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TOPIC: LOAN FUNCTIONS that it cannot avoid as it is the risk that it ran when it continued to
seek
NACAR VS. GALLERY FRAMES recourses against the Labor Arbiter’s decision.
As regards the payment of legal interest, the BSP Monetary Board
issued Circular No. 799, Series of 2013, which provides that in the
Facts: Petitioner Nacar filed a complaint for constructive dismissal
against the respondent Gallery Frames. absence of stipulation in loan contracts, the interest rate shall no
longer be 12%, but will be 6% per annum, effective July 1, 2013. The
On October 15, 1998, the Labor Arbiter ruled in favor of petitioner and 12% per annum legal interest shall apply only until June 30, 2013.
Starting July 1, 2013, the new rate of 6% per annum shall be the
prevailing rate when applicable.
awarded the latter with backwages and separation pay in lieu of
reinstatement in the amount of P158, 919.92. The NLRC sustained the
decision of the Labor Arbiter. The Court of Appeals dismissed the NEW SAMPAGUITA BUILDERS CONSTRUCTION, INC vs PHILIPPINE
respondent’s appeal. Supreme Court denied the petition. On May 27, NATIONAL BANK; G.R. No. 148753 | July 30, 2004
2002, an Entry of Judgment was issued certifying that the resolution of
the Supreme Court became final and executory. FACTS
1.NSB approved Board Resolution No. 05, s. 89 a uthorizing the company
Petitioner then filed a Motion for Correct Computation, praying that to apply for or secure a Commercial Loan with PNB (P8M) under such
his backwages be computed from the date of his dismissal up to terms agreed by the Bank and NSB:
the finality of the Resolution of the Supreme Court. Upon Mortgaged the REP of NSB’s President/Chairman of the Board
recomputation, an updated amount of P471, 320. 31 was arrived at. Authorized Petitioner-Spouses to secure the loan and sign
Respondent opposed. Petitioner now asserts that the reckoning point any/all documents that may be required by PNB
for the computation should be on May 27, 2002, upon the
Resolution of the Supreme Court and not when the decision of the 2.PNB approved NSB’s request. The P8M loan was broken down into a
Labor Arbiter was rendered on October 15, 1998. Revolving Credit Line of P7.7M and an Unadvised Line of P 300K.
Revolving Credit Line: a line of credit where the customer
Issue:
pays a commitment fee to a financial institution to borrow
Whether or not recomputation should be allowed
money, and is then allowed to use the funds when needed.
Usually used for operating purposes and the amount
Held:
drawn can fluctuate each month depending on the
Yes. By the nature of an illegal dismissal case, the reliefs continue to customer's current cash flow needs.
add up until full satisfaction, as expressed under Article 279 of the
Unadvised Line: a line of credit approved by bank. Until
Labor Code. The recomputation of the consequences upon execution
some specific event happens unadvised line of credit is not
of the decision does not constitute an alteration or amendment of the
disclosed to the borrower. When the event happens line of
final decision being implemented. The illegal dismissal ruling stands;
credit is informed to the customer. Usually it is a request
only the computation of monetary consequences of this dismissal is
for funding from the borrower.
affected, and this is not a violation of the principle of immutability of
final judgments. That the amount respondents shall now pay has
greatly increased is a consequence
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3.NSB’s loan was secured by a mortgage on 10 REP and PN. NSB also SUPREME COURT RULING
signed the Credit Agreement relating to the Revolving Credit Line and 1. YES. NSB’S LOAN ACCOUNT WAS BLOATED WITH INTERESTS,
Unadvised Line PENALTIES, AND OTHER CHARGES
4.NSB failed to comply with its obligations under the PN.
5.Eduardo Dee wrote PNB for a request of a 90-day extension for the FIRST: PROMISSORY NOTES
payment of interests and the restructuring of its loan for another term. NSB’s accessory duty to pay interests on the loan DID NOT give PNB
NSB then tendered a P1M payment to PNB through 3 checks. unrestrained freedom to charge any rate other than that agreed upon.
6.PNB’s bank manager wrote to Dee informing him that NSB’s No interest shall be due unless expressly stipulated in writing. It would
proposal
be the zenith of farcicality to specify and agree upon rates that could
was acceptable provided that the total payment should be different.
be subsequently upgraded at whim by only one party.
7.Dee wrote back the PNB branch manager reiterating his proposals
for
The unilateral determination and imposition of increased rates is
the settlement of NSB’s past due loan (P7M).
violative of the principle of mutuality of contracts. These one-sided
8.2 post-dated checks were dishonored.
impositions do not have the force of law between the parties
9.PNB wrote to Dee informing him to make good the dishonored checks
because such impositions are not based on the parties’ essential
or else consequences will arise.
equality.
