Salvacion vs.

Central Bank, 21 August 1997

G.R. No. 94723 | August 21, 1997 | Torres, Jr. | Foreign Currency Deposit Unit administrative body whatsoever. (Sec 8. R.A. 6426)
Digest by: Ands
The application of Section 8 of R.A. 6426 depends on the extent of its justice. The garnishment
Petitioners: KAREN E. SALVACION, minor, thru Federico N. Salvacion, Jr., father and Natural of a foreign currency deposit should be allowed to prevent injustice and for equitable
Guardian, and Spouses FEDERICO N. SALVACION, JR., and EVELINA E. SALVACION grounds, otherwise, it would negate Article 10 of the New Civil Code which provides that “in
Respondents: CENTRAL BANK OF THE PHILIPPINES, CHINA BANKING CORPORATION and case of doubt in the interpretation or application of laws, it is presumed that the lawmaking
GREG BARTELLI y NORTHCOTT body intended right and justice to prevail.

Recit-ready Digest + Doctrine:

[Trigger warning: rape; proceed w caution] Facts:
Greg Bartelli y Northcott, an American tourist, coaxed and lured petitioner Karen Salvacion, ● [Trigger warning: rape; proceed w caution]
then 12 years old to go with him to his apartment. Therein, Greg Bartelli detained Karen ● Greg Bartelli, an American tourist, invited petitioner Karen Salvacion, who was 12
Salvacion for four days, or up and was able to rape the child. After policemen and people years old, to go with him to his apartment. He told her that she would be tutoring his
living nearby, rescued Karen, Greg Bartelli was arrested and detained at the Makati Municipal niece in Filipino. He even gave her a stuffed toy to persuade her to teach his niece.
Jail. The policemen recovered from Bartelli a Dollar Check, a COCOBANK Bank Book and a ○ When Karen did not see the alleged niece inside the house, defendant told
Dollar Account with China Banking Corp. her maybe his niece was upstairs, and invited Karen to go upstairs. Upon
entering the bedroom defendant suddenly locked the door. Karen became
A case for Serious Illegal Detention and 4 counts of rape was filed. On the same day, nervous because his niece was not there. Defendant got a piece of cotton
petitioners filed for damages with preliminary attachment against Greg Bartelli. The day cord and tied Karen's hands with it, and then he undressed her. Karen cried
there was a scheduled hearing for Bartelli's petition for bail the latter escaped from jail. for help but defendant strangled her.
○ Bartelli detained her from February 4-7, 1989. She was raped at least three
In the Civil Case, the Judge issued an Order dated granting the application of herein times a day.
petitioners, for the issuance of the writ of preliminary attachment. The Deputy Sheriff of ○ Karen was rescued when people living nearby heard her cries for help.
Makati served a Notice of Garnishment on China Banking Corporation. Bartelli was arrested and detained at the Makati Municipal Jail.
○ After the incident, Karen has changed a lot. She does not play with her
China Banking Corporation, invoked Section 113 of Central Bank Circular No. 960 to the brother and sister anymore, and she is always in a state of shock; she has
effect that the dollar deposits of defendant Greg Bartelli are exempt from attachment, been absent-minded and is ashamed even to go out of the house.
garnishment, or any other order or process of any court, legislative body, government agency ● The policemen recovered from Bartelli the following items:
or any administrative body, whatsoever. The Central Bank, in response to the petitioner’s ○ Dollar Check No. 368, Control No. 021000678-1166111303, US 3,903.20;
inquiry with regard to Section 113 of the CB Circular No. 960 reiterated that the provision is ○ COCOBANK Bank Book No. 104-108758-8 (Peso Acct.)
absolute and admit no exception. ○ Dollar Account — China Banking Corp., US$/A#54105028-2
○ ID-122-30-8877
W/N the foreign currency deposit is exempt from attachment – NO ○ Philippine Money (P234.00) cash
○ Door Keys 6 pieces
Application of law depends on the extent of justice. Eventually, if we rule that the questioned ○ Stuffed Doll (Teddy Bear) used in seducing the complainant.
Section 113 of the CB Circular No 960 which exempts from attachment, garnishment or any ● A criminal case for serious illegal detention and criminal cases for 4 counts of rape
other order or process of any court, legislative body, government agency or any was filed. Petitioners also filed a case for damages with preliminary attachment
administrative body whatsoever is applicable to a foreign transient, injustice would result against Bartelli.
especially to a citizen aggrieved by a foreign guest. This would negate Article 10 of the New ○ But the day of Bartelli’s hearing for petition for bail, he escaped from jail.
Civil Code which provides that “in case of doubt in the interpretation or application of laws, ● The criminal cases were archived but the civil case continued.
it is presumed that the lawmaking body intended right and justice to prevail”. ● RTC: Granted application for writ of preliminary attachment
● March 1, 1989: Deputy Sheriff of Makati served a Notice of Garnishment on China
It would be unthinkable that the questioned provision would be used as a device by the Banking Corporation
accused for wrongdoing and in so doing acquitting the guilty at the expense of the innocent. ● China Bank: invoked RA No. 1405 (Bank Secrecy Law)
○ Sheriff reply: Garnishment didn’t violate secrecy of bank deposits since
DOCTRINE: disclosure is merely incidental to a garnishment properly and legally made
General Rule: Foreign currency deposits shall be exempt from attachment, garnishment, or by virtue of a court order
any other order or process of any court, legislative body, government agency or any ● China Bank: invoked Section 113 of Central Bank Circular No. 960 1
○ Dollar deposits of defendant Bartelli are exempt from attachment,

1
"Foreign currency deposits shall be exempt from attachment, garnishment, or any other
order or process of any court, legislative body, government agency or any administrative
body whatsoever."
Page 1 of 33
 garnishment or any other order or process of any court, legislative body, exemption
government agency or any administrative body, whatsoever ■ it does not violate the substantive due process guaranteed by
● Petitioners then made an inquiry with the Central Bank on whether Section 113 of CB the Constitution because
Circular No. 960 has any exception or whether said section has been repealed or ● a.) it was based on a law;
amended ● b.) the law seems to be reasonable;
○ said section has rendered nugatory the substantive right of the plaintiff to ● c.) it is enforced according to regular methods of
have the claim sought to be enforced by the civil action secured by way of procedure; and
the writ of preliminary attachment as granted to the plaintiff under Rule ● d.) it applies to all members of a class.
57, ROC ○ The Central Bank said; that one reason for exempting the foreign currency
● Central Bank responded in a letter that the cited provision is absolute in application. deposits from attachment, garnishment or any other order or process of
“The purpose of the law is to encourage dollar accounts within the country's banking any court, is to assure the development and speedy growth of the Foreign
system which would help in the development of the economy.” Currency Deposit System and the Offshore Banking System in the
● RTC: Declared Bartelli in default when he failed to file an Answer in the civil case Philippines
● Petitioners filed the instant petition for declaratory relief praying that an Order be ■ another reason is to encourage the inflow of foreign currency
issued restraining the respondents from applying and enforcing Sec 113, CB Circular deposits into the banking institutions, contributing to the
No. 960 economic development of the country
● Petitioner’s Arguments ■ it applies to all foreign currency deposits made by any person
○ Section 113 is unconstitutional because: and therefore does not violate the equal protection clause of the
■ it has taken away the right of petitioners to have the bank Constitution.
deposit of defendant Greg Bartelli garnished to satisfy the
judgment rendered in petitioners' favor in violation of Issue/s:
substantive due process guaranteed by the Constitution ● W/N the foreign currency deposit is exempt from attachment – NO
■ it has given foreign currency depositors an undue favor or a
class privilege in violation of the equal protection clause of the Ratio:
Constitution ● The Foreign Currency Deposit Act can be made applicable to a foreign transient
■ it has provided a safe haven for criminals like the herein because it is in the interest of justice.
respondent Greg Bartelli since criminals could escape civil ○ Rationale for RA 6426: It was enacted in 1983 or at a time when the
liability for their wrongful acts by merely converting their country's economy was in a shambles; when foreign investments were
money to a foreign currency and depositing it in a foreign minimal and presumably, this was the reason why said statute was
currency deposit account with an authorized bank enacted.
■ The Monetary Board, in issuing Section 113 of Central Bank ○ However, the realities of the present times show that the country has
Circular No. 960 has exceeded its delegated quasi-legislative recovered economically; and even if not, the questioned law still denies
power those entitled to due process of law for being unreasonable and oppressive.
● Respondent’s Arguments The law failed to anticipate the iniquitous effects producing outright
○ The Monetary Board in issuing Section 113 of CB Circular No. 960 did not injustice and inequality such as the case before us.
exceed its power or authority because the subject Section is copied ○ OSG argument: Based on the whereas clauses of PD 10342 and PD 10353, it
verbatim from a portion of R.A. No. 6426 as amended by P.D. 1246. is evident that the Offshore Banking System and the Foreign Currency
■ Hence, it is the law (R.A. 6426 as amended) itself grants the Deposit System were designed to draw deposits from foreign lenders and

2
'WHEREAS, conditions conductive to the establishment of an offshore banking system,
3
such as political stability, a growing economy and adequate communication facilities, among 'WHEREAS, the establishment of an offshore banking system in the Philippines has been
others, exist in the Philippines; authorized under a separate decree;

'WHEREAS, it is in the interest of developing countries to have as wide access as possible 'WHEREAS, a number of local commercial banks, as depository bank under the Foreign
to the sources of capital funds for economic development; Currency Deposit Act (RA No. 6426), have the resources and managerial competence to
more actively engage in foreign exchange transactions and participate in the grant of foreign
'WHEREAS, an offshore banking system based in the Philippines will be advantageous and currency loans to resident corporations and firms;
beneficial to the country by increasing our links with foreign lenders, facilitating the flow of
desired investments into the Philippines, creating employment opportunities and expertise in 'WHEREAS, it is timely to expand the foreign currency lending authority of the said depository
international finance, and contributing to the national development effort. banks under RA 6426 and apply to their transactions the same taxes as would be applicable
to transaction of the proposed offshore banking units;'
'WHEREAS, the geographical location, physical and human resources, and other positive
factors provide the Philippines with the clear potential to develop as another financial center
in Asia;'
Page 2 of 33
 investors (see second Whereas of PD No. 1034; third Whereas of PD No.
1035). It is these deposits that are induced by the two laws and given
protection and incentives by them.
● Therefore, the foreign currency deposit made by a transient or a tourist is not the kind
of deposit encouraged by PD Nos. 1034 and 1035 and given incentives and protection
by said laws. Such depositors stays only for a few days in the country and, therefore,
will maintain his deposit in the bank only for a short time.
● ITC: Respondent Greg Bartelli is just a tourist or a transient. He deposited his dollars
with respondent China Banking Corporation only for safekeeping during his
temporary stay in the Philippines.
○ In fine, the application of the law depends on the extent of its justice.
○ If the Supreme Court rules that the questioned Section 113 of Central Bank
Circular No. 960 is applicable to a foreign transient, injustice would result
specially to a citizen aggrieved by a foreign guest like accused Greg Bartelli.
○ This would negate Article 10 of the New Civil Code which provides
that "in case of doubt in the interpretation or application of laws, it is
presumed that the lawmaking body intended right and justice to
prevail. "Ninguno non deue enriquecerse tortizeramente con dano de otro."
● When the statute is silent or ambiguous, this is one of those fundamental solutions
that would respond to the vehement urge of conscience.
○ It would be unthinkable, that the questioned Section 113 of Central Bank
No. 960 would be used as a device by accused Greg Bartelli for wrongdoing,
and in so doing, acquitting the guilty at the expense of the innocent.

Dispositive:
IN VIEW WHEREOF, the provisions of Section 113 of CB Circular No. 960 and PD No. 1246,
insofar as it amends Section 8 of R.A. No. 6426 are hereby held to be INAPPLICABLE to this
case because of its peculiar circumstances. Respondents are hereby REQUIRED to COMPLY
with the writ of execution issued in Civil Case No. 89-3214, "Karen Salvacion, et al. vs. Greg
Bartelli y Northcott, by Branch CXLIV, RTC Makati and to RELEASE to petitioners the dollar
deposit of respondent Greg Bartelli y Northcott in such amount as would satisfy the judgment.

