1. Republic vs. Security Credit, GR No.

L-20583, January 23, 1967

Facts: Articles of Incorporation of defendant corporation were registered with the Securities and
Exchange Commission. When they applied with SEC for the registration and licensing of their
securities under the Securities Act, the latter referred it to the Central Bank which in turn rendered an
opinion classifying defendant corporation as engaged in banking. SEC then advised the corporation to
comply with the requirements under the General Banking Act.
Pursuant to a search warrant issued by MTC Manila, members of Central Bank intelligence
division and Manila police seized documents and records relative to the business operations of the
corporation. After examination of the same, the intelligence division of the Central Bank submitted a
memorandum to the then Acting Deputy Governor of Central Bank finding that the corporation is
engaged in banking operations. In lieu of the memorandum, the Monetary Board issued a resolution
declaring that the corporation is performing banking operations without first complying with the
provisions of Republic Act No. 337.
Notwithstanding such resolution, the corporation, have been and still are performing the
functions and activities which had been declared to constitute illegal banking operations; the
corporation had established 74 branches in principal cities and towns throughout the Philippines; that
through a systematic and vigorous campaign undertaken by the corporation, the same had managed
to induce the public to open 59,463 savings deposit accounts with an aggregate deposit of
P1,689,136.74; Accordingly, the Solicitor General commenced this quo warranto proceedings for the
dissolution of the corporation, with a prayer that, meanwhile, a writ of preliminary injunction be issued
ex parte, enjoining the corporation and its branches, as well as its officers and agents, from
performing the banking operations complained of, and that a receiver be appointed pendente lite.
Superintendent of Banks of the Central Bank was then appointed by the Supreme Court as receiver
pendente lite of defendant corporation.

Issue: Whether or not defendant corporation was engaged in banking operations.

Held. Yes. An investment company which loans out the money of its customers, collects the interest
and charges a commission to both lender and borrower, is a bank. It is conceded that a total of
59,463 savings account deposits have been made by the public with the corporation and its 74
branches, with an aggregate deposit of P1,689,136.74, which has been lent out to such persons as the
corporation deemed suitable therefore. It is clear that these transactions partake of the nature of
banking, as the term is used in Section 2 of the General Banking Act. Hence, defendant corporation
has violated the law by engaging in banking without securing the administrative authority required in
Republic Act No. 337. Accordingly, the defendant corporation was ordered dissolved and appointment
of receiver was made permanent.
2. Teodoro Banas vs. Asia Pacific, GR No. 128703, October 18, 2000

Facts:

Teodoro Bañas executed a Promissory Note in favor of C. G. Dizon Construction whereby for value received he
promised to pay to the order of C. G. Dizon Construction the sum of P390,000.00 in installments of “P32,500.00 every
25th day of the month starting from September 25, 1980 up to August 25, 1981.”Later, C. G. Dizon Construction
endorsed with recourse the Promissory Note to ASIA PACIFIC, and to secure payment thereof, C. G. Dizon
Construction, through its corporate officers, Cenen Dizon, President, and Juliette B. Dizon, Vice President and
Treasurer, executed a Deed of Chattel Mortgage covering three heavy equipment units of Caterpillar Bulldozer
Crawler Tractors 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 thereof, C. G. Dizon Construction made
three installment payments to ASIA PACIFIC for a total of P130,000.00. Thereafter, 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 of P267,737.50 inclusive of interests and charges, and P66,909.38
representing attorney’s fees. As the demand was unheeded, ASIA PACIFIC filed a complaint for a sum of money with
prayer for a writ of replevin against Teodoro Bañas, C. G. Dizon Construction and Cenen Dizon. The trial court issued
a writ of replevin against defendant C. G. Dizon Construction for the surrender of the bulldozer crawler tractors. Of
the three bulldozer crawler tractors, only two were actually turned over by defendants which units were subsequently
foreclosed by ASIA PACIFIC to satisfy the obligation. The two bulldozers were sold both to ASIA PACIFIC as the
highest bidder.
Petitioners insist that ASIA PACIFIC was organized as an investment house which could not engage in the lending of
funds obtained from the public through receipt of deposits. The disputed Promissory Note, Deed of Chattel Mortgage
and Continuing Undertaking were not intended to be valid and binding on the parties as they were merely devices to
conceal their real intention which was to enter into a contract of loan in violation of banking laws. 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 the decision of the trial court.