10.NSB failed to pay their loan obligations within the timeframe given
them. Thus, foreclosure proceedings were instituted resulting in the
Although Escalation Clauses are valid, giving PNB unbridled right to
public auction of the mortgaged REP (P10.3M).
adjust the interest independently and upwardly would completely take
11.Later on, PNB informed NSB that the proceeds of the sale were
away NSB’s right to assent to an important modification in their
insufficient to cover its total claim of P12.5M and thus demanded that
agreement and negate the element of mutuality in their contracts.
NSB to pay the deficiencies.
12.NSB refused.
While the Usury Law ceiling on interest rates was lifted by CBC
Circular No. 905, nothing in said Circular grants lenders carte blanche
RTC: Dismissed PNB’s petition: No cause of action.
authority to raise interest rates to levels which would either enslave their
borrowers or lead to a hemorrhaging of their assets.
CA: Reversed RTC ruling:
NSB did not avail of PNB’s Debt Relief Package; Increased in PNB’s
Assent to the increase cannot be implied from their request for loan
loan rates were authorized by law and the Monetary Board; and
restructuring or their lack of response to the statements of accounts
The increases were binding upon NSB having been freely and sent by PNB. Such request does not indicate any agreement to an
voluntarily entered into via the signing of the Credit Agreements. interest increase. No one receiving a proposal to modify a loan
contract (specifically interest rate) is obliged to answer such proposal.
ISSUES
1. WON the loan accounts are bloated Aside from sending demand letters, PNB did not at all exercise its
2. WON the extrajudicial foreclosure and subsequent claim for option to enforce collection nor did it renew or extend the account. No
deficiency are valid and proper complaint for collection was filed with the courts. Instead a Petition for
Sale of Mortgaged Properties was filed with the Provincial Sheriff.
BANKING CASE DIGESTS ACCM
the August 3, 2004 auction sale and to cancel the December 19, 2005 mortgaged properties in this case when RA 8791 was already in effect
writ of possession, within 30 days after respondent was given clearly falls within the purview of said provision.
possession. But it did not. Thus, inasmuch as the 30-day period to
avail of the said remedy had already lapsed, petitioner could no longer Issue: WON Goldenway can redeem the properties
assail the validity of the August 3, 2004 sale.
Ruling: No. Goldenway cannot redeem the properties.
In this case, the parties provided in their contract that upon
GOLDENWAY MERCHANDISING CORP. vs. EQUITABLE PCI BANK Goldenway’s
default, the entire loan obligation becoming due, the bank may
Facts: Goldenway instituted a Real Estate Mortgage in favor of immediately foreclose the mortgage judicially in accordance with
EqPCIB over its real properties in Bulacan. The mortgage secured the the Rules of Court or extrajudicially in accordance with Act 3135.
Php2million loan granted by the bank to Goldenway. As the latter
failed to settle its loan obligation, the bank extrajudicially foreclosed Sec. 47 of the General Banking Law amended Act 3135. Under the
the mortgage on December 2000 and the properties were sold to the new law, an exception is thus made in the case of juridical persons
bank. A certificate of Sale was then issued on January 26, 2001 and it which are allowed to exercise the right of redemption only until but not
was registered on February 16, 2001. after the registration of the certificate of foreclosure sale, and in no
case more than three months after foreclosure, whichever comes first.
On March 8, 2001, Goldenway offered to redeem the properties by
tendering a check (Php 3.5M) but was told that redemption is no longer Goldenway’s contention that Sec. 47 violates the constitutional
possible because the certificate of sale had already been registered. proscription against impairment of the obligation of contract has no
Goldenway filed a complaint for specific performance and damages basis. The purpose of the non-impairment clause of the Constitution is
against the bank, asserting that it is the 1-yr period under Act 3135 to safeguard the integrity of contracts against unwarranted
which should apply and not the shorter redemption period under RA interference by the State. Sec. 47 did not divest juridical persons of
8791. The bank, in its counterclaim, pointed out that Goldenway had all the right to redeem their foreclosed properties but only modified the
the time to redeem from the time it received the demand letter and time for the exercise of such right by reducing the 1-yr period originally
notice of sale, and even assuming that the redemption was timely provided in Act 3135.
made, it was not for the amount as required by law.
