Commercial Law Review

COMMERCIAL LAW REVIEW
BANKING LAW CASES
CASE TITLE JOSE GO V. BANGKO SENTRAL NG PILIPINAS

CITATION G.R. No. 178429
PROMULGATION
October 23, 2009
DATE
DIGEST BY ESPINAS, LYLE HARVEY A.
TOPIC COVERED Violation of Section 83 of Republic Act No. 337
DOCTRINE: To constitute a violation of sec 83 of RA 337, the following requisites must be present. These
are
1. The offender is a director or officer of any banking institution;
2. The offender, either directly or indirectly, for himself or as representative or agent of another,
performs any of the following acts:
a. he borrows any of the deposits or funds of such bank; or
b. he becomes a guarantor, indorser, or surety for loans from such bank to others, or
c. he becomes in any manner an obligor for money borrowed from bank or loaned by it;
3. The offender has performed any of such acts without the written approval of the majority of the
directors of the bank, excluding the offender, as the director concerned.
FACTS:
This is a case for violation of sec. 83 of Republic Act No. 337 or otherwise known as the General
Banking Act.
Jose Go is the director and the President and Chief Executive Officer of the Orient
Commercial Banking Corporation. He is then charged and prosecuted for an offense violating
section 83 of RA. 337.
Before the trial could commence, Go filed a motion to quash claiming that the information
was defective as the facts charged therein do not constitute an offense under Section 83 of RA 337.
In support, Go averred that based on the facts alleged in the Information, he was being prosecuted
for borrowing the deposits or funds of the Orient Bank and/or acting as a guarantor, indorser or
obligor for the banks loans to other persons. The use of the word and/or meant that he was charged
for being either a borrower or a guarantor, or for being both a borrower and guarantor.
Go claimed that the charge was not only vague, but also did not constitute an offense. He
posited that Section 83 of RA 337 penalized only directors and officers of banking institutions who
acted either as borrower or as guarantor, but not as both.
He further contends that the Information failed to state that his alleged act of borrowing
and/or guarantying was not among the exceptions provided for in the law.
The second paragraph of Section 83 allowed banks to extend credit accommodations to their
directors, officers, and stockholders, provided it is limited to an amount equivalent to the respective
outstanding deposits and book value of the paid-in capital contribution in the bank. Extending credit
accommodations to bank directors, officers, and stockholders is not per se prohibited, unless the
amount exceeds the legal limit. Since the Information failed to state that the amount he purportedly
borrowed and/or guarantied was beyond the limit set by law, Go insisted that the acts so charged
did not constitute an offense.
RTC granted the motion filed by Go. The prosecution filed a petition for certiorari before the
CA. thus, the CA granted the petition for certiorari on the ground that the RTC misread the law when
it decided to quash the Information against Go. It explained that the allegation that Go acted either
as a borrower or a guarantor or as both borrower and guarantor merely set forth the different modes
by which the offense was committed. It did not necessarily mean that Go acted both as borrower
and guarantor for the same loan at the same time. It agreed with the prosecutions stand that the
BANKING LAW CASES
second paragraph of Section 83 of RA 337 is not an exception to the first paragraph. Thus, the failure
of the Information to state that the amount of the loan Go borrowed or guaranteed exceeded the
legal limits was, to the CA, an irrelevant issue.
ISSUE:
Whether the appellate court legally erred in overturning the trial courts orders.
RULING:
No. To constitute a violation of sec 83 of RA 337, the following requisites must be present. These are
1. The offender is a director or officer of any banking institution;
2. The offender, either directly or indirectly, for himself or as representative or agent of another,
performs any of the following acts:
a. he borrows any of the deposits or funds of such bank; or
b. he becomes a guarantor, indorser, or surety for loans from such bank to others, or
c. he becomes in any manner an obligor for money borrowed from bank or loaned by it;
3. The offender has performed any of such acts without the written approval of the majority of the
directors of the bank, excluding the offender, as the director concerned.
A simple reading of the above elements easily rejects Gos contention that the law penalizes
a bank director or officer only either for borrowing the banks deposits or funds or for guarantying
loans by the bank, but not for acting in both capacities. The essence of the crime is becoming an
obligor of the bank without securing the necessary written approval of the majority of the banks
directors.
The second element merely lists down the various modes of committing the offense. The third
mode, by declaring that [no director or officer of any banking institution shall xxx] in any manner be
an obligor for money borrowed from the bank or loaned by it, in fact serves a catch-all phrase that
covers any situation when a director or officer of the bank becomes its obligor. The prohibition is
directed against a bank director or officer who becomes in any manner an obligor for money
borrowed from or loaned by the bank without the written approval of the majority of the banks
board of directors. To make a distinction between the act of borrowing and guarantying is therefore
unnecessary because in either situation, the director or officer concerned becomes an obligor of the
bank against whom the obligation is juridically demandable.
Further, Credit accommodation limit is not an exception nor is it an element of the offense. Go
claims that the second paragraph of Section 83, RA 337 does not provide for an exception to a
violation of the first paragraph thereof, nor does it constitute as an element of the offense charged.
Section 83 of RA 337 actually imposes three restrictions: approval, reportorial, and ceiling
requirements.
BANKING LAW CASES
CASE TITLE HILARIO P. SORIANO vs People

PROMULGATION
February 1, 2010
DATE
DIGEST BY FUMERA, JESUS J.
TOPIC COVERED DOSRI LAW (Section 83 of Republic Act (RA) No. 337)
DOCTRINE: A bank officer violates the DOSRI law when he acquires bank funds for his personal
benefit, even if such acquisition was facilitated by a fraudulent loan application. Directors, officers,
stockholders, and their related interests cannot be allowed to interpose the fraudulent nature of the
loan as a defense to escape culpability for their circumvention of Section 83 of Republic Act (RA) No.
337.
PONENTE: DEL CASTILLO, J.
FACTS:
The Office of Special Investigation of the BSP, through its officers, transmitted a letter to Jovencito
Zuo, Chief State Prosecutor of the DOJ. The letter attached as annexes five affidavits, which would
allegedly serve as bases for filing criminal charges for Estafa thru Falsification of Commercial
Documents, in relation to Presidential Decree (PD) No. 1689 and for Violation of Section 83 of RA 337,
as amended by PD 1795 ( DOSRI LAW), against, inter alia, petitioner herein Hilario P. Soriano. These
five affidavits, along with other documents, stated that spouses Enrico and Amalia Carlos appeared
to have an outstanding loan of P8 million with the Rural Bank of San Miguel (Bulacan), Inc. (RBSM),
but had never applied for nor received such loan; that it was petitioner, who was then president of
RBSM, who had ordered, facilitated, and received the proceeds of the loan; and that the P8 million
loan had never been authorized by RBSM's Board of Directors and no report thereof had ever been
submitted to the Department of Rural Banks, Supervision and Examination Sector of the BSP. Petitioner
contended that the commission of estafa under paragraph 1(b) of Article 315 of the RPC is inherently
incompatible with the violation of DOSRI law (as set out in Section 83 of RA 337, as amended by PD
1795), hence a person cannot be charged for both offenses. He argued that a violation of DOSRI law
requires the offender to obtain a loan from his bank, without complying with procedural, reportorial,
or ceiling requirements. On the other hand, estafa under par. 1(b), Article 315 of the RPC requires the
offender to misappropriate or convert something that he holds in trust, or on commission, or for
administration, or under any other obligation involving the duty to return the same. Essentially, the
petitioner theorized that the characterization of possession is different in the two offenses. If petitioner
acquired the loan as DOSRI, he owned the loaned money and therefore, cannot misappropriate or
convert it as contemplated in the offense of estafa. Conversely, if petitioner committed estafa, then
he merely held the money in trust for someone else and therefore, did not acquire a loan in violation
of DOSRI rules.
ISSUE:
Whether a loan transaction within the ambit of the DOSRI law (violation of Section 83 of RA 337, as
amended) could also be the subject of Estafa under Article 315 (1) (b) of the Revised Penal Code.
RULING:
Yes.
Petitioner raises the theory that he could not possibly be held liable for estafa in concurrence with the
charge for DOSRI violation. According to him, the DOSRI charge presupposes that he acquired a
loan, which would make the loan proceeds his own money and which he could neither possibly
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misappropriate nor convert to the prejudice of another, as required by the statutory definition of
estafa. On the other hand, if petitioner did not acquire any loan, there can be no DOSRI violation to
speak of. Thus, petitioner posits that the two offenses cannot co-exist. Petitioners theory is based on
the false premises that the loan was extended to him by the bank in his own name, and that he
became the owner of the loan proceeds. Both premises are wrong.
The P8 million which came to the possession of petitioner was money held in trust or administration by
him for the bank, in his fiduciary capacity as the President of said bank. It is not accurate to say that
petitioner became the owner of the P8 million because it was the proceeds of a loan. That would
have been correct if the bank knowingly extended the loan to petitioner himself. But that is not the
case here. According to the information for estafa, the loan was supposed to be for another person,
a certain Enrico Carlos; petitioner, through falsification, made it appear that said Enrico Carlos
applied for the loan when in fact he (Enrico Carlos) did not. Through such fraudulent device,
petitioner obtained the loan proceeds and converted the same. Under these circumstances, it
cannot be said that petitioner became the legal owner of the P8 million. Thus, petitioner remained
the banks fiduciary with respect to that money, which makes it capable of misappropriation or
conversion in his hands.
The next question is whether there can also be, at the same time, a charge for DOSRI violation in such
a situation wherein the accused bank officer did not secure a loan in his own name, but was alleged
to have used the name of another person in order to indirectly secure a loan from the bank. We
answer this in the affirmative. Section 83 of RA 337 reads:
Section 83. No director or officer of any banking institution shall, either directly or indirectly, for himself
or as the representative or agent of others, borrow any of the deposits of funds of such bank, nor shall
he become a guarantor, indorser, or surety for loans from such bank to others, or in any manner be
an obligor for moneys borrowed from the bank or loaned by it, except with the written approval of
the majority of the directors of the bank, excluding the director concerned. Any such approval shall
be entered upon the records of the corporation and a copy of such entry shall be transmitted
forthwith to the Superintendent of Banks. The office of any director or officer of a bank who violates
the provisions of this section shall immediately become vacant and the director or officer shall be
punished by imprisonment of not less than one year nor more than ten years and by a fine of not less
than one thousand nor more than ten thousand pesos.
The broad interpretation of the prohibition in Section 83 is justified by the fact that it even expressly
covers loans to third parties where the third parties are aware of the transaction (such as principals
represented by the DOSRI), and where the DOSRIs interest does not appear to be beneficial but even
burdensome (such as in cases when the DOSRI acts as a mere guarantor or surety). If the law finds it
necessary to protect the bank and the banking system in such situations, it will surely be illogical for it
to exclude a case like this where the DOSRI acted for his own benefit, using the name of an
unsuspecting person. A contrary interpretation will effectively allow a DOSRI to use dummies to
circumvent the requirements of the law.
BANKING LAW CASES
CASE TITLE BIBIANO O. REYNOSO, IV, petitioner, vs. HON. COURT OF APPEALS and
GENERAL CREDIT CORPORATION, respondents.
CITATION G.R. Nos. 116124-25
PROMULGATION
November 22, 2000
DATE
DIGEST BY Hipolito, Ma. Nia Anthonette L.
TOPIC COVERED Banking Laws, Central Bank Regulations
DOCTRINE: Under the Central Bank DOSRI prohibitions, the directors, officers, and stockholders are
prohibited from borrowing from their company or corporation.
FACTS:
Sometime in the early 1960s, the Commercial Credit Corporation (hereinafter, CCC), a financing and
investment firm, decided to organize franchise companies in different parts of the country, wherein it
shall hold thirty percent (30%) equity. Employees of the CCC were designated as resident managers
of the franchise companies. Petitioner Bibiano O. Reynoso, IV was designated as the resident
manager of the franchise company in Quezon City, known as the Commercial Credit Corporation of
Quezon City (hereinafter, CCC-QC).
CCC-QC entered into an exclusive management contract with CCC whereby the latter was granted
the management and full control of the business activities of the former. Under the contract, CCC-
QC shall sell, discount and/or assign its receivables to CCC. Subsequently, however, this discounting
arrangement was discontinued pursuant to the so-called DOSRI Rule, prohibiting the lending of funds
by corporations to its directors, officers, stockholders and other persons with related interests therein.
On account of the new restrictions imposed by the Central Bank policy by virtue of the DOSRI Rule,
CCC decided to form CCC Equity Corporation, (hereinafter, CCC-Equity), a wholly-owned
subsidiary, to which CCC transferred its thirty (30%) percent equity in CCC-QC, together with two
seats in the latters Board of Directors.
Under the new set-up, several officials of Commercial Credit Corporation, including petitioner
Reynoso, became employees of CCC-Equity. While petitioner continued to be the Resident Manager
of CCC-QC, he drew his salaries and allowances from CCC-Equity. Furthermore, although an
employee of CCC-Equity, petitioner, as well as all employees of CCC-QC, became qualified
members of the Commercial Credit Corporation Employees Pension Plan.
As Resident Manager of CCC-QC, petitioner oversaw the operations of CCC-QC and supervised its
employees. The business activities of CCC-QC pertain to the acceptance of funds from depositors
who are issued interest-bearing promissory notes. The amounts deposited are then loaned out to
various borrowers. Petitioner, in order to boost the business activities of CCC-QC, deposited his
personal funds in the company. In return, CCC-QC issued to him its interest-bearing promissory notes.
On August 15, 1980, a complaint for sum of money with preliminary attachment,[1] docketed as Civil
Case No. Q-30583, was instituted in the then Court of First Instance of Rizal by CCC-QC against
petitioner, who had in the meantime been dismissed from his employment by CCC-Equity..
In his amended Answer, petitioner denied having unlawfully used funds of CCC-QC and asserted
that the sum of P1,300,593.11 represented his money placements in CCC-QC, as shown by twenty-
three (23) checks which he issued to the said company.
BANKING LAW CASES
ISSUE:
Whether or not the contention of respondent General Credit Corporation, the new name of CCC,
that the corporate fiction should be appreciated in its favor is proper considering its acts of
circumventing the Central Bank DOSRI regulations.
RULING:
The circumstances which led to the filing of the aforesaid complaint are quite revealing. The
discounting agreements through which CCC controlled the finances of its subordinates became
unlawful when Central Bank adopted the DOSRI prohibitions. Under this rule the directors, officers,
and stockholders are prohibited from borrowing from their company. Instead of adhering to the letter
and spirit of the regulations by avoiding DOSRI loans altogether, CCC used the corporate device to
continue the prohibited practice. CCC organized still another corporation, the CCC-Equity
Corporation. However, as a wholly owned subsidiary, CCC-Equity was in fact only another name for
CCC. Key officials of CCC, including the resident managers of subsidiary corporations, were
appointed to positions in CCC-Equity.
In order to circumvent the Central Banks disapproval of CCC-QCs mode of reducing its DOSRI lender
accounts and its directive to follow Central Bank requirements, resident managers, including
petitioner, were told to observe a pseudo-compliance with the phasing out orders. For his
unwillingness to satisfactorily conform to these directives and his reluctance to resort to illegal
practices, petitioner earned the ire of his employers. Eventually, his services were terminated, and
criminal and civil cases were filed against him.
BANKING LAW CASES
CASE TITLE CENTRAL BANK OF THE PHILIPPINES vs. COURT OF APPEALS

PROMULGATION
March 30, 1993
DATE
DIGEST BY Lee, Mariline M.
TOPIC COVERED Banking and Non-Banking Receivership
DOCTRINE: Sec. 29 of R.A. 265 is a sound legislation promulgated in accordance with the Constitution
in the exercise of police power of the state. Consequently, the absence of notice and hearing is not
a valid ground to annul a Monetary Board resolution placing a bank under receivership. The absence
of prior notice and hearing cannot be deemed acts of arbitrariness and bad faith. Thus, an MB
resolution placing a bank under receivership, or conservatorship for that matter, may only be
annulled after a determination has been made by the trial court that its issuance was tainted with
arbitrariness and bad faith.
PONENTE: Bellosillo, J.
FACTS:
Based on examination reports submitted by the Supervision and Examination Sector of the Central
Bank that the financial condition of TSB is one of insolvency and its continuance in business would
involve probable loss to its depositors and creditors, the Monetary Board issued Resolution No. 596
ordering the closure of TSB, forbidding it from doing business in the Philippines, placing it under
receivership, and appointing as receiver, Ramon V. Tiaoqui who assumed office on 3 June 1985.
TSB then filed a complaint with the RTC against Central Bank and Ramon V. Tiaoqui to annul MB
Resolution No. 596 with prayer for injunction, challenging in the process the constitutionality of Sec. 29
of R.A. 269, otherwise known as "The Central Bank Act," as amended, insofar as it authorizes the
Central Bank to take over a banking institution even if it is not charged with violation of any law or
regulation, much less found guilty thereof.
TSB filed an urgent motion in the RTC to direct receiver Ramon V. Tiaoqui to restore TSB to its private
management which was granted by the court subject to CB comptrollership.
CB and Tiaoqui then filed a petition under Rule 45 of the Rules of Court.
ISSUE:
Whether absence of prior notice and hearing may be considered acts of arbitrariness and bad faith
sufficient to annul a Monetary Board resolution enjoining a bank from doing business and placing it
under receivership.
Whether an insolvent bank may still act or sue in the name and corporate capacity of such bank,
even after it had been ordered closed and placed under receivership.
RULING:
Under Sec. 29 of R.A. 265, 15 the Central Bank, through the Monetary Board, is vested with exclusive
authority to assess, evaluate and determine the condition of any bank, and finding such condition to
be one of insolvency, or that its continuance in business would involve probable loss to its depositors
or creditors, forbid the bank or non-bank financial institution to do business in the Philippines; and shall
designate an official of the CB or other competent person as receiver to immediately take charge of
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its assets and liabilities. The fourth paragraph, 16 which was then in effect at the time the action was
commenced, allows the filing of a case to set aside the actions of the Monetary Board which are
tainted with arbitrariness and bad faith.
Contrary to the notion of private respondent, Sec. 29 does not contemplate prior notice and hearing
before a bank may be directed to stop operations and placed under receivership. When par. 4 (now
par. 5, as amended by E.O. 289) provides for the filing of a case within ten (10) days after the receiver
takes charge of the assets of the bank, it is unmistakable that the assailed actions should precede
the filing of the case. Plainly, the legislature could not have intended to authorize "no prior notice and
hearing" in the closure of the bank and at the same time allow a suit to annul it on the basis of
absence thereof.
In the early case of Rural Bank of Lucena, Inc. v. Arca [1965], 17 We held that a previous hearing is
nowhere required in Sec. 29 nor does the constitutional requirement of due process demand that the
correctness of the Monetary Board's resolution to stop operation and proceed to liquidation be first
adjudged before making the resolution effective. It is enough that a subsequent judicial review be
provided.
It may be emphasized that Sec. 29 does not altogether divest a bank or a non-bank financial
institution placed under receivership of the opportunity to be heard and present evidence on
arbitrariness and bad faith because within ten (10) days from the date the receiver takes charge of
the assets of the bank, resort to judicial review may be had by filing an appropriate pleading with the
court. Respondent TSB did in fact avail of this remedy by filing a complaint with the RTC of Quezon
City on the 8th day following the takeover by the receiver of the bank's assets on 3 June 1985.
This "close now and hear later" scheme is grounded on practical and legal considerations to prevent
unwarranted dissipation of the bank's assets and as a valid exercise of police power to protect the
depositors, creditors, stockholders and the general public. At any rate, the bank is given full
opportunity to prove arbitrariness and bad faith in placing the bank under receivership, in which
event, the resolution may be properly nullified and the receivership lifted as the trial court may
determine.
In sum, appeal to procedural due process cannot just outweigh the evil sought to be prevented;
hence, We rule that Sec. 29 of R.A. 265 is a sound legislation promulgated in accordance with the
Constitution in the exercise of police power of the state. Consequently, the absence of notice and
hearing is not a valid ground to annul a Monetary Board resolution placing a bank under
receivership. The absence of prior notice and hearing cannot be deemed acts of arbitrariness and
bad faith. Thus, an MB resolution placing a bank under receivership, or conservatorship for that
matter, may only be annulled after a determination has been made by the trial court that its
issuance was tainted with arbitrariness and bad faith. Until such determination is made, the status
quo shall be maintained, i.e., the bank shall continue to be under receivership.
As regards the second ground, to rule that only the receiver may bring suit in behalf of the bank is, to
echo the respondent appellate court, "asking for the impossible, for it cannot be expected that the
master, the CB, will allow the receiver it has appointed to question that very appointment."
Consequently, only stockholders of a bank could file an action for annulment of a Monetary Board
resolution placing the bank under receivership and prohibiting it from continuing operations.
BANKING LAW CASES
CASE TITLE BF Savings Bank vs Mortgage Bank

