Banking Case Digests

SPCL- BANKING
Comia, Antonette Tud
BANKING
A. GENERAL PRINCIPLES
1. Register of Deeds of Manila v. China Banking Corporation, 4 SCRA 145 (1962)
2. Republic Bank v. Security Credit and Acceptance Corporation, 19 SCRA 58 (1967)
3. Perez v. Monetary Board, 20 SCRA 443 (1979)
4. Simex International (Manila) Inc. v. Court of Appeals, 183 SCRA 360 (1990)
5. Fidelity and Savings and Mortgage Bank c. Cenzon, 184 SCRA 141 (1990)
6. Sia v. Court of Appeals, 222 SCRA 24 (1993)
7. Banas v. Asia Pacific Finance Corporation, 343 SCRA 527 (2000)
8. Reyes v. Court of Appeals, 363 SCRA 51 (2001)
9. Banco de Oro v. JAPRL Development Corporation, 551 SCRA 342 (2008)
10. Philippine National Bank v. Erlando T. Rodriguez, et al, 556 SCRA 27 (2009)
11. Bank of America, NT and SA v. Associated Citizens Bank
B. CLOSURE OF BANKS
1. Ramos v. Central Bank of the Philippines, 41 SCRA 565 (1971)
2. Central Bank v. Court of Appeals, 106 SCRA 143 (1981)
3. Salud v. Central Bank, 143 SCRA 590 (1986)
4. Lipana v. Development Bank of Rizal, 154 SCRA 257 (1987)
5. Overseas Bank of Manila v. Court of Appeals, 172 SCRA 521 (1989)
6. Banco Filipino Savings and Mortgage Bank v. Central Bank, 204 SCRA 767 (1991)
7. Central Bank of the Philippines v. Court of Appeals, 208 SCRA 652 (1992)
8. First Philippine International Bank v. Court of Appeals, 252 SCRA 259 (1996)
9. Ong v. Court of Appeals, 253 SCRA 105 (1996)
10. Manalo v. Court of Appeals, 366 SCRA 753 (2001)
11. Rural Bank of Sta. Catalina v. Land Bank of the Philippines, 435 SCRA 183 (2004)
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12. Miranda v. PDIC, 501 SCRA 288 (2006)
C. POWERS OF A RECEIVER
1. Abacus Real Estate Development Center Inc. v. Manila Banking Corporation, 455 SCRA 97 (2005)
2. In Re: Petition for Assistance in the Liquidation in the Rural Bank of Bokod (Benguet), PDIC v. Bureau
of Internal Revenue, 511 SCRA 123 (2006)
3. Rural Bank of San Miguel v. Monetary Board, 516 SCRA 154 (2007)
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BANKING
A. GENERAL PRINCIPLES
1. Register of Deeds of Manila v. China Banking Corporation, 4 SCRA 145 (1962)
FACTS:
-Alfonso Pangilinan and Guillermo Chua, former employees of China Banking Corporation were charged with
qualified theft.
-Pangilinan admitted his civil liability in favor of china Banking Corporation .
-Pangilinan, together with his wife, Belen Sta. Ana executed a public instrument entitled DEED OF TRANSFER
whereby in relation to the charge of qualified theft he ceded and transferred to China Banking Corporation a
residential lot in satisfaction of his civil liability.
-The deed was presented for registration to the Register of Deeds of the City of Manila, but because the
transferee the China Banking Corporation was alien-owned and, as such, barred from acquiring lands in the
Philippines, in accordance with the provisions of Section 5, Article XIII of the Constitution of the Philippines, said
officer submitted the matter of its registration to the Land Registration Commission for resolution.
-The commission issued the resolution appealed from holding that the deed of transfer in favor of an alien bank,
subject of the present consulta is unregistrable for being in contravention of the constitution of the Philippines.
ISSUE:
1. May an alien-owned bank acquire lands in the Philippines;
2. Assuming it may, may it acquire land in satisfaction of a civil liability arising from a criminal offense.
HELD:
- Paragraph (c), Section 25 of Republic Act 337 allows a commercial bank to purchase and hold such real estate
as shall be conveyed to it in satisfaction of debts previously contracted in the course of its dealings, We deem it
quite clear and free from doubt that the "debts" referred to in this provision are only those resulting from previous
loans and other similar transactions made or entered into by a commercial bank in the ordinary course of its
business as such. Obviously, whatever "civil liability" arising from the criminal offense of qualified theft was
admitted in favor of appellant bank by its former employee, Alfonso Pangilinan, was not a debt resulting from a
loan or a similar transaction had between the two parties in the ordinary course of banking business.
-Neither do the provisions of paragraph (d) of the Same section apply to the present case because the deed of
transfer in question can in no sense be considered as a sale made by virtue of a judgment, decree, mortgage, or
trust deed held by appellant bank. In the same manner it cannot be said that the real property in question was
purchased by appellant "to secure debts due to it", considering that, as stated heretofore, the term debt employed
in the pertinent legal provision can logically refer only to such debts as may become payable to appellant bank as
a result of a banking transaction.
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2. Republic Bank v. Security Credit and Acceptance Corporation, 19 SCRA 58 (1967)

FACTS:
-Under its Articles of Incorporation registered with SEC, Security Credit and Acceptance Corporation was
authorized to engage
PRIMARILY- in financing agricultural, commercial and industrial projects; and
SECONDARILY- in buying and selling stocks and bonds of any corporation
-When it filed for their by-laws, the Superintendent of Banks of the Central Bank asked its legal counsel an opinion
whether or not the corporation is a banking institution within the purview of RA 337. Legal Counsel resolved in the
affirmative.
-When the Corporation applied with SEC for the registration and licensing of its securities under the Securities
Act, the application was referred to the Central Bank.
-The Central Bank in turn, gave SEC a copy of the opinion of the Legal Counsel of the Superintendent of the
Banks of the Central Bank, resolving in the affirmative the query of Whether or not the said corporation is a
banking institution within the purview of RA 337.
-In line with which, SEC advised the corporation to comply with the requirements of the General Banking Act.
-By virtue of a search warrant, the premises of the corporation were searched and documents and records thereof
relative to its business operations were seized.
-Upon examination and evaluation, it was found that the corporation have been and still continuously performing
functions and activities which have been declared to constitute illegal banking operations.
-The corporation had established branches in principal cities and towns throughout the Philippines and through a
systematic and vigorous campaign, had managed to induce the public to open savings deposit account which has
been lent out to such persons as the corporation deemed suitable thereof.
-Hence, an original quo warranto proceeding was initiated by the Solicitor General to dissolve Security Credit and
Acceptance Corporation for engaging in banking operations without the authority required thereof by the general
Banking Act.
ISSUE:
-Whether or not a bank may engage in banking business without first securing authority from the Central bank.
HELD:
-Security Credit and Acceptance Corporation violated the General banking Act because it is engaging in banking
business without the administrative authority from the Central Bank.
-Before a Corporation can engage in banking business it must first secure the administrative authority required by
law.
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3. Perez v. Monetary Board, 20 SCRA 443 (1979)

FACT:
-Damaso Perez, for himself and on behalf of the Republic Bank denounced before the Central Bank, Paolo roman
and several other republic Bank officials for violations of the General Banking Act and Central Bank Act, and for
falsification of public or commercial documents in connection with certain anomalous loans.
-The cases of alleged anomalous loans were referred by the Central Bank to the special Prosecutors of the
Department of Justice for criminal investigation and prosecution.
-Hence, Perez instituted mandamus proceedings in the CFI against the Monetary Board, the Superintendent of
Banks, the Central Bank and the Secretary of Justice to compel them to prosecute criminally those alleged
violators of the banking laws.
ISSUE:
-Whether or not mandamus may lie to compel the Central Bank or its officials to prosecute those alleged violatiors
of the banking laws.
HELD:
-Although the Central bank and its officials may have the duty under the Central Bank Act and General Banking
Law to cause the prosecution of alleged violators of Banking Laws, yet, there is nothing in said laws that imposes
a clear and specific duty on the former to undertake the actual prosecution of the latter.
-The Central Bank is a government corporation created principally to administer the monetary and banking
system of the Republic.
-It is not a prosecution agency like the fiscals office. Being an artificial person, the Central Bank is limited to its
statutory Powers.
-Its power to sue and be sued refers to Civil Cases only.
-For the officials of the Central Bank to do the actual prosecuting themselves would be tantamount to performing
an ULTRAVIRES ACT.
-Mandamus may not lie.
4. Simex International (Manila) Inc. v. Court of Appeals, 183 SCRA 360 (1990)
FACTS:
-Simex International engaged in the exportation of food products. It buys these products from various local
suppliers and then sells them abroad, particularly in the United States, Canada and the Middle East. Most of its
exports are purchased by Simex International on credit.
-The Simex International was a depositor of the Traders Royal Bank and maintained a checking account in its
branch at Romulo Avenue, Cubao, Quezon City. Simex International deposited to its account in the said bank the
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amount of P100,000.00, thus increasing its balance as of that date to P190,380.74. Subsequently, Simex
International issued several checks against its deposit but was surprised to learn later that they had been
dishonored for insufficient funds.
-As a consequence, the California Manufacturing Corporation sent, a letter of demand to Simex International,
threatening prosecution if the dishonored check issued to it was not made good. It also withheld delivery of the
order made by Simex International. Similar letters were sent to the petitioner by the Malabon Long Life Trading,
and by the G. and U. Enterprises. Malabon also canceled Simex International's credit line and demanded that
future payments be made by it in cash or certified check.
-Meantime, action on the pending orders of Simex International with the other suppliers whose checks were
dishonored was also deferred.
-Simex International complained to the bank. Investigation disclosed that the sum of P100,000.00 deposited by
Simex International, had not been credited to it. The error was rectified only 23 days after, and the dishonored
checks were paid after they were re-deposited.
-In its letter, Simex International demanded reparation from the bank for its "gross and wanton negligence." This
demand was not met.
-Simex International then filed a complaint for moral damages and exemplary damages, plus attorney's fees, and
costs.
TC, affirmed by CA:
-Ruled in favor of Simex.
ISSUE:
-Whether or not the bank was negligent and can be held for damages.
HELD:
- The banking system is an indispensable institution in the modern world and plays a vital role in the economic life
of every civilized nation. Whether as mere passive entities for the safekeeping and saving of money or as active
instruments of business and commerce, banks have become an ubiquitous presence among the people, who
have come to regard them with respect and even gratitude and, most of all, confidence. Thus, even the humble
wage-earner has not hesitated to entrust his life's savings to the bank of his choice, knowing that they will be safe
in its custody and will even earn some interest for him. The ordinary person, with equal faith, usually maintains a
modest checking account for security and convenience in the settling of his monthly bills and the payment of
ordinary expenses. As for business entities like the petitioner, the bank is a trusted and active associate that can
help in the running of their affairs, not only in the form of loans when needed but more often in the conduct of their
day-to-day transactions like the issuance or encashment of checks.
-In every case, the depositor expects the bank to treat his account with the utmost fidelity, whether such account
consists only of a few hundred pesos or of millions. The bank must record every single transaction accurately,
down to the last centavo, and as promptly as possible. This has to be done if the account is to reflect at any given
time the amount of money the depositor can dispose of as he sees fit, confident that the bank will deliver it as and
to whomever he directs. A blunder on the part of the bank, such as the dishonor of a check without good reason,
can cause the depositor not a little embarrassment if not also financial loss and perhaps even civil and criminal
litigation.
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5. Fidelity and Savings and Mortgage Bank c. Cenzon, 184 SCRA 141 (1990)
FACTS:
-Spouses Santiago deposited P50,000 with Fidelity Savings Bank under a savings account, and subsequently,
another P50,000 under a certificate of time deposit.
-Unfortunately, Fidelity Savings and Mortgage Bank was declared insolvent.
-A resolution was issued by the Monetary Board prohibiting Fidelity to continue with its banking operations.
-Pursuant also to the instructions of the Monetary Board, the Superintendent of Banks took charge in the name of
the Monetary Board, the assets of Fidelity.
-PDIC paid the spouses PP10,000 only, thereby leaving a balance of P90,000.
-In another resolution, the Monetary Board directed the liquidation of the affairs of Fidelity.
-While the liquidation proceedings is still pending, the spouses demanded the immediate payment of the savings
and time deposits.
-When demand was not met, the spouses instituted an action for sum of money with damages against Fidelity.
TC:
-Ordered Fidelity to pay the spouses Santiago P90,000 with accrued INTEREST, as well as damages.
ISSUE:
-Whether or not the bank forbidden by the Central Bank to do business has obligation to pay interest on deposit.
HELD:
-Insolvent banking institution and closed by the Central Bank is not liable to pay interest on bank deposits.
-It is settled jurisprudence that a banking institution which has been ordered close by the Central Bank cannot be
held liable to pay interest on bank deposits which accrued during the period when the bank is actually closed and
non-operational.
-However, Fidelity Savings and Mortgage Bank is liable, ONLY for the interest on bank deposits which had
already accrued until the time it was prohibited by the Central Bank to continue its banking operation.
-The reason is that, a bank cannot be expected to pay interest of the said deposit when at the time the bank was
prohibited to transact business operation, the bank no longer derives income.
6. Sia v. Court of Appeals, 222 SCRA 24 (1993)