Issue: Whether the disputed transaction between ASIA PACIFIC was engaged in banking activities.

RULING: An investment company refers to any issuer 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 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 purchase of receivables at a discount, well within the purview of “investing, reinvesting or
trading in securities” which an investment company, like ASIA PACIFIC, is authorized to perform and does not
constitute a violation of the General Banking Act.

What is prohibited by law is for investment companies to lend funds obtained from the public through receipts of
deposit, which is a function of banking institutions. But here, the funds supposedly “lent” to petitioners have not been
shown to have been obtained from the public by way of deposits, hence, the inapplicability of banking laws.

Wherefore, the assailed decision of the Court of Appeals was affirmed.

3. Register of Deeds vs. China Banking, 4 SCRA 1145

FACTS
Alfonso Pangilinan and one Guillermo Chua were charged with qualified theft, the money involved
amounting to P275,000.00.

Pangilinan and his wife, Belen Sta. Ana, executed a public instrument entitled DEED OF TRANSFER
whereby, after admitting his civil liability in favor of his employer, the China Banking Corporation, in
relation to the offense aforesaid, he ceded and transferred to the latter, in satisfaction thereof, a parcel of
land located in the City of Manila, registered in the name of "Belen Sta. Ana, married to Alfonso
Pangilinan".

The deed was presented for registration to the Register of Deeds of the City of Manila, but because the
transferee, the China Banking Corporation, was alien-owned and, as such, barred from acquiring lands in
the Philippines, in accordance with the provisions of Section 5, Article XIII of the Constitution of the
Philippines, said officer submitted the matter of its registration to the Land Registration Commission for
resolution.

ISSUE

Whether or not the China Banking Corporation, an alien-owned bank, can acquire ownership of the
residential lot by virtue of the deed of transfer for a civil liability arising from the criminal offense.

RULING

No, the China Banking Corporation, an alien-owned bank, cannot acquire ownership of the residential lot
by virtue of the deed of transfer for a civil liability arising from the criminal offense.

Any commercial bank, whether alien-owned or controlled or not, may purchase and hold real estate for
the specific purposes and in the particular cases enumerated in Section 25 thereof, we find that the case
before Us does not fall under anyone of them.

Although Paragraph (c), Section 25 of Republic Act 337 allows a foreign commercial bank to purchase
and hold such real estate as shall be conveyed to it in satisfaction of debts previously contracted in the
course of its dealings. However, the “debts” referred to in this provision are only those resulting from
previous loans and other similar transactions made or entered into by a commercial bank in the ordinary
course of its business as such.

Obviously, whatever “civil liability” arising from the criminal offense of qualified theft was admitted in
favor of appellant bank by its former e resulting from a loan or a similar transaction had bet employee,
Alfonso Pangilinan, was not a debt ween the two parties in the ordinary course of banking business.

Hence, China Banking Corporation, an alien-owned bank, cannot acquire ownership of the residential lot
by virtue of the deed of transfer for a civil liability arising from the criminal offense.

4. Sia vs CA, GR No. 102970, May 13, 1993

Facts:

Petitioner herein, Luzon Sia, rented the Safety Deposit Box of Respondent Security Bank & Trust Co.
(SBTC) wherein he placed his collection of stamps. Said safety deposit box was at the bottom or at the
lowest level of the safety deposit boxes of SBTC. During the floods that took place in 1985 and 1986,
floodwater entered into the SBTC’s premises, seeped into the safety deposit box leased by the plaintiff
and caused damage to his stamps collection.

Sia instituted an action for damages against SBTC. The latter denied liability and contented that its
contract with Sia over safety deposit box was one of lease and not of deposit, its liability is limited to the
exercise of the diligence to prevent the opening of the safe by any person other than the Renter, his
authorized agent or legal representative, and it has neither the possession nor the control of the same. The
trial court rendered in favor of Sia and ordered SBTC to pay damages.

