Delight Baratbate-Ladot Banking Laws Executive Class

REPUBLIC OF THE PHILIPPINES, vs. SECURITY CREDIT AND ACCEPTANCE CORPORATION, ROSENDO T. RESUELLO, PABLO TANJUTCO, ARTURO SORIANO, RUBEN BELTRAN, BIENVENIDO V. ZAPA, PILAR G. RESUELLO, RICARDO D. BALATBAT, JOSE SEBASTIAN and VITO TANJUTCO JR., respondents. G.R. No. L-20583 , January 23, 1967 Facts: When defendant corporation applied with SEC for the registration and licensing of their securities under the Securities Act, the latter referred it to the Central Bank which in turn rendered an opinion classifying defendant corporation as engaged in banking. SEC then advised the corporation to comply with the requirements under the General Banking Act. Pursuant to a search warrant issued by MTC Manila, members of Central Bank intelligence division and Manila police seized documents and records relative to the business operations of the corporation. After examination of the same, the intelligence division of the Central Bank submitted a memorandum to the then Acting Deputy Governor of Central Bank finding that the corporation is engaged in banking operations. In lieu of the memorandum, the Monetary Board issued a resolution declaring that the corporation is performing banking operations without first complying with the provisions of Republic Act No.337. Despite Central Banks such resolution, the corporation, was still performing the functions and activities which had been declared to constitute illegal banking operations; the corporation had even established 74 branches in principal cities and towns throughout the Philippines; that through a systematic and vigorous campaign undertaken by the corporation, it had even managed to induce the public to open 59,463 savings deposit accounts with an aggregate deposit of P1,689,136.74; Accordingly, the Solicitor General commenced this quo warranto proceedings for the dissolution of the corporation, with a prayer that, meanwhile, a writ of preliminary injunction be issued ex parte, enjoining the corporation and its branches, as well as its officers and agents, from performing the banking operations complained of, and that a receiver be appointed pendente lite. Superintendent of Banks

of the Central Bank was then appointed by the Supreme Court as receiver pendente lite of defendant corporation. Issue: Whether or not defendant corporation was engaged in banking operations. Ruling: Yes. An investment company which loans out the money of its customers, collects the interest and charges a commission to both lender and borrower ,is a bank. It is conceded that its total savings account deposits have been made by the public with the corporation and its 74 branches, with an aggregate deposit of P1,689,136.74, which has been lent out to such persons as the corporation deemed suitable therefore. It is clear that these transactions partake of the nature of banking, as the term is used in Section 2 of the General Banking Act. Hence, Defendant Corporation has violated the law by engaging in banking without securing the administrative authority required in Republic Act No.337. Accordingly, the defendant corporation was ordered dissolved and appointment of receiver was made permanent. Central Bank of the Phil Vs. The Honorable Judge Jesus P. Morfe and First Mutual Saving and Loan Organization, Inc., 1967 20 SCRA 507 Facts: First Mutual Saving and Loan Organization, Inc has the purpose of encouraging, implementing savings and thrift among its members and extending financial assistance in the form of loans as stipulated in its Articles of Incorporation. However, in an investigation conducted by the Central Bank, it was alleged that the organization violated Section 2 and 6 of the General Banking Act, RA No. 337 because the organization is said to be illegally engaged in banking activities by receiving deposits of money for deposits, disbursement, safekeeping or otherwise or transacts the business of a savings and mortgage bank and/or building loan associations without first complying with the provisions of the RA 337. In 1962, Hon. Cancinco issued a warrant commanding the search and seizure of the articles which were said to be used or intended to be used in the commission of a felony after a close observation and personal investigation of a member of the intelligence divisions of the Bank. The organization filed a civil case presided by respondent Judge Morfe for the annulment of the said warrant which then issued a writ of preliminary injunction restraining the search and seizure. Issues:

WON the transactions of the organization amount to banking as used in RA 337. WON the municipal Judge committed a grave abuse in finding that there was probable cause that the organization has violated Sec. 2 & 6 of RA 337. Ruling: As to the first issue, the court ruled that the transactions of the respondent organization do not amount to banking as termed in RA 337. The main purpose of the organization according to its By-Laws is to extend financial assistance in the form of loans to its members with funds deposited by them. Though such funds are referred as savings and that the depositors thereof are designated as members, the documents will readily show that anybody can be a depositor and thus be a participating member. In other words, it is open to the public for deposit account, and the funds so raised may be lent by the organization. Further, the Municipal Judge did not commit a grave abuse of discretion in finding that there was a probable cause that the organization had violated Sections 2 & 6 of aforesaid law and in issuing the warrant in question. The law requiring compliance with certain requirements before anybody can engage in banking seeks to protect the public against actual, as well as potential injury. Thus, the order of respondent Judge dated July 2, 1962 and the writ of preliminary mandatory injunction issued are hereby annulled.

