Merc SPCL Mock Bar Notes 2020

MockBar 2020
Notes for Special Commercial Law
MERCANTILE LAW – SPECIAL

COMMERCIAL LAWS INTEGRATION ! Not applicable to the combinations or
activities of worker or employees nor to
LECTURE
agreements or arrangements with their
JULY 22, 2020 activities, agreements, or arrangements
are designed solely to facilitate
collective bargaining in respect of
PHILIPPINE COMPETITION ACT conditions of employment.
(R.A. 10667)
Q: What are the prohibited practices
under this act?
PURPOSE
A:
- Anti-Competitive Agreements
! Enhance economic efficiency and - Abuse of Dominant Position
promote free and fair competition in - Anti-Competitive Mergers and
trade, industry and all economic Acquisitions
activities (Sec. 2, R.A. 10667)
So go back to the reason why the law
! Prevent economic concentration which was enacted, it wants to promote free
will control the production, distribution, trade, it wants to promote ample access
trade or industry that will unduly stifle because competition promotes better
competition, lessen, manipulate or pricing, better quality.
constrict the discipline of free markets.
As I’ve shared to my SPCL class during
! Penalize all forms of competitive the first semester, I remember that way
agreements, abuse of dominant position back in the year early 2000, you can
and anti-competitive mergers and purchase a Nokia phone so expensive,
acquisitions, with the objective of because Nokia command the market
protecting consumer welfare and with respect to cellphones at that time
advancing domestic and international but imagine in year 2000 or so
trade and economic development. purchasing a cellphone for 30,000, it
must be something right? Because even
SCOPE now, when you purchase 30,000 marami
ka na expectations sa phone mo, gusto
mo apat na yung camera non, nagsasalita
! Enforceable against any person or entity na siya mag-isa para sayo but in year
engaged in any trade, industry and 2000, you purchase 30,000 worth of
commerce in the Philippines (Sec. 3, cellphone, QWERTY keyboard yon,
R.A. No. 10667). diba? Dalawa pa rin ang gagamitin mo
na thumb mo para lang magtext don but
! Applicable to international trade having it was 30,000 in year 2000 because wala
direct, substantial, and reasonably pang competition, so yun naman ang
foreseeable effects in trade, industry, or kagandahan ng mga ganitong klaseng
commerce in the Philippines, including laws. When there is competition, it
those that result from acts done outside promotes better pricing and higher
the Philippines. quality.
UST - Faculty of Civil Law Page 1 of 72

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Price Fixing
Agreement
- it refers to any type or form of contract, Pinag-uusapan nila how much the
arrangement, understanding, collective commodity will be sold to the public, so that
recommendation, or concerted action, even if you could’ve opted for commodity 1
whether formal or informal, explicit or for being cheaper, they have fixed the price
tacit, written or oral.
they would have command the market, I am
Examples of Anti-Competitive not saying that they are doing this but I
Agreements would like to comment that this can readily
• Price Fixing be seen from the TelCo, nakita niyo parehas
Collusion between or among
yung mga 1899, 1799, hindi nagkakalayo.
market competitors to fix the
prices, or components therof, of Yung ibang company lagi lang nag eend sa 8
goods or services rather than saka sa 9, pero parehas na parehas yung
allow the prices to be determined pricing nila. Syempre para madali ka mag
by market forces.
decide kung ano ang magiging TelCo mo
• Bid-rigging
Coordination between or among except kung ang location mo wala talaga
market competitors on bids, yung certain TelCo. So minsan mapapansin
which aims to supress the mo ‘to sa mga subscription costs, halos
submission of independent bid
nagpaparehas but of course, and I’m pretty
prices.
sure that they would defend it as just they
Q: Bakit bawal ang bid-rigging? want to be competitive, that’s why they are
A: Kaya ka nga nagpapa-bid, kaya nga almost the same but in reality, to some
sealed ang bidding—because you’re extent there are allegations that there are
encouraging to get the highest value out of price-fixing kaya ang tawag sa kanila
that particular asset but if market duopoly, ngayon yung third player natin, na-
competitors would say, mag-usap na lang approve nga pero di pa dumadating so
tayo tapos paghatian natin yung property naglalagay pa lang ata ng cable sa mga
later on then it is anti-competitive. oceans and seas and rivers.
Take a look for example, of prime locations Examples of Anti-Competitive

in airports, supposedly the government Agreements
• Output-limitations
should be bidding out those locations Agreements between or among
locations so that they would be able to get market competitors to set or limit
from the business sector the highest bid but production levels to create
if you notice, I don’t know if they bid out all artificial supply shortage; and/or
coordination on investment
the locations but you notice, kung sino yung plans.
nakikita mo sa Terminal 1, sila din yung sa • Market-sharing
Terminal 2 because there are only group of Agreements between or among
people who are able to submit their bids market competitors to divide or
allocate the market among
kaya bawal yung bid-rigging.
themselves, resulting in
monopolies in their territories.

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Output-limitations It’s not the dominance but the abuse of the

Alam niyo naman yun, hindi lahat tayo position that is prohibited. The PCA does
economist, pero alam natin na pagka- not prevent businesses from having a
kinontrol mo yung supply, nagkakaron ng dominant position in a relevant market or
higher demand so they are able to charge from acquiring, maintaining, and increasing
higher. Gaya lang nung kinasasama ng loob market share through legitimate means, for
ko, sa mga facial mask--naalala niyo ba as long as they do not substantially prevent,
nung May and April katumbas nila ay ginto? restrict or lessen competition.
Bibili ka ng isang box for 1000 pesos or
more, which means that is 20 pesos per NOTE: Please memorize the definition
mask tapos ngayon makikita mo yung mask provided in section 4.
halos pinamimigay na lang diba kasi
nagkaron na ng over supply. Please take note that it is not the dominance
but the ABUSE, kasi wala naman tayong
So whenever I look at the 300-peso box of magagawa kung talagang napakaganda ng
mask and remember that I bought it for 1000 product mo at napaka competitive ng
or more, so nagkaron ng, of course alam product mo, that’s why you have 90% of the
niyo naman pandemic, extraordinary market share pero what you do with that
demand pero it is also possible kaya di ba power is actually the more crucial thing
may hinuli sila na mga tinago lang yung which is subject to scrutiny. Are you
supply so they tried to control the output in abusing your dominant position? Diba gaya
order to charge a higher amount for the nung laging sinasabi natin hindi ang iyong
commodity. pagkakamali ang hinuhusgahan ng tao pero
kung ano ang ginawa mo after mo
Market-sharing magkamali. Same goes here, not just your
Agreements between or among, so they dominance is being tested but your abuse
allocate it themselves. If you do this, wala with such dominant position.
na siyang competition nagiging monopoly
na siya. Kaya nga yung sinasabing duopoly. Examples of Abuse of Dominant
Position
Abuse of Dominant Position
- refers to the conduct of an entity with a Predatory Pricing
dominant position substantially prevents, - A dominant firm deliberately incurring
restricts, or lessen competition in the losses in the short term by setting prices
market (Sec. 15, RA 10667). so low in order to force out of the market
- Section 4 of the PCA defines “entity” its competitors which cannot compete
as any person, company, natural or with its extremely low prices.
juridical, sole proprietorship, partnership,
combination or association in any form, Exploitative behavior towards
whther incorporated or not, domestic or consumers, customers, and/or
foreign, including those owned or competitors
controlled by the government, engaged - Excessive or unfair purchase or sales
directly or indirectly in any economic prices, or other unfair trading conditions.
activity (RA No. 10667)

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Dahil dominant ka, alam mong walang

Section 20 of the PCA provides that
choice ang mga tao, sayo bibili. Nagkakaron “merger or acquisition agreements that
ng possibility for predatory pricing or substantially prevent, restrict or lessen
exploitative behavior. Hindi ko ulit sini- competition in the relevant market or in
single out ang TelCo, pero dahil sa the market for goods or services as may
be determined by the Commission shall
nangyayari sa atin ngayon na lahat tayo ay be prohibited.” (RA No. 10667)
nag-oonline classes, malamang sila ay mags-
scrutinize ng dominant position. Kasi pag Compulsory Notification (Sec. 17, RA
nagmahal ‘to, pumangit yung service in 10667)
what we are getting kasi naexploit yung
situation kasi wala tayong choice. “Parties to the merger or acquisition
agreement referred to in the preceding
section wherein the value of the
Examples of Abuse of Dominant transaction exceeds one billion pesos
Position (P1,000,000,000.00) are prohibited from
consummating their agreement until
Discriminatory Behavior thirty (30) days after providing
- Applying different pricing or conditions notification to the Commission in the
to equivalent transactions. form and containing the information
specified in the regulations issued by the
Limiting production, markets, or Commission: Provided, That the
technical development to the detriment Commission shall promulgate other
of consumers criteria, such as increased market share in
- Restricting output or illegitimate refusal the relevant market in excess of
to supply; restricting access to/use minimum thresholds, that may be applied
of/development of a new technology specifically to a sector, or across some or
all sectors, in determining whether
Mergers and Acquisitions parties to a merger or acquisition shall
notify the Commission under this
Merger Chapter.”
- the joining of 2 or more entities into an
existing entity or to form a new entity.
Thresholds for Compulsory
Acquisition Notification
- refers to the purchase of securities or
assets, through contract or other means, • Initial threshold was ONE
for the purpose of obtaining control by: BILLION PESOS
a. 1 entity of the whole or part of • This was increased under PCC
another; Memorandum Circular 18-001
b. 2 or more entities over another; or (20 March 2018)
c. 1 or more entities over 1 or more • Increased via PCC Memorandum
entities Circular 19-001 (effective 01
March 2019)
• Increased in 2020
o SoP is P5.6Bn – P6Bn
o SoT is P2.2Bn – 2.4Bn

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So nakikita niyo yung trend, every year nag a.) Kung nababasa niyo class, pati yung
i-increase para hindi naman lahat ay nire- isang proposed acquisition ng asukarera,
review nila, para hindi siya restrictive hindi rin yan in-approve kasi ang sabi
because ang purpose nga ng law is just to malilimit yung supply natin ng sugar and
allow free trade, hindi naman niya sinabing kung hindi pa kayo aware sa realidad ng
gagawin restrictive lahat ng transfers, lahat buhay, ang flour, ang sugar, important
ng merger. Way back 10 years ago, 20 years commodity siya, especially sa Pilipinas.
ago, pag sinabing 1 billion transaction Isipin na lang ninyo gano karaming tinapay
napaka laki, pag ngayon, pag sinabing 1 ang kinakain niyo, multiply niyo sa
billion transaction, baka isang bahay lang sa population. Makikita niyo gano ka-
Forbes Park yung binibili. Hindi ganong importante yung mga sectors na yun.
kalaki yung 1 billion na yan, depende kung
ano ang pinag-uusapan nating transaction. b.) This is not brought about bad faith to
Talagang nag-iiba iba na yung threshold. combine, but more to save the industry. So
under Section 21, this may be considered as
Exemptions from Prohibited exemptions from prohibited mergers or
Mergers/Acquisitions:
acquisition.
GENERAL RULE:
Philippined Competition Commission
Section 20 - Merger or acquisition
agreements that substantially prevent, restrict
or lessen competition in the relevant market • An independent, quasi-judicial body
or in the market for goods or services as may with original and primary jurisdiction
be determined by the Commission shall be over competition-related issues in the
prohibited. market.
• In charge of enforcing the PCA and
competition-related laws, and
Exemptions from Prohibited implementing the national
Mergers/Acquisitions: competition policy.
• Composed of a Chairperson and 4
EXCEPTIONS: Commissioners.
Section 21 - Merger or acquisition agreement
prohibited under Section 20 of this Chapter May nagtanong sakin na pano pag yung
may, nonetheless, be exempt from
prohibition by the Commission when the manufacturer ng kotse, nirerequire niya
parties establish either of the following: yung mga distributors niya to only ____
from certain plant and yung plant na yung
a.) The concentration has brought about or is magkakaiba pala ng may ari. So ako ang
likely to bring about gains in efficiencies that
are greater than the effects of any limitation sabi ko, it wouldn’t hurt to inquire to the
on competition that result or likely to result Philippine Competition Commission, what
from the merger or acquisition agreement; or is the recourse kasi in effect dun sa rational
b.) A party to the merger or acquisition intent ng law nav-violate kasi nawawala
agreement is faced with actual or imminent
financial failure, and the agreement yung freedom to choose the distributor but
represents the least anti-competitive of course class, please don’t forget that you
arrangement among the known alternative also have to take into account that freedom
uses for the failing entity’s assets.

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to contract, there’s also certain freedoms of (e) Conduct administrative proceedings,

the party and their contractual agreements. impose sanctions, fines or penalties for any
noncompliance with or breach of this Act
Powers and Functions (section 12, RA No. and its implementing rules and regulations
10667) (IRR) and punish for contempt;
(a) Conduct inquiry, investigate, and hear (f) Issue subpoena duces tecum and
and decide on cases involving any violation subpoena ad testificandum to require the
of this Act and other existing competition production of books, records, or other
laws motu proprio or upon receipt of a documents or data which relate to any
verified complaint from an interested party matter relevant to the investigation and
or upon referral by the concerned regulatory personal appearance before the Commission,
agency, and institute the appropriate civil or summon witnesses, administer oaths, and
criminal proceedings; issue interim orders such as show cause
orders and cease and desist orders after due
(b) Review proposed mergers and notice and hearing in accordance with the
acquisitions, determine thresholds for rules and regulations implementing this Act;
notification, determine the requirements and
procedures for notification, and upon (g) Upon order of the court, undertake
exercise of its powers to review, prohibit inspections of business premises and other
mergers and acquisitions that will offices, land and vehicles, as used by the
substantially prevent, restrict, or lessen entity, where it reasonably suspects that
competition in the relevant market; relevant books, tax records, or other
documents which relate to any matter
(c) Monitor and undertake consultation with relevant to the investigation are kept, in
stakeholders and affected agencies for the order to prevent the removal, concealment,
purpose of understanding market behavior; tampering with, or destruction of the books,
records, or other documents;
(d) Upon finding, based on substantial
evidence, that an entity has entered into an (h) Issue adjustment or divestiture orders
anti-competitive agreement or has abused its including orders for corporate reorganization
dominant position after due notice and or divestment in the manner and under such
hearing, stop or redress the same, by terms and conditions as may be prescribed
applying remedies, such as, but not limited in the rules and regulations implementing
to, issuance of injunctions, requirement of this Act.
divestment, and disgorgement of excess
profits under such reasonable parameters
that shall be prescribed by the rules and
regulations implementing this Act;

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What will trigger an investigation by the SM Group and Goldilocks case

PCC?
1. A verified complaint • The SM Group would like to acquire
2. Motu propio or PCC’s own initiative Goldilocks Bakeshop Inc.
to look into the case; or • The PCC expressed concerns on the
3. Referral by a concerned regulatory acquisition citing the possibility of
agency. partial or total foreclosure in the
supply of retail space in SM malls to
Let’s say the regulatory agency noticed that competitors of Goldilocks after its
there seems to be some irregularities on acquisition by the SM Group and the
potential for the SM Group to share a
acquisition or nagkakaron nan g limitation competing mall tentant’s business
sa supply or price-rigging etc. They can information to Goldilocks, since the
refer this to PCA for investigation. mall operator, through its point-of-
sale system, has access to sales
records of tenants.
Grab and Uber case
• After review by the PCC, it issued its
decision allowing the acquisition
When Grab acquired Uber, the PCC launched
provided that the SM Group comply
its motu propio review of the acquisition and
with its undertaking.
released an Interim Measure Order (IMO)
directing Uber to continue its operations • The SM Group is legally obliged to
while the PCC’s review is on going. comply with its commitment and
submit reports to the Commission.
“The exit of Uber in the Philippines will put Over a period of 5 years, the parties
its rival Grab in virtual monopoly in the ride- will be monitored periodically by a
sharing market until the new players come team of experts from PCC.
into operation.” Monitoring will also include random
inspections.
“Grab’s buyout of Uber will mean gobbling • If the monitoring team identifies
up 93% of the ride-hailing market.” violations or deficiencies during
inspection, the SM Group shall
promptly address the concerns. Any
So I mentioned to you the Grab and Uber breach of the consitions will subject
case, ang ruling ng CCB at this time, pag SM to fines, additional remedies, and
umalis agad si Uber, wala ng competition. other measures available to the
Commission.
So si Grab pwede siya mag pricing as he
pleases kaya pinut on hold niya yun and
nung nag tuloy si Uber to exit, this ended up
with sanctions and penalties against Grab
and Uber. While still conducting, nag shut
down na yung app ng Uber kaya nagkaron
ng 16 million fine, but ultimately na-allow
naman siya.

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Merger of Universal Robina Corporation Urban Deca Homes Manila Condominium

and Central Azucarera Don Pedro – • Numerous complaints were filed by
Roxas Holdings case unit owners and tenants of Urban
Deca Homes Manila claiming they
• URC expressed its intention to were prevented from applying for
acquire CADP-RH. other Internet Services Providers
• URC is engaged in a wide-range of (ISP). Urban Deca Homes is
food-related businesses, including requiring their tenants to subscribe to
the production of packed foods and the in-house ISP, “Fiber to Deca
beverages, sugar, agro-insutrial Homes”.
products, and bioethanol. • They alleged that “Fiber to Deca
• Both URC and CADP-RH mills are Homes” charges P1,249 for 2Mbps,
located in Batangas, URC’s sugar which is almost equivalent to a
mill is located in Balayan while 5Mbps plan from other service
CADP-RH’s sugar mill is located in providers, while its 5Mbps monthly
Nasugbu. plan of P2,599 only costs P1,299
• The merger was disallowed by the from other networks. Its 6Mbps
PCC. service costs P2,949 which is
• PCC raised the concern that the equivalent to 50Mbps from one ISP,
merger will substantially lessen and almost the same price for
competition in the sugar milling 100MBps from another ISP.
services market not only in Batangas, • PCC filed a case against Urban Deca
but also in Cavite, Laguna, and Homes for breaching the antitrust
Quezon. law by engaging in an exclusive
internet service tie-up on its property
“A merger to monopoly deal is among in Tomdo, Manila. It was charged
the most detrimental types of business with abuse of dominance by
transactions. The URC takeover removes imposing a sole ISP on its residents
its only competitor, erodes the benefits of and tenants, preventing them from
competition for the sugarcane planters, availing alternative fixed-line ISPs.
and leaves market power at the hands of • The PCC imposed a P27.11M fine
a single provider in an area.” against Urban Decan and ordered it
to stop imposing a sole ISP on unit
Hindi siya pinayagan because magkakaron owners at its nine condominium
na siya ng parang monopoly in that projects around the country.
particular locality so it was disallowed.
There was a concern raised that the merger Dito naman, nagr-require ng specific na
will substantially lessen competition in the provider. Under this new law, pwede na ‘to
sugar milling services. i-invoke. Bawal yun, for them to require you
to only avail from certain providers. Dati
kasi may mga exclusive tie-up sila eh. So in
this case, that was the resolution.

