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BANKING
A.
GENERAL PRINCIPLES
B.
CLOSURE OF BANKS
C.
POWERS OF A RECEIVER
1. Abacus Real Estate Development Center Inc. v. Manila Banking Corporation, 455 SCRA 97 (2005)
2. In Re: Petition for Assistance in the Liquidation in the Rural Bank of Bokod (Benguet), PDIC v. Bureau of Internal Revenue, 511 SCRA 123
(2006)
3. Rural Bank of San Miguel v. Monetary Board, 516 SCRA 154 (2007)
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BANKING
A.
GENERAL PRINCIPLES
HELD:
- Paragraph (c), Section 25 of Republic Act 337 allows a commercial bank to purchase and hold such real estate as shall be conveyed to it in satisfaction
of debts previously contracted in the course of its dealings, We deem it quite clear and free from doubt that the "debts" referred to in this provision are
only those resulting from previous loans and other similar transactions made or entered into by a commercial bank in the ordinary course of its business
as such. Obviously, whatever "civil liability" arising from the criminal offense of qualified theft was admitted in favor of appellant bank by its former
employee, Alfonso Pangilinan, was not a debt resulting from a loan or a similar transaction had between the two parties in the ordinary course of banking
business.
-Neither do the provisions of paragraph (d) of the Same section apply to the present case because the deed of transfer in question can in no sense be
considered as a sale made by virtue of a judgment, decree, mortgage, or trust deed held by appellant bank. In the same manner it cannot be said that
the real property in question was purchased by appellant "to secure debts due to it", considering that, as stated heretofore, the term debt employed in
the pertinent legal provision can logically refer only to such debts as may become payable to appellant bank as a result of a banking transaction.
2. Republic Bank v. Security Credit and Acceptance Corporation, 19 SCRA 58 (1967)
FACTS:
-Under its Articles of Incorporation registered with SEC, Security Credit and Acceptance Corporation was authorized to engage
PRIMARILY- in financing agricultural, commercial and industrial projects; and
SECONDARILY- in buying and selling stocks and bonds of any corporation
-When it filed for their by-laws, the Superintendent of Banks of the Central Bank asked its legal counsel an opinion whether or not the corporation is a
banking institution within the purview of RA 337. Legal Counsel resolved in the affirmative.
-When the Corporation applied with SEC for the registration and licensing of its securities under the Securities Act, the application was referred to the
Central Bank.
-The Central Bank in turn, gave SEC a copy of the opinion of the Legal Counsel of the Superintendent of the Banks of the Central Bank, resolving in the
affirmative the query of Whether or not the said corporation is a banking institution within the purview of RA 337.
-In line with which, SEC advised the corporation to comply with the requirements of the General Banking Act.
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-By virtue of a search warrant, the premises of the corporation were searched and documents and records thereof relative to its business operations
were seized.
-Upon examination and evaluation, it was found that the corporation have been and still continuously performing functions and activities which have
been declared to constitute illegal banking operations.
-The corporation had established branches in principal cities and towns throughout the Philippines and through a systematic and vigorous campaign,
had managed to induce the public to open savings deposit account which has been lent out to such persons as the corporation deemed suitable thereof.
-Hence, an original quo warranto proceeding was initiated by the Solicitor General to dissolve Security Credit and Acceptance Corporation for engaging
in banking operations without the authority required thereof by the general Banking Act.
ISSUE:
-Whether or not a bank may engage in banking business without first securing authority from the Central bank.
HELD:
-Security Credit and Acceptance Corporation violated the General banking Act because it is engaging in banking business without the administrative
authority from the Central Bank.
-Before a Corporation can engage in banking business it must first secure the administrative authority required by law.
4. Simex International (Manila) Inc. v. Court of Appeals, 183 SCRA 360 (1990)
FACTS:
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-Simex International engaged in the exportation of food products. It buys these products from various local suppliers and then sells them abroad,
particularly in the United States, Canada and the Middle East. Most of its exports are purchased by Simex International on credit.
-The Simex International was a depositor of the Traders Royal Bank and maintained a checking account in its branch at Romulo Avenue, Cubao,
Quezon City. Simex International deposited to its account in the said bank the amount of P100,000.00, thus increasing its balance as of that date to
P190,380.74. Subsequently, Simex International issued several checks against its deposit but was surprised to learn later that they had been dishonored
for insufficient funds.
-As a consequence, the California Manufacturing Corporation sent, a letter of demand to Simex International, threatening prosecution if the dishonored
check issued to it was not made good. It also withheld delivery of the order made by Simex International. Similar letters were sent to the petitioner by the
Malabon Long Life Trading, and by the G. and U. Enterprises. Malabon also canceled Simex International's credit line and demanded that future
payments be made by it in cash or certified check.
-Meantime, action on the pending orders of Simex International with the other suppliers whose checks were dishonored was also deferred.
-Simex International complained to the bank. Investigation disclosed that the sum of P100,000.00 deposited by Simex International, had not been
credited to it. The error was rectified only 23 days after, and the dishonored checks were paid after they were re-deposited.
-In its letter, Simex International demanded reparation from the bank for its "gross and wanton negligence." This demand was not met.
-Simex International then filed a complaint for moral damages and exemplary damages, plus attorney's fees, and costs.
TC, affirmed by CA:
-Ruled in favor of Simex.
ISSUE:
-Whether or not the bank was negligent and can be held for damages.
HELD:
- The banking system is an indispensable institution in the modern world and plays a vital role in the economic life of every civilized nation. Whether as
mere passive entities for the safekeeping and saving of money or as active instruments of business and commerce, banks have become an ubiquitous
presence among the people, who have come to regard them with respect and even gratitude and, most of all, confidence. Thus, even the humble wageearner has not hesitated to entrust his life's savings to the bank of his choice, knowing that they will be safe in its custody and will even earn some
interest for him. The ordinary person, with equal faith, usually maintains a modest checking account for security and convenience in the settling of his
monthly bills and the payment of ordinary expenses. As for business entities like the petitioner, the bank is a trusted and active associate that can help in
the running of their affairs, not only in the form of loans when needed but more often in the conduct of their day-to-day transactions like the issuance or
encashment of checks.
-In every case, the depositor expects the bank to treat his account with the utmost fidelity, whether such account consists only of a few hundred pesos or
of millions. The bank must record every single transaction accurately, down to the last centavo, and as promptly as possible. This has to be done if the
account is to reflect at any given time the amount of money the depositor can dispose of as he sees fit, confident that the bank will deliver it as and to
whomever he directs. A blunder on the part of the bank, such as the dishonor of a check without good reason, can cause the depositor not a little
embarrassment if not also financial loss and perhaps even civil and criminal litigation.
5. Fidelity and Savings and Mortgage Bank c. Cenzon, 184 SCRA 141 (1990)
FACTS:
-Spouses Santiago deposited P50,000 with Fidelity Savings Bank under a savings account, and subsequently, another P50,000 under a certificate of
time deposit.
-Unfortunately, Fidelity Savings and Mortgage Bank was declared insolvent.
-A resolution was issued by the Monetary Board prohibiting Fidelity to continue with its banking operations.
-Pursuant also to the instructions of the Monetary Board, the Superintendent of Banks took charge in the name of the Monetary Board, the assets of
Fidelity.
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-PDIC paid the spouses PP10,000 only, thereby leaving a balance of P90,000.
-In another resolution, the Monetary Board directed the liquidation of the affairs of Fidelity.
-While the liquidation proceedings is still pending, the spouses demanded the immediate payment of the savings and time deposits.
-When demand was not met, the spouses instituted an action for sum of money with damages against Fidelity.
TC:
-Ordered Fidelity to pay the spouses Santiago P90,000 with accrued INTEREST, as well as damages.
ISSUE:
-Whether or not the bank forbidden by the Central Bank to do business has obligation to pay interest on deposit.
HELD:
-Insolvent banking institution and closed by the Central Bank is not liable to pay interest on bank deposits.
-It is settled jurisprudence that a banking institution which has been ordered close by the Central Bank cannot be held liable to pay interest on bank
deposits which accrued during the period when the bank is actually closed and non-operational.
-However, Fidelity Savings and Mortgage Bank is liable, ONLY for the interest on bank deposits which had already accrued until the time it was
prohibited by the Central Bank to continue its banking operation.
