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SPCL- BANKING Comia, Antonette Tud
BANKING
A. GENERAL PRINCIPLES
1. Register of Deeds of Manila v. China Banking Corporation, 4
SCRA 145 (1962)
2. Republic Bank v. Security Credit and Acceptance Corporation,
19 SCRA 58 (1967)
3. Perez v. Monetary Board, 20 SCRA 443 (1979)
4. Simex International (Manila) Inc. v. Court of Appeals, 183
SCRA 360 (1990)
5. Fidelity and Savings and Mortgage Bank c. Cenzon, 184 SCRA
141 (1990)
6. Sia v. Court of Appeals, 222 SCRA 24 (1993)
7. Banas v. Asia Pacific Finance Corporation, 343 SCRA 527
(2000)
8. Reyes v. Court of Appeals, 363 SCRA 51 (2001)
9. Banco de Oro v. JAPRL Development Corporation, 551 SCRA 342
(2008)
10. Philippine National Bank v. Erlando T. Rodriguez, et al, 556
SCRA 27 (2009)
11. Bank of America, NT and SA v. Associated Citizens Bank
B. CLOSURE OF BANKS
1. Ramos v. Central Bank of the Philippines, 41 SCRA 565
(1971)
2. Central Bank v. Court of Appeals, 106 SCRA 143 (1981)
3. Salud v. Central Bank, 143 SCRA 590 (1986)
4. Lipana v. Development Bank of Rizal, 154 SCRA 257 (1987)
5. Overseas Bank of Manila v. Court of Appeals, 172 SCRA 521
(1989)
6. Banco Filipino Savings and Mortgage Bank v. Central Bank, 204
SCRA 767 (1991)
7. Central Bank of the Philippines v. Court of Appeals, 208 SCRA
652 (1992)
8. First Philippine International Bank v. Court of Appeals, 252
SCRA 259 (1996)
9. Ong v. Court of Appeals, 253 SCRA 105 (1996)
10. Manalo v. Court of Appeals, 366 SCRA 753 (2001)
11. Rural Bank of Sta. Catalina v. Land Bank of the Philippines,
435 SCRA 183 (2004)
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SPCL- BANKING Comia, Antonette Tud
12. Miranda v. PDIC, 501 SCRA 288 (2006)
C. POWERS OF A RECEIVER
1. Abacus Real Estate Development Center Inc. v. Manila Banking
Corporation, 455 SCRA 97 (2005)
2. In Re: Petition for Assistance in the Liquidation in the
Rural Bank of Bokod (Benguet), PDIC v. Bureau of Internal Revenue,
511 SCRA 123 (2006)
3. Rural Bank of San Miguel v. Monetary Board, 516 SCRA 154
(2007)
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SPCL- BANKING Comia, Antonette Tud
BANKING
A. GENERAL PRINCIPLES
1. Register of Deeds of Manila v. China Banking Corporation, 4
SCRA 145 (1962)
FACTS:
-Alfonso Pangilinan and Guillermo Chua, former employees of
China Banking Corporation were charged with qualified theft.
-Pangilinan admitted his civil liability in favor of china
Banking Corporation .
-Pangilinan, together with his wife, Belen Sta. Ana executed a
public instrument entitled DEED OF TRANSFER whereby in relation to
the charge of qualified theft he ceded and transferred to China
Banking Corporation a residential lot in satisfaction of his civil
liability.
-The deed was presented for registration to the Register of
Deeds of the City of Manila, but because the transferee the China
Banking Corporation was alien-owned and, as such, barred from
acquiring lands in the Philippines, in accordance with the
provisions of Section 5, Article XIII of the Constitution of the
Philippines, said officer submitted the matter of its registration
to the Land Registration Commission for resolution.
-The commission issued the resolution appealed from holding that
the deed of transfer in favor of an alien bank, subject of the
present consulta is unregistrable for being in contravention of the
constitution of the Philippines.
ISSUE:
1. May an alien-owned bank acquire lands in the Philippines;2.
Assuming it may, may it acquire land in satisfaction of a civil
liability arising from a criminal offense.
HELD:
- Paragraph (c), Section 25 of Republic Act 337 allows a
commercial bank to purchase and hold such real estate as shall be
conveyed to it in satisfaction of debts previously contracted in
the course of its dealings, We deem it quite clear and free from
doubt that the "debts" referred to in this provision are only those
resulting from previous loans and other similar transactions made
or entered into by a commercial bank in the ordinary course of its
business as such. Obviously, whatever "civil liability" arising
from the criminal offense of qualified theft was admitted in favor
of appellant bank by its former employee, Alfonso Pangilinan, was
not a debt resulting from a loan or a similar transaction had
between the two parties in the ordinary course of banking
business.
-Neither do the provisions of paragraph (d) of the Same section
apply to the present case because the deed of transfer in question
can in no sense be considered as a sale made by virtue of a
judgment, decree, mortgage, or trust deed held by appellant bank.
In the same manner it cannot be said that the real property in
question was purchased by appellant "to secure debts due to it",
considering that, as stated heretofore, the term debt employed in
the pertinent legal provision can logically refer only to such
debts as may become payable to appellant bank as a result of a
banking transaction.
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SPCL- BANKING Comia, Antonette Tud
2. Republic Bank v. Security Credit and Acceptance Corporation,
19 SCRA 58 (1967)
FACTS:
-Under its Articles of Incorporation registered with SEC,
Security Credit and Acceptance Corporation was authorized to
engage
PRIMARILY- in financing agricultural, commercial and industrial
projects; and
SECONDARILY- in buying and selling stocks and bonds of any
corporation
-When it filed for their by-laws, the Superintendent of Banks of
the Central Bank asked its legal counsel an opinion whether or not
the corporation is a banking institution within the purview of RA
337. Legal Counsel resolved in the affirmative.
-When the Corporation applied with SEC for the registration and
licensing of its securities under the Securities Act, the
application was referred to the Central Bank.
-The Central Bank in turn, gave SEC a copy of the opinion of the
Legal Counsel of the Superintendent of the Banks of the Central
Bank, resolving in the affirmative the query of Whether or not the
said corporation is a banking institution within the purview of RA
337.
-In line with which, SEC advised the corporation to comply with
the requirements of the General Banking Act.
-By virtue of a search warrant, the premises of the corporation
were searched and documents and records thereof relative to its
business operations were seized.
-Upon examination and evaluation, it was found that the
corporation have been and still continuously performing functions
and activities which have been declared to constitute illegal
banking operations.
-The corporation had established branches in principal cities
and towns throughout the Philippines and through a systematic and
vigorous campaign, had managed to induce the public to open savings
deposit account which has been lent out to such persons as the
corporation deemed suitable thereof.
-Hence, an original quo warranto proceeding was initiated by the
Solicitor General to dissolve Security Credit and Acceptance
Corporation for engaging in banking operations without the
authority required thereof by the general Banking Act.
ISSUE:
-Whether or not a bank may engage in banking business without
first securing authority from the Central bank.
HELD:
-Security Credit and Acceptance Corporation violated the General
banking Act because it is engaging in banking business without the
administrative authority from the Central Bank.
-Before a Corporation can engage in banking business it must
first secure the administrative authority required by law.
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SPCL- BANKING Comia, Antonette Tud
3. Perez v. Monetary Board, 20 SCRA 443 (1979)
FACT:
-Damaso Perez, for himself and on behalf of the Republic Bank
denounced before the Central Bank, Paolo roman and several other
republic Bank officials for violations of the General Banking Act
and Central Bank Act, and for falsification of public or commercial
documents in connection with certain anomalous loans.
-The cases of alleged anomalous loans were referred by the
Central Bank to the special Prosecutors of the Department of
Justice for criminal investigation and prosecution.
-Hence, Perez instituted mandamus proceedings in the CFI against
the Monetary Board, the Superintendent of Banks, the Central Bank
and the Secretary of Justice to compel them to prosecute criminally
those alleged violators of the banking laws.
ISSUE:
-Whether or not mandamus may lie to compel the Central Bank or
its officials to prosecute those alleged violatiors of the banking
laws.
HELD:
-Although the Central bank and its officials may have the duty
under the Central Bank Act and General Banking Law to cause the
prosecution of alleged violators of Banking Laws, yet, there is
nothing in said laws that imposes a clear and specific duty on the
former to undertake the actual prosecution of the latter.
-The Central Bank is a government corporation created
principally to administer the monetary and banking system of the
Republic.
-It is not a prosecution agency like the fiscals office. Being
an artificial person, the Central Bank is limited to its statutory
Powers.
-Its power to sue and be sued refers to Civil Cases only.
-For the officials of the Central Bank to do the actual
prosecuting themselves would be tantamount to performing an
ULTRAVIRES ACT.
-Mandamus may not lie.
4. Simex International (Manila) Inc. v. Court of Appeals, 183
SCRA 360 (1990)
FACTS:
-Simex International engaged in the exportation of food
products. It buys these products from various local suppliers and
then sells them abroad, particularly in the United States, Canada
and the Middle East. Most of its exports are purchased by Simex
International on credit.
-The Simex International was a depositor of the Traders Royal
Bank and maintained a checking account in its branch at Romulo
Avenue, Cubao, Quezon City. Simex International deposited to its
account in the said bank the
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SPCL- BANKING Comia, Antonette Tud
amount of P100,000.00, thus increasing its balance as of that
date to P190,380.74. Subsequently, Simex International issued
several checks against its deposit but was surprised to learn later
that they had been dishonored for insufficient funds.