Page 3 of 33
 Ejercito vs. Sandiganbayan ● The Court held that by examining RA 1405, the law shows that the term ‘deposits’
G.R. Nos. 157294-95 | November 30, 2006 | Carpio-Morales, J.| Trust v. Deposits used there is to understood broadly and not limited only to accounts which give rise
Digest by: SAN DIEGO to a creditor-debtor relationship between depositor and bank.
● If the money deposited in the bank account may be used by the banks for authorized
Petitioners: JOSEPH VICTOR G. EJERCITO loans to third persons, then they account, regardless of whether a creditor-debtor
Respondents: SANDIGANBAYAN (SPECIAL DIVISION) AND PEOPLE OF THE PHILIPPINES relationship exists, falls under the category of accounts which the law precisely seeks
to protect. In this case, Trust Account No. 858 is one such account.
Recit-ready Digest + Doctrine: ● The Trust Agreement provides that the trust account covers “deposit, placement, or
In the case of People v. Estrada, the Special Prosecution Panel filed before the Sandiganbayan investment of funds” by the bank for and in behalf of Ejercito.
several Requests for Issuance of a Subpoena Duces Tecum for the issuance of a subpoena ● The money deposited under the trust account was intended to be invested elsewhere
directing the President of Export and Industry Bank (EIB) to produce several documents and not just to remain with the bank. Moreover, Section 2 of RA 1405 also refers to
regarding Trust Account No. 858. The Trust Agreement provides that the trust account “all deposits of whatever nature,” which proscribes any restrictive interpretation of
covers “deposit, placement, or investment of funds” by the bank for and in behalf of Ejercito. deposits. It is clear that generally, the law applies not only to money which is
Joseph Ejercito (Ejercito), the owner of the bank accounts, argued that the bank accounts are deposited, but also to those which are invested. Thus, it is broad enough to cover
covered by RA 1405 or the Bank Secrecy Law and do not fall under any of the exceptions. Sc Trust Account No. 858.
disagrees. The bank secrecy law shows that the term ‘deposits’ used there is to understood
● RA 1405 is not absolute, there being 2 exceptions:
broadly and not limited only to accounts which give rise to a creditor-debtor relationship
○ (1) examination is upon order of a competent court in cases of bribery or
between depositor and bank. If the money deposited in the bank account may be used by the
dereliction of duty of public officials and
banks for authorized loans to third persons, then they account, regardless of whether a
○ (2) money deposited or invested is the subject matter of litigation.
creditor-debtor relationship exists, falls under the category of accounts which the law
● Ejercito’s case falls within the exceptions provided for by RA 1405. In PNB v.
precisely seeks to protect. In this case, Trust Account No. 858 is one such account. The
Gancayco, the Court held that cases of unexplained wealth are similar to bribery or
money deposited under the trust account was intended to be invested elsewhere and not just
dereliction of duty and there is no reason why these 2 classes of cases cannot be
to remain with the bank. Moreover, Section 2 of RA 1405 also refers to “all deposits of
excepted from the rule making bank deposits confidential.
whatever nature,” which proscribes any restrictive interpretation of deposits. It is clear that
● Section 2 of RA 7080 or the Plunder Law also provide that cases for plunder involve
generally, the law applies not only to money which is deposited, but also to those which are
unexplained wealth. An examination of the “overt or criminal acts” described in
invested. Thus, it is broad enough to cover Trust Account No. 858.
Section 1(d) of RA 7080 would make the similarity between plunder and bribery even
more pronounced since bribery is essentially included among these criminal acts.
Facts: ● The crime of bribery and the overt acts constitutive of plunder are crimes committed
● In the case of People v. Estrada, the Special Prosecution Panel filed before the by public officers. Plunder, being analogous to bribery, the exception to RA 1405
Sandiganbayan several Requests for Issuance of a Subpoena Duces Tecum for the applicable in bribery cases, must also apply to plunder cases.
issuance of a subpoena directing the President of Export and Industry Bank (EIB) to ● Moreover, it has already been pronounced that “subject matter of litigation” means
produce several documents regarding Trust Account No. 858. that the money deposited is the very thing in dispute. Applying such, the pending
● They also filed a Request for Issuance of Subpoena Duces Tecum directed to the plunder case necessarily involves an inquiry into the whereabouts of the amount
representative of Equitable-PCI Bank to produce statements of account pertaining to purportedly illegally acquired by former president Estrada.
certain accounts in the name of Jose Velarde. ● Case law provides that subject matter cannot be limited to bank accounts of Estrada,
● Several other requests were also made, which were all granted by the Sandiganbayan. but must also include those accounts to which the money purportedly acquired
● Joseph Ejercito (Ejercito), the owner of the bank accounts, argued that the bank illegally was alleged to have been transferred. Trust Account No. 858, allegedly used
accounts are covered by RA 1405 or the Bank Secrecy Law and do not fall under any for acts constituting plunder, falls under this description.
of the exceptions. ● Ejercito argues under the exclusionary rule, but this rule presupposes that there is a
● He posits as well that the specific identification of the documents and subpoenas violation of RA 1405. The Sandiganbayan credited the People’s recount of how the
could only have been made possible by an earlier illegal disclosure by EIB and the Ombudsman conducted inquiry into the bank accounts.
PDIC. ● Moreover, the issuance of the Ombudsman of the subpoenas relating to Ejercito’s
● Thus, being illegal, prosecution is not allowed to use it. On the other hand, the People bank accounts was promulgated months before the Marquez v. Desierto doctrine.
of the Philippines argues that the trust account may be inquired into not merely This is in consonance with the rule established in case law, where if the Court
because it falls under the coverage but because it is not contemplated by RA 1405. overrules and adopts a different view or there is a reversal, the new doctrine should
● They posit that the law applies only to “deposits,” meaning the money delivered to be applied prospectively. Thus, the doctrine established in that case does not apply.
the bank by which a creditor-debtor relationship is created between the depositor
and bank. Dispositive:
WHEREFORE, the petition is DISMISSED. The Sandiganbayan Resolutions dated February 7 and
Issue/s: 12, 2003 and March 11, 2003 are upheld. SAHaTc
● Whether or not Trust Account No. 858 is covered by the term “deposit.” - YES
The Sandiganbayan is hereby directed, consistent with this Court's ruling in Marquez v. Desierto,
Ratio: to notify petitioner as to the date the subject bank documents shall be presented in court by the
persons subpoenaed.
Page 4 of 33
Page 5 of 33
 DBP vs. Arcilla ● Upon his request, DBP agreed to grant Arcilla an additional cash advance of
G.R. No. 161397 | 30 June 2005 ₱32,000.00. Thereafter, a Supplement to the Conditional Sale Agreement was
Digest by: NAME OF DIGESTER executed.
● However, he failed to pay his loan account, advances, penalty charges and interests
Petitioners: DEVELOPMENT BANK OF THE PHILIPPINES which, as of October 31, 1990, amounted to ₱241,940.93.12.
Respondents: FELIPE P. ARCILLA, JR., ● DBP then rescinded the Deed of Conditional Sale by notarial act on November 27,
1990.
Recit-ready Digest + Doctrine: ● Arcilla filed a complaint against DBP with the RTC of Rizal, on February 1994.
Atty. Arcilla, an employee of DBP legal department, availed of a loan under the Individual ○ He alleged that DBP failed to furnish him with the disclosure
Housing Project (IHP) of the said bank. DBP and Arcilla executed a Deed of Conditional Sale statement required by (R.A.) No. 3765 and Central Bank Circular No.
over a parcel of land and house’s construction. Arcilla resigned from the bank in 1986 and 158 prior to the execution of the deed of conditional sale and the
later on failed to pay his loan accounts. DBP rescinded the Deed of Conditional Sale by conversion of his loan account with the bank into a regular housing
notarial act. Consequently, the property was advertised for sale at public bidding. Arcilla filed loan account.
a complaint against DBP with the RTC of Rizal. He alleged that DBP failed to furnish him with ○ The bank applied its own formula and imposed its usurious interests,
the disclosure statement required by (R.A.) No. 3765 and Central Bank Circular No. 158 prior penalties and charges on his loan account and advances.
to the execution of the deed of conditional sale and the conversion of his loan account with
● DBP alleged that:
the bank into a regular housing loan account. DBP alleged that it substantially complied with
○ it substantially complied with R.A. No. 3765 and CB Circular No. 158
such requirement because the details required in said statements were particularly disclosed
because the details required in said statements were particularly disclosed
in the promissory notes, deed of conditional sale and the required notices sent to Arcilla. Its
in the promissory notes, deed of conditional sale and the required notices
failure to comply strictly did not affect the validity and enforceability of the subject contracts
sent to Arcilla.
or transactions. The Court ruled that DBP failed to disclose the requisite information in the
○ Its failure to comply strictly with R.A. No. 3765 did not affect the validity
disclosure statement form authorized by the Central Bank, but DBP did disclose in the loan
and enforceability of the subject contracts or transactions. DBP interposed
transaction documents between it and Arcilla. There is no evidence on record that DBP
a counterclaim for the possession of the property.
sought to collect or collected any interest, penalty or other charges, from Arcilla other than
● RTC rendered judgment in favor of Arcilla and nullified the notarial rescission of the
those disclosed in the said deeds/documents. The Court is convinced that Arcilla's claim of
deeds executed by the parties.
not having been furnished the data/information required by R.A. No. 3765 and CB Circular
● DBP appealed the decision to the CA. The latter rendered judgment setting aside and
No. 158 was but an afterthought.Despite the notarial rescission of the conditional sale in
reversing the decision of the RTC.
1990, and DBP's subsequent repeated offers to repurchase the property, the latter
maintained his silence. Arcilla filed his complaint only on February 21, 1994, or four years
Issue/s:
after the said notarial rescission. As such, Arcilla had been sufficiently informed of the terms
● Whether DBP complied with the disclosure requirement of R.A. No. 3765 and CB
and the requisite charges necessarily included in the subject loan.
Circular No. 158, in the execution of the deed of conditional sale, the supplemental
deed of conditional sale, and promissory notes YES
Facts: ● Whether Arcilla, Jr. is mandated to vacate the property and pay rentals for his
● Atty. Felipe P. Arcilla, Jr. was employed by the Development Bank of the Philippines occupation thereof after the notarial rescission of the deed of conditional sale was
(DBP). He was later assigned to the legal department, and thereafter, decided to avail rescinded by notarial act, as well as the supplement executed by DBP.
of a loan under the Individual Housing Project (IHP) of the bank.
● DBP and Arcilla executed a Deed of Conditional Sale over a parcel of land, as well as Ratio:
the house to be constructed thereon, for the price of ₱160,000. He obliged himself to 1. YES
pay the loan in 25 years, with 9% interest per annum, to be deducted from his ● Section 1 of R.A. No. 3765 provides that prior to the consummation of a loan
monthly salary. transaction, the bank, as creditor, is obliged to furnish a client with a clear statement,
● DBP obliged itself to transfer the title of the property upon the payment of the loan, in writing, setting forth, to the extent applicable and in accordance with the rules and
including any increments thereof. regulations prescribed by the Monetary Board of the Central Bank of the Philippines,
● Arcilla opted to resign from the bank in December 1986. Conformably with the Deed the following information:
of Conditional Sale, the bank informed him that the balance of his loan account with 1. the cash price or delivered price of the property or service to be acquired;
the bank had been converted to a regular housing loan. 2. the amounts, if any, to be credited as down payment and/or trade-in;
● On July 24, 1987, Arcilla signed three Promissory Notes for the total amount of 3. the difference between the amounts set forth under clauses (1) and (2);
₱186,364.15. He also agreed to the reservation by the DBP of its right to increase 4. the charges, individually itemized, which are paid or to be paid by such
(with notice to him) the "rate of interest on the loan, as well as all other fees and person in connection with the transaction but which are not incident to the
charges on loans and advances pursuant to such policy as it may adopt from time to extension of credit;
time during the period of the loan; Provided, that the rate of interest on the loan shall 5. the total amount to be financed;
be reduced by law or by the Monetary Board; Provided, further, that the adjustment 6. the finance charges expressed in terms of pesos and centavos; and
in the rate of interest shall take effect on or after the effectivity of the increase or 7. the percentage that the finance charge bears to the total amount to be
decrease in the maximum rate of interest." financed expressed as a simple annual rate on the outstanding unpaid
balance of the obligation.
Page 6 of 33
● Under Circular No. 158 of the Central Bank, the information required by R.A. No. 3765 hold, in the light of the evidence at hand, that he was duly informed of the necessary
shall be included in the contract covering the credit transaction or any other charges and fully understood their implications and effects. Consequently, the trial
document to be acknowledged and signed by the debtor, thus: court's annulment of the rescission anchored on this ground was unjustified.
1. The contract covering the credit transaction, or any other document to be
acknowledged and signed by the debtor, shall indicate the above seven 2. Remanded.
items of information. In addition, the contract or document shall specify ● Anent the prayer of DBP to order Arcilla to vacate the property and pay rentals
additional charges, if any, which will be collected in case certain therefor from 1990, a review of the records has shown that it failed to adduce
stipulations in the contract are not met by the debtor. evidence on the reasonable amount of rentals for Arcilla's occupancy of the property.
2. Furthermore, the contract or document shall specify additional charges, if ● Hence, the Court orders a remand of the case to the court of origin, for the parties to
any, which will be collected in case certain stipulations in the contract are adduce their respective evidence on the bank's counterclaim.
not met by the debtor.
3. If the borrower is not duly informed of the data required by the law prior
to the consummation of the availment or drawdown, the lender will have Dispositive:
no right to collect such charge or increases thereof, even if stipulated in the IN LIGHT OF ALL THE FOREGOING, the petition in G.R. No. 161426 is DENIED for lack of merit.
promissory note. However, such failure shall not affect the validity or The petition in G.R. No. 161397 is PARTIALLY GRANTED. The case is hereby REMANDED to the
enforceability of any contract or transaction. Regional Trial Court of Antipolo, Rizal, Branch 73, for it to resolve the counterclaim of the
● In the present case, DBP failed to disclose the requisite information in the Development Bank of the Philippines for possession of the property, and for the reasonable
disclosure statement form authorized by the Central Bank, but DBP did disclose rentals for Felipe P. Arcilla, Jr.'s occupancy thereof after the notarial rescission of the Deed of
in the loan transaction documents between it and Arcilla. Conditional Sale in 1990.
● There is no evidence on record that DBP sought to collect or collected any Costs against petitioner Felipe P. Arcilla, Jr.
interest, penalty or other charges, from Arcilla other than those disclosed in the
said deeds/documents.
● The Court is convinced that Arcilla's claim of not having been furnished the
data/information required by R.A. No. 3765 and CB Circular No. 158 was but an
afterthought.
● Despite the notarial rescission of the conditional sale in 1990, and DBP's subsequent
repeated offers to repurchase the property, the latter maintained his silence.
● Arcilla filed his complaint only on February 21, 1994, or four years after the said
notarial rescission. After a careful perusal of the records, we find that the appellee
had been sufficiently informed of the terms and the requisite charges necessarily
included in the subject loan.
● It must be stressed that the Truth in Lending Act (R.A. No. 3765), was enacted
primarily "to protect its citizens from a lack of awareness of the true cost of credit to
the user by using a full disclosure of such cost with a view of preventing the
uninformed use of credit to the detriment of the national economy”
● Contrary to appellee's claim that he was not sufficiently informed of the details of the
loan, the records disclose that the required informations were readily available in the
three (3) promissory notes he executed. Precisely, the said promissory notes were
executed to apprise appellee of the remaining balance on his loan when the same was
converted into a regular housing loan.
● And on its face, the promissory notes signed by no less than the appellee readily
shows all the data required by the Truth in Lending Act (R.A. No. 3765)
● Apropos, We agree with the appellant that appellee, a lawyer, would not be so gullible
or negligent as to sign documents without knowing fully well the legal implications
and consequences of his actions, and that appellee was a former employee of
appellant. As such employee, he is as well presumed knowledgeable with matters
relating to appellant's business and fully cognizant of the terms of the loan he applied
for, including the charges that had to be paid.
● It might have been different if the borrower was, say, an ordinary employee eager to
buy his first house and is easily lured into accepting onerous terms so long as the
same is payable on installments.
● In such cases, the Court would be disposed to be stricter in the application of the Truth
in Lending Act, insisting that the borrower be fully informed of what he is entering
into. But in the case at bar, considering appellee's education and training, We must
Page 7 of 33
 Larrobis, Jr. vs. Philippine Veterans Bank, 1 October 200436 ● 1996 Aug. 26- Sps filed a complaint with the RTC to declare the extrajudicial
G.R. No. | Date | Ponente | Topic/Keywords foreclosure and the subsequent sale thereof to the bank as void.
Digest by: Torio ● At the pretrial conference, the parties agreed to limit the issue to whether the period
Petitioners: SPS. CESAR A. LARROBIS, JR. and VIRGINIA S. LARROBIS within which the bank was placed under receivership and liquidation was a fortuitous
Respondents: PHILIPPINE VETERANS BANK event which suspended the running of the 10-year prescriptive period.
● RTC dismissed the complaint. MR denied. Hence the present case before the SC.
Recit-ready Digest + Doctrine:
In 1980, Sps Larrobis obtained a loan from the bank, secured by a REM, due in 1981. In 1985, Issues:
the bank became bankrupt and was placed under receivership. In the same year, the bank
● Was the period within which the respondent bank was placed under receivership and
sent a demand letter to the sps for the insurance premiums advanced by the bank for the
mortgaged properties. In 1995 or more than 14 years since the loan became due, the bank liquidation proceedings may be considered a fortuitous event which interrupted the
foreclosed the property. The Sps instituted a complaint to annul the foreclosure. RTC running of the prescriptive period in bringing actions?— NO
dismissed the complaint. MR denied, hence the present case. ● Was the demand letter sent by respondent bank's representative on August 23, 1985
sufficient to interrupt the running of the prescriptive period?— NO
Issues:
Was the period within which the respondent bank was placed under receivership and
Ratio:
liquidation proceedings may be considered a fortuitous event which interrupted the running
On whether the period within which the respondent bank was placed under receivership
of the prescriptive period in bringing actions?— NO. It is true that foreclosure falls within the
and liquidation proceedings may be considered a fortuitous event which interrupted the
broad definition of “doing business.” It should not be considered included, however, in the
running of the prescriptive period in bringing actions— NO
acts prohibited whenever banks are "prohibited from doing business" during receivership
● The bank claims that because of a fortuitous event, it was not able to exercise its right
and liquidation proceedings. This is consistent with the purpose of receivership proceedings,
to foreclose the mortgage on petitioners' property; and that since it was banned from
i.e., to receive collectibles and preserve the assets of the bank in substitution of its former
pursuing its business and was placed under receivership from April 25, 1985 until
management, and prevent the dissipation of its assets to the detriment of the creditors of the
August 1992, it could not foreclose the mortgage on petitioners' property within such
bank. A bank is bound by the acts, or failure to act of its receiver. However, the bank may go
period since foreclosure is embraced in the phrase "doing business.”
after the receiver who is liable to it for any culpable or negligent failure to collect the assets
● This argument is without merit. It is true that foreclosure falls within the broad
of such bank and to safeguard its assets.
definition of “doing business.”4 It should not be considered included, however, in the
acts prohibited whenever banks are "prohibited from doing business" during
receivership and liquidation proceedings. This we made clear in Banco Filipino
Was the demand letter sent by respondent bank's representative on August 23, 1985
Savings & Mortgage Bank vs. Monetary Board, Central Bank of the Philippines where
sufficient to interrupt the running of the prescriptive period?— NO. n this case, it is clear that
we explained that:
the advanced payment of the insurance premiums is not part of the mortgage contract and
○ Section 29 of the Republic Act No. 265, as amended known as the Central
the promissory note signed by the Sps.
Bank Act, provides that when a bank is forbidden to do business in the
Philippines and placed under receivership, the person designated as
Facts: receiver shall immediately take charge of the bank's assets and liabilities,
● 1980 March 3- Sps. Larrobis obtained a loan from Philippine Veterans Bank for 135K, as expeditiously as possible, collect and gather all the assets and
evidenced by a promissory note, due on 1981 Feb 27 and secured by a real estate administer the same for the benefit of its creditors, and represent the bank
mortgage on a lot and the improvements thereon. personally or through counsel as he may retain in all actions or
● 1985 March 23- Bank went bankrupt and was placed under receivership/liquidation proceedings for or against the institution, exercising all the powers
by the Central Bank from 1985 April 25 to 1992 August. necessary for these purposes including, but not limited to, bringing and
● 1985 Aug. 23- Bank, thru Francisco Go, sent the Sps a demand letter for accounts foreclosing mortgages in the name of the bank.
receivable which pertained to the insurance premiums advanced by the bank over ● This is consistent with the purpose of receivership proceedings, i.e., to receive
the mortgaged property. collectibles and preserve the assets of the bank in substitution of its former
● 1995 Aug. 23- more than 14 years from the time the loan became due, bank filed a management, and prevent the dissipation of its assets to the detriment of the
petition for extrajudicial foreclosure of the mortgage. The property was sold in public creditors of the bank.
auction with the bank as the lone bidder.

