Metropolitan Bank and Trust Co V Centro Dev't
Corp Diaz and Company (2003) / Carpio
Banks; diligence required. Republic Act No. 8971, or
the General Banking Law of 2000, recognizes the
vital role of banks in providing an environment
conducive to the sustained development of the
national economy and the fiduciary nature of
banking; thus, the law requires banks to have high
standards of integrity and performance. The fiduciary
nature of banking requires banks to assume a
degree of diligence higher than that of a good father
of a family. In the case at bar, petitioner itself was
negligent in the conduct of its business when it
extended unsecured loans to the debtors. Worse, it
was in serious breach of its duty as the trustee of the
MTI. It was not able to protect the interests of the
parties and was even instrumental in violating the
terms of the MTI, to the detriment of the parties
thereto. Thus, petitioner has only itself to blame for
being left with insufficient recourse against petitioner
under the assailed MTI. Metropolitan Bank and Trust
Company vs. Centro Development Corp., et al., G.R.
No. 180974, June 13, 2012.
Corporation; corporate approval for appointment of
trustee. Reading carefully the Secretarys
Certificate, it is clear that the main purpose of the
directors Resolution was to appoint petitioner as the
new trustee of the previously executed and amended
MTI. Going through the original and the revised MTI,
we find no substantial amendments to the provisions
of the contract. We agree with petitioner that the act
of appointing a new trustee of the MTI was a regular
business transaction. The appointment necessitated
only a decision of at least a majority of the directors
present at the meeting in which there was a quorum,
pursuant to Section 25 of the Corporation Code.
Metropolitan Bank and Trust Company vs. Centro
Development Corp., et al., G.R. No. 180974, June
13, 2012.
Consolidated Bank v. CA
Consolidated Bank and Trust Corp. v. CA + L.C.
Facts
LC Diaz [professional partnership engaged in
accounting] opened a savings account with
Solidbank. LC Diaz's cashier, Macaraya, filled up two
savings deposit slips, and she gave them +
passbook to messenger Calapre and instructed him
to deposit the money with Solidbank. Calapre
presented the deposit slips and passbook to the
teller. He left the passbook with Solidbank first as he
had to make another deposit at Allied Bank, but
when he returned, he was informed that somebody
got the passbook. Calapre reported this to
Macaraya. Macaraya + Calapre went back to
Solidbank with a deposit slip [P200k check]. When
Macaraya asked about the passbook, the teller said
that someone shorter than Calapre got it. Macaraya
reported this matter.
The following day, CEO Diaz called Solidbank to
stop any transaction using the passbook until the
company could open a new account. It was found
out that learned that P300k was withdrawn from the
account the previous day. The withdrawal slip bore
the signatures of two authorized signatories of LC
Diaz but they denied signing it. Noel Tamayo
received this sum of money.
An information for Estafa through Falsification of
Commercial Document was filed against one of their
messengers (Ilagan) and one Roscoe Verdazola
(first time they appeared in the case discussion), but
the RTC dismissed the criminal case. LC Diaz
demanded the return of their money from Solidbank,
but the latter refused and a complaint for recovery of
a sum of money was filed against them. However,
Solidbank was absolved.
RTC applied rules on savings account written on
the passbook ["Possession of this book shall raise
the presumption of ownership and any payment or
payments made by the bank upon the production of
the said book and entry therein of the withdrawal
shall have the same effect as if made to the
depositor personally."] RTC said that the burden of
proof shifted to LC Diaz to prove that the signatures
are not forged. Also, they applied the rule that the
holder of the passport is presumed to be the owner.
It was also held that Solidbank did not have any
participation in the custody and care of the passbook
and as such, their act of allowing the withdrawal was
not the proximate cause of the loss. The proximate
cause was LC Diaz negligence. As regards the
contention that LC Diaz and Solidbank had
precautionary procedures (like a secret handshake
of sorts) whenever the former withdrew a large sum,
RTC pointed out that LC Diaz disregarded this in the
past withdrawal.
CA, on the other hand, said that the proximate
cause of the unauthorized withdrawal is Solidbank's
negligence, applying NCC 2176. CA said the 3
elements of QD are present [damages; fault or
negligence; connection of cause and effect]. The
teller could have called up LC Diaz since the amount
being drawn was significant. Proximate cause is
teller's failure to call LC Diaz. CA ruled that while LC
Diaz was negligent in entrusting its deposits to its
messenger and its messenger in leaving the
passbook with the teller, Solidbank could not escape
liability because of the doctrine of last clear chance.
Solidbank could have averted the injury had it called
up LC Diaz to verify the withdrawal.
RATIO
On Solidbank's fiduciary duty under the law
SC says that Solidbank is liable for breach of K due
to negligence [culpa contractual]. K [savings deposit
agreement] between bank and depositor governed
by provisions on simple loan; bank is the debtor and
depositor is the creditor. Banks are under obligation
to treat accounts of depositors with meticulous care
[higher than diligence of a good father of a family
standard], bearing in mind the fiduciary nature of
their relationship. The bank's obligation to observe
high standards of integrity and performance is
deemed written in every deposit agreement.
However, this nature does not convert K from a
simple loan to a trust agreement (failure by bank to
pay depositor is failure to pay a simple loan only).
Solidbank's breach of K-tual obligation
For breach of the savings deposit agreement due to
negligence, or culpa contractual, the bank is liable to
its depositor. When the passbook is in the
possession of Solidbanks tellers during withdrawals,
the law imposes an even higher degree of diligence.
Likewise, tellers must exercise a high degree of
diligence in insuring that they return the passbook
only to the depositor or authorized representative.
In culpa contractual, once the plaintiff proves a
breach of contract, there is a presumption that the
defendant was at fault or negligent. The burden is on
the defendant to prove that he was not at fault or
negligent. In culpa aquiliana, the plaintiff has the
burden of proof. Solidbank failed to discharge this
burden, after LC Diaz establishing the breach of K-
tual obligation. Hence, Solidbank is bound by the
negligence of its employees. The defense of
exercising required diligence in selecting, supervising
employees is NOT a complete defense in culpa
contractual, unlike in culpa aquiliana.
Proximate cause of unauthorized withdrawal
Solidbanks negligence in not returning the passbook
to Calapre was the proximate cause. [Definition:
cause which, in natural and continuous sequence,
unbroken by any efficient intervening cause,
produces the injury and without which the result
would not have occurred.]
RTC said that LC Diaz negligence was the
proximate cause. However, SC says LC Diaz was
not at fault that the passbook landed in the hands of
the impostor. In fact, it was in the possession of the
bank while the deposit was being processed. CA
said that teller's failure to call LC Diaz was the
proximate cause. SC says the bank did not have the
duty to call LC Diaz to confirm withdrawal.
Doctrine of last clear chance
"Where both parties are negligent but the negligent
act of one is appreciably later than that of the other,
or where it is impossible to determine whose fault or
negligence caused the loss, the one who had the last
clear opportunity to avoid the loss but failed to do so,
is chargeable with the loss."
SC DOES NOT APPLY IT HERE. Solidbank is
liable for breach of contract due to negligence in the
performance of its contractual obligation to LC Diaz.
This is a case of culpa contractual, where neither the
contributory negligence of the plaintiff nor his last
clear chance to avoid the loss, would exonerate the
defendant from liability. Since LC Diaz was guilty of
contributory negligence, Solidbank's liability should
be reduced.
CANLAS v CA
Lessons Applicable: Last Clear Chance (Torts
and Damages)
Laws Applicable: Article 1173
FACTS:
August, 1982: Osmundo S. Canlas executed a
Special Power of Attorney authorizing Vicente
Maosca to mortgage 2 parcels of land situated in
BF Homes Paranaque in the name of his wife
Angelina Canlas.
Subsequently, Osmundo Canlas agreed to sell the
lands to Maosca for P850K, P500K payable within
1 week, and the balance serves as his investment in
the business. Maosca issued 2 checks P40K and
P460K. The P460K lacked sufficient funds.
September 3, 1982: Maosca mortgage to Atty.
Manuel Magno the parcels of lands for P100K with
the help of impostors who misrepresented
themselves as the Spouses Canlas.
September 29, 1982: Maosca was granted a loan
by the respondent Asian Savings Bank (ASB) for
P500K with the parcels of land as security and with
the help of the same impostors. The loan was left
unpaid resulting in a extrajudicially foreclosure on the
lots.
January 15, 1983: Canlas wrote a letter informing
ASB that the mortgage was without their authority.
He also requested the sheriff Contreras to hold or
cancel the auction. Both parties refused.
The spouses Canlas filed a case for annulment of
deed of real estate mortgage with prayer for the
issuance of a writ of preliminary injunction
RTC: restrained the sheriff from issuing a Certificate
of Sheriffs Sale and annulled the mortgage
CA: reversed holding Canlas estopped for coming to
the bank with Maosca and letting himself be
introduced as Leonardo Rey
ISSUE: W/N the ASB had was negligent due to the
doctrine of last clear chance
HELD: YES. Petition is GRANTED
Article 1173. The fault or negligence of the obligor
consist in the omission of that diligence which is
required by the nature of the obligation and
corresponds with the circumstances of the persons,
of the time and of the place. When negligence shows
bad faith, the provisions of articles 1171 and 2201,
paragraph 2, shall apply
The degree of diligence required of banks is more
than that of a good father of a family
not even a single identification card was exhibited by
the said impostors to show their true identity
acted simply on the basis of the residence
certificates bearing signatures which tended to
match the signatures affixed on a previous deed of
mortgage to Atty. Magno
previous deed of mortgage did not bear the tax
account number of the spouses as well as the
Community Tax Certificate of Angelina Canlas
doctrine of last clear chance
where both parties are negligent but the negligent
act of one is appreciably later in point of time than
that of the other, or where it is impossible to
determine whose fault or negligence brought about
the occurrence of the incident, the one who had the
last clear opportunity to avoid the impending harm
but failed to do so, is chargeable with the
consequences arising therefrom
the antecedent negligence of a person does not
preclude recovery of damages caused by the
supervening negligence of the latter, who had the
last fair chance to prevent the impending harm by
the exercise of due diligence
Antecedent Negligence: Osmundo Canlas was
negligent in giving Vicente Maosca the opportunity
to perpetrate the fraud, by entrusting him the owner's
copy of the transfer certificates of title of subject
parcels of land
Supervening Negligence: Failing to perform the
simple expedient of faithfully complying with the
requirements for banks to ascertain the identity of
the persons transacting with them - ASB bears the
loss
Canlas went to ASB with Maosca and he was
introduced as Leonardo Rey. He didn't correct
Maosca. However, he did not know that the lots
were being used as a security for he was there to
make sure that Maosca pays his debt so he cannot
be estopped from assailing the validity of the
mortgage
But being negligent in believing the
misrepresentation by Maosca that he had other lots
and that the lot were not to be used as a security,
Canlas was negligent and undeserving of Attorney's
fees.
the contract of mortgage sued upon was entered into
and signed by impostors who misrepresented
themselves as the spouses Osmundo Canlas and
Angelina Canlas = complete nullity.
