Republic v.

Security Credit and Acceptance Corporation (19 SCRA 58)

Facts:
The Solicitor General filed a petition for quo warranto to dissolve the Security and Acceptance
Corporation, alleging that the latter was engaging in banking operations without the authority required
therefor by the General Banking Act (Republic Act No. 337). Pursuant to a search warrant issued by MTC
Manila, members of Central Bank intelligence division and Manila police seized documents and records
relative to the business operations of the corporation. After examination of the same, the intelligence
division of the Central Bank submitted a memorandum to the then Acting Deputy Governor of Central
Bank finding that the corporation is engaged in banking operations. It was found that Security and
Acceptance Corporation established 74 branches in principal cities and towns throughout the
Philippines; that through a systematic and vigorous campaign undertaken by the corporation, the same
had managed to induce the public to open 59,463 savings deposit accounts with an aggregate deposit of
P1,689,136.74; Accordingly, the Solicitor General commenced this quo warranto proceedings for the
dissolution of the corporation, with a prayer that, meanwhile, a writ of preliminary injunction be issued
ex parte, enjoining the corporation and its branches, as well as its officers and agents, from performing
the banking operations complained of, and that a receiver be appointed pendente lite. Superintendent
of Banks of the Central Bank was then appointed by the Supreme Court as receiver pendente lite of
defendant corporation.

In their defense, Security and Acceptance Corporation averred that the the corporation had filed with
the Superintendent of Banks an application for conversion into a Security Savings and Mortgage Bank,
with defendants Zapa, Balatbat, Tanjutco (Pablo and Vito, Jr.), Soriano, Beltran and Sebastian as
proposed directors.

Issue:
Whether or not defendant corporation was engaged in banking operations.

Ruling:
An investment company which loans out the money of its customers, collects the interest and charges
a commission to both lender and borrower, is a bank. It is conceded that a total of 59,463 savings
account deposits have been made by the public with the corporation and its 74 branches, with an
aggregate deposit of P1,689,136.74, which has been lent out to such persons as the corporation deemed
suitable therefore. It is clear that these transactions partake of the nature of banking, as the term is
used in Section 2 of the General Banking Act. Hence, defendant corporation has violated the law by
engaging in banking without securing the administrative authority required in Republic Act No. 337.

That the illegal transactions thus undertaken by defendant corporation warrant its dissolution is
apparent from the fact that the foregoing misuser of the corporate funds and franchise affects the
essence of its business, that it is willful and has been repeated 59,463 times, and that its continuance
inflicts injury upon the public, owing to the number of persons affected thereby.
Central Bank v. Morfe (20 SCRA 507)

Facts:
First Mutual Savings and Loan Organization encourage savings among its members and extend financial
assistance thru loans. Central bank said that the Organization and others with similar nature are banking
institutions and that the Organization have never been authorized. Central Bank applied for Search
Warrant because of the Organization’s illegal banking operations without compliance with RA 337.

Issue:
Whether First Mutual Savings Loan Organization is illegally doing banking operations?

Ruling:
Yes. The law requiring compliance with certain requirements before anybody can engage in banking
obviously seeks to protect the public against actual, as well as potential, injury.

The records suggest clearly that the transactions objected to by the Bank constitute the general pattern
of the business of the Organization. Indeed, the main purpose thereof, according to its By-laws, is "to
extend financial assistance, in the form of loans, to its members," with funds deposited by them.

In the Articles of Incorporation and the By-laws, the funds are referred to as “savings” and that the
depositors thereof are designated as "members," but, even a cursory examination of said documents
will readily show that anybody can be a depositor and thus be a "participating member." In other words,
the Organization is, in effect, open to the "public" for deposit accounts, and the funds so raised may be
lent by the Organization. Moreover, the power to so dispose of said funds is placed under the exclusive
authority of the "founder members," and "participating members" are expressly denied the right to vote
or be voted for, their "privileges and benefits," if any, being limited to those which the board of trustees
may, in its discretion, determine from time to time. As a consequence, the "membership" of the
"participating members" is purely nominal in nature. This situation is fraught, precisely, with the very
dangers or evils which Republic Act No. 337 seeks to forestall, by exacting compliance with the
requirements of said Act, before the transactions in question could be undertaken.
Bañas v. Asia Pacific Finance Corporation (343 SCRA 527)

Facts:
C.G. Dizon Construction Inc. and Cenen Dizon seeks the reversal of the decision of the Court of Appeals
which affirms the decision of the trial court holding them liable to Asia Pacific Finance Corporation for
the default in payment of a Promissory Note secured by a Chattel Mortgage and a Continuing
Undertaking.

Petitioners admitted the genuineness and due execution of the Promissory Note, the Deed of Chattel
Mortgage and the Continuing Undertaking but claimed that since ASIA PACIFIC could not directly engage
in banking business, it proposed to them a scheme wherein plaintiff ASIA PACIFIC could extend a loan to
them without violating banking laws.

Petitioners insist that ASIA PACIFIC was organized as an investment house which could not engage in the
lending of funds obtained from the public through receipt of deposits. The disputed Promissory Note,
Deed of Chattel Mortgage and Continuing Undertaking were not intended to be valid and binding on the
parties as they were merely devices to conceal their real intention which was to enter into a contract of
loan in violation of banking laws.

Issue:
Whether the transaction between the Petitioners and Asia Pacific violated the banking laws?

Ruling:
No. An investment company refers to any issuer which is or holds itself out as being engaged or
proposes to engage primarily in the business of investing, reinvesting or trading in securities. Clearly, the
transaction between petitioners and respondent was one involving not a loan but purchase of
receivables at a discount, well within the purview of "investing, reinvesting or trading in securities"
which an investment company, like ASIA PACIFIC, is authorized to perform and does not constitute a
violation of the General Banking Act.

Indubitably, what is prohibited by law is for investment companies to lend funds obtained from the
public through receipts of deposit, which is a function of banking institutions. But here, the funds
supposedly "lent" to petitioners have not been shown to have been obtained from the public by way of
deposits, hence, the inapplicability of banking laws.
Banco de Oro v. Republic, G.R. No. 198756, August 16, 2016

Facts:
The Bureau of Treasury (BTr) in a notice announced the auction of 10- year Zero-Coupon Bonds
denominated as the Poverty Eradication and Alleviation Certificates or the PEACE Bonds on October 16,
2001, which the BTr states shall not be subject to 20% final withholding tax since the issue is limited to
19 buyers/lenders.

At the auction, Rizal Commercial Banking Corporation (RCBC) participated on behalf of Caucus of
Development NGO Networks (CODE-NGO) and won the bid.

Thus, bonds were issued to RCBC, who, as appointed issue manager and lead underwriter of CODE-NGO,
then sold and distributed said government bonds to petitioner-banks.

On October 7, 2011, barely 11 days before maturity of the PEACe Bonds, the BIR issued the following:

BIR Ruling No. 370- 201119 declaring that the PEACe Bonds, being deposit substitutes, were subject to
20% final withholding tax . Under this, DOF directed BTr to withhold 20% final tax from the face value of
the PEACe Bonds. BIR Ruling No. DA 378-201157 clarified that the final withholding tax should be
imposed and withheld not only on RCBC/CODE NGO but also on all subsequent holders of the Bonds.

Banco de Oro, et al. thus filed a petition for Certiorari, Prohibition and Mandamus under Rule 65 to the
Supreme Court contending the assailed 2011 BIR Ruling, with urgent application of TRO and/or writ of
Preliminary Injuction.

SC then issued a TRO enjoining the implementation of the BIR ruling, subject to the condition that 20%
FWT be delivered to the banks to be placed in escrow. SC Decision promulgated January 13, 2015, SC
granted petition and ruled that the number of lenders/ investors at every transaction determines
whether a debt instrument is a deposit substitute subject to 20% FWT. When at any transaction, funds
are simultaneously obtained from 20 or more lenders/investors, there is deemed to be public borrowing
and bonds are deemed deposit substitutes. Hence, seller is required to withhold 20% FWT on the
imputed interest income from the bonds.