-As a consequence, the California Manufacturing Corporation
sent, a letter of demand to Simex International, threatening
prosecution if the dishonored check issued to it was not made good.
It also withheld delivery of the order made by Simex International.
Similar letters were sent to the petitioner by the Malabon Long
Life Trading, and by the G. and U. Enterprises. Malabon also
canceled Simex International's credit line and demanded that future
payments be made by it in cash or certified check.
-Meantime, action on the pending orders of Simex International
with the other suppliers whose checks were dishonored was also
deferred.
-Simex International complained to the bank. Investigation
disclosed that the sum of P100,000.00 deposited by Simex
International, had not been credited to it. The error was rectified
only 23 days after, and the dishonored checks were paid after they
were re-deposited.
-In its letter, Simex International demanded reparation from the
bank for its "gross and wanton negligence." This demand was not
met.
-Simex International then filed a complaint for moral damages
and exemplary damages, plus attorney's fees, and costs.
TC, affirmed by CA:
-Ruled in favor of Simex.
ISSUE:
-Whether or not the bank was negligent and can be held for
damages.
HELD:
- The banking system is an indispensable institution in the
modern world and plays a vital role in the economic life of every
civilized nation. Whether as mere passive entities for the
safekeeping and saving of money or as active instruments of
business and commerce, banks have become an ubiquitous presence
among the people, who have come to regard them with respect and
even gratitude and, most of all, confidence. Thus, even the humble
wage-earner has not hesitated to entrust his life's savings to the
bank of his choice, knowing that they will be safe in its custody
and will even earn some interest for him. The ordinary person, with
equal faith, usually maintains a modest checking account for
security and convenience in the settling of his monthly bills and
the payment of ordinary expenses. As for business entities like the
petitioner, the bank is a trusted and active associate that can
help in the running of their affairs, not only in the form of loans
when needed but more often in the conduct of their day-to-day
transactions like the issuance or encashment of checks.
-In every case, the depositor expects the bank to treat his
account with the utmost fidelity, whether such account consists
only of a few hundred pesos or of millions. The bank must record
every single transaction accurately, down to the last centavo, and
as promptly as possible. This has to be done if the account is to
reflect at any given time the amount of money the depositor can
dispose of as he sees fit, confident that the bank will deliver it
as and to whomever he directs. A blunder on the part of the bank,
such as the dishonor of a check without good reason, can cause the
depositor not a little embarrassment if not also financial loss and
perhaps even civil and criminal litigation.
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SPCL- BANKING Comia, Antonette Tud
5. Fidelity and Savings and Mortgage Bank c. Cenzon, 184 SCRA
141 (1990)
FACTS:
-Spouses Santiago deposited P50,000 with Fidelity Savings Bank
under a savings account, and subsequently, another P50,000 under a
certificate of time deposit.
-Unfortunately, Fidelity Savings and Mortgage Bank was declared
insolvent.
-A resolution was issued by the Monetary Board prohibiting
Fidelity to continue with its banking operations.
-Pursuant also to the instructions of the Monetary Board, the
Superintendent of Banks took charge in the name of the Monetary
Board, the assets of Fidelity.
-PDIC paid the spouses PP10,000 only, thereby leaving a balance
of P90,000.
-In another resolution, the Monetary Board directed the
liquidation of the affairs of Fidelity.
-While the liquidation proceedings is still pending, the spouses
demanded the immediate payment of the savings and time
deposits.
-When demand was not met, the spouses instituted an action for
sum of money with damages against Fidelity.
TC:
-Ordered Fidelity to pay the spouses Santiago P90,000 with
accrued INTEREST, as well as damages.
ISSUE:
-Whether or not the bank forbidden by the Central Bank to do
business has obligation to pay interest on deposit.
HELD:
-Insolvent banking institution and closed by the Central Bank is
not liable to pay interest on bank deposits.
-It is settled jurisprudence that a banking institution which
has been ordered close by the Central Bank cannot be held liable to
pay interest on bank deposits which accrued during the period when
the bank is actually closed and non-operational.
-However, Fidelity Savings and Mortgage Bank is liable, ONLY for
the interest on bank deposits which had already accrued until the
time it was prohibited by the Central Bank to continue its banking
operation.
-The reason is that, a bank cannot be expected to pay interest
of the said deposit when at the time the bank was prohibited to
transact business operation, the bank no longer derives income.
6. Sia v. Court of Appeals, 222 SCRA 24 (1993)
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SPCL- BANKING Comia, Antonette Tud
FACTS:
-Luaon Sia rented a Safety Deposit Box with Security Bank and
Trust Company, wherein he placed his stamps collection, pursuant to
Lease Agreement.
-During the floods that took place in 1985 1nd 1986, floodwater
entered into the banks premises and seeped into the safety deposit
box causing damage to the stamp collection.
-SBTC rejected Sias claim for compensation.
-Hence, Sia instituted an action for damages.
TC:
-In favor of Sia, holding that SBTC failed to exercise the
required diligence expected of a bank maintaining such safety
deposit bank.
CA:
-Reversed and dismissed the complaint holding that the LEASE
AGREEMENT covering the the safety deposit bank is just a contract
of lease, not a contract of deposit, and that paragraphs 9 and 13
thereof, expressly limited the banks liability to the exercise of
the diligence to prevent the opening of the safe by any person
other than the renter, his authorized agent or legal
representative; and that the bank not being depository of the
contents of the safe has neither the possession nor the control of
the same nor interest what so ever in the contents and thus assumes
no liability in connection therewith.
HELD:
-A bank is liable for the damages to a stamp collection
deposited in a safety deposit box caused by its failure to notify
the depositor to retrieve the stamps promptly when the floodwater
inundated the room where the safety deposit was located, because it
is a depository and the stipulation that it is not a depository and
is not liable for the contents of the safety deposit box is void
for being contrary to law and public policy.
7. Banas v. Asia Pacific Finance Corporation, 343 SCRA 527
(2000)
FACTS:
-Sometime in Teodoro Baas executed a Promissory Note in favor of
C. G. Dizon Construction whereby for value received he promised to
pay to the order of C. G. Dizon Construction the sum of P390,000.00
in installments of "P32,500.00 every 25th day of the month.
-Later, C. G. Dizon Construction endorsed with recourse the
Promissory Note to ASIA PACIFIC, and to secure payment thereof, C.
G. Dizon Construction, through its corporate officers, Cenen Dizon,
President, and Juliette B. Dizon, Vice President and Treasurer,
executed a Deed of Chattel Mortgage covering three (3) heavy
equipment units of Caterpillar Bulldozer Crawler Tractors.
-Moreover, Cenen Dizon executed a Continuing Undertaking wherein
he bound himself to pay the obligation jointly and severally with
C. G. Dizon Construction.
-In compliance with the provisions of the Promissory Note, C. G.
Dizon Construction made some installment
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SPCL- BANKING Comia, Antonette Tud
payments to ASIA PACIFIC.
-Thereafter, however, C. G. Dizon Construction defaulted in the
payment of the remaining installments, prompting ASIA PACIFIC to
send a Statement of Account to Cenen Dizon for the unpaid.
- As the demand was unheeded, ASIA PACIFIC sued Teodoro Baas, C.
G. Dizon Construction and Cenen Dizon.
-While defendants (herein petitioners) admitted the genuineness
and due execution of the Promissory Note, the Deed of Chattel
Mortgage and the Continuing Undertaking, they nevertheless
maintained that these documents were never intended by the parties
to be legal, valid and binding but a mere subterfuge to conceal the
loan of P390,000.00 with usurious interests.
-Defendants claimed that since ASIA PACIFIC could not directly
engage in banking business, it proposed to them a scheme wherein
plaintiff ASIA PACIFIC could extend a loan to them without
violating banking laws: first, Cenen Dizon would secure a
promissory note from Teodoro Baas with a face value of P390,000.00
payable in installments; second, ASIA PACIFIC would then make it
appear that the promissory note was sold to it by Cenen Dizon with
the 14% usurious interest on the loan or P54,000.00 discounted and
collected in advance by ASIA PACIFIC; and, lastly, Cenen Dizon
would provide sufficient collateral to answer for the loan in case
of default in payment and execute a continuing guaranty to assure
continuous and prompt payment of the loan. Defendants also alleged
that out of the loan of P390,000.00 defendants actually received
only P329,185.00 after ASIA PACIFIC deducted the discounted
interest, service handling charges, insurance premium, registration
and notarial fees.
-Sometime in October 1980 Cenen Dizon informed ASIA PACIFIC that
he would be delayed in meeting his monthly amortization on account
of business reverses and promised to pay instead in February 1981.
Cenen Dizon made good his promise and tendered payment to ASIA
PACIFIC in an amount equivalent to two (2) monthly amortizations.
But ASIA PACIFIC attempted to impose a 3% interest for every month
of delay, which he flatly refused to pay for being usurious.
-Afterwards, ASIA PACIFIC allegedly made a verbal proposal to
Cenen Dizon to surrender to it the ownership of the two (2)
bulldozer crawler tractors and, in turn, the latter would treat the
former's account as closed and the loan fully paid. Cenen Dizon
supposedly agreed and accepted the offer. Defendants averred that
the value of the bulldozer crawler tractors was more than adequate
to cover their obligation to ASIA PACIFIC.