CITATION G.R. Nos. 70054 and 68878
PROMULGATION December 11, 1991
DATE
DIGEST BY LUBAY , ANGELA
TOPIC COVERED Section 29 of the Republic Act No. 265
DOCTRINE: when a bank is forbidden to do business in the Philippines and placed under receivership,
the person designated as receiver shall immediately take charge of the banks assets and liabilities,
as expeditiously as possible, collect and gather all the assets and administer the same for the benefit
of its creditors, and represent the bank personally or through counsel as he may retain in all actions or
proceedings for or against the institution, exercising all the powers necessary for these purposes
including, but not limited to, bringing and foreclosing mortgages in the name of the bank
PONENTE: J. MEDIALDEA
FACTS:
Top Management Programs Corporation and Pilar Development Corporation are corporations
engaged in the business of developing residential subdivisions. Top Management and Pilar
Development obtained several loans from Banco Filipino all secured by real estate mortgage in their
various properties in Cavite. The Monetary Board by Ramon Tiaoqui, Special Assistant to the Governor
and Head, SES Department III submitted a report finding that the bank is insolvent and
recommending the appointment of a receiver. The Monetary Board, based on the Tiaoqui report,
issued a resolution finding Banco Filipino insolvent and placing it under receivership. Subsequently,
the Monetary Board issued another resolution placing the bank under liquidation and designated a
liquidator. By virtue of her authority as liquidator, Valenzuela appointed the law firm of Sycip, Salazar,
et al. to represent Banco Filipino in all litigations. Banco Filipino filed the petition for certiorari
questioning the validity of the resolutions issued by the Monetary Board authorizing the receivership
and liquidation of Banco Filipino. A temporary restraining order was issued enjoining the respondents
from executing further acts of liquidation of the bank. However, acts and other transactions
pertaining to normal operations of a bank are not enjoined. Subsequently, Top Management and
Pilar Development failed to pay their loans on the due date. Hence, the law firm of Sycip, Salazar, et
al. acting as counsel for Banco Filipino under authority of the liquidator, applied for extra-judicial
foreclosure of the mortgage over Top Management and Pilar Developments properties. Thus, the Ex-
Officio Sheriff of the Regional Trial Court of Cavite issued a notice of extra-judicial foreclosure sale of
the properties. Top Management and Pilar Development filed two separate petitions for injunction
and prohibition with the respondent appellate court seeking to enjoin the Regional Trial Court of
Cavite, the ex-officio sheriff of said court and Sycip, Salazar, et al. from proceeding with foreclosure
sale which were subsequently dismissed by the court. Hence this petition
ISSUE:
1. Whether or not the liquidator has the authority to prosecute as well as to defend suits and to
foreclose mortgages for and behalf of the bank while the issue on the validity of the receivership
and liquidation is still pending resolution.
2. Whether or not the closure of the bank based on the Tiaoqui report is correct.
RULING:
1) Yes, Section 29 of the Republic Act No. 265, as amended known as the Central Bank Act, provides
that when a bank is forbidden to do business in the Philippines and placed under receivership, the
BANKING LAW CASES
person designated as receiver shall immediately take charge of the banks assets and liabilities,
as expeditiously as possible, collect and gather all the assets and administer the same for the
benefit of its creditors, and represent the bank personally or through counsel as he may retain in
all actions or proceedings for or against the institution, exercising all the powers necessary for
these purposes including, but not limited to, bringing and foreclosing mortgages in the name of
the bank. If the Monetary Board shall later determine and confirm that banking institution is
insolvent or cannot resume business safety to depositors, creditors and the general public, it shall,
public interest requires, order its liquidation and appoint a liquidator who shall take over and
continue the functions of receiver previously appointed by Monetary Board. The liquidator may, in
the name of the bank and with the assistance counsel as he may retain, institute such actions as
deemed necessary in the appropriate court to collect and recover a counts and assets of such
institution or defend any action ft against the institution.
Pendency of the case did not diminish the powers and authority of the designated liquidator to
effectuate and carry on the administration of the bank. The Court did not prohibit however acts as a
receiving collectibles and receivables or paying off credits claims and other transactions pertaining
to normal operate of a bank. There is no doubt that the prosecution of suits collection and the
foreclosure of mortgages against debtors the bank by the liquidator are among the usual and
ordinary transactions pertaining to the administration of a bank.
No, it is nor correct. Clearly, Tiaoqui based his report on an incomplete examination of petitioner
bank and out rightly concluded therein that the latters financial status was one of insolvency or
illiquidity. In the instant case, the basic standards of substantial due process were not observed. Time
and again, we have held in several cases, that the procedure of administrative tribunals must satisfy
the fundamentals of fair play and that their judgment should express a well-supported conclusion.
The test of insolvency laid down in Section 29 of the Central Bank Act is measured by determining
whether the realizable assets of a bank are less than its liabilities. Hence, a bank is solvent if the fair
cash value of all its assets, realizable within a reasonable time by a reasonable prudent person,
would equal or exceed its total liabilities exclusive of stock liability; but if such fair cash value so
realizable is not sufficient to pay such liabilities within a reasonable time, the bank is
insolvent. Examination appraises the soundness of the institutions assets, the quality and character of
management and determines the institutions compliance with laws, rules and regulations. Audit is a
detailed inspection of the institutions books, accounts, vouchers, ledgers, etc. to determine the
recording of all assets and liabilities. Hence, examination concerns itself with review and appraisal,
while audit concerns itself with verification.
BANKING LAW CASES
CASE TITLE CENTRAL BANK OF THE PHILIPPINES vs COURT OF APPEALS

PROMULGATION
May 8, 1992
DATE
DIGEST BY Manaig, Jomel N.
TOPIC COVERED Banking Law: Conservatorship
DOCTRINE: The following requisites must be present before the order of conservatorship may be set
aside by a court:
1. The appropriate pleading must be filed by the stockholders of record representing the majority
of the capital stock of the bank in the proper court;
2. Said pleading must be filed within ten (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 arbitrarily and made in
bad faith.
PONENTE: Davide, Jr., J.
FACTS:
During a regular examination, Central Bank (CB) examiners discovered highly questionable loans
extended by the management of respondent bank Producers Bank of the Philippines (PBP) to several
entities. The finding triggered a bank-run in PBP which resulted in continuous over-drawings with the
CB. PBPs overdraft with the CB drastically increased, an indication of PBPs continuing inability to
maintain the condition of solvency and liquidity. On January 20, 1984, the CB placed PBP under
conservatorship and appointed petitioner Atty. Leonida Tansinin-Encarnacion as conservator. No
rehabilitation plan was reached.
On August 27, 1987, PBP filed a complaint verified by its former board chairman. The complaint
alleged that the conservatorship was unwarranted and illegal; that the appointment was
consequently arbitrary; and that PBP suffered losses. It sought to recover damages for the alleged
losses.
The petitioners filed a motion to dismiss the complaint on the ground, among others, that the
complaint was filed without authority of the conservator. The trial court denied the motion. Alleging
grave abuse of discretion, the petitioners filed with the respondent Court of Appeals (CA) a petition
for certiorari assailing the trial courts order. Hence this petition.
ISSUE:
Whether or not the CA erred in not dismissing the complaint for lack of legal personality because it
was brought in the name of the PBP without the authority of the conservator?
RULING:
The Supreme Court granted the petitions and reversed and set aside the resolution of the CA.
The case should have been dismissed on the grounds of prescription and lack of personality to bring
the action. Under Section 29 of the Central Bank Act (R.A. No. 265, as amended), the following
requisites must be present before the order of conservatorship may be set aside by a court:
1. The appropriate pleading must be filed by the stockholders of record representing the majority
of the capital stock of the bank in the proper court;
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2. Said pleading must be filed within ten (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 arbitrarily and made in
bad faith.
In the instant case, PBP was placed under conservatorship on January 20, 1984. The complaint was
filed on August 27, 1987 or three (3) years, seven (7) months and seven (7) days later, long after the
expiration of the 10-day period deferred above. It is also beyond question that the complaint and
the amended complaint were not initiated by the stockholders of record representing the majority of
the capital stock.
The Court also discussed whether an action for damages arising from the Monetary Boards (MB) act
of placing the PBP under conservatorship and the acts of the conservator, and to enjoin the MB from
implementing resolutions related or incidental thereto, may be brought only for and in behalf of the
PBP by the stockholders on record representing the majority of the capital stock or simply upon
authority of its Board of Directors, of by its Chairman.
On the first kind of damages (damages arising from placing PBP under conservatorship), the Court
ruled that the same may be claimed only if the MBs action is plainly arbitrary and made in bad faith,
and that the action is inseparable from an action to set aside the conservatorship. In other words, the
same must be filed within the ten (10) day period. Otherwise, Section 29 of the Central Bank Act, as
amended, could be rendered meaningless and illusory.
On the second kind of damages (damages arising from the acts of the conservator), Section 29 of
the Central Bank Act, as amended, equally applies because the questioned acts are but incidental
to the conservatorship.
The purpose of the law in requiring that only the stockholders of record representing the majority of
the capital stock may bring the action to set aside a resolution to place a bank under
conservatorship is to ensure that it be not frustrated or defeated by the incumbent Board of Directors
or officers who may immediately resort to court action to prevent its implementation or enforcement.
It is presumed that such a resolution is directed principally against acts of said Directors and officers
which place the bank in a state of continuing inability to maintain a condition of liquidity adequate
to protect the interest of depositors and creditors. Indirectly, it is likewise intended to protect and
safeguard the rights and interests of the stockholders. Common sense and public policy dictate then
that the authority to decide on whether to contest the resolution should be lodged with the
stockholders owning a majority of the shares for they are expected to be more objective in
determining whether the resolution is plainly arbitrary and issued in bad faith.
BANKING LAW CASES
CASE TITLE MIRANDA VS. PDIC

PROMULGATION
September 8, 2006
DATE
DIGEST BY Mallari, John Patrick S.
TOPIC COVERED Disputed claims
DOCTRINE: 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.
FACTS:
Petitioner Leticia G. Miranda was a depositor of Prime Savings Bank, Santiago City Branch.
On June 3, 1999, she withdrew substantial amounts from her account, but instead of cash
she opted to be issued a crossed cashier's check. She was thus issued cashier's check
no. 0000000518 in the sum of P2,500,000.00 and cashier's check no. 0000000514 in the
amount of P3,002,000.00.
Petitioner deposited the two checks into her account in another bank on the same day,
however, Bangko Sentral ng Pilipinas (BSP) suspended the clearing privileges of Prime Savings
Bank effective 2:00 p.m. of June 3, 1999. The two checks of petitioner were returned to her
unpaid.
On June 4, 1999, Prime Savings Bank declared a bank holiday. On January 7, 2000, the BSP
placed Prime Savings Bank under the receivership of the Philippine Deposit Insurance
Corporation (PDIC).
Petitioner filed a civil action for sum of money in the Regional Trial Court of Santiago City,
Isabela to recover the funds from her unpaid checks against Prime Savings Bank, PDIC and
the BSP.
ISSUE:
(1) Whether the two cashier's checks operate as an assignment of funds in the hands of the
petitioner; (2) Whether the claim lodged by the petitioner is a disputed claim under Section
30 of Republic Act (R.A.) No. 7653, otherwise known as the New Central Bank Act, and
therefore, under the jurisdiction of the liquidation court; and (3) Whether the respondents are
solidarily liable to the petitioner.
RULING:
1. The two cashier's 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 on June 3, 1999. As the Court of Appeals correctly ruled, the issuance of
the cashier's checks to petitioner 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.
BANKING LAW CASES
2. "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.
Petitioner's claim which involved the payment of the two cashier's checks that were
not honored by Prime Savings Bank due to its closure falls within the ambit of a claim
against the assets of the insolvent bank. The issuance of the cashier's checks by Prime
Savings Bank to the petitioner created a debtor/creditor relationship between them.
This disputed claim should therefore be lodged in the liquidation proceedings by the
petitioner as creditor, since the closure of Prime Savings Bank has rendered all claims
subsisting at that time moot which can best be threshed out by the liquidation court
and not the regular courts.
3. Regarding the third issue, it is only Prime Savings Bank that is liable to pay for the
amount of the two cashier's checks. Solidary liability cannot attach to the BSP, in its
capacity as government regulator of banks, and the PDIC as statutory receiver under
R.A. No. 7653, because they are the principal government agencies mandated by law
to determine the financial viability of banks and quasi-banks, and facilitate
receivership and liquidation of closed financial institutions, upon a factual
determination of the latter's insolvency.
As correctly pointed out by the Court of Appeals, the BSP should not be held liable on
the crossed cashier's checks for it was not a party to the issuance of the same; nor can
it be held liable for imposing the sanctions on Prime Savings Bank which indirectly
affected Miranda, since it is mandated under Sec. 37 of R.A. No. 7653 to act
accordingly. The BSP, through the Monetary Board was well within its discretion to
exercise this power granted by law to issue a resolution suspending the interbank
clearing privileges of Prime Savings Bank, having made a factual determination that
the bank had deficient cash reserves deposited before the BSP. There is no showing
that the BSP abused this discretionary power conferred upon it by law.
In addition, co-respondent PDIC was impleaded as a party-litigant only in its

representative capacity as the receiver/liquidator of Prime Savings Bank. Both BSP and
PDIC cannot therefore be held directly and solidarily liable for the payment of the two
cashier's checks. Sole liability rests with Prime Savings Bank.
BANKING LAW CASES
CASE TITLE PHIL. VETERANS BANK EMPLOYEES UNION v. PHIL. VETERANS BANK
PROMULGATION
Aug. 24, 1990
DATE
DIGEST BY Mauricio,Mark Lester O.
TOPIC COVERED Central bank Act(sec 25)
DOCTRINE: The mere fact that the Bank was created by special law does not confer upon it
extraordinary privileges over and above those granted similar charters like the Development Bank of
the Philippines and the Land Bank of the Philippines. As a lending institution, it is part of the banking
system and therefore covered by the regulatory power exercised over such entities by the Central
Bank. Such authority is expressly provided for in the Central Bank Act
PONENTE: CRUZ, J.
FACTS:
On April 10, 1983, the Bank was placed under receivership by virtue of Resolution of the Monetary
Board of the Central Bank. The reason was the precarious condition of the Bank. A year later, the
Philippine Veterans Bank Employees Union questioned the retrenchment and reorganization program
of the Bank and on the ground of security of tenure, prayed that the said program be prohibited. The
Union also asked for a temporary restraining order. Subsequently, while the case was pending, the
Monetary Board ordered the liquidation of the Bank after finding that the Bank had incurred an
outstanding liability of P540,835,860.79. This order was opposed by the Union. The Veterans Federation
of the Philippines entered the picture and filed a petition in intervention which, besides opposing the
liquidation, asserted the additional claim that it was in the process of formulating plans for the
rehabilitation and eventual expansion of the Bank. This was followed by an ancillary petition for the
immediate payment of the wage or salary increase ordered by the NLRC.
On 1988, an original petition for restitution and for extraordinary and equitable writs was filed by
Simeon Medalla et al. on behalf of the remaining World War II veterans or their heirs. It sought a
judicial declaration that the petitioners were entitled to the ownership, possession and control of the
Bank and an order restraining the Central Bank from disposing of the assets of the Bank or making
any disbursements therefrom except for ordinary administrative expenses and for the payment of
accrued wages and other benefits of personnel as approved by the liquidator court.
The Regional Trial Court of Manila had ordered the payment of the claims of the employees
amounting to P37,920,310.82. This was followed on by another order issued by the same court for the
payment of retirement benefits to two former board members of the Bank.The writ of preliminary
injunction was amended to exclude from its coverage the sale or disposal by the Central Bank or the
Bank Liquidator of the acquired assets of the PVB.
The petitioners claim that as the Bank was created by a special law, a contractual relationship now
exists between the Government and the stockholders of the Bank that cannot be disturbed without
violation of the impairment clause. The acceptance of the benefits of that law by the petitioners had
conferred a vested right on them that cannot now be withdrawn without their consent as this would
constitute a deprivation of their property without due process of law. Assuming that such benefits
could be validly revoked, this cannot be done by the Central Bank only but by the legislature itself
which conferred the franchise on the Bank in the first place. Moreover, the Central Bank cannot
BANKING LAW CASES
exercise any authority over the Bank because the latter is itself also a government bank with the
same status as the Development Bank of the Philippines, the Land Bank of the Philippines, and the
Philippine National Bank. The Central Bank has no control over these government lending institutions.
ISSUE:
Whether or not the Central Bank has the power to liquidate the Philippine Veterans Bank.
RULING:
The position of the petitioner is unmeritorious.
The mere fact that the Bank was created by special law does not confer upon it extraordinary
privileges over and above those granted similar charters like the Development Bank of the Philippines
and the Land Bank of the Philippines. As a lending institution, it is part of the banking system and
therefore covered by the regulatory power exercised over such entities by the Central Bank. Such
authority is expressly provided for in the Central Bank Act
It is stressed that in Section 25 of the said Act, the Department of Supervision and Examination is
charged with the supervision and periodic examination of all banking institutions operating in the
Philippines, including all government credit institutions. Assuming for the moment that the Bank is
owned or controlled by the government, it is nevertheless not exempt from but in fact expressly
placed under the jurisdiction of the Central Bank. More to the point, R.A. No. 3518 itself, which
created the Philippine Veterans Bank, provides in its Section 14 that the Bank shall be subject to the
authority of the Department of Supervision and Examination.
The need in the case at bar is no less compelling, to wit, the preservation of the integrity and stability
of our banking system. Unless adequate and determined efforts are taken by the government
against distressed and mismanaged banks, public faith in the banking system is certain to deteriorate
to the prejudice of the national economy itself, not to mention the losses suffered by the bank
depositors, creditors, and stockholders, who all deserve the protection of the government. The
government cannot simply cross its arms while the assets of a bank are being depleted through
mismanagement or irregularities. It is the duty of the Central Bank in such an event to step in and
salvage the remaining resources of the bank so that they may not continue to be dissipated or
plundered by those entrusted with their management.
There is also the practical difficulty of Congress itself decreeing liquidation, presumably to be made
after examination of the financial condition of the Bank. In effect, the legislature, through its
corresponding appropriate committees, will be undertaking the function purposely assigned by law
to the Department of Examination and Supervision of the Central Bank. This is an intricate
administrative function wisely entrusted by Congress to the said body, from which the petitioners
would now recall it for its direct exercise by the lawmaking body. Such a procedure would bring us
back to square one, so to speak, and revoke the authority confided by Congress to the Central Bank
in recognition of its established expertise in the regulation of banks.
BANKING LAW CASES
CASE TITLE RURAL BANK OF SAN MIGUEL VS BSP

