SANSON, CAMILLE A.

JD 4-B

Directions: Answer the following concisely. Answers may be handwritten or typewritten.

Submit this assignment on Saturday, April 22 during our class.

I. THE CONSOLIDATED BANK and TRUST CORPORATION vs. COURT OF

APPEALS and L.C. DIAZ and COMPANY, CPAs
G.R. No. 138569 | September 11, 2003 | Carpio, J.

1. Explain the nature of the relationship between a bank and its depositors.

-The nature of relationship between a bank and its depositors is fiduciary relationship which
means that the banks obligation is to observe high standards of integrity and performance is
deemed written into every deposit agreement between a bank and its depositor. The fiduciary
nature of banking requires banks to assume a degree of diligence higher than that of a good
father of a family as required in Article 1172 of the Civil Code.

2. Does the fiduciary nature of a bank-depositor relationship convert the contract between the
bank and its depositors from a simple loan to a trust agreement? Explain.

-The fiduciary nature of a bank-depositor relationship does not convert the contract between the
bank and its depositors from a simple loan to a trust agreement, whether express or implied.
Failure by the bank to pay the depositor is failure to pay a simple loan, and not a breach of trust.

3. Explain the principle of respondeat superior.

-Respondeat superior embodies the general rule that an employer is responsible for the negligent
acts or omissions of its employees. Under respondeat superior an employer is liable for the
negligent act or omission of any employee acting within the course and scope of his employment

II. RUFA C. SUAN vs. ATTY. RICARDO D. GONZALEZ A.C. NO. 6377 | March 12, 2007

4. What constitutes forum shopping?

- Forum shopping is resorted to by any party against whom an adverse judgment or order has
been issued in one forum, in an attempt to seek a favorable opinion in another, other than by
appeal or a special civil action for certiorari.

5. Why does the filing of an intra-corporate complaint by Gonzalez before the RTC and his filing
of the complaint before the BSP not considered as forum shopping?

- Because the filing of an intracorporate case before the RTC and a complaint with the Bangko
Sentral ng Pilipinas, invoking BSP’s supervisory powers over banking operations does not
amount to a judicial proceeding and therefore does not constitute forum shopping.

III. FIDELITY SAVINGS AND MORTGAGE BANK, petitioner, vs. HON. PEDRO D.
CENZON, in his capacity as Presiding Judge of the CFI Manila and SPOUSES TIMOTEO
AND OLIMPIA SANTIAGO, respondents, G.R. No. L-46208, April 5, 1990

6. May an insolvent bank like the FSMB may be adjudged to pay interest on unpaid deposits
even after its closure by the Central Bank by reason of insolvency? Explain.

-No. 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

7. May an insolvent bank be adjudged to pay moral and exemplary damages, attorney's fees and
costs? Explain.
- No. The insolvent bank may not be adjudged to pay moral, exemplary damages and attorney's
fees. There was no fraud or bad faith on the part of bank in accepting the deposits. The bank
could not even be faulted in not immediately returning the amount claimed considering that the
demand to pay was made and the collection suit was filed in the trial court several months after
its closure where it was no longer in a position to comply with its obligations to its creditors,
hence moral damages cannot be awarded.

IV. ILEANA DR. MACALINAO, petitioner, vs. BANK OF THE PHILIPPINE ISLANDS,
respondent G.R. No. 175490, September 17, 2009

8. May stipulated interest rates that are excessive, iniquitous, unconscionable and exorbitant be
reduced? On what basis?

-The stipulated interest rates of 3% per month and higher is excessive, iniquitous,
unconscionable and exorbitant. Such stipulations are void for being contrary to morals, if not
against the law. Since the stipulation is void, it is as if there was no express contract thereon. As
to penalty charge, the court shall equitably reduce the same when the principal obligation has
been partly or irregularly complied with by the debtor or when it is unconscionable.

9. Does the removal of ceiling rates through C.B. Circular No. 905-82 grant lenders, banks or
individuals the blanket authority to raise interest rates?