4 normally incident to and in progressive prosecution of the purpose and object of

a continuity of commercial dealings and arrangements and contemplates to that
extent, the performance of acts or words or the exercise of some of the functions its organization.
Page 8 of 33
 ● When a bank is declared insolvent and placed under receivership, the Central Bank, constitutes a valid extrajudicial demand which interrupted the running of the
through the Monetary Board, determines whether to proceed with the liquidation or prescriptive period.
reorganization of the financially distressed bank. A receiver, who concurrently ● This argument is wrong. Considering that the mortgage contract and the promissory
represents the bank, then takes control and possession of its assets for the benefit of note refer only to the loan of petitioners in the amount of P135,000.00, we have no
the bank's creditors. A liquidator meanwhile assumes the role of the receiver upon reason to hold that the insurance premiums, in the amount of P6,345.00, which was
the determination by the Monetary Board that the bank can no longer resume the subject of the August 1985 demand letter, should be considered as pertaining to
business. His task is to dispose of all the assets of the bank and effect partial payments the entire obligation of the Sps. In this case, it is clear that the advanced payment of
of the bank's obligations in accordance with legal priority. In both receivership and the insurance premiums is not part of the mortgage contract and the promissory note
liquidation proceedings, the bank retains its juridical personality notwithstanding the signed by the Sps.
closure of its business and may even be sued as its corporate existence is assumed by
the receiver or liquidator. The receiver or liquidator meanwhile acts not only for the Dispositive: WHEREFORE, the decision of the Regional Trial Court, Cebu City, Branch 24, dated
benefit of the bank, but for its creditors as well. April 17, 1998, and the order denying petitioners' motion for reconsideration dated August 25,
● It is true that in Provident Savings Bank vs. Court of Appeals cited by the respondent 1998 are hereby REVERSED and SET ASIDE. The extra-judicial foreclosure of the real estate
bank, the SC declared that the period during which the bank was placed under mortgage on October 18, 1995, is hereby declared null and void and respondent is ordered to
receivership was deemed a force majeure which validly interrupted the prescriptive return to petitioners their owner's duplicate certificate of title.
period.
● Such ruling, however, does not apply here because the facts are different. In Provident
Savings Bank, circumstances of Provident Savings Bank were peculiar because after
the Monetary Board issued MB Resolution No. 1766 prohibiting it from doing
business in the Philippines, the bank's majority stockholders immediately went to the
CFI, which prompted the trial court to issue its judgment declaring null and void the
resolution and ordering the Central Bank to desist from liquidating Provident. The
decision was appealed to and affirmed by this Court in 1981. Thus, the
Superintendent of Banks, which was instructed to take charge of the assets of the
bank in the name of the Monetary Board, had no power to act as a receiver of the bank
and carry out the obligations specified in Sec. 29 of the Central Bank Act.
● Unlike in Provident Savings Bank, there was no legal prohibition imposed upon herein
respondent bank to deter its receiver and liquidator from performing their
obligations under the law. Thus, the ruling laid down in the Provident case cannot
apply in the case at bar.
● There is also no truth to the bank’s claim that it could not continue doing business
while it was under receivership. As pointed out by the Sps, the bank was even able to
send a demand letter to the Sps for the insurance premiums advanced by the bank.
How it could send a demand letter on unpaid insurance premiums and not foreclose
the mortgage during the time it was "prohibited from doing business" was not
adequately explained by the bank.
● Settled is the principle that a bank is bound by the acts, or failure to act of its receiver.
However, the bank may go after the receiver who is liable to it for any culpable or
negligent failure to collect the assets of such bank and to safeguard its assets.

On whether the demand letter sent by respondent bank's representative on August 23, 1985
sufficient to interrupt the running of the prescriptive period— NO
● Prescription of actions is interrupted when they are filed before the court, when there
is a written extra-judicial demand by the creditors, and when there is any written
acknowledgment of the debt by the debtor.
● The bank claims that while the demand letter pertained to the insurance premium,
the same formed part of the total loan obligation of the Sps to the bank and, therefore,
Page 9 of 33
 Fidelity Savings Bank vs. Cenzon, 5 April 1990 who deposit money in banks are aware of such a simple economic proposition.
G.R. No. | Date | Ponente | Topic/Keywords Consequently, it should be deemed read into every contract of deposit with a bank
Digest by: NAME OF DIGESTER that the obligation to pay interest on the deposit ceases the moment the operation of
the bank is completely suspended by the duly constituted authority, the Central
Petitioners: FIDELITY SAVINGS AND MORTGAGE BANK, Bank."
Respondents: HON. PEDRO D. CENZON, in his capacity as Presiding Judge of the Court of ● This was reiterated in the subsequent case of The Overseas Bank of Manila v. The Hon.
First Instance of Manila (Branch XL) and SPOUSES TIMOTEO AND OLIMPIA SANTIAGO Court of Appeals and Julian R. Cordero, 5 and in the recent cases of Integrated Realty
Corporation, Et. Al. v. Philippine National Bank, Et. Al. and the Overseas Bank of
Manila v. Court of Appeals, Et. Al
Recit-ready Digest + Doctrine: ● Petitioner cannot be held liable for interest on bank deposits which accrued from the
Respondent spouses are depositors of petitioner bank. While the deposits were outstanding, time it was prohibited by the Central Bank to continue with its banking operations.
the bank was declared to be in a state of insolvency by the Monetary Board. Thus, the Acting ● There is also no valid basis for the award of exemplary damages which is supposed to
Superintendent of Banks took charge of their assets. serve as a warning to other banks from dissipating their assets in anomalous
transactions. It was not proven by private respondents, and neither was there a
The liquidation court ordered the bank to pay deposits to respondent spouses, with accrued categorical finding made by the trial court, that petitioner bank actually engaged in
interest. The bank questioned the award of interest. anomalous real estate transactions.
● It is also not violative of the Civil Code provision on preference and concurrence of
The Court held that an insolvent bank may not be adjudged to pay interest on unpaid
credits. As the trial court puts it: ". . . But this order of payment should not be
depositions even after closure was ordered by the Central Bank. A banking institution which understood as raising these deposits to the category of preferred credits of the
has been declared insolvent and subsequently ordered closed by the Central Bank of the
defendant Fidelity Savings and Mortgage Bank but shall be paid in accordance with
Philippines cannot be held liable to pay interest on bank deposits which accrued during the the Bank Liquidation Rules and Regulations embodied in the Order of the Court of
period when the bank is actually closed and non-operational.
First Instance of Manila, Branch XIII dated October 3, 1972 (Exh. 3) . . ."

Facts: Dispositive:
● Through a stipulation of facts, the Court rendered a decision based on the following: WHEREFORE, the judgment appealed from is hereby MODIFIED. Petitioner Fidelity Savings and
○ Respondent Spouses Santiago are depositors of Fidelity Savings and Mortgage Bank is hereby declared liable to pay private respondents Timoteo and Olimpia
Mortgage Bank with an aggregate amount of deposits worth Php100,000. Santiago the sum of P90,000.00, with accrued interest in accordance with the terms of Savings
○ While these deposits were still outstanding, the Monetary Board declared Account Deposit No. 16-0536 (Exhibit A) and Certificate of Time Deposit No. 0210 (Exhibit B)
that the bank was in a state of insolvency, instructed the Acting until February 18, 1969. The awards for moral and exemplary damages, and attorney’s fees are
Superintendent of Banks to take charge of their assets. hereby DELETED. No costs.
● Eventually, the Monetary Board directed the liquidation of the assets. The liquidation
court ordered the bank to pay the outstanding deposits due to Spouses Santiago,
together with accrued interest.
● The bank brought this petition challenging the award of interest on unpaid deposits
while it was under liquidation.

Issue/s:
● Whether or not an insolvent bank may be adjudged to pay interest on unpaid deposits
even after its closure by the Central Bank by reason of insolvency – NO

Ratio:
● A banking institution which has been declared insolvent and subsequently ordered
closed by the Central Bank of the Philippines cannot be held liable to pay interest on
bank deposits which accrued during the period when the bank is actually closed and
non-operational.
● In The Overseas Bank of Manila vs. Court of Appeals and Tony D. Tapia, the Court held
that: "It is a matter of common knowledge, which We take Judicial notice of, that what
enables a bank to pay stipulated interest on money deposited with it is that thru the
other aspects of its operation it is able to generate funds to cover the payment of such
interest. Unless a bank can lend money, engage in international transactions, acquire
foreclosed mortgaged properties or their proceeds and generally engage in other
banking and financing activities from which it can derive income, it is inconceivable
how it can carry on as a depository obligated to pay stipulated interest. Conventional
wisdom dictates this inexorable fair and just conclusion. And it can be said that all
Page 10 of 33
 Philippine National Bank vs. Vila, Vila filed before the RTC of Pangasinan an action to nullify the redemption with prayer for
799 SCRA 90, G.R. No. 213241 August 1, 2016 damages. A notice of lis pendens was issued.
Digest by: NAME OF DIGESTER ● 
The RTC ruled in favor of Vila which was affirmed by the CA and eventually became
final and executory.
Petitioners: Philippine National Bank (PNB)
● Upon the issuance of a writ of execution, the sheriff returned the writ unsatisfied at
Respondents: Juan F. Vila
iwas found that the property is no longer under the name of the spouses.
Again, in
the interim, it was found that the spouses had secured a loan from PNB and
Recit-ready Digest + Doctrine:
mortgaged the same property in favor of PNB. They again defaulted thus PNB
Vila filed before the RTC of Pangasinan a petition to nullify the redemption of a lot they
foreclosed and was the highest bidder. PNB consolidated ownership of the subject
purchased in foreclosure sale. The court ruled in Vila’s favor, affirmed by the CA and became
property in its name.
final and executory. A notice of lis pendens was issued. The court issued a writ of execution
but this was returned by the sheriff unsatisfied as it was found that the property was no
longer in the name of the spouses. Apparently, in the interim, the spouses Cornista (owners Vila filed before the RTC a petition for the nullification of the TCT issued in favor of PNB.
who mortgaged the same to Traders and defaulted) secured a loan from PNB and mortgaged
the same property. It was again foreclosed and PNB was the highest bidder and was able to PNB argued:
consolidate ownership. 1. That it was a mortgagee in good faith pointing the fact 
that at the time the subject
property was mortgaged to it, the same was still free from any liens and
Vila filed a petition before the RTC to nullify the TCT of PNB.PNB argues it was a mortgagee encumbrances and the Notice of Lis Pendens was registered only a month after the
in good faith because at the time of the mortgage the title was free from any lien, the notice REM was annotated on the title; 

of lis pendens was registered a month after 2. That at the time of the transaction, the Spouses Cornista were still the absolute
owners of the property 
possessing all the rights to mortgage the same to third
Issue: whether PNB is a mortgagee in good faith
persons; and

3. That a close examination of title was conducted and nowhere was it shown that there
No. The highest degree of diligence is expected, and high standards of integrity and
was any cloud in the title of the Spouses Cornista, the latter having redeemed the
performance are even required of banks. Whether as mere passive entities for the
property after they have lost it in a foreclosure sale.
safekeeping and saving of money or as active instruments of business and commerce, banks
have become an ubiquitous presence among the people, who have come to regard them with
respect and even gratitude and, most of all, confidence. Here, PNB accepted outright the The RTC ruled in favor of Vila on the ground that PNB is not a mortgagee in good faith being a
collateral offered by the Spouses Cornista without making further inquiry as to the real status financial institution expected to observe a higher degree of diligence, which it did not do as it
of the subject property. Had the bank been prudent and diligent enough in ascertaining the hastily granted the loan. The CA affirmed.
condition of the property, it could have discovered that the same was in the possession of
Vila who, at that time, possessed a colorable title thereon being a holder of a Final Certificate Issue/s: Whether PNB is a mortgagee in good faith. NO — because PNB was negligent in not
of Sale. What further tramples upon PNB's claim is the fact that, as shown on the records, it further investigating the subject property of the mortgage before its approval. Had it done so, it
was Vila who was religiously paying the real property tax due on the property from 1989 to would have easily discovered that it was Vila who was paying real property taxes instead of Sps.
1996, another significant fact that could have raised a red flag as to the real ownership of the Cornista.
property
Ratio:
PNB not a mortgagee in good faith; should have exercised a higher degree of diligence
Facts: Sps. Reynaldo and Erlinda Cornista obtained a loan from Traders Royal Bank and
required of banks
executed a real estate mortgage over a parcel of land with 451sqm in Pangasinan in favor of
*The issue on mortgagee in good faith cannot be entertained in a Rule 45 petition as it deals with
Traders
factual matters which lay outside the scope of a petition for review on certiorari. No exception
● The spouses defaulted so Traders foreclosed on the mortgage and it was Juan F. Vila
applies here as the RTC and CA agreed on their findings.
who was declared the highest bidder on public sale after he offered to buy the subject
property for PHP50,000.00.
Before approving a loan application, it is standard operating procedure for banks and financial
● The certificate of sale was recorded in the TCT of the subject property and eventually
institutions to conduct an ocular inspection of the property offered for mortgage and to
a certificate of final sale was issued to Vila after the 1-year redemption period had
determine the real owner(s) thereof.
lapsed without the spouses exercising their statutory right to redeem the subject
● The apparent purpose of an ocular inspection is to protect the "true owner" of the
property.
property as well as innocent third parties with a right, interest or claim thereon from
● However, Vila was prevented from consolidating ownership
under his name because a usurper who may have acquired a fraudulent certificate of title thereto.
the owner’s copy was not turned over
to him by the sheriff.
● In the meantime, and despite the lapse of the redemption period, the spouses were
When the purchaser or the mortgagee is a bank, the rule on innocent purchasers or mortgagees
nonetheless allowed by the sheriff to redeem the property upon tendering the
for value is applied more strictly.
amount of PHP50,000.00. A certificate of redemption was issued and annotated on
the TCT.

Page 11 of 33
 ● Being in the business of extending loans secured by real estate mortgage, banks are
presumed to be familiar with the rules on land registration. Dispositive:
● Since the banking business is impressed with public interest, they are expected to be
more cautious, to exercise a higher degree of diligence, care and prudence, than WHEREFORE, petition DENIED.
private individuals in their dealings, even those involving registered lands.
● Banks may not simply rely on the face of the certificate of title. Hence, they cannot
assume that, the title offered as security is on its face free of any encumbrances or
lien, they are relieved of the responsibility of taking further steps to verify the title
and inspect the properties to be mortgaged.
● As expected, the ascertainment of the status or condition of a property offered to it as
security for a loan must be a standard and indispensable part of the bank's operations.

Whether as mere passive entities for the safekeeping and saving of money or as active
instruments of business and commerce, banks have become an ubiquitous presence among the
people, who have come to regard them with respect and even gratitude and, most of all,
confidence. Consequently, the highest degree of diligence is expected, and high standards of
integrity and performance are even required, of it.

PNB fell short in exercising the diligence expected from bank and financial institutions:

1) PNB accepted outright the collateral offered by the Spouses Cornista without making
further inquiry as to the real status of the subject property.
● Had the bank been prudent and diligent enough in ascertaining the condition of
the property, it could have discovered that the same was in the possession of
Vila who, at that time, possessed a colorable title thereon being a holder of a
Final Certificate of Sale. 

● We agree with both the RTC and CA that if in fact it were true that ocular
inspection was conducted, a suspicion could have been raised as to the real
status of the property. 

2) What further tramples upon PNB's claim is the fact that, as shown on the records, it was
Vila who was religiously paying the real property tax due on the property from 1989 to
1996, another significant fact that could have raised a red flag as to 
he real ownership
of the property.

3) The Spouses Cornista's reacquisition of the property after the lapse of the redemption
period is fraudulent and the property used by the mortgagors as collateral rightfully
belongs to Vila, an innocent third party with a right, could have been protected if PNB
only observed the degree diligence expected from it.

Awarded moral and exemplary damages, attorney’s fees, and cost of litigation Having laid
down that the PNB is not in good faith, We are led to affirm the award of moral damages,
exemplary damages, attorney's fees and costs of litigation in favor of Vila.

a. Willful injury to property may be a legal ground for awarding moral damages if the court
should find that, under the circumstances, such damages are justly due.

b. As for the award of exemplary damages, we deem that the same is proper for the PNB was
remiss in its obligation to inquire the real status of the subject property, causing damage to Vila.

c. The award of attorney's fees and litigation expenses is valid since Vila was compelled to litigate
and thus incur expenses in order to protect its rights over the subject property.