On appeal, CA reversed the decision of the trial court finding the provisions that the liability of the bank
by reason of the lease is limited to the exercise of the diligence and SBTC is not a depository of the
contents of the Safe and it has neither the possession nor the control of the same are valid since said
stipulations are not contrary to law, morals, good customs, public order or public policy; and there is no
concrete evidence to show that SBTC failed to exercise the required diligence in maintaining the safety
deposit box. Hence, the current petition.

Issue: Whether or not CA erred in exculpating private respondent from any liability.

Ruling:

Yes. Section 72 of the General Banking Act provides that: In addition to the operations specifically
authorized elsewhere in this Act, banking institutions other than building and loan associations may
perform the following services (a) Receive in custody funds, documents, and valuable objects, and rent
safety deposit boxes for the safeguarding of such effects. The banks shall perform the services permitted
under subsections (a), (b) and (c) of this section as depositories or as agents. . . ." The depositary would
be liable if, in performing its obligation, it is found guilty of fraud, negligence, delay or contravention of
the tenor of the agreement.

SBTC’s negligence aggravated the injury or damage to the stamp collection. SBTC was aware that
floodwaters inundated the room where the safe deposit box was located; it should have lost no time in
notifying the petitioner in order that the box could have been opened to retrieve the stamps, thus saving
the same from further deterioration and loss. In this respect, it failed to exercise the reasonable care and
prudence expected of a good father of a family, thereby becoming a party to the aggravation of the injury
or loss. Article 1170 of the Civil Code, which reads “Those who in the performance of their obligation are
guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable
for damages” is applicable. Hence, the petition was granted.

5. PNB v. TAJONERA

G.R. No. 195889, September 24, 2014

PHILIPPINE NATIONAL BANK, Petitioner, v. SPOUSES EDUARDO AND

MA. ROSARIO TAJONERA AND EDUAROSA REALTY DEVELOPMENT,
INC., Respondents.

DECISION

FACTS
Respondent Eduarosa Realty Development, Inc. (ERDI) was engaged in
realty construction and sale of condominium buildings. Respondent Ma.
Rosario Tajonera (Rosario), the Vice President of ERDI, performed the duties
of president and marketing director dealing with banks, suppliers and
contractors.

ERDI, through Rosario, obtained loans from petitioner Philippine National

Bank (PNB) and entered into several credit agreements to finance the
completion of the construction of the Eduarosa Tower Condominium.

As security for the initial loan, ERDI executed the Real Estate Mortgage
(REM). In addition, the loan was secured by the assignment of proceeds of
contract receivables arising from the sale of condominium units to be
constructed on the mortgaged properties.

1. ERDI executed an amendment to the Credit Agreement (First

Amendment) and obtained an additional loan. As additional security to the
increased amounts of loan, the respondent spouses’ lot and the
improvements was mortgaged in favor of PNB.

2. A Second Amendment to Credit Agreement (Second Amendment) was

executed by the parties to extend the repayment dates of the loan and for
the additional loan.

3. The following year, a Third Amendment to the Credit Agreement (Third

Agreement) was entered into by the parties wherein PNB granted an
additional loan to ERDI, subject to several conditions stated in their
agreement.

ERDI’s outstanding loan obligation with PNB amounted to P211,935,067.40.

ERDI failed to settle its obligation.

PNB filed an application for foreclosure of the Greenhills property. As the

highest bidder, PNB was issued the Certificate of Sale. Upon ERDI’s failure
to redeem the property, PNB consolidated its title and caused the
cancellation of the title. A new title was issued in the name of PNB.

Respondents filed a complaint against PNB for annulment of sale,

cancellation of title, cancellation of mortgage, and damages before the RTC.
Respondents alleged that PNB’s delay in the release of loan proceeds under
the credit agreements caused the non-completion of the condominium
project.
PNB denied the respondents’ allegations claiming that the mortgage contract
was supported by valuable consideration as the loan proceeds under the
credit agreements were fully released to them;

RTC rendered its judgment in favor of the respondents. The RTC

annulled the mortgage contract constituted over the Greenhills property on
the ground of breach of contract on the part of PNB by violating the credit
agreements.

The CA affirmed the decision of the RTC. The CA agreed with the RTC
ruling that inasmuch as PNB did not release the remaining balance of the
approved loan under the Third Amendment, there was no sufficient valuable
consideration in the execution of the Supplement to REM that secured the
said credit agreement.

