Consolidated Bank V.

CA (2003)
G.R. No. 138569. September 11, 2003

FACTS:
 Solidbank is a domestic banking corporation organized and existing under Philippine laws.
 Private respondent L.C. Diaz and Company, CPA’s (“L.C. Diaz”), is a professional partnership
engaged in the practice of accounting.
 March 1976: L.C. Diaz, professional partnership engaged in the practice of
accounting, opened a savings account with Solidbank, designated as Savings Account No.
S/A 200-16872-6.
 August 14 1991:
 L.C. Diaz through its cashier, Mercedes Macaraya (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 (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 2 deposit slips and the
passbook.
 The teller acknowledged 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
 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.
 August 15 1991, L.C. Diaz through its CEO, Luis C. Diaz (Diaz) called up Solidbank to stop any
transaction using the same passbook until L.C. Diaz could open a new account
 Diaz formally wrote Solidbank to make the same request
 L.C. Diaz learned of the unauthorized withdrawal the day before, August 14 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 theP300,000.
 September 5 1991: , L.C. Diaz charged its messenger, Emerano Ilagan (Ilagan) and one
Roscon Verdazola with Estafa through Falsification of Commercial Document
 RTC: dismissed the criminal case after the City Prosecutor
 August 24 1992: Solidbank refused the demand from L.C. Diaz' counsel
 August 25 1992: L.C. Diaz filed a Complaint for Recovery of a Sum of Money against
Solidbank with the RTC.
 December 28 1994, RTC: a decision absolving Solidbank and dismissing the complaint
 October 27 1998: CA reversed the decision of RTC

ISSUE: W/N Solidbank should be liable for the recovery of the sum of money

HELD: YES. CA AFFIRMED with MODIFICATION. Petitioner Solidbank Corporation shall pay
private L.C. Diaz and Company, CPA’s only 60% of the actual damages awarded by the CA. The
remaining 40% of the actual damages shall be borne by private respondent L.C. Diaz and
Company, CPA’s
 Solidbank is liable for breach of contract due to negligence, or culpa contractual
 contract between the bank and its depositor is governed by the provisions of the Civil Code
on simple loan
 Section 2 of RA 8791 effected on June 13 2000, declares that the State recognizes the
“fiduciary nature of banking that requires high standards of integrity and performance
 Solidbank’s tellers must exercise a high degree of diligence in insuring that they return the
passbook only to the depositor or his authorized representative
 Solidbank is bound by the negligence of its employees under the principle of respondeat
superioror command responsibility
 The defense of exercising the required diligence in the selection and supervision of
employees is not a complete defense in culpa contractual, unlike in culpa aquiliana
 The doctrine of last clear chance states that where both parties are negligent but the
negligent act of one is appreciably later than that of the other, or where it is impossible to
determine whose fault or negligence caused the loss, the one who had the last clear
opportunity to avoid the loss but failed to do so, is chargeable with the loss - not applicable
 This is a case of culpa contractual, where neither the contributory negligence of the plaintiff
nor his last clear chance to avoid the loss, would exonerate the defendant from liability
 In this case, L.C. Diaz was guilty of contributory negligence in allowing a withdrawal slip
signed by its authorized signatories to fall into the hands of an impostor. Thus, the liability
of Solidbank should be reduced.

CITIBANK AND INVESTORS FINANCE CORPORATION VS MODESTA SABENIANO

G.R. NO. 156132 FEBRUARY 6, 2007

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 CORPORTATION VS COURT OF APPEALS ANDLEONILO MARCOSG.R.

