1. Republic vs. Security Credit & Acceptance Corp.

, 19 SCRA 58

Facts: This is an original quo warranto proceeding, initiated by the Solicitor

General, to dissolve the Security and Acceptance Corporation for allegedly
engaging in banking operations without the authority required therefor by the
General Banking Act (Republic Act No. 337).

Security Credit and acceptance corporation is a duly registered

corporation with SEC. The company's articles of incorporation authorize it only
to engage primarily in financing agricultural, commercial and industrial
projects, and secondarily, in buying and selling stocks and bonds of any
corporation, The Superintendent of Banks of the Central Bank of the
Philippines thru its legal counsel rendered an opinion that respondent herein is
a banking institution within the purview of RA 337. The Corporation therefore
is performing 'banking functions' as contemplated in Republic Act No. 337,
without having first complied with the provisions of said Act. Based from the
findings, Central Bank advised the corporation to comply with the
requirements of the General Banking Act. Notwithstanding the advised from
the central bank, the corporation, continued performing the functions and
activities which had been declared to constitute illegal banking.

Issue: WON the corporation is engaged in banking.

Held: The Court held that the corporation herein has violated the law by
engaging in banking without securing the administrative authority required by
RA 337. It is clear that the transactions of respondent corporation partake of
the nature of banking. Indeed, a bank has been defined as

; ... a moneyed institute [Talmage vs. Pell 7 N.Y. (3 Seld.) 328, 347, 348]
founded to facilitate the borrowing, lending and safe-keeping of money (Smith
vs. Kansas City Title & Trust Co., 41 S. Ct. 243, 255 U.S. 180, 210, 65 L. Ed.
577) and to deal, in notes, bills of exchange, and credits (State vs. Cornings
Sav. Bank, 115 N.W. 937, 139 Iowa 338). (Banks & Banking, by Zellmann Vol.
1, p. 46).

Moreover, it has been held that:

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. (Western Investment Banking 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; 9 C.J.S. 30.)

Thus, the writ prayed for should be, as it is hereby granted and
defendant corporation is, accordingly, ordered dissolved.
 2. Bañas vs. Asia Pacific Corp., 343 SCRA 527

G.R. No. 128703. October 18, 2000

TEODORO BAÑAS,* C. G. DIZON CONSTRUCTION, INC., and CENEN

DIZON, petitioners,
versus
ASIA PACIFICFINANCE CORPORATION substituted by INTERNATIONAL
CORPORATE BANK now known as UNIONBANK OF THE
PHILIPPINES, respondent.

Facts: Asia Pacific filed a complaint for a sum of money with prayer for a writ
of replevin against Teodoro Bañas,C.G. Dizon Construction Inc. and Cenen
Dizon. 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 secure payment thereof, C.G. Dizon through its
corporate officers executed a Deed of Chattel Mortgage covering three heavy
equipment units of Caterpillar Bulldozer Crawler Tractors 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. Dizon
Construction. In compliance with the provision of the promissory note, 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 Asia Pacific to send a statement of account to Cenen
Dizon for the unpaid balance. As the demand was unheeded, Asia Pacific
sued Teodoro Bañas, C.G. DizonConstruction Inc. and Cenen DizonTeodoro
Bañas, C.G. Dizon Construction Inc. and Cenen Dizon admitted the
genuineness and due execution of the Promissory Note, Deed of Chattel
Mortgage and the Continuing Undertaking, they nevertheless maintained that
these legal documents we never intended to be legal valid and binding but a
mere subterfuge to conceal the loan with usurious interest. Defendants claimed
that since Asia Pacific could not directly engage in banking business, it propose
to them a scheme wherein Asia Pacific could extend a loan to them without
violating banking laws : first,

