SIMEX

A Petitioner, a private corporation engaged in the exportation of food products,

was a depositor maintaining a checking account with respondent Traders
Royal Bank. Petitioner deposited to its account increasing its balance and
subsequently, issued several checks but was surprised to learn that it had
been dishonored for insufficient funds. As a consequence, petitioner received
demand letters from its suppliers for the dishonored checks. Investigation
disclosed that the deposit was not credited to it. The error was rectified and the
dishonored checks were consequently paid. Petitioner demanded reparation
from respondent bank for its gross and wanton negligence but the later did not
heed. Petitioner then filed before the RTC which later held that respondent
bank was guilty of negligence but petitioner nonetheless was not entitled to
moral damages. CA affirmed.

Issue:
Whether or not petitioner is entitled to damages due to respondent bank’s
negligence.

Ruling: YES.
As the Court sees it, the initial carelessness of the respondent bank,
aggravated by the lack of promptitude in repairing its error, justifies the grant of
moral damages. This rather lackadaisical attitude toward the complaining
depositor constituted the gross negligence, if not wanton bad faith, that the
respondent court said had not been established by the petitioner. We shall
recognize that the petitioner did suffer injury because of the private
respondent’s negligence that caused the dishonor of the checks issued by it.
The immediate consequence was that its prestige was impaired because of
the bouncing checks and confidence in it as a reliable debtor was diminished.
The point is that as a business affected with public interest and because of the
nature of its functions, the bank is under obligation to treat the accounts of its
depositors with meticulous care, always having in mind the fiduciary nature of
their relationship. In the case at bar, it is obvious that the respondent bank was
remiss in that duty and violated that relationship. What is especially deplorable
is that, having been informed of its error in not crediting the deposit in question
to the petitioner, the respondent bank did not immediately correct it but did so
only one week later or twenty-three days after the deposit was made. It bears
repeating that the record does not contain any satisfactory explanation of why
the error was made in the first place and why it was not corrected immediately
after its discovery. Such ineptness comes under the concept of the wanton
manner contemplated in the Civil Code that calls for the imposition of
exemplary damages.
Teodoro banas
Republic of the Philippines vs. Security Credit and Acceptance Corporation G.R.
No. L-20583

An investment company which loans out the money of its customers, collects
the interest and charges a commission to both lender and borrower, is a bank. It
is conceded that a total of 59,463 savings account deposits have been made by
the public with the corporation and its 74 branches, with an aggregate deposit
of P1,689,136.74, which has been lent out to such persons as the corporation
deemed suitable therefore. It is clear that these transactions partake of the
nature of banking, as the term is used in Section 2 of the General Banking Act.

Facts: The Solicitor General filed a petition for quo warranto to dissolve the Security
and Acceptance Corporation, alleging that the latter was engaging in banking
operations without the authority required therefor by the General Banking Act
(Republic Act No. 337). Pursuant to a search warrant issued by MTC Manila, members
of Central Bank intelligence division and Manila police seized documents and records
relative to the business operations of the corporation. After examination of the same,
the intelligence division of the Central Bank submitted a memorandum to the then
Acting Deputy Governor of Central Bank finding that the corporation is engaged in
banking operations. It was found that Security and Acceptance
Corporation established 74 branches in principal cities and towns throughout the
Philippines; that through a systematic and vigorous campaign undertaken by the
corporation, the same had managed to induce the public to open 59,463 savings
deposit accounts with an aggregate deposit of P1,689,136.74; Accordingly, the
Solicitor General commenced this quo warranto proceedings for the dissolution of the
corporation, with a prayer that, meanwhile, a writ of preliminary injunction be issued ex
parte, enjoining the corporation and its branches, as well as its officers and agents,
from performing the banking operations complained of, and that a receiver be
appointed pendente lite. Superintendent of Banks of the Central Bank was then
appointed by the Supreme Court as receiver pendente lite of defendant corporation.

In their defense, Security and Acceptance Corporation averred that the the
corporation had filed with the Superintendent of Banks an application for conversion
into a Security Savings and Mortgage Bank, with defendants Zapa, Balatbat, Tanjutco
(Pablo and Vito, Jr.), Soriano, Beltran and Sebastian as proposed directors.

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

Held. An investment company which loans out the money of its customers, collects
the interest and charges a commission to both lender and borrower, is a bank. It is
conceded that a total of 59,463 savings account deposits have been made by the
public with the corporation and its 74 branches, with an aggregate deposit of
P1,689,136.74, which has been lent out to such persons as the corporation deemed
suitable therefore. It is clear that these transactions partake of the nature of banking,
as the term is used in Section 2 of the General Banking Act. Hence, defendant
corporation has violated the law by engaging in banking without securing the
administrative authority required in Republic Act No. 337.
That the illegal transactions thus undertaken by defendant corporation warrant its
dissolution is apparent from the fact that the foregoing misuser of the corporate funds
and franchise affects the essence of its business, that it is willful and has been
repeated 59,463 times, and that its continuance inflicts injury upon the public, owing to
the number of persons affected thereby.
Doctrines:1.Only entities duly authorized by the Monetary Board of the Central Bank
may engage in the lending of funds obtained from the public through the receipt of
deposits of any kind and all entities regularly conducting such operations shall
be considered as banking institutions.2.What is prohibited by law is for investment
companies to lend funds obtained from the public through receipts of deposits which
is a function of banking institutions.3. An investment company refers to any insurer
which is or holds itself out as being engaged or proposes to engage primarily in the
business of investing, reinvesting or trading in securities. As defined in Section 2
paragraph (a) of the Revised Securites Act , securities shall include
commercial papers evidencing indebtedness of any person, financial or non financial
entity, irrespective of maturity,issued , endorsed, sold , transferred or in any manner
conveyed to another with or without recourse such as promissory notes.