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another, give me all your surnames, hindi

DATA PRIVACY ACT of 2012 (R.A. mo ba na-realize na made-determine ng mga
No. 10173) hackers yung password niyo o kaya yung
mga key question, yung middle name ng
Personal Information and Sensitive mother mo because pi-nost mo sa facebook
Information lahat ng kamag-anak mo. So by combining
different information and different apps that
Normally, we call them personal data. So you participated o yung mga challenges,
the person got your consent and asked you they can actually put together, your date of
to process and the word “process” is defined birth, sabihin mo, ay di ko naman nilagay
under the law. Siya yung responsible sayo kung kalian. Baka may isa kang post nilagay
for personal data but that person, as the mo dun, incidentally as you know, “my life
controller, depending on the consent that begin this year”. So halimbawa, nilagay ko
was taken from you, can also engage other dun, I’m now 40, so kahit hindi ko sabihin
parties to act as processor. kailan ako pinanganak, so siguro naman
yung magaling sa math kayang i-compute na
Example: pinanganak ako nung 1980 and pinakita
UST is our data controller because we are niya, binati ako nung certain date, so alam
students and faculty members of UST. nan g tao kung kailan ang birthday ko.
However, UST from time-to-time, outsource
certain services. Yung Blackboard, may Nanay mo nilagay mo as facebook friend
provider yan. In getting that provider, para mo, so alam nila ang pangalan ng nanay mo
mas strict yung access, ibibigay dun yung pero hindi nila alam ang middle name ng
pangalan ng mga estudyante, e-mail address nanay mo but you participated in a challenge
niyo, which can be personal information. So to share all your related surnames, so they
that service provider is the data processor. It can now piece together all the information.
was taken by the UST as the controller, it
was shared to the processor so that the Q: What is that greater violation of your
processor can comply with certain services privacy, na lahat tayo walang pakialam?
and agreements with UST. A: Makapag wifi lang, talagang i-aaccept
lahat ng conditions dun sa free wifi service.
Kasama na yan dun sa binigay niyong So please scrutinize this more because these
consent. Ngayon class, wag na kayong are real threats to your personal information,
gaanong sensitive dito. Papayagan ko lang your privacy.
kayo maging sensitive sa confidentiality ng
data kung consistent kayo. Minsan kasi ang Yung mga recent na nakita ko na modus: by
dami niyong reklamo dun sa official being able to replace to your sim, any text
business pero nagkaron lang ng facebook that will be sent to you for every password
app, nilagay niyo na yung mga mukha niyo confirmation, pag nag-access kayo ng mga
dun. Nagkaron lang ng get-to-know one portals, pinapadala sa cellphone niyo. So

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one of my clients experienced this. To think

Personal vs. Sensitive Personal
that the account is even off-shore, modus Information
operandi sila na meron silang kakunchaba
dito sa Pilipinas. May pumunta sa Globe, Personal information may be processed,
pretending to be my client, meron talaga provided that the requirements of the Data
Privacy Act are complied with. On the other,
siyang gawa sa Recto na driver license, the processing of sensitive personal
passport, humi-hingi ng replacement sim information is, in general, prohibited. The
card. Bakit siya humihingi ng replacement Data Privacy Act provides the specific cases
where processing of sensitive personal
sim card? Because yung initial attempt nila
information is allowed.
to withdraw funds from the bank, hindi na-
allow kasi ang tinake pala ng client ko na
confirmation is via cellphone call. So ang Personal Information (sec. 11, 10173)
ginawa nila, pinalamig nila. Nag-attempt Personal information must, be:,
sila naman makuha yung sim card so that
when they go back to the bank and the bank (a) Collected for specified and legitimate
calls my client, hawak na nila yung sim card purposes determined and declared before, or
as soon as reasonably practicable after
nab ago. So please make sure na careful collection, and later processed in a way
kayo sa mga ganitong bagay kasi especially compatible with such declared, specified and
in the age of online, alam niyo naman ang legitimate purposes only;
criminal minds, mas nauunang nakakapag
(b) Processed fairly and lawfully;
isip ng mga crimes so napapag-isipan nila
yung mga vulnerabilities ngayon. (c) Accurate, relevant and, where necessary
for purposes for which it is to be used the
processing of personal information, kept up
Then, I am also reminded pag dating nga
to date; inaccurate or incomplete data must
dun sa GBL, bakit yung teller na binigay be rectified, supplemented, destroyed or their
yung passbook sa maling tao, sabi “ok bank further processing restricted;
you are liable, you are supposed to exercise
(d) Adequate and not excessive in relation to
highest degree of diligence especially your
the purposes for which they are collected and
depositors. Anong impact nun? Alam kong processed;
marami kayo pera at alam kong lahat kayo
may passbook, alam ninyo na pwedeng mag
withdraw ang kahit na sino with just a piece
of paper na kunwaring pirma niyo,
authorized representative as long as that
person is in possession of your passbook.

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All these things will not just identify you,

Sensitive Personal Information (sec. 3[l],
10173) but may have certain effect to prejudice or
discriminate you that’s why we hold this in
(1) About an individual’s race, ethnic origin, confidence as much as possible.
marital status, age, color, and religious,
philosophical or political affiliations;
Scope (sec. 4, RA No. 10173)
(2) About an individual’s health, education,
genetic or sexual life of a person, or to any This Act applies to the processing of all types
proceeding for any offense committed or of personal information and to any natural
alleged to have been committed by such and juridical person involved in personal
person, the disposal of such proceedings, or information processing including those
the sentence of any court in such personal information controllers and
proceedings; processors who, although not found or
established in the Philippines, use equipment
(3) Issued by government agencies peculiar that are located in the Philippines, or those
to an individual which includes, but not who maintain an office, branch or agency in
limited to, social security numbers, previous the Philippines subject to the immediately
or current health records, licenses or its succeeding paragraph: Provided, That the
denials, suspension or revocation, and tax requirements of Section 5 are complied with.
returns; and
(4) Specifically established by an executive NOTE: please make sure that you know the
order or an act of Congress to be kept definition of processing.
classified.
Processing of Personal Information
Q: Bakit sila sensitive?
Principles of Transparency, Legitimate
A: If you will notice, the list of sensitive Purpose and Proportionality. The
personal information can result to your processing of personal data shall be allowed
discrimination, being disadvantaged, being subject to adherence to the principles of
bullied. Meron siyang effect hindi lang para transparency, legitimate purpose, and
proportionality.
i-identify kung sino ka, it can result to
something more.
Minsan ito yung information pag dinis-close

mo sa prospective mong employer,
kailangan freely mo itong dinis-close. Ang
dami na ngayon na anti-discrimination law
even dun sa mga may edad eh, di ba? Sabi
nga nila, strictly speaking, bawal mong
tanungin yung tao kung ilang taon siya pag
ini-interview mo kasi meron tayong law
against discrimination. However, there are
different ways of soliciting the information.

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because kung hindi man sa ayaw niyong

Processing of Personal Information
kumita about it, ang problema, nac-
• Transparency. The data subject commercialize siya ng ibang tao.
must be aware of the nature, purpose,
and extent of the processing of his or In data privacy, madalas nababanggit ang
her personal data, including the risks
and safeguards involved, the identity analytics, aggregation of data. I can a sure
of the personal information controller you of at least two things that can be of
his or her rights as a data subject, and commercial value to the entities getting your
how these can be exercised. And information:
information and communication
relating to the processing of personal
data should be easy to acess and 1. To allow them to aggregate data as long
understand, using clear and plain as it does not identify you but they use your
language. data for statistics, research purposes etc.
• Legitimate purpose. The processing
of information shall be compatible 2. To allow them to share your data to the
with a declared and specified parent companies, subsidiaries, affiliates etc.
purpose which must not be contrary
to law, morals, or public policy. Parehas yan commercial purpose kasi
• Proportionality. The processing of
information shall be adequate,
pumayag ka lang magpakabit ng cable, may
relevant, suitable, necessary, and not sister company pala yun na nagbebenta ng
excessive in relation to a declared sapatos, bukas makalawa mayroon ka ng
and specified purpose. Personal data text binebentahan ka na ng sapatos, because
shall be processed only if the purpose
of the processing could not
kahapon nung nagpakabit ka ng cable,
reasonably be fulfilled by other pumirma ka ng consent from wherein they
means. can share your data with all these other
affiliate subsidiaries, that is why kailangan
Dun sa transparency, nung kinuha ba sayo may transparency, legitimate purpose and
yung consent mo, sinabi ba sayo kung bakit proportionality. You must be aware of the
kinukuha yung data? Pinaalam ba sayo for nature, purpose and extent of the processing
what specific purpose? And yung hinihingi and it has to be compatible, the purpose with
ba sayong data is commensurate dun sa the declared specified purpose and kailangan
transaction? sakto lang, adequate or relevant lang yung
data na kinukuha sayo as may be necessary
Just remember that we live in a world where for the data that was disclosed to you.
information is found. So as long as hindi mo
binibigay yung information tungkol sa sarili
mo, the more you become a higher valued
commodity. Hindi ko sinasabi na ibenta niyo
ang mga sariling niyo, ang sinasabi ko lang,
there is value to information so wag niyong
pinamimigay nang libre or basta basta

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any data-sharing agreement imposes on the

Personal Information Controller
controller, the obligation to secure the
Principles of Transparency, Legitimate consent. Bakit? Ang sabi ko, your right only
Purpose and Proportionality. The emanates from the controller so you cannot
processing of personal data shall be allowed just assume the controller secured your
subject to adherence to the principles of
transparency, legitimate purpose, and consent. You have to put that in your
proportionality. agreement that securing consent is an
obligation of the controller.
It refers to a person or organization who
controls the collection, holding, processing Now, if your client is the controller and you
or use of personal information, including a are the one who’s facing the data subject
person or organization who instructs another because you secured the consent, what is
person or organization to collect, hold, now your primordial concern when you are
process, use, transfer or disclose personal entering into agreement with the processor?
information on his or her behalf. The term Make sure to restrict as much as possible the
excludes: processing that the processor may do to the
data because at the end of the day, you are
(1) A person or organization who performs ultimately liable for those processors. So
such functions as instructed by another make sure to impose on them the same
person or organization; and transparency, proportionality and legitimate
purpose that was imposed to you by the data
(2) An individual who collects, holds, subject. If the regulator says report to me
processes or uses personal information in within 3 days, impose on your processor
connection with the individual’s personal, within 24 hours, to enable you still to
family or household affairs. comply with the regulatory requirements. So
kailangan mas mahigpit, mas restrictive
Q: Bakit importante to identify who is the yung requirements m okay data processor.
controller?
A: In so far as the regulators are concerned, Rights of Data Subject
this is the person who shall immediately
report any breach kasi siya ang ultimate The data subject is entitled to:
control nung data. All the rights and
liabilities of the processor emanates from (a) Be informed whether personal
what’s given to the controller. information pertaining to him or her shall
be, are being or have been processed;
Now what I want to point out here to you as
future lawyers is to make sure to know (b) Be furnished the information indicated
whether you are presenting the data subject, hereunder before the entry of his or her
the controller or the processor. If you are personal information into the processing
representing the processor, make sure that system of the personal information

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controller, or at the next practical the performance of or in relation to a

opportunity: contract or service or when necessary or
desirable in the context of an employer-
(1) Description of the personal information employee relationship, between the collector
to be entered into the system; and the data subject, or when the
information is being collected and processed
(2) Purposes for which they are being or are as a result of legal obligation;
to be processed;
(c) Reasonable access to, upon demand, the
(3) Scope and method of the personal following:
information processing;
(1) Contents of his or her personal
(4) The recipients or classes of recipients to information that were processed;
whom they are or may be disclosed;
(2) Sources from which personal
(5) Methods utilized for automated access, if information were obtained;
the same is allowed by the data subject, and
the extent to which such access is (3) Names and addresses of recipients of the
authorized; personal information;
(6) The identity and contact details of the (4) Manner by which such data were
personal information controller or its processed;
representative;
(5) Reasons for the disclosure of the
(7) The period for which the information personal information to recipients;
will be stored; and
(6) Information on automated processes
(8) The existence of their rights, i.e., to where the data will or likely to be made as
access, correction, as well as the right to the sole basis for any decision significantly
lodge a complaint before the Commission. affecting or will affect the data subject;
Any information supplied or declaration (7) Date when his or her personal
made to the data subject on these matters information concerning the data subject
shall not be amended without prior were last accessed and modified; and
notification of data subject: Provided, That
the notification under subsection (b) shall (8) The designation, or name or identity and
not apply should the personal information be address of the personal information
needed pursuant to a subpoena or when the controller;
collection and processing are for obvious
purposes, including when it is necessary for

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(d) Dispute the inaccuracy or error in the While commercial documents can be signed
personal information and have the personal electronically, as even covered by Electronic
information controller correct it immediately Commerce Act, I hope you know the answer
and accordingly, unless the request is to the question:
vexatious or otherwise unreasonable. If the
personal information have been corrected, Can a document which was electronically
the personal information controller shall signed be notarized?
ensure the accessibility of both the new and
the retracted information and the A: No, because while everyone has been
simultaneous receipt of the new and the telling the Supreme Court, pwede bang mag
retracted information by recipients thereof: amend ng Notarial Rules? The present
Provided, That the third parties who have Notarial Rules require two things which
previously received such processed personal would prevent E-commerce Act from being
information shall he informed of its applied:
inaccuracy and its rectification upon
reasonable request of the data subject; 1. There has to be personal appearance
before the notary republic
(e) Suspend, withdraw or order the blocking, 2. In some of the notarial acts, you have to
removal or destruction of his or her personal affix your signature in fromt of the notary
information from the personal information public.
controller’s filing system upon discovery
and substantial proof that the personal - The definition as of now presupposes a wet
information are incomplete, outdated, false, ink signature, so E-commerce Act the
unlawfully obtained, used for unauthorized intention is to promote commerce.
purposes or are no longer necessary for the
purposes for which they were collected. In Legal Recognition of Electronic Data
this case, the personal information controller Messages, Documents and Signatures
may notify third parties who have previously
received such processed personal On the basis of law, we recognize certain
information; and commercial document, pag nasa magka
ibang jurisdiction as between the parties, it
(f) Be indemnified for any damages can be considered as signed and duly
sustained due to such inaccurate, executed. Unless, it will now be in a form
incomplete, outdated, false, unlawfully which is required in a public instrument.
obtained or unauthorized use of personal
information. Pag public instrument kailangan notaryo,
hindi pwede ang e-signature kasi hindi siya
magiging public instrument until it is
ELECTRONIC COMMERCE ACT notarized so under Section 6, information
OF 2000 (R.A. No. 8792) shall be denied legal effect, validity or

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enforceability solely on the grounds that it is i. There exists a reliable assurance as to the
on the data message purporting to give rise integrity of the document form the time
to such legal effect or that it is merely when it was first generated in its final form;
referred to in that electronic data message and
ii. That document is capable of being
Legal Recognition of Documents displayed to the person to whom it is to be
presented: Provided, That no provision of
Electronic documents shall have the legal this Act shall apply to vary any and all
effect, validity or enforceability as any other requirements of existing laws on formalities
document or legal writing, and - required in the execution of documents for
their validity
A. Where the law requires a document to be For evidentiary purposes, an electronic
in writing, that requirement is met by an document shall be the functional equivalent
electronic document if the said electronic of a written document under existing laws
document maintains its integrity and (Ibid.).
reliability and can be authenticated so as to This Act does not modify any statutory rule
be usable for subsequent reference, in that - relating to admissibility of electronic data
messages or electronic documents, except
i. The electronic document has remained the rules relating to authentication and best
complete and unaltered, apart from the evidence (Ibid.).
addition of any endorsement and any
authorized change, or any change which Example:
arises in the normal course of
communication, storage and display; and FDA now accepts electronic documents for
certification of products
ii. The electronic document is reliable in the Government institutions temporarily accepts
light of the purpose for which it was electronic document because of the Covid-
generated and in the light of all relevant 19 pandemic
circumstances.
SECTION 8, R.A. 8792. An electronic
B. Paragraph A applies whether the signature on the electronic document shall
requirement therein is in the form of an be equivalent to the signature of a person on
obligation or whether the law simply a written document if that signature is
provides consequences for the document not proved by showing that a prescribed
being presented or retained in its original procedure, not alterable by the parties
form. interested in the electronic document existed
under which -
C. Where the law requires that a document
be presented or retained in its original form,
that requirement is met by an electronic if - A. A method is used to identify the party
sought to be bound and to indicate said

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party’s access to the electronic document make the decision to proceed with the
necessary for his consent or approval transaction authenticated by the same.
through the electronic signature.
Presumption on Electronic Signature
Discussion: Not referring to actual ink SECTION 9, R.A. 8792 - Presumption
signature. You can sign it in your electronic Relating to Electronic Signatures - In any
gadget as long as it can be identified that proceedings involving an electronic
you are the one who signed the document. signature, it shall be presumed that -
There are applications which help you
provide information on the signature
(a) The electronic signature is the signature
provided. It can be a picture of your
of the person to whom it correlates; and
signature, it can be done through a touch
screen gadget, or it can be as simple as
writing your name, as long as it has integrity (b) The electronic signature was affixed by
and can be traced back to you. that person with the intention of signing or
approving the electronic document unless
the person relying on the electronically
Example:
signed electronic document knows or has
Using a gadget that can identify that it is you noticed of defects in or unreliability of the
who signed the document and that the signature or reliance on the electronic
signature can be traced back to you. signature is not reasonable under the
circumstances.
B. Said method is reliable and appropriate
for the purpose for which the electronic NOTE: To rebut, present evidence to the
document was generated or communicated, contrary.
in the light of all circumstances, including
any relevant agreement;
Admissibility and Evidential Weight of
Electronic Data Message of Electronic
C. It is necessary for the party sought to be Document
bound, in or order to proceed further with
the transaction, to have executed or provided
the electronic signature; and SECTION 12, R.A. 8792 - Admissibility and
Evidential Weight of Electronic Data
Q: Is it important that you signed the Message or Electronic Document. - In any
signature? If yes, the transaction will be legal proceedings, nothing in the application
recognized. of the rules on evidence shall deny the
admissibility of an electronic data message
D. The other party is authorized and enabled or electronic document in evidence -
to verify the electronic signature and to (a) On the sole ground that it is in electronic
form; or

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(b) On the ground that it is not in the “electronic data message” or an

standard written form, and the electronic “electronic document”
data message or electronic document ❖ Accordingly, a facsimile
meeting, and complying with the transmission cannot be considered
requirements under Sections 6 or 7 hereof as electronic evidence. It is not the
shall be the best evidence of the agreement functional equivalent of an original
and transaction contained therein. under the Best Evidence Rule and is
not admissible as electronic
Such evidence is given equal weight evidence. In an ordinary facsimile
transmission, there exists an original
paper-based information or data that
In assessing the evidential weight of an is scanned, sent through a phone
electronic data message or electronic line, and re-printed at the receiving
document, the reliability of the manner in end. In a virtual or paperless
which it was generated, stored or environment, technically, there is not
communicated, the reliability of the manner original copy to speak of, as all
in which its originator was identified, and direct printouts of the virtual reality
other relevant factors shall be given due are the same, in all respects, and are
regard. considered as originals. Ineluctably,
the law’s definition of “electronic
The main issue is the authentication of the data message,” which, as aforesaid,
document. is interchangeably with “electronic
document”, could not have included
facimile transmissions, which have
MCC INDUSTRIAL SALES CORP. v. an original paper-based copy as sent
SSANGYONG CORP and a paper-based facsimile copy as
received (MCC Industrial Sales
❖ An electronic document shall be Corp. v. Ssangyong Corp, G.R. No.
regarded as the equivalent of an 170633, 17 October 2007)!
original document under the Best
Evidence Rule, as long as it is a A facsimile document is not an electronic
printout or output readable by sight document, it is a stand copy, because it has
or other means, showing to reflect an original printed document. A true
the data accurately. Thus, to be electronic document is paperless and
admissible in evidence as an virtual.
electronic data message or to be
considered as the functional
equivalent of an original document SECTION 32, R.A. 8792 – Obligations of
under the Best Evidence Rule, the Confidentiality
writing must foremost be an Obligations of Confidentiality