No. 127469, January 15, 2004

Facts:
Leonilo Marcos filed in court a complaint for sum of money with damages against Phil. Banking
Corporation (PBC). Marcos allegedly made a time deposit in 2 occasions the amt. of
P664,897.67 and P764,897.67 through the persuasion of his friend Pagsaligan, one of the bank’s
officials. The bank issued receipt for the first deposit while a letter-certification was issued for
his second deposit by Pagsaligan. Pagsaligan kept the various time deposit certificates. Marcos
claimed that from the time of the deposit, he had not received the principal amount or its
interest. When Marcos wanted to withdraw his time deposit and its accumulated interest
Pagsaligan convinced him to keep his time deposits intact and instead to open several letters of
credit to the bank by executing 3 trust receipts agreement. Since Marcos trusted the Bank and
Pagsaligan, he signed blank forms for domestic letter of credits, trust receipts agreements and
promissory notes. He was required to deposit 30% of the total amount of credit and his time
deposit will secure the remaining 70% of the letters of credit. He is now accusing the bank for
unjustly collecting payment without deducting the 30% of his down payment and charging him
with accumulating interests since his time deposit serves as collateral for his remaining
obligation. He further denied making a loan of P500,000 with 25% interest per annum covered
by a promissory note produced by the bank. The bank explained that the promissory notes he
executed are distinct from the trust receipt agreement and denied falsifying the promissory
note covering for the loan of P500,000. The evidence presented on the promissory note
however is merely a machine copy of the document. The said loan was already paid by
offsetting it from his time deposit. The Trial Court ruled in favor of Marcos and directed the PBC
to return his time deposit in the sum of 971, 2922.49 with interest thereon at the legal rate
until fully restituted. The trial court noted the Bank’s defective documentation of its transaction
and attributed the Bank’s lapses to Pagsaligan’s scheme to defraud Marcos of his time deposit.
The Court of Appeals, however, differed with the finding of the trial court as to the amount of
time deposits since the certification letter issued was the aggregate or total amount of the time
deposits of Marcos as of that date. CA modified the decision of the trial court and a new
judgment is rendered ordering PBC to return the time deposit in the sum of P764,897.67 with
interest. Hence this petition.

Issue: Whether or not the bank failed to take a proper account on Marcos’ deposits and
payment of his loans.

Held: YES
The SC held that the Bank is liable for offsetting the time deposit of Marcos to the fictitious
promissory note for the 500,000 loan. The court upheld the findings of the lower court on the
discrepancies shown by the machine copy of the duplicate of the promissory note and the
suspicious claim of the bank that it could not produce the original copy thereof. The
mere machine copy of the document has no evidentiary value before the court. The court held
that the Bank did not forge the promissory note. Pagsaligan did to cover up his
failure to give the proper account of Marcos’ time deposits. This however does not excuse the
Bank to return to Marcos the correct amount of his time deposit with interest. Bank has the
fiduciary duty before its clients.

The fiduciary nature of banking requires banks to assume a degree higher than that of a good
father of a family. Thus, the bank’s fiduciary duty imposes upon it a higher level of
accountability than that expected of depositor.

Its duty is to observe the highest standards of integrity and performance. By the nature of its
business, the Bank should have had in its possession the copies of the disputed promissory note
and the records and ledgers evidencing the offsetting of the loan with the time deposits of
Marcos. The Bank inexplicably failed to produce the original copies of these documents. Clearly,
the Bank failed to treat the account of Marcos with meticulous
care. Assuming Pagsaligan is responsible for the spurious promissory note thecourt held that a
Bank is liable for the wrongful acts of its officers. A banking corporation is liable to innocent
third persons where the representation is made in the course of its business by an agent acting
within the general scope of his authority even though, in the particular case, the agent secretly
abusing his authority and attempting to perpetrate a fraud upon his principal or some other
person. The SC affirmed the decision of the CA with modification. The court made the proper
account of the total amount due to Marcos ordering the bank to give to him the same plus
moral and exemplary damages
BANK OF THE PHILIPPINE ISLANDS VS. COURT OF APPEALS
232 SCRA302, G.R. NO. 104612, MAY 10, 1994

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.

