Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-20583 January 23, 196
REPU!L"C O# T$E P$"L"PP"NES, petitioner,
vs.
SECUR"T% CRE&"T 'N& 'CCEPT'NCE CORPOR'T"ON, ROSEN&O T.
RESUELLO, P'!LO T'NJUTCO, 'RTURO SOR"'NO, RU!EN !ELTR'N,
!"EN(EN"&O (. )'P', P"L'R G. RESUELLO, R"C'R&O &. !'L'T!'T,
JOSE SE!'ST"'N an* ("TO T'NJUTCO JR., respondents.
Office of the Solicitor General Arturo A. Alafriz and Solicitor E. M. Salva for petitioner.
Sycip, Salazar, Luna, Manalo & Feliciano for respondents.
Natalio M. al!oa and F. E. Evan"elista for the receiver.

CONCEPC"ON, C.J.:
This is an original #uo $arranto proceeding, initiated by the olicitor !eneral, to
dissolve the ecurity and Acceptance Corporation for allegedly engaging in ban"ing
operations #ithout the authority re$uired therefor by the !eneral Ban"ing Act %Republic
Act No. &&'(. Na)ed as respondents in the petition are, in addition to said corporation,
the follo#ing, as alleged )e)bers of its Board of *irectors and+or E,ecutive -fficers,
na)ely.
N'ME POS"T"ON
Rosendo T. Resuello %resident & &hair'an of the oard
Pablo Tan/utco (irector
Arturo oriano (irector
Ruben Beltran (irector
Bienvenido 0. 1apa (irector & )ice*%resident
Pilar !. Resuello (irector & Secretary*+reasurer
Ricardo *. Balatbat (irector & Auditor
2ose R. ebastian (irector & Le"al &ounsel
0ito Tan/utco 2r. (irector & %ersonnel Mana"er
The record sho#s that the Articles of 3ncorporation of defendant corporation
4
#ere
registered #ith the ecurities and E,change Co))ission on March 5', 46748 that the
ne,t day, the Board of *irectors of the corporation adopted a set of by9la#s,
5
#hich #ere
filed #ith said Co))ission on April :, 46748 that on epte)ber 46, 4674, the
uperintendent of Ban"s of the Central Ban" of the Philippines as"ed its legal counsel an
opinion on #hether or not said corporation is a ban"ing institution, #ithin the purvie# of
Republic Act No. &&'8 that, acting upon this re$uest, on -ctober 44, 4674, said legal
counsel rendered an opinion resolving the $uery in the affir)ative8 that in a letter, dated
2anuary 4:, 4675, addressed to said uperintendent of Ban"s, the corporation through its
president, Rosendo T. Resuello, one of defendants herein, sought a reconsideration of the
afore)entioned opinion, #hich reconsideration #as denied on March 47, 46758 that, prior
thereto, or on March 6, 4674, the corporation had applied #ith the ecurities and
E,change Co))ission for the registration and licensing of its securities under the
ecurities Act8 that, before acting on this application, the Co))ission referred it to the
Central Ban", #hich, in turn, gave the for)er a copy of the above9)entioned opinion, in
line #ith #hich, the Co))ission advised the corporation on *ece)ber :, 4674, to
co)ply #ith the re$uire)ents of the !eneral Ban"ing Act8 that, upon application of
)e)bers of the Manila Police *epart)ent and an agent of the Central Ban", on May 4;,
4675, the Municipal Court of Manila issued earch <arrant No. A94=468 that, pursuant
thereto, )e)bers of the intelligence division of the Central Ban" and of the Manila
Police *epart)ent searched the pre)ises of the corporation and sei>ed docu)ents and
records thereof relative to its business operations8 that, upon the return of said #arrant,
the sei>ed docu)ents and records #ere, #ith the authority of the court, placed under the
custody of the Central Ban" of the Philippines8 that, upon e,a)ination and evaluation of
said docu)ents and records, the intelligence division of the Central Ban" sub)itted, to
the Acting *eputy !overnor thereof, a )e)orandu) dated epte)ber 4=, 4675, finding
that the corporation is.