PROMULGATION
February 16, 2007
DATE
DIGEST BY Morelos, Mark
TOPIC COVERED Receivership in re Sec. 30 of RA 7653
DOCTRINE: In RA 7653, only a "report of the head of the supervising or examining department" is
necessary. It is an established rule in statutory construction that where the words of a statute are
clear, plain and free from ambiguity, it must be given its literal meaning and applied without
attempted interpretation. This Court cannot look for or impose another meaning on the term "report"
or to construe it as synonymous with "examination." From the words used in Section 30, it is clear that
RA 7653 no longer requires that an examination be made before the MB can issue a closure order.
We cannot make it a requirement in the absence of legal basis.
PONENTE: CORONA, J.
FACTS:
Petitioner on this case received a resolution no. 105 from the Monetary Board of BSP prohibiting the
former from doing business in the Philippines, placing it under receivership and designating
respondent Philippine Deposit Insurance Corporation (PDIC) as receiver. The said resolution was
based on monitoring report conducted by the director of Department of Rural banks due to its failure
to pay liabilities and no longer feasible to continue business.
Petitioners argue that Resolution No. 105 was bereft of any basis considering that no complete
examination had been conducted before it was issued since the same has been based only from a
report.
ISSUE:
WON Section 30 of RA 7653 (New Central bank Act) requires a current and complete examination
before it can be closed and placed under receivership
RULING:
NO.
SECTION 30. Proceedings in Receivership and Liquidation. Whenever, upon report of the head of
the supervising or examining department, the Monetary Board finds that a bank or quasi-bank:
xxx the Monetary Board may summarily and without need for prior hearing forbid the
institution from doing business in the Philippines and designate the Philippine Deposit Insurance
Corporation as receiver of the banking institution xxx
In RA 7653, only a "report of the head of the supervising or examining department" is necessary. It is
an established rule in statutory construction that where the words of a statute are clear, plain and
free from ambiguity, it must be given its literal meaning and applied without attempted
interpretation:
BANKING LAW CASES
This plain meaning rule or verba legis derived from the maxim index animi sermo est (speech is the
index of intention) rests on the valid presumption that the words employed by the legislature in a
statute correctly express its intention or will and preclude the court from construing it differently. The
legislature is presumed to know the meaning of the words, to have used words advisedly, and to
have expressed its intent by use of such words as are found in the statute. Verba legis non est
recedendum, or from the words of a statute there should be no departure.
The word "report" has a definite and unambiguous meaning which is clearly different from
"examination." A report, as a noun, may be defined as "something that gives information" or "a usually
detailed account or statement." On the other hand, an examination is "a search, investigation or
scrutiny."
This Court cannot look for or impose another meaning on the term "report" or to construe it as
synonymous with "examination." From the words used in Section 30, it is clear that RA 7653 no longer
requires that an examination be made before the MB can issue a closure order. We cannot make it a
requirement in the absence of legal basis.
Indeed, the court may consider the spirit and reason of the statute, where a literal meaning would
lead to absurdity, contradiction, injustice, or would defeat the clear purpose of the lawmakers.
However, these problems are not present here. Using the literal meaning of "report" does not lead to
absurdity, contradiction or injustice. Neither does it defeat the intent of the legislators. The purpose of
the law is to make the closure of a bank summary and expeditious in order to protect public interest.
This is also why prior notice and hearing are no longer required before a bank can be closed.
BANKING LAW CASES
CASE TITLE ANA MARIA A. KORUGA vs. TEODORO O. ARCENAS, JR., ALBERT C. AGUIRRE,
CESAR S. PAGUIO, FRANCISCO A. RIVERA, and THE HONORABLE COURT OF
APPEALS/ TEODORO O. ARCENAS, JR., ALBERT C. AGUIRRE, CESAR S. PAGUIO,
and FRANCISCO A. RIVERA vs. HON. SIXTO MARELLA, JR., Presiding Judge,
Branch 138, Regional Trial Court of Makati City, and ANA MARIA A. KORUGA
CITATION G.R. No. 168332/ G.R. No. 169053
PROMULGATION
June 19, 2009
DATE
DIGEST BY Parrone, Justine Bette
TOPIC COVERED Jurisdiction of the BSP
DOCTRINE: The law vests in the BSP the supervision over operations and activities of banks. It is the
Governments responsibility to see to it that the financial interests of those who deal with banks and
banking institutions, as depositors or otherwise, are protected. That task is delegated to the BSP,
which pursuant to its Charter, is authorized to administer the monetary, banking, and credit system of
the Philippines. It is further authorized to take the necessary steps against any banking institution if its
continued operation would cause prejudice to its depositors, creditors and the general public as
well.
PONENTE: NACHURA
FACTS:
Ana Maria A. Koruga, a minority stockholder of Banco Filipino Savings and Mortgage Bank filed a
complaint against the Board of Directors of Banco Filipino and the Members of the Monetary Board
of the BSP before the RTC of Makati. She charged them with violation of Sections 31 to 34 of the
Corporation Code, prohibiting self-dealing and conflict of interest of directors and officers; invoked
her right to inspect the corporations records under Sections 74 and 75 of the Corporation Code; and
prayed for Receivership and Creation of a Management Committee, pursuant to Rule 59 of the Rules
of Civil Procedure, the Securities Regulation Code, the Interim Rules of Procedure Governing Intra-
Corporate Controversies, the General Banking Law of 2000, and the New Central Bank Act. She
accused the directors and officers of Banco Filipino of engaging in unsafe, unsound, and fraudulent
banking practices, more particularly, acts that violate the prohibition on self-dealing.
Arcenas, et al. filed their Answer raising, among others, the trial courts lack of jurisdiction to take
cognizance of the case. They anchored their prayer on the following grounds: that, in their Answer
before the RTC, they had raised the issue of failure of the court to acquire jurisdiction over them due
to improper service of summons; that the Koruga action is a nuisance or harassment suit; that there is
another case involving the same parties for the same cause pending before the Monetary Board of
the BSP, and this constituted forum-shopping; and that jurisdiction over the subject matter of the case
is vested by law in the BSP.
ISSUE:
Whether or not the BSP has jurisdiction over the case
RULING:
We hold that it is the BSP that has jurisdiction over the case.
It is clear that the acts complained of by the petitioner pertain to the conduct of Banco Filipinos
banking business. A bank, as defined in the General Banking Law, refers to an entity engaged in the
BANKING LAW CASES
lending of funds obtained in the form of deposits. The banking business is properly subject to
reasonable regulation under the police power of the state because of its nature and relation to the
fiscal affairs of the people and the revenues of the state. Banks are affected with public interest
because they receive funds from the general public in the form of deposits. It is the Governments
responsibility to see to it that the financial interests of those who deal with banks and banking
institutions, as depositors or otherwise, are protected. In this country, that task is delegated to the BSP,
which pursuant to its Charter, is authorized to administer the monetary, banking, and credit system of
the Philippines. It is further authorized to take the necessary steps against any banking institution if its
continued operation would cause prejudice to its depositors, creditors and the general public as
well.
The law vests in the BSP the supervision over operations and activities of banks. Furthermore, the
authority to determine whether a bank is conducting business in an unsafe or unsound manner is also
vested in the Monetary Board. Finally, the New Central Bank Act grants the Monetary Board the
power to impose administrative sanctions on the erring bank.
Koruga also accused Arcenas, et al. of violation of the Corporation Codes provisions on self-dealing
and conflict of interest. She invoked Section 31 of the Corporation Code and Section 32. She also
alleged that Banco Filipinos directors violated Sections 33 and 34 in approving the loans of
corporations with interlocking ownerships. However, the court held that Korugas invocation of the
provisions of the Corporation Code is misplaced.
It was held that The Corporation Code, however, is a general law applying to all types of
corporations, while the New Central Bank Act regulates specifically banks and other financial
institutions, including the dissolution and liquidation thereof. As between a general and special law,
the latter shall prevail generalia specialibus non derogant.
From the foregoing disquisition, there is no doubt that the RTC has no jurisdiction to hear and decide
a suit that seeks to place Banco Filipino under receivership.
BANKING LAW CASES
CASE TITLE FIRST PHILIPPINE INTERNATIONAL BANK (Formerly Producers Bank of the
Philippines) vs. COURT OF APPEALS
CITATION G.R. No. 115849.
PROMULGATION
January 24, 1996
DATE
DIGEST BY Rabanal, Jane Michelle B.
TOPIC COVERED Section 28-A of Republic Act No. 265 (otherwise known as the Central Bank
Act)
DOCTRINE: Section 28-A merely gives the conservator power to revoke contracts that are, under
existing law, deemed to be defective i.e., void, voidable, unenforceable or rescissible.
PONENTE:
PANGANIBAN, J
FACTS:
Producers Bank of the Philippines acquired 6 parcels of land. The property used to be owned by
BYME Investment and Development Corporation which had them mortgaged with the bank as
collateral for a loan. The original plaintiffs, Demetrio Demetria and Jose Janolo, wanted to purchase
the property and thus initiated negotiations for that purpose. The plaintiffs, upon the suggestion of
BYME investment's legal counsel, Jose Fajardo, met with defendant Mercurio Rivera, Manager of the
Property Management Department of Producers Bank. The meeting was held pursuant to plaintiffs'
plan to buy the property. Janolo, following the advice of Rivera, made a formal purchase offer to the
bank through a letter.
The foregoing letter drew no response for more than four months. Plaintiff, through counsel, made a
final demand for compliance by the bank with its obligations under the considered perfected
contract of sale. As recounted by the trial court, the defendants through Acting Conservator
Encarnacion repudiated the authority of defendant Rivera and claimed that his dealings with the
plaintiffs, particularly his counter-offer of P5.5 Million are unauthorized or illegal. On that basis, the
defendants justified the refusal of the tenders of payment and the non-compliance with the
obligations under what the plaintiffs considered to be a perfected contract of sale.
Plaintiffs filed a suit for specific performance with damages against the bank, its Manager Rivers and
Acting Conservator Encarnacion. The basis of the suit was that the transaction had with the bank
resulted in a perfected contract of sale, the defendants took the position that there was no such
perfected sale because the defendant Rivera is not authorized to sell the property, and that there
was no meeting of the minds as to the price. Henry L. Co (the brother of Luis Co), through counsel
Sycip Salazar Hernandez and Gatmaitan, filed a motion to intervene in the trial court, alleging that as
owner of 80% of the Bank's outstanding shares of stock, he had a substantial interest in resisting the
complaint. The trial court issued an order denying the motion to intervene on the ground that it was
filed after trial had already been concluded. It also denied a motion for reconsideration filed
thereafter. CA affirmed. Henry Co did not appeal the denial of his motion for intervention.
In the course of the proceedings in the CA, Carlos Ejercito was substituted in place of Demetria and
Janolo, in view of the assignment of the latters' rights in the matter in litigation to said private
respondent. Henry Co and several other stockholders of the Bank, through counsel Angara Abello
Concepcion Regala and Cruz, filed an action (hereafter, the "Second Case") purportedly a
"derivative suit" with the RTC of Makati against Encarnacion, Demetria and Janolo "to declare any
BANKING LAW CASES
perfected sale of the property as unenforceable and to stop Ejercito from enforcing or implementing
the sale."
ISSUE:
Did the bank conservator have the unilateral power to repudiate the authority of the bank officers
and/or to revoke the said contract?
RULING:
It is not disputed that the Bank was under a conservator placed by the Central Bank of the Philippines
during the time that the negotiation and perfection of the contract of sale took place. This issue of
the Conservator's alleged authority to revoke or repudiate the perfected contract of sale was raised
for the first time in this Petition as this was not litigated in the trial court or Court of Appeals. Issues
not raised and/or ventilated in the trial court, let alone in the CA, "cannot be raised for the first time
on appeal as it would be offensive to the basic rules of fair play, justice and due process."
There is absolutely no evidence that the Conservator, at the time the contract was perfected,
actually repudiated or overruled said contract of sale. The Bank's acting conservator at the time,
Rodolfo Romey, never objected to the sale of the property to Demetria and Janolo. What petitioners
are really referring to is the letter of Conservator Encarnacion, who took over from Romey after the
sale was perfected which unilaterally repudiated not the contract but the authority of Rivera to
make a binding offer and which unarguably came months after the perfection of the contract.
While admittedly, the Central Bank law gives vast and far-reaching powers to the conservator of a
bank, it must be pointed out that such powers must be related to the "(preservation of) the assets of
the bank, (the reorganization of) the management thereof and (the restoration of) its viability." Such
powers, enormous and extensive as they are, cannot extend to the post-facto repudiation of
perfected transactions, otherwise they would infringe against the non-impairment clause of the
Constitution.
Section 28-A merely gives the conservator power to revoke contracts that are, under existing law,
deemed to be defective i.e., void, voidable, unenforceable or rescissible. Hence, the conservator
merely takes the place of a bank's board of directors. What the said board cannot do such as
repudiating a contract validly entered into under the doctrine of implied authority the conservator
cannot do either. Ineluctably, his power is not unilateral and he cannot simply repudiate valid
obligations of the Bank. His authority would be only to bring court actions to assail such contracts
as he has already done so in the instant case. A contrary understanding of the law would simply not
be permitted by the Constitution. Neither by common sense. To rule otherwise would be to enable a
failing bank to become solvent, at the expense of third parties, by simply getting the conservator to
unilaterally revoke all previous dealings which had one way or another or come to be considered
unfavorable to the Bank, yielding nothing to perfected contractual rights nor vested interests of the
third parties who had dealt with the Bank.
BANKING LAW CASES
CASE TITLE CENTRAL BANK ET AL., VS DELA CRUZ

PROMULGATION
November 12, 1990
DATE
DIGEST BY Rivera, Odessa C.
TOPIC COVERED Commercial Law; Banking; Monetary Board; Actions in proceedings on
insolvency, final and executory
DOCTRINE:
It is noteworthy that the actions of the Monetary Board in proceedings on insolvency are
explicitly declared by law to be "final and executory." They may not be set aside, or restrained, or
enjoined by the courts, except upon "convincing proof that the action is plainly arbitrary and made
in bad faith" (Salud v. Central Bank of the Philippines, 143 SCRA 590).
Respondent Judge acted in plain disregard of the fourth paragraph of Section 29 of the Central
Bank Act, when he restrained the petitioners from closing and liquidating the Rural Bank of Libmanan,
prevented them from performing their functions, and ordered them to return the management and
control of the rural bank to its board of director without receiving convincing proof that the action of
the CB was plainly arbitrary and made in bad faith.
FACTS:
The Rural Bank of Libmanan started operations in 1965, originally owned and managed by the Albas
family, and was later sold to Manuel M. Villar and respondent Alex G. Durante, who commenced
banking operations in January 1979.
In 1979, the Department of Rural Banks and Savings and Loan Associations (DRBSLA) of the Central
Bank of the Philippines found serious irregularities in its lending and deposit operations, including false
entries and false statements in the banks records. As a result of its questionable transactions the
bank became insolvent. DRBSLA director, Consolacion V. Odra, in her Memorandum dated May 2,
1980 to the Monetary Board, recommended, that: (1) Libmanan Bank be prohibited from doing
business; (2) that it be placed under receivership in accordance with Section 29 of Republic Act No.
265, as amended; and (3) that the Director of DRBSLA be designated as receiver
On May 23, 1980, the Monetary Board adopted Resolution No. 929 placing Libmanan Bank under
statutory receivership designating Director Consolacion V. Odra, as Receiver.
Libmanan Bank was advised to submit to the Monetary Board an acceptable reorganization and
rehabilitation program, which they failed to do so, this resulted to the issuance of a Resolution
ordering its liquidation.
On August 3, 1981, the Solicitor General, in accordance with Republic Act No. 265, Section 29, filed in
the Court of First Instance of Camarines Sur, a petition for Assistance in the Liquidation of Libmanan
Bank which was opposed by its resident- Manager and the members of the Board of Director of the
Libmanan Bank.
On September 23, 1981 Libmanan Bank filed in the same Court of First Instance of Camarines Sur, a
separate complaint for prohibition, mandamus and injunction (Civil Case) against the Central Bank,
Et. Al., praying the Court to enjoin and dismiss the liquidation proceeding on the ground that the
Central Bank gravely abused its discretion in ordering the liquidation of said ruralBank.
BANKING LAW CASES
On January 15, 1982 respondent Judge restrained the respondent Central Bank from closing the
petitioner bank and from performing its customary banking business, to restore the control and
management of the bank to its Board of Directors and to desist from liquidating its assets. However,
on January 29, 1982, this was modified by requiring the parties to refrain from any act or acts which
will tend to disturb the state in which the parties were found before the complaint was filed.
On February 15, 1982, the Solicitor General filed a Motion to Dismiss on the ground that respondent
Judge had no jurisdiction over a special civil action for prohibition, mandamus and injunction against
the Central Bank and that the petition was defective in form because it was not properly verified, but
this was denied.
ISSUE:
Whether or not respondent Judge acted with grave abuse of discretion or without in excess of
jurisdiction in the following order in:
a) restraining the Central Bank from closing the rural bank and ordering return of management
and control to the Board of Directors
b) restraining the Central Bank from disturbing status quo before the complaint was filed
c) denying Central Banks motion to dismiss
d) declaring Central Bank in default
e) authorizing Libmanan Bank to withdraw money from its bank deposits
RULING: Yes.
The authority for the receivership of Libmanan Bank is found in Section 29 of the Central Bank Act
(P.D. 1827).
It is noteworthy that the actions of the Monetary Board in proceedings on insolvency are explicitly
declared by law to be "final and executory." They may not be set aside, or restrained, or enjoined by
the courts, except upon "convincing proof that the action is plainly arbitrary and made in bad faith"
(Salud v. Central Bank of the Philippines, 143 SCRA 590).
Respondent Judge acted in plain disregard of the fourth paragraph of Section 29 of the Central
Bank Act, when he restrained the petitioners from closing and liquidating the Rural Bank of Libmanan,
prevented them from performing their functions, and ordered them to return the management and
control of the rural bank to its board of directors without receiving convincing proof that the action of
the CB was plainly arbitrary and made in bad faith.
By using his own standards, instead of the standards set forth in Section 29 of the law, as basis
for issuing a restraining order against the CB, respondent Judge committed a grave abuse of
discretion. Respondent Judge acted with grave abuse of discretion in issuing the contested order
enjoining the CB liquidator from closing the rural bank and requiring it to restore the management
and control of the bank to its board of directors. It is a basic procedural postulate that a preliminary
injunction should never be used to transfer the possession or control of a thing to a party who did not
have such possession or control at the inception of the case (Lasala v. Fernandez, 5 SCRA 79; Emilia
v. Bado, 28 SCRA 183). Its proper function is simply to maintain the status quo at the commencement
of the action. The status quo at the time of filing Civil Case was that Libmanan Bank was under the
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control of the DRBSLA Director, with Consolacion V. Odra, as liquidator appointed by the Central
Bank.ch
Respondent Judge erred in denying the Central Banks motion to dismiss the complaint for
prohibition and mandamus (Civil Case) filed by Libmanan Bank. Since the Central Banks petition for
assistance in liquidation had been filed on August 3, 1981 a special proceeding case SP-111, the
Libmanan Banks filing on September 23, 1981 of a complaint for prohibition and mandamus
attacking the Central Banks resolution appointing a receiver and liquidator for the bank should have
been asserted as a counterclaim in SP-111, instead of as a separate special civil action for prohibition
against the Central Bank. The separate action should have been either dismissed or consolidated
with SP-111 for the law abhors multiplicity of suits. Failure of Libmanan Bank to assert in SP-111 the
defense that the Monetary Boards receivership and liquidation resolution was "arbitrary and made in
bad faith," constitutes a waiver of that defense conformably with the rule of "Waiver of Defense," i.e.,
that "defenses and objections not pleaded either in a motion to dismiss or in the answer are
(generally) deemed waived," or the "Omnibus Motion Rule," providing that "a motion attacking a
pleading or a proceeding shall include all objections then available, and all objections not so
included shall be deemed waived" (Salud v. Central Bank of the Phils., 143 SCRA 590).chanrobles
Respondent Judge abused his discretion in authorizing the Libmanan Bank to withdraw funds
from its deposits in other banks. The Rural Bank had become insolvent as a result of mismanagement,
frauds, irregularities and violations of banking laws, rules, and regulations by its officers. Its remaining
assets should be conserved to pay its creditors. Allowing the Rural Bank to withdraw its deposits in
other banks would result in the further diminution and dissipation of its assets to the prejudice of its
depositors and creditors, and to the unlawful advantage of the very officers who brought about the
banks insolvency.
BANKING LAW CASES
CASE TITLE ADVOCATES FOR TRUTH IN LENDING, INC. VS BANGKO SENTRAL MONETARY
BOARD
PROMULGATION
January 15, 2013
DATE
DIGEST BY Rodriguez, Maria Lorraine S.
TOPIC COVERED Banking Laws: Central Bank Circular No. 905 and Usury Law
DOCTRINE:
A. Central Bank Circular No. 905 did not repeal nor in anyway amend the Usury Law but simply
suspended the latters effectivity; that a Central Bank Circular cannot repeal a law, for only a
law can repeal another law; that by virtue of CB Circular 905, the Usury Law has been rendered
ineffective; and Usury Law has been legally non-inexistent in our jurisdiction.
B. Stipulations authorizing iniquitous or unconscionable interests have been invariably struck
down for being contrary to morals, if not against the law. Indeed, under Article 1409 of the Civil
Code, these contracts are deemed inexistent and void ab initio, and therefore cannot be
ratified, nor may the right to set up their illegality as a defense be waived.
FACTS:
Petitioner "Advocates for Truth in Lending, Inc." (AFTIL) is a non-profit, non-stock corporation
organized to engage in pro bono concerns and activities relating to money lending issues. It was
incorporated on July 9, 2010, and a month later, it filed this petition, joined by its founder and
president, Eduardo B. Olaguer, suing as a taxpayer and a citizen.
SHORT BACKGROUD RE. THE AUTHORITY OF CB-Monetary Board to fix ceiling interest rates
R.A. No. 265, which created the Central Bank (CB) of the Philippines on June 15, 1948,
empowered the Central Bank-Monetary Board to set the maximum interest rates which banks may
charge for all types of loans and other credit operations, within limits prescribed by the Usury Law.
On March 17, 1980, the Usury Law was amended by Presidential Decree (P.D.) No. 1684, giving
the CB-MB authority to prescribe different maximum rates of interest which may be imposed for a
loan or renewal thereof or the forbearance of any money, goods or credits, provided that the
changes are effected gradually and announced in advance.
In the exercise of the authority herein granted the Monetary Board may prescribe higher
maximum rates for loans of low priority, such as consumer loans or renewals thereof as well as such
loans made by pawnshops, finance companies and other similar credit institutions although the rates
prescribed for these institutions need not necessarily be uniform. The Monetary Board is also
authorized to prescribe different maximum rate or rates for different types of borrowings, including
deposits and deposit substitutes, or loans of financial intermediaries.
In its Resolution No. 2224 dated December 3, 1982,3 the CB-MB issued CB Circular No. 905,
Series of 1982, effective on January 1, 1983. Section 1 of the Circular, under its General Provisions,
removed the ceilings on interest rates on loans or forbearance of any money, goods or credits.
The Circular then went on to amend Books I to IV of the CBs "Manual of Regulations for Banks
and Other Financial Intermediaries" (Manual of Regulations) by removing the applicable ceilings on
specific interest rates for commercial, thrift, rural and non-bank financial intermediaries.
On June 14, 1993, President Fidel V. Ramos signed into law R.A. No. 7653 establishing the
Bangko Sentral ng Pilipinas (BSP) to replace the CB.
BANKING LAW CASES
Petitioners, claiming that they are raising issues of transcendental importance to the public,
filed directly With SC this Petition for Certiorari , seeking to declare that the Bangko Sentral ng Pilipinas
Monetary Board (BSP-MB), replacing the Central Bank Monetary Board (CB-MB) by virtue of Republic
Act (R.A.) No. 7653, has no authority to continue enforcing Central Bank Circular No. 905,1 issued by
the CB-MB in 1982, which "suspended" Act No. 2655, or the Usury Law of 1916.
Petitioners Contentions:
Under Section 1-a of Act No. 2655, as amended by P.D. No. 1684, the CB-MB was authorized only to
prescribe or set the maximum rates of interest for a loan or renewal thereof or for the forbearance of
any money, goods or credits, and to change such rates whenever warranted by prevailing
economic and social conditions, the changes to be effected gradually and on scheduled dates;
that nothing in P.D. No. 1684 authorized the CB-MB to lift or suspend the limits of interest on all credit
transactions, when it issued CB Circular No. 905. They further insist that under Section 109 of R.A. No.
265, the authority of the CB-MB was clearly only to fix the banks maximum rates of interest, but
always within the limits prescribed by the Usury Law. Thus, according to petitioners, CB Circular No.
905, which was promulgated without the benefit of any prior public hearing, is void because it
violated Article 5 of the New Civil Code, which provides that "Acts executed against the provisions of
mandatory or prohibitory laws shall be void, except when the law itself authorizes their validity." They
further claim that just weeks after the issuance of CB Circular No. 905, the benchmark 91-day Treasury
bills (T-bills), then known as "Jobo" bills shot up to 40% per annum, as a result. The banks immediately
followed suit and re-priced their loans to rates which were even higher than those of the "Jobo" bills:
that CB Circular No. 905 is also unconstitutional in light of Section 1 of the Bill of Rights, which
commands that "no person shall be deprived of life, liberty or property without due process of law,
nor shall any person be denied the equal protection of the laws." Finally, petitioners point out that R.A.
No. 7653 did not re-enact a provision similar to Section 109 of R.A. No. 265, and therefore, in view of
the repealing clause in Section 135 of R.A. No. 7653, the BSP-MB has been stripped of the power
either to prescribe the maximum rates of interest which banks may charge for different kinds of loans
and credit transactions, or to suspend Act No. 2655 and continue enforcing CB Circular No. 905.
ISSUES:
1. Whether CB Circular No. 905 amended/ repealed the Usury Law?
2. Whether the CB-MB exceeded its authority when it issued CB Circular No. 905, which removed
all interest ceilings and thus suspended Act No. 2655 as regards usurious interest rate; and
3. What is the limitation on the power to stipulate interest rates under CB Circular 905?
RULING:
1. NO. The CB-MB merely SUSPENDED the effectivity of the Usury Law when it issued CB Circular
No. 905.
The power of the CB to effectively suspend the Usury Law pursuant to P.D. No. 1684 has
long been recognized and upheld in many cases. As the Court explained in the landmark
case of Medel v. CA, citing several cases, CB Circular No. 905 "did not repeal nor in anyway
amend the Usury Law but simply suspended the latters effectivity;" that "a CB Circular cannot
repeal a law, [for] only a law can repeal another law;" that "by virtue of CB Circular No. 905,
the Usury Law has been rendered ineffective;" and "Usury has been legally non-existent in our
jurisdiction. Interest can now be charged as lender and borrower may agree upon."
Thus, according to the Court, by lifting the interest ceiling, CB Circular No. 905 merely
upheld the parties freedom of contract to agree freely on the rate of interest. It cited Article
1306 of the New Civil Code, under which the contracting parties may establish such
stipulations, clauses, terms and conditions as they may deem convenient, provided they are
not contrary to law, morals, good customs, public order, or public policy.
BANKING LAW CASES
2. NO. BSP(CB)-MB has authority to enforce CB Circular No. 905.