Facts:Asia Pacific filed a complaint for a sum of money with prayer for a writ of
replevin against TeodoroBañas,C.G. Dizon Construction Inc. and Cenen Dizon. Bañas
executed a promissory note in favor of C.G. Dizon Construction. Later C. G. Dizon
Construction endorsed with recourse the promissory noteto Asia Pacific and to secure
payment thereof, C.G. Dizon through its corporate officers executed aDeed of Chattel
Mortgage covering three heavy equipment units of Caterpillar Bulldozer
Crawler Tractors in favor of Asia Pacific. Moreover Cenen Dizon executed a
Continuing Undertaking whereinhe bound himself to pay the obligation jointly and
severally with C.G. Dizon Construction.In compliance with the provision of
the promissory note, C.G. Dizon construction made payments byway of Installments
to Asia Pacific, However C.G. Dizon Construction defaulted in the payment of the
remaining installments, prompting Asia Pacific to send a statement of account to
Cenen Dizon for theunpaid balance. As the demand was unheeded, Asia Pacific
sued Teodoro Bañas, C.G. DizonConstruction Inc. and Cenen DizonTeodoro Bañas,
C.G. Dizon Construction Inc. and Cenen Dizon admitted the genuineness and
dueexecution of the Promissory Note, Deed of Chattel Mortgage and the Continuing
Undertaking, they nevertheless maintained that these legal documents we never
intended to be legal valid and binding buta mere subterfuge to conceal the loan with
usurious interest.Defendants claimed that since Asia Pacific could not directly engage
in banking business, it propose tothem a scheme wherein Asia Pacific could extend a
loan to them without violating banking laws : first, Cenen Dizon would secure
a promissory note from Teodoro Bañas with a face value of P390,000.00 payable in
installments; second, ASIA PACIFIC would then make it appear that the promissory
notewas sold to it by Cenen Dizon with the 14% usurious interest on the loan or
P54,000.00 discounted andcollected in advance by ASIA PACIFIC; and, lastly, Cenen
Dizon would provide sufficient collateral toanswer for the loan in case of default in
payment and execute a continuing guaranty to assurecontinuous and prompt payment
of the loan. Sometime in October 1980 Cenen Dizon informed ASIAPACIFIC that he
would be delayed in meeting his monthly amortization on account of businessreverses
and promised to pay instead in February 1981. Cenen Dizon made good his promise
andtendered payment to ASIA PACIFIC in an amount equivalent to two (2) monthly
amortizations. ButASIA PACIFIC attempted to impose a 3% interest for every month
of delay, which he flatly refused to pay for being usurious

ISSUE Whether the disputed transaction between petitioners and Asia Pacific
violated banking laws, hencenull and void
Ruling:The Supreme Court ruled and said that an investment company refers to any
insurer which is or holdsitself out as being engaged or proposes to engage primarily in
the business of investing, reinvesting or trading in securities. As defined in Section 2
paragraph (a) of the Revised Securites Act , securitiesshall include commercial papers
evidencing indebtedness of any person, financial or non financialentity, irrespective of
maturity, issued , endorsed, sold , transferred or in any manner conveyed toanother
with or without recourse such as promissory notes.Clearly the transaction between
petitioners and respondent was one involving not a loan but a purchaseof receivables
at a discount well within the purview of investing, reinvesting or trading in
securitieswhich an investment company like the Asia Pacific is authorized to perform
and does not constitute aviolation of the General Banking Act. Moreover Section 2 of
the General Banking Act provides:“Only entities duly authorized by the Monetary
Board of the Central Bank may engage inn the lendingof funds obtained from the
public through the receipt of deposits of any kind and all entities regularlyconducting
such operations shall be considered as banking institutions and shall be subject to
the provisions of this Act, of the Central Bank Act and of other pertinent laws.
“Indubitably, what is prohibited by law is for investment companies to lend funds
obtained from the public through receipts of deposits which is a function of banking
institutions. But in the case at bar thefunds supposedly “lent” to petitioners have not
been shown to have been obtained from the public byway of deposits hence the
applicability of banking laws
THE CONSOLIDATED BANK and TRUST CORPORATION vs.
COURT OF APPEALS and L.C. DIAZ and COMPANY, CPA’s
G.R. No. 138569,

FACT:
Petitioner Solidbank is a domestic banking corporation organized and
existing under Philippine laws. Private respondent L.C. Diaz and
Company, CPA’s, is a professional partnership engaged in the practice
of accounting.

In March 1976, L.C. Diaz opened a savings account with Solidbank.

On 14 August 1991, L.C. Diaz through its cashier, Mercedes Macaraya,
filled up a savings (cash) deposit slip for P990 and a savings (checks)
deposit slip for P50. Macaraya instructed the messenger of L.C. Diaz,
Ismael Calapre, to deposit the money with Solidbank. Macaraya also
gave Calapre the Solidbank passbook.

