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1. Republic of the Philippines vs. Security Credit and Mortgage Bank, with defendants Zapa, Balatbat, Tanjutco
Acceptance Corporation G.R. No. L-20583, January
23, 1967
MARCH 16, 2014 LEAVE A COMMENT
An investment company which loans out the money of its
customers, collects the interest and charges a commission to
both lender and borrower, is a bank. It is conceded that a total
of 59,463 savings account deposits have been made by the
public with the corporation and its 74 branches, with an
aggregate deposit of P1,689,136.74, which has been lent out to
such persons as the corporation deemed suitable therefore. It
is clear that these transactions partake of the nature of
banking, as the term is used in Section 2 of the General
Banking Act.
Facts: The Solicitor General filed a petition for quo warranto to
dissolve the Security and Acceptance Corporation, alleging that
the latter was engaging in banking operations without the
authority required therefor by the General Banking Act
(Republic Act No. 337). Pursuant to a search warrant issued by
MTC Manila, members of Central Bank intelligence division and
Manila police seized documents and records relative to the
business operations of the corporation. After examination of
the same, the intelligence division of the Central Bank
submitted a memorandum to the then Acting Deputy Governor
of Central Bank finding that the corporation is engaged in
banking operations. It was found that Security and Acceptance
Corporation established 74 branches in principal cities and
towns throughout the Philippines; that through a systematic
and vigorous campaign undertaken by the corporation, the
same had managed to induce the public to open 59,463
savings deposit accounts with an aggregate deposit of
P1,689,136.74; Accordingly, the Solicitor General commenced
this quo warranto proceedings for the dissolution of the
corporation, with a prayer that, meanwhile, a writ of
preliminary injunction be issued ex parte, enjoining the
corporation and its branches, as well as its officers and agents,
from performing the banking operations complained of, and
that a receiver be appointed pendente lite. Superintendent of
Banks of the Central Bank was then appointed by the Supreme
Court as receiver pendente lite of defendant corporation.
In their defense, Security and Acceptance Corporation averred
that the the corporation had filed with the Superintendent of
Banks an application for conversion into a Security Savings and
the way in favor of PBP. Hence petitioners filed separate
(Pablo and Vito, Jr.), Soriano, Beltran and Sebastian as
proposed directors.
Issue: Whether or not defendant corporation was engaged in
banking operations.
Held. An investment company which loans out the money of
its customers, collects the interest and charges a commission
to both lender and borrower, is a bank. It is conceded that a
total of 59,463 savings account deposits have been made by
the public with the corporation and its 74 branches, with an
aggregate deposit of P1,689,136.74, which has been lent out to
such persons as the corporation deemed suitable therefore. It
is clear that these transactions partake of the nature of
banking, as the term is used in Section 2 of the General
Banking Act. Hence, defendant corporation has violated the
law by engaging in banking without securing the administrative
authority required in Republic Act No. 337.
That the illegal transactions thus undertaken by defendant
corporation warrant its dissolution is apparent from the fact
that the foregoing misuser of the corporate funds and
franchise affects the essence of its business, that it is willful
and has been repeated 59,463 times, and that its continuance
inflicts injury upon the public, owing to the number of persons
affected thereby.
2. CENTRAL BANK OF THE PHILIPPINES V. CA (G.R.
NO. 88353)
Facts:
Petitioner Central Bank and conservator claims that during the
regular examination of herein respondent Producers Bank of
the Philippines (PBP) it stumbled upon some highly
questionable loans which the latter extended to PBP owners
themselves without collateral. At the height of controversy of
discovering these anomalous loans, it triggered a bank-run in
PBP which resulted in continuous over-drawings on the bank’s
demand deposit account with the CB. The over-drawings’
continued increase prompted the MB to place PBP under
conservatorship. PBP failing to submit a rehabilitation plan, the
MB proposed its own which it considers as viable but PBP
made no response. A few days later, PBP filed a complaint
before the RTC contending that its placement under
conservatorship was unwarranted, ill-motivated, illegal, utterly
unnecessary and unjustified and that the appointed
conservators committed bank frauds and abuses. RTC ruled all
petitions which were then consolidated before the Court.
Issue:
Whether or not PBP was deprived of due process before being
placed under conservatorship
Ruling: NO.
The fact that PBP is grossly overdrawn on its reserve account
with the CB (up to P1.233 billion as of 13 February 1990) is not
disputed by PBP. This enormous overdraft evidences the
patent inability of the bank’s management to keep PBP liquid.
This fact alone sufficiently justifies the remedial measures
taken by the Monetary Board.
MB Resolutions Nos. 649 and 751 were not promulgated to
arbitrarily divest the present stockholders of control over PBP,
as is claimed by the latter. The same contemplates an effective
and viable plan to revive and restore PBP. It is to be noted that
before issuing these resolutions, the MB gave the management
of PBP ample opportunity to submit a viable rehabilitation plan
for the bank. MB Resolution Nos. 751 merely reiterated the
requirement set forth in Resolution No. 649 for PBP to identify
and submit the list of new stockholders who will infuse new
capital into the bank for CB approval. In this Resolution, the
MB gave PBP’s stockholders one (1) week from notice within
which to signify their acceptance or rejection of the proposed
rehabilitation plan.
The foregoing resolutions refer to a recommended
rehabilitation plan. What was conveyed to PBP was a mere
proposal. There was nothing in the resolutions to indicate that
the plan was mandatory. On the contrary, PBP was given a
specific period within which to accept or reject the plan. And,
as petitioners correctly pointed out, the plan was not self-
implementing. The warning given by the MB that should said
proposal be rejected, the CB “will take appropriate alternative
actions on the matter,” does not make the proposed
rehabilitation plan compulsory. Whether or not there is a
rehabilitation plan agreed upon between PBP and the MB, the
CB is authorized under R.A. No. 265 to take appropriate
measures to protect the interest of the bank’s depositors as
well as of the general public.
There is nothing objectionable to the actions of the MB. We,
therefore, find to be completely without legal or evidentiary

