FIDELITY SAVINGS AND MORTGAGE BANK, petitioner, vs. HON. PEDRO D.

CENZON, in his capacity as

Presiding Judge of the Court of First Instance of Manila (Branch XL) and SPOUSES TIMOTEO AND
OLIMPIA SANTIAGO, respondents.

Commercial Law; Central Bank Act; Insolvent banking institution and closed by the Central Bank of the
Philippines, not liable to pay interest on bank deposits.—It is settled jurisprudence that a banking
institution which has been declared insolvent and subsequently ordered closed by the Central Bank of
the Philippines cannot be held liable to pay interest on bank deposits which accrued during the period
when the bank is actually closed and non-operational.

Same; Petitioner bank may not be held responsible for damages in the absence of fraud, bad faith,
malice or wanton attitude.—In the absence of fraud, bad faith, malice or wanton attitude, petitioner
bank may, therefore, not be held responsible for damages which may be reasonably attributed to the
nonperformance of the obligation. Consequently, we reiterate that under the premises and pursuant to
the aforementioned provisions of law, it is apparent that private respondents are not justifiably entitled
to the payment of moral and exemplary damages and attorney’s fees.

Facts: Sometime on May 16, 1968, plaintiffs deposited with the defendant Fidelity Savings Bank the
amount of ONE HUNDRED THOUSAND PESOS (P100,000.00); That on February 18, 1969, the Monetary
Board, after finding the report of the Superintendent of Banks, that the condition of the defendant
Fidelity Savings and Mortgage Bank is one of insolvency. That herein plaintiffs, through their counsel,
sent demand letters to herein defendants, demanding the immediate payment of the aforementioned
savings and time deposits.

Issue: 1. Whether or not an insolvent bank like the Fidelity Savings and Mortgage Bank may be adjudged
to pay interest on unpaid deposits even after its closure by the Central Bank by reason of insolvency
without violating the provisions of the Civil Code on preference of credits; and

2. Whether or not an insolvent bank like the Fidelity Savings and Mortgage Bank may be adjudged to pay
moral and exemplary damages, attorney’s fees and costs when the insolvency is caused by the
anomalous real estate transactions without violating the provisions of the Civil Code on preference of
credits.

Held: The trial court found, and it is not disputed, that there was no fraud or bad faith on the part of
petitioner bank and the other defendants in accepting the deposits of private respondents. Petitioner
bank could not even be faulted in not immediately returning the amount claimed by private
respondents considering that the demand to pay was made and Civil Case No. 84800 was filed in the
trial court several months after the Central Bank had ordered petitioner’s closure. By that time,
petitioner bank was no longer in a position to comply with its obligations to its creditors, including
herein private respondents. Even the trial court had to admit that petitioner bank failed to pay private
respondents because it was already insolvent.8 Further, this case is not one of the specified or
analogous cases wherein moral damages may be recovered.9 There is no valid basis for the award of
exemplary damages which is supposed to serve as a warning to other banks from dissipating their assets
in anomalous transactions. It was not proven by private respondents, and

neither was there a categorical finding made by the trial court, that petitioner bank actually engaged in
anomalous real estate transactions.
G.R. No. 170865. April 25, 2012.* PHILIPPINE NATIONAL BANK, petitioner, vs. SPOUSES CHEAH CHEE
CHONG and OFELIA CAMACHO CHEAH, respondents.

G.R. No. 170892. April 25, 2012.* SPOUSES CHEAH CHEE CHONG and OFELIA CAMACHO CHEAH,
petitioners, vs. PHILIPPINE NATIONAL BANK, respondent.

Banks and Banking; Checks; The payment of the amounts of checks without previously clearing them
with the drawee bank especially so where the drawee bank is a foreign bank and the amounts
involved were large is contrary to normal or ordinary banking practice.—This Court already held that
the payment of the amounts of checks without previously clearing them with the drawee bank
especially so where the drawee bank is a foreign bank and the amounts involved were large is contrary
to normal or ordinary banking practice. Also, in Associated Bank v. Tan, 446 SCRA 282 (2004), wherein
the bank allowed the withdrawal of the value of a check prior to its clearing, we said that “[b]efore the
check shall have been cleared for deposit, the collecting bank can only ‘assume’ at its own risk x x x that
the check would be cleared and paid out.” The delay in the receipt by PNB Buendia Branch of the
November 13, 1992 SWIFT message notifying it of the dishonor of the subject check is of no moment,
because had PNB Buendia Branch waited for the expiration of the clearing period and had never
released during that time the proceeds of the check, it would have already been duly notified of its
dishonor. Clearly, PNB’s disregard of its preventive and protective measure against the possibility of
being victimized by bad checks had brought upon itself the injury of losing a significant amount of
money.

