Republic of the Philippines vs. Security Credit and Acceptance Corporation (G.R. No.

L-20583,
January 23, 1967)

FACTS:
The Solicitor General filed a petition for quo warranto to dissolve the Security and
Acceptance Corporation, alleging that the latter was engaging in banking operations without the
authority required therefor by the General Banking Act (Republic Act No. 337). Pursuant to a
search warrant issued by MTC Manila, members of Central Bank intelligence division and Manila
police seized documents and records relative to the business operations of the corporation. After
examination of the same, the intelligence division of the Central Bank submitted a memorandum
to the then Acting Deputy Governor of Central Bank finding that the corporation is engaged in
banking operations.

It was found that Security and Acceptance Corporation established 74 branches in

principal cities and towns throughout the Philippines; that through a systematic and vigorous
campaign undertaken by the corporation, the same had managed to induce the public to open
59,463 savings deposit accounts with an aggregate deposit of P1,689,136.74.

Accordingly, the Solicitor General commenced this quo warranto proceedings for the
dissolution of the corporation, with a prayer that, meanwhile, a writ of preliminary injunction be
issued ex parte, enjoining the corporation and its branches, as well as its officers and agents,
from performing the banking operations complained of, and that a receiver be appointed
pendente lite. Superintendent of Banks of the Central Bank was then appointed by the Supreme
Court as receiver pendente lite of defendant corporation.

In their defense, Security and Acceptance Corporation averred that the corporation had
filed with the Superintendent of Banks an application for conversion into a Security Savings and
Mortgage Bank, with defendants Zapa, Balatbat, Tanjutco (Pablo and Vito, Jr.), Soriano, Beltran
and Sebastian as proposed directors.

ISSUE:
Whether the defendant corporation was engaged in banking operations.

HELD:
An investment company which loans out the money of its customers, collects the interest
and charges a commission to both lender and borrower, is a bank. It is conceded that a total of
59,463 savings account deposits have been made by the public with the corporation and its 74
branches, with an aggregate deposit of P1,689,136.74, which has been lent out to such persons
as the corporation deemed suitable therefore. It is clear that these transactions partake of the
nature of banking, as the term is used in Section 2 of the General Banking Act. Hence, defendant
corporation has violated the law by engaging in banking without securing the administrative
authority required in Republic Act No. 337.
 That the illegal transactions thus undertaken by defendant corporation warrant its
dissolution is apparent from the fact that the foregoing misuser of the corporate funds and
franchise affects the essence of its business, that it is willful and has been repeated 59,463 times,
and that its continuance inflicts injury upon the public, owing to the number of persons affected
thereby.

Associated Bank (now Westermont Bank) vs Tan (GR NO: 156940)

FACTS:
Respondent Tan is a businessman and a regular depositor-creditor of the petitioner,
Associated Bank. Sometime in September 1990, he deposited a postdated check with the
petitioner in the amount of P101,000 issued to him by a certain Willy Cheng from Tarlac. The
check was duly entered in his bank record. Allegedly, upon advice and instruction of petitioner
that the P101,000 check was already cleared and backed up by sufficient funds, respondent, on
the same date, withdrew the sum of P240,000 from his account leaving a balance of P57, 793.45.
A day after, Tan deposited the amount of P50,000 making his existing balance in the amount of
P107,793.45, because he has issued several checks to his business partners. However, his
suppliers and business partners went back to him alleging that the checks he issued did bounced
for insufficiency of funds.

Thereafter, respondent informed petitioner to take positive steps regarding the matter
for he has adequate and sufficient funds to pay the amount of the subject checks. Nonetheless;
petitioner did not bother nor offer any apology regarding the incident. Respondent Tan filed a
complaint for damages on December 19,1990, with the RTC against petitioner. The trial court
rendered a decision in favor of respondent and ordered petitioner to pay damages and Attorney’s
fees. Appellate court affirmed the lower’s court decision. CA ruled that the bank should not have
authorized the withdrawal of the value of the deposited check prior to its clearing. Petitioner
filed a petition for review before the Supreme Court.

ISSUE:
Whether petitioner has the right to debit the amount of the dishonored check from the
account of the respondent on the ground that the check was withdrawn by respondent prior to
its clearing.

HELD:

No, the petition has no merit. The main issue here is not so much the right of petitioner
to debit respondent’s account but, rather the manner in which it exercised such right. Banks are
granted by law the right to debit the value of a dishonored check from a depositor’s account but
they must do so with the highest degree of care, so as not prejudice the depositor unduly.
The degree of diligence required of banks is more than that of a good father of a family where
the fiduciary nature of their relationship with their depositors concerned.
 In this case, petitioner did not treat respondent’s account with the highest degree of care.
Respondent withdrew his money his money upon the advice of petitioner that his money was
already cleared. It is petitioner’s premature authorization of the withdrawal that caused the
respondent’s account balance to fall to insufficient levels, and the subsequent dishonor of his
own checks for lack of funds.