The two BIR Rulings is void for disregarding the 20-lender rule provided in Section 22 (Y) of the Tax Code.
BTr reprimanded for its continued retention of the amount corresponding to 20% FWT. Separate
Motions for Reconsideration and clarification were filed both by BDO, et al and the Republic, et al.
Simex International (Manila), Inc. v. Court of Appeals (183 SCRA 360)

Facts:
Petitioner, a private corporation engaged in the exportation of food products, was a depositor
maintaining a checking account with respondent Traders Royal Bank. Petitioner deposited to its account
increasing its balance and subsequently, issued several checks but was surprised to learn that it had
been dishonored for insufficient funds. As a consequence, petitioner received demand letters from its
suppliers for the dishonored checks. Investigation disclosed that the deposit was not credited to it. The
error was rectified, and the dishonored checks were consequently paid. Petitioner demanded reparation
from respondent bank for its gross and wanton negligence but the later did not heed. Petitioner then
filed before the RTC which later held that respondent bank was guilty of negligence, but petitioner
nonetheless was not entitled to moral damages.

Issue:
Whether Petitioner is entitled to moral damages?

Ruling:
Yes. There is no question that the petitioner did sustain actual injury as a result of the dishonored checks
and that the existence of the loss having been established "absolute certainty as to its amount is not
required."

We shall recognize that the petitioner did suffer injury because of the private respondent's negligence
that caused the dishonor of the checks issued by it. The immediate consequence was that its prestige
was impaired because of the bouncing checks and confidence in it as a reliable debtor was diminished.
The private respondent makes much of the one instance when the petitioner was sued in a collection
case, but that did not prove that it did not have a good reputation that could not be marred, more so
since that case was ultimately settled.

As a business affected with public interest and because of the nature of its functions, the bank is under
obligation to treat the accounts of its depositors with meticulous care, always having in mind the
fiduciary nature of their relationship. In the case at bar, it is obvious that the respondent bank was
remiss in that duty and violated that relationship. What is especially deplorable is that, having been
informed of its error in not crediting the deposit in question to the petitioner, the respondent bank did
not immediately correct it but did so only one week later or twenty-three days after the deposit was
made. It bears repeating that the record does not contain any satisfactory explanation of why the error
was made in the first place and why it was not corrected immediately after its discovery. Such ineptness
comes under the concept of the wanton manner contemplated in the Civil Code that calls for the
imposition of exemplary damages.
Development Bank of the Philippines v. Commission on Audit (373 SCRA 356)

Facts:
The Philippine government, under the administration of then President Corazon C. Aquino, obtained
from the World Bank an Economic Recovery Loan. As a condition for granting the loan, the World Bank
required the Philippine government to rehabilitate the DBP and that DBP will now be required to have a
private external audit.

DBP Chairman Jesus Estanislao wrote to COA seeking approval of the DBP's engagement of a private
external auditor in addition to the COA. COA interposed no objection to the proposed scope of audit
services to be undertaken by the private external auditors to be engaged by the DBP. Board of Directors
of the DBP approved the hiring of Joaquin Cunanan & Co. as the DBP's private external auditor.

However, a change in the leadership of the COA suddenly reversed the course of events. The new COA
Chairman wrote the DBP Chairman that the COA resident auditors were under instructions to disallow
any payment to the private auditor whose services were unconstitutional, illegal and unnecessary
declaring that the COA has the sole and exclusive power to examine and audit government banks.

Issue:
Does the Constitution vest in the COA the sole and exclusive power to examine and audit government
banks?
Is there an existing statute that prohibits government banks from hiring private auditors in addition to
the COA?

Ruling:
No. The clear and unmistakable conclusion from a reading of the entire Section 2 is that the COA's
power to examine and audit is non-exclusive. On the other hand, the COA's authority to define the
scope of its audit, promulgate auditing rules and regulations, and disallow unnecessary expenditures
is exclusive.

No. COA has only general jurisdiction. The New Central Bank Act (RA No. 7653) authorizes expressly the
Monetary Board to conduct periodic or special examination of all banks.

Authority to disallow expenditure only COA

Facts:
An Information for violation of Section 83 of Republic Act No. 337 (RA 337) or the General Banking Act,
was filed against Go for allegedly borrowing the deposits or funds of the Orient Bank and/or acting as a
guarantor, endorser or obligor for the bank’s loans to other persons.

Go argued that the second paragraph of Section 83 allowed banks to extend credit accommodations to
their directors, officers, and stockholders, provided it is "limited to an amount equivalent to the
respective outstanding deposits and book value of the paid-in capital contribution in the bank."

Issue:
Whether Go violated Section 83 of Republic Act No. 337

Ruling:
Yes. The language of the law is broad enough to encompass either act of borrowing or guaranteeing, or
both. While the first paragraph of Section 83 is penal in nature, and by principle should be strictly
construed in favor of the accused, the Court is unwilling to adopt a liberal construction that would
defeat the legislature’s intent in enacting the statute. The objective of the law should allow for a
reasonable flexibility in its construction. Section 83 of RA 337, as well as other banking laws adopting the
same prohibition, was enacted to ensure that loans by banks and similar financial institutions to their
own directors, officers, and stockholders are above board. Banks were not created for the benefit of
their directors and officers; they cannot use the assets of the bank for their own benefit, except as
may be permitted by law. Congress has thus deemed it essential to impose restrictions on borrowings
by bank directors and officers in order to protect the public, especially the depositors. Hence, when the
law prohibits directors and officers of banking institutions from becoming in any manner an obligor of
the bank (unless with the approval of the board), the terms of the prohibition shall be the standards to
be applied to directors’ transactions such as those involved in the present case.
Busuego v. Court of Appeals

Facts:
The 16th regular examination of the books and records of the PESALA was conducted a team of Central
Bank examiners. Several anomalies and irregularities committed by the petitioners were uncovered
among which are:
1. Questionable investment in a multi-million peso real estate project (Pesalaville).
2. Conflict of interest in the conduct of business.
3. Unwarranted declaration and payment of dividends.
4. Commission of unsound and unsafe business practices.

Central Bank Supervision and Examination Section Department sent a letter to the Board of Directors of
PESALA inviting them to a conference but petitioners did not attend such conference.

Renato Lim wrote the PESALA's Board of Directors explaining his side on the said examination of
PESALA's records and requesting that a copy of his letter be furnished the CB, which was forthwith made
by the Board.

Monetary Board adopted and issued MB Resolution No. 805 which, among others, included the
petitioners in the Sector’s watchlist and to prevent them from holding positions in any institution under
Central Bank supervision.

Issue:
Whether petitioners were deprived of their right to a notice and the opportunity to be heard by the
Monetary Board?
Whether the Monetary Board Resolution No. 805 is null and void for being violative of petitioner’s right
to due process?

Ruling:
No. Contrary to petitioners' allegation, it appears that the requisites of procedural due process were
complied with by the Monetary Board before it issued the questioned Monetary Board Resolution No.
805. Firstly, the petitioner were invited to a conference to discuss the findings gathered during the 16th
regular examination of PESALA's records. (The requirement of a hearing is complied with as long as
there was an opportunity to be heard, and not necessarily that an actual hearing was conducted.)
Secondly, the Monetary Board considered the evidence presented. Thirdly, fourthly, and fifthly,
Monetary Board Resolution No. 805 was adopted on the basis of said findings unearthed during the 16th
regular examination of PESALA's records and derived from the letter-comments submitted by the
parties. Sixthly, the members of the Monetary Board acted independently on their own in issuing
subject Resolution, placing reliance on the said findings made during the 16th regular examination.
Lastly, the reason for the issuance of Monetary Board Resolution No. 805 is readily apparent, which is to
prevent further irregularities from being committed and to prosecute the officials responsible therefor.

No. Central Bank of the Philippines (now Bangko Sentral ng Pilipinas), through the Monetary Board, is
the government agency charged with the responsibility of administering the monetary, banking and
credit system of the country and is granted the power of supervision and examination over banks and
non-bank financial institutions performing quasi-banking functions of which savings and loan
associations, such as PESALA, from part of.
The Central Bank, through the Monetary Board, is empowered to conduct investigations and examine
the records of savings and loan associations. If any irregularity is discovered in the process, the
Monetary Board may impose appropriate sanctions, such as suspending the offender from holding office
or from being employed with the Central Bank or placing the names of the offenders in a watchlist.

