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Producers Bank (now called First Philippine International Bank), which has been under conservatorship since 1984

, is the owner of 6 parcels of land. The Bank had an agreement with Demetrio Demetria and Jose Janolo for the two to purchase the parcels of land for a purchase price of P5.5 million pesos. The said agreement was made by Demetria and Janolo with the Bank’s manager, Mercurio Rivera. Later however, the Bank, through its conservator, Leonida Encarnacion, sought the repudiation of the agreement as it alleged that Rivera was not authorized to enter into such an agreement, hence there was no valid contract of sale. Subsequently, Demetria and Janolo sued Producers Bank. The regional trial court ruled in favor of Demetria et al. The Bank filed an appeal with the Court of Appeals. Meanwhile, Henry Co, who holds 80% shares of stocks with the said Bank, filed a motion for intervention with the trial court. The trial court denied the motion since the trial has been concluded already and the case is now pending appeal. Subsequently, Co, assisted by ACCRA law office, filed a separate civil case against Demetria and Janolo seeking to have the purported contract of sale be declared unenforceable against the Bank. Demetria et al argued that the second case constitutes forum shopping. ISSUES: 1. Whether or not there is forum shopping. 2. Whether or not there is a perfected contract of sale. HELD: 1. Yes. There is forum shopping because there is identity of interest and parties between the first case and the second case. There is identity of interest because both cases sought to have the agreement, which involves the same property, be declared unenforceable as against the Bank. There is identity of parties even though the first case is in the name of the bank as defendant, and the second case is in the name of Henry Co as plaintiff. There is still forum shopping here because Henry Co essentially represents the bank. Both cases aim to have the bank escape liability from the agreement it entered into with Demetria et al. The Supreme Court did not lay down any disciplinary action against the ACCRA lawyers but they were warned that a repetition will be dealt with more severely. 2. Yes. There is a perfected contract of sale because the bank manager, Rivera, entered into the agreement with apparent authority. This apparent authority has been duly proved by the evidence presented which showed that in all the dealings and transactions, Rivera participated actively without the opposition of the conservator. In fact, in the advertisements and announcements of the bank, Rivera was designated as the go-to guy in relation to the disposition of the Bank’s assets

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

G.R. No. 109373 March 20, 1995 PACIFIC BANKING CORPORATION EMPLOYEES ORGANIZATION, PAULA S. PAUG, and its officers and members, petitioners, vs.

THE HONORABLE COURT OF APPEALS and VITALIANO N. NAÑAGAS II, as Liquidator of Pacific Banking Corporation, respondents. G.R. No. 112991 March 20, 1995 THE PRESIDENT OF THE PHILIPPINE DEPOSIT INSURANCE CORPORATION, as Liquidator of the Pacific Banking Corporation , petitioner, vs. COURT OF APPEALS, HON. JUDGE REGINO T. VERIDIANO II, DEPUTY SHERIFF RAMON ENRIQUEZ and ANG ENG JOO, ANG KEONG LAN and E.J ANG INT'L. LTD., represented by their Attorney-in-fact, GONZALO C. SY, respondents.

MENDOZA, J.: These cases have been consolidated because the principal question involved is the same: whether a petition for liquidation under §29 of Rep. Act No. 265, otherwise known as the Central Bank Act, is a special proceeding or an ordinary civil action. The Fifth and the Fourteenth Divisions of the Court of Appeals reached opposite results on this question and consequently applied different periods for appealing. The facts are as follows: I. Proceedings in the CB and the RTC On July 5, 1985, the Pacific Banking Corporation (PaBC) was placed under receivership by the Central Bank of the Philippines pursuant to Resolution No. 699 of its Monetary Board. A few months later, it was placed under liquidation 1 and a Liquidator was appointed. 2 On April 7, 1986, the Central Bank filed with the Regional Trial Court of Manila Branch 31, a petition entitled "Petition for Assistance in the Liquidation of Pacific Banking Corporation." 3 The petition was approved, after which creditors filed their claims with the court. On May 17, 1991, a new Liquidator, Vitaliano N. Nañagas, 4 President of the Philippine Deposit Insurance Corporation (PDIC), was appointed by the Central Bank. On March 13, 1989 the Pacific Banking Corporation Employees Organization (Union for short), petitioner in G.R. No. 109373, filed a complaint-in-intervention seeking payment of holiday pay, 13th month pay differential, salary increase differential, Christmas bonus, and cash equivalent of Sick Leave Benefit due its members as employees of PaBC. In its order dated September 13, 1991, the trial court ordered payment of the principal claims of the Union. 5 The Liquidator received a copy of the order on September 16, 1991. On October 16, 1991, he filed a Motion for Reconsideration and Clarification of the order. In his order of December 6, 1991, the judge modified his September 13, 1991 6 but in effect denied the Liquidator's motion for reconsideration. This order was received by the Liquidator on December 9, 1991. The following day, December 10, 1991, he filed a Notice of Appeal and a Motion for