-The reason is that, a bank cannot be expected to pay interest of the said deposit when at the time the bank was prohibited to transact business
operation, the bank no longer derives income.
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FACTS:
-Sometime in Teodoro Baas executed a Promissory Note in favor of C. G. Dizon Construction whereby for value received he promised to pay to the
order of C. G. Dizon Construction the sum of P390,000.00 in installments of "P32,500.00 every 25th day of the month.
-Later, C. G. Dizon Construction endorsed with recourse the Promissory Note to ASIA PACIFIC, and to secure payment thereof, C. G. Dizon
Construction, through its corporate officers, Cenen Dizon, President, and Juliette B. Dizon, Vice President and Treasurer, executed a Deed of Chattel
Mortgage covering three (3) heavy equipment units of Caterpillar Bulldozer Crawler Tractors.
-Moreover, Cenen Dizon executed a Continuing Undertaking wherein he bound himself to pay the obligation jointly and severally with C. G. Dizon
Construction.
-In compliance with the provisions of the Promissory Note, C. G. Dizon Construction made some installment payments to ASIA PACIFIC.
-Thereafter, however, C. G. Dizon Construction defaulted in the payment of the remaining installments, prompting ASIA PACIFIC to send a Statement of
Account to Cenen Dizon for the unpaid.
- As the demand was unheeded, ASIA PACIFIC sued Teodoro Baas, C. G. Dizon Construction and Cenen Dizon.
-While defendants (herein petitioners) admitted the genuineness and due execution of the Promissory Note, the Deed of Chattel Mortgage and the
Continuing Undertaking, they nevertheless maintained that these documents were never intended by the parties to be legal, valid and binding but a
mere subterfuge to conceal the loan of P390,000.00 with usurious interests.
-Defendants claimed that since ASIA PACIFIC could not directly engage in banking business, it proposed to them a scheme wherein plaintiff ASIA
PACIFIC could extend a loan to them without violating banking laws: first, Cenen Dizon would secure a promissory note from Teodoro Baas with a face
value of P390,000.00 payable in installments; second, ASIA PACIFIC would then make it appear that the promissory note was sold to it by Cenen Dizon
with the 14% usurious interest on the loan or P54,000.00 discounted and collected in advance by ASIA PACIFIC; and, lastly, Cenen Dizon would provide
sufficient collateral to answer for the loan in case of default in payment and execute a continuing guaranty to assure continuous and prompt payment of
the loan. Defendants also alleged that out of the loan of P390,000.00 defendants actually received only P329,185.00 after ASIA PACIFIC deducted the
discounted interest, service handling charges, insurance premium, registration and notarial fees.
-Sometime in October 1980 Cenen Dizon informed ASIA PACIFIC that he would be delayed in meeting his monthly amortization on account of business
reverses and promised to pay instead in February 1981. Cenen Dizon made good his promise and tendered payment to ASIA PACIFIC in an amount
equivalent to two (2) monthly amortizations. But ASIA PACIFIC attempted to impose a 3% interest for every month of delay, which he flatly refused to
pay for being usurious.
-Afterwards, ASIA PACIFIC allegedly made a verbal proposal to Cenen Dizon to surrender to it the ownership of the two (2) bulldozer crawler tractors
and, in turn, the latter would treat the former's account as closed and the loan fully paid. Cenen Dizon supposedly agreed and accepted the offer.
Defendants averred that the value of the bulldozer crawler tractors was more than adequate to cover their obligation to ASIA PACIFIC.
ISSUE:
-Whether or not the disputed transaction violated the banking laws.
HELD:
-An investment company refers to any issuer which is or holds itself out as being engaged or proposes to engage primarily in the business of investing,
reinvesting or trading in securities. As defined in Sec. 2, par. (a), of the Revised Securities Act,securities "shall include x x x x commercial papers
evidencing indebtedness of any person, financial or non-financial entity, irrespective of maturity, issued, endorsed, sold, transferred or in any manner
conveyed to another with or without recourse, such as promissory notes x x x x" Clearly, the transaction between petitioners and respondent was one
involving not a loan but purchase of receivables at a discount, well within the purview of "investing, reinvesting or trading in securities" which an
investment company, like ASIA PACIFIC, is authorized to perform and does not constitute a violation of the General Banking Act. i Moreover, Sec. 2 of the
General Banking Act provides in part Sec. 2. Only entities duly authorized by the Monetary Board of the Central Bank may engage in the lending of funds obtained from the public
through the receipt of deposits of any kind, and all entities regularly conducting such operations shall be considered as banking institutions and shall be
subject to the provisions of this Act, of the Central Bank Act, and of other pertinent laws (underscoring supplied).
-Indubitably, what is prohibited by law is for investment companies to lend funds obtained from the public through receipts of deposit, which is a function
of banking institutions. But here, the funds supposedly "lent" to petitioners have not been shown to have been obtained from the public by way of
deposits, hence, the inapplicability of banking laws.
8. Reyes v. Court of Appeals, 363 SCRA 51 (2001)
FACTS:
- In view of the 20th Asian Racing Conference in Sydney, Australia, the Philippine Racing Club, Inc. (PRCI, for brevity) sent four (4) delegates to the said
conference. Gregorio H. Reyes, as vice-president for finance, racing manager, treasurer, and director of PRCI, sent Godofredo Reyes, the clubs chief
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cashier, to Far East Bank and Trust Company, to apply for a foreign exchange demand draft in Australian dollars.
-Godofredo went to respondent banks Buendia Branch in Makati City to apply for a demand draft in the amount One Thousand Six Hundred Ten
Australian Dollars (AU$1,610.00) payable to the order of the 20 th Asian Racing Conference Secretariat of Sydney, Australia. He was attended to by
respondent banks assistant cashier, Mr. Yasis, who at first denied the application for the reason that respondent bank did not have an Australian dollar
account in any bank in Sydney. Godofredo asked if there could be a way for respondent bank to accommodate PRCIs urgent need to remit Australian
dollars to Sydney. Yasis of respondent bank then informed Godofredo of a roundabout way of effecting the requested remittance to Sydney thus: the
respondent bank would draw a demand draft against Westpac Bank in Sydney, Australia (Westpac-Sydney for brevity) and have the latter reimburse
itself from the U.S. dollar account of the respondent in Westpac Bank in New York, U.S.A (Westpac-New York for brevity). This arrangement has been
customarily resorted to since the 1960s and the procedure has proven to be problem-free. PRCI and the petitioner Gregorio H. Reyes, acting through
Godofredo, agreed to this arrangement or approach in order to effect the urgent transfer of Australian dollars payable to the Secretariat of the 20 th Asian
Racing Conference.
-On July 28, 1988, the respondent bank approved the said application of PRCI and issued Foreign Exchange Demand Draft (FXDD) No. 209968 in the
sum applied for, that is, One Thousand Six Hundred Ten Australian Dollars (AU$1,610.00), payable to the order of the 20 th Asian Racing Conference
Secretariat of Sydney, Australia, and addressed to Westpac-Sydney as the drawee bank.
-On August 10, 1988, upon due presentment of the foreign exchange demand draft, denominated as FXDD No. 209968, the same was dishonored, with
the notice of dishonor stating the following: xxx No account held with Westpac. Meanwhile, on August 16, 1988, Westpac-New York sent a cable to
respondent bank informing the latter that its dollar account in the sum of One Thousand Six Hundred Ten Australian Dollars (AU$1,610.00) was debited.
On August 19, 1988, in response to PRCIs complaint about the dishonor of the said foreign exchange demand draft, respondent bank informed
Westpac-Sydney of the issuance of the said demand draft FXDD No. 209968, drawn against the Westpac-Sydney and informing the latter to be
reimbursed from the respondent banks dollar account in Westpac-New York. The respondent bank on the same day likewise informed Westpac-New
York requesting the latter to honor the reimbursement claim of Westpac-Sydney. On September 14, 1988, upon its second presentment for payment,
FXDD No. 209968 was again dishonored by Westpac-Sydney for the same reason, that is, that the respondent bank has no deposit dollar account with
the drawee Westpac-Sydney.