We sustain the ruling of the Court of Appeals that petitioners' suspension was only preventive in nature
and therefore, no notice or hearing was necessary. Until such time that the petitioners have proved
their innocence, they may be preventively suspended from holding office so as not to influence the
conduct of investigation, and to prevent the commission of further irregularities.
General Banking Law, Section 2. Declaration Of Policy. - The State recognizes the vital role of banks
providing an environment conducive to the sustained development of the national economy and the
fiduciary nature of banking that requires high standards of integrity and performance. In furtherance
thereof, the State shall promote and maintain a stable and efficient banking and financial system that is
globally competitive, dynamic and responsive to the demands of a developing economy.

1. BPI vs. IAC, G.R. No. 69162 February 21, 1992

Spouse Canlas opened a joint current account with Petitioner bank. By mistake, the new accounts teller
of the bank placed the old personal account of Arthur on the deposit slip and miscredited the amount to
Arthur’s personal account with the bank. Thereafter, Vivienne issued 2 checks, 1 of which was
dishonored for insufficient funds. As a result, Spouses Canlas filed for damages.

Whether the bank should be held liable for its negligence?

Yes. The court stressed the fiduciary relationship between a bank and its depositors.

The bank is not expected to be infallible but, as correctly observed by respondent Appellate Court, in
this instance, it must bear the blame for not discovering the mistake of its teller despite the established
procedure requiring the papers and bank books to pass through a battery of bank personnel whose duty
it is to check and countercheck them for possible errors. Apparently, the officials and employees tasked
to do that did not perform their duties with due care, as may be gathered from the testimony of the
bank's lone witness, Antonio Enciso, who casually declared that "the approving officer does not have
to see the account numbers and all those things. Those are very petty things for the approving manager
to look into" (p. 78, Record on Appeal). Unfortunately, it was a "petty thing," like the incorrect account
number that the bank teller wrote on the initial deposit slip for the newly-opened joint current account
of the Canlas spouses, that sparked this half-a-million-peso damage suit against the bank.

While the bank's negligence may not have been attended with malice and bad faith, nevertheless, it
caused serious anxiety, embarrassment and humiliation to the private respondents for which they are
entitled to recover reasonable moral damages. The award of reasonable attorney's fees is proper for
the private respondents were compelled to litigate to protect their interest (Art. 2208, Civil Code).
However, the absence of malice and bad faith renders the award of exemplary damages improper.
2. BPI vs. Court of Appeals, G.R. No. 112392, February 29, 2000

Benjamin deposited a check with amount of 2,500 dollars to BPI. It appears that said check belonged to
a certain Henry who requested him to deposit the same by way of accommodation for the purpose of
clearing. Benjamin signed a blank withdrawal slip. Before the check was cleared, a certain Ruben was
able to withdraw 2541.67 dollars using the blank check which was duly initialed by the branch assistant
manager. Well Fargo Bank informed BPI that the check deposited was a counterfeit.
BPI demanded the return of the 2,500 dollars to which Benjamin replied that he merely signed an
authority to withdraw said deposit subject to its clearing and that BPI should not have allowed the
withdrawal since his passbook was not presented.

Whether BPI was grossly negligent in allowing the withdrawal?

Yes. By depositing the check to BPI, respondent was, in a way, merely designating it as the collecting
bank. The bank should have credited the amount to respondent’s account only after the drawee bank
shall have paid or cleared the check. Also, BPI did not follow its own rules of presenting the passbook
when withdrawing an amount.
3. Consolidated Bank vs. Court of Appeals, G.R. No. 138569, September 11, 2003

LC Diaz instructed its messenger, Ismael, to deposit cash and check with Solid Bank. Ismael presented to
teller 6, two deposit slips and the passbook. Since the transaction took time, Calapre left the passbook
with Solid Bank and went to Allied Bank to make another deposit. When Calapre returned to retrieve
the passbook, the teller informed him that somebody got the passbook. The following day, LC Diaz
learned of an unauthorized withdrawal amounting to 300k. The withdrawal slip bore the signatures of
their authorized signatories who denied signing the withdrawal slip. LC Diaz demanded the return of the
money to which Solid Bank refuse.

Whether Solid Bank is liable for the return of the money?

Yes. Solid Bank is bound by the negligence of its employees under the principle of respondeat superior.
The bank’s teller failed to exercise a high degree of diligence required in dealing with the bank’s
depositor for failure to return the passbook to Calapre, the authorized representative of LC Diaz.

We do not apply the doctrine of last clear chance to the present case. Solidbank is liable for breach of
contract due to negligence in the performance of its contractual obligation to L.C. Diaz. This is a case of
culpa contractual, where neither the contributory negligence of the plaintiff nor his last clear chance to
avoid the loss, would exonerate the defendant from liability.
4. Goyanko, Jr. v. UCPB, G.R. No. 179096, February 06, 2013

Goyanko Sr invested 2M with PALII. His legitimate and illegitimate family presented conflicting claims to
PALII for the release of the investment. Pending investigation of the claims, PALII deposited the
proceeds of investment with UCPB under the name of Phil Asia ITF Heirs of Goyanko Sr.

Thereafter, UCPB allowed PALII to withdraw 1.5M. Petitioner Goyanko Jr. demanded UCPB to restore
the amount withdrawn by PALII to which it refused. Petitioner then filed a complaint against UCPB.

Whether UCPB should be held liable for the amount withdrawn?

No. The word ITF on the account did not result in a trust agreement. The account opened by PALII was
an ordinary savings account. The savings account was between the bank and PALII only and by allowing
the withdrawal of PALII, UCPB was merely performing its contractual obligation under the saving deposit
agreement. The bank’s duty is to its creditor-depositor and not to third persons.
5. Philippine Banking Corporation vs. Court of Appeals, G.R. No. 127469, January 15, 2004

Leonilo was persuaded by Florencio, one of the officials of the petitioner bank, to deposit money with
the bank. Leonila claimed that he opened two time deposits with the bank. The bank issued an on
official receipt for the 1st time deposit and a letter certification for the 2nd.

Leonilo wanted to withdraw from the bank Florencio convinced him to open domestic letters of credit.
Leonilo was to give 30% of marginal deposit of the total amount of the letters of credit and the time
deposits would secure the 70%. Marcos claimed that he had a total obligation of 595,875 representing
70% of the letters of credit. Leonilo expected the bank to off-set from his time deposit, his remaining
obligation. Petitioner bank alleged that Leonilo defaulted the payment of the promissory note he
executed to secure the loans he made with the bank and applied the time deposit to pay the obligation.
Whether the bank is liable for the off setting of Leonilo’s time deposit with the promissory note?

Yes. The BANK is liable to Marcos for offsetting his time deposits with a fictitious promissory note. The
existence of Promissory Note No. 20-979-83 could have been easily proven had the BANK presented the
original copies of the promissory note and its supporting evidence. In lieu of the original copies, the
BANK presented the "machine copies of the duplicate" of the documents. These substitute documents
have no evidentiary value. The BANK’s failure to explain the absence of the original documents and to
maintain a record of the offsetting of this loan with the time deposits bring to fore the BANK’s dismal
failure to fulfill its fiduciary duty to Marcos.

Whether it was the BANK’s negligence and inefficiency or Pagsaligan’s misdeed that deprived Marcos of
the amount due him will not excuse the BANK from its obligation to return to Marcos the correct
amount of his time deposits with interest. The duty to observe "high standards of integrity and
performance" imposes on the BANK that obligation. The BANK cannot also unjustly enrich itself by
keeping Marcos’ money.

Assuming Pagsaligan was behind the spurious promissory note, the BANK would still be accountable to
Marcos. We have held that a bank is liable for the wrongful acts of its officers done in the interest of
the bank or in their dealings as bank representatives but not for acts outside the scope of their
authority.
6. Samsung Construction Company Philippines, Inc. vs. Far East Bank, G.R. NO. 129015, August 13,
2004

Samsung Construction maintained a current account with FEBTC with Jong as the sole signatory while
the checks remained in the custody of the company’s accountant, Kyu.

A certain Roberto presented for payment a check amounting to 999,500 payable to cash against the
account of Samsung Construction. The standard procedure was followed by the bank in ascertaining the
genuineness of the signature on the check. Also, Sempio, an employee of the petitioner who was
present at the bank when the transaction happened, vouched for the genuineness of the check.

Petitioner, alleging that there was a forgery, demanded the return of the amount withdrawn out of its
account.

Whether the bank should bear the loss from the forged check?

