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Banking Laws

1. Teodoro Bañas vs. Asia Pacific Finance Corporation, G.R. No. 128703, October 18,
2000
Transactions involving purchase of receivables at a discount, well within the purview of
investing, reinvesting or trading in securities, which as investment company is authorized
to perform, does not constitute a violation of the General Banking Act. In this case, the
funds supposedly lent have not been shown to have been obtained from the public by way
of deposits, hence, it cannot be said that the investment company was engaged in banking.
2. PNB v. Sps. Tajonera, G.R. No. 195889, 24 September 2014
Being a banking institution, PNB owes it to the respondents to observe the high standards
of integrity and performance in all its transactions because its business is imbued with
public interest. The high standards are also necessary to ensure public confidence in the
banking system, for, according to Philippine National Bank v. Pike, "[t]he stability of banks
largely depends on the confidence of the people in the honesty and efficiency of banks."
Thus, PNB was duty bound to comply with the terms and stipulations under its credit
agreements with the respondents, specifically the release of the amount of the additional
loan in its entirety, lest it erodes public confidence. Yet, PNB failed in this regard.
3. Consolidated Bank and Trust Corporation vs. Court of Appeals, G.R. No. 138569,
September 11, 2003
Banks must exercise a high degree of diligence in insuring that they return the passbook
only to the depositor or his authorized representative. The tellers should know that the rules
on savings account provide that any person in possession of the passbook is presumptively
its owner. By the teller giving the passbook to the wrong person, thereby facilitating
unauthorized withdrawals by that person, and for failing to return the passbook to the
authorized representative of the depositor, the Bank presumptively failed to observe such
high degree of diligence in safeguarding the passbook and in insuring its return to the
party authorized to receive the same. However, the Bank’s liability is mitigated by
the depositor’s contributory negligence in allowing a withdrawal slip signed by its
authorized signatories to fall into the hands of an impostor.
4. Citibank, N.A. vs. Spouses Luis & Carmelita Cabamongan, G.R. No. 146918, May 2,
2006
Allowing the pretermination of the account despite noticing discrepancies in the signature
and photograph of the person claiming to be the depositor, accompanied by the failure to
surrender the original certificate of time deposit, amounted to negligence on the part of the
bank. A bank that fails to exercise the degree of diligence required of it becomes liable for
damages.

5. Comsavings Bank vs. Spouses Danilo and Estrella Capistrano, G.R. No. 170942,
August 28, 2013
A banking institution serving as an originating bank for the Unified Home Lending
Program (UHLP) of the Government owes a duty to observe the highest degree of diligence
and a high standard of integrity and performance in all its transactions with its clients
because its business is imbued with public interest.

6. Land Bank of the Philippines vs. Emmanuel Oñate, G.R. No. 192371, January 15,
2014
As a business affected with public interest and by reason of the nature of its functions, the
bank is under obligation to treat the accounts of its depositors with meticulous care, always
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having in mind the fiduciary nature of their relationship. A bank that mismanages the trust
accounts of its client cannot benefit from the inaccuracies of the reports resulting
therefrom; it cannot impute the consequence of its negligence to the client which resulted
to miscrediting of funds.
7. Ileana Macalinao vs. Bank of the Philippine Islands, G.R. No. 175490, September 17,
2009
When the stipulation on the interest rate is void, it is as if there was no express contract
thereon; hence, courts may reduce the interest rate as reason and equity demand, which
would depend on the circumstances of each case. In the present case, the fact that petitioner
made partial payments makes the stipulated penalty charge of 3% per month or 36% per
annum, in addition to regular interests, iniquitous and unconscionable.
8. Heirs of Estelita Burgos-Lipat namely: Alan B. Lipat and Alfredo B. Lipat, Jr. vs.
Heirs of Eugenio D. Trinidad namely: Asuncion R. Trinidad, et. al., G.R. No. 185644,
March 2, 2010
Section 78 of the General Banking Act requires payment of the amount fixed by the court
in the order of execution, with interest thereon at the rate specified in the mortgage
contract, which shall be applied for the one-year period reckoned from the date of
registration of the certificate of sale. Nonetheless, when the period to exercise the right of
redemption was effectively extended beyond one year, it is only fair and just to require the
payment of 12% interest per annum beyond the one-year period up to the date of
consignment of the redemption price with the RTC.
9. Advocates for Truth in Lending vs. BSP, G.R. No. 192986, January 15, 2013
The CB Circular No. 905 merely suspended the effectivity of the Usury Law, thereby
allowing the parties to freely stipulate on the rate of interest. Nonetheless, the lifting of the
ceilings for interest rates does not authorize stipulations charging excessive,
unconscionable, and iniquitous interest.