Allied Banking Corporation vs. Bank of the
Philippine Islands
G.R. No. 188363. February 27, 2013
Tort; Doctrine of Last Clear Chance;
definition and characteristics;
contributory negligence; definition;
effect; apportionment of damages
between parties who are both negligent
involving banking transactions; highest
degree of diligence is required for
banks.
Facts:
On October 10, 2002, a check in the amount o
f P1 ,000,000.00 payable to "Mateo Mgt. Group
International" (MMGI) was presented for deposit and
accepted at petitioner's Kawit Branch. The check,
post-dated "Oct. 9, 2003." Respondent was drawn
against the account of Marciano Silva, Jr. (Silva) with
respondent Bank of the Philippine Islands (BPI) Bel-
Air Branch. Upon receipt, petitioner sent the check
for clearing to respondent through the Philippine
Clearing House Corporation (PCHC).
The check was cleared by respondent and
petitioner credited the account of MMGI. On October
22, 2002, MMGIs account was closed and all the
funds therein were withdrawn. A month later, Silva
discovered the debit of P1,000,000.00 from his
account. In response to Silvas complaint,
respondent credited his account with the aforesaid
sum.
On March 21, 2003, respondent returned a
photocopy of the check to petitioner for the reason:
Postdated. Petitioner, however, refused to accept
and sent back to respondent a photocopy of the
check. Thereafter, the check, or more accurately, the
Charge Slip, was tossed several times from
petitioner to respondent, and back to petitioner, until
on May 6, 2003, respondent requested the PCHC to
take custody of the check. PCHC likewise
encouraged respondent to submit the controversy for
resolution thru the PCHC Arbitration Mechanism.
However, it was petitioner who filed a complaint
before the Arbitration Committee, asserting that
respondent should solely bear the entire face value
of the check due to its negligence in failing to return
the check to petitioner within the 24-hour
reglementary period as provided in Section 20.1 of
the Clearing House Rules and Regulations8 (CHRR)
2000. Petitioner prayed that respondent be ordered
to reimburse the sum of P500,000.00 with 12%
interest per annum, and to pay attorneys fees and
other arbitration expenses.
In its Answer with Counterclaims, respondent
charged petitioner with gross negligence for
accepting the post-dated check in the first place. It
contended that petitioners admitted negligence was
the sole and proximate cause of the loss.

Ratio:
The doctrine of last clear chance, stated
broadly, is that the negligence of the plaintiff does not
preclude a recovery for the negligence of the
defendant where it appears that the defendant, by
exercising reasonable care and prudence, might
have avoided injurious consequences to the plaintiff
notwithstanding the plaintiffs negligence. The
doctrine necessarily assumes negligence on the part
of the defendant and contributory negligence on the
part of the plaintiff, and does not apply except upon
that assumption. Stated differently, the antecedent
negligence of the plaintiff does not preclude him from
recovering damages caused by the supervening
negligence of the defendant, who had the last fair
chance to prevent the impending harm by the
exercise of due diligence. Moreover, in situations
where the doctrine has been applied, it was
defendants failure to exercise such ordinary care,
having the last clear chance to avoid loss or injury,
which was the proximate cause of the occurrence of
such loss or injury.
A collecting bank is guilty of contributory
negligence when it accepted for deposit a post-dated
check notwithstanding that said check had been
cleared by the drawee bank which failed to return the
check within the 24-hour reglementary period.
In the cited case of Philippine Bank of
Commerce v. Court of Appeals, while the Court found
petitioner bank as the culpable party under the
doctrine of last clear chance since it had, thru its
teller, the last opportunity to avert the injury incurred
by its client simply by faithfully observing its own
validation procedure, it nevertheless ruled that the
plaintiff depositor (private respondent) must share in
the loss on account of its contributory negligence.
Thus:
The foregoing notwithstanding, it cannot be
denied that, indeed, private respondent was likewise
negligent in not checking its monthly statements of
account. Had it done so, the company would have
been alerted to the series of frauds being committed
against RMC by its secretary. The damage would
definitely not have ballooned to such an amount if
only RMC, particularly Romeo Lipana, had exercised
even a little vigilance in their financial affairs. This
omission by RMC amounts to contributory
negligence which shall mitigate the damages that
may be awarded to the private respondent under
Article 2179 of the New Civil Code, to wit:
x x x. When the plaintiffs own negligence
was the immediate and proximate cause of his injury,
he cannot recover damages. But if his negligence
was only contributory, the immediate and proximate
cause of the injury being the defendants lack of due
care, the plaintiff may recover damages, but the
courts shall mitigate the damages to be awarded.
In view of this, we believe that the demands
of substantial justice are satisfied by allocating the
damage on a 60-40 ratio. Thus, 40% of the damage
awarded by the respondent appellate court, except
the award of P25,000.00 attorneys fees, shall be
borne by private respondent RMC; only the balance
of 60% needs to be paid by the petitioners. The
award of attorneys fees shall be borne exclusively
by the petitioners. (Italics in the original; emphasis
supplied)
Contributory negligence is conduct on the
part of the injured party, contributing as a legal cause
to the harm he has suffered, which falls below the
standard to which he is required to conform for his
own protection. Admittedly, petitioners acceptance
of the subject check for deposit despite the one year
postdate written on its face was a clear violation of
established banking regulations and practices. In
such instances, payment should be refused by the
drawee bank and returned through the PCHC within
the 24-hour reglementary period. As aptly observed
by the CA, petitioners failure to comply with this
basic policy regarding post-dated checks was a
telling sign of its lack of due diligence in handling
checks coursed through it.
It bears stressing that the diligence required
of banks is more than that of a Roman paterfamilias
or a good father of a family. The highest degree of
diligence is expected, considering the nature of the
banking business that is imbued with public interest.
While it is true that respondents liability for its
negligent clearing of the check is greater, petitioner
cannot take lightly its own violation of the long-
standing rule against encashment of post-dated
checks and the injurious consequences of allowing
such checks into the clearing system.
Negotiable Instruments Digest: BPI FAMILY
BANK v. EDGARDO BUENAVENTURA et al.
 BPI FAMILY BANK v. EDGARDO
BUENAVENTURA et al.
[G.R. No. 148196, September 30, 2005] (471 SCRA
431)
FACTS:
A complaint for Reinstatement of Current
Account/Release of Money plus Damages was filed
by the Buenaventuras against BPI Family Bank (BPI-
FB) in the RTC. Buenaventura, et al. opened a
Current account with the BPI-FB Branch in Caloocan
City. They deposited a check from Amado Franco
which was purportedly issued by Eladio Teves and
Joseph Teves. The check was subsequently cleared
and the amount of P500, 000.00 was credited to their
Current Account.
Petitioners then drew a check amounting to
P91, 270.00 which was dishonored upon
presentment for payment for the reason that the
account was already closed in spite of the balance in
their current account. They subsequently learned
that the Bank of the Philippine Islands unilaterally
freeze their Current account on the ground that the
source of fund was illegal or unauthorized.
BPI-FB refused to reinstate the account even
after demand from the petitioners. It asserted that
the freezing of the account was triggered by the
forgery claim of FMIC and the unauthorized fund
transfer to Tevesteco. The check received by
Buenaventura, et al. from Amado Franco was drawn
by Eladio Teves and Joseph Teves against the
Current Account of the Tevesteco Arrastre
Stevedoring Co., Inc. (Tevesteco) by means of
forgery.
ISSUE:
WON BPI-FB is liable for the loss due to its
negligence to detect forgery prior to clearing the
check?
HELD:
YES. Every bank that issues checks for the
use of its customers should know whether or not the
drawer's signature thereon is genuine, whether there
are sufficient funds in the drawers account to cover
checks issued, and it should be able to detect
alterations, erasures, superimpositions or
intercalations thereon, for these instruments are
prepared, printed and issued by itself, it has control
of the drawer's account, and it is supposed to be
familiar with the drawer's signature. It should
possess appropriate detecting devices for
uncovering forgeries and/or alterations on these
instruments. Unless a forgery or alteration is
attributable to the fault or negligence of the drawer
himself, the remedy of the drawee bank that
negligently clears a forged and/or altered check for
payment is against the party responsible for the
forgery or alteration, otherwise, it bears the loss.
Having been negligent in detecting the
forgery prior to clearing the check, BPI-FB should
bear the loss and cant shift the blame to
Buenaventura, et al. having failed to show any
participation on their part in the forgery. BPI-FB fails
to point any circumstance which should have put
Buenaventura, et al. on inquiry as to the why and
wherefore of the possession of the check by Amado
Franco. Buenaventura, et al. were not privies to any
transaction involving FMIC, Tevesteco or Franco.
They thus had no obligation to ascertain from Franco
what the nature of the latters title to the checks was,
if any, or the nature of his possession. They cannot
be guilty of gross neglect amounting to legal
absence of good faith, absent any showing that there
was something amiss about Francos acquisition or
possession of the check, which was payable to
bearer.
Thus, BPI-FB has no unilateral right to freeze
the current account of Buenaventura, et al. based on
the suspicion that the funds in the latters account
are illegal or unauthorized having been sourced from
the unlawful transfer of funds from the account of
FMIC to Tevesteco and disallow any withdrawal
therefrom to allegedly protect its interest.