basis the contention that the impugned resolutions are
arbitrary, illegal and made in bad faith.
3. SIMEX INTERNATIONAL V. CA (G.R. NO. 88013)
Facts:
Petitioner, a private corporation engaged in the exportation of
food products, was a depositor maintaining a checking account
with respondent Traders Royal Bank. Petitioner deposited to its
account increasing its balance and subsequently, issued several
checks but was surprised to learn that it had been dishonored
for insufficient funds. As a consequence, petitioner received
demand letters from its suppliers for the dishonored checks.
Investigation disclosed that the deposit was not credited to it.
The error was rectified and the dishonored checks were
consequently paid. Petitioner demanded reparation from
respondent bank for its gross and wanton negligence but the
later did not heed. Petitioner then filed before the RTC which
later held that respondent bank was guilty of negligence but
petitioner nonetheless was not entitled to moral damages. CA
affirmed.
Issue:
Whether or not petitioner is entitled to damages due to
respondent bank’s negligence.
Ruling: YES.
As the Court sees it, the initial carelessness of the respondent
bank, aggravated by the lack of promptitude in repairing its
error, justifies the grant of moral damages. This rather
lackadaisical attitude toward the complaining depositor
constituted the gross negligence, if not wanton bad faith, that
the respondent court said had not been established by the
petitioner. We shall recognize that the petitioner did suffer
injury because of the private respondent’s negligence that
caused the dishonor of the checks issued by it. The immediate
consequence was that its prestige was impaired because of the
bouncing checks and confidence in it as a reliable debtor was
diminished.
The point is that as a business affected with public interest and
because of the nature of its functions, the bank is under
obligation to treat the accounts of its depositors with
meticulous care, always having in mind the fiduciary nature of
their relationship. In the case at bar, it is obvious that the
respondent bank was remiss in that duty and violated that
relationship. What is especially deplorable is that, having been
informed of its error in not crediting the deposit in question to
the petitioner, the respondent bank did not immediately
correct it but did so only one week later or twenty-three days
after the deposit was made. It bears repeating that the record
does not contain any satisfactory explanation of why the error
was made in the first place and why it was not corrected
immediately after its discovery. Such ineptness comes under
the concept of the wanton manner contemplated in the Civil
Code that calls for the imposition of exemplary damages.
4. Reyes vs. Court of Appeals G.R. No. 118492, August
15, 2001
MARCH 16, 2014 LEAVE A COMMENT
The degree of extraordinary diligence applies only to cases
where banks act under their fiduciary capacity, that is, as
depositary of the deposits of their depositors. But the same
higher degree of diligence is not expected to be exerted by
banks in commercial transactions that do not involve their
fiduciary relationship with their depositors.
Facts: Godofredo, Casheir of the Philippine Racing Club
(PCRI), went to respondent bank to apply for a demand draft in
the amount AU$1,610.00 payable to the order of the 20th
Asian Racing Conference Secretariat of Sydney, Australia. He
was attended to by respondent bank’s assistant cashier, Mr.
Yasis, who at first denied the application for the reason that
respondent bank did not have an Australian dollar account in