Cenen Dizon would secure a promissory note from Teodoro Bañas with a
face value of P390,000.00 payable in installments; second, ASIA PACIFIC
would then make it appear that the promissory note was sold to it by Cenen
Dizon with the 14% usurious interest on the loan or P54,000.00 discounted
and collected in advance by ASIA PACIFIC; and, lastly, Cenen Dizon would
provide sufficient collateral to answer for the loan in case of default in payment
and execute a continuing guaranty to assure continuous and prompt payment
of the loan. Sometime in October 1980 Cenen Dizon informed ASIAPACIFIC
that he would be delayed in meeting his monthly amortization on account
of business reverses and promised to pay instead in February 1981. Cenen
Dizon made good his promise and tendered payment to ASIA PACIFIC in an
amount equivalent to two (2) monthly amortizations. But ASIA PACIFIC
attempted to impose a 3% interest for every month of delay, which he flatly
refused to pay for being usurious. Afterwards, ASIA PACIFIC allegedly made
a verbal proposal to Cenen Dizon to surrender to it the ownership of the two (2)
bulldozer crawler tractors and, in turn, the latter would treat the former’s
account as closed and the loan fully paid. Cenen Dizon supposedly agreed and
accepted the offer. Defendants averred that the value of the bulldozer crawler
tractors was more than adequate to cover their obligation to ASIA PACIFIC.
Meanwhile, on 21 April 1981 the trial court issued a writ of replevin against
defendant C. G. Dizon Construction for the surrender of the bulldozer crawler
tractors subject of the Deed of Chattel Mortgage. Of the three (3) bulldozer
crawler tractors, only two (2) were actually turned over by defendants
which units were subsequently foreclosed by ASIA PACIFIC to satisfy
the obligation. On 25 September 1992 the Regional Trial Court ruled in favor 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.

Held: The Supreme Court ruled and said that an investment company refers to
any insurer which is or holds itself out as being engaged or proposes to engage
primarily in the business of investing, reinvesting or trading in securities. As
defined in Section 2 paragraph (a) of the Revised Securities Act , securities
shall include commercial papers evidencing indebtedness of any person,
financial or non financial entity, irrespective of maturity, issued , endorsed,
sold , transferred or in any manner conveyed to another with or without
recourse such as promissory notes. Clearly the transaction between petitioners
and respondent was one involving not a loan but a purchase of receivables at a
discount well within the purview of investing, reinvesting or trading in
securities which an investment company like the Asia Pacific is authorized to
perform and does not constitute a violation of the General Banking Act.
Moreover Section 2 of the General Banking Act provides:―Only entities duly
authorized by the Monetary Board of the Central Bank may engage in the
lending of funds obtained from the public through the receipt of deposits of any
kind and all entities regularly conducting such operations shall be considered
as banking institutions and shall be subject to the provisions of this Act, of the
Central Bank Act and of other pertinent laws. ―Indubitably, what is prohibited
by law is for investment companies to lend funds obtained from the public
through receipts of deposits which is a function of banking institutions. But in
the case at bar the funds supposedly ―lent‖ to petitioners have not been shown
to have been obtained from the public by way of deposits hence the
applicability of banking laws.
 3. Simex International (Manila), Inc. vs. CA, 183 SCRA 360

G.R. No. 88013 March 19, 1990

SIMEX INTERNATIONAL (MANILA), INCORPORATED, petitioner,

vs.
THE HONORABLE COURT OF APPEALS and TRADERS ROYAL
BANK, respondents.

Facts: The petitioner was a depositor of the respondent bank and maintained a
checking account in its branch at Romulo Avenue, Cubao, Quezon City. On
May 25, 1981, the petitioner deposited to its account in the said bank the
amount of P100,000.00, thus increasing its balance as of that date to
P190,380.74. 1 Subsequently, the petitioner issued several checks against its
deposit but was suprised to learn later that they had been dishonored for
insufficient funds.

As a consequence, the California Manufacturing Corporation sent on

June 9, 1981, a letter of demand to the petitioner, threatening prosecution if
the dishonored check issued to it was not made good. It also withheld delivery
of the order made by the petitioner.

The petitioner complained to the respondent bank on June 10,

1981. 3 Investigation disclosed that the sum of P100,000.00 deposited by the
petitioner on May 25, 1981, had not been credited to it. The error was rectified
on June 17, 1981, and the dishonored checks were paid after they were re-
deposited.

In its letter dated June 20, 1981, the petitioner demanded reparation
from the respondent bank for its "gross and wanton negligence." This demand
was not met. The petitioner then filed a complaint in the then Court of First
Instance of Rizal claiming from the private respondent moral damages in the
sum of P1,000,000.00 and exemplary damages in the sum of P500,000.00,
plus 25% attorney's fees, and costs.