PNB filed a motion for reconsideration of the said decision, but the same was
denied by the CA.

ISSUES:

Whether or not PNB breached its contractual obligation.

RULING:

PNB breached its contractual obligation when it failed to release the

remaining balance of the approved loan. The agreement between PNB and
the respondents was one of a loan. When they entered into the First, Second
and Third Amendments, they undertook reciprocal obligations.

The refusal of PNB to release the portion of the additional loan granted
under the Third Amendment to Credit Transaction is not justified. Thus, PNB
had no right to demand from the respondents’ compliance with their own
obligation under the loan. For its failure to release the balance of the
approved loan, the construction of the Eduarosa Towers Condominium
project was not finished, transgressing the very purpose of the credit
agreements, that is, to finance the completion of the construction of
Eduarosa Towers.

Being a banking institution, PNB owes it to the respondents to observe the

high standards of integrity and performance in all its transactions because its
business is imbued with public interest. The high standards are also
necessary to ensure public confidence in the banking system, for, according
to Philippine National Bank v. Pike, "[t]he stability of banks largely depends
on the confidence of the people in the honesty and efficiency of banks."
Thus, PNB was duty bound to comply with the terms and stipulations under
its credit agreements with the respondents, specifically the release of the
amount of the additional loan in its entirety, lest it erodes public confidence.
Yet, PNB failed in this regard.

WHEREFORE, the petition is DENIED. The Resolution of the Court of

Appeals is AFFIRMED.

Principles:

· A loan requires the delivery of money or any other consumable object by

one party to another who acquires ownership thereof, on the condition that
the same amount or quality shall be paid. Loan is a reciprocal obligation,
as it arises from the same cause where one party is the creditor, and the
other the debtor. The obligation of one party in a reciprocal obligation is
dependent upon the obligation of the other, and the performance should
ideally be simultaneous. This means that in a loan, the creditor should
release the full loan amount and the debtor repays it when it
becomes due and demandable.

In reciprocal obligations, the obligation or promise of each party is

the consideration for that of the other; and when one party has
performed or is ready and willing to perform his part of the contract,
the other party who has not performed or is not ready and willing to
perform incurs in delay.

· Breach of contract is defined as follows: [It] is the “failure without legal

reason to comply with the terms of a contract.” It is also defined as the
“[f]ailure, without legal excuse, to perform any promise which forms the
whole or part of the contract.”

· Moral damages are explicitly authorized in breaches of contract when

the defendant has acted fraudulently or in bad faith. Exemplary damages
are intended to serve as an example or a correction for the public good.
Courts may award them if the defendant is found to have acted in a wanton,
fraudulent, reckless, oppressive, or malevolent manner.
6. Comsavings Bank vs Spouses Capistrano
G.R. No. 170942. August 28, 2005.
BERSAMIN, J.

FACTS:
Respondent Spouses Danilo and Estrella Capistrano availed the Unified Home Lending Program (UHLP)
implemented by the National Home Mortgage Finance Corporation (NHMFC) through an accredited-
originator Comsavings Bank. As part of the requirements for the release of the loan, Comsavings Bank
made Capistrano signed various documents, including a ‘Certificate of House Completion and
Acceptance.’ After compliance with the preliminary requirements of the UHLP, an interim financing loan
in the amount of ₱260,000.00, which amount was to be paid out of the proceeds from NHMFC, was
approved and released to the construction contractor GCB Builders. Thereafter, while the construction is
still ongoing and the house was still unfinished, Capistrano received a letter from NHMFC advising them
to pay their monthly amortizations for the said loan. Respondents protested to said demand contending
that the ‘Certificate of Completion and Acceptance’ passed to NHMFC was only pre-signed and the
construction remained not completed, hence it prompted Capistrano to file a complaint against
Comsavings Bank and GCB Builders for the breach of contract.

ISSUE:
Whether or not Comsavings Bank exercised the degree of diligence required of a banking institution.

RULING:
No, a banking institution like Comsavings Bank serving as an originating bank for the Unified Home
Lending Program (UHLP) of the Government owes a duty to observe the highest degree of diligence and
a high standard of integrity and performance in all its transactions with its clients because its business is
imbued with public interest, to which it failed to do.