Additional Time to Submit Record on Appeal. On December 23, 1991, another Notice of Appeal was filed by the Office of the Solicitor General in behalf of Nañagas. In his order of February 10, 1992, respondent judge disallowed the Liquidator's Notice of Appeal on the ground that it was late, i.e., more than 15 days after receipt of the decision. The judge declared his September 13, 1991 order and subsequent orders to be final and executory and denied reconsideration. On March 27, 1992, he granted the Union's Motion for issuance of a writ of Execution. Ang Keong Lan and E.J. Ang Int'l., private respondents in G.R. No. 112991, likewise filed claims for the payment of investment in the PaBC allegedly in the form of shares of stocks amounting to US$2,531,632.18. The shares of stocks, consisting of 154,462 common shares, constituted 11% of the total subscribed capital stock of the PaBC. They alleged that their claim constituted foreign exchange capital investment entitled to preference in payment under the Foreign Investments Law. In his order dated September 11, 1992, respondent judge of the RTC directed the Liquidator to pay private respondents the total amount of their claim as preferred creditors. 7 The Liquidator received the order on September 16, 1992. On September 30, 1992 he moved for reconsideration, but his motion was denied by the court on October 2, 1992. He received the order denying his Motion for Reconsideration on October 5, 1992. On October 14, 1992 he filed a Notice of Appeal from the orders of September 16, 1992 and October 2, 1992. As in the case of the Union, however, the judge ordered the Notice of Appeal stricken off the record on the ground that it had been filed without authority of the Central Bank and beyond 15 days. In his order of October 28, 1992, the judge directed the execution of his September 11, 1992 order granting the Stockholders/ Investors' claim. II. Proceedings in the Court of Appeals The Liquidator filed separate Petitions for Certiorari, Prohibition and Mandamus in the Court of Appeals to set aside the orders of the trial court denying his appeal from the orders granting the claims of Union and of the Stockholders/Investors. The two Divisions of the Court of Appeals, to which the cases were separately raffled, rendered conflicting rulings. In its decision of November 17, 1992 in CA-G.R. SP No. 27751 (now G.R. No. 09373) the Fifth Division 8 held in the case of the Union that the proceeding before the trial court was a special proceeding and, therefore, the period for appealing from any decision or final order rendered therein is 30 days. Since the notice of appeal of the Liquidator was filed on the 30th day of his receipt of the decision granting the Union's claims, the appeal was brought on time. The Fifth Division, therefore, set aside the orders of the lower court and directed the latter to give due course to the appeal of the Liquidator and set the Record on Appeal he had filed for hearing. On the other hand, on December 16, 1993, the Fourteenth Division 9 ruled in CA-G.R. SP No. 29351 (now G.R. No. 112991) in the case of the Stockholders/Investors that a liquidation proceeding is an ordinary action. Therefore, the period for appealing from any decision or final order rendered therein is 15 days and that since the Liquidator's appeal notice was filed on the 23rd day of his receipt of the order appealed from, deducting the period during which his motion for reconsideration was pending, the notice of appeal was filed late. Accordingly, the Fourteenth Division dismissed the Liquidator's petition.

III. Present Proceedings The Union and the Liquidator then separately filed petitions before this Court. In G.R. No. 109373 the Union contends that: 1. The Court of Appeals acted without jurisdiction over the subject matter or nature of the suit. 2. The Court of Appeals gravely erred in taking cognizance of the petition for certiorari filed by Nañagas who was without any legal authority to file it. 3. The Court of Appeals erred in concluding that the case is a special proceeding governed by Rules 72 to 109 of the Revised Rules of Court. 4. The Court of Appeals erred seriously in concluding that the notice of appeal filed by Nañagas was filed on time. 5. The Court of Appeals erred seriously in declaring that the second notice of appeal filed on December 23, 1991 by the Solicitor General is a superfluity. On the other hand, in G.R. No. 112991 the Liquidator contends that: 1. The Petition for Assistance in the Liquidation of the Pacific Banking Corporation s a Special Proceeding case and/or one which allows multiple appeals, in which case the period of appeal is 30 days and not 15 days from receipt of the order/judgment appealed from. 2. Private respondents are not creditors of PaBC but are plain stockholders whose right to receive payment as such would accrue only after all the creditors of the insolvent bank have been paid. 3. The claim of private respondents in the amount of US$22,531,632.18 is not in the nature of foreign investment as it is understood in law. 4. The claim of private respondents has not been clearly established and proved. 5. The issuance of a writ of execution against the assets of PaBC was made with grave abuse of discretion. The petitions in these cases must be dismissed. First. As stated in the beginning, the principal question in these cases is whether a petition for liquidation under §29 of Rep. Act No. 265 is in the nature of a special proceeding. If it is, then the period of appeal is 30 days and the party appealing must, in addition to a notice of appeal, file with the trial court a record on appeal in order to perfect his appeal. Otherwise, if a liquidation proceeding is an ordinary action, the period of appeal is 15 days from notice of the decision or final order appealed from. BP Blg. 129 provides:

§39. Appeals. — The period for appeal from final orders, resolutions, awards, judgments, or decisions of any court in all cases shall be fifteen (15) days counted from the notice of the final order, resolution, award, judgment or decision appealed from: Provided, however, that in habeas corpuscases the period for appeal shall be forty-eight (48) hours from the notice of the judgment appealed from. No record on appeal shall be required to take an appeal. In lieu thereof, the entire record shall be transmitted with all the pages prominently numbered consecutively, together with an index of the contents thereof. This section shall not apply in appeals in special proceedings and in other cases wherein multiple appeals are allowed under applicable provisions of the Rules of Court. The Interim Rules and Guidelines to implement BP Blg. 129 provides: 19. Period of Appeals. — (a) All appeals, except in habeas corpus cases and in the cases referred to in paragraph (b) hereof, must be taken within fifteen (15) days from notice of the judgment, order, resolution or award appealed from. (b) In appeals in special proceedings in accordance with Rule 109 of the Rules of Court and other cases wherein multiple appeals are allowed, the period of appeals shall be thirty (30) days, a record on appeal being required. The Fourteenth Division of the Court of Appeals held that the proceeding is an ordinary action similar to an action for interpleader under Rule 63. 10 The Fourteenth Division stated: The petition filed is akin to an interpleader under Rule 63 of the Rules of Court where there are conflicting claimants or several claims upon the same subject matter, a person who claims no interest thereon may file an action for interpleader to compel the claimants to "interplead" and litigate their several claims among themselves. (Section I Rule 63). An interpleader is in the category of a special civil action under Rule 62 which, like an ordinary action, may be appealed only within fifteen (15) days from notice of the judgment or order appealed from. Under Rule 62, the preceding rules covering ordinary civil actions which are not inconsistent with or may serve to supplement the provisions of the rule relating to such civil actions are applicable to special civil actions. This embraces Rule 41 covering appeals from the regional trial court to the Court of Appeals. xxx xxx xxx Thus, under Section 1 Rule 2 of the Rules of Court, an action is defined as "an ordinary suit in a court of justice by which one party prosecutes another for the enforcement or protection of a right or the prevention or redress of a wrong." On the other hand, Section 2 of the same Rule states that "every