A closer perusal shows that Section 109 of R.A. No. 265 covered only loans extended by banks,
whereas under Section 1-a of the Usury Law, as amended, the BSP-MB may prescribe the
maximum rate or rates of interest for all loans or renewals thereof or the forbearance of any
money, goods or credits, including those for loans of low priority such as consumer loans, as well
as such loans made by pawnshops, finance companies and similar credit institutions. It even
authorizes the BSP-MB to prescribe different maximum rate or rates for different types of
borrowings, including deposits and deposit substitutes, or loans of financial intermediaries.
Act No. 2655, an earlier law, is much broader in scope, whereas R.A. No. 265, now R.A. No.
7653, merely supplemented it as it concerns loans by banks and other financial institutions. Had
R.A. No. 7653 been intended to repeal Section 1-a of Act No. 2655, it would have so stated in
unequivocal terms. Moreover, the rule is settled that repeals by implication are not favored,
because laws are presumed to be passed with deliberation and full knowledge of all laws existing
pertaining to the subject. An implied repeal is predicated upon the condition that a substantial
conflict or repugnancy is found between the new and prior laws. Thus, in the absence of an
express repeal, a subsequent law cannot be construed as repealing a prior law unless an
irreconcilable inconsistency and repugnancy exists in the terms of the new and old laws.47 We
find no such conflict between the provisions of Act 2655 and R.A. No. 7653.
3. LIMITATIONS UNDER CB Circular 905: The lifting of the ceilings for interest rates does not
authorize stipulations charging excessive, unconscionable, and iniquitous interest.
It is settled that nothing in CB Circular No. 905 grants lenders a carte blanche authority to raise
interest rates to levels which will either enslave their borrowers or lead to a hemorrhaging of
their assets. As held in Castro v. Tan:
The imposition of an unconscionable rate of interest on a money debt, even if
knowingly and voluntarily assumed, is immoral and unjust. It is tantamount to a repugnant
spoliation and an iniquitous deprivation of property, repulsive to the common sense of man. It
has no support in law, in principles of justice, or in the human conscience nor is there any
reason whatsoever which may justify such imposition as righteous and as one that may be
sustained within the sphere of public or private morals.
Stipulations authorizing iniquitous or unconscionable interests have been invariably
struck down for being contrary to morals, if not against the law. Indeed, under Article 1409 of
the Civil Code, these contracts are deemed inexistent and void ab initio, and therefore
cannot be ratified, nor may the right to set up their illegality as a defense be waived.
Nonetheless, the nullity of the stipulation of usurious interest does not affect the lenders right to
recover the principal of a loan, nor affect the other terms thereof. Thus, in a usurious loan with
mortgage, the right to foreclose the mortgage subsists, and this right can be exercised by the
creditor upon failure by the debtor to pay the debt due. The debt due is considered as without the
stipulated excessive interest, and a legal interest of 12% per annum will be added in place of the
excessive interest formerly imposed, following the guidelines laid down in the landmark case of
Eastern Shipping Lines, Inc. v. Court of Appeals, regarding the manner of computing legal interest:
BANKING LAW CASES
CASE TITLE BANCO FILIPINO SAVINGS and MORTGAGE BANK vs THE MONETARY BOARD
PROMULGATION
December 11, 1991
DATE
DIGEST BY Tomarong, Marian C.
TOPIC COVERED Section 29, Central Bank Act
DOCTRINE: Under Section 29 of Central Bank Act, the Monetary Board may order the cessation of
operations of a bank in the Philippine and place it under receivership upon a finding of insolvency or
when its continuance in business would involve probable loss its depositors or creditors. If the
Monetary Board shall determine and confirm within sixty (60) days that the bank is insolvent or can no
longer resume business with safety to its depositors, creditors and the general public, it shall, if public
interest will be served, order its liquidation.
If the Monetary Board shall later determine and confirm that banking institution is insolvent or cannot
resume business safety to depositors, creditors and the general public, it shall, public interest requires,
order its liquidation and appoint a liquidator who shall take over and continue the functions of
receiver previously appointed by Monetary Board. The liquid for may, in the name of the bank and
with the assistance counsel as he may retain, institute such actions as may necessary in the
appropriate court to collect and recover a counts and assets of such institution or defend any action
against the institution.
PONENTE: J. MEDIALDEA
FACTS:
G.R. No. 70054/ G.R. No. 78767/ G.R. No. 78894
On July 27, 1984, respondent Monetary Board issued M.B. Resolution No. 955 placing petitioner
bank under conservatorship of Basilio Estanislao who was later replaced by Gilberto Teodoro as
conservator. The latter submitted a report to respondent Board on the conservatorship of petitioner
bank, which report shall hereinafter be referred to as the Teodoro report.
On January 25, 1985, the Monetary Board issued the assailed MB Resolution No. 75 which
ordered the closure of BF. The receivers appointed by the Monetary Board were Carlota Valenzuela,
Arnulfo Aurellano and Ramon Tiaoqui. Then, petitioner BF filed a complaint with the Regional Trial
Court of Makati (Civil Case No. 9675) to set aside the action of the Monetary Board placing BF under
receivership which, at first, was granted but later dismissed the same on appeal to CA by the Central
Bank alleging that the receivers had not authorized anyone to file the action. Hence, this matter was
elevated to SC.
The receivers of Banco Filipino submitted their report on the receivership of BF to the Monetary
Board, in compliance with the mandate of Sec. 29 of R.A. 265 which provides that the Monetary
Board shall determine within sixty (60) days from date of receivership of a bank whether such bank
may be reorganized/permitted to resume business or ordered to be liquidated. Thereafter, the
Monetary Board placed the bank under liquidation and designated Valenzuela as liquidator and
Aurellano and Tiaoqui as deputy liquidators.
Then, petitioner elevated this matter to SC. On August 29, 1985, the SC resolved direct the
respondents Monetary Board and Central Bank hold hearings at which the petitioner should be
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heard, and terminate such hearings and submit its resolution within thirty (30) days. This Court further
resolved to issue a TRO enjoining the respondents from executing further acts of liquidation of a bank
and the CB was also ordered to designate comptroller for the petitioner BF.
After conducting hearings, as ordered by the SC, Judge Manuel Cosico of RTC Makati
submitted his report to the SC with the recommendation that the resolutions of respondents Monetary
Board and Central Bank authorizing the closure and liquidation of petitioner BP be upheld.
Subsequently, petitioner BF filed an urgent motion to reopen hearing to which respondents filed their
comment thereto. To obviate all doubts on Judge Cosico's impartiality, the SC designated a new
hearing commissioner in the person of former Judge Consuelo Santiago of the Regional Trial Court,
Makati, Branch 149 (now Associate Justice of the Court of Appeals). Thereafter, the latter submitted
her report and recommendation that BF's closure on January 25, 1985, not having satisfied the
requirements prescribed under Sec. 29 of RA 265, as amended, was null and void.
G.R. Nos. 77255-58/ G.R. No. 78766/ G.R. No. 81304/GR No. 81304/G.R. No. 90473/GR No. 68878
In consonance with this, petitioners Top Management, Pilar Development, El grande

Development, obtained loan from the said bank which was granted by the latter. The loan was
secured by real estate mortgage in their various properties. Subsequently, they failed to pay their
loan. Hence, the counsel for Banco Filipino under authority of Valenzuela as liquidator, applied for
extra-judicial foreclosure of the mortgage over their properties.
Hence, another petition was filed by above mentioned petitioners alleging that Carlota
Valenzuela, who was appointed by the Monetary Board as liquidator of Banco Filipino, has no
authority to proceed with the foreclosure sale of petitioners' properties on the ground that the
resolution of the issue on the validity of the closure and liquidation of Banco Filipino is still pending with
the SC in G.R. 70054.
This refers to nine (9) consolidated cases concerning the legality of the closure and receivership of
petitioner Banco Filipino Savings and Mortgage Bank pursuant to the order of respondent Monetary
Board.
ISSUE:
G.R. Nos. 68878, 77255-68, 78766, 81303, 81304 and 90473 - (1) whether or not the liquidator
appointed by the respondent Central Bank has the authority to prosecute as well as to defend suits,
and to foreclose mortgages for and in behalf of the bank while the issue on the validity of the
receivership and liquidation of the latter is pending resolution in G.R. No. 70054.- YES; (2) whether the
CB can be sued to fulfill financial commitments of a closed bank pursuant to Section 29 of the
Central Bank Act. - NO
G.R. Nos. 70054, 78767 and 78894 - (3) seek to annul and set aside M.B. Resolution No. 75 issued by
respondents Monetary Board and Central Bank on January 25, 1985. NULL AND VOID
RULING:
Section 29 of the Republic Act No. 265, as amended known as the Central Bank Act, provides
that when a bank is forbidden to do business in the Philippines and placed under receivership, the
person designated as receiver shall immediately take charge of the bank's assets and liabilities, as
BANKING LAW CASES
expeditiously as possible, collect and gather all the assets and administer the same for the benefit of
its creditors, and represent the bank personally or through counsel as he may retain in all actions or
proceedings for or against the institution, exercising all the powers necessary for these purposes
including, but not limited to, bringing and foreclosing mortgages in the name of the bank.
When the issue on the validity of the closure and receivership of Banco Filipino bank was
raised in G.R. No. 70054, pendency of the case did not diminish the powers and authority of the
designated liquidator to effectuate and carry on the a ministration of the bank. In fact when the SC
issued a restraining order to respondents Monetary Board and Central Bank, the former enjoined
further acts of liquidation. Such acts of liquidation, as explained in Sec. 29 of the Central Bank Act are
those which constitute the conversion of the assets of the banking institution to money or the sale,
assignment or disposition of the s to creditors and other parties for the purpose of paying debts of
such institution. The SC did not prohibit however act as receiving collectibles and receivables or
paying off credits claims and other transactions pertaining to normal operate of a bank. There is no
doubt that the prosecution of suits collection and the foreclosure of mortgages against debtors the
bank by the liquidator are among the usual and ordinary transactions pertaining to the administration
of a bank. They did the SC order in the same resolution for the designation by the Central Bank of a
comptroller Banco Filipino alter the powers and functions; of the liquid insofar as the management of
the assets of the bank is concerned. The mere duty of the comptroller is to supervise counts and
finances undertaken by the liquidator and to d mine the propriety of the latter's expenditures
incurred behalf of the bank. Notwithstanding this, the liquidator is empowered under the law to
continue the functions of receiver is preserving and keeping intact the assets of the bank in
substitution of its former management, and to prevent the dissipation of its assets to the detriment of
the creditors of the bank. These powers and functions of the liquidator in directing the operations of
the bank in place of the former management or former officials of the bank include the retaining of
counsel of his choice in actions and proceedings for purposes of administration.
Clearly, in G.R. Nos. 68878, 77255-58, 78766 and 90473, the liquidator by himself or through
counsel has the authority to bring actions for foreclosure of mortgages executed by debtors in favor
of the bank. In G.R. No. 81303, the liquidator is likewise authorized to resist or defend suits instituted
against the bank by debtors and creditors of the bank and by other private persons. Similarly, in G.R.
No. 81304, due to the aforestated reasons, the Central Bank cannot be compelled to fulfill financial
transactions entered into by Banco Filipino when the operations of the latter were suspended by
reason of its closure. The Central Bank possesses those powers and functions only as provided for in
Sec. 29 of the Central Bale the SC recognize the actual closure of Banco Filipino and the consequent
legal effects thereof on its operations, they cannot uphold the legality of its closure and thus, find the
petitions in G.R. Nos. 70054, 78767 and 78894 impressed with merit. We hold that the closure and
receivership of petitioner bank, which was ordered by respondent Monetary Board on January 25,
1985, is null and void.
Under Section 29 of the Central Bank Act, the following are the mandatory requirements to be
complied with before a bank found to be insolvent is ordered closed and forbidden to do business in
the Philippines:
Firstly, an examination shall be conducted by the head of the appropriate supervising or examining
department or his examiners or agents into the condition of the bank;
Tiaoqui based his report on an incomplete examination of petitioner bank (partial listings of
findings in the examination) and outrightly concluded therein that the latter's financial status was one
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of insolvency or illiquidity. Tiaoqui however admits the insufficiency and unreliability of the findings of
the examiner as to the setting up of recommended valuation reserves from the assets of petitioner
bank. It is evident that the examination contemplated in Sec. 29 of the CB Act as a mandatory
requirement was not completely and fully complied with. Despite the existence of the partial list of
findings in the examination of the bank, there were still highly significant items to be weighed and
determined such as the matter of valuation reserves, before these can be considered in the financial
condition of the bank. It would be a drastic move to conclude prematurely that a bank is insolvent if
the basis for such conclusion is lacking and insufficient, especially if doubt exists as to whether such
bases or findings faithfully represent the real financial status of the bank. As to the requirement of
notice and hearing, Sec. 29 of RA 265 does not require a previous hearing before the Monetary
Board implements the closure of a bank, since its action is subject to judicial scrutiny as provided for
under the same law.
Secondly, it shall be disclosed in the examination that the condition of the bank is one of insolvency,
or that its continuance in business would involve probable loss to its depositors or creditors; thirdly, the
department head concerned shall inform the Monetary Board in writing, of the facts; and lastly, the
Monetary Board shall find the statements of the department head to be true.
The test of insolvency laid down in Section 29 of the Central Bank Act is measured by
determining whether the realizable assets of a bank are less than its liabilities. Stated in other words,
the insolvency of a bank occurs when the actual cash market value of its assets is insufficient to pay
its liabilities, not considering capital stock and surplus which are not liabilities for such purpose In
arriving at the computation of realizable assets of petitioner bank, respondents used its books which
undoubtedly are not reflective of the actual cash or fair market value of its assets. This is not the
proper procedure contemplated in Sec. 29 of the Central Bank Act. Even the CB Manual of
Examination Procedures does not confine examination of a bank solely with the determination of the
books of the bank. The latter is part of auditing which should not be confused with examination.
Examination appraises the soundness of the institution's assets, the quality and character of
management and determines the institution's compliance with laws, rules and regulations. Audit is a
detailed inspection of the institution's books, accounts, vouchers, ledgers, etc. to determine the
recording of all assets and liabilities. Hence, examination concerns itself with review and appraisal,
while audit concerns itself with verification.
In view of the foregoing premises, the SC believes that the closure of the petitioner bank was
arbitrary and committed with grave abuse of discretion. Granting in gratia argumenti that the closure
was based on justified grounds to protect the public, the fact that petitioner bank was suffering from
serious financial problems should not automatically lead to its liquidation. Section 29 of the Central
Bank provides that a closed bank may be reorganized or otherwise placed in such a condition that it
may be permitted to resume business with safety to its depositors, creditors and the general public.
BANKING LAW CASES
CASE TITLE LETICIA MIRANDA V. PHILIPPINE DEPOSIT INSURANCE CORPORATION

PROMULGATION
September 8, 2006
DATE
DIGEST BY Tresvalles, Kris
TOPIC COVERED Power of the monetary board; disputed claims
DOCTRINE: that the Central Monetary Authority, through the Monetary Board, is vested with exclusive
be one of insolvency, or that its continuance in business would involve a probable loss to its
depositors or creditors, forbid bank or non-bank financial institution to do business in the Philippines;
and shall designate an official of the BSP or other competent person as receiver to immediately take
charge of its assets and liabilities.
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.
FACTS:
Petitioner Leticia G. Miranda was a depositor of Prime Savings Bank, Santiago City Branch. On June 3,
1999, she withdrew substantial amounts from her account, but instead of cash she opted to be issued
a crossed cashier's check. She was thus issued cashier's check no. 0000000518 in the sum of
P2,500,000.00 and cashier's check no. 0000000514 in the amount of P3,002,000.00.
Petitioner deposited the two checks into her account in another bank on the same day, however,
Bangko Sentral ng Pilipinas (BSP) suspended the clearing privileges of Prime Savings Bank effective
2:00 p.m. of June 3, 1999. The two checks of petitioner were returned to her unpaid.
On June 4, 1999, Prime Savings Bank declared a bank holiday. On January 7, 2000, the BSP placed
Prime Savings Bank under the receivership of the Philippine Deposit Insurance Corporation (PDIC).
Petitioner filed a civil action for sum of money in the Regional Trial Court of Santiago City, Isabela to
recover the funds from her unpaid checks against Prime Savings Bank, PDIC and the BSP.
Petitioner contends that she ceased to be a depositor upon withdrawal of her deposit and the
issuance of the two cashier's checks to her. As a holder in due course of the cashier's checks as
defined under Sections 52 and 191 of the Negotiable Instruments Law, she is an assignee of the funds
of Prime Savings Bank as drawer thereof and entitled to its immediate payment.
Petitioner next argues that the present claim is not a disputed claim in contemplation of Section 30 of
the New Central Bank Act. Since disputed claims refer to all claims, whether they be against the
assets of the insolvent bank, for specific performance, breach of contract, or damages, it is manifest
that petitioner's claim cannot fall within the purview of a disputed claim because she is recovering
assigned funds which are segregated monies of Prime Savings Bank.
Petitioner further states that by the mere issuance of the cashier's check, the funds represented by
the check are transferred from the credit of the maker to that of the payee or holder. Hence,
petitioner alleges that she cannot be placed on the same footing with the ordinary creditors of the
bank because Section 30 of R.A. No. 7653 is for equality among creditors. She avers that she is not a
creditor thus is entitled to the immediate payment of her claim, pursuant to Section 189 of the
Negotiable Instruments Law and existing jurisprudence. She argues that putting her on equal footing
BANKING LAW CASES
with ordinary creditors, would contravene the provisions of the Negotiable Instruments Law and
would greatly diminish her rights as a holder in due course of said two cashier's checks.
Petitioner also argues that respondents PDIC and BSP contrary to Sections 185 and 189 of the
Negotiable Instruments Law have caused damage to the petitioner and should be held solidarily
liable by indemnifying the petitioner for the value of the two cashier's checks. Respondents, on the
other hand, state that the mere issuance of the cashier's checks did not operate as assignment of
funds in favor of the petitioner. They argue that even prior to the issuance of the cashier's checks, the
bank was already cash-strapped, which negates petitioner's claim that there was an assignment of
funds in her favor. There can be no assignment of funds when there is no funds to speak of in the first
place.
They likewise argue that the cashier's checks issued to petitioner were not certified but crossed,
hence, there was no assignment of funds made by the cashier or manager of respondent Prime
Savings Bank-Santiago City Branch as it had insufficient funds to meet the said checks either in its
cash vault or with respondent BSP to clear the said checks.
Respondents argue that the instant case involves a disputed claim of sum of money against a closed
financial institution. Sections 30 and 31 of R.A. No. 7653, exclusively vests the authority to assess,
evaluate and determine the condition of any bank with the BSP, while the PDIC has the primary
responsibility of acting as receiver or liquidator of the closed financial institution. Since the relationship
between petitioner and Prime Savings Bank is one of creditor and debtor, petitioner should file her
claim with the liquidation court constituted precisely for purposes of adjudicating claims against the
bank in accordance with the rules on concurrence and preference of credits.
Respondent PDIC alleges that it was impleaded in its representative capacity as the
receiver/liquidator of the closed institution, therefore, it has no direct, personal and solidary liability for
the payment of the two cashier's checks. Its involvement came about only because a bank under
receivership or liquidation cannot sue or be sued except through its receiver or liquidator.
Respondent BSP also insists that not being a party to the said checks nor for imposing sanctions on
co-respondent Prime Savings Bank, is not liable on the said crossed cashier's checks.
ISSUE:
(1) Whether the two cashier's checks operate as an assignment of funds in the hands of the
petitioner;
(2) (2) Whether the claim lodged by the petitioner is a disputed claim under Section 30 of
Republic Act (R.A.) No. 7653, otherwise known as the New Central Bank Act, and therefore, under
the jurisdiction of the liquidation court; and
(3) (3) Whether the respondents are solidarily liable to the petitioner.
RULING:
1. The two cashier's 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 on June
3, 1999. As the Court of Appeals correctly ruled, the issuance of the cashier's checks to
petitioner 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.
BANKING LAW CASES
2. The second issue, the claim lodged by the petitioner 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.
The power and authority of the Monetary Board to close banks and liquidate them thereafter
when public interest so requires is an exercise of the police power of the State.
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. Petitioner's claim which
involved the payment of the two cashier's checks that were not honored by Prime Savings
Bank due to its closure falls within the ambit of a claim against the assets of the insolvent bank.
The issuance of the cashier's checks by Prime Savings Bank to the petitioner created a
debtor/creditor relationship between them. This disputed claim should therefore be lodged in
the liquidation proceedings by the petitioner as creditor, since the closure of Prime Savings
Bank has rendered all claims subsisting at that time moot which can best be threshed out by
the liquidation court and not the regular courts.
It is well-settled in both law and jurisprudence that the Central Monetary Authority, through the
Monetary Board, is vested with exclusive authority to assess, evaluate and determine the
condition of any bank, and finding such condition to be one of insolvency, or that its
continuance in business would involve a probable loss to its depositors or creditors, forbid bank
or non-bank financial institution to do business in the Philippines; and shall designate an official
of the BSP or other competent person as receiver to immediately take charge of its assets and
liabilities.
In Central Bank of the Philippines v. De la Cruz,2 we held that the actions of the Monetary
Board in proceedings on insolvency are explicitly declared by law to be "final and executory."
They may not be set aside, or restrained, or enjoined by the courts, except upon "convincing
proof that the action is plainly arbitrary and made in bad faith.
Hence, as clearly laid down in Ong v. Court of Appeals, the rationale behind judicial
liquidation is intended to prevent multiplicity of actions against the insolvent bank
3. It is only Prime Savings Bank that is liable to pay for the amount of the two cashier's checks.
Solidary liability cannot attach to the BSP, in its capacity as government regulator of banks,
and the PDIC as statutory receiver under R.A. No. 7653, because they are the principal
government agencies mandated by law to determine the financial viability of banks and
quasi-banks, and facilitate receivership and liquidation of closed financial institutions, upon a
factual determination of the latter's insolvency.
As correctly pointed out by the Court of Appeals, the BSP should not be held liable on the
crossed cashier's checks for it was not a party to the issuance of the same; nor can it be held
liable for imposing the sanctions on Prime Savings Bank which indirectly affected Miranda,
since it is mandated under Sec. 37 of R.A. No. 7653 to act accordingly. The BSP, through the
Monetary Board was well within its discretion to exercise this power granted by law to issue a
resolution suspending the interbank clearing privileges of Prime Savings Bank, having made a
BANKING LAW CASES
factual determination that the bank had deficient cash reserves deposited before the BSP.
There is no showing that the BSP abused this discretionary power conferred upon it by law.
In addition, co-respondent PDIC was impleaded as a party-litigant only in its representative

capacity as the receiver/liquidator of Prime Savings Bank. Both BSP and PDIC cannot therefore
be held directly and solidarily liable for the payment of the two cashier's checks. Sole liability
rests with Prime Savings Bank.
In the absence of fraud, the purchase of a cashier's 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 cashier's 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.
As correctly found by the Court of Appeals:

Prime Savings as a bank did not collapse overnight but was hemorrhaging and in financial
extremis for some time, a fact which could not have gone unnoticed by the bank officers.
They could not have issued in good faith checks for the total sum of P5,502,000.00 knowing
that the bank's coffers could not meet this.
Clearly, there was fraud or the intent to deceive when the two cashier's checks dated June 3,
1999 were issued by Prime Savings Bank to the petitioner.
In the distribution of assets of Prime Savings Bank, Section 31 of the New Central Bank Act
which provides that "[i]n case of liquidation of a bank or quasi-bank, after payment of the cost
of proceedings, including reasonable expenses and fees of the receiver to be allowed by the
court, the receiver shall pay the debts of such institution, under order of the court, in
accordance with the rules on concurrence and preference of credit as provided in the Civil
Code," should apply.
BANKING LAW CASES
CASE TITLE CENTRAL BANK OF THE PHILIPPINES vs. COURT OF APPEALS

PROMULGATION
March 30, 1993
DATE
DIGEST BY Tuason, Jannelle J.
TOPIC COVERED Banking Laws
DOCTRINE: Sec. 29 of R.A. 265 is a sound legislation promulgated in accordance with the Constitution
in the exercise of police power of the state. Consequently, the absence of notice and hearing is not
a valid ground to annul a Monetary Board resolution placing a bank under receivership. The absence
of prior notice and hearing cannot be deemed acts of arbitrariness and bad faith.
PONENTE: BELLOSILLO, J.
FACTS:
Based on examination reports submitted by the Supervision and Examination Sector (SES),
Department II, of the Central Bank (CB) "that the financial condition of Triumph Savings Bank(TSB) is
one of insolvency and its continuance in business would involve probable loss to its depositors and
creditors, "the Monetary Board (MB) issued a resolution ordering the closure of TSB, forbidding it from
doing business.
TSB filed a complaint with the RTC Quezon City, against Central Bank and Ramon V. Tiaoqui to annul
the resolution with prayer for injunction, challenging in the process the constitutionality of Sec. 29 of
R.A. 269, otherwise known as "The Central Bank Act," as amended, insofar as it authorizes the Central
Bank to take over a banking institution even if it is not charged with violation of any law or regulation,
much less found guilty thereof in the Philippines, placing it under receivership. TSB, on the other hand,
allege inter alia that in the Banco Filipino case which held that CB violated the rule on administrative
due process laid down in AngTibay vs. CIR (69 Phil. 635) and Eastern Telecom Corp. vs. Dans, Jr. (137
SCRA 628) which requires that prior notice and hearing be afforded to all parties in administrative
proceedings. Since MB Resolution was adopted without TSB being previously notified and heard,
according to respondents, the same is void for want of due process; consequently, the bank's
management should be restored to its board of directors and officers.
ISSUE:
Whether or not absence of prior notice and hearing are constitutive of acts of arbitrariness and bad
faith?
RULING:
No. Under Sec. 29 of R.A. 265,the Central Bank, through the Monetary Board, is vested with exclusive
be one of insolvency, or that its continuance in business would involve probable loss to its depositors
or creditors, forbid the bank or non-bank financial institution to do business in the Philippines; and shall
designate an official of the CB or other competent person as receiver to immediately take charge of
its assets and liabilities. The fourth paragraph, which was then in effect at the time the action was
commenced, allows the filing of a case to set aside the actions of the Monetary Board which are
tainted with arbitrariness and bad faith. It may be emphasized that Sec. 29 does not altogether
divest a bank or a non-bank financial institution placed under receivership of the opportunity to be
heard and present evidence on arbitrariness and bad faith because within ten (10) days from the
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date the receiver takes charge of the assets of the bank, resort to judicial review may be had by
filing an appropriate pleading with the court.
Respondent TSB did in fact avail of this remedy by filing a complaint with the RTC of Quezon City on
the 8th day following the takeover by the receiver of the bank's assets xxx. We rule that Sec. 29 of
R.A. 265 is a sound legislation promulgated in accordance with the Constitution in the exercise of
police power of the state. Consequently, the absence of notice and hearing is not a valid ground to
annul a Monetary Board resolution placing a bank under receivership. The absence of prior notice
and hearing cannot be deemed acts of arbitrariness and bad faith. Thus, an MB resolution placing a
bank under receivership, or conservatorship for that matter, may only be annulled after a
determination has been made by the trial court that its issuance was tainted with arbitrariness and
bad faith. Until such determination is made, the status quo shall be maintained, i.e., the bank shall
continue to be under receivership.
BANKING LAW CASES
CASE TITLE BANGKO SENTRAL NG PILIPINAS, MONETARY BOARD v HON NINA G

VALENZUELA
PROMULGATION
October 2, 2009
DATE
DIGEST BY UY, Alexander Charles L.
TOPIC COVERED Banking Law Section 28,29, and 30 of RA 7653
DOCTRINE: The actions of the monetary board of the Central Bank under Section 28 and 29 (Sec. 28
Examination of Banks; Sec 29 Appointment of a conservator) cannot be enjoined by a court except
by certiorari on the grounds that the action taken was in excess of jurisdiction or with grave abuse of
discretion amounting to absence or lack of jurisdiction
FACTS:
In September of 2007, the Supervision and Examination Department of the BSP conducted
inspections of the banks in question (respondent banks). After the examination, the Department
found several irregularities with the respondent banks and ordered them to comply with remedial
measures. Despite this warning from the SED, the respondent banks failed to comply with the
demands of the BSP.
On May 12, 2008, respondent RBPI filed a complaint for nullification of the Report of Examination
compiled by the SED and prayed that a TRO be issued preventing the SED from submitting the said
ROE to the Monetary Board. The ground relied upon by the respondent banks was that they had not
received a copy of the said ROE, even if they have copies of the preliminary reports that are
identical to the ROE itself. The prayer for the writ was eventually granted by respondent judge.
Before the CA, the petitioners appealed, but the CA ruled in favour of respondents. Pending the
case reaching the Court, the SED, by reason of a TRO (applied for by petitioners in this case.) was
able to submit the ROE to the Monetary Board, and on the basis of the same, ordered that the banks
be placed under receivership.
ISSUE:
Whether or not it was proper for the RTC Judge (Respondent Valenzuela) to issue the restraining
order, restraining the SED from submitting the ROE to the monetary board
RULING:
The Court ruled in the negative. The Court said that the issuance of the writ of injunction is an
unwarranted interference by the RTC on the powers of the Monetary Board. Under Section 29 and 30
of RA 7653, the Monetary Board is empowered to appoint conservators in order to safeguard the
banking industry and to protect the interest of the banking public. In order to know where and when
to appoint, the board must necessarily have copies of the ROE, the findings of the SED and from
such, determine whether or not they can exercise their power to appoint. This does not mean that
the Board can appoint at any time, for a bank could still challenge the appointment, though could
only do so upon the grounds that the action was taken in excess of jurisdiction or with grave abuse of
discretion, and only on certiorari.
BANKING LAW CASES
CASE TITLE LUCIA BARRAMEDA VDA. DE BALLESTEROS V. RURAL BANK OF CANAMAN INC
PROMULGATION
November 24, 2010
DATE
DIGEST BY Vizcarra, William
TOPIC COVERED Banking law; Liquidation
DOCTRINE: One of the exceptions of the Doctrine of Adherence of Jurisdiction is that when the
change in jurisdiction is curative in character.
A liquidation proceeding is a single proceeding which consists of a number of cases properly

classified as "claims." A disputed claim refers to all claims, whether they are against the assets of the
FACTS:
Lucia Barrameda Vda. De Ballesteros (Lucia) filed a complaint for Annulment of Deed of Extrajudicial
Partition, Deed of Mortgage and Damages with prayer for Preliminary Injunction against her children
and the Rural Bank of Canaman, Inc. (RBCI) before the RTC-Iriga (Civil Case No. IR-3128).
RBCIs counsel filed a motion to withdraw after being informed that Philippine Deposit Insurance
Corporation (PDIC) would handle the case as RBCI had already been closed and placed under the
receivership of the PDIC. Consequently, the lawyers of PDIC took over the case of RBCI.
RBCI, through PDIC, filed a motion to dismiss on the ground that the RTC-Iriga has no jurisdiction over
the subject matter of the action. RBCI stated that pursuant to Section 30, Republic Act No. 7653 (New
Central Bank Act), the RTC-Makati, already constituted itself as the liquidation court to assist PDIC in
undertaking the liquidation of RBCI. Thus, the subject matter of Civil Case No. IR-3128 fell within the
exclusive jurisdiction of such liquidation court.
The RTC-Iriga granted the Motion to Dismiss
CA ordered the consolidation of Civil Case No. IR-3128 and the liquidation case pending before RTC-
Makati.
Lucia now argues before the Supreme Court that the consolidation of the two cases is improper. Her
case, which is for annulment of deed of partition and waiver, deed of mortgage and damages,
cannot be legally brought before the RTC-Makati with the liquidation case considering that her
cause of action against RBCI is not a simple claim arising out of a creditor-debtor relationship, but
one which involves her rights and interest over a certain property irregularly acquired by RBCI.
ISSUE:
1. Whether the dismissal of the Civil Case No. IR-3128 pending in RTC-Iriga and consolidation of the
Civil Case No. IR-3128 and liquidation case pending in RTC-Makati violates the Doctrine of
Adherence of Jurisdiction.
2. Whether a liquidation court can take cognizance of a case wherein the main cause of action is
not a simple money claim against a bank ordered closed, placed under receivership of the PDIC,
and undergoing a liquidation proceeding.
BANKING LAW CASES
RULING:
1. No.
The Court recognizes the doctrine on adherence of jurisdiction. However, Lucia must be reminded
that such principle is not without exceptions. One of the exceptions is that when the change in
jurisdiction is curative in character. For sure, Section 30, R.A. 7653 is curative in character when it
declared that the liquidation court shall have jurisdiction in the same proceedings to assist in the
adjudication of the disputed claims against the Bank.
2. Yes, the liquidation court has a jurisdiction.

A liquidation proceeding is a single proceeding which consists of a number of cases properly
classified as "claims." A disputed claim refers to all claims, whether they are against the assets of the
It is clear therefore, that the liquidation court has jurisdiction over all claims, including that of Lucia
against the insolvent bank.
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 sum, this Court holds that the consolidation is proper considering that the liquidation court has
jurisdiction over Lucias action. It would be more in keeping with law and equity if Lucias case is
consolidated with the liquidation case in order to expeditiously determine whether she is entitled to
recover the property subject of mortgage from RBCI and, if so, how much she is entitled to receive
from the remaining assets of the bank.
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.
Thus, to allow Lucias case to proceed independently of the liquidation case, a possibility of favorable
judgment and execution thereof against the assets of RBCI would not only prejudice the other
creditors and depositors but would defeat the very purpose for which a liquidation court was
constituted as well.
BANKING LAW CASES
CASE TITLE LETICIA G. MIRANDA vs. PHILIPPINE DEPOSIT INSURANCE CORPORATION,

BANGKO SENTRAL NG PILIPINAS and PRIME SAVINGS BANK
PROMULGATION
September 8, 2006
DATE
DIGEST BY YATCO, NATHANIEL
TOPIC COVERED BANKING LAWS; New Central Bank Act, Section 31
DOCTRINE: Section 31 of the New Central Bank Act which provides that "[i]n case of liquidation of a
bank or quasi-bank, after payment of the cost of proceedings, including reasonable expenses and
fees of the receiver to be allowed by the court, the receiver shall pay the debts of such institution,
under order of the court, in accordance with the rules on concurrence and preference of credit as
provided in the Civil Code," should apply.
PONENTE: YNARES-SANTIAGO, J.
FACTS:
Petitioner Leticia Miranda withdrew from her account P2.5M and P3.002M (total: P5,502,000.00) as
evidenced by 2 crossed checks issued by Prime Savings Bank. The following day, she deposited the
two checks to another bank, however, on that same day, BSP suspended the clearing of checks
issued by Prime Savings. Such checks were returned to her unpaid. 6 months thereafter, Prime Savings
was put on receivership by the BSP to PDIC. Petitioner filed a civil action for sum of money to RTC
Isabela against Prime Savings, PDIC and BSP. RTC held in favour of Petitioners. CA reversed.
ISSUE:
Whether or not the PDIC and BSP are solidarily liable to pay the petitioner.
RULING:
Prime Savings Bank is solely liable to pay for the amount of the two cashiers checks. Solidary liability
cannot attach to the BSP, in its capacity as government regulator of banks, and the PDIC as statutory
receiver under R.A. No. 7653, because they are the principal government agencies mandated by
law to determine the financial viability of banks and quasi-banks, and facilitate receivership and
liquidation of closed financial institutions, upon a factual determination of the latters insolvency.
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. Hence, the CA decision is affirmed with
modification that the claim of petitioner Miranda is entitled to preference in the assets of PSB in its
liquidation.
Prime Savings as a bank did not collapse overnight but was hemorrhaging and in financial extremis
for some time, a fact which could not have gone unnoticed by the bank officers. They could not
have issued in good faith checks for the total sum of P5,502,000.00 knowing that the bank's coffers
could not meet this.
Clearly, there was fraud or the intent to deceive when the two cashier's checks dated June 3, 1999
were issued by Prime Savings Bank to the petitioner.
BANKING LAW CASES
In the distribution of assets of Prime Savings Bank, Section 31 of the New Central Bank Act which
provides that "[i]n case of liquidation of a bank or quasi-bank, after payment of the cost of
proceedings, including reasonable expenses and fees of the receiver to be allowed by the court, the
receiver shall pay the debts of such institution, under order of the court, in accordance with the rules
on concurrence and preference of credit as provided in the Civil Code," should apply.
SC affirmed CA decision with the modification that petitioner Leticia G. Miranda is entitled to a
preference in the assets of Prime Savings Bank in its liquidation for the amounts of P3,002,000.00 and
P2,500,000.00, in the proceedings before the liquidation court designated to adjudicate on all claims
against Prime Savings Bank, in accordance with the rules on concurrence and preference of credits
as provided in the Civil Code.
BANKING LAW CASES
CASE TITLE PHILIPPINE DEPOSIT INSURANCE CORPORATION, Petitioner, vs. BUREAU OF

INTERNAL REVENUE, Respondent.
PROMULGATION
June 13, 2013
DATE
DIGEST BY ALVAREZ, MELISSA P.
TOPIC COVERED Certificate of Tax Clearance under Section 52(C); liquidation under the New
Central Bank Act.
DOCTRINE: A tax clearance is not a prerequisite to the approval of the project of distribution of the
assets of a bank under liquidation by the Philippine Deposit Insurance Corporation (PDIC).
FACTS:
The Monetary Board of the BSP prohibited the Rural Bank of Tuba (Benguet), Inc. (RBTI) from doing
business in the Philippines, placed it under receivership in accordance with Section 30 of Republic
Act No. 7653, otherwise known as the "New Central Bank Act," and designated the PDIC as receiver.
PDIC conducted an evaluation of RBTIs financial condition and determined that RBTI remained
insolvent. Thus, the Monetary Board issued Resolution directing PDIC to proceed with the liquidation
of RBTI. Accordingly and pursuant to Section 30 of the New Central Bank Act, PDIC filed in the RTC a
petition for assistance in the liquidation of RBTI. The trial court gave the petition due course and
approved it. As an incident of the proceedings, the BIR intervened as one of the creditors of RBTI. The
BIR prayed that the proceedings be suspended until PDIC has secured a tax clearance required
under Section 52(C) of Republic Act No. 8424, otherwise known as the "Tax Reform Act of 1997" or the
"Tax Code of 1997,". The trial court granted BIRs motion. PDIC moved for partial reconsideration of
the Order and argued that Section 52(C) of the Tax Code of 1997 does not cover closed banking
institutions as the liquidation of closed banks is governed by Section 30 of the New Central Bank Act.
The motion was, however, denied.
ISSUE:
Whether or not a bank placed under liquidation has to secure a tax clearance from the BIR before
the project of distribution of the assets of the bank can be approved by the liquidation court.
RULING:
No. A tax clearance is not a prerequisite to the approval of the project of distribution of the assets of
a bank under liquidation by the Philippine Deposit Insurance Corporation (PDIC) for the following
reasons:
(1) Section 52(C) of the National Internal Revenue Code of 1997 pertains only to a regulation of the
relationship between the Securities and Exchange Commission (SEC) and the Bureau of Internal
Revenue (BIR) with respect to corporations contemplating dissolution or reorganization. On the other
hand, banks under liquidation by the PDIC as ordered by the Monetary Board constitute a special
case governed by the special rules and procedures provided under Section 30 of the New Central
Bank Act, which does not require that a tax clearance be secured from the BIR.
(2) Only a final tax return is required to satisfy the interest of the BIR in the liquidation of a closed
bank, which is the determination of the tax liabilities of a bank under liquidation by the PDIC. In view
of the timeline of the liquidation proceedings under Section 30 of the New Central Bank Act, it is
unreasonable for the liquidation court to require that a tax clearance be first secured as a condition
for the approval of project of distribution of a bank under liquidation.
BANKING LAW CASES
(3) It is not for the courts to fill in any gap in current statutes and regulations as to the relations
among the BIR, the Bangko Sentral ng Pilipinas and the PDIC. It is up to the legislature to address the
matter through appropriate legislation, and to the executive to provide the regulations for its
implementation.
(4) Section 30 of the New Central Bank Act expressly provides that debts and liabilities of the bank
under liquidation are to be paid in accordance with the rules on concurrence and preference of
credit under the Civil Code. Duties, taxes, and fees due the Government enjoy priority only when
they are with reference to a specific movable property, under Article 2241(1) of the Civil Code, or
immovable property, under Article 2242(1) of the same Code. However, with reference to the other
real and personal property of the debtor, sometimes referred to as free property, the taxes and
assessments due the National Government, other than those in Articles 2241(1) and 2242(1) of the
Civil Code, such as the corporate income tax, will come only in ninth place in the order of
preference. If a tax clearance shall be required before the project of distribution of the assets of a
bank under liquidation may be approved, then its tax liabilities will be given absolute preference in all
instances, including those that do not fall under Articles 2241(1) and 2242(1) of the Civil Code.
BANKING LAW CASES
CASE TITLE GOVERNMENT SERVICE INSURANCE SYSTEM versus-