ISSUE:
-Whether or not the disputed transaction violated the banking
laws.
HELD:
-An investment company refers to any issuer which is or holds
itself out as being engaged or proposes to engage primarily in the
business of investing, reinvesting or trading in securities. As
defined in Sec. 2, par. (a), of the Revised Securities
Act,securities "shall include x x x x commercial papers evidencing
indebtedness of any person, financial or non-financial entity,
irrespective of maturity, issued, endorsed, sold, transferred or in
any manner conveyed to another with or without recourse, such as
promissory notes x x x x" Clearly, the transaction between
petitioners and respondent was one involving not a loan but
purchase of receivables at a discount, well within the purview of
"investing, reinvesting or trading in securities" which an
investment company, like ASIA PACIFIC, is authorized to perform and
does not constitute a violation of the General Banking Act. i
Moreover, Sec. 2 of the General Banking Act provides in part -
Sec. 2. Only entities duly authorized by the Monetary Board of
the Central Bank may engage in the lending of funds obtained from
the public through the receipt of deposits of any kind, and all
entities regularly conducting such operations shall be considered
as banking institutions and shall be subject to the provisions of
this Act, of the Central Bank Act, and of other pertinent laws
(underscoring supplied).
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SPCL- BANKING Comia, Antonette Tud
-Indubitably, what is prohibited by law is for investment
companies to lend funds obtained from the public through receipts
of deposit, which is a function of banking institutions. But here,
the funds supposedly "lent" to petitioners have not been shown to
have been obtained from the public by way of deposits, hence, the
inapplicability of banking laws.
8. Reyes v. Court of Appeals, 363 SCRA 51 (2001)
FACTS:
- In view of the 20th Asian Racing Conference in Sydney,
Australia, the Philippine Racing Club, Inc. (PRCI, for brevity)
sent four (4) delegates to the said conference. Gregorio H. Reyes,
as vice-president for finance, racing manager, treasurer, and
director of PRCI, sent Godofredo Reyes, the clubs chief cashier, to
Far East Bank and Trust Company, to apply for a foreign exchange
demand draft in Australian dollars.
-Godofredo went to respondent banks Buendia Branch in Makati
City to apply for a demand draft in the amount One Thousand Six
Hundred Ten Australian Dollars (AU$1,610.00) payable to the order
of the 20th Asian Racing Conference Secretariat of Sydney,
Australia. He was attended to by respondent banks assistant
cashier, Mr. Yasis, who at first denied the application for the
reason that respondent bank did not have an Australian dollar
account in any bank in Sydney. Godofredo asked if there could be a
way for respondent bank to accommodate PRCIs urgent need to remit
Australian dollars to Sydney. Yasis of respondent bank then
informed Godofredo of a roundabout way of effecting the requested
remittance to Sydney thus: the respondent bank would draw a demand
draft against Westpac Bank in Sydney, Australia (Westpac-Sydney for
brevity) and have the latter reimburse itself from the U.S. dollar
account of the respondent in Westpac Bank in New York, U.S.A
(Westpac-New York for brevity). This arrangement has been
customarily resorted to since the 1960s and the procedure has
proven to be problem-free. PRCI and the petitioner Gregorio H.
Reyes, acting through Godofredo, agreed to this arrangement or
approach in order to effect the urgent transfer of Australian
dollars payable to the Secretariat of the 20th Asian Racing
Conference.
-On July 28, 1988, the respondent bank approved the said
application of PRCI and issued Foreign Exchange Demand Draft (FXDD)
No. 209968 in the sum applied for, that is, One Thousand Six
Hundred Ten Australian Dollars (AU$1,610.00), payable to the order
of the 20th Asian Racing Conference Secretariat of Sydney,
Australia, and addressed to Westpac-Sydney as the drawee bank.
-On August 10, 1988, upon due presentment of the foreign
exchange demand draft, denominated as FXDD No. 209968, the same was
dishonored, with the notice of dishonor stating the following: xxx
No account held with Westpac. Meanwhile, on August 16, 1988,
Westpac-New York sent a cable to respondent bank informing the
latter that its dollar account in the sum of One Thousand Six
Hundred Ten Australian Dollars (AU$1,610.00) was debited. On August
19, 1988, in response to PRCIs complaint about the dishonor of the
said foreign exchange demand draft, respondent bank informed
Westpac-Sydney of the issuance of the said demand draft FXDD No.
209968, drawn against the Westpac-Sydney and informing the latter
to be reimbursed from the respondent banks dollar account in
Westpac-New York. The respondent bank on the same day likewise
informed Westpac-New York requesting the latter to honor the
reimbursement claim of Westpac-Sydney. On September 14, 1988, upon
its second presentment for payment, FXDD No. 209968 was again
dishonored by Westpac-Sydney for the same reason, that is, that the
respondent bank has no deposit dollar account with the drawee
Westpac-Sydney.
-Spouses Gregorio H. Reyes and Consuelo Puyat-Reyes left for
Australia to attend the said racing conference. When petitioner
Gregorio H. Reyes arrived in Sydney in the morning of September 18,
1988, he went directly to the lobby of Hotel Regent Sydney to
register as a conference delegate. At the registration desk, in the
presence of other delegates from various member countries, he was
told by a lady member of the conference secretariat that he could
not register because the foreign exchange demand draft for his
registration fee had been dishonored for the second time. A
discussion ensued in the presence and within the hearing of many
delegates who were also registering. Feeling terribly embarrassed
and humiliated, petitioner Gregorio H. Reyes asked the lady member
of
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SPCL- BANKING Comia, Antonette Tud
the conference secretariat that he be shown the subject foreign
exchange demand draft that had been dishonored as well as the
covering letter after which he promised that he would pay the
registration fees in cash. In the meantime he demanded that he be
given his name plate and conference kit. The lady member of the
conference secretariat relented and gave him his name plate and
conference kit. It was only two (2) days later, or on September 20,
1988, that he was given the dishonored demand draft and a covering
letter. It was then that he actually paid in cash the registration
fees as he had earlier promised.
-Consuelo Puyat-Reyes arrived in Sydney. She too was embarrassed
and humiliated at the registration desk of the conference
secretariat when she was told in the presence and within the
hearing of other delegates that she could not be registered due to
the dishonor of the subject foreign exchange demand draft. She felt
herself trembling and unable to look at the people around her.
Fortunately, she saw her husband coming toward her. He saved the
situation for her by telling the secretariat member that he had
already arranged for the payment of the registration fees in cash
once he was shown the dishonored demand draft. Only then was
petitioner Puyat-Reyes given her name plate and conference kit.
-The Reyeses felt embarrassed and humiliated, filed a complaint
for damages alleging that it was the banks fault in not failing to
exercise highest degree of diligence in this case..- TC, affirmed
by CA dismissed the complaint and rendered judgment in favor of
FEBTC.
ISSUE:
-Whether or not banks are still required to act with the highest
degree of diligence, in its commercial transaction not involving an
exercise of its fiduciary capacity.
HELD:
-The degree of diligence required of a bank is more than that of
a good father of a family where fiduciary nature of their
relationship with the depositor is concerned. But the said ruling
applies only to cases where banks act under their fiduciary
capacity, that is, as depositary of the deposits. But the same
higher degree of diligence is not expected to be exerted by banks
in commercial transactions that do not involve their fiduciary
relationship with their depositors, such as sale and issuance of
the foreign exchange demand draft.
-The respondent bank was not required to exert more than the
diligence of a good father of a family in regard to the sale and
issuance of the subject foreign exchange demand draft. The case at
bar does not involve the handling of petitioners deposit, if any,
with the respondent bank. Instead, the relationship involved was
that of a buyer and seller, that is, between the respondent bank as
the seller of the subject foreign exchange demand draft, and PRCI
as the buyer of the same, with the 20th Asian Racing Conference
Secretariat in Sydney, Australia as the payee thereof. As earlier
mentioned, the said foreign exchange demand draft was intended for
the payment of the registration fees of the petitioners as
delegates of the PRCI to the 20th Asian Racing Conference in
Sydney.
9. Banco de Oro v. JAPRL Development Corporation, 551 SCRA 342
(2008).
FACTS:
-After evaluating the financial statements of respondent JAPRL
Development Corporation (JAPRL) for fiscal years 1998, 1999 and
2000, Banco de Oro-EPCI, Inc. extended credit facilities to it.
Rapid Forming Corporation (RFC) and Jose U. Arollado acted as
JAPRLs sureties.
-Despite its seemingly strong financial position, JAPRL
defaulted in the payment of four trust receipts soon after the
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approval of its loan BDO later learned from MRM Management,
JAPRLs financial adviser, that JAPRL had altered and falsified its
financial statements. It allegedly bloated its sales revenues to
post a big income from operations for the concerned fiscal years to
project itself as a viable investment. The information alarmed BDO.
Citing relevant provisions of the Trust Receipt Agreement, it
demanded immediate payment of JAPRLs outstanding obligations.
-JAPRL (and its subsidiary, RFC) filed a petition for
rehabilitation in the Regional Trial Court (RTC) of Quezon City,
Branch 90 (Quezon City RTC. It disclosed that it had been
experiencing a decline in sales for the three preceding years and a
staggering loss in 2002.
-Because the petition was sufficient in form and substance, a
stay order] was issued. However, the proposed rehabilitation plan
for JAPRL and RFC was eventually rejected by the Quezon City
RTC.