Page 12 of 33
 Soriano vs. People, 611 SCRA 191, G.R. No. 162336 February 1, 2010 ○ That the P8 million loan had never been authorized by RBSM’s Board of
G.R. No. | Date | Del Castillo, J. | DOSRI Rules Directors and no report thereof had ever been submitted to the
Digest by: JB Department of Rural Banks, Supervision and Examination Sector of the
BSP.
Petitioners: HILARIO P. SORIANO ● Two separate informations were filed against the petitioner.
Respondents: PEOPLE OF THE PHILIPPINES, BANGKO SENTRAL NG PILIPINAS (BSP), ○ Petitioner moved to quash these informations.
PHILIPPINE DEPOSIT INSURANCE CORPORATION (PDIC), PUBLIC PROSECUTOR ANTONIO ● Petitioner theorized that the characterization of possession is different in the two
C.BUAN, and STATE PROSECUTOR ALBERTO R. FONACIER offenses.
○ If the petitioner acquired the loan as DOSRI (directors, officers,
Recit-ready Digest + Doctrine: stockholders and related interests), he owned the loaned money and
therefore, cannot misappropriate or convert it as contemplated in the
The BSP transmitted a letter to the DOJ, attached with five affidavits, which would allegedly offense of estafa.
serve as bases for filing criminal charges for Estafa thru Falsification of Commercial ○ Conversely, if the petitioner committed estafa, then he merely held the
Documents, in relation to PD No. 1689, and for Violation of Section 83 of RA 337, as amended money in trust for someone else and therefore, did not acquire a loan in
by PD 1795, against petitioner Hilario P. Soriano. violation of DOSRI rules.
● RTC: Denied petitioner’s Motion to Quash for lack of merit.
These five affidavits, along with other documents, stated the following: ○ MR was denied as well.
● Petitioner filed a Petition for Certiorari before the CA which was also denied.
● That spouses Enrico and Amalia Carlos appeared to have an outstanding loan of
P8 million with the Rural Bank of San Miguel, Inc. (RBSM), but had never applied Issue/s:
for nor received such a loan.
● That it was petitioner, who was then the president of RBSM who had ordered, W/N a loan transaction within the ambit of the DOSRI law (violation of Section 83 of RA 337, as
facilitated, and received the proceeds of the loan; and amended) could also be the subject of Estafa under Article 315 (1) (b) of the Revised Penal Code.
● That the P8 million loan had never been authorized by RBSM’s Board of Directors – YES.
and no report thereof had ever been submitted to the Department of Rural Banks,
Supervision and Examination Sector of the BSP. Ratio:

A bank officer violates the DOSRI law when he acquires bank funds for his personal benefit, ● After examining the informations filed against the petitioner, the SC finds that these
even if such acquisition was facilitated by a fraudulent loan application. contain allegations which, if hypothetically admitted, would establish the essential
elements of the crime of DOSRI violation and estafa thru falsification of commercial
Directors, officers, stockholders, and their related interests cannot be allowed to interpose documents.
the fraudulent nature of the loan as a defense to escape culpability for their circumvention of ● In Criminal Case No. 238-M-2001 for violation of DOSRI rules, the information alleged
Section 83 of Republic Act (RA) No. 337 that:
○ Petitioner Soriano was the president of RBSM;
○ He was able to indirectly obtain a loan from RBSM by putting the loan in
An indirect borrowing includes one that is made by a third party, but the DOSRI has a stake
the name of depositor Enrico Carlos;
in the transaction. This type of borrowing applies in this case.
○ He did this without complying with the requisite board approval,
reportorial, and ceiling requirements.
● In Criminal Case No. 237-M-2001 for estafa thru falsification of commercial
Facts: documents, the information alleged that:
○ Petitioner, by taking advantage of his position as president of RBSM,
falsified various loan documents to make it appear that an Enrico Carlos
● The Office of Special Investigation (OSI) of the BSP transmitted a letter to the DOJ, secured a loan of P8 million from RBSM;
attached with five affidavits, which would allegedly serve as bases for filing criminal ○ Petitioner succeeded in obtaining the loan proceeds;
charges for Estafa thru Falsification of Commercial Documents, in relation to PD No. ○ He later converted the loan proceeds to his own personal gain and benefit;
1689, and for Violation of Section 83 of RA 337, as amended by PD 1795, against ○ His action caused damage and prejudice to RBSM, its creditors, the BSP,
petitioner Hilario P. Soriano. and the PDIC.
● These five affidavits, along with other documents, stated the following: ● Petitioner’s theory is based on the false premises that the loan was extended to him
○ That spouses Enrico and Amalia Carlos appeared to have an outstanding by the bank in his own name, and that he became the owner of the loan proceeds.
loan of P8 million with the Rural Bank of San Miguel, Inc. (RBSM), but had ● Under the circumstances, it cannot be said that petitioner became the legal owner of
never applied for nor received such a loan. the P8 million.
○ That it was petitioner, who was then the president of RBSM who had ○ Thus, petitioner remained the banks fiduciary with respect to that money,
ordered, facilitated, and received the proceeds of the loan; and which makes it capable of misappropriation or conversion in his hands.

Page 13 of 33
 ● The prohibition in Section 83 of Republic Act (RA) No. 337 is broad enough to cover
various modes of borrowing.
○ It covers loans by a bank director or officer (like herein petitioner) which
are made either:
■ (1) directly,
■ (2) indirectly,
■ (3) for himself,
■ (4) or as the representative or agent of others.
● It applies even if the director or officer is a mere guarantor, indorser or surety for
someone else’s loan or is in any manner an obligor for money borrowed from the bank
or loaned by it.
● The covered transactions are prohibited unless the approval, reportorial and
ceiling requirements under Section 83 are complied with.
○ The prohibition is intended to protect the public, especially the
depositors, from the overborrowing of bank funds by bank officers,
directors, stockholders and related interests, as such overborrowing
may lead to bank failures.
● It has been said that banking institutions are not created for the benefit of the
directors [or officers].
○ While directors have great powers as directors, they have no special
privileges as individuals.
○ They cannot use the assets of the bank for their own benefit except as
permitted by law.
● Stringent restrictions are placed about them so that when acting both for the bank
and for one of themselves at the same time, they must keep within certain prescribed
lines regarded by the legislature as essential to safety in the banking business.
● A direct borrowing is one that is made in the name of the DOSRI himself or where the
DOSRI is a named party
● An indirect borrowing includes one that is made by a third party, but the DOSRI has a
stake in the transaction.
○ Indirect borrowing applies here.

Dispositive:
WHEREFORE, the petition is DENIED. The assailed September 26, 2003 Decision as well as the
February 5, 2004 Resolution of the Court of Appeals in CA-G.R. SP No. 67657 are AFFIRMED.
Costs against petitioner.

Page 14 of 33
 Philippine National Bank vs. Cheah Chee Chong (Filipina), approached her to ask if she could have Filipina’s check5 cleared and
G.R. Nos. 170865, 170892 | April 25, 2012 | Del Castillo, J. | Banking encashed for a service fee of 2.5%.
Digest by: Capacite ○ Because Adelina did not have a dollar account in which to deposit the
check, she asked Ofelia if she could accommodate Filipina’s request since
Petitioners: Philippine National Bank she has a joint dollar savings account with her Malaysian husband Cheah
Respondents: Spouses Cheah Chee Chong and Ofelia Camacho Cheah Chee Chong with PNB Buendia Branch.
○ Ofelia agreed.
Petitioners: Spouses Cheah Chee Chong and Ofelia Camacho Cheah ● Same day: Ofelia and Adelina went to PNB Buendia.
Respondents: Philippine National Bank ○ PNB Division Chief Alberto Garin (Garin) discussed with them the process
of clearing the subject check and they were told that it normally takes
Recit-ready Digest + Doctrine: 15 days.
Nov 4: Filipina asked Adelina to have her Bank of America check cleared. Adelina asked Ofelia ○ Assured that the deposit and clearance of the check is a normal transaction,
to accommodate since Adelina did not have a dollar account and that Ofelia’s husband had a Ofelia deposited Filipina’s check.
joint dollar savings account with PNB Buendia. Ofelia agreed so they went to PNB Buendia ○ PNB then sent it for clearing through its correspondent bank, Philadelphia
and deposited Filipina’s check, having been informed that the process of clearing the check National Bank.
normally takes 15 days. Nov 17: PNB credited $300k to the account of Sps Cheah where ● 9 Nov 1992: PNB received a credit advice from Philadelphia National Bank that the
Ofelia was able to withdraw $180k. Nov 18: Adelina what was left. Filipina received the proceeds of the subject check had been temporarily credited to PNB’s account.
proceeds.
● 16 Nov 1992: Garin called up Ofelia to inform her that the check had already been
cleared.
Nov 16: PNB Head Office received a SWIFT message from Philadelphia National Bank ● 17 Nov 1992: PNB Buendia Branch, after deducting the bank charges, credited
(correspondent bank) that the check was returned for insufficient funds. PNB demanded from $299,248.37 to the account of the spouses Cheah.
Ofelia who, in turn, demanded from Filipina. PNB filed for sum of money against Sps Cheah.
○ Acting on Adelina’s instruction to withdraw the credited amount, Ofelia
Sps Cheah: the proximate cause of PNB’s injury was its own negligence of paying a US dollar that day personally withdrew $180,000.00.
denominated check without waiting for the 15-day clearing period, in violation of its own
○ 18 Nov 1992: Adelina was able to withdraw the remaining amount after
PNB General Circular No. 52-101/88. RTC: in favor of PNB. CA: both were equally negligent. having been authorized by Ofelia.
○ Filipina received all the proceeds.
W/N both PNB and Sps Cheah are negligent - YES. PNB’s act of releasing the proceeds of the
● 16 Nov 1992: PNB Head Office received a SWIFT message from Philadelphia National
check prior to the lapse of the 15-day clearing period was the proximate cause of the loss. Bank dated 13 Nov 1992 informing PNB of the return of the subject check for
The 15-day clearing period alluded to is construed as 15 banking days. Ofelia deposited the
insufficient funds.
subject check on November 4, 1992. Hence, the 15th banking day from the date of said ○ It was ascertained only after a few days that the message was intended for
deposit should fall on November 25, 1992. However, what happened was that PNB
the Buendia Branch.
Buendia Branch, upon calling up Ofelia that the check had been cleared, allowed the proceeds
● 20 Nov 1992: PNB Buendia Branch learned about the bounced check when it
to be withdrawn on Nov 17 and 18, 1992, a week before the lapse of the standard 15-
received a debit advice, followed by a letter on 24 Nov 1992, from Philadelphia
day clearing period. The payment of the amounts of checks without previously clearing
National Bank to which the SWIFT message was attached.
them with the drawee bank especially so where the drawee bank is a foreign bank and the
○ Upon demand by PNB Buendia Branch to return the money withdrawn,
amounts involved were large is contrary to normal or ordinary banking practice. Had PNB
Ofelia contacted Filipina to get the money back.
Buendia Branch waited for the expiration of the clearing period and had never released
○ Filipina told her that all the money had already been given to several
during that time the proceeds of the check, it would have already been duly notified of its
people who asked for the check’s encashment.
dishonor. The highest degree of diligence is expected. A bank is expected to be an expert in
○ The National Bureau of Investigation was able to apprehend some of the
banking procedures and it has the necessary means to ascertain whether a check, local or
beneficiaries of the proceeds of the check and recover from them
foreign, is sufficiently funded.
$20,000.00.
○ Criminal charges were then filed against these suspect beneficiaries.
Considering that Filipina was not personally known to her and the amount of the foreign
● Chee Chong in the end signed a PNB drafted letter which states that the spouses Cheah
check to be encashed was $300,000.00, a higher degree of care is expected of Ofelia which
are offering their condominium units as collaterals for the amount withdrawn.
she, however, failed to exercise under the circumstances.
○ Under this setup, the amount withdrawn would be treated as a loan
account with deferred interest while the spouses try to recover the money
Facts: from those who defrauded them.
● 4 Nov 1992: Ofelia Cheah (Ofelia) and her friend Adelina Guarin (Adelina) were ○ Chee Chong signed after the Vice President and Manager of PNB Buendia
having a conversation in the latter’s office when Adelina’s friend, Filipina Tuazon Branch, Erwin Asperilla (Asperilla), asked the spouses Cheah to help him

5
Bank of America Check No. 1906 under the account of Alejandria Pineda and Eduardo
Rosales and drawn by Atty. Eduardo Rosales against Bank of America Alhambra Branch in
California, USA, with a face amount of $300,000.00, payable to cash
Page 15 of 33
 and the other bank officers as they were in danger of losing their jobs ○ Clearly, PNB’s disregard of its preventive and protective measure against
because of the incident. the possibility of being victimized by bad checks had brought upon itself
○ Asperilla likewise assured that the letter was a mere formality and that the the injury of losing a significant amount of money.
mortgage will be disregarded once PNB receives its claim for indemnity ● The diligence required of banks is more than that of a Roman pater familias or a good
from Philadelphia National Bank. father of a family.
● PNB sent a demand letter to spouses Cheah for the return of the amount of the check, ○ The highest degree of diligence is expected.
froze their peso and dollar deposits, and filed a complaint against them for Sum of ○ PNB miserably failed to do its duty of exercising extraordinary diligence
Money. and reasonable business prudence.
○ Sps Cheah claimed that the proximate cause of PNB’s injury was its own ○ The disregard of its own banking policy amounts to gross negligence.
negligence of paying a US dollar denominated check without waiting for ○ A bank is expected to be an expert in banking procedures and it has the
the 15-day clearing period, in violation of its bank practice as mandated by necessary means to ascertain whether a check, local or foreign, is
its own bank circular:PNB General Circular No. 52-101/88. sufficiently funded.
● RTC: in PNB’s favor ● Contributory negligence is conduct on the part of the injured party, contributing as a
○ While the court found that the proximate cause of the wrongful payment legal cause to the harm he has suffered, which falls below the standard to which he is
of the check was PNB’s negligence in not observing the 15-day guarantee required to conform for his own protection.
period rule, it ruled that spouses Cheah still cannot escape liability to ○ Ofelia failed to observe caution in giving her full trust in accommodating a
reimburse PNB the value of the check as an accommodation party pursuant complete stranger and this led her and her husband to be swindled.
to Section 29 of the Negotiable Instruments Law. ○ Considering that Filipina was not personally known to her and the amount
● CA: reversed and found both equally negligent of the foreign check to be encashed was $300,000.00, a higher degree of
care is expected of Ofelia which she, however, failed to exercise under the
Issue: W/N both PNB and Sps Cheah are negligent - YES circumstances.
○ The fact that the check was cleared after only eight banking days from the
Ratio: time it was deposited or contrary to what Garin told her that clearing takes
● Proximate cause is ‘that cause, which, in natural and continuous sequence, unbroken 15 days should have already put Ofelia on guard.
by any efficient intervening cause, produces the injury and without which the result ○ Ofelia’s prior consultation with PNB officers is not enough to totally
would not have occurred. absolve her of any liability.
○ PNB’s act of releasing the proceeds of the check prior to the lapse of the ○ In the first place, she should have shunned any participation in that
15-day clearing period was the proximate cause of the loss. palpably shady transaction.
● The 15-day clearing period alluded to is construed as 15 banking days.
○ As declared by Josephine Estella, the Administrative Service Officer who Dispositive: WHEREFORE, premises considered, the Petitions for Review on Certiorari in G.R.
was the bank’s Remittance Examiner, what was unusual in the processing No. 170865 and in G.R. No. 170892 are both DENIED. The assailed August 22, 2005 Decision and
of the check was that the "lapse of 15 banking days was not observed." December 21, 2005 Resolution of the Court of Appeals in CA-G.R. CV No. 63948 are hereby
○ Even PNB’s agreement with Philadelphia National Bank regarding the AFFIRMED in toto.
rules on the collection of the proceeds of US dollar checks refers to
"business/ banking days."
● Here, 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 Branch, upon calling up
Ofelia that the check had been cleared, allowed the proceeds to be
withdrawn on Nov 17 and 18, 1992, a week before the lapse of the
standard 15-day clearing period.
● 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.
○ Before the check shall have been cleared for deposit, the collecting bank
can only ‘assume’ at its own risk that the check would be cleared and paid
out.
● Here, the delay in the receipt by PNB Buendia Branch of the November 13, 1992
SWIFT message notifying it of the dishonor of the subject check is of no moment,
because had PNB Buendia Branch 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.