THE HONORABLE 15TH DIVISION OF THE COURT OF APPEALS, ET AL
PROMULGATION
JUNE 8, 2011
DATE
DIGEST BY ARCILLA, JAY S.
TOPIC COVERED SECRECY OF FOREIGN CURRENCY DEPOSIT
DOCTRINE: RA 6426 only provides a single exception to the secrecy of foreign currency deposits, that
is, disclosure is allowed only upon the written permission of the depositor
PONENTE: PEREZ, J.:
FACTS:
This case is an offshoot of a main case for collection of sum of money with damages filed by
Industrial Bank of Korea, Tong Yang Merchant Bank, First Merchant Banking Corporation, Land Bank
of the Philippines, and Westmont Bank (now United Overseas Bank), collectively known as the Banks
against Domsat Holdings, Inc. (Domsat) and the Government Service Insurance System (GSIS). It
stemmed from a Loan Agreement, whereby the Banks agreed to lend $11 Million to Domsat for the
purpose of financing the lease and/or purchase of a Gorizon Satellite from the International
Organization of Space Communications (Intersputnik).
The controversy originated from a surety agreement by which Domsat obtained a surety bond
from GSIS to secure the payment of the loan from the Banks. Domsat failed to pay the loan, however,
GSIS refused to comply with its obligation reasoning that Domsat did not use the loan proceeds for
the payment of rental for the satellite. GSIS alleged that Domsat, with Westmont Bank as the conduit,
transferred the U.S. $11 Million loan proceeds from the Industrial Bank of Korea to Citibank New York
account of Westmont Bank and from there to the Binondo Branch of Westmont Bank. The Banks filed
a complaint before the RTC of Makati against Domsat and GSIS.
GSIS requested for the issuance of a subpoena duces tecum to the custodian of records of
Westmont Bank. The basis for the application of subpoena is to prove that the loan intended for
Domsat by the Banks and guaranteed by GSIS, was diverted to a purpose other than that stated in
the surety bond. The Banks, however, argue that GSIS is in fact liable to them for the proper
applications of the loan proceeds and not vice-versa. GSIS insists that Domsats deposit with
Westmont Bank can be examined and inquired into. It anchored its argument on Republic Act No.
1405 or the Law on Secrecy of Bank Deposits, which allows the disclosure of bank deposits in cases
where the money deposited is the subject matter of the litigation. The Banks maintain that Republic
Act No. 1405 is not the applicable law in the instant case because the Domsat deposit is a foreign
currency deposit, thus covered by Republic Act No. 6426. Under said law, only the consent of the
depositor shall serve as the exception for the disclosure of his/her .
RTC
The RTC issued a subpoena decus tecum on 21 November 2002. A motion to quash was filed
by the banks. On 9 April 2003, the RTC issued an Order denying the motion to quash for lack of merit.
On 26 June 2003, another Order was issued by the RTC denying the motion for reconsideration filed
by the banks. On 1 September 2003 however, the trial court granted the second motion for
reconsideration filed by the banks. The previous subpoenas issued were consequently quashed
C.A.
CA opined that Domsats deposit of $11,000,000.00 in Westmont Bank is covered by the Bank
Secrecy Law, as such it cannot be examined, inquired or looked into without the written consent of its
BANKING LAW CASES
owner. It however upheld the issuance of subpoena praying for the production of applications for
cashiers or managers checks by Domsat through Westmont Bank, as well as a copy of an Agreement
and/or Contract and/or Memorandum between Domsat and/or Philippine Agila Satellite and
Intersputnik for the acquisition and/or lease of a Gorizon Satellite. The appellate court believed that
the production of these documents does not involve the examination of Domsats account since it will
never be known how much money was deposited into it or withdrawn therefrom and how much
remains therein.
ISSUE:
Whether Republic Act No. 6426 or Republic Act No. 1405 should apply in the instant case.
RULING:
Applying Section 8 of Republic Act No. 6426, absent the written permission from Domsat, Westmont
Bank cannot be legally compelled to disclose the bank deposits of Domsat, otherwise, it might
expose itself to criminal liability under the same act, thus;
Section 8. Secrecy of Foreign Currency Deposits. All foreign currency deposits

authorized under this Act, as amended by Presidential Decree No. 1035, as well as
foreign currency deposits authorized under Presidential Decree No. 1034, are hereby
declared as and considered of an absolutely confidential nature and, except upon the
written permission of the depositor, in no instance shall foreign currency deposits be
examined, inquired or looked into by any person, government official, bureau or office
whether judicial or administrative or legislative or any other entity whether public or
private; Provided, however, That said foreign currency deposits shall be exempt from
attachment, garnishment, or any other order or process of any court, legislative body,
government agency or any administrative body whatsoever. (As amended by PD No.
1035, and further amended by PD No. 1246, prom. Nov. 21, 1977.)
According to the Court, these two laws both support the confidentiality of bank deposits. There is no
conflict between them. Republic Act No. 1405 was enacted for the purpose of giving
encouragement to the people to deposit their money in banking institutions and to discourage
private hoarding so that the same may be properly utilized by banks in authorized loans to assist in
the economic development of the country.It covers all bank deposits in the Philippines and no
distinction was made between domestic and foreign deposits. Thus, Republic Act No. 1405 is
considered a law of general application. On the other hand, Republic Act No. 6426 was intended to
encourage deposits from foreign lenders and investors. It is a special law designed especially for
foreign currency deposits in the Philippines. A general law does not nullify a specific or special
law. Generalia specialibus non derogant
BANKING LAW CASES
CASE TITLE CHINA BANKING CORPORATION vs. THE HONORABLE COURT OF APPEALS and
JOSE JOSEPH GOTIANUY as substituted by ELIZABETH GOTIANUY LO
PROMULGATION
December 18, 2006
DATE
DIGEST BY Azarcon, Pia Lea Andrea C.
TOPIC COVERED Secrecy of Foreign Currency Deposits
DOCTRINE: Foreign currency deposits authorized under P.D. No. 1034 are considered absolutely
confidential in nature and may not be inquired into. There is only one exception to the secrecy of
foreign currency deposits, that is, disclosure is allowed upon the written permission of the depositor.
PONENTE: CHICO-NAZARIO, J.
FACTS:
Respondent Jose Gotianuy accused his daughter Mary Margaret Dee of stealing US dollar deposits
with Citibank N.A. Mary Margaret Dee received these amounts from Citibank N.A. through checks
which she allegedly deposited at China Banking Corporation (China Bank). A Complaint for recovery
of sums of money and annulment of sales of real properties and shares of stock was filed by Jose
Joseph Gotianuy against his son-in-law, George Dee, and his daughter, Mary Margaret Dee, before
the Regional Trial Court (RTC) of Cebu City. Respondent died during the pendency of the case and
substituted by Elizabeth Gotionuy Lo. Upon motion of the latter, the trial court issued a subpoena to
the employees of China Bank, to testify on the case. China Bank moved for a reconsideration.
Resolving the motion, the trial court held that Chinabank employees may appear before the court
but only for the purpose of disclosing in whose name or names is the foreign currency fund deposited
with the movant Bank and not to other matters material and relevant to the issues in the case at bar.
China Bank filed a Petition for Certiorari with the Court of Appeals. The latter denied the petition of
China Bank and affirmed the Order of the RTC.
ISSUE:
Whether or not petitioner China Bank is correct in its submission that the Citibank dollar checks with
both Jose Gotianuy and/or Mary Margaret Dee as payees, deposited with China Bank, may not be
looked into under the law on secrecy of foreign currency deposits.
RULING:
NO. SEC. 8. Secrecy of Foreign Currency Deposits. All foreign currency deposits authorized under this
Act, as amended by Presidential Decree No. 1035, as well as foreign currency deposits authorized
under Presidential Decree No. 1034, are hereby declared as and considered of an absolutely
confidential nature and, except upon the written permission of the depositor, in no instance shall
such foreign currency deposits be examined, inquired or looked into by any person, government
official, bureau or office whether judicial or administrative or legislative or any other entity whether
public or private: Provided, however, that said foreign currency deposits shall be exempt from
attachment, garnishment, or any other order or process of any court, legislative body, government
agency or any administrative body whatsoever. (As amended by PD No. 1035, and further amended
by PD No. 1246, prom. Nov. 21, 1977)
Under the above provision, the law provides as a general rule that all foreign currency deposits
authorized under RA No. 6426, as amended by Sec. 8, PD No. 1246, PD No. 1035, as well as foreign
currency deposits authorized under PD No. 1034 are considered absolutely confidential in nature and
BANKING LAW CASES
may not be inquired into except when the disclosure is allowed upon the written permission of the
depositor.
The Court of Appeals, in allowing the inquiry, considered Jose Gotianuy, a co-depositor of Mary
Margaret Dee. It reasoned that since Jose Gotianuy is the named co-payee of the latter in the
subject checks, which checks were deposited in China Bank, then, Jose Gotianuy is likewise a
depositor thereof. On that basis, no written consent from Mary Margaret Dee is necessitated.
We agree in the conclusion arrived at by the Court of Appeals.
The following facts are established: (1) Jose Gotianuy and Mary Margaret Dee are co-payees of
various Citibank checks; (2) Mary Margaret Dee withdrew these checks from Citibank;(3) Mary
Margaret Dee admitted in her Answer to the Request for Admissions by the Adverse Party sent to her
by Jose Gotianuy that she withdrew the funds from Citibank upon the instruction of her father
Jose Gotianuy and that the funds belonged exclusively to the latter; (4) these checks were endorsed
by Mary Margaret Dee at the dorsal portion; and (5) Jose Gotianuy discovered that these checks
were deposited with China Bank as shown by the stamp of China Bank at the dorsal side of the
checks.
Thus, with this, there is no issue as to the source of the funds. Mary Margaret Dee declared the source
to be Jose Gotianuy. There is likewise no dispute that these funds in the form of Citibank US dollar
Checks are now deposited with China Bank. As the owner of the funds unlawfully taken and which
are undisputably now deposited with China Bank, Jose Gotianuy has the right to inquire into the said
deposits.
Furthermore, it is indubitable that the Citibank checks were drawn against the foreign currency
account with Citibank, NA. The monies subject of said checks originally came from the late
Jose Gotianuy, the owner of the account. Thus, he also has legal rights and interests in the China
Bank account where said monies were deposited. More importantly, the Citibank checks readily
demonstrate that the late Jose Gotianuy is one of the payees of said checks. Being a co-payee
thereof, then he or his estate can be considered as a co-depositor of said checks. Ergo, since the
late Jose Gotianuy is a co-depositor of the China Bank account, then his request for the assailed
subpoena is tantamount to an express permission of a depositor for the disclosure of the name of the
account holder.
One more point. It must be remembered that in the complaint of Jose Gotianuy, he alleged that his
US dollar deposits with Citibank were illegally taken from him. On the other hand, China Bank
employee testified that Mary Margaret Dee came to China Bank and deposited the money of
Jose Gotianuy in Citibank US dollar checks to the dollar account of her sister Adrienne Chu. This
fortifies our conclusion that an inquiry into the said deposit at China Bank is justified. At the very least,
Jose Gotianuy as the owner of these funds is entitled to a hearing on the whereabouts of these funds.
***All things considered and in view of the distinctive circumstances attendant to the present case,
the court are constrained to render a limited pro hac vice ruling.
BANKING LAW CASES
CASE TITLE INTENGAN VS. CA

CITATION 377 SCRA 63
PROMULGATION
February 15, 2002
DATE
DIGEST BY Bacolod, Christobal
TOPIC COVERED RA NO. 6426
DOCTRINE: filing of the complaint or information in the case at bar for alleged violation of Republic
Act No. 1405 did not have the effect of tolling the prescriptive period. For it is the filing of the
complaint or information corresponding to the correct offense which produces that effect.
PONENTE: De Leon Jr.
FACTS:
In 1993, Citibank filed a complaint against Santos and Genuino( Bank Officers) for the violation of
sec. 31 in relation to sec. 144 of the Corp. Code for acquiring adverse interest against the
corporation. Attached in the complaint is an affidavit by Vic Lim( VP of Citibank). As evidence to
establish the case of Citibank, Lim annexed documents purporting to be the dollar account bank
statements of herein petitioner and some other depositor of Citibank. Petitioner on its part raise that
there is a violation of RA 1405.
ISSUE:
Whether there is a violation of RA 1405 ( Secrecy of Bank Deposit Act)
RULING:
No. the accounts involved in the case are U.S dollar accounts and the applicable law is RA 6426 and
not RA 1405. A violation of RA 6426 shall subject the offender to imprisonment of not less than one year nor
more than five years, or by a fine of not less than five thousand pesos nor more than twenty-five thousand
pesos or both. Applying Act. No 3326, RA 6426 being a special law, the offense prescribes in 8 years. In this
case respondents may no longer be haled before the courts.
Republic Act No. 6426 being a special law, the provisions of Act No. 3326, as amended by Act No.
3763, are applicable:
SECTION 1. Violations penalized by special acts shall, unless otherwise provided in such acts,
prescribe in accordance with the following rules:; (c) after eight years for those punished by
imprisonment for two years or more, but less than six years
SEC. 2. Prescription shall begin to run from the day of the commission of the violation of the law, and if
the same be not known at the time, from the discovery thereof and the institution of judicial
proceedings for its investigation and punishment.
BANKING LAW CASES
CASE TITLE MARQUEZ vs DESIERTO

PROMULGATION
June 27, 2001
DATE
DIGEST BY Borja, Catherine
TOPIC COVERED Exception to the rule on secrecy of bank deposits
DOCTRINE: As an exception to the rule on secrecy of bank deposits, an in camera inspection may be
allowed only when there is a pending case before a court of competent jurisdiction. Pending
case does not contemplate investigations conducted by the Ombudsman.
PONENTE: J. PARDO
FACTS:
Petitioner Marquez received an Order from the Ombudsman Aniano A. Desierto dated April
29, 1998, to produce several bank documents for purposes of inspection in camera relative to various
accounts maintained at Union Bank of the Philippines, Julia Vargas Branch, where petitioner is the
branch manager.
The basis of the Ombudsman in ordering an in camera inspection of the accounts is a trail of
managers checks purchased by one George Trivinio, a respondent in OMB-0-97-0411, pending with
the office of the Ombudsman.
On June 4, 1998, petitioner wrote the Ombudsman explaining to him that the accounts in
question cannot readily be identified and asked for time to respond to the order. The Ombudsman,
responded to the request of the petitioner and ordered for timely compliance with the first order.
Due to the persistent refusal of the petitioner to comply with the order, the Ombudsman issued
an order directing petitioner to produce the bank documents relative to the accounts in issue and
warned them that their further refusal would constitute Indirect Contempt.
Thus, on July 10, 1998, petitioner together with Union Bank of the Philippines, filed a petition for
declaratory relief, prohibition and injunction with the Regional Trial Court, Makati City, against the
Ombudsman.
ISSUE:
Whether the order of the Ombudsman to have an in camera inspection of the questioned
account is allowed as an exception to the law on secrecy of bank deposits (R. A. No. 1405)
RULING:
No. It is not allowed as an exception to the rule on secrecy of bank deposits.
Before an in camera inspection may be allowed, there must be a pending case before a
court of competent jurisdiction. Further, the account must be clearly identified, the inspection limited
to the subject matter of the pending case before the court of competent jurisdiction.
BANKING LAW CASES
In Union Bank of the Philippines v. Court of Appeals, we held that Section 2 of the Law on
Secrecy of Bank Deposits, as amended, declares bank deposits to be absolutely confidential except:
(1) In an examination made in the course of a special or general examination of a bank that is
specifically authorized by the Monetary Board after being satisfied that there is reasonable
ground to believe that a bank fraud or serious irregularity has been or is being committed and
that it is necessary to look into the deposit to establish such fraud or irregularity,
(2) In an examination made by an independent auditor hired by the bank to conduct its
regular audit provided that the examination is for audit purposes only and the results thereof
shall be for the exclusive use of the bank,
(3) Upon written permission of the depositor,
(4) In cases of impeachment,
(5) Upon order of a competent court in cases of bribery or dereliction of duty of public official
s, or
(6) In cases where the money deposited or invested is the subject matter of the litigation.
In the case at bar, there is yet no pending litigation before any court of competent authority.
What is existing is an investigation by the office of the Ombudsman. In short, what the Office of the
Ombudsman would wish to do is to fish for additional evidence to formally charge Amado
Lagdameo, et. al., with the Sandiganbayan. Clearly, there was no pending case in court which
would warrant the opening of the bank account for inspection.
BANKING LAW CASES
CASE TITLE KAREN E. SALVACION, minor, thru Federico N. Salvacion, Jr., father and Natural
Guardian, and Spouses FEDERICO N. SALVACION, JR., and EVELINA E.
SALVACION vs. CENTRAL BANK OF THE PHILIPPINES, CHINA BANKING
CORPORATION and GREG BARTELLI y NORTHCOTT
PROMULGATION
August 21, 1997
DATE
DIGEST BY Borlagdatan, April Flor
TOPIC COVERED Foreign Currency Deposit Act
DOCTRINE: Foreign Currency Deposit System was designed to draw deposits from foreign lenders and
investors and, subsequently, to give the latter protection. However, the foreign currency deposit
made by a transient or a tourist is not the kind of deposit encouraged by PD Nos. 1034 and 1035 and
given incentives and protection by said laws because such depositor stays only for a few days in the
country and, therefore, will maintain his deposit in the bank only for a short time.
PONENTE: Torres, Jr.
FACTS:
In 1989, Greg Bartelli (American tourist) lured Karen Salvacion, 12 yrs old, to go to his
apartment and later on detained her for 4 days, raping the girl several times. Policemen and people
living nearby rescued Karen, and Greg was arrested and detained at the Makati Municipal Jail. The
policemen recovered from Bartelli dollar check, dollar bills, COCOBANK Bank Book, Philippine cash,
door keys and Teddy Bear used in seducing Karen. However, came hearing for his petition for bail, he
managed to escape from jail. The court granted the fiscals Urgent Ex-Parte Motion for the Issuance of
Warrant of Arrest and Hold Departure Order. Meanwhile in a civil case, the judge issued an order
granting the application for Writ of Preliminary Attachment, hence after petitioners gave a bond by
FGU Insurance Corporation in the amount P100,000.00, a Writ of Preliminary Attachment was issued
by the trial court. Deputy Sheriff of Makati served a Notice of Garnishment on China Banking
Corporation, the latter invoked Republic Act No. 1405 as its answer to the notice. Deputy sheriff
countered that the garnishment did not violate the secrecy of bank deposits since the disclosure is
merely incidental to a garnishment properly and legally made by virtue of a court order which has
placed the subject deposits in custodia legis. China Bank invoked Section 113 of Central Bank
Circular 960, stating that to the effect that the dollar deposits of defendant Greg Bartelli are exempt
from attachment, garnishment, or any other order or process of any court, legislative body,
government agency or any administrative body, whatsoever. Petitioners then made an inquiry with
Central Bank.
ISSUE:
WON Section 113 of Central Bank Circular No. 960 has the effect of exempting Bartelli's dollar
deposits.
RULING:
The provisions of Section 113 of CB Circular No. 960 and PD No. 1246, insofar as it amends
Section 8 of R.A. 6426 are hereby held to be INAPPLICABLE to this case because of its peculiar
circumstances.
The Court ruled that if they will rule that the questioned Section 113 of Central Bank Circular
No. 960 which exempts from attachment, garnishment, or any other order or process of any court,
legislative body, government agency or any administrative body whatsoever, is applicable to a
BANKING LAW CASES
foreign transient, injustice would result especially to a citizen aggrieved by a foreign guest like
accused Greg Bartelli. It adopted the comment of the Solicitor General who argued that the
Offshore Banking System and the Foreign Currency Deposit System were designed to draw deposits
from foreign lenders and investors and, subsequently, to give the latter protection. However, the
foreign currency deposit made by a transient or a tourist is not the kind of deposit encouraged by PD
Nos. 1034 and 1035 and given incentives and protection by said laws because such depositor stays
only for a few days in the country and, therefore, will maintain his deposit in the bank only for a short
time. Since Bartelli is just a tourist he is therefore not entitled to the protection of Section 113 of
Central Bank Circular No. 960 and PD No. 1246 against attachment, garnishment or other court
processes.
BANKING LAW CASES
CASE TITLE RICARDO B. BANGAYAN VS RIZAL COMMERCIAL BANKING CORPORATION AND

PHILIP SARIA
PROMULGATION
April 4, 2011
DATE
DIGEST BY CASTILLO, ROCH
TOPIC COVERED Section 2 of the Bank Secrecy Act
DOCTRINE: Section 2 of the Bank Secrecy Act provides:

All deposits of whatever nature with banks or banking institutions in the
Philippines including investments in bonds issued by the Government of the Philippines,
its political subdivisions and its instrumentalities, are hereby considered as of an
absolutely confidential nature and may not be examined, inquired or looked into by
any person, government official, bureau or office, except upon written permission of
the depositor, or in cases of impeachment, or upon order of a competent court in
cases of bribery or dereliction of duty of public officials, or in cases where the money
deposited or invested is the subject matter of the litigation.
PONENTE: SERENO, J.
FACTS:
Petitioner Ricardo Bangayan had a savings account and a current account with one of the
branches of respondent Rizal Commercial Banking Corporation (RCBC). These two accounts had an
automatic transfer condition wherein checks issued by the depositor may be funded by any of the
two accounts.
On 26 June 1992, petitioner Bangayan purportedly signed a Comprehensive Surety
Agreement (the Surety Agreement) with respondent RCBC in favor of nine corporations. Under the
Surety Agreement, the funds in petitioner Bangayans accounts with respondent RCBC would be used
as security to guarantee any existing and future loan obligations, advances, credits/increases and
other obligations, including any and all expenses that these corporations may incur with respondent
bank.
On 09 October 1992, respondent Philip Saria, who was an Account Officer of respondent
banks Binondo Branch, signed and executed a Statement before the BOC, with the assistance of
Atty. Arnel Z. Dolendo of respondent RCBC, on the banks letters of credit issued in favor of the three
corporations. Petitioner Bangayan cited this incident as the basis for the allegation in the Complaint
he subsequently filed that respondent RCBC had disclosed to a third party (the BOC) information
concerning the identity, nature, transaction and deposits including details of transaction related to
and pertaining to his deposits with the said bank, in violation of the Bank Secrecy Act. It must be
pointed out that the trial court found that no evidence was introduced by (petitioner Bangayan) to
substantiate his claim that (respondent RCBC) gave any classified information in violation of the Bank
Secrecy Law. Thus, the trial court considered the alleged disclosure of confidential bank information
by respondent RCBC as a non-issue.
ISSUE:
Whether respondent RCBC violated the Bank Secrecy Act.
RULING:
The Court affirms the trial courts findings which were likewise concurred with by the Court of
Appeals that the alleged violation of the Bank Secrecy Act was not substantiated.
BANKING LAW CASES
In his Memorandum, petitioner Bangayan argues that there was a wrongful disclosure by
respondents RCBC and Philip Saria of confidential information regarding his bank accounts in
violation of the Bank Secrecy Act. However, petitioner failed to identify which confidential
information respondents divulged before the BOC that would make them liable under the said law.
Section 2 of the Bank Secrecy Act provides:
All deposits of whatever nature with banks or banking institutions in the
Philippines including investments in bonds issued by the Government of the Philippines,
its political subdivisions and its instrumentalities, are hereby considered as of an
absolutely confidential nature and may not be examined, inquired or looked into by
any person, government official, bureau or office, except upon written permission of
the depositor, or in cases of impeachment, or upon order of a competent court in
cases of bribery or dereliction of duty of public officials, or in cases where the money
deposited or invested is the subject matter of the litigation.
Petitioner Bangayan claims that respondent Saria divulged confidential information through
the Affidavit he submitted to the BOC. However, nothing in respondent Sarias Affidavit before the
BOC showed that details of petitioner Bangayans bank accounts with respondent bank was
disclosed. If at all, respondent Saria merely discussed his functions as an account officer in
respondent bank and identified petitioner as the one who had guaranteed the payment or
obligations of the importers under the Surety Agreement.
According to petitioner Bangayan, the responses of respondent RCBCs officers in relation to
the BOCs actions led to unsavory news reports that disparaged petitioners good character and
reputation and exposed him to public ridicule and contempt. However, as the appellate court
correctly found, the humiliation and embarrassment that petitioner Bangayan suffered in the business
community was not brought about by the alleged violation of the Bank Secrecy Act; it was due to
the smuggling charges filed by the Bureau of Customs which found their way in the headlines of
newspapers.
Both the trial and appellate courts correctly found that petitioner Bangayan did not
satisfactorily introduce evidence to substantiate his claim that defendant bank gave any classified
information in violation of the Bank Secrecy Act. Failing to adduce further evidence in the instant
Petition with respect to the banks purported disclosure of confidential information as regards his
accounts, petitioner cannot be awarded any damages arising from an unsubstantiated and
unproved violation of the Bank Secrecy Act.
BANKING LAW CASES
CASE TITLE BSB GROUP, INC., represented by its President, Mr. RICARDO BANGAYAN
vs.
SALLY GO a.k.a. SALLY GO-BANGAYAN
PROMULGATION
February 16, 2010
DATE
DIGEST BY Castillo, Shain Ann
TOPIC COVERED Republic Act (R.A.) No. 1405
PONENTE Peralta J;
DOCTRINE: The inquiry into bank deposits allowable under RA 1405 must be premised on the fact that
the money deposited in the account is itself the subject of the action.
FACTS:
Petitioner, the BSB Group, Inc., is a duly organized domestic corporation presided by its herein
representative, Ricardo Bangayan (Bangayan). Respondent Sally Go is Bangayans wife, who was
employed in the company as a cashier, and was engaged, among others, to receive and account
for the payments made by the various customers of the company.
Bangayan filed a complaint for estafa and/or qualified theft against respondent, alleging that
several checks representing the aggregate amount of P1,534,135.50 issued by the companys
customers in payment of their obligation were, instead of being turned over to the companys
coffers, indorsed by respondent who deposited the same to her personal banking account
maintained at Security Bank and Trust Company (Security Bank) in Divisoria, Manila Branch.Upon a
finding that the evidence adduced was uncontroverted, the assistant city prosecutor recommended
the filing of the Information for qualified theft against respondent.
The trial ensued. On the premise that respondent had allegedly encashed the subject checks and
deposited the corresponding amounts thereof to her personal banking account, the prosecution
moved for the issuance of subpoena duces tecum /ad testificandum against the respective
managers or records custodians of Security Banks Divisoria Branch, as well as Metrobank. The trial
court granted the motion and issued the corresponding subpoena.
Petitioner, opposing respondents move, argued for the relevancy of the Metrobank account and he
also invoked the confidential nature of the Metrobank account under the provisions of Republic Act
(R.A.) No. 1405.The trial court did not sustain respondent; hence, it denied the motion to quash for
lack of merit.
Thus, the prosecution was able to present in court the testimony of Elenita Marasigan the
representative of Security Bank. In a nutshell, Marasigans testimony sought to prove that between
1988 and 1989, respondent, while engaged as cashier at the BSB Group, Inc., was able to run away
with the checks issued to the company by its customers, endorse the same, and credit the
corresponding amounts to her personal deposit account with Security Bank. Then, Respondent filed a
Motion to Suppress, seeking the exclusion of Marasigans testimony and accompanying documents
thus far received, bearing on the subject Security Bank account.
RTC: Ruled in favor Bangayan and denied the motion to suppress of respondent.
CA: Reversed the decision of the RTC. Ruled in favor of Respondent.
BANKING LAW CASES
ISSUE:
1. Whether the testimony of Marasigan and the accompanying documents are relevant to the
case?
2. Whether the testimony of Marasigan is violative of the absolutely confidential nature of bank
deposits and, hence, excluded by operation of R.A. No. 1405.
RULING:
1. No. The fact in issue appears to be that respondent has taken away cash in the amount
of P1,534,135.50 from the coffers of petitioner. In support of this allegation, petitioner seeks to
establish the existence of the elemental act of taking by adducing evidence that respondent,
at several times between 1988 and 1989, deposited some of its checks to her personal
account with Security Bank.
Petitioner addresses the incongruence between the allegation of theft of cash in the
Information, on the one hand, and the evidence that respondent had first stolen the checks
and deposited the same in her banking account, on the other hand, by impressing upon the
Court that there obtains no difference between cash and check for purposes of prosecuting
respondent for theft of cash. Petitioner is mistaken.
In pursuing a case for estafa by conversion,the prosecution may establish its cause by the
presentation of the checks involved. These checks would then constitute the best evidence to
establish their contents and to prove the elemental act of conversion in support of the
proposition that the offender has indeed indorsed the same in his own name.
Theft, however, is not of such character. Thus, , as the Information in this case accuses
respondent of having stolen cash, proof tending to establish that respondent has actualized
her criminal intent by indorsing the checks and depositing the proceeds thereof in her
personal account, becomes not only irrelevant but also immaterial and, on that score,
inadmissible in evidence.
2. Yes. In taking exclusion from the coverage of the confidentiality rule, petitioner in the instant
case posits that the account maintained by respondent with Security Bank contains the
proceeds of the checks that she has fraudulently appropriated to herself and, thus, falls under
one of the exceptions in Section 2 of R.A. No. 1405 that the money kept in said account is the
subject matter in litigation.
What indeed constitutes the subject matter in litigation in relation to Section 2 of R.A. No. 1405
has been pointedly and amply addressed in Union Bank of the Philippines v. Court of
Appeals,in which the Court noted that the inquiry into bank deposits allowable under R.A. No.
1405 must be premised on the fact that the money deposited in the account is itself the
subject of the action.
In the present case, the subject matter of the action in this case is the money amounting
to P1,534,135.50 alleged to have been stolen by respondent, and not the money equivalent of
the checks which are sought to be admitted in evidence. Thus, it is that, which the prosecution
is bound to prove with its evidence, and no other.
It comes clear that the admission of testimonial and documentary evidence relative to
respondents Security Bank account serves no other purpose than to establish the existence of
BANKING LAW CASES
such account, its nature and the amount kept in it. It constitutes an attempt by the
prosecution at an impermissible inquiry into a bank deposit account the privacy and
confidentiality of which is protected by law
In sum, we hold that the testimony of Marasigan on the particulars of respondents supposed
bank account with Security Bank and the documentary evidence represented by the checks
adduced in support thereof, are not only incompetent for being excluded by operation of
R.A. No. 1405. They are likewise irrelevant to the case, inasmuch as they do not appear to
have any logical and reasonable connection to the prosecution of respondent for qualified
theft.A
BANKING LAW CASES
CASE TITLE JOSEPH VICTOR EJERCITO VS SANDIGANBAYAN

CITATION G.R. No. 157294-95
PROMULGATION
November 30, 2006
DATE
DIGEST BY Cadavis, Albert Lloyd C.
TOPIC COVERED RA No. 1405(The Secrecy of Bank Deposits Law)
DOCTRINE: SECTION 2. All deposits of whatever nature with banks or banking institutions in the
Philippines including investments in bonds issued by the Government of the Philippines, its political
subdivisions and its instrumentalities, are hereby considered as of an absolutely confidential nature
and may not be examined, inquired or looked into by any person, government official, bureau or
office, except upon written permission of the depositor, or in cases of impeachment, or upon order of
a competent court in cases of bribery or dereliction of duty of public officials, or in cases where the
money deposited or invested is the subject matter of the litigation.
The phrase of whatever nature proscribes any restrictive interpretation of deposits. Moreover, it is
clear from the immediately quoted provision that, generally, the law applies not only to money which
is deposited but also to those which are invested. This further shows that the law was not intended to
apply only to deposits in the strict sense of the word. Otherwise, there would have been no need to
add the phrase or invested.
FACTS:
Joseph Victor G. Ejercito is the owner of Trust Account No. 858 and Savings Account No. 0116-17345-
9. The Special Prosecution Panel filed before the Sandiganbayan a Request for Issuance of
Subpoena Duces Tecum for the issuance of a subpoena directing the President of Export and
Industry Bank (EIB, formerly Urban Bank) or his/her authorized representative to produce the following
documents. Also, a Request for Issuance of Subpoena Duces Tecum/Ad Testificandum directed to
the authorized representative of Equitable-PCI Bank to produce statements of account pertaining to
certain accounts in the name of Jose Velarde and to testify thereon. The Sandiganbayan granted
both requests subpoenas were accordingly issued. Another Request for Issuance of Subpoena Duces
Tecum/Ad Testificandum for the President of EIB or his/her authorized representative to produce the
same documents and the same was granted.
Associate Justice Edilberto Sandoval, advised petitioner that his remedy was to file a motion to
quash. Petitioner, unassisted by counsel, thus filed a Motion to Quash Subpoena Duces Tecum/Ad
Testificandum. Petitioner claimed that his bank accounts are covered by R.A. No. 1405 and do not
fall under any of the exceptions stated therein. He further claimed that the specific identification of
documents in the questioned subpoenas, including details on dates and amounts, could only have
been made possible by an earlier illegal disclosure thereof by the EIB and the Philippine Deposit
Insurance Corporation (PDIC) in its capacity as receiver of the then Urban Bank.
Before the Motion to Quash was resolved by the Sandiganbayan, the prosecution filed another
Request for the Issuance of Subpoena Duces Tecum/Ad Testificandum again to direct the President
of the EIB to produce the same documents. The prosecution also filed a Request for the Issuance of
Subpoena Duces Tecum/Ad Testificandum directed to Aurora C. Baldoz, Vice President-CR-II of the
PDIC for her to produce the following documents. The subpoenas prayed for in both requests were
issued by the Sandiganbayan. Petitioner, this time assisted by counsel, filed an Urgent Motion to
Quash Subpoenae Duces Tecum/Ad Testificandum praying that the subpoena directed to Aurora
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Baldoz be quashed. The SB denied the petitioners motion to quash and petitioners urgent motion to
quash. Also, the MR of the petitioner was denied. Hence this present petition.
ISSUE:
1. Whether petitioners Trust Account No. 858 is covered by the term deposit as used in R.A. 1405;
2. Whether petitioners Trust Account No. 858 and Savings Account No. 0116-17345-9 are
excepted from the protection of R.A. 1405; and
3. Whether the extremely-detailed information contained in the Special Prosecution Panels

requests for subpoena was obtained through a prior illegal disclosure of petitioners bank accounts, in
violation of the fruit of the poisonous tree doctrine.
RULING:
Trust Account No. 858 is, without doubt, one such account. The Trust Agreement between petitioner
and Urban Bank provides that the trust account covers deposit, placement or investment of funds by
Urban Bank for and in behalf of petitioner. The money deposited under Trust Account No. 858, was,
therefore, intended not merely to remain with the bank but to be invested by it elsewhere. To hold
that this type of account is not protected by R.A. 1405 would encourage private hoarding of funds
that could otherwise be invested by banks in other ventures, contrary to the policy behind the law.
Section 2 of the same law in fact even more clearly shows that the term deposits was intended to be
understood broadly:
SECTION 2. All deposits of whatever nature with banks or banking institutions in the Philippines
including investments in bonds issued by the Government of the Philippines, its political subdivisions
and its instrumentalities, are hereby considered as of an absolutely confidential nature and may not
be examined, inquired or looked into by any person, government official, bureau or
office, except upon written permission of the depositor, or in cases of impeachment, or upon order of
a competent court in cases of bribery or dereliction of duty of public officials, or in cases where the
money deposited or invested is the subject matter of the litigation.
The phrase of whatever nature proscribes any restrictive interpretation of deposits. Moreover, it is
clear from the immediately quoted provision that, generally, the law applies not only to money which
is deposited but also to those which are invested. This further shows that the law was not intended to
apply only to deposits in the strict sense of the word. Otherwise, there would have been no need to
add the phrase or invested.
Clearly, therefore, R.A. 1405 is broad enough to cover Trust Account No. 858. The protection afforded
by the law is, however, not absolute, there being recognized exceptions thereto, as above-quoted
Section 2 provides. In the present case, two exceptions apply, to wit: (1) the examination of bank
accounts is upon order of a competent court in cases of bribery or dereliction of duty of public
officials, and (2) the money deposited or invested is the subject matter of the litigation.
Plunder being thus analogous to bribery, the exception to R.A. 1405 applicable in cases of bribery
must also apply to cases of plunder. The plunder case now pending with the Sandiganbayan
necessarily involves an inquiry into the whereabouts of the amount purportedly acquired illegally by
former President Joseph Estrada.
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The subject matter of the litigation cannot be limited to bank accounts under the name of President
Estrada alone, but must include those accounts to which the money purportedly acquired illegally or
a portion thereof was alleged to have been transferred. Trust Account No. 858 and Savings Account
No. 0116-17345-9 in the name of petitioner fall under this description and must thus be part of the
subject matter of the litigation.
The Court finds that the Sandiganbayan did not commit grave abuse of discretion in issuing the
challenged subpoenas for documents pertaining to petitioners Trust Account No. 858 and Savings
Account No. 0116-17345-9 for the following reasons:
1. These accounts are no longer protected by the Secrecy of Bank Deposits Law, there being two
exceptions to the said law applicable in this case, namely: (1) the examination of bank accounts is
upon order of a competent court in cases of bribery or dereliction of duty of public officials, and (2)
the money deposited or invested is the subject matter of the litigation. Exception (1) applies since the
plunder case pending against former President Estrada is analogous to bribery or dereliction of duty,
while exception (2) applies because the money deposited in petitioners bank accounts is said to
form part of the subject matter of the same plunder case.
2. The fruit of the poisonous tree principle, which states that once the primary source (the tree) is
shown to have been unlawfully obtained, any secondary or derivative evidence (the fruit) derived
from it is also inadmissible, does not apply in this case. In the first place, R.A. 1405 does not provide for
the application of this rule. Moreover, there is no basis for applying the same in this case since the
primary source for the detailed information regarding petitioners bank accounts the investigation
previously conducted by the Ombudsman was lawful.
3. At all events, even if the subpoenas issued by the Sandiganbayan were quashed, the
Ombudsman may conduct on its own the same inquiry into the subject bank accounts that it earlier
conducted last February-March 2001, there being a plunder case already pending against former
President Estrada. To quash the challenged subpoenas would, therefore, be pointless since the
Ombudsman may obtain the same documents by another route. Upholding the subpoenas avoids
an unnecessary delay in the administration of justice.
The petition is DISMISSED.

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CASE TITLE PEOPLE OF THE PHILIPPINES, Petitioner, -versus- JOSEPH EJERCITO ESTRADA and
THE HONORABLE SPECIAL DIVISION OF THE SANDIGANBAYAN, Respondents.
CITATION G.R. No. 164368-69
PROMULGATION
April 2, 2009
DATE
DIGEST BY De Guzman, Jiana Joselle
TOPIC COVERED Banking Law; Use of Alias within the context of Bank Transactions
DOCTRINE: The provisions of CA No. 142, as interpreted in Ursua, must necessarily be harmonized with
the provisions of R.A. No.1405 and R.A. No. 9160 under the principle that every statute should be
construed in a way that will harmonize it with existing laws. A reasonable scrutiny of all these laws in
relation to the present case, led to the conclusion that the use of an alias within the context of a
bank transaction (specifically, the opening of a numbered account made before bank officers) is
protected by the secrecy provisions of R.A. No. 1405, and is thus outside the coverage of CA No. 142
until the passage into law of R.A. No. 9160.
PONENTE: Justice Arturo Brion
FACTS:
An Information for plunder was filed with the Sandiganbayan against respondent Estrada. A separate
Information for illegal use of alias, was likewise filed against him. In the information, it was alleged that
the then President Estrada, taking advantage of his position and in order to conceal the ill-gotten
wealth he acquired during his tenure and his true identity as the President, represented himself as
JOSE VELARDE in several transactions and used and employed the said alias which is neither his
registered name at birth nor his baptismal name, in signing documents with Equitable PCI Bank
and/or other corporate entities.
ISSUE:
Whether the court a quo gravely erred and abused its discretion in holding that the use by
respondent Joseph Estrada of his alias "Jose Velarde" was allowable under banking rules, despite the
clear prohibition under Commonwealth Act No. 142.
RULING:
No. Sandiganbayan did not err in holding that the use of an alias was allowable under banking rules.
The enactment of C.A. No. 142 was made primarily to curb the common practice among the
Chinese of adopting scores of different names and aliases which created tremendous confusion in
the field of trade. Such a practice almost bordered on the crime of using fictitious names which for
obvious reasons could not be successfully maintained against the Chinese who, rightly or wrongly,
claimed they possessed a thousand and one names. C.A. No. 142 thus penalized the act of using an
alias name, unless such alias was duly authorized by proper judicial proceedings and recorded in the
civil register.
The Sandiganbayan found that the People failed to present evidence that Estrada committed the
crime punished under Commonwealth Act No. 142, as amended by Republic Act (R.A.) No. 6085 (CA
142), as interpreted by the Supreme Court in Ursua v. Court of Appeals. There is an illegal use of alias
within the context of CA 142 only if the use of the alias is public and habitual. In Estradas case, the
Sandiganbayan noted, the application of the principles was not as simple because of the
complications resulting from the nature of the transaction involved the alias was used in connection
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with the opening of a numbered trust account made during the effectivity of R.A. No. 1405, as
amended, and prior to the enactment of Republic R.A. No. 9160.
Respondents act of signing "Jose Velarde" in bank documents being absolutely confidential, the
witnessing thereof by bank officers who were likewise sworn to secrecy by the same law cannot be
considered as public as to fall within the ambit of CA 142 as amended. On account of the absolute
confidentiality of the transaction, it cannot be said that the respondent intended to be known by this
name in addition to his real name. Confidentiality and secrecy negate publicity.
Ursua instructs: Hence, the use of a fictitious name or a different name belonging to another person
in a single instance without any sign or indication that the user intends to be known by this name in
addition to his real name from that day forth does not fall within the prohibition in C.A. No. 142 as
amended.
The Court ruled that the provisions of CA No. 142, as interpreted in Ursua, must necessarily be
harmonized with the provisions of R.A. No.1405 and R.A. No. 9160 under the principle that every
statute should be construed in a way that will harmonize it with existing laws. A reasonable scrutiny,
the Sandiganbayan said, of all these laws in relation to the present case, led it to conclude that the
use of an alias within the context of a bank transaction (specifically, the opening of a numbered
account made before bank officers) is protected by the secrecy provisions of R.A. No. 1405, and is
thus outside the coverage of CA No. 142 until the passage into law of R.A. No. 9160.
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CASE TITLE REPUBLIC OF THE PHILIPPINES, Represented by THE ANTIMONEY LAUNDERING