other remedy including one to establish the status or right of a party or a particular fact shall be by special proceeding." To our mind, from the aforequoted definitions of an action and a special proceeding, the petition for assistance of the court in the liquidation of an asset of a bank is not "one to establish the status or right of a party or a particular fact." Contrary to the submission of the petitioner, the petition is not intended to establish the fact of insolvency of the bank. The insolvency of the bank had already been previously determined by the Central Bank in accordance with Section 9 of the CB Act before the petition was filed. All that needs to be done is to liquidate the assets of the bank and thus the assistance of the respondent court is sought for that purpose. It should be pointed out that this petition filed is not among the cases categorized as a special proceeding under Section 1, Rule 72 of the Rules of Court, nor among the special proceedings that may be appealed under Section 1, Rule 109 of the Rules. We disagree with the foregoing view of the Fourteenth Division. Rule 2 of the Rules of Court provide: §1. Action defined. — Action means an ordinary suit in a court of justice, by which the party prosecutes another for the enforcement or protection of a right, or the prevention or redress of a wrong. §2. Special Proceeding Distinguished. — Every other remedy, including one to establish the status or right of a party or a particular fact, shall be by special proceeding. Elucidating the crucial distinction between an ordinary action and a special proceeding, Chief Justice Moran states:" 11 Action is the act by which one sues another in a court of justice for the enforcement or protection of a right, or the prevention or redress of a wrong while special proceeding is the act by which one seeks to establish the status or right of a party, or a particular fact. Hence, action is distinguished from special proceeding in that the former is a formal demand of a right by one against another, while the latter is but a petition for a declaration of a status, right or fact. Where a party litigant seeks to recover property from another, his remedy is to file an action. Where his purpose is to seek the appointment of a guardian for an insane, his remedy is a special proceeding to establish the fact or status of insanity calling for an appointment of guardianship. Considering this distinction, a petition for liquidation of an insolvent corporation should be classified a special proceeding and not an ordinary action. Such petition does not seek the enforcement or protection of a right nor the prevention or redress of a wrong against a party. It does not pray for affirmative relief for injury arising from a party's wrongful act or omission nor state a cause of action that can be enforced against any person. What it seeks is merely a declaration by the trial court of the corporation's insolvency so that its creditors may be able to file their claims in the settlement of the corporation's debts and obligations. Put in another way, the petition only seeks a declaration of the corporation's debts and obligations. Put in another way, the petition only seeks a declaration of the

corporation's state of insolvency and the concomitant right of creditors and the order of payment of their claims in the disposition of the corporation's assets. Contrary to the rulings of the Fourteenth Division, liquidation proceedings do not resemble petitions for interpleader. For one, an action for interpleader involves claims on a subject matter against a person who has no interest therein. 12 This is not the case in a liquidation proceeding where the Liquidator, as representative of the corporation, takes charge of its assets and liabilities for the benefit of the creditors. 13 He is thus charged with insuring that the assets of the corporation are paid only to rightful claimants and in the order of payment provided by law. Rather, a liquidation proceeding resembles the proceeding for the settlement of state of deceased persons under Rules 73 to 91 of the Rules of Court. The two have a common purpose: the determination of all the assets and the payment of all the debts and liabilities of the insolvent corporation or the estate. The Liquidator and the administrator or executor are both charged with the assets for the benefit of the claimants. In both instances, the liability of the corporation and the estate is not disputed. The court's concern is with the declaration of creditors and their rights and the determination of their order of payment. Furthermore, as in the settlement of estates, multiple appeals are allowed in proceedings for liquidation of an insolvent corporation. As the Fifth Division of the Court of Appeals, quoting the Liquidator, correctly noted: A liquidation proceeding is a single proceeding which consists of a number of cases properly classified as "claims." It is basically a two-phased proceeding. The first phase is concerned with the approval and disapproval of claims. Upon the approval of the petition seeking the assistance of the proper court in the liquidation of a close entity, all money claims against the bank are required to be filed with the liquidation court. This phase may end with the declaration by the liquidation court that the claim is not proper or without basis. On the other hand, it may also end with the liquidation court allowing the claim. In the latter case, the claim shall be classified whether it is ordinary or preferred, and thereafter included Liquidator. In either case, the order allowing or disallowing a particular claim is final order, and may be appealed by the party aggrieved thereby. The second phase involves the approval by the Court of the distribution plan prepared by the duly appointed liquidator. The distribution plan specifies in detail the total amount available for distribution to creditors whose claim were earlier allowed. The Order finally disposes of the issue of how much property is available for disposal. Moreover, it ushers in the final phase of the liquidation proceeding — payment of all allowed claims in accordance with the order of legal priority and the approved distribution plan. Verily, the import of the final character of an Order of allowance or disallowance of a particular claim cannot be overemphasized. It is the operative fact that constitutes a liquidation proceeding a "case where multiple appeals are allowed by law." The issuance of an Order which, by its nature, affects only the particular claims involved, and which may assume finality if no appeal is made therefrom, ipso facto creates a situation where multiple appeals are allowed. A liquidation proceeding is commenced by the filing of a single petition by the Solicitor General with a court of competent jurisdiction entitled, "Petition for