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FACTS:
-Luaon Sia rented a Safety Deposit Box with Security Bank and Trust Company, wherein he placed his stamps
collection, pursuant to Lease Agreement.
-During the floods that took place in 1985 1nd 1986, floodwater entered into the banks premises and seeped into
the safety deposit box causing damage to the stamp collection.
-SBTC rejected Sias claim for compensation.
-Hence, Sia instituted an action for damages.
TC:
-In favor of Sia, holding that SBTC failed to exercise the required diligence expected of a bank maintaining such
safety deposit bank.
CA:
-Reversed and dismissed the complaint holding that the LEASE AGREEMENT covering the the safety deposit
bank is just a contract of lease, not a contract of deposit, and that paragraphs 9 and 13 thereof, expressly limited
the banks liability to the exercise of the diligence to prevent the opening of the safe by any person other than the
renter, his authorized agent or legal representative; and that the bank not being depository of the contents of the
safe has neither the possession nor the control of the same nor interest what so ever in the contents and thus
assumes no liability in connection therewith.
HELD:
-A bank is liable for the damages to a stamp collection deposited in a safety deposit box caused by its failure to
notify the depositor to retrieve the stamps promptly when the floodwater inundated the room where the safety
deposit was located, because it is a depository and the stipulation that it is not a depository and is not liable for
the contents of the safety deposit box is void for being contrary to law and public policy.
7. Banas v. Asia Pacific Finance Corporation, 343 SCRA 527 (2000)

FACTS:
-Sometime in Teodoro Baas executed a Promissory Note in favor of C. G. Dizon Construction whereby for value
received he promised to pay to the order of C. G. Dizon Construction the sum of P390,000.00 in installments of
"P32,500.00 every 25th day of the month.
-Later, C. G. Dizon Construction endorsed with recourse the Promissory Note to ASIA PACIFIC, and to secure
payment thereof, C. G. Dizon Construction, through its corporate officers, Cenen Dizon, President, and Juliette B.
Dizon, Vice President and Treasurer, executed a Deed of Chattel Mortgage covering three (3) heavy equipment
units of Caterpillar Bulldozer Crawler Tractors.
-Moreover, Cenen Dizon executed a Continuing Undertaking wherein he bound himself to pay the obligation
jointly and severally with C. G. Dizon Construction.
-In compliance with the provisions of the Promissory Note, C. G. Dizon Construction made some installment
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payments to ASIA PACIFIC.

-Thereafter, however, C. G. Dizon Construction defaulted in the payment of the remaining installments, prompting
ASIA PACIFIC to send a Statement of Account to Cenen Dizon for the unpaid.
- As the demand was unheeded, ASIA PACIFIC sued Teodoro Baas, C. G. Dizon Construction and Cenen Dizon.
-While defendants (herein petitioners) admitted the genuineness and due execution of the Promissory Note, the
Deed of Chattel Mortgage and the Continuing Undertaking, they nevertheless maintained that these documents
were never intended by the parties to be legal, valid and binding but a mere subterfuge to conceal the loan of
P390,000.00 with usurious interests.
-Defendants claimed that since ASIA PACIFIC could not directly engage in banking business, it proposed to them
a scheme wherein plaintiff ASIA PACIFIC could extend a loan to them without violating banking laws: first, Cenen
Dizon would secure a promissory note from Teodoro Baas with a face value of P390,000.00 payable in
installments; second, ASIA PACIFIC would then make it appear that the promissory note was sold to it by Cenen
Dizon with the 14% usurious interest on the loan or P54,000.00 discounted and collected in advance by ASIA
PACIFIC; and, lastly, Cenen Dizon would provide sufficient collateral to answer for the loan in case of default in
payment and execute a continuing guaranty to assure continuous and prompt payment of the loan. Defendants
also alleged that out of the loan of P390,000.00 defendants actually received only P329,185.00 after ASIA
PACIFIC deducted the discounted interest, service handling charges, insurance premium, registration and notarial
fees.
-Sometime in October 1980 Cenen Dizon informed ASIA PACIFIC that he would be delayed in meeting his
monthly amortization on account of business reverses and promised to pay instead in February 1981. Cenen
Dizon made good his promise and tendered payment to ASIA PACIFIC in an amount equivalent to two (2) monthly
amortizations. But ASIA PACIFIC attempted to impose a 3% interest for every month of delay, which he flatly
refused to pay for being usurious.
-Afterwards, ASIA PACIFIC allegedly made a verbal proposal to Cenen Dizon to surrender to it the ownership of
the two (2) bulldozer crawler tractors and, in turn, the latter would treat the former's account as closed and the
loan fully paid. Cenen Dizon supposedly agreed and accepted the offer. Defendants averred that the value of the
bulldozer crawler tractors was more than adequate to cover their obligation to ASIA PACIFIC.
ISSUE:
-Whether or not the disputed transaction violated the banking laws.
HELD:
-An investment company refers to any issuer which is or holds itself out as being engaged or proposes to engage
primarily in the business of investing, reinvesting or trading in securities. As defined in Sec. 2, par. (a), of the
Revised Securities Act,securities "shall include x x x x commercial papers evidencing indebtedness of any person,
financial or non-financial entity, irrespective of maturity, issued, endorsed, sold, transferred or in any manner
conveyed to another with or without recourse, such as promissory notes x x x x" Clearly, the transaction between
petitioners and respondent was one involving not a loan but purchase of receivables at a discount, well within the
purview of "investing, reinvesting or trading in securities" which an investment company, like ASIA PACIFIC, is
authorized to perform and does not constitute a violation of the General Banking Act. i Moreover, Sec. 2 of the
General Banking Act provides in part Sec. 2. Only entities duly authorized by the Monetary Board of the Central Bank may engage in the lending
of funds obtained from the public through the receipt of deposits of any kind, and all entities regularly conducting
such operations shall be considered as banking institutions and shall be subject to the provisions of this Act, of the
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Central Bank Act, and of other pertinent laws (underscoring supplied).

-Indubitably, what is prohibited by law is for investment companies to lend funds obtained from the public through
receipts of deposit, which is a function of banking institutions. But here, the funds supposedly "lent" to petitioners
have not been shown to have been obtained from the public by way of deposits, hence, the inapplicability of
banking laws.
8. Reyes v. Court of Appeals, 363 SCRA 51 (2001)