Needless to stress, the contract between a
bank and its depositor is governed by the provisions
of the Civil Code on simple loan. Thus, there is a
debtor-creditor relationship between a bank and its
depositor. The bank is the debtor and the depositor is
the creditor. The depositor lends the bank money
and the bank agrees to pay the depositor on
demand. The savings or current deposit agreement
between the bank and the depositor is the contract
that determines the rights and obligations of the
parties.
Thus, the fact that the funds in deposit with BPI-
FB under the name of Buenaventura, et al. were
allegedly derived exclusively from the alleged
P80,000,000.00 unlawfully transferred from the funds
of FMIC or that the deposit under the name of
Tevesteco consisted allegedly exclusively of the said
P80,000,000.00 debited from FMICs account is
immaterial. These circumstances cannot be used
against a party not privy to the forgery. xxx
Citybank N.A. vs. Cabamongan 488 SCRA 517
Digest
Citybank v. Cabamongan
488 SCRA 517
G.R. No. 146918 May 2, 2006
Ponente: Austria-Martinez, J.:
Bank negligent
Facts:
1. The Cabamongan spouses Luis and Carmelita are
both based in California, USA. The spouses opened
a foreign currency time deposit account for their
children with petitioner CityBank with a 180-day
term. An impostor who claimed to be Carmelita (wife)
succeeded to preterminate the time deposit after
presenting passport, credit card and other
identification.
2. The bank personnel who attended to the
transaction ignored several red flags which could
have alerted the bank as to the real identity of the
person claiming to be 'Carmelita'. For one, she failed
to present the certificate of time deposit, there was
also a discrepancy in her signature with that in the
signature cards of the bank. Finally, the photo in the
bank's file did not look like this person claiming to be
Carmelita. Despite all these irregularities, the bank
went through with the transaction, which only took 40
minutes. The document waiver which the impostor
signed was also not notarized, as required under
bank's procedures.
3. To the aghast of the spouses, they only came to
learn of the incident through a daughter-in-law who
called them up in the US. Apparently, a break-in
occurred previously in their US residence and
several important documents were lost to the thief.
The spouses demanded payment from the bank who
refused. Hence the filing of the suit against petitioner
bank.
4. The spouses presented a PNP Document
Examiner expert who analysed the signature and
concluded that the signature was forged, hence the
discrepancy between the signature of the impostor
and the one written in the signature cards held by the
bank.
4. The trial court ruled in favor of the spouses
Cabamongan, held the bank negligent and awarded
actual, moral and exemplary damages. The bank
appealed to the CA which affirmed the lower court's
decision. Both parties filed a petition for review on
certiorari before the SC where the petitioner insisted
that it Carmela who preterminated the TD despite
claims to the contrary, while the Cabamongan
spouses contended that Citybank's negligence was
established by evidence.
Issue: Whether or not the bank is negligent and
therefor should be held liable when it allowed the
pretermination of the TD in favor of the impostor
HELD:
YES. The bank was indeed negligent as it failed to
exercise the highest degree of care and diligence
required of it. The banking business is impressed
with public interest and of paramount importance
thereto is the trust and confidence of the public in
general. The Court has held that the bank "is bound
to know the signatures of its customers; and if it pays
a forged check, it must be considered as making
payment out of its own funds, and cannot ordinarily
charge the amount so paid to the account of the
depositor whose name was forged." (San Carlos
Milling Ltd. vs. BPI)
It has been sufficiently shown that the signatures of
Carmelita in the pretermination were forged. The
petitioner, even with its signature verification
procedure failed to detect the forgeries. Citybank
cannot label its negligence as mere error. For not
exercising the degree of diligence required of
banking institutions, it is liable for damages.
EQUITABLE PCI BANK V. ARCELITO B. TAN
 G.R. NO. 165339 AUGUST 23, 2010
FACTS:
Respondent Arcelito B.Tan maintained a
current and savings account with petitioner Equitable
PCI Bank. On May 13, 1992, Tan issued PCIB Check
No. 275100 postdated May 30, 1992 in the amount
of P34,588.72 in favor of Sulpicio Lines, Inc. As of
May 14, 1992, respondent's balance with PCIB was
P35,147.59. On May 14, 1992, Sulpicio Lines, Inc.
deposited the aforesaid check to its account with
Solid Bank, Carbon Branch, Cebu City. After
clearing, the amount of the check was immediately
debited by PCIB from Tan's account leaving him with
a balance of only P558.87. However, from May 9 to
16, 1992, Tan issued three checks, specifically: PCIB
Check No. 275080 dated May 9, 1992, payable to
Agusan del Sur Electric Cooperative Inc. (ASELCO)
for the amount of P6,427.68; PCIB Check No.
275097 dated May 10, 1992 payable to Agusan del
Norte Electric Cooperative Inc., (ANECO) for the
amount of P6,472.01; and PCIB Check No. 314104
dated May 16, 1992 payable in cash for the amount
of P10,000.00. Thus, when presented for payment,
the three checks were dishonored for being drawn
against insufficient funds. As a result of the
dishonored checks payable to ASELCO and ANECO,
the electric power supply for the two mini-sawmills
owned and operated by Tan was cut off and was
restored only after several days. This prompted Tan
to file with the RTC of Cebu a complaint against
PCIB for the payment of losses consisting of
unrealized income together with other claims,
contending that Check No. 275100 was a postdated
check in payment of Bills of Lading Nos. 15, 16 and
17, and that his account with PCIB would have had
sufficient funds to cover payment of the three other
checks were it not for the negligence of the bank in
immediately debiting from his account Check No.
275100, in the amount of P34,588.72, even as the
said check was postdated to May 30, 1992. PCIB, on
the other hand, averred that the questioned check
was postdated May 30, 1992 and claimed that it was
a current check dated May 3, 1992. The bank
alleged that the disconnection of the electric supply
to respondent's sawmills was not due to the dishonor
of the checks, but for other reasons not attributable
to the bank.
DOCTRINE/LAWS RELATED TO THE CASE:
The diligence required of banks is more than
that of a good father of a family. 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.
The bank on which the check is drawn,
known as the drawee bank, is under strict liability to
pay to the order of the payee in accordance with the
drawers instructions as reflected on the face and by
the terms of the check. Thus, payment made before
the date specified by the drawer is clearly against the
drawee bank's duty to its client.
ISSUE: WHETHER OR NOT PCIB ACTED
NEGLIGENTLY IN DEALING WITH TANS
ACCOUNT.
DECISION OF THE RTC:
The RTC ruled in favor of PCIB, holding that
it did not act negligently and dismissed the
complaint. Tan appealed.
DECISION OF THE CA:
The CA reversed the decision of RTC and
directed PCIB to pay respondent the sum of
P1,864,500.00 actual damages, P50,000.00 moral
damages, P50,000.00 exemplary damages and
attorney's fees of P30,000.00.
PCIB filed a motion for reconsideration, which
the CA denied.
SC RULING:
The SC affirmed with modifications the
decision of CA, holding that PCIB acted negligently.
However, the award of moral damages was deleted
and added the award of temperate damages.
The Court had already imposed on banks the
same high standard of diligence required under R.A.
8791 at the time of the untimely debiting of Tan's
account by PCIB. In Simex International (Manila),
Inc. v. Court of Appeals, the Court held that as a
business affected with public interest and because of
the nature of its functions, the bank is under
obligation to treat the accounts of its depositors with
meticulous care, always having in mind the fiduciary
nature of their relationship. The diligence required of
banks, therefore, is more than that of a good father
of a family. 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.
Based on the facts, it is clear that PCIB did
not exercise the degree of diligence that it ought to
have exercised in dealing with its client.
Furthermore, the bank on which the check is drawn,
known as the drawee bank, is under strict liability to
pay to the order of the payee in accordance with the
drawers instructions as reflected on the face and by
the terms of the check. Thus, payment made before
the date specified by the drawer is clearly against the
drawee bank's duty to its client. As such, the Court
finds that PCIBs negligence is the proximate cause
of Tans loss.
PHILIPPINE NATIONAL BANK vs. SPOUSES
CHEAH CHEE CHONG and OFELIA CAMACHO
CHEAH
1. On November 4, 1992, Ofelia Cheah and her
friend Adelina Guarin were having a conversation in
the latters office when Adelinas friend, Filipina
Tuazon, approached her to ask if she could have
Filipinas check cleared and encashed for a service
fee of 2.5%.
2. The check was Bank of America Check No. 190
drawn by Atty. Rosales against Bank of America
California, USA, with a face amount of $300,000.00,
payable to cash.
3. Because Adelina does not have a dollar account,
she asked Ofelia if she could accommodate Filipinas
request since she has a joint dollar savings account
with her husband Cheah Chee Chong with PNB
Buendia Branch.
4. Ofelia agreed. They met with the Loans
Department who referred them to PNB Division Chief
Garin. Garin discussed with them the process of
clearing the check and they were told that it normally
takes 15 days. Assured that the deposit and
subsequent clearance of the check is a normal
transaction, Ofelia deposited Filipinas check.
5. PNB then sent it for clearing through its
correspondent bank, Philadelphia National Bank. 5
days later, PNB received a credit advice from
Philadelphia that the proceeds of the subject check
had been temporarily credited to PNBs account as
of November 6, 1992.
6. On November 16, 1992, Garin called up Ofelia to
inform her that the check had already been
cleared. The following day, PNB Buendia, after
deducting the bank charges, credited $299,248.37 to
the account of the spouses Cheah.
7. Acting on Adelinas instruction to withdraw the
credited amount. Filipina received all the proceeds.
8. In the meantime, the Cable Division of PNB Head
Office received on November 16, 1992 a
SWIFT message from Philadelphia, informing PNB
of the return of the check for insufficient
funds. However, the PNB Head Office could not
ascertain to which branch/office it should forward the
same for proper action.
9. After a few days, PNB Head Office ascertained
that the SWIFT message was intended for PNB
Buendia Branch.
10. Informed about the bounced check and upon
demand by PNB Buendia to return the money
withdrawn, Ofelia immediately contacted Filipina to
get the money back. But the latter told her that all the
money had already been given to several people
who asked for the checks encashment. Criminal
charges were then filed against these suspect
beneficiaries.
11. Subsequently, PNB sent a demand letter to
spouses Cheah for the return of the amount of the
check, froze their peso and dollar deposits, and filed
a complaint against them for Sum of Money with the
RTC. In said complaint, PNB demanded payment of
around P8,202,220.44, plus interests and attorneys
fees.