Assistance in the Liquidation of e.g., Pacific Banking Corporation. All claims against the insolvent are required to be filed with the liquidation court. Although the claims are litigated in the same proceeding, the treatment is individual. Each claim is heard separately. And the Order issued relative to a particular claim applies only to said claim, leaving the other claims unaffected, as each claim is considered separate and distinct from the others. Obviously, in the event that an appeal from an Order allowing or disallowing a particular claim is made, only said claim is affected, leaving the others to proceed with their ordinary course. In such case, the original records of the proceeding are not elevated to the appellate court. They remain with the liquidation court. In lieu of the original record, a record of appeal is instead required to be prepared and transmitted to the appellate court. Inevitably, multiple appeals are allowed in liquidation proceedings. Consequently, a record on appeal is necessary in each and every appeal made. Hence, the period to appeal therefrom should be thirty (30) days, a record on appeal being required. (Record pp. 162-164). In G.R. No. 112991 (the case of the Stockholders/Investors), the Liquidator's notice of appeal was filed on time, having been filed on the 23rd day of receipt of the order granting the claims of the Stockholders/Investors. However, the Liquidator did not file a record on appeal with the result that he failed to perfect his appeal. As already stated a record on appeal is required under the Interim Rules and Guidelines in special proceedings and for cases where multiple appeals are allowed. The reason for this is that the several claims are actually separate ones and a decision or final order with respect to any claim can be appealed. Necessarily the original record on appeal must remain in the trial court where other claims may still be pending. Because of the Liquidator's failure to perfect his appeal, the order granting the claims of the Stockholders/Investors became final. Consequently. the Fourteenth Division's decision dismissing the Liquidator's Petition for Certiorari, Prohibition and Mandamus must be affirmed albeit for a different reason. On the other hand, in G.R. No. 109373 (case of the Labor Union), we find that the Fifth Division correctly granted the Liquidator's Petition for Certiorari. Prohibition and Mandamus. As already noted, the Liquidator filed a notice of appeal and a motion for extension to file a record on appeal on December 10, 1991, i.e., within 30 days of his receipt of the order granting the Union's claim. Without waiting for the resolution of his motion for extension, he filed on December 20, 1991 within the extension sought a record on appeal. Respondent judge thus erred in disallowing the notice on appeal and denying the Liquidator's motion for extension to file a record on appeal. The Fifth Division of the Court of Appeals correctly granted the Liquidator's Petition for Certiorari, Prohibition andMandamus and its decision should, therefore, be affirmed. Second. In G.R. No. 109373, The Union claims that under §29 of Rep. Act No. 265, the court merely assists in adjudicating the claims of creditors, preserves the assets of the institution, and implements the liquidation plan approved by the Monetary Board and that, therefore, as representative of the Monetary Board, the Liquidator cannot question the order of the court or appeal from it. It contends that since the Monetary Board had previously admitted PaBC's liability to the laborers by in fact setting aside the amount of P112,234,292.44 for the payment of their claims, there was nothing else for the Liquidator to do except to comply with the order of the court.

The Union's contention is untenable. In liquidation proceedings, the function of the trial court is not limited to assisting in the implementation of the orders of the Monetary Board. Under the same section (§29) of the law invoked by the Union, the court has authority to set aside the decision of the Monetary Board "if there is a convincing proof that the action is plainly arbitrary and made in bad faith." 14 As this Court held in Rural Bank of Buhi, Inc. v. Court of Appeals: 15 There is no question, that the action of the monetary Board in this regard may be subject to judicial review. Thus, it has been held that the Court's may interfere with the Central Bank's exercise of discretion in determining whether or not a distressed bank shall be supported or liquidated. Discretion has its limits and has never been held to include arbitrariness, discrimination or bad faith (Ramos v. Central Bank of the Philippines, 41 SCRA 567 [1971]). In truth, the Liquidator is the representative not only of the Central Bank but also of the insolvent bank. Under §§28A-29 of Rep. Act No. 265 he acts in behalf of the bank "personally or through counsel as he may retain, in all actions or proceedings or against the corporation" and he has authority "to do whatever may be necessary for these purposes." This authority includes the power to appeal from the decisions or final orders of the court which he believes to be contrary to the interest of the bank. Finally the Union contends that the notice of appeal and motion for extension of time to file the record on appeal filed in behalf of the Central Bank was not filed by the office of the Solicitor General as counsel for the Central Bank. This contention has no merit. On October 22, 1992, as Assistant Solicitor General Cecilio O. Estoesta informed the trial court in March 27, 1992, the OSG had previously authorized lawyers of the PDIC to prepare and sign pleadings in the case. 16 Conformably thereto the Notice of Appeal and the Motion for Additional Time to submit Record on Appeal filed were jointly signed by Solicitor Reynaldo I. Saludares in behalf of the OSG and by lawyers of the PDIC. 17 WHEREFORE, in G.R. No. 109373 and G.R. No 112991, the decisions appealed from are AFFIRMED. SO ORDERED

REPUBLIC OF THE PHILIPPINES vs. SECURITY CREDIT AND ACCEPTANCECORPORATION [G.R. No. L-20583, January 23, 1967]FACTS: This case is a quo warranto proceeding or a proper proceeding to challenge individuals who areacting as officers or directors of business corporations initiated by the Solicitor General todissolve the Security and Acceptance Corporation for engaging in banking without the authorityrequired by the General banking Act.As the Security Credit and Acceptance Corporation applied with the Security and ExchangeCommission for the registration and licensing of their securities under the Securities Act, SECreferred it to the Central Bank. The Central Bank classified the Security Credit and AcceptanceCorporation as engaged in banking. So, SEC advised the Corporation to comply with therequirements under the General Banking Act or RA No. 337.The MTC of Manila issued a search warrant to search the premises of the corporation in whichthe Manila Police Department seized the documents and records of the corporation relative to itsbusiness operations; and the seized documents were placed under custody of the Central Bank which later submitted a memorandum. This memorandum lead to the issuance by the Monetaryboard of a resolution stating that the corporation is engaged in banking without compliance withRA No. 337.Despite the issuance of the resolution, the corporation continued its banking operations and hadinduced greater number of the public to open savings deposit accounts. The Security Credit andAcceptance Corporation denied that its transactions partake of the nature of banking operations.

ISSUE: Whether or not the Security Credit and Acceptance Corporation was engaged in banking andviolated the General Banking Act. RULING: Yes, the corporation is engaged in banking and violated the General Banking Act by its non-compliance with the administrative authority required in RA No. 337 An investment company which loans out the money of its customers, collects the interestand charges a commission to both lender and borrower, is a bank. (Western InvestmentBanking Co. vs. Murray, 56 P. 728, 730, 731; 6 Ariz 215.)... any person engaged in the business carried on by banks of deposit, of discount, or of circulation is doing a banking business, although but one of these functions is exercised.(MacLaren vs. State, 124 N.W. 667, 141 Wis. 577, 135 Am. S.R. 55, 18 Ann. Cas. 826; 9C.J.S. 30.)Because the corporation is engaged in baking operations for example loaning out the money of its customers, collecting the interests and encouraging people to open savings deposit accounts,the corporation was ordered dissolved.

