Banking Laws Case Digests

MAXWELL NICKY NOTES Tahanlangit, Maxi Dominick D.
1
COMMERCIAL LAW CASE DIGESTS Xavier University-Ateneo de Cagayan
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BANKING LAWS There are, however, some cases where the borrower fails to repay its loan
with the BSP. In these instances, the BSP simply forecloses on the
A. NEW CENTRAL BANK ACT collaterals, consolidates title to the property, and subsequently disposes of
the collaterals to recover costs.
Doctrine: BSP is the lender of last resort.
ONE of the principal responsibilities of the Bangko Sentral ng Pilipinas is to 1. Banco Filipino Savings and Mortgage Bank v. BSP and the Monetary
act as lender of last resort. This is in line with BSP’s mandate of Board, G.R. No. 200678, 4 June 2018
preserving the stability of the monetary and banking system and
protecting the interest of the depositing public. Facts:
The Bangko Sentral performs this mandate by extending discounts, On December 11, 1991, this Court promulgated Banco Filipino Savings &
loans and advances to banking institutions, which are experiencing Mortgage Bank v. Monetary Board and Central Bank of the Philippines,
temporary liquidity problems. The emergency loan is meant to enable which declared void the Monetary Board's order for closure and
these banks to be able to service clients' deposits. receivership of Banco Filipino Savings & Mortgage Bank (Banco Filipino).
This Court also directed the Central Bank of the Philippines and the
Note that the problem sought to be addressed is liquidity, not solvency. Monetary Board to reorganize Banco Filipino and to allow it to resume
Hence, any bank seeking this type of BSP assistance must be able to business under the comptrollership of both the Central Bank and the
demonstrate that it is solvent. Also, it has sufficient assets to fully secure Monetary Board.
the loan applied for.
Banco Filipino subsequently filed several Complaints before the Regional
The proposed collaterals are assessed, their titles are validated and based on Trial Court, among them a claim for damages in the total amount of
BSP’s evaluation and credit criteria, the corresponding emergency loan P18,800,000,000.00.
amount is released.
On June 14, 1993, Congress passed Republic Act No. 7653, providing for
Often, this emergency assistance has enabled a number of financial the establishment and organization of Bangko Sentral as the new monetary
institutions to overcome their temporary liquidity problems. They have authority.
since repaid their loans and have continued normal operations.
MAXWELL NICKY NOTES Tahanlangit, Maxi Dominick D. 2
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On November 6, 1993, pursuant to this Court's 1991 Banco Filipino During the pendency of its Petition, Banco Filipino entered into discussions
Decision, the Monetary Board issued Resolution No. 427, which allowed and negotiations with Bangko Sentral, which resulted to seven (7) revisions
Banco Filipino to resume its business. in the business plan. Thus, Banco Filipino filed a Proposal for Settlement
dated September 21, 2007 before Branch 62, Regional Trial Court, Makati
In 2002, Banco Filipino suffered from heavy withdrawals, prompting it to City to settle the issues between the parties.
seek the help of Bangko Sentral. In a letter dated October 9, 2003, Banco
Filipino asked for financial assistance of more than P3,000,000,000.00 On April 8, 2009, Banco Filipino submitted its 8th Revised Business Plan to
through emergency loans and credit easement terms. In a letter dated Bangko Sentral for evaluation. In this business plan, Banco Filipino
November 21, 2003, Bangko Sentral informed Banco Filipino that it should requested, among others, a P25,000,000,000.00 income enhancement loan.
first comply with certain conditions imposed by Republic Act No. 7653 Unable to come to an agreement, the parties constituted an Ad Hoc
before financial assistance could be extended. Banco Filipino was also Committee composed of representatives from both parties to study and act
required to submit a rehabilitation plan approved by Bangko Sentral before on the proposals. The Ad Hoc Committee produced an Alternative Business
emergency loans could be granted. Plan, which was accepted by Banco Filipino, but was subject to the
Monetary Board's approval.
In a letter dated April 14, 2004, Banco Filipino submitted its Long-Term
Business Plan to Bangko Sentral. It also claimed that Bangko Sentral In a letter dated December 4, 2009, Bangko Sentral informed Banco Filipino
already extended similar arrangements to other banks and that it was still that the Monetary Board issued Resolution No. 1668 granting its request for
awaiting the payment of P18,800,000,000.00 in damage claims, "the the P25,000,000,000.00 Financial Assistance and Regulatory Reliefs to
entitlement to which the Supreme Court has already decided with finality." form part of its Revised Business Plan and Alternative Business Plan. The
approval was also subject to certain terms and conditions, among which was
In response, Bangko Sentral informed Banco Filipino that its business the withdrawal or dismissal with prejudice to all pending cases filed by
plan could not be acted upon since it was neither "confirmed nor Banco Filipino against Bangko Sentral and its officials. The terms also
approved by Banco Filipino's Board of Directors." included the execution of necessary quitclaims and commitments to be
given by Banco Filipino's principal stockholders, Board of Directors, and
On July 8, 2004, Banco Filipino filed a Petition for Revival of Judgment duly authorized officers "not to revive or refile such similar cases in the
with the Regional Trial Court of Makati to compel Bangko Sentral to future."
approve its business plan. The case was docketed as Civil Case No. 04-
823 and was raffled to Branch 62.
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In a letter dated January 20, 2010, Banco Filipino requested reconsideration In a letter dated August 13, 2010, Banco Filipino questioned the legality
of the terms and conditions of the P25,000,000,000.00 Financial Assistance of referring the matter to private counsel and stated that it had not
and Regulatory Reliefs package, noting that the salient features of the been notified of the action taken on the acceptance of its Business Plan.
Alternative Business Plan were materially modified. However, in a
letter dated April 8, 2010, Banco Filipino informed Bangko Sentral that In a letter dated September 13, 2010, CVC Law told Banco Filipino that the
it was constrained to accept the "unilaterally whittled down version of matter was referred to it as an incident of Civil Case No. 04-823, which it
the P25,000,000,000.00 Financial Assistance Package and Regulatory was handling on behalf of Bangko Sentral. It also informed Banco Filipino
Reliefs." It, however, asserted that it did not agree with the condition to that the latter's rejection of the terms and conditions of Resolution No. 1668
dismiss and withdraw its cases since this would require a separate made this Resolution legally unenforceable.
discussion.
Banco Filipino sent letters dated September 22, 2010 and September 28,
In a letter dated April 19, 2010, Bangko Sentral informed Banco Filipino 2010, questioning the legality of Bangko Sentral's referral to private counsel
that it was surprised by the latter's hesitation in accepting the terms and and reiterating that the terms and conditions embodied in Resolution No.
conditions, in particular, the withdrawal of the cases against it, since this 1668 were not meant to be a settlement of its P18,800,000,000.00 damage
condition had already been discussed from the start of the negotiations claim against Bangko Sentral.
between the parties.
In a letter dated October 4, 2010, Bangko Sentral reiterated that its referral
In a letter dated June 21, 2010, Banco Filipino informed Bangko Sentral that of the matter to CVC Law was due to the matter being incidental to the civil
it never accepted the condition of the withdrawal of the cases in prior case pending before the Regional Trial Court.
negotiations but was willing to discuss this condition as a separate and
distinct matter. On October 20, 2010, Banco Filipino filed a Petition For Certiorari and
Mandamus with prayer for issuance of a temporary restraining order
In a letter dated August 10, 2010, Bangko Sentral and the Monetary and writ of preliminary injunction before Branch 66, Regional Trial
Board, through counsel CVC Law, informed Banco Filipino that its Court, Makati City, docketed as Civil Case No. 10-1042. It assailed the
rejection of certain portions of Resolution No. 1668, particularly its alleged "arbitrary, capricious and illegal acts" of Bangko Sentral and of
refusal to withdraw all cases filed against Bangko Sentral, was deemed the Monetary Board in coercing Banco Filipino to withdraw all its
as a failure to reach a mutually acceptable settlement. present suits in exchange of the approval of its Business Plan. In
particular, Banco Filipino alleged that Bangko Sentral and the Monetary
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Board committed grave abuse of discretion in imposing an additional Regional Trial Court's October 28, 2010 Order for having been issued
condition in Resolution No. 1668 requiring it to withdraw its cases and without jurisdiction. The Petition was docketed as CA-G.R. SP No. 116627.
waive all future cases since it was unconstitutional and contrary to
public policy. It prayed that a writ of mandamus be issued to compel On November 17, 2010, the trial court issued an Order denying the
Bangko Sentral and the Monetary Board to approve and implement its Bangko Sentral and the Monetary Board's Motion to Dismiss Ad
business plan and release its Financial Assistance and Regulatory Cautelam, stating that the acts complained of pertained to Bangko
Reliefs package. Sentral 's regulatory functions, not its adjudicatory functions. It likewise
stated that as requested in the handwritten letter dated October 21, 2010 by
The trial court issued a Notice of Hearing on the prayer for a temporary Bangko Sentral's general counsel requesting for an advanced copy of Banco
restraining order on the same day, setting the hearing on October 27, 2010. Filipino's Petition, it furnished Bangko Sentral a copy of the Petition. It also
held that Bangko Sentral's subsequent participation in the preliminary
On October 27, 2010, Bangko Sentral and the Monetary Board filed their hearing and its receipt of the summons on October 28, 2010 satisfied the
Motion to Dismiss Ad Cautelam, assailing the Regional Trial Court's requirements of procedural due process.
jurisdiction over the subject matter and over the persons of Bangko Sentral
and the Monetary Board. Banco Filipino, on the other hand, filed its The trial court likewise found that litis pendencia and forum shopping were
Opposition to this Petition. not present in the case, that Bangko Sentral's verification and certification of
non-forum shopping were validly signed by the Executive Committee, and
In its October 28, 2010 Order, the Regional Trial Court granted the request that Banco Filipino's Petition did not fail to state a cause of action.
for the issuance of a temporary restraining order against Bangko Sentral and
the Monetary Board. On November 25, 2010, Bangko Sentral and the Monetary Board filed
another Petition for Certiorari with prayer for temporary restraining order
On the same day or on October 28, 2010, summons was served on Bangko and writ of preliminary injunction with the Court of Appeals, this time
Sentral through a staff member of the Office of the Governor, as certified by assailing the November 17, 2010 Order. The case was docketed as CA-G.R.
the Process Server's Return dated November 4, 2010. SP No. 116905. However, the trial court issued a writ of preliminary
injunction on November 18, 2010 so they filed their Urgent Motion to
On November 5, 2010, Bangko Sentral and the Monetary Board filed a Admit Attached Amended Petition with the Court of Appeals to include the
Petition For Certiorari with prayer for temporary restraining order and/or Issuance.
writ of preliminary injunction with the Court of Appeals, assailing the
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In the meantime, or on November 23, 2010, Bangko Sentral and the before the Court of Appeals, not before a trial court. The Court of
Monetary Board filed a Motion to Admit Attached Supplemental Petition Appeals also denied the Urgent Motion for Consolidation for the following
for Certiorari with Application for Interim Relief[53] in CA-G.R. SP No. reasons:
116627 seeking to include the trial court's October 28, 2010 Order.
1) [I]t would cause not only further congestion of the already congested
In its December 28, 2010 Resolution, the Court of Appeals granted Bangko docket of the ponente of CA-G.R. SP No. 116627, but also in the delay in
Sentral and the Monetary Board's Urgent Motion to Admit Attached the disposition of both cases; 2) the subject matters and issues raised in the
Amended Petition in CA-G.R. SP No. 116905. instant petition are different from those set forth in CA-G.R. SP No.
116627, hence, they can be the subject of separate: petitions; and 3) Since a
Meanwhile, Banco Filipino filed its Opposition dated January 18, 2011 in writ of preliminary injunction was earlier issued, Section 2 (d), Rule VI of
CA-G.R. SP No. 116905. the 2009 IRCA requires that the instant petition remain with the
undersigned ponente for decision on the merits with dispatch.
After oral arguments were held on February 7, 2011, the Court of Appeals
issued its February 14, 2011 Resolution in CA-G.R. SP No. 116905. It On July 28, 2011, the Court of Appeals rendered its Decision in CA-G.R.
granted the application for a writ of preliminary injunction and enjoined the SP No. 116905 granting Bangko Sentral and the Monetary Board's
trial court from conducting further proceedings in Civil Case No. 10-1042 Amended Petition. According to the Court of Appeals, the trial court had no
pending a decision on the merits. jurisdiction over the Petition for Certiorari and Mandamus filed by Banco
Filipino since special civil actions against quasi-judicial agencies are only
On February 16, 2011, Banco Filipino filed an Urgent Motion for cognizable by the Court of Appeals. It also found that the trial court
Consolidation in CA-G.R. SP No. 116905, requesting for the consolidation gravely abused its discretion in acquiring jurisdiction over Bangko
of the two (2) Petitions for Certiorari filed by Bangko Sentral and the Sentral and the Monetary Board by reason of their voluntary
Monetary Board before the Court of Appeals. On March 1, 2011, it also appearance in the preliminary hearing since their counsel had made it
filed a Motion for Reconsideration of the Court of Appeals February 14, clear that the appearance was specifically to question the absence of a
2011 Resolution. service of summons.
In its June 2, 2011 Resolution, the Court of Appeals in CA-G.R. SP No. The Court of Appeals likewise found that the delegation of authority from
116905 denied Banco Filipino's Motion for Reconsideration, holding Banco Filipino's Board of Directors to the Executive Committee to sign
that special civil actions against quasi-judicial agencies should be filed pleadings on its behalf validated the verification and certification of non-
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forum shopping signed only by the Executive Vice Presidents. It also ruled Petitioner asserts that the trial court had jurisdiction over special civil
that there was no litis pendencia or forum shopping in the case docketed as actions against respondents, accordingly with Merchants Rural Bank of
Civil Case No. 10-1042 despite the pendency of Civil Case No. 04-823 Talavera v. Monetary Board, et al., a decision promulgated by the Court of
since the causes of action and the reliefs prayed for were not the same. Appeals in 2006.
Banco Filipino filed a Motion for Reconsideration, which was denied by the Petitioner likewise argues that the trial court acquired jurisdiction over
Court of Appeals in its February 16, 2012 Resolution. Hence, it filed this respondents considering that they were able to participate in the summary
Petition on April 10, 2012 against Bangko Sentral and the Monetary Board hearing. It points out that respondents questioned before the trial court the
before this Court. service of the petition on October 21, 2010 but never actually questioned the
service of summons on October 28, 2010 until it filed its petition with the
Petitioner claims that it had the authority to file this Petition since the Court Court of Appeals. It argues that respondents' private counsel was present
of Appeals promulgated its January 27, 2012 Decision in CA-G.R. SP No. during the raffle of the case on October 21, 2010 and even assisted
118599, finding petitioner's closure and receivership to have been illegal. It respondents' general counsel in receiving copies of the petition that the latter
argues that to dismiss its Petition now pending before this Court for lack of requested, showing that respondents' due process was never violated. It
authority from its receiver Philippine Deposit Insurance Corporation would asserts that the Court of Appeals should have dismissed outright
be "an absurd and unjust situation." Petitioner admits, however, that this respondents' Petition for Certiorari for "maliciously omitt[ing]" the
decision was eventually overturned on reconsideration in the Court of handwritten letter dated October 21, 2010 of their general counsel. It
Appeals November 21, 2012 Amended Decision. likewise points out that respondents failed to file a motion for
reconsideration before the trial court before filing their petition for certiorari
Petitioner points out that there was nothing in the Philippine Deposit with the Court of Appeals.
Insurance Corporation Charter or in Republic Act No. 7653 that precludes
its Board of Directors from suing on its behalf. It adds that there was an Respondents, on the other hand, counter that the Petition should be
obvious conflict of interest in requiring it to seek Philippine Deposit dismissed outright for being filed without Philippine Deposit Insurance
Insurance Corporation's authority to file the case considering that Philippine Corporation's authority. It asserts that petitioner was placed under
Deposit Insurance Corporation was under the control of herein respondent receivership on March 17, 2011, and thus, petitioner's Executive Committee
Monetary Board. would have had no authority to sign for or on behalf of petitioner absent the
authority of its receiver, Philippine Deposit Insurance Corporation. They
also point out that both the Philippine Deposit Insurance Corporation
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Charter and Republic Act No. 7653 categorically state that the General is not equivalent to the service of summons to the Governor
authority to file suits or retain counsels for closed banks is vested in the General, making the service of summons ineffective.
receiver. Thus, the verification and certification of non-forum shopping
signed by petitioner's Executive Committee has no legal effect. Respondents likewise claim that their filing of their Petition before the
Court of Appeals without a prior motion for reconsideration was justified by
Respondents likewise claim that the Court of Appeals did not err in finding certain exceptional circumstances. They mention, among others, the trial
that the trial court had no jurisdiction over respondents. It cited this Court's court's lack of jurisdiction, the fact that the issues have already been raised
ruling in United Coconut Planters Bank v. E. Ganzon, Inc. and National and passed upon by the trial court, the prejudice to government interest in
Water Resources Board v. A. L. Ang Network, where this Court delaying the case, and their denied due process because of the improper
categorically stated that special civil cases filed against quasi-judicial service of summons. They further argue that the only significance of the
agencies must be filed before the Court of Appeals. They argue that there October 21, 2010 handwritten letter was to show that respondents were
was no showing that Merchants Rural Bank of Talavera was ever upheld by informed that a Petition was filed, and not that the trial court had already
this Court. They contend that petitioner should be estopped from raising the acquired jurisdiction over their persons.
issue of jurisdiction considering that during the pendency of this case, or on
March 21, 2011 and November 20, 2011, it filed two (2) separate petitions Issue:
for certiorari against respondent Monetary Board directly before the Court
of Appeals. (1) Whether or not trial courts have jurisdiction to take cognizance of a
petition for certiorari against acts and omissions of the Monetary
Respondents maintain that the trial court did not acquire jurisdiction over Board;
them since there was no valid service of summons. They argue that when
they filed their Motion to Dismiss on October 27, 2010, they could not have (2) Whether or not respondents Bangko Sentral ng Pilipinas and the
validly argued the propriety of the summons on them on October 28, 2010. Monetary Board should have filed a motion for reconsideration of the
They likewise contend that their voluntary appearance in the summary trial court's denial of their motion to dismiss before filing their petition
hearing before the trial court was not a submission to the trial court's for certiorari before the Court of Appeals; and
jurisdiction since they consistently manifested that their appearance would
be special and limited to raise the issues of jurisdiction. They also assert that (3) Whether or not the trial court validly acquired jurisdiction over
the service of summons to a staff member of the Office of the Governor respondents Bangko Sentral ng Pilipinas and the Monetary Board.
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Ruling: Under the old Central Bank Act, or Republic Act No. 265, as amended, the
same principle applies to the receiver appointed by the Central Bank. The
(1) A closed bank under receivership can only sue or be sued through law explicitly stated that a receiver shall "represent the [insolvent] bank
its receiver, the Philippine Deposit Insurance Corporation. personally or through counsel as he [or she] may retain in all actions or
proceedings for or against the institution."
Under Republic Act No. 7653, when the Monetary Board finds a bank
insolvent, it may "summarily and without need for prior hearing forbid The relationship between the Philippine Deposit Insurance Corporation
the institution from doing business in the Philippines and designate the and a closed bank is fiduciary in nature. Section 30 of Republic Act No.
Philippine Deposit Insurance Corporation as receiver of the banking 7653 directs the receiver of a closed bank to "immediately gather
institution." and take charge of all the assets and liabilities of the institution" and
"administer the same for the benefit of its creditors."
Before the enactment of Republic Act No. 7653, an insolvent bank under
liquidation could not sue or be sued except through its liquidator. The law likewise grants the receiver "the general powers of a receiver
In Hernandez v. Rural Bank of Lucena: under the Revised Rules of Court." Under Rule 59, Section 6 of the
Rules of Court, "a receiver shall have the power to bring and defend, in
[A]n insolvent bank, which was under the control of the finance such capacity, actions in his or her own name." Thus, Republic Act No.
commissioner for liquidation, was without power or capacity to sue or be 7653 provides that the receiver shall also "in the name of the institution, and
sued, prosecute or defend, or otherwise function except through the finance with the assistance of counsel as [it] may retain, institute such actions as
commissioner or liquidator. may be necessary to collect and recover accounts and assets of, or defend
any action against, the institution." Considering that the receiver has the
This Court in Manalo v. Court of Appeals reiterated this principle: power to take charge of all the assets of the closed bank and to institute for
or defend any action against it, only the receiver, in its fiduciary capacity,
A bank which had been ordered closed by the monetary board retains
may sue and be sued on behalf of the closed bank.
its juridical personality which can sue and be sued through its
liquidator. The only limitation being that the prosecution or defense of In Balayan Bay Rural Bank v. National Livelihood Development
the action must be done through the liquidator. Otherwise, no suit for Corporation, this Court explained that a receiver of a closed bank is
or against an insolvent entity would prosper. tasked with the duty to hold the assets and liabilities in trust for the
benefit of the bank's creditors.
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As fiduciary of the insolvent bank, Philippine Deposit Insurance The legal personality of the petitioner bank is not ipso facto dissolved
Corporation conserves and manages the assets of the bank to prevent by insolvency; it is not divested of its capacity to sue and be sued after it
the assets' dissipation. This includes the power to bring and defend any was ordered by the Monetary Board to cease operation. The law
action that threatens to dissipate the closed bank's assets. Balayan Bay mandated, however, that the action should be brought through its
Rural Bank explained that Philippine Deposit Insurance Corporation statutory liquidator/receiver which in this case is the PDIC. The
does so, not as the real party-in-interest, but as a representative party, authority of the PDIC to represent the insolvent bank in legal actions
thus: emanates from the fiduciary relation created by statute which reposed
upon the receiver the task of preserving and conserving the properties
As the fiduciary of the properties of a closed bank, the PDIC may of the insolvent for the benefit of its creditors.
prosecute or defend the case by or against the said bank as a
representative party while the bank will remain as the real party in Petitioner contends that it was not a closed bank at the time of the filing
interest pursuant to Section 3, Rule 3 of the Revised Rules of Court which of this Petition on April 10, 2012 since the Court of Appeals January 27,
provides: 2012 Decision, docketed as CA-G.R. SP No. 118599, found the closure
to have been illegal.
SEC. 3. Representatives as parties. — Where the action is allowed to be
prosecuted or defended by a representative or someone acting in a fiduciary This Court of Appeals Decision, however, was not yet final since the
capacity, the beneficiary shall be included in the title of the case and shall be Monetary Board filed a timely motion for reconsideration. There is also
deemed to be the real party in interest. A representative may be a trustee nothing in its dispositive portion which states that it was immediately
of an express trust, a guardian, an executor or administrator, or a party executory. Through its November 21, 2012 Amended Decision, the Court
authorized by law or these Rules. An agent acting in his own name and of Appeals reversed its January 27, 2012 Decision, confirming petitioner's
for the benefit of an undisclosed principal may sue or be sued without status as a closed bank under receivership. It was, therefore, erroneous for
joining the principal except when the contract involves things belonging petitioner to presume that it was not a closed bank on April 10, 2012 when it
to the principal. filed its Petition with this Court considering that there was no final
declaration yet on the matter.
The inclusion of the PDIC as a representative party in the case is therefore
grounded on its statutory role as the fiduciary of the closed bank which, Petitioner should have attempted to comply after the promulgation of the
under Section 30 of R.A. 7653 (New Central Bank Act), is authorized to November 21, 2012 Amended Decision. Its substantial compliance would
conserve the latter's property for the benefit of its creditors. have cured the initial defect of its Petition.
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Petitioner likewise claims that there was "an obvious conflict of interest" if people who have entrusted their money to banks in the hopes of
it was required to sue respondents only through Philippine Deposit growing their savings. When banks become insolvent, depositors are
Insurance Corporation, considering that respondent Monetary Board secure in the knowledge that they can still recoup some part of their
appointed Philippine Deposit Insurance Corporation as petitioner's receiver. savings through Philippine Deposit Insurance Corporation. Thus,
This is a fact, however, that petitioner failed to address when it filed its Philippine Deposit Insurance Corporation's participation in all suits
Petition, signifying that petitioner had no intention of complying with the involving the insolvent bank is necessary and imbued with the public
law when it filed its Petition or anytime after. interest.
It was speculative on petitioner's part to presume that it could file this When petitioner was placed under receivership, the powers of its Board of
Petition without joining its receiver on the ground that Philippine Deposit Directors and its officers were suspended. Thus, its Board of Directors
Insurance Corporation might not allow the suit. At the very least, petitioner could not have validly authorized its Executive Vice Presidents to file the
should have shown that it attempted to seek Philippine Deposit Insurance suit on its behalf. The Petition, not having been properly verified, is
Corporation's authorization to file suit. It was possible that Philippine considered an unsigned pleading. A defect in the certification of non-forum
Deposit Insurance Corporation could have granted its permission to be shopping is likewise fatal to petitioner's cause.
joined in the suit. If it had refused to allow petitioner to file its suit,
petitioner still had a remedy available to it. Under Rule 3, Section 10 of the Considering that the Petition was filed by signatories who were not validly
Rules of Court, petitioner could have made Philippine Deposit authorized to do so, the Petition does not produce any legal effect. Being an
Insurance Corporation an unwilling co-petitioner and be joined as a unauthorized pleading, this Court never validly acquired jurisdiction over
respondent to this case. the case. The Petition, therefore, must be dismissed.
Petitioner's suit concerned its Business Plan, a matter that could have (2) Even assuming that the Petition did not suffer from procedural
affected the status of its insolvency. Philippine Deposit Insurance infirmities, it must still be denied for lack of merit.
Corporation's participation would have been necessary, as it had the duty to
conserve petitioner's assets and to examine any possible liability that Unless otherwise provided for by law and the Rules of Court, petitions
petitioner might undertake under the Business Plan. for certiorari against a quasi-judicial agency are cognizable only by the
Court of Appeals. The Regional Trial Court had no jurisdiction over
Philippine Deposit Insurance Corporation also safeguards the interests of the Petition for Certiorari filed by petitioner against respondents.
the depositors in all legal proceedings. Most bank depositors are ordinary
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Pursuant to Article XII, Section 20 of the Constitution, Congress its examination, to impose fines and other sanctions and to issue cease
constituted Bangko Sentral as an independent central monetary and desist order. Section 37 of Republic Act No. 7653, in particular,
authority. As an administrative agency, it is vested with quasi-judicial explicitly provides that the BSP Monetary Board shall exercise its discretion
powers, which it exercises through the Monetary Board. In United in determining whether administrative sanctions should be imposed on
Coconut Planters Bank v. E. Ganzon, Inc.: banks and quasi-banks, which necessarily implies that the BSP Monetary
Board must conduct some form of investigation or hearing regarding the
A quasi-judicial agency or body is an organ of government other than a same.
court and other than a legislature, which affects the rights of private
parties through either adjudication or rule-making. The very definition Bangko Sentral's Monetary Board is a quasi-judicial agency. Its decisions,
of an administrative agency includes its being vested with quasi-judicial resolutions, and orders are the decisions, resolutions, and orders of a quasi-
powers. The ever increasing variety of powers and functions given to judicial agency. Any action filed against the Monetary Board is an
administrative agencies recognizes the need for the active intervention of action against a quasi-judicial agency.
administrative agencies in matters calling for technical knowledge and
speed in countless controversies which cannot possibly be handled by This does not mean, however, that Bangko Sentral only exercises quasi-
regular courts. A "quasi-judicial function" is a term which applies to the judicial functions. As an administrative agency, it likewise exercises
action, discretion, etc., of public administrative officers or bodies, who are "powers and/or functions which may be characterized as
required to investigate facts, or ascertain the existence of facts, hold administrative, investigatory, regulatory, quasi-legislative, or quasi-
hearings, and draw conclusions from them, as a basis for their official action judicial, or a mix of these five, as may be conferred by the Constitution
and to exercise discretion of a judicial nature. or by statute."
Undoubtedly, the BSP Monetary Board is a quasi-judicial agency exercising The Rules of Court categorically provide that petitions for certiorari
quasi-judicial powers or functions. As aptly observed by the Court of involving acts or omissions of a quasi-judicial agency "shall be filed in and
Appeals, the BSP Monetary Board is an independent central monetary cognizable only by the Court of Appeals."
authority and a body corporate with fiscal and administrative
autonomy, mandated to provide policy directions in the areas of money, As previously discussed, respondent Bangko Sentral exercises a myriad of
banking and credit. It has power to issue subpoena, to sue for contempt functions, including those that may not be necessarily exercised by a quasi-
those refusing to obey the subpoena without justifiable reason, to administer judicial agency. It is settled, however, that it exercises its quasi judicial
oaths and compel presentation of books, records and others, needed in functions through respondent Monetary Board. Any petition for certiorari
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against an act or omission of Bangko Sentral, when it acts through the motion for reconsideration of the assailed decision, based on palpable or
Monetary Board, must be filed with the Court of Appeals. Thus, this Court patent errors, to be made under oath and filed within ten (10) calendar days
in Vivas v. Monetary Board and Philippine Deposit Insurance Corporation from receipt of the questioned decision.
held that the proper remedy to question a resolution of the Monetary
Board is through a petition for certiorari filed with the Court of However, in Estate of Salvador Serra Serra v. Primitivo Hernaez, a case
Appeals. decided after the Rules of Court were revised in 1997:
The Court of Appeals, therefore, did not err in dismissing the case before The settled rule is that a motion for reconsideration is a sine qua non
the Regional Trial Court since the trial court did not have jurisdiction over condition for the filing of a petition for certiorari. The purpose is to
the Petition for Certiorari filed by petitioner against respondents. grant an opportunity to public respondent to correct any actual or
perceived error attributed to it by the re-examination of the legal and
This Court cannot subscribe to petitioner's contention that a Court of factual circumstances of the case.
Appeals decision already provided for an exception to Rule 65. A Court of
Appeals decision, no matter how persuasive or well written, does not There are, however, recognized exceptions to this rule, namely:
function as stare decisis. Neither can a Court of Appeals decision amend the
Rules of Court. As it stands, Rule 65 and jurisprudence hold that petitions (a) where the order is a patent nullity, as where the Court a quo had no
for certiorari against the Monetary Board must be filed with the Court of jurisdiction; (b) where the questions raised in the certiorari proceeding
Appeals. have been duly raised and passed upon by the lower court, or are the
same as those raised and passed upon in the lower court; (c) where
(3) It would appear that the Revised Rules of Court allow a direct filing there is an urgent necessity for the resolution of the question and any
of a petition for certiorari of an interlocutory order without need of a further delay would prejudice the interests of the Government or of the
motion for reconsideration. petitioner or the subject matter of the action is perishable; (d) where,
under the circumstances, a motion for reconsideration would be
The unquestioned rule in this jurisdiction is that certiorari will lie only useless; (e) where petitioner was deprived of due process and there is
if there is no appeal or any other plain, speedy and adequate remedy in extreme urgency for relief; (f) where, in a criminal case, relief from an
the ordinary course of law against the acts of public respondent. In the order of arrest is urgent and the granting of such relief by the trial
instant case, the plain and adequate remedy expressly provided by Sec. 9, court is improbable; (g) where the proceedings in the lower court are a
Rule X, New Rules of the National Labor Relations Commission was a nullity for lack of due process; (h) where the proceedings [were] ex
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parte or in which the petitioner had no opportunity to object; and (i) Belinda Rodriguez. Following the said examination, several anomalies and
where the issue raised is one purely of law or where public interest is irregularities committed by the herein petitioners; PESALA's directors and
involved. officers, were uncovered, among which are:
In this instance, the trial court had no jurisdiction over the petition filed by 1. Questionable investment In a multi-million peso real estate project
petitioner against respondents, an issue which respondents properly asserted (Pesalaville)
before the Court of Appeals when they filed their Petition for Certiorari.
They were, thus, excused from filing the requisite motion for 2. Conflict of interest in the conduct of business
reconsideration.
3. Unwarranted declaration and payment of dividends
Considering that there is sufficient basis to dismiss this Petition outright,
this Court finds it unnecessary to address the other issues raised. 4. Commission of unsound and unsafe business practices.
In sum, this Court holds that petitioner did not have the legal capacity On July 19, 1988,, Central Bank ("CB") Supervision and Examination
to file this Petition absent any authorization from its statutory receiver, Section ("SES") Department IV Director Ricardo. F. Lirio sent a letter to the
Philippine Deposit Insurance Corporation. Even assuming that the Board of Directors of PESALA inviting them to a conference on July 21,
Petition could be given due course, it would still be denied. The Court 1988 to discuss subject findings noted in the said 16th regular examination,
of Appeals did not err in dismissing the action pending between the but petitioners did not attend such conference.
parties before the trial court since special civil actions against quasi-
judicial agencies must be filed with the Court of Appeals. On July 28, 1988, petitioner Renato Lim wrote the PESALA's Board of
Directors explaining his side on the said examination of PESALA's records
and requesting that a copy of his letter be furnished the CB, which was
2. Busuego v. Court of Appeals, G.R. No. 95326, March 11, 1999 fortwith made by the Board.
Facts: On July 29, 1988, PESALA's Board of Directors sent to Director Lirio a
letter concerning the 16th regular examination of PESALA's records.
The 16th regular examination of the books and records of the PAL
Employees Savings and Loan Association, Inc. ("PESALA") was conducted On September 9, 1988, the Monetary Board adopted and issued MB
from March 14 to April 16, 1988 by a team of CB examiners headed by Resolution No. 805 the pertinent provisions of which are as follows:
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"1. To note the report on the examination of the PAL Employees' Savings 8. To require the board of directors of PESALA to improve the operations
and Loan Association, Inc. (PESALA) as of December 31, 1987, as of the Association, correct all violations noted, and adopt internal control
submitted in a memorandum of the Director, Supervision and Examination measures to prevent the recurrence of similar incidents as shown in Annex E
Section (SES) Department IV, dated August 19, 1988; of the subject memorandum of the Director, SES Department IV;"
2. To require the board of directors of PESALA to immediately inform On January 23, 1989, petitioners filed a Petition for Injunction with Prayer
the members of PESALA of the results of the Central Bank for the Immediate Issuance of a Temporary Restraining Order docketed as
examination and their effects on the financial condition of the Civil Case No. Q-89-1617 before Branch 104 of the Regional Trial Court of
Association; Quezon City.
xxx On January 26 1989, the said court issued a temporary restraining order
enjoining the defendant, the Monetary Board of the Central Bank, (now
5. To include the names of Mr. Catalino Banez, Mr. Romeo Busuego Banko Sentral ng Pilipinas) from including the names of petitioners in the
and Mr. Renato Lim in the Sector's watchlist to prevent them from watchlist.
holding responsible positions in any institution under Central Bank
supervision; On February 10, 1989, the same trial court issued a writ of preliminary
injunction, conditioned upon the filing by petitioners of a bond in the
6. To require PESALA to enforce collection of the overpayment to the Vista amount of Ten Thousand (P10,000.00) Pesos each. The Monetary Board
Grande Management and Development Corporation and to require the presented a Motion for Reconsideration of the said Order, but the same was
accounting of P12.28 million unaccounted and unremitted bank loan denied.
proceeds and P3.9 million other unsupported cash disbursements from the
responsible directors and officers; or to properly charge these against their On September 11, 1989, the trial court handed down its Decision, disposing
respective accounts, if necessary; thus:
7. To require the board of directors of PESALA to file civil and "WHEREFORE, judgment is hereby rendered declaring Monetary
criminal cases against Messrs. Catalino Banez, Romeo Busuego and Board Resolution No. 805 as void and inexistent. The writ of
Renato Lim for all the misfeasance and malfeasance committed by preliminary prohibitory injunctions issued on February 10, 1989 is
them, as warranted by the evidence; deemed permanent. Costs against respondent."
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The Monetary Board appealed the aforesaid Decision to the Court of (1) Whether or not the petitioners were deprived of their right to a
Appeals which came out with a Decision of reversal on September 14, 1990, notice and the ooportunity to be heard bt the Monertary Board prior to
the decretal portion of which is to the following effect: its issuance of MB Resolution No. 805.
"WHEREFORE, the decision appealed from is hereby reversed and (2) Whether or not the respondent board is legally bound to observe the
another one entered dismissing the petition for injunction." essential requirements of due process of a valid charge, notice and
opportunity to be heard insofar as the petitioner’s subject cause is
Dissatisfied with the said Decision of the Court of Appeals, petitioners have concerned.
come to this Court via the present petition for review on certiorari.
(3) Whether or not the MB Resolution No. 805 is null and void for being
On June 5, 1992, petitioners filed an "Urgent Motion for the Immediate violative of petitoner’s right to due process.
Issuance of a Temporary Restraining Order and/or Writ of Preliminary
Injunction against the Secretary of Justice and the City Prosecutor of Pasay" Ruling:
stating that several complaints were lodged against the petitioners before
the Office of the City Prosecutor of Pasay City pursuant to Monetary (1) No. Petitioners were duly afforded their right to due process by the
Board Resolution No. 805; that the said complaints were dismissed by Monetary Board, it appearing that:
the City Prosecutor and the dismissals were appealed to the Secretary
of Justice for review, some of which have been reversed 1. Petitioners were invited by Director Lirio to a conference scheduled
already. Petitioners prayed that a Temporary Restraining Order for July 21, 1988 to discuss the findings made in the 16th regular
and/or Writ of Preliminary Injunction issue "restraining and enjoining examination of PESALA's records. Petitioners did not attend, said
the Secretary of Justice and the City Prosecutor of Pasay City from conference;
proceeding and taking further actions, and more specially from filing
Informations in I.S. Nos.-90-1836; 90-1831; 90-1835; 90-1832; 90-1248; 2. Petitioner Renato Lim's letter of July 28, 1988 to PESALA's Board of
90-1249; 90-3031; 90-3032; 90-1837; 90-1834, pending the final Directors, explaining his side of the controversy, was forwarded to the
resolution of the case at bar." However, in the Resolution dated Monetary Board which the latter considered in adopting Monetary Board
September 9, 1992, the court denied the said motion. Resolution No. 805; and
Issue:
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3. PESALA's Board of Director's letter, dated July 29, 1988, to the reliance on the said findings made during the 16th regular
Monetary Board, explaining the Board's side of the controversy, was examination. Lastly, the reason for the issuance of Monetary Board
properly considered in the adoption of Monetary Board Resolution No. 805. Resolution No. 805 is readily apparent, which is to prevent further
irregularities from being committed and to prosecute the officials
Petitioners therefore cannot complain of deprivation of their right to responsible therefor.
due process, as they were given ample opportunity by the Monetary
Board to air their Submission and defenses as to the findings of (2) Yes. While administrative tribunals exercising quasi-judicial
irregularity during the said 16th regular examination. The essence of functions are free from the rigidity of certain procedural requirements
due process is to be afforded a reasonable opportunity to be heard and they are bound by law and practice to observe the fundamental and
to submit any evidence one may have in support of his defense. What is essential requirements of due process in justiciable cases presented
offensive to due process is the denial of the opportunity to be heard. before them. However, the standard of due process that must be met in
Petitioners having availed of their opportunity to present their position administrative tribunals allows a certain latitude as long as the element
to the Monetary Board by their letters-explanation, they were not of fairness is not ignored. Hence, there is no denial of due process where
denied due process. records show that hearings were held with prior notice to adverse
parties. But even in the absence of previous notice, there is no denial of
Contrary to petitioners' allegation, it appears that the requisites of procedural due, process as long as the parties are given the opportunity
procedural due process were complied with by the Monetary Board before it to be heard."
issued the questioned Monetary Board Resolution No. 805. Firstly, the
petitioners were invited to a conference to discuss the findings gathered (3) No. It must be remembered that the Central Bank of the. Philippines
during the 16th regular examination of PESALA's records. (The (now Bangko Sentral ng Pilipinas), through the Monetary Board, is the
requirement of a hearing is complied with as long as there was an government agency charged with the responsibility of administering the
opportunity to be heard, and not necessarily that an actual hearing was monetary, banking and credit system of the country and is granted the
conducted. Secondly, the Monetary Board considered the evidence power of supervision and examination over banks and non-bank
presented. Thirdly, fourthly and fifthly, Monetary Board Resolution No. 805 financial institutions performing quasi-banking functions, of which
was adopted on the basis of said findings unearthed during the 16th regular savings and loan associations, such as PESALA, form part of.
examination of PESALA's records and derived from the letter-comments
submitted by the parties. Sixthly, the members of the Monetary Board The special law governing savings and loan association is Republic Act
acted independently on their own in issuing subject Resolution, placing No. 3779, as amended, otherwise known as the "Savings and Loan
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Association Act." Said law authorizes the Monetary Board to conduct Neither were petitioners deprived of their lawful calling as they are free to
regular yearly examinations of the books and records of savings and look for another employment so long as the agency or company involved is
loan associations, to suspend, a savings and loan association for not subject to Central Bank control and supervision. Petitioners can still
violation of law, to decide any controversy over the obligations and practise their profession or engage in business as long as these are not
duties of directors and officers, and to take remedial measures, among within the ambit of Monetary Board Resolution No. 805.
others.
The Central Bank, through the Monetary Board, is empowered to