Page 16 of 33
 Carbonell vs. Metropolitan Bank and Trust Company ● The Sps. then claimed they had bought jewelry from a shop owner by using 4 of the
G.R. No. 178467. | April 26, 2017 | Bersamin | Banking remaining USD100 bills as payment; The next day, they were confronted by the shop
Digest by: V. Chang owner at the hotel lobby because their 4 USD 100 bills had turned out to be
counterfeit; that the shop owner had shouted at them: "You Filipinos, you are all
Petitioners: Sps. Cristino & Edna Carbonell cheaters!" and that the incident had occurred within the hearing distance of fellow
Respondents: Metropolitan Bank And Trust Company travelers and several foreigners.
● Upon their return to the Philippines, the Sps. confronted the manager of MBTC's
Recit-ready Digest + Doctrine: Pateros branch on the fake dollar bills, but the latter had insisted that the bills she
Sps. Carbonell withdrew ten 100USD bills from their dollar account at MBTC’s Pateros gave them were genuine as the bills had come from the head office.
Branch for their trip to Bangkok. Once there, they discovered that 5 of the bills were fake. 1 ● In order to put the issue to rest, the counsel of the Sps. submitted the subject USD 100
bil was found to be fake when presented to a bank to be exchanged for Thai Baht. The other bills to the Bangko Sentral ng Pilipinas for examination and the BSP certified that the
4 bills when they bought jewelry. The jewelry store owner even shouted at the saying “You 4 USD100 bills were near perfect genuine notes.
Filipinos, you are all cheaters”. When the Sps. arrived back to the PH, they confronted the bank ● The Sps’s counsel had explained by letter their bad experience due to MBTCs release
manager who told them that the bills came from their head office. The counsel for the Sps. of the fake US dollar bills to them, and demanded moral damages of ₱10 Million and
took the bills to the BSP. BSP certified that the bills were “near perfect genuine notes,” i.e., exemplary damages.
really good fakes. Sps. demanded moral damages amounting to P10M and exemplary
● Sps. then sent a written notice to MBTC, attaching the BSP certification and informing
damages. They claimed that the bank acted in bad faith. The Bank offered to reimburse them
the latter that they were giving it 5 days within which to comply with their demand,
the 500USD and offered them an all-expense-paid trip to HK as recompense. RTC and CA
or face court action.
ruled for MBTC.
● In response, MBTC's counsel wrote to the Sps. expressing sympathy with them on
their experience but stressing that MBTC could not absolutely guarantee the
Issue: W/N MBTC was grossly negligent? No.
genuineness of each and every foreign currency note that passed through its system;
that it had also been a victim like them; and that it had exercised the diligence
The General Banking Act of 2000 demands of banks the highest standards of integrity and
required in dealing with foreign currency notes and in the selection and supervision
performance. As such, the banks are under obligation to treat the accounts of their depositors
of its employees.
with meticulous care. However, the banks' compliance with this degree of diligence is to be
● Prior to the filing of the suit, the Sps. had 2 meetings with the MBTC's representatives.
determined in accordance with the particular circumstances of each case. Gross negligence
In the meetings, MBTC's representatives reiterated their sympathy over the
connotes want of care in the performance of one's duties. In order for gross negligence to
experience that the Sps. had encountered, and offered to reinstate USD500 to their
exist, the Sps. must establish that MBTC did not exert any effort at all to avoid unpleasant
account, and to underwrite a round-trip all-expense-paid trip to Hong Kong, but Sps.
consequences, or that it wilfully and intentionally disregarded the proper protocols or
staged a walk-out.
procedure in the handling of US dollar notes and in selecting and supervising its
employees.The CA and the RTC both found that MBTC had exercised the diligence required
RTC: ruled in favor of MBTC. CA: affirmed RTC.
by law in observing the standard operating procedure. The BSP even certified that the falsity
of the US dollar notes in question, which were "near perfect genuine notes," could be
Sps. Carbonell’s argument: as the business of banking is imbued with public interest, MBTC's
detected only with extreme difficulty even with the exercise of due diligence.
failure to exercise the degree of diligence required in handling the affairs of its clients showed
that it was liable not just for simple negligence but for misrepresentation and bad faith
Being neither guilty of negligence nor remiss in its exercise of the degree of diligence
amounting to fraud; that the CA erred in giving weight and relying on the news clippings
required by law or the nature of its obligation as a banking institution, MBTC was not liable
allegedly showing that the "supernotes" had deceived even the U.S. Secret Service and Central
for damages. Since this is a case of damnum absque injuria, they could not be compensated
Intelligence Agency, for such news were not based on facts.
for the damage sustained.
Issue/s:
Facts: ● W/N MBTC was grossly negligent in this case? No.
● The petitioner Sps. initiated against the respondent an action for damages, alleging that they ● W/N Sps. Carbonell are entitled to moral and exemplary damages? No.
had experienced emotional shock, mental anguish, public ridicule, humiliation, insults and
embarrassment during their trip to Thailand because of the respondent's release to them of Ratio:
five USD 100 bills that later on turned out to be counterfeit. 1. MBTC was not grossly negligent nor was it in bad faith.
● Sps. claimed that they went to Bangkok after withdrawing USD 1,000 in USD 100 bills from
their dollar account at the MBTC’s Pateros branch. ● The General Banking Act of 2000 demands of banks the highest standards of integrity and
● While in Bangkok, they had exchanged five 100 bills into Baht, but only four of the performance. As such, the banks are under obligation to treat the accounts of their depositors
USD 100 bills had been accepted by the foreign exchange dealer because the fifth one with meticulous care. However, the banks' compliance with this degree of diligence is to be
was "no good." determined in accordance with the particular circumstances of each case.
● Unconvinced by the rejection, they had asked a companion to exchange the same bill ● Gross negligence connotes want of care in the performance of one's duties; it is a negligence
at Norkthon Bank, the bank teller there informed them that the dollar bill was fake characterized by the want of even slight care, acting or omitting to act in a situation where
and then confiscated the USD 100 bill and had threatened to report them to the police there is duty to act, not inadvertently but wilfully and intentionally, with a conscious
if they insisted in getting the fake dollar bill back.
Page 17 of 33
 indifference to consequences insofar as other persons may be affected. It evinces a thoughtless ● Here, although the Sps. suffered humiliation resulting from their unwitting use of the
disregard of consequences without exercising any effort to avoid them. counterfeit US dollar bills, MBTC, by virtue of its having observed the proper protocols and
● In order for gross negligence to exist, the Sps. must establish that MBTC did not exert any effort procedure in handling the US dollar bills involved, did not violate any legal duty towards them.
at all to avoid unpleasant consequences, or that it wilfully and intentionally disregarded the Being neither guilty of negligence nor remiss in its exercise of the degree of diligence required
proper protocols or procedure in the handling of US dollar notes and in selecting and by law or the nature of its obligation as a banking institution, MBTC was not liable for damages.
supervising its employees. Given the situation being one of damnum absque injuria, they could not be compensated for the
● The CA and the RTC both found that MBTC had exercised the diligence required by law in damage sustained.
observing the standard operating procedure, in taking the necessary precautions for handling
the USD bills in question, and in selecting and supervising its employees. Such factual findings Dispositive: WHEREFORE, the Court AFFIRMS the decision promulgated on December 7,
by the RTC and CA are entitled to great weight and could be overturned only upon a showing 2006; and ORDERS the petitioners to pay the costs of suit.
of a very good reason.
● The BSP certified that the falsity of the US dollar notes in question, which were "near
perfect genuine notes," could be detected only with extreme difficulty even with the
exercise of due diligence.
● Ms. Nanette Malabrigo, BSP's Senior Currency Analyst, testified that the subject dollar
notes were "highly deceptive" inasmuch as the paper used for them were similar to that
used in the printing of the genuine notes. She observed that the security fibers and the
printing were perfect except for some microscopic defects, and that all lines were clear,
sharp and well defined.

2. Sps. Carbonell are not entitled to moral and exemplary damages.

● The relationship existing between the Sps. and MBTC that resulted from a contract of loan was
that of a creditor-debtor.
● Even if the law imposed a high standard on MBTC by virtue of the fiduciary nature of its banking
business, bad faith or gross negligence amounting to bad faith was absent. So, there was no
legal basis for holding MBTC liable for moral and exemplary damages.
● In breach of contract, moral damages may be awarded only where the defendant acted
fraudulently or in bad faith. That was not true here because the MBTC was not shown to have
acted fraudulently or in bad faith. This is pursuant to Art. 22206 of the Civil Code.
● With MBTC establishing that the characteristics of the dollar bills had made it difficult even for
the BSP itself as the country's own currency note expert to identify the counterfeiting with ease
despite adhering to all the properly laid out standard operating procedure and precautions in
the handling of US bills, holding it liable for damages in favor of the Sps. would be highly
unwarranted in the absence of proof of bad faith, malice or fraud on its part.
● MBTC formally apologized to Sps. and even offered to reinstate the USD500 in their account
and give them the all-expense-paid round trip ticket to HK as means to assuage their
inconvenience did not necessarily mean it was liable. In civil cases, an offer of compromise is
not an admission of liability, and is inadmissible as evidence against the offeror.
● It is true that the Sps. suffered embarrassment and humiliation in Bangkok. Yet, we should
distinguish between damage and injury.
● The Orchard Golf & Country Club, Inc. v. Yu: Injury is the illegal invasion of a legal right, damage
is the loss, hurt, or harm which results from the injury; and damages are the recompense or
compensation awarded for the damage suffered. Thus, there can be damage without injury in
those instances in which the loss or harm was not the result of a violation of a legal duty. These
situations are often called damnum absque injuria.
● In every situation of damnum absque injuria, therefore, the injured person alone bears the
consequences because the law affords no remedy for damages resulting from an act that does
not amount to a legal injury or wrong.

6
Article 2220. Willful injury to property may be a legal ground for awarding moral damages if the court
should find that, under the circumstances, such damages are justly due. The same rule applies to
breaches of contract where defendant acted fraudulently or in bad faith.
Page 18 of 33
 Balayan Bay Rural Bank, Inc. vs. National Livelihood Development Corporation, the action must be done thru the liquidator, lest, no suit for or against the insolvent
771 SCRA 139, G.R. No. 194589 September 21, 2015 entity would prosper.
G.R. No. | Date | Ponente | Topic/Keywords ● Arguing that the substitution is not proper in the instant case since the PDIC is not the
Digest by: CASAMA real party in interest but was merely tasked to conserve the assets of the bank for the
benefit of its creditors, petitioner bank elevated the matter before the Court on
Petitioners: (Put Petitioner/s Here) question of law via this instant Petition for Review on Certiorari
Respondents: (Put Respondent/s Here)
Issue/s:
Recit-ready Digest + Doctrine: ● WHETHER OR NOT THE 11 JUNE 2010 RTC ORDER WHICH DIRECTED THE
Respondent filed a collection case against petitioner. While the case is pending, BSP placed SUBSTITUTION OF THE PDIC AS DEFENDANT OR ITS INCLUSION THEREIN AS CO-
petitioner under receivership and appointed PDIC as receiver. Respondent filed a motion for DEFENDANT IS CONTRARY TO LAW? NO
Substitution of Party invoking ROC that because of the transfer of interest of petitioner to
PDIC, the latter must be substituted or joined by the original party. Petitioner opposed saying Ratio:
that PDIC is not a real party in interest. ● The instant case involves a disputed claim of sum of money against a closed financial
institution. After the Monetary Board has declared that a bank is insolvent and has
Issue is whether the substitution is proper? Yes ordered it to cease operations, the Board becomes the trustee of its assets for the
equal benefit of all the creditors, including depositors.
The legal personality of the petitioner bank is not ipso facto dissolved by insolvency; it is not
● The assets of the insolvent banking institution are held in trust for the equal
divested of its capacity to sue and be sued after it was ordered by the Monetary Board to benefit of all creditors, and after its insolvency, one cannot obtain an advantage or
cease operation. The law mandated, however, that the action should be brought through its
a preference over another by an attachment, execution or otherwiseT. owards this
statutory liquidator/receiver which in this case is the PDIC. The authority of the PDIC to end, the PDIC, as the statutory receiver/liquidator of the bank, is mandated to
represent the insolvent bank in legal actions emanates from the fiduciary relation created by
immediately gather and take charge of all the assets and liabilities of the institution
statute which reposed upon the receiver the task of preserving and conserving the properties and administer the same for the benefit of its creditors.
of the insolvent for the benefit of its creditors
● As the fiduciary of the properties of a closed bank, the PDIC may prosecute or defend
the case by or against the said bank as a representative party while the bank will
Facts: remain as the real party in interest pursuant to Section 3, Rule 3 of the Revised Rules
● Petitioner bank is a banking institution duly authorized by the Central Bank to engage of Court which provides:
in banking business before it was placed under receivership by the Bangko Sentral ng ● SEC. 3. Representatives as parties.- Where the action is allowed to be
Pilipinas on 26 November 2009. prosecuted or defended by a representative or someone acting in a fiduciary
● NLDC, on the other hand, is a government institution created to promote and generate capacity, the beneficiary shall be included in the title of the case and shall be
the development of livelihood and community-based enterprises by virtue of deemed to be the real party in interest. A representative may be a trustee of
Executive Order No. 715 (1981). an express trust, a guardian, an executor or administrator, or a party
● On 12 October 2009, NLDC filed a complaint for collection of sum of money against authorized by law or these Rules. An agent acting in his own name and for
petitioner bank for the latter's unpaid obligation in the amount of P1,603,179.86 the benefit of an undisclosed principal may sue or be sued without joining
before the RTC of Makati City. the principal except when the contract involves things belonging to the
● During the pendency of the case before the RTC, the Bangko Sentral ng Pilipinas, thru principal.
the Monetary Board, issued MIN-70-26 November 2009, placing the petitioner bank ● The inclusion of the PDIC as a representative party in the case is therefore grounded
under receivership and appointed the PDIC as receiver of the bank pursuant to on its statutory role as the fiduciary of the closed bank which, under Section 30 of R.A.
Section 30 of Republic Act (R.A.) No. 7653. 7653 (New Central Bank Act), is authorized to conserve the latter's property for the
● After the petitioner bank was placed under receivership, NLDC filed a Motion for benefit of its creditors.
Substitution of Party and Set the Case for Pre-Trial invoking Section 19, Rule 3 of the ● While we agree with the conclusion reached by the RTC that the PDIC should be
Revised Rules of Court that by virtue of transfer of interest of the petitioner bank to included in Civil Case No. 09-917, its reliance on Section 19, Rule 3 of the Revise Rules
the PDIC, the latter may be substituted as party or joined with the original party. of Court on transfer of interest pendente lite as justification for its directive to include
● The motion was duly opposed by the petitioner bank contending that the PDIC is not the PDIC in the case is erroneous.
the real party in interest in the instant case because it does not stand to be benefited
or injured by the judgment in the suit. It argued that the PDIC is merely the Statutory ● For one, the properties of an insolvent bank are not transferred by operation of law
Receiver/Liquidator of all banks placed by the Monetary Board under receivership to the statutory receiver/liquidator but rather these assets are just held in trust to be
and is merely a representative of the petitioner bank which remains as the real party distributed to its creditors after the liquidation proceedings in accordance with the
in interest. The substitution of the PDIC as defendant in this case is therefore not rules on concurrence and preference of credits.
proper. ● The debtors properties are then deemed to have been conveyed to the
● On 11 June 2010, the RTC issued an Order granting the Motion for Substitution filed Liquidator in trust for the benefit of creditors, stockholders and other persons
by NLDC and directed that the PDIC be substituted or joined as co-defendant in the in interest.
case. In sustaining the NLDC, the court a quo ruled that the prosecution or defense of

Page 19 of 33
 ● This notwithstanding, any lien or preference to any property shall be recognized by
the Liquidator in favor of the security or lienholder, to the extent allowed by law, in
the implementation of the liquidation plan.
● In addition, the insolvent bank's legal personality is not dissolved by virtue of being
placed under receivership by the Monetary Board. It must be stressed here that a
bank retains its juridical personality even if placed under conservatorship; it is
neither replaced nor substituted by the conservator who shall only take charge of the
assets, liabilities and the management of the institution.
● It being the fact that the PDIC should not be considered as a substitute or as a co-
defendant of the petitioner bank but rather as a representative party or someone
acting in fiduciary capacity, the insolvent institution shall remain in the case and shall
be deemed as the real party in interest.
● Nowhere in Section 3, Rule 3 of the Revised Rules of Court is it stated or, at the very
least implied, that the representative is likewise deemed as the real party in
interest.The said rule simply states that, in actions which are allowed to be
prosecuted or defended by a representative, the beneficiary shall be deemed the real
party in interest and, hence, should be included in the title of the case.
● In Manalo v. Court of Appeals,23 the Court validated the right of a bank which was
placed under receivership to continue litigating the petition for the issuance of writ
of possession and dismissed the position assumed by petitioner therein that a closed
bank cannot maintain a suit against its debtor,
● A bank which had been ordered closed by the monetary board retains its
juridical personality which can sue and be sued through its liquidator. The only
limitation being that the prosecution or defense of the action must be done
through the liquidator. Otherwise, no suit for or against an insolvent entity would
prosper. In such situation, banks in liquidation would lose what justly belongs to them
through a mere technicality.

Dispositive:
● WHEREFORE, premises considered, the instant petition is hereby DENIED.

Page 20 of 33
 Banco Filipino Savings and Mortgage Bank vs. Bangko Sentral ng Pilipinas and the
Monetary Board, G.R. No. 200678, June 04, 2018 temporary restraining order and writ of preliminary injunction with the CA, this time
G.R. No. 200678| June 04, 2018 | Leonen | Receivership assailing the RTC’s order denying their Motion to Dismiss Ad Cautelam. The CA granted the
Digest by: Cua (Edited from other digest) application for a writ of preliminary injunction and enjoined the RTC from conducting further
proceedings. Eventually, CA ruled that RTC had no jurisdiction over the Petition for Certiorari
Petitioners: BANCO FILIPINO SAVINGS AND MORTGAGE BANK and Mandamus filed by Banco Filipino.
Respondents: BANGKO SENTRAL NG PILIPINAS AND THE MONETARY BOARD
WoN Banco Filipino, as a closed bank under receivership, could file this Petition for
Recit-ready Digest + Doctrine: Review without joining its statutory receiver, the Philippine Deposit Insurance
On December 11, 1991, SC promulgated Banco Filipino Savings Mortgage Bank v. Monetary Corporation, as a party to the case? NO. A closed bank under receivership can only sue or
Board and Central Bank of the Philippines, which declared void the Monetary Board's order be sued through its receiver, the Philippine Deposit Insurance Corporation. Under R.A. 7653,
for closure and receivership of Banco Filipino. SC also directed the Central Bank of the when the Monetary Board finds a bank insolvent, it may "summarily and without need for
Philippines and the Monetary Board to reorganize Banco Filipino and to allow it to resume prior hearing forbid the institution from doing business in the Philippines and designate the
business under the comptrollership of both the Central Bank and the Monetary Board. Philippine Deposit Insurance Corporation as receiver of the banking institution.