After trial, Judge Johnico G. Serquinia rendered judgment holding that

moral and exemplary damages were not called for under the circumstances.
However, observing that the plaintiff's right had been violated, he ordered the
defendant to pay nominal damages

This decision was affirmed in toto by the respondent court.

Issue: Whether or not that the private respondent was guilty of negligence.
Held: This Court has carefully examined the facts of this case and finds that it
cannot share some of the conclusions of the lower courts. It seems to us that
the negligence of the private respondent had been brushed off rather lightly as
if it were a minor infraction requiring no more than a slap on the wrist

The respondent bank has not even explained why it was committed at
all. It is true that the dishonored checks were, as the Court of Appeals put it,
"eventually" paid. However, this took almost a month when, properly, the
checks should have been paid immediately upon presentment.

As the Court sees it, the initial carelessness of the respondent bank,
aggravated by the lack of promptitude in repairing its error, justifies the grant
of moral damages.

We shall recognize that the petitioner did suffer injury because of the
private respondent's negligence that caused the dishonor of the checks issued
by it. The immediate consequence was that its prestige was impaired because
of the bouncing checks and confidence in it as a reliable debtor was
diminished. The private respondent makes much of the one instance when the
petitioner was sued in a collection case, but that did not prove that it did not
have a good reputation that could not be marred, more so since that case was
ultimately settled.

After deliberating on this particular matter, the Court, in the exercise of

its discretion, hereby imposes upon the respondent bank exemplary damages
in the amount of P50,000.00, "by way of example or correction for the public
good," in the words of the law. It is expected that this ruling will serve as a
warning and deterrent against the repetition of the ineptness and indefference
that has been displayed here, lest the confidence of the public in the banking
system be further impaired.

ACCORDINGLY, the appealed judgment is hereby MODIFIED and the

private respondent is ordered to pay the petitioner, in lieu of nominal damages,
moral damages in the amount of P20,000.00, and exemplary damages in the
amount of P50,000.00 plus the original award of attorney's fees in the amount
of P5,000.00, and costs.
 4. Reyes vs. CA, G.R. No.118492, 15 August 2001

G.R. No. 118492 August 15, 2001

GREGORIO H. REYES and CONSUELO PUYAT-REYES, petitioners,

versus
THE HON. COURT OF APPEALS and FAR EAST BANK AND TRUST COMPANY,
respondents.

Facts: In view of the 20th Asian Racing Conference then scheduled to be held in
September, 1988 in Sydney, Australia, the Philippine Racing Club, Inc. (PRCI,
for brevity) sent four (4) delegates to the said conference. Petitioner Gregorio H.
Reyes, as vice-president for finance, racing manager, treasurer, and director of
PRCI, sent Godofredo Reyes, the club's chief cashier, to the respondent bank to
apply for a foreign exchange demand draft in Australian dollars.

Godofredo went to respondent bank's Buendia Branch in Makati City to

apply for a demand draft in the amount One Thousand Six Hundred Ten
Australian Dollars (AU$1,610.00) payable to the order of the 20th Asian Racing
Conference Secretariat of Sydney, Australia. He was attended to by respondent
bank's assistant cashier, Mr. Yasis, who at first denied the application for the
reason that respondent bank did not have an Australian dollar account in any
bank in Sydney. Godofredo asked if there could be a way for respondent bank
to accommodate PRCI's urgent need to remit Australian dollars to Sydney.

Upon due presentment of the foreign exchange demand draft,

denominated as FXDD No. 209968, the same was dishonoured. The petitioners
spouses Gregorio H. Reyes and Consuelo Puyat-Reyes left for Australia to
attend the said racing conference. When petitioner Gregorio H. Reyes arrived in
Sydney in the morning of September 18, 1988, he went directly to the lobby of
Hotel Regent Sydney to register as a conference delegate. At the registration
desk, in the presence of other delegates from various member of the conference
secretariat that he could not register because the foreign exchange demand
draft for his registration fee had been dishonored for the second time. A
discussion ensued in the presence and within the hearing of many delegates
who were also registering. Feeling terribly embarrassed and humiliated,
petitioner Gregorio H. Reyes asked the lady member of the conference
secretariat that he be shown the subject foreign exchange demand draft that
had been dishonored as well as the covering letter after which he promised that
he would pay the registration fees in cash.