TEODORO BAAS,* C. G. DIZON CONSTRUCTION, INC., and CENEN DIZON vs.ASIA PACIFICFINANCE CORPORATION,substituted by INTERNATIONAL CORPORATE BANK now known as UNIONBANK OF THE PHILIPPINES, G.R. No. 128703, October 18, 2000, 343 SCRA 527 Facts: Asia Pacific Finance Corporation filed a complaint for a sum of money with prayer for a writ of replevin against TeodoroBaas, C. G. Dizon Construction and Cenen Dizon. In August 1980 Petitioner Baas executed a Promissory Note in favor of C. G. Dizon Construction prominissing to the sum of P390,000.00 in installments of "P32,500.00 every 25th day of the month starting from September 25, 1980 up to August 25, 1981." C. G. Dizon Construction endorsed with recourse the Promissory Note to ASIA PACIFIC, and to secure payment thereof, executed a Deed of Chattel

Mortgage covering three (3) heavy equipment units in favor of ASIA PACIFIC. 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 instalment payments to ASIA PACIFIC. However, after their last payment on 27 February 1981, C. G. Dizon Construction defaulted, prompting ASIA PACIFIC to send a Statement of Account to Cenen which was unheeded. ASIA PACIFIC sued TeodoroBaas, C. G. Dizon Construction and CenenDizon. During the pendency of the case, defendant TeodoroBaas passed away, and on motion of the remaining defendants, the trial court dismissed the case against him. On the other hand, ASIA PACIFIC was substituted as party plaintiff by International Corporate Bank after the disputed Promissory Note was assigned and/or transferred by ASIA PACIFIC to International Corporate Bank. Later, International Corporate Bank merged with Union Bank of the Philippines. As the surviving entity after the merger, and having succeeded to all the rights and interests of International Corporate Bank in this case, Union Bank of the Philippines was substituted as a party in lieu of International Corporate Bank. On 25 September 1992 the Regional Trial Court ruled in favor of ASIA PACIFIC and on 24 July 1996 the Court of Appeals affirmed in toto the decision of the trial court. Hence, this petition for review Issues: (a) Whether the disputed transaction between petitioners and ASIA PACIFIC violated banking laws, hence, null and void; and (b) Whether the surrender of the bulldozer crawler tractors to respondent resulted in the extinguishment of petitioners' obligation. Ruling: On the first issue, oral evidence certainly cannot prevail over the written agreements of the parties. The courts need only rely on the faces of the written contracts to determine their true intention on the principle that when the parties have reduced their agreements in writing, it is presumed that they have made the writings the only repositories and memorials of their true agreement. The second issue is not the function of this Court to analyze and weigh the evidence all over again, its jurisdiction being limited to reviewing errors of law that might have been committed by the lower court. Barring therefore a showing that the findings complained of are totally devoid of support in the records, or that they are so glaringly erroneous as to constitute serious abuse of discretion, we see no valid reason to discard them. More so in this

case where the findings of both the trial court and the appellate court coincide with each other on the matter. Petitioners have undoubtedly benefited from the transaction; they cannot now be allowed to impugn its validity and legality to escape the fulfilment of a valid and binding obligation. SC ASSAILED the decision of the lower court and AFFIRMED the CAs resolution. Accordingly, petitioners C.G. Construction Inc. and CenenDizon are ordered jointly and severally to pay respondent Asia Pacific Finance Corporation, substituted by International Corporate Bank (now known as Union Bank of the Philippines), for the unpaid balance and other costs.

ROMEO P. BUSUEGO, CATALINO F. BANEZ and RENATO F. LIM, vs. THE HONORABLE COURT OF APPEALS and THE MONETARY BOARD OF THE CENTRAL BANK OF THE PHILIPPINES, G.R. No. 95326. March 11, 1999, 304 SCRA 473 Facts: After the 16thexamination of the books and records of the PAL Employees Savings and Loan Association, Inc. ("PESALA") was conducted by a team of CB examiners headed by Belinda Rodriguez, several anomalies and irregularities committed by the herein petitioners; PESALA's directors and officers, were uncovered. Central Bank ("CB") Supervision and Examination Section ("SES") Department sent a letter to the Board of Directors of PESALA inviting them to a conference to discuss subject findings noted in the said examination, but petitioners did not attend such conference. Petitioner Renato Lim wrote the PESALA's Board of Directors explaining his side on the said examination of PESALA's records and requesting that a copy of his letter be furnished the CB, which was forthwith made by the Board. PESAL A's sent to SES a letter concerning the examination of PESALA's records. On September 9, 1988, the Monetary Board adopted and issued MB Resolution No. which provides the inclusion of the names of the petitioners in the Sector's watchlist to prevent them from holding responsible positions in any institution under Central Bank supervision and to require the board of directors of PESALA to file civil and criminal cases against Banez petitioners for all the misfeasance and malfeasance committed by them, as warranted by the evidence.