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Except for the purposes authorized under asks for letter of credit, so that before
this Act, any person who obtained access to sending the goods, it is assured that it will be
any electronic key, electronic data message paid the moment the goods are sent in the
Philippines. Buyer goes to the bank, applies
or electronic document, book, register,
for a letter of credit. Between the buyer and
correspondence, information, or other the bank, the contract would be the
material pursuant to any powers conferred application for letter of credit. The money
under this Act, shall not convey to or share would be issued in favor of the seller. The
the same with any other person. contract between the bank and the seller
would be the letter credit proper because the
Example: letter of credit is issued by the bank, to the
seller. Seller would present documents as
We put security messages at the end of our
specified by the buyer in the letter of credit
e-mails. to release the money, proof that the goods
are delivered to the buyer. The remaining
LETTERS OF CREDIT obligation would be between the buyer and
the bank, the reimbursement of the money
by the buyer because of the bank paying for
the goods to the seller. It is done by the bank
presenting the documents given by the
seller.
Marginal deposit – the bank would require

the buyer to deposit a certain percentage of
the whole payment. It would serve as an
initial payment of the reimbursement. In
case the remaining balance is not paid, the
interest would accrue to the remaining
The chart represents a commercial letter of balance.
credit as opposed to a standby letter of
credit. It is assumed in this chart that the There is an obligation based on the
same bank transacting with the seller, will stipulated documents.
be the same bank transacting with the buyer.
A letter of credit is not negotiable, however Doctrine of Strict Compliance – For the
the draft created in this transaction is documents that will be given by seller to the
negotiable. bank, the seller should strictly comply with
the requirements set by buyer in the
There are three parties to a letter of credit. application for letter of credit and mirrored
The rules on letter of credit are also in the letter of credit. Anything less should
applicable to sale transaction because it not amount to payment. The basis would
originated from necessity. Without letters of that the buyer agreed to reimburse if
credit, merchants would be limited to cash presented with the stipulated document. The
transactions. documents would tell the bank that the seller
complied with his obligation under the sale
The transaction in letter of credit goes like contract.
this. Buyer want to buy from Seller. Seller

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Independence Principle (based on the

contract of sale between the buyer and BANK OF AMERICA, NT & SA v. COURT
seller) (BPI case) – The letter of credit is
OF APPEALS
independent of the contract of sale. If there
is any infirmity in the contract of sale, it will
not affect the letter of credit, as long as the A letter of credit is a financial device
seller would provide the stipulated developed by merchants as a convenient and
documents for the payment. The buyer relatively safe mode of dealing with sales of
would not have paid the bank if it received goods to satisfy the seemingly irreconcilable
the wrong goods. The bank cannot say that interests of a seller, who refuses to part with
he cannot pay the seller if there is the his goods before he is paid, and a buyer,
marginal deposit. who wants to have control of the goods
before paying. To break the impasse, the
In a commercial letter of credit, they get buyer may be required to contract a bank to
paid once they complied with the issue a letter of credit in favor of the seller
commitment (to ship the goods, and to so that, by virtue of the letter of credit, the
submit the documents). In a standby letter of issuing bank can authorize the seller to
credit, the creditor is paid if the debtor did draw drafts and engage to pay them upon
not do his obligation. A standby LOC is their presentment simultaneously with the
always compared to a performance bond. tender of documents required by the letter of
credit (Bank of America, NT & SA v. Court
of Appeals, G.R. No. 105395, 10 December
ARTICLE 2, UNIFORM CUSTOMS AND 1993).
PRACTICE FOR DOCUMENTARY CREDIT –
A Letter of Credit, as defined by the PRUDENTIAL BANK AND TRUST

International Chamber of Commerce, is an
COMPANY V. INTERMEDIATE APPELLATE
agreement, however named or described,
whereby a bank, acting upon request of his COURT
client or on his own behalf, agrees to:
Through a letter of credit, the bank merely
a. Pay a 3rd Party to the order of the substitutes its own promise to pay for one of
Beneficiary its customers who in return promises to pay
b. Accept a draft drawn by the the bank the amount of funds mentioned in
beneficiary the letter of credit plus credit or commitment
c. Authorize another bank to pay the fees mutually agreed upon (Prudential Bank
beneficiary and Trust Company v. Intermediate
d. To negotiate against stipulated Appellate Court, G.R. No. 74886, 08
documents provided that the terms of December 1992)
the letter of credit are complied with.
Security arrangements but not accessory
NOTE: Memorize the different kinds of contracts: A Letter of Credit is not a
bank Contract of Guaranty
It is a financial devise used to facilitate FEATI BANK & TRUST COMPANY V.

commercial transactions

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COURT OF APPEALS A composite of at least three distinct but

intertwined relationships
The guaranty theory destroys the
independence of the bank’s responsibility
RELIANCE COMMODITIES, INC. V.
from the contract upon which it was opened.
DAEWOO INDUSTRIAL CO., LTD.
In contracts of guarantee, the guarantor’s
obligation is merely collateral and it arises
only upon the default of the person primarily A letter of credit transaction may thus be
seen to be a composite of at least three (3)
liable. On the other hand, in an irrevocable
distinct but intertwined relationships being
credit the bank undertakes a primary concretized in a contract:
obligation.
First contract – Such relationship links the
The Benefit of Excussion is not enjoined party applying for the L/C (the account
under Letters of Credit. party or buyer or importer) and the party for
whose benefit the L/C is issued (the
The seller can go directly to the bank to beneficiary or seller or exporter)
enforce payment.
Second contract – The relationship is
A Letter of Credit is not a Contract of between the account party and the issuing
Surety bank. Under the contract, (sometimes called
the “Application and Agreement” or the
METROPOLITAN WATERWORKS AND
“Reimbursement Agreement”), the account
party among other things, applies to the
SEWERAGE SYSTEM V. DAWAY
issuing bank for a specified L/C and agrees
to reimburse the bank for amounts paid by
What distinguishes letters of credit from that bank pursuant to the L/C.
other accessory contracts, is the engagement
of the issuing bank to pay the seller once the Third contract – The relationship is
draft and other required shipping documents established between the issuing bank and the
beneficiary, in order to support the contract,
are presented to it. They are definite
under the first contract above, of the
undertakings to pay at sight once the account party and the beneficiary to, inter
documents stipulated therein are presented alia, pay certain monies to the latter.
A surety contract and guaranty contract are (Reliance Commodities, Inc. v. Daewoo
accessory contracts, it presupposes that the Industrial Co., Ltd., G.R. No. L-100831, 17
principal obligor would be the buyer. A December 1993)
letter of credit, however, the principal
obligor would be the bank because he will Not negotiable instruments
give the money upon presentment of the
documents. The only recourse would be
reimbursement from the buyer. LEE V. COURT OF APPEALS

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Letters of credit and trust receipts are not of one of its dispose of the
negotiable instruments. But drafts issued in customers who in goods, documents,
connection with letters of credit are return promises to and instruments
negotiable instruments. They do not conform pay the bank the with the obligation
to the elements of a Negotiable Instrument amount of funds to turn over to the
under the NIL mentioned in the entruster the
letter of credit plus proceeds thereof to
While the presumption found under the credit or the extent of the
Negotiable Instruments Law may not commitment fees amount owing to
necessarily be applicable to trust receipts mutually agreed the entruster, or as
and letters of credit, the presumption that upon. [Bank of appears in the trust
the drafts drawn in connection with the Commerce v. receipt, or return
letters of credit have sufficient consideration Serrano, G.R. No. the goods,
applies on drafts drawn in connection with 151895, 16 documents, or
the Letters of Credit (Lee v. Court of February 2005, instrument
Appeals, G.R. No. 117913, 01 February (451 SCRA 484)] themselves if they
2002) are unsold, or not
otherwise of, in
accordance with the
LETTER OF TRUST RECEIPT
terms and
CREDIT
conditions specified
A letter of credit is A trust receipt in the trust receipt.
an engagement by a transaction is one
bank or other where the entruster,
person made at the who holds an Liability of the Liability of the
request of a absolute title or Buyer/importer to entrustee when the
reimburse the latter fails to
customer that the security interests receive the
issuer will honor over certain goods, issuing bank is civil
proceeds in trust for
drafts or other documents or in nature. Even if the entruster and
demands for instruments, he does not pay, turn over the same
payment upon released the same criminal liability to the extent of the
compliance with to the entrustee, does not arise. obligation of the
entrustee, or to
the conditions who executes a
return the goods,
specified in the trust receipt binding documents, or
credit. Through a himself to hold the instruments in the
letter of credit, the goods, documents, event of non-sale or
bank merely or instruments in upon demand of the
substitutes its own trust for the entruster, is
promise to pay for entruster and to sell criminal in nature
the promise to pay or otherwise
Transaction Transaction

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involves at least involves 2 parties trade transactions, the International

three parties Chamber of Commerce has published from
time to time updates on the Uniform
Customs and Practices (UCP) for
Trust receipts are created to protect the Documentary Credits to standardize
bank practices in area of letters of credit. The
vast majority of letters of credit incorporate
Laws governing Letters of Credit the UCP (Transfield Philippines, Inc. v.
Luzon Hydro Corp., G.R. No. 146717, 22
A letter of credit is a commercial transaction November 2004).
governed by the Code of Commerce. Article
567 to 572 of the Code of Commerce on
Letters of Credit, i.e., “those issued by one BANK OF THE PHILIPPINE ISLANDS V. DE
merchant to another, or for the purpose of
RENY FABRIC INDUSTRIES, INC.
attending to a commercial transaction,” are
obsolete, since modern letters of credit are
strictly bank to bank transactions
(Villanueva & Villanueva, 2015) The bank introduced in evidence a provision
contained in the “Uniform Customs and
Usage and customs apply in commercial Practices for Commercial Documentary
transactions in the absence of any particular
Credits Fixed for the 13th Congress of
provision in the Code of Commerce.
International Chamber of Commerce,” to
Nevertheless, Sec 2 of the Code of which the Philippines is a signatory nation.
Commerce provides the following: This support the terms under their
Commercial Letter of Credit Agreements
“Article 2 - Commercial Transactions, be with the bank appellants. The existence of a
they performed by merchants or not, custom in international banking and
whether they are specified in this Code or
financing circles negating any duty on the
not, shall be governed by the provisions
contained in the same; in the absence of part of a bank to verify whether what has
such provisions, by the commercial customs been described in letters of credit or drafts
generally observed in each place; and in the or shipping documents actually tallies with
absence of both, by those of the common what was loaded aboard ship, having been
law.” positively proven as a fact, the appellant are
bound by this established usage
TRANSFIELD PHILIPPINES, INC. V. LUZON
HYDRO CORP. Kinds of Letters of Credit
Stand-by Letters of Credit –

Therefore, Letters of Credit being
commercial documents are also governed by *Stand-by Letters of Credit are those used in
Applicable International and Customary non-sale settings where they serve to reduce
Practices. Since the letters of credit have the risk of non-performance. (Transfield
gained general acceptability in international

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Philippines, Inc. v. Luzon Hydro Corp., G.R. G.R. No. 146717,

No. 146717, 22 November 2004) 22 November 2004)
*The standby L/Cs are, in effect, an absolute These are primary These are not
undertaking to pay the money advanced or payment methods primary payment
the amount for which credit is given on the methods. They act
faith of the instrument. They are primary as a secondary
obligations and not accessory contracts
payment option and
(Insular Bank of Asia & America v.
Intermediate Appellate Court, G.R. 74834, will be utilized in
17 November 1988) case another
primary payment
COMMERCIAL STAND-BY method does not
LETTER OF CREDIT LETTERS OF
work
CREDIT
Commercial credits In the standby type, Irrevocable letter of credit

involve the the credit is payable
payment of money upon certification PHILIPPINE VIRGINIA TOBACCO
under a contract of of a party’s non- ADMINISTRATION V. DE LOS ANGELES
sale performance of the
agreement
An irrevocable letter of credit cannot during
Such credits The documents that its lifetime be cancelled or modified without
become payable accompany the the express permission of the beneficiary
upon the beneficiary’s draft
presentation by the tend to show that Judge Delos Santos issued the injunction
seller-beneficiary the applicant has order an in a subsequent petition, ordered
of documents that not performed, e.g.: the funds of the letter of credit released to
Sevilla. In issuing such Order, respondent
show he has taken Judge violated the irrevocability of the letter
affirmative steps to *Certificate of of credit issued by respondent Bank in favor
comply with the Non-Payment of petitioner. (Philippine Virginia Tobacco
sales agreement Administration v. De Los Angeles, G.R. No.
(Transfield *Certificate of L-27829, 19 August 1988)
Philippines, Inc. v. Default
Luzon Hydro Corp., PRUDENTIAL BANK AND TRUST
G.R. No. 146717, *Certificate of COMPANY V. IAC
22 November 2004) Non-Performance
(Transfield
An irrevocable letter of credit is not
Philippines, Inc. v.
synonymous with a confirmed letter of
Luzon Hydro Corp., credit. In an irrevocable letter of credit, the
issuing bank may not, without the consent of

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the beneficiary and the applicant, revoke its Trust Company v. Court of Appeals, G.R.
undertaking under the letter, whereas, in a No. 94209, 30 April 1991)
confirmed letter of credit, the correspondent
bank gives an absolute assurance to the Parties to a Letter of Credit – Rights and
beneficiary that it will undertake the issuing Obligation
bank’s obligation as its own according to the
terms and condition of the credit (Prudential Buyer/Applicant/Account Party
Bank and Trust Company v. IAC, G.R. No.
74886, 8 December 1992) It can be a buyer, importer, or obligor
The irrevocable LOC is issued in favor of
It is the person who agrees to pay the bank
beneficiary (bank), the seller can rely on it
that upon the issuance and receipt of the that issued the Letter of Credit the necessary
LOC, it can now ship the goods, without any commission and charges, and to reimburse
concerns that the LOC might be revoked. the issuing bank the amount duly paid under
the Letter of Credit.
Distinguish irrevocable LOC from
confirmed LOC: the latter has a confirming
bank (lends credence to a lesser known
RELIANCE COMMODITIES, INC. V.
bank, it confirms the existence of the LOC)
DAEWOO INDUSTRIAL CO., LTD.
Confirmed and Unconfirmed Letters of
Credit
Failure of a buyer to seasonably furnish an
agreed letter of credit is a breach of the
FEATI BANK & TRUST COMPANY V. contract between buyer and seller. Where
COURT OF APPEALS the buyer fails to open a letter or credit as
stipulated, the seller or exporter is entitled
to claim damages for such breach
A Confirmed Letter of Credit pertains to
the kind of obligation assumed by the
correspondent bank. In this case, the ABAD V. COURT OF APPEALS
correspondent bank gives an absolute
assurance to the beneficiary that it will The debtor (or its surety) (Buyer/Applicant)
undertake the issuing bank’s obligation as its is entitled to deduct the debtor’s cash
own according to the terms and conditions marginal deposit from the principal
of the credit obligation under a letter of credit and to
have the interest charges computed only on
The mere fact that a letter of credit is the balance of the said obligation. Requiring
irrevocable does not necessarily imply that otherwise would be a clear case of unjust
the correspondent bank in accepting the enrichment (Abad v. Court of Appeals, G.R.
instructions of the issuing bank, has also No. L-42735, 22 January 1990)
confirmed the letter of credit (Feati Bank &

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prescribed period, of all the documents

CONSOLIDATED BANK & TRUST necessary for collection, as the Letter of
CORPORATION V. COURT OF APPEALS Credit had already expired and had in fact
been cancelled. The bank should not have
Indeed, it would be onerous to compute paid under such circumstances
interest and other charges on the face value
of the letter of credit which the petitioner Despite such erroneous payment, the bank
issued, without first crediting or setting off may still recover from Seller/Beneficiary on
the marginal deposit which the respondent ground of solutio indebiti or on Article 2142
Corporation paid to it. Compensation is of the Civil Code
proper and should take effect by operation
Seller/Beneficiary
of law (Consolidated Bank & Trust
Corporation v. Court of Appeals, G.R. No.
One entitled to payment from the issuing
114286, 19 April 2001)
bank after submission of stipulated
documents and compliance with the term of
Issuing bank – bank of the buyer
credit
One who undertakes to pay the beneficiary
He has prestation to do under the main
when the latter submits the stipulated
contract but his failure to fulfill his
documents and complies with the terms of
obligation under main contract does not
the crediting.
negate his right of payment from the issuing
MWSS V. DAWAY bank provided that such seller was able to
submit the required documents and comply
Obligations of the banks issuing letters of with the terms of the credit without
credit is solidary with that of the person or prejudice to his liability against the account
entity requesting for its issuance, the same party under the law on contract and
being a direct primary, absolute and definite damages.
undertaking to pay the beneficiary upon
presentation of the set of documents Correspondent Banks
required therein (MWSS v. Daway, G.R. No.
In commercial transactions involving letters
160732, 21 June 2004)
of credit, the functions assumed by a
RODZSSEN SUPPLY COMPANY, INC. V. correspondent bank are classified according
FAR EAST BANK AND TRUST COMPANY to the obligations taken up by it. The
corresponding bank may be called a
The erroneous payment made by the bank on
an expired Letter of Credit precludes the 1. Advising/Notifying Bank
latter to collect payment from the buyer
2. Negotiating Bank
applicant. In the same vein, of no moment
was the Seller’s presentation, within the

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3. Confirming Bank America is bound only to check the

“apparent authenticity” of the letter of
(Feati Bank & Trust Company v. Court of credit, which it did. The word
Appeals, G.R. No. 94209, 30 April 1991) “APPARENT” suggests appearance to
unaided senses that is not or may not be
#1 just confirms the existence of LOC and borne out by more rigorous examination or
does not take any further obligation. greater knowledge. (Bank of America, NT &
SA v. Court of Appeals, G.R. No. 105395, 10
#3 confirms the existence of LOC by lending
its name December 1993)
#2 renegotiates the amount of payment to Negotiating bank

the seller, will be the one who will present to
the issuing bank the stipulated documents of Buys or discounts a draft under the letter of
the seller, and he will get the balance to be credit and its liability is dependent upon the
paid by buyer. It will earn the discounted stage of the negotiation: If before
amount. negotiation, it has no liability with respect to
the seller but after negotiation, a contractual
Advising/Notifying bank
relationship will then prevail between the
Assumes no liability except to notify and/or negotiating bank and the seller (Ibid)
transmit to the beneficiary the existence of
the letter of credit. Thus: Confirming bank
This corresponding bank assumes a direct

1. A notifying bank is not liable to pay the
obligation to the seller and its liability is a
draft drawn against the letter of credit; primary one as if the correspondent bank
itself had issued the letter of credit.
2. Suggest to seller its willingness to
negotiate, but this fact alone does not imply If the correspondent bank was a confirming
that the notifying bank promises to accept bank, then a categorical declaration should
the draft drawn under the documentary have been stated in the letter of credit that
credit; the correspondent bank is to honor all drafts
drawn in conformity with the letter of credit
(Feati Bank & Trust Company v. Court of
3. It has no privity to the sale between the Appeals, G.R. No. 94209, 30 April 1991)
buyer and seller, and its relationship is only
with that of the issuing bank Doctrine of Independence
(Feati Bank & Trust Company v. Court of The independent nature of the letter of credit
Appeals, G.R. No. 94209, 30 April 1991) may be:
*Bringing the letter of credit to the attention a. independence in toto where the credit is
independent from the justification aspect
of the seller is the primordial obligation of
and is a separate obligation from the
an advising bank. As advising bank, Bank of