10. Jose C. Go vs. BSP, G.R. No. 178429, October 23, 2009
The law on DOSRI transactions imposes three restrictions: a) the approval requirement,
which refers to the written approval of the majority of the bank’s board of directors,
excluding the director concerned; b) the reportorial requirement, which mandates that the
approval should be entered upon the records of the corporation, and a copy of the entry be
transmitted to the appropriate supervising department; and c) the ceiling requirement,
which limits the amount of credit accommodations to an amount equivalent to the
respective outstanding deposits and book value of the paid-in capital contribution in the
bank. Failure to observe the three requirements constitutes commission of three separate
and different offenses.
11. Hilario P. Soriano vs. People of the Philippines, et. al., G.R. No. 162336, February 1,
2010
The rule on DOSRI transactions covers loans by a bank director or officer which are made
either: (1) directly, (2) indirectly, (3) for himself, (4) or as the representative or agent of
others. The bank officer’s act of indirectly securing a fraudulent loan application by using
the name of an unsuspecting person and without prior compliance with the requirements
of the law would make the officer liable not only for violation of the law on DOSRI
transactions but also for estafa through falsification of commercial documents

The New Central Bank Act (R.A. No. 7653)


12. Ana Maria Koruga vs. Teodoro Arcenas, Jr., G.R. No. 168332/ G.R. No. 169053,
June 19, 2009

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The Monetary Board, is vested with exclusive authority to assess, evaluate and determine
the condition of any bank, and finding such condition to be one of insolvency, or that its
continuance in business would involve a probable loss to its depositors or creditors, forbid
bank or non-bank financial institution to do business in the Philippines; and shall designate
an official of the BSP or other competent person as receiver to immediately take charge of
its assets and liabilities. When the complaint filed by a stockholder of the bank pertains to
the alleged unsafe and unsound banking practices, the authority to determine the existence
of such is with the Monetary Board.

13. BSP Monetary Board vs. Hon. Antonio-Valenzuela, G.R. No. 184778, October 2,
2009
The actions of the Monetary Board under Sec. 29 and 30 of RA 7653, which pertain to the
power to appoint a conservator or a receiver for a bank, may not be restrained or set aside
by the court except on petition for certiorari on the ground that the action taken was in
excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess
of jurisdiction. Hence, the issuance by the RTC of writs of preliminary injunction is an
unwarranted interference with the powers of the Monetary Board.
14. Central Bank of the Philippines vs. Court of Appeals, G.R. No. 88353, May 8, 1992
The following requisites must be present before the order of conservatorship may be set
aside by a court: 1) The appropriate pleading must be filed by the stockholders of record
representing the majority of the capital stock of the bank in the proper court; 2) Said
pleading must be filed within ten (10) days from receipt of notice by said majority
stockholders of the order placing the bank under conservatorship; and 3) There must be
convincing proof, after hearing, that the action is plainly arbitrary and made in bad faith.
15. Philippine International Bank vs. Court of Appeals, G.R. No. 115849, January 24,
1996
The authority of the conservator under the Central Bank Law is limited to acts of
administration; the conservator merely takes the place of the bank’s board of directors and
as such, the former cannot perform acts the latter cannot do. Hence, the conservator cannot
revoke a contract of sale of a property acquired by the bank entered into by a bank officer
even though the price agreed upon is no longer reflective of the fair market value of the
property by reason of its appreciation of value over time.