Yes. The general rule remains that the drawee who has paid upon the forged signature bears the loss.
There was no evidence to establish that Samsung Construction was negligent in safeguarding its blank
checks.

In this case, not only did the amount in the check nearly total one million pesos, it was also payable to
cash. That latter circumstance should have aroused the suspicion of the bank, as it is not ordinary
business practice for a check for such large amount to be made payable to cash or to bearer, instead of
to the order of a specified person. Moreover, the check was presented for payment by one Roberto
Gonzaga, who was not designated as the payee of the check, and who did not carry with him any
written proof that he was authorized by Samsung Construction to encash the check. Gonzaga, a
stranger to FEBTC, was not even an employee of Samsung Construction. These circumstances are
already suspicious if taken independently, much more so if they are evaluated in concurrence. Given the
shadiness attending Gonzaga’s presentment of the check, it was not sufficient for FEBTC to have merely
complied with its internal procedures, but mandatory that all earnest efforts be undertaken to ensure
the validity of the check, and of the authority of Gonzaga to collect payment therefor.
7. Heirs of Eduardo Manlapat vs. Court of Appeals, G.R. NO. 125585, June 8, 2005

Eduardo sold a portion of his land to Ricardo before the land was titled. This was evidenced by a Deed of
Sale. Pursuant to a free patent, OCT was issued in the name of Eduardo. Eduardo mortgaged the
property including the portion sold to Ricardo to obtain a loan from RBSP. Owner’s duplicate certificate
was deposited with the bank. Heirs of Ricardo, upon learning of their right to the subject land, went to
RBSP to borrow the duplicate copy of the title to which the manager of the bank obliged after the heirs
showed the Deed of Sale. Heirs of Ricardo was able to obtain 2 new certificate of titles. They returned to
the bank the title in the name of Eduardo. Eduardo’s heirs learned of the dealing of Ricardo’s heirs
hence this case.

Whether the bank was liable for damages?

Yes. A mortgagee-bank has no right to deliver to any stranger any property entrusted to it other than
to those contractually and legally entitled to its possession. The bank should not have allowed
complete strangers to take possession of the owner’s duplicate certificate even if the purpose is merely
for photocopying for a danger of losing the same is more than imminent.

Such act constitutes manifest negligence on the part of the bank which would necessarily hold it liable
for damages.
8. Cruz vs. Bancom Finance Corporation, G.R. No. 147788, March 19, 2002

Norma paid 25k to Fr. Cruz as earnest money for an agricultural land which the latter owned with the
agreement that title would be transferred upon payment of 675k of the balance. Fr. Cruz executed a
document of sale in favor of Candelaria who obtain a bank loan in her name using the subject land as
collateral. Candelaria then executed a Deed of Absolute Sale in favor of Norma. It appeared in both
document that the sale of the land was only for 150k. Pursuant to the sale, Norma obtained title to the
land.

Candelaria undertook to pay the balance of the actual price of the land. In a Special Agreement, Norma
assumed Candelaria’s obligation. Unknown to Fr. Cruz, Norma obtained a loan from Bancom over the
subject property now in her name. Norma failed to pay Fr. Cruz and defaulted in her payment to the
bank. Fr. Cruz filed for reconveyance of the property and Bancom claimed for priority as mortgagee in
good faith. The subject land was foreclosed and Bancom was declared the highest bidder and was issued
the certificate of sale over the land.

Whether the bank was a mortgagee in good faith?

No. As a general rule, every person dealing with registered land may safely rely on the correctness of
the certificate of title and is no longer required to look behind the certificate in order to determine the
actual owner. This rule is, however, subject to the right of a person deprived of land through fraud to
bring an action for reconveyance, provided the rights of innocent purchasers for value and in good faith
are not prejudiced. An innocent purchaser for value or any equivalent phrase shall be deemed, under
Section 38 of the same Act, 32 to include an innocent lessee, mortgagee or any other encumbrancer for
value.

Respondent claims that, being an innocent mortgagee, it should not be required to conduct an
exhaustive investigation on the history of the mortgagor’s title before it could extend a loan.

Respondent, however, is not an ordinary mortgagee; it is a mortgagee-bank. As such, unlike private

First, at the time the property was mortgaged to it, it failed to conduct an ocular inspection. Second,
respondent was already aware that there was an adverse claim and notice of lis pendens annotated on
the Certificate of Title when it registered the mortgage
9. Philippine National Bank vs. Pike, G.R. No. 157845, September 20, 2005

Norman opened a US Dollar Savings Account with PNB for which he was issued a corresponding
passbook. It appears that before Norman left for abroad to work, it was alleged by the bank that he
made a verbal instruction to honor all withdrawals by his Talent Manager Joy who shall present pre-
signed withdrawal slips bearing his signature. Joy made 2 unauthorized withdrawals amounting to 7,500
dollars. Norman, upon his return to the Phil, demanded the same to be returned but PNB refused.
Hence, this case.

Whether the bank was negligent in allowing withdrawals with pre-signed checks?

Yes. PNB was utterly remiss in protecting the bank's client, as well as the bank itself, when he allowed
an account holder to make it appear as if he was the one actually withdrawing from an account and
actually receiving the withdrawn amount. Ordinarily, banks allow withdrawal by someone who is not
the account holder so long as the account holder authorizes his representative to withdraw and receive
from his account by signing on the space provided particularly for such transactions, usually found at the
back of withdrawal slips.

The witness approved the withdrawal transaction without asking for any proof of identification for the
reason that: 1) Davasol was in possession of a pre-signed withdrawal slip; and 2) the witness 'recognized
the signature of respondent Pike ' even after admitting that he did not bother to counter check the
signature on the slip with the specimen signature card
10. Cadiz vs. Court of Appeals, G.R. No. 153784, October 25, 2005

Petitioners were the employees of the Respondent bank. It was alleged that the Petitioners diverted the
funds from the account of Alqueza to an account under the name of Sonia Alfiscar. Respondent bank
dismissed the petitioners. Petitioners filed an illegal dismissal case before the Labor Arbiter which ruled
in favor of them and ordered their reinstatement. Labor Arbiter ruled that petitioners had miscoded
several deposit slips and characterized the errors as mere procedural inadequacies which could have
been prevented had management exercised greater control over their employees.

Whether the bank was negligent for having inadequate control over the security of its operations?

No. The miscoding of deposit slips cannot be downplayed as "mere procedural inadequacies.” It is such
miscoding that precipitated the fraudulent withdrawals. Whatever liability or responsibility was
expected of the bank stands as an issue separate from the liability of the recreant bank employees.
Even assuming that the bank observed less-than-ideal controls over the security of its operations, such
laxity does not serve as the carte blanche signal for the bank employees to take advantage of
safeguard control lapses and perpetrate chicanery on their employer.
11. Far East Bank and Trust Company vs. Pacilan, Jr., G.R. No. 157314, July 29, 2005

Pacilan opened a current account with Petitioner bank. Sometime in March 1988, Pacilan issued a check
for 680. Upon presentment, the check was dishonored by the bank. The next day, Pacilan deposited 800
to increase his deposit. When Pacilan verified with the bank about the dishonored check, he discovered
that his account was closed on the ground that it was improperly handled. Pacilan filed a case for
damages alleging that the closure of his account was unjustified. Petitioner answered that Pacilan’s
account was subject to the rules and regulations of the bank that provides that the bank reserves the
right to close an account if the depositor frequently issues checks against insufficient deposits. They
showed that Pacilan had hundreds of instances where the account was overdrawn due to issuance of
checks against insufficient funds and that Pacilan also signed checks with different signatures from the
specimen on file.

Whether the bank acted in good faith when it closed Pacilan’s account?

Yes. The elements of abuse of rights are the following: (a) the existence of a legal right or duty; (b) which
is exercised in bad faith; and (c) for the sole intent of prejudicing or injuring another.

The 2nd and 3rd elements are wanting in the present case. No malice or bad faith could be imputed on
petitioner bank for so acting since the records bear out that the respondent had indeed been improperly
and irregularly handling his account not just a few times but hundreds of times. Under the
circumstances, petitioner bank could not be faulted for exercising its right in accordance with the
express rules and regulations governing the current accounts of its depositors. Upon the opening of his
account, the respondent had agreed to be bound by these terms and conditions.