In 2002, Banco Filipino suffered from heavy withdrawals, so it asked Bangko Sentral for Doctrine: A bank which has been ordered closed by the Bangko Sentral ng Pilipinas (Bangko
financial assistance through emergency loans and credit easement terms. Bangko Sentral Sentral) is placed under the receivership of the Philippine Deposit Insurance Corporation. As
informed Banco Filipino that it should first comply with certain conditions imposed by R.A. a consequence of the receivership, the closed bank may sue and be sued only through its
7653 before financial assistance could be extended. It also required Banco Filipino to submit receiver, the Philippine Deposit Insurance Corporation. Any action filed by the closed bank
a rehabilitation plan approved by Bangko Sentral before emergency loans could be granted. without its receiver may be dismissed.
Banco Filipino submitted its Long-Term Business Plan to Bangko Sentral. It also claimed that
Bangko Sentral already extended similar arrangements to other banks and that it was still
awaiting the payment of P18,800,000,000.00 in damage claims, "the entitlement to which the Facts:
Supreme Court has already decided with finality." ● On December 11, 1991, SC promulgated Banco Filipino Savings Mortgage Bank v.
Monetary Board and Central Bank of the Philippines, which declared void the
Bangko Sentral informed Banco Filipino that its business plan could not be acted upon since Monetary Board's order for closure and receivership of Banco Filipino Savings &
it was neither "confirmed nor approved by [Banco Filipino's Board of Directors]. Banco Mortgage Bank (Banco Filipino).
Filipino filed a Petition for Revival of Judgment with the RTC of Makati to compel Bangko ○ SC also directed the Central Bank of the Philippines and the Monetary
Sentral to approve its business plan. During the pendency of its Petition, Banco Filipino Board to reorganize Banco Filipino and to allow it to resume business
entered into discussions and negotiations with Bangko Sentral, which resulted to seven (7) under the comptrollership of both the Central Bank and the Monetary
revisions in the business plan. Thus, Banco Filipino filed a Proposal for Settlement before Board.
RTC Makati. Subsequently, Banco Filipino submitted its 8th Revised Business Plan to Bangko ● Banco Filipino filed several complaints before the RTC among them a claim for
Sentral, where it requested, among others, a P25,000,000,000 income enhancement loan. damages totaling P18,800,000,000.
Bangko Sentral informed Banco Filipino that the Monetary Board issued Resolution No. 1668 ● Congress then passed R.A. 7653, which established and organized Bangko Sentral as
granting its request for the P25,000,000,000.00 Financial Assistance and Regulatory Reliefs the new monetary authority.
to form part of its Revised Business Plan and Alternative Business Plan. The approval was ● Pursuant to the prior SC decision, the Monetary Board issued Resolution No. 427,
also subject to certain terms and conditions, among which was the withdrawal or dismissal which allowed Banco Filipino to resume its business.
with prejudice to all pending cases filed by Banco Filipino against Bangko Sentral and its ● In 2002, Banco Filipino suffered from heavy withdrawals, so it asked Bangko Sentral
officials, as well as the execution of necessary quitclaims and commitments to be given by for financial assistance for more than P3,000,000,000 through emergency loans and
Banco Filipino's principal stockholders, Board of Directors, and duly authorized officers "not credit easement terms. Bangko Sentral informed Banco Filipino that it should first
to revive or refile such similar cases in the future." Banco Filipino requested reconsideration comply with certain conditions imposed by R.A. 7653 before financial assistance
of the terms and conditions, informing Bangko Sentral that it did not agree with the condition could be extended. It also required Banco Filipino to submit a rehabilitation plan
to dismiss and withdraw its cases since this would require a separate discussion. approved by Bangko Sentral before emergency loans could be granted.
● Banco Filipino submitted its Long-Term Business Plan to Bangko Sentral. It also
On October 20, 2010, Banco Filipino filed a Petition for Certiorari and Mandamus with prayer claimed that Bangko Sentral already extended similar arrangements to other banks
for issuance of a temporary restraining order and writ of preliminary injunction before and that it was still awaiting the payment of P18,800,000,000.00 in damage claims,
Branch 66, RTC, Makati City, assailing the alleged arbitrary, capricious, and illegal acts of "the entitlement to which the Supreme Court has already decided with finality."
Bangko Sentral and of the Monetary Board in coercing Banco Filipino to withdraw all its ● Bangko Sentral informed Banco Filipino that its business plan could not be acted upon
present suits in exchange of the approval of its Business Plan. RTC granted the request for since it was neither "confirmed nor approved by [Banco Filipino's Board of Directors],
the issuance of a temporary restraining order against Bangko Sentral and the Monetary ● Banco Filipino filed a Petition for Revival of Judgment with the RTC of Makati to
Board. Bangko Sentral and the Monetary Board filed a Petition for Certiorari with prayer for compel Bangko Sentral to approve its business plan. During the pendency of its
temporary restraining order and/or writ of preliminary injunction with the CA, assailing the Petition, Banco Filipino entered into discussions and negotiations with Bangko
RTC’s Order for having been issued without jurisdiction. On November 25, 2010, Bangko Sentral, which resulted to seven (7) revisions in the business plan. Thus, Banco
Sentral and the Monetary Board filed another Petition for Certiorari with prayer for Filipino filed a Proposal for Settlement before RTC Makati.

Page 21 of 33
 ● Subsequently, Banco Filipino submitted its 8th Revised Business Plan to Bangko forbid the institution from doing business in the Philippines and designate the
Sentral, where it requested, among others, a P25,000,000,000 income enhancement Philippine Deposit Insurance Corporation as receiver of the banking institution.
loan. The parties constituted an Ad Hoc Committee composed of representatives from ● The relationship between the Philippine Deposit Insurance Corporation and a closed
both parties to study and act on the proposals. The Ad Hoc Committee produced an bank is fiduciary in nature. Section 30 of R.A. 7653 directs the receiver of a closed
Alternative Business Plan, which was accepted by Banco Filipino, but was subject to bank to "immediately gather and take charge of all the assets and liabilities of the
the Monetary Board's approval. institution" and "administer the same for the benefit of its creditors."
● Bangko Sentral informed Banco Filipino that the Monetary Board issued Resolution ● The law likewise grants the receiver "the general powers of a receiver under the
No. 1668 granting its request for the P25,000,000,000.00 Financial Assistance and Revised Rules of Court." Under Rule 59, Section 6 of the Rules of Court, "a receiver
Regulatory Reliefs to form part of its Revised Business Plan and Alternative Business shall have the power to bring and defend, in such capacity, actions in his [or her] own
Plan. The approval was also subject to certain terms and conditions, among which name." Thus, R.A. 7653 provides that the receiver shall also "in the name of the
was the withdrawal or dismissal with prejudice to all pending cases filed by Banco institution, and with the assistance of counsel as [it] may retain, institute such actions
Filipino against Bangko Sentral and its officials, as well as the execution of necessary as may be necessary to collect and recover accounts and assets of, or defend any
quitclaims and commitments to be given by Banco Filipino's principal stockholders, action against, the institution." Considering that the receiver has the power to take
Board of Directors, and duly authorized officers "not to revive or refile such similar charge of all the assets of the closed bank and to institute for or defend any action
cases in the future." against it, only the receiver, in its fiduciary capacity, may sue and be sued on behalf of
● Banco Filipino requested reconsideration of the terms and conditions, informing the closed bank.
Bangko Sentral that it did not agree with the condition to dismiss and withdraw its ● Petitioner contends that it was not a closed bank at the time of the filing of this
cases since this would require a separate discussion. Petition on April 10, 2012 since the CA found the closure to have been illegal. This CA
● Bangko Sentral and the Monetary Board, through counsel CVC Law, informed Banco Decision, however, was not yet final since the Monetary Board filed a timely motion
Filipino that its rejection of certain portions of Resolution No. 1668, particularly its for reconsideration. There is also nothing in its dispositive portion which states that
refusal to withdraw all cases filed against Bangko Sentral, was deemed as a failure to it was immediately executory.
reach a mutually acceptable settlement. ● Petitioner's suit concerned its Business Plan, a matter that could have affected the
● On October 20, 2010, Banco Filipino filed a Petition for Certiorari and Mandamus with status of its insolvency. Philippine Deposit Insurance Corporation's participation
prayer for issuance of a temporary restraining order and writ of preliminary would have been necessary, as it had the duty to conserve petitioner's assets and to
injunction before Branch 66, RTC, Makati City, assailing the alleged arbitrary, examine any possible liability that petitioner might undertake under the Business
capricious, and illegal acts of Bangko Sentral and of the Monetary Board in coercing Plan.
Banco Filipino to withdraw all its present suits in exchange of the approval of its ● Philippine Deposit Insurance Corporation also safeguards the interests of the
Business Plan. depositors in all legal proceedings. Most bank depositors are ordinary people who
● RTC granted the request for the issuance of a temporary restraining order against have entrusted their money to banks in the hopes of growing their savings. When
Bangko Sentral and the Monetary Board. banks become insolvent, depositors are secure in the knowledge that they can still
● Bangko Sentral and the Monetary Board filed a Petition for Certiorari with prayer for recoup some part of their savings through Philippine Deposit Insurance Corporation.
temporary restraining order and/or writ of preliminary injunction with the CA, Thus, Philippine Deposit Insurance Corporation's participation in all suits involving
assailing the RTC’s October 28, 2010 Order for having been issued without the insolvent bank is necessary and imbued with the public interest.
jurisdiction. ● petitioner's verification and certification of non- forum shopping was signed by its
● On November 25, 2010, Bangko Sentral and the Monetary Board filed another Executive Vice Presidents Maxy S. Abad and Atty. Francisco A. Rivera, as authorized
Petition for Certiorari with prayer for temporary restraining order and writ of by its Board of Directors.
preliminary injunction with the CA, this time assailing the RTC’s order denying their ● Pursuant to Section 10 (b) of the Philippine Deposit Insurance Corporation Charter,
Motion to Dismiss Ad Cautelam. “the powers, functions and duties, as well as all allowances, remuneration and
● The CA granted the application for a writ of preliminary injunction and enjoined the prerequisites of the directors, officers, and stockholders of such bank are suspended.”
RTC from conducting further proceedings. Eventually, CA ruled that RTC had no ● When petitioner was placed under receivership, the powers of its Board of Directors
jurisdiction over the Petition for Certiorari and Mandamus filed by Banco Filipino. and its officers were suspended. Thus, its Board of Directors could not have validly
Issue/s: authorized its Executive Vice Presidents to file the suit on its behalf. The petition, not
● WoN Banco Filipino, as a closed bank under receivership, could file this Petition for having been properly verified, is considered an unsigned pleading. A defect in the
Review without joining its statutory receiver, the Philippine Deposit Insurance certification of non-forum shopping is likewise fatal to petitioner's cause.
Corporation, as a party to the case. – NO. ● Considering that the Petition was filed by signatories who were not validly authorized
● WoN RTC has jurisdiction over petitions for certiorari against acts and omissions of to do so, the Petition does not produce any legal effect. Being an unauthorized
the Monetary Board. – NO.Monetary Board is a quasi-judicial agency; thus, the CA has pleading, the SC never validly acquired jurisdiction over the case. The Petition,
jurisdiction. therefore, must be dismissed.
2.
Ratio: ● Petitions for certiorari against a quasi-judicial agency are cognizable only by the CA.
1. The RTC had no jurisdiction over the Petition for Certiorari filed by petitioner against
● A closed bank under receivership can only sue or be sued through its receiver, the respondents.
Philippine Deposit Insurance Corporation. Under R.A. 7653, when the Monetary
Board finds a bank insolvent, it may "summarily and without need for prior hearing
Page 22 of 33
 ● Bangko Sentral's Monetary Board is a quasi-judicial agency. Its decisions, resolutions,
and orders are the decisions, resolutions, and orders of a quasi-judicial agency. Any
action filed against the Monetary Board is an action against a quasi-judicial agency.
● This does not mean that Bangko Sentral only exercises quasi- judicial functions. As an
administrative agency, it likewise exercises "powers and/or functions which may be
characterized as administrative, investigatory, regulatory, quasi legislative, or quasi-
judicial, or a mix of these ve, as may be conferred by the Constitution or by statute."
It is settled, however, that it exercises its quasi-judicial functions through respondent
Monetary Board.
● The Rules of Court categorically provide that petitions for certiorari involving acts or
omissions of a quasi-judicial agency "shall be filed in and cognizable only by the CA."
The CA, therefore, did not err in dismissing the case before the RTCsince the RTC did
not have jurisdiction over the Petition for Certiorari filed by petitioner against
respondents.

Dispositive:
WHEREFORE, the Petition is DISMISSED on the ground of petitioner's lack of capacity to sue. SO
ORDERED.

Page 23 of 33
 Peter L. So vs. Philippine Deposit Insurance Commission, G.R. No. 230020, March ● Rule 65 provides that if the petition involves an act or omission of a quasi-judicial
19, 2018 agency, the petition for certiorari should be filed with the Court of Appeals. Thus, the
G.R. No |Date| Ponente| PDIC acting as QJ body - Pet. for Certiorari (R65) to CA RTC was correct in denying the petition since it had no jurisdiction over it.
Digest by: Faderguya
Dispositive:
Petitioners: Peter So WHEREFORE, the instant petition is DENIED for lack of merit. SO ORDERED.
Respondents: PDIC

Recit-ready Digest + Doctrine:

Short Case.

The PDIC in denying the insurance claims filed before it acts in a quasi-judicial
capacity. Thus, the denial should be questioned via petition for certiorari under Rule
65 in the Court of Appeals.

Facts:
● Petitioner opened an account with Cooperative Rural Bank of Bulacan amounting to
P300,000.
● Petitioner learned that the bank closed its operations and was placed under
receivership under PDIC.
○ Petitioner filed an insurance claim with PDIC (because PDIC insures the
deposits of the depositors)
● PDIC denied the claim. It held that the fund inside the account originated from a
terminated account owned by a certain Reyes Family.
○ This amounted to splitting of deposits which is prohibited by the law.
○ MR was denied by PDIC.
● Petitioner then filed a petition for certiorari under Rule 65 before the RTC
● RTC denied the petition. It held that the recourse sought by petitioner was incorrect
because the PDIC, in denying the claim, was exercising its quasi-judicial power. Thus,
the correct remedy was to file a petition for certiorari with the Court of Appeals.
● Petitioner claims that the PDIC is not a quasi-judicial agency and it does not possess
any quasi-judicial power since it only performs fact-finding functions.

Issue/s:
● W/N RTC have jurisdiction over the petition for certiorari? NO

Ratio:
● The PDIC was created as an insurer of deposits in all banks entitled to the benefit of
insurance.
○ It has the duty to determine the validity of and grant or deny deposit
insurance claims. Its decision is considered as final and executory and may
be reviewed by the courts only through a petition for certiorari.
● The legislative intent in creating PDIC was to confer its quasi-judicial functions.
○ In carrying out their quasi-judicial functions the administrative officers or
bodies are required to investigate facts or ascertain the existence of
facts, hold hearings, weigh evidence, and draw conclusions from them as
basis for their official action and exercise of discretion in a judicial nature.
○ The test to determine whether an administrative body is exercising quasi
judicial function is whether it is conferred the power of adjudication over
the rights and obligations of the parties.
● PDIC exercises judicial discretion and judgment in determining whether a claimant is
entitled to a deposit insurance claim. Such determination results from its exercise of
fact-finding power.