4. Perfor)ing ban"ing functions, #ithout re$uisite certificate of authority fro)
the Monetary Board of the Central Ban", in violation of ecs. 5 and 7 of Republic
Act &&', in that it is solicitin" and acceptin" deposit fro' the pu!lic and lendin"
out the funds so received8
5. Solicitin" and acceptin" savin"s deposits fro' the "eneral pu!lic #hen the
co)pany?s articles of incorporation authori>e it only to engage pri)arily in
financing agricultural, co))ercial and industrial pro/ects, and secondarily, in
buying and selling stoc"s and bonds of any corporation, thereby e,ceeding the
scope of its po#ers and authority as granted under its charter8 conse$uently such
acts are ultra*vires.
&. Solicitin" su!scriptions to the corporate shares of stoc, and acceptin" deposits
on account thereof, $ithout prior re"istration and-or licensin" of such shares or
securin" e.e'ption therefor, in violation of the Securities Act8 and
@. That being a private credit and financial institution, it should co'e under the
supervision of the Monetary oard of the &entral an,, by virtue of the transfer
of the authority, po#er, duties and functions of the ecretary of Ainance, Ban"
Co))issioner and the defunct Bureau of Ban"ing, to the said Board, pursuant to
ecs. 4&6 and 4@= of Republic Act 57: and ecs. ;; and ;6 of Republic Act &&'.B
%E)phasis upplied.( that upon e,a)ination and evaluation of the sa)e records
of the corporation, as #ell as of other docu)ents and pertinent pipers obtained
else#here, the uperintendent of Ban"s, sub)itted to the Monetary Board of the
Central Ban" a )e)orandu) dated August 5;, 4675, stating inter alia.
44. Pursuant to the re$uest for assistance by the Chief, 3ntelligence *ivision,
contained in his Me)orandu) to the !overnor dated May 5&, 4675 and in
accordance #ith the #ritten instructions of !overnor Castillo dated May &4,
4675, an e,a)ination of the boo"s and records of the ecurity Credit and Coans
-rgani>ations, 3nc. sei>ed by the co)bined MP*9CB tea) #as conducted by this
*epart)ent. The e,a)ination disclosed the follo#ing findings.
a. Considering the e,tent of its operations, the ecurity Credit and
Acceptance Corporation, 3nc., receives deposits fro' the pu!lic re"ularly.
Such deposits are treated in the &orporation/s financial state'ents as
conditional su!scription to capital stoc,. Accu)ulated deposits of P:,===
of an individual depositor )ay be converted into stoc" subscription to the
capital stoc" of the ecurity Credit and Acceptance Corporation at the
option of the depositor. ale of its shares of stoc" or subscriptions to its
capital stoc" are offered to the pu!lic as part of its re"ular operations.
b. That out of the funds obtained fro) the public through the receipt of
deposits and+or the sale of securities, loans are 'ade re"ularly to any
person !y the Security &redit and Acceptance &orporation.
A copy of the Me)orandu) Report dated 2uly &=, 4675 of the e,a)ination )ade
by E,a)iners of this *epart)ent of the sei>ed boo"s and records of the
Corporation is attached hereto.
45. ection 5 of Republic Act No. &&', other#ise "no#n as the !eneral Ban"ing
Act, defines the ter), Bban"ing institutionB as follo#s.
ec. 5. -nly duly authori>ed persons and entities )ay engage in the
lending of funds obtained fro) the public through the receipts of deposits
or the sale of bonds, securities, or obligations of any "ind and all entities
regularly conducting operations shall be considered as ban"ing institutions
and shall be sub/ect to the provisions of this Act, of the Central Ban" Act,
and of other pertinent la#s. ...
4&. Pre)ises considered, the e,a)ination disclosed that the ecurity Credit and
Acceptance Corporation is re"ularly lendin" funds o!tained fro' the receipt of
deposits and-or the sale of securities. +he &orporation therefore is perfor'in"
/!an,in" functions/ as conte'plated in 0epu!lic Act No. 112, $ithout havin" first
co'plied $ith the provisions of said Act.
0eco''endations3
3n vie# of all the foregoing, it is reco))ended that the Monetary Board decide
and declare.
4. That the ecurity Credit and Acceptance Corporation is perfor)ing ban"ing
functions #ithout having first co)plied #ith the provisions of Republic Act No.