Same; Same; A bank is expected to be an expert in banking procedures and it has the necessary means
to ascertain whether a check, local or foreign, is sufficiently funded.—It bears stressing that “the
diligence required of banks is more than that of a Roman pater familias or a good father of a family. The
highest degree of diligence is expected.” PNB miserably failed to do its duty of exercising extraordinary
diligence and reasonable business prudence. The disregard of its own banking policy amounts to gross
negligence, which the law defines as “negligence characterized by the want of even slight care, acting or
omitting to act in a situation where there is duty to act, not inadvertently but wilfully and intentionally
with a conscious indifference to consequences in so far as other persons may be affected.” With regard
to collection or encashment of checks, suffice it to say that the law imposes on the collecting bank the
duty to scrutinize diligently the checks deposited with it for the purpose of determining their
genuineness and regularity. “The collecting bank, being primarily engaged in banking, holds itself out to
the public as the expert on this field, and the law thus holds it to a high standard of conduct.” A bank is
expected to be an expert in banking procedures and it has the necessary means to ascertain whether a
check, local or foreign, is sufficiently funded.

Facts: On November 4, 1992, Ofelia Cheah (Ofelia) and her friend Adelina Guarin (Adelina) were having a
conversation in the latter’s office when Adelina’s friend, Filipina Tuazon (Filipina), approached her to ask
if she could have Filipina’s check cleared and encashed for a

service fee of 2.5%. The check is Bank of America Check No. 1906 under the account of Alejandria
Pineda and Eduardo Rosales and drawn by Atty. Eduardo Rosales against Bank of America Alhambra
Branch in California, USA, with a face amount of $300,000.00, payable to cash. Because Adelina does not
have a dollar account in which to deposit the check, she asked Ofelia if she could accommodate
Filipina’s request since she has a joint dollar savings account with her Malaysian husband Cheah Chee
Chong (Chee Chong) under Account No. 265-705612-2 with PNB Buendia Branch. Ofelia agreed. PNB
Division Chief Alberto Garin discussed with them the process of clearing the subject check and they were
told that it normally takes 15 days. Assured that the deposit and subsequent clearance of the check is a
normal transaction, Ofelia deposited Filipina’s check. PNB then sent it for clearing through its
correspondent bank, Philadelphia National Bank. Garin called up Ofelia to inform her that the check had
already been cleared. The following day, PNB Buendia Branch, after deducting the bank charges,
credited $299,248.37 to the account of the spouses Cheah. Acting on Adelina’s instruction to withdraw
the credited amount, Ofelia that day personally withdrew $180,000.00.11 Adelina was able to withdraw
the remaining amount the next day after having been authorized by Ofelia. Filipina received all the
proceeds. In the meantime, the Cable Division of PNB Head Office in Escolta, Manila received on
November 16, 1992 a SWIFT message from Philadelphia National Bank dated November 13, 1992
informing PNB of the return of the subject check for insufficient funds. PNB Buendia Branch learned
about the bounced check when it received on November 20, 1992 a debit advice, followed by a letter on
November 24, 1992, from Philadelphia National Bank to which the November 13, 1992 SWIFT message
was attached. Informed about the bounced check and upon demand by PNB Buendia Branch to return
the money withdrawn, Ofelia immediately contacted Filipina to get the money back. But the latter told
her that all the money had already been given to several people who asked for the check’s encashment.
In their effort to recover the money, spouses Cheah then sought the help of the National Bureau of
Investigation. Said agency’s Anti-Fraud and Action Division was later able to apprehend some of the
beneficiaries of the proceeds of the check and recover from them $20,000.00. Criminal charges were
then filed against these suspect beneficiaries.

The RTC held that spouses Cheah were guilty of contributory negligence. Because Ofelia trusted a
friend’s friend whom she did not know and considering the amount of the check made payable to cash,
the RTC opined that Ofelia showed lack of vigilance in her dealings.

Ruling of the Court of Appeals While the CA recognized the spouses Cheah as victims of a scam who
nevertheless have to suffer the consequences of Ofelia’s lack of care and prudence in immediately
trusting a stranger, the appellate court did not hold PNB scot-free. REVERSED and SET ASIDE and
another one entered DECLARING both parties equally negligent and should suffer and shoulder the loss.

Issue: Whether or not PNB failed to exercise extraordinary diligence.

Held. YES.

All told, the Court concurs with the findings of the CA that PNB and the spouses Cheah are equally
negligent and should therefore equally suffer the loss. The two must both bear the consequences of
their mistakes.