-Spouses Gregorio H. Reyes and Consuelo Puyat-Reyes left for Australia to attend the said racing conference. When petitioner Gregorio H. Reyes
arrived in Sydney in the morning of September 18, 1988, he went directly to the lobby of Hotel Regent Sydney to register as a conference delegate. At
the registration desk, in the presence of other delegates from various member countries, he was told by a lady member of the conference secretariat
that he could not register because the foreign exchange demand draft for his registration fee had been dishonored for the second time. A discussion
ensued in the presence and within the hearing of many delegates who were also registering. Feeling terribly embarrassed and humiliated, petitioner
Gregorio H. Reyes asked the lady member of the conference secretariat that he be shown the subject foreign exchange demand draft that had been
dishonored as well as the covering letter after which he promised that he would pay the registration fees in cash. In the meantime he demanded that he
be given his name plate and conference kit. The lady member of the conference secretariat relented and gave him his name plate and conference kit. It
was only two (2) days later, or on September 20, 1988, that he was given the dishonored demand draft and a covering letter. It was then that he actually
paid in cash the registration fees as he had earlier promised.
-Consuelo Puyat-Reyes arrived in Sydney. She too was embarrassed and humiliated at the registration desk of the conference secretariat when she
was told in the presence and within the hearing of other delegates that she could not be registered due to the dishonor of the subject foreign exchange
demand draft. She felt herself trembling and unable to look at the people around her. Fortunately, she saw her husband coming toward her. He saved
the situation for her by telling the secretariat member that he had already arranged for the payment of the registration fees in cash once he was shown
the dishonored demand draft. Only then was petitioner Puyat-Reyes given her name plate and conference kit.
-The Reyeses felt embarrassed and humiliated, filed a complaint for damages alleging that it was the banks fault in not failing to exercise highest degree
of diligence in this case.
.
- TC, affirmed by CA dismissed the complaint and rendered judgment in favor of FEBTC.
ISSUE:
-Whether or not banks are still required to act with the highest degree of diligence, in its commercial transaction not involving an exercise of its fiduciary
capacity.
HELD:
-The degree of diligence required of a bank is more than that of a good father of a family where fiduciary nature of their relationship with the depositor is
concerned. But the said ruling applies only to cases where banks act under their fiduciary capacity, that is, as depositary of the deposits. But the same
higher degree of diligence is not expected to be exerted by banks in commercial transactions that do not involve their fiduciary relationship with their
depositors, such as sale and issuance of the foreign exchange demand draft.
-The respondent bank was not required to exert more than the diligence of a good father of a family in regard to the sale and issuance of the subject
foreign exchange demand draft. The case at bar does not involve the handling of petitioners deposit, if any, with the respondent bank. Instead, the
relationship involved was that of a buyer and seller, that is, between the respondent bank as the seller of the subject foreign exchange demand draft,
and PRCI as the buyer of the same, with the 20 th Asian Racing Conference Secretariat in Sydney, Australia as the payee thereof. As earlier mentioned,
the said foreign exchange demand draft was intended for the payment of the registration fees of the petitioners as delegates of the PRCI to the 20 th
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In formulating the rules and regulations under this Section, the Monetary Board shall recognize the peculiar
characteristics of microfinancing, such as cash flow-based lending to the basic sectors that are not covered by traditional
collateral.
Under this provision, banks have the right to annul any credit accommodation or loan, and demand the immediate payment thereof, from borrowers
proven to be guilty of fraud.
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10. Philippine National Bank v. Erlando T. Rodriguez, et al, 556 SCRA 27 (2009)
FACTS:
-Spouses Erlando and Norma Rodriguez were clients of Philippine National Bank (PNBThey maintained savings and demand/checking accounts,
-The spouses were engaged in the informal lending business. In line with their business, they had a discounting arrangement with the Philnabank
Employees Savings and Loan Association (PEMSLA), an association of PNB employees. Naturally, PEMSLA was likewise a client of PNB Amelia
Avenue Branch. The association maintained current and savings accounts with petitioner bank.
-PEMSLA regularly granted loans to its members. Spouses Rodriguez would rediscount the postdated checks issued to members whenever the
association was short of funds. As was customary, the spouses would replace the postdated checks with their own checks issued in the name of the
members.
-It was PEMSLAs policy not to approve applications for loans of members with outstanding debts. To subvert this policy, some PEMSLA officers
devised a scheme to obtain additional loans despite their outstanding loan accounts. They took out loans in the names of unknowing members, without
the knowledge or consent of the latter. The PEMSLA checks issued for these loans were then given to the spouses for rediscounting. The officers
carried this out by forging the indorsement of the named payees in the checks.
-In return, the spouses issued their personal checks (Rodriguez checks) in the name of the members and delivered the checks to an officer of PEMSLA.
The PEMSLA checks, on the other hand, were deposited by the spouses to their account.
-Meanwhile, the Rodriguez checks were deposited directly by PEMSLA to its savings account without any indorsement from the named payees. This
was an irregular procedure made possible through the facilitation of Edmundo Palermo, Jr., treasurer of PEMSLA and bank teller in the PNB Branch. It
appears that this became the usual practice for the parties.
-PNB eventually found out about these fraudulent acts. To put a stop to this scheme, PNB closed the current account of PEMSLA. As a result, the
PEMSLA checks deposited by the spouses were returned or dishonored for the reason Account Closed.
-The corresponding Rodriguez checks, however, were deposited as usual to the PEMSLA savings account. The amounts were duly debited from the
Rodriguez account. Thus, because the PEMSLA checks given as payment were returned, spouses Rodriguez incurred losses from the rediscounting
transactions.
TC:
-Ruled in favor of spouses Rodriguez, PNB is liable to return the value of the checks.
CA:
-Reversed RTC. The checks are payable not to order but to bearer PEMSLA. The payees in the checks were fictitious payee because they were not the
intended payees at all.
-After a Motion for Reconsideration, CA reversed itself.
ISSUE:
-Whether or not PNB is liable to return the value of the checks to Spouses Rodriguez.
HELD:
-In a checking transaction, the drawee bank has the duty to verify the genuineness of the signature of the drawer and to pay the check strictly in
accordance with the drawers instructions, i.e., to the named payee in the check. It should charge to the drawers accounts only the payables
authorized by the latter. Otherwise, the drawee will be violating the instructions of the drawer and it shall be liable for the amount charged to the
drawers account.
-Banks handle daily transactions involving millions of pesos. By the very nature of their work the degree of responsibility, care and trustworthiness
expected of their employees and officials is far greater than those of ordinary clerks and employees. For obvious reasons, the banks are expected to
exercise the highest degree of diligence in the selection and supervision of their employees.
-PNBs tellers and officers, in violation of banking rules of procedure, permitted the invalid deposits of checks to the PEMSLA account. Indeed, when it is
the gross negligence of the bank employees that caused the loss, the bank should be held liable.
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-A bank that has been remiss in its duty must suffer the consequences of its negligence. Being issued to named payees, PNB was duty-bound by law
and by banking rules and procedure to require that the checks be properly indorsed before accepting them for deposit and payment. In fine, PNB
should be held liable for the amounts of the checks.
Whether or not Bank of America is liable to pay BA Finance the amount of the four checks;
Whether or not Associated Bank is liable to reimburse Bank of America the amount of the four checks.
HELD:
- The bank on which a check is drawn, known as the drawee bank, is under strict liability, based on the contract between the bank and its customer
(drawer), to pay the check only to the payee or the payees order. The drawers instructions are reflected on the face and by the terms of the check.
When the drawee bank pays a person other than the payee named on the check, it does not comply with the terms of the check and violates its duty to
charge the drawers account only for properly payable items. Thus, we ruled in Philippine National Bank v. Rodriguez that a drawee should charge to
the drawers accounts only the payables authorized by the latter; otherwise, the drawee will be violating the instructions of the drawer and shall be liable
for the amount charged to the drawers account.
-A collecting bank where a check is deposited, and which endorses the check upon presentment with the drawee bank, is an endorser. Under Section 66
of the Negotiable Instruments Law, an endorser warrants that the instrument is genuine and in all respects what it purports to be; that he has good title
to it; that all prior parties had capacity to contract; and that the instrument is at the time of his endorsement valid and subsisting. This Court has
repeatedly held that in check transactions, the collecting bank or last endorser generally suffers the loss because it has the duty to ascertain the
genuineness of all prior endorsements considering that the act of presenting the check for payment to the drawee is an assertion that the party making
the presentment has done its duty to ascertain the genuineness of the endorsements.