Calapre went to Solidbank and presented to Teller No. 6 the two

deposit slips and the passbook. The teller acknowledged the receipt of
the deposit by returning to Calapre the duplicate copies of the two
deposit slips. Teller No. 6 stamped the deposit slips with the words
“DUPLICATE” and “SAVING TELLER 6 SOLIDBANK HEAD
OFFICE.” Since the transaction took time and Calapre had to make
another deposit for L.C. Diaz with Allied Bank, he left the passbook
with Solidbank. Calapre then went to Allied Bank. When Calapre
returned to Solidbank to retrieve the passbook, Teller No. 6 informed
him that “somebody got the passbook.” Calapre went back to L.C. Diaz
and reported the incident to Macaraya.

Macaraya immediately prepared a deposit slip in duplicate copies

with a check of P200,000. Macaraya and Calapre went to Solidbank
and presented to Teller No. 6 the deposit slip and check. The teller
stamped the words “DUPLICATE” and “SAVING TELLER 6
SOLIDBANK HEAD OFFICE” on the duplicate copy of the deposit slip.
When Macaraya asked for the passbook, Teller No. 6 told Macaraya
that someone got the passbook but she could not remember to whom
she gave the passbook. When Macaraya asked Teller No. 6 if Calapre
got the passbook, Teller No. 6 answered that someone shorter than
Calapre got the passbook. Calapre was then standing beside
Macaraya.

The following day L.C. Diaz learned of the unauthorized withdrawal

the day before (14 August 1991) of P300,000 from its
savings account. The withdrawal slip for the P300,000 bore the
signatures of the authorized signatories of L.C. Diaz, namely Diaz and
Rustico L. Murillo. The signatories, however, denied signing the
withdrawal slip. A certain Noel Tamayo received the P300,000.

L.C. Diaz demanded from Solidbank the return of its money.

Solidbank refused. L.C. Diaz filed a Complaint for Recovery of a Sum
of Money against Solidbank. The trial court absolved Solidbank. L.C.
Diaz appealed to the CA. CA reversed the ecision of the trial court. CA
denied the motion for reconsideration of Solidbank. But it modified
its decision by deleting the award of exemplary damages and
attorney’s fees. Hence this petition.

ISSUE:
WON petitioner Solidbank is liable.

RULING:
Yes. Solidbank is liable for breach of contract due to negligence, or
culpa contractual.

Solidbank’s Breach of its Contractual Obligation

Article 1172 of the Civil Code provides that “responsibility arising
from negligence in the performance of every kind of obligation is
demandable.” For breach of the savings deposit agreement due to
negligence, or culpa contractual, the bank is liable to its depositor.

Calapre left the passbook with Solidbank because the “transaction

took time” and he had to go to Allied Bank for another transaction.
The passbook was still in the hands of the employees of Solidbank for
the processing of the deposit when Calapre left Solidbank. When the
passbook is in the possession of Solidbank’s tellers during
withdrawals, the law imposes on Solidbank and its tellers an even
higher degree of diligence in safeguarding the passbook

In culpa contractual, once the plaintiff proves a breach of contract,

there is a presumption that the defendant was at fault or negligent.
The burden is on the defendant to prove that he was not at fault or
negligent.

CITIBANK AND INVESTORS FINANCE CORPORATION VS

MODESTA SABENIANO
G.R. NO. 156132

FACTS: Modesta Sabeniano is a client of Citibank and FNCB Finance. On

February 1978, Sabeniano obtained a loan of Php 200,000 from Citibank. This
loan was followed with several other loans – some were paid, while some were
not. Those that were not paid upon maturity were rolled over, reflecting a total
unpaid loan of Php 1,069,847.40 as of September 1979.

These loans were secured by Sabeniano’s money market placements with

FNCB Finance through a Deed of Assignment plus a Declaration of Pledge
which states that all present and future fiduciary placements held in her
personal and/or joint name with Citibank Switzerland, will secure all claims that
Citibank may have or, in the future, acquire against her.

The Deeds of Assignment were duly notarized, while the Declaration of Pledge
was not notarized and Citibank’s copy was undated, while that of Sabeniano
bore the date, September 24, 1979.
Since Sabeniano failed to pay her obligations to Citibank, the latter sent
demand letters to request payment. Her total unpaid loan initially amounted to
Php 2,123,843.20 (inclusive of interests).

Still failing to pay, Citibank executed the Deeds of Assignment and used the
proceeds of Sabeniano’s money market placement from FNCB Finance which
totaled Php 1,022,916.66 and her deposits with Citibank which totaled Php
31,079.14 to set-off her loan.

This reduced the unpaid balance to Php 1,069,847.40 as previously mentioned.

Since the loan remains unpaid, Citibank proceeded to execute the Declaration
of Pledge and remitted a total of $149,632.99 from Sabeniano’s
Citibank-Geneva accounts to off-set the loan.

Sabeniano then filed a complaint against Citibank for damages and specific
performance (for proper accounting and return of the remitted proceeds from
her personal accounts). She also contended that the proceeds of 2 promissory
notes (PN) from her money market placements with Citibank were rolled over or
reinvested into the petitioner bank, and these should also be returned to her.

Regarding the execution of the pledge, the RTC declared this illegal, null and
void. Citibank was ordered to return the $149,632.99 to Sabeniano’s
Citibank-Geneva account with a legal interest of 12% per annum. The RTC also
ordered Sabeniano to pay her outstanding loan to Citibank without interests
and penalty charges.

Both parties appealed to the CA which affirmed the RTC’s decision, but further
ruled entirely in favor of Sabeniano – holding that Citibank failed to establish
her indebtedness and that all the executed deeds should be returned to her
account. The case has now reached the Supreme Court.