-No. While C.B. Circular No. 905-82, which took effect on January 1, 1983, effectively removed
the ceiling on interest rates for both secured and unsecured loans, regardless of 21 maturity,
nothing in the said circular could possibly be read as granting carte blanche authority to lenders
to raise interest rates to levels which would either enslave their borrowers or lead to a
hemorrhaging of their assets.”

10. May penalty charges be equitably reduce by courts? On what basis?

- Yes. The judge shall equitably reduce the penalty when the principal obligation has been partly
or irregularly complied with by the debtor. Even if there has been no performance, the penalty
may also be reduced by the courts if it is iniquitous or unconscionable.

V. ASIATRUST DEVELOPMENT BANK v. CARMELO TUBLE G.R. No. 183987, July

25, 2012, SECOND DIVISION

11. In this case, why can’t the bank include the interest charges on the promissory note of the
loans and the 18% annual interest on the bid price of P421,800 as part of the redemption price?

-Because in foreclosures, the mortgaged property is subjected to the proceedings for the
satisfaction of the obligation. As a result, payment is effected by abnormal means whereby the
debtor is forced by a judicial proceeding to comply with the presentation or to pay indemnity.
Once the proceeds from the sale of the property are applied to the payment of the obligation, the
obligation is already extinguished. Thus, in Spouses Romero v. Court of Appeals, we held that
the mortgage indebtedness was extinguished with the foreclosure and sale of the mortgaged
property, and that what remained was the right of redemption granted by law.

VI. ADVOCATES FOR TRUTH IN LENDING, INC. and EDUARDO OLAGUER v.

BANGKO SENTRAL MONETARY BOARD, represented by GOVERNOR ARMANDO
TETANGCO et al. G.R. No. 192986, 15 January 2013

12. What is Section 1 of Central Bank Circular No. 905, Series of 1982?
- 905, series of 1982, which suspended the effectivity of the Usury Law. As such, the borrower
and lender are free to agree on the interest rates, fees and other charges that will apply to the loan
in their agreement.

13. Was there an excess in authority granted by law to the Monetary Board of Central Bank
when it issued CB Circular No. 905 Series of 1982? Explain.

- NO. It did not engage in self-legislation when it issued the said Circular. The CB-MB merely
suspended the effectivity of the Usury Law when it issued CB Circular No. 905, this has long
been recognized and upheld in many cases. As the Court explained in the landmark case of
Medel v. CA, citing several cases, CB Circular No. 905 “did not repeal nor in anyway amend the
Usury Law but simply suspended the latter’s effectivity.” A Central Bank Circular cannot repeal
a law. Only a law can repeal another law.

14. Did Central Bank Circular No 905 amend or repeal the usury law? Explain.

- CB Circular No. 905 did not repeal nor in anyway amend the Usury Law but simply suspended
the latter's effectivity. Hence, the general rule is that the rate of interest as agreed upon by the
parties freely shall govern the transaction.

VII. BANCO DE ORO, PETITIONER-APPELLANT, VS. JAIME Z. BAYUGA AND

ROBERTO P. TOLENTINO, RESPONDENTS-APPELLEES, THE COURT OF
APPEALS AND HON. FRANCISCO DE LA ROSA IN HIS CAPACITY AS JUDGE OF
THE CFI-RIZAL, BRANCH VII PASAY CITY, RESPONDENTS G.R. No. L-49568,
October 17, 1979

15. What is Sec. 39 of the Gen. Banking Act of 2000?

Grant and Purpose of Loans and Other Credit Accommodations. - A bank shall grant loans and
other credit accommodations only in amounts and for the periods of time essential for the
effective completion of the operations to be financed. Such grant of loans and other credit
accommodations shall be consistent with safe and sound banking practices. (75a) The purpose of
all loans and other credit accommodations shall be stated in the application and in the contract
between the bank and the borrower. If the bank finds that the proceeds of the loan or other credit
accommodation have been employed, without its approval, for purposes other than those agreed
upon with the bank, it shall have the right to terminate the loan or other credit accommodation
and demand immediate repayment of the obligation.