12. The RTC ruled in PNBs favor. It held that
spouses Cheah were guilty of contributory
negligence. While the CA recognized the spouses
Cheah as victims of a scam who nevertheless have
to suffer the consequences of Ofelias lack of care
and prudence in immediately trusting a stranger, the
appellate court did not hold PNB scot-free. It
declared both parties equally negligent and should
suffer and shoulder the loss.
ISSUE: Whether PNB should be held liable.
HELD: PNBs act of releasing the proceeds of the
check prior to the lapse of the 15-day clearing period
was the proximate cause of the loss.
Ofelia deposited the subject check on November 4,
1992. Hence, the 15th banking day from the date of
said deposit should fall on November 25, 1992.
However, what happened was that PNB Buendia,
upon calling up Ofelia that the check had been
cleared, allowed the proceeds thereof to be
withdrawn on November 17 and 18, 1992, a week
before the lapse of the standard 15-day clearing
period.
This Court already held that the payment of the
amounts of checks without previously clearing them
with the drawee bank especially so where the
drawee bank is a foreign bank and the amounts
involved were large is contrary to normal or ordinary
banking practice. Also, in Associated Bank v.
Tan, wherein the bank allowed the withdrawal of the
value of a check prior to its clearing, we said that
"[b]efore the check shall have been cleared for
deposit, the collecting bank can only assume at its
own risk x x x that the check would be cleared and
paid out."
The delay in the receipt by PNB Buendia of the
SWIFT message notifying it of the dishonor is of no
moment, because had PNB Buendia waited for the
expiration of the clearing period and had never
released during that time the proceeds of the check,
it would have already been duly notified of its
dishonor. Clearly, PNBs disregard of its preventive
and protective measure against the possibility of
being victimized by bad checks had brought upon
itself the injury of losing a significant amount of
money.
It bears stressing that "the diligence required of
banks is more than that of a Roman pater familias or
a good father of a family. The highest degree of
diligence is expected." PNB miserably failed to do its
duty of exercising extraordinary diligence and
reasonable business prudence. The disregard of its
own banking policy amounts to gross negligence,
which the law defines as "negligence characterized
by the want of even slight care, acting or omitting to
act in a situation where there is duty to act, not
inadvertently but wilfully and intentionally with a
conscious indifference to consequences in so far as
other persons may be affected." With regard to
collection or encashment of checks, suffice it to say
that the law imposes on the collecting bank the duty
to scrutinize diligently the checks deposited with it for
the purpose of determining their genuineness and
regularity. "The collecting bank, being primarily
engaged in banking, holds itself out to the public as
the expert on this field, and the law thus holds it to a
high standard of conduct." A bank is expected to be
an expert in banking procedures and it has the
necessary means to ascertain whether a check, local
or foreign, is sufficiently funded.
Incidentally, PNB obliges the spouses Cheah to
return the withdrawn money under the principle of
solutio indebiti.
In the case at bench, PNB cannot recover the
proceeds of the check under the principle it invokes.
1st, the gross negligence of PNB, can never be
equated with a mere mistake of fact, which must be
something excusable and which requires the
exercise of prudence. No recovery is due if the
mistake done is one of gross negligence.
The spouses Cheah are guilty of contributory
negligence and are bound to share the loss with the
bank. "Contributory negligence is conduct on the part
of the injured party, contributing as a legal cause to
the harm he has suffered, which falls below the
standard to which he is required to conform for his
own protection."
The fact that the check was cleared after only eight
banking days from the time it was deposited or
contrary to what Garin told her that clearing takes 15
days should have already put Ofelia on guard. She
should have first verified the regularity of such hasty
clearance considering that if something goes wrong
with the transaction, it is she and her husband who
would be put at risk and not the accommodated
party. Thus, we are one with the CA in ruling that
Ofelias prior consultation with PNB officers is not
enough to totally absolve her of any liability
In any case, the complaint against the spouses
Cheah could not be dismissed. As PNBs client,
Ofelia was the one who dealt with PNB and
negotiated the check such that its value was credited
in her and her husbands account. Being the ones in
privity with PNB, the spouses Cheah are therefore
the persons who should return to PNB the money
released to them.
All told, the Court concurs with the findings of the CA
that PNB and the spouses Cheah are equally
negligent and should therefore equally suffer the
loss. The two must both bear the consequences of
their mistakes.
WHEREFORE, premises considered, the Petitions
for Review on Certiorari in G.R. No. 170865 and in
G.R. No. 170892 are both DENIED. The assailed
August 22, 2005 Decision and December 21, 2005
Resolution of the Court of Appeals in CA-G.R. CV
No. 63948 are hereby AFFIRMED in toto.
Land Bank of the Philippines v. Barbara Sampaga
Poblete; G.R. No. 196577. February 25, 2013 On
October 1997, respondent Poblete obtained a loan
worth P300k from Kapantay Multi-Purpose. She
mortgaged her Lot No.29 located in Buenavista,
Sablayan, Occidental Mindoro, under OCT No. P-
12026. Kapantay, in turn, used OCT No. P-12026 as
collateral under its Loan Account No. 97-OC-013
with Land Bank-Sablayan Branch. After a year,
Poblete instructed her son-in-law Domingo Balen to
look for a buyer for the Lot No. 29 in order to pay her
loan and he referred Angelito Joseph Maniego. Both
parties agreed that the lot shall amount to P 900k but
in order to reduce taxes they will execute a P 300k
agreed price appearing in the Deed of Absolute Sale
dated November 9, 1998. In the Deed, Poblete
specifically described herself as a widow. Balen,
then, delivered the Deed to Maniego. Instead of
paying the price, Maniego promised in an affidavit
dated November 19, 1998 stating that the said
amount will be deposited to her Land Bank Savings
Account but he failed to do so. On August 1999,
Maniego paid Kapantays Loan Account for
P448,202.08 and on subsequent year he applied for
a loan worth P1M from Land Bank using OCT No. P-
12026 as a collateral with a condition that the title
must be first transferred on his name. On August 14,
2000, the Registry of Deeds issued TCT No. T-20151
in Maniegos name pursuant to a Deed of Absolute
Sale with the signatures of Mrs. Poblete and her
husband dated August 11, 2000 and Maniego
successfully availed the Credit Line Agreement for
P1M and a Real Estate Mortgage over TCT No. T-
20151 on August 15, 2000. On November 2002,
Land Bank filed an Application for an Extra-judicial
Foreclosure against the said Mortgage stating that
Maniego failed to pay his loan. Poblete filed a
complaint for nullification of the Deed of Sale dated
August 11, 2000 and TCT No. T-20151,
Reconveyance of the Title and Damages with a
Prayer for Temporary Restraining Order and/or
Issuance of Writ of Preliminary Injunction against
Maniego, Landbank and the Register of Deeds. The
judgment of RTC, affirmed by the CA upon appeal,
favors the plaintiff Poblete. Hence, this petition.
ISSUE: WON the CA erred in upholding the finding
of the trial court declaring the TCT No. T-20151 as
null and void. Held : The petition is meritorious. It is
well-entrenched rule, as applied, by the CA, that a
forged or fraudulent deed is a nullity and conveys no
title. Moreover, where the deed of sale states that the
purchase price has been paid but in fact has never
been, the deed is void ab initio for lack of
consideration. Since the deed, is void, the title is also
void. Since the land title has been declared void by
final judgment, the Real Estate Mortgage over it is
also void. It is essential that the mortgagor be the
absolute owner of the mortgage; otherwise, the
mortgage is void. The doctrine the mortgagee in
good faith as a rule does not apply to banks which
are required to observe a higher standard of
diligence. A bank cannot assume that, simply
because the title offered as security is on its face,
free of any encumbrances or lien, it is relieved of the
responsibility of taking further steps to verify the title
and inspect the properties to be mortgage. The
records do not even show that Land Bank
investigated and inspected the actual occupants.
Land Bank merely mentioned Maniegos loan
application upon his presentation of OCT No. P-
12026, which was still under the name of Poblete.
Land Bank even ignored the fact that Kapantay
previously used Pobletes title as collateral in its loan
account with Land Bank. Furthermore, only one day
after Maniego obtained TCT No. P-20151 under his
name, Land Bank and Maniego executed a Credit
Line Agreement and Real Mortgage. It appears that
Maniegos loan was already completely processed
while the collateral was still in the name of Poblete.
Where said mortgagee acted with haste in granting
the mortgage loan and did not ascertain the
ownership of the land being mortgaged, it cannot be
considered innocent mortgagee. The pari delicto rule
provides when two parties are equally at fault, the
law leaves them as they are and denies recovery by
either one of them. This court adopt the decisions of
RTC and CA that only Maniego is at fault. Finally, on
the issue of estoppels and laches, such question
were not raised before the trial court. It is settled that
an issue which are neither alleged in the complaint
nor raised during the trial cannot be raised for the
time on appeal. The issue on the nullity of Maniegos
title had already been foreclosed when this Court
denied Maniegos petition for review in the
Resolution dated 13 July 2011, which became final
and executory on 19 January 2012. It is settled that a
decision that has acquired finality becomes
immutable and unalterable and may no longer be
modified in any respect, even if the modification is
meant to correct erroneous conclusions of fact or law
and whether it will be made by the court that
rendered it or by the highest court of the land. This is
without prejudice, however, to the right of Maniego to
recover from Poblete what he paid to Kapantay for
the account of Poblete, otherwise there will be unjust
enrichment by Poblete.
Negotiable Instruments Case Digest: Moran V. CA
And Citytrust Bank (1994)
G.R. No. 105836 March 7, 1994
Lessons Applicable: Promissory notes and checks
(Negotiable Instruments Law)
FACTS:
Spouses George and Librada Moran are the
owners of the Wack-Wack Petron gasoline
station located at Shaw Boulevard, corner Old
Wack-Wack Road, Mandaluyong, Metro Manila.
They regularly purchased bulk fuel and other
related products from Petrophil Corporation on
cash on delivery (COD) basis. Orders for bulk
fuel and other related products were made by
telephone and payments were effected by
personal checks upon delivery.
Petitioners maintained 3 joint accounts,
namely 1 current account and 2 savings
accounts with the Shaw Boulevard branch of
Citytrust Banking Corporation.