Issue: Whether or not the drawer bank exerted the degree of diligence that
banks are required to exert in their commercial dealings.
Held: The respondent bank did everything within its power to prevent the
dishonor of the subject foreign exchange demand draft. The erroneous reading
of its cable message to Westpac-Sydney by an employee of the latter could not
have been foreseen by the respondent bank. Being unaware that its employee
erroneously read the said cable message, Westpac-Sydney merely stated that
the respondent bank has no deposit account with it to cover for the amount of
One Thousand Six Hundred Ten Australian Dollar (AU $1610.00) indicated in
the foreign exchange demand draft. Thus, the respondent bank had the
impression that Westpac-New York had not yet made available the amount for
reimbursement to Westpac-Sydney despite the fact that respondent bank has a
sufficient deposit dollar account with Westpac-New York. That was the reason
why the respondent bank had to re-confirm and repeatedly notify Westpac-New
York to debit its (respondent bank's) deposit dollar account with it and to
transfer or credit the corresponding amount to Westpac-Sydney to cover the
amount of the said demand draft.

The dishonor of the subject foreign exchange demand draft is not

attributable to any fault of the respondent bank, whereas the petitioners
appeared to be under estoppel as earlier mentioned, it is no longer necessary to
discuss the alleged application of Section 61 of the Negotiable Instruments Law
to the case at bar. In any event, it was established that the respondent bank
acted in good faith and that it did not cause the embarrassment of the
petitioners in Sydney, Australia.
 5. DBP vs. CA, 331 SCRA 267

DEVELOPMENT BANK OF THE PHILIPPINES v. COURT OF APEEALS

G.R.No. 138703,June 30, 2006

Facts: In March 1968, DBP granted to private respondents an industrial loan

in the amount of P2,500,000 – P500,000 n cash and P2,000,000 in DBP
Progress Bank. It was evidenced by a promissory note and secured by a
mortgage executed by respondents over their present and future properties.
Another loan was granted by DBP in the for of a 5-year revolving guarantee to
P1,700,000. In 1975, the outstanding accounts wth DBP was restructured in
view of failure to pay. Amounting to P4,655,992.35 were consolidated into a
single account. On the other hand, all accrued interest and charges due
amounting to P3,074,672.21 were denominated as ― Notes Taken for Interests‖
and evidenced by a separate promissory note. For failure to comply with its
obligation, DBP initiated foreclosure proceedings upon its computation that
respondent’s loans were arrears by P62,954,473.68. Respondents contended
that the collection was unconscionable if not unlawful or usurious. RTC, as
affirmed by the CA, ruled in favor of the respondents.

Issue: Whether the prestation to collect by the DBP is unconscionable or

usurious

Held: It cannot be determined whether DBP in fact applied an interest rate

higher than what is prescribed under the law. Assuming it did exceed 12% in
addition to the other penalties stipulated in the note, this should be stricken
out for being usurious.

The petition is partly granted. Decision of the court of Appeals is reversed

and set aside. The case is remanded o the trial court for the determination of
the total amount of the respondent’s obligation based on the promissory notes,
according to the interest rate agreed upon by the parties on the interest rate of
12% per annum, whichever is lower.
 6. UCPB vs. Ramos, G.R. No.147800, November 11, 2003