In accordance with Article 20 and Article 1170 of the Civil Code, Comsavings Bank is liable for the
damages for their misrepresentations in obtaining the mortgage loan from NHMFC in the name of the
respondents as it submitted false loan documents, such as photographs of the completed house, and made
the respondent signed the ‘Certificate of House Completion and Acceptance’ even if the construction of
the house had not yet started. Hence, it had prejudiced the respondents as they are demanded payment for
the loan despite the non-completion of the house. These acts of Comsavings Bank were irregular per se
and there is no question that it was grossly negligent with its dealings with the respondents because it did
not comply with is legal obligation to exercise the required diligence and integrity.
7.

DBP vs. GUARIÑA AGRICULTURAL AND REALTY DEVELOPMENT CORPORATION

GR No. 160758, January 15, 2014

FACTS:

Guariña Corporation (GCorp) applied for a loan from DBP in the amount of ₱3,387,000.00 to
finance the development of its resort complex. The loan was evidenced by a promissory
note which was secured by real estate mortgage over several properties and additional
chattel mortgage. The loan was released in several installments which totalled
₱3,003,617.49. GCorp demanded the release of the balance of the loan, but DBP refused.

Upon inspection, DBP found out that GCorp had not completed the construction works. DBP
thus demanded in a telegram that GCorp expedite the completion of the project, and
warned that it would initiate foreclosure proceedings should they not comply. The non-
action and objection of GCorp led DBP to initiate extrajudicial foreclosure proceedings. A
notice of foreclosure sale was published and sent to GCorp which gave its clients the
impression that its business operation had slowed down and that the resort had closed.

GCorp sued DBP in the RTC to seek the nullification of the foreclosure proceedings and the
cancellation of the certificate of sale. In the meantime, DBP applied for the issuance of a
writ of possession which the RTC initially denied but later on granted upon DBP’s motion for
reconsideration. Aggrieved, GCorp assailed the granting of the application before the CA on
certiorari but the petition was dismissed.

Subsequently, RTC rendered the extrajudicial sale of the mortgaged properties as null and
void, ordered DBP to give back the properties foreclosed and for Gcorp to pay the loan. CA
sustained the RTC's judgment and dismissed DBP’s motion for reconsideration. Hence, this
appeal by DBP assailing the declaration by the CA that GCorp had not yet been in default in
its obligations despite violations of the terms of the mortgage contract. GCorp countered
that it did not violate the terms of the promissory note and the mortgage contract because
DBP had fully collected the interest notwithstanding that the principal obligation did not yet
fall due and become demandable.

ISSUE:

1. Whether or not Guariña Corporation is in default when it failed to perform the terms
of the mortgage contract.
2. Whether or not DBP failed in its duty to exercise the highest degree of diligence by
prematurely foreclosing the mortgages and unwarrantedly causing the foreclosure
sale of the mortgaged properties.

HELD:

1. No, Guariña Corporation is not in default. The loan agreement between the parties is
a reciprocal obligation.

Under the law, loan is a reciprocal obligation, as it arises from the same cause where
one party is the creditor, and the other the debtor. The obligation of one party in a
 reciprocal obligation is dependent upon the obligation of the other, and the
performance should ideally be simultaneous. This means that in a loan, the creditor
should release the full loan amount and the debtor repays it when it becomes due
and demandable.

In the present case, DBP did not release the total amount of the approved loan. DBP
therefore could not have made a demand for payment of the loan since it had yet to
fulfil its own obligation. The promise of GCorp to pay the loan upon due date as well
as to execute sufficient security for said loan by way of mortgage gave rise to a
reciprocal obligation on the part of DBP to release the entire approved loan amount.
Thus, GCorp is entitled to receive the total loan amount as agreed upon and not an
incomplete amount. Moreover, the fact that GCorp was not yet in default rendered
the foreclosure proceedings premature and improper. Default generally begins from
the moment the creditor demands the performance of the obligation. Without such
demand, judicial or extrajudicial, the effects of default will not arise. Records show
that DBP did not make any demand for payment of the promissory note. It appears
that the basis of the foreclosure was not a default on the loan but GCorp’s failure to
complete the project. Hence, GCorp would not incur in delay before DBP fully
performed its reciprocal obligation.

2. Yes, DBP failed to exercise the highest degree of diligence.

As a rule, the highest standards are necessary to ensure public confidence in the
banking system.