As a special privilege to the Morans,
whom it considered as valued clients, the bank
allowed them to maintain a zero balance in their
current account.
Transfers from Saving Account to their
current account could be made only with their
prior authorization
but they gave written authority
to Citytrust to automatically transfer funds from
their Savings Account to their Current Account at
any time whenever the funds in their current
account were insufficient to meet withdrawals
from said current account = pre-authorized
transfer (PAT) agreement
December 12, 1983: Librada Moran drew a
check for P50,576.00 payable to
Petrophil Corporation
December 13, 1983: Librada Moran, issued
another check in the amount of P56,090.00 in
favor of the same corporation
December 14, 1983: Petrophil Corporation
deposited the 2 checks to its account with the
Pandacan branch of the Philippine National Bank
(PNB), the collecting bank.
PNB presented them for clearing with
the Philippine Clearing House Corporation in the
afternoon of the same day
Records shows:
Current Account had a zero
balance
Savings Account had an
available balance of P26,104.30 and Savings
Account had an available balance of P43,268.39
December 15, 1983 10 a.m.: George Moran
went to the bank, as was his regular practice, to
personally oversee their daily transactions with
the bank
deposited in their Savings Account the
amounts of P10,874.58 and P6,754.25
deposited in their Savings Account
No. 1037001372 the amounts of P5,900.00,
P35,100.00 and 30.00
P40,000.00 was then transferred by
him from Saving Account No. 1037002387 to
their current account by means of a pro
forma withdrawal form (a debit memorandum),
which was provided by the bank, authorizing the
latter to make the necessary transfer.
P66,666.00 was transferred from
Savings Account No. 1037001372 to the same
 current account through the pre-authorized certification clearing their name and paid them
transfer (PAT) agreement. P1,000,000.00 as moral damages
December 15 or 16, 1983: George Moran CA affirmed RTC's dismissal
was informed by his wife Librada, that Petrophil W/N: Spouses Moran can sue Citytrust for damages
refused to deliver their orders on a credit basis for negligence
because the 2 checks they had previously issued
were dishonored upon presentment for payment
due to "insufficiency of funds."
The non-delivery of gasoline forced HELD: NO. Affirmed
them to temporarily stop business operations,
Spouses Moran had no reason to complain,
allegedly causing them to suffer loss of
for they alone were at fault.
earnings.
A drawer must remember his
In addition, Petrophil cancelled their
responsibilities every time he issues a check. He
credit accommodation, forcing them to pay for
must personally keep track of his available
their purchases in cash.
balance in the bank and not rely on the bank to
George Moran, furious and upset, demanded
notify him of the necessity to fund certain check
an explanation from Raul Diaz, the branch
she previously issued
manager. Failing to get a sufficient explanation,
A bank is under no obligation to make part
he talked to a certain Villareal, a bank officer,
payment on a check
who allegedly told him that Amy Belen Ragodo,
actions taken by the bank after the incident
the customer service officer, had committed a
clearly show that there was neither malice nor
"grave error".
bad faith, but rather a clear intent to mollify an
December 16 or 17, 1983: Diaz went to the
obviously agitated client
Moran residence to get the signatures of the
letter was sent by respondent bank to
petitioners on an application for a manager's
Petrophil explaining that the dishonor of the
check so that the dishonored checks could be
checks was due to "operational error." - NOT an
redeemed.
admission of guilt
Diaz then went to Petrophil to
bank may not be held responsible for such
personally present the checks in payment for the
damages in the absence of fraud, bad faith,
2 dishonored checks.
malice, or wanton attitude
May or June, 1984: George Moran learned
from Constancio Magno, credit manager of
IRST PLANTERS PAWNSHOP VS. CIR G.R. No.
Petrophil, that the he received on January 4,
174134 July 30, 2008 FACTS: In a Pre-assessment
1984 from Citytrust, through Diaz, a letter dated Notice, petitioner was informed by the BIR that it has
December 16, 1983, notifying them that the 2 an existing tax deficiency on its VAT and
checks were "inadvertently dishonored . . . due to Documentary Stamp Tax (DST) liabilities for the year
2000. Petitioner protested the assessment for lack of
operational error."
legal and factual bases. Petitioner subsequently
July 24, 1984: Moran, through counsel, wrote received a Formal Assessment Notice, directing
Citytrust claiming that the bank's dishonor of the payment of VAT deficiency and DST deficiency,
checks caused them besmirched business and inclusive of surcharge and interest. Petitioner filed a
personal reputation, shame and anxiety, hence protest, which was denied by the Acting Regional
Director. Petitioner then filed a petition for review
they were contemplating the filing of the
with the CTA, which upheld the deficiency
necessary legal actions unless the bank issued a assessment. Petitioner filed an MR which was
denied. Petitioner appealed to the CTA En Banc
which denied the Petition for Review. Petitioner
sought reconsideration but this was denied by the
CTA.. Hence, the present petition for review under
Rule 45 of the ROC. The core of petitioners
argument is that it is not a lending investor within the
purview of Section 108(A) of the NIRC, as amended,
and therefore not subject to VAT. Petitioner also
contends that a pawn ticket is not subject to DST
because it is not proof of the pledge transaction, and
even assuming that it is so, still, it is not subject to
tax since a DST is levied on the document issued
and not on the transaction. ISSUE: is petitioner in
this case liable for: VAT DST HELD: 1. NO The
determination of petitioners tax liability depends on
the tax treatment of a pawnshop business. It was the
CTAs view that the services rendered by pawnshops
fall under the general definition of sale or exchange
of services under Section 108(A) of the Tax Code of
1997. The Court finds that pawnshops should have
been treated as non-bank financial intermediaries
from the very beginning, subject to the appropriate
taxes provided by law. At the time of the disputed
assessment, that is, for the year 2000, pawnshops
were not subject to 10% VAT under the general
provision on sale or exchange of services as
defined under Section 108(A) of the Tax Code of
1997. Instead, due to the specific nature of its
business, pawnshops were then subject to 10% VAT
under the category of non-bank financial
intermediaries, as provided in the same Section
108(A), which reads: SEC. 108. Value-added Tax on
Sale of Services and Use or Lease of Properties.
(A) xx The phrase sale or exchange of services
means the performance of all kinds or services in the
Philippines for others for a fee, remuneration or
consideration, including x x x services of banks, non-
bank financial intermediaries and finance companies;
and non-life insurance companies (except their crop
insurances), including surety, fidelity, indemnity and
bonding companies..xx Coming now to the issue at
hand Since petitioner is a non-bank financial
intermediary, it is subject to 10% VAT for the tax
years 1996 to 2002; however, with the levy,
assessment and collection of VAT from non-bank
financial intermediaries being specifically deferred by
law, then petitioner is not liable for VAT during these
tax years. But with the full implementation of the VAT
system on non-bank financial intermediaries starting
January 1, 2003, petitioner is liable for 10% VAT for
said tax year. And beginning 2004 up to the present,
by virtue of R.A. No. 9238, petitioner is no longer
liable for VAT but it is subject to percentage tax on
gross receipts from 0% to 5 %, as the case may be.
YES Applying jurisprudence, it was ruled that the
subject of DST is not limited to the document alone.
Pledge, which is an exercise of a privilege to transfer
obligations, rights or properties incident thereto, is
also subject to DST, thus xx.. the subject of a DST
is not limited to the document embodying the
enumerated transactions. A DST is an excise tax on
the exercise of a right or privilege to transfer
obligations, rights or properties incident thereto xx
Pledge is among the privileges, the exercise of which
is subject to DST. A pledge may be defined as an
accessory, real and unilateral contract by virtue of
which the debtor or a third person delivers to the
creditor or to a third person movable property as
security for the performance of the principal
obligation, upon the fulfillment of which the thing
pledged, with all its accessions and accessories,
shall be returned to the debtor or to the third person
True, the law does not consider said ticket as an
evidence of security or indebtedness. However, for
purposes of taxation, the same pawn ticket is proof
of an exercise of a taxable privilege of concluding a
contract of pledge. At any rate, it is not said ticket
that creates the pawnshops obligation to pay DST
but the exercise of the privilege to enter into a
contract of pledge. There is therefore no basis in
petitioners assertion that a DST is literally a tax on a
document and that no tax may be imposed on a
pawn ticket. Also, Section 195 of the NIRC
unqualifiedly subjects all pledges to DST. It states
that [o]n every x x x pledge x x x there shall be
collected a documentary stamp tax x x x. It is clear,
categorical, and needs no further interpretation or
construction. In the instant case, there is no law
specifically and expressly exempting pledges
entered into by pawnshops from the payment of
DST. Section 199 of the NIRC enumerated certain
documents which are not subject to stamp tax; but a
pawnshop ticket is not one of them. Hence,
petitioners nebulous claim that it is not subject to
DST is without merit.
ANA MARIA A. KORUGA v TEODORO O.
ARCENAS, JR., ALBERT C. AGUIRRE, CESAR S.
PAGUIO, and FRANCISCO A. RIVERA
TC: In an Order dated October 18, 2004, the trial
court denied the Manifestation and Motion, ruling thus:
 The result of the procedure sought by
defendants Arcenas, et al. (sic) is for the
Court to conduct a preliminary hearing on
the affirmative defenses raised by them in
their Answer. This [is] proscribed by the
Interim Rules of Procedure on
Intracorporate (sic) Controversies because
when a preliminary hearing is conducted
it is as if a Motion to Dismiss was filed
(Rule 16, Section 6, 1997 Rules of Civil
Procedure). A Motion to Dismiss is a
prohibited pleading under the Interim
Rules, for which reason, no favorable
consideration can be given to the
Manifestation and Motion of defendants,
Arcenas, et al.
The Court finds no merit to (sic) the claim
that the instant case is a nuisance or
harassment suit.
WHEREFORE, the Court defers
resolution of the affirmative defenses
raised by the defendants Arcenas, et al. [4]
Our Ruling
Initially, we will discuss the procedural issue.
Arcenas, et al. argue that Korugas petition should
be dismissed for its defective Verification
Certification Against Forum-Shopping, since only a
facsimile of the same was attached to the Petition. They
also claim that the Verification and Certification Against
Forum-Shopping, allegedly executed
in Seattle, Washington, was not authenticated in the
manner prescribed by Philippine law and not certified by
the Philippine Consulate in the United States.