Roque vs. People444 SCRA 98, G.R. No. 138954, November 25, 2004Qualified Theft

FACTS:
One Antonio Salazar is a depositor of the Basa Air Base Savings and Loan Association Inc.
(BABSLA). He disclosed that around July 1990 he heard that the funds of other depositors were
missing inside the BABSLA and were supposedly clandestinely circulating around the base.
Prodded by this news, and considering that the balance in his passbook was P46,000, he went
to the BABSLA to withdraw P40,000, but was informed that his balance at the BABSLA was
insufficient to cover the withdrawal. He was not allowed to withdraw. Rosalina de Lazo, the
general manager, informed him that several withdrawals were made on his account amounting
to P30,500, as evidenced by three (3) withdrawal slips. Included among these withdrawal slips
is one with the amount of P10,000. Salazar claimed that the signature appearing on said
withdrawal slip was not his signature. He does not personally know who made the withdrawal
of P10,000. Salazar assumed that the one in control of the funds made the withdrawal.
Asuncion Galang Roque, being then employed as teller of the BABSLA, and as such was
authorized and reposed with the responsibility to receive and collect capital contributions from
its member/contributors of said corporation, and having collected and received in her capacity
as teller of the BABSLA the sum P10,000.00, said accused, with intent of gain, with grave abuse
of confidence and without the knowledge and consent of said corporation, took, stole and
carried away the amount of P10,000.00, by making it appear that a certain depositor Antonio
Salazar withdrew from his savings account, when in truth and in fact Salazar did not withdraw
the said amount. She was then convicted of the crime of qualified theft by the trial court. The
Court of Appeals affirmed the trial court’s decision, hence this appeal.

ISSUES:
Whether or not qualified theft may be committed when the personal property is in the lawful
possession of the accused prior to the commission of the alleged felony?2.

Whether or not the elements of qualified theft were proven

HELD:
1. No. A person tasked to receive and collect capital contributions and having collected and
received in her capacity as teller as alleged in the information cannot be guilty of theft. In the
present case, what is involved is the possession of money in the capacity of a bank teller. The
Court considers deposits received by a teller in behalf of a bank as being only in the material
possession of the teller. This interpretation applies with equal force to money received by a
bank teller at the beginning of a business day for the purpose of servicing withdrawals. Such is
only material possession. Juridical possession remains with the bank.

2. No. The elements of qualified theft include the elements of theft and any of the
circumstances enumerated in Article 310 of the Revised Penal Code (RPC). The elements of
theft, which is defined in Article 308 of the RPC, are the following: “there are five essential
elements which constitute the crime of theft, namely: (1) Taking of personal property; (2) that
said property belongs to another; (3) that said taking be done with intent to gain; (4) that,
further, it be done without the owner's consent; and (5) finally, that it be accomplished without
the use of violence or intimidation against persons, nor of force upon things.”

The specific qualifying circumstance in Article 310 of the RPC which the information indicated
was that the felony was committed with grave abuse of confidence. Hence, to warrant a
conviction, the prosecution should have proven the following elements:1. Taking of personal
property.2. That the said property belongs to another.3. That the said taking be done with
intent to gain.4. That it be done without the owner's consent.5. That it be accomplished
without the use of violence or intimidation against persons, nor of force upon things.6. That it
be done with grave abuse of confidence. Regarding the first element, the taking of personal
property, the prosecution was not able to present direct evidence that petitioner took the
P10,000. The prosecution attempted to prove the taking through circumstantial evidence. One
of the pieces of evidence that the prosecution adduced and the trial court and Court of Appeals
relied on heavily for the conviction was the withdrawal slip forP10,000. Antonio Salazar
disowned the signature on the withdrawal slip. However, he also indicated that he did
not know who made the withdrawal. Rosalina de Lazo, the general manager testified that the
initial on the withdrawal slip, was the customary signature of petitioner. She, however, did not
intimate the significance of petitioner's initial on the withdrawal slip. A careful inspection of all
the withdrawal slips, including the withdrawal slip stated above, shows that the date and the
initial of petitioner were written across the stamped word "paid." This indicates that
petitioner's initial was placed in her capacity as a teller which, therefore, only proves that this
transaction passed through her hands in such capacity. It does not in any manner show that
petitioner prepared the withdrawal slip or that the proceeds of the withdrawal increased her
patrimony. In the presumption availed of by the lower courts the property found in the
possession of the accused, which is the withdrawal slip, is not stolen property. Furthermore,
the presumption the lower court made was not that the petitioner stole anything, but rather
that the petitioner was the maker of the withdrawal slip. Consequently, there is no basis for the
finding that the withdrawal slip was prepared by the petitioner.