-Because JAPRL ignored its demand for payment, BDO filed a
complaint for sum of money with an application for the issuance of
a writ of preliminary attachment against JAPRL. BDO essentially
asserted that JAPRL was guilty of fraud because it (JAPRL) altered
and falsified its financial statements.
ISSUE:
-Whether or not BDO may annul the credit accommodations it
extended to JAPRL and demand immediate payment due to the
alteration and falsification of JAPRLs financial statement.
HELD:
-Banks are entities engaged in the lending of funds obtained
through deposits from the public. They borrow the publics excess
money (i.e., deposits) and lend out the same. Banks therefore
redistribute wealth in the economy by channeling idle savings to
profitable investments.
-Banks operate (and earn income) by extending credit facilities
financed primarily by deposits from the public. They plough back
the bulk of said deposits into the economy in the form of loans.
Since banks deal with the publics money, their viability depends
largely on their ability to return those deposits on demand. For
this reason, banking is undeniably imbued with public interest.
Consequently, much importance is given to sound lending practices
and good corporate governance.
-Protecting the integrity of the banking system has become, by
large, the responsibility of banks. The role of the public,
particularly individual borrowers, has not been emphasized.
Nevertheless, we are not unaware of the rampant and unscrupulous
practice of obtaining loans without intending to pay the same.
-In this case, petitioner alleged that JAPRL fraudulently
altered and falsified its financial statements in order to obtain
its credit facilities. Considering the amount of petitioners
exposure in JAPRL, justice and fairness dictate that the Makati RTC
hear whether or not respondents indeed committed fraud in securing
the credit accommodation.
-Section 40 of the General Banking Law which states:
Section 40. Requirement for Grant of Loans or Other Credit
Accommodations. Before granting a loan or other credit
accommodation, a bank must ascertain that the debtor is capable of
fulfilling his commitments to the bank.
Towards this end, a bank may demand from its credit applicants a
statement of their assets and liabilities and of their income and
expenditures and such information as may be prescribed by law or by
rules and regulations of the Monetary Board to enable the bank to
properly evaluate the credit application which includes the
corresponding financial statements
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SPCL- BANKING Comia, Antonette Tud
submitted for taxation purposes to the Bureau of Internal
Revenue. Should such statements prove to be false or incorrect in
any material detail, the bank may terminate any loan or credit
accommodation granted on the basis of said statements and shall
have the right to demand immediate repayment or liquidation of the
obligation.
In formulating the rules and regulations under this Section, the
Monetary Board shall recognize the peculiar characteristics of
microfinancing, such as cash flow-based lending to the basic
sectors that are not covered by traditional collateral.
Under this provision, banks have the right to annul any credit
accommodation or loan, and demand the immediate payment thereof,
from borrowers proven to be guilty of fraud.
10. Philippine National Bank v. Erlando T. Rodriguez, et al, 556
SCRA 27 (2009)
FACTS:
-Spouses Erlando and Norma Rodriguez were clients of Philippine
National Bank (PNBThey maintained savings and demand/checking
accounts,
-The spouses were engaged in the informal lending business. In
line with their business, they had a discounting arrangement with
the Philnabank Employees Savings and Loan Association (PEMSLA), an
association of PNB employees. Naturally, PEMSLA was likewise a
client of PNB Amelia Avenue Branch. The association maintained
current and savings accounts with petitioner bank.
-PEMSLA regularly granted loans to its members. Spouses
Rodriguez would rediscount the postdated checks issued to members
whenever the association was short of funds. As was customary, the
spouses would replace the postdated checks with their own checks
issued in the name of the members.
-It was PEMSLAs policy not to approve applications for loans of
members with outstanding debts. To subvert this policy, some PEMSLA
officers devised a scheme to obtain additional loans despite their
outstanding loan accounts. They took out loans in the names of
unknowing members, without the knowledge or consent of the latter.
The PEMSLA checks issued for these loans were then given to the
spouses for rediscounting. The officers carried this out by forging
the indorsement of the named payees in the checks.
-In return, the spouses issued their personal checks (Rodriguez
checks) in the name of the members and delivered the checks to an
officer of PEMSLA. The PEMSLA checks, on the other hand, were
deposited by the spouses to their account.
-Meanwhile, the Rodriguez checks were deposited directly by
PEMSLA to its savings account without any indorsement from the
named payees. This was an irregular procedure made possible through
the facilitation of Edmundo Palermo, Jr., treasurer of PEMSLA and
bank teller in the PNB Branch. It appears that this became the
usual practice for the parties.-PNB eventually found out about
these fraudulent acts. To put a stop to this scheme, PNB closed the
current account of PEMSLA. As a result, the PEMSLA checks deposited
by the spouses were returned or dishonored for the reason Account
Closed.
-The corresponding Rodriguez checks, however, were deposited as
usual to the PEMSLA savings account. The amounts were duly debited
from the Rodriguez account. Thus, because the PEMSLA checks given
as payment were returned, spouses Rodriguez incurred losses from
the rediscounting transactions.
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SPCL- BANKING Comia, Antonette Tud
TC:
-Ruled in favor of spouses Rodriguez, PNB is liable to return
the value of the checks.
CA:
-Reversed RTC. The checks are payable not to order but to bearer
PEMSLA. The payees in the checks were fictitious payee because they
were not the intended payees at all.
-After a Motion for Reconsideration, CA reversed itself.
ISSUE:
-Whether or not PNB is liable to return the value of the checks
to Spouses Rodriguez.
HELD:
-In a checking transaction, the drawee bank has the duty to
verify the genuineness of the signature of the drawer and to pay
the check strictly in accordance with the drawers instructions,
i.e., to the named payee in the check. It should charge to the
drawers accounts only the payables authorized by the latter.
Otherwise, the drawee will be violating the instructions of the
drawer and it shall be liable for the amount charged to the drawers
account.
-Banks handle daily transactions involving millions of pesos. By
the very nature of their work the degree of responsibility, care
and trustworthiness expected of their employees and officials is
far greater than those of ordinary clerks and employees. For
obvious reasons, the banks are expected to exercise the highest
degree of diligence in the selection and supervision of their
employees.
-PNBs tellers and officers, in violation of banking rules of
procedure, permitted the invalid deposits of checks to the PEMSLA
account. Indeed, when it is the gross negligence of the bank
employees that caused the loss, the bank should be held liable.
-A bank that has been remiss in its duty must suffer the
consequences of its negligence. Being issued to named payees, PNB
was duty-bound by law and by banking rules and procedure to require
that the checks be properly indorsed before accepting them for
deposit and payment. In fine, PNB should be held liable for the
amounts of the checks.
11. Bank of America, NT and SA v. Associated Citizens Bank
FACTS:
- BA-Finance Corporation (BA-Finance) entered into a transaction
with Miller Offset Press, Inc. (Miller), through the latters
authorized representatives, BA-Finance granted Miller a credit line
facility through which the latter could assign or discount its
trade receivables with the former. Uy Kiat Chung, Ching Uy Seng,
and Uy Chung Guan Seng executed a Continuing Suretyship Agreement
with BA-Finance whereby they jointly and severally guaranteed the
full and prompt payment of any and all indebtedness which Miller
may incur with BA-Finance.
-Miller discounted and assigned several trade receivables to
BA-Finance by executing Deeds of Assignment in favor of the latter.
In consideration of the assignment, BA-Finance issued four checks
payable to the Order of Miller
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SPCL- BANKING Comia, Antonette Tud
Offset Press, Inc. with the notation For Payees Account Only.
These checks were drawn against Bank of America .
-The four checks were deposited by Ching Uy Seng (a.k.a. Robert
Ching), then the corporate secretary of Miller, in a joint bank
account under the names of Ching Uy Seng and Uy Chung Guan Seng.
Associated Bank stamped the checks with the notation all prior
endorsements and/or lack of endorsements guaranteed, and sent them
through clearing. Later, the drawee bank, Bank of America, honored
the checks and paid the proceeds to Associated Bank as the
collecting bank.
-Miller failed to deliver to BA-Finance the proceeds of the
assigned trade receivables. Consequently, BA-Finance filed a
Complaint against Miller for collection of the amount which
BA-Finance allegedly paid in consideration of the assignment, plus
interest at the rate of 16% per annum and penalty charges. Likewise
impleaded as party defendants in the collection case were Uy Kiat
Chung, Ching Uy Seng, and Uy Chung Guan Seng.
-Miller, Uy Kiat Chung, and Uy Chung Guan Seng denied that they
received the amount covered by the four Bank of America checks, and
that they authorized their co-defendant Ching Uy Seng to transact
business with BA-Finance on behalf of Miller. Uy Kiat Chung and Uy
Chung Guan Seng also denied having signed the Continuing Suretyship
Agreement with BA-Finance.
TC:
-Ordered Bank of America to pay BA Finance and Associated
Citizens Bank to Reimburse Bank of America.
CA:
-Affirmed TC and ordered Robert Ching and Uy Chung Guan Seng to
pay Associated Citizens Bank.
ISSUES:
1. Whether or not Bank of America is liable to pay BA Finance
the amount of the four checks;2. Whether or not Associated Bank is
liable to reimburse Bank of America the amount of the four
checks.