The legislature clearly intended to shorten the period of redemption for
Trial Court: juridical persons whose properties were foreclosed and sold in
dismissed complaint and counterclaim; attempt to redeem was accordance with Act 3135. The difference in the treatment of juridical
already late; persons and natural persons was based on the nature of the
no valid redemption made because Atty. Abat-Vera of properties foreclosed- whether these are used as residence for which
Goldenway was not properly authorized by Goldenway BOD the more liberal 1-yr redemption period is retained, or used for
industrial or commercial purposes, in which case a shorter term is
deemed necessary to reduce the period of uncertainty in the
ownership of property and enable mortgagee banks to dispose sooner
of these acquired assets.
CA: Sec. 47/ RA 8791 reveals the intention to shorten the period of
redemption for juridical persons and that the foreclosure of the
BANKING CASE DIGESTS ACCM
to restrain the bank officers from intermeddling with the property of 2.The Monetary Board placed Banco Filipino Savings and Mortgage
the bank in any way. Bank under conservatorship of Basilio Estanislao. He was later
replaced by Gilberto Teodoro as conservator on August 10, 1984.
With respondent bank having been already placed under receivership, its Gilberto Teodoro submitted a report dated January 8, 1985 to
officers, inclusive of its acting president, Vicente G. Puyat, were no respondent The Monetary Board on the conservatorship of the bank.
longer authorized to transact business in connection with the bank’s
assets and 3.Subsequently, another report dated January 23, 1985 was submitted
property. Clearly then, the “exclusive option to purchase” granted by to the Monetary Board by Ramon Tiaoqui regarding the major findings
Vicente G. Puyat was and still is unenforceable against Manila Bank. of examination on the financial condition of Banco Filipino Savings and
Mortgage Bank as of July 31, 1984, finding the bank one of insolvency
2. No. As provided under Sec.30 on NCBA, the receiver and illiquidity and provides sufficient justification for forbidding the bank
appointed by the Central Bank to take charge of the properties from engaging in banking.
of a bank placed under receivership only had authority to
administer the same for the benefit of its creditors. Granting or 4.The Monetary Board ordered the closure of Banco Filipino and
approving an “exclusive option to purchase” is not an act of designated Mrs. Carlota P. Valenzuela as Receiver.
administration, but an act of strict ownership, involving, as it
does, the disposition of property of the bank. Not being an 5.Banco Filipino filed a complaint with the RTC to set aside the action
act of administration, the so-called “approval” by Atty. Renan of the Monetary Board placing the bank under receivership and filed
Santos amounts to no approval at all, a bank receiver not with the SC the petition for certiorari and mandamus.
being authorized to do so on his own.
6.Carlota Valenzuela, as Receiver and Arnulfo Aurellano and Ramon
In all, respondent bank’s receiver was without any power to Tiaoqui as Deputy Receivers of Banco Filipino submitted their report
approve or ratify the “exclusive option to purchase ” granted by the late on the receivership of the bank to the Monetary Board, finding that the
Vicente G. Puyat, who, in the first place, was himself bereft of any condition of the banking institution continues to be one of insolvency,
authority, to bind the bank under such exclusive option. Manila i.e., its realizable assets are insufficient to meet all its liabilities and
Bank may not thus be compelled to sell the land and building in that the bank cannot resume business with safety to its depositors,
question to petitioner Abacus under the terms of the latter’s other creditors and the general public, and recommends the liquidation
“exclusive option to purchase.” of the bank.
PRINCIPAL Issue: Whether or not the Central Bank and the Monetary 1984, total capital accounts consisting of paid-in capital and other
Board acted arbitrarily and in bad faith in finding and thereafter capital accounts such as surplus, surplus reserves and undivided
concluding that Banco Filipino Savings and Mortgage Bank is insolvent, profits aggregated ₱351.8 million; that capital adjustments, however,
and in ordering its closure wiped out the capital accounts and placed the bank with a capital
deficiency amounting to ₱334.956 million; that the biggest adjustment
Ruling: YES, they acted arbitrarily in concluding that BFS is insolvent. which contributed to the deficit is the provision for estimated losses on
accounts classified as doubtful and loss which was computed at
The closure and receivership of Banco Filipino Savings and Mortgage ₱600.4 million pursuant to the examination. The valuation which was
Bank, which was ordered by the Monetary Board on is null and void. set up or deducted against the capital accounts of the bank in arriving
at the latter's financial condition. Tiaoqui admits the insufficiency and
The Monetary Board may order the cessation of operations of a bank unreliability of the findings of the examiner as to the setting up of
in the Philippines and place it under receivership upon a finding of recommended valuation reserves from the assets of the bank.
insolvency or when its continuance in business would involve probable
loss its depositors or creditors. If the Monetary Board shall determine The examination contemplated in Sec. 29 of the CB Act as a
and confirm within 60 days that the bank is insolvent or can no longer mandatory requirement was not completely and fully complied with.