TEODORO BAÑAS vs. ASIA PACIFIC FINANCE CORPORATION[G.R. No. 128703. October 18, 2000]FACTS: Teodoro Bañas executed a promissory note in favor of C.G. Dizon Construction. Later C. G.Dizon Construction endorsed with recourse the promissory note to Asia Pacific and to securepayment thereof, C.G. Dizon Construction, through its corporate officers, executed a Deed of Chattel Mortgage covering three heavy equipment units of Caterpillar Bulldozer CrawlerTractors in favor of Asia Pacific. Moreover Cenen Dizon executed a Continuing Undertaking wherein he bound himself to pay the obligation jointly and severally with C.G. DizonConstruction.C.G. Dizon construction made payments by way of Installments to Asia Pacific, However C.G.Dizon Construction defaulted in the payment of the remaining installments, prompting AsiaPacific to send a Statement of Account to Cenen Dizon for the unpaid balance. As the demandwas unheeded, Asia Pacific sued Teodoro Bañas, C.G. Dizon Construction Inc. and Cenen Dizon.Defendants claimed that since Asia Pacific could not directly engage in banking business, itpropose to them a scheme wherein Asia Pacific could extend a loan to them without violatingbanking. Sometime in October 1980 Cenen Dizon informed Asia Pacific that he would bedelayed in meeting his monthly amortization on account of business reverses and promised topay instead in February 1981. Cenen Dizon made good his promise and tendered payment toAsia Pacific in an amount equivalent to two (2) monthly amortizations. But Asia Pacificattempted to impose a 3% interest for every month of delay, which he flatly refused to pay forbeing usurious.Afterwards, Asia Pacific allegedly made a verbal proposal to Cenen Dizon to surrender to it theownership of the two (2) bulldozer crawler tractors and, in turn, the latter would treat the former’s account as closed and the loan fully pa id. Cenen Dizon supposedly agreed and acceptedthe offer. Defendants averred that the value of the bulldozer crawler tractors was more thanadequate to cover their obligation to Asia Pacific.The trial court issued a writ of replevin against defendant C. G. Dizon Construction for thesurrender of the bulldozer crawler tractors subject of the Deed of Chattel Mortgage; and ruled infavor of Asia Pacific holding the defendants jointly and severally liable for the unpaid balance of the obligation under the Promissory Note. The Court of Appeals affirmed in toto the decision of the trial court. ISSUE: Whether the disputed transaction between petitioners and Asia Pacific violated banking laws,hence null and void RULING:

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 insecurities" which an investment company, like ASIA PACIFIC, is authorized to perform and doesnot constitute a violation of the General Banking Act. Moreover, Sec. 2 of the General BankingAct provides in part -Sec. 2. Only entities duly authorized by the Monetary Board of the Central Bank mayengage 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 asbanking institutions and shall be subject to the provisions of this Act, of the Central Bank Act, and of other pertinent laws (underscoring supplied).What is prohibited by law is for investment companies to lend funds obtained from the publicthrough receipts of deposit, which is a function of banking institutions. But here, the fundssupposedly "lent" to petitioners have not been shown to have been obtained from the public byway of deposits, hence, the inapplicability of banking laws. Petitioners C.G. Construction Inc.and Cenen Dizon are ordered jointly and severally to pay respondent Asia Pacific FinanceCorporation, substituted by International Corporate Bank

SIMEX INTERNATIONAL (MANILA),INCORPORATED, petitioner,vs. THE HONORABLE COURT OF APPEALS andTRADERS ROYAL BANK, respondents.BOTTOMLINE: You got preexisting 90K and youdeposited 100K, but it was not updated by thebank, 8 checks bounced and you lost businesspartners. (burn down the bank? hahaha) Canyou demand moral and exemplary damages?FACTS: We are concerned in this case with thequestion of damages, specifically moral andexemplary damages The petitioner is a privatecorporation engaged in the exportation of foodproducts. It buys these products from variouslocal suppliers and then sells them abroad,particularly in the United States, Canada and theMiddle East. Most of its exports are purchasedby the petitioner on credit. The petitioner was adepositor of the respondent bank andmaintained a checking account in its branch atRomulo Avenue, account in the said bank theamount of P100,000.00, thus increasing itsbalance as of that date to P190,380.74. , thepetitioner issued several checks against itsdeposit but was surprised to learn later that theyhad been dishonored for insufficient funds.There were 8 dishonored checks.The California ManufacturingCorporation sent on June 9, 1981, a letter ofdemand to the petitioner, threateningprosecution if the dishonored check issued to itwas not made good. . Malabon also canceledthe petitioner's credit line and demanded thatfuture payments be made by it in cash orcertified check The petitioner complained to therespondent bank on June 10,1981. 3 Investigation disclosed that the sum ofP100,000.00 deposited by the petitioner on May25, 1981, had not been credited to it. The errorwas rectified on June 17, 1981, and thedishonored checks were paid after they were re-deposited , the petitioner demanded reparationfrom the respondent bank for its "gross andwanton negligence." This demand was not met.Court of First Instance of Rizal claiming from theprivate respondent moral damages in the sum ofP1,000,000.00 and exemplary damages in thesum of P500,000.00, plus 25% attorney's fees,and costs.Judge Johnico G. Serquinia rendered judgmentholding that moral and exemplary damageswere not called for under the circumstances.However, observing that the plaintiff's right hadbeen violated, he ordered the defendant to paynominal damages in the amount of P20,000.00plus P5,000.00 attorney's fees and costs. Therespondent court found with the trial court thatthe private respondent was guilty of negligencebut agreed that the petitioner was neverthelessnot entitled to moral damages The error shouldnot have been committed in the first place. Therespondent bank has not even explained why itwas committed at all. It is true that thedishonored checks were, as the Court ofAppeals put it, "eventually" paid. However, thistook almost a month when, properly, the checksshould have been paid immediately uponpresentment.ISSUE: After all that you went through, the judgeonly awarded you 20k and 5k, can you demandfor 1,000,000 damage?RULING:We also note that while stressing therectification made by the respondent bank, thedecision