-When Associated Bank stamped the back of the four checks with the phrase all prior endorsements and/or lack of endorsement guaranteed, that bank
had for all intents and purposes treated the checks as negotiable instruments and, accordingly, assumed the warranty of an endorser.
-When a bank allows a client to collect on crossed checks issued in the name of another and for a specific purpose, the bank is guilty of negligence.
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B.
CLOSURE OF BANKS
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-CB contended that Closure is an exercise of Police Power, which the court cannot pass upon.
-CFI, Affirmed by CA granted the petition.
ISSUE:
-Whether or not the Closure and Liquidation of Bank which is considered an exercise of Police Power may be subject of judicial inquiry.
HELD:
-While closure and liquidation of a bank may be considered an exercise of police power, the validity of such exercise of police power is subject to judicial
inquiry and could be set aside if it is either capricious, discriminatory, whimsical, unjust or a denial of the due process and equal protection clauses of the
Constitution.
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-Respondent Judge, ordered the issuance of a writ of attachment, and pursuant thereto, a writ of was issued in favor of the Sps. Lipana..
-Meanwhile, the Monetary Board, finding that the condition Development Bank Of Rizal was one of insolvency and that its continuance in business would
result in probable loss to its depositors and creditors, decided to place it under receivership
-Sps. Lipana filed a Motion for Execution Pending Appeal, which was opposed by Development Bank Of Rizal
-In an order, respondent judge ordered the issuance of a writ of execution.
-Development Bank Of Rizal filed a Motion for Reconsideration of order and to Stay Writ of Execution, which, respondent judge stayed the execution.
-When the motion to lift stay of execution was denied, the Sps. Lipana filed the instant petition.
ISSUE:
-Whether or not respondent judge could legally stay execution of judgment that has already become final and executory.
HELD:
- The rule that once a decision becomes final and executory, it is the ministerial duty of the court to order its execution, admits of certain exceptions as in
cases of special and exceptional nature where it becomes imperative in the higher interest of justice to direct the suspension of its execution; whenever
it is necessary to accomplish the aims of justice; or when certain facts and circumstances transpired after the judgment became final which could render
the execution of the judgment unjust.
-In the instant case, the stay of the execution of judgment is warranted by the fact that respondent bank was placed under receivership. To execute the
judgment would unduly deplete the assets of respondent bank to the obvious prejudice of other depositors and creditors, after the Monetary Board has
declared that a bank is insolvent and has ordered it to cease operations, the Board becomes the trustee of its assets for the equal benefit of all the
creditors, including depositors. The assets of the insolvent banking institution are held in trust for the equal benefit of all creditors, and after its
insolvency, one cannot obtain an advantage or a preference over another by an attachment, execution or otherwise.
5. Overseas Bank of Manila v. Court of Appeals, 172 SCRA 521 (1989)
FACTS:
- In relation to a contract of sale between NAWASA, as vendor and a certain Bonifacio Regalado, as vendee, and by authority of the former's board of
directors, the amount of P327,257.20 was placed on a time deposit with the Overseas Bank by the NAWASA Treasurer for a period of 6 months. The
amount corresponding to a payment earlier made by Regalado to the NAWASA, and the time deposit was made so that a refund could quickly be made
to Regalado in the event that his contract with the NAWASA be disapproved by the Office of the President.
- A second payment having been made by Regalado in the same sum of P327,257.20 in connection with his aforesaid contract, another time deposit
was made by the NAWASA Treasurer with the Overseas Bank, respresenting the balance of the purchase price due from Regalado. The period of this
second deposit was fixed at one (1) year.
-NAWASA's Acting General Manager wrote to the Overseas Bank advising that (1) as regards the first time deposit of P327,257.20 which had already
matured, NAWASA wished to withdraw it immediately, and (2) with respect to the second time deposit of P2,945,314.80, it intended to withdraw it sixty
(60) days thereafter as authorized by the parties' agreement set forth in the certificate of the deposit.
-The Overseas Bank having failed to remit to it, it did however pay to NAWASA, , interest on its time deposits.
-After maturity of the second time deposit, NAWASA again sent a letter to the Overseas Bank, demanding remittance of both time deposits. Having
received no response, NAWASA wrote to the Bank once more giving it five (5) days to remit the deposited sums, and warning that it would seek the
intervention of the Central Bank for the protection of its interests. Still no word was received from the bank.
-NAWASA then wrote to the Central Bank Governor about the matter. The latter replied that it was pursuing a suggestion of the Monetary Board for the
Overseas Bank to transfer government deposits in its custody (including those of NAWASA) to the Philippine National Bank and/or the Development
Bank of the Philippines. Apparently, even the Central Bank was ignored by Overseas Bank.
-NAWASA informed the Central Bank that it had received no remittance from the Overseas Bank nor did it appear that the latter had transferred the time
deposits to the PNB or the DBP. The Central Bank wrote back, pointing out that while the matter really had to be resolved by NAWASA and the Overseas
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Bank according to their contract, it was nonetheless pursuing an available measures to induce the Overseas Bank to remit the time deposits in question
or at least transfer them to either the PNB or DBP; the Central Bank also said that it had informed the President of the Philippines of the status of
Government deposits in the Overseas Bank.
-One last letter was written by NAWASA to the Overseas Bank, reiterating its demand for the return of its money. Again the letter went unheeded.
-NAWASA thus brought suit to recover its deposits and damages, with the results already mentioned. The Overseas Bank failed to file its answer despite
service of summons; it was declared in default; the Court received NAWASA's evidence ex parte and on the basis thereof, thereafter rendered judgment
by default. The Overseas Bank made no effort whatever to have the order of default lifted, or to have the judgment by default reconsidered. After being
served with notice of the judgment, it simply brought the case up to the Court of Appeals.
-Trial Court, affirmed by the Court of Appeal, rendered decision against Overseas Bank.
OBMs Defense:
-By reason of punitive action taken by the CB, it had been prevented from undertaking banking operations which would have generated funds to pay not
only its depositors and creditors but likewise the interests due on the deposits.
HELD:
- There is in the first place absolutely no evidence of these facts in the record: and this is simply because the petitioner bank had made no effort
whatever to set aside the default order against it so that it could present evidence in its behalf before the Trial Court. Moreover, the suspension of
operations which took place in August, 1968, could not possibly excuse non-compliance with the obligations in question which matured in 1966. Again,
the claim that the Central Bank, by suspending the Overseas Bank's banking operations, had made it impossible for the Overseas Bank to pay its debts,
whatever validity might be accorded thereto, or the further claim that it had fallen into a "distressed financial situation," cannot in any sense excuse it
from its obligation to the NAWASA, which had nothing whatever to do with the Central Bank's actuations or the events leading to the bank's distressed
state.
- Furthermore, that rehabilitation program or procedure of payment does not in any way negate or diminish the indebtedness of the Overseas Bank to
the NAWASA incurred in 1966, for conceding full faith and credit to such a prescribed procedure of payment, it constitutes no obstacle to determining the
principal and interests of the debts at issue at this time.
6. Banco Filipino Savings and Mortgage Bank v. Central Bank, 204 SCRA 767 (1991)
FACTS:
-On different occasions, Top Management Program Corporation, Pilar Development Corporation, El Grande Development Corporation obtained a loan
from Banco Filipino and Savings and Mortgage Bank secured by Real Estate Mortgages.
-When the bank suffered serious financial problems, the Monetary Board issued resolution finding the bank insolvent and placed it under receivership.
-Banco Filipino filed a complaint to set aside the said action of MB.
-Subsequently, MB issued another resolution placing the bank under liquidation and designating a liquidator.
-Banco Filipino filed another petition questioning the validity of the said resolution.
-A temporary restraining order was issued, however, acts pertaining to normal operations of a bank are not enjoined.
-A resolution was also issued ordering the conduct of hearings.
-In the meantime, Top Management Program Corporation, Pilar Development Corporation, El Grande Development Corporation failed to pay their
obligations.
-The liquidator extra judicially foreclosed the Real Estate Mortgages.
-Each filed separately a petition for injunction and prohibition seeking to enjoin the sheriff from proceeding with the foreclosure sale.