Being a banking institution, DBP owed it to GCorp to exercise the highest degree of
diligence, as well as to observe the high standards of integrity and performance in all
its transactions because its business is imbued with public interest. Thus, DBP had to
act with great care in applying the stipulations of its agreement with GCorp, lest it
erodes such public confidence. Yet, DBP failed in its duty to exercise the highest
degree of diligence by prematurely foreclosing the mortgages and unwarrantedly
causing the foreclosure sale of the mortgaged properties despite GCorp not being yet
in default.
8. Reyes vs. CA, GR No. 118492, August 15, 2001
9. Consolidated Bank vs. CA, GR No. 138569
10. JOSE C. GO vs. BANGKO SENTRAL NG PILIPINAS ,G.R. No. 178429 October 23,
2009

Facts:

An Information for violation of Section 83 of Republic Act No. 337 (RA 337) or the General
Banking Act, as amended by PD No. 1795, was filed against Go before the Regional Trial Court, alleging
that Go, being then the Director and the President of the Orient Commercial Banking Corporation (Orient
Bank) unlawfully borrow the deposits or funds of the said banking institution for his own use without the
written approval of the majority of the Board of Directors of Orient Bank. Before the trial could
commence, Go filed a motion to quash the Information claiming that the same do not constitute an
offense under Section 83 of RA 337. The Regional Trial Court granted Go’s motion to quash the
Information. On appeal, the Court of Appeals ruled against Go. Hence, this petition.

Issue: WON the Court of Appeals erred in overturning the trial Court’s decision

Ruling:

No. The Supreme Court ruled that under Section 83 of RA 337, the following elements must be
present to constitute a violation of its first paragraph:1. the offender is a director or officer of any banking
institution;2. the offender, either directly or indirectly, for himself or as representative or agent of another,
performs any of the following acts: a. he borrows any of the deposits or funds of such bank; or b. he
becomes a guarantor, indorser, or surety for loans from such bank to others, orc. he becomes in any
manner an obligor for money borrowed from bank or loaned by it; 3. the offender has performed any of
such acts without the written approval of the majority of the directors of the bank, excluding the offender,
as the director concerned. Since the elements are present in the instant case, the same constitutes an
offense. The Supreme Court denied the petition.

11. Soriano vs. People, GR No. 162336 February 1, 2010

FACTS: The case stemmed when a bank officer violates the DOSRI law when he acquires bank funds for
his personal benefit, even of such acquisition was facilitated by a fraudulent loan application. Directors,
officers, stockholdders, and their related interests cannot be allowed to interpose the fraudulent nature of
the loan as a defense to escape culpability for their circumvention of sec. 83 of RA 337. The trial court
denied petitioner’s Motion to Quash for lack of merit. Petitioners Motion for Reconsideration was likewise
denied. Petitioner files a petition for Certiorari with the CA. The CA denied the petition on both issues
presented by the petititoners.

ISSUE: WHether a loan transaction within the ambit of the DOSRI law (vilation of sec. 83 of RA 337, as
amended) could also be subject of Estafa under Art.315 (1)(b) of rhte Revised Penal COde.

RULING: Yes. The court have examined the two informations against petitioner and 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.