conduct investigations and examine the records of savings and loan 3. Koruga v. Arcenas, G.R. No. 159063, June 19, 2009
associations. If any irregularity is discovered in the process, the
Monetary Board may impose appropriate sanctions, such as suspending Facts:
the offender from holding office or from being employed with the
Central Bank, or placing the names of the offenders in a watchlist. G.R. No. 168332
The requirement of prior notice is also relaxed under Section 28 (c) of The first is a Petition for Certiorari under Rule 65 of the Rules of Court,
RA 3779 as investigations or examinations may be conducted with or docketed as G.R. No. 168332, praying for the annulment of the Court of
without prior notice "but always with fairness and reasonable Appeals (CA) Resolution in CA-G.R. SP No. 88422 dated April 18, 2005
opportunity for the association or any of its officials to give their side." granting the prayer for a Writ of Preliminary Injunction of therein
As may be gathered from the records, the said requirement was petitioners Teodoro O. Arcenas, Jr., Albert C. Aguirre, Cesar S. Paguio, and
properly complied with by the respondent Monetary Board. Francisco A. Rivera (Arcenas, et al.).
We sustain the ruling of the Court of Appeals that petitioners' suspension Koruga is a minority stockholder of Banco Filipino Savings and
was only preventive in nature and therefore, no notice or, hearing was Mortgage Bank. On August 20, 2003, she filed a complaint before the
necessary. Until such time that the petitioners have proved their Makati RTC which was raffled to Branch 138, presided over by Judge
innocence, they may be preventively suspended from holding office so Sixto Marella, Jr. Koruga’s complaint alleged:
as not to influence the conduct of investigation, and to prevent the
commission of further irregularities.
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10. 1 Violation of Sections 31 to 34 of the Corporation Code ("Code") administration, by unlawfully releasing loans to the Borrower
which prohibit self-dealing and conflicts of interest of directors and Corporations or refusing or failing to impugn these, knowing before the
officers, thus: loans were released or thereafter that the Bank’s cash resources would
be dissipated thereby, to the prejudice of the Petitioner, other Banco
(a) For engaging in unsafe, unsound, and fraudulent banking practices Filipino depositors, and the public.
that have jeopardized the welfare of the Bank, its shareholders, who
includes among others, the Petitioner, and depositors. (sic) 10.2 Right of a stockholder to inspect the records of a corporation
(including financial statements) under Sections 74 and 75 of the Code, as
(b) For granting and approving loans and/or "loaned" sums of money implemented by the Interim Rules;
to six (6) "dummy" borrower corporations ("Borrower Corporations")
which, at the time of loan approval, had no financial capacity to justify (a) Unlawful refusal to allow the Petitioner from inspecting or otherwise
the loans. (sic) accessing the corporate records of the bank despite repeated demand in
writing, where she is a stockholder. (sic)
(c) For approving and accepting a dacion en pago, or payment of loans
with property instead of cash, resulting to a diminished future 10.3 Receivership and Creation of a Management Committee pursuant to:
cumulative interest income by the Bank and a decline in its liquidity
position. (sic) (a) Rule 59 of the 1997 Rules of Civil Procedure ("Rules");
(d) For knowingly giving "favorable treatment" to the Borrower (b) Section 5.2 of R.A. No. 8799;
Corporations in which some or most of them have interests, i.e.
interlocking directors/officers thereof, interlocking ownerships. (sic) (c) Rule 1, Section 1(a)(1) of the Interim Rules;
(e) For employing their respective offices and functions as the Bank’s (d) Rule 1, Section 1(a)(2) of the Interim Rules;
officers and directors, or omitting to perform their functions and
duties, with negligence, unfaithfulness or abuse of confidence of (e) Rule 7 of the Interim Rules;
fiduciary duty, misappropriated or misapplied or ratified by inaction
(f) Rule 9 of the Interim Rules; and
the misappropriation or misappropriations, of (sic) almost ₱1.6 Billion
Pesos constituting the Bank’s funds placed under their trust and (g) The General Banking Law of 2000 and the New Central Bank Act.
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On September 12, 2003, Arcenas, et al. filed their Answer raising, among Arcenas, et al. moved for reconsideration but, on January 18, 2005, the RTC
others, the trial court’s lack of jurisdiction to take cognizance of the case. denied the motion. This prompted Arcenas, et al. to file before the CA a
They also filed a Manifestation and Motion seeking the dismissal of the case Petition for Certiorari and Prohibition under Rule 65 of the Rules of Court
on the following grounds: (a) lack of jurisdiction over the subject matter; (b) with a prayer for the issuance of a writ of preliminary injunction and a
lack of jurisdiction over the persons of the defendants; (c) forum-shopping; temporary retraining order (TRO).
and (d) for being a nuisance/harassment suit. They then moved that the trial
court rule on their affirmative defenses, dismiss the intra-corporate case, and On February 9, 2005, the CA issued a 60-day TRO enjoining Judge Marella
set the case for preliminary hearing. from conducting further proceedings in the case.
In an Order dated October 18, 2004, the trial court denied the Manifestation On February 22, 2005, the RTC issued a Notice of Pre-trial setting the case
and Motion, ruling thus: for pre-trial on June 2 and 9, 2005. Arcenas, et al. filed a Manifestation and
Motion before the CA, reiterating their application for a writ of preliminary
The result of the procedure sought by defendants Arcenas, et al. (sic) is for injunction. Thus, on April 18, 2005, the CA issued the assailed Resolution,
the Court to conduct a preliminary hearing on the affirmative defenses which reads in part:
raised by them in their Answer. This [is] proscribed by the Interim Rules of
Procedure on Intracorporate (sic) Controversies because when a preliminary (C)onsidering that the Temporary Restraining Order issued by this Court on
hearing is conducted it is "as if a Motion to Dismiss was filed" (Rule 16, February 9, 2005 expired on April 10, 2005, it is necessary that a writ of
Section 6, 1997 Rules of Civil Procedure). A Motion to Dismiss is a preliminary injunction be issued in order not to render ineffectual whatever
prohibited pleading under the Interim Rules, for which reason, no favorable final resolution this Court may render in this case, after the petitioners shall
consideration can be given to the Manifestation and Motion of defendants, have posted a bond in the amount of FIVE HUNDRED THOUSAND
Arcenas, et al. (₱500,000.00) PESOS.
The Court finds no merit to the claim that the instant case is a nuisance or Dissatisfied, Koruga filed this Petition for Certiorari under Rule 65 of
harassment suit. the Rules of Court. Koruga alleged that the CA effectively gave due
course to Arcenas, et al.’s petition when it issued a writ of preliminary
Wherefore, the Court defers resolution of the affirmative defenses raised by injunction without factual or legal basis, either in the April 18, 2005
the defendants Arcenas, et al. Resolution itself or in the records of the case. She prayed that this
Court restrain the CA from implementing the writ of preliminary
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injunction and, after due proceedings, make the injunction against the On the other hand, respondents Dr. Conrado P. Banzon and Gen. Ramon
assailed CA Resolution permanent. Montaño also filed their Comment on Koruga’s Petition, raising
substantially the same arguments as Arcenas, et al.
In their Comment, Arcenas, et al. raised several procedural and substantive
issues. They alleged that the Verification and Certification against G.R. No. 169053
Forum-Shopping attached to the Petition was not executed in the
manner prescribed by Philippine law since, as admitted by Koruga’s G.R. No. 169053 is a Petition for Review on Certiorari under Rule 45 of
counsel himself, the same was only a facsimile. the Rules of Court, with prayer for the issuance of a TRO and a writ of
preliminary injunction filed by Arcenas, et al.
They also averred that Koruga had admitted in the Petition that she never
asked for reconsideration of the CA’s April 18, 2005 Resolution, contending In their Petition, Arcenas, et al. asked the Court to set aside the Decision
that the Petition did not raise pure questions of law as to constitute an dated July 20, 2005 of the CA in CA-G.R. SP No. 88422, which denied
exception to the requirement of filing a Motion for Reconsideration before a their petition, having found no grave abuse of discretion on the part of the
Petition for Certiorari is filed. Makati RTC. The CA said that the RTC Orders were interlocutory in
nature and, thus, may be assailed by certiorari or prohibition only
They, likewise, alleged that the Petition may have already been rendered when it is shown that the court acted without or in excess of jurisdiction
moot and academic by the July 20, 2005 CA Decision, which denied their or with grave abuse of discretion. It added that the Supreme Court
Petition, and held that the RTC did not commit grave abuse of discretion in frowns upon resort to remedial measures against interlocutory orders.
issuing the assailed orders, and thus ordered the RTC to proceed with the
trial of the case. Arcenas, et al. anchored their prayer on the following grounds: that, in their
Answer before the RTC, they had raised the issue of failure of the court to
Meanwhile, on March 13, 2006, this Court issued a Resolution granting the acquire jurisdiction over them due to improper service of summons; that the
prayer for a TRO and enjoining the Presiding Judge of Makati RTC, Branch Koruga action is a nuisance or harassment suit; that there is another case
138, from proceeding with the hearing of the case upon the filing by involving the same parties for the same cause pending before the Monetary
Arcenas, et al. of a ₱50,000.00 bond. Koruga filed a motion to lift the TRO, Board of the BSP, and this constituted forum-shopping; and that jurisdiction
which this Court denied on July 5, 2006. over the subject matter of the case is vested by law in the BSP.
Issue:
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I. THE COURT OF APPEALS, IN "FINDING NO GRAVE ABUSE OF Consul, the undersigned counsel shall immediately provide duplicate copies
DISCRETION COMMITTED BY PUBLIC RESPONDENT REGIONAL thereof to the Honorable Court.
TRIAL COURT OF MAKATI, BRANCH 138, IN ISSUING THE
ASSAILED ORDERS," FAILED TO CONSIDER AND MERELY Thus, in a Compliance filed with the Court on September 5, 2005,
GLOSSED OVER THE MORE TRANSCENDENT ISSUES OF THE petitioner submitted the original copy of the duly notarized and
LACK OF JURISDICTION ON THE PART OF SAID PUBLIC authenticated Verification and Certification Against Forum-Shopping
RESPONDENT OVER THE SUBJECT MATTER OF THE CASE she had executed. This Court noted and considered the Compliance
BEFORE IT, LITIS PENDENTIA AND FORUM SHOPPING, AND THE satisfactory in its Resolution dated November 16, 2005. There is,
CASE BELOW BEING A NUISANCE OR HARASSMENT SUIT, therefore, no need to further belabor this issue.
EITHER ONE AND ALL OF WHICH GOES/GO TO RENDER THE
ISSUANCE BY PUBLIC RESPONDENT OF THE ASSAILED ORDERS (2) We hold that the Petition in G.R. No. 168332 has become moot and
A GRAVE ABUSE OF DISCRETION. academic. The writ of preliminary injunction being questioned had
effectively been dissolved by the CA’s July 20, 2005 Decision. The
II. THE FINDING OF THE COURT OF APPEALS OF "NO GRAVE dispositive portion of the Decision reads in part:
ABUSE OF DISCRETION COMMITTED BY PUBLIC RESPONDENT
REGIONAL TRIAL COURT OF MAKATI, BRANCH 138, IN ISSUING The case is REMANDED to the court a quo for further proceedings and to
THE ASSAILED ORDERS," IS NOT IN ACCORD WITH LAW OR resolve with deliberate dispatch the intra-corporate controversies and
WITH THE APPLICABLE DECISIONS OF THIS HONORABLE determine whether there was actually a valid service of summons. If, after
COURT. hearing, such service is found to have been improper, then new summons
should be served forthwith.
Ruling:
Accordingly, there is no necessity to restrain the implementation of the writ
(1) In view of that fact that the Petitioner is currently in the United States, of preliminary injunction issued by the CA on April 18, 2005, since it no
undersigned counsel is attaching a facsimile copy of the Verification longer exists.
and Certification Against Forum-Shopping duly signed by the
Petitioner and notarized by Stephanie N. Goggin, a Notary Public for However, this Court finds that the CA erred in upholding the jurisdiction of,
the State of Washington. Upon arrival of the original copy of the and remanding the case to, the RTC.
Verification and Certification as certified by the Office of the Philippine
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The resolution of these petitions rests mainly on the determination of one otherwise, are protected. In this country, that task is delegated to the
fundamental issue: Which body has jurisdiction over the Koruga BSP, which pursuant to its Charter, is authorized to administer the
Complaint, the RTC or the BSP? monetary, banking, and credit system of the Philippines. It is further
authorized to take the necessary steps against any banking institution if
We hold that it is the BSP that has jurisdiction over the case. its continued operation would cause prejudice to its depositors,
creditors and the general public as well.
Koruga’s Complaint charged defendants with violation of Sections 31 to 34
of the Corporation Code, prohibiting self-dealing and conflict of interest of The law vests in the BSP the supervision over operations and activities of
directors and officers; invoked her right to inspect the corporation’s records banks. The New Central Bank Act provides:
under Sections 74 and 75 of the Corporation Code; and prayed for
Receivership and Creation of a Management Committee, pursuant to Rule Section 25. Supervision and Examination. - The Bangko Sentral shall
59 of the Rules of Civil Procedure, the Securities Regulation Code, the have supervision over, and conduct periodic or special examinations of,
Interim Rules of Procedure Governing Intra-Corporate Controversies, the banking institutions and quasi-banks, including their subsidiaries and
General Banking Law of 2000, and the New Central Bank Act. She accused affiliates engaged in allied activities.
the directors and officers of Banco Filipino of engaging in unsafe,
unsound, and fraudulent banking practices, more particularly, acts that Specifically, the BSP’s supervisory and regulatory powers include:
violate the prohibition on self-dealing.
4.1 The issuance of rules of conduct or the establishment of standards of
It is clear that the acts complained of pertain to the conduct of Banco operation for uniform application to all institutions or functions covered,
Filipino’s banking business. A bank, as defined in the General Banking taking into consideration the distinctive character of the operations of
Law, refers to an entity engaged in the lending of funds obtained in the institutions and the substantive similarities of specific functions to which
form of deposits. The banking business is properly subject to such rules, modes or standards are to be applied;
reasonable regulation under the police power of the state because of its
nature and relation to the fiscal affairs of the people and the revenues 4.2 The conduct of examination to determine compliance with laws and
of the state. Banks are affected with public interest because they receive regulations if the circumstances so warrant as determined by the
funds from the general public in the form of deposits. It is the Monetary Board;
Government’s responsibility to see to it that the financial interests of
those who deal with banks and banking institutions, as depositors or
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4.3 Overseeing to ascertain that laws and Regulations are complied and other financial institutions, including the dissolution and liquidation
with; thereof. As between a general and special law, the latter shall prevail –
generalia specialibus non derogant.
4.4 Regular investigation which shall not be oftener than once a year
from the last date of examination to determine whether an institution is Consequently, it is not the Interim Rules of Procedure on Intra-Corporate
conducting its business on a safe or sound basis: Provided, That the Controversies, or Rule 59 of the Rules of Civil Procedure on Receivership,
deficiencies/irregularities found by or discovered by an audit shall be that would apply to this case. Instead, Sections 29 and 30 of the New
immediately addressed; Central Bank Act should be followed, viz.:
4.5 Inquiring into the solvency and liquidity of the institution; or Section 29. Appointment of Conservator. - Whenever, on the basis of a
report submitted by the appropriate supervising or examining
4.6 Enforcing prompt corrective action. department, the Monetary Board finds that a bank or a quasi-bank is
in a state of continuing inability or unwillingness to maintain a
It is well-settled in both law and jurisprudence that the Central Monetary condition of liquidity deemed adequate to protect the interest of
Authority, through the Monetary Board, is vested with exclusive depositors and creditors, the Monetary Board may appoint a
authority to assess, evaluate and determine the condition of any bank, conservator with such powers as the Monetary Board shall deem
and finding such condition to be one of insolvency, or that its necessary to take charge of the assets, liabilities, and the management
continuance in business would involve a probable loss to its depositors thereof, reorganize the management, collect all monies and debts due
or creditors, forbid bank or non-bank financial institution to do said institution, and exercise all powers necessary to restore its viability.
business in the Philippines; and shall designate an official of the BSP or The conservator shall report and be responsible to the Monetary Board
other competent person as receiver to immediately take charge of its and shall have the power to overrule or revoke the actions of the
assets and liabilities. previous management and board of directors of the bank or quasi-
bank.
Koruga’s invocation of the provisions of the Corporation Code is misplaced.
In an earlier case with similar antecedents, we ruled that: The Monetary Board shall terminate the conservatorship when it is
satisfied that the institution can continue to operate on its own and the
The Corporation Code, however, is a general law applying to all types of conservatorship is no longer necessary. The conservatorship shall
corporations, while the New Central Bank Act regulates specifically banks likewise be terminated should the Monetary Board, on the basis of the
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report of the conservator or of its own findings, determine that the receivership and, upon an affirmative finding, it also has authority to
continuance in business of the institution would involve probable loss to its appoint a receiver. This is further affirmed by the fact that the law
depositors or creditors, in which case the provisions of Section 30 shall allows the Monetary Board to take action summarily and without need
apply. for prior hearing.
The actions of the Monetary Board taken under this section or under And, as a clincher, the law explicitly provides that "actions of the
Section 29 of this Act shall be final and executory, and may not be Monetary Board taken under this section or under Section 29 of this
restrained or set aside by the court except on petition for certiorari on Act shall be final and executory, and may not be restrained or set aside
the ground that the action taken was in excess of jurisdiction or with by the court except on a petition for certiorari on the ground that the
such grave abuse of discretion as to amount to lack or excess of action taken was in excess of jurisdiction or with such grave abuse of
jurisdiction. The petition for certiorari may only be filed by the discretion as to amount to lack or excess of jurisdiction."
stockholders of record representing the majority of the capital stock
within ten (10) days from receipt by the board of directors of the From the foregoing disquisition, there is no doubt that the RTC has no
institution of the order directing receivership, liquidation or jurisdiction to hear and decide a suit that seeks to place Banco Filipino
conservatorship. under receivership.
The designation of a conservator under Section 29 of this Act or the

appointment of a receiver under this section shall be vested exclusively
4. BSP Monetary Board v. Hon. Antonio-Valenzuela, G.R. No. 184778,
with the Monetary Board. Furthermore, the designation of a
2 October 2009
conservator is not a precondition to the designation of a receiver.
Facts:
On the strength of these provisions, it is the Monetary Board that exercises
exclusive jurisdiction over proceedings for receivership of banks. In September of 2007, the Supervision and Examination Department (SED)
of the Bangko Sentral ng Pilipinas (BSP) conducted examinations of the
Crystal clear in Section 30 is the provision that says the appointment of a books of the following banks: Rural Bank of Parañaque, Inc. (RBPI), Rural
receiver under this section shall be vested exclusively with the Bank of San Jose (Batangas), Inc., Rural Bank of Carmen (Cebu), Inc.,
Monetary Board. The term "exclusively" connotes that only the Monetary Pilipino Rural Bank, Inc., Philippine Countryside Rural Bank, Inc., Rural
Board can resolve the issue of whether a bank is to be placed under Bank of Calatagan (Batangas), Inc. (now Dynamic Rural Bank), Rural Bank
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of Darbci, Inc., Rural Bank of Kananga (Leyte), Inc. (now First Interstate Antonio, and Nelly F. Villafuerte. RBPI prayed that Fonacier, her
Rural Bank), Rural Bank de Bisayas Minglanilla (now Bank of East Asia), subordinates, agents, or any other person acting in her behalf be
and San Pablo City Development Bank, Inc. enjoined from submitting the ROE or any similar report to the
Monetary Board (MB), or if the ROE had already been submitted, the
After the examinations, exit conferences were held with the officers or MB be enjoined from acting on the basis of said ROE, on the allegation
representatives of the banks wherein the SED examiners provided them with that the failure to furnish the bank with a copy of the ROE violated its
copies of Lists of Findings/Exceptions containing the deficiencies right to due process.
discovered during the examinations. These banks were then required to
comment and to undertake the remedial measures stated in these lists within The Rural Bank of San Jose (Batangas), Inc., Rural Bank of Carmen (Cebu),
30 days from their receipt of the lists, which remedial measures included the Inc., Pilipino Rural Bank, Inc., Philippine Countryside Rural Bank, Inc.,
infusion of additional capital. Though the banks claimed that they made the Rural Bank of Calatagan (Batangas), Inc., Rural Bank of Darbci, Inc., Rural
additional capital infusions, petitioner Chuchi Fonacier, officer-in-charge of Bank of Kananga (Leyte), Inc., and Rural Bank de Bisayas Minglanilla
the SED, sent separate letters to the Board of Directors of each bank, followed suit, filing complaints with the RTC substantially similar to that of
informing them that the SED found that the banks failed to carry out the RBPI, including the reliefs prayed for, which were raffled to different
required remedial measures. In response, the banks requested that they be branches and docketed as Civil Cases Nos. 08-119244, 08-119245, 08-
given time to obtain BSP approval to amend their Articles of Incorporation, 119246, 08-119247, 08-119248, 08-119249, 08-119250, and 08-119251,
that they have an opportunity to seek investors. They requested as well that respectively.
the basis for the capital infusion figures be disclosed, and noted that none of
them had received the Report of Examination (ROE) which finalizes the On May 13, 2008, the RTC denied the prayer for a TRO of Pilipino
audit findings. They also requested meetings with the BSP audit teams to Rural Bank, Inc. The bank filed a motion for reconsideration the next
reconcile audit figures. In response, Fonacier reiterated the banks’ failure to day.
comply with the directive for additional capital infusions.
On May 14, 2008, Fonacier and the BSP filed their opposition to the
On May 12, 2008, the RBPI filed a complaint for nullification of the BSP application for a TRO and writ of preliminary injunction in Civil Case No.
ROE with application for a TRO and writ of preliminary injunction 08-119243 with the RTC. Respondent Judge Nina Antonio-Valenzuela of
before the RTC docketed as Civil Case No. 08-119243 against Fonacier, Branch 28 granted RBPI’s prayer for the issuance of a TRO.
the BSP, Amado M. Tetangco, Jr., Romulo L. Neri, Vicente B.
Valdepenas, Jr., Raul A. Boncan, Juanita D. Amatong, Alfredo C.
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The other banks separately filed motions for consolidation of their cases in May 29, 2008, a hearing was conducted on the application for a TRO and
Branch 28, which motions were granted. Judge Valenzuela set the complaint for a writ of preliminary injunction of San Pablo City Development Bank,
of Rural Bank of San Jose (Batangas), Inc. for hearing on May 15, 2008. Inc.
Petitioners assailed the validity of the consolidation of the nine cases before
the RTC, alleging that the court had already prejudged the case by the Issue:
earlier issuance of a TRO in Civil Case No. 08-119243, and moved for the
inhibition of respondent judge. Petitioners filed a motion for reconsideration Whether the Honorable Court of Appeals gravely erred in not finding
regarding the consolidation of the subject cases. that the injunction issued by the Regional Trial Court violated Section
25 of the New Central Bank Act and effectively handcuffed the Bangko
On May 16, 2008, San Pablo City Development Bank, Inc. filed a similar Sentral from discharging its functions to the great and irreparable
complaint against the same defendants with the RTC, and this was docketed damahe of the coutry’s banking system.
as Civil Case No. 08-119273 that was later on consolidated with Civil Case
No. 08-119243. Petitioners filed an Urgent Motion to Lift/Dissolve the TRO Ruling:
and an Opposition to the earlier motion for reconsideration of Pilipino Rural
Bank, Inc. The petition is meritorious.
On May 19, 2008, Judge Valenzuela issued an Order granting the prayer for The requisites for preliminary injunctive relief are: (a) the invasion of
the issuance of TROs for the other seven cases consolidated with Civil Case right sought to be protected is material and substantial; (b) the right of
No. 08-119243. On May 21, 2008, Judge Valenzuela issued an Order the complainant is clear and unmistakable; and (c) there is an urgent
denying petitioners’ motion for reconsideration regarding the consolidation and paramount necessity for the writ to prevent serious damage.
of cases in Branch 28. On May 22, 2008, Judge Valenzuela granted the
As such, a writ of preliminary injunction may be issued only upon clear
urgent motion for reconsideration of Pilipino Rural Bank, Inc. and issued a
showing of an actual existing right to be protected during the pendency
TRO similar to the ones earlier issued.
of the principal action. The twin requirements of a valid injunction are the
On May 26, 2008, petitioners filed a Motion to Dismiss against all the existence of a right and its actual or threatened violations. Thus, to be
complaints (except that of the San Pablo City Development Bank, Inc.), on entitled to an injunctive writ, the right to be protected and the violation
the grounds that the complaints stated no cause of action and that a against that right must be shown.
condition precedent for filing the cases had not been complied with. On
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These requirements are absent in the present case. because they are not furnished with copies of the ROEs. Respondent
banks were held by the CA to be entitled to copies of the ROEs prior to or
In granting the writs of preliminary injunction, the trial court held that simultaneously with their submission to the MB, on the principles of
the submission of the ROEs to the MB before the respondent banks fairness and transparency. Further, the CA held that if the contents of the
would violate the right to due process of said banks. ROEs are essentially the same as those of the lists of findings/exceptions
provided to said banks, there is no reason not to give copies of the ROEs to
This is erroneous. the banks. This is a flawed conclusion, since if the banks are already aware
of the contents of the ROEs, they cannot say that fairness and transparency
The respondent banks have failed to show that they are entitled to are not present. If sanctions are to be imposed upon the respondent banks,
copies of the ROEs. They can point to no provision of law, no section in they are already well aware of the reasons for the sanctions, having been
the procedures of the BSP that shows that the BSP is required to give informed via the lists of findings/exceptions, demolishing that particular
them copies of the ROEs. Sec. 28 of RA 7653, or the New Central Bank argument. The ROEs would then be superfluities to the respondent
Act, which governs examinations of banking institutions, provides that banks, and should not be the basis for a writ of preliminary injunction.
the ROE shall be submitted to the MB; the bank examined is not Also, the reliance of the RTC on Banco Filipino v. Monetary Board is
mentioned as a recipient of the ROE. misplaced. The petitioner in that case was held to be entitled to annexes of
the Supervision and Examination Sector’s reports, as it already had a copy
The respondent banks cannot claim a violation of their right to due
of the reports themselves. It was not the subject of the case whether or not
process if they are not provided with copies of the ROEs. The same
the petitioner was entitled to a copy of the reports. And the ruling was made
ROEs are based on the lists of findings/exceptions containing the
after the petitioner bank was ordered closed, and it was allowed to be
deficiencies found by the SED examiners when they examined the books
supplied with annexes of the reports in order to better prepare its defense. In
of the respondent banks. As found by the RTC, these lists of
this instance, at the time the respondent banks requested copies of the
findings/exceptions were furnished to the officers or representatives of the
ROEs, no action had yet been taken by the MB with regard to imposing
respondent banks, and the respondent banks were required to comment and
sanctions upon said banks.
to undertake remedial measures stated in said lists. Despite these
instructions, respondent banks failed to comply with the SED’s directive. The issuance by the RTC of writs of preliminary injunction is an
unwarranted interference with the powers of the MB. Secs. 29 and 30 of RA
Respondent banks are already aware of what is required of them by the
7653 refer to the appointment of a conservator or a receiver for a bank,
BSP, and cannot claim violation of their right to due process simply
which is a power of the MB for which they need the ROEs done by the
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supervising or examining department. The writs of preliminary injunction The trial court required the MB to respect the respondent banks’ right to due
issued by the trial court hinder the MB from fulfilling its function process by allowing the respondent banks to view the ROEs and act upon
under the law. The actions of the MB under Secs. 29 and 30 of RA 7653 them to forestall any sanctions the MB might impose. Such procedure has
"may not be restrained or set aside by the court except on petition no basis in law and does in fact violate the "close now, hear later" doctrine.
for certiorari on the ground that the action taken was in excess of We held in Rural Bank of San Miguel, Inc. v. Monetary Board, Bangko
jurisdiction or with such grave abuse of discretion as to amount to lack or Sentral ng Pilipinas:
excess of jurisdiction." The writs of preliminary injunction order are
precisely what cannot be done under the law by preventing the MB from It is well-settled that the closure of a bank may be considered as an
taking action under either Sec. 29 or Sec. 30 of RA 7653. exercise of police power. The action of the MB on this matter is final
and executory. Such exercise may nonetheless be subject to judicial
As to the third requirement, the respondent banks have shown no necessity inquiry and can be set aside if found to be in excess of jurisdiction or
for the writ of preliminary injunction to prevent serious damage. The serious with such grave abuse of discretion as to amount to lack or excess of
damage contemplated by the trial court was the possibility of the imposition jurisdiction.
of sanctions upon respondent banks, even the sanction of closure. Under the
law, the sanction of closure could be imposed upon a bank by the BSP The respondent banks cannot—through seeking a writ of preliminary
even without notice and hearing. The apparent lack of procedural due injunction by appealing to lack of due process, in a roundabout
process would not result in the invalidity of action by the MB. This was manner— prevent their closure by the MB. Their remedy, as stated, is
the ruling in Central Bank of the Philippines v. Court of Appeals. a subsequent one, which will determine whether the closure of the bank
was attended by grave abuse of discretion. Judicial review enters the
This "close now, hear later" scheme is grounded on practical and legal picture only after the MB has taken action; it cannot prevent such
considerations to prevent unwarranted dissipation of the bank’s assets action by the MB. The threat of the imposition of sanctions, even that of
and as a valid exercise of police power to protect the depositors, closure, does not violate their right to due process, and cannot be the
creditors, stockholders, and the general public. The writ of preliminary basis for a writ of preliminary injunction.
injunction cannot, thus, prevent the MB from taking action, by
preventing the submission of the ROEs and worse, by preventing the The "close now, hear later" doctrine has already been justified as a
MB from acting on such ROEs. measure for the protection of the public interest. Swift action is called
for on the part of the BSP when it finds that a bank is in dire straits.
Unless adequate and determined efforts are taken by the government against
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distressed and mismanaged banks, public faith in the banking system is sound discretion of the lower court, this Court may and should intervene in
certain to deteriorate to the prejudice of the national economy itself, not to a clear case of abuse.
mention the losses suffered by the bank depositors, creditors, and
stockholders, who all deserve the protection of the government.
5. Central Bank of the Philippines v. Court of Appeals, G.R. No. 88353,
The respondent banks have failed to show their entitlement to the writ of May 8, 1992
preliminary injunction. It must be emphasized that an application for
injunctive relief is construed strictly against the pleader. The Facts:
respondent banks cannot rely on a simple appeal to procedural due Petitioner Central Bank and conservator claims that during the regular
process to prove entitlement. The requirements for the issuance of the examination of herein respondent Producers Bank of the Philippines (PBP)
writ have not been proved. No invasion of the rights of respondent it stumbled upon some highly questionable loans which the latter
banks has been shown, nor is their right to copies of the ROEs clear extended to PBP owners themselves without collateral. At the height of
and unmistakable. There is also no necessity for the writ to prevent serious controversy of discovering these anomalous loans, it triggered a bank-
damage. Indeed the issuance of the writ of preliminary injunction tramples run in PBP which resulted in continuous over-drawings on the bank’s
upon the powers of the MB and prevents it from fulfilling its functions. demand deposit account with the CB. The over-drawings’ continued
There is no right that the writ of preliminary injunction would protect in this increase prompted the MB to place PBP under conservatorship. PBP
particular case. In the absence of a clear legal right, the issuance of the failing to submit a rehabilitation plan, the MB proposed its own which
injunctive writ constitutes grave abuse of discretion. In the absence of proof it considers as viable but PBP made no response. A few days later, PBP
of a legal right and the injury sustained by the plaintiff, an order for the filed a complaint before the RTC contending that its placement under
issuance of a writ of preliminary injunction will be nullified. conservatorship was unwarranted, ill-motivated, illegal, utterly unnecessary
and unjustified and that the appointed conservators committed bank frauds
Courts are hereby reminded to take greater care in issuing injunctive relief and abuses. RTC ruled all the way in favor of PBP. Hence petitioners filed
to litigants, that it would not violate any law. The grant of a preliminary separate petitions which were then consolidated before the Court.
injunction in a case rests on the sound discretion of the court with the caveat
that it should be made with great caution. Thus, the issuance of the writ of Issue:
preliminary injunction must have basis in and be in accordance with law.
All told, while the grant or denial of an injunction generally rests on the Whether or not PBP was deprived of due process before being placed
under conservatorship.
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Ruling: 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
No. The fact that PBP is grossly overdrawn on its reserve account with appropriate measures to protect the interest of the bank’s depositors as
the CB (up to P1.233 billion as of 13 February 1990) is not disputed by well as of the general public.
PBP. This enormous overdraft evidences the patent inability of the
bank’s management to keep PBP liquid. This fact alone sufficiently There is nothing objectionable to the actions of the MB. We, therefore, find
justifies the remedial measures taken by the Monetary Board. to be completely without legal or evidentiary basis the contention that the
impugned resolutions are arbitrary, illegal and made in bad faith.
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 6. Spouses Lipana v. Development Bank of the Philippines, G.R. No.
gave the management of PBP ample opportunity to submit a viable 73884, September 24, 1987
rehabilitation plan for the bank. MB Resolution Nos. 751 merely reiterated Facts:
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 Petitioners opened and maintained both time and savings deposits with
bank for CB approval. In this Resolution, the MB gave PBP’s stockholders herein respondent bank. Upon maturity of some of their time deposit
one (1) week from notice within which to signify their acceptance or certificates, petitioners were not able to cash them but instead were
rejection of the proposed rehabilitation plan. issued a manager’s check which was dishonored upon presentment.
Demands for the payment of deposits having failed, petitioners moved
The foregoing resolutions refer to a recommended rehabilitation plan. What for the issuance of a writ of preliminary attachment for collection of a
was conveyed to PBP was a mere proposal. There was nothing in the sum of money. Respondent Judge ordered the issuance of a writ and later,
resolutions to indicate that the plan was mandatory. On the contrary, PBP rendered judgment in favor of petitioners. Meanwhile, the Monetary Board
was given a specific period within which to accept or reject the plan. finding that respondent bank was insolvent, decided to place it under
And, as petitioners correctly pointed out, the plan was not self- receivership. Petitioners then moved for the execution which was granted,
implementing. The warning given by the MB that should said proposal but was subsequently stayed upon reconsideration. Petitioners moved to lift
be rejected, the CB “will take appropriate alternative actions on the the stay but were denied. Hence, the instant petition.
matter,” does not make the proposed rehabilitation plan compulsory.
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Issue: EuroCredit Community Bank (ECBI). Through a series of examinations

conducted by the BSP, the findings bore that ECBI was illiquid,
Whether or not the stay of execution of judgment against a bank placed insolvent, and was performing transactions which are considered
under receivership is valid. unsafe and unsound banking practices. Consequently ECBI was placed
under receivership. Petitioner contends that the implementation of the
Ruling: questioned resolution was tainted with arbitrariness and bad faith, stressing
that ECBI was placed under receivership without due and prior hearing in
Yes. In the instant case, the stay of the execution of judgment is warranted violation of his and the bank’s right to due process.
by the fact that respondent bank was placed under receivership. To execute
the judgment would unduly deplete the assets of respondent bank to the Issue:
obvious prejudice of other depositors and creditors, since, as aptly stated
in Central Bank of the Philippines vs. Morfe, after the Monetary Board Whether or not ECBI was entitled to due and prior hearing before its
has declared that a bank is insolvent and has ordered it to cease being placed under receivership.
operations, the Board becomes the trustee of its assets for the equal
benefit of all the creditors, including depositors. The assets of the Ruling:
insolvent banking institution are held in trust for the equal benefit of all
creditors, and after its insolvency, one cannot obtain an advantage or a Yes. In the case of Bangko Sentral Ng Pilipinas Monetary Board v. Hon.
preference over another by an attachment, execution or otherwise. Antonio-Valenzuela, the Court reiterated the doctrine of “close now, hear
later,” stating that it was justified as a measure for the protection of the
public interest. Thus:
7. Vivas v. Monetary Board, G.R. No. 191424, August 7, 2013 The “close now, hear later” doctrine has already been justified as a
measure for the protection of the public interest. Swift action is called
Facts: for on the part of the BSP when it finds that a bank is in dire straits.
Unless adequate and determined efforts are taken by the government
Petitioner Vivas and his principals acquired the controlling interest in Rural against distressed and mismanaged banks, public faith in the banking
Bank Faire, a bank whose corporate life has already expired. BSP system is certain to deteriorate to the prejudice of the national economy
authorized extending the banks’ corporate life and was later renamed to itself, not to mention the losses suffered by the bank depositors,
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creditors, and stockholders, who all deserve the protection of the jurisdiction or with such grave abuse of discretion as to amount to lack
government. or excess of jurisdiction.
In Rural Bank of Buhi, Inc. v. Court of Appeals, the Court also wrote that Facts:
x x x due process does not necessarily require a prior hearing; a hearing or Monetary Board (MB), the governing board of respondent Bangko
an opportunity to be heard may be subsequent to the closure. One can just Sentral ng Pilipinas (BSP), issued Resolution No. 105 prohibiting
imagine the dire consequences of a prior hearing: bank runs would be the RBSM from doing business in the Philippines, placing it under
order of the day, resulting in panic and hysteria. In the process, fortunes receivership and designating respondent Philippine Deposit Insurance
may be wiped out and disillusionment will run the gamut of the entire Corporation (PDIC) as receiver on the basis of the comptrollership
banking community. reports of the banks supervising head. To assist its impaired liquidity and
operations, the RBSM was granted emergency loans on different occasions
The doctrine is founded on practical and legal considerations to obviate in the aggregate amount of P375. As early as November 18, 1998, Land
unwarranted dissipation of the bank’s assets and as a valid exercise of Bank of the Philippines (LBP) advised RBSM that it will terminate the
police power to protect the depositors, creditors, stockholders, and the clearing of RBSM’s checks in view of the latter’s frequent clearing losses
general public. Swift, adequate and determined actions must be taken and continuing failure to replenish its Special Clearing Demand Deposit
against financially distressed and mismanaged banks by government with LBP. The BSP interceded with LBP not to terminate the clearing
agencies lest the public faith in the banking system deteriorate to the arrangement of RBSM to protect the interests of RBSM’s depositors and
prejudice of the national economy. creditors. On the basis of reports prepared by PDIC stating that RBSM
could not resume business with sufficient assurance of protecting the
interest of its depositors, creditors and the general public, the MB passed
8. Rural Bank of San Miguel v. Monetary Board, G.R. No. 150886,
Resolution No. 966 directing PDIC to proceed with the liquidation of
February 16, 2007
RBSM under Section 30 of RA 7653.
Doctrine: It is well-settled that the closure of a bank may be considered
as an exercise of police power. The action of the MB on this matter is Issue:
final and executory. Such exercise may nonetheless be subject to
judicial inquiry and can be set aside if found to be in excess of Whether or not the Monetary Board can unilaterally close a bank
without prior hearing.
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Excerpt: An investment company refers to any issuer, who is or holds