ISSUE: Whether or not Citibank’s execution of deeds and pledge to off-set

Sabeniano’s loan was valid and legal.

HELD: The Supreme Court reversed the CA’s findings regarding Sabeniano’s
Citibank loan as this was properly documented and sufficient in evidence. Thus,
the execution of deeds was valid, especially that the agreement was duly
notarized, signed and prepared in accordance with the law.

The court also ordered Citibank to return the amount of P318,897.34 and
P203,150.00 plus 14.5% per annum to Sabeniano. This is the total amount
from the 2 PNs which were executed despite being reinvested in said bank. The
bank was also ordered to pay moral damages of P300,000, exemplary
damages for P250,000, attorney’s fees of P200,000.
The SC however affirmed the RTC’s decision regarding the pledge. Being a
separate entity, Citibank cannot exercise automatic remittance from
Sabeniano’s Citibank Geneva account to off-set her outstanding loan.

The court also noted that the pledge was filled out irregularly – it was not
notarized and Citibank’s copy bore no date. The original copy was not also
produced in court.

Regarding Sabeniano’s obligation, the Supreme Court affirmed RTC’s decision

and ordered her to pay the remaining balance of her loan which amounts to
P1,069,847.40 as of 5 September 1979. These loans continue to earn interest
based on the maturity date that were agreed and stipulated upon by the parties.

philippine banking corporation vs ca

BANK OF THE PHILIPPINE ISLANDS VS. COURT OF

APPEALS

A DOCTRINE: Article 1980 of the Civil Code expressly provides that

"[f]ixed, savings, and current deposits of money in banks and similar
institutions shall be governed by the provisions concerning simple loan." In
Serrano vs. Central Bank of the Philippines, 21we held that bank deposits are
in the nature of irregular deposits; they are really loans because they earn
interest. The relationship then between a depositor and a bank is one of
creditor and debtor. The deposit under the questioned account was an
ordinary bank deposit; hence, it was payable on demand of the depositor

FACTS: Private respondents Eastern Plywood Corporation and Benigno Lim

as officer of the corporation, had an “AND/OR” joint account with
Commercial Bank and Trust Co (CBTC), the predecessor-in-interest of
petitioner Bank of the Philippine Islands. Lim withdraw funds from such
account and used it to open a joint checking account (an “AND” account)
with Mariano Velasco. When Velasco died in 1977, said joint checking
account had P662,522.87. By virtue of an Indemnity Undertaking executed
by Lim and as President and General Manager of Eastern withdrew one half
of this amount and deposited it to one of the accounts of Eastern with CBTC.

Eastern obtained a loan of P73,000.00 from CBTC which was not secured.
However, Eastern and CBTC executed a Holdout Agreement providing that
the loan was secured by the “Holdout of the C/A No. 2310-001-42” referring
to the joint checking account of Velasco and Lim. Meanwhile, a judicial
settlement of the estate of Velasco ordered the withdrawal of the balance of
the account of Velasco and Lim. Asserting that the Holdout Agreement
provides for the security of the loan obtained by Eastern and that it is the duty
of CBTC to debit the account of respondents to set off the amount of P73,000
covered by the promissory note, BPI filed the instant petition for recovery.
Private respondents Eastern and Lim, however, assert that the amount
deposited in the joint account of Velasco and Lim came from Eastern and
therefore rightfully belong to Eastern and/or Lim. Since the Holdout
Agreement covers the loan of P73,000, then petitioner can only hold that
amount against the joint checking account and must return the rest.

ISSUE: Whether BPI can demand the payment of the loan despite the
existence of the Holdout Agreement and whether BPI is still liable to
the private respondents on the account subject of the withdrawal by
the heirs of Velasco.

RULING: Yes, for both issues. Regarding the first, the Holdout
Agreement conferred on CBTC the power, not the duty, to set off the
loan from the account subject of the Agreement. When BPI demanded
payment of the loan from Eastern, it exercised its right to collect
payment based on the promissory note, and disregarded its option
under the Holdout Agreement. Therefore, its demand was in the
correct order. Regarding the second issue, BPI was the debtor and
Eastern was the creditor with respect to the joint checking account.
Therefore, BPI was obliged to return the amount of the said account
only to the creditor. When it allowed the withdrawal of the balance of
the account by the heirs of Velasco, it made the payment to the wrong
party. The law provides that payment made by the debtor to the
wrong party does not extinguish its obligation to the creditor who is
without fault or negligence. Therefore, BPI was still liable to the true
creditor, Eastern.

G.R. Nos. 173654-765 August 28, 2008

PEOPLE OF THE PHILIPPINES vs. TERESITA PUIG and ROMEO

PORRAS

Facts: On 7 November 2005, the Iloilo Provincial Prosecutor's Office

filed before RTC in Dumangas, Iloilo, 112 cases of Qualified Theft
against respondents Teresita Puig (Puig) and Romeo Porras (Porras)
who were the Cashier and Bookkeeper, respectively, of private
complainant Rural Bank of Pototan, Inc. It was alleged in the
information that Teresita Puig and Romeo Porras took away P15,000
without the consent of the owner Bank to the prejudice and damage of
the bank. The RTC dismissed the case for insufficiency of the
information ruling that the real parties in interest are the
depositors-clients and not the bank because the bank does not acquire
ownership of the money deposited in it. Hence petitioner Rural Bank
went directly to the court via petition for certiorari. Petitioner
explains that under Article 1980 of the New Civil Code, "fixed, savings,
and current deposits of money in banks and similar institutions shall
be governed by the provisions concerning simple loans." Corollary
thereto, Article 1953 of the same Code provides that "a person who
receives a loan of money or any other fungible thing acquires the
ownership thereof, and is bound to pay to the creditor an equal
amount of the same kind and quality." Thus, it posits that the
depositors who place their money with the bank are considered
creditors of the bank. The bank acquires ownership of the money
deposited by its clients, making the money taken by respondents as
belonging to the bank.