G.R. No. 147800. November 11, 2003

UNITED COCONUT PLANTERS BANK vs. TEOFILO C. RAMOS

Facts: The petitioner United Coconut Planters Bank (UCPB) granted a loan to
Zamboanga Development Corporation (ZDC) with Venicio Ramos and the
Spouses Teofilo Ramos, Sr. and Amelita Ramos as sureties. The ZDC failed to
pay its account to the petitioner despite demands. The latter filed a complaint
with the RTC against the ZDC, and the sureties for the collection of the
corporation’s account. The RTC rendered judgment in favor of the petitioner
ordering defendant to pay 3,150,000.00. Thereafter, the court issued a writ of
execution for the enforcement of its decision ordering Deputy Sheriff to levy
and attach all the real and personal properties belonging to the aforesaid
defendants to satisfy the judgment. Eduardo C. Reniva, an appraiser found a
residential lot covered by TCT No. 275167 under the name of Teofilo C. Ramos,
President of the Ramdustrial Corporation, married to Rebecca F. Ramos. In
view of appraisal report the Sheriff caused the annotation of a notice of levy on
the said title.
Meanwhile, Ramdustrial Corporation applied for a loan with the UCPB,
using the subject property. The respondent was informed that upon
verification, a notice of levy was annotated in TCT No. 275167 in favor of the
petitioner, because of which the bank had to hold in abeyance any action on its
loan application. Later, The UCPB approved the Ramdustrial Corporation’s
credit line application. As business did not go well, Ramdustrial Corporation
found it difficult to pay the loan. The corporation then applied for a loan with
the Planters Development Bank (PDB), the respondent offered to use the
subject property as collateral for its loan. But the PDB withheld the release of
the loan pending the cancellation of the notice of levy on said property.
Thus, respondent filed a complaint for damages against the petitioner and
Sheriff before the RTC despite the cancellation of the notice of levy, alleging
that without any legal basis, the petitioner and Sheriff caused the annotation of
a notice to levy on the TCT of his aforesaid property which caused his failure to
secure a timely loan from UCPB and PDB. In its answer, the petitioner, while
admitting that it made a mistake in causing the annotation of notice of levy on
the TCT of the respondent, denied that it was motivated by malice and bad
faith and also asserted that it had no knowledge that there were two persons
bearing the same name Teofilo Ramos.
The RTC rendered a decision against UCPB. The CA ruled that the
petitioner was negligent in causing the annotation of notice of levy on the title
of the petitioner. Hence this petition.

Issue: Whether or not petitioner UCBP acted negligently in causing the

annotation of levy on the title of the respondent property?
Held: Yes. The court ruled that the petitioner acted negligently when it caused
the annotation of the notice of levy in respondent property. The petitioner, as a
bank and a financial institution engaged in the grant of loans, is expected to
ascertain and verify the identities of the persons it transacts business with. As
the bank is one affected with public interest, because it invests the money that
it holds in trust from its depositors, for this reason, the bank should guard
against loss due to negligence or bad faith.
The petitioner has access to more facilities in confirming the identity of
their judgment debtors. It should have acted more cautiously, especially since
some uncertainty had been reported by the appraiser whom the petitioner had
tasked to make verifications. Thus, the petitioner failed to act with the
reasonable care and caution which an ordinarily prudent person would have
used in the same situation.
In sum, we rule that the petitioner acted negligently in levying the
property of the respondent despite doubts as to the identity of the respondent
vis-à-vis its judgment debtor. By reason of such negligent act, a wrongful levy
was made, and was the proximate cause of the damages sustained by the
respondent.
 7. GSIS vs. Eduardo Santiago, G.R. No.155206, October 28, 2003

G.R. No. 155206 October 28, 2003

GSIS vs Eduardo M. Santiago, substituted by his widow Rosario Enriquez Vda.