HELD:
- The bank on which a check is drawn, known as the drawee bank,
is under strict liability, based on the contract between the bank
and its customer (drawer), to pay the check only to the payee or
the payees order. The drawers instructions are reflected on the
face and by the terms of the check. When the drawee bank pays a
person other than the payee named on the check, it does not comply
with the terms of the check and violates its duty to charge the
drawers account only for properly payable items. Thus, we ruled in
Philippine National Bank v. Rodriguez that a drawee should charge
to the drawers accounts only the payables authorized by the latter;
otherwise, the drawee will be violating the instructions of the
drawer and shall be liable for the amount charged to the drawers
account.
-A collecting bank where a check is deposited, and which
endorses the check upon presentment with the drawee bank, is an
endorser. Under Section 66 of the Negotiable Instruments Law, an
endorser warrants that the instrument is genuine and in all
respects what it purports to be; that he has good title to it; that
all prior parties had capacity to contract; and that the instrument
is at the time of his endorsement valid and subsisting. This Court
has repeatedly held that in check transactions, the collecting bank
or last endorser generally suffers the loss because it has the duty
to ascertain the genuineness of all prior endorsements considering
that the act of presenting the check for payment to the drawee is
an assertion that the party making the presentment has done its
duty to ascertain the genuineness of the endorsements.
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SPCL- BANKING Comia, Antonette Tud
-When Associated Bank stamped the back of the four checks with
the phrase all prior endorsements and/or lack of endorsement
guaranteed, that bank had for all intents and purposes treated the
checks as negotiable instruments and, accordingly, assumed the
warranty of an endorser.
-When a bank allows a client to collect on crossed checks issued
in the name of another and for a specific purpose, the bank is
guilty of negligence.
B. CLOSURE OF BANKS
1. Ramos v. Central Bank of the Philippines, 41 SCRA 565
(1971)
FACTS:
-Overseas Bank of Manila, a domestic commercial bank was
suspended by Central Bank from clearing and from lending operations
for various violations of banking laws and implementing
regulations.
-Because of this suspension and deprivation of all usual credit
facilities and accommodations which were accorded to other banks
OBM became financially distressed.
-The Central Bank, through its Monetary Board, in a letter
advised OBM to sign trusteeship agreement in favor of the Central
Bank in order to enable it to recognize and transfer management to
a nominee of Central Bank.
-In another letter, CB governor reiterated to Emerito Ramos the
need for OBM stockholders to execute voting trust agreement to
stave off liquidation and mortgage the properties to secure OBMs
obligations to the Central Bank.
-Because CB committed itself to continued operation and
rehabilitation of OBM, the majority and controlling stockholders of
OBM complied by executing (a) Voting Trust Agreement, turning over
the management of OBM to CB, (b) mortgaging the properties.
-Thereafter CB elected and installed new Directors and officers
drafted from CB itself, PNB and DBP.
-Despite compliance of OBM and parting with value to the profit
of CB, CB did not heed to the request for an advance.
-For almost, six months, CB did nothing to enable OBM to resume
normal operation nor support OBM and even kept the management team
largely in the dark.
-Further, CB, in a resolution, excluded OBM from clearing with
it.
-Subsequently, in another resolution, CB authorized its nominee
Board of Directors to suspend operations, and thirteen days
thereafter directed its Superintendent of Banks to proceed to
liquidate OBM under the Central Bank charter.
-Hence this petition for certiorari, prohibition and mandamus
with prayer for the issuance of a writ of preliminary injunction to
restrain CB from enforcing the resolution.
HELD:
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SPCL- BANKING Comia, Antonette Tud
-When the Central Bank made express representations that it
would support the bank and avoid its liquidation if its majority
stockholders would execute a voting trust agreement turning over
the management of the bank to CB or its nominees and mortgage or
assign their properties to CB to cover the over draft balance of
the bank, the CB may not thereafter renege in its representation
and liquidate the bank after the majority stockholders of the bank
complied with the conditions and parted with value to the profit of
CB, which thus acquired additional security for its own advances to
the detriment of the banks stockholders, depositors and other
creditors under the rule of promissory estoppel.
2. Central Bank v. Court of Appeals, 106 SCRA 143 (1981)
FACTS:
-Provident Savings Bank experienced a bank run. Due to unusually
heavy withdrawals of depositors, Provident requested from Central
Bank emergency loans. Initially, CB denied such request which
resulted to temporary closure of Provident. But later on, CB
extended emergency loans. Unfortunately, such were not sufficient
to cover withdrawals of depositors.
-Fernando and Jayme, Providents major stockholders, appealed to
CB for its continued assistance.
-CB Deputy declared that assistance would continue, provided
that Fernandez and Jayme would turn-over the management and control
of Provident to Iglesia ni Cristo.
-Fernandez and Jayme complied with such condition. However, INC
had no intention of restoring the bank but merely to recover its
deposit.
-Monetary Board ordered the closure of Provident.
-Provident filed a petition for certiorari, prohibition and
mandamus.
-CB contended that Closure is an exercise of Police Power, which
the court cannot pass upon.
-CFI, Affirmed by CA granted the petition.
ISSUE:
-Whether or not the Closure and Liquidation of Bank which is
considered an exercise of Police Power may be subject of judicial
inquiry.
HELD:
-While closure and liquidation of a bank may be considered an
exercise of police power, the validity of such exercise of police
power is subject to judicial inquiry and could be set aside if it
is either capricious, discriminatory, whimsical, unjust or a denial
of the due process and equal protection clauses of the
Constitution.
3. Salud v. Central Bank, 143 SCRA 590 (1986)
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FACTS:
-The Monetary Board issued resolutions forbidding the Rural Bank
of Muntinlupa to do business and ordering its liquidation after
confirmation that it was insolvent and could not resume business
with safety to all concerned.
-CB thereafter filed a petition for assistance in the
liquidation of the Rural Bank of Muntinlupa.
- Rural Bank of Muntinlupa opposed on the grounds that: (a) the
liquidation is premature and void there being no prior
reorganization and restoration of its viability and; (b) the
liquidation was arbitrary and in bad faith because Rural Bank of
Muntinlupa is still capable of rehabilitation and the act of CB was
inconsistent with its prior actions of rehabilitating similarly
distressed banks.
-The Trial Court declared the actions taken by the Monetary
Board to be arbitrary and dismissed the petition for assistance in
liquidation.
-Failure I two attempts to have this order reconsidered, CB and
its liquidator instituted with the Supreme Court a special civil
action of certiorari and mandamus.
-The petition was referred to the IAC which initially remanded
the case to the RTC, but upon motion of CB, IAC clarified its
decision and approved the petition for assistance.
-Hence this petition by Rural Bank of Muntinlupa.
ISSUE:
-Whether or not the issue of whether the MB resolution is
arbitrary and made in bad faith may only be raised in a separate
action or proceeding.
HELD:
-Resolutions of the Monetary Board under Section 29 of the
Central Bank Act-e.g., forbidding banking institutions to do
business on account of a "condition of insolvency" or because "its
continuance in business would involve probable loss to depositors
or creditors;" or appointing a receiver to take charge of the
bank's assets and liabilities; or determining whether the banking
institutions may be rehabilitated, or should be liquidated and
appointing a liquidator towards this end are by law "final and
executory," as earlier pointed out. But they "can be set aside by
the court" on one specific ground, and that is, "if there is
convincing proof that the action is plainly arbitrary and made in
bad faith." The Central Bank concedes this power in "the court,"
but insists that that setting aside cannot be done in the same
proceeding for assistance in liquidation, but in a separate action
instituted specifically for the purpose.
4. Lipana v. Development Bank of Rizal, 154 SCRA 257 (1987)
FACTS:
- Spouses Lipana opened and maintained both time and savings
deposits with Development Bank of Rizal.
-When some of the Time Deposit Certificates matured, Sps. Lipana
were not able to cash them but instead were issued a manager's
check which was dishonored upon presentment. Demands for the
payment of both time and savings deposits having failed, Sps Lipana
filed a Complaint With Prayer For Issuance of a Writ of Preliminary
Attachment for collection of a sum of money with damages.
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SPCL- BANKING Comia, Antonette Tud
-Respondent Judge, ordered the issuance of a writ of attachment,
and pursuant thereto, a writ of was issued in favor of the Sps.
Lipana..
-Meanwhile, the Monetary Board, finding that the condition
Development Bank Of Rizal was one of insolvency and that its
continuance in business would result in probable loss to its
depositors and creditors, decided to place it under
receivership
-Sps. Lipana filed a Motion for Execution Pending Appeal, which
was opposed by Development Bank Of Rizal
-In an order, respondent judge ordered the issuance of a writ of
execution.
-Development Bank Of Rizal filed a Motion for Reconsideration of
order and to Stay Writ of Execution, which, respondent judge stayed
the execution.
-When the motion to lift stay of execution was denied, the Sps.
Lipana filed the instant petition.
ISSUE:
-Whether or not respondent judge could legally stay execution of
judgment that has already become final and executory.
HELD:
- The rule that once a decision becomes final and executory, it
is the ministerial duty of the court to order its execution, admits
of certain exceptions as in cases of special and exceptional nature
where it becomes imperative in the higher interest of justice to
direct the suspension of its execution; whenever it is necessary to
accomplish the aims of justice; or when certain facts and
circumstances transpired after the judgment became final which
could render the execution of the judgment unjust.
-In the instant case, the stay of the execution of judgment is
warranted by the fact that respondent bank was placed under
receivership. To execute the judgment would unduly deplete the
assets of respondent bank to the obvious prejudice of other
depositors and creditors, after the Monetary Board has declared
that a bank is insolvent and has ordered it to cease operations,
the Board becomes the trustee of its assets for the equal benefit
of all the creditors, including depositors. The assets of the
insolvent banking institution are held in trust for the equal
benefit of all creditors, and after its insolvency, one cannot
obtain an advantage or a preference over another by an attachment,
execution or otherwise.