Ruling: itself out as being engaged or proposes to engage primarily in the
business of investing, reinvesting or trading in securities. As defined in
Yes. It is well-settled that the closure of a bank may be considered as an Revised Securities Act, securities “shall include commercial papers
exercise of police power. The action of the MB on this matter is final and evidencing indebtedness of any person, financial or non-financial entity,
executory. Such exercise may nonetheless be subject to judicial inquiry and irrespective of maturity, issued, endorsed, sold, transferred or in any manner
can be set aside if found to be in excess of jurisdiction or with such grave conveyed to another with or without recourse, such as promissory
abuse of discretion as to amount to lack or excess of jurisdiction. notes. Clearly, the transaction between petitioners and respondent was
one involving not a loan but purchase of receivables at a discount, well
This case essentially boils down to one core issue: whether Section 30 of within the purview of “investing, reinvesting or trading in securities”
RA 7653 (also known as the New Central Bank Act) and applicable which an investment company, like ASIA PACIFIC, is authorized to
jurisprudence require a current and complete examination of the bank before perform and does not constitute a violation of the General Banking Act.
it can be closed and placed under receivership. The actions of the Monetary
Board taken under this section or under Section 29 of this Act shall be final Facts:
and executory, and may not be restrained or set aside by the court except on
petition for certiorari on the ground that the action taken was in excess of Teodoro Bañas executed a Promissory Note in favor of C. G. Dizon
jurisdiction or with such grave abuse of discretion as to amount to lack or Construction whereby for value received he promised to pay to the order of
excess of jurisdiction. The petition for certiorari may only be filed by the C. G. Dizon Construction the sum of P390,000.00 in installments of
stockholders of record representing the majority of the capital stock “P32,500.00 every 25th day of the month starting from September 25, 1980
within ten (10) days from receipt by the board of directors of the up to August 25, 1981.”Later, C. G. Dizon Construction endorsed with
institution of the order directing receivership, liquidation or recourse the Promissory Note to ASIA PACIFIC, and to secure payment
conservatorship. thereof, C. G. Dizon Construction, through its corporate officers, Cenen
Dizon, President, and Juliette B. Dizon, Vice President and Treasurer,
executed a Deed of Chattel Mortgage covering three heavy equipment units
GENERAL BANKING LAW OF 2000 of Caterpillar Bulldozer Crawler Tractors Moreover, Cenen Dizon executed
a Continuing Undertaking wherein he bound himself to pay the obligation
1. Teodoro Banas v. Asia Pacific Finance Corp, G.R. No. 128703, jointly and severally with C. G. Dizon Construction.
10/18/2000
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In compliance thereof, C. G. Dizon Construction made three installment Whether the disputed transaction between ASIA PACIFIC was
payments to ASIA PACIFIC for a total of P130,000.00. Thereafter, engaged in banking activities.
however, C. G. Dizon Construction defaulted in the payment of the
remaining installments, prompting ASIA PACIFIC to send a Statement Ruling:
of Account to Cenen Dizon for the unpaid balance of P267,737.50
inclusive of interests and charges, and P66,909.38 representing An investment company refers to any issuer which is or holds itself out as
attorney’s fees. As the demand was unheeded, ASIA PACIFIC filed a being engaged or proposes to engage primarily in the business of investing,
complaint for a sum of money with prayer for a writ of replevin against reinvesting or trading in securities. As defined in Revised Securities Act,
Teodoro Bañas, C. G. Dizon Construction and Cenen Dizon. The trial court securities “shall include commercial papers evidencing indebtedness of
issued a writ of replevin against defendant C. G. Dizon Construction for the any person, financial or non-financial entity, irrespective of maturity,
surrender of the bulldozer crawler tractors. Of the three bulldozer crawler issued, endorsed, sold, transferred or in any manner conveyed to
tractors, only two were actually turned over by defendants which units were another with or without recourse, such as promissory notes” Clearly, the
subsequently foreclosed by ASIA PACIFIC to satisfy the obligation. The transaction between petitioners and respondent was one involving not a
two bulldozers were sold both to ASIA PACIFIC as the highest bidder. loan but purchase of receivables at a discount, well within the purview
of “investing, reinvesting or trading in securities” which an investment
Petitioners insist that ASIA PACIFIC was organized as an investment company, like ASIA PACIFIC, is authorized to perform and does not
house which could not engage in the lending of funds obtained from the constitute a violation of the General Banking Act.
public through receipt of deposits. The disputed Promissory Note, Deed
of Chattel Mortgage and Continuing Undertaking were not intended to be What is prohibited by law is for investment companies to lend funds
valid and binding on the parties as they were merely devices to conceal their obtained from the public through receipts of deposit, which is a
real intention which was to enter into a contract of loan in violation of function of banking institutions. But here, the funds supposedly “lent”
banking laws. The Regional Trial Court ruled in favor of ASIA PACIFIC to petitioners have not been shown to have been obtained from the
holding the defendants jointly and severally liable for the unpaid balance of public by way of deposits, hence, the inapplicability of banking laws.
the obligation under the Promissory Note. The Court of Appeals affirmed Wherefore, the assailed decision of the Court of Appeals was affirmed.
the decision of the trial court.
Issue:
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2. BDO-EPCI Inc. v. JAPRL Development Corp, G.R. NO. 179901, (1) Whether or not jurisdiction over the defendants was acquired
4/14/08
(2) Whether or not JAPRL are liable to pay their obligations
Doctrine: Under Sec. 40 of the General Banking Law, should such
statements (financial) prove to be false or incorrect in any material Ruling:
detail, the bank may terminate any loan or credit accommodation
granted on the basis of said statements and shall have the right to (1) When respondents moved for the suspension of proceedings of the
demand immediate repayment or liquidation of the obligation. civil case before the Makati RTC, on the basis of the stay order of the
Calamba RTC, they waived whatever defect there was in the service of
Facts: summons and were deemed to have submitted themselves voluntarily to
the jurisdiction of the Makati RTC.
Banco de Oro extended financial facilities to JAPRL Development
Corporation (JAPRL) amounting to P230,000,000 with co-respondents (2) Considering the amount of petitioner’s exposure in JAPRL, justice and
Rapid Forming Corporation (RFC) and Jose Arollado acting as sureties. fairness dictate that the Makati RTC hear whether or not respondents indeed
JAPRL defaulted in the payment of four trust receipts. Petitioner bank committed fraud in securing the credit accomodation. In this event,
subsequently found out that JAPRL altered and falsified its financial petitioner can use the finding of fraud to move for the dismissal of the
statements to project itself as a viable investment. Because the demand rehabilitation case in the Calamba RTC. Moreover, under Sec. 40 of the
for payment was unheeded, petitioner bank sued JAPRL and the sureties for General Banking Law, should such statements (financial) prove to be
payment of the balance due on the trust receipts in RTC Makati. false or incorrect in any material detail, the bank may terminate any
Respondents then hastily filed a petition for rehabilitation and stay order in loan or credit accommodation granted on the basis of said statements
Calamba of RTC which were granted. As a result, the complaint was and shall have the right to demand immediate repayment or liquidation
dismissed with respect to JAPRL and RFC. Arollado remained as defendant. of the obligation. Hence, JARPL is liable to pay for their obligations.
Respondents filed a petition for certiorari before the CA, contending that the
trial court did not acquire jurisdiction over them as the summons were
served on a mere administrative assistant. CA granted the petition and 3. Spouses Panlilio v. Citibank NA, G.R. No. 156335, 11/28/2007
dismissed petitioner’s motion for reconsideration. Facts:
Issues:
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On October 10, 1997, petitioner Amalia Panlilio (Amalia) visited visit, Amalia instructed Lee on what to do with the PhP3 million. Later,
respondent's Makati City office and deposited one million pesos (PhP1 she learned that out of the said amount, PhP2,134,635.87 was placed by
million) in the bank's Citihi account, a fixed-term savings account with Citibank in a Long-Term Commercial Paper (LTCP), a debt
a higher-than-average interest. On the same day, Amalia also opened a instrument that paid a high interest, issued by the
current or checking account with respondent, to which interest corporation Camella and Palmera Homes (C&P Homes). The rest of
earnings of the Citihi account were to be credited. Respondent assigned the money was placed in two PRPN accounts, in trust for each
one of its employees, Jinky Suzara Lee (Lee), to personally transact of Amalia's two children.
with Amalia and to handle the accounts.
Allegations differ between petitioners and respondent as to whether Amalia
Amalia opened the accounts as ITF or in trust for accounts, as they instructed Lee to place the money in the LTCP of C&P Homes.
were intended to benefit her minor children, Alejandro King Aguilar
and Fe Emanuelle C. Panlilio, in case she would meet an untimely An LTCP is an evidence of indebtedness, with a maturity period of
death. To open these accounts, Amalia signed two documents: a more than 365 days, issued by a corporation to any person or entity. It
Relationship Opening Form (ROF) and an Investor Profiling and Suitability is in effect a loan obtained by a corporation (as borrower) from the
Questionnaire (Questionnaire). investing public (as lender) and is one of many instruments that
investment banks can legally buy on behalf of their clients, upon the
Amalia's initial intention was to invest the money in a Citibank product latter's express instructions, for investment purposes. LTCPs' attraction
called the Peso Repriceable Promissory Note (PRPN), a product that had a is that they usually have higher yields than most investment instruments. In
higher interest. However, as the PRPN was not available that the case of the LTCP issued by C&P Homes, the gross interest rate was
day, Amaliaput her money in the Citihi savings account. 16.25% per annum at the time Amalia made her investment.
More than a month later, or on November 28, 1997, Amalia phoned On November 28, 1997, the day she made the PhP3million
Citibank saying she wanted to place an investment, this time in the amount investment, Amalia signed the following documents: a Directional
of three million pesos (PhP3 million). Again, she spoke with Lee, the bank Investment Management Agreement (DIMA), Term Investment Application
employee, who introduced her to Citibank's various investment (TIA), and Directional Letter/Specific Instructions. Key features of the
offerings. After the phone conversation, apparently decided on where to DIMA and the Directional Letter are provisions that essentially clear
invest the money, Amalia went to Citibank bringing a PCIBank check in the Citibank of any obligation to guarantee the principal and interest of the
amount of three million pesos (PhP3 million). During the investment, absent fraud or negligence on the latter's part. The provisions
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likewise state that all risks are to be assumed by the investor On August 18, 1998, Amalia, through counsel, sent her first formal, written
(petitioner). demand to respondent for a withdrawal of her investment as soon as
possible. The same was followed by another letter dated September 7, 1998,
As to the amount invested, only PhP2,134,635.87 out of the PhP3 million which reiterated the same demands. In answer to the letters, respondent
brought by Amalia was placed in the LTCP since, according to Lee, this noted that the investment had a 2003 maturity, was not a deposit, and
was the only amount of LTCP then available. According to Lee, the balance thus, its return to the investor was not guaranteed by respondent;
of the PhP3 million was placed in two PRPN accounts, each one in trust however, it added that the LTCP may be sold prior to maturity and had
for Amalia's two children, per her instructions. in fact been put up for sale, but such sale was subject to the availability
of buyers in the secondary market. At that time, respondent was not
Following this investment, respondent claims to have regularly sent able to find a buyer for the LTCP. As this response did not satisfy
confirmations of investment (COIs) to petitioners.[ A COI is a one-page, petitioners, Amalia again wrote respondent, this time a final demand letter
computer generated document informing the customer of the investment dated September 21, 1998, asking for reconsideration and a return of the
earlier made with the bank. The first of these COIs was received by money she invested. In reply, respondent wrote a letter dated October 12,
petitioners on or about December 9, 1997, as admitted by Amalia, which is 1998 stating that despite efforts to sell the LTCP, no
around a week after the investment was made. Respondent claims that other willing buyers werefound and that even if a buyer would come later, the
succeeding COIs were sent to and received by petitioners. price would be lower than Amalia's original investment.
Amalia claims to have called Lee as soon as she received the first COI in Thus, petitioners filed with the RTC their complaint against respondent
December 1997, and demanded that the investment in LTCP be withdrawn for a sum of money and damages.
and placed in a PRPN. Respondent, however, denies this, claiming
that Amalia merely called to clarify provisions in the COI and did not The Complaint essentially demanded a return of the investment, alleging
demand a withdrawal. On August 6, 1998, petitioners met with that Amalia never instructed respondent's employee Lee to invest the money
respondent's other employee, Lizza Colet, to preterminate the LTCP and in an LTCP; and that far from what Lee executed, Amalia's instructions
their other investments. Petitioners were told that as to the LTCP, were to invest the money in a trust account with an interest of around
liquidation could be made only if there is a willing buyer, a prospect, which 16.25% with a term of 91 days. Further, petitioners alleged that it was only
could be difficult at that time because of the economic crisis. Still, later, or on December 8, 1997, when Amalia received the first confirmation
petitioners signed three sets of Sales Order Slip to sell the LTCP and left of investment (COI) from respondent, that she and her husband learned of
these with Colet. Lee's infidelity to her orders. The COI allegedly informed petitioners that
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the money was placed in an LTCP of C&P Homes with a maturity in 2003, The rest of respondent's Answer denied (1) that it convinced Amalia not to
and that the investment was not guaranteed by respondent. Petitioners also liquidate or withdraw her investment or to ignore the contents of the COI;
claimed that as soon as Amalia received the COI, she immediately called (2) that it assured Amalia that the investment could be easily or quickly
Lee; however, the latter allegedly convinced her to ignore the COI, that withdrawn or sold; (3) that it misrepresented that C&P was an Ayala
C&P Homes was an Ayala company, that the investment was secure, and company, implying that C&P had secure finances; and (4) that respondent
that it could be easily withdrawn; hence, Amalia decided not to immediately had been unfaithful to and in breach of its contractual obligations.
withdraw the investment. Several months later, or on August 6, 1998,
petitioners allegedly wanted to withdraw the investment to buy a property; After trial, the RTC rendered its Decision, dated February 16, 2000,
however, they failed to do so, since respondent told them the LTCP had not the dispositive portion of which states:
yet matured, and that no buyers were willing to buy it. Hence, they sent
various demand letters to respondent, asking for a return of their money; and The foregoing considered, the court hereby rules in favor of plaintiffs and
when these went unheeded, they filed the complaint. order defendant to pay:
In its Answer, respondent admitted that, indeed, Amalia was its client and 1. The sum of PhP2,134,635.87 representing the actual amount deposited by
that she invested the amounts stated in the complaint. However, respondent plaintiffs with defendant plus interest corresponding to time deposit during
disputed the claim that Amalia opened a trust account with a request for an the time material to this action from date of filing of this case until fully
interest rate of around 16.25% with a term of 91 days; instead, respondent paid;
presented documents stating that Amalia opened a directional investment 2. The sum of PhP300,000.00, representing moral damages;
management account, with investments to be made in C&P Homes' LTCP 3. The sum of PhP100,000.00, representing attorney's fees;
with a 2003 maturity. Respondent disputed allegations that it violated 4. Costs.
petitioners' express instructions. Respondent likewise denied that Amalia,
upon her receipt of the COI, immediately called respondent and protested
the investment in LTCP, its 2003 maturity and Citibank's lack of Issue:
guarantee. According to respondent, no such protest was made and
(1) Whether petitioners are bound by the terms and conditions of the
petitioners actually decided to liquidate their investment only months later,
Directional Investment Management Agreement (DIMA), Term
after the newspapers reported that Ayala Land, Inc. was cancelling plans to
Investment Application (TIA), Directional Letter/Specific Instructions,
invest in C&P Homes.
and Confirmations of Investment (COIs);
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Article 1910. The principal must comply with all the obligations which
(2) Whether petitioners are entitled to take back the money they the agent may have contracted within the scope of his authority.
invested from respondent bank; or stated differently, whether
respondent is obliged to return the money to petitioners upon their As for any obligation wherein the agent has exceeded his power, the
demand prior to maturity. principal is not bound except when he ratifies it expressly or tacitly.
Ruling: The transaction is perfectly legal, as investment management activities may

be exercised by a banking institution, pursuant to Republic Act No. 337 or
(1) Yes. The DIMA, Directional Letter and COIs are evidence of the the General Banking Act of 1948, as amended, which was the law then in
contract between the parties and are binding on them, following Article effect. Section 72 of said Act provides:
1159 of the Civil Code which states that contracts have the force of law
between the parties and must be complied with in good faith. In Sec. 72. In addition to the operations specifically authorized elsewhere in
particular, petitioner Amalia affixed her signatures on the DIMA, this Act, banking institutions other than building and loan associations may
Directional Letter and TIA, a clear evidence of her consent which, perform the following services:
under Article 1330 of the same Code, she cannot deny absent any
(a) Receive in custody funds, documents, and valuable objects, and rent
evidence of mistake, violence, intimidation, undue influence or fraud.
safety deposit boxes for the safeguarding of such effects;
The DIMA, Directional Letter, TIA and COIs, read together, establish
(b) Act as financial agent and buy and sell, by order of and for the
the agreement between the parties as an investment management
account of their customers, shares, evidences of indebtedness and all
agreement, which created a principal-agent relationship between
types of securities;
petitioners as principals and respondent as agent for investment
purposes. The agreement is not a trust or an ordinary bank deposit; (c) Make collections and payments for the account of others and perform
hence, no trustor-trustee-beneficiary or even borrower-lender such other services for their customers as are not incompatible with banking
relationship existed between petitioners and respondent with respect to business.
the DIMA account. Respondent purchased the LTCPs only as agent of
petitioners; thus, the latter assumed all obligations or inherent risks
entailed by the transaction under Article 1910 of the Civil Code, which
provides:
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(d) Upon prior approval of the Monetary Board, act as managing agent, investment purposes; and (i) other transactions which the Monetary Board
adviser, consultant or administrator of investment may, by regulation, define or specify as not covered by the prohibition.
management/advisory/consultancy accounts.
Nothing also taints the legality of the LTCP bought in behalf of petitioners.
The banks shall perform the services permitted under subsections (a), C&P Homes' LTCP was duly registered with the Securities and Exchange
(b) and (c) of this section as depositories or as agents. Accordingly, they Commission while the issuer was accredited by the Philippine Trust
shall keep the funds, securities and other effects which they thus receive Committee.
duly separated and apart from the bank's own assets and liabilities.
The evidence also sustains respondent's claim that its trust department
The Monetary Board may regulate the operations authorized by this section handled the account only because it was the department tasked to oversee
in order to insure that said operations do not endanger the interests of the the trust, and other fiduciary and investment management services of the
depositors and other creditors of the banks. bank. Contrary to petitioners' claim, this did not mean that petitioners
opened a trust account. This is consistent with Bangko Sentral ng Pilipinas
Section 74 prohibits banks from guaranteeing obligations of any person, (BSP) regulations, specifically the Manual of Regulations for Banks
thus: (MORB), which groups a bank's trust, and other fiduciary and investment
management activities under the same set of regulations
Sec. 74. No bank or banking institution shall enter, directly, or
indirectly into any contract of guaranty or suretyship, or shall PART FOUR: TRUST, OTHER FIDUCIARY BUSINESS AND
guarantee the interest or principal of any obligation of any INVESTMENT MANAGEMENT ACTIVITIES
person, copartnership, association, corporation or other entity. The
provisions of this section shall, however, not apply to the following: (a) Sec. X402 Scope of Regulations. These regulations shall govern the grant of
borrowing of money by banking institution through the rediscounting of authority to and the management, administration and conduct of trust, other
receivables; (b) acceptance of drafts or bills of exchange (c) certification of fiduciary business and investment management activities (as these terms are
checks; (d) transactions involving the release of documents attached to defined in Sec. X403) of banks. The regulations are divided into three (3)
items received for collection; (e) letters of credit transaction, including
stand-by arrangements; (f) repurchase agreements; (g) shipside bonds; (h) Sub-Parts where:
ordinary guarantees or indorsements in favor of foreign creditors where the
principal obligation involves loans and credits extended directly by foreign
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A. Trust and Other Fiduciary Business shall apply to banks authorized to in the use of the facilities of the other operating departments of said
engage in trust and other fiduciary business including investment bank. Investment management activities, which are considered as
management activities; among other fiduciary business, shall be separately defined in the
succeeding item to highlight its being a major source of fiduciary
B. Investment Management Activities shall apply to banks without trust business.
authority but with authority to engage in investment management
activities; and c. Investment management activity shall refer to any activity resulting
from a contract or agreement primarily for financial return whereby
C. General Provisions shall apply to both. the bank (the investment manager) binds itself to handle or
manage investible funds or any investment portfolio in a representative
Sec. X403 Definitions. For purposes of regulating the operations of trust capacity as financial or managing agent, adviser, consultant or
and other fiduciary business and investment management activities, unless administrator of financial or investment management, advisory,
the context clearly connotes otherwise, the following shall have the meaning consultancy or any similar arrangement which does not create or result
indicated. in a trusteeship.
a. Trust business shall refer to any activity resulting from a trustor-trustee The Court finds no proof to sustain petitioners' contention that the DIMA
relationship (trusteeship) involving the appointment of a trustee by and Directional Letter contradict other papers on record, or were signed in
a trustor for the administration, holding, management of funds and/or blank, or had unauthorized intercalations. Petitioners themselves admit
properties of the trustor by the trustee for the use, benefit or advantage of that Amalia signed the DIMA and the Directional Letter, which bars them
the trustor or of others called beneficiaries. from disowning the contract on the belated claim that she signed it in blank
or did not read it first because of the fine print. On the contrary, the
b. Other fiduciary business shall refer to any activity of a trust-licensed evidence does not support these latter allegations, and it is highly
bank resulting from a contract or agreement whereby the bank binds improbable that someone fairly educated and with investment experience
itself to render services or to act in a representative capacity such as in would sign a document in blank or without reading it first. Petitioners
an agency, guardianship, administratorship of wills, properties and owned various businesses and were clients of other banks, which omit the
estates, executorship, receivership, and other similar services which do possibility of such carelessness. Even more damning for petitioners is that,
not create or result in a trusteeship. It shall exclude collecting or paying on record, Amalia admitted that it was not her habit to sign in blank and that
agency arrangements and similar fiduciary services, which are inherent the contents of the documents were explained to her before she signed.
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Testimonial evidence and the complaint itself contained allegations that the Bank. The INVESTMENT MANAGER shall not be required to inquire
petitioners' reason for transferring their money from local banks to as to the income/principal so withdrawn from the Portfolio. Any income of
respondent is because it is safer to do so, a clear indicia of their the Portfolio not withdrawn shall be accumulated and added to the principal
intelligence and keen business sense which they could not have easily of the Portfolio for further investment and reinvestment.
surrendered upon meeting with respondent.
It is clear that since the money is committed to C&P Homes
Nothing irregular or illegal attends the execution or construction of the via LTCP forfive years, or until 2003, petitioners may not seek its recovery
DIMA and the Directional Letter, as their provisions merely conform with from respondent prior to the lapse of this period. Petitioners must wait and
BSP regulations governing these types of transactions. Specifically, the meanwhile just be content with receiving their interest regularly. If
MORB mandates that investment managers act as agents, not as petitioners want the immediate return of their investment before the
trustees, of the investor; that the investment manager is prohibited maturity date, their only way is to find a willing buyer to purchase the
from guaranteeing returns on the funds or properties; that a written LTCP at an agreed price, or to go directly against the issuer C&P Homes,
document should state that the account is not covered by the PDIC; and not against the respondent.
that losses are to be borne by clients. That these legal requirements
were communicated to petitioners is evident in Amalia's signatures on The nature of the DIMA and the other documents signed by the parties calls
the documents and in testimony to this effect. for this condition. The DIMA states that respondent is a mere agent of
petitioners and that losses from both the principal and interest of the
(2) No. Petitioners may not seek a return of their investment directly investment are strictly on petitioners' account. Meanwhile, the Directional
from respondent at or prior to maturity. As earlier explained, the Letter clearly states that the investment is to be made in an LTCP, which, by
investment is not a deposit and is not guaranteed by respondent. Absent definition, has a term of more than 365 days. Prior to the expiry of the term,
any fraud or bad faith, the recourse of petitioners in the LTCP is solely which in the case of the C&P Homes LTCP is five years, petitioners may
against the issuer, C&P Homes, and only upon maturity. The DIMA not claim back their investment, especially not from respondent bank.
states, thus:
Having bound themselves under the contract as earlier discussed, petitioners
11. Withdrawal of Income/Principal Subject to availability of funds and are governed by its provisions. Petitioners as principals in an agency
taking into consideration the commitment of this account to third relationship are solely obliged to observe the solemnity of the transaction
parties, the PRINCIPAL may withdraw the income/principal of the entered into by the agent on their behalf, absent any proof that the latter
Portfolio or portion thereof upon request or application thereof from acted beyond its authority. Concomitant to this obligation is that the
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principal also assumes the risks that may arise from the transaction. Indeed, (Westpac-Sydney) and have the latter reimburse itself from the U.S. dollar
as in the instant case, bank regulations prohibit banks from account of the respondent in Westpac Bank in New York, U.S.A. (Westpac-
guaranteeing profits or the principal in an investment management New York).
account. Hence, the Court of Appeals correctly dismissed petitioners
complaint against respondent. 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
4. Reyes v. CA, G.R. No. 118492, 8/15/01 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
Doctrine: The degree of extraordinary diligence applies only to cases the dishonor of the said foreign exchange demand draft, respondent bank
where banks act under their fiduciary capacity, that is, as depositary of informed Westpac-Sydney of the issuance of the said demand draft, drawn
the deposits of their depositors. But the same higher degree of diligence against the Wespac-Sydney and informing the latter to be reimbursed from
is not expected to be exerted by banks in commercial transactions that the respondent bank’s dollar account in Westpac-New York. The respondent
do not involve their fiduciary relationship with their depositors. bank on the same day likewise informed Wespac-New York requesting the
latter to honor the reimbursement claim of Wespac-Sydney. Upon its
Facts: second presentment for payment, the demand draft was again
dishonored by Westpac-Sydney for the same reason, that is, that the
Godofredo, Casheir of the Philippine Racing Club (PCRI), went to
respondent bank has no deposit dollar account with the drawee
respondent bank to apply for a demand draft in the amount AU$1,610.00
Wespac-Sydney. Gregorio Reyes and Consuelo Puyat-Reyes arrived in
payable to the order of the 20th Asian Racing Conference Secretariat of
Sydney on a separate date and both were humiliated and embarrassed in the
Sydney, Australia. He was attended to by respondent bank’s assistant
presence of international audience after being denied registration of the
cashier, Mr. Yasis, who at first denied the application for the reason that
conference secretariat since the foreign exchange draft was dishonored.
respondent bank did not have an Australian dollar account in any bank in
Petitioners were only able to attend the conference after promising to pay in
Sydney. Godofredo asked if there could be a way for respondent bank to
cash instead which they fulfilled
accommodate PRCI’s urgent need to remit Australian dollars to Sydney.
Yasis of respondent bank then informed Godofredo of a roundabout way of Issue:
effecting the requested remittance to Sydney thus: the respondent bank
would draw a demand draft against Westpac Bank in Sydney, Australia
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Whether or not respondent bank is liable for damages due to the Respondent spouses opened a joint foreign currency time deposit in trust for
dishonor of the foreign exchange demand drafts. their sons at petitioner’s Makati branch. Prior to maturity, a person
claiming to be Carmelita Cabamongan pre-terminated the said account
Ruling: upon presenting identification cards. Though not being able to surrender
the Original Certificate of Deposit, the money was released to her despite
Yes. The evidence also shows that the respondent bank exercised that the release and waiver documents not being notarized. Respondent spouses
degree of diligence expected of an ordinary prudent person under the learned of the incident and informed petitioner bank that Carmelita could
circumstances obtaining; the respondent bank advised Westpac-New York not have pre-terminated the account since she was in the US at that time.
to honor the reimbursement claim of Westpac-Sydney and to debit the dollar The spouses made a formal demand of payment of the deposit and
accountof respondent bank with the former. The degree of diligence consequently, filed a complaint when petitioner refused to pay. Petitioner
required of banks, is more than that of a good father of a family where the bank insists that it was not negligent of its duties since the deposit was
fiduciary nature of their relationship with their depositors is concerned. In released upon proper identification and verification. RTC ruled in favor
other words banks are duty bound to treat the deposit accounts of their of the spouses. CA affirmed.
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 Issue:
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 Whether or not petitioner bank was negligent in its duties as to be liable
do not involve their fiduciary relationship with their depositors. The for damages.
case at bar does not involve the handling of petitioners’ deposit, if any,
with the respondent bank. Instead, the relationship involved was that of Ruling:
a buyer and seller.
Yes. The Court has repeatedly emphasized that, since the banking
business is impressed with public interest, of paramount importance
thereto is the trust and confidence of the public in general.
5. Citibank NA v. Spouses Cabamongan, 146918, 5/2/06 Consequently, the highest degree of diligence is expected, and high
standards of integrity and performance are even required, of it. By the
Facts: nature of its functions, a bank is “under obligation to treat the accounts
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of its depositors with meticulous care, always having in mind the Doctrine: If the plaintiff’s negligence was only contributory, the
fiduciary nature of their relationship.” immediate and proximate cause of the injury being the defendant’s lack
of due care, the plaintiff may recover damages, but the courts shall
In this case, it has been sufficiently shown that the signatures of Carmelita mitigate the damages to be awarded.
in the forms for pretermination of deposits are forgeries. Citibank, with
its signature verification procedure, failed to detect the forgery. Its Facts:
negligence consisted in the omission of that degree of diligence required
of banks. The Court has held that a bank is “bound to know the The Citytrust Banking Corporation (Citytrust) gave Central Bank of the
signatures of its customers; and if it pays a forged check, it must be Philippines a list of signatures of five of its officers authorized to sign
considered as making the payment out of its own funds, and cannot checks and serve as drawers and indorsers for its account, and also the list of
ordinarily charge the amount so paid to the account of the depositor the roving tellers authorized to perform other transactions on its behalf, one
whose name was forged.” Such principle equally applies here. of whom was Rounceval Flores (Flores). Flores presented two checks to the
Central Bank’s Senior Teller Iluminada dela Cruz (Dela Cruz) and was
The Court agrees with the observation of the CA that Citibank, thru subsequently approved. Dela Cruz prepared the cash transfer slip where
Account Officer San Pedro, openly courted disaster when despite noticing Flores should sign but instead he sign as one Rosauro C. Cayabyab. This
discrepancies in the signature and photograph of the person claiming to be fact was missed by Dela Cruz. It was given to Cash Department and the
Carmelita and the failure to surrender the original certificate of time deposit, signatures were examined and later on paid Flores for the checks. After one
the pretermination of the account was allowed. Even the waiver document year and nine months, the Citytrust demanded that the checks be
was not notarized, a procedure meant to protect the bank. For not observing cancelled and the funds taken out be returned because the check was
the degree of diligence required of banking institutions, whose business is stolen before. Central Bank did not heed such call. Citytrust filed a
impressed with public interest, Citibank is liable for damages. complaint to collect the sum of money with damages against Central Bank
to the Regional Trial Court (RTC). RTC found both parties negligent and
held them equally liable for the loss. Court of Appeals affirmed the
decision.
6. Central Bank of the Philippines v. Citytrust Banking Corp, G.R. No.
141835, 2/4/09 Issue:
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Whether or not Citytrust can collect sum of money as damages from 7. DBP v. Guarina Agricultural and Realty Development Corp, G.R.
the Central Bank. No. 160758, 1/15/14
Ruling: Facts:
The law imposes on banks high standards in view of the fiduciary In July 1976, Guariña Corporation applied for a loan from DBP to finance
nature of banking. Section 2 of Republic Act No. 8791 (R.A. 8791), the development of its resort complex. The loan, in the amount of
which took effect on 13 June 2000, declares that the State recognizes the P3,387,000.00, was approved on August 5, 1976. Guariña Corporation
“fiduciary nature of banking that requires high standards of integrity executed a promissory note that would be due on November 3, 1988. On
and performance.” October 5, 1976, Guariña Corporation executed a real estate mortgage
over several real properties in favor of DBP as security for the
This fiduciary relationship means that the bank’s obligation to observe repayment of the loan. On May 17, 1977, Guariña Corporation executed a
“high standards of integrity and performance” is deemed written into chattel mortgage over the personal properties existing at the resort complex
every deposit agreement between a bank and its depositor. The fiduciary and those yet to be acquired out of the proceeds of the loan, also to secure
nature of banking requires banks to assume a degree of diligence higher the performance of the obligation. Prior to the release of the loan, DBP
than that of a good father of a family. Article 1172 of the Civil Code states required Guariña Corporation to put up a cash equity of P1,470,951.00 for
that the degree of diligence required of an obligor is that prescribed by law the construction of the buildings and other improvements on the resort
or contract, and absent such stipulation then the diligence of a good father of complex.
a family. Section 2 of R.A. 8791 prescribes the statutory diligence required
from banks – that banks must observe “high standards of integrity and The loan was released in several installments, and Guariña Corporation used
performance” in servicing their depositors. Citytrust’s failure to timely the proceeds to defray the cost of additional improvements in the resort
examine its account, cancel the checks and notify petitioner of their complex. In all, the amount released totaled P3,003,617.49, from which
alleged loss/theft should mitigate petitioner’s liability, in accordance DBP withheld P148,102.98 as interest.
with Article 2179 of the Civil Code which provides that if the plaintiff’s
negligence was only contributory, the immediate and proximate cause Guariña Corporation demanded the release of the balance of the loan, but
of the injury being the defendant’s lack of due care, the plaintiff may DBP refused. Instead, DBP directly paid some suppliers of Guariña
recover damages, but the courts shall mitigate the damages to be Corporation over the latter’s objection. DBP found upon inspection of the
awarded. resort project, its developments and improvements that Guariña
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Corporation had not completed the construction works. In a letter dated Loan is a reciprocal obligation, as it arises from the same cause where one
February 27, 1978, and a telegram dated June 9, 1978, DBP thus party is the creditor, and the other the debtor. The obligation of one party in
demanded that Guariña Corporation expedite the completion of the a reciprocal obligation is dependent upon the obligation of the other, and the
project, and warned that it would initiate foreclosure proceedings performance should ideally be simultaneous. This means that in a loan,
should Guariña Corporation not do so. the creditor should release the full loan amount and the debtor repays it
when it becomes due and demandable.
Unsatisfied with the non-action and objection of Guariña Corporation, DBP
initiated extrajudicial foreclosure proceedings The loan agreement between the parties is a reciprocal obligation.
Appellant in the instant case bound itself to grant appellee the loan
Issue: amount of P3,387,000.00 condition on appellee’s payment of the amount
when it falls due. The appellant did not release the total amount of the
Whether or not Guarina was in delay in performing its obligation approved loan. Appellant therefore could not have made a demand for
making DBP’s action to foreclose the mortgage proper. payment of the loan since it had yet to fulfil its own obligation.
Moreover, the fact that appellee was not yet in default rendered the
Ruling: foreclosure proceedings premature and improper.
No. The Court held that the foreclosure of a mortgage prior to the By its failure to release the proceeds of the loan in their entirety, DBP had
mortgagor’s default on the principal obligation is premature, and no right yet to exact on Guariña Corporation the latter’s compliance with its
should be undone for being void and ineffectual. The mortgagee who has own obligation under the loan. Indeed, if a party in a reciprocal contract like
been meanwhile given possession of the mortgaged property by virtue of a a loan does not perform its obligation, the other party cannot be obliged to
writ of possession issued to it as the purchaser at the foreclosure sale may be perform what is expected of it while the other’s obligation remains
required to restore the possession of the property to the mortgagor and to unfulfilled. In other words, the latter party does not incur delay.
pay reasonable rent for the use of the property during the intervening period.
The agreement between DBP and Guariña Corporation was a loan.