From the foregoing discussion it is plain that the prosecution failed to prove by direct or
sufficient circumstantial evidence that there was a taking of personal property by petitioner. A
discussion of the other elements of qualified theft mentioned above is not necessary. Even if
the other elements were satisfactorily proven, the first and most basic element of qualified
theft was not established. The prosecution was, therefore, unsuccessful in proving beyond
reasonable doubt that the petitioner committed the crime of qualified theft. Therefore, the
accused was acquitted.

DBP vs COA GR 88435 January 6, 2002

Facts:
In 1986, the Philippine government, under the administration of then President Corazon C.
Aquino, obtained from the World Bank an Economic Recovery Loan
The ERL was intended to support the recovery of the Philippine economy
As a condition for granting the loan, the World Bank required the Philippine government to
rehabilitate the DBP which was then saddled with huge non-performing loans.
he DBP was expected to continue "providing principally medium and long-term financing to
projects with risks higher than the private sector may be willing to accept under
reasonable... terms.
he Monetary Board adopted Resolution No. 1079 amending the Central Bank's Manual of
Regulations for Banks and other Financial Intermediaries, in line with the government's
commitment to the World Bank to require a private external auditor for
DBP.
he Audit of a Government-owned or controlled bank by an external independent auditor
shall be in addition to and without prejudice to that conducted by the Commission on Audit
in the discharge of its mandate under existing law.
pursuant to Central Bank Circular No. 1124 and the government's commitment to the World
Bank, DBP Chairman Jesus Estanislao wrote the COA seeking approval of the DBP's
engagement of a private external auditor in addition to the COA.
he COA Chairman's reply stated that:
"x x x the Commission on Audit (COA) will interpose no objection to your engagement of a
private external auditor as required by the Economic Recovery Program Loan
Agreements... owever, a change in the leadership of the COA suddenly reversed the course
of events.
Howe... wrote the Central Bank Governor protesting the Central Bank's issuance of Circular
No. 1124 which allegedly encroached upon the
COA's constitutional and statutory power to audit government agencies.
hat the COA resident auditors were under instructions to disallow any payment to the
private auditor whose... services were unconstitutional, illegal and unnecessary.[15]... the
DBP paid the billings of the private auditor in the total amount of P487,321.14[17] despite
the objection of the COA.
To allow private firms to interfere in this governmental audit domain would be to derogate
the Constitutional supremacy of State audit as the Government's guardian of the people's
treasury, and as... the prime advocate of economy in the use of government resources.'
Issues:
whether or not the constitutional power of the COA to examine and audit the DBP is
exclusive and precludes a concurrent... audit of the DBP by a private external auditor.
The DBP's petition raises the following issues:
Does the Constitution vest in the COA the sole and exclusive power to examine and audit
government banks so as to prohibit concurrent audit by private external auditors under any
circumstance?
Is there an existing statute that prohibits government banks from hiring private auditors in
addition to the COA? If there is none, is there an existing statute that authorizes
government banks to hire private auditors in addition to the COA?
If there is no legal impediment to the hiring by government banks of a private auditor, was
the hiring by the DBP of a private auditor in the case at bar necessary, and were the fees
paid by DBP to the private auditor reasonable, under the circumstances?
Ruling:
The DBP's petition is meritorious.
First Issue: Power of COA to Audit under the Constitution
The resolution of the primordial issue of whether or not the COA has the sole and exclusive
power to examine and audit government banks involves an interpretation of Section 2,
Article IX-D of the 1987 Constitution.
The COA vigorously asserts that under the first paragraph of Section 2, the COA enjoys the
sole and exclusive power to examine and audit all government agencies, including the DBP.
The COA contends this is similar to its sole and exclusive authority, under the second
paragraph... of the same Section, to define the scope of its audit, promulgate auditing rules
and regulations, including rules on the disallowance of unnecessary expenditures of
government agencies. The bare language of Section 2, however, shows that the COA's
power under the first paragraph... is not declared exclusive, while its authority under the
second paragraph is expressly declared "exclusive." There is a significant reason for this
marked difference in language.
The clear and unmistakable conclusion from a reading of the entire Section 2 is that the
COA's power to examine and audit is non-exclusive. On the other hand, the COA's authority
to define the scope of its audit, promulgate auditing rules and regulations, and disallow...
unnecessary expenditures is exclusive.
as the constitutionally mandated auditor of all government agencies, the COA's findings and