Page 24 of 33
 Subido Pagente Certeza Mendoza and Binay Law Offices vs. Court of Appeals, G.R.
No. 216914, December 6, 2016 Facts:
G.R. No.216914 | Perez | Inquiry into Bank Accounts ● Challenged in this petition for certiorari and prohibition under Rule 65 of the Rules
Digest by: MAXENE of Court is the constitutionality of Section 11 of Republic Act (R.A.) No. 9160, the
Petitioners: SUBIDO PAGENTE CERTEZA MENDOZA and BINAY LAW OFFICES Anti-Money Laundering Act, as amended, specifically the Anti-Money Laundering
Respondents: THE COURT OF APPEALS, HON. ANDRES B. REYES, JR., in his capacity as Council's authority to file with the Court of Appeals (CA) in this case, an ex-parte
Presiding Justice of the Court of Appeals, and the ANTI-MONEY LAUNDERING COUNCIL, application for inquiry into certain bank deposits and investments, including related
represented by its members, HON. AMANDO M. TETANGCO, JR., Governor of the accounts based on probable cause.
BANGKO SENTRAL NG PILIPINAS, HON. TERESITA J. HERBOSA, Chairperson of the ● In 2015, a year before the 2016 presidential elections, reports abounded on the
Securities and Exchange Commission, and HON. EMMANUEL F. DOOC, Insurance supposed disproportionate wealth of then Vice President Jejomar Binay and the rest
Commissioner of the Insurance Commission,
of his family,
Recit-ready Digest + Doctrine: (Sorry super long case) ● The Anti-Money Laundering Council (AMLC) asked the Court of Appeals (CA) to
Basically CA allowed the ex parte hearing on the inquiry of bank deposits of the Binay Family allow the Council to peek into the bank accounts of the Binays, their corporations,
and its law firm. Binay alleges it violates the right to due process and privacy. They challenge and a law office where a family member was once a partner.
the constitutionality of Sec. 11 of AMLA which provides that the AMLC may inquire into or ● By 8 March 2015, the Manila Times published another article entitled, "CA orders
examine any particular deposit or investment, including related accounts, with any banking probe of Binay's assets" reporting that the appellate court had issued a Resolution
institution or non-bank financial institution upon order of any competent court based on an
granting the ex-parte application of the AMLC to examine the bank accounts of
ex parte application in cases of violations of this Act, when it has been established that there
is probable cause that the deposits or investments, including related accounts involved, are SPCMB:
related to an unlawful activity. W/N Sec. 11 of of AMLA is constitutional? YES. We extract the ● The Court of Appeals (CA) has officially issued an order for examination of Vice-
following principles: President Jejomar Binay's bank accounts.
● The Constitution did not allocate specific rights peculiar to bank deposits; ● The bank accounts of the law office linked to Binay — the Subido Pagente Certeza
● The general rule of absolute confidentiality is simply statutory, i.e., not Mendoza & Binay — where Binay's daughter, Makati City (Metro Manila) Rep. Mar-
specified in the Constitution, which has been affirmed in jurisprudence; len Abigail Binay was a partner, are also included in the probe, the sources said.
● Exceptions to the general rule of absolute confidentiality have been carved out ● Forestalled in the CA thus Binay alleging that it had no ordinary, plain, speedy, and
by the Legislature which legislation have been sustained, albeit subjected to adequate remedy to protect its rights and interests in the purported ongoing
heightened scrutiny by the courts; and unconstitutional examination of its bank accounts by public respondent Anti-Money
● One such legislated exception is Section 11 of the AMLA. Laundering Council (AMLC), SPCMB undertook direct resort to SC via this petition
for certiorari and prohibition
We thus subjected Section 11 of the AMLA to heightened scrutiny and found nothing ● AMLC, through the Office of the Solicitor General (OSG), points out a supposed
arbitrary in the allowance and authorization to AMLC to undertake an inquiry into certain jurisdictional defect of the instant petition, i.e., SPCMB failed to implead the House of
bank accounts or deposits. Instead, we found that it provides safeguards before a bank Representatives which enacted the AMLA and its amendments. In all, the OSG
inquiry order is issued, ensuring adherence to the general state policy of preserving the argues for the dismissal of the present petition, highlighting that the AMLC's inquiry
absolutely confidential nature of Philippine bank accounts: into bank deposits does not violate due process nor the right to privacy:
1. The AMLC is required to establish probable cause as basis for its ex-parte a. Section 11's allowance for AMLC's ex-parte application for an inquiry
application for bank inquiry order; into particular bank deposits and investments is investigative, not
2. The CA, independent of the AMLC's demonstration of probable cause, itself adjudicatory;
makes a finding of probable cause that the deposits or investments are related b. The text of Section 11 itself provides safeguards and limitations on the
to an unlawful activity under Section 3 (i) or a money laundering offense under allowance to the AMLC to inquire into bank deposits: (a) issued by the
Section 4 of the AMLA; CA based on probable cause; and (b) specific compliance to the
3. A bank inquiry court order ex-parte for related accounts is preceded by a bank requirements of Sections 2 and 3, Article III of the Constitution;
inquiry court order ex-parte for the principal account which court order ex- c. The ex-parte procedure for investigating bank accounts is necessary to
parte for related accounts is separately based on probable cause that such achieve a legitimate state objective;
related account is materially linked to the principal account inquired into; and d. There is no legitimate expectation of privacy as to the bank records of a
4. The authority to inquire into or examine the main or principal account and the depositor;
related accounts shall comply with the requirements of Article III, Sections 2 e. The examination of, and inquiry, into SPCMB's bank accounts does not
and 3 of the Constitution. violate Attorney-Client Privilege; and
f. A criminal complaint is not a pre-requisite to a bank inquiry order.
Page 25 of 33
 ● In their Reply, SPCMB maintains that the ex-parte proceedings authorizing inquiry ● Quite apparent from the foregoing is that absent a specific wording in the AMLA
of the AMLC into certain bank deposits and investments is unconstitutional, allowing for ex-parte proceedings in orders authorizing inquiry and examination
violating its rights to due process and privacy. by the AMLC into certain bank deposits or investments, notice to the affected party
is required.
● Heeding the Court's observance in Eugenio that the remedy of the Republic then
Issue/s: lay with the legislative, Congress enacted Republic Act No. 10167 amending
● W/N Sec. 11 of of AMLA is constitutional? YES
Section 11 of the AMLA and specifically inserted the word ex-parte appositive of
the nature of this provisional remedy available to the AMLC thereunder.
Ratio: ● We do not subscribe to SPCMB's position.
● SEC. 11. Authority to Inquire into Bank Deposits. — Notwithstanding the provisions ● Succinctly, Section 11 of the AMLA providing for ex-parte application and inquiry
of Republic Act No. 1405, as amended; Republic Act No. 6426, as amended; Republic by the AMLC into certain bank deposits and investments does not violate
Act No. 8791; and other laws, the AMLC may inquire into or examine any particular substantive due process, there being no physical seizure of property involved at
deposit or investment, including related accounts, with any banking institution or that stage. It is the preliminary and actual seizure of the bank deposits or
non-bank financial institution upon order of any competent court based on an ex investments in question which brings these within reach of the judicial process,
parte application in cases of violations of this Act, when it has been established that specifically a determination that the seizure violated due process.
there is probable cause that the deposits or investments, including related accounts ● At the stage in which the petition was filed before us, the inquiry into certain bank
involved, are related to an unlawful activity as defined in Section 3(i) hereof or a deposits and investments by the AMLC still does not contemplate any form of
money laundering offense under Section 4 hereof; except that no court order shall be physical seizure of the targeted corporeal property. From this cite, we proceed to
required in cases involving activities defined in Section 3(i)(1), (2), and (12) hereof, examine whether Section 11 of the law violates procedural due process.
and felonies or offenses of a nature similar to those mentioned in Section 3(i)(1), (2), ● As previously stated, the AMLA now specifically provides for an ex-parte
and (12), which are punishable under the penal laws of other countries, and terrorism application for an order authorizing inquiry or examination into bank deposits or
and conspiracy to commit terrorism as defined and penalized under Republic Act No. investments which continues to pass constitutional muster
9372. ● On that score, the SPCMB points out that the AMLC's bank inquiry is preliminary
● The Court of Appeals shall act on the application to inquire into or examine any to the seizure and deprivation of its property as in a freeze order under Section 10
deposit or investment with any banking institution or non-bank financial institution of the AMLA which peculiarity lends itself to a sui generis proceeding akin to the
within twenty-four (24) hours from filing of the application. evaluation process in extradition proceedings pronounced in Secretary of Justice v.
● To ensure compliance with this Act, the Bangko Sentral ng Pilipinas may, in the course Hon. Lantion.
of a periodic or special examination, check the compliance of a covered institution ● The evaluation process, just like the extradition proceedings, proper
with the requirements of the AMLA and its implementing rules and regulations. belongs to a class by itself. It is sui generis
● For purposes of this section, 'related accounts' shall refer to accounts, the funds and ● The submission of AMLC requires a determination whether the AMLC is an
sources of which originated from and/or are materially linked to the monetary administrative body with quasi-judicial powers; corollary thereto, a determination
instrument(s) or property(ies) subject of the freeze order(s). of the jurisdiction of the AMLC.
● A court order ex parte must first be obtained before the AMLC can inquire into these ● Textually, the AMLA is the first line of defense against money laundering in
related Accounts: Provided, That the procedure for the ex parte application of the ex compliance with our international obligation. There are three (3) stages of
parte court order for the principal account shall be the same with that of the related determination, two (2) levels of investigation, falling under three (3) jurisdictions:
accounts. 1. The AMLC investigates possible money laundering offences and initially
● The authority to inquire into or examine the main account and the related accounts determines whether there is probable cause to charge any person with
shall comply with the requirements of Article III, Sections 2 and 3 of the 1987 a money laundering offence under Section 4 of the AMLA, resulting in
Constitution, which are hereby incorporated by reference. the filing of a complaint with the Department of Justice or the Office of
● As presently worded, Section 11 of the AMLA has three elements: (1) ex-parte the Ombudsman;
application by the AMLC; (2) determination of probable cause by the CA; and (3) 2. The DOJ or the Ombudsman conducts the preliminary investigation
exception of court order in cases involving unlawful activities defined in Sections proceeding and if after due notice and hearing finds probable cause for
3 (i) (1), (2), and (12). money laundering offences, shall file the necessary information before
● As a brief backgrounder to the amendment to Section 11 of the AMLA, the text the Regional Trial Courts or the Sandiganbayan;
originally did not specify for an ex-parte application by the AMLC for authority to 3. The RTCs or the Sandiganbayan shall try all cases on money laundering,
inquire into or examine certain bank accounts or investments. as may be applicable.

Page 26 of 33
● Nowhere from the text of the law nor its Implementing Rules and Regulations can 6. The CA, independent of the AMLC's demonstration of probable cause, itself makes
we glean that the AMLC exercises quasi-judicial functions whether the actual a finding of probable cause that the deposits or investments are related to an
preliminary investigation is done simply at its behest or conducted by the unlawful activity under Section 3 (i) or a money laundering offense under Section
Department of Justice and the Ombudsman. 4 of the AMLA;
● Again, we hark back to Lantion citing Ruperto v. Torres, where the Court had 7. A bank inquiry court order ex-parte for related accounts is preceded by a bank
occasion to rule on the functions of an investigatory body with the sole power of inquiry court order ex-parte for the principal account which court order ex-parte
investigation: for related accounts is separately based on probable cause that such related
● The sole investigative functions of the AMLC finds more resonance with the account is materially linked to the principal account inquired into; and
investigative functions of the National Bureau of Investigation (NBI). 8. The authority to inquire into or examine the main or principal account and the
● Thereafter, the next step is for the AMLC to file a Complaint with either the DOJ or related accounts shall comply with the requirements of Article III, Sections 2 and 3
the Ombudsman pursuant to Rule 6.b. of the Constitution.
● Plainly, the AMLC's investigation of money laundering offenses and its ● First. The AMLC and the appellate court are respectively required to demonstrate
determination of possible money laundering offenses, specifically its inquiry into and ascertain probable cause.
certain bank accounts allowed by court order, does not transform it into an ● Second. As regards SPCMB's contention that the bank inquiry order is in the nature
investigative body exercising quasi-judicial powers. Hence, Section 11 of the of a general warrant, Eugenio already declared that Section 11, even with the
AMLA, authorizing a bank inquiry court order, cannot be said to violate SPCMB's allowance of an ex-parte application therefor, "is not a search warrant or warrant
constitutional right to procedural due process. of arrest as it contemplates a direct object but not the seizure of persons or
● We now come to a determination of whether Section 11 is violative of the property." 34 It bears repeating that the "bank inquiry order" under Section 11 is
constitutional right to privacy enshrined in Section 2, Article III of the Constitution. a provisional remedy to aid the AMLC in the enforcement of the AMLA.
● The theme of playing off privacy rights and interest against that of the state's ● Third. Contrary to the stance of SPCMB, the bank inquiry order does not
interest in curbing money laundering offenses is recurring. contemplate that SPCMB be first impleaded in a money laundering case already
● Once again, Eugenio offers guidance: Notably, the United States Supreme Court in filed before the courts:
U.S. v. Miller held that there was no legitimate expectation of privacy as to the bank ● Nonetheless, although the bank inquiry order ex-parte passes constitutional
records of a depositor. Moreover, the text of our Constitution has not bothered with muster, there is nothing in Section 11 nor the implementing rules and regulations
the triviality of allocating specific rights peculiar to bank deposits. of the AMLA which prohibits the owner of the bank account, as in this instance
● We extract the following principles: SPCMB, to ascertain from the CA, post issuance of the bank inquiry order ex-parte,
○ The Constitution did not allocate specific rights peculiar to bank if his account is indeed the subject of an examination.
deposits; ● The present controversy revolves around the issue of whether or not the appellate
○ The general rule of absolute confidentiality is simply statutory, i.e., not court, through the Presiding Justice, gravely abused its discretion when it
specified in the Constitution, which has been affirmed in jurisprudence; effectively denied SPCMB's letter-request for confirmation that the AMLC had
○ Exceptions to the general rule of absolute confidentiality have been applied (ex-parte) for, and was granted, a bank inquiry order to examine SPCMB's
carved out by the Legislature which legislation have been sustained, bank accounts relative to the investigation conducted on Vice-President Binay's
albeit subjected to heightened scrutiny by the courts; and accounts.
○ One such legislated exception is Section 11 of the AMLA. ● We recall the Presiding Justice's letter to SPCMB categorically stating that "under
● The warning in Eugenio that an ex-parte proceeding authorizing the government the rules, the Office of the Presiding Justice is strictly mandated not to disclose,
to inspect certain bank accounts or investments without notice to the depositor divulge, or communicate to anyone directly or indirectly, in any manner or by any
would have significant implications on the right to privacy still does not preclude means, the fact of the filing of the petition brought before [the Court of Appeals] by
such a bank inquiry order to be allowed by specific legislation as an exception to the [AMLC], its contents and even its entry in the logbook."
the general rule of absolute confidentiality of bank deposits. ● The foregoing rule, in relation to what Section 11 already provides, signifies that
● We thus subjected Section 11 of the AMLA to heightened scrutiny and found ex-parte bank inquiry orders on related accounts may be questioned alongside,
nothing arbitrary in the allowance and authorization to AMLC to undertake an albeit subsequent to, the issuance of the initial freeze order of the subject bank
inquiry into certain bank accounts or deposits. Instead, we found that it provides accounts.
safeguards before a bank inquiry order is issued, ensuring adherence to the general ● What is reflected by the foregoing disquisition is that the law plainly prohibits a
state policy of preserving the absolutely confidential nature of Philippine bank mere investigation into the existence and the amount of the deposit.
accounts: ● All told, we affirm the constitutionality of Section 11 of the AMLA allowing the ex-
5. The AMLC is required to establish probable cause as basis for its ex-parte parte application by the AMLC for authority to inquire into, and examine, certain
application for bank inquiry order; bank deposits and investments.
Page 27 of 33
Dispositive:
WHEREFORE, the petition is DENIED. Section 11 of Republic Act No. 9160, as amended, is
declared VALID and CONSTITUTIONAL.