Under the law, a loan requires the delivery of money or any other 8. Consolidated Bank and Trust Corp v. Court of Appeals, G.R. No.
consumable object by one party to another who acquires ownership 138569, 9/11/03
thereof, on the condition that the same amount or quality shall be paid.
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Doctrine: Solidbank’s tellers must exercise a high degree of diligence in slip bore the signatures of the authorized signatories of L.C. Diaz,
insuring that they return the passbook only to the depositor or his namely Diaz and Rustico L. Murillo. The signatories, however, denied
authorized representative. The tellers know, or should know, that the signing the withdrawal slip. A certain Noel Tamayo received
rules on savings account provide that any person in possession of the the P300,000.
passbook is presumptively its owner.
L.C. Diaz demanded from Solidbank the return of its money but to no
Facts: avail. Hence, L.C. Diaz filed a Complaint for Recovery of a Sum of Money
against Solidbank with the Regional Trial Court. After trial, the trial court
Solidbank is a domestic banking corporation while private respondent L.C. rendered a decision absolving Solidbank and dismissing the
Diaz and Company, CPA’s (“L.C. Diaz”), is a professional partnership complaint. Court of Appeals reversed the decision of the trial court.
engaged in the practice of accounting and which opened a savings account
with Solidbank. Diaz through its cashier, Mercedes Macaraya , filled up a Issue:
savings cash deposit slip and a savings checks deposit slip. Macaraya
instructed the messenger of L.C. Diaz, Ismael Calapre, to deposit the money Whether or not Solidbank must be held liable for the fraudulent
with Solidbank and give him the Solidbank passbook. Calapre went to withdrawal on private respondent’s account.
Solidbank and presented to Teller No. 6 the two deposit slips and the
passbook. The teller acknowledged receipt of the deposit by returning to Ruling:
Calapre the duplicate copies of the two deposit slips. Since the transaction
took time and Calapre had to make another deposit for L.C. Diaz with Solidbank’s tellers must exercise a high degree of diligence in insuring
Allied Bank, he left the passbook with Solidbank. When Calapre that they return the passbook only to the depositor or his authorized
returned to Solidbank to retrieve the passbook, Teller No. 6 informed representative. The tellers know, or should know, that the rules on
him that somebody got the passbook. Calapre went back to L.C. Diaz and savings account provide that any person in possession of the passbook is
reported the incident to Macaraya. The following day,, L.C. Diaz through its presumptively its owner. If the tellers give the passbook to the wrong
Chief Executive Officer, Luis C. Diaz, called up Solidbank to stop any person, they would be clothing that person presumptive ownership of
transaction using the same passbook until L.C. Diaz could open a new the passbook, facilitating unauthorized withdrawals by that
account followed by a formal written request later that day. It was also on person. For failing to return the passbook to Calapre, the authorized
the same day that L.C. Diaz learned of the unauthorized withdrawal representative of L.C. Diaz, Solidbank and Teller No. 6 presumptively
the day before of P300,000 from its savings account. The withdrawal failed to observe such high degree of diligence in safeguarding the
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passbook, and in insuring its return to the party authorized to receive the declare that the Bangko Sentral ng Pilipinas Monetary Board (BSP-MB),
same. However, L.C. Diaz was guilty of contributory negligence in replacing the Central Bank Monetary Board (CB-MB) by virtue of R.A. No.
allowing a withdrawal slip signed by its authorized signatories to fall 7653, has no authority to continue enforcing Central Bank Circular No. 905,
into the hands of an impostor. Thus, the liability of Solidbank should issued by the CB-MB in 1982, which "suspended" the Usury Law of 1916
be reduced. Hence, the liability of Solidbank for actual damages was (Act No. 2655).
reduced to only 60%, the remaining 40% was borne by private
respondent. R.A. No. 265, which created the Central Bank (CB) of the Philippines,
empowered the CB-MB to, among others, set the maximum interest
The contract between the bank and its depositor is governed by the rates which banks may charge for all types of loans and other credit
provisions of the Civil Code on simple loan. There is a debtor-creditor operations, within limits prescribed by the Usury Law.
relationship between the bank and its depositor. The bank is the debtor
and the depositor is the creditor. The law imposes on banks high In its Resolution No. 2224, the CB-MB issued CB Circular No. 905,
standards in view of the fiduciary nature of banking. RA 8791 declares Series of 1982. Section 1 of the Circular, under its General Provisions,
that the State recognizes the “fiduciary nature of banking that requires high removed the ceilings on interest rates on loans or forbearance of any
standards of integrity and performance.” This new provision in the general money, goods or credits.
banking law, introduced in 2000, is a statutory affirmation of Supreme
Court decisions holding that “the bank is under obligation to treat the On June 14, 1993, President Fidel V. Ramos signed into law R.A. No. 7653
accounts of its depositors with meticulous care, always having in mind the establishing the Bangko Sentral ng Pilipinas (BSP) to replace the CB.
fiduciary nature of their relationship.”
Issue:
9. Advocates for Truth in Lending v. BSP, G.R. No. 192986, 1/15/13 (1) Whether the CB-MB exceeded its authority when it issued CB
Circular No. 905, which removed all interest ceilings and thus
Facts: suspended Act No. 2655 as regards usurious interest rates.
Advocates for Truth in Lending, Inc. and its President, Eduardo Olaguer (2) Whether under R.A. No. 7653, the BSP-MB may continue to enforce
claim that they are raising issues of transcendental importance to the public CB Circular No. 905.
and so they filed Petition for Certiorari under Rule 65 ROC seeking to
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Ruling: whether secured or unsecured, that may be charged or collected by any

person, whether natural or juridical, shall not be subject to any ceiling
(1) No. The CB-MB merely suspended the effectivity of the Usury Law prescribed under or pursuant to the Usury Law, as amended." It does not
when it issued CB Circular No. 905. purport to suspend the Usury Law only as it applies to banks, but to all
lenders.
The power of the CB to effectively suspend the Usury Law pursuant to
P.D. No. 1684 has long been recognized and upheld in many cases. As Petitioners contend that, granting that the CB had power to "suspend" the
the Court explained in the landmark case of Medel v. CA, citing several Usury Law, the new BSP-MB did not retain this power of its predecessor, in
cases, CB Circular No. 905 "did not repeal nor in anyway amend the view of Section 135 of R.A. No. 7653, which expressly repealed R.A. No.
Usury Law but simply suspended the latter’s effectivity;" that "a CB 265. The petitioners point out that R.A. No. 7653 did not reenact a provision
Circular cannot repeal a law, for only a law can repeal another law;" similar to Section 109 of R.A. No. 265.
that "by virtue of CB Circular No. 905, the Usury Law has been rendered
ineffective;" and "Usury has been legally non-existent in our A closer perusal shows that Section 109 of R.A. No. 265 covered only loans
jurisdiction. Interest can now be charged as lender and borrower may extended by banks, whereas under Section 1-a of the Usury Law, as
agree upon." amended, the BSP-MB may prescribe the maximum rate or rates of
interest for all loans or renewals thereof or the forbearance of any
By lifting the interest ceiling, CB Circular No. 905 merely upheld the money, goods or credits, including those for loans of low priority such
parties’ freedom of contract to agree freely on the rate of interest. It as consumer loans, as well as such loans made by pawnshops, finance
cited Article 1306 of the New Civil Code, under which the contracting companies and similar credit institutions. It even authorizes the BSP-
parties may establish such stipulations, clauses, terms and conditions as MB to prescribe different maximum rate or rates for different types of
they may deem convenient, provided they are not contrary to law, borrowings, including deposits and deposit substitutes, or loans of
morals, good customs, public order, or public policy. financial intermediaries. Act No. 2655, an earlier law, is much broader in
scope, whereas R.A. No. 265, now R.A. No. 7653, merely supplemented it
(2) Yes. The BSP-MB has authority to enforce CB Circular No. 905. as it concerns loans by banks and other financial institutions. Had R.A. No.
7653 been intended to repeal Section 1-a of Act No. 2655, it would have so
Section 1 of CB Circular No. 905 provides that, "The rate of interest, stated in unequivocal terms.
including commissions, premiums, fees and other charges, on a loan or
forbearance of any money, goods, or credits, regardless of maturity and
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Further, the lifting of the ceilings for interest rates does not authorize guarantor, indorser or obligor for loans from the said bank to others, by
stipulations charging excessive, unconscionable, and iniquitous interest. then and there using said borrowed deposits/funds of the said bank in
It is settled that nothing in CB Circular No. 905 grants lenders a carte facilitating and granting and/or caused the facilitating and granting of
blanche authority to raise interest rates to levels which will either credit lines/loans and, among others, to the New Zealand Accounts
enslave their borrowers or lead to a hemorrhaging of their assets. loans in the total amount of TWO BILLION AND SEVEN HUNDRED
Stipulations authorizing iniquitous or unconscionable interests have been FIFTY-FOUR MILLION NINE HUNDRED FIVE THOUSAND AND
invariably struck down for being contrary to morals, if not against the law. EIGHT HUNDRED FIFTY-SEVEN AND 0/100 PESOS, Philippine
Currency, said accused knowing fully well that the same has been done
by him without the written approval of the majority of the Board of
Directors of said Orient Bank and which approval the said accused
10. Go v. BSP, G.R. No. 178429, 10/23/2009
deliberately failed to obtain and enter the same upon the records of said
Facts: banking institution and to transmit a copy of which to the supervising
department of the said bank, as required by the General Banking Act.
On August 20, 1999, an Information for violation of Section 83 of Republic
Act No. 337 (RA 337) or the General Banking Act, as amended by On May 28, 2001, Go pleaded not guilty to the offense charged.
Presidential Decree No. 1795, was filed against Go before the RTC. The
charge reads: That on or about and during the period comprised between After the arraignment, both the prosecution and accused Go took part in the
June 27, 1996 and September 15, 1997, inclusive, in the City of Manila, pre-trial conference where the marking of the voluminous evidence for the
Philippines, the said accused, being then the Director and the President parties was accomplished. After the completion of the marking, the trial
and Chief Executive Officer of the Orient Commercial Banking court ordered the parties to proceed to trial on the merits.
Corporation (Orient Bank), a commercial banking institution created,
organized and existing under Philippines laws, with its main branch located Before the trial could commence, however, Go filed on February 26, 2003 a
at C.M. Recto Avenue, this City, and taking advantage of his position as motion to quash the Information, which motion Go amended on March 1,
such officer/director of the said bank, did then and there wilfully, 2003. Go claimed that the Information was defective, as the facts
unlawfully and knowingly borrow, either directly or indirectly, for charged therein do not constitute an offense under Section 83 of RA
himself or as the representative of his other related companies, the 337 which states:
deposits or funds of the said banking institution and/or become a
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No director or officer of any banking institution shall either directly or In addition to the conditions established in the preceding paragraph, no
indirectly, for himself or as the representative or agent of director or a building and loan association shall engage in any of the
another, borrow any of the deposits of funds of such banks, nor shall operations mentioned in said paragraphs, except upon the pledge of
he become a guarantor, indorser, or surety for loans from such bank, to shares of the association having a total withdrawal value greater than
others, or in any manner be an obligor for money borrowed from the bank or the amount borrowed. (As amended by PD 1795)
loaned by it, except with the written approval of the majority of the directors
of the bank, excluding the director concerned. Any such approval shall be In support of his motion to quash, Go averred that based on the facts alleged
entered upon the records of the corporation and a copy of such entry shall be in the Information, he was being prosecuted for borrowing the deposits or
transmitted forthwith to the appropriate supervising department. The office funds of the Orient Bank and/or acting as a guarantor, indorser or obligor
of any director or officer of a bank who violates the provisions of this for the banks loans to other persons. The use of the word and/or meant that
section shall immediately become vacant and the director or officer he was charged for being either a borrower or a guarantor, or for being both
shall be punished by imprisonment of not less than one year nor more a borrower and guarantor. Go claimed that the charge was not only vague,
than ten years and by a fine of not less than one thousand nor more but also did not constitute an offense. He posited that Section 83 of RA 337
than ten thousand pesos. penalized only directors and officers of banking institutions who acted
either as borrower or as guarantor, but not as both.
The Monetary Board may regulate the amount of credit accommodations
that may be extended, directly or indirectly, by banking institutions to their Go further pointed out that the Information failed to state that his alleged act
directors, officers, or stockholders. However, the outstanding credit of borrowing and/or guarantying was not among the exceptions provided for
accommodations which a bank may extend to each of its stockholders in the law. According to Go, the second paragraph of Section 83 allowed
owning two percent (2%) or more of the subscribed capital stock, its banks to extend credit accommodations to their directors, officers, and
directors, or its officers, shall be limited to an amount equivalent to the stockholders, provided it is limited to an amount equivalent to the respective
respective outstanding deposits and book value of the paid-in capital outstanding deposits and book value of the paid-in capital contribution in
contribution in the bank. Provided, however, that loans and advances to the bank. Extending credit accommodations to bank directors, officers, and
officers in the form of fringe benefits granted in accordance with rules stockholders is not per se prohibited, unless the amount exceeds the legal
and regulations as may be prescribed by Monetary Board shall not be limit. Since the Information failed to state that the amount he
subject to the preceding limitation. (As amended by PD 1795) purportedly borrowed and/or guarantied was beyond the limit set by
law, Go insisted that the acts so charged did not constitute an offense.
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Finding Gos contentions persuasive, the RTC granted Gos motion to quash legal limits was, to the CA, an irrelevant issue. For these reasons, the CA
the Information on May 20, 2003. It denied on June 30, 2003 the motion for annulled and set aside the RTCs orders and ordered the reinstatement of the
reconsideration filed by the prosecution. criminal charge against Go. After the CAs denial of his motion for
reconsideration, Go filed the present appeal by certiorari.
The prosecution did not accept the RTC ruling and filed a petition
for certiorari to question it before the CA. The Information, the prosecution Issue:
claimed, was sufficient. The word and/or did not materially affect the
validity of the Information, as it merely stated a mode of committing the Whether Go can be prosecuted for the offense charged.
crime penalized under Section 83 of RA 337. Moreover, the prosecution
asserted that the second paragraph of Section 83 (referring to the credit Ruling:
accommodation limit) cannot be interpreted as an exception to what the first
paragraph provided. The second paragraph only sets borrowing limits that, Yes. Under the Constitution, a person who stands charged of a criminal
if violated, render the bank, not the director-borrower, liable. A violation of offense has the right to be informed of the nature and cause of the
the second paragraph of Section 83 under which Go is being prosecuted is accusation against him. The Rules of Court, in implementing the right,
therefore separate and distinct from a violation of the first paragraph. Thus, specifically require that the acts or omissions complained of as constituting
the prosecution prayed that the orders of the RTC quashing the Information the offense, including the qualifying and aggravating circumstances, must
be set aside and the criminal case against Go be reinstated. be stated in ordinary and concise language, not necessarily in the language
used in the statute, but in terms sufficient to enable a person of common
On October 26, 2006, the CA rendered the assailed decision granting the understanding to know what offense is being charged and the attendant
prosecutions petition for certiorari. The CA declared that the RTC misread qualifying and aggravating circumstances present, so that the accused can
the law when it decided to quash the Information against Go. It explained properly defend himself and the court can pronounce judgment. To broaden
that the allegation that Go acted either as a borrower or a guarantor or as the scope of the right, the Rules authorize the quashal, upon motion of the
both borrower and guarantor merely set forth the different modes by which accused, of an Information that fails to allege the acts constituting the
the offense was committed. It did not necessarily mean that Go acted both offense. Jurisprudence has laid down the fundamental test in appreciating a
as borrower and guarantor for the same loan at the same time. It agreed with motion to quash an Information grounded on the insufficiency of the facts
the prosecutions stand that the second paragraph of Section 83 of RA 337 is alleged therein. We stated in People v. Romualdez that:
not an exception to the first paragraph. Thus, the failure of the Information
to state that the amount of the loan Go borrowed or guaranteed exceeded the
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The determinative test in appreciating a motion to quash xxx is the a. he borrows any of the deposits or funds of such bank; or
sufficiency of the averments in the information, that is, whether the facts b. he becomes a guarantor, indorser, or surety for loans from such
alleged, if hypothetically admitted, would establish the essential elements of bank to others, or
the offense as defined by law without considering matters aliunde. As c. he becomes in any manner an obligor for money borrowed from
Section 6, Rule 110 of the Rules of Criminal Procedure requires, the bank or loaned by it;
information only needs to state the ultimate facts; the evidentiary and
other details can be provided during the trial. 3. the offender has performed any of such acts without the written
approval of the majority of the directors of the bank, excluding the
To restate the rule, an Information only needs to state the ultimate facts offender, as the director concerned.
constituting the offense, not the finer details of why and how the illegal
acts alleged amounted to undue injury or damage matters that are A simple reading of the above elements easily rejects Gos contention that
appropriate for the trial. the law penalizes a bank director or officer only either for borrowing the
banks deposits or funds or for guarantying loans by the bank, but not for
The facts and circumstances necessary to be included in the Information are acting in both capacities. The essence of the crime is becoming an obligor
determined by reference to the definition and elements of the specific of the bank without securing the necessary written approval of the
crimes. The Information must allege clearly and accurately the elements majority of the banks directors.
of the crime charged.
The second element merely lists down the various modes of committing the
Elements of Violation of Section 83 of RA 337 offense. The third mode, by declaring that [no director or officer of any
banking institution shall in any manner be an obligor for money borrowed
Under Section 83, RA 337, the following elements must be present to from the bank or loaned by it, in fact serves a catch-all phrase that covers
constitute a violation of its first paragraph: any situation when a director or officer of the bank becomes its obligor. The
prohibition is directed against a bank director or officer who becomes
1. the offender is a director or officer of any banking institution; in any manner an obligor for money borrowed from or loaned by the
bank without the written approval of the majority of the banks board
2. the offender, either directly or indirectly, for himself or as of directors. To make a distinction between the act of borrowing and
representative or agent of another, performs any of the following acts: guarantying is therefore unnecessary because in either situation, the
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director or officer concerned becomes an obligor of the bank against 337 actually imposes three restrictions: approval, reportorial, and ceiling
whom the obligation is juridically demandable. requirements.
The language of the law is broad enough to encompass either act of The approval requirement (found in the first sentence of the first
borrowing or guaranteeing, or both. While the first paragraph of Section 83 paragraph of the law) refers to the written approval of the majority of the
is penal in nature, and by principle should be strictly construed in favor of banks board of directors required before bank directors and officers can in
the accused, the Court is unwilling to adopt a liberal construction that would any manner be an obligor for money borrowed from or loaned by the bank.
defeat the legislatures intent in enacting the statute. The objective of the law Failure to secure the approval renders the bank director or officer
should allow for a reasonable flexibility in its construction. Section 83 of concerned liable for prosecution and, upon conviction, subjects him to
RA 337, as well as other banking laws adopting the same prohibition, was the penalty provided in the third sentence of first paragraph of Section
enacted to ensure that loans by banks and similar financial institutions to 83.
their own directors, officers, and stockholders are above board. Banks were
not created for the benefit of their directors and officers; they cannot use the The reportorial requirement, on the other hand, mandates that any such
assets of the bank for their own benefit, except as may be permitted by approval should be entered upon the records of the corporation, and a copy
law. Congress has thus deemed it essential to impose restrictions on of the entry be transmitted to the appropriate supervising department. The
borrowings by bank directors and officers in order to protect the public, reportorial requirement is addressed to the bank itself, which, upon its
especially the depositors. Hence, when the law prohibits directors and failure to do so, subjects it to quo warranto proceedings under Section 87 of
officers of banking institutions from becoming in any manner an obligor of RA 337.
the bank (unless with the approval of the board), the terms of the prohibition
shall be the standards to be applied to directors transactions such as those The ceiling requirement under the second paragraph of Section 83
involved in the present case. regulates the amount of credit accommodations that banks may extend to
their directors or officers by limiting these to an amount equivalent to the
Credit accommodation limit is not an exception nor is it an element of the respective outstanding deposits and book value of the paid-in capital
offense contribution in the bank. Again, this is a requirement directed at the bank. In
this light, a prosecution for violation of the first paragraph of Section 83,
Contrary to Gos claims, the second paragraph of Section 83, RA 337 does such as the one involved here, does not require an allegation that the loan
not provide for an exception to a violation of the first paragraph thereof, nor exceeded the legal limit. Even if the loan involved is below the legal limit, a
does it constitute as an element of the offense charged. Section 83 of RA written approval by the majority of the banks directors is still required;
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otherwise, the bank director or officer who becomes an obligor of the bank Although an Information may be defective because the facts charged do not
is liable. Compliance with the ceiling requirement does not dispense constitute an offense, the dismissal of the case will not necessarily
with the approval requirement. follow. The Rules specifically require that the prosecution should be given a
chance to correct the defect; the court can order the dismissal only upon the
Evidently, the failure to observe the three requirements under Section 83 prosecutions failure to do so.The RTCs failure to provide the prosecution
paves the way for the prosecution of three different offenses, each with its this opportunity twice constitutes an arbitrary exercise of power that was
own set of elements. A successful indictment for failing to comply with the correctly addressed by the CA through the certiorari petition. This defect in
approval requirement will not necessitate proof that the other two were the RTCs action on the case, while not central to the issue before us,
likewise not observed. strengthens our conclusion that this criminal case should be resolved
through full-blown trial on the merits.
Rules of Court allow amendment of insufficient Information
Assuming that the facts charged in the Information do not constitute an

offense, we find it erroneous for the RTC to immediately order the dismissal 11. RP v. Sandiganbayan, G.R. No. 166859, 4/12/2011
of the Information, without giving the prosecution a chance to amend Facts:
it. Section 4 of Rule 117 states:
A complaint was filed against the defendants Eduardo Cojuangco Jr., the
SEC. 4. Amendment of complaint or information. If the motion to quash is ACCRA lawyers, Danilo Ursua and 71 corporations by the Presidential
based on an alleged defect of the complaint or information which can be Commission on Good Government (PCGG) referred here as “Republic of
cured by amendment, the court shall order that an amendment be made. the Philippines” with regard to a block of San Miguel Corporation (SMC)
stock which were allegedly bought through the CIIF Holding Companies
If it is based on the ground that the facts charged do not constitute an and funded by the coconut levy fund passing through the Unicom Oil Mills
offense, the prosecution shall be given by the court an opportunity to and directly from UCPB. The coconut levy funds were considered as
correct the defect by amendment. The motion shall be granted if the government funds since this came from contributions from the coconut
prosecution fails to make the amendment, or the complaint or farmers with the purpose of improving and stabilizing the coconut farming
information still suffers from the same defect despite the amendment. industry, however these were said to be privatized under presidential
directives of then Pres. Marcos. Defendant Cojuangco Jr., being close with
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the Marcoses is said to have taken undue advantage of his association, (2) the Republic through the PCGG shall be given twenty (20) days written
influence and connection, embarked upon different devices and schemes notice by Defendants Eduardo Cojuangco, et al. prior to any sale, pledge,
including the use of the ACCRA Lawyers as “nominee shareholders” and mortgage or other disposition of the shares;
the defendant corporations as fronts to unjustly enrich themselves at the
expense of the Filipino people when he misused the coconut levy fund, (3) in the event of sale, mortgage or other disposition of the shares, by
amounting to $150 million, to purchase 33 million shares of the SMC the Defendants Cojuangco, et al., the consideration therefore, whether
through the holding companies. Hence with the allegations mentioned and in cash or in kind, shall be placed in escrow with Land Bank of the
with different cases and issues which remain unresolved, the block of shares Philippines, subject to disposition only upon further orders of this
representing 20% of the outstanding capital stock of SMC remained Court; and
sequestered by the government.
(4) any cash dividends that are declared on the shares shall be placed in
During the pre-trial brief, the Sandiganbayan sought clarification from the escrow with the Land Bank of the Philippines, subject to disposition only
parties, particularly the Republic, on their respective positions, but at the upon further orders of this Court. If in case stock dividends are declared,
end it found the clarifications "inadequately" enlightening. To resolve the conditions on the sale, pledge, mortgage and other disposition of any of
various pending motions and pleadings, Sandiganbayan lifted and the shares as above-mentioned in conditions 1, 2 and 3, shall likewise apply.
declared the Writs of Sequestration null and void.
Sandiganbayan denied both Motion for Reconsideration and Motion for
Despite the lifting of the writs of sequestration, since the Republic Modification but eventually reduced its resolution deleting the last 2
continues to hold a claim on the shares which is yet to be resolved, it is provisions. Cojuangco, et al. filed a Motion for Authority to Sell San Miguel
hereby ordered that the following shall be annotated in the relevant Corporation (SMC) shares, praying for leave to allow the sale of SMC
corporate books of San Miguel Corporation: shares and Sandiganbayan granted the motion. Cojuangco, et al. later
rendered a complete accounting of the proceeds from the sale of the
(1) any sale, pledge, mortgage or other disposition of any of the shares Cojuangco block of shares of SMC stock, informing that a total amount of P
of the Defendants Eduardo Cojuangco, et al. shall be subject to the 4,786,107,428.34 had been paid to the UCPB as loan repayment.
outcome of this case;
Issue:
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Whether or not Sandiganbayan has committed grave abuse of dicretion academic following the Sandiganbayan’s promulgation of its decision
in: (1) in lifting the Writ of Sequestrations on the sequestered SMC dismissing the Republic's Amended Complaint, which thereby removed the
shares; and (2) in deleting the last two conditions the Sandiganbayan stated reason - "the Republic continues to hold a claim on the shares which
had earlier imposed on the subject shares of stock. is yet to be resolved" - underlying the need for the annotation of the
conditions (whether four or two).
Ruling:
No. Among the Writs of Sequestration issued, only one writ WOS 87-0218 12. Nacar v. Gallery Frames, G.R. No. 189871, 8/13/2013
complied with PCGG Rules and Regulations requirement that the issuance
Note: This is a labor case. Hence, the issues do not dwell on the topic of
be made by at least two Commissioners. However, even if Writ of
banking laws. The present rule now prescribes that the interest rate for
Sequestration No. 87-0218 complied with the requirement that the same
forbearance of money, loans and judgments is pegged at 6% per
be issued by at least two Commissioners, the records fail to show that it
annum.
was issued with factual basis or with factual foundation. It is the
absence of a prima facie basis for the issuance of a writ of sequestration Interest; legal rate beginning July 1, 2013. The guidelines laid down in the
and not the lack of authority of two (2) Commissioners which renders case of Eastern Shipping Lines are accordingly modified to embody BSP-
the said writ void ab initio. Thus, being the case, Writ of Sequestration MB Circular No. 799, as follows:
No. 87-0218 must be automatically lifted. Consequently, the writs of
sequestration nos. 86-0062, 86-0069, 86-0085, 86-0095, 86-0096, 86-0097 I. When an obligation, regardless of its source, i.e., law, contracts,
and 86-0098 must be lifted for not having complied with the pertinent quasicontracts, delicts or quasi-delicts is breached, the contravenor can be
provisions of the PCGG Rules and Regulations, all of which were issued by held liable for damages. The provisions under Title XVIII on “Damages” of
only one Commissioner. the Civil Code govern in determining the measure of recoverable damages.
Nor did the Sandiganbayan gravely abuse its discretion in reducing from II. With regard particularly to an award of interest in the concept of actual
four to only two the conditions imposed for the lifting of the WOS. The and compensatory damages, the rate of interest, as well as the accrual
Sandiganbayan thereby acted with the best of intentions, being all too aware thereof, is imposed, as follows:
that the claim of the Republic to the sequestered assets and properties might
be prejudiced or harmed pendente lite unless the protective conditions were 1. When the obligation is breached, and it consists in the payment of a
annotated in the corporate books of SMC. Moreover, the issue became sum of money, i.e., a loan or forbearance of money, the interest due
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should be that which may have been stipulated in writing. judgments that have become final and executory prior to July 1, 2013, shall
Furthermore, the interest due shall itself earn legal interest from the not be disturbed and shall continue to be implemented applying the rate of
time it is judicially demanded. In the absence of stipulation, the rate of interest fixed therein.
interest shall be 6% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of
Article 1169 of the Civil Code. 13. Oliver v. PSBank, G.R. No. 214567, 4/4/2016
2. When an obligation, not constituting a loan or forbearance of money, Facts:

is breached, an interest on the amount of damages awarded may be Petitioner Mercedes Oliver was a depositor of respondent Philippine
imposed at the discretion of the court at the rate of 6% per annum. No Savings Bank (PSBank) with account number 2812-07991-6. Respondent
interest, however, shall be adjudged on unliquidated claims or damages, Lilia Castro (Castro) was the Assistant Vice President of the Acting Branch
except when or until the demand can be established with reasonable Manager of PSBank San Pedro, Laguna.
certainty.
Oliver’s Position
Accordingly, where the demand is established with reasonable certainty,
the interest shall begin to run from the time the claim is made judicially In her Complaint, dated October 5, 1999, Oliver alleged that sometime in
or extrajudicially (Art. 1169, Civil Code), but when such certainty 1997, she made an initial deposit of P12 million into her PSBank
cannot be so reasonably established at the time the demand is made, the account. During that time, Castro convinced her to loan out her deposit
interest shall begin to run only from the date the judgment of the court as interim or bridge financing for the approved loans of bank
is made (at which time the quantification of damages may be deemed to borrowers who were waiting for the actual release of their loan
have been reasonably ascertained). The actual base for the computation proceeds.
of legal interest shall, in any case, be on the amount finally adjudged.
Under this arrangement, Castro would first show the approved loan
3. When the judgment of the court awarding a sum of money becomes final documents to Oliver. Thereafter, Castro would withdraw the amount
and executory, the rate of legal interest, whether the case falls under needed from Oliver’s account. Upon the actual release of the loan by
paragraph 1 or paragraph 2, above, shall be 6% per annum from such PSBank to the borrower, Castro would then charge the rate of 4% a
finality until its satisfaction, this interim period being deemed to be by then month from the loan proceeds as interim or bridge financing interest.
an equivalent to a forbearance of credit. And, in addition to the above, Together with the interest income, the principal amount previously
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withdrawn from Oliver’s bank account would be deposited back to her discovered another loan for P1,396,310.45, acquired on January 5, 1999
account. Meanwhile, Castro would earn a commission of 10% from the and allegedly issued in connection with the P10 million credit line.
interest.
In Oliver’s passbook, there were no entries from December 17, 1998 to
Their arrangement went on smoothly for months. Due to the frequency of December 27, 1998. The transaction history register, however, showed
bank transactions, Oliver even entrusted her passbook to Castro. several transactions on these very same dates including the crediting of P4.5
Because Oliver earned substantial profit, she was further convinced by million and the debiting of P7 million on December 21, 1998. Oliver then
Castro to avail of an additional credit line in the amount of P10 million. The learned that the additional P4.5 million and P1,396,310.45 loans were also
said credit line was secured by a real estate mortgage on her house and lot in secured by the real estate mortgage, dated January 8, 1998, covering the
Ayala Alabang covered by Transfer Certificate of Title (TCT) No. 137796.5 same property in Ayala Alabang. Oliver received two collection
letters, dated May 13, 1999 and June 18, 1999, from PSBank referring to the
Oliver instructed Castro to pay P2 million monthly to PSBank starting on non-payment of unpaid loans, to wit: (1) P4,491,250.00 from the additional
September 3, 1998 so that her credit line for P10 million would be fully paid loan and (2) P1,396,310.45 from the P10 million credit line. In response,
by January 3, 1999. Oliver protested that she neither availed of the said loans nor authorized the
withdrawal of P7 million from her account. She also claimed that the P10
Beginning September 1998, Castro stopped rendering an accounting for million loan from her credit line was already paid in full.
Oliver. The latter then demanded the return of her passbook. When Castro
showed her the passbook sometime in late January or early February 1995, On July 14, 1999, a final demand letter was sent to Oliver by PSBank,
she noticed several erasures and superimpositions therein. She became very requiring her to pay the unpaid loans. Oliver, however, still refused to pay.
suspicious of the many erasures pertaining to the December 1998 entries so Subsequently, Oliver received a notice of sale involving the property in
she requested a copy of her transaction history register from PSBank. Ayala Alabang, issued by Notary Public Jose Celestino Torres on
September 15, 1999. The said notice informed her of the impending extra-
When her transaction history register was shown to her, Oliver was judicial foreclosure and sale of her house and lot to be held on October 21,
surprised to discover that the amount of P4,491,250.00 (estimated at 1999.
P4.5 million) was entered into her account on December 21, 1998. While
a total of P7 million was withdrawn from her account on the same day, As a result, Oliver filed the subject complaint against PSBank and Castro.
Oliver asserted that she neither applied for an additional loan of P4.5
million nor authorized the withdrawal of P7 million. She also Castro’s Position
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In her Answer, Castro admitted that she and Oliver agreed that the businessman who borrowed money from Oliver. Castro knew him because
latter would lend out money to borrowers at 4% to 5% interest per he was also a depositor and borrower of PSBank San Pedro Branch.
month provided that the former would screen them. She also
acknowledged having been instructed by Oliver to pay the bank P2 As to the amount of P1,396,310.45, Castro explained that it was a separate
million every month to settle the P10 million credit line. Nonetheless, and personal loan obtained by her from Oliver. To secure the payment of
Castro informed Oliver that the payment thereof was subject to the such obligation, Castro mortgaged a property located in Camella Homes III
availability of funds in her account. She disclosed that she made some in Tunasan, Muntinlupa City.
alterations and erasures in Oliver’s passbook so as to reconcile the
passbook with the computer printout of the bank, but denied any Castro admitted that on October 19, 1999, she was terminated by PSBank
attempt to hide the passbook as she was able to return it sometime in because of certain problems regarding client accommodation and loss of
January 1999. confidence.
Castro also denied the deceit imputed against her. She asserted that their PSBank’s Position
arrangement was not "interim or bridge financing" inasmuch as the loans
were entirely new and distinct from that granted by PSBank. When Oliver’s In its defense, PSBank averred that Oliver applied for a credit line of P10
clients multiplied, Castro advised her to apply for a credit line of P10 million which was granted by the bank and which secured by a real estate
million. The said credit line was first approved in December 1997 with a mortgage. Both loans were secured by a real estate mortgage, dated
term of one year. January 8, 1998, and the proceeds thereof were issued as proved by the
release tickets, dated December 21, 1998 and January 5, 1999,
Sometime in August 1998, Castro informed Oliver about the impending respectively.
expiration of her credit line. Subsequently, Oliver applied for another loan
in the amount of P4.5 million as evidenced by a promissory note, dated Issue:
December 21, 1998. On January 5, 1999, another promissory note was
(1) Whether or not the Court of Appeals gravely errer in ruling that the
executed by Oliver to cover a loan in the amount of P1,396,310.45.
petitioner failed to show compelling evidence to prove that fraud
Castro asserted that, on December 21, 1998, upon Oliver’s instruction, a attended the processing and release of the loan of P4.5 million as well as
total of P7 million was withdrawn from the latter’s account and was then the withdrawal of the P7 million pesos from her account.
deposited to the account of one Ben Lim (Lim) on the same date. Lim was a
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(2) Whether or not the Court of Appeals gravely erred when it ruled In this case, Oliver and Castro had a business agreement wherein Oliver
that there was no evidence to prove that the sum of P7 million was would obtain loans from the bank, through the help of Castro as its branch
debited from the acoount of petitioner sans her authorization. manager; and after acquiring the loan proceeds, Castro would lend the
acquired amount to prospective borrowers who were waiting for the actual
(3) Whether or not the Court of Appeals gravely erred when it ruled release of their loan proceeds. Oliver would gain 4% to 5% interest per
that the respondents treated the petitioner’s account with month from the loan proceeds of her borrowers, while Castro would earn a
extraordinary diligence. commission of 10% from the interests. Clearly, an agency was formed
because Castro bound herself to render some service in representation
(4) Whether or not the Court of Appeals gravely erred when it failed to or on behalf of Oliver, in the furtherance of their business pursuit.
hold that the respondents are jointly and severally liable to the
petitioner for damages. For months, the agency between Oliver and Castro benefited both
parties. Oliver, through Castro’s representations, was able to obtain
Ruling: loans, relend them to borrowers, and earn interests; while Castro
acquired commissions from the transactions. Oliver even gave Castro
The petition is impressed with merit. her passbook to facilitate the transactions.
There was an implied agency between Oliver and Castro; the loans were Accordingly, the laws on agency apply to their relationship. Article 1881
properly acquired of the New Civil Code provides that the agent must act within the scope
of his authority. He may do such acts as may be conducive to the
A contract of agency may be inferred from all the dealings between Oliver
accomplishment of the purpose of the agency. Thus, as long as the agent
and Castro. Agency can be express or implied from the acts of the principal,
acts within the scope of the authority given by his principal, the actions
from his silence or lack of action, or his failure to repudiate the agency
of the former shall bind the latter.
knowing that another person is acting on his behalf without authority. The
question of whether an agency has been created is ordinarily a question Oliver claims that the P4.5 million loan, released on December 21, 1998,
which may be established in the same way as any other fact, either by direct and the P1,396,310.45 loan, released on January 5, 1999, were not acquired
or circumstantial evidence. The question is ultimately one of intention. with her consent. Castro and PSBank, on the other hand, countered that
these loans were obtained with Oliver’s full consent. The Court finds that
the said loans were acquired with Oliver’s authority. The promissory notes
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and the release tickets for the said loans bore her signatures. She failed in the testimony of Castro could be gathered that she made a detailed,
to prove that her signatures appearing on the loan documents were plausible and acceptable explanation as to why she had to make numerous
forged. Hence, the loan documents were reliable and these proved that corrections in the entries in the passbook. Even after the corrections
the loans were processed by Castro within the scope of her authority. allegedly done to reconcile the records, the passbook and the transaction
As the loans were validly obtained, PSBank correctly stated that Oliver history register still contained different entries.
had incurred a debt of P4.5 million and P1,396,310.45, or a total of
P5,888,149.33. Curiously, though she asserts that Oliver obtained a loan of P4.5
million and authorized the withdrawal of P7 million, Castro could not
P7 million was improperly withdrawn; agent acted beyond her scope of explain why these transactions were not reflected in the passbook which
authority was in her possession. Bearing in mind that the alleged unauthorized
withdrawal happened on December 21, 1998, while Castro was
Although it was proven that Oliver authorized the loans, in the aggregate questionably withholding the passbook, the Court is of the impression
amount of P5,888,149.33, there was nothing in the records which proved that she manipulated the entries therein to conceal the P7 million
that she also allowed the withdrawal of P7 million from her bank account. withdrawal.
Oliver vehemently denied that she gave any authority whatsoever to either
Castro or PSBank to withdraw the said amount. In her judicial affidavit Further, Castro claims that Oliver instructed her to withdraw the P7 million
before the RTC, Castro initially claimed that Oliver authorized the from her bank account and to deposit the same in Lim’s account. Glaringly,
withdrawal of P7 million from her bank account. Lim was not presented as a witness to substantiate her defense. Even though
she testified that the P7 million transfer from Oliver’s account to Lim’s was
Castro’s lack of authority to withdraw the P7 million on behalf of duly documented, Castro never presented a single documentary proof of that
Oliver became more apparent when she altered the passbook to hide specific transaction.
such transaction. It must be remembered that Oliver entrusted her
passbook to Castro. In the transaction history register for her account, it was The Court is convinced that Castro went beyond the scope of her authority
clear that there was a series of dealings from December 17, 1998 to in withdrawing the P7 million from Oliver’s bank account. Her flimsy
December 23, 1998. When compared with Oliver’s passbook, the latter excuse that the said amount was transferred to the account of a certain Lim
showed that the next transaction from December 16, 1998 was on December deserves scant consideration. Hence, Castro must be held liable for
28, 1998. It was also obvious to the naked eye that the December 28, 1998 prejudicing Oliver.
entry in the passbook was altered. As aptly observed by the RTC, nowhere
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PSBank failed to exercise the highest degree of diligence required of Time and again, the Court has emphasized that the bank is expected to
banking institutions ensure that the depositor’s funds shall only be given to him or his authorized
representative. In Producers Bank of the Phil. v. Court of Appeals, the Court
Aside from Castro, PSBank must also be held liable because it failed to held that the usual banking procedure was that withdrawals of savings
exercise utmost diligence in the improper withdrawal of the P7 million from deposits could only be made by persons whose authorized signatures
Oliver’s bank account. were in the signature cards on file with the bank. In the said case, the
bank therein allowed an unauthorized person to withdraw from its
In the case of banks, the degree of diligence required is more than that of depositor’s savings account, thus, it failed to exercise the required
a good father of a family. Considering the fiduciary nature of their diligence of banks and must be held liable.
relationship with their depositors, banks are duty bound to treat the
accounts of their clients with the highest degree of care. The point is With respect to withdrawal slips, the Court declared in Philippine National
that as a business affected with public interest and because of the Bank v. Pike that "[o]rdinarily, banks allow withdrawal by someone who is
nature of its functions, the bank is under obligation to treat the not the account holder so long as the account holder authorizes his
accounts of its depositors with meticulous care, always having in mind representative to withdraw and receive from his account by signing on the
the fiduciary nature of their relationship. space provided particularly for such transactions, usually found at the back
of withdrawal slips." There, the bank violated its fiduciary duty because it
In Simex International v. Court of Appeals,48 the Court held that the allowed a withdrawal by a representative even though the authorization
depositor expected the bank to treat his account with the utmost fidelity, portion of the withdrawal slip was not signed by the depositor.
whether such account consisted only of a few hundred pesos or of millions.
The bank must record every single transaction accurately, down to the last Finally, in Cagungun v. Planters Development Bank, a case very similar to
centavo, and as promptly as possible. This has to be done if the account is to the present one, the depositors therein entrusted their passbook to the bank
reflect at any given time the amount of money the depositor can dispose of employees for some specific transactions. The bank employees went beyond
as he sees fit, confident that the bank will deliver it as and to whomever he their authority and were able to withdraw from the depositors’ account
directs. A blunder on the part of the bank, such as the dishonor of a check without the latter’s consent. The bank was held liable therein for the acts of
without good reason, can cause the depositor not a little embarrassment if its employees because it failed to safeguard the accounts of its depositors.
not also financial loss and perhaps even civil and criminal litigation.
In the case at bench, it must be determined whether the P7 million was
withdrawn from the bank with the authority of Oliver. As testified to by
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Castro, every withdrawal from the bank was duly evidenced by a cash to present evidence on the facts in issue necessary to establish his claim or
withdrawal slip, a copy of which is given both to the bank and to its client. defense by the amount of evidence required by law." In civil cases, the
Contrary to the position of the CA and that of the respondents, Oliver burden of proof rests upon the plaintiff, who is required to establish his case
cannot be required to produce the cash withdrawal slip for the said by a preponderance of evidence. Once the plaintiff establishes his case, the
transaction because, precisely, she consistently denied giving authority to burden of evidence shifts to the defendant, who, in turn, bears the burden to
withdraw such amount from her account. establish his defense.
Necessarily, the party that must have access to such crucial document would Here, Oliver alleged that she did not authorize the withdrawal of P7 million
either be PSBank or Castro. They must present the said cash withdrawal from her account. To establish her allegation, Oliver presented the
slip, duly signed by Oliver, to prove that the withdrawal of P7 million was following: (1) the transaction history register which showed the withdrawal
indeed sanctioned. Unfortunately, both PSBank and Castro failed to present of P7 million from her account on December 21, 1998; (2) the passbook
the cash withdrawal slip. which contained alterations to conceal the withdrawal on December 21,
1998 while in the possession of Castro; and (3) testimonial evidence that she
From the foregoing, there was a clear showing of PSBank’s failure to did not allow the withdrawal of the said amount. The Court is of the view
exercise the degree of diligence that it ought to have exercised in dealing that Oliver had sufficiently discharged her burden in proving that P7 million
with its clients. It could not prove that the withdrawal of P7 million was was withdrawn from her account without her authorization. Hence, the
duly authorized by Oliver. As a banking institution, PSBank was burden was shifted to the respondents to refute the allegation of Oliver.
expected to ensure that such substantial amount should only be
transacted with the consent and authority of Oliver. PSBank, however, As discussed above, both Castro and PSBank failed to establish the burden
reneged on its fiduciary duty by allowing an encroachment upon its of their defense. They failed to present proof that Oliver authorized the said
depositor’s account without the latter’s permission. Hence, PSBank must be transaction. They could have presented either the cash withdrawal slip for
held liable for such improper transaction. the P7 million on December 21, 1999 or Lim’s testimony to prove the
transfer of funds to the latter’s account, but they did neither. Without an iota
PSBank and Castro failed to discharge their burden and must be held of proof to substantiate the validity of the said transaction, the respondents
solidarily liable unlawfully deprived Oliver of her funds.
The party who alleges a fact has the burden of proving it. Section 1, Rule Indeed, the bank should be solidarily liable with its employee for the
131 of the Rules of Court defines "burden of proof" as "the duty of a party damages committed to its depositor. Under Article 2180 of the Civil Code,
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employers shall be held primarily and solidarily liable for damages Consequently, PSBank’s foreclosure of the real estate mortgage
caused by their employees acting within the scope of their assigned covering the two (2) loans in the total amount of P5,888,149.33 was
tasks. improper. With PSBank being found liable to Oliver for P7 million, after
offsetting her loans would have PSBank and Castro still owing her
Castro, as acting branch manager of PSBank ,was able to facilitate the P1,111,850.77, which must be suitably paid in the form of actual damages.
questionable transaction as she was also entrusted with Oliver’s passbook.
In other words, Castro was the representative of PSBank, and, at the same The award of moral damages must also be upheld. Specifically, in culpa
time, the agent of Oliver, earning commissions from their transactions. contractual or breach of contract, like in the present case, moral
Oddly, PSBank, either consciously or through sheer negligence, allowed the damages are recoverable only if the defendant has acted fraudulently or
double dealings of its employee with its client. Such carelessness and lack in bad faith, or is found guilty of gross negligence amounting to bad
of protection of the depositors from its own employees led to the unlawful faith, or in wanton disregard of his contractual obligations. Verily, the
withdrawal of the P7 million from Oliver’s account. Although Castro was breach must be wanton, reckless, malicious, or in bad faith, oppressive or
eventually terminated by PSBank because of certain problems regarding abusive.
client accommodation and loss of confidence, the damage to Oliver had
already been done. Thus, both Castro and PSBank must be held solidarily Here, Castro and PSBank were utterly reckless in allowing the
liable. withdrawal of a huge amount from Oliver's account without her
consent. The bank's negligence is a result of lack of due care and
Award of damages; invalid foreclosure caution required of managers and employees of a firm engaged in a
business so sensitive and demanding. Hence, the award of Pl00,000.00 as
To recapitulate, the loans of Oliver from PSBank which were secured by moral damages is warranted.
real estate mortages amounted to P5,888,149.33. Finding PSBank and
Castro solidarily liable to Oliver in the amount of P7 million because it The award of exemplary damages is also proper due to the failure of Castro
was improperly withdrawn from her bank account, the Court agrees and PSBank to prevent the unauthorized withdrawal from Oliver's account.
with the RTC that had it not been for the said unauthorized The law allows the grant of exemplary damages to set an example for public
withdrawal, Oliver’s debts amounting to P5,888,149.33 would have good. The Court, however, finds that the amount of exemplary damages
been satisfied. must be decreased to P50,000.00.
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Finally; the Court agrees with the RTC that Castro and PSBank should be Eventually, Sps. Guevarra failed to redeem the subject property within the
held solidarily liable for attorney's fees. Article 2208 of the Civil Code is one-year reglementary period, which led to the cancellation of OCT No. F-
clear that attorney's fees may be recovered when exemplary damages are 31900 and the issuance of Transfer Certificate of Title No.T-16187 in the
awarded or when the plaintiff, through the defendant's act or omission, has name of TCLC. Thereafter, TCLC demanded that Sps. Guevarra vacate the
been compelled to litigate with thirds persons. A decreased amount of property, but to no avail.
P50,000.00 attorney's fees should be sufficient.
Issue:
Whether or not the CA committed a reversible error in ruling that the
repurchase price for the subject property should be fixed by TCLC.
14. Spouses Guevara v. The Commoner Lending Corporation, G.R. No.
204672, February 18, 2015
Ruling:
Facts:
In an extra-judicial foreclosure of registered land acquired under a free
On December 16, 1996, Sps. Guevarra obtained a P320,000.00 loan from patent, the mortgagor may redeem the property within two (2) years
TCLC, which was secured by a real estate mortgage over a 5,532- square from the date of foreclosure if the land is mortgaged to a rural bank
meter parcel of land situated in Guimbal, Iloilo, covered by Original under Republic Act No. (RA) 720, as amended, otherwise known as the
Certificate of Title (OCT) No. F-31900 (subject property), emanating from a Rural Banks Act, or within one (1) year from the registration of the
free patent granted to Sps. Guevarraon February 25, 1986. certificate of sale if the land is mortgaged to parties other than rural
banks pursuant to Act No. 3135. If the mortgagor fails to exercise such
Sps. Guevarra, however, defaulted in the payment of their loan, right, he or his heirs may still repurchase the property within five (5)
promptingTCLC to extra-judicially foreclose the mortgage on the subject years from the expiration of the aforementioned redemption period
property in accordance with Act No. 3135, as amended. In the process, pursuant to Section 119 of the Public Land Act, which states:
TCLC emerged as the highest bidder at the public auction sale held on
June 15, 2000 for the bid amount of P150,000.00, and on August 25, SEC. 119. Every conveyance of land acquired under the free patent or
2000, the certificate of sale was registered with the Registry of Deeds of homestead provisions, when proper, shall be subject to repurchase by the
Iloilo. applicant, his widow, or legal heirs, within a period of five years from the
date of the conveyance.
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In this case, the subject property was mortgaged to and foreclosed by Appellate Court (Belisario) and Salenillas v. CA (Salenillas). On the other
TCLC, which is a lending or credit institution, and not a rural bank; hand, TCLC maintains that it is entitled to its total claims under the
hence, the redemption period is one (1) year from the registration of the promissory note and the mortgage contract in accordance with Section 47 of
certificate of sale on August 25, 2000, or until August 25, 2001. Given the General Banking Law of 2000.
that Sps. Guevarra failed to redeem the subject property within the
aforestated redemption period, TCLC was entitled, as a matter of right, The Commoner Lending Corporation’s argument is partly correct.
to consolidate its ownership and to possess the same. Nonetheless, such
right should not negate Sps. Guevarra’s right to repurchase said property To resolve the matter, it must first be pointed out that case law has equated a
within five (5) years from the expiration of the redemption period on August right of repurchase of foreclosed properties under Section 119 of the Public
25, 2001, or until August 25, 2006, in view of Section 119 of the Public Land Act as a “right of redemption” and the repurchase price as a
Land Act as above-cited. “redemption price.” Thus, in Salenillas, the Court applied then Section 30,
now Section 28, Rule 39 of the Rules of Court (Rules) in the redemption of
In this relation, it is apt to clarify that contrary to TCLC’s claim, the tender the foreclosed property covered by a free patent:
of the repurchase price is not necessary for the preservation of the right of
repurchase, because the filing of a judicial action for such purpose within Now, as regards the redemption price, applying Sec. 30 of Rule 39 of the
the five-year period under Section 119 of the Public Land Actis already [Rules], the petitioners should reimburse the private respondent the amount
equivalent to a formal offer to redeem. On this premise, consignation of the of the purchase price at the public auction plus interest at the rate of
redemption price is equally unnecessary. one per centum per month up to November 17, 1983, together with the
amounts of assessments and taxes on the property that the private
Thus, the RTC and CA both correctly ruled that Sps. Guevarra’s right respondent might have paid after purchase and interest on the last
to repurchase the subject property had not yet expired when Cadastral named amount at the same rate as that on the purchase price.
Case No. 122 was filed on September 8, 2005. That being said, the
Court now proceeds to determine the proper amount of the repurchase The Court has, however, ruled that redemptions from lending or credit
price. institutions, like TCLC, are governed by Section 78 of the General Banking
Act (now Section 47 of the General Banking Law of 2000), which amended
Sps. Guevarrainsist that the repurchase price should be the purchase price at Section 6 of Act No. 3135 in relation to the proper redemption price when
the auction sale plus interest of one percent (1%) per month and other the mortgagee is a bank, or a banking or credit institution.
assessment fees, citing the rulings in the cases of Belisario v. Intermediate
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Nonetheless, the Court cannot subscribe to TCLC’s contention that it is not against the law, it is as if there was no express contract on said
entitled to its total claims under the promissory note and the mortgage interest rate; thus, the interest rate may be reduced as reason and
contract in view of the settled rule that an action to foreclose must be equity demand.
limited to the amount mentioned in the mortgage. Hence, amounts not
stated therein must be excluded, like the penalty charges of three As such, the stipulated three percent (3%) monthly interest should be
percent (3%) per month included in TCLC’s claim. A penalty charge is equitably reduced to one percent (1%) per month or twelve percent (12%)
likened to a compensation for damages in case of breach of the per annum reckoned from the execution of the real estate mortgage on
obligation. Being penal in nature, it must be specific and fixed by the December 12, 1996, until the filing of the petition in Cadastral Case No. 122
contracting parties. on September 8, 2005.
Moreover, the Court notes that the stipulated three percent (3%) In addition to the principal and interest, the repurchase price should also
monthly interest is excessive and unconscionable. In a plethora of cases, include all the expenses of foreclosure, i.e., Judicial Commission,
the Court has affirmed that stipulated interest rates of three percent Publication Fee, and Sheriff’s Fee, in accordance with Section 47 of the
(3%) per month and higher are excessive, iniquitous, unconscionable, General Banking Law of 2000. Considering further that Sps. Guevarra
and exorbitant, hence, illegal and void for being contrary to failed to redeem the subject property within the one-year reglementary
morals. In Agner v. BPI Family Savings Bank, Inc., the Court had the period, they are liable to reimburse TCLC for the corresponding
occasion to rule: Documentary Stamp Tax (DST) and Capital Gains Tax (CGT) it paid
pursuant to Bureau of Internal Revenue (BIR) Revenue Regulations No. 4-
Settled is the principle which this Court has affirmed in a number of 99, which requires the payment of DST on extra-judicial foreclosure sales of
cases that stipulated interest rates of three percent (3%) per month and capital assets initiated by banks, finance and insurance companies, as well
higher are excessive, iniquitous, unconscionable, and exorbitant. While as CGT in cases of non-redemption. CGT and DST are expenses incident to
Central Bank Circular No. 905-82, which took effect on January 1, TCLC’s custody of the subject property, hence, likewise due, under the
1983, effectively removed the ceiling on interest rates for both secured above provision of law.
and unsecured loans, regardless of maturity, nothing in the said
circular could possibly be read as granting carte blanche authority to
lenders to raise interest rates to levels which would either enslave their 15. Sinamban v. China Banking Corporation, G.R. No. 193890, March
borrowers or lead to a hemorrhaging of their assets. Since the 11, 2015
stipulation on the interest rate is void for being contrary to morals, if
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Facts: 2. PN No. OACL 636-95, dated May 23, 1995, for a loan principal of
325,000.00, with interest at 21% per annum; the spouses Sinamban signed
On February 19, 1990, the spouses Danilo and Magdalena Manalastas as solidary co-makers;
(spouses Manalastas) executed a Real Estate Mortgage (REM) in favor of
respondent China Banking Corporation (Chinabank) over two real estate 3. PN No. CLF 5-93, dated February 26, 1991, for a loan principal of
properties covered by Transfer Certificate of Title Nos. 173532-R and ₱1,300,000.00, with interest at 22.5% per annum; only Estanislao Sinamban
173533-R, Registry of Deeds of Pampanga, to secure a loan from signed as solidary co-maker.
Chinabank of ₱700,000.00 intended as working capital in their rice milling
business. During the next few years, they executed several amendments to All of the three promissory notes carried an acceleration clause stating
the mortgage contract progressively increasing their credit line secured by that if the borrowers failed to pay any stipulated interest, installment or
the aforesaid mortgage. Thus, from ₱700,000.00 in 1990, their loan limit loan amortization as they accrued, the notes shall, at the option of
was increased to ₱1,140,000.00 on October 31, 1990, then to ₱1,300,000.00 Chinabank and without need of notice, immediately become due and
on March 4, 1991, and then to, 450,000.00 on March 23, 1994. The spouses demandable. A penalty clause also provides that an additional amount shall
Manalastas executed several promissory notes (PNs) in favor of Chinabank. be paid equivalent to 1/10 of 1% per day of the total amount due from date
In two of the PNs, petitioners Estanislao and Africa Sinamban (spouses of default until fully paid, and the further sum of 10% of the total amount
Sinamban) signed as co-makers. due, inclusive of interests, charges and penalties, as and for attorney’s fees
and costs.
On November 18, 1998, Chinabank filed a Complaint for sum of money,
docketed as Civil Case No. 11708, against the spouses Manalastas and the In Chinabank’s Statement of Account dated May 18, 1998, reproduced
spouses Sinamban (collectively called the defendants) before the RTC. The below, the outstanding balances of the three loans are broken down, as
complaint alleged that they reneged on their loan obligations under the PNs follows:
which the spouses Manalastas executed in favor of Chinabank on different
dates, namely: (a) PN No. OACL 636-95 has an outstanding principal of ₱325,000.00,
cumulative interest of ₱184,679.00, and cumulative penalties of
1. PN No. OACL 634-95, dated April 24, 1995, for a loan principal of ₱258,050.00, or a total amount due of ₱767,729.00; (b) PN No. OACL 634-
₱1,800,000.00, with interest at 23% per annum; the spouses Manalastas 95 has an outstanding principal of ₱1,800,000.00, cumulative interest of
signed alone as makers. ₱1,035,787.50, and cumulative penalties of 1,429,200.00, or a total amount
due of 4,264,987.50; and
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(c) PN No. CLF 5-93 has an outstanding principal of ₱148,255.08, collateral was worth more than ₱10,000,000.00, enough to answer for
cumulative interest of ₱64,461.84, and cumulative penalties of ₱156,541.58, all the loans, interests and penalties. They also claimed that they were
or a total amount due of ₱369,258.50. Note that from the original amount of not notified of the auction sale, and denied that they knew about the
₱1,300,000.00, the loan principal had been reduced to only ₱148,255.08 as Certificate of Sale and the Statement of Account dated May 18, 1998,
of May 18, 1998. and insisted that Chinabank manipulated the foreclosure sale to
exclude them therefrom. By way of counterclaim, the Spouses
On the basis of the above statement of account, and pursuant to the Sinamban prayed for damages and attorney’s fees of 25%, plus
promissory notes, Chinabank instituted extrajudicial foreclosure litigation expenses and costs of suit.
proceedings against the mortgage security. The foreclosure sale was held on
May 18, 1998, with Chinabank offering the highest bid of ₱4,600,000.00, The spouses Manalastas were declared in default in the RTC Order dated
but by then the defendants’ total obligations on the three promissory notes April 6, 1999, and Chinabank was allowed to present evidence ex parte as
had risen to ₱5,401,975.00, before attorney’s fees of 10% and auction against them, but at the pre-trial conference held on July 5, 1999, the
expenses, leaving a loan deficiency of ₱1,758,427.87.14. Thus, in the spouses Sinamban and their counsel also did not appear; hence, in the
complaint before the RTC, Chinabank prayed to direct the defendants to Order dated July 5, 1999, the RTC allowed Chinabank to present evidence
jointly and severally settle the said deficiency, plus 12% interest per annum ex parte against the defendants before the Branch Clerk of Court. During the
after May 18, 1998,15 the date of the auction sale. testimony of Rosario D. Yabut, Branch Manager of Chinabank-San
Fernando Branch, all the foregoing facts were adduced and confirmed,
The spouses Sinamban, in their Answer dated February 26, 1999, averred particularly the identity of the pertinent loan documents and the signatures
that they do not recall having executed PN No. OACL 636-95 for of the defendants. On July 21, 1999, the court admitted the exhibits of
₱325,000.00 on May 23, 1995, or PN No. CLF 5-93 for ₱1,300,000.00 on Chinabank and declared the case submitted for decision.
February 26, 1991, and had no participation in the execution of PN No.
OACL 634-95 for ₱1,800,000.00 on April 24, 1995. They however admitted Issue:
that they signed some PN forms as co-makers upon the request of the
spouses Manalastas who are their relatives; although they insisted that they Whether or not the Honorable Court of Appeals erred in not
derived no money or other benefits from the loans. They denied knowing considering that the Sps. Sinamban’s obligations under PN# OACL
about the mortgage security provided by the spouses Manalastas, or that the 636-95 dated May 23, 1995 in the principal sum of Php325,000.00 and
latter defaulted on their loans. They also refused to acknowledge the loan PN# CLF 5-93 dated February 26, 1991 in the principal sum of
deficiency of ₱1,758,427.87 on the PNs, insisting that the mortgage Php1,300,000.00 are more onerous and burdensome on their part as
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mere sureties (co-makers) of their co-defendants-spouses Danilo and by him through the signature he affixes thereto as a token of his good
Magdalena Manalastas’ (hereinafter referred to as the "Sps. faith. If he reneges on his promise without cause, he forfeits the
Manalastas") obligations over the same, compared to the Sps. sympathy and assistance of this Court and deserves instead its sharp
Manalastas’ sole obligation under PN# OACL 634-95 dated 24 April repudiation."
1995 in the principal amount of Php1,800,000.00, such that the proceeds
of the auction sale of the properties securing all the three (3) Employing words of common commercial usage and well-accepted legal
promissory notes should first be applied to satisfy the promissory notes significance, the three subject PNs uniformly describe the solidary nature
signed by the Sps. Sinamban; and and extent of the obligation assumed by each of the defendants in Civil Case
No. 11708, to wit:
Whether or not the Honorable Court of Appeals erred in not considering the
facts indubitably showing that it is the Sps. Sinamban, as the debtors, and "FOR VALUE RECEIVED, I/We jointly and severally promise to pay to
not the respondent bank, who are given the choice under Article 1252 of the the CHINA BANKING CORPORATION or its order the sum of PESOS."
Civil Code to have the proceeds of the auction sale applied as payments to
their obligations under PN# OACL 636-95 dated 23 May 1995 and PN# According to Article 2047 of the Civil Code, if a person binds himself
CLF 5-93 dated 26 February 1991. solidarily with the principal debtor, the provisions of Articles 1207 to
1222 of the Civil Code (Section 4, Chapter 3,Title I, Book IV) on joint
Ruling: and solidary obligations shall be observed. Thus, where there is a
concurrence of two or more creditors or of two or more debtors in one and
The Court modifies the CA decision. the same obligation, Article 1207 provides that among them, "[t]here is a
solidary liability only when the obligation expressly so states, or when the
A co-maker of a PN who binds himself with the maker "jointly and law or the nature of the obligation requires solidarity." It is settled that
severally" renders himself directly and primarily liable with the maker when the obligor or obligors undertake to be "jointly and severally"
on the debt, without reference to his solvency. liable, it means that the obligation is solidary. In this case, the spouses
Sinamban expressly bound themselves to be jointly and severally, or
"A promissory note is a solemn acknowledgment of a debt and a formal solidarily, liable with the principal makers of the PNs, the spouses
commitment to repay it on the date and under the conditions agreed Manalastas.
upon by the borrower and the lender. A person who signs such an
instrument is bound to honor it as a legitimate obligation duly assumed
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Moreover, as the CA pointed out, in Paragraph 5 of the PNs, the borrowers with the spouses Manalastas, but notthe entire deficiency judgment of
and their co-makers expressly authorized Chinabank, as follows: ₱1,758,427.87."
[T]o apply to the payment of this note and/or any other particular obligation Significantly, in modifying the RTC’s second amended decision, which
or obligations of all or any one of us to the CHINA BANKING provides for the pro rata distribution of the loan deficiency of
CORPORATION as the said Corporation may select, irrespective of the ₱1,758,427.87, the CA first applied the entire net proceeds of the auction
dates of maturity, whether or not said obligations are then due, any or all sale of ₱4,183,744.63 (after auction expenses of ₱416,255.37), to PN No.
moneys, securities and things of value which are now or which may OACL 634-95, which on May 18, 1998 had an outstanding balance of
hereafter be in its hands on deposit or otherwise to the credit of, or ₱4,264,987.50, inclusive of interest and penalties, plus 10% attorney’s fees,
belonging to, all or any one of us, and the CHINA BANKING or a total of ₱4,691,486.25. Thus, ₱4,691,486.25 less ₱4,183,744.63 leaves
CORPORATION is hereby authorized to sell at public or private sale such a deficiency on PN No. OACL 634-95 of ₱507,741.62, which is due solely
securities or things of value for the purpose of applying their proceeds to from the spouses Manalastas.
such payments.
As for PN No. OACL 636-95, the CA ordered the spouses Sinamban to pay,
Pursuant to Article 1216 of the Civil Code, as well as Paragraph 5 of solidarily with the spouses Manalastas, the entire amount due thereon,
the PNs, Chinabank opted to proceed against the co-debtors ₱844,501.90, consisting of the loan principal of ₱767,729.00 plus accrued
simultaneously, as implied in its May 18, 1998 statement of account interest, penalties and 10% attorney’s fees; concerning PN No. CLF 5-93,
when it applied the entire amount of its auction bid to the aggregate the CA ordered the spouses Sinamban to pay, solidarily with the spouses
amount of the loan obligations. Manalastas, the amount of ₱406,184.35, consisting of the balance of the
loan principal of ₱369,258.50 plus accrued interest, penalties and 10%
The PNs were executed to acknowledge each loan obtained from the credit attorney’s fees. The CA further ordered the payment of 12% interest per
line extended by Chinabank, which the principal makers and true annum from November 18, 1998, the date of judicial demand, until fully
beneficiaries, the spouses Manalastas, secured with a REM they executed paid, on the above deficiencies.
over their properties. As the RTC noted in its Order dated December 8,
1999, "the real estate mortgage was constituted to secure all the three (3) Article 1216 of the Civil Code provides that "the creditor may proceed
promissory notes," concluding that "[j]ust as the liability of the [spouses] against any one of the solidary debtors or some or all of them
Sinamban was lessened by the foreclosure proceedings, so must they also simultaneously. The demand made against one of them shall not be an
share in the deficiency judgment, in proportion to the PNs they co-signed obstacle to those which may subsequently be directed against the
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others, so long as the debt has not been fully collected." Article 1242 of But as the Court has noted, by deducting the auction proceeds from the
the Civil Code does not apply, as urged by the petitioners, because in the aggregate amount of the three loans due, Chinabank in effect opted to apply
said article the situation contemplated is that of a debtor with several debts the entire proceeds of the auction simultaneously to all the three loans. This
due, whereas the reverse is true, with each solidary debt imputable to implies that each PN will assume a pro rata portion of the resulting
