obligation as a debtor and
not a breach of trust arising from depositarys failure
to return the subject matter of the deposit
WHEREFORE, the petition is dismissed for lack of
merit, with costs against petitioner. SO ORDERED.

Teofisto Guingona, Jr., Antonio Martin, and

Teresita Santos vs. The City Fiscal of Manila,
Hon. Jose Flaminiano, Asst. City Fiscal Felizardo
Facts: From March 1979 to March 1981, Clement
David made several investments with the National
Savings and Loan Association. On March 21, 1981,
the bank was placed under receivership by the
Bangko Sentral. Upon Davids request, petitioners
Guingona and Martin issued a joint promissory note,
absorbing the obligations of the bank. On July 17,
1981, they divided the indebtedness. David filed a
complaint for estafa and violation of Central Bank
Circular No. 364 and related regulations regarding
foreign exchange transactions before the Office of
the City Fiscal of Manila. Petitioners filed the herein
petition for prohibition and injunction with a prayer for
immediate issuance of restraining order and/or writ
of preliminary injunction to enjoin the public breach of trust but would merely be a failure to pay
respondents to proceed with the preliminary the obligation as a debtor. Moreover, while it is true
investigation on the ground that the petitioners that novation does not extinguish criminal liability, it
obligation is civil in nature. Issue: (1) Whether the may however, prevent the rise of criminal liability as
contract between NSLA and David is a contract of long as it occurs prior to the filing of the criminal
depositor a contract of loan, which answer information in court. In the case at bar, there is no
determines whether the City Fiscal has the dispute that petitioners Guingona and Martin
jurisdiction to file a case for estafa (2) Whether there executed a promissory note on June 17, 1981
was a violation of Central Bank Circular No. 364 assuming the obligation of the bank to private
Held: (1) When private respondent David invested respondent David; while the criminal complaint for
his money on nine. and savings deposits with the estafa was filed on December 23, 1981 with the
aforesaid bank, the contract that was perfected was Office of the City Fiscal. Hence, it is clear that
a contract of simple loan or mutuum and not a novation occurred long before the filing of the
contract of deposit. Hence, the relationship between criminal complaint with the Office of the City Fiscal.
the private respondent and the Nation Savings and Consequently, as aforestated, any incipient criminal
Loan Association is that of creditor and debtor; liability would be avoided but there will still be a civil
consequently, the ownership of the amount liability on the part of petitioners Guingona and
deposited was transmitted to the Bank upon the Martin to pay the assumed obligation. (2) Petitioner
perfection of the contract and it can make use of the Guingona merely accommodated the request of the
amount deposited for its banking operations, such as Nation Savings and loan Association in order to clear
to pay interests on deposits and to pay withdrawals. the bank draft through his dollar account because
While the Bank has the obligation to return the the bank did not have a dollar account. Immediately
amount deposited, it has, however, no obligation to after the bank draft was cleared, petitioner Guingona
return or deliver the same money that was authorized Nation Savings and Loan Association to
deposited. And, the failure of the Bank to return the withdraw the same in order to be utilized by the bank
amount deposited will not constitute estafa through for its operations. It is safe to assume that the U.S.
misappropriation punishable under Article 315, par. dollars were converted first into Philippine pesos
l(b) of the Revised Penal Code, but it will only give before they were accepted and deposited in Nation
rise to civil liability over which the public respondents Savings and Loan Association, because the bank is
have no jurisdiction. But even granting that the presumed to have followed the ordinary course of
failure of the bank to pay the time and savings the business which is to accept deposits in Philippine
deposits of private respondent David would currency only, and that the transaction was regular
constitute a violation of paragraph 1(b) of Article 315 and fair, in the absence of a clear and convincing
of the Revised Penal Code, nevertheless any evidence to the contrary. In conclusion, considering
incipient criminal liability was deemed avoided, that the liability of the petitioners is purely civil in
because when the aforesaid bank was placed under nature and that there is no clear showing that they
receivership by the Central Bank, petitioners engaged in foreign exchange transactions, We hold
Guingona and Martin assumed the obligation of the that the public respondents acted without jurisdiction
bank to private respondent David, thereby resulting when they investigated the charges against the
in the novation of the original contractual obligation petitioners. Consequently, public respondents should
arising from deposit into a contract of loan and be restrained from further proceeding with the
converting the original trust relation between the criminal case for to allow the case to continue, even
bank and private respondent David into an ordinary if the petitioners could have appealed to the Ministry
debtor-creditor relation between the petitioners and of Justice, would work great injustice to petitioners
private respondent. Consequently, the failure of the and would render meaningless the proper
bank or petitioners Guingona and Martin to pay the administration of justice.
deposits of private respondent would not constitute a