This contention deserves scant consideration.
On the last page of the Petition in G.R. No.
168332, Korugas counsel executed an Undertaking, which
reads as follows:
In view of that fact that the
Petitioner is currently in the United
States, undersigned counsel is attaching a
facsimile copy of the Verification and
Certification Against Forum-Shopping
duly signed by the Petitioner and
notarized by Stephanie N. Goggin, a
Notary Public for the Sate (sic)
of Washington. Upon arrival of the
original copy of the Verification and
Certification as certified by the Office of
the Philippine Consul, the undersigned
counsel shall immediately provide
duplicate copies thereof to the Honorable
Court.[17]
Thus, in a Compliance[18] filed with the Court on
September 5, 2005, petitioner submitted the original copy
of the duly notarized and authenticated Verification and
Certification Against Forum-Shopping she had executed.
[19]
This Court noted and considered the Compliance
satisfactory in its Resolution dated November 16, 2005.
There is, therefore, no need to further belabor this issue.
We now discuss the substantive issues in this case.
First, we resolve the prayer to nullify the CAs
April 18, 2005 Resolution.
We hold that the Petition in G.R. No. 168332 has
and become moot and academic. The writ of preliminary
injunction being questioned had effectively been dissolved
by the CAs July 20, 2005 Decision. The dispositive
portion of the Decision reads in part:
The case is REMANDED to the
court a quo for further proceedings and to
resolve with deliberate dispatch the intra-
corporate controversies and determine
whether there was actually a valid service
of summons. If, after hearing, such
service is found to have been improper,
then new summons should be served
forthwith.[20]
Accordingly, there is no necessity to restrain the
implementation of the writ of preliminary injunction
issued by the CA on April 18, 2005, since it no longer
exists.

However, this Court finds that the CA erred in
upholding the jurisdiction of, and remanding the case to,
the RTC.
The resolution of these petitions rests mainly on
the determination of one fundamental issue: Which body
has jurisdiction over the Koruga Complaint, the RTC or
the BSP?
We hold that it is the BSP that has jurisdiction
over the case.
A reexamination of the Complaint is in order.
Korugas Complaint charged defendants with
violation of Sections 31 to 34 of the Corporation Code,
prohibiting self-dealing and conflict of interest of directors
and officers; invoked her right to inspect the corporations
records under Sections 74 and 75 of the Corporation
Code; and prayed for Receivership and Creation of a
Management Committee, pursuant to Rule 59 of the Rules
of Civil Procedure, the Securities Regulation Code, the
Interim Rules of Procedure Governing Intra-Corporate
Controversies, the General Banking Law of 2000, and the
New Central Bank Act. She accused the directors and
officers of Banco Filipino of engaging in unsafe, unsound,
and fraudulent banking practices, more particularly, acts
that violate the prohibition on self-dealing.
It is clear that the acts complained of pertain to the
conduct of Banco Filipinos banking business. A bank, as
defined in the General Banking Law,[21] refers to an entity
engaged in the lending of funds obtained in the form of
deposits.[22] The banking business is properly subject to
reasonable regulation under the police power of the state
because of its nature and relation to the fiscal affairs of the
people and the revenues of the state. Banks are affected
with public interest because they receive funds from the
general public in the form of deposits. It is the
Governments responsibility to see to it that the financial
interests of those who deal with banks and banking
institutions, as depositors or otherwise, are protected. In
this country, that task is delegated to the BSP, which
pursuant to its Charter, is authorized to administer the
monetary, banking, and credit system of the Philippines. It
is further authorized to take the necessary steps against
any banking institution if its continued operation would
cause prejudice to its depositors, creditors and the general
public as well.[23]
The law vests in the BSP the supervision over
operations and activities of banks. The New Central Bank
Act provides:
Section 25. Supervision and
Examination. - The Bangko Sentral shall
have supervision over, and conduct
periodic or special examinations of,
banking institutions and quasi-banks,
including their subsidiaries and affiliates
engaged in allied activities.[24]
Specifically, the BSPs supervisory and regulatory
powers include:
4.1 The issuance of rules of conduct or
the establishment of standards of
operation for uniform application
to all institutions or functions
covered, taking into consideration
the distinctive character of the
operations of institutions and the
substantive similarities of specific
functions to which such rules,
modes or standards are to be
applied;
4.2 The conduct of examination to
determine compliance with laws
and regulations if the
circumstances so warrant as
determined by the Monetary
Board;
4.3 Overseeing to ascertain that laws
and Regulations are complied
with;
 receiver to immediately take charge of its
4.4 Regular investigation which shall assets and liabilities.[27]
not be oftener than once a
year from the last date of
examination to determine Correlatively, the General Banking Law of
whether an institution is
conducting its business on a 2000 specifically deals with loans contracted by bank
safe or sound directors or officers, thus:
basis: Provided, That
the deficiencies/irregularities
found by or discovered by an SECTION 36. Restriction on
audit shall be Bank Exposure to Directors, Officers,
immediately addressed; Stockholders and Their Related
Interests. No director or officer of any
4.5 Inquiring into the solvency bank shall, directly or indirectly, for
and liquidity of the institution himself or as the representative or agent
(2-D); or of others, borrow from such bank nor
shall he become a guarantor, indorser or
4.6 Enforcing prompt corrective action. surety for loans from such bank to others,
[25] or in any manner be an obligor or incur
any contractual liability to the bank
except with the written approval of the
majority of all the directors of the bank,
Koruga alleges that the dispute in the trial court excluding the director concerned:
involves the manner with which the Directors (sic) have Provided, That such written approval shall
not be required for loans, other credit
handled the Banks affairs, specifically the fraudulent loans accommodations and advances granted to
and dacion en pago authorized by the Directors in favor of officers under a fringe benefit plan
several dummy corporations known to have close ties and approved by the Bangko Sentral. The
required approval shall be entered upon
are indirectly controlled by the Directors. [26] Her the records of the bank and a copy of such
allegations, then, call for the examination of the allegedly entry shall be transmitted forthwith to the
appropriate supervising and examining
questionable loans. Whether these loans are covered by department of the Bangko Sentral.
the prohibition on self-dealing is a matter for the BSP to
Dealings of a bank with any of its
determine. These are not ordinary intra-corporate matters;
directors, officers or stockholders and
rather, they involve banking activities which are, by law, their related interests shall be upon terms
regulated and supervised by the BSP. As the Court has not less favorable to the bank than those
offered to others.
previously held:
After due notice to the board of
It is well-settled in both law and directors of the bank, the office of any
jurisprudence that the Central Monetary bank director or officer who violates the
Authority, through the Monetary Board, is provisions of this Section may be declared
vested with exclusive authority to assess, vacant and the director or officer shall be
evaluate and determine the condition of subject to the penal provisions of the New
any bank, and finding such condition to Central Bank Act.
be one of insolvency, or that its
continuance in business would involve a The Monetary Board may
probable loss to its depositors or creditors, regulate the amount of loans, credit
forbid bank or non-bank financial accommodations and guarantees that
institution to do business in the may be extended, directly or indirectly,
Philippines; and shall designate an official by a bank to its directors, officers,
of the BSP or other competent person as stockholders and their related interests,
as well as investments of such bank in
enterprises owned or controlled by said
 directors, officers, stockholders and
their related interests. However, the
outstanding loans, credit accommodations
and guarantees which a bank may extend
to each of its stockholders, directors, or
officers and their related interests, shall be
limited to an amount equivalent to their
respective unencumbered deposits and
book value of their paid-in capital
contribution in the bank: Provided,
however, That loans, credit
accommodations and guarantees secured
by assets considered as non-risk by the
Monetary Board shall be excluded from
such limit: Provided, further, That loans,
credit accommodations and advances to
officers in the form of fringe benefits
granted in accordance with rules as may
be prescribed by the Monetary Board
shall not be subject to the individual limit.
The Monetary Board shall define
the term related interests.
The limit on loans, credit
accommodations and guarantees
prescribed herein shall not apply to loans,
credit accommodations and guarantees
extended by a cooperative bank to its
cooperative shareholders.[28]
Furthermore, the authority to determine whether a
bank is conducting business in an unsafe or unsound
manner is also vested in the
Board. The General Banking Law of 2000 provides:
SECTION 56. Conducting
Business in an Unsafe or Unsound
Manner. In determining whether a
particular act or omission, which is not
otherwise prohibited by any law, rule or
regulation affecting banks, quasi-banks or
trust entities, may be deemed as
conducting business in an unsafe or
unsound manner for purposes of this
Section, the Monetary Board shall
consider any of the following
circumstances:
56.1. The act or omission has
resulted or may result in
material loss or damage,
or abnormal risk or
danger to the safety,
stability, liquidity or
solvency of the
institution;
56.2. The act or omission has
resulted or may result in
material loss or damage
or abnormal risk to the
institution's depositors,
creditors, investors,
stockholders or to the
Bangko Sentral or to the
public in general;
56.3. The act or omission has
caused any undue injury,
or has given any
unwarranted benefits,
advantage or preference
to the bank or any party
in the discharge by the
director or officer of his
duties and responsibilities
through manifest
partiality, evident bad
faith or gross inexcusable
negligence; or
56.4. The act or omission
involves entering into any
contract or transaction
manifestly and grossly
disadvantageous to the
bank, quasi-bank or trust
Monetary entity, whether or not the
director or officer
profited or will profit
thereby.
Whenever a bank, quasi-bank or
trust entity persists in conducting its
business in an unsafe or unsound manner,
the Monetary Board may, without
prejudice to the administrative sanctions
provided in Section 37 of the New Central
Bank Act, take action under Section 30 of
the same Act and/or immediately exclude
the erring bank from clearing, the
provisions of law to the contrary
notwithstanding.