16. Rural Bank of San Miguel vs. Monetary Board, G.R. No. 150886, February 16, 2007
Under R.A. No. 265, an examination is required to be made before the Monetary Board
could issue a closure order; however, under R.A. No. 7653, prior notice and hearing are no
longer required and a report made by the head of the supervising and examining department
suffices for a bank to be closed and placed under receivership. The purpose of the law is
to make the closure of the bank summary and expeditious for the protection of the public
interest
17. Abacus Real Estate Development Center, Inc. vs. Manila Banking Corp., G.R. No.
162270, April 06, 2005
When a bank is placed under receivership, the appointed receiver is tasked to take charge
of the bank’s assets and properties and the scope of the receiver’s power is limited to acts
of administration. The receiver’s act of approving the exclusive option to purchase granted
by the bank’s president is beyond the authority of the former and as such, it cannot be
considered a valid approval.

18. Alfeo D. Vivas, vs. Monetary Board and PDIC, G.R. No. 191424, August 7, 2013
The Monetary Board may forbid a bank from doing business and place it under receivership
without prior notice and hearing it the MB finds that a bank: (a) is unable to pay its
liabilities as they become due in the ordinary course of business; (b) has insufficient
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realizable assets to meet liabilities; (c) cannot continue in business without involving
probable losses to its depositors and creditors; and (d) has willfully violated a cease and
desist order of the Monetary Board for acts or transactions which are considered unsafe
and unsound banking practices and other acts or transactions constituting fraud or
dissipation of the assets of the institution.
19. Jerry Ong vs. Court of Appeals, G.R. No. 112830, February 1, 1996
The court shall have jurisdiction in the same proceedings to adjudicate disputed claims
against the bank and enforce 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. Hence, all claims against the insolvent bank should be
filed in the liquidation proceeding and it is not necessary that a claim be initially disputed
in a court or agency before it is filed with the liquidation court.
20. Domingo Manalo vs. Court of Appeals, G.R. No. 141297, October 8, 2001
The rule that all claims against a bank must be filed in the liquidation proceedings does not
apply to actions filed by the bank itself for the preservation of its assets and protection of
its property, such as a petition for the issuance of a Writ of Possession instituted by the
bank itself. Moreover, a bank ordered closed by the Monetary Board retains its personality
which can sue and be sued through its liquidator.

21. Leticia G. Miranda vs. Philippine Deposit Insurance Corporation, G.R. No. 169334,
September 8, 2006
As a rule, bank deposits are not preferred credits. However, when the deposits covered by
a cashier’s check were purchased from a bank at the time when it was already insolvent,
the purchase is entitled to preference in the assets of the bank upon its liquidation by reason
of the fraud in the transaction.
22. Oñate vs. Abrogar, G.R. No. 107303, February 23, 1995
In a case where the money paid by an insurance company for treasury bills was deposited
in a bank account, the examination of the said bank account is prohibited under R.A. No.
1405 by reason of the fact that the subject matter of the action filed by the insurance
company against the seller of the treasury bills is the failure to deliver the treasury bills,
not the money deposited.
23. Intengan vs. Court of Appeals, G.R. No. 128996, February 15, 2002
When the account subject of the complaint is in the foreign currency, such complaint filed
for violation of R.A. No. 1405 did not toll the running of the prescriptive period to file
the appropriate complaint for violation of R.A. No. 6426. The Law on Secrecy of Bank
Deposits (R.A. No. 1405) covers deposits under the Philippine Currency; a separate and
distinct law governs deposits under the foreign currency (R.A. No. 6426).