any bank in Sydney. Godofredo asked if there could be a way
for respondent bank to accommodate PRCI’s urgent need to
remit Australian dollars to Sydney. Yasis of respondent bank
then informed Godofredo of a roundabout way of effecting the
requested remittance to Sydney thus: the respondent bank
would draw a demand draft against Westpac Bank in Sydney,
Australia (Westpac-Sydney) and have the latter reimburse itself
from the U.S. dollar account of the respondent in Westpac
Bank in New York, U.S.A. (Westpac-New York).
However, upon due presentment of the foreign exchange
demand draft, the same was dishonored, with the notice of
dishonor stating that there is “No account held with Westpac.”
Meanwhile, Wespac-New York sent a cable to respondent bank
informing the latter that its dollar account in the sum of AU$
1,610.00 was debited. In response to PRCI’s complaint about
the dishonor of the said foreign exchange demand draft,
respondent bank informed Westpac-Sydney of the issuance of
the said demand draft, drawn against the Wespac-Sydney and
informing the latter to be reimbursed from the respondent
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bank’s dollar account in Westpac-New York. The respondent
bank on the same day likewise informed Wespac-New York
requesting the latter to honor the reimbursement claim of
Wespac-Sydney. Upon its second presentment for payment,
the demand draft was again dishonored by Westpac-Sydney
for the same reason, that is, that the respondent bank has no
deposit dollar account with the drawee Wespac-Sydney.
Gregorio Reyes and Consuelo Puyat-Reyes arrived in Sydney on
a separate date and both were humiliated and embarrassed in
the presence of international audience after being denied
registration of the conference secretariat since the foreign
exchange draft was dishonored. Petitioners were only able to
attend the conference after promising to pay in cash instead
which they fulfilled
Issue: Whether or not respondent bank is liable for damages
due to the dishonor of the foreign exchange demand drafts.
Held: Yes. The evidence also shows that the respondent bank
exercised that degree of diligence expected of an ordinary
prudent person under the circumstances obtaining; the
respondent bank advised Westpac-New York to honor the
reimbursement claim of Westpac-Sydney and to debit the
dollar accountof respondent bank with the former. The degree
of diligence required of banks, is more than that of a good
father of a family where the fiduciary nature of their
relationship with their depositors is concerned. In other words
banks are duty bound to treat the deposit accounts of their
depositors with the highest degree of care. But the said ruling
applies only to cases where banks act under their fiduciary
capacity, that is, as depositary of the deposits of their
depositors. But the same higher degree of diligence is not
expected to be exerted by banks in commercial transactions
that do not involve their fiduciary relationship with their
depositors. The case at bar does not involve the handling of
petitioners’ deposit, if any, with the respondent bank. Instead,
the relationship involved was that of a buyer and seller.
5. PNB v. Sps. Cheah, GR 170865
FACTS: 1. On November 4, 1992, Ofelia Cheah and her friend
Adelina Guarin were having a conversation in the latter’s office
when Adelina’s friend, Filipina Tuazon, approached her to ask if
she could have Filipina’s check cleared and encashed for a
service fee of 2.5%.
2. The check was Bank of America Check No. 190 drawn by
Atty. Rosales against Bank of America California, USA, with a
face amount of $300,000.00, payable to cash.