&&', other#ise "no#n as the !eneral Ban"ing Act, in violation of ections 5 and
7 thereof8 and
5. That this case be referred to the pecial Assistant to the !overnor %Cegal
Counsel( for #hatever legal actions are #arranted, including, if #arranted
cri)inal action against the Persons cri)inally liable and+or #uo $arranto
proceedings #ith preli)inary in/unction against the Corporation for its
dissolution. %E)phasis supplied.(
that, acting upon said )e)orandu) of the uperintendent of Ban"s, on
epte)ber 4@, 4675, the Monetary Board pro)ulgated its Resolution No. 4=6:,
declaring that the corporation is perfor)ing ban"ing operations, #ithout having
first co)plied #ith the provisions of ections 5 and 7 of Republic Act No. &&'8
&

that on epte)ber 5:, 4675, the corporation #as advised of the afore)entioned
resolution, but, this not#ithstanding, the corporation, as #ell as the )e)bers of
its Board of *irectors and the officers of the corporation, have been and still are
perfor)ing the functions and activities #hich had been declared to constitute
illegal ban"ing operations8 that during the period fro) March 5', 4674 to May 4;,
4675, the corporation had established '@ branches in principal cities and to#ns
throughout the Philippines8 that through a syste)atic and vigorous ca)paign
underta"en by the corporation, the sa)e had )anaged to induce the public to open
:6,@7& savings deposit accounts #ith an aggregate deposit of P4,7;6,4&7.'@8 that,
in conse$uence of the foregoing deposits #ith the corporation, its original capital
stoc" of P:==,===, divided into 5=,=== founders? shares of stoc" and ;=,===
preferred shares of stoc", both of #hich had a par value of P:.== each, #as
increased, in less than one %4( year, to P&,===,=== divided into 4&=,=== founders?
shares and @'=,=== preferred shares, both #ith a par value of P:.== each8 and that,
according to its state)ent of assets and liabilities, as of *ece)ber &4, 4674, the
corporation had a capital stoc" aggregating P4,5'&,57:.6; and suffered, during
the year 4674, a loss of P67,7;:.56. Accordingly, on *ece)ber 7, 4675, the
olicitor !eneral co))enced this #uo $arranto proceedings for the dissolution
of the corporation, #ith a prayer that, )ean#hile, a #rit of preli)inary in/unction
be issued e, parte, en/oining the corporation and its branches, as #ell as its
officers and agents, fro) perfor)ing the ban"ing operations co)plained of, and
that a receiver be appointed pendente lite.
Dpon /oint )otion of both parties, on August 5=, 467&, the uperintendent of Ban"s of
the Central Ban" of the Philippines #as appointed by this Court receiver pendente lite of
defendant corporation, and upon the filing of the re$uisite bond, said officer assu)ed his
functions as such receiver on epte)ber 47, 467&.
3n their ans#er, defendants ad)itted practically all of the allegations of fact )ade in the
petition. They, ho#ever, denied that defendants Tan/utco %Pablo and 0ito, 2r.(, oriano,
Beltran, 1apa, Balatbat and ebastian, are directors of the corporation, as #ell as the
validity of the opinion, ruling, evaluation and conclusions, rendered, )ade and+or reached
by the legal counsel and the intelligence division of the Central Ban", the ecurities and
E,change Co))ission, and the uperintendent of Ban"s of the Philippines, or in
Resolution No. 4=6: of the Monetary Board, or of earch <arrant No. A94=46 of the
Municipal Court of Manila, and of the search and sei>ure )ade thereunder. By #ay of
affir)ative allegations, defendants averred that, as of 2uly ', 4674, the Board of *irectors
of the corporation #as co)posed of defendants Rosendo T. Resuello, A$uilino C. 3llera
and Pilar !. Resuello8 that on 2uly 44, 4675, the corporation had filed #ith the
uperintendent of Ban"s an application for conversion into a ecurity avings and
Mortgage Ban", #ith defendants 1apa, Balatbat, Tan/utco %Pablo and 0ito, 2r.(, oriano,
Beltran and ebastian as proposed directors, in addition to the defendants first na)ed