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underlying agreement like for instance a liability or responsibility "for the form,
typical standby; or sufficiency, accuracy, genuineness,
falsification or legal effect of any
b. independence may be only as to the documents, or for the general and/or
justification aspect like in a commercial
letter of credit or repayment standby, which particular conditions stipulated in the
is identical with the same obligations under documents or superimposed thereon ... "
the underlying agreement
Thus, as long as the proper documents are
(Transfield Philippines, Inc. v. Luzon Hydro presented, the issuing bank has an
Corp., G.R. No. 146717, 22 November 2004) obligation to pay even if the buyer should
later on refuse payment. (The Hongkong
Shanghai Banking Corporation v. National
LAND BANK OF THE PHILIPPINES V. Steel Corporation, G.R. No. 183486, 24
February 2016)
MONET’S EXPORT AND
MANUFACTURING CORP.
PHILIPPINE NATIONAL BANK V. SAN
MIGUEL CORPORATION
Article 3 of the Uniform Customs and
Practice (UCP) for Documentary Credits
provides that credits, by their nature, are As on of the requirements to avail a credit
separate transactions from the sales or other line for Goroza’s Exclusive Dealership
contract(s) on which they may be based and agreement with SMC, Goroza applied for a
banks are in no way concerned with or Letter of Credit with PNB. The court soon
bound by such contract(s), even if any
found Goroza liable in the collection case
reference whatsoever to such contract(s) is
included in the credit. Consequently, the filed by SMC against PNB and Goroza. The
undertaking of a bank to pay, accept and pay issuing bank, PNB cannot evade its
draft(s) or negotiate and/or fulfill any other responsibility to pay fully SMC on the sole
obligation under the credit is not subject to ground that the RTC judgment found
claims or defenses by the applicant resulting Goroza, liable and ordered him to pay the
from his relationships with the issuing bank amount sought to be recovered by SMC.
or the beneficiary.
PNB’s liability, if any, under the letter of
(Land Bank of the Philippines v. Monet’s credit is yet to be determined (Philippine
Export and Manufacturing Corp., G.R. No. National Bank v. San Miguel Corporation,
161865, 10 March 2005) G.R. No. 186063, 15 January 2014)
*The effects of the stay order under Sec. 6

THE HONGKONG SHANGHAI BANKING (b), Rule 4 of the Interim Rules of Procedure
CORPORATION V. NATIONAL STEEL for Corporate Rehabilitation which enjoins
CORPORATION the enforcement of all claims against
guarantors and sureties “who are not
solidarily liable with the debtor,” cannot
Article 17 of UCP 400 explains that under apply to the letter of credit issued in behalf
this principle, an issuing bank assumes no of the debtor-applicant since the obligation

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of the issuing banks under the letter of credit Turnkey Contract knowing fully well that
is primary and solidary (MWSS v. Daway, this is yet to be determined by the arbitral
G.R. No. 160732, 21 June 2004) tribunals. It asserts that the "fraud
exception" exists when the beneficiary, for
The subject of the rehabilitation is the buyer,
not the bank. The subject of the stay order is the purpose of drawing on the credit,
the creditors of the buyer. The letter of fraudulently presents to the confirming
credit is the obligation of the bank, so it bank, documents that contain, expressly or
cannot be a subject of a stay order. The by implication, material representations of
bank will continue to pay the seller because fact that to his knowledge are untrue.
it took a primary and solidary liability under
the LOC issued in favor of seller. This contention must fail. By petitioner’s
own admission, the right of LHC to call on
Fraud exception principle
the Securities was contractually rooted and
Fraud is an exception to the Doctrine of subject to the express stipulations in the
Independence Turnkey Contract. The pendency of the
arbitration proceedings would not per se
*Under such principle, the beneficiary may make LHC's draws on the Securities
be enjoined from collecting on the letter of wrongful or fraudulent for there was nothing
credit if the following requisites are present: in the Contract which would indicate that
the parties intended that all disputes
a. There is clear proof of fraud; regarding delay should first be settled
through arbitration before LHC would be
b. Fraud constitutes fraudulent abuse of the allowed to call upon the Securities.
independent purpose of the letter of credit
and not only fraud under the main (Transfield Philippines, Inc. v. Luzon Hydro
agreement; and Corp., G.R. No. 146717, 22 November 2004)
c. Irreparable injury might follow if Doctrine of Strict Compliance

injunction is not granted or the recovery of
damages would be seriously undetermined The documents tendered must strictly
(Transfield Philippines, Inc. v. Luzon Hydro conform to the terms of the letter of credit.
Corp., G.R. No. 146717, 22 November 2004, The tender of documents by the beneficiary
as cited by Villanueva & Villanueva, 2015) (seller) must include all documents required
by the letter. A correspondent bank which
NOTE: This has to be strictly construed. departs from what has been stipulated under
the letter of credit, as when it accepts a
Petitioner invokes the "fraud exception" faulty tender, acts on its own risks and it
principle. It avers that LHC's call on the may not thereafter be able to recover from
Securities is wrongful because it the buyer or the issuing bank, as the case
fraudulently misrepresented to ANZ Bank may be, the money thus paid to the
and SBC that there is already a breach in the beneficiary

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(Feati Bank & Trust Company v. Court of A trust receipt is considered as a security
Appeals, G.R. No. 94209, 30 April 1991) transaction intended to aid in financing
importers and retail dealers who do not have
It is not a question on whether or not it is sufficient funds or resources to finance the
fair or equitable to require submission of importation or purchase of merchandise, and
documents but whether or not the documents who may not be able to acquire credit except
were agreed upon, in which case all such through utilization, as collateral of the
documents must be submitted (Ibid) merchandise imported or purchased. A trust
receipt, therefor, is a document of security
TRUST RECEIPTS LAW pursuant to which a bank acquires a
"security interest" in the goods under trust
receipt. (Lee v. Court of Appeals, G.R. No.
117913, 01 February 2002)
If you are a businessman who is regularly

engaged in the importation of goods, it is
advisable, because there will criminal
liability of you did not remit the payment.
The loan and security features of a trust

Importer: To sell the goods and to remit the receipt
payment to the bank
If unable to sell the goods: remit the goods ROSARIO TEXTILE MILLS CORP. V.
to the bank to show good faith, not HOME BANKERS SAVINGS & TRUST
misappropriated COMPANY
Returning the goods to the bank would only

extinguish criminal aspect arising from the • Loan feature – brought about by the
security feature. It will not extinguish the fact that the entruster financed the
loan aspect. importation or purchase of the goods
under TR
Failure to return: presumption of • Security feature – Property interest
misappropriation. The bank can go to the in the Goods, Document or Interest
importer for violation of trust receipts for to secure performance of some
collection and prosecution for Estafa. obligation of the entrustee or of some
third persons to the entruster
A security transaction
(Rosario Textile Mills Corp. v. Home
Bankers Savings & Trust Company, G.R.
No. 137232, 29 June 2005, as cited in
LEE V. COURT OF APPEALS Mercantile Law Golden Notes, 2019)

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The loan should be granted to finance financing in order to encourage commerce in

acquisition of the goods under trust the Philippines
receipt. If loan is granted when entrustee
already has ownership of the goods, the
transaction is only a simple loan. LAND BANK OF THE PHILIPPINES V.
PEREZ
COLINARES V. COURT OF APPEALS

In the case of materials used in the
It is not a trust receipt transaction when manufacture of finished products, these
petitioners are not importers acquiring the finished products – if not the raw materials
goods for re-sale, contrary to the express or their components – similarly remain in
provision embodied in the trust receipt. the possession of the trustee until they are
They are contractors who obtained the sold. But the goods and the materials that
fungible goods for their construction project. are used for a construction project are often
At no time did title over the construction placed under the control and custody of the
materials pass to the bank, but directly to the clients employing the contractor, who can
Petitioners from CM Builders Centre only be compelled to return the materials if
(Colinares v. Court of Appeals, G.R. No. they fail to pay the contractor and often only
90828, 05 September 2000) after the requisite legal proceedings. The
contractor’s difficulty and uncertainty in
The goods must be intended for sale or
claiming these materials (or the buildings
resale, otherwise, it is a simple loan
and structures which they become part of),
as soon as the bank demands them,
NG V. PEOPLE disqualify them from being covered by trust
receipt agreements.
Considering that the goods in this case were
The only obligation actually agreed upon by
never intended for sale but for use in the
the parties would be the return of the
fabrication of steel communication towers,
proceeds of the sale transaction. This
the trial court erred in ruling that the
transaction becomes a mere loan, where the
agreement is a trust receipt transaction
borrower is obligated to pay the bank the
The true nature of a trust receipt transaction amount spent for the purchase of the goods.
can be found in the whereas clause of PD
The goods must be for sale or resale so that
115 which states that a trust receipt is to be
it would be susceptible of turnover.
utilized “as a convenient business device to
assist importers and merchants solve their
XPN – If the bank was made to believe that
financial problems.” Obviously, the State, in
the goods were intended for sale or resale,
enacting the law, sought to find a way to
then importer used it for different purpose –
assist importers and merchants in their
misappropriation

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Remember constitutional provision on non- sold, constitutes a criminal offense that

imprisonment of unpaid debt. causes prejudice not only to another, but
more to the public interest. (People v.
HUR TIN YANG V. PEOPLE Nitafan, G.R. No. 81559 – 60, 6 April 1992)
Crime against public order

The fact that the entruster bank knew even
before the execution of the trust receipt
agreements that the construction materials
covered were never intended by the METROPOLITAN BANK & TRUST
entrustee for resale or for the manufacture of COMPANY V. TONDA
items to be sold is sufficient to prove that
the transaction was a simple loan and not a Settlement of the parties does not affect the
trust receipts transaction.
criminal liability under the trust receipts
SECTION 4, P.D. NO. 115 - No trust receipt, law. It does not preclude prosecution for the
notwithstanding the label, if goods offered offense already committed. It has been held
as security for a loan accomodation are that "[a]ny compromise relating to the civil
goods sold to the debtor - The sale of liability arising from an offense does not
goods by a person in the business of selling automatically terminate the criminal
goods for profit who, at the outset of the proceeding against or extinguish the
transaction, has, as against the buyer,
criminal liability of the malefactor."
general property rights in such goods, or
who sells the goods to the buyer on credit,
retaining title or other interest as security for As correctly observed by the Solicitor
the payment of the purchase price, does not General, P.D. 115, like Bata Pambansa Blg.
constitute a trust receipt transaction and is 22, punishes the act "not as an offense
outside the purview and coverage of the law against property, but as an offense against
public order. x x x The misuse of trust
Failure of the entrustee to remit sale receipts therefore should be deterred to
proceeds or return the goods in case of prevent any possible havoc in trade circles
non-sale constitutes criminal liability and the banking community.
PEOPLE v. NITAFAN (Metropolitan Bank & Trust Company v.

Tonda, G.R. No. 134436, 16 August 2000)
It is in the context of upholding public
interest that the law now specifically The Trust Receipts Law gives credibility to
designates a breach of a trust receipt this transactions, hence the penalty.
agreement to be an act that “shall” make one
liable for estafa. Ownership of the Goods, Documents, and
Instruments under a Trust Receipt.
The offense is punished as a malum
prohibitum regardless of the existence of At the time of the execution of the Trust
intent or malice. A mere failure to deliver Receipt, the goods are not delivered yet to
the proceeds of the sale or the goods if not the importer, because it is impossible to

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create a fiction of ownership that the bank appears by virtue of possession and
owns the goods if from the very start, prior the face of the instrument to be the
the execution of the trust receipt, the goods owner. “Instrument” shall not
were already delivered and owned by the include a document as defined in this
importer. If not, the contract created is a Decree. (Section 3(e), P.D. No. 115,
mortgage contract, and the liability is only Trust Receipts Law)
civil in nature.
Entrustee is the owner of the goods
The Trust Receipts Law should be strictly
construed, and to prove violation, the goods
should not be at the hands of the buyer- VINTOLA V. INSULAR BANK OF ASIA AND
importer. AMERICA
Delivery must follow the execution. Since the Bank Entrustor is not the factual
owner of the goods, the Entrustees cannot
Subjects of Trust Receipt Transaction justifiably claim that because they have
surrendered the goods to IBAA and
1. Goods – Include chattels and subsequently deposited them in the custody
personal property other than: money, of the court, they are absolutely relieved of
things in action, or things so affixed their obligation to pay their loan because of
to land as to become a part thereof their inability to dispose of the goods. The
(Section 3(d), P.D. No. 115, Trust trust receipt arrangement did not convert the
Receipts Law) Bank Entrustor into an investor; the latter
2. Document – Written or printed remained a lender and creditor (Vintola v.
evidence of title to goods (Section Insular Bank of Asia and America, G.R. No.
3(a), P.D. No. 115, Trust Receipts 73271, 29 May 1987)
Law)
The principle of res perit domino will not
3. Instrument - “Instrument” means any apply if under the trust receipt, the bank is
negotiable instrument as defined in made to appear as the owner, it was but an
the Negotiable Instrument Law; any artificial expedient, more of legal fiction
certificate of stock, or bond or than fact, for if it were really so, it could
debenture for the payment of money dispose of the goods in any manner that it
issued by a public or private wants, which it cannot do, just to give
corporation, or any certificate of consistency with the purpose of the trust
deposit, participation certificate or receipt of giving a stronger security for the
receipt, any credit or investment loan obtained by the importer. To consider
instrument of a sort marketed in the the bank as the true owner from the
ordinary course of business or inception of the transaction would be to
finance, whereby the entrustee, after disregard the loan feature thereof (Rosario
the issuance of the trust receipt, Textile Mills Corp. v. Home Bankers

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Savings & Trust Company, G.R. No. Validity of the Security Interest as
137232, 29 June 2005) Against the Creditors of the
Entrustee/Innocent Purchaser for Value
The entrustee bears the risk of loss.
Rights of the entruster PRUDENTIAL BANK V. NATIONAL LABOR

RELATIONS COMMISSION
1. The entruster shall be entitled to the
proceeds from the sale of the goods, The security interest of the entruster is valid
documents or instruments released under a and enforceable against the creditors of the
trust receipt to the entrustee to the extent of entrustee for the duration of the Trust
the amount owing to the entruster or as Receipt Agreement. The right of the creditor
appears in the trust receipt, or to the return is inferior to the right of the entruster with
of the goods, documents or instruments in respect to the Goods held under the Trust
case of non-sale Receipt (Prudential Bank v. National Labor
Relations Commission, G.R. No. 112592, 19
2. Cancel the trust and take possession of the December 1995)
goods, documents or instruments subject of
the trust or of the proceeds realized The only person who can defeat the right of
therefrom at any time upon default or failure the entruster is an innocent purchaser for
of the entrustee to comply with any of the value (Sec. 7, P.D. No. 115, Trust Receipts
terms and conditions of the trust receipt or Law)
any other agreement between the entruster
and the entrustee The bank has a higher right compared to the
creditor of the entrustee. The creditor
3. Entruster in possession of the goods, cannot reach out because the goods are not
documents or instruments may, on or after the properties of the entrustee.
default, give notice to the entrustee of the
intention to sell, and may, not less than five The recourse of the bank is to go to the
days after serving or sending of such notice, buyer-importer to receive payment of the
sell the goods, documents or instruments at goods
public or private sale, and the entruster may,
at a public sale, become a purchaser. Obligations of the Entrustee
(Section 7, P.D. No. 115, Trust Receipts
Law) The entrustee shall
These are, conversely, the rights of 1. Hold the goods, documents or

entrustee, and will include the buyer instruments in trust for the entruster
insuring of goods. and shall dispose of them strictly in
accordance with the terms and
Obligation and Liability of the Entrustee conditions of the trust receipt;

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2. Receive the proceeds in trust for the 3. Non-delivery of goods

entruster and turn over the same to
the entruster to the extent of the The Court ruled that the accused Ramos
amount owing to the entruster or as cannot be convicted for Estafa for failure of
appears on the trust receipt; the prosecution to prove that she received
the goods subject of the trust receipt. At any
3. Insure the goods for their total value
rate, Ramos has categorically and
against loss from fire, theft, pilferage
consistently denied ever having received the
or other casualties;
goods either from the Bank or the suppliers.
4. Keep said goods or proceeds thereof And this was because, according to her, the
whether in money or whatever form, suppliers simply refused to part with the
separate and capable of identification goods as no payment had been made
as property of the entruster; therefor by the Bank. (Ramos v. Court of
Appeals, G.R. No. L-39922-25, 27 August
5. Return the goods, documents or
1987)
instruments in the event of non-sale
or upon demand of the entruster; and
4. Novation
6. Observe all other terms and
conditions of the trust receipt not The parties entered into a compromise
contrary to the provisions of this agreement to settle the claim in said civil
Decree. case, on the basis of which the trial court
rendered judgment, dated March 27, 1980,
(Sec 9, P.D. No. 115, Trust Receipts Law) approving the same.
No criminal liability in the following cases There being a novation, it is respectfully

submitted that even if the novation took
1. Entrustee already owns the goods when place after the filing of the Information in
loan under TR granted (Colinares v. Court the criminal case, the transaction had
of Appeals, G.R. No. 90828, 05 September nonetheless been converted from a criminal
2000; Consolidated Bank & Trust violation to civil obligation, which would
Corporation v. Court of Appeals, G.R. No. therefore necessitate the consequent
114286, 19 April 2001) dismissal of the criminal case. If the trust is
converted to a creditor-debtor relationship
2. Goods not intended for sale or resale (Ng then the trust element which gives rise to
v. People, G.R. No. 173905, 23 April 2010; criminal liability will be gone. (Ong v. Court
Land Bank of the Philippines v. Perez, G.R. of Appeals, G.R. No. L-58476, 02 September
No. 166884, 13 June 2012; Hur Tin Yang v. 1983)
People, G.R. No. 195117, 14 August 2013)
No criminal liability arises, when previous
to the petitioner bank’s demand upon BMC
to comply with its obligations under the trust

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receipts, the entrustee filed the Petition for

rehabilitation and declaration in a state of
suspension of payments. Liability when the Goods, Documents, or
Instruments was not returned in case of
Novation is present. The MOA rescheduling Non-sale
the payment of BMC’s debts provided
principal conditions, which are incompatible *Vintolas are civily liable under the Trust
with the trust agreement. The execution of Receipts Agreement to IBAA even through
the MOA extinguished respondent’s no fault of their own, they were unable to
obligation under the trust receipts. dispose of the seashells, and that they have
Respondent’s liability, if any, would only be relinquished possession thereof to the IBAA
civil in nature since the trust receipts were by depositing them with the Court (Vintola
transformed into mere loan documents after v. Insular Bank of Asia and America, G.R.
the execution of the MOA. (Pilipinas Bank No. 73271, 29 May 1987)
v. Ong, G.R. No. 133176, 08 August 2002)
The loss of goods, regardless of the cause of
Penalty clause the loss, whether due to force majeure or not
and period of loss will extinguish the
The failure of an entrustee to turn over the criminal liability but will not extinguish the
proceeds of the sale of the goods, civil liability of the entrustee up to the extent
documents or instruments covered by a owing to the entruster. In this case, goods
trust receipt to the extent of the amount were not accepted by the entrustee because
owing to the entruster or as appears in the they did not conform to the specifications.
trust receipt or to return said goods, While the goods were stored in a bodega, it
documents or instruments if they were was gutted by fire without the entrustee
not sold or disposed of in accordance with having possession of it.
the terms of the trust receipt shall
constitute the crime of estafa, punishable (Rosario Textile Mills Corp. v. Home
under the provisions of Article Three Bankers Savings & Trust Company, G.R.
hundred and fifteen, paragraph one (b) of No. 137232, 29 June 2005)
Act Numbered Three thousand eight
hundred and fifteen, as amended, otherwise Penal Sanctions if Offender is a
known as the Revised Penal Code. If the Corporation
violation or offense is committed by a
corporation, partnership, association or other Because the corporation act through its
juridical entities, the penalty provided for in officers – separate juridical personality
this Decree shall be imposed upon the
The bank cannot reach out to the officers for
directors, officers, employees or other
the civil liability, but rather for the criminal
officials or persons therein responsible for
liability.
the offense, without prejudice to the civil
liabilities arising from the criminal offense.