several debtors. deficiency on the total indebtedness as bears upon each PN’s outstanding
balance. Contrary to the spouses Sinamban’s insistence, none of the three
While the CA correctly noted that the choice is given to the solidary creditor PNs is more onerous than the others to justify applying the proceeds
to determine against whom he wishes to enforce payment, the CA stated according to Article 1254 of the Civil Code, in relation to Articles 1252 and
that Chinabank, in the exercise of the aforesaid option, chose to apply the 1253. Since each loan, represented by each PN, was obtained under a
net proceeds of the extrajudicial foreclosure sale first to the PN solely single credit line extended by Chinabank for the working capital
signed by spouses Manalastas. Thus, the net proceeds were applied first to requirements of the spouses Manalastas’ rice milling business, which
PN No. OACL 634-95 in the principal amount of ₱1,800,000.00, instead of credit line was secured also by a single REM over their properties, then
pro rata to all three PNs due. each PN is simultaneously covered by the same mortgage security, the
foreclosure of which will also benefit them proportionately. No PN
The Court finds this factual conclusion of the CA not supported by any enjoys any priority or preference in payment over the others, with the
evidence or any previous arrangement. To the contrary, as clearly shown in only difference being that the spouses Sinamban are solidarily liable for
its Statement of Account dated May 18, 1998, Chinabank opted to apply the the deficiency on two of them.
entire auction proceeds to the aggregate amount of the three PNs due,
₱5,401,975.00 (before attorney’s fees and auction expenses). Had it chosen In short, in the CA decision, the spouses Manalastas would be solely liable
to enforce the debts as ruled by the CA, the Statement of Account would on PN No. OACL 634-95 for only ₱507,741.62 (instead of the much bigger
have shown that the loan due on PN No. OACL 634-95 which is amount of ₱1,388,320.55 which this Court found), whereas the spouses
₱4,691,486.25, should have been deducted first from the net auction Sinamban would be solidarily liable with the spouses Manalastas for a total
proceeds of ₱4,183,744.63, arriving at a deficiency of ₱507,741.62 on PN deficiency of ₱1,250,686.25 on PN No. OACL 636-95 and PN No. CLF 5-
No. OACL 634-95 alone; thereby, leaving no remainder of the proceeds 93. But under the Court’s interpretation, the spouses Sinamban are solidarily
available to partially settle the other two PNs. As it appears, the auction liable with the spouses Manalastas for only ₱370,107.32on the said two
proceeds are not even sufficient to cover just PN No. OACL 634-95 alone. PNs, for a significant difference of ₱880,578.93.
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Pursuant to Monetary Board Circular No. 799, effective July 1, 2013, 16. Metropolitan Bank v. SF Naguiat Enterprises Inc, G.R. No. 178407,
the rate of interest for the loan or forbearance of any money, goods or March 18, 2015
credits and the rate allowed in judgments, in the absence of an express
contract as to such rate of interest, has been reduced to six percent Facts:
(6%) per annum.
Sometime in April 1997, Spouses Rommel Naguiat and Celestina
The subject three PNs bear interests ranging from 21% to 23% per annum, Naguiat and S.F. Naguiat Enterprises, Inc. (S.F. Naguiat) executed a
exclusive of penalty of 1% on the overdue amount per month of delay, real estate mortgage in favor of Metropolitan Bank and Trust Company
whereas in its complaint, Chinabank prayed to recover only the legal rate of (Metrobank) to secure certain credit accommodations obtained from
12% on whatever judgment it could obtain. Meanwhile, the Monetary Board the latter amounting to P17 million. The mortgage was constituted over
of the Bangko Sentral ng Pilipinas in its Resolution No. 796 dated May 16, the following properties:
2013, and now embodied in Monetary Board Circular No. 799, has effective
July 1, 2013 reduced to 6%, from 12%, the legal rate of interest for the loan (1) TCT No. 58676 - a parcel of land in the Barrio of Pulung Bulu,
or forbearance of any money, goods or credits and the rate allowed in Angeles, Pampanga, with an area of 489 square meters; and
judgments, in the absence of stipulation. Since Chinabank demanded only (2) TCT No. 310523 - a parcel of land in Marikina, Rizal, with an area
the legal, not the stipulated, interest rate on the deficiency and attorney’s of 1,200.10 square meters.
fees due, the defendants will solidarily pay interest on their shares in the
deficiency at the rate of 12% from November 18, 1998 to June 30, 2013, On March 3, 2005, S.F. Naguiat represented by Celestina T. Naguiat,
and 6% from July 1, 2013 until fully paid. WHEREFORE, the Decision of Eugene T. Naguiat, and Anna N. Africa obtained a loan from Metrobank in
the Court of Appeals dated May 19, 2010 in CA-G.R. CV No. 66274 is the amount of P1,575,000.00. The loan was likewise secured by the 1997
MODIFIED. The Decision dated July 30, 1999 and the Order dated real estate mortgage by virtue of the Agreement on Existing Mortgage(s)
December 8, 1999 of the Regional Trial Court of San Fernando City, executed between the parties on March 15, 2004.
Pampanga, Branch 45 in Civil Case No. 11708 are hereby AFFIRMED with
MODIFICATIONS On July 7, 2005, S.F. Naguiat filed a Petition for Voluntary Insolvency
with Application for the Appointment of a Receiver pursuant to Act No.
1956, as amended, before the Regional Trial Court of Angeles City and
which was raffled to Branch 56. Among the assets declared in the Petition
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was the property covered by TCT No. 58676 (one of the properties
mortgaged to Metrobank). Aggrieved by both Orders of Executive Judge Gabitan-Erum, Metrobank
filed a Petition for certiorari and mandamus before the Court of Appeals on
Presiding Judge Irin Zenaida S. Buan (Judge Buan) issued the Order15dated June 22, 2006. S.F. Naguiat filed its Manifestation stating that it was not
July 12, 2005, declaring S.F. Naguiat insolvent; directing the Deputy Sheriff interposing any objection to the Petition and requested that the issues raised
to take possession of all the properties of S.F. Naguiat until the appointment in the Petition be resolved without objection and argument on its part.
of a receiver/assignee; and forbidding payment of any debts due, delivery of
properties, and transfer of any of its properties. On November 15, 2006, the Court of Appeals rendered its Decision
dismissing the Petition on the basis of Metrobank's failure to "obtain the
Pending the appointment of a receiver, Judge Buan directed the creditors, permission of the insolvency court to extrajudicially foreclose the
including Metrobank, to file their respective Comments on the Petition. In mortgaged property. The Court of Appeals declared that "a suspension
lieu of a Comment, Metrobank filed a Manifestation and Motion of the foreclosure proceedings is in order, until an assignee or receiver,
informing the court of Metrobank's decision to withdraw from the is elected or appointed by the insolvency court] so as to afford the
insolvency proceedings because it intended to extrajudicially foreclose insolvent debtor proper representation in the foreclosure proceedings
the mortgaged property to satisfy its claim against S.F. Naguiat.
Metrobank filed a Motion for Reconsideration and Clarification, which was
Subsequently, S.F. Naguiat defaulted in paying its loan. On November 8, denied by the Court of Appeals in its Resolution dated June 14, 2007.The
2005, Metrobank instituted an extrajudicial foreclosure proceeding against Court of Appeals held that leave of court must be obtained from the
the mortgaged property covered by TCT No. 58676 and sold the property at insolvency court whether the foreclosure suit was instituted judicially
a public auction held on December 9, 2005 to Phoenix Global Energy, Inc., or extrajudicially so as to afford the insolvent estate's proper
the highest bidder. Afterwards, Sheriff Claude B. Balasbas prepared the representation (through the assignee) in such action and "to avoid the
Certificate of Sale and submitted it for approval to Clerk of Court Vicente S. dissipation of the insolvent debtor's assets in possession of the
Fernandez, Jr. and Executive Judge Bernardita Gabitan-Erum (Executive insolvency court without the latter's knowledge.
Judge Gabitan-Erum). However, Executive Judge Gabitan-Erum issued
the Order dated December 15, 2005 denying her approval of the Issue:
Certificate of Sale in view of the July 12, 2005 Order issued by the
insolvency court. Metrobank's subsequent Motion for Reconsideration was Whether the approval and consent of the insolvency court is required
also denied in the Order dated April 24, 2006. under Act No. 1956, otherwise known as the Insolvency Law, before a
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secured creditor like petitioner Metropolitan Bank and Trust Company creditor [is] not allowed to prove any part of his debt," but the assignee
can proceed with the extrajudicial foreclosure of the mortgaged shall deliver to the creditor the mortgaged property. Hence, explicitly under
property. Section 59 and as a necessary consequence flowing from the exclusive
jurisdiction of the insolvency court over the estate of the insolvent, the
Ruling: mortgaged property must first be formally delivered by the court or the
assignee (if one has already been elected) before a mortgagee-creditor
Yes. A secured creditor is required to ask the permission of the insolvent can initiate proceedings for foreclosure.
court before said creditor can foreclose the mortgaged property. Here, the foreclosure and sale of the mortgaged property of the debtor,
without leave of court, contravene the provisions of Act No. 1956 and
With the declaration of insolvency of the debtor, insolvency courts violate the Order dated July 12, 2005 of the insolvency court which
"obtain full and complete jurisdiction over all property of the insolvent declared S.F. Naguiat insolvent and forbidden from making any
and of all claims by and against it." It follows that the insolvency court transfer of any of its properties to any person.
has exclusive jurisdiction to deal with the property of the insolvent.
Consequently, after the mortgagor-debtor has been declared insolvent Petitioner would insist that "respondent was given the opportunity to be
and the insolvency court has acquired control of his estate, a mortgagee represented in the public auction sale conducted on December 9, 2005"
may not, without the permission of the insolvency court, institute because it received a copy of the Notice of the Sheriffs Sale on November
proceedings to enforce its lien. In so doing, it would interfere with the 11, 2005;" and the Notice of Auction Sale was published in a newspaper of
insolvency court's possession and orderly administration of the general circulation. However, respondent allegedly opted not to participate
insolvent's properties. by not attending the public auction sale.
It is true that under Section 59 of Act No. 1956, the creditor is given the Such was to be expected because when the foreclosure proceeding was
option to participate in the insolvency proceedings by proving the balance of initiated, respondent was already declared insolvent. Indeed, upon the
his debt, after deducting the value of the mortgaged property as agreed upon adjudication of insolvency, the insolvent ceased to exist and was in effect
with the receiver or determined by the court or by a sale of the property as judicially declared dead as of the filing of the insolvency petition and by the
directed by the court; or proving his whole debt, after releasing his claim to nature of things had no further interest in the property covered by the
the receiver/sheriff before the election of an assignee, or to the assignee. mortgage. Under Section 32 of Act No. 1956, title to the insolvent's estate
However, Section 59 of Act No. 1956 proceeds to state that when "the relates back to the filing of the insolvency petition upon the election of the
property is not sold or released, and delivered up, or its value fixed, the assignee who shall thereafter act on behalf of all the creditors. Under
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Section 36, the assignee has the power to redeem all valid mortgages or the insolvent or obtaining the highest return possible from its sale for the
sell property subject to mortgage. Thus, the extrajudicial foreclosure of benefit of all the creditors (both secured and unsecured).
the mortgaged property initiated by petitioner without leave of
insolvency court would effectively exclude the assignee's right to
participate in the public auction sale of the property and to redeem the LAW ON SECRECY OF BANK DEPOSITS
foreclosed property to the prejudice of all the other creditors of the 1. BSB Group v. Go, G.R. No. 168644, February 16, 2010
insolvent.
Facts:
Petitioner filed its Manifestation and Motion before the insolvency court on
September 7, 2005, praying that it would no longer file the Comment Petitioner is a duly organized domestic corporation presided by its
required as it opted to exercise its right to extrajudicially foreclose the representative, Ricardo Bangayan, husband of herein respondent Sally Go.
property mortgaged and that it "be allowed to temporarily withdraw its Respondent was employed as a cashier, and was engaged, among others, to
active participation in the . . . proceeding pending the outcome of the extra- receive and account for the payments made by the various customers of the
judicial foreclosure proceeding of the mortgaged property." company. Bangayan filed with the Manila Prosecutor’s Office a
complaint for estafa/qualified theft against respondent alleging that
Petitioner should have waited for the insolvency court to act on its several checks issued by the company’s customers in payment of their
Manifestation and Motion before foreclosing the mortgaged property obligation were, instead of being turned over to the company’s coffers,
and its lien (assuming valid) would not be impaired or its claim in any indorsed by respondent who deposited the same to her personal
way jeopardized by any reasonable delay. There are mechanisms within banking account maintained at Security Bank. Accordingly, respondent
Act No. 1956 such as Section 59 that ensure that the interests of the was charged and the prosecution moved for the issuance of subpoena duces
secured creditor are adequately protected. Parenthetically, mortgage tecum/ad testificandum against the respective managers or records
liens are retained in insolvency proceedings. What is merely suspended custodians of Security Bank and Asian Savings Bank. Respondent opposed
until court approval is obtained is the creditor's enforcement of such and meanwhile, prosecution was able to present in court the testimony of
preference. one Security Bank representative. Petitioner moved to exclude the testimony
but was denied by the trial court. CA reversed and set aside the order.
On the other hand, to give the secured creditor a free hand in foreclosing its
collateral upon the initiation of insolvency proceedings may frustrate the Issue:
basic objectives of Act No. 1956 of maximizing the value of the estate of
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Whether or not the testimony on the particulars of respondent’s the checks subject of the testimonial and documentary evidence sought to be
account with Security Bank, as well as of the corresponding evidence of suppressed. Neither do the allegations in said Information make mention
the checks allegedly deposited in said account, constitutes an of the supposed bank account in which the funds represented by the
unallowable inquiry under R.A. 1405. checks have allegedly been kept.
Ruling: In other words, it can hardly be inferred from the indictment itself that the
Security Bank account is the ostensible subject of the prosecution’s inquiry.
Yes. The Court found guidance in the relevant portions of the legislative Without needlessly expanding the scope of what is plainly alleged in the
deliberations on Senate Bill No. 351 and House Bill No. 3977, which later Information, the subject matter of the action in this case is the money
became the Bank Secrecy Act, and it held that the absolute confidentiality alleged to have been stolen by respondent, and not the money
rule in R.A. No. 1405 actually aims at protection from unwarranted equivalent of the checks which are sought to be admitted in evidence.
inquiry or investigation if the purpose of such inquiry or investigation Thus, it is that, which the prosecution is bound to prove with its evidence,
is merely to determine the existence and nature, as well as the amount and no other.
of the deposit in any given bank account.
It comes clear that the admission of testimonial and documentary evidence
What indeed constitutes the subject matter in litigation in relation to Section relative to respondent’s Security Bank account serves no other purpose than
2 of R.A. No. 1405 has been pointedly and amply addressed in Union Bank to establish the existence of such account, its nature and the amount kept in
of the Philippines v. Court of Appeals, in which the Court noted that the it. It constitutes an attempt by the prosecution at an impermissible inquiry
inquiry into bank deposits allowable under R.A. No. 1405 must be into a bank deposit account the privacy and confidentiality of which is
premised on the fact that the money deposited in the account is itself protected by law. On this score alone, the objection posed by respondent in
the subject of the action. Given this perspective, we deduce that the her motion to suppress should have indeed put an end to the controversy at
subject matter of the action in the case at bar is to be determined from the very first instance it was raised before the trial court.
the indictment that charges respondent with the offense, and not from
the evidence sought by the prosecution to be admitted into the records.
In the criminal Information filed with the trial court, respondent, 2. GSIS v. Court of Appeals, G.R. No. 189206, June 8, 2011
unqualifiedly and in plain language, is charged with qualified theft by
abusing petitioner’s trust and confidence and stealing cash. The said Facts:
Information makes no factual allegation that in some material way involves
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The subject of this petition for certiorari is the Decision of the Court of In the course of the hearing, GSIS requested for the issuance of a subpoena
Appeals in CA-G.R. SP No. 82647 allowing the quashal by the Regional duces tecum to the custodian of records of Westmont Bank to produce the
Trial Court (RTC) of Makati of a subpoena for the production of bank following documents:
ledger. This case is incident to Civil Case No. 99-1853, which is the main
case for collection of sum of money with damages filed by Industrial 1. Ledger covering the account of DOMSAT Holdings, Inc. with Westmont
Bank of Korea, Tong Yang Merchant Bank, First Merchant Banking Bank (now United Overseas Bank), any and all documents, records, files,
Corporation, Land Bank of the Philippines, and Westmont Bank (now books, deeds, papers, notes and other data and materials relating to the
United Overseas Bank), collectively known as the Banks against account or transactions of DOMSAT Holdings, Inc. with or through the
Domsat Holdings, Inc. (Domsat) and the Government Service Insurance Westmont Bank (now United Overseas Bank) for the period January 1997
System (GSIS). Said case stemmed from a Loan Agreement, whereby the to December 2002, in his/her direct or indirect possession, custody or
Banks agreed to lend United States (U.S.) $11 Million to Domsat for the control (whether actual or constructive), whether in his/her capacity as
purpose of financing the lease and/or purchase of a Gorizon Satellite from Custodian of Records or otherwise;
the International Organization of Space Communications (Intersputnik).
2. All applications for cashiers/ managers checks and bank transfers funded
The controversy originated from a surety agreement by which Domsat by the account of DOMSAT Holdings, Inc. with or through the Westmont
obtained a surety bond from GSIS to secure the payment of the loan Bank (now United Overseas Bank) for the period January 1997 to December
from the Banks. 2002, and all other data and materials covering said applications, in his/her
direct or indirect possession, custody or control (whether actual or
When Domsat failed to pay the loan, GSIS refused to comply with its constructive), whether in his/her capacity as Custodian of Records or
obligation reasoning that Domsat did not use the loan proceeds for the otherwise;
payment of rental for the satellite. GSIS alleged that Domsat, with
Westmont Bank as the conduit, transferred the U.S. $11 Million loan 3. Ledger covering the account of Philippine Agila Satellite, Inc. with
proceeds from the Industrial Bank of Korea to Citibank New York account Westmont Bank (now United Overseas Bank), any and all documents,
of Westmont Bank and from there to the Binondo Branch of Westmont records, files, books, deeds, papers, notes and other data and materials
Bank. The Banks filed a complaint before the RTC of Makati against relating to the account or transactions of Philippine Agila Satellite, Inc. with
Domsat and GSIS. or through the Westmont bank (now United Overseas Bank) for the period
January 1997 to December 2002, in his/her direct or indirect possession,
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custody or control (whether actual or constructive), whether in his/her The case at bench is for the collection of a sum of money from
capacity as Custodian of Records or otherwise; defendants that obtained a loan from the plaintiff. The loan was
secured by defendant GSIS which was the surety. It is the contention of
4. All applications for cashiers/managers checks funded by the account of defendant GSIS that the proceeds of the loan was deviated to purposes
Philippine Agila Satellite, Inc. with or through the Westmont Bank (now other than to what the loan was extended. The quashal of the subpoena
United Overseas Bank) for the period January 1997 to December 2002, and would deny defendant GSIS its right to prove its defenses.
all other data and materials covering said applications, in his/her direct or
indirect possession, custody or control (whether actual or constructive), WHEREFORE, for lack of merit the motion is DENIED.
whether in his/her capacity as Custodian of Records or otherwise.
On 26 June 2003, another Order was issued by the RTC denying the motion
The RTC issued a subpoena decus tecum on 21 November 2002. A motion for reconsideration filed by the banks. On 1 September 2003 however,
to quash was filed by the banks on three grounds: 1) the subpoena is the trial court granted the second motion for reconsideration filed by the
unreasonable, oppressive and does not establish the relevance of the banks. The previous subpoenas issued were consequently quashed. The trial
documents sought; 2) request for the documents will violate the Law on court invoked the ruling in Intengan v. Court of Appeals, where it was ruled
Secrecy of Bank Deposits; and 3) GSIS failed to advance the reasonable that foreign currency deposits are absolutely confidential and may be
cost of production of the documents. Domsat also joined the banks motion examined only when there is a written permission from the
to quash through its Manifestation/Comment. On 9 April 2003, the RTC depositor. The motion for reconsideration filed by GSIS was denied on 30
issued an Order denying the motion to quash for lack of merit. We quote the December 2003.
pertinent portion of the Order, thus:
Issue:
After a careful consideration of the arguments of the parties, the Court did
not find merit in the motion. Whether there is grave abuse of discretion on the part of the Court of
Appeals in ruling that Domsats deposit with Westmont Bank cannot be
The serious objection appears to be that the subpoena is violative of the Law examined and in finding that the banks second motion for
on Secrecy of Bank Deposit, as amended. The law declares bank deposits reconsideration in Civil Case No. 99-1853 is procedurally acceptable.
to be absolutely confidential except: xxx (6) In cases where the money
deposited or invested is the subject matter of the litigation. Ruling:
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No. GSIS insists that Domsats deposit with Westmont Bank can be The Banks maintain that Republic Act No. 1405 is not the applicable
examined and inquired into. It anchored its argument on Republic Act No. law in the instant case because the Domsat deposit is a foreign currency
1405 or the Law on Secrecy of Bank Deposits, which allows the disclosure deposit, thus covered by Republic Act No. 6426. Under said law, only
of bank deposits in cases where the money deposited is the subject matter of the consent of the depositor shall serve as the exception for the
the litigation. GSIS asserts that the subject matter of the litigation is the U.S. disclosure of his/her deposit. The Banks counter the arguments of GSIS as
$11 Million obtained by Domsat from the Banks to supposedly finance the a mere rehash of its previous arguments before the Court of Appeals. They
lease of a Russian satellite from Intersputnik. Whether or not it should be justify the issuance of the subpoena as an interlocutory matter which may be
held liable as a surety for the principal amount of U.S. $11 Million, GSIS reconsidered anytime and that the pro forma rule has no application to
contends, is contingent upon whether Domsat indeed utilized the amount to interlocutory orders.
lease a Russian satellite as agreed in the Surety Bond Agreement. Hence,
GSIS argues that the whereabouts of the U.S. $11 Million is the subject It appears that only GSIS appealed the ruling of the Court of Appeals
matter of the case and the disclosure of bank deposits relating to the pertaining to the quashal of the subpoena for the production of Domsats
U.S. $11 Million should be allowed. bank ledger with Westmont Bank. Since neither Domsat nor the Banks
interposed an appeal from the other portions of the decision, particularly for
GSIS also contends that the concerted refusal of Domsat and the banks to the production of applications for cashiers or managers checks by Domsat
divulge the whereabouts of the U.S. $11 Million will greatly prejudice and through Westmont Bank, as well as a copy of an agreement and/or contract
burden the GSIS pension fund considering that a substantial portion of this and/or memorandum between Domsat and/or Philippine Agila Satellite and
fund is earmarked every year to cover the surety bond issued. Intersputnik for the acquisition and/or lease of a Gorizon satellite, the latter
became final and executory.
Lastly, GSIS defends the acceptance by the trial court of the second motion
for reconsideration filed by the banks on the grounds that it is pro forma and GSIS invokes Republic Act No. 1405 to justify the issuance of the subpoena
did not conform to the notice requirements of Section 4, Rule 15 of the while the banks cite Republic Act No. 6426 to oppose it. The core issue is
Rules of Civil Procedure. which of the two laws should apply in the instant case.
Domsat denies the allegations of GSIS and reiterates that it did not give a Republic Act No. 1405 was enacted in 1955. Section 2 thereof was first
categorical or affirmative written consent or permission to GSIS to examine amended by Presidential Decree No. 1792 in 1981 and further amended by
its bank statements with Westmont Bank. Republic Act No. 7653 in 1993. It now reads:
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Section 2. All deposits of whatever nature with banks or banking whatsoever. (As amended by PD No. 1035, and further amended by PD No.
institutions in the Philippines including investments in bonds issued by 1246, prom. Nov. 21, 1977.)
the Government of the Philippines, its political subdivisions and its
instrumentalities, are hereby considered as of an absolutely confidential On the one hand, Republic Act No. 1405 provides for four (4) exceptions
nature and may not be examined, inquired or looked into by any when records of deposits may be disclosed. These are under any of the
person, government official, bureau or office, except upon written following instances: a) upon written permission of the depositor, (b) in
permission of the depositor, or in cases of impeachment, or upon order cases of impeachment, (c) upon order of a competent court in the case
of a competent court in cases of bribery or dereliction of duty of public of bribery or dereliction of duty of public officials or, (d) when the
officials, or in cases where the money deposited or invested is the money deposited or invested is the subject matter of the litigation, and
subject matter of the litigation. e) in cases of violation of the Anti-Money Laundering Act (AMLA), the
Anti-Money Laundering Council (AMLC) may inquire into a bank account
Section 8 of Republic Act No. 6426, which was enacted in 1974, and upon order of any competent court. On the other hand, the lone exception
amended by Presidential Decree No. 1035 and later by Presidential Decree to the non-disclosure of foreign currency deposits, under Republic Act
No. 1246, provides: No. 6426, is disclosure upon the written permission of the depositor.
Section 8. Secrecy of Foreign Currency Deposits. All foreign currency These two laws both support the confidentiality of bank deposits. There is
deposits authorized under this Act, as amended by Presidential Decree no conflict between them. Republic Act No. 1405 was enacted for the
No. 1035, as well as foreign currency deposits authorized under purpose of giving encouragement to the people to deposit their money in
Presidential Decree No. 1034, are hereby declared as and considered of banking institutions and to discourage private hoarding so that the same
an absolutely confidential nature and, except upon the written may be properly utilized by banks in authorized loans to assist in the
permission of the depositor, in no instance shall foreign currency economic development of the country. It covers all bank deposits in the
deposits be examined, inquired or looked into by any person, Philippines and no distinction was made between domestic and foreign
government official, bureau or office whether judicial or administrative deposits. Thus, Republic Act No. 1405 is considered a law of general
or legislative or any other entity whether public or private; Provided, application. On the other hand, Republic Act No. 6426 was intended to
however, That said foreign currency deposits shall be exempt from encourage deposits from foreign lenders and investors. It is a special law
attachment, garnishment, or any other order or process of any court, designed especially for foreign currency deposits in the Philippines. A
legislative body, government agency or any administrative body general law does not nullify a specific or special law. Generalia specialibus
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non derogant. Therefore, it is beyond cavil that Republic Act No. 6426 Applying Section 8 of Republic Act No. 6426, absent the written
applies in this case. permission from Domsat, Westmont Bank cannot be legally compelled
to disclose the bank deposits of Domsat, otherwise, it might expose itself
Intengan v. Court of Appeals affirmed the above-cited principle and to criminal liability under the same act.
categorically declared that for foreign currency deposits, such as U.S.
dollar deposits, the applicable law is Republic Act No. 6426. The basis for the application of subpoena is to prove that the loan intended
for Domsat by the Banks and guaranteed by GSIS, was diverted to a
In said case, Citibank filed an action against its officers for persuading their purpose other than that stated in the surety bond. The Banks, however,
clients to transfer their dollar deposits to competitor banks. Bank records, argue that GSIS is in fact liable to them for the proper applications of the
including dollar deposits of petitioners, purporting to establish the deception loan proceeds and not vice-versa. We are however not prepared to rule on
practiced by the officers, were annexed to the complaint. Petitioners now the merits of this case lest we pre-empt the findings of the lower courts on
complained that Citibank violated Republic Act No. 1405. This Court ruled the matter.
that since the accounts in question are U.S. dollar deposits, the applicable
law therefore is not Republic Act No. 1405 but Republic Act No. 6426. The third issue raised by GSIS was properly addressed by the appellate
court. The appellate court maintained that the judge may, in the exercise of
The above pronouncement was reiterated in China Banking Corporation v. his sound discretion, grant the second motion for reconsideration despite its
Court of Appeals, where respondent accused his daughter of stealing his being pro forma. The appellate court correctly relied on precedents where
dollar deposits with Citibank. The latter allegedly received the checks from this Court set aside technicality in favor of substantive justice. Furthermore,
Citibank and deposited them to her account in China Bank. The subject the appellate court accurately pointed out that petitioner did not assail the
checks were presented in evidence. A subpoena was issued to employees of defect of lack of notice in its opposition to the second motion of
China Bank to testify on these checks. China Bank argued that the Citibank reconsideration, thus it can be considered a waiver of the defect.
dollar checks with both respondent and/or her daughter as payees, deposited
with China Bank, may not be looked into under the law on secrecy of
foreign currency deposits. This Court highlighted the exception to the non- 3. Ejercito v. Sandiganbayan, G.R. Nos. 157294-95, November 30, 2006
disclosure of foreign currency deposits, i.e., in the case of a written
permission of the depositor, and ruled that respondent, as owner of the funds Facts:
unlawfully taken and which are undisputably now deposited with China
Bank, he has the right to inquire into the said deposits.
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In lieu of the Criminal Case “People v. Estrada” for plunder, the which give rise to a creditor-debtor relationship between the depositor
Special Prosecution Panel filed before the Sandiganbayan a request for and the bank.
issuance of Subpoena Duces Tecum directing the President of Export
and Industry Bank or his/her authorized representative to produce The policy behind the law is laid down in Section 1. If the money
documents namely, Trust Account and Savings Account belonging to deposited under an account may be used by banks for authorized loans
petitioner and statement of accounts of one named “Jose Velarde” and to third persons, then such account, regardless of whether it creates a
to testify thereon during the hearings. Sandiganbayan granted both creditor-debtor relationship between the depositor and the bank, falls
requests and subpoenas were accordingly issued. Sandiganbayan also under the category of accounts which the law precisely seeks to protect
granted and issued subpoenas prayed for by the Prosecution Panel in for the purpose of boosting the economic development of the country.
another later date. Petitioner now assisted by his counsel filed two separate
motions to quash the two subpoenas issued. Sandiganbayan denied both Trust Account No. 858 is, without doubt, one such account. The Trust
motions and the consequent motions for reconsideration of petitioner. Agreement between petitioner and Urban Bank provides that the trust
account covers “deposit, placement or investment of funds” by Urban Bank
Issue: for and in behalf of petitioner. The money deposited under Trust Account
No. 858, was, therefore, intended not merely to remain with the bank but to
(1) Whether or not the trust accounts of petitioner are covered by the be invested by it elsewhere. To hold that this type of account is not
term “deposits” as used in R.A. No. 1405 protected by R.A. 1405 would encourage private hoarding of funds that
could otherwise be invested by banks in other ventures, contrary to the
(2) Whether or not plunder is neither bribery nor dereliction of duty policy behind the law.
not exempted from protection of R.A. No. 1405
Section 2 of the same law in fact even more clearly shows that the term
(3) Whether or not the unlawful examination of bank accounts shall “deposits” was intended to be understood broadly. The phrase “of whatever
render the evidence obtained therefrom inadmissible in evidence. nature” proscribes any restrictive interpretation of “deposits.” Moreover, it
is clear from the immediately quoted provision that, generally, the law
Ruling: applies not only to money which is deposited but also to those which are
invested. This further shows that the law was not intended to apply only to
(1) Yes. An examination of the law shows that the term “deposits” used “deposits” in the strict sense of the word. Otherwise, there would have been
therein is to be understood broadly and not limited only to accounts no need to add the phrase “or invested.”
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Clearly, therefore, R.A. 1405 is broad enough to cover Trust Account No. Even assuming arguendo, however, that the exclusionary rule applies in
858. principle to cases involving R.A. 1405, the Court finds no reason to
apply the same in this particular case. Clearly, the “fruit of the
(2) No. Cases of unexplained wealth are similar to cases of bribery or poisonous tree” doctrine presupposes a violation of law. If there was no
dereliction of duty and no reason is seen why these two classes of cases violation of R.A. 1405 in the instant case, then there would be no
cannot be excepted from the rule making bank deposits confidential. “poisonous tree” to begin with, and, thus, no reason to apply the
The policy as to one cannot be different from the policy as to the other. doctrine.
This policy expresses the notion that a public office is a public trust and
any person who enters upon its discharge does so with the full Additional Note: (This case is to be contrasted with Marquez v.
knowledge that his life, so far as relevant to his duty, is open to public Desierto)
scrutiny.
The Marquez ruling notwithstanding, the above-described examination by
The crime of bribery and the overt acts constitutive of plunder are crimes the Ombudsman of petitioner’s bank accounts, conducted before a case was
committed by public officers, and in either case the noble idea that “a public filed with a court of competent jurisdiction, was lawful.
office is a public trust and any person who enters upon its discharge does so
with the full knowledge that his life, so far as relevant to his duty, is open to For the Ombudsman issued the subpoenas bearing on the bank
public scrutiny” applies with equal force. accounts of petitioner about four months before Marquez was
promulgated on June 27, 2001.
Plunder being thus analogous to bribery, the exception to R.A. 1405
applicable in cases of bribery must also apply to cases of plunder. When this Court construed the Ombudsman Act of 1989, in light of the
Secrecy of Bank Deposits Law in Marquez, that “before an in camera
(3) No. Petitioner’s attempt to make the exclusionary rule applicable to the inspection may be allowed there must be a pending case before a court of
instant case fails. R.A. 1405, it bears noting, nowhere provides that an competent jurisdiction”, it was, in fact, reversing an earlier doctrine found in
unlawful examination of bank accounts shall render the evidence obtained Banco Filipino Savings and Mortgage Bank v. Purisima.
therefrom inadmissible in evidence. Section 5 of R.A. 1405 only states that
“[a]ny violation of this law will subject the offender upon conviction, to an Banco Filipino involved subpoenas duces tecum issued by the Office of the
imprisonment of not more than five years or a fine of not more than twenty Ombudsman, then known as the Tanodbayan, in the course of its
thousand pesos or both, in the discretion of the court.” preliminary investigation of a charge of violation of the Anti-Graft and
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Corrupt Practices Act. As the subpoenas subject of Banco Filipino were petitioners, the latter filed motions to discharge/dissolve the attachment.
issued during a preliminary investigation, in effect this Court upheld the Meanwhile, Sun Life filed motions for examination of petitioners’ bank
power of the Tandobayan under P.D. 1630 to issue subpoenas duces tecum accounts. Respondent judge ruled in all the motions in favor of Sun Life.
for bank documents prior to the filing of a case before a court of competent Petitioners moved for reconsideration but were denied.
jurisdiction.
Issue:
Marquez, on the other hand, practically reversed this ruling in Banco
Filipino despite the fact that the subpoena power of the Ombudsman under Whether or not respondent judge erred in allowing the examination of
R.A. 6770 was essentially the same as that under P.D. 1630. the bank accounts of herein petitioners.
The Marquez ruling that there must be a pending case in order for the Ruling:
Ombudsman to validly inspect bank records in camera thus reversed a
prevailing doctrine. Hence, it may not be retroactively applied. The No. We find both petitions unmeritorious.
Ombudsman’s inquiry into the subject bank accounts prior to the filing of
any case before a court of competent jurisdiction was therefore valid at the It is clear from the foregoing provision that notice need only be given to
time it was conducted. In fine, the subpoenas issued by the Ombudsman in the garnishee, but the person who is holding property or credits
this case were legal, hence, invocation of the “fruit of the poisonous tree” belonging to the defendant. The provision does not require that notice
doctrine is misplaced. be furnished the defendant himself, except when there is a need to
examine said defendant “for the purpose of giving information
respecting his property.
4. Onate v. Abrogar, G.R. No. 107303, February 23, 1995
Furthermore, Section 10 Rule 57 is not incompatible with Republic Act No.
Facts: 1405, as amended, “An Act Prohibiting Disclosure or Inquiry Into, Deposits
With Any Banking Institution and Providing Penalty Therefore,” for Section
Sun Life filed a complaint for a sum of money with a prayer for the 2 therefore provides an exception “in cases where the money deposited or
immediate issuance of a writ of attachment against petitioners Onate invested is the subject matter of the litigation.”
and Dino. Respondent Judge granted the prayer and the writ was
correspondingly issued. After the summons were eventually served upon
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The examination of the bank records is not a fishing expedition, but rather a Ruling:
method by which Sun Life could trace the proceeds of the check it paid to
petitioners. No. Actually, this case should have been studied more carefully by all
concerned. The finest legal minds in the country – from the parties’
respective counsel, the Provincial Prosecutor, the Department of Justice, the
5. Intengan v. Court of Appeals, G.R. No. 128996, February 15, 2002 Solicitor General, and the Court of Appeals – all appear to have overlooked
a single fact which dictates the outcome of the entire controversy. A
Facts: circumspect review of the record shows us the reason. The accounts in
question are U.S. dollar deposits; consequently, the applicable law is
Citibank filed a complaint for violation of the Corporation Code not Republic Act No. 1405 but Republic Act (RA) No. 6426, known as
against 2 of its officers. The complaint was attached with the affidavit the “Foreign Currency Deposit Act of the Philippines.”
of Vic Lim, VP of Citibank, who was then instructed by the higher
management of the bank to investigate the anomalous/highly irregular Thus, under R.A. No. 6426 there is only a single exception to the secrecy
activities of the said officers. As evidence, Lim annexed bank records of foreign currency deposits, that is, disclosure is allowed only upon the
purporting to establish the deception practiced by the officers. Some of the written permission of the depositor. Incidentally, the acts of private
documents pertained to the dollar deposits of petitioners. As an incident to respondents complained of happened before the enactment on
the foregoing, petitioners filed respective motions for the exclusion and September 29, 2001 of R.A. No. 9160 otherwise known as the Anti-
physical withdrawal of their bank records that were attached to Lim’s Money Laundering Act of 2001.
affidavit. The filing of Informations against private respondents was
recommended for alleged violation of Republic Act No. 1405. Private A case for violation of Republic Act No. 6426 should have been the proper
respondents appealed before the DOJ which ruled in their favor. Resort to case brought against private respondents. Private respondents Lim and
the Court, referred the matter to the CA which then held that the disclosure Reyes admitted that they had disclosed details of petitioners’ dollar deposits
was proper and falls under the exception under R.A. No. 1405. without the latter’s written permission. It does not matter if that such
disclosure was necessary to establish Citibank’s case against Dante L.
Issue: Santos and Marilou Genuino. Lim’s act of disclosing details of petitioners’
bank records regarding their foreign currency deposits, with the authority of
Whether or not the disclosure falls under the exception under R.A. No. Reyes, would appear to belong to that species of criminal acts punishable by
1405. special laws, called malum prohibitum.
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*The decision however was still unfavorable to the petitioners since there Whether or not the order of Ombudsman to have an in camera
is an issue as to prescription. The action to assail the disclosure of herein inspection of the accounts is an allowable exception of R.A. No. 1405.
private respondents for them to be liable for violating RA 6426 had
already prescribed. Ruling:
No. The order of the Ombudsman to produce for in camera inspection