above, #ith defendants Rosendo T. Resullo, 1apa, Pilar !. Resuello, Balatbat and
ebastian as proposed president, vice9president, secretary9treasurer, auditor and legal
counsel, respectively8 that said additional officers had never assu)ed their respective
offices because of the pendency of the approval of said application for conversion8 that
defendants oriano, Beltran, ebastian, 0ito Tan/utco 2r. and Pablo Tan/utco had
subse$uently #ithdra#n fro) the proposed )ortgage and savings ban"8 that on
Nove)ber 56, 4675 E or before the co))ence)ent of the present proceedings E the
corporation and defendants Rosendo T. Resuello and Pilar !. Resuello had instituted
Civil Case No. :5&@5 of the Court of Airst 3nstance of Manila against Purificacion antos
and other )e)bers of the savings plan of the corporation and the City Aiscal for a
declaratory relief and an in/unction8 that on *ece)ber &, 4675, 2udge !audencio Cloribel
of said court issued a #rit directing the defendants in said case No. :5&@5 and their
representatives or agents to refrain fro) prosecuting the plaintiff spouses and other
officers of the corporation by reason of or in connection #ith the acceptance by the sa)e
of deposits under its savings plan8 that acting upon a petition filed by plaintiffs in said
case No. :5&@5, on *ece)ber 7, 4675, the Court of Airst 3nstance of Manila had
appointed 2ose Ma. Ra)ire> as receiver of the corporation8 that, on *ece)ber 45, 4675,
said Ra)ire> $ualified as such receiver, after filing the re$uisite bond8 that, e,cept as to
one of the defendants in said case No. :5&@5, the issues therein have already been /oined8
that the failure of the corporation to honor the de)ands for #ithdra#al of its depositors
or )e)bers of its savings plan and its for)er e)ployees #as due, not to )is)anage)ent
or )isappropriation of corporate funds, but to an abnor)al situation created by the )ass
de)and for #ithdra#al of deposits, by the attach)ent of property of the corporation by
its creditors, by the suspension by debtors of the corporation of the pay)ent of their debts
thereto and by an order of the ecurities and E,change Co))ission dated epte)ber 57,
4675, to the corporation to stop soliciting and receiving deposits8 and that the #ithdra#al
of deposits of )e)bers of the savings plan of the corporation #as understood to be
sub/ect, as to ti)e and a)ounts, to the financial condition of the corporation as an
invest)ent fir).
3n its reply, plaintiff alleged that a photostat copy, attached to said pleading, of the
anniversary publication of defendant corporation sho#ed that defendants Pablo Tan/utco,
Arturo oriano, Ruben Beltran, Bienvenido 0. 1apa, Ricardo *. Balatbat, 2ose R.
ebastian and 0ito Tan/utco 2r. are officers and+or directors thereof8 that this is confir)ed
by the )inutes of a )eeting of stoc"holders of the corporation, held on epte)ber 5',
4675, sho#ing that said defendants had been elected officers thereof8 that the vie#s of the
legal counsel of the Central Ban", of the ecurities and E,change Co))ission, the
3ntelligence *ivision, the uperintendent of Ban"s and the Monetary Board above
referred to have been e,pressed in the la#ful perfor)ance of their respective duties and
have not been assailed or i)pugned in accordance #ith la#8 that neither has the validity
of earch <arrant No. A94=46 been contested as provided by la#8 that the only assets of
the corporation no# consist of accounts receivable a)ounting appro,i)ately to
P:==,===, and its office e$uip)ent and appliances, despite its increased capitali>ation of
P&,===,=== and its deposits a)ounting to not less than P4,7;6,4&7.'@8 and that the
afore)entioned petition of the corporation, in Civil Case No. :5&@5 of the Court of Airst
3nstance of Manila, for a declaratory relief is no# highly i)proper, the defendants having
already co))itted infractions and violations of the la# /ustifying the dissolution of the
corporation.