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The Trust Receipts Law recognizes the Appellate Court, G.R. No. 74886, 8
impossibility of imposing the penalty of December 1992)
imprisonment on a corporation. Hence, if the
entrustee is a corporation, the law makes the Directors or officers are personally liable for
officers or employees or other persons the corporation’s debts only if they so
responsible for the offense liable to suffer contractually agree or stipulate
the penalty of imprisonment. The reason is
obvious: corporations, partnerships, Directors and officers of the corporation
associations and other juridical entities not civilly liable unless they assume
cannot be put to jail. Hence, the criminal personal liability
liability falls on the human agent responsible
for the violation of the Trust Receipts Law. The person signing the trust receipt for the
(Ong v. Court of Appeals, G.R. No. 119858, corporation is not solidarily liable with the
29 April 2003) entrustee-corporation for the civil liability
arising from the criminal offense. He may,
Criminal liability of directors, officers, however, be personally liable if he bound
and agents himself to pay the debt of the corporation
under a separate contract of surety or
Although petitioner signed the trust receipts guaranty
merely as Senior Vice-President of PBMI
and had no physical possession of the goods, (Prudential Bank v. Intermediate Appellate
he cannot avoid prosecution for violation of Court, G.R. No. 74886, 8 December 1992)
P.D. No. 115.
Directors or officers are personally liable for
The crime defined in P.D. No. 115 is malum the corporation’s debts only if they so
prohibitum but is classified as estafa under contractually agree or stipulate (Tupaz v.
paragraph 1(b), Article 315 of the Revised Court of Appeals, G.R. No. 145578, 18
Penal Code, or estafa with abuse of November 2005)
confidence. It may be committed by a
corporation or other juridical entity or by Although these pieces of evidence show that
natural persons. (Ibid) respondent signed the Trust Receipt
Agreements, they do not show that he signed
The person signing the trust receipt for the them in his personal capacity. On the bottom
corporation is not solidarily liable with the right corner of the agreements are two (2)
entrustee-corporation for the civil liability lines: one for the "NAME OF
arising from the criminal offense. He may, CORPORATION," and the other for
however, be personally liable if he bound "AUTHORIZED SIGNATURE." In all
himself to pay the debt of the corporation agreements, "Camden Inds." was
under a separate contract of surety or handwritten as the name of the corporation,
guaranty (Prudential Bank v. Intermediate while respondent's signature appeared as the
authorized signature. Clearly, respondent

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affixed his signature only as Camden's

GENERAL BANKING LAW OF 2000
representative. Moreover, there was no
guaranty clause or a similar clause on the
The General Banking Law of 2000 (GBL) is
page that he signed that would have made
the law that generally governs the
him personally liable in case of default of
regulation, organization, and operation of
the company. (BDO Unibank, Inc., v. Choa,
banks, quasi-banks, and other quasi-entities.
G.R. No. 237553, 10 July 2019)
It primarily governs Universal Banks and
Remedied available Commercial Banks. It has suppletory
application to Thrift Banks, Rural Banks and
Criminal and civil action Cooperative Banks.
The Bank’s separate civil action to enforce Concentrate on Universal and Commercial
the civil liability arising out of a Trust Banks
Receipt agreement will prosper despite the
dismissal of the estafa case because of the State Policy
twin feature of a Trust Receipts Agreement.
SECTION 2, R.A. 8792. The State recognizes
For as long as the loan is not paid, the civil
the vital role of banks providing an
liability will remain. (Vintola v. Insular
environment conducive to the sustained
Bank of Asia and America, G.R. No. 73271,
development of the national economy and
29 May 1987)
the fiduciary nature of banking that
requires high standards of integrity and
In this case, the decision of the acquittal
performance.
expressly declared that the remedy of the
Bank is civil and not criminal in nature. This
In furtherance thereof, the State shall
amounts to a reservation of the civil action
promote and maintain a stable and efficient
in IBAA’s favor for the Court would not
banking and financial system that is globally
have dwelt on a civil liability that it had
competitive, dynamic and responsive to the
intended to extinguish by the same decision
demands of a developing economy.
(Ibid.)
Correlate with Secrecy of Bank Deposits
Respondent’s act of filing a civil action
Policy
against the former on account of the Trust
Receipt is not barred by Criminal Case No. Definition of Banks
14126. In the said criminal case, Sarmiento,
Jr. was fropped as an accused and as to SECTION 3, R.A. 8792. Banks shall refer to
Limpin, Jr., the civil action was not entities engaged in the lending of funds
expressly reserved in the same criminal obtained in the form of deposits.
action (Sarmiento Jr. v. Court of Appeals,
G.R. No. 122502, 27 December 2002).

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REPUBLIC V. SECURITY CREDIT AND has been lent out to such persons as the
ACCEPTANCE CORPORATION corporation deemed suitable therefor. An
investment company which loans out the
A bank has been defined as a “moneyed money of its customers, collects the interests
institute founded to facilitate the borrowing, and charges a commission to both borrower
lending, and safe-keeping of money and to and lender is a bank. (Ibid)
deal in notes, bills of exchange, and credits”
SECTION 3, R.A. 8792
(Republic v. Security Credit and Acceptance
Corporation, G.R. No. L-20583, 23 January
Classification of Banks
1967)
1. Universal banks;
If an institution let others deposit and it did
not let others loan from them, it is not 2. Commercial banks;
considered bank
3. Thrift banks, composed of: Savings and
A deposit made at the bank is a simple loan. mortgage banks; Stock savings and loan
It is not the “deposit” term contemplated in associations; and; Private development
credit transactions banks, as defined in the Republic Act No.
7906 (hereafter the “Thrift Banks Act”);
Elements
4. Rural banks, as defined in Republic Act
1. Entity engaged in Lending Funds
No. 73S3 (hereafter the "Rural Banks Act");
2. Funds are obtained from the public
(at least 20 depositors) 5. Cooperative banks, as defined in Republic
Act No 6938 (hereafter the "Cooperative
3. Such funds are in the form of
Code");
Deposit
6. Islamic banks as defined in Republic Act
Deposits – funds which give rise to a
No. 6848, otherwise known as the “Charter
creditor-debtor relationship between the
of Al Amanah Islamic Investment Bank of
depositor and the bank
the Philippines”; and
Petitioners is engaged in banking operations
7. Other classifications of banks as
without the authority required therefore by
determined by the Monetary Board of the
the General Banking Act (Republic Act No.
Bangko Sentral ng Pilipinas.
337) in violation of Sections 2 and 6 thereof.
In consequence of a propaganda campaign Universal banks
therefor, a total of 59, 643 savings account
deposits have been made by the public with SECTION 23, R.A. 8792
the corporation and its 74 branches, with an
aggregate deposit of P1,689,136.74, which

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A universal bank shall have the authority to SECTION 29, R.A. 8792
exercise, in addition to the powers
authorized for a commercial bank in Section A commercial bank may invest only in the
29, the powers of an investment house as equities of allied enterprises as may be
provided in existing laws and the power to determined by the Monetary Board.
invest in non-allied enterprises as provided
in this Act. The total investment in equities of allied
enterprises shall not exceed thirty-five
SECTION 24, R.A. 8792 percent (35%) of the net worth of the bank;
and
The total investment in equities of allied and
non-allied enterprises shall not exceed fifty The equity investment in any one enterprise
percent (50%) of the net worth of the bank shall not exceed twenty-five percent (25%)
of tile net worth of the bank.
The equity investment in any one enterprise,
whether allied or non-allied, shall not Only universal banks may invest in non-
exceed twenty-five percent (25%) of the net allied enterprises
worth of the bank.
Distinction of Banks from Quasi-Banks
Commercial Banks and Trust Entities
SECTION 29, R.A. 8792 SECTION 6, R.A. 8792
A commercial bank shall have, in addition to No person or entity shall engage in banking
the general powers incident to corporations, operations or quasibanking functions
all such powers as may be necessary to carry without authority from the Bangko Sentral:
on the business of commercial banking such
Provided, however, That an entity
as accepting drafts and issuing letters of
credit discounting and negotiating authorized by the Bangko Sentral to perform
promissory notes, drafts, bills of exchange, universal or commercial banking functions
and other evidences of debt; accepting or shall likewise have the authority to engage
creating demand deposits; receiving other in quasi-banking functions.
types of deposits and deposit substitutes;
buying and selling foreign exchange and Quasi-banks - entities engaged in the
gold or silver bullion; acquiring marketable borrowing of funds through the issuance,
bonds and other debt securities; and endorsement or assignment with recourse or
extending credit acceptance of deposit substitutes for
purposes of re-lending or purchasing of
A savings bank cannot issue letters of credit receivables and other obligations.
Demand deposit – a deposit immediately

withdrawn upon demand BANKS QUASI-BANKS
Obtain funds from Borrowing funds
Time deposit – deductions of penalties upon the public in the through issuance
withdrawal of deposit because it is form of deposits endorsement or
committed upon a specified period

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assignment with through them, either for their own account

recourse or or for the account of others”
acceptance of
deposit substitutes It need not be elaborated that pawnshops are
for purpose of non-banks/banking institutions. Moreover,
relending or the nature of their business activities
purchasing partakes that of a financial intermediary in
receivables that its principal function is lending.
Deposits are Not insured
insured with the Bank Powers and Liabilities
PDIC
Corporate Powers
With Creditor- Without Creditor-
Debtor Debtor 1. Acquire Ownership of Real Property
Relationship Relationship
2. Invest in Allied or Non-Allied
Enterprises
BANAS V. ASIA PACIFIC FINANCE
Ownership of Real Property
CORPORATION
A bank may acquire, hold or convey real
Purchase of receivables at a discount, well property under the following circumstances:
within the purview of “investing,
reinvesting, or trading in securities” which 1. Such as shall be mortgaged to it in
good faith by way of security for
an investment company, like ASIA
debts;
PACIFIC, is authorized to perform does not 2. Such as shall be conveyed to it in
constitute banking since the funds satisfaction of debts previously
supposedly “lent” to petitioners have not contracted in the course of its
been shown to have been obtained from the dealings; or
public by way of deposits, hence, the 3. Such as it shall purchase at sales
inapplicability of banking laws under judgments, decrees,
mortgages, or trust deeds held by it
and such as it shall purchase to
secure debts due it.
FIRST PLANTERS PAWNSHOP, INC. V.
CIR Any real property acquired or held under the
circumstances enumerated in the above
Financial intermediaries are defined as paragraph shall be disposed of by the bank
“persons or entities whose principal within a period of five (5) years or as may
functions include the lending, investing, or be prescribed by the Monetary Board
placement of funds or evidences of
With respect to ownership of real property,
indebtedness or equity deposited with them, remember the five-year limitation.
acquired by them, or otherwise coursed

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It is not a business of the bank to engage in losses made by the bank throughout the
real estate, getting real estate is just an years.
incident to the security they get from real
estate mortgages. As such, they are only
allowed to own real properties – real or UNIVERSAL COMMERCI
other properties acquired (ROPA), may only BANK AL BANK
be held for 5 years. TOTAL 50% of the 35% of the
INVESTMEN bank’s net bank’s net
Beyond 5 years, the BSP may already
question the bank on why are they not T IN worth worth
selling the real property or that it may not EQUITIES
be a realizable asset anymore. OF ALLIED
ENTERPRIS
Banks follow risk-based capitalization ES
TOTAL 50% of the Cannot invest
REGISTER OF DEEDS OF MANILA V. INVESTMEN bank’s net
CHINA BANKING CORPORATION T IN worth
EQUITIES
China Banking Corporation, an alien owned OF NON-
bank, cannot acquire ownership of the land ALLIED
ceded to it by the Pangilinan Spouses ENTERPRIS
wherein the subject land was used to cover ES
the civil liability of the latter. Assuming, EQUITY 25% of the 25% of the
arguendo, that under the provisions of the INVESTMEN bank’s net bank’s net
aforesaid Act any commercial bank, whether T IN ANY worth worth
alien-owned or controlled or not, may ONE
purchase and hold real estate for the specific ENTERPRIS
purposes and in the particular cases E
enumerated in Section 25 thereof, the case
does not fall under any of the exceptions
found in Section 25 of R.A. 337 Bank Powers and Liabilities
(Register of Deeds of Manila v. China Banking and Incidental Powers

Banking Corporation, G.R. No. L-11964, 28
April 1962) SECTION 29, R.A. 8792
The capital is different from net worth 1. accepting drafts and issuing letters of
obligation credit;
2. discounting and negotiating
For the capital, outstanding capital stock promissory notes, drafts, bills of
cannot be relied. One should deduct the exchange, and other evidences of
debt;

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3. accepting or creating demand #5 – if the safety deposit box is accessed,

deposits; bank is liable, tempered, whether the
depositor is negligent
4. receiving other types of deposits and
deposit substitutes; buying and When? If the person who accessed the safety
selling foreign exchange and gold or deposit box was not verified by the bank
silver bullion; (contributory negligence)
5. acquiring marketable bonds and #1,2,3, 4 – deposit transaction

other debt securities; and extending
credit, subject to such rules as the Enumeration is not exclusive
Monetary Board may promulgate.
SECTION 53.3, R.A. 8792
Other banking services
The law says that a bank can perform such
SECTION 53, R.A. 8792 other services for their customers as are not
incompatible with banking business
1. Receive in custody funds, documents
and valuable objects; Investment Management Agreement
2. Act as financial agent and buy and PANLILIO V. CITIBANK

sell, by order of and for the account
of their customers, shares, evidences An investment management agreement
of indebtedness and all types of which may be exercised by a banking
securities; institution, which created a principal-agent
relationship between petitioners as
3. Make collections and payments for
principals and respondents as agent for
the account of others and perform
investment purposes does not create a trust
such other services for their
or an ordinary bank deposit; hence no
customers as are not incompatible
trustor-trustee-beneficiary or even borrower-
with banking business;
lender relationship existed between
4. Upon prior approval of the Monetary petitioners and respondent. Respondent
Board, act as managing agent, purchased the LTCPs only as agent of
adviser, consultant or administrator petitioners; thus, the latter assumed all
of investment obligations or inherent risks entailed by the
management/advisory/consultancy transaction (Panlilio v. Citibank, N.A., G.R.
accounts; and No. 156335, 28 November 2007)
5. Rent out safety deposit boxes.
The bank is just an agent of the principal. It
These are done by the bank in the concept of is not a trustor.
a depositary except #5. #5 is governed by
law on lease.

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Foreclosure of Real Estate Mortgage; The shorter redemption period should also
Period of Redemption redound to the benefit of a Non-bank
assignee of the Mortgagee since by virtue of
SECTION 47, R.A. 8792 such assignment, the former is deemed to
have stepped into the shoes of the latter
General rule: The mortgagor or debtor (White Marketing Development Corporation
whose real property has been sold for the v. Grandwood Furniture & Woodwork, Inc.,
G.R. No. 222407, 23 November 2016)
full or partial payment of his obligation shall
have the right within one year after the sale
of the real estate, to redeem the property
GOLDENWAY MERCHANDISING
CORPORATION V. EQUITABLE PCI BANK
Exception: Juridical persons whose
property is being sold pursuant to an
extrajudicial foreclosure, shall have the right The difference in the treatment of juridical
to redeem the property within three (3) persons and natural persons was based on
months after foreclosure, or from the nature of the properties foreclosed
Registration of the Certificate of Sale whether these are used as residence, for
(whichever is earlier) (Annotated at the back which the more liberal one-year redemption
of the title) whichever is earlier period is retained, or used for industrial or
commercial purposes, in which case a
Greater remedy for the individual debtor. shorter term is deemed necessary to reduce
the period of uncertainty in the ownership of
This presupposes that the mortgagee is the property and enable mortgagee-banks to
bank dispose sooner of these acquired assets
(Goldenway Merchandising Corporation v.
Assignment – 3 month rule applies even if Equitable PCI Bank, G.R. No. 195540, 13
assignee is not a bank March 2013)
Requisites in Order to Apply Period for Diligence required of banks

Juridical Persons
Highest degree of diligence
1. The Mortgagor is a Juridical Person
2. The Mortgagor is a Bank SANDEJAS V. IGNACIO
3. Extra-judicial Foreclosure
The banking system has become an
Cases indispensible institution in the modern world
and plays a vital role in the economic life of
WHITE MARKETING DEVELOPMENT civilized society – banks have attained an
CORPORATION V. GRANDWOOD ubiquitous presence among the people, who
FURNITURE & WOODWORK, INC.
have come to regard them with respect and
even gratitude and most of all, confidence,

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and it is for this reason, banks should guard integrity and performance are even
against injury attributable to negligence or required of it. By the nature of its
bad faith on its part (Sandejas v. Ignacio, functions, a bank is “under
G.R. No. 155033, 19 December 2007 obligation to treat the accounts of its
depositors with meticulous care,
Diligence Required of Banks
always having in mind the fiduciary
nature of their relationship.
With respect to the relation of the bank to its
depositors, it is highest degree of diligence.
With respect to other commercial
transactions it engages with the public, just Banks’ Obligation on Deposit Accounts is
diligence of an ordinary person. Fiduciary and of the Highest Standards
The bank in taking the deposits would lend CONSOLIDATED BANK AND TRUST
it to the public. There is a possibility that the CORPORATION v. CA
bank, if they will not be required to exercise
highest degree of diligence, baka maubos ❖ Bank tellers must exercise a high
nila ung deposits mo and hindi na nila degree of diligence in insuring that
maibalik sayo. That is why the law they return the passbook only to the
impresses on them highest degree of depositor or to his authorized
diligence if it is a deposit transaction. If it is representative. For failing to return
a commercial transaction with the public, the passbook of Calapre, the
highest degree of diligence is not required authorized representative of L.C.
and ordinary diligence lang ang iaaply. Diaz, Solidbank and Teller No. 6
presumptively failed to observe such
BANK OF AMERICA v. PHILIPPINE high degree of diligence in
RACING CLUB (2009) safeguarding the passbook, and in
insuring its return to the party
❖ The banking industry is impressed authorized to receive the same.
with public interest, and it is their
duty to protect in return their many
clients and depositors who transact Q: Are there instances wherein the bank
business with them. will not be 100% liable?
A: Yes. If there are contributory negligence
by the depositor, hinahati ung obligation.
Usually, 60% in favor of the bank and 40%
BPI v. CASA MONTESSORI
in favor of the depositor.
INTERNATIONALE (2004)
❖ The highest degree of diligence is Banks can be made liable to innocent

expected, and high standards of third persons for acts of its employees

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under the Doctrine of Apparent Ipapakita, pinirmahan. My Bank BPI knows

Authority. my signature. So BDO, before paying,
kailangan muna icheck kay BPI kung pirma
CITYSTATE SAVINGS BANK v. TOBIAS ko ba talaga yon. Ung bank account ni Pedro
(2018) sa BDO, BDO ang nakakaalam kung si
Pedro talaga ung nagdeposito ng cheke at
kung bank account niya talaga yon.
❖ Petitioner is still liable even though
the proximate cause of respondents’
Who exercised due diligence? BDO insofar
los is the misappropriation of
as Pedro is concerned; BPI insofar as I am
Robles, its branch manager. Robles
concerned. Ang attribution ng liability
has been vested with the apparent or
would depend on who between these two
implied authority to act for the
banks did not discharge their required
petitioner in offering and facilitating
diligence.
banking transactions. In this light,
respondents cannot be blamed for
Kung ung bangko ko, nag go sa funds at
believing that Robles has the
sinabi na cleared ung cheke even if pag
authority to transact for and on
tinignan mo iba ung pirma, my bank (BPI)
behalf of the petitioner and for
would become liable.
relying upon the representations
made by him. After all, Robles as
If on the other end, it will be proven na
branch manager is recognized
fictitious ung account ni Pedro – I issued an
“within his field and as to third
account (check?) in favour of Pedro Santos
persons as the general agent and is
at napunta siya sa ibang tao, si Juan dela
in general charge of the corporation,
Cruz. Si Juan dela Cruz nakapag open ng
with apparent authority
Pedro Santos account sa BDO – then, BDO
commensurate with the ordinary
would also have liability.
business entrusted him and the usual
course and conduct thereof.”
Yun ung mga situation na nagakaroon ng
allocation of liability as between two banks.
Liability of a Negligent Collecting Bank
and Drawee Bank
Did my bank discharge its function by
verifying that the check was really issued
Let’s say ang bangko ko ay BPI, inissue ko
by me by verifying my signature?
ung cheke kay Pedro. Si Pedro dineposit ung
cheke sa bank account niya sa BDO. In that
Did the other bank discharged its
example, BDO ang makakakita ng cheke ko
function by verifying that the check is
kasi siya ang tumanggap ng cheke.
being deposited, especially crossed checks,
to the accounts to which they should be
So may clearing process wherein my
deposited?
account would be sent to BPI – that check.