resume business with safety to its depositors, creditors and the Despite the existence of the partial list of findings in the examination of
general public, it shall, if public interest will be served, order its the bank, there were still highly significant items to be weighed and
liquidation. determined such as the matter of valuation reserves, before these can
be considered in the financial condition of the bank. It would be a
Under Section 29 of the Central Bank Act , the following are the drastic move to conclude prematurely that a bank is insolvent if the
mandatory requirements to be complied with before a bank found basis for such conclusion is lacking and insufficient, especially if doubt
to be insolvent is ordered closed and forbidden to do business in exists as to whether such bases or findings faithfully represent the real
the Philippines: financial status of the bank.
1. an examination shall be conducted by the head of the
appropriate supervising or examining department or his In arriving at the computation of realizable assets of Banco Filipino,
examiners or agents into the condition of the bank; respondents used its books which undoubtedly are not reflective of the
2. it shall be disclosed in the examination that the condition of actual cash or fair market value of its assets which is not the proper
the bank is one of insolvency, or that its continuance in procedure contemplated in Sec. 29 of the Central Bank Act.
business would involve probable loss to its depositors or
creditors; The receivership of Banco Filipino, indicates that total liabilities of
3. the department head concerned shall inform the ₱4,540.84 million does not exceed the total assets of ₱4,981.53 million.
Monetary Board in writing, of the facts; and Likewise, the consolidated statement of condition of the bank prepared
4. the Monetary Board shall find the statements of the by the Central Bank Authorized Deputy Receiver Artemio Cruz shows that
department head to be true. total assets amounting to ₱4,981,522,996.22 even exceeds total liabilities
amounting to ₱4,540,836,834.15.
Clearly, Tiaoqui based his report on an incomplete examination of the
bank and outrightly concluded that the latter's financial status was one
of insolvency or illiquidity. He arrived at the conclusion: that as of July
31,
BANKING CASE DIGESTS ACCM
Based on the foregoing, there was no valid reason for the Respondent RBO filed a motion to dismiss on the ground of res judicata
Valenzuela, Aurellano and Tiaoqui report to finally recommend the and that it was undergoing liquidation and it is the liquidation court
liquidation of Banco Filipino instead of its rehabilitation. which has exclusive jurisdiction to take cognizance of petitioner’s
claim. Trial court denied the motion to dismiss because it found that
the causes of action in the previous and present cases were different
ONG VS. COURT OF APPEALS; G.R. No. 112830. February 1, 1996. although it was silent on the jurisdictional issue. RBO filed a motion for
reconsideration but was similarly rejected. The Court of Appeals,
All claims against the insolvent bank should be filed in the through a certiorari filed by RBO, annulled the challenged orders of the
liquidation proceeding. The judicial liquidation is intended to prevent trial court which sustained the jurisdiction of the trial court and denied
multiplicity of actions against the insolvent bank. It is a pragmatic reconsideration thereof. Moreover, the trial judge was ordered to
arrangement designed to establish due process and orderliness in the dismiss the civil case without prejudice to the right of petitioner to file
liquidation of the bank, to obviate the proliferation of litigations and to his claim in the liquidation proceedings pending before the Regional
avoid injustice and arbitrariness. Trial Court of Olongapo City.
Facts: Jerry Ong filed with the Regional Trial Court of Quezon City a Issue: Whether or not the civil case against RBO may proceed
petition for the surrender of 2 TCTs against Rural Bank of Olongapo, independently from the liquidation proceedings.