conclusions necessarily prevail over those of private auditors, at least insofar as
government agencies and officials are concerned.
The mere fact that private auditors may audit government agencies does not divest the
COA of its power to examine and audit the same government agencies. The COA is neither
by-passed nor ignored since even with a private audit the COA will still conduct its usual...
examination and audit, and its findings and conclusions will still bind government agencies
and their officials. A concurrent private audit poses no danger whatsoever of public funds or
assets escaping the usual scrutiny of a COA audit.
the COA's power to examine and audit government banks must be reconciled with the
Central Bank's power to supervise the same banks.
The inevitable conclusion is that the COA and the Central Bank have concurrent jurisdiction,
under the Constitution, to examine and audit government banks.
However, despite the Central Bank's concurrent jurisdiction over government banks, the
COA's audit still prevails over that of the Central Bank since the COA is the constitutionally
mandated auditor of government banks
Second Issue: Statutes Prohibiting or Authorizing Private Auditors
The COA argues that Sections 26, 31 and 32 of PD No. 1445, otherwise known as the
Government Auditing Code of the Philippines, prohibit the hiring of private auditors by
government agencies.
Section 26 is a definition of the COA's "general jurisdiction." Jurisdiction may be exclusive
or concurrent. Section 26 of PD No. 1445 does not state that the COA's jurisdiction is
exclusive, and there are other laws providing for concurrent jurisdiction. Thus,... Section 26
must be applied in harmony with Section 58[32] of the General Banking Law of 2000 (RA
No. 8791) which authorizes unequivocally the Monetary Board to require banks to hire
independent auditors. S
Third Issue: Necessity of Private Auditor and Reasonableness of the Fees... he hiring of a
private auditor was not only necessary based on the government's loan covenant with the
World Bank, it was also necessary because it was... mandated by Central Bank Circular No.
1124 under pain of administrative and penal sanctions.
Principles:
During the deliberations of the Constitutional Commission, Commissioner Serafin Guingona
proposed the addition of the word "exclusive" in the first paragraph of Section 2, thereby
granting the COA the sole and exclusive power to examine and audit all government
agencies.
However, the Constitutional Commission rejected the addition of the word "exclusive" in the
first paragraph of Section 2 and Guingona was forced to withdraw his
proposal. Commissioner Christian Monsod explained the rejection in this manner:
"MR. MONSOD. Earlier Commissioner Guingona, in withdrawing his amendment to add
"EXCLUSIVE" made a statement about the preponderant right of COA.
"For the record, we would like to clarify the reason for not including the word. First, we do
not want an Article that would constitute a disincentive or an obstacle to private investment.
There are government institutions with private investments in them, and some of these...
investors - Filipinos, as well as in some cases, foreigners - require the presence of private
auditing firms, not exclusively, but concurrently. So this does not take away the power of
the Commission on Audit. Second, there are certain instances... where private auditing
may be required, like the listing in the stock exchange. In other words, we do not want this
provision to be an unnecessary obstacle to privatization of these companies or attraction of
investments."[22] (Emphasis... supplied)... the Central Bank has been conducting periodic
and special examination and audit of banks to determine the soundness of their operations
and the safety of the deposits of the public. Undeniably, the Central Bank's power of
"supervision" includes the... power to examine and audit banks, as the banking laws have
always recognized this power of the Central Bank.[31] Hence, the COA's power to examine
and audit government banks must be reconciled with the Central Bank's power to supervise
the same banks.
The inevitable conclusion is that the COA and the Central Bank have concurrent jurisdiction,
under the Constitution, to examine and audit government banks.
However, despite the Central Bank's concurrent jurisdiction over government banks, the
COA's audit still prevails over that of the Central Bank since the COA is the constitutionally
mandated auditor of government banks. And in matters falling under the second...
paragraph of Section 2, Article IX-D of the Constitution, the COA's jurisdiction is
exclusive. Thus, the Central Bank is devoid of authority to allow or disallow expenditures of
government banks since this function belongs exclusively to the COA.
The Bangko Sentral ng Pilipinas, which succeeded the Central Bank, retained under the
1987 Constitution and the General Banking Law of 2000 (RA No. 8791) the same
constitutional and statutory power the Central Bank had under the Freedom Constitution...
and the General Banking Act (RA No. 337) with respect to the independent audit of banks.
this Court has held consistently that the rules and regulations issued by the Central Bank
pursuant to its supervisory and regulatory powers have the force and effect of... law.