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PHILIPPINE NATIONAL BANK v. GIRON-

Nakalagay Pedro Santos pero nadeposit sa ROQUE (2019)
account ni Juan dela Cruz. May possible
liability ung kabila kasi pinayagang
❖ However, and as unanimously found
madeposit kay Juan dela Cruz when the
by the courts a quo: (a) Respondent
check states Pedro Santos.
Felina did not avail of the second
load, as her signature in the subject
There would be allocation of liabilities as
check was forged; (b)Respondent
between the two banks – collecting bank and
Gloria was not duly authorized to
drawee bank.
obtain the second loan from PNB;
and (c) PNB was remiss of the
diligence required of a banking
Shared Liability – 60/40 Ratio
institution in allowing the
withdrawal and encashment of the
CENTRAL BANK OF THE PHILIPPINES v. subject check representing the
CITYTRUST BANKING CORPORATION second loan. Thus, the Bank was
(2009) wrong when it commenced
extrajudicial foreclosure
❖ Petitioner Banks’s senior teller proceedings on Respondent’s real
wrongfully verified the signature on property.
the 2 checks presented leading to the
encashment of the same. Citytrust’s
failure to timely examine its account, PNB v. RAYMUNDO (2016)
cancel the checks and notify
petitioner of their alleged loss/theft
❖ Payment of the amounts of checks
should mitigate petitioner’s liability,
without previously clearing them
in accordance with Article 2179 of
with the drawee bank, especially so
the Civil Code which provides that if
where the drawee bank is a foreign
the plaintiff’s negligence was only
bank and the amounts involved
contributory, the immediate and
were large, is contrary to normal or
proximate cause of the injury being
ordinary banking practice. A bank’s
the defendant’s lack of due care, the
disregard of its own banking policy
plaintiff may recover damages, but
amounts to gross negligence, which
the courts shall mitigate the damages
is described as “negligence
awarded.
characterized by the want of even
slight care, acting or omitting to act
in a situation where there is duty to
Cases when a Bank was Adjudged
act, not inadvertently but willfully
Negligent
and unintentionally with a conscious

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indifference to consequences insofar nakarating na sa Pilipinas, hindi natin

as other persons may be affected. kayang itrace kung di natin ililista. There is
that obligation because it is imposed as a
matter of regulation to list down.
Dun sa example ko (BDO and BPI
example), binayaran agad ni BDO hindi man
lang cinlarify kay BPI kung pirma ko ung Cases when a Bank was NOT Adjudged
nasa cheke, then possible na hindi makaka Negligent
recover si BDO kay BPI.
This case is a commercial transaction.
REYES v. CA (2019)
BPI v. SPOUSES QUIAOIT (2019)
❖ The respondent bank was not
❖ BPI insists that there is no law required to exert more than the
requiring it to list down the serial diligence of a good father of a family
numbers of the dollar bills. However, in regard to the sale and issuance of
it is well settled that the diligence the subject foreign exchange demand
required of banks is more than that draft. The case at bar does not
of a good father of a family. In involve the handling of petitioners’
releasing the dollar bills without deposit, if any, with the respondent
listing down their serial numbers, bank. Instead, the relationship
BPI failed to exercise the highest involved was that of a buyer and
degree of care and diligence seller, that is, between the
required of it. Had BPI listed down respondent bank as the seller of the
the serial numbers, BPI’s subject foreign exchange demand
presentation of a copy of such listed draft, and PRCI as the buyer of the
serial numbers would establish same, with the 20th Asian Racing
whether the returned 44 dollar bills conference Secretariat in Sydney,
came from BPI or not. Australia as the payee thereof.
For foreign currency, there is a different

procedure. Irerequire kayo ng bangko ilista SPOUSES CARBONELL v. METROPOLITAN
isa isa ung serial numbers since hindi natin BANK AND TRUST COMPANY (2017)
siya pera and lesser ung familiarity. And
under international agreements, may mga ❖ Respondent Bank cannot be made
commitments tayo to prevent money liable for damages by the petitioners
laundering. So halimbawa, certain serial even if the former release to the
numbers were already tagged by the US latter counterfeit US dollar bills
Treasury as part of money laundering at

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which they knowingly used in their attributed to it, Obviously, there is

trip to Bangkok. The relationship also no reason to adjudge the bank
existing between the petitioners and liable for damages.
the respondent that resulted from a
contract of loan was that of a
creditor-debtor. Even if the law In this case, the Bank was exercising
imposed high standard on the latter diligence because there were conflicting
as a bank by virtue of the fiduciary claims.
nature of its banking business, bad
faith or gross negligence amounting
NATURE OF BANK FUNDS AND
to bad faith was absent. Hence,
BANK DEPOSITS
there is simply no legal basis for
holding the respondent liable for
moral and exemplary damages. CONSOLIDATED BANK AND TRUST
Given the situation being one of the CORPORATION v. CA (2003)
damnum absque injuria, they could
not be compensated for the damage ❖ The contract between the bank and
sustained. its depositor is governed by the
provisions of the Civil Code on
ALLIED BANKING CORPORATION v. SIA simple loan. Article 1980 of the Civil
(2019) Code expressly provides that
“…savings…deposits of money in
banks and similar institutions shall
❖ Allied Bank could not be faulted
be governed by the provisions
when they temporarily froze S.A. No
concerning simple loan.” There is a
0570231382 of Elizabeth pending
debtor-creditor relationship between
the settlement of the conflicting
the bank and its depositor. The bank
claims among See’s heirs. While
is the debtor and the depositor is the
Elizabeth was the only one expressly
creditor. The depositor lends the
names as depositor of S.A. No
bank money and the bank agrees to
0570231382, the Deed of Assignment
pay the depositor on demand. The
dated December 13, 1999, indicates
savings deposit agreement between
that the subject savings account is
the bank and the depositor is the
essentially a joint account between
contract that determines the rights
her and her father. The settlement
and obligations of the parties.
payment for Orient Bank was one of
the sources of the deposits in S.A. No
0570231382, making See a co- Types of Deposits
owner, and effectively a co-
depositor, of the said account. No 1. Time Deposit – payment of which cannot
breach of contract could be be required within such a specified number

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of days. During the period, the money against public policy. The Supreme Court
deposited cannot be withdrawn. The banks can void the interest rate that was applied if
use this money to lend others. That is why the Court said that the interest is excessive,
such accounts. Depositors are paid high iniquitous, unconscionable and exorbitant.
interest rates as compensation for the use of 3% is the usual credit card rate. 3%
money by the Bank. multiplied by 12 months is 36% per year.
6% lang ang legal rate of interest – in some
2. Savings Deposit – Under the fine prints if cases, SC said that 3% is unconscionable.
you deposit today, you cannot withdraw the
amount until 60 days later. The bank can Note: Five Six Scheme– 20% interest per
lend out such funds; that is why it pays month - excessive
interests on such deposits.
Escalation Clause
Note: Parehas na savings, ang difference
lang ung time deposit mas mahaba. VILLA CRISTA MONTE REALTY &
DEVELOPMENT CORPORATION v.
3. Demand Deposits – are all those EQUITABLE PCI BANK (2018)
liabilities of BSP and of other banks which
are denominated in Philippine currency and
❖ Escalation clause refers to the
are subject to payment in legal tender upon
stipulation allowing increases in the
demand by the presentation (depositor’s)
interest rates agreed upon by the
checks. No interest is paid by the bank
contracting parties. There is
because the depositor can take out his funds
nothing inherently wrong with the
ay time. It is called demand deposit because
escalation clause because it is
depositor can withdraw the money he
validly stipulated in commercial
deposited on the very same day when he
contracts as one of the means
deposited it.
adopted to maintain fiscal stability
and to retain the value of money in
Stipulation of Interests
long term contracts. It is valid per
se.
Usury Law is suspended but it does not
mean that Usury Law is abolished. Under
Escalation clause is valid provided it follows
the present rule, pareparehas na silang 6%.
mutuality of contracts. Escalation Clauses
which are unilaterally decided by the Bank
We know the basic rules. The interest rate
are not allowed. It will be voided because it
must be agreed upon, in writing, and
violates mutuality of contracts.
reasonable. The courts can still adjudicate
even if there is no ceiling required by the
Usury Law – that certain interests agreed LIMITATIONS ON LOANS AND
upon by the parties are very onerous or OTHER CREDIT

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ACCOMODATIONS entity shall at no time exceed 25% of the

net worth of such bank. This may be
Real Estate increased by an additional 10% of the net
If you would be securing a loan and provide worth of such bank provided the additional
your real estate as your collateral, we have liabilities of any borrower are adequately
75-60% rule. You can only get loan secured.
amount equivalent to 75% of the land and
60% of the improvement. That makes the To understand this, it is as simple as the
bank secured by 25% or 40% more. Because bank should not put all its eggs in one
if I will lend you the whole value of your basket. Hindi porket may gustong
property, what would prevent you from just mangutang nang mangutang, papautangin
leaving the property to me? Nakuha mo na niya isang group of debtors lang kasi if that
ung fair market value niya eh. Kailangan group of debtors default magiging
may motivation ka as borrower to still pay problematic ung bangko kasi lahat ng
for the loan and recover the property. pinautang niya nasa isang group lang. That
is why there is a Single Borrower’s Limit.
On Security of Chattels and Intangible For this purpose, related entities are
Properties considered as one borrower.
75% of the appraised value of the
security, and such loans and other SECTION 35.4. Even if a parent
accommodations may be made to title holder corporation, partnership,
of chattels of intangible properties or his association, entity or an individual
assignees. who owns or controls a majority
interest in such entities has no
The Banker is also obligated to ascertain the liability to the bank, the Monetary
capability of the borrower and to ascertain Board may prescribe the
the purpose of the loan. The Bank can later combination of the liabilities of
on invalidate the loan and make it subsidiary corporations or
immediately due and demandable if the members of the partnership,
proceeds were used for a purpose different association, entity or such
as declared to the bank individual under certain
circumstances, including but not
SINGLE BORROWER’S LIMIT limited to any of the following
(SBL) situations: (a) the parent corporation,
partnership, association, entity or
individual guarantees the repayment
The total amount of loans, credit
of the liabilities; (b) the liabilities
accommodations and guarantees that may be
were incurred for the
extended by a bank to any person,
accommodation of the parent
partnership, association, corporation or other
corporation or another subsidiary or

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of the partnership or association or

entity or such individual; or (c) the Excluded from SBL – found in Section 35.5
subsidiaries though separate entities
operate merely as departments or SECTION 35.5. For purposes of this
divisions of a single entity. Section, loans, other credit
accommodations and guarantees
Due to the pandemic, this is temporarily shall exclude:
increased to 30% only for a period 6
months. The BSP recognizes as one of the (a) loans and other credit
regulatory reliefs that the banks may accommodations secured by
have to give greater loan exposure to obligations of the Bangko Sentral or
certain businesses. of the Philippine Government; (b)
loans and other credit
Prescribed ceilings are provided under accommodations fully guaranteed by
Section 35.3 the government as to the payment of
principal and interest; (c) loans and
SECTION 35.3. The above prescribed other credit accommodations
ceilings shall include: covered by assignment of deposits
maintained in the lending bank and
(a) the direct liability of the maker or held in the Philippines; (d) loans,
acceptor of paper discounted with or credit accommodations and
sold to such bank and the liability of acceptances under letters of credit to
a general indorser, drawer or the extent covered by margin
guarantor who obtains a loan or other deposits; and (e) other loans or credit
credit accommodation from or accommodations which the
discounts paper with or sells papers Monetary Board may from time to
to such bank; (b) in the case of an time, specify as non-risk items
individual who owns or controls a
majority interest in a corporation, These are low risk guaranteed obligations
partnership, association or any other kaya excluded sila from the computation.
entity, the liabilities of said entities
to such bank; (c) in the case of a
RESTRICTIONS ON BANK
corporation, all liabilities to such EXPOSURE TO DIRECTORS,
bank of all subsidiaries in which OFFICERS, STOCKHOLDERS, AND
such corporation owns or controls a THEIR RELATED INTERESTS
majority interest; and (d) in the case (DOSRI)
of a partnership, association or other
entity, the liabilities of the members Restrictions, not total prohibition, are
thereof to such bank. imposed on borrowings and security

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arrangement by directors, officers, book value of their paid-in capital

stockholders and their related interest contribution in the bank.
(DOSRI).
Credit accommodations and advances
No director or officer of any bank shall, granted to officers under a fringe benefit
directly or indirectly, for himself or as of the plan approved by the Bangko Sentral is not
representative or agent of others: (a) borrow subject to individual limit.
from such bank; (b) shall become guarantor,
indorser or surety for loans from such bank Q: Who are considered Related Interests
to others; nor (c) in manner be an obligor or A: M.B Circular No. 423, Series of 2004
incur contractual liability to the bank. 1. Spouse or relative within the first
degree of consanguinity or affinity, or
PROCEDURAL REQUIREMENTS FOR A relative by legal adoption, of a director,
DOSRI TRANSACTION officer or stockholder of a bank
1. Approval Requirement – the account
should be upon written approval of the 2. Partnership of which a director,
majority of all the directors of the officer or stockholder of a bank or his
lending bank, excluding the director spouse or relative within the first degree
included of consanguinity or affinity, or relative
2. Recording Requirement – the by legal adoption, is a general partner.
resolution approving the loan shall be
entered in the records of the bank. 3. Co-owner with the director, officer,
3. Reportorial Requirement – a copy of stockholder or his spouse or relative
the entry shall be transmitted forthwith within the first degree of consanguinity
to the Supervising and Examination or affinity, or relative by legal adoption,
Sector of the BSP. of the property or interest or right
mortgaged, pledged or assigned to
SUBSTANTIVE REQUIREMENTS FOR A secure the loans or other credit
DOSRI TRANSACTION accommodations, except when the
1. Arms Length Rule – the account should mortgage, pledge or assignment covers
be upon terms no less favourable to the only said co-owner's undivided interest
bank than those offered to others.
2. Aggregate Ceiling Requirement – 15% 4. Corporation, association, or firm of
of the total loan portfolio of the bank, or which a director or officer of the bank,
100% of the combined capital accounts or his spouse is also a director or officer
whichever is lower. of such corporation, association or firm,
3. Individual Ceiling Requirement – except: (a) where the securities of such
limited to an amount equivalent to their corporation, association or firm are listed
respective encumbered deposits and and traded in the big board or
commercial and industrial board of

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domestic stock exchanges and less than percent (20%) of the subscribed capital
fifty percent (50%) of the voting stock of a substantial stockholder of the
thereof is owned by any one person or lending bank or which controls majority
by persons related to each other within interest of the bank pursuant to
the first degree of consanguinity or Subsection X303.1 of the MOR.
affinity; or (b) where the director, officer
or stockholder of the bank sits as a 8. Corporation, association or firm in
representative of the bank in the board of which the lending bank and/or its
directors of such corporation: Provided, parent/subsidiary holds or owns at least
That the bank representative shall not twenty percent (20%) of the subscribed
have any equity interest in the borrower capital of such corporation, or in the
corporation except for the minimum equity of such association or firm, or
shares required by law, rules and has an existing management contract or
regulations, or by the by-laws of the any similar arrangement with the lending
corporation: Provided, further, that the bank or its parent/subsidiary.
borrowing corporation is not among
those mentioned in items e(5), e(6), e(7) Effect of Violation of the DOSRI and SBL
and e(8) of this Section; Restrictions
5. Corporation, association or firm of The bank or the officers responsible for

which any or a group of directors, the approval and grant of the DOSRI
officers, stockholders of the lending loan would be subject to sanctions but the
bank and/or their spouses or relatives loan is valid because this is not prohibition
within the first degree of consanguinity against DOSRI. This is just a restriction
or affinity, or relative by legal adoption, against DOSRI loans.
hold or own at least twenty percent
(20%) of the subscribed capital of such
corporation, or of the equity of such
NEW CENTRAL BANK ACT
association or firm;
6. Corporation, association or firm Ang New Central Bank Act may panibago
wholly or majority-owned or controlled nanaman siyang amendment (RA 11211).
by any related entity or a group of Same pa rin ung NCBA (RA7653) pero
related entities mentioned in Items 2, 4 please take note that you are able to read in
and 5 of this Section. full RA 11211 kasi ung inaral ninyo about
receivership, nabago na siya.
7. Corporation, association or firm
which owns or controls directly or We know the Central Bank is the central
indirectly whether singly or as part of a monetary authority. And we know those
group of related interest at least twenty three words – money, banking and credit.
It is granted with the power of supervision