Issue: Whether or not the Bank acquired ownership of the money

deposited in it to be able tohold the respondents liable for qualified
theft which requires that there must be taking of the money without
the consent of the owners.

Held: The petition is meritorious. Banks where monies are deposited,

are considered the owners thereof. This is very clear not only from the
express provisions of the law, but from established jurisprudence. The
relationship between banks and depositors has been held to bethat of
creditor and debtor. Articles 1953 and 1980 of the New Civil Code, as
appropriately pointed out by petitioner, provide as follows:

Article 1953.A person who receives a loan of money or any other

fungible thing acquires the ownership thereof, and is bound to pay to

the creditor an equal amount of the same kind and quality.

Article 1980. Fixed, savings, and current deposits of money in banks

and similar institutions shall be governed by the provisions
concerning loan. In a long line of cases involving Qualified Theft, the
Court has firmly established the nature of possession by the Bank of
the money deposits therein, and the duties being performed by its
employees who have custody of the money or have come into
possession of it. The Court has consistently considered the allegations
in the Information that such employees acted with grave abuse of
confidence, to the damage and prejudice of the Bank, without
particularly referring to it as owner of the money deposits, as
sufficient to make out acase of Qualified Theft. In summary, the Bank
acquires ownership of the money deposited by its clients; and the
employees of the Bank, who are entrusted with the possession of
money of the Bank due to the confidence reposed in them, occupy
positions of confidence. The Informations, therefore, sufficiently
allege all the essential elements constituting the crime of Qualified
Theft. WHEREFORE, premises considered, the Petition for Review on
Certiorari is hereby GRANTED. The Orders dated 30 January 2006
and 9 June 2006 of the RTC dismissing Criminal cases No. 05-3054
to 05-3165 are REVERSED and SET ASIDE

NEW CENTRAL BANK ACT

Producers bank vs nlrc conservator

Power of conservator cannot impair obligations of
contracts • Conservator power to revoke contracts cannot
post-facto affect perfected transaction as it would infringe
non-impairment clause

Conservator is given power to revoke contracts only those

that are defect (void, voidable, unenforceable, rescissible) •
Conservator merely takes place of board of directors •
Conservator cannot simply repudiate valid obligations of
the bank and must bring them to court actions
Damaso Perez vs. Monetary
Board G.R. No. L-23307
Being an artificial person, The Central Bank is limited to its statutory powers
and the nearest power to which prosecution of violators of banking laws may be
attributed is its power to sue and be sued. But this corporate power of litigation
evidently refers to civil cases only. Violations of banking laws constitute a
public offense, the prosecution of which is a matter of public interest and hence,
anyone even private individuals can denounce such violations before the
prosecuting authorities.

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

Respondents, Monetary Board, the Superintendent of Banks, the Central Bank and the
Secretary of Justice their respective answers, the propriety of mandamus. The
Secretary of Justice claimed that it was not their specific duty to prosecute the persons
denounced by Perez. The Central Bank and its respondent officials, on the other hand,
averred that they had already done their duty under the law by referring to the special
prosecutors of the Department of Justice for criminal investigation and prosecution
those cases involving the alleged anomalous loans.

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

the alleged violators of banking laws.
Held: As for the Secretary of Justice, while he may have the power to prosecute —
through the office of the Solicitor General — criminal cases, yet it is settled rule
that mandamus will not lie to compel a prosecuting officer to prosecute a criminal case
in court.

Perez cannot seek by mandamus to compel respondents to prosecute criminally those

alleged violators of the banking laws. Although the Central Bank and its respondent
officials may have the duty under the Central Bank Act and the General Banking Act to
cause the prosecution of those alleged violators, yet there is nothing in said laws that
imposes a clear, specific duty on the former to do the actual prosecution of the latter.
The Central Bank is a government corporation created principally to administer the
monetary and banking system of the Republic, not a prosecution agency like the
fiscal’s office. Being an artificial person, The Central Bank is limited to its statutory
powers and the nearest power to which prosecution of violators of banking laws may
be attributed is its power to sue and be sued. But this corporate power of litigation
evidently refers to civil cases only. Central Bank and its officers have already done
what they can by referring the matter to the special prosecutors of the Department of
Justice for prosecution and investigation. Moreover, it is a settled rule that mandamus
will not lie to compel a prosecuting officer, like the Secretary of Justice, to prosecute a
case in court.
SERRANO VS CENTRAL BANK

FACTS
Serrano filed a case against Overseas Bank and Central bank so that they may
jointly separately liable, because, the P350K worth of time deposits by
Serrano in overseas bank of Manila is not successful when he made a series of
encashment, because on the alleged failure of the Overseas Bank of Manila to
return the time deposits made by petitioner and assigned to him, because
respondent Central Bank failed in its duty to exercise strict supervision over
respondent Overseas Bank of Manila to protect depositors and the general
public.

ISSUE
Whether the Central Bank is Liable for the case filed?