6. Marquez v. Desierto, G.R. No. 135882, June 27, 2001 the subject accounts with the Union Bank of the Philippines, Julia
Vargas Branch, is based on a pending investigation at the Office of the
Facts: Ombudsman against Amado Lagdameo, et. al. for violation of R.A. No.
3019, Sec. 3 (e) and (g) relative to the Joint Venture Agreement between
Petitioner Lourdes Marquez received an Order from respondent the Public Estates Authority and AMARI.
Ombudsman Aniano Desierto to produce several bank documents for
purposes of inspection in camera relative to various accounts We rule that before an in camera inspection may be allowed, there must
maintained at the bank where petitioner is the branch manager. The be a pending case before a court of competent jurisdiction. Further, the
accounts to be inspected are involved in a case pending with the account must be clearly identified, the inspection limited to the subject
Ombudsman entitled, Fact-Finding and Intelligence Bureau (FFIB) v. matter of the pending case before the court of competent jurisdiction.
Amado Lagdameo. It appears that a certain George Trivinio purchased The bank personnel and the account holder must be notified to be
trail managers check and deposited some of it to an account maintained present during the inspection, and such inspection may cover only the
at petitioner’s branch. Petitioner after meeting with the FFIB Panel to account identified in the pending case.
ensure the veracity of the checks agreed to the in camera inspection.
Petitioner being unable to readily identify the accounts in question, the In the case at bar, there is yet no pending litigation before any court of
Ombudsman issued an order directing petitioner to produce the bank competent authority. What is existing is an investigation by the Office
documents. Thus, petitioner sought a declaration of her rights from the of the Ombudsman. In short, what the office of the ombudsman would
court due to the clear conflict between RA 6770 and RA 1405. wish to do is to fish for additional evidence to formally charge Amado
Meanwhile, FFIB moved to cite petitioner in contempt before the Lagdameo, et. al., with the Sandiganbayan. Clearly, there was no pending
Ombudsman. case in court which would warrant the opening of the bank account for
inspection.
Issue:
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*In contrast to Ejercito v. Sandiganbayan. Interestingly, time is of the Whether or not petitioner is bound by the provision in the BPI-
essence. A different ruling in Ejercito was enunciated because there was TIDCORP Joint Motion to Approve Agreement to waive its rights to
already a pending investigation months before the ruling made in this confidentiality of its bank deposits under R.A. No. 1405.
case as to the exemption in the power of the Ombudsman.
Ruling:
7. Dona Adela Export International Inc v. TIDCORP and BPI, G.R. No. R.A. No. 1405 provides for exceptions when records of deposits may
No. 201931, February 11, 2015 be disclosed. These are under any of the following instances: (a) upon
written permission of the depositor, (b) in cases of impeachment, (c)
Facts: upon order of a competent court in the case of bribery or dereliction of
duty of public officials or, (d) when the money deposited or invested is
Petitioner Dona Adela filed a Petition for Voluntary Insolvency before the the subject matter of the litigation, and (e) in cases of violation of the
RTC. After finding the petition sufficient in form and substance, RTC Anti-Money Laundering Act, the Anti-Money Laundering Council may
declared petitioner herein as insolvent and stayed all civil proceedings inquire into a bank account upon order of any competent court.
against it. Thereafter, Atty. Arlene Gonzales was appointed as a receiver
and proceeded to make the necessary report, to engage appraisers and In this case, the Joint Motion to Approve Agreement was executed by
require the creditors to submit proof of their respective claims. Atty. BPI and TIDCORP only. There was no written consent given by
Gonzales then filed a Motion for Parties to Enter Into Compromise petitioner or its representative, Epifanio Ramos, Jr., that petitioner is
Agreement incorporating therein her proposed terms of compromise. Then, waiving the confidentiality of its bank deposits. The provision on the
TIDCORP and BPI also filed a Joint Motion to Approve Agreement which waiver of the confidentiality of petitioner’s bank deposits was merely
was approved. Petitioner filed a motion for partial reconsideration inserted in the agreement. It is clear therefore that petitioner is not
claiming that TIDCORP and BPI’s agreement imposes upon it several bound by the said provision since it was without the express consent of
obligations such as payment of expenses and taxes and waiver of petitioner who was not a party and signatory to the said agreement.
confidentiality of bank deposits when it is not a party and signatory to
the said agreement. RTC denied the motion. Clearly, the waiver of confidentiality of petitioner’s bank deposits in the
BPI-TIDCORP Joint Motion to Approve Agreement lacks the required
Issue: written consent of petitioner and conformity of the receiver. We, thus, hold
that petitioner is not bound by the said provision.
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also REQUIRED the respondents to COMMENT on the [merits of the]

8. Philippine Savings Bank v. Senate Impeachment Court, G.R. No. petition.]
200238, February 9, 2012
Yes. A TRO should be issued against the impeachment court to enjoin it
Facts: from further implementing the subpoena with respect to the alleged
foreign currency denominated accounts of CJ Corona.
Philippine Savings Bank (PS Bank) and its President, Pascual M. Garcia III,
filed before the Supreme Court an original civil action for certiorari and There are two requisite conditions for the issuance of a preliminary
prohibition with application for temporary restraining order and/or writ of injunction:
preliminary injunction. The TRO was sought to stop the Senate, sitting as
impeachment court, from further implementing the Subpoena Ad (1) the right to be protected exists prima facie, and
Testificandum et Duces Tecum, dated February 6, 2012, that it issued
against the Branch Manager of PS Bank, Katipunan Branch. The (2) the acts sought to be enjoined are violative of that right. It must be
subpoena assailed by petitioners covers the foreign currency proven that the violation sought to be prevented would cause an
denominated accounts allegedly owned by the impeached Chief Justice irreparable injustice.
Renato Corona of the Philippine Supreme Court.
A clear right to maintain the confidentiality of the foreign currency deposits
Issue: of the Chief Justice is provided under Section 8 of Republic Act No. 6426,
otherwise known as the Foreign Currency Deposit Act of the Philippines
Whether a TRO should be issued against the impeachment court to (RA 6426). This law establishes the absolute confidentiality of foreign
enjoin it from further implementing the subpoena with respect to the currency deposits:
alleged foreign currency denominated accounts of CJ Corona.
Ruling:
Under R.A. No. 6426 there is only a single exception to the secrecy of
[The Court en banc ISSUED A TEMPORARY RESTRAINING ORDER foreign currency deposits, that is, disclosure is allowed only upon the
enjoining the respondents from implementing the subpoena. It written permission of the depositor. In Intengan v. Court of Appeals, the
Court ruled that where the accounts in question are U.S. dollar deposits, the
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applicable law is not Republic Act No. 1405 but RA 6426. Similarly, in the authority to administer oaths, to examine, take and preserve testimony of
recent case of Government Service Insurance System v. 15th Division of the any person relating to the subject of the investigation, and to examine
Court of Appeals, the Court also held that RA 6426 is the applicable law for pertinent bank records.
foreign currency deposits and not Republic Act No. 1405.
On May 25, 2005, the PDIC Board adopted another resolution,
The written consent under RA 6426 constitutes a waiver of the Resolution No. 2005-05-056, approving the conduct of an investigation
depositor’s right to privacy in relation to such deposit. In the present on PCRBI based on a Complaint-Affidavit filed by a corporate
case, neither the prosecution nor the Impeachment Court has presented depositor, the Philippine School of Entrepreneurship and
any such written waiver by the alleged depositor, Chief Justice Renato Management (PSEMI) through its president, Jacinto L. Jamero.
C. Corona. Also, while impeachment may be an exception to the secrecy
of bank deposits under RA 1405, it is not an exemption to the absolute On June 3, 2005, in accordance with the two PDIC Board resolutions, then
confidentiality of foreign currency deposits under RA 6426. PDIC President and Chief Executive Officer Ricardo M. Tan issued the
Notice of Investigation to the President or The Highest Ranking Officer of
PCRBI.
PHILIPPINE DEPOSIT INSURANCE CORPORATION
On June 7, 2005, the PDIC Investigation Team personally served the Notice
1. PDIC v. Philippine Countryside Rural Bank Inc., G.R. No. 176438, of Investigation on PCRBI at its Head Office in Pajo, Lapu-Lapu City.
January 24, 2011
According to PDIC, in the course of its investigation, PCRBI was found
Facts: to have granted loans to certain individuals, which were settled by way
of dacion of properties. These properties, however, had already been
On March 9, 2005, the Board of Directors of the PDIC (PDIC Board) previously foreclosed and consolidated under the names of PRBI, BEAI
adopted Resolution No. 2005-03-032 approving the conduct of an and RBCI.
investigation, in accordance with Section 9(b-1) of Republic Act (R.A.) No.
3591, as amended, on the basis of the Reports of Examination of the On June 15, 2005, PDIC issued similar notices of investigation to PRBI
Bangko Sentral ng Pilipinas (BSP) on ten (10) banks, four (4) of which are and BEAI.
respondents in this petition for review. The said resolution also created a
Special Investigation Team to conduct the said investigation, with the
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The notices stated that the investigation was to be conducted pursuant to Philippine Deposit Insurance Corporation, Defining Its Powers And
Section 9 (b-1) of the PDIC Charter and upon authority of PDIC Board Duties And For Other Purposes), cannot be differentiated from the
Resolution No. 2005-03-032 authorizing the twelve (12) named examination powers accorded to PDIC under Section 8, paragraph 8 of
representatives of PDIC to conduct the investigation. the same law, under which, prior approval from the Monetary Board is
required.
The investigation was sought because the Banks were found to be among
the ten (10) banks collectively known as Legacy Banks. The Reports of On June 17, 2005, PDIC General Counsel Romeo M. Mendoza sent a reply
General and Special Examinations of the BSP as of June 30, 2004, to Atty. Noel stating that PDICs investigation power, as distinguished from
disclosed, among others, that the Legacy Banks were commonly owned the examination power of the PDIC under Section 8 of the same law, does
and/or controlled by Legacy Plans Inc. (now Legacy Consolidated Plans, not need prior approval of the Monetary Board. PDIC then urged PRBI and
Inc.), and Celso Gancayco delos Angles, Jr. and his family. BEAI not to impede the conduct of PDICs investigation as the same
constitutes a violation of the PDIC Charter for which PRBI and BEAI may
The notice of investigation was served on PRBI the next day, June 16, 2005. be held criminally and/or administratively liable.
On June 25, 2005, a separate notice of investigation was served on On June 27 and 28, 2005, the Banks, through counsel, sought further
RBCI. The latter provided the PDIC Investigation Team with certified clarification from PDIC on its source of authority to conduct the impending
copies of the loan documents they had requested, until its president received investigations and requested that PDIC refrain from proceeding with the
an order directing him not to allow the investigation. investigations.
Subsequently, PRBI and BEAI refused entry to their bank premises and Simultaneously, the Banks wrote to the Monetary Board requesting a
access to their records and documents by the PDIC Investigation Team, clarification on the parameters of PDICs power of investigation/examination
upon advice of their respective counsels. over the Banks and for an issuance of a directive to PDIC not to pursue the
investigations pending the requested clarification.
On June 16 and 17, 2005, Atty. Victoria G. Noel (Atty. Noel) of the
Tiongson & Antenor Cruz Law Office sent letters to the PDIC On June 28, 2005, PRBI and BEAI again received letters from PDIC,
informing it of her legal advice to PCRBI and BEAI not to submit to dated June 24, 2005, which appeared to be final demands on them to
PDIC investigation on the ground that its investigatory power pursuant allow its investigation. PRBI and BEAI replied that letters of clarification
to Section 9(b-1) of R.A. No. 3591, as amended (An Act Establishing The had been sent to PDIC and the Monetary Board. Pending action on such
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requests, PDIC was requested to refrain from proceeding with the Injunction (CA-Manila petition) before the Court of Appeals-
investigation. Manila (CA-Manila). The case was docketed as CA-G.R. SP No. 91038.
Notwithstanding, on July 11, 2005, the Banks received a letter, dated Even before the CA-Manila could rule on the application for a TRO and/or
July 8, 2005, from the PDIC General Counsel reiterating its position writ of preliminary injunction, the RTC-Makati dismissed the petition on
that prior Monetary Board approval was not a pre-requisite to PDICs the ground that there already existed a breach of law that isolated the case
exercise of its investigative power. from the jurisdiction of the trial court.
Not in conformity, on July 28, 2005, the Banks filed a Petition for The Banks filed a motion for reconsideration but it was denied by the RTC
Declaratory Relief with a Prayer for the Issuance of a TRO and/or Writ of for lack of merit. On February 10, 2006, the Banks filed a notice of appeal
Preliminary Injunction (RTC Petition) before the Regional Trial Court of which they later withdrew on February 28, 2006.
Makati (RTC-Makati) which was docketed as Civil Case No. 05-697.
In view of the dismissal of the RTC-Makati petition, the CA-Manila
In the RTC Petition, the Banks prayed for a judgment interpreting Section dismissed the petition for injunction for being moot and academic. In its
9(b-1) of the PDIC Charter, as amended, to require prior Monetary Board Decision, dated February 1, 2006, the CA-Manila wrote:
approval before PDIC could exercise its investigation/examination power
over the Banks. What remained for the petitioners to do was to litigate over the breach or
violation by ordinary action, as the circumstances ensuing from the breach
PDIC filed a motion to dismiss alleging that the RTC had no jurisdiction or violation warrant. The ordinary action may either be in the same case, if
over the said petition since a breach had already been committed by the the RTC permitted the conversion, in which event the RTC may allow the
Banks when they received the notices of investigation, and because PDIC parties to file such pleadings as may be necessary or proper, pursuant to Sec.
need not secure prior Monetary Board approval since examination and 5, Rule 63; or the petitioners may file another action in the proper court (e.g.
investigation are two different terms. including the Court of Appeals, should injunction be among the reliefs to be
sought) upon some cause of action that has arisen from the breach or
Later, the Banks withdrew their application for a temporary violation.
restraining order (TRO) reasoning that lower courts cannot issue
injunctions against PDIC. Thus, the Banks instituted a petition for
injunction with application for TRO and/or Preliminary
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Thereafter, on March 14, 2006, the Banks filed their Petition for Injunction provisions of the 1997 Rules of Civil Procedure, as amended, governing
with Prayer for Preliminary Injunction (CA-Cebu Petition) with the CA- petitions for certiorari, prohibition and mandamus filed with the Supreme
Cebu (CA-Cebu). Court, since petitioner failed to submit a verified statement of material date
of receipt of the assailed resolution dated 16 May 2006 in accordance with
On March 15, 2006, the CA-Cebu issued a resolution granting the Banks Section 4, Rule 65 in relation to the second paragraph of Section 3, Rule
application for a TRO. This enjoined the PDIC, its representatives or agents 46. In any event, the petition is premature since no motion
or any other persons or agency assisting them or acting for and in their for reconsideration of the questioned resolution of the Court of Appeals was
behalf from conducting examinations/investigations on the Banks head and filed prior to the availment of this special civil action and there are no
branch offices without securing the requisite approval from the Monetary sufficient allegations to bring the case within the recognized exceptions to
Board of BSP. this rule.
During the pendency of the CA-Cebu petition, PDIC filed with this Court On September 18, 2006, after both parties had submitted their respective
a Petition for Certiorari, Prohibition and Mandamus with Prayer for memoranda, the CA-Cebu rendered a decision granting the writ of
Issuance of Temporary Restraining Order and/or Writ of Preliminary preliminary injuction, pertinent portions of which read:
Injunction under Rule 65 docketed as G.R. No. 173370. It alleged that the
CA-Cebu committed grave abuse of discretion amounting to lack or excess [A]fter undergoing a series of amendments, the controlling law with respect
of jurisdiction in taking cognizance of the Banks petition, and in issuing a to PDICs power to conduct examination of banks is-prior approval of the
TRO and a writ of preliminary injunction. Monetary Board is a condition sine qua non for PDIC to exercise its power
of examination. To rule otherwise would disregard the amendatory law of
On July 31, 2006, this Court issued a resolution dismissing the petition the PDICs charter.
for certiorari in G.R. No. 173370. The Resolution reads:
The Court is not also swayed by the contention of respondent that what it
Considering the allegations, issues and arguments adduced in the petition seeks to conduct is an investigation and not an examination of petitioners
for certiorari, prohibition and mandamus with prayer for preliminary transactions, hence prior approval of the Monetary Board is a mere
injunction and/or restraining order dated 19 July 2006, the Court resolves to surplusage.
DISMISS the petition for failure to sufficiently show that the questioned
resolution of the Court of Appeals is tainted with grave abuse of discretion. The ordinary definition of the words examination and investigation would
Moreover, the petition failed to conform with Rule 65 and other related lead one to conclude that both pertain to the same thing and there seems to
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be no fine line differentiating one from the other. Blacks Law Dictionary Moreover, the Court sees that the rationale of the law in requiring a (sic)
defines the word investigate as to examine and inquire into with care prior approval from the Monetary Board whenever an examination or in this
and accuracy; to find out by careful inquisition; examination and the case an investigation needs to be conducted by the PDIC is obviously to
word examination as an investigation. In Collins Dictionary of Banking ensure that there is no overlapping of efforts, duplication of functions and
and Finance, the word investigation is defined as an examination to find out more importantly to provide a check and balance to the otherwise
what is wrong. unrestricted power of respondent PDIC to conduct investigations on banks
insured by it.
In the case of Anti-Graft League of the Philippines, Inc. vs. Hon. Ortega, et
al., the Supreme Court using Ballentines Law Dictionary defines an With the foregoing premises, this Court rules that a prior approval from the
investigation as an inquiry, judicial or otherwise, for the discovery or Monetary Board is necessary before respondent PDIC can proceed with its
collection of facts concerning the matter or matters involved. Such common investigations on petitioners-banks.
definitions would show that there is really nothing to distinguish between
these two (2) terms as to support the PDIC view differentiating Section 9 (b- Issue:
1) from paragraph 8, Section 8 of the PDIC Charter.
WHETHER THE COURT OF APPEALS ERRED IN FINDING
In the realm of the PDIC rules, specifically under Section 3 of PDIC THAT PRIOR APPROVAL OF THE MONETARY BOARD OF THE
Regulatory Issuance No. 2205-02[42] investigation is defined as: BANGKO SENTRAL NG PILIPINAS IS NECESSARY BEFORE
Investigation shall refer to fact-finding examination, study, inquiry, for THE PDIC MAY CONDUCT AN INVESTIGATION OF
determining whether the allegations in a complaint or findings in a final RESPONDENT BANKS.
report of examination may properly be the subject of an administrative,
criminal or civil action. Ruling:
From the foregoing definition alone, it can be easily deduced that PDIC is of the position that in order for it to exercise its power of
investigation and examination are synonymous terms. Simply stated, investigation, the law requires that:
investigation encompasses a fact-finding examination. Thus, it is
inconsistent with the rules if respondent PDIC be (sic) allowed to conduct (a) The investigation is based on a complaint of a depositor or any other
an investigation without the approval of the Monetary Board. government agency, or on the report of examination of the Bangko
Sentral ng Pilipinas (BSP) and/or PDIC; and,
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(b) The complaint alleges, or the BSP and/or PDIC Report of Examination (l) Investigation shall refer to fact-finding examination, study or inquiry
contains adverse findings of, fraud, irregularities or anomalies committed by for determining whether the allegations in a complaint or findings in a
the Bank and/or its directors, officers, employees or agents; and, final report of examination may properly be the subject of an
administrative, criminal or civil action.
(c) The investigation is upon the authority of the PDIC Board of Directors.
The Banks further cite Section X658 of the Manual of Regulations for
It argues that when it commenced its investigation on the Banks, all of the Banks, which states:
aforementioned requirements were met. PDIC stresses that its power of
examination is different from its power of investigation, in such that the Sec. X658 - Examination by the BSP. The term examination shall,
former requires prior approval of the Monetary Board while the latter henceforth, refer to an investigation of an institution under the supervisory
requires merely the approval of the PDIC Board. It further claims that the authority of the BSP to determine compliance with laws and regulations. It
power of examination cannot be exercised within twelve (12) months from shall include determination that the institution is conducting its
the last examination conducted, whereas the power of investigation is business on a safe and sound basis. Examination requires full and
without limitation as to the frequency of its conduct. It states that the comprehensive looking into the operations and books of institutions,
purpose of the PDICs power of examination is merely to look into the and shall include, but need not be limited to the following:
condition of the bank, whereas the power of investigation aims to address
fraud, irregularities and anomalies based on complaints from depositors and a. Determination of the banks solvency and liquidity position;
other government agencies or upon reports of examinations conducted by
the PDIC itself or by the BSP. b. Evaluation of asset quality as well as determination of sufficiency of
valuation reserves on loans and other risk assets;
The Banks, on the other hand, are of the opinion that a holistic reading of
the PDIC charter shows that petitioners power of examination is c. Review of all aspects of bank operations;
synonymous with its power of investigation. They cite, as bases, the law
dictionary definitions, Section 8, Eighth paragraph and Section 9(b-1) of the d. Assessment of risk management system, including the evaluation of the
PDIC Charter, and Rule 1, Section 3(1) of PDIC Regulatory Issuance No. effectiveness of the bank managements oversight functions, policies,
2005-02, which defines investigation as follows: procedures, internal control and audit;
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e. Appraisal of overall management of the bank;f. Review of compliance Section 1 of the PDIC Charter states:
and applicable laws, rules and regulations; and any other activities relevant
to the above. SECTION 1. There is hereby created a Philippine Deposit Insurance
Corporation hereinafter referred to as the Corporation which shall insure, as
After an evaluation of the respective positions of the parties, the Court herein provided, the deposits of all banks which are entitled to the benefits
is of the view that the Monetary Board approval is not required for of insurance under this Act, and which shall have the powers hereinafter
PDIC to conduct an investigation on the Banks. granted.
The disagreement stems from the interpretation of these two key provisions The Corporation shall, as a basic policy, promote and safeguard the interests
of the PDIC Charter. The confusion can be attributed to the fact that of the depositing public by way of providing permanent and continuing
although investigation and examination are two separate and insurance coverage on all insured deposits.
distinct procedures under the charter of the PDIC and the BSP, the words
seem to be used loosely and interchangeably. Section 1 of R.A. No. 9576 further provides: An Act Increasing the
Maximum Deposit Insurance Coverage, and in connection therewith, to
It does not help that indeed these terms are very closely related in a generic Strengthen the Regulatory and Administrative Authority, and Financial
sense. However, while examination connotes a mere generic perusal or Capability of the Philippine Deposit Insurance Corporation (PDIC),
inspection, investigation refers to a more intensive scrutiny for a more amending for this purpose R.A. No. 3591, as Amended, otherwise known as
specific fact-finding purpose. The latter term is also usually associated the PDIC Charter.
with proceedings conducted prior to criminal prosecution.
SECTION 1. Statement of State Policy and Objectives. - It is hereby
The PDIC was created by R.A. No. 3591 on June 22, 1963 as an insurer of declared to be the policy of the State to strengthen the mandatory deposit
deposits in all banks entitled to the benefits of insurance under the PDIC insurance coverage system to generate, preserve, maintain faith and
Charter to promote and safeguard the interests of the depositing public by confidence in the countrys banking system, and protect it from illegal
way of providing permanent and continuing insurance coverage of all schemes and machinations.
insured deposits. It is a government instrumentality that operates under the
Department of Finance. Its primary purpose is to act as deposit insurer, as a Towards this end, the government must extend all means and mechanisms
co-regulator of banks, and as receiver and liquidator of closed banks. necessary for the Philippine Deposit Insurance Corporation to effectively
fulfill its vital task of promoting and safeguarding the interests of the
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depositing public by way of providing permanent and continuing insurance POWERS AND RESPONSIBILITIES AND PROHIBITIONS
coverage on all insured deposits, and in helping develop a sound and stable
banking system at all times. SECTION 9. xxx
Under its charter, the PDIC is empowered to conduct examination of (b) The Board of Directors shall appoint examiners who shall have power,
banks with prior approval of the Monetary Board: on behalf of the Corporation to examine any insured bank. Each such
examiner shall have the power to make a thorough examination of all the
To conduct examination of banks with prior approval of the Monetary affairs of the bank and in doing so, he shall have the power to administer
Board: Provided, That no examination can be conducted within twelve oaths, to examine and take and preserve the testimony of any of the officers
(12) months from the last examination date: Provided, however, That and agents thereof, and, to compel the presentation of books, documents,
the Corporation may, in coordination with the Bangko Sentral, conduct papers, or records necessary in his judgment to ascertain the facts relative to
a special examination as the Board of Directors, by an affirmative vote the condition of the bank; and shall make a full and detailed report of the
of a majority of all its members, if there is a threatened or impending condition of the bank to the Corporation. The Board of Directors in like
closure of a bank; Provided, further, That, notwithstanding the manner shall appoint claim agents who shall have the power to
provisions of Republic Act No. 1405, as amended, Republic Act No. investigate and examine all claims for insured deposits and transferred
6426, as amended, Republic Act No. 8791, and other laws, the deposits. Each claim agent shall have the power to administer oaths and
Corporation and/or the Bangko Sentral, may inquire into or examine to examine under oath and take and preserve testimony of any person
deposit accounts and all information related thereto in case there is a relating to such claim. (As amended by E.O. 890, 08 April 1983; R.A.
finding of unsafe or unsound banking practice; Provided, That to avoid 7400, 13 April 1992)
overlapping of efforts, the examination shall maximize the efficient use of
the relevant reports, information, and findings of the Bangko Sentral, which (b-1) The investigators appointed by the Board of Directors shall have
it shall make available to the Corporation; (As amended by R.A. 9302, 12 the power on behalf of the Corporation to conduct investigations on
August 2004, R.A. 9576, 1 June 2009) frauds, irregularities and anomalies committed in banks, based on
reports of examination conducted by the Corporation and Bangko
Section 9(b-1) of the PDIC Charter further provides that the PDIC Board Sentral ng Pilipinas or complaints from depositors or from other
shall have the power to: government agency. Each such investigator shall have the power to
administer oaths, and to examine and take and preserve the testimony of any
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person relating to the subject of investigation. (As added by R.A. 9302, 12 examinations of banks conducted by the Bangko Sentral ng Pilipinas and/or
August 2004) PDIC.
As stated above, the charter empowers the PDIC to conduct an investigation The same issuance states that the Final Report of Examination is one of the
of a bank and to appoint examiners who shall have the power to examine three pre-requisites to the conduct of an investigation, in addition to the
any insured bank. Such investigators are authorized to conduct authorization of the PDIC Board and a complaint. Juxtaposing this
investigations on frauds, irregularities and anomalies committed in provision with Section 9(b-1) of the PDIC Charter, since an examination is
banks, based on an examination conducted by the PDIC and the BSP or explicitly made the basis of a fact-finding examination, then clearly
on complaints from depositors or from other government agencies. examination and investigation are two different proceedings. It would
obviously defy logic to make the result of an investigation the basis of the
The distinction between the power to investigate and the power to examine same proceeding. Thus, RI No. 2005-02 defines an investigation as a fact-
is emphasized by the existence of two separate sets of rules governing the finding examination, study or inquiry for determining whether the
procedure in the conduct of investigation and examination. Regulatory allegations in a complaint or findings in a final report of examination may
Issuance (RI) No. 2005-02 or the PDIC Rules on Fact-Finding Investigation properly be the subject of an administrative, criminal or civil action.
of Fraud, Irregularities and Anomalies Committed in Banks covers the
procedural requirements of the exercise of the PDICs power of The Banks cite the dictionary definitions of examination and investigation
investigation. On the other hand, RI No. 2009-05 sets forth the guidelines to justify their conclusion that these terms refer to one and the same
for the conduct of the power of examination. proceeding. It is tempting to use these two terms interchangeably, which
practice may be perfectly justified in a purely literary sense. Indeed, a
The definitions provided under the two aforementioned regulatory issuances reading of the PDIC Charter shows that the two terms have been used
elucidate on the distinction between the power of examination and the interchangeably at some point. However, based on the provisions aforecited,
power of investigation. the intention of the laws is clearly to differentiate between the process of
investigation and that of examination.
Section 2 of RI No. 2005-02 states that its coverage shall be applicable to all
fact-finding investigations on fraud, irregularities and/or anomalies In 2009, to clarify procedural matters, PDIC released RI No. 2009-05 or the
committed in banks that are conducted by PDIC based on: [a] complaints Rules and Regulations on Examination of Banks. Section 2 thereof
from depositors or other government agencies; and/or [b] final reports of differentiated between the two types of examination as follows:
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In contrast, although it also involves a detailed evaluation, an investigation Board, whereas an investigation based on an examination report, does
centers on specific acts of omissions and, thus, requires a less invasive not.
assessment.
The practical justification for not requiring the Monetary Board