5. Overseas Bank of Manila v. Court of Appeals, 172 SCRA 521
(1989)
FACTS:
- In relation to a contract of sale between NAWASA, as vendor
and a certain Bonifacio Regalado, as vendee, and by authority of
the former's board of directors, the amount of P327,257.20 was
placed on a time deposit with the Overseas Bank by the NAWASA
Treasurer for a period of 6 months. The amount corresponding to a
payment earlier made by Regalado to the NAWASA, and the time
deposit was made so that a refund could quickly be made to Regalado
in the event that his contract with the NAWASA be disapproved by
the Office of the President.
- A second payment having been made by Regalado in the same sum
of P327,257.20 in connection with his aforesaid contract, another
time deposit was made by the NAWASA Treasurer with the Overseas
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SPCL- BANKING Comia, Antonette Tud
respresenting the balance of the purchase price due from
Regalado. The period of this second deposit was fixed at one (1)
year.
-NAWASA's Acting General Manager wrote to the Overseas Bank
advising that (1) as regards the first time deposit of P327,257.20
which had already matured, NAWASA wished to withdraw it
immediately, and (2) with respect to the second time deposit of
P2,945,314.80, it intended to withdraw it sixty (60) days
thereafter as authorized by the parties' agreement set forth in the
certificate of the deposit.
-The Overseas Bank having failed to remit to it, it did however
pay to NAWASA, , interest on its time deposits.
-After maturity of the second time deposit, NAWASA again sent a
letter to the Overseas Bank, demanding remittance of both time
deposits. Having received no response, NAWASA wrote to the Bank
once more giving it five (5) days to remit the deposited sums, and
warning that it would seek the intervention of the Central Bank for
the protection of its interests. Still no word was received from
the bank.
-NAWASA then wrote to the Central Bank Governor about the
matter. The latter replied that it was pursuing a suggestion of the
Monetary Board for the Overseas Bank to transfer government
deposits in its custody (including those of NAWASA) to the
Philippine National Bank and/or the Development Bank of the
Philippines. Apparently, even the Central Bank was ignored by
Overseas Bank.
-NAWASA informed the Central Bank that it had received no
remittance from the Overseas Bank nor did it appear that the latter
had transferred the time deposits to the PNB or the DBP. The
Central Bank wrote back, pointing out that while the matter really
had to be resolved by NAWASA and the Overseas Bank according to
their contract, it was nonetheless pursuing an available measures
to induce the Overseas Bank to remit the time deposits in question
or at least transfer them to either the PNB or DBP; the Central
Bank also said that it had informed the President of the
Philippines of the status of Government deposits in the Overseas
Bank.
-One last letter was written by NAWASA to the Overseas Bank,
reiterating its demand for the return of its money. Again the
letter went unheeded.
-NAWASA thus brought suit to recover its deposits and damages,
with the results already mentioned. The Overseas Bank failed to
file its answer despite service of summons; it was declared in
default; the Court received NAWASA's evidence ex parte and on the
basis thereof, thereafter rendered judgment by default. The
Overseas Bank made no effort whatever to have the order of default
lifted, or to have the judgment by default reconsidered. After
being served with notice of the judgment, it simply brought the
case up to the Court of Appeals.
-Trial Court, affirmed by the Court of Appeal, rendered decision
against Overseas Bank.
OBMs Defense:
-By reason of punitive action taken by the CB, it had been
prevented from undertaking banking operations which would have
generated funds to pay not only its depositors and creditors but
likewise the interests due on the deposits.
HELD:
- There is in the first place absolutely no evidence of these
facts in the record: and this is simply because the petitioner bank
had made no effort whatever to set aside the default order against
it so that it could present evidence in its behalf before the Trial
Court. Moreover, the suspension of operations which took place in
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SPCL- BANKING Comia, Antonette Tud
1968, could not possibly excuse non-compliance with the
obligations in question which matured in 1966. Again, the claim
that the Central Bank, by suspending the Overseas Bank's banking
operations, had made it impossible for the Overseas Bank to pay its
debts, whatever validity might be accorded thereto, or the further
claim that it had fallen into a "distressed financial situation,"
cannot in any sense excuse it from its obligation to the NAWASA,
which had nothing whatever to do with the Central Bank's actuations
or the events leading to the bank's distressed state.
- Furthermore, that rehabilitation program or procedure of
payment does not in any way negate or diminish the indebtedness of
the Overseas Bank to the NAWASA incurred in 1966, for conceding
full faith and credit to such a prescribed procedure of payment, it
constitutes no obstacle to determining the principal and interests
of the debts at issue at this time.
6. Banco Filipino Savings and Mortgage Bank v. Central Bank, 204
SCRA 767 (1991)
FACTS:
-On different occasions, Top Management Program Corporation,
Pilar Development Corporation, El Grande Development Corporation
obtained a loan from Banco Filipino and Savings and Mortgage Bank
secured by Real Estate Mortgages.
-When the bank suffered serious financial problems, the Monetary
Board issued resolution finding the bank insolvent and placed it
under receivership.
-Banco Filipino filed a complaint to set aside the said action
of MB.
-Subsequently, MB issued another resolution placing the bank
under liquidation and designating a liquidator.
-Banco Filipino filed another petition questioning the validity
of the said resolution.
-A temporary restraining order was issued, however, acts
pertaining to normal operations of a bank are not enjoined.
-A resolution was also issued ordering the conduct of
hearings.
-In the meantime, Top Management Program Corporation, Pilar
Development Corporation, El Grande Development Corporation failed
to pay their obligations.
-The liquidator extra judicially foreclosed the Real Estate
Mortgages.
-Each filed separately a petition for injunction and prohibition
seeking to enjoin the sheriff from proceeding with the foreclosure
sale.
-Petitions were dismissed. Hence, petitions were filed by Top
Management Program Corporation, Pilar Development Corporation, El
Grande Development Corporation alleging that the liquidator has no
authority to proceed with the foreclosure sale pending the
resolution of the issue on the validity of the closure and
liquidation of Banco Filipino.
ISSUE:
-Whether or not the liquidator has the authority to prosecute as
well as to defend suits and foreclose mortgages for and in behalf
of the bank while the issue on the validity of the receivership and
liquidation is still pending resolution.
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SPCL- BANKING Comia, Antonette Tud
HELD:
-The Central bank is vested with the authority to take charge
and administer the monetary and banking systems of the country and
this authority includes the power to examine and determine the
financial condition of banks for the purpose of closure ion the
ground of insolvency.
-Even if the bank is questioning the validity of its closure,
during the pendency of the case, the liquidator can continue
prosecution suits for collection and foreclosure of mortgages, as
they are acts done In the usual course of administration of the
banks.
7. Central Bank of the Philippines v. Court of Appeals, 208 SCRA
652 (1992)
FACTS:
- At the height of the controversy surrounding the discovery of
the anomalous loans, several blind items about a family-owned bank
in Binondo which granted fictitious loans to its stockholders
appeared in major newspapers. These news items triggered a bank-run
in PBP which resulted in continuous over-drawings on the bank's
demand deposit account with the Central Bank. Hence, on the basis
of the report submitted by the Supervision and Examination Sector,
Department I of the CB, the Monetary Board (MB), pursuant to its
authority under Section 28-A of R.A. No. 265 and by virtue of MB
Board Resolution No. 164, placed PBP under conservatorship.
-While PBP admits that it had no choice but to submit to the
conservatorship, it nonetheless requested that the same be lifted
by the CB. Consequently, the MB issued Resolution directing the
principal stockholders of PBP to increase its capital accounts by
such an amount that would be necessary for the elimination of PBP's
negative net worth. CB senior deputy Governor Gabriel Singson
informed PBP that pursuant to MB Resolution, the CB would be
willing to lift the conservatorship under the following conditions:
(a) PBP's unsecured overdraft with the Central Bank will be
converted into an emergency loan, to be secured by sufficient
collateral, including but not limited to the properties offered by
PBP's principal stockholders.
- MB adopted Resolution approving the consolidation of PBP's
other unsecured obligations to the CB with its overdraft and
authorizing the conversion thereof into an emergency loan. The same
resolution authorized the CB Governor to lift the conservatorship
and return PBP's management to its principal stockholders upon
completion of the documentation and full collateralization of the
emergency loan, but directed PBP to pay the emergency loan in five
(5) equal annual installments, with interest and penalty rates at
MRR 180 days plus 48% per annum, and liquidated damages of 5% for
delayed payments.
- PBP submitted a rehabilitation plan to the CB which proposed
the transfer to PBP of three (3) buildings owned by Producers
Properties, Inc. (PPI), its principal stockholder and the
subsequent mortgage of said properties to the CB as collateral for
the bank's overdraft obligation. Although said proposal was
explored and discussed, no program acceptable to both the CB and
PPI was arrived at because of disagreements on certain matters such
as interest rates, penalties and liquidated damages.
-No other rehabilitation program was submitted by PBP for almost
three (3) years; as a result thereof, its overdrafts with the CB
continued to accumulate. The CB Monetary Board decided to approve
in principle what it considered a viable rehabilitation program for
PBP.