FACTS:
- In view of the 20th Asian Racing Conference in Sydney, Australia, the Philippine Racing Club, Inc. (PRCI, for
brevity) sent four (4) delegates to the said conference. Gregorio H. Reyes, as vice-president for finance, racing
manager, treasurer, and director of PRCI, sent Godofredo Reyes, the clubs chief cashier, to Far East Bank and
Trust Company, to apply for a foreign exchange demand draft in Australian dollars.
-Godofredo went to respondent banks Buendia Branch in Makati City to apply for a demand draft in the amount
One Thousand Six Hundred Ten Australian Dollars (AU$1,610.00) payable to the order of the 20 th Asian Racing
Conference Secretariat of Sydney, Australia. He was attended to by respondent banks assistant cashier, Mr.
Yasis, who at first denied the application for the reason that respondent bank did not have an Australian dollar
account in any bank in Sydney. Godofredo asked if there could be a way for respondent bank to accommodate
PRCIs urgent need to remit Australian dollars to Sydney. Yasis of respondent bank then informed Godofredo of a
roundabout way of effecting the requested remittance to Sydney thus: the respondent bank would draw a demand
draft against Westpac Bank in Sydney, Australia (Westpac-Sydney for brevity) and have the latter reimburse itself
from the U.S. dollar account of the respondent in Westpac Bank in New York, U.S.A (Westpac-New York for
brevity). This arrangement has been customarily resorted to since the 1960s and the procedure has proven to be
problem-free. PRCI and the petitioner Gregorio H. Reyes, acting through Godofredo, agreed to this arrangement
or approach in order to effect the urgent transfer of Australian dollars payable to the Secretariat of the 20 th Asian
Racing Conference.
-On July 28, 1988, the respondent bank approved the said application of PRCI and issued Foreign Exchange
Demand Draft (FXDD) No. 209968 in the sum applied for, that is, One Thousand Six Hundred Ten Australian
Dollars (AU$1,610.00), payable to the order of the 20 th Asian Racing Conference Secretariat of Sydney, Australia,
and addressed to Westpac-Sydney as the drawee bank.
-On August 10, 1988, upon due presentment of the foreign exchange demand draft, denominated as FXDD No.
209968, the same was dishonored, with the notice of dishonor stating the following: xxx No account held with
Westpac. Meanwhile, on August 16, 1988, Westpac-New York sent a cable to respondent bank informing the
latter that its dollar account in the sum of One Thousand Six Hundred Ten Australian Dollars (AU$1,610.00) was
debited. On August 19, 1988, in response to PRCIs complaint about the dishonor of the said foreign exchange
demand draft, respondent bank informed Westpac-Sydney of the issuance of the said demand draft FXDD No.
209968, drawn against the Westpac-Sydney and informing the latter to be reimbursed from the respondent banks
dollar account in Westpac-New York. The respondent bank on the same day likewise informed Westpac-New
York requesting the latter to honor the reimbursement claim of Westpac-Sydney. On September 14, 1988, upon
its second presentment for payment, FXDD No. 209968 was again dishonored by Westpac-Sydney for the same
reason, that is, that the respondent bank has no deposit dollar account with the drawee Westpac-Sydney.
-Spouses Gregorio H. Reyes and Consuelo Puyat-Reyes left for Australia to attend the said racing conference.
When petitioner Gregorio H. Reyes arrived in Sydney in the morning of September 18, 1988, he went directly to
the lobby of Hotel Regent Sydney to register as a conference delegate. At the registration desk, in the presence
of other delegates from various member countries, he was told by a lady member of the conference secretariat
that he could not register because the foreign exchange demand draft for his registration fee had been dishonored
for the second time. A discussion ensued in the presence and within the hearing of many delegates who were
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also registering. Feeling terribly embarrassed and humiliated, petitioner Gregorio H. Reyes asked the lady
member of the conference secretariat that he be shown the subject foreign exchange demand draft that had been
dishonored as well as the covering letter after which he promised that he would pay the registration fees in cash.
In the meantime he demanded that he be given his name plate and conference kit. The lady member of the
conference secretariat relented and gave him his name plate and conference kit. It was only two (2) days later, or
on September 20, 1988, that he was given the dishonored demand draft and a covering letter. It was then that he
actually paid in cash the registration fees as he had earlier promised.
-Consuelo Puyat-Reyes arrived in Sydney. She too was embarrassed and humiliated at the registration desk of
the conference secretariat when she was told in the presence and within the hearing of other delegates that she
could not be registered due to the dishonor of the subject foreign exchange demand draft. She felt herself
trembling and unable to look at the people around her. Fortunately, she saw her husband coming toward her. He
saved the situation for her by telling the secretariat member that he had already arranged for the payment of the
registration fees in cash once he was shown the dishonored demand draft. Only then was petitioner Puyat-Reyes
given her name plate and conference kit.
-The Reyeses felt embarrassed and humiliated, filed a complaint for damages alleging that it was the banks fault
in not failing to exercise highest degree of diligence in this case.
.
- TC, affirmed by CA dismissed the complaint and rendered judgment in favor of FEBTC.
ISSUE:
-Whether or not banks are still required to act with the highest degree of diligence, in its commercial transaction
not involving an exercise of its fiduciary capacity.
HELD:
-The degree of diligence required of a bank is more than that of a good father of a family where fiduciary nature of
their relationship with the depositor is concerned. But the said ruling applies only to cases where banks act under
their fiduciary capacity, that is, as depositary of the deposits. But the same higher degree of diligence is not
expected to be exerted by banks in commercial transactions that do not involve their fiduciary relationship with
their depositors, such as sale and issuance of the foreign exchange demand draft.
-The respondent bank was not required to exert more than the diligence of a good father of a family in regard to
the sale and issuance of the subject foreign exchange demand draft. The case at bar does not involve the
handling of petitioners deposit, if any, with the respondent bank. Instead, the relationship involved was that of a
buyer and seller, that is, between the respondent bank as the seller of the subject foreign exchange demand draft,
and PRCI as the buyer of the same, with the 20 th Asian Racing Conference Secretariat in Sydney, Australia as the
payee thereof. As earlier mentioned, the said foreign exchange demand draft was intended for the payment of the
registration fees of the petitioners as delegates of the PRCI to the 20 th Asian Racing Conference in Sydney.
9. Banco de Oro v. JAPRL Development Corporation, 551 SCRA 342 (2008).

FACTS:
-After evaluating the financial statements of respondent JAPRL Development Corporation (JAPRL) for fiscal years
1998, 1999 and 2000, Banco de Oro-EPCI, Inc. extended credit facilities to it. Rapid Forming Corporation (RFC)
and Jose U. Arollado acted as JAPRLs sureties.
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-Despite its seemingly strong financial position, JAPRL defaulted in the payment of four trust receipts soon after
the approval of its loan BDO later learned from MRM Management, JAPRLs financial adviser, that JAPRL had
altered and falsified its financial statements. It allegedly bloated its sales revenues to post a big income from
operations for the concerned fiscal years to project itself as a viable investment. The information alarmed BDO.
Citing relevant provisions of the Trust Receipt Agreement, it demanded immediate payment of JAPRLs
outstanding obligations.
-JAPRL (and its subsidiary, RFC) filed a petition for rehabilitation in the Regional Trial Court (RTC) of Quezon City,
Branch 90 (Quezon City RTC. It disclosed that it had been experiencing a decline in sales for the three preceding
years and a staggering loss in 2002.
-Because the petition was sufficient in form and substance, a stay order ] was issued. However, the proposed
rehabilitation plan for JAPRL and RFC was eventually rejected by the Quezon City RTC.
-Because JAPRL ignored its demand for payment, BDO filed a complaint for sum of money with an application for
the issuance of a writ of preliminary attachment against JAPRL. BDO essentially asserted that JAPRL was guilty
of fraud because it (JAPRL) altered and falsified its financial statements.
ISSUE:
-Whether or not BDO may annul the credit accommodations it extended to JAPRL and demand immediate
payment due to the alteration and falsification of JAPRLs financial statement.
HELD:
-Banks are entities engaged in the lending of funds obtained through deposits from the public. They borrow the
publics excess money (i.e., deposits) and lend out the same. Banks therefore redistribute wealth in the economy
by channeling idle savings to profitable investments.
-Banks operate (and earn income) by extending credit facilities financed primarily by deposits from the public.
They plough back the bulk of said deposits into the economy in the form of loans. Since banks deal with the
publics money, their viability depends largely on their ability to return those deposits on demand. For this reason,
banking is undeniably imbued with public interest. Consequently, much importance is given to sound lending
practices and good corporate governance.
-Protecting the integrity of the banking system has become, by large, the responsibility of banks. The role of the
public, particularly individual borrowers, has not been emphasized. Nevertheless, we are not unaware of the
rampant and unscrupulous practice of obtaining loans without intending to pay the same.
-In this case, petitioner alleged that JAPRL fraudulently altered and falsified its financial statements in order to
obtain its credit facilities. Considering the amount of petitioners exposure in JAPRL, justice and fairness dictate
that the Makati RTC hear whether or not respondents indeed committed fraud in securing the credit
accommodation.
-Section 40 of the General Banking Law which states:
Section 40. Requirement for Grant of Loans or Other Credit Accommodations. Before
granting a loan or other credit accommodation, a bank must ascertain that the debtor is
capable of fulfilling his commitments to the bank.
Towards this end, a bank may demand from its credit applicants a statement of their
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assets and liabilities and of their income and expenditures and such information as may be
prescribed by law or by rules and regulations of the Monetary Board to enable the bank to
properly evaluate the credit application which includes the corresponding financial statements
submitted for taxation purposes to the Bureau of Internal Revenue. Should such statements
prove to be false or incorrect in any material detail, the bank may terminate any loan or credit
accommodation granted on the basis of said statements and shall have the right to demand
immediate repayment or liquidation of the obligation.
In formulating the rules and regulations under this Section, the Monetary Board shall
recognize the peculiar characteristics of microfinancing, such as cash flow-based lending to
the basic sectors that are not covered by traditional collateral.
Under this provision, banks have the right to annul any credit accommodation or loan, and demand the immediate
payment thereof, from borrowers proven to be guilty of fraud.
10. Philippine National Bank v. Erlando T. Rodriguez, et al, 556 SCRA 27 (2009)
FACTS:
-Spouses Erlando and Norma Rodriguez were clients of Philippine National Bank (PNBThey maintained savings
and demand/checking accounts,
-The spouses were engaged in the informal lending business. In line with their business, they had a discounting
arrangement with the Philnabank Employees Savings and Loan Association (PEMSLA), an association of PNB
employees. Naturally, PEMSLA was likewise a client of PNB Amelia Avenue Branch. The association maintained
current and savings accounts with petitioner bank.
-PEMSLA regularly granted loans to its members. Spouses Rodriguez would rediscount the postdated checks
issued to members whenever the association was short of funds. As was customary, the spouses would replace
the postdated checks with their own checks issued in the name of the members.
-It was PEMSLAs policy not to approve applications for loans of members with outstanding debts. To subvert this
policy, some PEMSLA officers devised a scheme to obtain additional loans despite their outstanding loan
accounts. They took out loans in the names of unknowing members, without the knowledge or consent of the
latter. The PEMSLA checks issued for these loans were then given to the spouses for rediscounting. The officers
carried this out by forging the indorsement of the named payees in the checks.
-In return, the spouses issued their personal checks (Rodriguez checks) in the name of the members and
delivered the checks to an officer of PEMSLA. The PEMSLA checks, on the other hand, were deposited by the
spouses to their account.
-Meanwhile, the Rodriguez checks were deposited directly by PEMSLA to its savings account without any
indorsement from the named payees. This was an irregular procedure made possible through the facilitation of
Edmundo Palermo, Jr., treasurer of PEMSLA and bank teller in the PNB Branch. It appears that this became the
usual practice for the parties.
-PNB eventually found out about these fraudulent acts. To put a stop to this scheme, PNB closed the current
account of PEMSLA. As a result, the PEMSLA checks deposited by the spouses were returned or dishonored for
the reason Account Closed.
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-The corresponding Rodriguez checks, however, were deposited as usual to the PEMSLA savings account. The
amounts were duly debited from the Rodriguez account. Thus, because the PEMSLA checks given as payment
were returned, spouses Rodriguez incurred losses from the rediscounting transactions.
TC:
-Ruled in favor of spouses Rodriguez, PNB is liable to return the value of the checks.
CA:
-Reversed RTC. The checks are payable not to order but to bearer PEMSLA. The payees in the checks were
fictitious payee because they were not the intended payees at all.
-After a Motion for Reconsideration, CA reversed itself.
ISSUE:
-Whether or not PNB is liable to return the value of the checks to Spouses Rodriguez.
HELD:
-In a checking transaction, the drawee bank has the duty to verify the genuineness of the signature of the drawer
and to pay the check strictly in accordance with the drawers instructions, i.e., to the named payee in the check.
It should charge to the drawers accounts only the payables authorized by the latter. Otherwise, the drawee will
be violating the instructions of the drawer and it shall be liable for the amount charged to the drawers account.
-Banks handle daily transactions involving millions of pesos. By the very nature of their work the degree of
responsibility, care and trustworthiness expected of their employees and officials is far greater than those of
ordinary clerks and employees. For obvious reasons, the banks are expected to exercise the highest degree of
diligence in the selection and supervision of their employees.
-PNBs tellers and officers, in violation of banking rules of procedure, permitted the invalid deposits of checks to
the PEMSLA account. Indeed, when it is the gross negligence of the bank employees that caused the loss, the
bank should be held liable.
-A bank that has been remiss in its duty must suffer the consequences of its negligence. Being issued to named
payees, PNB was duty-bound by law and by banking rules and procedure to require that the checks be properly
indorsed before accepting them for deposit and payment. In fine, PNB should be held liable for the amounts of
the checks.
11. Bank of America, NT and SA v. Associated Citizens Bank