The CA found Ofelia’s credulousness blameworthy. We agree. Indeed, Ofelia failed to observe caution in
giving her full trust in accommodating a complete stranger and this led her and her husband to be
swindled. Considering that Filipina was not personally known to her and the amount of the foreign
check to be encashed was $300,000.00, a higher degree of care is expected of Ofelia which she,
however, failed to exercise under the circumstances.
G.R. No. 213241. August 1, 2016.
  PHILIPPINE NATIONAL BANK, petitioner, vs. JUAN F. VILA, respondent.

Banks and Banking; It is standard operating procedure for banks to conduct an ocular inspection of the
property offered for mortgage and to determined the owners thereof.—Before approving a loan
application, it is standard operating procedure for banks and financial institutions to conduct an ocular
inspection of the property offered for mortgage and to determine the real owner(s) thereof. The
apparent purpose of an ocular inspection is to protect the “true owner” of the property as well as
innocent third parties with a right, interest or claim thereon from a usurper who may have acquired a
fraudulent certificate of title thereto.

Same; The banking system is an indispensable institution in the modern world and plays a vital role in
the economic life of every civilized nation.—The banking system is an indispensable institution in the
modern world and plays a vital role in the economic life of every civilized nation. Whether as mere
passive entities for the safekeeping and saving of money or as active instruments of business and
commerce, banks have become an ubiquitous presence among the people, who have come to regard
them with respect and even gratitude and, most of all, confidence. Consequently, the highest degree of
diligence is expected, and high standards of integrity and performance are even required, of it.

Facts: Petitioner PNB is a universal banking corporation duly authorized by Bangko Sentral ng Pilipinas
(BSP) to engage in banking business. Sometime in 1986, Spouses Reynaldo Cornista and Erlinda Gamboa
Cornista (Spouses Cornista) obtained a loan from Traders Royal Bank (Traders Bank).5 To secure the said
obligation, the Spouses Cornista mortgaged to the bank a parcel of land with an area of 451 square
meters. For failure of the Spouses Cornista to make good of their loan obligation after it has become
due, Traders Bank foreclosed the mortgage constituted on the security of the loan. After the notice and
publication requirements were complied with, the subject property was sold at the public auction.
During the public sale, respondent Juan F. Vila (Vila) was declared as the highest bidder after he offered
to buy the subject property for P50,000.00. On 11 February 1989, a Certificate of Final Sale was issued to
Vila after the one-year redemption period had passed without the Spouses Cornista exercising their
statutory right to redeem the subject property. He was, however, prevented from consolidating the
ownership of the property under his name because the owner’s copy of the certificate of title was not
turned over to him by the Sheriff. Despite the lapse of the redemption period and the fact of issuance of
a Certificate of Final Sale to Vila, the Spouses Cornista were nonetheless allowed to buy back the subject
property by tendering the amount of P50,000.00. Claiming that the Spouses Cornista already lost their
right to redeem the subject property, Vila filed an action for nullification of redemption, transfer of title
and damages against the Spouses Cornista and Alfredo Vega in his capacity as the Register of Deeds of
Pangasinan. the RTC rendered a in favor of Vila thereby ordering the Register of Deeds to cancel the
registration of the certificate of redemption and the annotation thereof. The said decision was affirmed
by the CA The decision of the appellate court became final and executory.

By unfortunate turn of events, the Sheriff could not successfully enforce the decision because the
certificate of title covering the subject property was no longer registered under the names of the
Spouses Cornista. Hence, the judgment was returned unsatisfied as shown in Sheriff’s Return. Upon
investigation it was found out that during the interregnum the Spouses Cornista were able to secure a
loan from the PNB in the amount of P532,000.00 using the same property subject of litigation as
security. The Real Estate Mortgage (REM) was recorded on 28 September 1992 under Entry No.
75817113 or month before the Notice of Lis Pendens was annotated. Eventually, the Spouses Cornista
defaulted in the payment of their loan obligation with the PNB prompting the latter to foreclose the
property offered as security. The bank emerged as the highest bidder during the public sale as shown at
the Certificate of Sale issued by the Sheriff The foregoing turn of events left Vila with no other choice but
to commence another round of litigation against the Spouses Cornista and PNB before the RTC Vila
sought for the nullification of title issued under the name of PNB and for the payment of damages.

RTC rendered a Decision17 in favor of Vila and ruled that PNB is not a mortgagee in good faith. As a
financial institution, the trial court held that PNB is expected to observe a higher degree of diligence. In
hastily granting the loan, the trial court declared that PNB failed in this regard. Had the bank exercised
due diligence, it could have easily discovered that the Spouses Cornista were not the possessors. CA
Affirmed.