HELD
No, Bank deposits are in the nature of irregular deposits. They are really loans
because they earn interest. All kinds of bank deposits, whether fixed, savings,
or current are to be treated as loans and are to be covered by the law on loans.
Current and savings deposit are loans to a bank because it can use the same.
The petitioner here in making time deposits that earn interests with
respondent Overseas Bank of Manila was in reality a creditor of the
respondent Bank and not a depositor. The respondent Bank was in turn a
debtor of petitioner. Failure of the respondent Bank to honor the time deposit
is failure to pay s obligation as a debtor and not a breach of trust arising from
depositary’s failure to return the subject matter of the deposit

WHEREFORE, the petition is dismissed for lack of merit, with costs against
petitioner.

SO ORDERED.

CA Agro-Industrial Development Corporation vs CA GR No. 90027

CA Agro (through its President, Aguirre) and spouses Pugao entered

into an agreement whereby the former purchased two parcels of land
for P350, 525 with a P75, 725 down payment while the balance was
covered by three (3) postdated checks. Among the terms embodied in
a Memorandum of True and Actual Agreement of Sale of Land were
that titles to the lots shall be transferred to the petitioner upon full
payment of the purchase price and that the owner’s copies of the
certificates of titles thereto shall be deposited in a safety deposit box
of any bank. The same could be withdrawn only upon the joint
signatures of a representative of the petitioner upon full payment of
the purchase price. They then rented Safety Deposit box of private
respondent Security Bank and Trust Company (SBTC). For this
purpose, both signed a contract of lease which contains the following
conditions:
13. The bank is not a depositary of the contents of the safe and it has
neither the possession nor control of the same.
14. The bank has no interest whatsoever in said contents, except
herein expressly provided, and it assumes absolutely no liability in
connection therewith.

After the execution of the contract, two (2) renter’s key were given to
Aguirre, and Pugaos. A key guard remained with the bank. The safety
deposit box has two key holes and can be opened with the use of both
keys. Petitioner claims that the CTC were placed inside the said box.

Thereafter, a certain Mrs. Ramos offered to buy from the petitioner

the two (2) lots at a price of P225 per sqm. Mrs. Ramose demanded
the execution of a deed of sale which necessarily entailed the
production of the CTC. Aguirre and Pugaos then proceeded to the
bank to open the safety deposit box. However, when opened in the
presence of bank’s representative, the box yielded no certificates.
Because of the delay in reconstitution of title, Mrs. Ramos withdrew
her earlier offer and as a consequence petitioner failed to realize the
expected profit of P280 , 500. Hence, the latter filed a complaint for
damages.
RTC: Dismissed the complaint
CA: Affirmed

Issue:
Whether or not the contractual relation between a commercial
bank and another party in the contract of rent of a safety deposit box
is one of bailor and bailee.

Ruling:
Yes.
The contract in the case at bar is a special kind of deposit. It
cannot be characterized as an ordinary contract of lease under Article
1643 because the full and absolute possession and control of the safety
deposit box was not given to the joint renters – the petitioner and
Pugaos.
American Jurisprudence:
The prevailing rule is that the relation between a bank renting
out safe-deposit boxes and its customer with respect to the contents of
the box is that of a bail or bailee, the bailment being for hire and
mutual benefit.

Our provisions on safety deposit boxes are governed by Section

72 (a) of the General Banking Act, and this primary function is still
found within the parameters of a contract of deposit like the receiving
in custody of funds, documents and other valuable objects for
safekeeping. The renting out of the safety deposit boxes is not
independent from, but related to or in conjunction with, this principal
function. Thus, depositary’s liability is governed by our civil code
rules on obligation and contracts, and thus the SBTC would be liable if,
in performing its obligation, it is found guilty of fraud, negligence,
delay or contravention of the tenor of the agreement.
CHINA BANKING CORP VS ORTEGA

FACTS:
Vicente Acaban won in a civil case for sum of money against B & B
Forest Development Corporation. To satisfy the judgment, the Acaban
sought the garnishment of the bank deposit of the B & B Forest
Development Corporation with the China Banking Corporation (CBC).
Accordingly, a notice of garnishment was issued by the Deputy Sheriff
of the trial court and served on said bank through its cashier, Tan Kim
Liong. Liong was ordered to inform the Court whether or not there is
a deposit in the CBC of B & B Forest Development Corporation, and if
there is any deposit, to hold the same intact and not allow any
withdrawal until further order from the Court. CBC and Liong refuse
to comply with a court process garnishing the bank deposit of a
judgment debtor by invoking the provisions of Republic Act No. 1405
( Secrecy of Bank Deposits Act) which allegedly prohibits the
disclosure of any information concerning to bank deposits.
ISSUES: Whether or not a banking institution may validly refuse to
comply with a court processes garnishing the bank deposit of a
judgment debtor, by invoking the provisions of Republic Act No.
1405.

RULING: NO. The lower court did not order an examination of or

inquiry into deposit of B & B Forest Development Corporation, as
contemplated in the law. It merely required Tan Kim Liong to inform
the court whether or not the defendant B & B Forest Development
Corporation had a deposit in the China Banking Corporation only for
the purposes of the garnishment issued by it, so that the bank would
hold the same intact and not allow any withdrawal until further order.
It is sufficiently clear that the prohibition against examination of or
inquiry into bank deposit under RA 1405 does not preclude its being
garnished to insure satisfaction of a judgment. Indeed there is no real
inquiry in such a case, and the existence of the deposit is disclosed the
disclosure is purely incidental to the execution process. It is hard to
conceive that it was ever within the intention of Congress to enable
debtors to evade payment of their just debts, even if ordered by the
Court, through the expedient of converting their assets into cash and
depositing the same in a bank.