FACTS:
- BA-Finance Corporation (BA-Finance) entered into a transaction with Miller Offset Press, Inc. (Miller), through
the latters authorized representatives, BA-Finance granted Miller a credit line facility through which the latter
could assign or discount its trade receivables with the former. Uy Kiat Chung, Ching Uy Seng, and Uy Chung
Guan Seng executed a Continuing Suretyship Agreement with BA-Finance whereby they jointly and severally
guaranteed the full and prompt payment of any and all indebtedness which Miller may incur with BA-Finance.
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-Miller discounted and assigned several trade receivables to BA-Finance by executing Deeds of Assignment in
favor of the latter. In consideration of the assignment, BA-Finance issued four checks payable to the Order of
Miller Offset Press, Inc. with the notation For Payees Account Only. These checks were drawn against Bank of
America .
-The four checks were deposited by Ching Uy Seng (a.k.a. Robert Ching), then the corporate secretary of Miller,
in a joint bank account under the names of Ching Uy Seng and Uy Chung Guan Seng. Associated Bank stamped
the checks with the notation all prior endorsements and/or lack of endorsements guaranteed, and sent them
through clearing. Later, the drawee bank, Bank of America, honored the checks and paid the proceeds to
Associated Bank as the collecting bank.
-Miller failed to deliver to BA-Finance the proceeds of the assigned trade receivables. Consequently, BA-Finance
filed a Complaint against Miller for collection of the amount which BA-Finance allegedly paid in consideration of
the assignment, plus interest at the rate of 16% per annum and penalty charges. Likewise impleaded as party
defendants in the collection case were Uy Kiat Chung, Ching Uy Seng, and Uy Chung Guan Seng.
-Miller, Uy Kiat Chung, and Uy Chung Guan Seng denied that they received the amount covered by the four Bank
of America checks, and that they authorized their co-defendant Ching Uy Seng to transact business with BAFinance on behalf of Miller. Uy Kiat Chung and Uy Chung Guan Seng also denied having signed the Continuing
Suretyship Agreement with BA-Finance.
TC:
-Ordered Bank of America to pay BA Finance and Associated Citizens Bank to Reimburse Bank of America.
CA:
-Affirmed TC and ordered Robert Ching and Uy Chung Guan Seng to pay Associated Citizens Bank.
ISSUES:
1. Whether or not Bank of America is liable to pay BA Finance the amount of the four checks;
2. Whether or not Associated Bank is liable to reimburse Bank of America the amount of the four checks.
HELD:
- The bank on which a check is drawn, known as the drawee bank, is under strict liability, based on the contract
between the bank and its customer (drawer), to pay the check only to the payee or the payees order. The
drawers instructions are reflected on the face and by the terms of the check. When the drawee bank pays a
person other than the payee named on the check, it does not comply with the terms of the check and violates its
duty to charge the drawers account only for properly payable items. Thus, we ruled in Philippine National Bank v.
Rodriguez that a drawee should charge to the drawers accounts only the payables authorized by the latter;
otherwise, the drawee will be violating the instructions of the drawer and shall be liable for the amount charged to
the drawers account.
-A collecting bank where a check is deposited, and which endorses the check upon presentment with the drawee
bank, is an endorser. Under Section 66 of the Negotiable Instruments Law, an endorser warrants that the
instrument is genuine and in all respects what it purports to be; that he has good title to it; that all prior parties had
capacity to contract; and that the instrument is at the time of his endorsement valid and subsisting. This Court
has repeatedly held that in check transactions, the collecting bank or last endorser generally suffers the loss
because it has the duty to ascertain the genuineness of all prior endorsements considering that the act of
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presenting the check for payment to the drawee is an assertion that the party making the presentment has done
its duty to ascertain the genuineness of the endorsements.
-When Associated Bank stamped the back of the four checks with the phrase all prior endorsements and/or lack
of endorsement guaranteed, that bank had for all intents and purposes treated the checks as negotiable
instruments and, accordingly, assumed the warranty of an endorser.
-When a bank allows a client to collect on crossed checks issued in the name of another and for a specific
purpose, the bank is guilty of negligence.
B. CLOSURE OF BANKS
1. Ramos v. Central Bank of the Philippines, 41 SCRA 565 (1971)

FACTS:
-Overseas Bank of Manila, a domestic commercial bank was suspended by Central Bank from clearing and from
lending operations for various violations of banking laws and implementing regulations.
-Because of this suspension and deprivation of all usual credit facilities and accommodations which were
accorded to other banks OBM became financially distressed.
-The Central Bank, through its Monetary Board, in a letter advised OBM to sign trusteeship agreement in favor of
the Central Bank in order to enable it to recognize and transfer management to a nominee of Central Bank.
-In another letter, CB governor reiterated to Emerito Ramos the need for OBM stockholders to execute voting trust
agreement to stave off liquidation and mortgage the properties to secure OBMs obligations to the Central Bank.
-Because CB committed itself to continued operation and rehabilitation of OBM, the majority and controlling
stockholders of OBM complied by executing (a) Voting Trust Agreement, turning over the management of OBM to
CB, (b) mortgaging the properties.
-Thereafter CB elected and installed new Directors and officers drafted from CB itself, PNB and DBP.
-Despite compliance of OBM and parting with value to the profit of CB, CB did not heed to the request for an
advance.
-For almost, six months, CB did nothing to enable OBM to resume normal operation nor support OBM and even
kept the management team largely in the dark.
-Further, CB, in a resolution, excluded OBM from clearing with it.
-Subsequently, in another resolution, CB authorized its nominee Board of Directors to suspend operations, and
thirteen days thereafter directed its Superintendent of Banks to proceed to liquidate OBM under the Central Bank
charter.
-Hence this petition for certiorari, prohibition and mandamus with prayer for the issuance of a writ of preliminary
injunction to restrain CB from enforcing the resolution.
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HELD:
-When the Central Bank made express representations that it would support the bank and avoid its liquidation if
its majority stockholders would execute a voting trust agreement turning over the management of the bank to CB
or its nominees and mortgage or assign their properties to CB to cover the over draft balance of the bank, the CB
may not thereafter renege in its representation and liquidate the bank after the majority stockholders of the bank
complied with the conditions and parted with value to the profit of CB, which thus acquired additional security for
its own advances to the detriment of the banks stockholders, depositors and other creditors under the rule of
promissory estoppel.
2. Central Bank v. Court of Appeals, 106 SCRA 143 (1981)

FACTS:
-Provident Savings Bank experienced a bank run. Due to unusually heavy withdrawals of depositors, Provident
requested from Central Bank emergency loans. Initially, CB denied such request which resulted to temporary
closure of Provident. But later on, CB extended emergency loans. Unfortunately, such were not sufficient to cover
withdrawals of depositors.
-Fernando and Jayme, Providents major stockholders, appealed to CB for its continued assistance.
-CB Deputy declared that assistance would continue, provided that Fernandez and Jayme would turn-over the
management and control of Provident to Iglesia ni Cristo.
-Fernandez and Jayme complied with such condition. However, INC had no intention of restoring the bank but
merely to recover its deposit.
-Monetary Board ordered the closure of Provident.
-Provident filed a petition for certiorari, prohibition and mandamus.
-CB contended that Closure is an exercise of Police Power, which the court cannot pass upon.
-CFI, Affirmed by CA granted the petition.
ISSUE:
-Whether or not the Closure and Liquidation of Bank which is considered an exercise of Police Power may be
subject of judicial inquiry.
HELD:
-While closure and liquidation of a bank may be considered an exercise of police power, the validity of such
exercise of police power is subject to judicial inquiry and could be set aside if it is either capricious, discriminatory,
whimsical, unjust or a denial of the due process and equal protection clauses of the Constitution.
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3. Salud v. Central Bank, 143 SCRA 590 (1986)

FACTS:
-The Monetary Board issued resolutions forbidding the Rural Bank of Muntinlupa to do business and ordering its
liquidation after confirmation that it was insolvent and could not resume business with safety to all concerned.
-CB thereafter filed a petition for assistance in the liquidation of the Rural Bank of Muntinlupa.
- Rural Bank of Muntinlupa opposed on the grounds that: (a) the liquidation is premature and void there being no
prior reorganization and restoration of its viability and; (b) the liquidation was arbitrary and in bad faith because
Rural Bank of Muntinlupa is still capable of rehabilitation and the act of CB was inconsistent with its prior actions
of rehabilitating similarly distressed banks.
-The Trial Court declared the actions taken by the Monetary Board to be arbitrary and dismissed the petition for
assistance in liquidation.
-Failure I two attempts to have this order reconsidered, CB and its liquidator instituted with the Supreme Court a
special civil action of certiorari and mandamus.
-The petition was referred to the IAC which initially remanded the case to the RTC, but upon motion of CB, IAC
clarified its decision and approved the petition for assistance.
-Hence this petition by Rural Bank of Muntinlupa.
ISSUE:
-Whether or not the issue of whether the MB resolution is arbitrary and made in bad faith may only be raised in a
separate action or proceeding.
HELD:
-Resolutions of the Monetary Board under Section 29 of the Central Bank Act-e.g., forbidding banking institutions
to do business on account of a "condition of insolvency" or because "its continuance in business would involve
probable loss to depositors or creditors;" or appointing a receiver to take charge of the bank's assets and
liabilities; or determining whether the banking institutions may be rehabilitated, or should be liquidated and
appointing a liquidator towards this end are by law "final and executory," as earlier pointed out. But they "can be
set aside by the court" on one specific ground, and that is, "if there is convincing proof that the action is plainly
arbitrary and made in bad faith." The Central Bank concedes this power in "the court," but insists that that setting
aside cannot be done in the same proceeding for assistance in liquidation, but in a separate action instituted
specifically for the purpose.
4. Lipana v. Development Bank of Rizal, 154 SCRA 257 (1987)

FACTS:
- Spouses Lipana opened and maintained both time and savings deposits with Development Bank of Rizal.
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-When some of the Time Deposit Certificates matured, Sps. Lipana were not able to cash them but instead were
issued a manager's check which was dishonored upon presentment. Demands for the payment of both time and
savings deposits having failed, Sps Lipana filed a Complaint With Prayer For Issuance of a Writ of Preliminary
Attachment for collection of a sum of money with damages.
-Respondent Judge, ordered the issuance of a writ of attachment, and pursuant thereto, a writ of was issued in
favor of the Sps. Lipana..
-Meanwhile, the Monetary Board, finding that the condition Development Bank Of Rizal was one of insolvency and
that its continuance in business would result in probable loss to its depositors and creditors, decided to place it
under receivership
-Sps. Lipana filed a Motion for Execution Pending Appeal, which was opposed by Development Bank Of Rizal
-In an order, respondent judge ordered the issuance of a writ of execution.
-Development Bank Of Rizal filed a Motion for Reconsideration of order and to Stay Writ of Execution, which,
respondent judge stayed the execution.
-When the motion to lift stay of execution was denied, the Sps. Lipana filed the instant petition.
ISSUE:
-Whether or not respondent judge could legally stay execution of judgment that has already become final and
executory.
HELD:
- The rule that once a decision becomes final and executory, it is the ministerial duty of the court to order its
execution, admits of certain exceptions as in cases of special and exceptional nature where it becomes imperative
in the higher interest of justice to direct the suspension of its execution; whenever it is necessary to accomplish
the aims of justice; or when certain facts and circumstances transpired after the judgment became final which
could render the execution of the judgment unjust.
-In the instant case, the stay of the execution of judgment is warranted by the fact that respondent bank was
placed under receivership. To execute the judgment would unduly deplete the assets of respondent bank to the
obvious prejudice of other depositors and creditors, after the Monetary Board has declared that a bank is
insolvent and has ordered it to cease operations, the Board becomes the trustee of its assets for the equal benefit
of all the creditors, including depositors. The assets of the insolvent banking institution are held in trust for the
equal benefit of all creditors, and after its insolvency, one cannot obtain an advantage or a preference over
another by an attachment, execution or otherwise.
5. Overseas Bank of Manila v. Court of Appeals, 172 SCRA 521 (1989)