Damnum absque injuria – loss or damage without injury

Spouses Cabamongan opened a joint and/or foreign currency time deposit in trust for their sons with
Petitioner Bank. Prior to maturity, a person claiming to be Carmelita pre-terminated the foreign
currency account by presenting identification documents. The person failed to surrender the original
Certificate of Deposit and had to execute a notarized release and waiver document in favor of the bank
pursuant to the bank’s internal procedure. The release and waiver document were not notarized but
the person claiming to be Carmelita was able to withdraw the account, nonetheless. Petitioners, upon
learning of the unauthorized withdrawal, filed a case for specific performance with damages for the
return of the deposited amount with the bank.

Whether the bank was negligent in allowing the withdrawal of the foreign currency time deposit?

Yes. It was sufficiently shown that the signatures in the forms for pre-termination were forgeries. The
bank failed to detect the forgeries despite noticing discrepancies in the signature and photograph of
the person claiming to be Carmelita and the failure to surrender the original Certificate of time
deposit.

The bank was also grossly negligent when it allowed the pre-termination without the notarized waiver in
the absence of the original Certificate of time deposit.
13. Tan vs. Court of Appeals, G.R. No. 108555, December 20, 1994

Ramon secured a cashier’s check from PCIB amounting to 30k. He deposited it with RCBC using local
check deposit slip instead of a regional check deposit slip. RCBC erroneously sent it to Central Bank for
clearing. RCBC debited the amount covered by the cashier’s check from the account of Ramon. RCBC
did not inform Ramon of this incident.

Relying on the knowledge that cashier’s check was good as cash, Ramon issued 2 checks which was
presented to RCBC 45 days after the cashier’s check was deposited. RCBC dishonored the checks for
insufficiency of funds. Ramon filed a complaint for damages alleging to have suffered humiliation.

Whether the bank was negligent?

Yes. Petitioner’s use of the wrong deposit slip was not the proximate cause of the case. Bank
transactions pass through a succession of bank personnel whose duty is to check and countercheck
transactions for possible errors.

Also, the Bank had ample time to have cleared the cashier’s check after the misroute of the check to
Central Bank.

Further, there was no reason why RCBC did not exercised its discretion in favor of Ramon since it was a
cashier’s check of PCIB. Both banks are members of the same clearing house group.
14. Metropolitan Bank & Trust Company vs. Court of Appeals, G.R. No. 112576, October 26, 1994

MBTC received a credit memo amounting to 304k credited to the account of RBPG. Isabel, the president
and director of RBPG, issued several checks on the basis of the credit memo. Said checks were
dishonored upon presentment with PBC for insufficiency of funds. Maris informed Isabel, who was then
in Hong Kong on a business-vacation trip, that the Assistant Cashier of MBTC berated her about the
bouncing checks. Isabel went back to the Phil for a re-examination of the records regarding the credit
memo. Isabel also got berated by an employee of MBTC. MBTC also issued 4 debit memos against the
account of RBPG.

Whether MBTC is liable for damages.

Yes. As borne out by the records, the dishonoring of the respondent’s checks committed through
negligence by the petitioner bank on April 6, 1982 was rectified only on April 15, 1992 or nine (9) days
after receipt of the credit memo. Clearly, petitioner bank was remiss in its duty and obligation to treat
private respondents’ account with the highest degree of care, considering the fiduciary nature of their
relationship. The bank is under obligation to treat the accounts of its depositors with meticulous care,
whether such account consists only of a few hundred pesos or of millions. It must bear the blame for
failing to discover the mistake of its employee despite the established procedure requiring bank
papers to pass through bank personnel whose duty it is to check and countercheck them for possible
errors. Responsibility arising from negligence in the performance of every kind of obligation is
demandable. While the bank’s negligence may not have been attended with malice and bad faith,
nevertheless, it caused serious anxiety, embarrassment and humiliation to private respondents for
which they are entitled to recover reasonable moral damages. (messenger’s fault because he was not
able to deliver the credit advice to the department in charge of processing)

The damage to private respondents’ reputation and social standing entitles them to moral damages.
Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social humiliation and similar injury.
15. Philippine National Bank vs. Court of Appeals, G.R. No. 116181, April 17, 1996

This case was filed by Carmelo when petitioner bank refused to honor his Manager’s check worth 1M
because the bank alleged that there was shortage of Carmelo’s payment for the check. Carmelo also
stated that the refusal of the bank to honor his checks besmirched his reputation as a real estate
businessman because he was not able to execute a deal for the purchase of a house in Baguio.

Whether the bank was negligent?

Yes. In this case, the money counter who, among her other duties, is in charge of counting the money
received from a client purchasing a manager's check did not perform her duty with diligence and due
care. This may be gathered from her testimony that she did not wait for the counting machine to finish
counting the money for the plaintiff is a VIP client and he was in a hurry as he was tapping the window.
Equally negligent is Reynaldo Castor for not doing anything when he noticed that their money
counters who entertained the plaintiff were rattled. From these unfolded facts, the so-called honest
mistake pleaded is therefore misplaced and perforced, defendant must suffer the consequences of its
own negligent acts.
16. Tetangco, Jr. v. Commission on Audit, G.R. No. 215061, June 6, 2017

COA disallowed the Extraordinary and Miscellaneous Expenses of the ex officio members of the MBM.
Petitioners were the participants in the processing and approval of the EME. Pursuant to an audit
conducted by the COA, petitioners received additional EMEs other than that appropriated under the
GAA as cabinet member.

Whether the COA gravely abused its discretion when it disallowed the EMEs?

No. In the absence of grave abuse of discretion; the factual findings of the COA, which are undoubtedly
supported by the evidence on record, must be accorded great respect and finality. COA, as the duly
authorized agency to adjudicate money claims against government agencies and instrumentalities has
acquired special knowledge and expertise in handling matters falling under its specialized jurisdiction.

The COA pointed out that the Petitioners MBM, in approving the irregular allowance, were remiss in
their duty to protect the interest of the Bank. x x x they ought to know that the ex officio members of
the Monetary Board were already receiving the same allowance from their respective Departments,
hence, they were no longer entitled to the additional EMEs.

The patent disregard of several case laws and COA directives, as in this case. amounts to gross
negligence; hence, petitionerk ' cannot be presumed in good faith.
Busuego v. Court of Appeals

Facts:
The 16th regular examination of the books and records of the PESALA was conducted by a team of
Central Bank examiners. Several anomalies and irregularities committed by the petitioners were
uncovered among which are:
1. Questionable investment in a multi-million peso real estate project (Pesalaville).
2. Conflict of interest in the conduct of business.
3. Unwarranted declaration and payment of dividends.
4. Commission of unsound and unsafe business practices.

Central Bank Supervision and Examination Section Department sent a letter to the Board of Directors of
PESALA inviting them to a conference, but petitioners did not attend such conference.

Renato Lim wrote the PESALA's Board of Directors explaining his side on the said examination of
PESALA's records and requesting that a copy of his letter be furnished to the CB, which was forthwith
made by the Board.

Monetary Board adopted and issued MB Resolution No. 805 which, among others, included the
petitioners in the Sector’s watchlist and to prevent them from holding positions in any institution under
Central Bank supervision.

Issue:
Whether petitioners were deprived of their right to a notice and the opportunity to be heard by the
Monetary Board?
Whether the Monetary Board Resolution No. 805 is null and void for being violative of petitioner’s right
to due process?

Ruling:
No. The requisites of procedural due process were complied by the Monetary Board before it issued the
questioned Monetary Board Resolution No. 805. Firstly, the petitioners were invited to a conference to
discuss the findings gathered during the 16th regular examination of PESALA's records. (The
requirement of a hearing is complied with as long as there was an opportunity to be heard, and not
necessarily that an actual hearing was conducted.) Secondly, the Monetary Board considered the
evidence presented. Thirdly, fourthly, and fifthly, Monetary Board Resolution No. 805 was adopted on
the basis of said findings unearthed during the 16th regular examination of PESALA's records and
derived from the letter-comments submitted by the parties. Sixthly, the members of the Monetary
Board acted independently on their own in issuing subject Resolution, placing reliance on the said
findings made during the 16th regular examination. Lastly, the reason for the issuance of Monetary
Board Resolution No. 805 is readily apparent, which is to prevent further irregularities from being
committed and to prosecute the officials responsible therefor.