-Petitions were dismissed. Hence, petitions were filed by Top Management Program Corporation, Pilar Development Corporation, El Grande
Development Corporation alleging that the liquidator has no authority to proceed with the foreclosure sale pending the resolution of the issue on the
validity of the closure and liquidation of Banco Filipino.
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ISSUE:
-Whether or not the liquidator has the authority to prosecute as well as to defend suits and foreclose mortgages for and in behalf of the bank while the
issue on the validity of the receivership and liquidation is still pending resolution.
HELD:
-The Central bank is vested with the authority to take charge and administer the monetary and banking systems of the country and this authority
includes the power to examine and determine the financial condition of banks for the purpose of closure ion the ground of insolvency.
-Even if the bank is questioning the validity of its closure, during the pendency of the case, the liquidator can continue prosecution suits for collection and
foreclosure of mortgages, as they are acts done In the usual course of administration of the banks.
7. Central Bank of the Philippines v. Court of Appeals, 208 SCRA 652 (1992)
FACTS:
- At the height of the controversy surrounding the discovery of the anomalous loans, several blind items about a family-owned bank in Binondo which
granted fictitious loans to its stockholders appeared in major newspapers. These news items triggered a bank-run in PBP which resulted in continuous
over-drawings on the bank's demand deposit account with the Central Bank. Hence, on the basis of the report submitted by the Supervision and
Examination Sector, Department I of the CB, the Monetary Board (MB), pursuant to its authority under Section 28-A of R.A. No. 265 and by virtue of MB
Board Resolution No. 164, placed PBP under conservatorship.
-While PBP admits that it had no choice but to submit to the conservatorship, it nonetheless requested that the same be lifted by the CB. Consequently,
the MB issued Resolution directing the principal stockholders of PBP to increase its capital accounts by such an amount that would be necessary for the
elimination of PBP's negative net worth. CB senior deputy Governor Gabriel Singson informed PBP that pursuant to MB Resolution, the CB would be
willing to lift the conservatorship under the following conditions: (a) PBP's unsecured overdraft with the Central Bank will be converted into an
emergency loan, to be secured by sufficient collateral, including but not limited to the properties offered by PBP's principal stockholders.
- MB adopted Resolution approving the consolidation of PBP's other unsecured obligations to the CB with its overdraft and authorizing the conversion
thereof into an emergency loan. The same resolution authorized the CB Governor to lift the conservatorship and return PBP's management to its
principal stockholders upon completion of the documentation and full collateralization of the emergency loan, but directed PBP to pay the emergency
loan in five (5) equal annual installments, with interest and penalty rates at MRR 180 days plus 48% per annum, and liquidated damages of 5% for
delayed payments.
- PBP submitted a rehabilitation plan to the CB which proposed the transfer to PBP of three (3) buildings owned by Producers Properties, Inc. (PPI), its
principal stockholder and the subsequent mortgage of said properties to the CB as collateral for the bank's overdraft obligation. Although said proposal
was explored and discussed, no program acceptable to both the CB and PPI was arrived at because of disagreements on certain matters such as
interest rates, penalties and liquidated damages.
-No other rehabilitation program was submitted by PBP for almost three (3) years; as a result thereof, its overdrafts with the CB continued to accumulate.
The CB Monetary Board decided to approve in principle what it considered a viable rehabilitation program for PBP.
-PBP, without responding to the communications of the CB, filed a complaint verified against the CB, the MB and CB Governor Jose B. Fernandez, Jr.,
asserting that the conservatorship was unwarranted, ill-motivated, illegal, utterly unnecessary and unjustified; that the appointment of the conservator
was arbitrary; that herein petitioners acted in bad faith; that the CB-designated conservators committed bank frauds and abuses; that the CB is guilty of
promissory estoppel; and that by reason of the conservatorship, it suffered losses exclusive of loss of profits and loss of goodwill.
-The trial court and the Court of Appeals is into lifting the conservatorship. (However, there is nothing in the amended complaint to reflect an unequivocal
intention to ask for its lifting.)
HELD:
-If it were to lift the conservatorship because it was arbitrarily imposed, then the case should have been dismissed on the grounds of prescription and
lack of personality to bring action.
-The following requisites must be present before the order of conservatorship may be set aside by a court:
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1.
The appropriate pleading must be filed by the stockholders of record representing majority of the capital stock of the bank in the proper
court;
2.
Said pleading must be filed within 10 days from receipt of notice by said majority stockholders of the order placing the bank under
conservatorship; and
3.
There must be convincing proof after hearing that the action is plainly arbitrary and made in bad faith.
8. First Philippine International Bank v. Court of Appeals, 252 SCRA 259 (1996)
FACTS:
-In the course of its banking operations Producers Bank of the Philippines acquired six parcels of land which used to be owned by BYMC Investment
and Development Corporation which was mortgaged to the bank as collateral for a loan.
-Demetrio Demetria and Jose Janolo wanted to purchase the property and thus initiated negotiations for that purpose. They met with Mercurio Rivera,
manager of the Property Management Department of the bank, who advised them to make formal offer.
-Janolo following the advice of Rivera made a formal purchase offer, through a letter, for 3P3.5M in cash, which was counter-offered by Rivera, on behalf
of the bank, to P5.5M, in which Janolo made an amended offer of P4.250M.
-There was reply on Janolos last offer, instead they met with Luis Co, Senior Vice-President of the Bank, sticked to their counter offer of P5.5M, which
Janolo et al., accepted after two days.
-The bank was placed under conservatorship by CB and through a letter, Rivera informed Demetria that their proposal to purchase the property is under
study yet by the newly created committee for submission to the Acting Consrvator.
-Series of demands were made by Janolo et al for compliance by the bank with what Janolo et al considered as perfected contract of sale which
demands were refused by the bank, and refused to receive tender of payment.
-Instead the land was advertised for sale.
-Final demand was made in which acting conservator replied that the bank through the acting Conservator repudiated the authority of Rivera and all his
dealings and counter-offer were unauthorized and illegal, and that there was no perfected contract of sale as there was no meeting of minds as to the
price.
-Hence, Janolo et al filed a suit for specific performance against the bank.
CA:
-Ruled that there was perfected contract of sale and conservator has no authority to revoke it.
ISSUE:
-Whether or not a conservator has the authority to revoke a perfected contract of sale entered into by the bank through its officers before
conservatorship.
HELD:
-The power of conservator, enormous and extensive as they are, cannot extend to the post-facto repudiation of perfected transactions, otherwise they
would infringe the non-impairment clause of the Constitution. What the conservator may revoke are contracts which are, under existing law, deemed
defective- such as void, voidable, unenforceable or rescissible. Hence, the conservator merely takes place of a banks board of directors. What said
board cannot dosuch as repudiating a contract validly entered into under the doctrine of implied authoritythe conservator cannot do either.
FACTS:
-Rural Bank of Olonggapo was the owner in fee simple of two parcels of land including the improvements thereon situated in Tagaytay City.
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-Said parcels of land were duly mortgaged by RBO in favor Ong to guarantee the payment of Omnibus Finance, Inc., which is likewise now
undergoing liquidation proceedings of its money market obligations to Ong.
-Omnibus Finance, Inc., not having seasonably settled its obligations to Ong, the latter proceeded to effect the extrajudicial foreclosure of said
mortgages, such that the City Sheriff of Tagaytay City issued a Certificate of Sale in favor of Ong.
-Respondents failed to seasonably redeem said parcels of land, for which reason, Ong has executed an Affidavit of Consolidation of Ownership
which, to date, has not been submitted to the Registry of Deeds of Tagaytay City, in view of the fact that possession of the aforesaid titles or
owners duplicate certificates of title remains with the RBO.
-To date, Ong has not been able to effect the registration of said parcels of land in his name in view of the persistent refusal of RBO, despite
demand, to surrender RBOs copies of its owners certificates of title for the parcels of land.
-RBO filed a motion to dismiss on the ground of res judicata alleging that petitioner had earlier sought a similar relief which case was dismissed with
finality on appeal before the Court of Appeals.
-RBO contended that it was undergoing liquidation and, pursuant to prevailing jurisprudence, it is the liquidation court which has exclusive jurisdiction to
take cognizance of Ongs claim.
ISSUES:
1.