approval to conduct an investigation of banks is the administrative 2. PDIC v. Citibank, G.R. No. 170290, April 11, 2012
hurdles and paperwork it entails, and the correspondent time to Facts:
complete those additional steps or requirements. As in other types of
investigation, time is always of essence, and it is prudent to expedite the Petitioner Philippine Deposit Insurance Corporation (PDIC) is a
proceedings if an accurate conclusion is to be arrived at, as an investigation government instrumentality created by virtue of Republic Act (R.A.) No.
is only as precise as the evidence on which it is based. The promptness 3591, as amended by R.A. No. 9302.
with which such evidence is gathered is always of utmost importance Respondent Citibank, N.A. (Citibank) is a banking corporation while
because evidence, documentary evidence in particular, is remarkably respondent Bank of America, S.T. & N.A. (BA) is a national banking
fungible. A PDIC investigation is conducted to determine whether the association, both of which are duly organized and existing under the laws of
allegations in a complaint or findings in a final report of examination the United States of America and duly licensed to do business in the
may properly be the subject of an administrative, criminal or civil Philippines, with offices in Makati City.
action. In other words, an investigation is based on reports of
examination and an examination is conducted with prior Monetary In 1977, PDIC conducted an examination of the books of account of
Board approval. Therefore, it would be unnecessary to secure a Citibank. It discovered that Citibank, in the course of its banking
separate approval for the conduct of an investigation. Such would business, from September 30, 1974 to June 30, 1977, received from its
merely prolong the process and provide unscrupulous individuals the head office and other foreign branches a total of P11,923,163,908.00 in
opportunity to cover their tracks. dollars, covered by Certificates of Dollar Time Deposit that were
interest-bearing with corresponding maturity dates. These funds, which
Indeed, while in a literary sense, the two terms may be used were lodged in the books of Citibank under the account "Their
interchangeably, under the PDIC Charter, examination and Account-Head Office/Branches-Foreign Currency," were not reported
investigation refer to two different processes. To reiterate, an to PDIC as deposit liabilities that were subject to assessment for
examination of banks requires the prior consent of the Monetary insurance. As such, in a letter dated March 16, 1978, PDIC assessed
Citibank for deficiency in the sum of P1,595,081.96.
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subject of the petitions were not assessable for insurance purposes under the
Similarly, sometime in 1979, PDIC examined the books of accounts of BA PDIC Charter because said placements were deposits made outside of the
which revealed that from September 30, 1976 to June 30, 1978, BA Philippines and, under Section 3.05(b) of the PDIC Rules and Regulations,
received from its head office and its other foreign branches a total of such deposits are excluded from the computation of deposit
P629,311,869.10 in dollars, covered by Certificates of Dollar Time Deposit liabilities. Section 3(f) of the PDIC Charter likewise excludes from the
that were interest-bearing with corresponding maturity dates and lodged in definition of the term "deposit" any obligation of a bank payable at the
their books under the account "Due to Head Office/Branches." Because BA office of the bank located outside the Philippines. The RTC further stated
also excluded these from its deposit liabilities, PDIC wrote to BA on that there was no depositor-depository relationship between the respondents
October 9, 1979, seeking the remittance of P109,264.83 representing and their head office or other branches. As a result, such deposits were not
deficiency premium assessments for dollar deposits. included as third-party deposits that must be insured. Rather, they were
considered inter-branch deposits which were excluded from the assessment
Believing that litigation would inevitably arise from this dispute, Citibank base, in accordance with the practice of the United States Federal Deposit
and BA each filed a petition for declaratory relief before the Court of First Insurance Corporation (FDIC) after which PDIC was patterned.
Instance (now the Regional Trial Court) of Rizal on July 19, 1979 and
December 11, 1979, respectively. In their petitions, Citibank and BA sought Aggrieved, PDIC appealed to the CA which affirmed the ruling of the RTC
a declaratory judgment stating that the money placements they received in its October 27, 2005 Decision. In so ruling, the CA found that the
from their head office and other foreign branches were not deposits and did money placements were received as part of the bank's internal dealings
not give rise to insurable deposit liabilities under Sections 3 and 4 of R.A. by Citibank and BA as agents of their respective head offices. This
No. 3591 (the PDIC Charter) and, as a consequence, the deficiency showed that the head office and the Philippine branch were considered
assessments made by PDIC were improper and erroneous. The cases were as the same entity. Thus, no bank deposit could have arisen from the
then consolidated. transactions between the Philippine branch and the head office because
there did not exist two separate contracting parties to act as depositor and
On June 29, 1998, the Regional Trial Court, Branch 163, Pasig City (RTC) depositary. Secondly, the CA called attention to the purpose for the creation
promulgated its Decision in favor of Citibank and BA, ruling that the of PDIC which was to protect the deposits of depositors in the Philippines
subject money placements were not deposits and did not give rise to and not the deposits of the same bank through its head office or foreign
insurable deposit liabilities, and that the deficiency assessments issued by branches. Thirdly, because there was no law or jurisprudence on the
PDIC were improper and erroneous. Therefore, Citibank and BA were not treatment of inter-branch deposits between the Philippine branch of a
liable to pay the same. The RTC reasoned out that the money placements foreign bank and its head office and other branches for purposes of
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insurance, the CA was guided by the procedure observed by the FDIC that the law treats a branch of a foreign bank as a separate and independent
which considered inter-branch deposits as non-assessable. Finally, the CA banking unit.
cited Section 3(f) of R.A. No. 3591, which specifically excludes obligations
payable at the office of the bank located outside the Philippines from the The respondents, on the other hand, initially point out that the factual
definition of a deposit or an insured deposit. Since the subject money findings of the RTC and the CA, with regard to the nature of the money
placements were made in the respective head offices of Citibank and BA placements, the capacity in which the same were received by the
located outside the Philippines, then such placements could not be subject to respondents and the exclusion of inter-branch deposits from assessment, can
assessment under the PDIC Charter. Hence, this petition. no longer be disturbed and should be accorded great weight by this Court.
They also argue that the money placements are not deposits. They postulate
Issue: that for a deposit to exist, there must be at least two parties a depositor and a
depository each with a legal personality distinct from the other. Because the
Whether or not the money placements subject matter of these petitions respondents' respective head offices and their branches form only a single
are assessable for insurance purposes under the PDIC Act. legal entity, there is no creditor-debtor relationship and the funds placed in
the Philippine branch belong to one and the same bank. A bank cannot have
Ruling: a deposit with itself.
No. The Court rules in the negative. This Court is of the opinion that the key to the resolution of this controversy
is the relationship of the Philippine branches of Citibank and BA to their
A branch has no separate legal personality; Purpose of the PDIC respective head offices and their other foreign branches.
PDIC argues that the head offices of Citibank and BA and their individual The Court begins by examining the manner by which a foreign corporation
foreign branches are separate and independent entities. It insists that under can establish its presence in the Philippines. It may choose to incorporate
American jurisprudence, a bank's head office and its branches have a its own subsidiary as a domestic corporation, in which case such subsidiary
principal-agent relationship only if they operate in the same jurisdiction. In would have its own separate and independent legal personality to conduct
the case of foreign branches, however, no such relationship exists because business in the country. In the alternative, it may create a branch in the
the head office and said foreign branches are deemed to be two distinct Philippines, which would not be a legally independent unit, and simply
entities. Under Philippine law, specifically, Section 3(b) of R.A. No. 3591, obtain a license to do business in the Philippines.
which defines the terms "bank" and "banking institutions," PDIC contends
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In the case of Citibank and BA, it is apparent that they both did not
incorporate a separate domestic corporation to represent its business This ruling was later reiterated in the more recent case of United States v.
interests in the Philippines. Their Philippine branches are, as the name BCCI Holdings Luxembourg where the United States Court of Appeals,
implies, merely branches, without a separate legal personality from District of Columbia Circuit, emphasized that "while individual bank
their parent company, Citibank and BA. Thus, being one and the same branches may be treated as independent of one another, each branch,
entity, the funds placed by the respondents in their respective branches unless separately incorporated, must be viewed as a part of the parent
in the Philippines should not be treated as deposits made by third bank rather than as an independent entity."
parties subject to deposit insurance under the PDIC Charter.
In addition, Philippine banking laws also support the conclusion that the
For lack of judicial precedents on this issue, the Court seeks guidance from head office of a foreign bank and its branches are considered as one legal
American jurisprudence. In the leading case of Sokoloff v. The National City entity. Section 75 of R.A. No. 8791 (The General Banking Law of 2000)
Bank of New York, where the Supreme Court of New York held: and Section 5 of R.A. No. 7221 (An Act Liberalizing the Entry of Foreign
Where a bank maintains branches, each branch becomes a separate Banks) both require the head office of a foreign bank to guarantee the
business entity with separate books of account. A depositor in one prompt payment of all the liabilities of its Philippine branch, to wit:
branch cannot issue checks or drafts upon another branch or demand Republic Act No. 8791:
payment from such other branch, and in many other respects the branches
are considered separate corporate entities and as distinct from one another as Sec. 75. Head Office Guarantee. In order to provide effective protection of
any other bank. Nevertheless, when considered with relation to the the interests of the depositors and other creditors of Philippine branches of a
parent bank they are not independent agencies; they are, what their foreign bank, the head office of such branches shall fully guarantee the
name imports, merely branches, and are subject to the supervision and prompt payment of all liabilities of its Philippine branch.
control of the parent bank, and are instrumentalities whereby the parent
bank carries on its business, and are established for its own particular Residents and citizens of the Philippines who are creditors of a branch in the
purposes, and their business conduct and policies are controlled by the Philippines of foreign bank shall have preferential rights to the assets of
parent bank and their property and assets belong to the parent bank, such branch in accordance with the existing laws.
although nominally held in the names of the particular
branches. Ultimate liability for a debt of a branch would rest upon the Republic Act No. 7721:
parent bank.
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Sec. 5. Head Office Guarantee. The head office of foreign bank branches necessary for the Philippine Deposit Insurance Corporation to effectively
shall guarantee prompt payment of all liabilities of its Philippine fulfill its vital task of promoting and safeguarding the interests of the
branches. depositing public by way of providing permanent and continuing insurance
coverage on all insured deposits, and in helping develop a sound and stable
Moreover, PDIC must be reminded of the purpose for its creation, as banking system at all times.
espoused in Section 1 of R.A. No. 3591 (The PDIC Charter) which
provides: The purpose of the PDIC is to protect the depositing public in the event of a
bank closure. It has already been sufficiently established by US
Section 1. There is hereby created a Philippine Deposit Insurance jurisprudence and Philippine statutes that the head office shall answer
Corporation hereinafter referred to as the "Corporation" which shall insure, for the liabilities of its branch. Now, suppose the Philippine branch of
as herein provided, the deposits of all banks which are entitled to the Citibank suddenly closes for some reason. Citibank N.A. would then be
benefits of insurance under this Act, and which shall have the powers required to answer for the deposit liabilities of Citibank Philippines. If the
hereinafter granted. Court were to adopt the posture of PDIC that the head office and the branch
are two separate entities and that the funds placed by the head office and its
The Corporation shall, as a basic policy, promote and safeguard the interests foreign branches with the Philippine branch are considered deposits within
of the depositing public by way of providing permanent and continuing the meaning of the PDIC Charter, it would result to the incongruous
insurance coverage on all insured deposits. situation where Citibank, as the head office, would be placed in the
ridiculous position of having to reimburse itself, as depositor, for the losses
R.A. No. 9576, which amended the PDIC Charter, reaffirmed the rationale it may incur occasioned by the closure of Citibank Philippines. Surely our
for the establishment of the PDIC: law makers could not have envisioned such a preposterous circumstance
when they created PDIC.
Section 1. Statement of State Policy and Objectives. - It is hereby declared
to be the policy of the State to strengthen the mandatory deposit insurance Finally, the Court agrees with the CA ruling that there is nothing in the
coverage system to generate, preserve, maintain faith and confidence in the definition of a "bank" and a "banking institution" in Section 3(b) of the
country's banking system, and protect it from illegal schemes and PDIC Charter which explicitly states that the head office of a foreign bank
machinations. and its other branches are separate and distinct from their Philippine
branches.
Towards this end, the government must extend all means and mechanisms
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There is no need to complicate the matter when it can be solved by simple which implements R.A. No. 6426; (2) the dollar deposits were credited as
logic bolstered by law and jurisprudence. Based on the foregoing, it is dollar time accounts and were covered by Certificates of Dollar Time
clear that the head office of a bank and its branches are considered as Deposit which were interest-bearing and payable upon maturity, and (3) the
one under the eyes of the law. While branches are treated as separate respondents maintain 100% foreign currency cover for their deposit liability
business units for commercial and financial reporting purposes, in the arising from the dollar time deposits as required by Section 4 of R.A. No.
end, the head office remains responsible and answerable for the 6426.
liabilities of its branches which are under its supervision and
control. As such, it is unreasonable for PDIC to require the To refute PDIC's allegations, the respondents explain the inter-branch
respondents, Citibank and BA, to insure the money placements made transactions which necessitate the creation of the accounts or placements
by their home office and other branches. Deposit insurance is subject of this case. When the Philippine branch needs to procure foreign
superfluous and entirely unnecessary when, as in this case, the institution currencies, it will coordinate with a branch in another country which
holding the funds and the one which made the placements are one and the handles foreign currency purchases. Both branches have existing accounts
same legal entity. with their head office and when a money placement is made in relation to
the acquisition of foreign currency from the international market, the
Funds not a deposit under the definition of the PDIC Charter; Excluded amount is credited to the account of the Philippine branch with its head
from assessment office while the same is debited from the account of the branch which
facilitated the purchase. This is further documented by the issuance of a
PDIC avers that the funds are dollar deposits and not money certificate of time deposit with a stated interest rate and maturity date. The
placements. Citing R.A. No. 6848, it defines money placement as a deposit interest rate represents the cost of obtaining the funds while the maturity
which is received with authority to invest. Because there is no evidence to date represents the date on which the placement must be returned. On the
indicate that the respondents were authorized to invest the subject dollar maturity date, the amount previously credited to the account of the
deposits, it argues that the same cannot be considered money placements. Philippine branch is debited, together with the cost for obtaining the funds,
PDIC then goes on to assert that the funds received by Citibank and BA are and credited to the account of the other branch. The respondents insist that
deposits, as contemplated by Section 3(f) of R.A. No. 3591, for the the interest rate and maturity date are simply the basis for the debit and
following reasons: (1) the dollar deposits were received by Citibank and BA credit entries made by the head office in the accounts of its branches to
in the course of their banking operations from their respective head office reflect the inter-branch accommodation. As regards the maintenance of
and foreign branches and were recorded in their books as "Account-Head currency cover over the subject money placements, the respondents point
Office/Branches-Time Deposits" pursuant to Central Bank Circular No. 343
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out that they maintain foreign currency cover in excess of what is required straightforward issue, thereby causing this case to drag on for more than
by law as a matter of prudent banking practice. three decades.
PDIC attempts to define money placement in order to impugn the Noticeably, PDIC does not dispute the veracity of the internal transactions
respondents' claim that the funds received from their head office and other of the respondents which gave rise to the issuance of the certificates of time
branches are money placements and not deposits, as defined under the PDIC deposit for the funds the subject of the present dispute. Neither does it
Charter. In the process, it loses sight of the important issue in this case, question the findings of the RTC and the CA that the money placements
which is the determination of whether the funds in question are subject to were made, and were payable, outside of the Philippines, thus, making them
assessment for deposit insurance as required by the PDIC Charter. In its fall under the exclusions to deposit liabilities. PDIC also fails to impugn the
struggle to find an adequate definition of "money placement," PDIC truth of the testimony of John David Shaffer, then a Fiscal Agent and Head
desperately cites R.A. No. 6848, The Charter of the Al-Amanah Islamic of the Assessment Section of the FDIC, that inter-branch deposits were
Investment Bank of the Philippines. Reliance on the said law is unfounded excluded from the assessment base. Therefore, the determination of facts of
because nowhere in the law is the term "money placement" the lower courts shall be accepted at face value by this Court, following the
defined. Additionally, R.A. No. 6848 refers to the establishment of an well-established principle that factual findings of the trial court, when
Islamic bank subject to the rulings of Islamic Shari'a to assist in the adopted and confirmed by the CA, are binding and conclusive on this Court,
development of the Autonomous Region of Muslim Mindanao (ARMM), and will generally not be reviewed on appeal.
making it utterly irrelevant to the case at bench. Since Citibank and BA are
neither Islamic banks nor are they located anywhere near the ARMM, then As explained by the respondents, the transfer of funds, which resulted from
it should be painfully obvious that R.A. No. 6848 cannot aid us in deciding the inter-branch transactions, took place in the books of account of the
this case. respective branches in their head office located in the United States. Hence,
because it is payable outside of the Philippines, it is not considered a deposit
Furthermore, PDIC heavily relies on the fact that the respondents pursuant to Section 3(f) of the PDIC Charter:
documented the money placements with certificates of time deposit to
simply conclude that the funds involved are deposits, as contemplated by Sec. 3(f) The term "deposit" means the unpaid balance of money or its
the PDIC Charter, and are consequently subject to assessment for deposit equivalent received by a bank in the usual course of business and for
insurance. It is this kind of reasoning that creates non-existent obscurities in which it has given or is obliged to give credit to a commercial, checking,
the law and obstructs the prompt resolution of what is essentially a savings, time or thrift account or which is evidenced by its certificate of
deposit, and trust funds held by such bank whether retained or
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deposited in any department of said bank or deposit in another bank, 1. Republic of the Philippines v. First Pacific Network Inc., G.R. No.
together with such other obligations of a bank as the Board of Directors 156646, 10 November 2014
shall find and shall prescribe by regulations to be deposit liabilities of
the Bank; Provided, that any obligation of a bank which is payable at The Court of Appeals may issue a freeze order, which shall be effective
the office of the bank located outside of the Philippines shall not be a immediately. The freeze order shall be for a period of twenty (20) days
deposit for any of the purposes of this Act or included as part of the unless extended by the court.
total deposits or of the insured deposits; Provided further, that any
insured bank which is incorporated under the laws of the Philippines may In cases of extension, it shall not exceed six (6) months depending upon
elect to include for insurance its deposit obligation payable only at such the circumstances of the case: Provided, That if there is no case filed
branch. against a person whose account has been frozen within the period
determined by the court, the freeze order shall be deemed ipso facto lifted:
The testimony of Mr. Shaffer as to the treatment of such inter-branch
deposits by the FDIC, after which PDIC was modelled, is also NOTE: The AMLC must file a petiton ex parte for the extension of the
persuasive. Inter-branch deposits refer to funds of one branch freeze order before the expiration of the original 20 day period of the
deposited in another branch and both branches are part of the same freeze order.
parent company and it is the practice of the FDIC to exclude such inter-
See the PDF.
branch deposits from a bank's total deposit liabilities subject to
assessment. 2. Republic of the Philippines v. Glasgow Credit and Collection
Services, Inc, G.R. No. 170281, 18 January 2008
All things considered, the Court finds that the funds in question are not
deposits within the definition of the PDIC Charter and are, thus, excluded Facts:
from assessment.
This is a petition for review of the order dated October 27, 2005 of the
SPECIAL LAWS Regional Trial Court (RTC) of Manila, Branch 47, dismissing the complaint
for forfeiture filed by the Republic of the Philippines, represented by the
ANTI-MONEY LAUNDERING ACT Anti-Money Laundering Council (AMLC) against respondents Glasgow
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Credit and Collection Services, Inc. (Glasgow) and Citystate Savings Bank, issuance of alias summons. However, no mention was made of the motion
Inc. (CSBI). for leave of court to serve summons by publication.
On July 18, 2003, the Republic filed a complaint in the RTC Manila for In an order dated January 30, 2004, the trial court archived the case
civil forfeiture of assets (with urgent plea for issuance of temporary allegedly for failure of the Republic to serve the alias summons. The
restraining order [TRO] and/or writ of preliminary injunction) against Republic filed an ex parte omnibus motion to (a) reinstate the case and (b)
the bank deposits in account number CA-005-10-000121-5 maintained resolve its pending motion for leave of court to serve summons by
by Glasgow in CSBI. The case, filed pursuant to RA 9160 (the Anti- publication.
Money Laundering Act of 2001), as amended, was docketed as Civil
Case No. 03-107319. In an order dated May 31, 2004, the trial court ordered the reinstatement of
the case and directed the Republic to serve the alias summons on Glasgow
Acting on the Republic’s urgent plea for the issuance of a TRO, the and CSBI within 15 days. However, it did not resolve the Republic’s motion
executive judge of RTC Manila issued a 72-hour TRO dated July 21, 2003. for leave of court to serve summons by publication declaring:
The case was thereafter raffled to Branch 47 and the hearing on the
application for issuance of a writ of preliminary injunction was set on Until and unless a return is made on the alias summons, any action on [the
August 4, 2003. Republic’s] motion for leave of court to serve summons by publication
would be untenable if not premature.
After hearing, the trial court (through then Presiding Judge Marivic T.
Balisi-Umali) issued an order granting the issuance of a writ of preliminary On July 12, 2004, the Republic (through the Office of the Solicitor General
injunction. The injunctive writ was issued on August 8, 2003. [OSG]) received a copy of the sheriff’s return dated June 30, 2004 stating
that the alias summons was returned "unserved" as Glasgow was no longer
Meanwhile, summons to Glasgow was returned "unserved" as it could no holding office at the given address since July 2002 and left no forwarding
longer be found at its last known address. address.
On October 8, 2003, the Republic filed a verified omnibus motion for (a) Meanwhile, the Republic’s motion for leave of court to serve summons by
issuance of alias summons and (b) leave of court to serve summons by publication remained unresolved. Thus, on August 11, 2005, the Republic
publication. In an order dated October 15, 2003, the trial court directed the filed a manifestation and ex parte motion to resolve its motion for leave of
court to serve summons by publication.
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On August 12, 2005, the OSG received a copy of Glasgow’s "Motion to from implementing the assailed October 27, 2005 order. It restrained
Dismiss (By Way of Special Appearance)" dated August 11, 2005. It Glasgow from removing, dissipating or disposing of the funds in account
alleged that (1) the court had no jurisdiction over its person as no. CA-005-10-000121-5 and CSBI from allowing any transaction on the
summons had not yet been served on it; (2) the complaint was said account.
premature and stated no cause of action as there was still no conviction
for estafa or other criminal violations implicating Glasgow and (3) Issue:
there was failure to prosecute on the part of the Republic.
Whether the complaint for civil forfeiture was correctly dismissed on
The Republic opposed Glasgow’s motion to dismiss. It contended that its grounds of improper venue, insufficiency in form and substance and
suit was an action quasi in rem where jurisdiction over the person of the failure to prosecute.
defendant was not a prerequisite to confer jurisdiction on the court. It
asserted that prior conviction for unlawful activity was not a Ruling:
precondition to the filing of a civil forfeiture case and that its complaint
The Court agrees with the Republic.
alleged ultimate facts sufficient to establish a cause of action. It denied
that it failed to prosecute the case. The Complaint Was Filed In The Proper Venue
On October 27, 2005, the trial court issued the assailed order. It dismissed In its assailed order, the trial court cited the grounds raised by Glasgow in
the case on the following grounds: (1) improper venue as it should have support of its motion to dismiss:
been filed in the RTC of Pasig where CSBI, the depository bank of the
account sought to be forfeited, was located; (2) insufficiency of the 1. That this [c]ourt has no jurisdiction over the person of Glasgow
complaint in form and substance and (3) failure to prosecute. It lifted the considering that no [s]ummons has been served upon it, and it has not
writ of preliminary injunction and directed CSBI to release to Glasgow or entered its appearance voluntarily;
its authorized representative the funds in CA-005-10-000121-5.
2. That the [c]omplaint for forfeiture is premature because of the absence of
Raising questions of law, the Republic filed this petition. a prior finding by any tribunal that Glasgow was engaged in unlawful
activity: [i]n connection therewith[,] Glasgow argues that the [c]omplaint
On November 23, 2005, this Court issued a TRO restraining Glasgow and states no cause of action; and
CSBI, their agents, representatives and/or persons acting upon their orders
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3. That there is failure to prosecute, in that, up to now, summons has yet to Sec. 3. Venue of cases cognizable by the regional trial court. – A petition
be served upon Glasgow.5 for civil forfeiture shall be filed in any regional trial court of the judicial
region where the monetary instrument, property or proceeds
But inasmuch as Glasgow never questioned the venue of the Republic’s representing, involving, or relating to an unlawful activity or to a
complaint for civil forfeiture against it, how could the trial court have money laundering offense are located; provided, however, that where all
dismissed the complaint for improper venue? In Dacoycoy v. Intermediate or any portion of the monetary instrument, property or proceeds is located
Appellate Court (reiterated in Rudolf Lietz Holdings, Inc. v. Registry of outside the Philippines, the petition may be filed in the regional trial court in
Deeds of Parañaque City), this Court ruled: Manila or of the judicial region where any portion of the monetary
instrument, property, or proceeds is located, at the option of the petitioner.
The motu proprio dismissal of petitioner’s complaint by [the] trial court on
the ground of improper venue is plain error. Under Section 3, Title II of the Rule of Procedure in Cases of Civil
Forfeiture, therefore, the venue of civil forfeiture cases is any RTC of the
At any rate, the trial court was a proper venue. judicial region where the monetary instrument, property or proceeds
representing, involving, or relating to an unlawful activity or to a money
On November 15, 2005, this Court issued A.M. No. 05-11-04-SC, the Rule laundering offense are located. Pasig City, where the account sought to be
of Procedure in Cases of Civil Forfeiture, Asset Preservation, and Freezing forfeited in this case is situated, is within the National Capital Judicial
of Monetary Instrument, Property, or Proceeds Representing, Involving, or Region (NCJR). Clearly, the complaint for civil forfeiture of the account
Relating to an Unlawful Activity or Money Laundering Offense under RA may be filed in any RTC of the NCJR. Since the RTC Manila is one of the
9160, as amended (Rule of Procedure in Cases of Civil Forfeiture). The RTCs of the NCJR, it was a proper venue of the Republic’s complaint for
order dismissing the Republic’s complaint for civil forfeiture of Glasgow’s civil forfeiture of Glasgow’s account.
account in CSBI has not yet attained finality on account of the pendency of
this appeal. Thus, the Rule of Procedure in Cases of Civil Forfeiture applies The Complaint Was Sufficient In Form And Substance
to the Republic’s complaint. Moreover, Glasgow itself judicially admitted
that the Rule of Procedure in Cases of Civil Forfeiture is "applicable to the In the assailed order, the trial court evaluated the Republic’s complaint to
instant case." determine its sufficiency in form and substance:
Section 3, Title II (Civil Forfeiture in the Regional Trial Court) of the Rule
of Procedure in Cases of Civil Forfeiture provides:
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At the outset, this [c]ourt, before it proceeds, takes the opportunity to and 108 (dated August 2, 2002), directing the issuance of freeze orders
examine the [c]omplaint and determine whether it is sufficient in form and against the bank accounts of Glasgow;
substance.
(g) Pursuant to said AMLC Resolutions, Freeze Orders Nos. 008-010, 011
Before this [c]ourt is a [c]omplaint for Civil Forfeiture of Assets filed by the and 013 were issued on different dates, addressed to the concerned banks;
[AMLC], represented by the Office of the Solicitor General[,] against
Glasgow and [CSBI] as necessary party. The [c]omplaint principally alleges (h) The facts and circumstances plainly showing that defendant Glasgow’s
the following: bank account and deposit are related to the unlawful activities of Estafa and
violation of Securities Regulation Code, as well as to a money laundering
(a) Glasgow is a corporation existing under the laws of the Philippines, with offense [which] [has] been summarized by the AMLC in its Resolution No.
principal office address at Unit 703, 7th Floor, Citystate Center [Building], 094; and
No. 709 Shaw Boulevard[,] Pasig City;
(i) Because defendant Glasgow’s bank account and deposits are related to
(b) [CSBI] is a corporation existing under the laws of the Philippines, with the unlawful activities of Estafa and violation of Securities Regulation
principal office at Citystate Center Building, No. 709 Shaw Boulevard, Code, as well as [to] money laundering offense as aforestated, and being the
Pasig City; subject of covered transaction reports and eventual freeze orders, the same
should properly be forfeited in favor of the government in accordance with
(c) Glasgow has funds in the amount of P21,301,430.28 deposited with Section 12, R.A. 9160, as amended.
[CSBI], under CA 005-10-000121-5;
In a motion to dismiss for failure to state a cause of action, the focus is on
(d) As events have proved, aforestated bank account is related to the the sufficiency, not the veracity, of the material allegations. The
unlawful activities of Estafa and violation of Securities Regulation Code; determination is confined to the four corners of the complaint and nowhere
else.
(e) The deposit has been subject of Suspicious Transaction Reports;
In a motion to dismiss a complaint based on lack of cause of action, the
(f) After appropriate investigation, the AMLC issued Resolutions No. 094 question submitted to the court for determination is the sufficiency of the
(dated July 10, 2002), 096 (dated July 12, 2002), 101 (dated July 23, 2002), allegations made in the complaint to constitute a cause of action and not
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whether those allegations of fact are true, for said motion must (a) the name and address of the primary defendant therein, Glasgow;
hypothetically admit the truth of the facts alleged in the complaint.
(b) a description of the proceeds of Glasgow’s unlawful activities with
The test of the sufficiency of the facts alleged in the complaint is particularity, as well as the location thereof, account no. CA-005-10-
whether or not, admitting the facts alleged, the court could render a 000121-5 in the amount of P21,301,430.28 maintained with CSBI;
valid judgment upon the same in accordance with the prayer of the
complaint. (c) the acts prohibited by and the specific provisions of RA 9160, as
amended, constituting the grounds for the forfeiture of the said
In this connection, Section 4, Title II of the Rule of Procedure in Cases of proceeds. In particular, suspicious transaction reports showed that
Civil Forfeiture provides: Glasgow engaged in unlawful activities of estafa and violation of the
Securities Regulation Code (under Section 3(i)(9) and (13), RA 9160, as
Sec. 4. Contents of the petition for civil forfeiture. - The petition for civil amended); the proceeds of the unlawful activities were transacted and
forfeiture shall be verified and contain the following allegations: deposited with CSBI in account no. CA-005-10-000121-5 thereby
making them appear to have originated from legitimate sources; as
(a) The name and address of the respondent: such, Glasgow engaged in money laundering (under Section 4, RA 9160,
as amended); and the AMLC subjected the account to freeze order and
(b) A description with reasonable particularity of the monetary instrument,
property, or proceeds, and their location; and (d) the reliefs prayed for, namely, the issuance of a TRO or writ of
preliminary injunction and the forfeiture of the account in favor of the
(c) The acts or omissions prohibited by and the specific provisions of the government as well as other reliefs just and equitable under the premises.
Anti-Money Laundering Act, as amended, which are alleged to be the
grounds relied upon for the forfeiture of the monetary instrument, property, The form and substance of the Republic’s complaint substantially
or proceeds; and conformed with Section 4, Title II of the Rule of Procedure in Cases of
Civil Forfeiture.
(d) The reliefs prayed for.
Moreover, Section 12(a) of RA 9160, as amended, provides:
Here, the verified complaint of the Republic contained the following
allegations: SEC. 12. Forfeiture Provisions. –
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(a) Civil Forfeiture. – When there is a covered transaction report made, amended, were satisfied. Hence, the Republic, represented by the AMLC,
and the court has, in a petition filed for the purpose ordered seizure of properly instituted the complaint for civil forfeiture.
any monetary instrument or property, in whole or in part, directly or
indirectly, related to said report, the Revised Rules of Court on civil Whether or not there is truth in the allegation that account no. CA-005-10-
forfeiture shall apply. 000121-5 contains the proceeds of unlawful activities is an evidentiary
matter that may be proven during trial. The complaint, however, did not
RA 9160, as amended, and its implementing rules and regulations lay down even have to show or allege that Glasgow had been implicated in a
two conditions when applying for civil forfeiture: conviction for, or the commission of, the unlawful activities of estafa and
violation of the Securities Regulation Code.
(1) when there is a suspicious transaction report or a covered
transaction report deemed suspicious after investigation by the AMLC A criminal conviction for an unlawful activity is not a prerequisite for
and the institution of a civil forfeiture proceeding. Stated otherwise, a
finding of guilt for an unlawful activity is not an essential element of
(2) the court has, in a petition filed for the purpose, ordered the seizure civil forfeiture.
of any monetary instrument or property, in whole or in part, directly or
indirectly, related to said report. Section 6 of RA 9160, as amended, provides:
It is the preliminary seizure of the property in question which brings it SEC. 6. Prosecution of Money Laundering. –
within the reach of the judicial process. It is actually within the court’s
possession when it is submitted to the process of the court. The injunctive (a) Any person may be charged with and convicted of both the offense of
writ issued on August 8, 2003 removed account no. CA-005-10-000121-5 money laundering and the unlawful activity as herein defined.
from the effective control of either Glasgow or CSBI or their representatives
or agents and subjected it to the process of the court. (b) Any proceeding relating to the unlawful activity shall be given
precedence over the prosecution of any offense or violation under this
Since account no. CA-005-10-000121-5 of Glasgow in CSBI was (1) Act without prejudice to the freezing and other remedies provided.
covered by several suspicious transaction reports and (2) placed under the
control of the trial court upon the issuance of the writ of preliminary Rule 6.1 of the Revised Implementing Rules and Regulations of RA 9160,
injunction, the conditions provided in Section 12(a) of RA 9160, as as amended, states:
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Rule 6.1. Prosecution of Money Laundering – 3. Ret. Lt. Ligot v. Republic of the Philippines, G.R. No. 176944, 6
March 2013
(a) Any person may be charged with and convicted of both the offense of
money laundering and the unlawful activity as defined under Rule 3(i) of Facts:
the AMLA.
On June 27, 2005, the Republic of the Philippines (Republic),
(b) Any proceeding relating to the unlawful activity shall be given represented by the Anti-Money Laundering Council (AMLC), filed an
precedence over the prosecution of any offense or violation under the Urgent Ex-Parte Application for the issuance of a freeze order with the
AMLA without prejudice to the application ex-parte by the AMLC to the CA against certain monetary instruments and properties of the
Court of Appeals for a freeze order with respect to the monetary instrument petitioners, pursuant to Section 10 of Republic Act (RA) No. 9160, as
or property involved therein and resort to other remedies provided under amended (otherwise known as the Anti-Money Laundering Act of
the AMLA, the Rules of Court and other pertinent laws and rules. 2001). This application was based on the February 1, 2005 letter of the
(emphasis supplied) Office of the Ombudsman to the AMLC, recommending that the latter
conduct an investigation on Lt. Gen. Ligot and his family for possible
Finally, Section 27 of the Rule of Procedure in Cases of Civil Forfeiture violation of RA No. 9160.
provides:
In support of this recommendation, the Ombudsman attached the Complaint
Sec. 27. No prior charge, pendency or conviction necessary. – No prior it filed against the Ligots for perjury under Article 183 of the Revised Penal
criminal charge, pendency of or conviction for an unlawful activity or Code, and for violations of Section 87 of RA No. 6713 and RA No. 3019
money laundering offense is necessary for the commencement or the (Anti-Graft and Corrupt Practices Act).
resolution of a petition for civil forfeiture.
The Ombudsman’s Complaint
Thus, regardless of the absence, pendency or outcome of a criminal
prosecution for the unlawful activity or for money laundering, an a. Lt. Gen. Ligot and immediate family
action for civil forfeiture may be separately and independently
prosecuted and resolved. The Ombudsman’s complaint alleges that Lt. Gen. Ligot served in the
Armed Forces of the Philippines (AFP) for 33 years and 2 months, from
April 1, 1966 as a cadet until his retirement on August 17, 2004. He and
Mrs. Ligot have four children, namely: Paulo Y. Ligot, Riza Y. Ligot,
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George Y. Ligot and Miguel Y. Ligot, who have all reached the age of assets registered in Lt. Gen. Ligot’s name, as well as those in his wife’s
majority at the time of the filing of the complaint. and children’s names, to be illegally obtained and unexplained wealth,
pursuant to the provisions of RA No. 1379 (An Act Declaring Forfeiture
Lt. Gen. Ligot declared in his Statement of Assets, Liabilities, and Net in Favor of the State Any Property Found to Have Been Unlawfully
Worth (SALN) that as of December 31, 2003, he had assets in the total Acquired by Any Public Officer or Employee and Providing for the
amount of Three Million Eight Hundred Forty-Eight Thousand and Three Proceedings Therefor).
Pesos (₱3,848,003.00).11 In contrast, his declared assets in his 1982 SALN
amounted to only One Hundred Five Thousand Pesos (₱105,000.00). b. Edgardo Tecson Yambao
Aside from these declared assets, the Ombudsman’s investigation revealed The Ombudsman’s investigation also looked into Mrs. Ligot’s younger
that Lt. Gen. Ligot and his family had other properties and bank accounts, brother, Edgardo Tecson Yambao. The records of the Social Security
not declared in his SALN, amounting to at least Fifty Four Million One System (SSS) revealed that Yambao had been employed in the private
Thousand Two Hundred Seventeen Pesos (₱54,001,217.00). These sector from 1977 to 1994. Based on his contributions to the SSS, Yambao
undeclared assets consisted of the following: did not have a substantial salary during his employment. While Yambao had
an investment with Mabelline Foods, Inc., the Ombudsman noted that this
Undeclared Assets Amount company only had a net income of ₱5,062.96 in 2002 and ₱693.67 in
2003. Moreover, the certification from the Bureau of Internal Revenue
Jacinto Ligot’s undeclared assets P 41,185,583.53
stated that Yambao had no record of any annual Individual Income
Jacinto Ligot’s children’s assets 1,744,035.60
Tax Return filed for the calendar year 1999 up to the date of the
Tuition fees and travel expenses P 2,308,047.87
investigation.
Edgardo Yambao’s assets relative to the real properties P 8,763,550.00
Despite Yambao’s lack of substantial income, the records show that he has
Total P 54,001,217.00
real properties and vehicles registered in his name, amounting to Eight
Million Seven Hundred Sixty Three Thousand Five Hundred Fifty Pesos
Bearing in mind that Lt. Gen. Ligot’s main source of income was his (₱8,763,550.00), which he acquired from 1993 onwards. The Office of the
salary as an officer of the AFP, and given his wife and children’s lack of Ombudsman further observed that in the documents it examined, Yambao
any other substantial sources of income, the Ombudsman declared the declared three of the Ligots’ addresses as his own.
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From these circumstances, the Ombudsman concluded that Yambao frozen are related to the unlawful activity or money laundering offense.
acted as a dummy and/or nominee of the Ligot spouses, and all the Accordingly, the CA issued a freeze order against the Ligots’ and
properties registered in Yambao’s name actually belong to the Ligot Yambao’s various bank accounts, web accounts and vehicles, valid for a
family. period of 20 days from the date of issuance.
Urgent Ex-Parte Freeze Order Application On July 26, 2005, the Republic filed an Urgent Motion for Extension of
Effectivity of Freeze Order, arguing that if the bank accounts, web
As a result of the Ombudsman’s complaint, the Compliance and accounts and vehicles were not continuously frozen, they could be
Investigation staff (CIS) of the AMLC conducted a financial placed beyond the reach of law enforcement authorities and the
investigation, which revealed the existence of the Ligots’ various bank government’s efforts to recover the proceeds of the Ligots’ unlawful
accounts with several financial institutions. On April 5, 2005, the activities would be frustrated. In support of its motion, it informed the CA
Ombudsman for the Military and Other Law Enforcement Officers that the Ombudsman was presently investigating the following cases
issued a resolution holding that probable cause exists that Lt. Gen. involving the Ligots:
Ligot violated Section 8, in relation to Section 11, of RA No. 6713, as
well as Article 183 of the Revised Penal Code. Case Number Complainant(s) Nature
On May 25, 2005, the AMLC issued Resolution No. 52, Series of 2005, OMB-P-C-05- Wilfredo Garrido Plunder
directing the Executive Director of the AMLC Secretariat to file an 0523
application for a freeze order against the properties of Lt. Gen. Ligot and the OMB-P-C-05- AGIO Gina Perjury
members of his family with the CA. Subsequently, on June 27, 2005, the 0003 Villamor, et al.
Republic filed an Urgent Ex-Parte Application with the appellate court for
the issuance of a Freeze Order against the properties of the Ligots and OMB-P-C-05- Field Investigation Violation of RA No. 3019,
Yambao. 0184 Office Section 3(b); Perjury under
Article 183, Revised Penal
The appellate court granted the application in its July 5, 2005 Code in relation to Section
resolution, ruling that probable cause existed that an unlawful activity 11 of RA No. 6713;
and/or money laundering offense had been committed by Lt. Gen. Ligot Forfeiture Proceedings in
and his family, including Yambao, and that the properties sought to be Relation to RA No. 1379
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OMB-P-C-05- David Odilao Malicious Mischief; and not intended to supplant a case for money laundering. When the CA
0352 Violation of Section 20, RA denied this motion in its resolution dated January 12, 2007, the Ligots filed
No. 7856 the present petition.
Issue:
Finding merit in the Republic’s arguments, the CA granted the motion
in its September 20, 2005 resolution, extending the freeze order until Whether or not the freeze order could be extended.
after all the appropriate proceedings and/or investigations have been
terminated. Ruling:
On September 28, 2005, the Ligots filed a motion to lift the extended We find merit in the petition.
freeze order, principally arguing that there was no evidence to support
the extension of the freeze order. They further argued that the I. Procedural aspect
extension not only deprived them of their property without due process;
a. Certiorari not proper remedy to assail freeze order; exception
it also punished them before their guilt could be proven. The appellate
court subsequently denied this motion in its January 4, 2006 resolution. Section 57 of the Rule in Civil Forfeiture Cases explicitly provides the
remedy available in cases involving freeze orders issued by the CA:
Meanwhile, on November 15, 2005, the "Rule of Procedure in Cases of
Civil Forfeiture, Asset Preservation, and Freezing of Monetary Instrument, Section 57. Appeal. - Any party aggrieved by the decision or ruling of the
Property, or Proceeds Representing, Involving, or Relating to an Unlawful court may appeal to the Supreme Court by petition for review on certiorari
Activity or Money Laundering Offense under Republic Act No. 9160, as under Rule 45 of the Rules of Court. The appeal shall not stay the
Amended" (Rule in Civil Forfeiture Cases) took effect. Under this rule, a enforcement of the subject decision or final order unless the Supreme Court
freeze order could be extended for a maximum period of six months. directs otherwise.
On January 31, 2006, the Ligots filed a motion for reconsideration of the From this provision, it is apparent that the petitioners should have filed a
CA’s January 4, 2006 resolution, insisting that the freeze order should be petition for review on certiorari, and not a petition for certiorari, to assail the
lifted considering: (a) no predicate crime has been proven to support the CA resolution which extended the effectivity period of the freeze order over
freeze order’s issuance; (b) the freeze order expired six months after it was their properties.
issued on July 5, 2005; and (c) the freeze order is provisional in character
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Even assuming that a petition for certiorari is available to the petitioners, a Clearly, the Ligots should have filed a petition for review on certiorari, and
review of their petition shows that the issues they raise (i.e., existence of not what is effectively a second motion for reconsideration (nor an original
probable cause to support the freeze order; the applicability of the 6-month action of certiorari after this second motion was denied), within fifteen days
limit to the extension of freeze orders embodied in the Rule of Procedure in from receipt of the CA’s January 4, 2006 resolution. To recall, this
Cases of Civil Forfeiture) pertain to errors of judgment allegedly committed resolution denied the petitioners’ motion to lift the extended freeze order
by the CA, which fall outside the Court’s limited jurisdiction when which is effectively a motion for reconsideration of the CA ruling extending
resolving certiorari petitions. As held in People v. Court of Appeals: the freeze order indefinitely.
In a petition for certiorari, the jurisdiction of the court is narrow in scope. It However, considering the issue of due process squarely brought before us in
is limited to resolving only errors of jurisdiction. It is not to stray at will and the face of an apparent conflict between Section 10 of RA No. 9160, as
resolve questions or issues beyond its competence such as errors of amended, and Section 53(b) of the Rule in Civil Forfeiture Cases, this Court
judgment. Errors of judgment of the trial court are to be resolved by the finds it imperative to relax the application of the rules of procedure and
appellate court in the appeal by and of error or via a petition for review resolve this case on the merits in the interest of justice.
on certiorari in this Court under Rule 45 of the Rules of Court.
Certiorari will issue only to correct errors of jurisdiction. It is not a b. Applicability of 6-month extension period under the Rule in Civil
remedy to correct errors of judgment. An error of judgment is one in Forfeiture Cases
which the court may commit in the exercise of its jurisdiction, and
which error is reversible only by an appeal. Error of jurisdiction is one Without challenging the validity of the fixed 6-month extension period, the
where the act complained of was issued by the court without or in excess of Republic nonetheless asserts that the Rule in Civil Forfeiture Cases does not
jurisdiction and which error is correctible only by the extraordinary writ of apply to the present case because the CA had already resolved the issues
certiorari. Certiorari will not be issued to cure errors by the trial court in its regarding the extension of the freeze order before the
appreciation of the evidence of the parties, and its conclusions anchored on
the said findings and its conclusions of law. As long as the court acts within Rule in Civil Forfeiture Cases came into effect.
its jurisdiction, any alleged errors committed in the exercise of its discretion
This reasoning fails to convince us.
will amount to nothing more than mere errors of judgment, correctible by an
appeal or a petition for review under Rule 45 of the Rules of Court.
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Notably, the Rule in Civil Forfeiture Cases came into effect on December 1379 (entitled "Republic of the Philippines v. Lt. Gen. Jacinto Ligot, et.
15, 2005. Section 59 provides that it shall "apply to all pending civil al."), pending before the Sandiganbayan.
forfeiture cases or petitions for freeze order" at the time of its effectivity.
These subsequent developments and their dates are significant in our
A review of the record reveals that after the CA issued its September 20, consideration of the present case, particularly the procedural aspect. Under
2005 resolution extending the freeze order, the Ligots filed a motion to lift Section 56 of the Rule in Civil Forfeiture Cases which provides that after
the extended freeze order on September 28, 2005. Significantly, the CA the post-issuance hearing on whether to modify, lift or extend the freeze
only acted upon this motion on January 4, 2006, when it issued a resolution order, the CA shall remand the case and transmit the records to the RTC for
denying it. consolidation with the pending civil forfeiture proceeding. This provision
gives the impression that the filing of the appropriate cases in courts in 2011
While denominated as a Motion to Lift Extended Freeze Order, this motion and 2012 rendered this case moot and academic.
was actually a motion for reconsideration, as it sought the reversal of the
assailed CA resolution. Since the Ligots’ motion for reconsideration was The apparent conflict presented by the limiting provision of the Rule in
still pending resolution at the time the Rule in Civil Forfeiture Cases came Civil Forfeiture Cases, on one hand, and the very broad judicial discretion
into effect on December 15, 2005, the Rule unquestionably applies to the under RA No. 9160, as amended, on the other hand, and the uncertainty it
present case. casts on an individual’s guaranteed right to due process indubitably call for
the Court’s exercise of its discretion to decide the case, otherwise moot and
c. Subsequent events academic, under those two exceptions, for the future guidance of those
affected and involved in the implementation of RA No. 9160, as amended.
During the pendency of this case, the Republic manifested that on
September 26, 2011, it filed a Petition for Civil Forfeiture with the Regional Additionally, we would be giving premium to the government’s failure to
Trial Court (RTC) of Manila. On September 28, 2011, the RTC, Branch 22, file an appropriate case until only after six years (despite the clear provision
Manila, issued a Provisional Asset Preservation Order and on October 5, of the Rule in Civil Forfeiture Cases) were we to dismiss the petition
2011, after due hearing, it issued an Asset Preservation Order. because of the filing of the forfeiture case during the pendency of the case
before the Court. The sheer length of time and the constitutional violation
On the other hand, the petitioners manifested that as of October 29, 2012, involved, as will be discussed below, strongly dissuade us from dismissing
the only case filed in connection with the frozen bank accounts is Civil Case the petition on the basis of the "moot and academic" principle. The Court
No. 0197, for forfeiture of unlawfully acquired properties under RA No. should not allow the seeds of future violations to sprout by hiding under this
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principle even when directly confronted with the glaring issue of the We do not see any merit in this claim. The Ligots’ argument is founded on a
respondent’s violation of the petitioners’ due process right - an issue that the flawed understanding of probable cause in the context of a civil forfeiture
respondent itself chooses to ignore. proceeding31 or freeze order application.32
We shall discuss the substantive relevance of the subsequent developments Based on Section 10 quoted above, there are only two requisites for the
and their dates at length below. issuance of a freeze order: (1) the application ex parte by the AMLC and (2)
the determination of probable cause by the CA. The probable cause
II. Substantive aspect required for the issuance of a freeze order differs from the probable
cause required for the institution of a criminal action, and the latter was
a. Probable cause exists to support the issuance of a freeze order not an issue before the CA nor is it an issue before us in this case.
The legal basis for the issuance of a freeze order is Section 10 of RA No. As defined in the law, the probable cause required for the issuance of a
9160, as amended by RA No. 9194, which states: freeze order refers to "such facts and circumstances which would lead a
reasonably discreet, prudent or cautious man to believe that an
Section 10. Freezing of Monetary Instrument or Property. – The Court of unlawful activity and/or a money laundering offense is about to be, is
Appeals, upon application ex parte by the AMLC and after determination being or has been committed and that the account or any monetary
that probable cause exists that any monetary instrument or property is in any instrument or property subject thereof sought to be frozen is in any
way related to an unlawful activity as defined in Section way related to said unlawful activity and/or money laundering offense."
3(i) hereof, may issue a freeze order which shall be effective immediately. In other words, in resolving the issue of whether probable cause exists, the
The freeze order shall be for a period of twenty (20) days unless extended CA’s statutorily-guided determination’s focus is not on the probable
by the court. [italics supplied] commission of an unlawful activity (or money laundering) that the Office of
the Ombudsman has already determined to exist, but on whether the bank
The Ligots claim that the CA erred in extending the effectivity period of the
accounts, assets, or other monetary instruments sought to be frozen are in
freeze order against them, given that they have not yet been convicted of
any way related to any of the illegal activities enumerated under RA No.
committing any of the offenses enumerated under RA No. 9160 that would
9160, as amended.35 Otherwise stated, probable cause refers to the
support the AMLC’s accusation of money-laundering activity.
sufficiency of the relation between an unlawful activity and the property or
monetary instrument which is the focal point of Section 10 of RA No. 9160,
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as amended. To differentiate this from any criminal case that may thereafter It should be noted that the existence of an unlawful activity that would
be instituted against the same respondent, the Rule in Civil Forfeiture Cases justify the issuance and the extension of the freeze order has likewise
expressly provides – been established in this case.
SEC. 28. Precedence of proceedings. - Any criminal case relating to an From the ex parte application and the Ombudsman’s complaint, we glean
unlawful activity shall be given precedence over the prosecution of any that Lt. Gen. Ligot himself admitted that his income came from his salary as
offense or violation under Republic Act No. 9160, as amended, without an officer of the AFP. Yet, the Ombudsman’s investigation revealed that the
prejudice to the filing of a separate petition for civil forfeiture or the bank accounts, investments and properties in the name of Lt. Gen. Ligot and
issuance of an asset preservation order or a freeze order. Such civil his family amount to more than Fifty-Four Million Pesos (₱54,000,000.00).
action shall proceed independently of the criminal prosecution. Since these assets are grossly disproportionate to Lt. Gen. Ligot’s income,
as well as the lack of any evidence that the Ligots have other sources of
Section 10 of RA No. 9160 (allowing the extension of the freeze order) income, the CA properly found that probable cause exists that these funds
and Section 28 (allowing a separate petition for the issuance of a freeze have been illegally acquired. On the other hand, the AMLC’s verified
order to proceed independently) of the Rule in Civil Forfeiture Cases allegations in its ex parte application, based on the complaint filed by the
are only consistent with the very purpose of the freeze order, which Ombudsman against Ligot and his family for violations of the Anti-Graft
specifically is to give the government the necessary time to prepare its and Corrupt Practices Act, clearly sustain the CA’s finding that probable
case and to file the appropriate charges without having to worry about cause exists that the monetary instruments subject of the freeze order are
the possible dissipation of the assets that are in any way related to the related to, or are the product of, an unlawful activity.
suspected illegal activity. Thus, contrary to the Ligots’ claim, a freeze
order is not dependent on a separate criminal charge, much less does it b. A freeze order, however, cannot be issued for an indefinite period.
depend on a conviction.
Assuming that the freeze order is substantively in legal order, the Ligots
That a freeze order can be issued upon the AMLC’s ex parte application now assert that its effectiveness ceased after January 25, 2006 (or six
further emphasizes the law’s consideration of how critical time is in these months after July 25, 2005 when the original freeze order first expired),
proceedings. As we previously noted in Republic v. Eugenio, Jr., "to make pursuant to Section 53(b) of the Rule in Civil Forfeiture Cases (A.M. No.
such freeze order anteceded by a judicial proceeding with notice to the 05-11-04-SC). This section states:
account holder would allow for or lead to the dissipation of such funds even
before the order could be issued." Section 53. Freeze order. –
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xxxx We observe on this point that nothing in the law grants the owner of the
"frozen" property any substantive right to demand that the freeze order be
(b) Extension. – On motion of the petitioner filed before the expiration lifted, except by implication, i.e., if he can show that no probable cause
of twenty days from issuance of a freeze order, the court may for good exists or if the 20-day period has already lapsed without any extension being
cause extend its effectivity for a period not exceeding six months. requested from and granted by the CA. Notably, the Senate deliberations on
RA No. 9160 even suggest the intent on the part of our legislators to make
We find merit in this claim. the freeze order effective until the termination of the case, when necessary.
A freeze order is an extraordinary and interim relief issued by the CA The silence of the law, however, does not in any way affect the Court’s own
to prevent the dissipation, removal, or disposal of properties that are power under the Constitution to "promulgate rules concerning the protection
suspected to be the proceeds of, or related to, unlawful activities as and enforcement of constitutional rights xxx and procedure in all courts."
defined in Section 3(i) of RA No. 9160, as amended. The primary Pursuant to this power, the Court issued A.M. No. 05-11-04-SC, limiting the
objective of a freeze order is to temporarily preserve monetary effectivity of an extended freeze order to six months – to otherwise leave the
instruments or property that are in any way related to an unlawful grant of the extension to the sole discretion of the CA, which may extend a
activity or money laundering, by preventing the owner from utilizing freeze order indefinitely or to an unreasonable amount of time – carries
them during the duration of the freeze order. The relief is pre-emptive serious implications on an individual’s substantive right to due process. This
in character, meant to prevent the owner from disposing his property right demands that no person be denied his right to property or be subjected
and thwarting the State’s effort in building its case and eventually filing to any governmental action that amounts to a denial. The right to due
civil forfeiture proceedings and/or prosecuting the owner. process, under these terms, requires a limitation or at least an inquiry on
whether sufficient justification for the governmental action.
Our examination of the Anti-Money Laundering Act of 2001, as amended,
from the point of view of the freeze order that it authorizes, shows that the In this case, the law has left to the CA the authority to resolve the issue of
law is silent on the maximum period of time that the freeze order can be extending the freeze order it issued. Without doubt, the CA followed the law
extended by the CA. The final sentence of Section 10 of the Anti-Money to the letter, but it did so by avoiding the fundamental law’s command under
Laundering Act of 2001 provides, "the freeze order shall be for a period its Section 1, Article III. This command, the Court – under its constitutional
of twenty (20) days unless extended by the court." In contrast, Section rule-making power – sought to implement through Section 53(b) of the Rule
55 of the Rule in Civil Forfeiture Cases qualifies the grant of extension in Civil Forfeiture Cases which the CA erroneously assumed does not apply.
"for a period not exceeding six months" "for good cause" shown.
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The Ligots’ case perfectly illustrates the inequity that would result from As correctly noted by the petitioners, a freeze order is meant to have a
giving the CA the power to extend freeze orders without limitations. As temporary effect; it was never intended to supplant or replace the actual
narrated above, the CA, via its September 20, 2005 resolution, extended the forfeiture cases where the provisional remedy - which means, the remedy is
freeze order over the Ligots’ various bank accounts and personal properties an adjunct of or an incident to the main action – of asking for the issuance
"until after all the appropriate proceedings and/or investigations being of an asset preservation order from the court where the petition is filed is
conducted are terminated." By its very terms, the CA resolution effectively precisely available. For emphasis, a freeze order is both a preservatory and
bars the Ligots from using any of the property covered by the freeze order preemptive remedy.
until after an eventual civil forfeiture proceeding is concluded in their favor
and after they shall have been adjudged not guilty of the crimes they are To stress, the evils caused by the law’s silence on the freeze order’s period
suspected of committing. These periods of extension are way beyond the of effectivity compelled this Court to issue the Rule in Civil Forfeiture
intent and purposes of a freeze order which is intended solely as an Cases. Specifically, the Court fixed the maximum allowable extension on
interim relief; the civil and criminal trial courts can very well handle the freeze order’s effectivity at six months. In doing so, the Court sought
the disposition of properties related to a forfeiture case or to a crime to balance the State’s interest in going after suspected money
charged and need not rely on the interim relief that the appellate court launderers with an individual’s constitutionally-protected right not to
issued as a guarantee against loss of property while the government is be deprived of his property without due process of law, as well as to be
preparing its full case. The term of the Court of Appeals’ extension, too, presumed innocent until proven guilty.
borders on inflicting a punishment to the Ligots, in violation of their
constitutionally protected right to be presumed innocent, because the To our mind, the six-month extension period is ordinarily sufficient for
unreasonable denial of their property comes before final conviction. the government to act against the suspected money launderer and to file
the appropriate forfeiture case against him, and is a reasonable period
In more concrete terms, the freeze order over the Ligots’ properties has as well that recognizes the property owner’s right to due process. In
been in effect since 2005, while the civil forfeiture case – per the this case, the period of inaction of six years, under the circumstances,
Republic’s manifestation – was filed only in 2011 and the forfeiture case already far exceeded what is reasonable.
under RA No. 1379 – per the petitioners’ manifestation – was filed only
in 2012. This means that the Ligots have not been able to access the We are not unmindful that the State itself is entitled to due process. As a due
properties subject of the freeze order for six years or so simply on the process concern, we do not say that the six-month period is an inflexible
basis of the existence of probable cause to issue a freeze order, which rule that would result in the automatic lifting of the freeze order upon its
was intended mainly as an interim preemptive remedy. expiration in all instances. An inflexible rule may lend itself to abuse - to
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the prejudice of the State’s legitimate interests - where the property owner resolution by the CA, which is hereby directed to resolve this kind of
would simply file numerous suits, questioning the freeze order during the motion for extension with reasonable dispatch.
six-month extension period, to prevent the timely filing of a money
laundering or civil forfeiture case within this period. With the limited In the present case, we note that the Republic has not offered any
resources that our government prosecutors and investigators have at their explanation why it took six years (from the time it secured a freeze
disposal, the end-result of an inflexible rule is not difficult to see. order) before a civil forfeiture case was filed in court, despite the clear
tenor of the Rule in Civil Forfeiture Cases allowing the extension of a
We observe, too, that the factual complexities and intricacies of the case and freeze order for only a period of six months. All the Republic could
other matters that may be beyond the government’s prosecutory agencies’ proffer is its temporal argument on the inapplicability of the Rule in Civil
control may contribute to their inability to file the corresponding civil Forfeiture Cases; in effect, it glossed over the squarely-raised issue of due
forfeiture case before the lapse of six months. Given these considerations, it process. Under these circumstances, we cannot but conclude that the
is only proper to strike a balance between the individual’s right to due continued extension of the freeze order beyond the six-month period
process and the government’s interest in curbing criminality, particularly violated the Ligot’s right to due process; thus, the CA decision should be
money laundering and the predicate crimes underlying it. reversed.
Thus, as a rule, the effectivity of a freeze order may be extended by the CA We clarify that our conclusion applies only to the CA ruling and does not
for a period not exceeding six months. Before or upon the lapse of this affect the proceedings and whatever order or resolution the RTC may have
period, ideally, the Republic should have already filed a case for civil issued in the presently pending civil cases for forfeiture. We make this
forfeiture against the property owner with the proper courts and clarification to ensure that we can now fully conclude and terminate this CA
accordingly secure an asset preservation order or it should have filed aspect of the case.
the necessary information. Otherwise, the property owner should already
be able to fully enjoy his property without any legal process affecting it. As our last point, we commend the fervor of the CA in assisting the State’s
However, should it become completely necessary for the Republic to further efforts to prosecute corrupt public officials. We remind the appellate court
extend the duration of the freeze order, it should file the necessary motion though that the government’s anti-corruption drive cannot be done at the
before the expiration of the six-month period and explain the reason or expense of cherished fundamental rights enshrined in our Constitution. So
reasons for its failure to file an appropriate case and justify the period of long as we continue to be guided by the Constitution and the rule of law, the
extension sought. The freeze order should remain effective prior to the Court cannot allow the justification of governmental action on the basis of
the noblest objectives alone. As so oft-repeated, the end does not justify the
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means. Of primordial importance is that the means employed must be in received another P38 million from Molugan on the same day.
keeping with the Constitution. Mere expediency will certainly not excuse Curiously, AGS returned the P38 million to Molugan also on the same
constitutional shortcuts. day.
WHEREFORE, premises considered, we GRANT the petition and The transactions were reported '"suspicious" because they had no
LIFT the freeze order issued by the Court of Appeals in CA G.R. SP underlying legal or trade obligation, purpose or economic justification;
No. 90238. This lifting is without prejudice to, and shall not affect, the nor were they commensurate to the business or financial capacity of
preservation orders that the lower courts have ordered on the same Molugan and AGS, which were both lowly capitalized at P50, 000 each.
properties in the cases pending before them. Pursuant to Section 56 of In the case of Molugan, Samuel S. Bombeo, who holds the position of
A.M. No. 05-11-04-SC, the Court of Appeals is hereby ordered to remand president, secretary and treasurer, is the lone signatory to the account. In the
the case and to transmit the records to the Regional Trial Court of Manila, case of AGS, Samuel S. Bombeo shares this responsibility with Ariel
Branch 22, where the civil forfeiture proceeding is pending, for Panganiban.
consolidation therewith as may be appropriate.
On 7 March 2006, the Senate furnished the AMLC a copy of its Committee
Report No. 54 prepared by the Committee on Agriculture and Food and the
Committee on Accountability of Public Officers and Investigations.
4. Republic v. Bolante, GR 186717, 17 April 2017
Committee Report No. 54 narrated that former Undersecretary of
Facts: Agriculture Jocelyn I. Bolante (Bolante) requested the Department of
Budget and Management to release to the Department of Agriculture the
In April 2005, the Philippine National Bank (PNB) submitted to the
amount of ₱728 million for the purchase of farm inputs under the
Anti-Money Laundering Council (AMLC) a series of suspicious
Ginintuang Masaganang Ani Program. This amount was used to purchase
transaction reports involving the accounts of Livelihood Corporation
liquid fertilizers from Freshan Philippines, Inc., which were then distributed
(LIVECOR), Molugan Foundation (Molugan), and Assembly of
to local government units and congressional districts beginning January
Gracious Samaritans, Inc. (AGS).
2004. Based on the Audit Report prepared by the Commission on Audit
According to the reports, LIVECOR transferred to Molugan a total (COA), the use of the funds was characterized by massive irregularities,
amount of' ₱172.6 million in a span of 15 months from 2004 to 2005. On overpricing, and violations of the procurement law and wanton wastage of
30 April 2004, LIVECOR transferred ₱40 million to AGS, which scarce government resources.
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The AMLC issued Resolution No.75 finding probable cause to believe that The CA issued a freeze order effective for 20 days. The freeze order
the accounts of LIVECOR, Molugan and AGS - the subjects of the required the covered institutions of the 70 accounts to desist from and
suspicious transaction reports submitted by PNB - were related to what not allow any transaction involving the identified monetary
became known as the "fertilizer fund scam. The acts involved in the instruments. It also asked the covered institutions to submit a detailed
"fertilizer scam" may constitute violation of Section 3(e) of Republic written return to the CA within 24 hours from receipt of the freeze
Act No. 3019, as well as violation or Republic Act No. 7080 (Plunder). order.
Thus, the AMLC authorized the filing of a petition for the issuance of The CA conducted a summary hearing of the application, after which the
an order allowing an inquiry into the six accounts 18 of LIVECOR, parties were ordered to submit their memoranda, manifestations and
Molugan, AGS, Samuel S. Bombeo and Ariel Panganiban. The AMLC comments/oppositions. The freeze order was later extended for a period of
also required all covered institutions to submit reports of covered 30 days until 19 August 2008.
transactions and/or suspicious transactions of these entities and
individuals, including all the related web of accounts. Finding that there existed probable cause that the funds transferred to
and juggled by LIVECOR, Molugan, and AGS formed part of the ₱728
Petition was filed ex parte before the RTC and docketed as AMLC SP million fertilizer fund, the CA extended the effectivity of the freeze
Case No. 06-003. On 17 November 2006, the trial court found probable order for another four months, or until 20 December 2008. The
cause and issued the Order prayed for. It allowed the AMLC to inquire extension covered only 31 accounts, which showed an existing balance
into and examine the six bank deposits or investments and the related based on the returns of the covered institutions.
web of accounts.
In the meantime, the Republic filed an Ex Parte Application docketed as
In view of this development, the AMLC issued Resolution No. 40.27 It AMLC Case No. 07-001 before the RTC. Drawing on the authority
authorized the filing of a petition for the issuance of a freeze order against provided by the AMLC through Resolution No. 90, the ex parte application
the 70 accounts found to be related to the fertilizer fund scam. Hence, the sought the issuance of an order allowing an inquiry into the 70 accounts.
Republic filed an Ex Parte Petition docketed as CA-G.R. AMLC No. 00014
before the CA, seeking the issuance of a freeze order against the 70 The RTC found probable cause and issued the Order prayed for. It allowed
accounts. the AMLC to inquire into and examine the 70 bank deposits or investments
and the related web of accounts.
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Hence, the Republic filed an Urgent Ex Parte Petition docketed as CA-G.R. previous case has finally been resolved (the ground for dismissal is res
AMLC No. 00024 before the CA seeking the issuance of a freeze order judicata); and (3) filing multiple cases based on the same cause of
against the 24 accounts. action, but with different prayers (splitting of causes of action, where
the ground for dismissal is also either litis pendentia or res judicata).
In the Resolution dated 4 February 2009, the CA issued a freeze order
effective for 20 days. The freeze order required the covered institutions of While it is true that a previous freeze order was issued in CA-G.R. AMLC
the 24 accounts to desist from and not allow any transaction involving the No. 00014 covering some of the accounts subject of CA-G.R. AMLC No.
identified monetary instruments. It also asked the covered institutions to 00024, CA-G.R. AAILC No. 00014 had already attained finality when the
submit a detailed written return to the CA within 24 hours from receipt of second petition was filed, neither petitioner nor any of the respondents
the freeze order. interposed an appeal therefrom, pursuant to Section 57 of the Rule of
Procedure in Cases of Civil F01feiture, etc.
Issue:
We are not even sure where the Republic got the notion that the CA found
(1) Whether the Republic committed forum shopping in filing CA-G.R. "that the filing of the second petition for freeze order constitutes forum
AMLC No. 00024 before the CA. shopping on the ground of litis pendentia. In its assailed Resolution, the
appellate court aptly cited Quinsay v. CA, stating that "forum shopping
(2) Whether the RTC committed grave abuse of discretion in ruling concurs not only when a final judgment in one case will amount to res
that there exists no probable cause to allow an inquiry into the total of judicata in another, but also where the elements of litis pendentia are
76 deposits and investments of respondents. present."
Ruling: Rule 10.2 of the Revised Rules and Regulations Implementing Republic Act
No. 9160, as Amended by Republic Act No. 9194, defined probable cause
(1) Yes. The Republic committed forum shopping. As we ruled in Chua v. as "such facts and circumstances which would lead a reasonably discreet,
Metropolitan Bank and Trust Co, forum shopping is committed in three prudent or cautious man to believe that an unlawful activity and/or a money
ways: (1) filing multiple cases based on the same cause of action and laundering offense is about to be, is being or has been committed and that
with the same prayer, where the previous case has not yet been resolved the account or any monetary instrument or property subject thereof sought
(the ground for dismissal is litis pendentia); (2) filing multiple cases to be frozen is in any way related to said unlawful activity and/or money
based on the same cause of action and with the same prayer, where the laundering offense.
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Section 11, itself requires that it be established that "there is probable cause accounts of LIVECOR, Molugan, AGS, Samuel S. Bombeo and Ariel
that the deposits or investments are related to unlawful activities," and it Panganiban.
obviously is the court which stands as arbiter whether there is indeed such
probable cause. The process of inquiring into the existence of probable With the resources available to the AMLC, coupled with a bank inquiry
cause would involve the function of determination reposed on the trial court. order granted 15 months before Eugenio was even promulgated, the
AMLC should have been able to obtain more evidence establishing a
For the trial court to issue a bank inquiry order, it is necessary for the more substantive link tying Bolante and the fertilizer fund scam to
AMLC to be able to show specific facts and circumstances that provide LIVECOR. It did not help that the AMLC failed to include in its
a link between an unlawful activity or a money laundering offense, on application for a bank inquiry order in AMLC SP Case No. 06-003
the one hand, and the account or monetary instrument or property LIVECOR's PNB account as indicated in the suspicious transaction
sought to be examined on the other hand. In this case, the RTC found the reports. This PNB account was included only in the application for a
evidence presented by the AMLC wanting. For its part, the latter insists that bank inquiry order in AMLC Case No. 07-001.
the RTC's determination was tainted with grave abuse of discretion for
ignoring the glaring existence of probable cause that the subject bank As it stands, the evidence relied upon by the AMLC in 2006 was still the
deposits and investments were related to an unlawful activity. same evidence it used to apply for a bank inquiry order in 2008.
Regrettably, this evidence proved to be insufficient when weighed
It was this excerpt that led the AMLC to connect the fertilizer fund scam to against that presented by the respondents, who were given notice and
the suspicious transaction reports earlier submitted to it by PNB. However, the opportunity to contest the issuance of the bank inquiry order
the RTC found during trial that respondent Bolante had ceased to be a pursuant to Eugenio. In fine, the RTC did not commit grave abuse of
member of the board of trustees of LIVECOR for 14 months before the discretion in denying the application.
latter even made the initial transaction, which was the subject of the
suspicious transaction reports. Furthermore, the RTC took note that WHEREFORE, the petition in G.R. No. 186717 is DENIED. The Court
according to the Audit Report submitted by the Commission on Audit, no of Appeals Resolution dated 27 February 2009 in CA-G.R. AMLC No.
part of the P728 million fertilizer fund was ever released to LIVECOR. 00024 is AFFIRMED.
We note that in the RTC Order dated 17 November 2006 in AMLC SP Case The petition in G.R. No. 190357 is DISMISSED. The Resolution dated 3
No. 06-003, the AMLC was already allowed ex parte to inquire into and July 2009 and Order dated 13 November 2009 issued by the Regional Trial
examine the six bank deposits or investments and the related web of Court of Makati, Branch 59, in AMLC Case No. 07-001 are AFFIRMED.
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The Status Quo Ante Order issued by this Court on 25 March 2009 is
hereby LIFTED.

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MAXWELL NICKY NOTES Tahanlangit, Maxi Dominick D.

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Excerpt: An investment company refers to any issuer, who is or holds

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2. When an obligation, not constituting a loan or forbearance of money, Facts:

No. The order of the Ombudsman to produce for in camera inspection

also REQUIRED the respondents to COMMENT on the [merits of the]

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