Page 28 of 33
 Apex Bancrights Holdings, Inc. vs. Bangko Sentral ng Pilipinas, 841 SCRA 436, G.R. ● A public bidding was scheduled by PDIC, but the same failed as no bid was submitted.
No. 214866 October 2, 2017 ● A rebidding was then set which also did not materialize as no bids were submitted.
G.R. No. 214866 | October 2, 2017 | Perlas-Bernabe, J. | Topic/Keywords ● Thereafter, PDIC informed BSP that EIB can hardly be rehabilitated and so the
Digest by: GARCIA Monetary Board directed PDIC to proceed with the liquidation.
● Petitioners, who are stockholders representing the majority stock of EIB, filed a
Petitioners: APEX BANCRIGHTS HOLDINGS, INC., LEAD BANCFUND HOLDINGS, INC., ASIA
petition for certiorari before the CA challenging the Resolution of Liquidation.
WIDE REFRESHMENTS CORPORATION, MEDCO ASIA INVESTMENT CORPORATION, ZEST-O ● In essence, petitioners blame PDIC for the failure to rehabilitate EIB, contending that
CORPORATION, HARMONY BANCSHARES HOLDINGS, INC., EXCALIBUR HOLDINGS, INC., and
PDIC:
ALFREDO M. YAO
○ (a) imposed unreasonable and oppressive conditions which delayed or
Respondents: BANGKO SENTRAL NG PILIPINAS DEPOSIT CORPORATION, and PHILIPPINE
frustrated the transaction between BDO and EIB;
INSURANCE,
○ (b) frustrated EIB's efforts to increase its liquidity when PDIC disapproved
EIB's proposal to sell its MRT bonds to a private third party and, instead,
Recit-ready Digest + Doctrine:
required EIB to sell the same to government entities;
EIB entered into a 3-way merger with UBI and UII. UBI was under receivership. Thus, the
○ (c) imposed impossible and unnecessary bidding requirements; and
merger was done to salvage UBI. EIB then underwent its own financial difficulties so was
○ (d) delayed the public bidding which dampened investors' interest.
subject to receivership by the PDIC. PDIC then took over EIB. PDIC later subjected EIB for
In defense, PDIC countered that petitioners were already estopped from assailing the
bidding as a precondition for its continued operation. Since the 2 biddings scheduled failed,
placement of EIB under receivership and its eventual liquidation since they had
PDIC subjected EIB for liquidation afer the Monetary Board’s order. Petitioners now
already surrendered full control of the bank to the BSP.
challenge the resolution of liquidation. Petiitoners contend that it is due to PDIC’s fault why
● For its part, BSP maintained that it had ample factual and legal bases to order EIB's
the biddings failed. BSP maintained that it had ample factual and legal bases to order EIB's
liquidation.
liquidation.
● The CA ruled in favor of the BSP noting that nothing in the Section 30 of RA
7653requires the Monetary Board to make its own independent factual
determination on the bank's viability before ordering its liquidation.
As per Section 30 (c) of RA 7653 on the Proceedings in Receivership and Liquidation provides
● The law only provides that the Monetary Board "shall notify in writing the board of
that “the Monetary Board may summarily and without need for prior hearing forbid the
directors of its findings and direct the receiver to proceed with the liquidation of the
institution from doing business in the Philippines and designate the Philippine Deposit
institution," which it did in this case.
Insurance Corporation as receiver of the banking institution”. The receiver shall immediately
gather and take charge of all the assets and liabilities of the institution, administer the same
Issue/s:
for the benefit of its creditors, and exercise the general powers of a receiver under the
● Whether or not the monetary board did not gravely abuse its discretion when it
Revised Rules of Court. If the receiver determines that the institution cannot be rehabilitated
directed the PDIC to proceed with the liquidation of EIB.- YES
or permitted to resume business in accordance with the next preceding paragraph, the
Monetary Board shall notify in writing the board of directors of its findings and direct the
Ratio:
receiver to proceed with the liquidation of the institution.
● As per Section 30 (c) of RA 7653 on the Proceedings in Receivership and Liquidation
provides that “the Monetary Board may summarily and without need for prior
hearing forbid the institution from doing business in the Philippines and designate
Facts: the Philippine Deposit Insurance Corporation as receiver of the banking institution”.
● EIB, entered into a three-way merger with Urban Bank, Inc. (UBI) and Urbancorp ● The receiver shall immediately gather and take charge of all the assets and liabilities
Investments, Inc. (UII) in an attempt to rehabilitate UBI which was then under of the institution, administer the same for the benefit of its creditors, and exercise the
receivership. general powers of a receiver under the Revised Rules of Court.
● EIB then encountered its own financial difficulties and failed to overcome those thus ● If the receiver determines that the institution cannot be rehabilitated or permitted to
leading to PDIC placing it under receivership pursuant to Section 30 of RA 7653 or resume business in accordance with the next preceding paragraph, the Monetary
the New Central Bank Act. Board shall notify in writing the board of directors of its findings and direct the
● Accordingly, PDIC took over EIB. receiver to proceed with the liquidation of the institution.
○ PDIC submitted its initial receivership report to the Monetary Board which ● The actions of the Monetary Board taken under this section or under Section 29 of
contained its finding that EIB can be rehabilitated or permitted to resume this Act shall be final and executory and may not be restrained or set aside by the
business; provided, that a bidding for its rehabilitation would be court except on petition for certiorari on the ground that the action taken was in
conducted, and that the following conditions would be met: excess of jurisdiction or with such grave abuse of discretion as to amount to lack or
▪ (a) there are qualified interested banks that will comply with excess of jurisdiction.
the parameters for rehabilitation of a closed bank, capital ● It is settled that "the power and authority of the Monetary Board to close banks and
strengthening, liquidity, sustainability and viability of liquidate them thereafter when public interest so requires is an exercise of the police
operations, and strengthening of bank governance; and power of the State. Police power, however, is subject to judicial inquiry.
▪ (b) all parties (including creditors and stockholders) agree to ● It may not be exercised arbitrarily or unreasonably and could be set aside if it is either
the rehabilitation and the revised payment terms and capricious, discriminatory, whimsical, arbitrary, unjust, or is tantamount to a denial
conditions of outstanding liabilities. of due process and equal protection clauses of the Constitution."
Page 29 of 33
 ● Here, there was no grave abuse of discretion. In an attempt to forestall EIB's
liquidation, petitioners insist that the Monetary Board must first make its own
independent finding that the bank could no longer be rehabilitated — instead of
merely relying on the findings of the PDIC — before ordering the liquidation of a bank.
Such position is untenable.
● As correctly held by the CA, nothing in Section 30 of RA 7653 requires the BSP,
through the Monetary Board, to make an independent determination of whether a
bank may still be rehabilitated or not.
● As expressly stated in the afore-cited provision, once the receiver determines that
rehabilitation is no longer feasible, the Monetary Board is simply obligated to:
○ (a) notify in writing the bank's board of directors of the same; and
○ (b) direct the PDIC to proceed with liquidation.

Dispositive:
WHEREFORE, the petition is hereby DENIED. The Decision dated January 21, 2014 and the
Resolution dated October 10, 2014 of the Court of Appeals in CA-G.R. SP No. 129674 are hereby
AFFIRMED.
SO ORDERED.

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 Philippine Banking Corporation vs. Dy, 685 SCRA 567, G.R. No. 183774 November Facts:
14, 2012 ● Respondents Spouses Cipriana and Jose Delgado (seller) entered into an agreement
G.R. No. 183774| Nov. 4 2012 | Perlas-Bernabe | Topic/Keywords with Cecilia Tan (buyer) for the sale of the land situated in Barrio Tongkil, Cebu
Digest by: GUEVARRA covered by TCT No. 18565. In consideration of P10/sq.m wherein the Tan shall make
Petitioners: Philippine Banking Corporation partial payments from time to time and pay the balance when Sps Delgado are ready
Respondents: Alfredo Dy, Bernardo Dy, Jose Delgado and Cipriana Delgado to execute the deed of sale and transfer the title to her.
● At the time of sale, Tan was already occupying a portion of the property where she
Recit-ready Digest + Doctrine: operates a noodle (bihon) factory while the rest was occupied by tenants which Sps.
Spouses Delgado entered into an agreement with Cecilia Tan for the purchase of the former’s Delgado undertook to clear prior to full payment. After paying the total sum of
property to be paid from time to time for P10/sq.m until Sps. Deglado are ready to execute a
deed of sale and transfer the title to Tan upon full payment.Tan demanded the execution of P147,000.00 and being then ready to pay the balance, Tan demanded the execution
the deed of sale but it was refused. Tan later found out that the property had already been of the deed, which was refused. Eventually, Tan learned of the sale of the property to
transferred to the Dys and had been mortgaged to Philbank. Tan filed an action for specific the Dys and its subsequent mortgage to petitioner Philippine Banking Corporation
performance and annulment of title of the Dys. The Delgado’s content that there was no (Philbank), prompting the filing of the Complaint for annulment of certificate of title,
perfected sale between them and Tan as she did not agree on the selling price (should have specific performance and/or reconveyance with damages against Sps. Delgado, the
been P17/sq.m) and that the sale and transfer of the property of the Dys was fictitious wand Dys and Philbank.
was only made in order for the Dys to enable the Delgados to mortgage the property and
● In their Answer, Sps. Delgado, while admitting receipt of the partial payments made
obtain a loan from Philbank. The Delgados contend that PhilBank is not a mortgagee in good
faith as it granted the loan and accepted the mortgage even if it was aware of the fictitious by Tan, claimed that there was no perfected sale because the latter was not willing to
nature of the sale of the property. Philbank avers that it is a mortgagee in good faith. It further pay their asking price of P17.00/sq.m. They also interposed a cross-claim against the
contends that Sps. Delgado are estopped from denying the validity of the mortgage Dys averring that the deeds of absolute sale in their favor dated June 28, 19826 and
constituted over the two lots since they participated in inducing Philbank to grant a loan to June 30, 19827 covering Lot No. 6966 and the adjoining Lot No. 4100-A (on which
the Dys. Tan subsequently abandoned her claim on the property and the sale between the Sps. Delgado's house stands), were fictitious and merely intended to enable the Dys
Dys and the Delgados have been ruled as void which became final and executory. to use the said properties as collateral for their loan application with Philbank and
WON Philbank is a mortgagee in good faith
thereafter, pay the true consideration of P17.00/sq.m. for Lot No. 6966. However,
The doctrine of "mortgagee in good faith" is based on the rule that all persons dealing with
after receiving the loan proceeds, the Dys reneged on their agreement, prompting Sps.
property covered by a Torrens Certificate of Title are not required to go beyond what appears
Delgado to cause the annotation of an adverse claim on the Dys' titles and to inform
on the face of the title. This is in deference to the public interest in upholding the
Philbank of the simulation of the sale. Sps. Delgado, thus, prayed for the dismissal of
indefeasibility of a certificate of title as evidence of lawful ownership of the land or of any
the complaint, with a counterclaim for damages and a cross-claim against the Dys for
encumbrance thereon.
the payment of the balance of the purchase price plus damages.
In the case of banks and other financial institutions, however, greater care and due diligence
are required since they are imbued with public interest, failing which renders the mortgagees ● The Dys denied knowledge of the alleged transaction between cross-claimants Sps.
in bad faith. Thus, before approving a loan application, it is a standard operating practice for Delgado and Tan. They claimed to have validly acquired the subject property from
Sps. Delgado and paid the full consideration therefor as the latter even withdrew their
these institutions to conduct an ocular inspection of the property offered for mortgage and
adverse claim and never demanded for the payment of any unpaid balance.
to verify the genuineness of the title to determine the real owner(s) thereof. The apparent
purpose of an ocular inspection is to protect the "true owner" of the property as well as ● Philbank filed its Answer asserting that it is an innocent mortgagee for value without
innocent third parties with a right, interest or claim thereon from a usurper who may have notice of the defect in the title of the Dys. It filed a cross-claim against Sps. Delgado
acquired a fraudulent certificate of title thereto. and the Dys for all the damages that may be adjudged against it in the event they are
While Philbank failed to exercise greater care in conducting the ocular inspection of the declared seller and purchaser in bad faith, respectively.
properties offered for mortgage, its omission did not prejudice any innocent third parties. In ● In answer to the cross-claim, Sps. Delgado insisted that Philbank was not a mortgagee
particular, the buyer did not pursue her cause and abandoned her claim on the property. On in good faith for having granted the loan and accepted the mortgage despite
the other hand, Sps. Delgado were parties to the simulated sale in favor of the Dys which was knowledge of the simulation of the sale to the Dys and for failure to verify the nature
intended to mislead Philbank into granting the loan application. Thus, no amount of diligence of the buyer’s physical possession of a portion of Lot No. 6966. They thereby prayed
in the conduct of the ocular inspection could have led to the discovery of the complicity for the cancellation of the mortgage in Philbank's favor.
between the ostensible mortgagors (the Dys) and the true owners (Sps. Delgado). In fine, ● Sps. Delgado amended their cross-claim against the Dys to include a prayer for the
Philbank can hardly be deemed negligent under the premises since the ultimate cause of the nullification of the deeds of absolute sale in the latter's favor and the corresponding
mortgagors' (the Dys') defective title was the simulated sale to which Sps. Delgado were certificates of title, and for the consequent reinstatement of Cipriana’s title.
privies. ● The complaints against the Dys and Philbank were subsequently withdrawn. On the
other hand, both Tan and Sps. Delgado never presented any evidence in support of

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 their respective claims. Hence, the RTC limited itself to the resolution of the claims of of public policy, the subsequent nullification of title to a property is not a ground to
Sps. Delgado, Philbank and the Dys against one another. annul the contractual right which may have been derived by a purchaser, mortgagee
● RTC: The RTC dismissed the cross-claims of Sps. Delgado against the Dys and or other transferee who acted in good faith.
Philbank for failure to adduce competent evidence to support their claim. On the ● The doctrine of "mortgagee in good faith" is based on the rule that all persons dealing
other hand, the Dys presented a cash voucher dated April 6, 1983 duly signed by Sps. with property covered by a Torrens Certificate of Title are not required to go beyond
Delgado acknowledging receipt of the total consideration for the two lots. The RTC what appears on the face of the title. This is in deference to the public interest in
also observed that Sps. Delgado notified Philbank of the purported simulation of the upholding the indefeasibility of a certificate of title as evidence of lawful ownership
sale to the Dys only after the execution of the loan and mortgage documents and the of the land or of any encumbrance thereon.
release of the loan proceeds to the latter, negating their claim of bad faith. Moreover, ● In the case of banks and other financial institutions, however, greater care and due
they subsequently notified the bank of the Dys' full payment for the two lots diligence are required since they are imbued with public interest, failing which
mortgaged to it. renders the mortgagees in bad faith. Thus, before approving a loan application, it is a
● CA set aside the RTC’s decision and ordered the cancellation of the Dys' certificates of standard operating practice for these institutions to conduct an ocular inspection of
title and the reinstatement of Cipriana's title. It ruled that there were no perfected the property offered for mortgage and to verify the genuineness of the title to
contracts of sale between Sps. Delgado and the Dys in view of the latter's admission determine the real owner(s) thereof. The apparent purpose of an ocular inspection is
that the deeds of sale were purposely executed to facilitate the latter's loan to protect the "true owner" of the property as well as innocent third parties with a
application with Philbank and that the prices indicated therein were not the true right, interest or claim thereon from a usurper who may have acquired a fraudulent
consideration. Being merely simulated, the contracts of sale were, thus, null and void, certificate of title thereto.
rendering the subsequent mortgage of the lots likewise void. ● while Philbank failed to exercise greater care in conducting the ocular inspection of
● The CA also declared Philbank not to be a mortgagee in good faith for its failure to the properties offered for mortgage, its omission did not prejudice any innocent third
ascertain how the Dys acquired the properties and to exercise greater care when it parties. In particular, the buyer did not pursue her cause and abandoned her claim on
conducted an ocular inspection thereof. It thereby canceled the mortgage over the the property. On the other hand, Sps. Delgado were parties to the simulated sale in
two lots. favor of the Dys which was intended to mislead Philbank into granting the loan
● Philbank insists that it is a mortgagee in good faith. It further contends that Sps. application. Thus, no amount of diligence in the conduct of the ocular inspection could
Delgado are estopped from denying the validity of the mortgage constituted over the have led to the discovery of the complicity between the ostensible mortgagors (the
two lots since they participated in inducing Philbank to grant a loan to the Dys. Dys) and the true owners (Sps. Delgado). In fine, Philbank can hardly be deemed
● Sps. Delgado maintain that Philbank was not an innocent mortgagee for value for negligent under the premises since the ultimate cause of the mortgagors' (the Dys')
failure to exercise due diligence in transacting with the Dys and may not invoke the defective title was the simulated sale to which Sps. Delgado were privies.
equitable doctrine of estoppel to conceal its own lack of diligence. ● Indeed, a finding of negligence must always be contextualized in line with the
● Arturo Dy filed a Petition-in-Intervention arguing that while the deeds of absolute attendant circumstances of a particular case. Philippine National Bank v. Heirs of
sale over the two properties were admittedly simulated, the simulation was only a Estanislao Militar:
relative one involving a false statement of the price. Hence, the parties are still bound ● "the diligence with which the law requires the individual or a corporation at all times
by their true agreement. The same was opposed/objected to by both Philbank and to govern a particular conduct varies with the nature of the situation in which one is
Sps. Delgado as improper, considering that the CA judgment had long become final placed, and the importance of the act which is to be performed."
and executory as to the Dys who neither moved for reconsideration nor appealed the ● Thus, without diminishing the time-honored principle that nothing short of
CA Decision. extraordinary diligence is required of banks whose business is impressed with public
Issue/s: interest, Philbank's inconsequential oversight should not and cannot serve as a
● W/N Philbank is a mortgagee in good faith - YES bastion for fraud and deceit.
Ratio: ● Fraud comprises "anything calculated to deceive, including all acts, omissions, and
● CA Decision nullifying the questioned contracts of sale between Sps. Delgado and the concealment involving a breach of legal duty or equitable duty, trust, or confidence
Dys had become final and executory. Accordingly, the Petition-in-Intervention filed justly reposed, resulting in damage to another, or by which an undue and
by Arturo Dy, which seeks to maintain the subject contracts' validity, can no longer unconscientious advantage is taken of another." In this light, the Dys' and Sps.
be entertained. The cancellation of the Dys' certificates of title over the disputed Delgado's deliberate simulation of the sale intended to obtain loan proceeds from and
properties and the issuance of new TCTs in favor of Cipriana must therefore be to prejudice Philbank clearly constitutes fraudulent conduct. As such, Sps. Delgado
upheld. cannot now be allowed to deny the validity of the mortgage executed by the Dys in
● Philbank's mortgage rights over the subject properties shall be maintained. While it favor of Philbank as to hold otherwise would effectively sanction their blatant bad
is settled that a simulated deed of sale is null and void and therefore, does not convey faith to Philbank's detriment.
any right that could ripen into a valid title, it has been equally ruled that, for reasons
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 ● Accordingly, in the interest of public policy, fair dealing, good faith and justice, the
Court accords Philbank the rights of a mortgagee in good faith whose lien to the
securities posted must be respected and protected. In this regard, Philbank is entitled
to have its mortgage carried over or annotated on the titles of Cipriana Delgado over
the said properties.

Dispositive:
WHEREFORE, the assailed January 30, 2008 Decision of the Court of Appeals in CA-G.R. CV No.
51672 is hereby AFFIRMED with MODIFICATION upholding the mortgage rights of petitioner
Philippine Banking Corporation over the subject properties.
SO ORDERED.

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