Issue: Whether or not PNB is a mortgagee in good faith and has exercised the highest degree of
diligence.

Held. NO. Clearly, the PNB failed to observe the exacting standards required of banking institutions
which are behooved by statutes and jurisprudence to exercise greater care and prudence before
entering into a mortgage contract. No credible proof on the records could substantiate the claim of PNB
that a physical inspection of the property was conducted. We agree with both the RTC and CA that if in
fact it were true that ocular inspection was conducted, a suspicion could have been raised as to the real
status of property. By failing to uncover a crucial fact that the mortgagors were not the possessors of
the subject property, We could not lend credence to claim of the bank that an ocular inspection of the
property was conducted.
G.R. No. 162336. February 1, 2010.* HILARIO P. SORIANO, petitioner, vs. PEOPLE OF THE PHILIPPINES,
BANGKO SENTRAL NG PILIPINAS (BSP), PHILIPPINE DEPOSIT INSURANCE CORPORATION (PDIC), PUBLIC
PROSECUTOR ANTONIO C. BUAN, and STATE PROSECUTOR ALBERTO R. FONACIER, respondents.

Criminal Law; Estafa Through Falsification of Commercial Documents; The bank money (amounting to
Php. 8 million) which came to the possession of petitioners was money held in trust or administration
by him for the bank in his fiduciary capacity as the President of said bank.—The bank money
(amounting to P8 million) which came to the possession of petitioner was money held in trust or
administration by him for the bank, in his fiduciary capacity as the President of said bank. It is not
accurate to say that petitioner became the owner of the P8 million because it was the proceeds of a
loan. That would have been correct if the bank knowingly extended the loan to petitioner himself. But
that is not the case here. According to the information for estafa, the loan was supposed to be for
another person, a certain “Enrico Carlos”; petitioner, through falsification, made it appear that said
“Enrico Carlos” applied for the loan when in fact he (“Enrico Carlos”) did not. Through such fraudulent
device, petitioner obtained the loan proceeds and converted the same. Under these circumstances, it
cannot be said that petitioner became the legal owner of the P8 million. Thus, petitioner remained the
bank’s fiduciary with respect to that money, which makes it capable of misappropriation or conversion
in his hands.

Same; Same; Prohibition in Section 83 is broad enough to cover various modes of borrowing.—The
prohibition in Section 83 is broad enough to cover various modes of borrowing. It covers loans by a bank
director or officer (like herein petitioner) which are made either: (1) directly, (2) indirectly, (3) for
himself, (4) or as the representative or agent of others. It applies even if the director or officer is a mere
guarantor, indorser or surety for someone else’s loan or is in any manner an obligor for money
borrowed from the bank or loaned by it. The covered transactions are prohibited unless the approval,
reportorial and ceiling requirements under Section 83 are complied with. The prohibition is intended to
protect the public, especially the depositors, from the overborrowing of bank funds by bank officers,
directors, stockholders and related interests, as such overborrowing may lead to bank failures. It has
been said that “banking institutions are not created for the benefit of the directors [or officers]. While
directors have great powers as directors, they have no special privileges as individuals. They cannot use
the assets of the bank for their own benefit except as permitted by law. Stringent restrictions are placed
about them so that when acting both for the bank and for one of themselves at the same time, they
must keep within certain prescribed lines regarded by the legislature as essential to safety in the
banking business.”

Facts: the Office of Special Investigation (OSI) of the BSP, through its officers, transmitted a letter to
Jovencito Zuño, Chief State Prosecutor of the DOJ. The letter attached as annexes five affidavits,which
would allegedly serve as bases for filing criminal charges for Estafa thru Falsification of Commercial
Documents, in relation to Presidential Decree (PD) No. 1689, and for Violation of Section 83 of RA 337,
as amended by PD 1795,12 against, inter alia, petitioner herein Hilario P. Soriano. These five affidavits,
along with other documents, stated that spouses Enrico and Amalia Carlos appeared to have an
outstanding loan of P8 million with the Rural Bank of San Miguel (Bulacan), Inc. (RBSM), but had never
applied for nor received such loan; that it was petitioner, who was then president of RBSM, who had
ordered, facilitated, and received the proceeds of the loan; and that the P8 million loan had never been
authorized by RBSM’s Board of Directors and no report thereof had ever been submitted to the
Department of Rural Banks, Supervision and Examination Sector of the BSP.
petitioner contended that the commission of estafa under paragraph 1(b) of Article 315 of the RPC is
inherently incompatible with the violation of DOSRI law (as set out in Section 8323 of RA 337, as
amended by PD 1795),24 hence a person cannot be charged for both offenses. He argued that a
violation of DOSRI law requires the offender to obtain a loan from his bank, without complying with
procedural, reportorial, or ceiling requirements. On the other hand, estafa under par. 1(b), Article 315 of
the RPC requires the offender to misappropriate or convert something that he holds in trust, or on
commission, or for administration, or under any other obligation involving the duty to return the
same.25 Essentially, the petitioner theorized that the characterization of possession is different in the
two offenses. If petitioner acquired the loan as DOSRI, he owned the loaned money and therefore,
cannot misappropriate or convert it as contemplated in the offense of estafa. Conversely, if petitioner
committed estafa, then he merely held the money in trust for someone else and therefore, did not
acquire a loan in violation of DOSRI rules.