FACTS:
- In relation to a contract of sale between NAWASA, as vendor and a certain Bonifacio Regalado, as vendee, and
by authority of the former's board of directors, the amount of P327,257.20 was placed on a time deposit with the
Overseas Bank by the NAWASA Treasurer for a period of 6 months. The amount corresponding to a payment
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earlier made by Regalado to the NAWASA, and the time deposit was made so that a refund could quickly be
made to Regalado in the event that his contract with the NAWASA be disapproved by the Office of the President.
- A second payment having been made by Regalado in the same sum of P327,257.20 in connection with his
aforesaid contract, another time deposit was made by the NAWASA Treasurer with the Overseas Bank,
respresenting the balance of the purchase price due from Regalado. The period of this second deposit was fixed
at one (1) year.
-NAWASA's Acting General Manager wrote to the Overseas Bank advising that (1) as regards the first time
deposit of P327,257.20 which had already matured, NAWASA wished to withdraw it immediately, and (2) with
respect to the second time deposit of P2,945,314.80, it intended to withdraw it sixty (60) days thereafter as
authorized by the parties' agreement set forth in the certificate of the deposit.
-The Overseas Bank having failed to remit to it, it did however pay to NAWASA, , interest on its time deposits.
-After maturity of the second time deposit, NAWASA again sent a letter to the Overseas Bank, demanding
remittance of both time deposits. Having received no response, NAWASA wrote to the Bank once more giving it
five (5) days to remit the deposited sums, and warning that it would seek the intervention of the Central Bank for
the protection of its interests. Still no word was received from the bank.
-NAWASA then wrote to the Central Bank Governor about the matter. The latter replied that it was pursuing a
suggestion of the Monetary Board for the Overseas Bank to transfer government deposits in its custody (including
those of NAWASA) to the Philippine National Bank and/or the Development Bank of the Philippines. Apparently,
even the Central Bank was ignored by Overseas Bank.
-NAWASA informed the Central Bank that it had received no remittance from the Overseas Bank nor did it appear
that the latter had transferred the time deposits to the PNB or the DBP. The Central Bank wrote back, pointing out
that while the matter really had to be resolved by NAWASA and the Overseas Bank according to their contract, it
was nonetheless pursuing an available measures to induce the Overseas Bank to remit the time deposits in
question or at least transfer them to either the PNB or DBP; the Central Bank also said that it had informed the
President of the Philippines of the status of Government deposits in the Overseas Bank.
-One last letter was written by NAWASA to the Overseas Bank, reiterating its demand for the return of its money.
Again the letter went unheeded.
-NAWASA thus brought suit to recover its deposits and damages, with the results already mentioned. The
Overseas Bank failed to file its answer despite service of summons; it was declared in default; the Court received
NAWASA's evidence ex parte and on the basis thereof, thereafter rendered judgment by default. The Overseas
Bank made no effort whatever to have the order of default lifted, or to have the judgment by default reconsidered.
After being served with notice of the judgment, it simply brought the case up to the Court of Appeals.
-Trial Court, affirmed by the Court of Appeal, rendered decision against Overseas Bank.
OBMs Defense:
-By reason of punitive action taken by the CB, it had been prevented from undertaking banking operations which
would have generated funds to pay not only its depositors and creditors but likewise the interests due on the
deposits.
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HELD:
- There is in the first place absolutely no evidence of these facts in the record: and this is simply because the
petitioner bank had made no effort whatever to set aside the default order against it so that it could present
evidence in its behalf before the Trial Court. Moreover, the suspension of operations which took place in August,
1968, could not possibly excuse non-compliance with the obligations in question which matured in 1966. Again,
the claim that the Central Bank, by suspending the Overseas Bank's banking operations, had made it impossible
for the Overseas Bank to pay its debts, whatever validity might be accorded thereto, or the further claim that it had
fallen into a "distressed financial situation," cannot in any sense excuse it from its obligation to the NAWASA,
which had nothing whatever to do with the Central Bank's actuations or the events leading to the bank's
distressed state.
- Furthermore, that rehabilitation program or procedure of payment does not in any way negate or diminish the
indebtedness of the Overseas Bank to the NAWASA incurred in 1966, for conceding full faith and credit to such a
prescribed procedure of payment, it constitutes no obstacle to determining the principal and interests of the debts
at issue at this time.
6. Banco Filipino Savings and Mortgage Bank v. Central Bank, 204 SCRA 767 (1991)
FACTS:
-On different occasions, Top Management Program Corporation, Pilar Development Corporation, El Grande
Development Corporation obtained a loan from Banco Filipino and Savings and Mortgage Bank secured by Real
Estate Mortgages.
-When the bank suffered serious financial problems, the Monetary Board issued resolution finding the bank
insolvent and placed it under receivership.
-Banco Filipino filed a complaint to set aside the said action of MB.
-Subsequently, MB issued another resolution placing the bank under liquidation and designating a liquidator.
-Banco Filipino filed another petition questioning the validity of the said resolution.
-A temporary restraining order was issued, however, acts pertaining to normal operations of a bank are not
enjoined.
-A resolution was also issued ordering the conduct of hearings.
-In the meantime, Top Management Program Corporation, Pilar Development Corporation, El Grande
Development Corporation failed to pay their obligations.
-The liquidator extra judicially foreclosed the Real Estate Mortgages.
-Each filed separately a petition for injunction and prohibition seeking to enjoin the sheriff from proceeding with the
foreclosure sale.
-Petitions were dismissed. Hence, petitions were filed by Top Management Program Corporation, Pilar
Development Corporation, El Grande Development Corporation alleging that the liquidator has no authority to
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proceed with the foreclosure sale pending the resolution of the issue on the validity of the closure and liquidation
of Banco Filipino.
ISSUE:
-Whether or not the liquidator has the authority to prosecute as well as to defend suits and foreclose mortgages
for and in behalf of the bank while the issue on the validity of the receivership and liquidation is still pending
resolution.
HELD:
-The Central bank is vested with the authority to take charge and administer the monetary and banking systems of
the country and this authority includes the power to examine and determine the financial condition of banks for the
purpose of closure ion the ground of insolvency.
-Even if the bank is questioning the validity of its closure, during the pendency of the case, the liquidator can
continue prosecution suits for collection and foreclosure of mortgages, as they are acts done In the usual course
of administration of the banks.
7. Central Bank of the Philippines v. Court of Appeals, 208 SCRA 652 (1992)
FACTS:
- At the height of the controversy surrounding the discovery of the anomalous loans, several blind items about a
family-owned bank in Binondo which granted fictitious loans to its stockholders appeared in major newspapers.
These news items triggered a bank-run in PBP which resulted in continuous over-drawings on the bank's demand
deposit account with the Central Bank. Hence, on the basis of the report submitted by the Supervision and
Examination Sector, Department I of the CB, the Monetary Board (MB), pursuant to its authority under Section 28A of R.A. No. 265 and by virtue of MB Board Resolution No. 164, placed PBP under conservatorship.
-While PBP admits that it had no choice but to submit to the conservatorship, it nonetheless requested that the
same be lifted by the CB. Consequently, the MB issued Resolution directing the principal stockholders of PBP to
increase its capital accounts by such an amount that would be necessary for the elimination of PBP's negative net
worth. CB senior deputy Governor Gabriel Singson informed PBP that pursuant to MB Resolution, the CB would
be willing to lift the conservatorship under the following conditions: (a) PBP's unsecured overdraft with the Central
Bank will be converted into an emergency loan, to be secured by sufficient collateral, including but not limited to
the properties offered by PBP's principal stockholders.
- MB adopted Resolution approving the consolidation of PBP's other unsecured obligations to the CB with its
overdraft and authorizing the conversion thereof into an emergency loan. The same resolution authorized the CB
Governor to lift the conservatorship and return PBP's management to its principal stockholders upon completion
of the documentation and full collateralization of the emergency loan, but directed PBP to pay the emergency loan
in five (5) equal annual installments, with interest and penalty rates at MRR 180 days plus 48% per annum, and
liquidated damages of 5% for delayed payments.
- PBP submitted a rehabilitation plan to the CB which proposed the transfer to PBP of three (3) buildings owned
by Producers Properties, Inc. (PPI), its principal stockholder and the subsequent mortgage of said properties to
the CB as collateral for the bank's overdraft obligation. Although said proposal was explored and discussed, no
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program acceptable to both the CB and PPI was arrived at because of disagreements on certain matters such as
interest rates, penalties and liquidated damages.
-No other rehabilitation program was submitted by PBP for almost three (3) years; as a result thereof, its
overdrafts with the CB continued to accumulate. The CB Monetary Board decided to approve in principle what it
considered a viable rehabilitation program for PBP.
-PBP, without responding to the communications of the CB, filed a complaint verified against the CB, the MB and
CB Governor Jose B. Fernandez, Jr., asserting that the conservatorship was unwarranted, ill-motivated, illegal,
utterly unnecessary and unjustified; that the appointment of the conservator was arbitrary; that herein petitioners
acted in bad faith; that the CB-designated conservators committed bank frauds and abuses; that the CB is guilty
of promissory estoppel; and that by reason of the conservatorship, it suffered losses exclusive of loss of profits
and loss of goodwill.
-The trial court and the Court of Appeals is into lifting the conservatorship. (However, there is nothing in the
amended complaint to reflect an unequivocal intention to ask for its lifting.)
HELD:
-If it were to lift the conservatorship because it was arbitrarily imposed, then the case should have been dismissed
on the grounds of prescription and lack of personality to bring action.
-The following requisites must be present before the order of conservatorship may be set aside by a court:
1. The appropriate pleading must be filed by the stockholders of record representing majority of the
capital stock of the bank in the proper court;
2. Said pleading must be filed within 10 days from receipt of notice by said majority stockholders of the
order placing the bank under conservatorship; and
3. There must be convincing proof after hearing that the action is plainly arbitrary and made in bad faith.
8. First Philippine International Bank v. Court of Appeals, 252 SCRA 259 (1996)
FACTS:
-In the course of its banking operations Producers Bank of the Philippines acquired six parcels of land which used
to be owned by BYMC Investment and Development Corporation which was mortgaged to the bank as collateral
for a loan.
-Demetrio Demetria and Jose Janolo wanted to purchase the property and thus initiated negotiations for that
purpose. They met with Mercurio Rivera, manager of the Property Management Department of the bank, who
advised them to make formal offer.
-Janolo following the advice of Rivera made a formal purchase offer, through a letter, for 3P3.5M in cash, which
was counter-offered by Rivera, on behalf of the bank, to P5.5M, in which Janolo made an amended offer of
P4.250M.
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-There was reply on Janolos last offer, instead they met with Luis Co, Senior Vice-President of the Bank, sticked
to their counter offer of P5.5M, which Janolo et al., accepted after two days.
-The bank was placed under conservatorship by CB and through a letter, Rivera informed Demetria that their
proposal to purchase the property is under study yet by the newly created committee for submission to the Acting
Consrvator.
-Series of demands were made by Janolo et al for compliance by the bank with what Janolo et al considered as
perfected contract of sale which demands were refused by the bank, and refused to receive tender of payment.
-Instead the land was advertised for sale.
-Final demand was made in which acting conservator replied that the bank through the acting Conservator
repudiated the authority of Rivera and all his dealings and counter-offer were unauthorized and illegal, and that
there was no perfected contract of sale as there was no meeting of minds as to the price.
-Hence, Janolo et al filed a suit for specific performance against the bank.
CA:
-Ruled that there was perfected contract of sale and conservator has no authority to revoke it.
ISSUE:
-Whether or not a conservator has the authority to revoke a perfected contract of sale entered into by the bank
through its officers before conservatorship.
HELD:
-The power of conservator, enormous and extensive as they are, cannot extend to the post-facto repudiation of
perfected transactions, otherwise they would infringe the non-impairment clause of the Constitution. What the
conservator may revoke are contracts which are, under existing law, deemed defective- such as void, voidable,
unenforceable or rescissible. Hence, the conservator merely takes place of a banks board of directors. What said
board cannot dosuch as repudiating a contract validly entered into under the doctrine of implied authoritythe
conservator cannot do either.
9. Ong v. Court of Appeals, 253 SCRA 105 (1996)
FACTS:
-Rural Bank of Olonggapo was the owner in fee simple of two parcels of land including the improvements
thereon situated in Tagaytay City.
-Said parcels of land were duly mortgaged by RBO in favor Ong to guarantee the payment of Omnibus
Finance, Inc., which is likewise now undergoing liquidation proceedings of its money market obligations to
Ong.
-Omnibus Finance, Inc., not having seasonably settled its obligations to Ong, the latter proceeded to effect
the extrajudicial foreclosure of said mortgages, such that the City Sheriff of Tagaytay City issued a Certificate
of Sale in favor of Ong.
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-Respondents failed to seasonably redeem said parcels of land, for which reason, Ong has executed an
Affidavit of Consolidation of Ownership which, to date, has not been submitted to the Registry of Deeds of
Tagaytay City, in view of the fact that possession of the aforesaid titles or owners duplicate certificates of title
remains with the RBO.
-To date, Ong has not been able to effect the registration of said parcels of land in his name in view of the
persistent refusal of RBO, despite demand, to surrender RBOs copies of its owners certificates of title for
the parcels of land.
-RBO filed a motion to dismiss on the ground of res judicata alleging that petitioner had earlier sought a similar
relief which case was dismissed with finality on appeal before the Court of Appeals.
-RBO contended that it was undergoing liquidation and, pursuant to prevailing jurisprudence, it is the liquidation
court which has exclusive jurisdiction to take cognizance of Ongs claim.
ISSUES:
1. Whether or not the liquidation court has jurisdiction over all claims against insolvent bank.
2. Whether or not it is necessary that a claim be initially disputed in a court or agency before it is filed with
the liquidation court.
HELD:
-Sec. 29, par. 3, of R.A. 265 as amended by P.D. 1827 does not limit the jurisdiction of the liquidation court to
claims against the assets of the insolvent bank. The provision is general in that it clearly and unqualifiedly states
that the liquidation court shall have jurisdiction to adjudicate disputed claims against the bank. Disputed claims
refer to all claims, whether they be against the assets of the insolvent bank, for specific performance, breach of
contract, damages, or whatever. To limit the jurisdiction of the liquidation court to those claims against the assets
of the bank is to remove significantly and without basis the cases that may be brought against a bank in case of
insolvency.
-It is not necessary that a claim be initially disputed in a court or agency before it is filed with the liquidation court.
10. Manalo v. Court of Appeals, 366 SCRA 753 (2001)
FACTS:
-S. Villanueva Enterprises, represented by its president, Therese Villanueva Vargas, obtained a loan from PAIC
Savings and Mortgage Bank and the Philippine American Investments Corporation (PAIC), respectively.
-To secure payment of both debts, Vargas executed in favor PAIC Savings and PAIC a Joint First Mortgageover
two parcels of land registered under her name.
-S. Villanueva Enterprises defaulted in paying the amortizations due.
respondent, it failed to settle its loan obligation.
Despite repeated demands from the
-Accordingly, PAIC Savings instituted extrajudicial foreclosure proceedings over the mortgaged lots. The Pasay
City property was sold at a public auction to the respondent itself, after tendering the highest bid. PAIC Saving
then caused the annotation of the corresponding Sheriffs Certificate of Sale on the title of the land. After the lapse
of one year, or the statutory period extended by law to a mortgagor to exercise his/her right of redemption, title
was consolidated in PAIC Savings name for failure of Vargas to redeem.
-The Central Bank of the Philippines filed a Petition for assistance in the liquidation of the PAIC Savings with the
Regional Trial Court. The petition was given due course.
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-It appears that from the years 1986 to 1991, Vargas negotiated with the PAIC Savings (through its then liquidator,
the Central Bank) for the repurchase of the foreclosed property. The negotiations, however, fizzled out as Vargas
cannot afford the repurchase price fixed by the PAIC Savings based on the appraised value of the land at that
time.
-Vargas filed a case for annulment of mortgage and extra-judicial foreclosure sale.
-The court rendered a decision dismissing the complaint and upholding the validity of the mortgage and
foreclosure sale.
-On appeal, the appellate court upheld the assailed judgment and declared the said mortgage and foreclosure
proceedings to be in accord with law. This decision of the Court of Appeals subsequently became final and
executory when we summarily dismissed Vargass Petition for Review on Certiorari for having been filed beyond
the reglementary period.
-In the meantime, PAIC Savings petitioned the herein court a quo, for the issuance of a writ of possession for the
subject property. This is in view of the consolidation of its ownership over the same as mentioned earlier. Vargas
and S. Villanueva Enterprises, Inc. filed their opposition thereto. After which, trial ensued.
-During the pendency of the case (for the issuance of a writ of possession), Vargas executed a Deed of Absolute
Sale selling, transferring, and conveying ownership of the disputed lot in favor of a certain Armando Angsico.
Notwithstanding this sale, Vargas, still representing herself to be the lawful owner of the property, leased the same
to Domingo R. Manalo
Later, Armando Angsico, as buyer of the property, assigned his rights therein to Domingo Manalo.
-Shortly, S. Villanueva Enterprises and Vargas moved for its quashal. Thereafter, Manalo, on the strength of the
lease contract and Deed of Assignment made in his favor, submitted a Permission to File an Ex-parte Motion to
Intervene. He had separately instituted a Complaint for Mandamus to compel PAIC Bank to allow him to
repurchase the subject property.
-Trial Court denied the Motion to Quash and Motion to Intervene filed respectively by Vargas and Manalo. A
Motion for Reconsideration and a Supplemental Motion for Reconsideration were filed by the Manalo which,
however, were similarly denied.
ISSUE:
-Whether or not the public respondent committed grave abuse of discretion when it held that what are required to
be instituted before the liquidation court are those claims against the insolvent banks only considering that the
PAIC Savings bank is legally dead due to insolvency and considering further that there is already a liquidation
court which is exclusively vested with jurisdiction to hear all matters and incidents on liquidation pursuant to
Section 29, Republic Act No. 265, otherwise known as The Central Bank Act, as amended.
HELD:
-The liquidator designated as hereunder provided shall, by the Solicitor General, file a petition in the Regional
Trial Court reciting the proceedings which have been taken and praying the assistance of the court in the
liquidation of such institution. The court shall have jurisdiction in the same proceedings to assist in the
adjudication of disputed claims against the bank or non-bank financial intermediary performing quasi-banking
functions and the enforcement of individual liabilities of the stockholders and do all that is necessary to preserve
the assets of such institution and to implement the liquidation plan approved by the Monetary Board.
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-. A bank which had been ordered closed by the monetary board retains its juridical personality which can sue
and be sued through its liquidator. The only limitation being that the prosecution or defense of the action must be
done through the liquidator. Otherwise, no suit for or against an insolvent entity would prosper. In such situation,
banks in liquidation would lose what justly belongs to them through a mere technicality
11. Rural Bank of Sta. Catalina v. Land Bank of the Philippines, 435 SCRA 183 (2004)
FACTS:
-Land Bank of the Philippines, filed a complaint against Sta. Catalina Rural Bank, Inc, for the collection of the sum
of money, capitalized and accrued interests, penalties and surcharges, and for such other equitable reliefs.
-On motion of the LBP, the trial court issued an Order declaring Sta. Catalina Rural Bank, Inc in default for its
failure to file its answer to the complaint. Despite its receipt of the copy of the said order, Sta. Catalina Rural
Bank, Inc failed to file a motion to set aside the order of default.
-In the meantime, the Monetary Board of the Central Bank of the Philippines approved the placement of the Sta.
Catalina Rural Banks assets under receivership under Section 29 of Republic Act No. 7653, as recommended by
its Supervision and Management Section. The Philippine Deposit Insurance Corporation (PDIC) was designated
as receiver (conservator) of the Sta. Catalina Rural Bank, and the latter was prohibited from doing business in the
Philippines.
-Unaware of the action of the Central Bank of the Philippines, the trial court, rendered judgment by default against
Sta. Catalina Rural Bank ordering it to pay LBP.
-Sta. Catalina Rural Bank, through the PDIC, appealed the decision to the Court of Appeals. PDIC submitted
a Report to the Monetary Board of the Central Bank of the Philippines that Sta. Catalina Rural Bank
remained insolvent, and that its management failed to rehabilitate the said bank.
-Sta. Catalina Rural Bank cited the ruling of this Court in Overseas Bank of Manila vs. Court of Appeals to support
its claim that since it was placed under receivership, and prohibited from doing business in the Philippines, it
should no longer be held liable for interests and penalties on its account LBP.
-CA rendered judgment affirming the decision of the RTC. The CA ruled that having failed to file a motion for
reconsideration of the trial courts order declaring it in default before such court rendered judgment, compounded
by its failure to do so in the Court of Appeals, Sta. Catalina Rural Bank was precluded from invoking in the
appellate court the placement of its assets and affairs under receivership and its exemption from liability for
interests and penalties on its account with the LBP after the said date. The CA ruled that if it acquiesced to the
contention of Sta. Catalina Rural Bank, it would defeat the very principle behind the declaration of default of a
party for failing to file an answer to the complaint within the reglementary period therefore. The CA further
declared that a contrary ruling would render nugatory the effect of the trial courts declaration of default on the part
of the Sta. Catalina Rural Bank.
ISSUE:
-Whether or not it is liable for interests and penalties on its account with the Land Bank of the Philippines, when its
assets and affairs were placed under receivership by the Central Bank of the Philippines, and was prohibited from
doing business.
HELD:
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-The records show that Sta. Catalina Rural Bank was served with a copy of summons and the complaint, but
failed to file its answer thereto. It also failed to file a verified motion to set aside the Order of default despite its
receipt of a copy thereof. We note that the trial court rendered more than a year after the issuance of the default
order; yet, Sta. Catalina Rural Bank failed to file any verified motion to set aside the said order before the rendition
of the judgment of default. The PDIC was designated by the Central Bank of the Philippines as receiver
(conservator), and in the course of its management of the Sta. Catalina Rural Banks affairs, it should have known
of the pendency of the case against the latter in the trial court. Moreover, Sta. Catalina Rural Bank, through the
PDIC, received a copy of the decision of the trial court on June 2, 1998, but did not bother filing a motion for
partial reconsideration, under Rule 37 of the Rules of Court, appending thereto the orders of the Monetary Board
or a motion to set aside the order of default. Instead, Sta. Catalina Rural Bank appealed the decision, and even
failed to assign as an error the default order of the trial court. Sta. Catalina Rural Bank is, thus, barred from relying
on the orders of the Monetary Board of the Central Bank of the Philippines placing its assets and affairs under
receivership and ordering its liquidation.
-It bears stressing that a defending party declared in default loses his standing in court and his right to adduce
evidence and to present his defense. He, however, has the right to appeal from the judgment by default and assail
said judgment on the ground, inter alia, that the amount of the judgment is excessive or is different in kind from
that prayed for, or that the plaintiff failed to prove the material allegations of his complaint, or that the decision is
contrary to law. Such party declared in default is proscribed from seeking a modification or reversal of the assailed
decision on the basis of the evidence submitted by him in the Court of Appeals, for if it were otherwise, he would
thereby be allowed to regain his right to adduce evidence, a right which he lost in the trial court when he was
declared in default, and which he failed to have vacated. In this case, the petitioner sought the modification of the
decision of the trial court based on the evidence submitted by it only in the Court of Appeals.
-The Sta. Catalina Rural Bank cannot, likewise, rely on the ruling of the Court in Overseas Bank of Manila vs.
Court of Appeals, because in the said case, the issue of whether a party who had been declared in default is
entitled to relief from the judgment by default based on evidence presented only in the appellate court, when such
order of default was not vacated by the trial court prior to the appeal from the judgment of default was not raised
therein, much less resolved by the Court.
12. Miranda v. PDIC, 501 SCRA 288 (2006)