3. Because Adelina does not have a dollar account, she asked
Ofelia if she could accommodate Filipina’s request since she
has a joint dollar savings account with her husband Cheah
Chee Chong with PNB Buendia Branch.
4. Ofelia agreed. They met with the Loans Department who
referred them to PNB Division Chief Garin. Garin discussed
with them the process of clearing the check and they were told
that it normally takes 15 days. Assured that the deposit and
subsequent clearance of the check is a normal transaction,
Ofelia deposited Filipina’s check.
5. PNB then sent it for clearing through its correspondent bank,
Philadelphia National Bank. 5 days later, PNB received a credit
advice from Philadelphia that the proceeds of the subject
check had been temporarily credited to PNB’s account as of
November 6, 1992.
6. On November 16, 1992, Garin called up Ofelia to inform her
that the check had already been cleared. The following day,
PNB Buendia, after deducting the bank charges, credited
$299,248.37 to the account of the spouses Cheah.
7. Acting on Adelina’s instruction to withdraw the credited
amount. Filipina received all the proceeds.
8. In the meantime, the Cable Division of PNB Head Office
received on November 16, 1992 a SWIFT message from
Philadelphia, informing PNB 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.
9. After a few days, PNB Head Office ascertained that the
SWIFT message was intended for PNB Buendia Branch.
10. Informed about the bounced check and upon demand by
PNB Buendia to return the money withdrawn, Ofelia
immediately contacted Filipina to get the money back. But the
latter told her that all the money had already been given to
several people who asked for the check’s encashment. Criminal
charges were then filed against these suspect beneficiaries.
11. Subsequently, PNB sent a demand letter to spouses Cheah
for the return of the amount of the check, froze their peso and
dollar deposits, and filed a complaint against them for Sum of
Money with the RTC. In said complaint, PNB demanded
payment of around P8,202,220.44, plus interests and
attorney’s fees.
12. The RTC ruled in PNB’s favor. It held that spouses Cheah
were guilty of contributory negligence. While the CA
recognized the spouses Cheah as victims of a scam who
nevertheless have to suffer the consequences of Ofelia’s lack
of care and prudence in immediately trusting a stranger, the
appellate court did not hold PNB scot-free. It declared both
parties equally negligent and should suffer and shoulder the
loss.
6. FEB v. Tentmaker, GR 171050
FACTS: The signatures of respondents, Gregoria Pilares Santos
(President) and Rhoel P. Santos(Treasurer) of Tentmakers
Group Inc. (TGI) appeared on 3 promissory notes for loans
contractedwith the petitioner.
Petitioner, after a futile demand, filed a complaint before the
RTC for the payment of theprincipal of the promissory notes
which amounted to a total of Php 887,613.37 inclusive of
interest, penalty charges and attorney’s fees.
The RTC rendered a decision in favour of the petitioner.
However, this was reversed by theCA on the ground, among
others, that there were no collaterals to ensure the payment of
the loansand, in the conferment of such unsecured loans, the
bank manager also failed to comply with theguidelines set
forth under the Manual fo Regulation for Banks when it
approved and released thesubject loans to Gregoria and Rhoel.
Petitioner contends that the evidence on record showed its
compliance with the bankingrules and regulations through
