2007

Banks; Money Laundering: Predicate Crimes

No. X. Name at least five predicate crimes to money laundering. (5%)

SUGGESTED ANSWER: Any five of the following are predicate crimes to money
laundering:

1. Kidnapping for ransom under Article 267 of Act No.3815, otherwise known
as the Revised Penal Code, as amended;
2. Sections 3,4,5,7,8 and 9 of Article Two of Republic Act No. 6425, as
amended, otherwise known as the Dangerous Drugs Act of 1972;
3. Section 3 paragraphs B,C,E,G,H and I of Republic Act No. 3019, as
amended; otherwise known as the Anti-graft and Corrupt Practices Act;
4. Plunder under Republic Act No. 7080, as amended;
5. Robbery and extortion under Articles 294,295,296,299,300,301 and 302 of
the Revised Penal Code, as amended;
6. Jueteng and Masiao punished as illegal gambling under Presidential
Decree No. 1602;
7. Piracy on the high seas under the Revised Penal Code, as amended and
Presidential Decree No. 532; (8) Qualified theft under Article 310 of the
Revised Penal Code, as amended;
8. Swindling under Article 315 of the Revised Penal Code, as amended.
9. Smuggling under Republic Act Nos. 455 and 1937
10. Violations under Republic Act No. 8792, otherwise known as the
Electronic Commerce Act of 2000
11. Hijacking and other violations under Republic Act No 6235;destructive
arson and murder, as defined under the Revised Penal Code, as
amended, including those perpetrated by terrorist against non-combatant
persons and similar targets;
12. Fraudulent practices and other violations under Republic Act No. 8799,
otherwise known as the securities Regulation Code of 2000
13. Felonies or offenses of a similar nature those are punishable under the
penal laws of other countries. (Sec 3, Anti-Money Laundering Act of 2001).

Banks; Mortgage; Redemption

No. IX. On December 4, 2003, RED Corporation executed a real estate

mortgage in favor of BLUE Bank. RED Corporation defaulted in the
payment of its loan. Consequently, on June 4, 2004, BLUE Bank extra
judicially foreclosed the property. Being the highest bidder in the auction
sale conducted, the Bank was issued a Certificate of Sale which was
registered on August 4, 2004. Does RED Corporation still have the right to
redeem the property as of September 14, 2007? Reason briefly. (5%)

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 SUGGESTED ANSWER:
No, RED Corporation has lost its right to redeem the property. Juridical
persons whose property is sold pursuant to an extrajudicial foreclosure, shall
have the right to redeem the property until registration of the certificate of sale
with the Register of Deeds, which shall in no case be more than three months
after foreclosure, whichever is earlier (Section 47, General Banking Law).

Banks; Receivership

No. VIII. Due to growing financial difficulties, Z Bank was unable to finish
construction of its 21-storey building on a prime lot located in Makati City.
Inevitably, the Bangko Sentral ordered the closure of Z Bank and
consequently placed it under receivership. In a bid to save the banks
property investment, the President of Z Bank entered into a financing
agreement with a group of investors for the completion of the construction
of the 21-storey building in exchange for a ten-year lease and the exclusive
option to purchase the building. (10%) (A) Is the act of the President valid?
Why or why not?

SUGGESTED ANSWER:
No, the bank presidents act is not valid. He had no authority to enter into the
financing agreement. Z Bank was ordered closed and placed under receivership.
Control over the properties of Z Bank passed to the receiver. The appointment of a
receiver operates to suspend the authority of the bank and its officers over the banks
assets and properties, Mercantile Law Q&As (2007-2013)
hectorchristopher@yahoo.com JayArhSals Never Let The Odds Keep You From
Pursuing What You Know In Your Heart You Were Meant To Do.-Leroy Satchel Paige
Page 14 of 173 such authority being reposed in the receiver (Abacus Real Estate
Development Center, Inc. v. Manila Banking Corporation, 455 SCRA 97 (2005)).

2008
Banks; Single Borrowers Limit; Collateral Security

No. XIX. Industry Bank, which has a net worth of P1 Billion, extended a loan
to Celestial Properties Inc. amounting to P270 Million. The loan was
secured by a mortgage over a vast commercial lot in the Fort Bonifacio
Global City, appraised at P350 Million. After audit, the Banko Sentral ng
Pilipinas gave notice that the loan to Celestial Properties exceeded the
single borrowers limit of 25% of the banks net worth under a recent BSP
Circular. In light of other previous similar violations of the credit limit
requirement, the BSP advised Industry Bank to reduce the amount of the
loan to Celestial Properties under pain of severe sanctions. When Industry
Bank informed Celestial Properties that it intended to reduce the loan by
P50 Million, Celestial Properties countered that the bank should first
release a part of the collateral worth P50 Million. Industry Bank rejected the

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counter-proposal, and referred the matter to you as counsel. How would
you advise Industry Bank to proceed, with its best interests in mind? (5%)

SUGGESTED ANSWER:
With a net worth of P1.0 Billion, the maximum loan exposure of the bank
to Celestial Properties can reach up to P250.0 Million. The bank should proceed
with to reduce the loan of Celestial properties by P20.0 Million, but should not
release any part of the collateral by the amount of reduction. The collateral is a
single commercial lot in the Fort, covered by a single title and beings essentially
indivisible in character, the mortgage cannot be partially released. Besides,
since a real estate mortgage cannot be partially released. Besides, since a real
estate mortgage is merely a collateral contract, it can be enforced only to the
amount of the loan; and the moment the loan exposure is reduced, then
automatically, reduction of the collateral coverage of the real estate mortgage
follows.