Whether or not the liquidation court has jurisdiction over all claims against insolvent bank.
2.
Whether or not it is necessary that a claim be initially disputed in a court or agency before it is filed with the liquidation court.
HELD:
-Sec. 29, par. 3, of R.A. 265 as amended by P.D. 1827 does not limit the jurisdiction of the liquidation court to claims against the assets of the insolvent
bank. The provision is general in that it clearly and unqualifiedly states that the liquidation court shall have jurisdiction to adjudicate disputed claims
against the bank. Disputed claims refer to all claims, whether they be against the assets of the insolvent bank, for specific performance, breach of
contract, damages, or whatever. To limit the jurisdiction of the liquidation court to those claims against the assets of the bank is to remove significantly
and without basis the cases that may be brought against a bank in case of insolvency.
-It is not necessary that a claim be initially disputed in a court or agency before it is filed with the liquidation court.
10. Manalo v. Court of Appeals, 366 SCRA 753 (2001)
FACTS:
-S. Villanueva Enterprises, represented by its president, Therese Villanueva Vargas, obtained a loan from PAIC Savings and Mortgage Bank and the
Philippine American Investments Corporation (PAIC), respectively.
-To secure payment of both debts, Vargas executed in favor PAIC Savings and PAIC a Joint First Mortgageover two parcels of land registered under her
name.
-S. Villanueva Enterprises defaulted in paying the amortizations due. Despite repeated demands from the respondent, it failed to settle its loan
obligation.
-Accordingly, PAIC Savings instituted extrajudicial foreclosure proceedings over the mortgaged lots. The Pasay City property was sold at a public auction
to the respondent itself, after tendering the highest bid. PAIC Saving then caused the annotation of the corresponding Sheriffs Certificate of Sale on the
title of the land. After the lapse of one year, or the statutory period extended by law to a mortgagor to exercise his/her right of redemption, title was
consolidated in PAIC Savings name for failure of Vargas to redeem.
-The Central Bank of the Philippines filed a Petition for assistance in the liquidation of the PAIC Savings with the Regional Trial Court. The petition was
given due course.
-It appears that from the years 1986 to 1991, Vargas negotiated with the PAIC Savings (through its then liquidator, the Central Bank) for the repurchase
of the foreclosed property. The negotiations, however, fizzled out as Vargas cannot afford the repurchase price fixed by the PAIC Savings based on the
appraised value of the land at that time.
-Vargas filed a case for annulment of mortgage and extra-judicial foreclosure sale.
-The court rendered a decision dismissing the complaint and upholding the validity of the mortgage and foreclosure sale.
-On appeal, the appellate court upheld the assailed judgment and declared the said mortgage and foreclosure proceedings to be in accord with law. This
decision of the Court of Appeals subsequently became final and executory when we summarily dismissed Vargass Petition for Review on Certiorari for
having been filed beyond the reglementary period.
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-In the meantime, PAIC Savings petitioned the herein court a quo, for the issuance of a writ of possession for the subject property. This is in view of the
consolidation of its ownership over the same as mentioned earlier. Vargas and S. Villanueva Enterprises, Inc. filed their opposition thereto. After which,
trial ensued.
-During the pendency of the case (for the issuance of a writ of possession), Vargas executed a Deed of Absolute Sale selling, transferring, and
conveying ownership of the disputed lot in favor of a certain Armando Angsico. Notwithstanding this sale, Vargas, still representing herself to be the
lawful owner of the property, leased the same to Domingo R. Manalo
Later, Armando Angsico, as buyer of the property, assigned his rights therein to Domingo Manalo.
-Shortly, S. Villanueva Enterprises and Vargas moved for its quashal. Thereafter, Manalo, on the strength of the lease contract and Deed of Assignment
made in his favor, submitted a Permission to File an Ex-parte Motion to Intervene. He had separately instituted a Complaint for Mandamus to compel
PAIC Bank to allow him to repurchase the subject property.
-Trial Court denied the Motion to Quash and Motion to Intervene filed respectively by Vargas and Manalo. A Motion for Reconsideration and a
Supplemental Motion for Reconsideration were filed by the Manalo which, however, were similarly denied.
ISSUE:
-Whether or not the public respondent committed grave abuse of discretion when it held that what are required to be instituted before the liquidation
court are those claims against the insolvent banks only considering that the PAIC Savings bank is legally dead due to insolvency and considering further
that there is already a liquidation court which is exclusively vested with jurisdiction to hear all matters and incidents on liquidation pursuant to Section 29,
Republic Act No. 265, otherwise known as The Central Bank Act, as amended.
HELD:
-The liquidator designated as hereunder provided shall, by the Solicitor General, file a petition in the Regional Trial Court reciting the proceedings which
have been taken and praying the assistance of the court in the liquidation of such institution. The court shall have jurisdiction in the same proceedings to
assist in the adjudication of disputed claims against the bank or non-bank financial intermediary performing quasi-banking functions and the enforcement
of individual liabilities of the stockholders and do all that is necessary to preserve the assets of such institution and to implement the liquidation plan
approved by the Monetary Board.
-. A bank which had been ordered closed by the monetary board retains its juridical personality which can sue and be sued through its liquidator. The
only limitation being that the prosecution or defense of the action must be done through the liquidator. Otherwise, no suit for or against an insolvent
entity would prosper. In such situation, banks in liquidation would lose what justly belongs to them through a mere technicality
11. Rural Bank of Sta. Catalina v. Land Bank of the Philippines, 435 SCRA 183 (2004)
FACTS:
-Land Bank of the Philippines, filed a complaint against Sta. Catalina Rural Bank, Inc, for the collection of the sum of money, capitalized and accrued
interests, penalties and surcharges, and for such other equitable reliefs.
-On motion of the LBP, the trial court issued an Order declaring Sta. Catalina Rural Bank, Inc in default for its failure to file its answer to the
complaint. Despite its receipt of the copy of the said order, Sta. Catalina Rural Bank, Inc failed to file a motion to set aside the order of default.
-In the meantime, the Monetary Board of the Central Bank of the Philippines approved the placement of the Sta. Catalina Rural Banks assets under
receivership under Section 29 of Republic Act No. 7653, as recommended by its Supervision and Management Section. The Philippine Deposit
Insurance Corporation (PDIC) was designated as receiver (conservator) of the Sta. Catalina Rural Bank, and the latter was prohibited from doing
business in the Philippines.
-Unaware of the action of the Central Bank of the Philippines, the trial court, rendered judgment by default against Sta. Catalina Rural Bank ordering it to
pay LBP.
-Sta. Catalina Rural Bank, through the PDIC, appealed the decision to the Court of Appeals. PDIC submitted a Report to the Monetary Board of
the Central Bank of the Philippines that Sta. Catalina Rural Bank remained insolvent, and that its management failed to rehabilitate the said bank.
-Sta. Catalina Rural Bank cited the ruling of this Court in Overseas Bank of Manila vs. Court of Appeals to support its claim that since it was placed
under receivership, and prohibited from doing business in the Philippines, it should no longer be held liable for interests and penalties on its account
LBP.
-CA rendered judgment affirming the decision of the RTC. The CA ruled that having failed to file a motion for reconsideration of the trial courts order
declaring it in default before such court rendered judgment, compounded by its failure to do so in the Court of Appeals, Sta. Catalina Rural Bank was
precluded from invoking in the appellate court the placement of its assets and affairs under receivership and its exemption from liability for interests and
penalties on its account with the LBP after the said date. The CA ruled that if it acquiesced to the contention of Sta. Catalina Rural Bank, it would defeat
the very principle behind the declaration of default of a party for failing to file an answer to the complaint within the reglementary period therefore. The
CA further declared that a contrary ruling would render nugatory the effect of the trial courts declaration of default on the part of the Sta. Catalina Rural
Bank.
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ISSUE:
-Whether or not it is liable for interests and penalties on its account with the Land Bank of the Philippines, when its assets and affairs were placed under
receivership by the Central Bank of the Philippines, and was prohibited from doing business.