24. Ejercito vs. Sandiganbayan, G.R. Nos. 157294-95, November 30, 2006
The “deposits” covered by the law on secrecy of bank deposits should not be limited to
those creating a creditor-debtor relationship; the law must be broad enough to include
“deposits of whatever nature” which banks may use for authorized loans to third persons.
R.A. No. 1405 extends to funds invested such as those placed in a trust account which the
bank may use for loans and similar transactions.
25. Mellon Bank, N.A. vs. Magsino, G.R. No. 71479, October 18, 1990
One of the exceptions under R.A. No. 1405 is when a court order is issued for the disclosure
of bank deposits in a case where the money deposited is the subject matter of litigation.
When the subject matter is the money the bank transmitted by mistake, an inquiry to the
whereabouts of the amount extends to whatever concealed by being held or recorded in the
name of the persons other than the one responsible for the illegal acquisition.

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26. Marquez vs. Desierto, G.R. No. 135882, June 27, 2001
In a case for violation of the Anti-Graft and Corrupt Practices Act, the Ombudsman can
only examine bank accounts upon compliance with the following requisites: there is a
pending case before a court of competent jurisdiction; the account must be clearly
identified, and the inspection must be limited to the subject matter of the pending case; the
bank personnel and the account holder must be informed of the examination; and such
examination must be limited to the account identified in the pending case. If there is no
pending case yet but only an investigation by the Ombudsman, any order for the
examination of the bank account is premature.
27. PCIB vs. Court of Appeals, G.R. No. 84526, January 28, 1991)
The law on secrecy of bank deposits cannot be used to preclude the bank deposits from
being garnished for the satisfaction of a judgment. There is no violation of R.A. No. 1405
because the disclosure is purely incidental to the execution process and it was not the
intention of the legislature to place bank deposits beyond the reach of the judgment
creditor.
28. Salvacion vs. Central Bank of the Philippines, G.R. No. 94723, August 21, 1997)
A foreign transient who raped a minor, escaped and was made liable for damages to the
victim cannot invoke the exemption from court process of foreign currency deposits under
R.A. No. 6426. The garnishment of his foreign currency deposit should be allowed by
reason of equity and to prevent injustice; moreover, the purpose of the law is to encourage
foreign currency deposits and not to benefit a wrongdoer.

29. Republic of the Philippines vs. Glasgow Credit and Collection Services, Inc., G.R.
No. 170281, January 18, 2008
Since the account of Glasgow in CSBI was (1) covered by several suspicious transaction
reports and (2) placed under the control of the trial court upon the issuance of the writ of
preliminary injunction, the conditions provided in Section 12(a) of RA 9160, as amended,
were satisfied. A criminal conviction for an unlawful activity is not a prerequisite for the
institution of a civil forfeiture proceeding. A finding of guilt for an unlawful activity is not
an essential element of civil forfeiture.
30. Republic of the Philippines vs. Cabrini Green & Ross, Inc., G.R. No. 154522, May 5,
2006
The amendment by RA 9194 of RA 9160 erased any doubt on the jurisdiction of the Court
of Appeals over the extension of freeze orders. It is solely the CA which has the authority
to issue a freeze order as well as to extend its effectivity; it also has the exclusive
jurisdiction to extend existing freeze orders previously issued by the AMLC vis-à-vis
accounts and deposits related to money-laundering activities
31. Ret. Lt. Gen. Jacinto Ligot, et. al. vs. Republic of the Philippines, G.R. No. 176944,
March 6, 2013
The primary objective of a freeze order is to temporarily preserve monetary instruments or
property that are in any way related to an unlawful activity or money laundering, by
preventing the owner from utilizing them during the duration of the freeze order. The
effectivity of the freeze order was limited to a period not exceeding six months, which may
be extended by the CA should it become completely necessary. Nonetheless, when the
Republic has not offered any explanation why it took six years before a civil forfeiture
case was filed in court, it can only be concluded that the continued extension of the freeze
order beyond the six-month period violated the party’s right to due process.