No. Central Bank of the Philippines (now Bangko Sentral ng Pilipinas), through the Monetary Board, is
the government agency charged with the responsibility of administering the monetary, banking and
credit system of the country and is granted the power of supervision and examination over banks and
non-bank financial institutions performing quasi-banking functions of which savings and loan
associations, such as PESALA, from part of.
The Central Bank, through the Monetary Board, is empowered to conduct investigations and examine
the records of savings and loan associations. If any irregularity is discovered in the process, the
Monetary Board may impose appropriate sanctions, such as suspending the offender from holding office
or from being employed with the Central Bank or placing the names of the offenders in a watchlist.

We sustain the ruling of the Court of Appeals that petitioners' suspension was only preventive in nature
and therefore, no notice or hearing was necessary. Until such time that the petitioners have proved
their innocence, they may be preventively suspended from holding office so as not to influence the
conduct of investigation, and to prevent the commission of further irregularities.
Prudential Bank v. Court of Appeals, G.R. No. 108957, June 14, 1993

Aurora invested 200k in Central bank bills with Petitioner bank. The amount to be invested was
withdrawn from her savings account. The transaction was evidenced by a Confirmation of Sale and a
Debit Memo and was issued by Susan. Upon maturity, Aurora returned to the bank to renew her
investment, but this time Susan asked her to sign a Withdrawal slip. Confirmation of Sale and Debit
Memo was again received by Aurora.

Thereafter, Aurora returned to the bank to withdraw her 200k but was informed that her investment
appeared to have already been withdrawn.

Aurora filed a complaint for breach of contract and demanded the return of her money. The bank
denied liability insisting that Aurora had already withdrawn her investment.

Whether the bank is liable for the amount withdrawn?

Yes. A bank is liable for wrongful acts of its officers done in the interests of the bank or in the course of
dealings of the officers in their authority. A bank holding out its officers and agent as worthy of
confidence will not be permitted to profit by the frauds they may thus be enabled to perpetuate in the
apparent scope of their employment; nor will it be permitted to shirk its responsibility for such frauds,
even though no benefit may accrue to the bank therefrom. Accordingly, a banking corporation is liable
to innocent third persons where the representation is made in the course of its business by an agent
acting within the general scope of his authority even though, in the particular case, the agent is
secretly abusing his authority and attempting to perpetrate a fraud upon his principal or some other
person, for his own ultimate benefit.
First Philippine International Bank v. Court of Appeals, G.R. No. 115849, January 24, 1996

Respondents made a formal offer to purchase a property acquired by the Petitioner bank from a
foreclosure which was previously owned by BYME. The offer was for 3.5M. Petitioner bank, through
Mercurio Rivera, Manager of the Property Management Department of the bank, made a formal reply
with a counteroffer of 5.5M on the subject property. Respondent made a reply and offered to pay 4.250
for the property but no reply was made by the bank. Respondent send a letter through Rivera accepting
the offer of the bank of 5.5M as purchase price of the property.

Petitioner bank was place under conservatorship. Several demand letters were made by Respondent on
the bank to consummate and execute the perfected contract of sale. Respondents also tendered
payment of the 5.5M purchase price but Petitioner bank refused to receive the payment and the letter.
Petitioner bank claimed that through the Acting Conservator, the bank repudiated the authority of
Mercurio Rivera and claimed that his dealings with the plaintiffs, particularly his counteroffer of P5.5
Million are unauthorized or illegal.

Respondents filed a suit for specific performance with damages against the bank on the basis that the
transaction with the bank resulted in a perfected contract of sale, The Bank took the position that there
was no such perfected sale because the defendant Rivera is not authorized to sell the property, and that
there was no meeting of the minds as to the price.

May the Conservator Revoke the Perfected and Enforceable Contract?

No. No evidence that the Conservator, at the time the contract was perfected, actually repudiated or
overruled said contract of sale. The Bank's acting conservator at the time, Rodolfo Romey, never
objected to the sale of the property to Demetria and Janolo. What petitioners are really referring to is
the letter of Conservator Encarnacion, who took over from Romey after the sale was perfected which
unilaterally repudiated — not the contract — but the authority of Rivera to make a binding offer — and
which unarguably came months after the perfection of the contract.

Central bank gives only such powers to the conservator that relates to preservation of the assets of the
bank, reorganization of the management and restoration of viability. Such powers cannot extend to
the post-facto repudiation of perfected transactions, otherwise they would infringe against the non-
impairment clause of the Constitution.

Section 28-A merely gives the conservator power to revoke contracts that are, under existing law,
deemed to be defective — i.e., void, voidable, unenforceable or rescissible. Hence, the conservator
merely takes the place of a bank's board of directors. What the said board cannot do — such as
repudiating a contract validly entered into under the doctrine of implied authority — the conservator
cannot do either. Ineluctably, his power is not unilateral and he cannot simply repudiate valid
obligations of the Bank. His authority would be only to bring court actions to assail such contracts — as
he has already done so in the instant case. A contrary understanding of the law would simply not be
permitted by the Constitution. Neither by common sense. To rule otherwise would be to enable a failing
bank to become solvent, at the expense of third parties, by simply getting the conservator to unilaterally
revoke all previous dealings which had one way or another or come to be considered unfavorable to the
Bank, yielding nothing to perfected contractual rights nor vested interests of the third parties who had
dealt with the Bank.
Conservator – when it is needed – bank is in a state of continuing inability or unwillingness to maintain
a state of liquidity deemed adequate to protect the interest of depositors and creditors, the Monetary
Board may appoint a conservator to take charge of the assets, liabilities, and the management of that
institution.
BPI Family Savings Bank, Inc. v. First Metro Investment Corporation, G.R. No. 132390

FMIC, through its Executive Vice President, Antonio Ong, opened current account with Metrobank and
deposited 100M upon the request of his friend who was closely related with the Branch Manager, Jaime
Sebastian, of the bank to increase the deposit level in the Branch. Petitioner bank guaranteed the
payment of 17% per annum interest of 100M. FMIC assured that it will maintain its deposit for a period
of 1 year.

On the basis of an Authority to Debit signed by Ong and Ma. Theresa David, Senior Manager of FMIC, BPI
FB transferred P80 million from FMICs current account to the savings account of Tevesteco.

FMIC denied having authorized the transfer of its funds to Tevesteco, claiming that the signatures of
Ong and David were falsified. Thereupon, to recover immediately its deposit, FMIC issued BPI FB check
no. 129077 for P86,057,646.72 payable to itself and drawn on its deposit with BPI FB SFDM branch. But
upon presentation for payment on September 13, 1989, BPI FB dishonored the check as it was drawn
against insufficient funds.

In the Civil Case filed by FMIC, Petitioner bank was ordered to pay the Respondent.

Whether Branch Manager, Jaime Sebastian, clearly overstepped his authority in entering into such an
agreement with FMIC?

No. A bank holding out its officers and agent as worthy of confidence will not be permitted to profit by
the frauds they may thus be enabled to perpetrate in the apparent scope of their employment; nor will
it be permitted to shirk its responsibility for such frauds, even though no benefit may accrue to the bank
therefrom. Accordingly, a banking corporation is liable to innocent third persons where the
representation is made in the course of its business by an agent acting within the general scope of his
authority even though the agent is secretly abusing his authority and attempting to perpetrate a fraud
upon his principal or some other person for his own ultimate benefit.

Petitioner may not impute negligence on the part of respondent’s representative in failing to find out
the scope of authority of petitioners Branch Manager. Indeed, the public has the right to rely on the
trustworthiness of bank managers and their acts. Obviously, confidence in the banking system, which
necessarily includes reliance on bank managers, is vital in the economic life of our society.

Significantly, the transaction was acknowledged and ratified by petitioner when it paid respondent in
advance the interest for one year. Thus, petitioner is estopped from denying that it authorized its
Branch Manager to enter into an agreement with respondents Executive Vice President concerning the
deposit with the corresponding 17% interest per annum.
Agan, Jr., et al. vs. PIATCO, et al., G.R. No. 155001, May 5, 2003

AEDC submitted an unsolicited proposal to the Government. DOTC constituted the PBAC for the
implementation of the NAIA IPT III project. PBAC was to evaluate the challengers of AEDC for the project
if the bidders have the capability to sustain the financing requirement for the detailed engineering,
design, construction, operation, and maintenance phases of the project. The proponent would be
evaluated based on its ability to provide a minimum amount of equity to the project, and its capacity to
secure external financing for the project.