-PBP, without responding to the communications of the CB, filed
a complaint verified against the CB, the MB and CB Governor Jose B.
Fernandez, Jr., asserting that the conservatorship was unwarranted,
ill-motivated, illegal, utterly unnecessary and unjustified; that
the appointment of the conservator was arbitrary; that herein
petitioners
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acted in bad faith; that the CB-designated conservators
committed bank frauds and abuses; that the CB is guilty of
promissory estoppel; and that by reason of the conservatorship, it
suffered losses exclusive of loss of profits and loss of
goodwill.
-The trial court and the Court of Appeals is into lifting the
conservatorship. (However, there is nothing in the amended
complaint to reflect an unequivocal intention to ask for its
lifting.)
HELD:
-If it were to lift the conservatorship because it was
arbitrarily imposed, then the case should have been dismissed on
the grounds of prescription and lack of personality to bring
action.
-The following requisites must be present before the order of
conservatorship may be set aside by a court:
1. The appropriate pleading must be filed by the stockholders of
record representing majority of the capital stock of the bank in
the proper court;
2. Said pleading must be filed within 10 days from receipt of
notice by said majority stockholders of the order placing the bank
under conservatorship; and
3. There must be convincing proof after hearing that the action
is plainly arbitrary and made in bad faith.
8. First Philippine International Bank v. Court of Appeals, 252
SCRA 259 (1996)
FACTS:
-In the course of its banking operations Producers Bank of the
Philippines acquired six parcels of land which used to be owned by
BYMC Investment and Development Corporation which was mortgaged to
the bank as collateral for a loan.
-Demetrio Demetria and Jose Janolo wanted to purchase the
property and thus initiated negotiations for that purpose. They met
with Mercurio Rivera, manager of the Property Management Department
of the bank, who advised them to make formal offer.
-Janolo following the advice of Rivera made a formal purchase
offer, through a letter, for 3P3.5M in cash, which was
counter-offered by Rivera, on behalf of the bank, to P5.5M, in
which Janolo made an amended offer of P4.250M.
-There was reply on Janolos last offer, instead they met with
Luis Co, Senior Vice-President of the Bank, sticked to their
counter offer of P5.5M, which Janolo et al., accepted after two
days.
-The bank was placed under conservatorship by CB and through a
letter, Rivera informed Demetria that their proposal to purchase
the property is under study yet by the newly created committee for
submission to the Acting Consrvator.
-Series of demands were made by Janolo et al for compliance by
the bank with what Janolo et al considered as perfected contract of
sale which demands were refused by the bank, and refused to receive
tender of payment.
-Instead the land was advertised for sale.
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-Final demand was made in which acting conservator replied that
the bank through the acting Conservator repudiated the authority of
Rivera and all his dealings and counter-offer were unauthorized and
illegal, and that there was no perfected contract of sale as there
was no meeting of minds as to the price.
-Hence, Janolo et al filed a suit for specific performance
against the bank.
CA:
-Ruled that there was perfected contract of sale and conservator
has no authority to revoke it.
ISSUE:
-Whether or not a conservator has the authority to revoke a
perfected contract of sale entered into by the bank through its
officers before conservatorship.
HELD:
-The power of conservator, enormous and extensive as they are,
cannot extend to the post-facto repudiation of perfected
transactions, otherwise they would infringe the non-impairment
clause of the Constitution. What the conservator may revoke are
contracts which are, under existing law, deemed defective- such as
void, voidable, unenforceable or rescissible. Hence, the
conservator merely takes place of a banks board of directors. What
said board cannot dosuch as repudiating a contract validly entered
into under the doctrine of implied authoritythe conservator cannot
do either.
9. Ong v. Court of Appeals, 253 SCRA 105 (1996)
FACTS:
-Rural Bank of Olonggapo was the owner in fee simple of two
parcels of land including the improvements thereon situated in
Tagaytay City.
-Said parcels of land were duly mortgaged by RBO in favor Ong to
guarantee the payment of Omnibus Finance, Inc., which is likewise
now undergoing liquidation proceedings of its money market
obligations to Ong.
-Omnibus Finance, Inc., not having seasonably settled its
obligations to Ong, the latter proceeded to effect the
extrajudicial foreclosure of said mortgages, such that the City
Sheriff of Tagaytay City issued a Certificate of Sale in favor of
Ong.
-Respondents failed to seasonably redeem said parcels of land,
for which reason, Ong has executed an Affidavit of Consolidation of
Ownership which, to date, has not been submitted to the Registry of
Deeds of Tagaytay City, in view of the fact that possession of the
aforesaid titles or owners duplicate certificates of title remains
with the RBO.
-To date, Ong has not been able to effect the registration of
said parcels of land in his name in view of the persistent refusal
of RBO, despite demand, to surrender RBOs copies of its owners
certificates of title for the parcels of land.
-RBO filed a motion to dismiss on the ground of res judicata
alleging that petitioner had earlier sought a similar relief which
case was dismissed with finality on appeal before the Court of
Appeals.
-RBO contended that it was undergoing liquidation and, pursuant
to prevailing jurisprudence, it is the liquidation court which has
exclusive jurisdiction to take cognizance of Ongs claim.
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ISSUES:
1. Whether or not the liquidation court has jurisdiction over
all claims against insolvent bank.
2. Whether or not it is necessary that a claim be initially
disputed in a court or agency before it is filed with the
liquidation court.
HELD:
-Sec. 29, par. 3, of R.A. 265 as amended by P.D. 1827 does not
limit the jurisdiction of the liquidation court to claims against
the assets of the insolvent bank. The provision is general in that
it clearly and unqualifiedly states that the liquidation court
shall have jurisdiction to adjudicate disputed claims against the
bank. Disputed claims refer to all claims, whether they be against
the assets of the insolvent bank, for specific performance, breach
of contract, damages, or whatever. To limit the jurisdiction of the
liquidation court to those claims against the assets of the bank is
to remove significantly and without basis the cases that may be
brought against a bank in case of insolvency.
-It is not necessary that a claim be initially disputed in a
court or agency before it is filed with the liquidation court.
10. Manalo v. Court of Appeals, 366 SCRA 753 (2001)
FACTS:
-S. Villanueva Enterprises, represented by its president,
Therese Villanueva Vargas, obtained a loan from PAIC Savings and
Mortgage Bank and the Philippine American Investments Corporation
(PAIC), respectively.
-To secure payment of both debts, Vargas executed in favor PAIC
Savings and PAIC a Joint First Mortgageover two parcels of land
registered under her name.
-S. Villanueva Enterprises defaulted in paying the amortizations
due. Despite repeated demands from the respondent, it failed to
settle its loan obligation.
-Accordingly, PAIC Savings instituted extrajudicial foreclosure
proceedings over the mortgaged lots. The Pasay City property was
sold at a public auction to the respondent itself, after tendering
the highest bid. PAIC Saving then caused the annotation of the
corresponding Sheriffs Certificate of Sale on the title of the
land. After the lapse of one year, or the statutory period extended
by law to a mortgagor to exercise his/her right of redemption,
title was consolidated in PAIC Savings name for failure of Vargas
to redeem.
-The Central Bank of the Philippines filed a Petition for
assistance in the liquidation of the PAIC Savings with the Regional
Trial Court. The petition was given due course.
-It appears that from the years 1986 to 1991, Vargas negotiated
with the PAIC Savings (through its then liquidator, the Central
Bank) for the repurchase of the foreclosed property. The
negotiations, however, fizzled out as Vargas cannot afford the
repurchase price fixed by the PAIC Savings based on the appraised
value of the land at that time.
-Vargas filed a case for annulment of mortgage and
extra-judicial foreclosure sale.
-The court rendered a decision dismissing the complaint and
upholding the validity of the mortgage and foreclosure sale.
-On appeal, the appellate court upheld the assailed judgment and
declared the said mortgage and foreclosure proceedings to be in
accord with law. This decision of the Court of Appeals subsequently
became final and executory when we summarily dismissed Vargass
Petition for Review on Certiorari for having been filed beyond the
reglementary period.
-In the meantime, PAIC Savings petitioned the herein court a
quo, for the issuance of a writ of possession for the
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subject property. This is in view of the consolidation of its
ownership over the same as mentioned earlier. Vargas and S.
Villanueva Enterprises, Inc. filed their opposition thereto. After
which, trial ensued.
-During the pendency of the case (for the issuance of a writ of
possession), Vargas executed a Deed of Absolute Sale selling,
transferring, and conveying ownership of the disputed lot in favor
of a certain Armando Angsico. Notwithstanding this sale, Vargas,
still representing herself to be the lawful owner of the property,
leased the same to Domingo R. Manalo
Later, Armando Angsico, as buyer of the property, assigned his
rights therein to Domingo Manalo.
-Shortly, S. Villanueva Enterprises and Vargas moved for its
quashal. Thereafter, Manalo, on the strength of the lease contract
and Deed of Assignment made in his favor, submitted a Permission to
File an Ex-parte Motion to Intervene. He had separately instituted
a Complaint for Mandamus to compel PAIC Bank to allow him to
repurchase the subject property.
-Trial Court denied the Motion to Quash and Motion to Intervene
filed respectively by Vargas and Manalo. A Motion for
Reconsideration and a Supplemental Motion for Reconsideration were
filed by the Manalo which, however, were similarly denied.