De Santiango

Facts: Deceased spouses Jose C. Zulueta and Soledad Ramos obtained various
loans from herein petitioner GSIS secured by real estate mortgages over parcels
of land. The Zuluetas failed to pay their loans to GSIS and the latter foreclosed
the real estate mortgages. The mortgaged properties were sold at public auction
by GSIS submitting a bid price. Not all lots covered by the mortgaged titles,
however, were sold. Ninety-one (91) lots were expressly excluded from the
auction since the lots were sufficient to pay for all the mortgage debts.
Thereafter, An Affidavit of Consolidation of Ownership was executed by GSIS
over Zulueta’s lots, including the lots, which were already excluded from the
foreclosure and sold the foreclosed properties to Yorkstown Development
Corporation which sale was disapproved by the President. After GSIS had re-
acquired the properties sold to said Corporation, it began disposing the
foreclosed lots including the excluded ones.
Eduardo Santiago and Antonio Vic Zulueta executed an agreement
whereby Zulueta transferred all his rights and interests over the excluded lots.
They wrote a demand letter to GSIS for the return excluded lots and later filed
with the (RTC) a complaint for reconveyance of real estate against the GSIS. the
petitioner maintains that it did not act in bad faith nor could fraud or malice be
attributed when it erroneously included in its certificate of sale, and
subsequently consolidated the titles in its name over the subject lots despite
the fact that these were expressly excluded from the foreclosure sale, and that
its failure to apprise or return to the Zuluetas, the respondent’s predecessors-
in-interest, the seventy-eight lots excluded from the foreclosure sale cannot be
imputed against them because the petitioner had no such obligation under the
pertinent loan and mortgage agreement. The RTC rendered judgment ordering
the GSIS to reconvey to the respondent herein, the78 lots excluded from the
foreclosure sale. The CA affimed the decision in toto. Hence this petition.

Issue: W/N the GSIS committed an act of negligence amounting to bad faith
when it included the subject properties into the consolidated titles in its name
and its failure to apprise or inform the defendant herein of the exclusion of said
properties from the public sale?

Held: Yes. The petitioner is not an ordinary mortgagee. It is a government

financial institution and, like banks, is expected to exercise greater care and
prudence in its dealings, including those involving registered lands. Due
diligence required of banks extend even to persons, or institutions like the
petitioner, regularly engaged in the business of lending money secured by real
estate mortgages. Thus, in a case the court ruled that Banks, indeed, should
exercise more care and prudence in dealing even with registered lands, than
private individuals, for their business is one affected with public interest,
keeping in trust money belonging to their depositors, which they should guard
against loss by not committing any act of negligence which amounts to lack of
good faith by which they would be denied the protective mantle of land
registration statute, extended only to purchasers for value and in good faith, as
well as to mortgagees of the same character and description.
In this case, the petitioner executed an affidavit in consolidating its
ownership and causing the issuance of titles in its name over the subject lots
despite the fact that these were expressly excluded from the foreclosure sale.
By so doing, the petitioner acted in gross and evident bad faith. It cannot feign
ignorance of the fact that the subject lots were excluded from the sale at public
auction. Its act constituted gross negligence amounting to bad faith. Further,
the petitioner’s acts of concealing the existence of these lots, its failure to
return them to the Zuluetas and even its attempt to sell them to a third party is
proof of the petitioner’s intent to defraud the Zuluetas and appropriate for itself
the subject lots. The petitioner had the legal duty to return the subject lots to
the Zuluetas. The petitioner’s attempts to justify its omission by insisting that
it had no such duty under the mortgage contract is obviously clutching at
straw. Article 22 of the Civil Code provides that "every person who, through an
act of performance by another, or any other means, acquires or comes into
possession of something at the expense of the latter without just or legal
ground, shall return the same to him."
 8. Central Bank vs. CA, 208 SCRA 652

9. PCIBank vs. CA, 350 SCRA 446

10. Perez vs. Monetary Board, 20 SCRA 592

Perez and Republic Bank vs. Monetary Board

G.R. No. L-23307 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 investigation and prosecution those cases
involving the alleged anomalous loans.

On January 20, 1964, the Monetary Board of the Central Bank passed
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 the prosecution 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 the Department 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 Bank or
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.
 11. Central Bank vs. Morfe, 20 SCRA 507

G.R. No. L-38427 March 12, 1975

CENTRAL BANK OF THE PHILIPPINES as Liquidator of the FIDELITY SAVINGS

BANK, petitioner,

versus

HONORABLE JUDGE JESUS P. MORFE, as Presiding Judge of Branch XIII,

Court of First Instance of Manila, Spouses AUGUSTO and ADELAIDA PADILLA
and Spouses MARCELA and JOB ELIZES, respondents.

Facts: This case involves the question of whether a final judgment for the
payment of a time deposit in a savings bank which judgment was obtained
after the bank was declared insolvent, is a preferred claim against the bank.