Issue: WON MONETARY BOARD RESOLUTION NO. 805 IS NULL AND VOID FOR BEING VIOLATIVE OF PETITIONERS' RIGHTS TO DUE PROCESS. Ruling: Petitioners' contentions are untenable. It must be remembered that the Central Bank of the Philippines (now Bangko Sentral ng Pilipinas), through the Monetary Board, is the government agency charged with the responsibility of administering the monetary, banking and credit system of the country and is granted the power of supervision and examination over banks and non-bank financial institutions performing quasi-banking functions of which savings and loan associations, such as PESALA. The Central Bank, through the Monetary Board, is empowered to conduct investigations and examine the records of savings and loan associations. If any irregularity is discovered in the process, the Monetary Board may impose appropriate sanctions, such as suspending the offender from holding office or from being employed with the Central Bank, or placing the names of the offenders in a watchlist. The requirement of prior notice is also relaxed under Section 28 (c) of RA 3779 as investigations or examinations may be conducted with or without prior notice "but always with fairness and reasonable opportunity for the association or any of its officials to give their side." As may be gathered from the records, the said requirement was properly complied with by the respondent Monetary Board. We sustain the ruling of the Court of Appeals that petitioners' suspension was only preventive in nature and therefore, no notice or hearing was necessary. Until such time that the petitioners have proved their innocence, they may be preventively suspended from holding office so as not to influence the conduct of investigation, and to prevent the commission of further irregularities. Neither were petitioners deprived of their lawful calling as they are free to look for another employment so long as the agency or company involved is not subject to Central Bank control and supervision. Petitioners can still practice their profession or engage in business as long as these are not within the ambit of Monetary Board Resolution No. 805. Philippine Commercial International Bank vs CA, 2001, 350 SCRA 446 Facts:

In 1977, 1978, and 1979 Ford Philippines was assessed a tax liability in the amounts of P4.7 million, P5.8 million, and P6.3 million respectively. To pay said tax, Ford issued three Citibank checks in the said amounts. The checks named payee was the Commissioner of Internal Revenue. The checks are in the nature of payees checks which are only supposed to be deposited to the CIRs bank account which is with Metrobank. However, Fords accountant, Godofredo Rivera, deposited said checks with the Philippine Commercial International Bank (then called IBAA). The latter accepted the same and eventually, the checks were cleared by Citibank but the checks never reached the CIR hence the Bureau of Internal Revenue notified Ford of the nonpayment of the tax liabilities. This forced Ford to issue new checks to satisfy its tax liabilities. Ford then sued PCIB and Citibank in order for the two banks to refund them the amounts of the checks earlier issued. An investigation ensued and it was found out that Godofredo Rivera, Fords accountant, was a member of a syndicate. He conspired with other members of the same syndicate who were also ranking employees of PCIB in order to facilitate the fraud. Apparently, a PCIB manager (Remberto Castro) who was also a member of the syndicate, set up a fictitious savings account to help facilitate the fraud. After they successfully carted with the money, they vanished and became fugitives of justice. Issue: WON PCIB their employees. and Citibank are liable for the tortuous acts of

Ruling: Yes, but also Ford for its contributory negligence. As a general rule, banking corporations are liable for the wrongful or tortuous acts and declarations of their officers or agents within the course and scope of their employment. A bank will be held liable for the negligence of its officers or agents when acting within the course and scope of their employment. It may be liable for the tortuous acts of its officers even as regards that species of tort of which malice is an essential element. Citibank is liable because as per its agreement with Ford, the payees checks are only supposed to be deposited with the CIRs account which is with Metrobank, yet Citibank when PCIB indorsed the said checks, Citibank cleared them without verifying with Ford. PCIB has no hands in the embezzlement but since it was its employees that mainly facilitated the fraud, it is likewise liable under the above stated

principle. PCIBs and Citibanks liabilities are fixed on a 50-50 basis, hence they must equally shoulder the paying of the checks amounts to Ford with interest. But since Ford is also negligent, as when it failed to diligently check its books of accounts which could have avoided further loss, the interest rate upon which the two banks are to pay is lowered from 12% to 6% per annum. Fords negligence is only contributory because it was not the proximate cause of the embezzlement. Further, it was shown that Riveras act of depositing the checks with PCIB was not confirmed by the Board of Directors of Ford.