Although, ad)ittedly, defendant corporation has not secured the re$uisite authority to
engage in ban"ing, defendants deny that its transactions parta"e of the nature of ban"ing
operations. 3t is conceded, ho#ever, that, in conse$uence of a propaganda ca)paign
therefor, a total of :6,@7& savings account deposits have been )ade by the public #ith the
corporation and its '@ branches, #ith an aggregate deposit of P4,7;6,4&7.'@, #hich has
been lent out to such persons as the corporation dee)ed suitable therefor. 3t is clear that
these transactions parta"e of the nature of ban"ing, as the ter) is used in ection 5 of the
!eneral Ban"ing Act. 3ndeed, a ban" has been defined as.
... a )oneyed institute FTal)age vs. Pell ' N.G. %& eld. ( &5;, &@', &@;H founded
to facilitate the borro#ing, lending and safe9"eeping of )oney %)ith vs. Iansas
City Title J Trust Co., @4 . Ct. 5@&, 5:: D.. 4;=, 54=, 7: C. Ed. :''( and to
deal, in notes, bills of e,change, and credits %tate vs. Cornings av. Ban", 44:
N.<. 6&', 4&6 3o#a &&;(. %Ban"s J Ban"ing, by 1ell)ann 0ol. 4, p. @7(.
Moreover, it has been held that.
An invest)ent co)pany #hich loans out the )oney of its custo)ers, collects the
interest and charges a co))ission to both lender and borro#er, is a ban".
%<estern 3nvest)ent Ban"ing Co. vs. Murray, :7 P. '5;, '&=, '&48 7 Ari> 54:.(
... any person engaged in the business carried on by ban"s of deposit, of discount,
or of circulation is doing a ban"ing business, although but one of these functions
is e,ercised. %MacCaren vs. tate, 45@ N.<. 77', 4@4 <is. :'', 4&: A). .R. ::,
4; Ann. Cas. ;578 6 C.2.. &=.(
Accordingly, defendant corporation has violated the la# by engaging in ban"ing
#ithout securing the ad)inistrative authority re$uired in Republic Act No. &&'.
That the illegal transactions thus underta"en by defendant corporation #arrant its
dissolution is apparent fro) the fact that the foregoing )isuser of the corporate funds and
franchise affects the essence of its business, that it is #illful and has been repeated :6,@7&
ti)es, and that its continuance inflicts in/ury upon the public, o#ing to the nu)ber of
persons affected thereby.
3t is urged, ho#ever, that this case should be re)anded to the Court of Airst 3nstance of
Manila upon the authority of )era"uth vs. 4sa!ela Su"ar &o. %:' Phil. 577(. 3n this
connection, it should be noted that this Court is vested #ith original /urisdiction,
concurrently #ith courts of first instance, to hear and decide #uo $arranto cases and,
that, conse$uently, it is discretionary for us to entertain the present case or to re$uire that
the issues therein be ta"en up in said Civil Case No. :5&@5. The 0eraguth case cited by
herein defendants, in support of the second alternative, is not in point, because in said
case there #ere issues of fact #hich re$uired the presentation of evidence, and courts of
first instance are, in general, better e$uipped than appellate courts for the ta"ing of
testi)ony and the deter)ination of $uestions of fact. 3n the case at bar, there is, ho#ever,
no dispute as to the principal facts or acts perfor)ed by the corporation in the conduct of
its business. The )ain issue here is one of la#, na)ely, the legal nature of said facts or of
the afore)entioned acts of the corporation. Aor this reason, and because public interest
de)ands an early disposition of the case, #e have dee)ed it best to deter)ine the )erits
thereof.
<herefore, the #rit prayed for should be, as it is hereby granted and defendant
corporation is, accordingly, ordered dissolved. The appoint)ent of receiver herein issued
pendente lite is hereby )ade per)anent, and the receiver is, accordingly, directed to
ad)inister the properties, deposits, and other assets of defendant corporation and #ind up
the affairs thereof confor)ably to Rules :6 and 77 of the Rules of Court. 3t is so ordered.
0eyes, 5..L., (izon, 0e"ala, Ma,alintal, en"zon, 5.%., 6aldivar, Sanchez and &astro,
55., concur.
#oo+no+,-
4
<hich, as a)ended on May ;, 4674, authori>ed it.