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and examination. It is a regulatory agency The Bangko Sentral shall promote

but its power is more of supervision and financial stability and closely work
examination. You already know the with the National Government,
responsibilities of the BSP under Section 3. including, but not limited to, the
(What is the primary objective of BSP – Department of Finance, Securities
usual question) and Exchange Commission, the
Insurance Commission, and the
SECTION 3. Responsibility and Philippine Deposit Insurance
Primary Objective. — The Bangko Corporation.
Sentral shall provide policy
directions in the areas of money, The Bangko Sentral shall oversee
banking, and credit. It shall have the payment and settlement
supervision over the operations of systems in the Philippines,
banks and exercise such regulatory including critical financial market
and examination powers as provided infrastructures, in order to promote
in this Act and other pertinent laws sound and prudent practices
over the quasi-banking operations of consistent with the maintenance of
non-bank financial institutions. As financial stability.
may be determined by the Monetary
Board, it shall likewise exercise
In the attainment of its objectives,
regulatory and examination powers
the Bangko Sentral shall promote
over money service businesses,
broad and convenient access to high
credit granting businesses, and
quality financial services and
payment system operators. The
consider the interest of the general
Monetary Board is hereby
public.
empowered to authorize entities or
persons to engage in money service
businesses. In connection with the objective of BSP to
oversee the payment and settlement of
system: Wirecard in Germany (long
The primary objective of the Bangko
example)
Sentral is to maintain price stability
conducive to a balanced and
sustainable growth of the economy In Germany, may nawalang billions of
and employment. It shall also dollars.
promote and maintain monetary
stability and the convertibility of Kapag ikaw ay isang settlement system,
the peso. nauuna binibigay sakanila ung pera bago
nireremit. Hindi lahat kayang magkaroon
ng payment and settlement system so

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normally nageengage sila ng 3rd party. Ung admit na meron kaming mga empleyado na
3rd party na yon pag may binili ka online nagbigay ng fictitious documents making it
(like PayPal), di naman sila bangko pero sila appear that they have deposits in the
ung nakakatanggap ng payment ninyo tapos Philippines. Off the hook lang sila na hindi
sila magbabayad doon sa merchant na na launder ung pera dito kasi hindi dumating
binilihan mo. There is a time na nasakanila ung pera sa Pilipinas pero nagkaroon ng
ung pera at ang cash ay may interest. In internal fraud. An official communication
reality, sila ung nagbebenefit doon. Hindi which was supposed to be sent by BDO and
niyo yan marerealize hanggat hindi natin BPI were intercepted by a low ranking
imultiply kung magkano ung perang employee. Ung counterpart ng SGV sa
mapupunta sakanila. Germany (Ernest Young) nagpadala – BDO
BPI can you confirm that Wirecard has
deposit in your banking institution. The low
If I tell you that your demand deposit
account will only earn 0.5 %, sabihin mo ranking employee using the letterhead,
sakin ang liit naman. Pero if you will earn signing a fictitious officer confirmed that
yes there are funds in the Philippines.
0.5% from money that you don’t own and if
we’re talking about billions of dollars, it
wouldn’t hurt to get the interest of that Hindi siya katulad ng Bangladesh heist na
money. So sino nakakakuha non? Yung mga pumasok ung pera tapos si RCBC inallow na
payment processors. ma withdraw ung billion of pesos. For BDO
and BPI may nag intercept/reply confirming
There are certain days na nasakanila ung na may pera sa Pilipinas. So ung mga
pera, that is why they are also supervised Wirecard people akala nila may pera sila sa
kasi baka naman when it is due to be paid to Pilipinas. When they checked, zero deposits
the merchants, wala na silang pera. So and they are looking for no less than 1
Billion dollars.
definitely meron silang reserve requirement
at meron din silang requisites on
capitalization because while hindi ko So BSP played primary role because we
dineposito sakanila as the buyer, sakanila don’t want people to think that we don’t
dumaan ung bayad ko for the merchant. have good banking system.
Ung mga credit card ninyo minsan nakikita

MONETARY BOARD POWER AND
niyo may aggregator, may payment and FUNCTIONS
settlement system, so meron silang
opportunity na napupunta sakanila. And that
Wirecard transaction in Germany is almost We know that we have a BSP governor with
similar to that. Nung hinanap na ung pera 5 members from the private sector and 1
sabi andito na sa Pilipinas. Sabi ng BPI and member from the Cabinet. We know their
BDO, hindi nila siya depositor pero we qualifications.

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Philippines. Whenever the

There are 7 members inclusive of the designated Cabinet Member is
Governor and the Cabinet member. These unable to attend a meeting of the
people decides on money, banking and Board, he shall designate an
credit policies so they have to be experts in Undersecretary in his Department to
those fields except the member of the attend as his alternate; and
Cabinet. This is a lucrative job – you have
insurance, indemnification and maganda ang (c) five (5) members who shall
packages because they have greater come from the private sector, all of
responsibility. whom shall serve full-time:
Provided, however, That of the
SECTION 6. Composition of the members first appointed under the
Monetary Board. — The powers and provisions of this subsection, three
functions of the Bangko Sentral shall (3) shall have a term of six (6) years,
be exercised by the Bangko Sentral and the other two (2), three (3) years.
Monetary Board, hereafter referred No member of the Monetary Board
to as the Monetary Board, composed may be reappointed more than once
of seven (7) members appointed by
the President of the Philippines for SECTION 8. Qualifications. — The
a term of six (6) years. members of the Monetary Board
must be natural-born citizens of the
(a) the Governor of the Bangko Philippines, at least thirty-five (35)
Sentral, who shall be the years of age, with the exception of
Chairman of the Monetary Board. the Governor who should at least be
The Governor of the Bangko Sentral forty (40) years of age, of good
shall be head of a department and his moral character, of unquestionable
appointment shall be subject to integrity, of known probity and
confirmation by the Commission on patriotism, and with recognized
Appointments. Whenever the competence in social and economic
Governor is unable to attend a disciplines.
meeting of the Board, he shall
designate a Deputy Governor to act SECTION 9. Disqualifications. — In
as his alternate: Provided, That in addition to the disqualifications
such event, the Monetary Board shall imposed by Republic Act No. 6713,
designate one of its members as a member of the Monetary Board is
acting Chairman; disqualified from being a director,
officer, employee, consultant,
(b) a member of the Cabinet to be lawyer, agent or stockholder of any
designated by the President of the bank, quasi-bank or any other

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institution which is subject to Subsidiary - more than 50% of its voting

supervision or examination by the stock of which is directly or indirectly
Bangko Sentral, in which case such owned, controlled or held with power to
member shall resign from, and divest vote by a bank or quasi-bank.
himself of any and all interests in
such institution before assumption of A subsidiary is part of the supervision
office as member of the Monetary because the bank may be funnelling its
Board. money towards its subsidiary.
The members of the Monetary Board Transfer or acquisitions of at least 10% of

coming from the private sector shall the voting shares in banks or quasi banks
not hold any other public office or shall require the prior approval of board
public employment during their because the BSP wants to see if the new
tenure.
shareholders, who would potentially
exercise control over the bank are also
No person shall be a member of the diligent, respectable person, good
Monetary Board if he has been backgrounds etc. Kung may background
connected directly with any siya ng fraud baka hindi iapprove ng BSP.
multilateral banking or financial
institution or has a substantial
interest in any private bank in the HOW THE BSP HANDLES BANKS
Philippines, within one (1) year prior IN DISTRESS
to his appointment; likewise, no
member of the Monetary Board shall This is usual question in the bar exam and
be employed in any such institution even in our examinations in UST.
within two (2) years after the
expiration of his term except when
he serves as an official representative 1. Conservatorship
of the Philippine Government to 2. Closure
such institution. 3. Liquidation
Power to Supervise and Examine Under the amendments to the NCBA, wala
ng receivership. May receiver pero the
The BSP shall have supervision over, and purpose of receivership is to proceed with
conduct regular/special examinations of liquidation. Wala na ung 90 days para tignan
banking institutions and quasi-banks, niya kung pwede pa niyang ma rehabilitate
including their subsidiaries and affiliates kasi kung kaya pa ma rehabilitate dapat
engaged in allied activities. nangyari na yun during conservatorship.

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In all these instances, the rule on Close Note: Hindi kailangan dumaan sa
Now- Hear Later applies. The BSP cannot receivership bago mag liquidation. If after
be enjoined in performing its functions conservatorship hindi ka pinakinggan and
under NCBA but judicial review is possible nagkaroon ng greater risk at lahat ng reasons
if there is showing of grave abuse of for receivership ay nandoon na, it can go
discretion resulting to lack or excess directly to liquidation.
jurisdiction. In such instance, petition of
certiorari must be filed but after the act and These are just acts of administration, no act
it has to be approved by the majority of of ownership. The idea is to collate all
shareholders. It must be done within 10 days assets.
from receipt of the order by the Board of
Directors. Hindi pwedeng magakaroon ng Conservatorship: Paaano ba natin
injuction prior because this is something that
macoconserve para macontinue ang
BSP can do.
business?
Receivership towards Liquidation: paano
Q: Bakit hindi pwedeng magkaroon ba natin magagawa para ma collate natin
muna ng hearing? lahat ng assets and hopefully mabayaran
A: It might result to bank runs, public panic natin as many creditors as possible?
or further dissipation of assets. Baka lalong
itago/ibenta ng directors/officers ung bank Please relate this to the PDIC. I want to
properties kasi alam nilang ipapasara na sila. highlight that amendments in NCBA deleted
In relation to PDIC, pwedeng bigyan ng tip Sections 31 and 32, and revised Section 30
ng mga directors ang mga kamag (no more powers of receivers). However, if
anak/kaibigan nila atsabihing mag withdraw you read PDIC as amended by RA 10846,
or mag splitting. dun niyo makikita ung powers and functions
of receiver.
Powers of Conservator
Conservatorship
In conservatorship, assets are still more than
SECTION 29. Appointment of
the liability but it is not available in cash
Conservator. — Whenever, on the
(illiquid). Pag hindi na yun ung situation,
basis of a report submitted by the
pupunta na sa receivership kasi insolvent na
appropriate supervising or examining
siya or liabilities are more than the asset.
department, the Monetary Board
When you go receivership, the path you are
finds that a bank or a quasi-bank is in
now taking is towards liquidation.
a state of continuing inability or
unwillingness to maintain a
In conservatorship, may chance pa gusto mo condition of liquidity deemed
lang maging liquid siya ulit kaya kailangan adequate to protect the interest of
mo ng conservator para mag administer ng depositors and creditors, the
mga properties. Monetary Board may appoint a

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conservator with such powers as the such remaining balance. The

Monetary Board shall deem Monetary Board may appoint a
necessary to take charge of the conservator connected with the
assets, liabilities, and the Bangko Sentral, in which case he
management thereof, reorganize the shall not be entitled to receive any
management, collect all monies and remuneration or emolument from the
debts due said institution, and Bangko Sentral during the
exercise all powers necessary to conservatorship. The expenses
restore its viability. The conservator attendant to the conservatorship shall
shall report and be responsible to the be borne by the bank or quasi-bank
Monetary Board and shall have the concerned.
power to overrule or revoke the
actions of the previous management
The Monetary Board shall terminate
and board of directors of the bank or the conservatorship when it is
quasi-bank.
satisfied that the institution can
continue to operate on its own and
The conservator should be competent the conservatorship is no longer
and knowledgeable in bank necessary. The conservatorship shall
operations and management. The likewise be terminated should the
conservatorship shall not exceed one Monetary Board, on the basis of the
(1) year. report of the conservator or of its
own findings, determine that the
The conservator shall receive continuance in business of the
remuneration to be fixed by the institution would involve probable
Monetary Board in an amount not to loss to its depositors or creditors, in
exceed two-thirds (2/3) of the salary which case the provisions of Section
30 shall apply.
of the president of the institution in
one (1) year, payable in twelve (12)
equal monthly payments: Provided, The conservator cannot nullify a valid action
That, if at any time within one-year but anything that is a defective contract
period, the conservatorship is pwede niyang action-an as can be seen in the
terminated on the ground that the cases. Pag valid contract, hindi siya
institution can operate on its own, pwedeng baguhin because it would amount
the conservator shall receive the to impairment of contract. Anything that
balance of the remuneration which has been entered into by the Board of
he would have received up to the end Directors and the officers prior to the
of the year; but if the conservatorship conservatorship, as long as they are valid
is terminated on other grounds, the transactions, cannot be changed by the
conservator shall not be entitled to conservator.

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3. Inability to continue business without

FIRST PHILIPPINES INTERNATIONAL BANK involving probable losses to its
v. CA (1996) depositors and creditors. (Section 30 [c],
NCBA)
4. Willful violation of a cease and desist
❖ While admittedly, the Central Bank
order under Section 37 that has become
law gives vast and far reaching
final, involving acts or transactions
powers to the conservator of a bank.
which amount to fraud or a dissipation
Such power, enormous and extensive
of the assets. (Section 30 [d], NCBA)
as they are, cannot extend to the post
5. Notification to the BSP or public
facto repudiation of perfected
announcement of a bank holiday. (Sec
transactions, otherwise they would
53, GBL)
infringe against the non-impairment
6. Suspension of payment of its deposit
clause of the Constitution.
liabilities continuously for more than 30
days (Sec 53, GBL)
7. Persisting in conducting its business in
REQUISITES TO SET ASIDE AN ORDER OF
an unsafe and unsound manner (Sec 56,
CONSERVATORSHIP
GBL)
1. The appropriate pleading must be filed
by the stockholders of record
Numbers 5-7 are additional grounds for
representing the majority of the capital
closure of a bank.
stock of the bank in proper court;
2. Said pleasing must be filed within 10
days from receipt of notice by said
majority stockholders of the order
Close Now- Hear Later Scheme
placing the bank under conservatorship;
and
3. There must be convincing proof, after CENTRAL BANK OF THE PHILIPPINES v.
hearing, that the action is plainly CA (1993)
arbitrary and made in bad faith. (Sec. 30)
❖ No prior hearing is necessary in
appointing a receiver and in closing
Closure the bank. It is enough that
subsequent judicial review is
Grounds for Closure of a Bank or Quasi- provided for.
Bank
1. Inability to pay liabilities as they become
due in the ordinary course of business. RURAL BANK OF LUCENA v. ARCA
(Section 30 [a], NCBA)
2. Insufficiency of realizable assets to meet
its liabilities. (Section 30 [b], NCBA)

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❖ To require such previous hearing examiners or his agents into the

would not only be impractical, but condition of the bank;
would tend to defeat the very 2. It shall be disclosed in the examination
purpose of the law when it invested that the condition of the bank is one of
the Monetary Board with such insolvency, or that its continuance in
authority. business would involve probable loss to
its depositors or creditors; the
department head concerned shall inform
The authority of the Monetary Board to the Monetary Bank in writing of the
summarily and without need for prior facts; and
hearing forbid the bank or quasi-bank from 3. MB shall find the statements of the
doing business in the Philippines may also department head to be true.
be exercised over non-stock savings and
loan associations. (Sec 30, NCBA) The report of examination is a document
intended to be submitted by the examiner to
BANCO FILIPINO SAVINGS AND MB, not to the Bank. As of now, they give
MORTGAGE BANK v. MONETARY copies to the Bank but it has to be highly
BOARD, CENTRAL BAN OF THE confidential (pag nabasa na ng public baka
PHILIPPINES (1991) magwithdraw na ng pera). The Bank is not
the end user of the report of examination.
However, to protect the bank and afford it
❖ This close now, hear later scheme is
due process in the whole examination
grounded on practical and legal
process, they are afforded an opportunity to
considerations to prevent
explain and to justify why certain actions
unwarranted dissipation of the
were done in a certain way.
bank’s assets and as valid exercise
of police power to protect the
There is a regular and special examination
depositors, creditors, stockholders,
and subsequent to regular examination, there
and the general public. The writ of
can be follow up examination.
preliminary injunction cannot, thus,
prevent the MB from taking action.
As a general rule, closure is not a fortuitous
or an unforeseen event.
Requirements to be complied with before Proceedings in Receivership and

a bank found to be insolvent is ordered Liquidation
close and forbidden to do business in the
Philippines
SECTION 30. Proceedings in
1. An examination shall be conducted by
Receivership and Liquidation. —
the head of the appropriate supervising
Whenever, upon report of the head
or examining department or his
of the supervising or examining

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department, the Monetary Board Corporation (PDIC) as receiver in

finds that a bank or quasi-bank: the case of banks and direct the
PDIC to proceed with the liquidation
(a) has notified the Bangko Sentral of the closed bank pursuant to this
or publicly announced a unilateral section and the relevant provisions of
closure, or has been dormant for Republic Act No. 3591, as amended.
at least sixty (60) days or in any The Monetary Board shall notify in
manner has suspended the writing, through the receiver, the
payment of its deposit/deposit board of directors of the closed bank
of its decision.
substitute liabilities, or is unable to
pay its liabilities as they become due
in the ordinary course of business: The actions of the Monetary Board
Provided, That this shall not include taken under this section or under
inability to pay caused by Section 29 of this Act shall be final
extraordinary demands induced by and executory, and may not be
financial panic in the banking restrained or set aside by the court
community; except on petition for certiorari on
the ground that the action taken was
(b) has insufficient realizable in excess of jurisdiction or with such
assets, as determined by the grave abuse of discretion as to
Bangko Sentral, to meet its amount to lack or excess of
liabilities; or jurisdiction. The petition for
certiorari may only be filed by the
stockholders of record representing
(c) cannot continue in business the majority of the capital stock
without involving probable losses within ten (10) days from receipt by
to its depositors or creditors; or the board of directors of the
institution of the order directing
(d) has willfully violated a cease receivership, liquidation or
and desist order under Section 37 conservatorship. The designation of
of this Act that has become final, a conservator under Section 29 of
involving acts or transactions this Act or the appointment of a
which amount to fraud or a receiver under this section shall be
dissipation of the assets of the vested exclusively with the Monetary
institution; in which cases, the Board. Furthermore, the designation
Monetary Board may summarily and of a conservator is not a precondition
without need for prior hearing forbid to the designation of a receiver.
the institution from doing business in
the Philippines and designate the
Philippine Deposit Insurance

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The authority of the Monetary Board must only be filed before the liquidation
to summarily and without need for court.
prior hearing forbid the bank or
quasi-bank from doing business in
the Philippines as provided above PDIC as Statutory Receiver
may also be exercised over non-
stock savings and loan associations, The PDIC has the power to prepare and
based on the same applicable issue rules and regulations to effectively
grounds. For quasi-banks and non- discharge its responsibilities. The power of
stock savings and loan associations, the PDIC as to whether it will deny or grant
any person of recognized the claim for deposit insurance based on its
competence in banking, credit or rules and regulations partakes of a quasi-
finance may be designated by the judicial function. Also, the fact that decision
Bangko Sentral as a receiver. of the PDIC as to deposit insurance shall be
final and executory, such that it can only be
PDIC is the receiver for the Banks but it can set aside by a petition for certiorari evinces
go to the trial courts for assistance in the intention of the Congress to make PDIC
liquidation. The purpose of liquidation as a quasi-judicial agency.
proceedings is to collate all the actions
against the Bank in one proceeding. Even Note: Bangko Sentral can appoint other
during liquidations, various actions against receivers for other non-bank institutions
the Bank should be filed only with the under its supervision and examination.
liquidation court. But the Bank, as the one
filing the case, can file with several courts Note: Read RA 3591 and its latest
depending on the venue and jurisdiction amendments under RA 10846.
governing its claim. JUDICIAL REVIEW
Example:
GR: The actions of the MB taken under this
section or under Section 29 of this Act shall
Ako as depositor, I can only file with the
be final and executory (Sec 30) and may not
liquidation court. But the Bank, in
be restrained or set aside by the court.
foreclosing an asset, can file it in any other
court where the foreclosure must be filed. If
XPN: On petition for certiorari on the
the Bank will be filing a case on Trust
ground that the action taken was in excess of
Receipt, it has to be where venue and
jurisdiction as to amount to lack or excess of
jurisdiction lie.
jurisdiction.
Any claim of the Bank can be filed with the
REQUISITES OF JUDICIAL REVIEW
proper court. Any claim against the Bank
1. The petition for certiorari may only be
filed by the stockholder of record