board resolutions issued by TGI fully authorizing Gregoria and
Rhoelto transact business with it.
9. Philippine Commercial and Industrial Bank (PCIB)
vs. Philnabank Employees Association
GR No. L-29630 dated July 2, 1981
Facts: There is an action for Libel against Philnabank
Employees Association filed by PCIB as a result of placard and
signboard along PNB Building, containing the following: “PCIB
BAD ACCOUNTS TRANSFERRED TO PNB-NIDC?”
PCIB considered the above “defamatory and libelous per se”
(for at the very least it amounts to an act tending to cause
dishonour, discredit or contempt of a juridical person).
The libelous character of those placards were denied by
defendants on the ground that those said placards were
displayed during the strike which is a fair, legal labor strategy
denouncing the lack of business foresight, incompetence,
mismanagement, arbitrary and disputing acts of Management
to heed the legal and legitimate demands of Philnabank
Employees association, as striking Union. Also such strike was
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only move with good intention and justifiable motives and did
not intend to injure any party not connected with the strike.
The lower court ruled in favour of the Philnabank Union,
having the judge not able to discern any libelous imputation in
the allege offending words.
Issue: W/ N the words in the placards (as quoted above) used
by the Philnabank Union during their strike against employer
PNB is libelous.
Ruling: No
If the matter were viewed solely from what appeared in the
placards, there is an element of plausibility in the assertion
that while it was aimed at the PNB, the way it was worded
could reflect on a stranger to the controversy, that is the
PCIB.What could at first glance be for the most fastidious
hurtful to its prestige, could if viewed with calmness and
objectivity be considered as “lacking in libelous imputation”.
Peaceful picketing is part of the freedom of speech guaranteed
by Constitution. Labor disputes give rise to strong emotional
response. It is a fact of industrial life, that in continuing
confrontation esteem Labor and management, it is far from
likely that the language employed would be both courteous
and polite.
The judiciary in deciding suits for libel must ascertain whether
or not the alleged offending words may be embraced by the
guarantees of free press and free speech.
10. G.R. No. 102636 September 10, 1993METROPOLITAN
BANK & TRUST COMPANY EMPLOYEES UNION-ALU-TUCP and
ANTONIO V. BALINANG,petitioners,vs.NATIONAL LABOR
RELATIONS COMMISSION (2nd Division) and METROPOLITAN
BANK and TRUST COMPANY,respondents.
Facts: On 25 May 1989, the Metropolitan Bank & Trust
Company entered into a collective bargaining agreement with
the Metropolitan Bank & Trust CompanyEmployees Union
MBTCEU, granting a monthly P900 wage increase effective 01
January 1989. With the exclusion of the probationary
employees. Republic Act 6727 was enacted "an act to
rationalize wage policy determination be establishing the
mechanism and proper standards thereof, . . . fixing new wage
rates, providing wage incentives for industrial dispersal to the
countryside, and for other purposes," took effect which
provides for the agricultural or non-agricultural employees
salary, be increased by twenty-five pesos (P25) per day, . .
.:Provided, That those already receiving above the minimum
wage rates up to one hundred pesos(P100.00) shall shall also
receive an increase of twenty-five pesos (P25.00) per day, . .