Prior to the institution of the liquidation proceeding but after the

declaration of insolvency, or, specifically, sometime in March, 1971, the
spouses Job Elizes and Marcela P. Elizes filed a complaint in the Court of First
Instance of Manila against the Fidelity Savings Bank for the recovery of the
sum of P50, 584 as the balance of their time deposits (Civil Case No. 82520
assigned to Branch I).

In the judgment rendered in that case on December 13, 1972 the Fidelity
Savings Bank was ordered to pay the Elizes spouses the sum of P50,584 plus
accumulated interest.

From the said order, the Central Bank appealed to this Court by
certiorari. It contends that the final judgments secured by the Elizes and
Padilla spouses do not enjoy any preference because (a) they were rendered
after the Fidelity Savings Bank was declared insolvent and (b) under the
charter of the Central Bank and the General Banking Law, no final judgment
can be validly obtained against an insolvent bank.

It should be noted that fixed, savings, and current deposits of money in

banks and similar institutions are not true deposits. They are considered
simple loans and, as such, are not preferred credits (Art. 1980, Civil Code

Issue: WON there can be no final judgment can be validly obtained

against an insolvent bank?
Held: The circumstance that the Fidelity Savings Bank, having stopped
operations since February 19, 1969, was forbidden to do business (and that
ban would include the payment of time deposits) implies that suits for the
payment of such deposits were prohibited under Sec. 85, General Banking Act,
Republic Act No. 337. What was directly prohibited should not be encompassed
indirectly. There is no cogent reason why the Elizes and Padilla spouses should
not adhere to the procedure outlined in the said rules and regulations.

WHEREFORE, the lower court's orders of August 20, 1973 and February 25,
1974 are reversed and set aside. No costs. SO ORDERED.
 12. Serrano vs. CA, 96 SCRA 96

MANUEL M. SERRANO vs. CENTRAL BANK OF THE PHILIPPINES

G. R. No. L-30511 February 14, 1980

Facts: On October 13, 1966 and December 12, 1966, petitioner made a time
deposit, for one year with 6% interest, of One Hundred Fifty Thousand Pesos
[P150,000.00] with the respondent Overseas Bank of Manila. Concepcion
Maneja also made a time deposit, for one year with 6-½% interest, on March 6,
1967, of Two Hundred Thousand Pesos [P200,000.00] with the same
respondent Overseas Bank of Manila.

On August 31, 1968, Concepcion Maneja, married to Felixberto M.

Serrano, assigned and conveyed to petitioner Manuel M. Serrano, her time
deposit of P200,000.00 with respondent Overseas Bank of Manila.

Notwithstanding series of demands for encashment of the

aforementioned time deposits from the respondent Overseas Bank of Manila,
dating from December 6, 1967 up to March 4, 1968, not a single one of the
time deposit certificates was honored by respondent Overseas Bank of Manila.

Respondent Central Bank admits that it is charged with the duty of

administering the banking system of the Republic and it exercises supervision
over all doing business in the Philippines, but denies the petitioner's allegation
that the Central Bank has the duty to exercise a most rigid and stringent
supervision of banks, implying that respondent Central Bank has to watch
every move or activity of all banks, including respondent Overseas Bank of
Manila. Respondent Central Bank claims that as of March 12, 1965, the
Overseas Bank of Manila, while operating, was only on a limited degree of
banking operations since the Monetary Board decided in its Resolution No.
322, dated March 12, 1965, to prohibit the Overseas Bank of Manila from
making new loans and investments in view of its chronic reserve deficiencies
against its deposit liabilities. This limited operation of respondent Overseas
Bank of Manila continued up to 1968.

Respondent Central Bank also denied that it is guarantor of the

permanent solvency of any banking institution as claimed by petitioner. It
claims that neither the law nor sound banking supervision requires respondent
Central Bank to advertise or represent to the public any remedial measures it
may impose upon chronic delinquent banks as such action may inevitably
result to panic or bank "runs". In the years 1966-1967, there were no findings
to declare the respondent Overseas Bank of Manila as insolvent.

Respondent Central Bank likewise denied that a constructive trust was

created in favor of petitioner and his predecessor in interest Concepcion
Maneja when their time deposits were made in 1966 and 1967 with the
respondent Overseas Bank of Manila as during that time the latter was not an
insolvent bank and its operation as a banking institution was being salvaged
by the respondent Central Bank.