Inc. (RBO), represented by its liquidator Guillermo G. Reyes, Jr. and
deputy liquidator Abel Allanigue. The complaint stemed from 2 parcels Held: Section 29, par. 3, of R.A. 265 as amended by P. D. 1827
of land which was duly mortgaged by RBO in favor of petitioner to provides
guarantee the payment of Omnibus Finance, Inc., which is likewise –If the Monetary Board shall determine and confirm within (sixty days)
now undergoing liquidation proceedings of its money market that the bank x x x is insolvent or cannot resume business with safety
obligations to petitioner. Omnibus Finance, Inc., not having to its depositors, creditors and the general public, it shall, if the public
seasonably settled its obligations to petitioner, the latter proceeded to interest requires, order its liquidation, indicate the manner of its
effect the extrajudicial foreclosure of said mortgages and the city liquidation and approve a liquidation plan. The Central Bank shall, by
sheriff of Tagaytay City issued a certificate of sale in favor of petitioner the Solicitor General, file a petition in the Court of First Instance
which were duly registered. reciting the proceedings which have been taken and praying the
assistance of the court in the liquidation of such institution. The
Respondents failed to seasonably redeem said parcels of land, for court shall have
which reason, petitioner has executed an affidavit of consolidation of jurisdiction in the same proceedings to adjudicate disputed claims
ownership which has not been submitted to the Registry of Deeds of against the bank x x x and enforce individual liabilities of the
Tagaytay City, in view of the fact that possession of the aforesaid titles stockholders and do all that is necessary to preserve the assets of
or owner’s duplicate certificates of title remains with the RBO. To date, such institution and to implement the liquidation plan approved by the
petitioner has not been able to effect the registration of said parcels of Monetary Board
land in his name in view of the persistent refusal of respondents to
surrender RBO’s copies of its owner’s certificates of title for the parcels All claims against the insolvent bank should be filed in the liquidation
of land covered by the two TCTs. proceeding. The judicial liquidation is intended to prevent multiplicity of
actions against the insolvent bank. It is a pragmatic arrangement
designed to establish due process and orderliness in the liquidation of
the bank, to obviate the proliferation of litigations and to avoid
injustice and
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The BSP issued the Certificate issued the Certificate of The Petition Should Have Been Filed in the CA
Authority extending the corporate life of RBFI for another 50 MB is a quasi-judicial agency be filed in the Court of Appeals.
years and it also approved the change of its name to Euro If it involves the acts or omissions of a quasi-judicial agency,
Credit Incorporated, as well as the increase in the number of unless otherwise provided by law or the Rules, the petition
the members of the BOD, from 5 to 11
shall be filed in and cognizable only by the Court of Appeals.
The Integrated Supervision Department II (ISD II) of the BSP
conducted a general examination on ECBI pursuant to Sec. Close Now, Hear Later
28 of the NCBA, and the members of the BOD were At any rate, if circumstances warrant it, the MB may forbid a bank from
immediately apprised of the findings doing business and place it under receivership without prior notice and
In April 2008, the examiners from the Dept. of Loans and hearing.
Credit if the BSP cancelled the rediscounting line of ECBI,
which prompted Vivas to appeal the cancellation to the BSP Section 30 of R.A. No. 7653 provides, viz:
The Monetary Board issued Resolution No. 1255 placing Sec. 30. Proceedings in Receivership and Liquidation. –
ECBI under Prompt Corrective Action due to serious Whenever, upon report of the head of the supervising or
findings and supervisory concerns so Vivas moved for examining department, the Monetary Board finds that a bank
reconsideration or quasi-bank:
The ISD II had invited the BOD of ECBI to discuss a. is unable to pay its liabilities as they become due in
matters on several instances but the meeting never the ordinary course of business: Provided, that this
materialized shall not include inability to pay caused by
The MB eventually imposed fine on ECBI and referred the extraordinary demands induced by financial panic in
matter to the Office of Special Investigation for the filing of the banking community;
appropriate legal action b. has insufficient realizable assets, as determined by
The OSI filed with the DOJ a complaint for Estafa the Bangko Sentral, to meet its liabilities; or
through Falsification of Commercial Documents a c. cannot continue in business without involving
The MB then issued Resolution No. 276 placing ECBI probable losses to its depositors or creditors; or
under receivership d. has willfully violated a cease and desist order under
Section 37 that has become final, involving acts or
ISSUE: WON ECBI’s placement under receivership was unwarranted transactions which amount to fraud or a dissipation
and of the assets of the institution; in which cases, the
improper Monetary Board may summarily and without need for
prior hearing forbid the institution from doing
RULING: No. Vivas Availed of the Wrong Remedy business in the Philippines and designate the
Philippine Deposit Insurance Corporation as receiver
To begin with, Vivas availed of the wrong remedy. The MB issued of the banking institution.
Resolution No. 276, dated March 4, 2010, in the exercise of its power
under R.A. No. 7653. The Court, in several cases, upheld the power of the MB to take over
Under Section 30 thereof, any act of the MB placing a bank banks without need for prior hearing. It is not necessary inasmuch as
under conservatorship, receivership or liquidation may not the
be restrained or set aside except on a petition for certiorari.
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The "close now, hear later" doctrine has already been justified as a
measure for the protection of the public interest. Swift action is called
for on the part of the BSP when it finds that a bank is in dire straits.
Unless adequate and determined efforts are taken by the government
against distressed and mismanaged banks, public faith in the banking
system is certain to deteriorate to the prejudice of the national economy
itself, not to mention the losses suffered by the bank depositors,
creditors, and stockholders, who all deserve the protection of the
government.