HELD:
-The records show that Sta. Catalina Rural Bank was served with a copy of summons and the complaint, but failed to file its answer thereto. It also
failed to file a verified motion to set aside the Order of default despite its receipt of a copy thereof. We note that the trial court rendered more than a year
after the issuance of the default order; yet, Sta. Catalina Rural Bank failed to file any verified motion to set aside the said order before the rendition of the
judgment of default. The PDIC was designated by the Central Bank of the Philippines as receiver (conservator), and in the course of its management of
the Sta. Catalina Rural Banks affairs, it should have known of the pendency of the case against the latter in the trial court. Moreover, Sta. Catalina
Rural Bank, through the PDIC, received a copy of the decision of the trial court on June 2, 1998, but did not bother filing a motion for partial
reconsideration, under Rule 37 of the Rules of Court, appending thereto the orders of the Monetary Board or a motion to set aside the order of default.
Instead, Sta. Catalina Rural Bank appealed the decision, and even failed to assign as an error the default order of the trial court. Sta. Catalina Rural
Bank is, thus, barred from relying on the orders of the Monetary Board of the Central Bank of the Philippines placing its assets and affairs under
receivership and ordering its liquidation.
-It bears stressing that a defending party declared in default loses his standing in court and his right to adduce evidence and to present his defense. He,
however, has the right to appeal from the judgment by default and assail said judgment on the ground, inter alia, that the amount of the judgment is
excessive or is different in kind from that prayed for, or that the plaintiff failed to prove the material allegations of his complaint, or that the decision is
contrary to law. Such party declared in default is proscribed from seeking a modification or reversal of the assailed decision on the basis of the evidence
submitted by him in the Court of Appeals, for if it were otherwise, he would thereby be allowed to regain his right to adduce evidence, a right which he
lost in the trial court when he was declared in default, and which he failed to have vacated. In this case, the petitioner sought the modification of the
decision of the trial court based on the evidence submitted by it only in the Court of Appeals.
-The Sta. Catalina Rural Bank cannot, likewise, rely on the ruling of the Court in Overseas Bank of Manila vs. Court of Appeals, because in the said
case, the issue of whether a party who had been declared in default is entitled to relief from the judgment by default based on evidence presented only
in the appellate court, when such order of default was not vacated by the trial court prior to the appeal from the judgment of default was not raised
therein, much less resolved by the Court.
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-The two cashiers checks issued by Prime Savings Bank do not constitute an assignment of funds in the hands of the petitioner as there were no funds
to speak of in the first place. The bank was financially insolvent for sometime, even before the issuance of the checks. As the Court of Appeals
correctly ruled, the issuance of the cashiers checks to Miranda did not constitute an assignment of funds, of which there was practically none
at the time these were issued, as the bank was in dire financial straits for some time.
-However, the claim lodged by the Miranda qualifies as a disputed claim subject to the jurisdiction of the liquidation court. Regular courts do not have
jurisdiction over actions filed by claimants against an insolvent bank, unless there is a clear showing that the action taken by the BSP, through the
Monetary Board in the closure of financial institutions was in excess of jurisdiction, or with grave abuse of discretion
-In the absence of fraud, the purchase of a cashiers check, like the purchase of a draft on a correspondent bank, creates the relation of creditor and
debtor, not that of principal and agent, with the result that the purchaser or holder thereof is not entitled to a preference over general creditors in the
assets of the bank issuing the check, when it fails before payment of the check. However, in a situation involving the element of fraud, where a cashiers
check is purchased from a bank at a time when it is insolvent, as its officers know or are bound to know by the exercise of reasonable diligence, it has
been held that the purchase is entitled to a preference in the assets of the bank on its liquidation before the check is paid
C.
POWERS OF A RECEIVER
1. Abacus Real Estate Development Center Inc. v. Manila Banking Corporation, 455 SCRA 97 (2005)
FACTS:
-Manila Banking Corporation (Manila Bank), owns a 1,435-square meter parcel of land located along Gil Puyat Avenue Extension, Makati City. The bank
began constructing on said land a 14-storey building. Not long after, however, the bank encountered financial difficulties that rendered it unable to finish
construction of the building.
-Central Bank of the Philippines, now Bangko Sentral ng Pilipinas, ordered the closure of Manila Bank and placed it under receivership, with Feliciano
Miranda, Jr. being initially appointed as Receiver. The legality of the closure was contested by the bank before the proper court.
-Central Bank, by virtue of Monetary Board (MB), ordered the liquidation of Manila Bank and designated Atty. Renan V. Santos as Liquidator. The
liquidation, however, was held in abeyance pending the outcome of the earlier suit filed by Manila Bank regarding the legality of its closure.
Consequently, the designation of Atty. Renan V. Santos as Liquidator was amended by the Central Bank to that of Statutory Receiver.
-In the interim, Manila Banks then acting president, the late Vicente G. Puyat, in a bid to save the banks investment, started scouting for possible
investors who could finance the completion of the building earlier mentioned.
-A group of investors, represented by Calixto Y. Laureano (Laureano group), wrote Vicente G. Puyat offering to lease the building for ten (10) years and
to advance the cost to complete the same, with the advanced cost to be amortized and offset against rental payments during the term of the lease.
Likewise, the letter-offer stated that in consideration of advancing the construction cost, the group wanted to be given the exclusive option to purchase
the building and the lot on which it was constructed.
-Since no disposition of assets could be made due to the litigation concerning Manila Banks closure, an arrangement was thought of whereby the
property would first be leased to Manila Equities Corporation (MEQCO,), a wholly-owned subsidiary of Manila Bank, with MEQCO thereafter subleasing
the property to the Laureano group.
-Vicente G. Puyat accepted the Laureano groups offer and granted it an exclusive option to purchase the lot and building for One Hundred Fifty Million
Pesos (P150,000,000.00). Later, the building was leased to MEQCO for a period of ten (10) years pursuant to a contract of lease bearing that
date. MEQCO subleased the property to petitioner Abacus Real Estate Development Center, Inc. (Abacus), a corporation formed by the Laureano group
for the purpose, under identical provisions as that of the lease contract between Manila Bank and MEQCO.
-The Laureano group was, however, unable to finish the building due to the economic crisis brought about by the failed coup attempt. On account
thereof, the Laureano group offered its rights in Abacus and its exclusive option to purchase to Benjamin Bitanga (Bitanga ), for Twenty Million Five
Hundred Thousand Pesos (P20,500,000.00). Bitanga would later allege that because of the substantial amount involved, he first had to talk with Atty.
Renan Santos, the Receiver appointed by the Central Bank, to discuss Abacus offer. Bitanga further alleged that, over lunch, Atty. Santos then verbally
approved his entry into Abacus and his take-over of the sublease and option to purchase.
-Laureano group transferred and assigned to Bitanga all of its rights in Abacus and the exclusive option to purchase the subject land and building.
-Abacus sent a letter to Manila Bank informing the latter of its desire to exercise its exclusive option to purchase. However, Manila Bank refused to
honor the same.
-Such was the state of things, Abacus Real Estate Development Center, Inc. filed a complaint for specific performance and damages against Manila
Bank and/or the Estate of Vicente G. Puyat. Abacus prayed for a judgment ordering Manila Bank, inter alia, to sell, transfer and convey unto it for the
land and building in dispute free from all liens and encumbrances, plus payment of damages and attorneys fees.
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-ABACUS asseverates that the exclusive option to purchase was ratified by Manila Banks receiver, Atty. Renan Santos, during a lunch meeting held
with Benjamin Bitanga
-Subsequently, defendant Manila Bank, followed a month later by its co-defendant Estate of Vicente G. Puyat, filed separate motions to dismiss the
complaint.
-Trial Court in favor of Abacus.
-CA reversed TC.
ISSUE:
-Whether or not a bank having been already placed under receivership, its officers still authorized to transact business in connection to banks assets and
properties.
HELD:
- A contract unenforceable for lack of authority by one of the parties may be ratified by the person in whose name the contract was executed. However,
even assuming, in gratia argumenti, that Atty. Renan Santos, Manila Banks receiver approved the exclusive option to purchase granted by Vicente G.
Puyat, the same would still be of no force and effect.