practically ignored the prejudicesuffered by the petitioner. Article 2205 of theCivil Code provides that actual or compensatorydamages may be received "(2) for injury to theplaintiff s business standing or commercialcredit." We agree that moral damages are notawarded to penalize the defendant but tocompensate the plaintiff for the injuries he mayhave suffered From every viewpoint except thatof the petitioner's, its claim of moral damages inthe amount of P1,000,000.00 is nothing short ofpreposterous. Its business certainly is not thatbig, or its name that prestigious, to sustain suchan extravagant pretense Considering all this, wefeel that the award of nominal damages in thesum of P20,000.00 was not the proper relief towhich the petitioner was entitled. Under Article2221 of the Civil Code, "nominal damages areadjudicated in order that a right of the plaintiff,which has been violated or invaded by thedefendant, may be vindicated or recognized,and not for the purpose of indemnifying theplaintiff for any loss suffered by him." the properremedy is the award to it of moral damages,which we impose, in our discretion, in the sameamount of P20,000.00.

Busuego vs. CA [304 SCRA 473 (March 11 1999)]Power of Monetory BoardFacts: The 16th regular examination of the books and records of PAL Employees Savings and Loan Association (PESALA) was conducted by a team of CB Examiners.Several irregularities were found to have been committed by the PESALA officers. Hence, CB sent a letter to petitioners for them to be

present at a meeting specifically for thepurpose of investigating said anomalies. Petitioners did not respond. Hence, the Monetary Board adopted a resolution including the names of the officers of PESALA in thewatchlist to prevent them from holding responsible positions in any institution under CB supervision.Petitioners filed a petition for injunction against the MB in order to prevent their names from being added in the said watchlist. RTC issued the TRO. The MB appealed to theCA which reversed RTC. Hence, this petition for certiorari with the SC.Petitioners

contend that the MB resolution was null and void for being violative of their right to due process by imposing administrative sanctions where the MB is not vested withauthority to disqualify persons from occupying positions in institutions under the supervision of CB.Issue: Whether or not the MB resolution was null and void.Held: NO. The CB, through the MB, is the government agency charged with the responsibility of administering the monetary, banking and credit system of the country and isgranted 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, form part of.The special law governing savings and loan associations is R.A. 3779, the Savings and Loan Association Act. Said law authorizes the MB to conduct regular yearlyexaminations of the books and records of savings and loan associations, to suspend a savings and loan association for violation of law, to decide any controversy over theobligations and duties of

directors and officers, and to take remedial measures. Hence, the CB, through the MB, is empowered to conduct investigations and examine therecords of savings and loan associations. If any irregularity is discovered in the process, the MB may impose appropriate sanctions, such as suspending the offender fromholding office or from being employed with the CB, or placing the names of the offenders in a watchlist
Perez and republic bank vs monetary board June 30, 1967

Facts: This action was instituted by Damaso Perez to compel the Monetary Board, the Superintendent of Banks, the Central Bank and the Secretary of Justice to

prosecute, among others, Pablo Roman and several other Republic Bank officials for violations of the General Banking Act (Secs. 76-78 & 83) and the Central Bank Act, and for falsification of public or commercial documents in connection with certain alleged anomalous loans amounting to P1,303,400 authorized by Roman and the other bank officials. The respondents assailed, in their respective answers, the propriety of mandamus. (a) The Secretary of Justice claimed that it was not their specific duty to prosecute the persons denounced by Perez. (b) The Central Bank and its respondent officials, averred that they had already done their duty under the law by referring to the special prosecutors of the Department of Justice for criminal investigationand prosecution those cases involving the alleged anomalous loans. On January 20, 1964, the Monetary Board of the Central Bankpassed Resolution No. 81 granting the request of Republic Bank (intervenor) for credit accommodations to cover the unusual withdrawal of deposits by its depositors in view of the fact that said Bank was under investigation then by the authorities. The grant, was conditioned upon the execution of a voting trust agreement in favor of a Board of Trustees to be chosen by the latter with the approval of the Central Bank. Thus, Pablo Roman and his family (the controlling stockholders of Republic Bank) then executed a voting trust agreement, which was then superseded by another

one with the Philippine National Bank as the trustee. In view of these developments, the intervenors-appellees filed a motion to dismiss before the lower court claiming that the ouster of Pablo Roman and his family from the management of the Republic Bank effected by the voting trust agreement rendered the mandamus case moot and academic. Respondents-appellees also filed motion to dismiss in which they again raised the impropriety of mandamus. Acting upon the two motions and the oppositions thereto filed by petitioners, the lower court granted the motions and dismissed the case. Hence, this appeal. Issue: Whether or not the ouster of Pablo Roman from Republic Bank’s management and control renders moot the issues in the case, and that the remedy of mandamus should lie. Held: NO. Damaso Perez and Republic Bank cannot seek by mandamus to compel respondents to prosecute criminally those alleged violators of the banking laws. The remedy of mandamus is improper. Although the Central Bank and its respondent officials may have the duty under the Central Bank Act and the General Banking Act to cause the prosecution of those alleged violators, yet nothing in said laws that imposes a clear, specific duty on the former to do 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 fiscal's office. Being an artificial person,

The Central Bank is limited to its statutory powers and the nearest power to which prosecution of violators of banking laws may be attributed is its power to sue and be sued. But this corporate power of litigation evidently refers to civil cases only. The Central Bank and its respondent officials have already done all they could, within the confines of their powers, to cause theprosecution of those persons denounced by Perez. Annexes show that the cases of the alleged anomalous loans had already been referred by the Central Bank to the special prosecutors of theDepartment of Justice for criminal investigation and prosecution. For respondents to do the actual prosecuting themselves, as petitioners would have it, would be tantamount to an ultra vires act already. As for the Secretary of Justice, while he may have the power to prosecute — through the office of the Solicitor General — criminal cases, yet it is settled rule that mandamus will not lie to compel a prosecuting officer to prosecute a criminal case in court. Moreover, it does not appear from the law that only the Central Bankor its respondent officials can cause the prosecution of alleged violations of banking laws. Said violations constitute a public offense, the prosecution of which is a matter of public interest and hence, anyone — even private individuals — can denounce such violations before the prosecuting authorities. Since Perez himself could cause the filing of criminal complaints against those allegedly involved in the anomalous loans, if any, then he has a plain,

adequate and speedy remedy in the ordinary course of law, which makes mandamus against respondents improper.