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Securities Regulation Code

213. Betty Gabionza and Isabelita Tan vs. Court of Appeals, G.R. No. 161057,
September 12, 2008
The issuance of checks for the purpose of securing a loan to finance the activities of the
corporation is well within the ambit of a valid corporate act. It is one thing for a corporation
to issue checks to satisfy isolated individual obligations, and another for a corporation to
execute an elaborate scheme where it would comport itself to the public as a pseudo-
investment house and issue postdated checks instead of stocks or traditional securities to
evidence the investments of its patrons.
214. Securities and Exchange Commission vs. Prosperity.Com, Inc., G.R. No.
164197, January 25, 2012
For an investment contract to exist, the following elements, referred to as the Howey test
must concur: (1)a contract, transaction, or scheme; (2)an investment of money;
(3)investment is made in a common enterprise; (4) expectation of profits; and (5)profits
arising primarily from the efforts of others. Network marketing, a scheme adopted by
companies for getting people to buy their products where the buyer can become a down-
line seller, who earns commissions from purchases made by new buyers whom he refers
to the person who sold the product to him, is not an investment contract.
215. Securities and Exchange Commission vs. Oudine Santos, G.R. No. 195542,
March 19, 2014
A person is liable for violation of Section 28 of the SRC where, acting as a broker, dealer
or salesman is in the employ of a corporation which sold or offered for sale unregistered
securities in the Philippines. The transaction initiated by the investment consultant of a
corporation is an investment contract or participation in a profit sharing agreement that
falls within the definition of law—an investment in a common venture premised on a
reasonable expectation of profits to be derived from the entrepreneurial or managerial
efforts of others.
216. Securities and Exchange Commission vs. Interport Resources Corporation, et.
al., G.R. No. 135808, October 6, 2008
The term “insiders” now includes persons whose relationship or former relationship to the
issuer gives or gave them access to a fact of special significance about the issuer or the
security that is not generally available, and one who learns such a fact from an insider
knowing that the person from whom he learns the fact is such an insider. Insiders have the
duty to disclose material facts which are known to them by virtue of their position but
which are not known to persons with whom they deal and which, if known, would affect
their investment judgment.
217. Philippine Veterans Bank v. Callangan, in her capacity Director of the
Corporation Finance Department of the Securities and Exchange Commission and/or
the Securities and Ex-change Commission, G.R. No. 191995, August 3, 2011

A “public company,” as contemplated by the SRC is not limited to a company whose shares
of stock are publicly listed; even companies whose shares are offered only to a specific
group of people, are considered a public company, provided they fall under Subsec. 17.2
of the SRC, which provides: “any corporation with a class of equity securities listed on an
Exchange or with assets of at least Fifty Million Pesos (P50,000,000.00) and having two
hundred (200) or more holders, at least two hundred
(200) of which are holding at least one hundred (100) shares of a class of its equity
securities.” Philippine Veterans Bank meets the requirements and as such, is subject to the
reportorial requirements for the benefit of its shareholders.

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218. Cemco Holdings, Inc. vs. National Life Insurance Company of the Philippines,
G.R. No. 171815, August 7, 2007
A tender offer is an offer by the acquiring person to stockholders of a public company for
them to tender their shares; it gives the minority shareholders the chance to exit the
company under reasonable terms, giving them the opportunity to sell their shares at the
same price as those of the majority shareholders. The mandatory tender offer is still
applicable even if the acquisition, direct or indirect, is less than 35% when the purchase
would result in ownership of over 51% of the total outstanding equity securities of the
public company.
219. Securities and Exchange Commission vs. Interport Resources Corporation, et.
al., G.R. No. 135808, October 6, 2008
Section 27 (SRC) penalizes an insider’s misuse of material and non-public information
about the issuer, for the purpose of protecting public investors; Section 26 widens the
coverage of punishable acts, which intend to defraud public investors through various
devices, misinformation and omissions. Section 23 imposes upon (1) a beneficial owner of
more than ten percent of any class of any equity security or (2) a director or any officer of
the issuer of such security, the obligation to submit a statement indicating his or her
ownership of the issuer’s securities and such changes in his or her ownership thereof.
220. Jose U. Pua vs. Citibank, N. A. G.R. No. 180064, September 16, 2013
Civil suits falling under the SRC (like liability for selling unregistered securities) are under
the exclusive original jurisdiction of the RTC and hence, need not be first filed before the
SEC, unlike criminal cases wherein the latter body exercises primary jurisdiction.

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