Ruling of the Regional Trial Court In an Order26 dated August 8, 2001, the trial court denied petitioner’s
Motion to Quash for lack of merit.

Ruling of the Court of Appeals The CA denied the petition on both issues presented by petitioner.

Anent the second ground, the CA found no merit in petitioner’s argument that the violation of the
DOSRI law and the commission of estafa thru falsification of commercial documents are inherently
inconsistent with

each other. It explained that the test in considering a motion to quash on the ground that the facts
charged do not constitute an offense, is whether the facts alleged, when hypothetically admitted,
constitute the elements of the offense charged. The appellate court held that this test was sufficiently
met because the allegations in the assailed informations, when hypothetically admitted, clearly
constitute the elements of Estafa thru Falsification of Commercial Documents and Violation of DOSRI
law.

Issue: Whether a loan transaction within the ambit of the DOSRI law (violation of Section 83 of RA 337,
as amended) could also be the subject of Estafa under Article 315 (1) (b) of the Revised Penal Code.

Held: YES. We have examined the two informations against petitioner and we find that they contain
allegations which, if hypothetically admitted, would establish the essential elements of the crime of
DOSRI violation and estafa thru falsification of commercial documents.
G.R. No. 135706. October 1, 2004.*
SPS. CESAR A. LARROBIS, JR. and VIRGINIA S. LARROBIS, petitioners, vs. PHILIPPINE VETERANS BANK,
respondent.

Banks; Receivership; Obligations; The receiver of the bank is obliged to collect pre-existing debts due
to the bank, and in connection therewith, to foreclose mortgages securing such debts.— When a bank
is prohibited from continuing to do business by the Central Bank and a receiver is appointed for such
bank, that bank would not be able to do new business, i.e., to grant new loans or to accept new
deposits. However, the receiver of the bank is in fact obliged to collect debts owing to the bank, which
debts form part of the assets of the bank. The receiver must assemble the assets and pay the obligation
of the bank under receivership, and take steps to prevent dissipation of such assets. Accordingly, the
receiver of the bank is obliged to collect pre-existing debts due to the bank, and in connection
therewith, to foreclose mortgages securing such debts.

Same; Same; Same; Settled is the principle that a bank is bound by the act, or failure to act of its
receiver.—Settled is the principle that a bank is bound by the acts, or failure to act of its receiver. As we
held in Philippine Veterans Bank vs. NLRC,a labor case which also involved respondent bank, . . . all the
acts of the receiver and liquidator pertain to petitioner, both having assumed petitioner’s corporate
existence. Petitioner cannot disclaim liability by arguing that the non-payment of MOLINA’s just wages
was committed by the liquidators during the liquidation period. However, the bank may go after the
receiver who is liable to it for any culpable or negligent failure to collect the assets of such bank and to
safeguard its assets.

Actions; Prescription; Prescription of actions is interrupted in the following instances.—Prescription of

actions is interrupted when they are filed before the court, when there is a written extrajudicial demand
by the creditors, and when there is any written acknowledgment of the debt by the debtor.

Facts: Case: Sps Larrobis vs Phil Veterans Bank Facts: Sps Larrobis secured a loan from Phil Veterans
Bank, at one point during the pendency of the loan. PVB was placed under receivership, the bank was
later on rehabilitated, the management found that Sps. Larrobis is not yet paid with their loan. PVB
foreclosed the property, Sps Larrobis put up the defense of prescription since they filed the case after 14
years which is beyond the 10 year period. PVB argued that they undergo receivership therefore the
prescriptive period was stalled.

Issue: WON prescription shall run against PVB that is placed under receivership

Held: YES- One of the duties & responsibilities of a receiver is to collect debts in order to rehabilitate
such bank. The prescriptive period therefore shall not be stalled. When banks are placed in a
receivership, they are only prohibited to conduct business banking transaction. When PNB failed to file
an action against Sps, Larrobis, they already slept on their rights.