Damaso Perez vs. Monetary Board G.R. No. L-23307, June 30, 1967

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.
Violations of banking laws constitute a public offense, the prosecution of which is a matter of
public interest and hence, anyone even private individuals can denounce such violations before
the prosecuting authorities. Since Perez himself could cause the filing of criminal complaints
against those allegedly involved in the anomalous loans, if any, then he has a plain, adequate
and speedy remedy in the ordinary course of law, which makes mandamus against respondents
improper. Hence, the order of the lower court dismissing the petition was affirmed.

Serrano vs. Central Bank

February 14, 1980; GR No. L-30511

Facts:
Petitioners Serrano (150k; 6% interest) and Maneja (200k; 6.5% interest) made 1 year time
deposits with the respondent Overseas Bank of Manila (OBM). Serrano and Maneja got
married. Consequently Maneja conveyed her deposits to Serrano. Despite Serrano’s demands
for the encasement of such deposits, none of the certificates of deposit was honored by the
respondent.

Consequently Serrano filed a petition for mandamus and prohibition, with preliminary
injunction against respondents. Serrano argued that respondent Central Bank failed in its duty
to exercise strict supervision over respondent OBM to protect depositors and the general
public. He also filed a petition for judgment based on the case of Emerito M. Ramos, et al. vs.
Central Bank of the Philippines, where the Supreme Court annulled and set aside CBP
resolutions which prohibited OBM to participate in clearing, direct the suspension of its
operation, and ordering its liquidation. Respondent Central Bank of Philippines (CBP) argued
that; 1) it does not have the duty to exercise a most rigid and stringent supervision of banks; 2)
it is not a guarantor of the permanent solvency of any banking institution; that 3) there was no
constructive trust created in favor of Serrano and Maneja when their time deposits were made
in 1966 and 1967 with respondent OBM as during that time such bank was not insolvent and its
operations as a banking institution was being salvaged by the respondent CBP; and 4) that it
had no knowledge of petitioner’s claim that the properties given by respondent OBM as additional collaterals to
respondent CBP for former’s overdrafts and emergency loans were acquired through the use of depositors’
money, including that of the petitioner and Maneja.

Issue:
WON the petitioner’s petition for mandamus and prohibition, with preliminary injunction
against respondent Banks will prosper.
Held:No.
The Supreme Court ruled that in reality the nature of the claims and cases of the petitioner are
recovery of time deposits plus interest from respondent OBM and revery of damages against respondent
CBP for its alleged failure in the performance of its duty to supervise all banks. These claims of
these nature according to the court, are not proper in actions for mandamus and prohibition as
there is no shown clear abuse of discretion by the Central Bank in its exercise of supervision
over the other respondent Overseas Bank of Manila, and if there was, petitioner here is not the
proper party to raise that question, but rather the Overseas Bank of Manila. Finally, the
Supreme Court explained that 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 deposits 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 xxxxx

CA Agro-Industrial Development Corporation vs CA GR No.

90027. March 3, 1993
Facts:

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.