.Pursuant to the above provisions, the bank gave the P25
increase per day, orP750 a month, to its probationary
employees and to those who had been promoted to regular or
permanent status before 01 July 1989 but whose dailyrate was
P100 and below. The bank refused to give the same increase to
its regular employees who were receiving more than P100 per
day and recipients of the P900 CBA increase.Contending that
the bank's implementation of Republic Act 6727 resulted in the
categorization of the employees into (a) the probationary
employees as of 30 June 1989 and regular employees receiving
P100 or less a day who hadbeen promoted to permanent or
regular status before 01 July 1989, and (b) the regular
employees as of 01 July 1989, whose pay was over P100 a day,
and that, between the two groups, there emerged a
substantially reduced salary gap.The Union sought from the
bank the correction of the alleged distortion in pay by granting
750 increase in regular employees with above 100 pay and
reciepient of 900 CBA increase. To avoid strike the bank
petitioned the secretary of Labor to assume jurisdiction, then
assigned to Labor Arbiter for arbitration.
The Labor arbiter sided with the Union, that such salary
increase resulted in the severe contraction of an intentional
quantitative difference in wage between employee groups. The
bank appealed to the NLRC, and the NLRC reversed the
decision of the Labor Arbiter in favour of Metrobank and Trust
Company.
Issue:Whether there has been a wage distortion, and a need to
grant the increase 750 to regular employees receiving above
100 peso per day.
11. BPI EMPLOYEES UNION-DAVAO CITY-FUBU v. BANK OF
PHILIPPINE ISLANDS, GR No. 174912, 2013-07-24
Facts:
A service agreement between BPI and BOMC was initially
implemented in BPI's Metro Manila branches. In this
agreement, BOMC undertook to provide services such as check
clearing, delivery of bank statements, fund transfers, card
production, operations accounting and control,... and cash
servicing, conformably with BSP Circular No. 1388. Not a single
BPI employee was displaced and those performing the
functions, which were transferred to BOMC, were given other
assignments.
On January 1, 1996, the service agreement was likewise
implemented in Davao City. Later, a merger between BPI and
Far East Bank and Trust Company (FEBTC) took effect on April
10, 2000 with BPI as the surviving corporation. Thereafter,
BPI's cashiering function and FEBTC's... cashiering, distribution
and bookkeeping functions were handled by BOMC.
Consequently, twelve (12) former FEBTC employees were
transferred to BOMC to complete the latter's service
complement.
BPI Davao's rank and file collective bargaining agent, BPI
Employees Union-Davao City-FUBU (Union), objected to the
transfer of the functions and the twelve (12) personnel to
BOMC contending that the functions rightfully belonged to the
BPI employees and that the Union... was deprived of
membership of former FEBTC personnel who, by virtue of the
merger, would have formed part of the bargaining unit
represented by the Union pursuant to its union shop provision
in the CBA.
Issues:
During the LMC, BPI invoked management prerogative stating
that the creation of the BOMC was to preserve more jobs and
to designate it as an agency to place employees where they
were most needed. On the other hand, the Union charged that
BOMC undermined the existence of the... union since it
reduced or divided the bargaining unit. While BOMC
employees perform BPI functions, they were beyond the
bargaining unit's coverage. In contracting out FEBTC functions
to BOMC, BPI effectively deprived the union of the
membership of employees handling said... functions as well as
curtailed the right of those employees to join the union.
While the Union admitted that BPI has the prerogative to
determine what should be done to meet the exigencies of
business in accordance with the case of Sime Darby Pilipinas,...
Inc. v. NLRC,[19] it insisted that the exercise of management
prerogative is not absolute, thus, requiring good faith and
adherence to the law and the CBA. Citing the case of Shell Oil
Workers' Union v. Shell Company of the Philippines,... Ltd.,[20]
the Union claims that it is unfair labor practice for an employer
to outsource the positions in the existing bargaining unit
Ruling:
It is to be emphasized that contracting out of services is not
illegal per se. It is an exercise of business judgment or
management prerogative. Absent proof that the management
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acted in a malicious or arbitrary manner, the Court will not
interfere with the exercise of... judgment by an employer
In one case, the Court held that it is management prerogative
to farm out any of its activities, regardless of whether such
activity is peripheral or core in nature.[44] What is of
primordial importance is that the service agreement does not
violate... the employee's right to security of tenure and
payment of benefits to which he is entitled under the law.
Furthermore, the outsourcing must not squarely fall under
labor-only contracting
12. CENTRAL BANK v. MORFE
FACTS: First Mutual Savings and Loan Organization encourage
savings among its members and extend financial assistance
thru loans. Central bank said that the Organization and others
with similar nature are banking institutions and that the Org
have never been authorized. CB applied for SW because of the
Org’s illegal receipt of deposits of money for deposit,
disbursements…without compliance with RA 337. The SW
includes articles such as book of original entry…and others.
They said that the SW is general in its terms and that the use of
the word “and others” permits the unreasonable search and
seizure of documents which have no relation to any specific
criminal act.
HELD: SW is upheld.
– Depending on the circumstances, while in one instance
the particular wording of the warrant may make it assume the
character of a general warrant, in another context it may be
considered perfectly alright.
– SW only for one offense, if issued for more than two, it
is void. Scatter shot warrant.
– In illegal possession of shabu, marijuana, paraphernalia-
one SW ok!
– SW may be partially void
– Undetermined amount of marijuana ok!
– Purpose of Particularity of Description:
Readily identify the items to be seized, thus prevent them from
seizing the wrong items
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Leave officers with no discretion regarding articles to be seized

and thus prevent unreasonable searches and seizure

– Not required that technical precision of description be

required

– “narcotics paraphernalia”, “any and all narcotics”, and

“a quantity of loose heroin”- ok!

– “and the like”- not necessarily general warrant

– Where should the requisite description appear- in the

caption or body of the warrant? Body sufficient.

– What if there’s discrepancy between the address in the

caption and in the body? Not sufficient to invalidate. It is
sufficient as long as you can identify the place intended and
distinguish it from other places in the community.