COUNCIL (AMLC), vs. HON. ANTONIO M. EUGENIO, JR., AS PRESIDING JUDGE
OF RTC, MANILA, BRANCH 34, PANTALEON ALVAREZ and LILIA CHENG
PROMULGATION
February 14, 2008
DATE
DIGEST BY De Guzman, Jabriellie
TOPIC COVERED Anti-Money Laundering Act; Bank Secrecy Act
DOCTRINE: Even if the bank inquiry order may be availed of without need of a preexisting case under
the AntiMoney Laundering Act (AMLA), it does not follow that such order may be availed of ex parte.
Court receiving the application for inquiry order cannot simply take the AntiMoney Laundering
Councils (AMLCs) word that probable cause exists that the deposits or investments are related to an
unlawful activity.
PONENTE: TINGA, J.
FACTS:
OSG wrote the AMLC requesting the latters assistance in obtaining evidence to completely
reveal the financial trail of corruption surrounding the NAIA 3 project, and also noting that petitioner
RP was presently defending itself in 2 international arbitration cases filed in relation to the NAIA
3 project. AMLC issued a resolution wherein the Council resolved to authorize the Executive
Director of the AMLC to sign and verify an application to inquire and/or examine the deposits or
investments of Pantaleon Alvarez and others. It was found during the investigation that amounts were
transferred from a HK bank account owned by Jetstream Pacific Ltd to bank accounts in the
Philippines maintained by Liongson and Cheng Yong.
AMLC filed an application to inquire into or examine the deposits or investments of Alvarez
and the others. The trial court being satisfied that there existed to believe that the deposits in various
bank accounts, details of which appear in paragraph 1 of the application, are related to the offense
of violation of Anti-Graft and Corrupt Practices Act now the subject of criminal prosecution before
the Sandiganbayan as attested in the submitted information. The CIS proceeded to inquire and
examine the said deposits.
Following the AMLC Resolution, the Republic filed an application before the Manila
RTC to inquire into and/or examine 13 accounts and 2 related web of accounts alleged as having
been used to facilitate corruption in the NAIA 3 project. RTC issued an order granting ex parte
application expressing the allegations in said application to be impressed with merit, and in
conformity with section 11 of RA No. 9160, as amended, otherwise known as the AMLA of
2001. Authority was granted to the AMLC to inquire into the bank accounts of listed therein.
Meanwhile, respondent Lilia Cheng filed with the Court of Appeals a Petition for Certiorari,
Prohibition and Mandamus with Application for TRO and/or Writ of Preliminary Injunction directed
against the Republic of the Philippines through the AMLC. She identified herself as the wife of Cheng
Yongwith whom she jointly owns a conjugal bank account with Citibank that is covered by the
Makati RTC bank inquiry order, and two conjugal bank accounts with Metrobank that are covered
by the Manila RTC bank inquiry order. Lilia Cheng imputed grave abuse of discretion on the part of
the Makati and Manila RTCs in granting AMLCs ex parte applications for a bank inquiry order,
arguing among others that the ex parte applications violated her constitutional right to due process,
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that the bank inquiry order under the AMLA can only be granted in connection with violations of the
AMLA and that the AMLA cannot apply to bank accounts opened and transactions entered into
prior to the effectivity of the AMLA or to bank accounts located outside the Philippines. The RTC
issued an order resolving to hold in abeyance the resolution until the resolution of Lilia Chengs
petition for certiorari with the CA. The CA directed the issuance of the temporary restraining.
ISSUE:
Whether a bank inquiry order may be issued ex-parte.
RULING:
In the instances where a court order is required for the issuance of the bank inquiry order,
nothing in Section 11 specifically authorizes that such court order may be issued ex parte. It might be
argued that this silence does not preclude the ex parte issuance of the bank inquiry order since the
same is not prohibited under Section 11. Yet this argument falls when the immediately preceding
provision, Section 10, is examined.
Although oriented towards different purposes, the freeze order under Section 10 and the bank
inquiry order under Section 11 are similar in that they are extraordinary provisional reliefs which the
AMLC may avail of to effectively combat and prosecute money laundering offenses. Crucially,
Section 10 uses specific language to authorize an ex parte application for the provisional relief
therein, a circumstance absent in Section 11. If indeed the legislature had intended to authorize ex
parte proceedings for the issuance of the bank inquiry order, then it could have easily expressed
such intent in the law, as it did with the freeze order under Section 10.
That the AMLA does not contemplate ex parte proceedings in applications for bank inquiry
orders is confirmed by the present implementing rules and regulations of the AMLA, promulgated
upon the passage of R.A. No. 9194. With respect to freeze orders under Section 10, the implementing
rules do expressly provide that the applications for freeze orders be filed ex parte, but no similar
clearance is granted in the case of inquiry orders under Section 11.
The court receiving the application for inquiry order cannot simply take the AMLCs word that
probable cause exists that the deposits or investments are related to an unlawful activity. It will have
to exercise its own determinative function in order to be convinced of such fact. The account holder
would be certainly capable of contesting such probable cause if given the opportunity to be
apprised of the pending application to inquire into his account; hence a notice requirement would
not be an empty spectacle. It may be so that the process of obtaining the inquiry order may
become more cumbersome or prolonged because of the notice requirement, yet we fail to see any
unreasonable burden cast by such circumstance. After all, as earlier stated, requiring notice to the
account holder should not, in any way, compromise the integrity of the bank records subject of the
inquiry which remain in the possession and control of the bank.
Sufficient for our purposes, we can assert there is a right to privacy governing bank accounts in
the Philippines, and that such right finds application to the case at bar. The source of such right is
statutory, expressed as it is in R.A. No. 1405 otherwise known as the Bank Secrecy Act of 1955. The
right to privacy is enshrined in Section 2 of that law. Because of the Bank Secrecy Act, the
confidentiality of bank deposits remains a basic state policy in the Philippines. Subsequent laws,
including the AMLA, may have added exceptions to the Bank Secrecy Act, yet the secrecy of bank
deposits still lies as the general rule. It falls within the zones of privacy recognized by our laws. The
framers of the 1987 Constitution likewise recognized that bank accounts are not covered by either
the right to information under Section 7, Article III or under the requirement of full public disclosure
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under Section 28, Article II. Unless the Bank Secrecy Act is repealed or amended, the legal order is
obliged to conserve the absolutely confidential nature of Philippine bank deposits.
Any exception to the rule of absolute confidentiality must be specifically legislated. Section 2
of the Bank Secrecy Act itself prescribes exceptions whereby these bank accounts may be examined
by any person, government official, bureau or office; namely when: (1) upon written permission of
the depositor; (2) in cases of impeachment; (3) the examination of bank accounts is upon order of a
competent court in cases of bribery or dereliction of duty of public officials; and (4) the money
deposited or invested is the subject matter of the litigation. Section 8 of R.A. Act No. 3019, the
AntiGraft and Corrupt Practices Act, has been recognized by this Court as constituting an additional
exception to the rule of absolute confidentiality. A subsequent law, the Ombudsman Act of 1989
contains a provision relating to access to bank accounts and records.
The AMLA also provides exceptions to the Bank Secrecy Act. Under Section 11, the AMLC may
inquire into a bank account upon order of any competent court in cases of violation of the AMLA, it
having been established that there is probable cause that the deposits or investments are related to
unlawful activities as defined in Section 3(i) of the law, or a money laundering offense under Section
4 thereof. Further, in instances where there is probable cause that the deposits or investments are
related to kidnapping for ransom, certain violations of the Comprehensive Dangerous Drugs Act of
2002, hijacking and other violations under R.A. No. 6235, destructive arson and murder, then there is
no need for the AMLC to obtain a court order before it could inquire into such
accounts.
Just because the AMLA establishes additional exceptions to the Bank Secrecy Act it does not
mean that the later law has dispensed with the general principle established in the older law that
[a]ll deposits of whatever nature with banks or banking institutions in the Philippines x x x are hereby
considered as of an absolutely confidential nature. Indeed, by force of statute, all bank deposits are
absolutely confidential, and that nature is unaltered even by the legislated exceptions referred to
above. There is disfavor towards construing these exceptions in such a manner that would authorize
unlimited discretion on the part of the government or of any party seeking to enforce those
exceptions and inquire into bank deposits. If there are doubts in upholding the absolutely
confidential nature of bank deposits against affirming the authority to inquire into such accounts,
then such doubts must be resolved in favor of the former. Such a stance would persist unless
Congress passes a law reversing the general state policy of preserving the absolutely confidential
nature of Philippine bank accounts.
BANKING LAW CASES
CASE TITLE REPUBLIC vs. GLASGOW CREDIT AND COLLECTION SERVICES, INC.
PROMULGATION DATE January 18, 2008
DIGEST BY Danduan, Jake
TOPIC COVERED AMLA
DOCTRINE: A criminal conviction for an unlawful activity is not a prerequisite for the institution of a civil
forfeiture proceeding. Stated otherwise, a finding of guilt for an unlawful activity is not an essential
element of civil forfeiture.
PONENTE:
FACTS:
Republic filed a complaint in the RTC Manila for civil forfeiture of assets against the bank deposits in
an account maintained by Glasgow in CSBI. The case was filed pursuant to R.A. 9160 (the Anti-
Money Laundering Act of 2001), as amended.
In its motion to dismiss by way of special appearance, Glasgow alleged that (1) the court had no
jurisdiction over its person as summons had not yet been served on it; (2) the complaint was
premature and stated no cause of action as there was still no conviction for estafa or other criminal
violations implicating Glasgow, and (3) there was failure to prosecute on the part of the Republic.
The Republic opposed Glasgows motion to dismiss. It contended that its suit was an action quasi in
rem where jurisdiction over the person of the defendant was not a prerequisite to confer jurisdiction
on the court. It asserted that prior conviction for unlawful activity was not a precondition to the filing
of a civil forfeiture case and that its complaint alleged ultimate facts sufficient to establish a cause of
action. It denied that it failed to prosecute the case.
The trial court dismissed the case on the following grounds: (1) improper venue as it should have
been filed in the RTC Pasig where CSBI, the depository bank of the account sought to be forfeited,
was located; (2) insufficiency of the complaint in form and substance, and (3) failure to prosecute.
ISSUE:
Should the dismissal be upheld? NO.
RULING:
(1) The complaint was filed in the proper venue. Section 3, Title II (Civil Forfeiture in the Regional Trial
Court) of the Rule of Procedure in Cases of Civil Forfeiture provides: A petition for civil forfeiture shall
be filed in any regional trial court of the judicial region where the monetary instrument, property or
proceeds representing, involving, or relating to an unlawful activity or to a money laundering offense
are located; provided, however, that where all or any portion of the monetary instrument, property or
proceeds is located outside the Philippines, the petition may be filed in the regional trial court in
Manila or of the judicial region where any portion of the monetary instrument, property, or proceeds
is located, at the option of the petitioner.
(2) The complaint was sufficient in form and substance. RA 9160, as amended, and its implementing
rules and regulations lay down two conditions when applying for civil forfeiture: (a) when there is a
suspicious transaction report or a covered transaction report deemed suspicious after investigation
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by the AMLC, and (b) the court has, in a petition filed for the purpose, ordered the seizure of any
monetary instrument or property, in whole or in part, directly or indirectly, related to said report.
Whether or not there is truth in the allegation that Glasgow account contains the proceeds of
unlawful activities is an evidentiary matter that may be proven during trial. The complaint, however,
did not even have to show or allege that Glasgow had been implicated in a conviction for, or the
commission of, the unlawful activities of estafa and violation of the Securities Regulation Code.
A criminal conviction for an unlawful activity is not a prerequisite for the institution of a civil forfeiture
proceeding. Stated otherwise, a finding of guilt for an unlawful activity is not an essential element of
civil forfeiture.
Regardless of the absence, pendency or outcome of a criminal prosecution for the unlawful activity
or for money laundering, an action for civil forfeiture may be separately and independently
prosecuted and resolved.
(3) There was no failure to prosecute. While there was admittedly a delay in the proceeding, it could
not be entirely or primarily ascribed to the Republic. That Glasgows whereabouts could not be
ascertained was not only beyond the Republics control, it was also attributable to Glasgow which
left its principal office address without informing the SEC or any official regulatory body (like the BIR or
the DTI) of its new address. Moreover, as early as October 8, 2003, the Republic was already seeking
leave of court to serve summons by publication. In the absence of a pattern or scheme to delay the
disposition of the case or a wanton failure to observe the mandatory requirement of the rules on the
part of the plaintiff, as in the case at bar, courts should decide to dispense with rather than wield their
authority to dismiss. We see no pattern or scheme on the part of the Republic to delay the disposition
of the case or a wanton failure to observe the mandatory requirement of the rules. The trial court
should not have so eagerly wielded its power to dismiss the Republics complaint.
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CASE TITLE REPUBLIC OF THE PHILIPPINES, Represented by the ANTI-MONEY LAUNDERING

COUNCIL vs. CABRINI GREEN & ROSS, INC., MICHAEL J. FINDLAY and JANE
GELBERG
PROMULGATION May 5, 2006 - June 19, 2009 in the case list
DATE
DIGEST BY Dimaliwat, Dianne Eunice T.
TOPIC COVERED AMLA
DOCTRINE: The amendment by RA 9194 of RA 9160 erased any doubt on the jurisdiction of the Court
of Appeals over the extension of freeze orders. It is solely the CA which has the authority to issue a
freeze order as well as to extend its effectivity; it also has the exclusive jurisdiction to extend existing
freeze orders previously issued by the AMLC vis--vis accounts and deposits related to money-
laundering activities
FACTS:
In the exercise of its power under Sec. 10 of RA 9160, the Anti-Money Laundering Council
(AMLC) issued freeze orders against various bank accounts of respondents. The frozen bank accounts
were previously found prima facie to be related to the unlawful activities of respondents.
Under RA 9160, a freeze order issued by the AMLC is effective for a period not exceeding 15
days unless extended "upon order of the court." Accordingly, before the lapse of the period of
effectivity of its freeze orders, the AMLC filed with the CA various petitions for extension of effectivity
of its freeze orders.
The AMLC invoked the jurisdiction of the CA in the belief that the power given to the CA to
issue a TRO or writ of injunction against any freeze order issued by the AMLC carried with it the power
to extend the effectivity of a freeze order. In other words, the AMLC interpreted the phrase "upon
order of the court" to refer to the CA. However, the CA disagreed with the AMLC and dismissed the
petitions.
ISSUE:
Which court has jurisdiction to extend the effectivity of a freeze order?
RULING:
The CA. During the pendency of these petitions, or on March 3, 2003, Congress enacted RA
9194 (An Act Amending Republic Act No. 9160, Otherwise Known as the "Anti-Money Laundering Act
of 2001"). It amended Section 10 of RA 9160 as follows:
SEC. 7. Section 10 of [RA 9160] is hereby amended to read as follows:

SEC. 10. Freezing of Monetary Instrument or Property. The Court of Appeals, upon
application ex parte by the AMLC and after determination that probable cause exists that
any monetary instrument or property is in any way related to an unlawful activity as defined in
Sec. 3(i) hereof, may issue a freeze order which shall be effective immediately. The freeze
order shall be for a period of twenty (20) days unless extended by the court. (emphasis
supplied)
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Section 12 of RA 9194 further provides:

SEC 12. Transitory Provision. Existing freeze orders issued by the AMLC shall remain in
force for a period of thirty (30) days after the effectivity of this Act, unless extended by
the Court of Appeals.
The OSG prayed for the remand of the case to the CA. The amendment by RA 9194 of RA
9160 erased any doubt on the jurisdiction of the CA over the extension of freeze orders. As the law
now stands, it is solely the CA, which has the authority to issue a freeze order as well as to extend its
effectivity. It also has the exclusive jurisdiction to extend existing freeze orders previously issued by the
AMLCvis--vis accounts and deposits related to money-laundering activities.
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CASE TITLE RET. LT. GEN. JACINTO C. LIGOT, ERLINDA Y. LIGOT, PAULO Y. LIGOT, RIZA Y.
LIGOT, and MIGUEL Y. LIGOT vs. REPUBLIC OF THE PHILIPPINES, represented by
the ANTI-MONEY LAUNDERING COUNCIL
PROMULGATION
March 06, 2013
DATE
DIGEST BY DIZON, Jenine Andrea
TOPIC COVERED Freeze Order
DOCTRINE: A freeze order cannot be issued for an indefinite period. As a rule, the effectivity of a
freeze order may be extended by the CA for a period not exceeding six months. However, should it
become completely necessary for the Republic to further extend the duration of the freeze order, it
should file the necessary motion before the expiration of the six-month period and explain the reason
or reasons for its failure to file an appropriate case and justify the period of extension sought.
PONENTE: Brion, J.
FACTS:
Lt. Gen. Ligot served in the AFP for 33 years and 2 months, from April 1, 1966 as a cadet until his
retirement on August 17, 2004. Lt. Gen. Ligot declared in his SALN that as of December 31, 2003, he
had assets in the total amount of P3,848,003.00. In contrast, his declared assets in his 1982 SALN
amounted to only P105,000.00.
Aside from these declared assets, the Ombudsmans investigation revealed that Lt. Gen. Ligot and
his family had other properties and bank accounts, not declared in his SALN, amounting to at least
P54,001,217.00. It declared that the assets registered in Lt. Gen. Ligots name, as well as those in his
wifes and childrens names, to be illegally obtained and unexplained wealth.
The Ombudsmans investigation also looked into Mrs. Ligots younger brother, Edgardo Tecson
Yambao. Despite Yambaos lack of substantial income, the records show that he has real properties
and vehicles registered in his name and an an investment with Mabelline Foods, Inc, amounting to
P8,763,550.00. The Ombudsman concluded that Yambao acted as a dummy and/or nominee of the
Ligot spouses, and all the properties registered in Yambaos name actually belong to the Ligot family.
As a result of the Ombudsmans complaint, the Compliance and Investigation staff (CIS) of the AMLC
conducted a financial investigation, which revealed the existence of the Ligots various bank
accounts with several financial institutions. An application for freeze order was filed with the Court of
Appeals which was granted. The freeze order is valid for a period of 20 days from the date of
issuance.
Later on, the Republic filed an Urgent Motion for Extension of Effectivity of Freeze Order which was
granted, extending the freeze order until after all the appropriate proceedings and/or investigations
have been terminated.
The Ligots filed a motion to lift the extended freeze order, principally arguing that there was no
evidence to support the extension of the freeze order. They further argued that the extension not only
deprived them of their property without due process; it also punished them before their guilt could be
proven. He also maintains that the freeze order issued against them ceased to be effective in view of
the 6-month extension limit of freeze orders provided under the Rule in Civil Forfeiture Cases.
BANKING LAW CASES
The Republic claims that the CA can issue a freeze order upon a determination that probable cause
exists, showing that the monetary instruments or properties subject of the freeze order are related to
the unlawful activity enumerated in RA No. 9160.
ISSUE:
Whether or not a freeze order can be issued for an indefinite period.
RULING:
NO. A freeze order, however, cannot be issued for an indefinite period.
Pursuant to Section 53(b) of the Rule in Civil Forfeiture Cases (A.M. No. 05-11-04-SC). It states:
Section 53. Freeze order.
(b) Extension. On motion of the petitioner filed before the expiration of twenty days from
issuance of a freeze order, the court may for good cause extend its effectivity for a period not
exceeding six months.
As a rule, the effectivity of a freeze order may be extended by the CA for a period not exceeding six
months. Before or upon the lapse of this period, ideally, the Republic should have already filed a
case for civil forfeiture against the property owner with the proper courts and accordingly secure an
asset preservation order or it should have filed the necessary information. Otherwise, the property
owner should already be able to fully enjoy his property without any legal process affecting it.
However, should it become completely necessary for the Republic to further extend the duration of
the freeze order, it should file the necessary motion before the expiration of the six-month period and
explain the reason or reasons for its failure to file an appropriate case and justify the period of
extension sought.
In the present case, the Republic has not offered any explanation why it took six years (from the time
it secured a freeze order) before a civil forfeiture case was filed in court, despite the clear tenor of
the Rule in Civil Forfeiture Cases allowing the extension of a freeze order for only a period of six
months. All the Republic could proffer is its temporal argument on the inapplicability of the Rule in
Civil Forfeiture Cases; in effect, it glossed over the squarely-raised issue of due process.
BANKING LAW CASES
CASE TITLE REPUBLIC OF THE PHILIPPINES represented by the Anti-Money Laundering

Council, petitioner vs. FIRST PACIFIC NETWORK INC., respondent
PROMULGATION
November 19, 2014
DATE
DIGEST BY Dumapias, Gay
TOPIC COVERED A.M. No. 05-11-04-SC; Effectivity of freeze order.
DOCTRINE: Law and jurisprudence gave the appellate court discretion to extend a freeze order only
for a reasonable period of time which was later clarified by A.M. No. 05-11-04-SC as not exceeding
more than six (6) months.
FACTS:
The Anti-Money Laundering Council (AMLC) received a report from Reynaldo Geronimo, that
respondent is involved in illegal securities trading and maintains bank account at the main branch of
Standard Chartered. RTC Makati issued three search warrants against several persons. Raiding team
were able to seize several documents including false buy-sell confirmation slips, client files,
documents showing share transactions, stock quotations, brokers scripts and fictitious name
belonging to First Pacific, who was not registered with SEC. This was followed by the issuance of
freeze order upon First Pacifics account. Court of Appeals extends the effectivity of freeze order.
AMLC filed a Motion for Clarification and/or Partial Reconsideration which, however, was denied by
the CA.
ISSUE:
Whether the freeze order issued against respondent's bank account should be further
extended beyond the thirty (30)-day period granted by the Court of Appeals.
RULING:
The pertinent provision o0f law involved in this case is Section 10 of RA No. 9160, which states
that the AMLC may issue a freeze order, effective immediately for a period not exceeding 15 days.
This 15-day freeze order may be extended upon order of the court. However, during the pendency of
the petition, said law was amended by RA No. 9194, entitled as "An Act Amending Republic Act No.
9160, Otherwise Known As The Anti-Money Laundering Act of 2001". It was provided in that law that
the Court of Appeals, upon application ex parte by the AMLC and after determination of probable
cause, may issue a freeze order which shall be effective immediately. The freeze order shall be for a
period of twenty (20) days unless extended by the court.
Meanwhile, on November 15, 2005, A.M. No. 05- 11-04-SC or the "Rule of Procedure in Cases of
Civil Forfeiture, Asset Preservation, and Freezing of Monetary Instrument, Property, or Proceeds
Representing, Involving, or Relating to an Unlawful Activity or Money Laundering Offense under
Republic Act No. 9160, as Amended'' (Rule in Civil Forfeiture Cases) was promulgated. Under Section
53(b) of this rule, a freeze order could be extended for a maximum period of six months.
Recently, Republic Act No. 10365, which was enacted on February 15, 2013, further amended
Section I 0 of Republic Act No. 9160 by mandating that the Court of Appeals may issue a freeze order
BANKING LAW CASES
the duration of which shall not exceed six months otherwise it would be considered lifted. Court of
Appeals has been given sole authority and discretion to issue a freeze order as well as to extend its
effectivity. It is likewise apparent that a freeze order is meant to be a temporary legal remedy in
order to facilitate the attainment of the purpose of the Anti-Money Laundering Law.
In the case at bar, we find no error in the decision of the Court of Appeals to extend the freeze
order to a definite period of thirty (30) days. The state of law and jurisprudence at the time of the
issuance of the assailed ruling of the Court of Appeals gave the appellate court discretion to extend
a freeze order only for a reasonable period of time which was later clarified by A.M. No. 05-11-04-SC
as not exceeding more than six (6) months.

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BANKING LAW CASES

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CASE TITLE CENTRAL BANK OF THE PHILIPPINES vs COURT OF APPEALS

PONENTE: Davide, Jr., J.

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In addition, co-respondent PDIC was impleaded as a party-litigant only in its

The position of the petitioner is unmeritorious.

CASE TITLE RURAL BANK OF SAN MIGUEL VS BSP

CASE TITLE CENTRAL BANK ET AL., VS DELA CRUZ

2. NO. BSP(CB)-MB has authority to enforce CB Circular No. 905.

G.R. No. 70054/ G.R. No. 78767/ G.R. No. 78894

In consonance with this, petitioners Top Management, Pilar Development, El grande

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In addition, co-respondent PDIC was impleaded as a party-litigant only in its representative

As correctly found by the Court of Appeals:

CASE TITLE CENTRAL BANK OF THE PHILIPPINES vs. COURT OF APPEALS

CASE TITLE BANGKO SENTRAL NG PILIPINAS, MONETARY BOARD v HON NINA G

A liquidation proceeding is a single proceeding which consists of a number of cases properly

The RTC-Iriga granted the Motion to Dismiss

2. Yes, the liquidation court has a jurisdiction.

CASE TITLE LETICIA G. MIRANDA vs. PHILIPPINE DEPOSIT INSURANCE CORPORATION,

CASE TITLE PHILIPPINE DEPOSIT INSURANCE CORPORATION, Petitioner, vs. BUREAU OF

CASE TITLE GOVERNMENT SERVICE INSURANCE SYSTEM versus-

PONENTE: PEREZ, J.:

Section 8. Secrecy of Foreign Currency Deposits. All foreign currency deposits

We agree in the conclusion arrived at by the Court of Appeals.

CASE TITLE INTENGAN VS. CA

PONENTE: De Leon Jr.

CASE TITLE MARQUEZ vs DESIERTO

(3) Upon written permission of the depositor,

(4) In cases of impeachment,

PONENTE: Torres, Jr.

CASE TITLE RICARDO B. BANGAYAN VS RIZAL COMMERCIAL BANKING CORPORATION AND

DOCTRINE: Section 2 of the Bank Secrecy Act provides:

CASE TITLE JOSEPH VICTOR EJERCITO VS SANDIGANBAYAN

3. Whether the extremely-detailed information contained in the Special Prosecution Panels

The petition is DISMISSED.

PONENTE: Justice Arturo Brion

CASE TITLE REPUBLIC OF THE PHILIPPINES, Represented by THE ANTIMONEY LAUNDERING

CASE TITLE REPUBLIC OF THE PHILIPPINES, Represented by the ANTI-MONEY LAUNDERING

SEC. 7. Section 10 of [RA 9160] is hereby amended to read as follows:

Section 12 of RA 9194 further provides:

CASE TITLE REPUBLIC OF THE PHILIPPINES represented by the Anti-Money Laundering

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