Section 29 of the Central Bank Act, as amended, pertinently provides:
Sec. 29. Proceedings upon insolvency. Whenever, upon examination by the head of the appropriate supervising and examining
department or his examiners or agents into the condition of any banking institution, it shall be disclosed that the condition of the same is one
of insolvency, or that its continuance in business would involve probable loss to its depositors or creditors, it shall be the duty of the
department head concerned forthwith, in writing, to inform the Monetary Board of the facts, and the Board may, upon finding the statements
of the department head to be true, forbid the institution to do business in the Philippines and shall designate an official of the Central Bank
as receiver to immediately take charge of its assets and liabilities, as expeditiously as possible collect and gather all the assets and
administer the same for the benefit of its creditors, exercising all the powers necessary for these purposes including, but not limited to,
bringing suits and foreclosing mortgages in the name of the banking institution.
-Clearly, the receiver appointed by the Central Bank to take charge of the properties of Manila Bank only had authority to administer the same for the
benefit of its creditors. Granting or approving an exclusive option to purchase is not an act of administration, but an act of strict ownership, involving,
as it does, the disposition of property of the bank. Not being an act of administration, the so-called approval by Atty. Renan Santos amounts to no
approval at all, a bank receiver not being authorized to do so on his own.
2. In Re: Petition for Assistance in the Liquidation in the Rural Bank of Bokod (Benguet), PDIC v. Bureau of Internal Revenue, 511 SCRA 123
(2006)
FACTS:
-A special examination of Rural Bank of Bokod (Benguet), Inc. (RBBI) was conducted by the Supervision and Examination Sector (SES) Department III
of what is now the Bangko Sentral ng Pilipinas (BSP), wherein various loan irregularities were uncovered.
-SES Department III required the RBBI management to infuse fresh capital into the bank, within 30 days from date of the advice, and to correct all the
exceptions noted. However, up to the termination of the subsequent general examination conducted by the SES Department III, no concrete action was
taken by the RBBI management.
-In view of the irregularities noted and the insolvent condition of RBBI, the members of the RBBI Board of Directors were called for a conference at the
BSP. Only one RBBI Director, a certain Mr. Wakit, attended the conference, and the examination findings and related recommendations were discussed
with him.
-In a letter, receipt of which was acknowledged by Mr. Wakit, the SES Department III warned the RBBI Board of Directors that, unless substantial
remedial measures are taken to rehabilitate the bank, it will recommend that the bank be placed under receivership. In a subsequent letter, a copy of
which was sent to every member of the RBBI Board of Directors via registered mail, the SES Department III reiterated its warning that it would
recommend the closure of the bank, unless the needed fresh capital was immediately infused. Despite these notices, the SES Department III received
no word from RBBI or from any of its Directors.
-In a meeting, the Monetary Board of the BSP decided to take the following; forbid the bank to do business in the Philippines and place its assets and
affairs under receivership in accordance with Section 29 of R.A. No. 265, as amended; designate the Special Assistant to the Governor and Head, SES
Department III, as Receiver of the bank; refer the cases of irregularities/frauds to the Office of Special Investigation for further investigation and possible
filing of appropriate charges against the following present/former officers and employees of the bank.
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A memorandum and report, were submitted by the Director of the SES Department III concluding that the RBBI remained in insolvent financial condition
and it can no longer safely resume business with the depositors, creditors, and the general public.
-Monetary Board, after determining and confirming the said memorandum and report, ordered the liquidation of the bank and designated the Director of
the SES Department III as liquidator.
-The designated BSP liquidator of RBBI caused the filing with the RTC of a Petition for Assistance in the Liquidation of RBBI. Subsequently, the
Monetary Board transferred to herein Philippine Deposit Insurance Corporation (PDIC) the receivership/liquidation of RBBI.
-PDIC then filed, a Motion for Approval of Project of Distribution ] of the assets of RBBI, in accordance with Section 31, in relation to Section 30, of
Republic Act No. 7653, otherwise known as the New Central Bank Act. During the hearing, Bureau of Internal Revenue (BIR), through Atty. Justo
Reginaldo, manifested that PDIC should secure a tax clearance certificate from the appropriate BIR Regional Office, pursuant to Section 52(C) of
Republic Act No. 8424, or the Tax Code of 1997, before it could proceed with the dissolution of RBBI.
-On even date, the RTC issued order directing PDIC to comply with Section 52(C) of the Tax Code of 1997 within 30 days from receipt of a copy of the
said order. Pending compliance therewith, the RTC held in abeyance the Motion for Approval of Project of Distribution. In order therefore that all taxes
due the government should be paid, petitioner should secure a tax clearance from the Bureau of Internal Revenue.
-Hence, PDIC filed the present Petition for Review on Certiorari, under Rule 45 of the revised Rules of Court, raising pure questions of law. PDIC argues
that the closure of banks under Section 30 of the New Central Bank Act is summary in nature and procurement of tax clearance as required under
Section 52(C) of the Tax Code of 1997 is not a condition precedent thereto; that under Section 30, in relation to Section 31, of the New Central Bank Act,
asset distribution of a closed bank requires only the approval of the liquidation court; and that the BIR is not without recourse since, subject to the
applicable provisions of the Tax Code of 1997, it may therefore assess the closed RBBI for tax liabilities, if any.
ISSUE:
-Whether or not RBBI, as represented by its liquidator, PDIC, still needs to secure a tax clearance from the BIR before the RTC could approve the
Project of Distribution of the assets of RBBI.
HELD:
-Section 30 of the New Central Bank Act lays down the proceedings for receivership and liquidation of a bank. The said provision is silent as regards the
securing of a tax clearance from the BIR. The omission, nonetheless, cannot compel this Court to apply by analogy the tax clearance requirement of the
SEC, as stated in Section 52(C) of the Tax Code of 1997 and BIR-SEC Regulations No. 1, since, again, the dissolution of a corporation by the SEC is a
totally different proceeding from the receivership and liquidation of a bank by the BSP. This Court cannot simply replace any reference by Section 52(C)
of the Tax Code of 1997 and the provisions of the BIR-SEC Regulations No. 1 to the SEC with the BSP. To do so would be to read into the law and
the regulations something that is simply not there, and would be tantamount to judicial legislation.
-It should be noted that there are substantial differences in the procedure for involuntary dissolution and liquidation of a corporation under the
Corporation Code, and that of a banking corporation under the New Central Bank Act, so that the requirements in one cannot simply be imposed in the
other.
3. Rural Bank of San Miguel v. Monetary Board, 516 SCRA 154 (2007)
FACTS:
-To assist its impaired liquidity and operations, the RBSM was granted emergency loans on different occasions in the aggregate amount of
P375 [million].
-Land Bank of the Philippines (LBP) advised RBSM that it will terminate the clearing of RBSMs checks in view of the latters frequent clearing
losses and continuing failure to replenish its Special Clearing Demand Deposit with LBP. The BSP interceded with LBP not to terminate the
clearing arrangement of RBSM to protect the interests of RBSMs depositors and creditors.
-LBP informed the BSP of the termination of the clearing facility of RSBM in view of the clearing problems of RBSM.
-MB approved the release of P26.189 [million] which is the last tranche of the P375 million emergency loan for the sole purpose of servicing
and meeting the withdrawals of its depositors. Of the P26.180 million, xxx P12.6 million xxx was not used to service withdrawals [and]
remains unaccounted for as admitted by [RBSMs Treasury Officer and Officer-in-Charge of Treasury]. Instead of servicing withdrawals of
depositors, RBSM paid Forcecollect Professional Solution, Inc. and Surecollect Professional, Inc., entities which are owned and controlled by
Hilario P. Soriano and other RBSM officers.
-RBSM declared a bank holiday. RBSM and all of its 15 branches were closed from doing business.
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-Alarmed and disturbed by the unilateral declaration of bank holiday, [BSP] wanted to examine the books and records of RBSM but
encountered problems.
-Thereafter, PDIC implemented the closure order and took over the management of RBSMs assets and affairs.
-In their petition before the CA, petitioners claimed that respondents MB and BSP committed grave abuse of discretion in issuing Resolution No. 105.
The petition was dismissed by the CA on March 28, 2000. It held, among others, that the decision of the MB to issue Resolution No. 105 was based on
the findings and recommendations of the Department of Rural Banks Supervision and Examination Sector, the comptroller reports. Such could be
considered as substantial evidence.
-On the basis of reports prepared by PDIC stating that RBSM could not resume business with sufficient assurance of protecting the interest of its
depositors, creditors and the general public, the MB passed resolution directing PDIC to proceed with the liquidation of RBSM.
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