Respondent Central Bank avers no knowledge of petitioner's claim that

the properties given by respondent Overseas Bank of Manila as additional
collaterals to respondent Central Bank of the Philippines for the former's
overdrafts and emergency loans were acquired through the use of depositors'
money, including that of the petitioner and Concepcion Maneja.

Issue: Whether or not Bank deposits are in the nature of irregular deposits.

Held: Bank deposits are in the nature of irregular deposits. They are really
loans because they earn interest. All kinds of bank deposits, whether fixed,
savings, or current are to be treated as loans and are to be covered by the law
on loans. Current and savings deposits are loans to a bank because it can use
the same. The petitioner here, in making time deposits that earn interests with
respondent Overseas Bank of Manila was, in reality, a creditor of the
respondent Bank and not a depositor. The respondent Bank was in turn a
debtor of petitioner. Failure of he respondent Bank to honor the time deposit is
failure to pay its obligation as a debtor and not a breach of trust arising from
depositary's failure to return the subject matter of the deposit

WHEREFORE, the petition is dismissed for lack of merit, with costs against
petitioner. SO ORDERED.
 13. Vitug vs. CA, March 29, 1990

ROMARICO G. VITUG vs. THE HONORABLE COURT OF APPEALS

G.R. No. 82027 March 29, 1990

Facts: This case is a chapter in an earlier suit decided by this Court involving
the probate of the two wills of the late Dolores Luchangco Vitug, who died in
New York, U. S.A., on November 10, 1980.

On January 13, 1985, Romarico G. Vitug filed a motion asking for

authority from the probate court to sell certain shares of stock and real
properties belonging to the estate to cover allegedly his advances to the estate
in the sum of P667,731.66, plus interests, which he claimed were personal
funds. As found by the Court of Appeals, 2 the alleged advances consisted of
P58,147.40 spent for the payment of estate tax, P518,834.27 as deficiency
estate tax, and P90,749.99 as "increment thereto." 3According to Mr. Vitug, he
withdrew the sums of P518,834.27 and P90,749.99 from savings account No.
35342-038 of the Bank of America, Makati, Metro Manila.

On April 12, 1985, Rowena Corona opposed the motion to sell on the
ground that the same funds withdrawn from savings account No. 35342-038
were conjugal partnership properties and part of the estate, and hence, there
was allegedly no ground for reimbursement. She also sought his ouster for
failure to include the sums in question for inventory and for "concealment of
funds belonging to the estate."

Vitug insists that the said funds are his exclusive property having
acquired the same through a survivorship agreement executed with his late
wife and the bank on June 19, 1970.

The trial courts upheld the validity of this agreement and granted "the motion
to sell some of the estate of Dolores L. Vitug, the proceeds of which shall be
used to pay the personal funds of Romarico Vitug in the total sum of
P667,731.66 ... ."

On the other hand, the Court of Appeals, in the petition for certiorari
filed by the herein private respondent, held that the above-quoted survivorship
agreement constitutes a conveyance mortis causa which "did not comply with
the formalities of a valid will as prescribed by Article 805 of the Civil Code," and
secondly, assuming that it is a mere donation inter vivos, it is a prohibited
donation under the provisions of Article 133 of the Civil Code.
Issue: Whether or not some funds withdrawn from the savings account no.
35342-038 were conjugal partnership properties and a part of the estate.

Held: There is no demonstration here that the survivorship agreement had

been executed for such unlawful purposes, or, as held by the respondent court,
in order to frustrate our laws on wills, donations, and conjugal partnership.

The conclusion is accordingly unavoidable that Mrs. Vitug having

predeceased her husband, the latter has acquired upon her death a vested
right over the amounts under savings account No. 35342-038 of the Bank of
America. Insofar as the respondent court ordered their inclusion in the
inventory of assets left by Mrs. Vitug, we hold that the court was in error. Being
the separate property of petitioner, it forms no more part of the estate of the
deceased.

WHEREFORE, the decision of the respondent appellate court, dated June

29, 1987, and its resolution, dated February 9, 1988, are SET ASIDE.No costs.

SO ORDERED.