 Finally, the New Central Bank Act grants the
Monetary Board the power to impose administrative
sanctions on the erring bank:
Section 37. Administrative
Sanctions on Banks and Quasi-banks. -
Without prejudice to the criminal
sanctions against the culpable persons
provided in Sections 34, 35, and 36 of this
Act, the Monetary Board may, at its
discretion, impose upon any bank or
quasi-bank, their directors and/or
officers, for any willful violation of its
charter or by-laws, willful delay in the
submission of reports or publications
thereof as required by law, rules and
regulations; any refusal to permit
examination into the affairs of the
institution; any willful making of a false
or misleading statement to the Board or
the appropriate supervising and
examining department or its examiners;
any willful failure or refusal to comply
with, or violation of, any banking law or
any order, instruction or regulation issued
by the Monetary Board, or any order,
instruction or ruling by the Governor; or
any commission of irregularities,
and/or conducting business in an
unsafe or unsound manner as may be
determined by the Monetary Board, the
following administrative sanctions,
whenever applicable:
(a) fines in amounts as may be
determined by the Monetary
Board to be appropriate, but in no
case to exceed Thirty thousand
pesos (P30,000) a day for each
violation, taking into
consideration the attendant
circumstances, such as the nature
and gravity of the violation or
irregularity and the size of the
bank or quasi-bank;
(b) suspension of rediscounting
privileges or access to Bangko
Sentral credit facilities;
(c) suspension of lending or
foreign exchange operations or
authority to accept new deposits
or make new investments;
(d) suspension of interbank
clearing privileges; and/or
(e) revocation of quasi-banking
license.
Resignation or termination from
office shall not exempt such director or
officer from administrative or criminal
sanctions.
The Monetary Board may,
whenever warranted by circumstances,
preventively suspend any director or
officer of a bank or quasi-bank pending an
investigation: Provided, That should the
case be not finally decided by the Bangko
Sentral within a period of one hundred
twenty (120) days after the date of
suspension, said director or officer shall
be reinstated in his position: Provided,
further, That when the delay in the
disposition of the case is due to the fault,
negligence or petition of the director or
officer, the period of delay shall not be
counted in computing the period of
suspension herein provided.
The above administrative
sanctions need not be applied in the order
of their severity.
Whether or not there is an
administrative proceeding, if the
institution and/or the directors and/or
officers concerned continue with or
otherwise persist in the commission of the
indicated practice or violation, the
Monetary Board may issue an order
requiring the institution and/or the
directors and/or officers concerned to
cease and desist from the indicated
practice or violation, and may further
order that immediate action be taken to
correct the conditions resulting from such
practice or violation. The cease and desist
order shall be immediately effective upon
service on the respondents.
The respondents shall be afforded
an opportunity to defend their action in a
hearing before the Monetary Board or any
committee chaired by any Monetary
Board member created for the purpose,
upon request made by the respondents
within five (5) days from their receipt of
 the order. If no such hearing is requested
within said period, the order shall be final.
If a hearing is conducted, all issues shall
be determined on the basis of records,
after which the Monetary Board may
either reconsider or make final its order.
The Governor is hereby
authorized, at his discretion, to impose
upon banking institutions, for any failure
to comply with the requirements of law,
Monetary Board regulations and policies,
and/or instructions issued by the
Monetary Board or by the Governor, fines
not in excess of Ten thousand pesos
(P10,000) a day for each violation, the
imposition of which shall be final and
executory until reversed, modified or
lifted by the Monetary Board on appeal.[29]
Koruga also accused Arcenas, et al. of violation of
the Corporation Codes provisions on self-dealing and
conflict of interest. She invoked Section 31 of the
Corporation Code, which defines the liability of directors,
trustees, or officers of a corporation for, among others,
acquiring any personal or pecuniary interest in conflict
with their duty as directors or trustees, and Section 32,
which prescribes the conditions under which a contract of
the corporation with one or more of its directors or
trustees the so-called self-dealing directors [30] would be
valid. She also alleged that Banco Filipinos directors
violated Sections 33 and 34 in approving the loans of
corporations with interlocking ownerships, i.e., owned,
directed, or managed by close associates of Albert C.
Aguirre.
Sections 31 to 34 of the Corporation Code
provide:
Section 31. Liability of directors,
trustees or officers. - Directors or trustees
who wilfully and knowingly vote for or
assent to patently unlawful acts of the
corporation or who are guilty of gross
negligence or bad faith in directing the
affairs of the corporation or acquire any
personal or pecuniary interest in conflict
with their duty as such directors or
trustees shall be liable jointly and
severally for all damages resulting
therefrom suffered by the corporation, its
stockholders or members and other
persons.
When a director, trustee or officer
attempts to acquire or acquires, in
violation of his duty, any interest adverse
to the corporation in respect of any matter
which has been reposed in him in
confidence, as to which equity imposes a
disability upon him to deal in his own
behalf, he shall be liable as a trustee for
the corporation and must account for the
profits which otherwise would have
accrued to the corporation.
Section 32. Dealings of directors,
trustees or officers with the corporation. -
A contract of the corporation with one or
more of its directors or trustees or officers
is voidable, at the option of such
corporation, unless all the following
conditions are present:
1. That the presence of such
director or trustee in the board meeting in
which the contract was approved was not
necessary to constitute a quorum for such
meeting;
2. That the vote of such director
or trustee was not necessary for the
approval of the contract;
3. That the contract is fair and
reasonable under the circumstances; and
4. That in case of an officer, the
contract has been previously authorized
by the board of directors.
Where any of the first two
conditions set forth in the preceding
paragraph is absent, in the case of a
contract with a director or trustee, such
contract may be ratified by the vote of the
stockholders representing at least two-
thirds (2/3) of the outstanding capital
stock or of at least two-thirds (2/3) of the
members in a meeting called for the
purpose: Provided, That full disclosure of
the adverse interest of the directors or
trustees involved is made at such meeting:
Provided, however, That the contract is
 fair and reasonable under the
circumstances.
Section 33. Contracts between
corporations with interlocking directors. -
Except in cases of fraud, and provided the
contract is fair and reasonable under the
circumstances, a contract between two or
more corporations having interlocking
directors shall not be invalidated on that
ground alone: Provided, That if the
interest of the interlocking director in one
corporation is substantial and his interest
in the other corporation or corporations is
merely nominal, he shall be subject to the
provisions of the preceding section
insofar as the latter corporation or
corporations are concerned.
Stockholdings exceeding twenty
(20%) percent of the outstanding capital
stock shall be considered substantial for
purposes of interlocking directors.
Section 34. Disloyalty of a
director. - Where a director, by virtue of
his office, acquires for himself a business
opportunity which should belong to the
corporation, thereby obtaining profits to
the prejudice of such corporation, he must
account to the latter for all such profits by
refunding the same, unless his act has
been ratified by a vote of the stockholders
owning or representing at least two-thirds
(2/3) of the outstanding capital stock. This
provision shall be applicable,
notwithstanding the fact that the director
risked his own funds in the venture.
Korugas invocation of the provisions of the
Corporation Code is misplaced. In an earlier case with
similar antecedents, we ruled that:
The Corporation Code, however, is a
general law applying to all types of
corporations, while the New Central Bank
Act regulates specifically banks and other
financial institutions, including the
dissolution and liquidation thereof. As
between a general and special law, the
latter shall prevail generalia specialibus
non derogant.[31]
Consequently, it is not the Interim Rules of
Procedure on Intra-Corporate Controversies, [32] or Rule 59
of the Rules of Civil Procedure on Receivership, that
would apply to this case. Instead, Sections 29 and 30 of
the New Central Bank Act should be followed, viz.:
Section 29. Appointment of
Conservator. - Whenever, on the basis of
a report submitted by the appropriate
supervising or examining department, the
Monetary Board finds that a bank or a
quasi-bank is in a state of continuing
inability or unwillingness to maintain a
condition of liquidity deemed adequate to
protect the interest of depositors and
creditors, the Monetary Board may
appoint a conservator with such powers as
the Monetary Board shall deem necessary
to take charge of the assets, liabilities, and
the management thereof, reorganize the
management, collect all monies and debts
due said institution, and exercise all
powers necessary to restore its viability.
The conservator shall report and be
responsible to the Monetary Board and
shall have the power to overrule or revoke
the actions of the previous management
and board of directors of the bank or
quasi-bank.
xxxx
The Monetary Board shall
terminate the conservatorship when it is
satisfied that the institution can continue
to operate on its own and the
conservatorship is no longer necessary.
The conservatorship shall likewise be
terminated should the Monetary Board, on
the basis of the report of the conservator
or of its own findings, determine that the
continuance in business of the institution
would involve probable loss to its
depositors or creditors, in which case the
provisions of Section 30 shall apply.
Section 30. Proceedings in
Receivership and Liquidation. -
Whenever, upon report of the head of the
supervising or examining department, the
Monetary Board finds that a bank or
quasi-bank:
 (a) is unable to pay its petition for certiorari may only be filed
liabilities as they become by the stockholders of record representing
due in the ordinary course the majority of the capital stock within ten
of business: Provided, (10) days from receipt by the board of
That this shall not include directors of the institution of the order
inability to pay caused by directing receivership, liquidation or
extraordinary demands conservatorship.
induced by financial
panic in the banking The designation of a conservator
community; under Section 29 of this Act or the
appointment of a receiver under this
(b) has insufficient section shall be vested exclusively with
realizable assets, as the Monetary Board. Furthermore, the
determined by the designation of a conservator is not a
Bangko Sentral, to meet precondition to the designation of a
its liabilities; or receiver.[33]

(c) cannot continue in

business without On the strength of these provisions, it is the
involving probable losses
to its depositors or Monetary Board that exercises exclusive jurisdiction over
creditors; or proceedings for receivership of banks.
(d) has willfully violated
a cease and desist order Crystal clear in Section 30 is the provision that
under Section 37 that has
says the appointment of a receiver under this section shall
become final, involving
acts or transactions which be vested exclusively with the Monetary Board. The term
amount to fraud or a exclusively connotes that only the Monetary Board can
dissipation of the assets
of the institution; in resolve the issue of whether a bank is to be placed under
which cases, the receivership and, upon an affirmative finding, it also has
Monetary Board may
summarily and without authority to appoint a receiver. This is further affirmed by
need for prior hearing the fact that the law allows the Monetary Board to take
forbid the institution
action summarily and without need for prior hearing.
from doing business in
the Philippines and
designate the Philippine And, as a clincher, the law explicitly provides that
Deposit Insurance
Corporation as receiver actions of the Monetary Board taken under this section or
of the banking under Section 29 of this Act shall be final and executory,
institution.
and may not be restrained or set aside by the court except
xxxx on a petition for certiorari on the ground that the action
taken was in excess of jurisdiction or with such grave
The actions of the Monetary
Board taken under this section or abuse of discretion as to amount to lack or excess of
under Section 29 of this Act shall be jurisdiction.
final and executory, and may not be
restrained or set aside by the court
except on petition for certiorari on the From the foregoing disquisition, there is no doubt
ground that the action taken was in
excess of jurisdiction or with such that the RTC has no jurisdiction to hear and decide a suit
grave abuse of discretion as to amount that seeks to place Banco Filipino under receivership.
to lack or excess of jurisdiction. The
 Koruga herself recognizes the BSPs power over
the allegedly unlawful acts of Banco Filipinos directors.