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representing the majority of the capital ❖ Acts of liquidation are those which
stock within 10 days from receipt of the constitute the conversion of assets of
Board of Directors of the institution of the banking institution to money or
the order directing receivership, the sale, assignment or disposition of
liquidation or conservatorship. the same to creditors and other
2. The designation of a conservator is not a parties for the purpose of paying
precondition to the designation of a debts of such institution.
receiver.
RELEVANT CASES Tax Clearance is not a prerequisite to

undergo Liquidation
SPOUSES LIPANA v. DEVELOPMENT As compared to ordinary corporations,

BANK OF RIZAL (1987) Banks do not need prior tax clearance before
it can undergo liquidation.
❖ The assets of the insolvent banking
institution are held in trust for the Banks are impressed with public interest. So
equal benefit of all creditors, and kung wala ng pera, the earlier the
after its insolvency, one cannot liquidation, the better. It cannot be held in
obtain an advantage or a preference abeyance just because wala pang tax
over another by an attachment, clearance.
execution or otherwise.
Liquidation Proceedings cannot be
Summary in Nature
VIVAS v. MONETARY BOARD OF THE
CENTRAL BANK OF THE PHILIPPINES All claimants are given the opportunity to
(2013) lay their claims before the liquidation court.
❖ A hearing is not necessary inasmuch PHILIPPINE DEPOSIT INSURANCE

as the law entrusts to the MB the CORPORATION
appreciation and determination of
whether any or all of the statutory Remember, since PDIC is the insurer of
grounds for closure and receivership deposits, ung inaral niyo sa insurance also
of the erring bank are present. applies here. Foremost of which,
nagbabayad ng premium ang mga bangko
for the coverage.
BANCO FILIPINO v. CENTRAL BANK
(1991) If the banks try to defraud the PDIC by
claiming that these are not deposits and
should not be included in the computation of

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the premium, then at the time there would be determines its subject of a
a claim, it might be denied because the compliance with complaint or a
premiums were not paid with respect to the set standards Final Report of
those deposits. Since these are regulated regarding solvency, Examiantion.
transactions, maliit lang naman ung chance liquidity, asset
na yun (pertaining to defraud by bank), but valuation,
nagkakaroon ng ganitong possibility because operations,
the banks still pay the premium on these systems,
deposits. management, and
compliance with
Under 3591, the PDIC shall insure the banking laws, rules
deposits of all banks. As a basic policy, it and regulations.
shall promote and safeguard the interest of It entails a review It centers on
the depositing public by providing insurance of essentially all the
specific acts or
coverage on all insured deposits and helping functions and facets omission and, thus,
maintain a sound and stable banking system. of bank and its requires a less
Para siyang co-regulator ng BSP because operation. invasive
PDIC also examines the banks. assessment.
An examination of An examination of
Note: BSP is considered lender of last banks requires the bank does not
resort because it can grant emergency prior consent of the require the prior
loans to the banks. Ordinarily, banks Monetary Board. consent of the MB.
borrow from one another but in case the
bank is really in distress but there is Q: What is the practical justification for
possibility to be conserved or saved, the not requiring the MB approval to conduct
BSP can provide emergency loans. investigation of banks?
(Favorite ni Dean) A: The administrative hurdles and
paperwork it entails, and the correspondent
POWERS OF THE PDIC time to complete those additional steps or
requirements
Powers of PDIC is found under Section 9 of

As in other types of investigation, time is
the law. Always know the difference of
always of the essence, and it is prudent to
examination and investigation.
expedite the proceedings if an accurate
conclusion is to be arrived at, as an
EXAMINATION INVESTIGATION investigation is only as precise as the
It involves an It is conducted on evidence on which it is based.
evaluation of the specific findings of
current status of a certain acts or
bank and omission which are PDIC’s Authority to Condone

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purchase of assets and/or assumption of

PDIC VS. COA liabilities.
Example of Purchase of Assets:

❖ The authority of PDIC to condone
applies only to ordinary receivable,
Pwede ka kasi makahanap ng bangko na
penalties and surcharges and must
willing to purchase some of your assets
be submitted to the Commission
(example of assets: banking license, branch
before it is implemented.
licence). Meron tayong mga tinatawag na
restricted areas dahil hindi naman pwede na
magbukas ang mga bangko ng magkakatabi.
PDIC’s authority to condone under its
Specially in business areas, meron tayong
charter is circumscribed by the phrase “to
tinatawag na restriction on the branch
protect the interest of the Corporation.” This
licenses. So, if ABC Bank would be
authority does not include the power to
undergoing liquidation and it has 10
condone a liability that arises from a
restricted license pwede niya yun ibenta sa
violation of law. Thus, it is not in the
ibang bangko, specially to those banks
interest of PDIC to forego audit allowances
which do not have branches yet in that
as it is neither its mandate nor its task to
territory. The moment may ililiquidate na
perpetuate breaches of law.
bangko and it has branch license in that
particular area, there is value to that and that
Liquidation of a Closed Bank
would be bought by another bank
Whenever a bank is ordered closed by the

ADDITIONAL POWERS OF A RECEIVER
MB, PDIC shall be designated as receiver
(ALSO FOUND IN SEC 13 [B])
and it shall proceed with the takeover and
1. Represent and act for and on behalf of a
liquidation of the closed bank. PDIC is the
closed bank;
one which files with the trial court a petition
2. Gather and take charge of all the assets ,
for assistance in liquidation.
records and affairs of the closed bank,
and administer the same for the benefit
AUTHORITIES OF A RECEIVER of its creditors;
AND EFFECT OF PLACEMENT OF 3. Convert the assets of the closed bank to
A BANK UNDER LIQUIDATION cash or other forms of liquid assets, as
far as practicable;
The receiver is authorized to adopt and 4. Bring suits to enforce liabilities of the
implement without need of consent of directors, officers, employees, agents of
stockholders, board of directors, creditors or the closed bank and other entities related
depositors of the closed bank. We have or connected to the closed bank or to
different kinds of receivership and how to collect, recover, and preserve all assets
liquidate – conventional liquidation and

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including assets over which the bank has reasonable rate: Provided, that any of the
equitable interest; modifications or reductions
5. Appoint or hire persons or entities of 12. Utilize available funds of the bank,
recognized competence in banking, including funds generated by the
finance, asset management or remedial receiver from the conversion of assets to
management, as its deputies, assistants pay for reasonable costs and expenses
or agents, to perform such powers and incurred for the preservation of the
functions of the Corporation as receiver assets, and liquidation of, the closed
of the closed bank, or assist in the bank, without need for approval of the
performance thereof; liquidation court;
6. Appoint or hire persons or entities of 13. Charge reasonable fees for the
recognized competence in forensic and liquidation of the bank from the assets of
fraud investigations the bank; Provided, that payment of
7. Pay accrued utilities, rentals and salaries these fees including any unpaid
of personnel of the closed bank for a advances under the immediately
period not exceeding 3 months, from preceding paragraph, shall be subject to
available funds of the closed bank; approval by the liquidation court;
8. Collect loans and other claims of the 14. Distribute the available assets of the
closed bank and for this purpose, closed bank, in cash or in kind, to its
modify, compromise or restructure the creditors in accordance with the Rules
terms and conditions of such loans or on Concurrence and Preference of
claims as may be deemed advantageous Credits under the Civil Code or other
to the interest of the creditors of the laws;
closed bank; 15. Dispose records of the closed bank that
9. Hire or retain private counsel as are no longer needed in the liquidation in
necessary accordance with guidelines set by the
10. Borrow or obtain a loan, or mortgage, PDIC Board of Directors,
pledge or encumber any asset of the notwithstanding the laws on archival
closed bank, when necessary to preserve period and disposal of records; and
or prevent dissipation of the assets, or to 16. Exercise such other powers as are
redeem foreclosed assets of the closed inherent and necessary for the effective
bank, or to minimize losses to its discharge of the duties of the
depositors and creditors; Corporation as receiver.
11. If the stipulated interest rate on deposits
is unusually high compared with Effect of Placement of a Bank under
prevailing applicable interest rates, the Liquidation
Corporation as a receiver, may exercise
such powers which may include a Upon placement, by MB of a bank under
reduction of the interest rate to a liquidation, it shall continue as corporate
body until the termination of the winding-up

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period. Such continuation as a body

corporate shall only be for the purpose of The receiver may cancel, terminate,
liquidating, settling and closing its affairs rescind or repudiate any contract of the
and for the disposal, conveyance or closed bank that is not necessary for the
distribution of its assets. The receiver shall orderly liquidation of the bank, or is
represent the closed bank in all cases by or grossly disadvantageous to the closed
against the closed bank and prosecute and bank, or for any ground provided by law.
defend suits by or against it. In no case Ang hindi pwede ay valid contract.
shall the bank be reopened and permitted
to resume banking business after being The liability of a bank to pay interest on
placed under liquidation. We are trying to deposits and all other obligations as of a
protect the public so the bank is no longer closure shall cease upon its closure by the
allowed to take deposits. We are also trying MB. The receiver shall have the authority,
to preserve the assets that’s why the bank without need for approval of the liquidation
can no longer lend money. court, to assign, as payment to secured
creditors, the bank assets serving as
The powers, voting rights, functions and collaterals to their respective loans up to the
duties, as well as the allowances, extent of the outstanding obligations. The
remuneration and prerequisites of the valuation of the asset must be based on the
directors, officers, and stockholders of prevailing market value.
such bank are terminated upon its
closure. Wala na si bank, si PDIC na ang in There are also all these enumerations under
charge in collating the assets of banking PDIC with respect to liability for penalties
institution. and surcharges, and bank charges and fees.
The common denominator is
Upon service of notice of closure, all the suspended/terminated na sila and the bank is
assets of the closed bank shall be deemed no longer liable for payment kasi nga under
in custodia legis in the hands of the liquidation na siya. Even in FRIA, that is the
receiver. As such, these assets may not be reason why we are suspending everything at
subject to attachment, garnishment, nagkakaroon ng commencement order and
execution, levy or any other court processes. stay order. We want to preserve all creditors
and we want to prevent them from collecting
Notwithstanding the provision of the Labor from the distressed institution. A banking
Code, the employer-employee relationship institution is no different in this scenario.
shall be deemed terminated. Payment of
separation pay or benefits shall be made
INSURED DEPOSIT
from available assets of the bank in
accordance with the Rules on Concurrence
and Preference of credits under the Civil Insured deposit refers to the amount due to
Code and other laws. any depositor for deposits in an insured bank
net of any obligation of the depositor to the

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insured bank as of the date of closure, but

not to exceed the Maximum Deposit I want you to go back and study the
Insurance Coverage. difference between sole account and joint
account. In a joint account, regardless of
They are insured up to P500,000. This is the whether the conjunction and/or is used, shall
maximum. be insured separately from any individually
owned deposit account. So separate 500,000
Excluded from Insured Deposit Cover siya kung joint account.
(Please memorize)
1. Investment products such as bonds and Single accounts are accounts maintained
securities, trust accounts, and other solely by a depositor (natural person or
similar instruments; juridical entity/organization). In-Trust-For
2. Deposit accounts or transaction which (ITF) and By Accounts are also considered
are fictitious or fraudulent as determined single accounts.
by the Corporation
3. Deposit accounts or transaction Joint account is an account held jointly by
constituting, and/or emanating from, two or more natural persons, or by two or
unsafe and unsound banking practice/s, more juridical persons or entities. Joint
as determined by the Corporation, in account regardless of whether the
consultation with the BSP, after due conjunction "and," "or," "and/or" is used,
notice and hearing, and publication of a shall be insured separately from any single
directive to cease and desist issued by or singly-owned deposit account.
the Corporation against such deposit
accounts, transactions or practices; and If the account is held jointly by two or more
4. Deposits that are determined to be natural persons, or by two or more juridical
proceeds of an unlawful activity as persons/entities, the maximum insured
defined under AMLA. deposit shall be divided into as many equal
shares as there are natural persons or
juridical entities, unless a different sharing is
The basic distinction between the definition indicated in the deposit document.
of deposit under Secrecy of Bank Deposit If the account is held by a juridical
and under PDIC is one thing. Under Secrecy person/entity jointly with one or more
of Bank Deposit, since it affords protection, natural persons, the maximum insured
it likes to encompass as many kinds of deposit shall be presumed to belong entirely
deposits as possible. With respect to PDIC, to such juridical person/entity
since there is an insurance premium and The aggregate of the interests of each co-
obligation to pay 500,000, there is a specific owner over several joint accounts, whether
definition of deposit as covered in the owned by the same or different
insurance provision of PDIC. Mas restrictive combinations, shall likewise be subject to
siya.

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the Maximum Deposit Insurance Coverage Juan Cruz P1,000,000 P250,000

of Php500,000. AND Jennifer
Santos
Juan Cruz P1,000,000 0
Fig 1. Four Deposit Accounts in the Same AND/OR
bank Andrea
Santos
Total P2,500,000 P500,000
ACCOUNT DEPOSIT INSURED
NAME DEPOSIT
Juan Cruz P100,000 P100,000 Juan Cruz OR Mark Santos: Unless the
Mark Cruz P100,000 P100,000 division is stated, the presumption is it is
For the proportionate. So kung dalawa sila, 250k
Account of doon kay Juan Cruz
Juan Cruz
Jennifer P100,000 P100,000 Juan Cruz AND Jennifer Santos: Meron
Santos silang 1M pero naubos na ung 250 doon sa
In Trust for taas
Juan Cruz
Juna Cruz P700,000 P200,000 Juan Cruz AND/OR Andrea Santos: May
Store (?) 1M pero wala na naubos na ng 250k sa taas
(sole
proprietor) So even if 2.5M ung joint accounts ni Juan
Total P1,000,000 P500,000 Cruz, he can only claim 500k arising from
these AND/OR accounts. We are talking
about per bank.
For purpose of computing the insurance
coverage of Juan dela Cruz, all of these Tip: Kung ang pera niyo ay 1M or 2M lang,
would be considered under Juan dela Cruz paki deposit nalang sa magkakaibang
under his name. bangko. Please wag niyo na ideposit sa isang
bangko.
As opposed to this one:
Fig. 3. Total Insured Deposits for All
Fig. 2. Three Joint Accounts in the Same Accounts
Bank
NAME DEPOSIT
NAME DEPOSIT
All single P1,000,000 P500,000
Juan Cruz OR P500,000 P250,000
accounts of
Mark Santos

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Juan Cruz still claim the 2M. There is a penalty for

All joint P2,500,000 P500,000 splitting of deposits.
accounts of
Juan Cruz SECTION 26 (E). Splitting of deposits
Total P3,500,000 P1,000,000 or creation of fictitious or fraudulent
loans or deposit accounts.
Tig 500k lang yung pwedeng ma insure
even if his deposit exceeds 500k. “Splitting of deposits occurs
whenever a deposit account with
Note: Visit PDIC website for illustrations an outstanding balance of more
about the coverage. than the statutory maximum
amount of insured deposit
Splitting of Deposits maintained under the name of
natural or juridical persons is
Make sure you can define Splitting of broken down and transferred into
Deposits under Sec 26. As I’ve said earlier, two (2) or more accounts in the
this is prohibited because it is a name/s of natural or juridical persons
circumvention of the 500k limitation. or entities who have no beneficial
ownership on transferred deposits
Q: Why is it important for the law to in their names within one hundred
provide restrictions on collections? twenty (120) days immediately
A: Because as we learned in insurance, the preceding or during a bank-
premium paid is very much smaller than the declared bank holiday, or
proceeds. If everyone would be allowed to immediately preceding a closure
collect, there would come a time when the order issued by the Monetary Board
scheme will not work and wala na ma-claim of the Bangko Sentral ng Pilipinas
under the fund. for the purpose of availing of the
maximum deposit insurance
Every proceeds that has to be given must be coverage.
substantiated as really owing to the insured.
So hindi pinapayagan ung splitting of --------------------------END---------------------
deposit wherein two days, a couple of days,
120 days immediately preceding the bank
holiday mapapansin na there is a concerted
effort to put the money under the name of
different individuals to take advantage of
maximum 500k coverage. So halimbawa,
2M ung pera mo and within 120 days nilipat
mo ung 1.5M sa tatlong tao so that you can

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Notes for Special Commercial Law

MERCANTILE LAW – SPECIAL

UST - Faculty of Civil Law Page 1 of 72

Take a look for example, of prime locations Examples of Anti-Competitive

UST - Faculty of Civil Law Page 2 of 72

Output-limitations It’s not the dominance but the abuse of the

UST - Faculty of Civil Law Page 3 of 72

Dahil dominant ka, alam mong walang

UST - Faculty of Civil Law Page 4 of 72

UST - Faculty of Civil Law Page 5 of 72

to contract, there’s also certain freedoms of (e) Conduct administrative proceedings,

UST - Faculty of Civil Law Page 6 of 72

What will trigger an investigation by the SM Group and Goldilocks case

UST - Faculty of Civil Law Page 7 of 72

Merger of Universal Robina Corporation Urban Deca Homes Manila Condominium

UST - Faculty of Civil Law Page 8 of 72

another, give me all your surnames, hindi

UST - Faculty of Civil Law Page 9 of 72

one of my clients experienced this. To think

UST - Faculty of Civil Law Page 10 of 72

All these things will not just identify you,

Minsan ito yung information pag dinis-close

UST - Faculty of Civil Law Page 11 of 72

because kung hindi man sa ayaw niyong

UST - Faculty of Civil Law Page 12 of 72

any data-sharing agreement imposes on the

UST - Faculty of Civil Law Page 13 of 72

controller, or at the next practical the performance of or in relation to a

UST - Faculty of Civil Law Page 14 of 72

UST - Faculty of Civil Law Page 15 of 72

UST - Faculty of Civil Law Page 16 of 72

UST - Faculty of Civil Law Page 17 of 72

(b) On the ground that it is not in the “electronic data message” or an

UST - Faculty of Civil Law Page 18 of 72

Marginal deposit – the bank would require

UST - Faculty of Civil Law Page 19 of 72

Independence Principle (based on the

A Letter of Credit, as defined by the PRUDENTIAL BANK AND TRUST

It is a financial devise used to facilitate FEATI BANK & TRUST COMPANY V.

UST - Faculty of Civil Law Page 20 of 72

COURT OF APPEALS A composite of at least three distinct but

UST - Faculty of Civil Law Page 21 of 72

UST - Faculty of Civil Law Page 22 of 72

involves at least involves 2 parties trade transactions, the International

Stand-by Letters of Credit –

UST - Faculty of Civil Law Page 23 of 72

Philippines, Inc. v. Luzon Hydro Corp., G.R. G.R. No. 146717,

Commercial credits In the standby type, Irrevocable letter of credit

UST - Faculty of Civil Law Page 24 of 72

UST - Faculty of Civil Law Page 25 of 72

prescribed period, of all the documents

UST - Faculty of Civil Law Page 26 of 72

3. Confirming Bank America is bound only to check the

#2 renegotiates the amount of payment to Negotiating bank

This corresponding bank assumes a direct

UST - Faculty of Civil Law Page 27 of 72

*The effects of the stay order under Sec. 6

UST - Faculty of Civil Law Page 28 of 72

c. Irreparable injury might follow if Doctrine of Strict Compliance

UST - Faculty of Civil Law Page 29 of 72

If you are a businessman who is regularly