B4. To e,tend credit facilities for ho)e building and agricultural,
co))ercial and industrial pro/ects8
5. To e,tend credit, give loans, )ortgages and pledges, either as principal,
agent, bro"er or attorney9in9fact, upon every and all "ind and classes of
products, )aterials, goods, )erchandise, and other properties, real or
personal of every "ind and nature8
&. To dra#, accept, endorse, purchase, o#n, sell, discount, )ortgage,
assign or other#ise dispose of, negotiate or collect accounts or notes
receivables, negotiable instru)ents, letters of credit and other evidence of
indebtedness8
@. To purchase, ac$uire, and ta"e over, all or any part of the rights, assets
and business of any person, partnership, corporation or association, and to
underta"e and assu)e the liabilities and obligations of such person,
partnership, corporation or association #hose rights, assets, business or
property )ay be purchased, ac$uired or ta"en over8
:. To issue bonds, debentures, securities, collaterals and other obligations
or other#ise incur indebtedness in such )anner as )ay be ascertained by
the corporation8 and
7. To underta"e the )anage)ent, pro)otion, financing and+or collection
services of the operation of the business, industry or enterprises of any
person, partnership, corporation or association in so far as )ay be
per)itted under the la#s of the Philippines.B %E)phasis supplied.(.
5
E)po#ering said Board, inter alia.
Bc( To pay for any property or rights ac$uired by the corporation or to
discharge obligations of the corporation either #holly or partly in )oney
or in stoc", bonds, debentures or other securities of the corporation8
Bd( To lend or borro# )oney for the corporation #ith or #ithout security
and for such purpose to accept or create, )a"e and issue )ortgages,
bonds, deeds of trust and negotiable instru)ents or securities, secured by
)ortgage or pledge of property belonging to the corporation8 provided,
that as hereinafter provided, the proper officers of the corporation shall
have these po#ers, unless e,pressly li)ited by the Board of *irectors. ...
%E)phasis supplied(.
&
Bec. 5. -nly duly authori>ed persons and entities )ay engage in the lending of
funds obtained fro) the public through the receipts of deposits or the sale of
bonds, securities, or obligations of any "ind, and all entities regularly conducting
such operations shall be considered as ban"ing institutions and shall be sub/ect to
the provisions of this Act, of the !eneral Ban" Act, and of other pertinent la#s.
The ter)s ?ban"ing institution and ?ban"?, as used in this Act, are synony)ous and
interchangeable and specially include ban"s, ban"ing institutions, co))ercial
ban"s, savings ban"s, )ortgage ban"s, trust co)panies, building and loan
associations, branches and agencies in the Philippines of foreign ban"s,
hereinafter called Philippine branches, and all other corporations, co)panies,
partnerships, and associations perfor)ing ban"ing functions in the Philippines.
BPersons and entities #hich receive deposits only occasionally shall not be
considered as ban"s, but such persons and entities shall be sub/ect to
regulation by the Monetary Board of the Central Ban"8 nevertheless in no
case )ay the Central Ban" authori>e the dra#ing of chec"s against
deposits not )aintained in ban"s, or branches or agencies thereof.
BThe Monetary Board )ay si)ilarly regulate the activities of persons and
entities #hich act as agents of ban"s.
Bec. 7. No person, association or corporation not conducting the business
of a co))ercial ban"ing corporation, trust corporation, savings and
)ortgage ban"s, or building and loan association, as defined in this Act,
shall advertise or hold itself out as being engaged in the business of such
ban", corporation or association, or use in connection #ith its business
title the #ord or #ords, ?ban"?, ?ban"ing,? ?ban"er,? ?building and loan
association,? ?trust corporation,? ?trust co)pany,? or #ords of si)ilar i)port,
or solicit or receive deposits of )oney for deposit, disburse)ent,
safe"eeping, or other#ise, or transact in any )anner the business of any
such ban", corporation or association #ithout having first co)plied #ith
the provisions of this Act in so far as it relates to co))ercial ban"ing
corporations, trust corporations, savings and )ortgage ban"s, or building
and loan association as the case )ay be. Aor any violation of the
provisions of this section by a corporation, the officers and directors
thereof shall be /ointly and severally liable. Any violation of the provisions
of this section shall be punished by a fine of five hundred pesos for each
day during #hich such violation is continued or repeated, and, in default
of the pay)ent thereof, subsidiary i)prison)ent as prescribed by la#.B