PBAC awarder the bid for the project in favor of Paircargo for the failure of AEDC to match the proposal
of Paircargo. AEDC questioned the prequalification of Paircargo arguing that the prohibition imposed by
RA 337, as amended (the General Banking Act) on the amount that Security Bank could legally invest in
the project.

Whether Respondent is a qualified bidder?

No. Any challenger to the unsolicited proposal of AEDC must possesses the requisite financial capability
to undertake the project in the minimum amount of 30% of the project cost.

The minimum project cost was estimated at 9.183B. Respondent had to show that it had the ability to
provide a minimum equity of at least 2.755B.

It was shown that Security Bank has a net worth equivalent to its capital funds in the amount of
P3,523,504,377.00. However, the entire amount of its net worth could not be invested in a single
undertaking or enterprise, whether allied or non-allied in accordance with the provisions of R.A. No.
337.

The maximum amount that Security Bank can validly invest in the Paircargo Consortium is only 528M
representing 15% of its entire net worth pursuant to R.A. 337 and the 1993 Manual Regulations for
Banks.

As a result of this, only 6.08% of the project cost may be validly invested by the Paircargo consortium, an
amount substantially less than the prescribed minimum equity investment required for the project in
the amount of P2,755,095,000.00 or 30% of the project cost.

Further, the determination of whether or not a bidder is pre-qualified to undertake the project requires
an evaluation of the financial capacity of the said bidder at the time the bid is submitted based on the
required documents presented by the bidder. The PBAC should not be allowed to speculate on the
future financial ability of the bidder to undertake the project on the basis of documents submitted. This
would open doors to abuse and defeat the very purpose of a public bidding.
Cancio vs. Court of Tax Appeals, G.R. No. L-73882, October 22, 1987

Rosa was apprehended while clearing through the Pre-Boarding Area of MIA on her way to a flight to
Hong Kong. 102,900 US dollars in cash, 600 US dollars in traveler’s checks and 1500php that were placed
inside 2 chocolate boxes were seized from her for failure to present the Central Bank Authority.

At the seizure proceedings, she presented a photocopy of her bank book for foreign currency deposit.
She attested that the money will be used for her medical treatment in US. A forfeiture was decreed by
the Commissioner of Customs which were affirmed by the CTA because of failure of petitioner to
present a Central Bank Authority to bring the currencies out of the country.

Whether the forfeiture of the currencies in question was proper?

No. Petitioner is a foreign currency depositor. Under the Foreign Currency Deposit Act of the Philippines,
the transferability abroad of foreign currency deposits is unrestricted. Only one exception is provided
for therein, which is, any restriction " from the contract between the depositor and the bank."

A Circular-Letter issued by the Central Bank provides that the banks authorized to accept foreign
currency deposits are instructed to advise their foreign currency depositors who are withdrawing funds
for travel purposes to carry with them the certificate of withdrawal that the banks shall issue.

It is a fact that petitioner could not present a certificate of withdrawal at the Manila International
Airport when she was about to depart. As she had explained, however, she was unaware of this
requirement. And if she had wrapped her dollar currency inside a chocolate box it was for "security
reasons." Besides, as instructed in the Circular-Letter above quoted, it is the authorized depository bank
which should advise its depositors to carry with them the certificate of withdrawal. At any rate,
respondent Court has found that petitioner has presented in evidence her foreign currency bank book
and her withdrawal cards. These may be considered as substantial compliance for purposes of this
case.

Indeed, given the underlying objective of the Foreign Currency Deposit Act, as amended, which is to
attract and invite the deposit of foreign currencies which are acceptable as part of the international
reserve in duly authorized banks in order that they may be put into the stream of the banking system, it
would be to defeat the very purpose of the law to place undue restrictions on the transferability of such
funds. The countervailing effect would be to discourage prospective foreign currency depositors to the
detriment of the banking system.

Central Bank Circulars Nos. 265 and 534 requiring prior Central Bank authority for the taking out of the
country of foreign currency should not be made to encompass foreign currency depositors whose rights
are expressly defined and guaranteed in a special law, the Foreign Currency Deposit Act.
Salvacion vs. Central Bank, G.R. No. 94723, August 21, 1997

Karen Salvacion, a 12-year-old child, was raped by Greg Bartelli 10 times in 4 days. In the civil case, the
Judge ordered a preliminary attachment. The Deputy sheriff served a Notice of Garnishment on China
Bank Corporation on the dollar deposit of Greg Bartelli. The Bank invoked Section 113 of Central Bank
Circular No. 960 to the effect that the dollar deposits or defendant Greg Bartelli are exempt from
attachment, garnishment, or any other order or process of any court, legislative body, government
agency or any administrative body, whatsoever.

Whether Section 113 of Central Bank Circular No. 960 and Section 8 of R.A. 6426, as amended by P.D.
1246, otherwise known as the Foreign Currency Deposit Act be made applicable to a foreign transient?

No. Offshore Banking System and the Foreign Currency Deposit System were designed to draw deposits
from foreign lenders and investors. It is these deposits that are induced by the two laws and given
protection and incentives by them.

Obviously, 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 because such
depositor stays only for a few days in the country and, therefore, will maintain his deposit in the bank
only for a short time.

The application of the law depends on the extent of its justice. Eventually, if we rule that the questioned
Section 113 of Central Bank Circular No. 960 which exempts from attachment, garnishment, or any other
order or process of any court, legislative body, government agency or any administrative body
whatsoever, is applicable to a foreign transient, injustice would result especially 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." Simply stated, when the statute is silent or ambiguous, this is one of those
fundamental solutions that would respond to the vehement urge of conscience.

INAPPLICABLE to this case because of its peculiar circumstances.

Serrano and Maneja made a time deposit for 1 year with Overseas Bank. Maneja assigned and conveyed
her time deposit to Serrano. Upon maturity, Petitioner made series of demands for the encashment of
the time deposits but was not honored by Overseas Bank because Central bank has dissolved and
liquidated the Overseas Bank and that properties were given by Overseas bank as additional collaterals
to Central Bank of the Philippines for the former's overdrafts and emergency loans.

Petitioner filed for mandamus and prohibition with preliminary injunction that seeks to establish joint
and solidary liability of Central bank with Overseas Bank for the amount of the time deposits and its
interest. Petitioner prayed to the Court to declare all assets assigned or mortgaged by the respondents
Overseas Bank of Manila and the Ramos groups in favor of the Central Bank as trust funds for the
benefit of petitioner and other depositors.

Whether a constructive trust was created in favor of the petitioner when his time deposits were made?

No. Bank deposits are in the nature of irregular deposits. They are really Loans because they earn
interest. All kinds of bank deposits, whether fixed, savings, or current are to be treated as loans and are
to be covered by the law on loans. Current and savings deposit are loans to a bank because it can use
the same. The petitioner here in making time deposits that earn interests with respondent Overseas
Bank of Manila was in reality a creditor of the respondent Bank and not a depositor. The respondent
Bank was in turn a debtor of petitioner. Failure of the respondent Bank to honor the time deposit is
failure to pay its obligation as a debtor and not a breach of trust arising from depositary's failure to
return the subject matter of the deposit.
Guingona, Jr. v. City Fiscal of Manila

Respondent David invested time deposit, savings deposit and foreign currency deposit with NSLA.
Sometime after, NSLA was placed in a receivership. Upon request of David, Petitioners assumed the
obligation of the bank by executing joint promissory note acknowledging the indebtedness. David filed
claims for his investments. He then received a report from Central Bank, a deficient amount of his
investment was recorded by NSLA. David then filed a case for Estafa alleging that the Petitioners
misappropriated the balance of investment.

Whether estafa was committed by Petitioners?

No. The contract that was perfected was a contract of simple loan or mutuum and not a contract of
deposit.

Hence, the relationship between the private respondent and the Nation Savings and Loan Association is
that of creditor and debtor; consequently, the ownership of the amount deposited was transmitted to
the Bank upon the perfection of the contract and it can make use of the amount deposited for its
banking operations, such as to pay interests on deposits and to pay withdrawals. While the Bank has the
obligation to return the amount deposited, it has, however, no obligation to return or deliver the same
money that was deposited. And, the failure of the Bank to return the amount deposited will not
constitute estafa through misappropriation. It will only give rise to civil liability over which the public
respondents have no- jurisdiction.