CENTRAL BANK v. MORFE
July 5, 2013 § Leave a Comment

CENTRAL BANK v. MORFE

FACTS: First Mutual Savings and Loan Organization encourage savings among its members and extend financial assistance thru loans. Central bank said that the Organization and others with similar nature are banking institutions and that the Org have never been authorized. CB applied for SW because of the Org’s illegal receipt of deposits of money for deposit, disbursements…without compliance with RA 337. The SW includes articles such as book of original entry…and others. They said that the SW is general in its terms and that the use of the word “and others” permits the unreasonable search and seizure of documents which have no relation to any specific criminal act.

HELD: SW is upheld.

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Depending on the circumstances, while in one instance the particular wording of the warrant

may make it assume the character of a general warrant, in another context it may be considered perfectly alright.

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SW only for one offense, if issued for more than two, it is void. Scatter shot warrant.

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In illegal possession of shabu, marijuana, paraphernalia- one SW ok!

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SW may be partially void

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Undetermined amount of marijuana ok!

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Purpose of Particularity of Description:

1. 2.

Readily identify the items to be seized, thus prevent them from seizing the wrong items Leave officers with no discretion regarding articles to be seized and thus prevent unreasonable searches and seizure

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Not required that technical precision of description be required

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“narcotics paraphernalia”, “any and all narcotics”, and “a quantity of loose heroin” - ok!

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“and the like”- not necessarily general warrant

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Where should the requisite description appear- in the caption or body of the warrant? Body

sufficient.

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What if there’s discrepancy between the address in the caption and in the body? Not sufficient

to invalidate. It is sufficient as long as you can identify the place intended and distinguish it from other places in the community.

Central Bank of the Philippines v. CA (1985)Ponente: Makasiar, C.J.Topic:

Delay (Art. 1169)Facts:April 28, 1965 - Island Savings Bank (ISB) approvedthe loan application for P80,000 of Sulpicio Tolentino, who, asa security for the loan, also executed a real estate mortgageover

his 100-ha land. The approved loan application called for P80,000 loan, repayable in semiannual installments for a period of 3 years, with 12% interest.May 22, 1965 – a mere P17,000 partial

release of theloan was made by ISB, and Tolentino and his wife Editasigned a promissory note for P17,000 at 12% annual interest, payable within 3 years from the date of execution of thecontract at

semi-annual installments of P3,459.An advance interest for the P80,000 loan covering a6-mo period amounting to P4,800was deducted from the partial release of P17,000, but this was refunded

to Tolentinoon July 23, 1965, after being informed by ISB that there wasno fund yet available for the release of the P63,000 balance.Aug. 13, 1965 – the Monetary Board of the CentralBank issued Resolution No.

1049, which prohibited ISB frommaking new loans and investments, after finding that it wassuffering liquidity problems.June 14, 1968 – the Monetary Board issuedResolution No.

967, which prohibited ISB from doing business in the Philippines, after finding that it failed to put upthe required capital to restore its solvency.Aug. 1, 1968 – ISB, in view of non-payment of theP17,000 covered

by the promissory note, filed an applicationfor the extra-judicial foreclosure of the real estate mortgagecovering the 100-ha land; and the sheriff scheduled auction.Tolentino filed a petition with

the CFI for injunction,specific performance or rescission and damages with preliminary injunction, alleging that since ISB failed to deliver the P63,000 remaining balance of the loan, he is entitled

tospecific performance by ordering ISB to deliver it with interestof 12% per annum from April 28, 1965, and if said balancecannot be delivered, to rescind the real estate mortgage.CFI issued

a TRO enjoining ISB from continuingwith the foreclosure of the mortgage, however, after findingTolentino’s petition unmeritorious, ordered the latter to payISB P17,000 plus legal interest and

legal charges and liftingthe TRO so the sheriff may proceed with the foreclosure.CA, on appeal by Tolentino, modified CFI’s decision byaffirming dismissal of Tolentino’s petition for

specific performance, but ruled that ISB can neither foreclose themortgage nor collect the P1

7,
00

0
l

oan.SC: T
he

pa
r

t
i
e

s, i
n t

h

e P8
0

,000
loan agreement,undertook reciprocal obligations, wherein theobligation/promise of each party is the consideration for thatof the other; and when one party has performed or is ready

andwilling to perform his part of the contract, the other party whohas not performed or is not ready and willing to performincurs in delay (Art. 1169, CC).When Tolentino executed a real estate mortgage, hesignified

his willingness to pay the P80,000 loan, and fromsuch date, the obligation of ISB to furnish the loan accrued.Thus, ISB’s delay started on April 28, 1965 and lasted 3 yearsor when Resolution No. 967 was

issued prohibiting ISB fromdoing further b

u
s

i
n

e
s

s
, which

m

a
d

e i
t legally impossiblefrom ISB

to furnish the P63,000 of the loan.Resolution No. 1049 c

a
nnot interrupt the default of ISBin complying with its obligation to release the P63,000 balance because it

merely prohibited ISB from making new loans andinvestments, not from releasing the balance of loanagreements previously contracted .The mere pecuniary inability to fulfill an engagementdoes not

discharge the obligation of the contract, nor does itconstitute any defense to a decree of specific performance; andthe mere fact of insolvency of a debtor is never an excuse for the

nonfulfillment of an obligation, but instead, is taken as a breach of contract.The fact that Tolentino demanded and accepted the refundof the prededucted interest cannot be taken as a waiver of hisright to

collect the P63,000 balance. The act of ISB in askingfor the advance interest was improper considering that onlyP17,000 out of the P80,000 loan was released.The alleged discovery by ISB of the overvaluation

of theloan collateral cannot exempt it from complying with itsobligation to furnish the entire P80,000 loan because bank officials/employ ees have the obligation to investigate theexistence and

valuation of the properties being offered as aloan security before approving the loan application.Issues/He ld/Ratio

1)
WON the action of Tolenitno for

specific performance can prosper. NO.Since ISB was in default under the agreement, Tolentinomay choose between specific performance or rescission, butsince ISB is now prohibited from doing

further business, theonly remedy left is Rescission only for the P63,000 balance of the loan.