FACTS:
-Leticia G. Miranda was a depositor of Prime Savings Bank, Santiago City Branch. She withdrew substantial
amounts from her account, but instead of cash she opted to be issued a crossed cashiers check. She was thus
issued cashiers check.
-Miranda 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.
-Prime Savings Bank declared a bank holiday. BSP placed Prime Savings Bank under the receivership of the
Philippine Deposit Insurance Corporation (PDIC).
-Miranda filed a civil action for sum of money to recover the funds from her unpaid checks against Prime Savings
Bank, PDIC and the BSP.
-Trial Court rendered judgment against Philippine Deposit Insurance Corporation, Bangko Sentral ng Pilipinas and
Prime Bank, to pay jointly and solidarily the amount of the checks to Miranda.
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-On appeal, the Court of Appeals reversed the trial court and ruled in favor of the PDIC and BSP, dismissing the
case against them, without prejudice to the right of Miranda to file her claim before the court designated to
adjudicate on claims against Prime Savings Bank.
-Miranda contends that she ceased to be a depositor upon withdrawal of her deposit and the issuance of the two
cashiers checks to her. As a holder in due course of the cashiers 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.
ISSUE:
-Whether or not Mirandas claim is entitled to preference in the assets of the bank on its liquidation.
HELD:
-The two cashiers checks issued by Prime Savings Bank do not constitute an assignment of funds in the hands of
the petitioner as there were no funds to speak of in the first place. The bank was financially insolvent for
sometime, even before the issuance of the checks. As the Court of Appeals correctly ruled, the issuance of the
cashiers checks to Miranda did not constitute an assignment of funds, of which there was practically none
at the time these were issued, as the bank was in dire financial straits for some time.
-However, the claim lodged by the Miranda qualifies as a disputed claim subject to the jurisdiction of the
liquidation court. Regular courts do not have jurisdiction over actions filed by claimants against an insolvent bank,
unless there is a clear showing that the action taken by the BSP, through the Monetary Board in the closure of
financial institutions was in excess of jurisdiction, or with grave abuse of discretion
-In the absence of fraud, the purchase of a cashiers check, like the purchase of a draft on a correspondent bank,
creates the relation of creditor and debtor, not that of principal and agent, with the result that the purchaser or
holder thereof is not entitled to a preference over general creditors in the assets of the bank issuing the check,
when it fails before payment of the check. However, in a situation involving the element of fraud, where a
cashiers check is purchased from a bank at a time when it is insolvent, as its officers know or are bound to know
by the exercise of reasonable diligence, it has been held that the purchase is entitled to a preference in the assets
of the bank on its liquidation before the check is paid
C. POWERS OF A RECEIVER
1. Abacus Real Estate Development Center Inc. v. Manila Banking Corporation, 455 SCRA 97 (2005)
FACTS:
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-Manila Banking Corporation (Manila Bank), owns a 1,435-square meter parcel of land located along Gil Puyat
Avenue Extension, Makati City. The bank began constructing on said land a 14-storey building. Not long after,
however, the bank encountered financial difficulties that rendered it unable to finish construction of the building.
-Central Bank of the Philippines, now Bangko Sentral ng Pilipinas, ordered the closure of Manila Bank and placed
it under receivership, with Feliciano Miranda, Jr. being initially appointed as Receiver. The legality of the closure
was contested by the bank before the proper court.
-Central Bank, by virtue of Monetary Board (MB), ordered the liquidation of Manila Bank and designated Atty.
Renan V. Santos as Liquidator. The liquidation, however, was held in abeyance pending the outcome of the
earlier suit filed by Manila Bank regarding the legality of its closure. Consequently, the designation of Atty. Renan
V. Santos as Liquidator was amended by the Central Bank to that of Statutory Receiver.
-In the interim, Manila Banks then acting president, the late Vicente G. Puyat, in a bid to save the banks
investment, started scouting for possible investors who could finance the completion of the building earlier
mentioned.
-A group of investors, represented by Calixto Y. Laureano (Laureano group), wrote Vicente G. Puyat offering to
lease the building for ten (10) years and to advance the cost to complete the same, with the advanced cost to be
amortized and offset against rental payments during the term of the lease. Likewise, the letter-offer stated that in
consideration of advancing the construction cost, the group wanted to be given the exclusive option to purchase
the building and the lot on which it was constructed.
-Since no disposition of assets could be made due to the litigation concerning Manila Banks closure, an
arrangement was thought of whereby the property would first be leased to Manila Equities Corporation
(MEQCO,), a wholly-owned subsidiary of Manila Bank, with MEQCO thereafter subleasing the property to the
Laureano group.
-Vicente G. Puyat accepted the Laureano groups offer and granted it an exclusive option to purchase the lot and
building for One Hundred Fifty Million Pesos (P150,000,000.00). Later, the building was leased to MEQCO for a
period of ten (10) years pursuant to a contract of lease bearing that date. MEQCO subleased the property to
petitioner Abacus Real Estate Development Center, Inc. (Abacus), a corporation formed by the Laureano group
for the purpose, under identical provisions as that of the lease contract between Manila Bank and MEQCO.
-The Laureano group was, however, unable to finish the building due to the economic crisis brought about by the
failed coup attempt. On account thereof, the Laureano group offered its rights in Abacus and its exclusive option
to purchase to Benjamin Bitanga (Bitanga ), for Twenty Million Five Hundred Thousand Pesos (P20,500,000.00).
Bitanga would later allege that because of the substantial amount involved, he first had to talk with Atty. Renan
Santos, the Receiver appointed by the Central Bank, to discuss Abacus offer. Bitanga further alleged that, over
lunch, Atty. Santos then verbally approved his entry into Abacus and his take-over of the sublease and option to
purchase.
-Laureano group transferred and assigned to Bitanga all of its rights in Abacus and the exclusive option to
purchase the subject land and building.
-Abacus sent a letter to Manila Bank informing the latter of its desire to exercise its exclusive option to
purchase. However, Manila Bank refused to honor the same.
-Such was the state of things, Abacus Real Estate Development Center, Inc. filed a complaint for specific
performance and damages against Manila Bank and/or the Estate of Vicente G. Puyat. Abacus prayed for a
judgment ordering Manila Bank, inter alia, to sell, transfer and convey unto it for the land and building in dispute
free from all liens and encumbrances, plus payment of damages and attorneys fees.
-ABACUS asseverates that the exclusive option to purchase was ratified by Manila Banks receiver, Atty. Renan
Santos, during a lunch meeting held with Benjamin Bitanga
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-Subsequently, defendant Manila Bank, followed a month later by its co-defendant Estate of Vicente G. Puyat,
filed separate motions to dismiss the complaint.
-Trial Court in favor of Abacus.
-CA reversed TC.
ISSUE:
-Whether or not a bank having been already placed under receivership, its officers still authorized to transact
business in connection to banks assets and properties.
HELD:
- A contract unenforceable for lack of authority by one of the parties may be ratified by the person in whose name
the contract was executed. However, even assuming, in gratia argumenti, that Atty. Renan Santos, Manila Banks
receiver approved the exclusive option to purchase granted by Vicente G. Puyat, the same would still be of no
force and effect.
Section 29 of the Central Bank Act, as amended, pertinently provides:
Sec. 29. Proceedings upon insolvency. Whenever, upon examination by the head of the
appropriate supervising and examining department or his examiners or agents into the condition of any
banking institution, it shall be disclosed that the condition of the same is one of insolvency, or that its
continuance in business would involve probable loss to its depositors or creditors, it shall be the duty of
the department head concerned forthwith, in writing, to inform the Monetary Board of the facts, and the
Board may, upon finding the statements of the department head to be true, forbid the institution to do
business in the Philippines and shall designate an official of the Central Bank as receiver to immediately
take charge of its assets and liabilities, as expeditiously as possible collect and gather all the assets
and administer the same for the benefit of its creditors, exercising all the powers necessary for these
purposes including, but not limited to, bringing suits and foreclosing mortgages in the name of the
banking institution.
-Clearly, the receiver appointed by the Central Bank to take charge of the properties of Manila Bank only had
authority to administer the same for the benefit of its creditors. Granting or approving an exclusive option to
purchase is not an act of administration, but an act of strict ownership, involving, as it does, the disposition of
property of the bank. Not being an act of administration, the so-called approval by Atty. Renan Santos amounts
to no approval at all, a bank receiver not being authorized to do so on his own.
2. In Re: Petition for Assistance in the Liquidation in the Rural Bank of Bokod (Benguet), PDIC v. Bureau
of Internal Revenue, 511 SCRA 123 (2006)
FACTS:
-A special examination of Rural Bank of Bokod (Benguet), Inc. (RBBI) was conducted by the Supervision and
Examination Sector (SES) Department III of what is now the Bangko Sentral ng Pilipinas (BSP), wherein various
loan irregularities were uncovered.
-SES Department III required the RBBI management to infuse fresh capital into the bank, within 30 days from date
of the advice, and to correct all the exceptions noted. However, up to the termination of the subsequent general
examination conducted by the SES Department III, no concrete action was taken by the RBBI management.
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-In view of the irregularities noted and the insolvent condition of RBBI, the members of the RBBI Board of
Directors were called for a conference at the BSP. Only one RBBI Director, a certain Mr. Wakit, attended the
conference, and the examination findings and related recommendations were discussed with him.
-In a letter, receipt of which was acknowledged by Mr. Wakit, the SES Department III warned the RBBI Board of
Directors that, unless substantial remedial measures are taken to rehabilitate the bank, it will recommend that the
bank be placed under receivership. In a subsequent letter, a copy of which was sent to every member of the
RBBI Board of Directors via registered mail, the SES Department III reiterated its warning that it would
recommend the closure of the bank, unless the needed fresh capital was immediately infused. Despite these
notices, the SES Department III received no word from RBBI or from any of its Directors.
-In a meeting, the Monetary Board of the BSP decided to take the following; forbid the bank to do business in the
Philippines and place its assets and affairs under receivership in accordance with Section 29 of R.A. No. 265, as
amended; designate the Special Assistant to the Governor and Head, SES Department III, as Receiver of the
bank; refer the cases of irregularities/frauds to the Office of Special Investigation for further investigation and
possible filing of appropriate charges against the following present/former officers and employees of the bank.
A memorandum and report, were submitted by the Director of the SES Department III concluding that the RBBI
remained in insolvent financial condition and it can no longer safely resume business with the depositors,
creditors, and the general public.
-Monetary Board, after determining and confirming the said memorandum and report, ordered the liquidation of
the bank and designated the Director of the SES Department III as liquidator.
-The designated BSP liquidator of RBBI caused the filing with the RTC of a Petition for Assistance in the
Liquidation of RBBI. Subsequently, the Monetary Board transferred to herein Philippine Deposit Insurance
Corporation (PDIC) the receivership/liquidation of RBBI.
-PDIC then filed, a Motion for Approval of Project of Distribution ] of the assets of RBBI, in accordance with Section
31, in relation to Section 30, of Republic Act No. 7653, otherwise known as the New Central Bank Act. During the
hearing, Bureau of Internal Revenue (BIR), through Atty. Justo Reginaldo, manifested that PDIC should secure a
tax clearance certificate from the appropriate BIR Regional Office, pursuant to Section 52(C) of Republic Act No.
8424, or the Tax Code of 1997, before it could proceed with the dissolution of RBBI.
-On even date, the RTC issued order directing PDIC to comply with Section 52(C) of the Tax Code of 1997 within
30 days from receipt of a copy of the said order. Pending compliance therewith, the RTC held in abeyance the
Motion for Approval of Project of Distribution. In order therefore that all taxes due the government should be paid,
petitioner should secure a tax clearance from the Bureau of Internal Revenue.
-Hence, PDIC filed the present Petition for Review on Certiorari, under Rule 45 of the revised Rules of Court,
raising pure questions of law. PDIC argues that the closure of banks under Section 30 of the New Central Bank
Act is summary in nature and procurement of tax clearance as required under Section 52(C) of the Tax Code of
1997 is not a condition precedent thereto; that under Section 30, in relation to Section 31, of the New Central
Bank Act, asset distribution of a closed bank requires only the approval of the liquidation court; and that the BIR is
not without recourse since, subject to the applicable provisions of the Tax Code of 1997, it may therefore assess
the closed RBBI for tax liabilities, if any.
ISSUE:
-Whether or not RBBI, as represented by its liquidator, PDIC, still needs to secure a tax clearance from the BIR
before the RTC could approve the Project of Distribution of the assets of RBBI.
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HELD:
-Section 30 of the New Central Bank Act lays down the proceedings for receivership and liquidation of a bank.
The said provision is silent as regards the securing of a tax clearance from the BIR. The omission, nonetheless,
cannot compel this Court to apply by analogy the tax clearance requirement of the SEC, as stated in Section
52(C) of the Tax Code of 1997 and BIR-SEC Regulations No. 1, since, again, the dissolution of a corporation by
the SEC is a totally different proceeding from the receivership and liquidation of a bank by the BSP. This Court
cannot simply replace any reference by Section 52(C) of the Tax Code of 1997 and the provisions of the BIR-SEC
Regulations No. 1 to the SEC with the BSP. To do so would be to read into the law and the regulations
something that is simply not there, and would be tantamount to judicial legislation.
-It should be noted that there are substantial differences in the procedure for involuntary dissolution and
liquidation of a corporation under the Corporation Code, and that of a banking corporation under the New Central
Bank Act, so that the requirements in one cannot simply be imposed in the other.
3. Rural Bank of San Miguel v. Monetary Board, 516 SCRA 154 (2007)
FACTS:
-To assist its impaired liquidity and operations, the RBSM was granted emergency loans on different
occasions in the aggregate amount of P375 [million].
-Land Bank of the Philippines (LBP) advised RBSM that it will terminate the clearing of RBSMs checks in
view of the latters frequent clearing losses and continuing failure to replenish its Special Clearing
Demand Deposit with LBP. The BSP interceded with LBP not to terminate the clearing arrangement of
RBSM to protect the interests of RBSMs depositors and creditors.
-LBP informed the BSP of the termination of the clearing facility of RSBM in view of the clearing problems
of RBSM.
-MB approved the release of P26.189 [million] which is the last tranche of the P375 million emergency
loan for the sole purpose of servicing and meeting the withdrawals of its depositors. Of the P26.180
million, xxx P12.6 million xxx was not used to service withdrawals [and] remains unaccounted for as
admitted by [RBSMs Treasury Officer and Officer-in-Charge of Treasury]. Instead of servicing
withdrawals of depositors, RBSM paid Forcecollect Professional Solution, Inc. and Surecollect
Professional, Inc., entities which are owned and controlled by Hilario P. Soriano and other RBSM officers.
-RBSM declared a bank holiday. RBSM and all of its 15 branches were closed from doing business.
-Alarmed and disturbed by the unilateral declaration of bank holiday, [BSP] wanted to examine the books
and records of RBSM but encountered problems.
-Thereafter, PDIC implemented the closure order and took over the management of RBSMs assets and affairs.
-In their petition before the CA, petitioners claimed that respondents MB and BSP committed grave abuse of
discretion in issuing Resolution No. 105. The petition was dismissed by the CA on March 28, 2000. It held,
among others, that the decision of the MB to issue Resolution No. 105 was based on the findings and
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recommendations of the Department of Rural Banks Supervision and Examination Sector, the comptroller reports.
Such could be considered as substantial evidence.
-On the basis of reports prepared by PDIC stating that RBSM could not resume business with sufficient assurance
of protecting the interest of its depositors, creditors and the general public, the MB passed resolution directing
PDIC to proceed with the liquidation of RBSM.
-Hence this petition.