Salvacion v Central Bank G.R. No.

94723.
The application of Section 8 of Republic Act No. 6426, on bank
secrecy, depends on the extent of its justice. Eventually, if we rule that the
questioned Section 113 of Central Bank Circular No. 960 which exempts from
attachment, garnishment, or any other order or process of any court, legislative
body, government agency or any administrative body whatsoever, is applicable
to a foreign transient, injustice would result especially to a citizen aggrieved by
a foreign guest like accused Greg Bartelli.

Facts: Greg Bartelli, an American tourist, was arrested for committing four counts of
rape and serious illegal detention against Karen Salvacion. Police recovered from him
several dollar checks and a dollar account in the China Banking Corp. He was,
however, able to escape from prison. In a civil case filed against him, the trial court
awarded Salvacion moral, exemplary and attorney’s fees amounting to almost
P1,000,000.00. Salvacion tried to execute the judgment on the dollar deposit of Bartelli
with the China Banking Corp. but the latter refused arguing that Section 11 of Central
Bank Circular No. 960 exempts foreign currency deposits from attachment,
garnishment, or any other order or process of any court, legislative body, government
agency or any administrative body whatsoever. Salvacion therefore filed this action for
declaratory relief in the Supreme Court.

Issue: Whether or not Section 113 of Central Bank Circular No. 960 and Section 8 of
Republic Act No. 6426, as amended by PD 1246, be made applicable to a foreign
transient.

Held: The provisions of Section 113 of Central Bank Circular No. 960 and PD No.
1246, insofar as it amends Section 8 of Republic Act No. 6426, are hereby held to be
INAPPLICABLE to this case because of its peculiar circumstances. Respondents are
hereby required to comply with the writ of execution issued in the civil case and to
release to petitioners the dollar deposit of Bartelli in such amount as would satisfy the
judgment.

MARQUEZ vs DESIERTO

G.R. NO. 135882

FACTS: Marquez, branch manager of Union Bank Julia Vargas, received an Order
from Ombudsman to produce several bank documents for purposes of inspection in
camera. The Ombudsman wanted to conduct such in camera inspection on the
accounts based on a trail of manager’s checks by a certain Trivinio who purchased 51
managers checks for a total amount of P272M. Marquez agreed to the inspection.

Marquez wrote to the Ombudsman saying that the accounts in question cannot readily
be identified and asked for time to respond to the order. The Ombudsman replied that
the Bank should have preserved records despite the accounts being dormant.

Ombudsman issued order to direct Marquez to produce the bank documents due to
the unjustified delay by the Bank since the in camera inspection had already been
extended twice.

Marquez filed for declaratory relief to clear the rights of petitioners under the bank
secrecy law

ISSUE/S: Whether the in camera inspection orders are allowed as an exception to the
bank secrecy law? NO

RULING: The in camera inspection is not allowed. There being no pending case
before a court of competent jurisdiction.

An exception to the bank secrecy law is when the money deposited is the subject
matter of a litigation.
Therefore, it may be allowed on the ground of a pending case when:

o The case is pending in court of competent jurisdiction

o The account must be clearly identified

o Inspection is limited to the subject matter of the pending case

o The Bank personnel and account holder must be notified to be present during the
inspection

o Such inspection may cover only the account identified in the pending case

The order for in camera inspection is based on a pending investigation of the

Ombudsman for violations of RA 3019, Sec 3(e)(g). Clearly, there is no pending
litigation yet before a court of competent authority. It is only an investigation by the
Ombudsman.
Bsb group vs GO gr 168644
FACTS: Petitioner BSB Group, Inc. is a duly organized domestic
corporation presided by its
representative, Ricardo Bangayan (Bangayan). Respondent Sally Go
is Bangayan’s wife who
was employed in the company as a cashier, and was engaged, among
others, to receive and
account for the payments made by the various customers of the
company.
In 2002, Bangayan filed with the Manila Prosecutor Office a
complaint for estafa and/or qualified
theft against respondent, alleging that several checks representing the
aggregate amount of
P1,534,135.50 issued by the company customers were, instead of
being turned over to the
company coffers, indorsed by respondent who deposited the same to
her personal banking
account maintained at Security Bank and Trust Company (Security
Bank) in Divisoria Branch.
Respondent was charged before the RTC Manila for grave abuse of
confidence being then
employed as cashier, and with intent to gain and without the
knowledge and consent of the
owner when she took, stole, and carried away cash money in the total
amount of P1,534,135.50
belonging to BSB GROUP OF COMPANIES represented by RICARDO
BANGAYAN, to the
damage and prejudice of said owner in the aforesaid amount of
P1,534,135.50, Philippine
currency.
When arraigned, respondent entered a negative plea and the trial
ensued. The prosecution
moved for the issuance of subpoena duces tecum /ad testificandum
against the respective
managers or records custodians of Security Bank Divisoria Branch, as
well as of the Asian
Savings Bank (now Metropolitan Bank & Trust Co. [Metrobank]).
When the trial court granted
the motion and issued the corresponding subpoena, the respondent
filed a motion to quash the
subpoena noting to the court that there was no mention made of the
said bank account in the
complaint-affidavit.
Since Petitioner argued for the relevancy of the Metrobank account as
there were two checks
which respondent allegedly deposited with the said bank, respondent
filed a supplemental
motion to quash, invoking the absolutely confidential nature of the
Metrobank account under the
provisions of Republic Act (R.A.) No. 1405, to which the trial court did
not sustain for lack of
merit.
The prosecution then presented Elenita Marasigan (Marasigan), the
representative of Security
Bank, to prove that respondent was able to run away with the checks
issued to the company by
its customers, endorse the same, and credit the corresponding
amounts to her personal deposit
account with Security Bank