In Soriano v. People, involving the same petitioner in this case( but different transactions), we also
reviewed the sufficiency of informations of DOSRI violation and ESTAFA thru falsification of commercial
documents, which is almost identical , mutual mutandis, with the subject information herein. We held in
Soriano v. people that there is no basis for the quashal of the information as the contain material
allegations charging Soriano with violations of DOSRI rules and estafa thru falsification of commercial
documents.
12. Republic vs. Sandiganbayan, GR No. 166859, April 12, 2011
13. Quano vs. CA, 398 SCRA 405
14. Belo vs. PNB, 353 SCRA 359
FACTS:
Eduarda Belo owned an agricultural land
She leased a portion of... the said tract of land to respondents spouses Marcos and Arsenia
Eslabon in connection with the said spouses' sugar plantation business.
To finance their business venture, respondents spouses Eslabon obtained a loan from
respondent Philippine National Bank (PNB for brevity) secured by a real estate mortgage on
their own four (4) residential houses located in Roxas City, as well as on the agricultural
land owned... by Eduarda Belo. The assent of Eduarda Belo to the mortgage was acquired
through a special power of attorney which she executed in favor of respondent Marcos
Eslabon on June 15, 1982.
Inasmuch as the respondents spouses Eslabon failed to pay their loan obligation,
extrajudicial foreclosure proceedings against the mortgaged properties were instituted by
respondent PNB.
At the auction sale on June 10, 1991, respondent PNB was the highest bidder of the...
foreclosed properties
Meanwhile, Eduarda Belo sold her right of redemption to petitioners spouses Enrique and
Florencia Belo under a deed of absolute sale of proprietary and redemption rights.
Before the expiration of the redemption period, petitioners spouses Belo tendered payment
for the redemption of the agricultural land
However, respondent PNB rejected the tender of payment of petitioners spouses Belo. It
contended that the redemption price should be the total claim of the bank on the date of the
auction sale and custody of property plus charges accrued and interests
On June 18, 1992, petitioners spouses Belo initiated in the Regional Trial Court of Roxas
City, Civil Case No. V-6182 which is an action for declaration of nullity of mortgage, with an
alternative cause of action, in the event that the accommodation mortgage be held to be
valid,... to compel respondent PNB to accept the redemption price tendered by petitioners
spouses Belo which is based on the winning bid price of respondent PNB in the extrajudicial
foreclosure... a... ailure to appeal the same after the trial court rendered its decision
affirming their validity... he best evidence was the SPA... in his own name... portion of the
SPA is quite relevant to the case at bar

ISSUE:
whether or not the petitioners are required to pay, as redemption price, the entire claim of
respondent PNB in the amount of P2,779,978.72 as of the date of the public auction sale on
June 10, 1991

RULING:
Section 78 of the General Banking Act, as amended by P.D. No. 1828, is inapplicable to
accommodation mortgagors in the redemption of their mortgaged properties.
While the petitioners, as assignees of Eduarda Belo, are not required to pay the entire claim
of respondent PNB against the principal debtors, spouses Eslabon, they can only exercise
their right of redemption with respect to the parcel of land belonging to Eduarda Belo, the...
accommodation mortgagor. Thus, they have to pay the bid price less the corresponding
loan value of the foreclosed four (4) residential lots of the spouses Eslabon.
There is no dispute that the mortgage on the four (4) parcels of land by the Eslabon
spouses and the other mortgage on the property of Eduarda Belo both secure the loan
obligation of respondents spouses Eslabon to respondent PNB. However, we are not
persuaded by the contention... of the respondent PNB that the indivisibility concept applies
to the right of redemption of an accommodation mortgagor and her assignees.
From the wordings of the law, indivisibility arises only when there is a debt, that is, there is a
debtor-creditor relationship. But, this relationship is wanting in the case at bar in the sense
that petitioners are assignees of an accommodation mortgagor and not of a... debtor-
mortgagor. Hence, it is fair and logical to allow the petitioners to redeem only the property
belonging to their assignor, Eduarda Belo.
With respect to the four (4) parcels of residential land belonging to the Eslabon spouses,
petitioners - being total strangers to said lots - lack legal personality to redeem the same.
Fair play and justice demand that the respondent PNB's interest of recovering its entire
bank... claim should not be at the expense of petitioners, as assignees of Eduarda Belo,
who is not indebted to it.
Principles:
An accommodation mortgage is not necessarily void simply because the accommodation
mortgagor did not benefit from the same. The validity of an accommodation mortgage is
allowed under Article 2085 of the New Civil Code which provides that "(t)hird persons who
are not parties to... the principal obligation may secure the latter by pledging or mortgaging
their own property." An accommodation mortgagor, ordinarily, is not himself a recipient of
the loan, otherwise that would be contrary to his designation as such. It is not always
necessary that the... accommodation mortgagor be appraised beforehand of the entire
amount of the loan nor should it first be determined before the execution of the SPA for it
has been held that:
"(real) mortgages given to secure future advancements are valid and legal contracts; that
the amounts named as consideration in said contract do not limit the amount for which the
mortgage may stand as security if from the four corners of the instrument the intent to...
secure future and other indebtedness can be gathered. A mortgage given to secure
advancements is a continuing security and is not discharged by repayment of the amount
named in the mortgage, until the full amount of the advancements are paid."