HELD:
-It is well-settled that the closure of a bank may be considered as an exercise of police power. The action of the
MB on this matter is final and executory. Such exercise may nonetheless be subject to judicial inquiry and can be
set aside if found to be in excess of jurisdiction or with such grave abuse of discretion as to amount to lack or
excess of jurisdiction.
-Laying down the requisites for the closure of a bank under the law is the prerogative of the legislature and what
its wisdom dictates. The lawmakers could have easily retained the word examination (and in the process also
preserved the jurisprudence attached to it) but they did not and instead opted to use the word report. The
insistence on an examination is not sanctioned by RA 7653 and we would be guilty of judicial legislation were we
to make it a requirement when such is not supported by the language of the law.
-What is being raised here as grave abuse of discretion on the part of the respondents was the lack of an
examination and not the supposed arbitrariness with which the conclusions of the director of the Department of
Rural Banks Supervision and Examination Sector had been reached in the report which became the basis of
Resolution No. 105.
-The absence of an examination before the closure of RBSM did not mean that there was no basis for the closure
order. Needless to say, the decision of the MB and BSP, like any other administrative body, must have something
to support itself and its findings of fact must be supported by substantial evidence. But it is clear under RA 7653
that the basis need not arise from an examination as required in the old law.
-We thus rule that the MB had sufficient basis to arrive at a sound conclusion that there were grounds that would
justify RBSMs closure. It relied on the report of Mr. Domo-ong, the head of the supervising or examining
department, with the findings that: (1) RBSM was unable to pay its liabilities as they became due in the ordinary
course of business and (2) that it could not continue in business without incurring probable losses to its depositors
and creditors. The report was a 50-page memorandum detailing the facts supporting those grounds, an extensive
chronology of events revealing the multitude of problems which faced RBSM and the recommendations based on
those findings.
-In short, MB and BSP complied with all the requirements of RA 7653. By relying on a report before placing a
bank under receivership, the MB and BSP did not only follow the letter of the law, they were also faithful to its
spirit, which was to act expeditiously. Accordingly, the issuance of Resolution No. 105 was untainted with
arbitrariness.
Page 34 of 35