ISSUE
WON Marasigan's testimony dealing with respondent
deposit account with Security Bank
constitutes an unallowable inquiry under R.A. 1405

No. Marasigan's testimony is not an allowable inquiry

under RA1405
the admission of testimonial and documentary evidence
relative to respondent Security Bank
account serves no other purpose than to establish the
existence of such account, its nature and
the amount kept in it. It constitutes an attempt by the
prosecution at an impermissible inquiry
into a bank deposit account the privacy and confidentiality
of which is protected by law

Section 2 of the Law declares that all deposits of whatever

nature with banks or banking
institutions in the Philippines including investments in
bonds issued by the Government of the
Philippines, its political subdivisions and its
instrumentalities, are hereby considered as of an
absolutely confidential nature and may not be examined,
inquired or looked into by any person,
government official, bureau or office, except upon written
permission of the depositor, or in
cases of impeachment, or upon order of a competent court
in cases of bribery or dereliction of
duty of public officials, or in cases where the money
deposited or invested is the subject matter
of the litigation
Union Bank of the Philippines v. CA (G.R. No. 134699)
Facts:
A check in the amount of P1M was drawn against an
account with private respondent Allied Bank payable to the
order of one Jose Ch. Alvarez. The payee deposited the
check with petitioner Union Bank who credited the P1M to
the account of Mr. Alvarez. Petitioner sent the check for
clearing and when the check was presented for payment, a
clearing discrepancy was committed by Union Bank’s
clearing staff when the amount P1M was erroneously
“under-encoded” to P1,000 only. Petitioner only discovered
the under-encoding almost a year later. Thus, Union Bank
notified Allied Bank of the discrepancy by way of a charge
slip for P999,000.00 for automatic debiting against Allied
Bank. The latter, however, refused to accept the charge slip
“since [the] transaction was completed per your [Union
Bank’s] original instruction and client’s account is now
insufficiently funded.” Union Bank filed a complaint
against Allied Bank before the PCHC Arbitration
Committee (Arbicom). Thereafter, Union Bank filed before
the RTC a petition for the examination of the account with
respondent bank. Judgment on the arbitration case was
held in abeyance pending the resolution of said petition.
The RTC dismissed Union Bank’s petition. CA affirmed the
dismissal ruling that the case was not one where the money
deposited is the subject matter of the litigation.

Issue:
Whether the discrepancy amount is the subject matter of
litigation.
Ruling: NO.
The petition before this Court reveals that the true purpose
for the examination is to aid petitioner in proving the
extent of Allied Bank’s liability. In other words, only a
disclosure of the pertinent details and information relating
to the transactions involving subject account will enable
petitioner to prove its allegations in the pending Arbicom
case. Petitioner is fishing for information so it can
determine the culpability of private respondent and the
amount of damages it can recover from the latter. It does
not seek recovery of the very money contained in the
deposit. The subject matter of the dispute may be the
amount of P999,000.00 that petitioner seeks from private
respondent as a result of the latter’s alleged failure to
inform the former of the discrepancy; but it is not the
P999,000.00 deposited in the drawer’s account. By the
terms of R.A. No. 1405, the “money deposited” itself should
be the subject matter of the litigation. That petitioner feels
a need for such information in order to establish its case
against private respondent does not, by itself, warrant the
examination of the bank deposits. The necessity of the
inquiry, or the lack thereof, is immaterial since the case
does not come under any of the exceptions allowed by the
Bank Deposits Secrecy Act.
Intengan v. CA (G.R. No. 128996)
Facts:

Citibank filed a complaint for violation of the Corporation Code

against 2 of its officers. The complaint was attached with the
affidavit of Vic Lim, VP of Citibank, who was then instructed by
the higher management of the bank to investigate the
anomalous/highly irregular activities of the said officers. As
evidence, Lim annexed bank records purporting to establish the
deception practiced by the officers. Some of the documents
pertained to the dollar deposits of petitioners. As an incident to
the foregoing, petitioners filed respective motions for the exclusion
and physical withdrawal of their bank records that were attached
to Lim’s affidavit. The filing of Informations against private
respondents was recommended for alleged violation of Republic
Act No. 1405. Private respondents appealed before the DOJ
which ruled in their favor. Resort to the Court, referred the
matter to the CA which then held that the disclosure was proper
and falls under the exception under R.A. No. 1405.

Issue:

Whether or not the disclosure falls under the exception under R.A.
No. 1405.

Ruling: 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 Solicitor General, and the Court of
Appeals – all appear to have overlooked a single fact which
dictates the outcome of the entire controversy. A circumspect
review of the record shows us the reason. The accounts in question
are U.S. dollar deposits; consequently, the applicable law is not
Republic Act No. 1405 but Republic Act (RA) No. 6426, known as
the “Foreign Currency Deposit Act of the Philippines.”

Thus, under R.A. No. 6426 there is only a single exception to the
secrecy of foreign currency deposits, that is, disclosure is allowed
only upon the written permission of the depositor. Incidentally,
the acts of private respondents complained of happened before
the enactment on September 29, 2001 of R.A. No. 9160
otherwise known as the Anti-Money Laundering Act of 2001.

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