15. Belo vs. PNB, 353 SCRA 359

Basis: Sec 47, General Banking Law of 2000.

FACTS:
 Eduarda Belo owned an agricultural land in Timpas, Panitan, Capiz, which she leased a
portion to Spouses Marcos and Arsenia Eslabon in connection with the said spouses’ sugar
plantation business.

To finance their business venture, Respondent spouses Eslabon obtained a loan from PNB
secured by a real estate mortgage on their own four (4) residential houses located in Roxas
City, as well as on the land owned by Eduarda Belo. Special Power of Attorney was executed
by Eduarda Belo as to the mortgage of her property.

Sps Eslabon failed to pay mortgages and extrajudicial foreclosure proceedings against the
mortgaged properties were instituted by PNB. PNB was the highest bidder at the auction sale
(P447,632.00).

PNB appraised Eduarda Belo of the sale at public auction of her agricultural land. She had
one-year period to redeem the land.

Eduarda Belo sold her right of redemption to petitioner Sps Enrique and Florencia Belo under
a deed of absolute sale of proprietary and redemption rights.
Sps Belo tendered payment for the redemption of the agricultural land for (P484,482.96), which
includes the bid price of respondent PNB, plus interest and expenses as provided under Act No.
3135.

PNB rejected payment contending that redemption price should be the total claim of the bank
on the date of the auction sale and custody of property plus charges accrued and interests
(P2,779,978.72).

Sps Belo filed action to annul the mortgage, with an alternative cause of action to compel
PNB to accept offer of spouses Belo which is based on the winning bid price of PNB
(P447,632.00) plus interest and expenses.

RTC Ruling:

Granted alternative cause of action of Sps Belo P447,632.00, plus interest and other charges.

CA Ruling:

Modified TC ruling that the petitioners should pay the entire amount due to PNB under the
mortgage deed at the time of the foreclosure sale plus interest, costs and expenses. As
assignees of Eduarda Belo’s right of redemption, the appellees succeed to the precise right of
Eduarda including all conditions attendant to such right.

ISSUE:
 Whether or not the petitioners are required to pay, as redemption price, the entire claim of
PNB (P 2,779,978.92)?

RULING:

The petition is partially granted in that the petitioners are hereby allowed to redeem only the
property, covered and described in Transfer Certificate of Title No. T-7493-Capiz registered in
the name of Eduarda Belo, by paying only the bid price less the corresponding loan value of the
foreclosed four (4) residential lots of the respondents spouses Marcos and Arsenia Eslabon,
consistent with the Decision of the Regional Trial Court of Roxas City in Civil Case No. V-6182.

There is no doubt that Eduarda Belo, assignor of the petitioners, is an accommodation

mortgagor. “Mortgagor” in Section 25 of P.D. No. 694 pertains only to a debtor-mortgagor and
not to an accommodation mortgagor. Respondent PNB maintains that Section 25 of Presidential
Decree No. 694 (right to redeem the property by paying all claims of the Bank against him on
the date of the sale)Petitioners assert to follow Section 6 of Act No. 3135 & Section 28 of Rule
39 of the Rules of Court (by paying the purchaser the amount of his purchase plus interest &
other expenses).

While the petitioners, as assignees of Eduarda Belo, are not required to pay the entire claim
of respondent PNB against the principal debtors, spouses Eslabon, they can only exercise their
right of redemption with respect to the parcel of land belonging to Eduarda Belo, the
accommodation mortgagor. Thus, they have to pay the bid price less the corresponding loan
value of the foreclosed four (4) residential lots of the spouses Eslabon.

The interpretation accorded by respondent PNB to Section 25 of P.D. No. 694 is unfair and
unjust to accommodation mortgagors and their assignees. Forcing an accommodation
mortgagor like Eduarda Belo to pay for what the principal debtors (Eslabon spouses) owe to
respondent bank is to punish her for the accommodation and generosity she accorded to the
Eslabon spouses. Also, PNB’s application for extrajudicial foreclosure and public auction sale of
Eduarda Belo’s mortgaged property was filed under Act No. 3135 and none of the proceedings
thereafter mentioned P. D. No. 694 as the basis for redemption.