2)
WON Tolentino is liable to pay the P17,000 debtcovered by the promissory note.

YES.The bank was deemed to have complied with itsreciprocal obligation to furnish a P17,000 loan. The promissory note gave rise to Tolentino’s reciprocal obligationto pay such

loan when it falls due and his failure to pay theoverdue amortizations under the promissory note made him a party in default, hence not entitled to rescission (Art. 1191,CC). ISB has the right to rescind

the promissory note, beingthe aggrieved party.Since both parties were in default in the performance of their reciprocal obligations, both are liable for damages. Incase both parties have committed a

breach of their reciprocalobligations, the liability of the first infractor shall be equirablytempered by the courts (Art. 1192, CC). The liability of ISBfor damages in not furnishing the entire loan is offset by theliability

of Tolentino for damages (penalties and surcharges)for not paying his overdue P17,000 debt. Since Tolentinoderiv ed some benefit for his use of the P17,000, he shouldaccount for the

interest thereon (interest was not included inthe offsetting).

3)
WON Tolentino’s real estate mortgage can beforeclosed to satisfy the P17,000 if his liability to paytherefor subsists.

NO
First bank vs ca
Producers Bank (now called First Philippine International Bank), which has been under conservatorship since 1984, is the owner of 6 parcels of land. The Bank had an agreement with Demetrio Demetria and Jose Janolo for the two to purchase the parcels of land for a purchase price of P5.5 million pesos. The said agreement was made by Demetria and Janolo with the Bank’s manager, Mercurio Rivera. Later however, the Bank, through its conservator, Leonida Encarnacion, sought the repudiation of the agreement as it alleged that Rivera was not authorized to enter into such an agreement, hence there was no valid contract of sale. Subsequently, Demetria and Janolo sued Producers Bank. The regional trial court ruled in favor of Demetria et al. The Bank filed an appeal with the Court of Appeals. Meanwhile, Henry Co, who holds 80% shares of stocks with the said Bank, filed a motion for intervention with the trial court. The trial court denied the motion since the trial has been concluded already and the case is now pending appeal. Subsequently, Co, assisted by ACCRA law office, filed a separate civil case against Demetria and Janolo seeking to have the purported contract of sale be declared unenforceable against the Bank. Demetria et al argued that the second case constitutes forum shopping. ISSUES: 1. Whether or not there is forum shopping. 2. Whether or not there is a perfected contract of sale. HELD: 1. Yes. There is forum shopping because there is identity of interest and parties between the first case and the second case. There is identity of interest because both cases sought to have the agreement, which involves the same property, be declared unenforceable as against the Bank. There is identity of parties even though the first case is in the name of the bank as defendant, and the second case is in the name of Henry Co as plaintiff. There is still forum shopping here because Henry Co essentially represents the bank. Both cases aim to have the bank escape liability from the agreement it entered into with Demetria et al. The Supreme Court did not lay down any disciplinary action against the ACCRA lawyers but they were warned that a repetition will be dealt with more severely. 2. Yes. There is a perfected contract of sale because the bank manager, Rivera, entered into the agreement with apparent authority. This apparent authority has been duly proved by the evidence presented which showed that in all the dealings and transactions, Rivera participated actively without the opposition of the conservator. In fact, in the advertisements and announcements of the bank, Rivera was designated as the go-to guy in relation to the disposition of the Bank’s assets.

Pcib vs ca 350 scra 445

FACTS:Ford Philippines filed ac tions to recover from the drawe e bank Citibank and collecting b ank PCIB the value of several c hecks payable to the Commissi oner of Internal Revenue which were embezzled allegedly by an organized syndicate. What prompted this action was the drawing of a check by Ford, which it deposited toPCIB as payment and was debited from their Citibank acco unt. It later on found out that the payment wasn’t received by the Commissioner. Meanwhile,

according tothe NBI report, one of the checks issued by petitioner was withdrawn from PCIB for alleged mistake in the amount to be paid. This was replaced with manager’s check by PCIB, which were allegedly stolen by the syndicate and deposited in their own account.The trial court decided in favor of Ford.ISSUE:Has Ford the right to recover the value of the checks intended as payment to CIR?HELD:The checks were drawn against the drawee bank but the title of the person negotiating the same was

allegedly defective because the instrument was obtained by fraud andunlawful means, and the proceeds of the checks were not remitted to the payee. It was established that instead paying theCommissioner, the checks were diverted and encashed for the eventual distribution among members of the syndicate.Pursuant to this, it is v ital to show that the negotiation is made by the perpetrator in breach of faith amounting to fraud. The person negotiating th e checks must havegone beyond the authority given by

his principal. If the principal could prove that there was no negligence in the performance of his duties, he may set up the personaldefense to escape liabil ity and recover from other parties who, through their own negligence, allowed the commission of the crime.It should be resolved i f Ford is guilty of the imputed co ntributory negligence that would defeat its claim for reimbursement, bearing in mind that its employees were amongthe members of the syndi cate. It appears although the employees of Ford initiated the

transactions attributable to the organized syndicate, their actions were not theproximate cause of encashing the checks payable to CIR. The degree of Ford’s negligence couldn’t be characterized as the proximate cause of the injury toparties. The mere fact that the forgery was committed by a drawerpayor’s confident ial employee or agent, who by virtue of his position had unusual facilities for

perpetrating the fraud and imposing the forged paper upon the bank, doesn’t entitle the bank to shift the loss to the drawer -payor, in the absence of some circumstance raisingestoppel against the drawer.Note: not only PCIB but also Citibank is responsible for negligence. Citibank was negligent in the performanc e of its duties as a drawee bank. It f ailed to establish itspayments of Ford’s checks were made in due course and legally in order