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Comia, Antonette Tud

Comia, Antonette Tud

12. Miranda v. PDIC, 501 SCRA 288 (2006)

Comia, Antonette Tud

Comia, Antonette Tud

2. Republic Bank v. Security Credit and Acceptance Corporation, 19 SCRA 58 (1967)

Comia, Antonette Tud

3. Perez v. Monetary Board, 20 SCRA 443 (1979)

Comia, Antonette Tud

Comia, Antonette Tud

6. Sia v. Court of Appeals, 222 SCRA 24 (1993)

Comia, Antonette Tud

7. Banas v. Asia Pacific Finance Corporation, 343 SCRA 527 (2000)

Comia, Antonette Tud

payments to ASIA PACIFIC.

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Central Bank Act, and of other pertinent laws (underscoring supplied).

8. Reyes v. Court of Appeals, 363 SCRA 51 (2001)

Comia, Antonette Tud

9. Banco de Oro v. JAPRL Development Corporation, 551 SCRA 342 (2008).

Comia, Antonette Tud

Comia, Antonette Tud

Comia, Antonette Tud

11. Bank of America, NT and SA v. Associated Citizens Bank

Comia, Antonette Tud

Comia, Antonette Tud

1. Ramos v. Central Bank of the Philippines, 41 SCRA 565 (1971)

Comia, Antonette Tud

2. Central Bank v. Court of Appeals, 106 SCRA 143 (1981)

Comia, Antonette Tud

3. Salud v. Central Bank, 143 SCRA 590 (1986)

4. Lipana v. Development Bank of Rizal, 154 SCRA 257 (1987)

Comia, Antonette Tud

5. Overseas Bank of Manila v. Court of Appeals, 172 SCRA 521 (1989)

Comia, Antonette Tud

Comia, Antonette Tud

Comia, Antonette Tud

Comia, Antonette Tud

Comia, Antonette Tud

9. Ong v. Court of Appeals, 253 SCRA 105 (1996)

Comia, Antonette Tud

Despite repeated demands from the

Comia, Antonette Tud

Comia, Antonette Tud

Comia, Antonette Tud

12. Miranda v. PDIC, 501 SCRA 288 (2006)

Comia, Antonette Tud

Comia, Antonette Tud

Comia, Antonette Tud

Comia, Antonette Tud

Comia, Antonette Tud

Comia, Antonette Tud

-Hence this petition.

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