The records of this case bear out that Koruga, through her
legal counsel, wrote the Monetary Board[34] on April 21,
2003 to bring to its attention the acts she had enumerated
in her complaint before the RTC. The letter reads in part:
Banco Filipino and the current
members of its Board of Directors should
be placed under investigation for
violations of banking laws, the
commission of irregularities, and for
conducting business in an unsafe or
unsound manner. They should likewise be
placed under preventive suspension by
virtue of the powers granted to the
Monetary Board under Section 37 of the
Central Bank Act. These blatant violations
of banking laws should not go by without
penalty. They have put Banco Filipino, its
depositors and stockholders, and the
entire banking system (sic) in jeopardy.
xxxx
We urge you to look into the
matter in your capacity as regulators. Our
clients, a minority stockholders, (sic) and
many depositors of Banco Filipino are
prejudiced by a failure to regulate, and
taxpayers are prejudiced by
accommodations granted by the BSP to
Banco Filipino[35]
In a letter dated May 6, 2003, BSP Supervision
and Examination Department III Director Candon B.
Guerrero referred Korugas letter to Arcenas for comment.
[36]
On June 6, 2003, Banco Filipinos then Executive Vice
President and Corporate Secretary Francisco A. Rivera
submitted the banks comments essentially arguing that
Korugas accusations lacked legal and factual bases. [37]
On the other hand, the BSP, in its Answer before
the RTC, said that it had been looking into Banco
Filipinos activities. An October 2002 Report
Examination (ROE) prepared by the Supervision and
Examination Department (SED) noted
certain dacion payments, out-of-the-ordinary expenses,
among other dealings. On July 24, 2003, the Monetary
Board passed Resolution No. 1034 furnishing Banco
Filipino a copy of the ROE with instructions for the bank
to file its comment or explanation within 30 to 90 days
under threat of being fined or of being subjected to other
remedial actions. The ROE, the BSP said, covers
substantially the same matters raised in Korugas
complaint. At the time of the filing of Korugas complaint
on August 20, 2003, the period for Banco Filipino to
submit its explanation had not yet expired.[38]
Thus, the courts jurisdiction could only have been
invoked after the Monetary Board had taken action on the
matter and only on the ground that the action taken was in
excess of jurisdiction or with such grave abuse of
discretion as to amount to lack or excess of jurisdiction.
Finally, there is one other reason why Korugas
complaint before the RTC cannot prosper. Given her own
admission and the same is likewise supported by evidence
that she is merely a minority stockholder of Banco
Filipino, she would not have the standing to question the
Monetary Boards action. Section 30 of the New Central
Bank Act provides:
The petition for certiorari may only be
filed by the stockholders of record
representing the majority of the capital
stock within ten (10) days from receipt by
the board of directors of the institution of
the order directing receivership,
liquidation or conservatorship.
All the foregoing discussion yields the inevitable
conclusion that the CA erred in upholding the jurisdiction
of, and remanding the case to, the RTC. Given that the
RTC does not have jurisdiction over the subject matter of
the case, its refusal to dismiss the case on that ground
of
amounted to grave abuse of discretion.
 WHEREFORE, the foregoing premises Petition for mandamus and prohibition, with
preliminary injunction that pursues the creation of
considered, the Petition in G.R. No. 168332 joint and solidary liability against the respondent.
is DISMISSED, while the Petition in G.R. No. 169053 FACTS Serrano filed a case against Overseas Bank
is GRANTED. The Decision of the Court of Appeals and Central bank so that they may jointly separately
liable, because, the P350K worth of time deposits by
dated July 20, 2005 in CA-G.R. SP No. 88422 is Serrano in overseas bank of Manila is not successful
hereby SET ASIDE. The Temporary Restraining Order when he made a series of encashment, because on
issued by this Court on March 13, 2006 is the alleged failure of the Overseas Bank of Manila to
return the time deposits made by petitioner and
made PERMANENT. Consequently, Civil Case No. 03- assigned to him, because respondent Central Bank
985, pending before failed in its duty to exercise strict supervision over
the Regional Trial Court of Makati City, is DISMISSED. respondent Overseas Bank of Manila to protect
depositors and the general public. ISSUE Whether
the Central Bank is Liable for the case filed? HELD
SO ORDERED. No, Bank deposits are in the nature of irregular
deposits. They are really loans because they earn
interest. All kinds of bank deposits, whether fixed,
savings, or current are to be treated as loans and are
to be covered by the law on loans. Current and
Serrano vs Central Bank savings deposit are loans to a bank because it can
use the same. The petitioner here in making time
deposits that earn interests with respondent
Overseas Bank of Manila was in reality a creditor of
the respondent Bank and not a depositor. The
respondent Bank was in turn a debtor of petitioner.
Failure of the respondent Bank to honor the time
deposit is failure to pay s obligation as a debtor and
not a breach of trust arising from depositarys failure
to return the subject matter of the deposit
WHEREFORE, the petition is dismissed for lack of
merit, with costs against petitioner. SO ORDERED.

Teofisto Guingona, Jr., Antonio Martin, and

Teresita Santos vs. The City Fiscal of Manila,
Hon. Jose Flaminiano, Asst. City Fiscal Felizardo
Lota
Facts: From March 1979 to March 1981, Clement
David made several investments with the National
Savings and Loan Association. On March 21, 1981,
the bank was placed under receivership by the
Bangko Sentral. Upon Davids request, petitioners
Guingona and Martin issued a joint promissory note,
absorbing the obligations of the bank. On July 17,
1981, they divided the indebtedness. David filed a
complaint for estafa and violation of Central Bank
Circular No. 364 and related regulations regarding
foreign exchange transactions before the Office of
the City Fiscal of Manila. Petitioners filed the herein
petition for prohibition and injunction with a prayer for
immediate issuance of restraining order and/or writ
of preliminary injunction to enjoin the public
respondents to proceed with the preliminary
investigation on the ground that the petitioners
obligation is civil in nature. Issue: (1) Whether the
contract between NSLA and David is a contract of
depositor a contract of loan, which answer
determines whether the City Fiscal has the
jurisdiction to file a case for estafa (2) Whether there
was a violation of Central Bank Circular No. 364
Held: (1) When private respondent David invested
his money on nine. and savings deposits with the
aforesaid bank, the contract that was perfected was
a contract of simple loan or mutuum and not a
contract of deposit. Hence, the relationship between
the private respondent and the Nation Savings and
Loan Association is that of creditor and debtor;
consequently, the ownership of the amount
deposited was transmitted to the Bank upon the
perfection of the contract and it can make use of the
amount deposited for its banking operations, such as
to pay interests on deposits and to pay withdrawals.
While the Bank has the obligation to return the
amount deposited, it has, however, no obligation to
return or deliver the same money that was
deposited. And, the failure of the Bank to return the
amount deposited will not constitute estafa through
misappropriation punishable under Article 315, par.
l(b) of the Revised Penal Code, but it will only give
rise to civil liability over which the public respondents
have no jurisdiction. But even granting that the
failure of the bank to pay the time and savings
deposits of private respondent David would
constitute a violation of paragraph 1(b) of Article 315
of the Revised Penal Code, nevertheless any
incipient criminal liability was deemed avoided,
because when the aforesaid bank was placed under
receivership by the Central Bank, petitioners
Guingona and Martin assumed the obligation of the
bank to private respondent David, thereby resulting
in the novation of the original contractual obligation
arising from deposit into a contract of loan and
converting the original trust relation between the
bank and private respondent David into an ordinary
debtor-creditor relation between the petitioners and
private respondent. Consequently, the failure of the
bank or petitioners Guingona and Martin to pay the
deposits of private respondent would not constitute a
breach of trust but would merely be a failure to pay
the obligation as a debtor. Moreover, while it is true
that novation does not extinguish criminal liability, it
may however, prevent the rise of criminal liability as
long as it occurs prior to the filing of the criminal
information in court. In the case at bar, there is no
dispute that petitioners Guingona and Martin
executed a promissory note on June 17, 1981
assuming the obligation of the bank to private
respondent David; while the criminal complaint for
estafa was filed on December 23, 1981 with the
Office of the City Fiscal. Hence, it is clear that
novation occurred long before the filing of the
criminal complaint with the Office of the City Fiscal.
Consequently, as aforestated, any incipient criminal
liability would be avoided but there will still be a civil
liability on the part of petitioners Guingona and
Martin to pay the assumed obligation. (2) Petitioner
Guingona merely accommodated the request of the
Nation Savings and loan Association in order to clear
the bank draft through his dollar account because
the bank did not have a dollar account. Immediately
after the bank draft was cleared, petitioner Guingona
authorized Nation Savings and Loan Association to
withdraw the same in order to be utilized by the bank
for its operations. It is safe to assume that the U.S.
dollars were converted first into Philippine pesos
before they were accepted and deposited in Nation
Savings and Loan Association, because the bank is
presumed to have followed the ordinary course of
the business which is to accept deposits in Philippine
currency only, and that the transaction was regular
and fair, in the absence of a clear and convincing
evidence to the contrary. In conclusion, considering
that the liability of the petitioners is purely civil in
nature and that there is no clear showing that they
engaged in foreign exchange transactions, We hold
that the public respondents acted without jurisdiction
when they investigated the charges against the
petitioners. Consequently, public respondents should
be restrained from further proceeding with the
criminal case for to allow the case to continue, even
if the petitioners could have appealed to the Ministry
of Justice, would work great injustice to petitioners
and would render meaningless the proper
administration of justice.