16. In what instances may a bank possess the right to terminate a contract of loan or any credit
accommodation and demand immediate payment thereof? Apply this right to the present case.

The Bank may terminate a contract of loan or any credit accommodation and demand for
immediate payment thereof in instances when the bank finds that the purpose of such loan is not
being implemented and there are transactions without its prior approval. As in the case at hand,
respondent’s purpose for entering into a loan contract with the bank is for the acquisition of a
property located in Tagaytay. Respondent’s action therein showed that the purpose of the loan is
not being met with, hence the Bank was justified in cancelling the subject loan.

VIII. JOSE C. GO vs BANGKO SENTRAL NG PILIPINAS G.R. No. 178429, October 23,
2009

17. What is the rationale of the prohibition under Section 83 of RA 337?

The prohibition under Section 83 of RA 337 was for the purpose of safeguarding the assets of the
bank from possible abuse in power of its officers. It is to ensure that loans by banks and similar
financial institutions to their own directors, officers, and stakeholders are above board.

18. Explain the three restrictions (approval, reportorial, and ceiling requirements) under Section
83 of RA 337.
The approval requirement mandates that bank directors and officers shall secure approval from
the majority of its board of directors before becoming an obligor for money borrowed. Failure to
secure approval renders the bank director or officer liable for prosecution. The reportorial
requirement mandates that all approval by the board of directors shall be entered in the records of
the corporation and shall be reported and forwarded to the supervising department. The ceiling
requirement sets the limit on the amount of credit accommodation that the bank may extend to its
directors and officers.

IX. HILARIO P. SORIANO v. PEOPLE OF THE PHILIPPINES, BSP, PDIC, PUBLIC

PROSECUTOR ANTONIO BUAN and STATE PROSECUTOR ALBERTO FONACIER
G.R. No. 162336, 1 February 2010

19. Is the commission of estafa inherently incompatible with the violation of the DOSRI law?
Explain.

No, for in the case at hand, petitioner still remains the fiduciary. The money was held by him in
trust in his fiduciary capacity as the President of the bank. Soriano, through falsification, made it
appear that said Enrico Carlos applied for the loan when in fact he 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 banks fiduciary with respect to that money, which makes it capable of
misappropriation or conversion in his hands.

20. DOSRI stands for?

DIRECTORS OFFICERS STOCKHOLDERS and RELATED INTEREST

X. REPUBLIC OF THE PHILIPPINES v. SANDIGANBAYAN, et al. G.R. Nos. 166859,

169203 and 180702, 12 April 2011

21. Why did the Court rule that there was no violation of DOSRI and Single Borrower’s Limit
restrictions in Conjuanco’s loan with UCPB?

The court ruled that there was no violation of DOSRI and Single Borrower’s Limit restrictions
for the reason that the state failed to adduced evidence nor did it established that the loans were
DOSRI or in violation of Single Borrower’s Limit restrictions.

XI. PHILIPPINE AMANAH BANK (NOW AL-AMANAH ISLAMIC INVESTMENT

BANK OF THE PHILIPPINES, ALSO KNOWN AS ISLAMIC BANK), Petitioner, vs.
EVANGELISTA CONTRERAS, Respondent. [G.R. No. 173168, September 29, 2014

22. May a bank, in dealing with real properties, rely solely on the face of a title without need of
further conducting physical investigation on the property? What degree of diligence is required
of banks in its dealings with registered lands?

No, the ascertainment of the status of condition of a property offered as security for a loan is a
standard and indispensable part of a Bank’s operation. The rule that persons dealing with
registered lands can solely rely on the certificate of title does not apply to banks. Banks are
expected to exercise more care and prudence than private individuals in their dealings since their
business is impressed with public interest.