ISSUE:
-Whether or not the public respondent committed grave abuse of
discretion when it held that what are required to be instituted
before the liquidation court are those claims against the insolvent
banks only considering that the PAIC Savings bank is legally dead
due to insolvency and considering further that there is already a
liquidation court which is exclusively vested with jurisdiction to
hear all matters and incidents on liquidation pursuant to Section
29, Republic Act No. 265, otherwise known as The Central Bank Act,
as amended.
HELD:
-The liquidator designated as hereunder provided shall, by the
Solicitor General, file a petition in the Regional Trial Court
reciting the proceedings which have been taken and praying the
assistance of the court in the liquidation of such institution. The
court shall have jurisdiction in the same proceedings to assist in
the adjudication of disputed claims against the bank or non-bank
financial intermediary performing quasi-banking functions and the
enforcement of individual liabilities of the stockholders and do
all that is necessary to preserve the assets of such institution
and to implement the liquidation plan approved by the Monetary
Board.
-. A bank which had been ordered closed by the monetary board
retains its juridical personality which can sue and be sued through
its liquidator. The only limitation being that the prosecution or
defense of the action must be done through the liquidator.
Otherwise, no suit for or against an insolvent entity would
prosper. In such situation, banks in liquidation would lose what
justly belongs to them through a mere technicality
11. Rural Bank of Sta. Catalina v. Land Bank of the Philippines,
435 SCRA 183 (2004)
FACTS:
-Land Bank of the Philippines, filed a complaint against Sta.
Catalina Rural Bank, Inc, for the collection of the sum of money,
capitalized and accrued interests, penalties and surcharges, and
for such other equitable reliefs.
-On motion of the LBP, the trial court issued an Order declaring
Sta. Catalina Rural Bank, Inc in default for its failure to file
its answer to the complaint. Despite its receipt of the copy of the
said order, Sta. Catalina Rural Bank, Inc failed to file a motion
to set aside the order of default. Page 26 of 35
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-In the meantime, the Monetary Board of the Central Bank of the
Philippines approved the placement of the Sta. Catalina Rural Banks
assets under receivership under Section 29 of Republic Act No.
7653, as recommended by its Supervision and Management Section. The
Philippine Deposit Insurance Corporation (PDIC) was designated as
receiver (conservator) of the Sta. Catalina Rural Bank, and the
latter was prohibited from doing business in the Philippines.
-Unaware of the action of the Central Bank of the Philippines,
the trial court, rendered judgment by default against Sta. Catalina
Rural Bank ordering it to pay LBP.
-Sta. Catalina Rural Bank, through the PDIC, appealed the
decision to the Court of Appeals. PDIC submitted a Report to the
Monetary Board of the Central Bank of the Philippines that Sta.
Catalina Rural Bank remained insolvent, and that its management
failed to rehabilitate the said bank.
-Sta. Catalina Rural Bank cited the ruling of this Court in
Overseas Bank of Manila vs. Court of Appeals to support its claim
that since it was placed under receivership, and prohibited from
doing business in the Philippines, it should no longer be held
liable for interests and penalties on its account LBP.
-CA rendered judgment affirming the decision of the RTC. The CA
ruled that having failed to file a motion for reconsideration of
the trial courts order declaring it in default before such court
rendered judgment, compounded by its failure to do so in the Court
of Appeals, Sta. Catalina Rural Bank was precluded from invoking in
the appellate court the placement of its assets and affairs under
receivership and its exemption from liability for interests and
penalties on its account with the LBP after the said date. The CA
ruled that if it acquiesced to the contention of Sta. Catalina
Rural Bank, it would defeat the very principle behind the
declaration of default of a party for failing to file an answer to
the complaint within the reglementary period therefore. The CA
further declared that a contrary ruling would render nugatory the
effect of the trial courts declaration of default on the part of
the Sta. Catalina Rural Bank.
ISSUE:
-Whether or not it is liable for interests and penalties on its
account with the Land Bank of the Philippines, when its assets and
affairs were placed under receivership by the Central Bank of the
Philippines, and was prohibited from doing business.
HELD:
-The records show that Sta. Catalina Rural Bank was served with
a copy of summons and the complaint, but failed to file its answer
thereto. It also failed to file a verified motion to set aside the
Order of default despite its receipt of a copy thereof. We note
that the trial court rendered more than a year after the issuance
of the default order; yet, Sta. Catalina Rural Bank failed to file
any verified motion to set aside the said order before the
rendition of the judgment of default. The PDIC was designated by
the Central Bank of the Philippines as receiver (conservator), and
in the course of its management of the Sta. Catalina Rural Banks
affairs, it should have known of the pendency of the case against
the latter in the trial court. Moreover, Sta. Catalina Rural Bank,
through the PDIC, received a copy of the decision of the trial
court on June 2, 1998, but did not bother filing a motion for
partial reconsideration, under Rule 37 of the Rules of Court,
appending thereto the orders of the Monetary Board or a motion to
set aside the order of default. Instead, Sta. Catalina Rural Bank
appealed the decision, and even failed to assign as an error the
default order of the trial court. Sta. Catalina Rural Bank is,
thus, barred from relying on the orders of the Monetary Board of
the Central Bank of the Philippines placing its assets and affairs
under receivership and ordering its liquidation.
-It bears stressing that a defending party declared in default
loses his standing in court and his right to adduce evidence and to
present his defense. He, however, has the right to appeal from the
judgment by default and assail said judgment on the ground, inter
alia, that the amount of the judgment is excessive or is different
in kind from that prayed for, or that the plaintiff failed to prove
the material allegations of his complaint, or that the decision is
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to law. Such party declared in default is proscribed from
seeking a modification or reversal of the assailed decision on the
basis of the evidence submitted by him in the Court of Appeals, for
if it were otherwise, he would thereby be allowed to regain his
right to adduce evidence, a right which he lost in the trial court
when he was declared in default, and which he failed to have
vacated. In this case, the petitioner sought the modification of
the decision of the trial court based on the evidence submitted by
it only in the Court of Appeals.
-The Sta. Catalina Rural Bank cannot, likewise, rely on the
ruling of the Court in Overseas Bank of Manila vs. Court of
Appeals, because in the said case, the issue of whether a party who
had been declared in default is entitled to relief from the
judgment by default based on evidence presented only in the
appellate court, when such order of default was not vacated by the
trial court prior to the appeal from the judgment of default was
not raised therein, much less resolved by the Court.
12. Miranda v. PDIC, 501 SCRA 288 (2006)
FACTS:
-Leticia G. Miranda was a depositor of Prime Savings Bank,
Santiago City Branch. She withdrew substantial amounts from her
account, but instead of cash she opted to be issued a crossed
cashiers check. She was thus issued cashiers check.
-Miranda deposited the two checks into her account in another
bank on the same day, however, Bangko Sentral ng Pilipinas (BSP)
suspended the clearing privileges of Prime Savings Bank effective
2:00 p.m. of June 3, 1999. The two checks of petitioner were
returned to her unpaid.
-Prime Savings Bank declared a bank holiday. BSP placed Prime
Savings Bank under the receivership of the Philippine Deposit
Insurance Corporation (PDIC).-Miranda filed a civil action for sum
of money to recover the funds from her unpaid checks against Prime
Savings Bank, PDIC and the BSP.
-Trial Court rendered judgment against Philippine Deposit
Insurance Corporation, Bangko Sentral ng Pilipinas and Prime Bank,
to pay jointly and solidarily the amount of the checks to
Miranda.
-On appeal, the Court of Appeals reversed the trial court and
ruled in favor of the PDIC and BSP, dismissing the case against
them, without prejudice to the right of Miranda to file her claim
before the court designated to adjudicate on claims against Prime
Savings Bank.
-Miranda contends that she ceased to be a depositor upon
withdrawal of her deposit and the issuance of the two cashiers
checks to her. As a holder in due course of the cashiers checks as
defined under Sections 52 and 191 of the Negotiable Instruments
Law, she is an assignee of the funds of Prime Savings Bank as
drawer thereof and entitled to its immediate payment.
ISSUE:
-Whether or not Mirandas claim is entitled to preference in the
assets of the bank on its liquidation.
HELD:
-The two cashiers checks issued by Prime Savings Bank do not
constitute an assignment of funds in the hands of the petitioner as
there were no funds to speak of in the first place. The bank was
financially insolvent for sometime, even before the issuance of the
checks. As the Court of Appeals correctly ruled, the issuance of
the cashiers
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checks to Miranda did not constitute an assignment of funds, of
which there was practically none at the time these were issued, as
the bank was in dire financial straits for some time.
-However, the claim lodged by the Miranda qualifies as a
disputed claim subject to the jurisdiction of the liquidation
court. Regular courts do not have jurisdiction over actions filed
by claimants against an insolvent bank, unless there is a clear
showing that the action taken by the BSP, through the Monetary
Board in the closure of financial institutions was in excess of
jurisdiction, or with grave abuse of discretion
-In the absence of fraud, the purchase of a cashiers check, like
the purchase of a draft on a correspondent bank, creates the
relation of creditor and debtor, not that of principal and agent,
with the result that the purchaser or holder thereof is not
entitled to a preference over general creditors in the assets of
the bank issuing the check, when it fails before payment of the
check. However, in a situation involving the element of fraud,
where a cashiers check is purchased from a bank at a time when it
is insolvent, as its officers know or are bound to know by the
exercise of reasonable diligence, it has been held that the
purchase is entitled to a preference in the assets of the bank on
its liquidation before the check is paid
C. POWE