But even granting that the failure of the bank to pay the time and savings deposits of private respondent
David would constitute a violation of paragraph 1(b) of Article 315 of the Revised Penal Code,
nevertheless any incipient criminal liability was deemed avoided, because when the aforesaid bank was
placed under receivership by the Central Bank, petitioners Guingona and Martin assumed the obligation
of the bank to private respondent David, thereby resulting in the novation of the original contractual
obligation arising from deposit into a contract of loan and converting the original trust relation between
the bank and private respondent David into an ordinary debtor-creditor relation between the
petitioners and private respondent. Consequently, the failure of the bank or petitioners Guingona and
Martin to pay the deposits of private respondent would not constitute a breach of trust but would
merely be a failure to pay the obligation as a debtor.

Moreover, while it is true that novation does not extinguish criminal liability, it may however, prevent
the rise of criminal liability as long as it occurs prior to the filing of the criminal information in court.
BPI Family Bank v. Franco

Tevesteco opened a savings and current account with BPI-FB. FMIC also opened a time deposit with the
bank with a deposit of 100M. Franco opened 3 accounts with the bank. 500k each to current and savings
account and 1M for a time deposit. The total 2M is traceable to a check issued by Tevesteco. The 2M
was part of the 80M debited by the bank from FMIC’s time deposit. FMIC however claimed that the
Authority to Debit from their time deposit was a forgery. Unfortunately, Tevesteco had already
withdrawn 37M from which the 2M paid to Franco was included.

In the meantime, 2 check were issued by Franco which were dishonored with a notation that account
under garnishment. Franco heeded to BPI-FB to unfreeze his accounts and release his deposits to which
the bank refuse.

May the bank freeze the account of Franco?

No. BPI-FB cannot unilaterally freeze Franco’s accounts and preclude him from withdrawing his
deposits.

There is no doubt that BPI-FB owns the deposited monies in the accounts of Franco, but not as a legal
consequence of its unauthorized transfer of FMIC’s deposits to Tevesteco’s account. BPI-FB conveniently
forgets that the deposit of money in banks is governed by the Civil Code provisions on simple loan or
mutuum. As there is a debtor-creditor relationship between a bank and its depositor, BPI-FB ultimately
acquired ownership of Franco’s deposits, but such ownership is coupled with a corresponding obligation
to pay him an equal amount on demand.

Although BPI-FB owns the deposits in Franco’s accounts, it cannot prevent him from demanding
payment of BPI-FB’s obligation by drawing checks against his current account, or asking for the release
of the funds in his savings account. Thus, when Franco issued checks drawn against his current account,
he had every right as creditor to expect that those checks would be honored by BPI-FB as debtor.

More importantly, BPI-FB does not have a unilateral right to freeze the accounts of Franco based on its
mere suspicion that the funds therein were proceeds of the multi-million peso scam Franco was
allegedly involved in. To grant BPI-FB, or any bank for that matter, the right to take whatever action it
pleases on deposits which it supposes are derived from shady transactions, would open the floodgates
of public distrust in the banking industry.
Fulton Iron Works Co. v. China Banking Corp.

Fulton employed Schwarzkopf to represent them to obtain security for the debt of Binalbangan Estate.
Schwarzkopf opened a personal account with China Bank. Binalbangan drew a check payable to the
order of Sydney C. Schwarzkopf and delivered the same to him in part payment of the indebtedness
owing to Fulton. Upon receiving this check Schwarzkopf signed a receipt as "attorney-in-fact of Fulton
Iron Works Co." The check was deposited with China Bank in a new account. This money was thereafter
withdrawn from the bank from time to time by Schwarzkopf, upon his personal checks, and used for his
individual purposes.

Schwarzkopf received another collection, a check made payable on its face to "S. C. Schwarkopf
Attorney-in-Fact, Fulton Iron Works Co., or order." Schwarzkopf opened a new account with the
defendant bank, entitled "S. C. Schwarzkopf, Attorney- in-Fact, Fulton Iron Works Co.," and deposited
said check

No. 2 Account became depleted but due to the amount deposited on the 3 rd account, manager of the
bank gave him credit amounting to 25k. Said account became overdrawn. The manager of the bank then
intervened and requested Schwarzkopf to settle the overdraft. To accomplish this Schwarkopf merely
transferred, by check, the money to his credit in his 3 rd account to the No. 2 account. The amount thus
transferred was P61,360.81, and the effect of the transfer was to absorb the overdraft and place a
credit balance of nearly P40,000 in No. 2 account. Schwarzkopf then purchased a draft on New York in
the amount of $15,000, and after some delay transmitted the same by mail to the plaintiff. This draft
cost Schwarzkopf the sum of P30,375.02, and it was the only remittance ever made by him to his client.

Whether Bank is liable to Fulton?

Yes, on the amount of the overdraft considering that it is sufficient to charge the bank with notice of the
fact that the money deposited in said account belonged to the Fulton Iron Works Co. and not to
Schwarzkopf.

No to the amount deposited to the No. 2 account with a check.

The specialized function of bank is to serve as a place of deposit for money, to keep it safely while on
deposit, and to pay it out, upon demand to the person who effected the deposit or upon his order. A
bank is not a guardian of trust funds deposited with it in the sense that it must see to their proper
application nor is it its business to pry into the uses to which moneys on deposit in its vault are being
put; and so long as it serves its function and pays the money out in good faith to the person who
deposited it, or upon his order, without knowledge or notice that it is in fact assisting in the
misappropriation of the fund, the bank will be protected.

A depositor is presumed to be the owner of funds standing in his name in a bank deposit; and where a
bank is not chargeable with notice that the money deposited in such account is the property of some
other person than the depositor, the bank is justified in paying out the money to the depositor or upon
his order, and cannot be liable to any other person as the true owner.
BPI v. Court of Appeals

Eastern and Lim held a joint bank account with CBTC, now BPI. Lim and Velasco also opened a joint
checking account with Petitioner bank. Velasco died and half of the balance from the joint checking
account was provisionally released and transferred to one of the bank accounts of Eastern with CBTC.

Eastern obtained a loan secured by the joint account of Lim and Velasco that was under a holdout
agreement.

In the meantime, probate court granted the heirs of Velasco to withdraw the deposit under the joint
account of Lim and Velasco. The heirs were able to withdraw the amount in the joint account of Lim and
Velasco.

BPI filed a complaint demanding the payment of the loan. Defendants Lim and Eastern, in turn, filed a
counterclaim against BPI for the return of the balance in the disputed account subject of the Holdout
Agreement and the interests thereon after deducting the amount due on the promissory note.

Whether BPI can demand payment of the loan of P73,000.00 despite the existence of the Holdout
Agreement and whether BPI is still liable to the private respondents on the account subject of the
Holdout Agreement after its withdrawal by the heirs of Velasco.

Yes. Petitioner had every right to demand that Eastern and Lim settle their liability under the promissory
note. It cannot be compelled to retain and apply the deposit in Lim and Velasco's joint account to the
payment of the note. What the agreement conferred on CBTC was a power, not a duty. Generally, a
bank is under no duty or obligation to make the application. To apply the deposit to the payment of a
loan is a privilege, a right of set-off which the bank has the option to exercise.

Yes. The account was proved and established to belong to Eastern even if it was deposited in the names
of Lim and Velasco. As the real creditor of the bank, Eastern has the right to withdraw it or to demand
payment thereof. BPI cannot be relieved of its duty to pay Eastern simply because it already allowed the
heirs of Velasco to withdraw the whole balance of the account. The petitioner should not have allowed
such withdrawal because it had admitted in the Holdout Agreement the questioned ownership of the
money deposited in the account. As early as 12 May 1979, CBTC was notified by the Corporate Secretary
of Eastern that the deposit in the joint account of Velasco and Lim was being claimed by them and that
one-half was being claimed by the heirs of Velasco.

BPI was not specifically ordered to release the account to the said heirs; hence, it was under no judicial
compulsion to do so. The authorization given to the heirs of Velasco cannot be construed as a final
determination or adjudication that the account belonged to Velasco. We have ruled that when the
ownership of a particular property is disputed, the determination by a probate court of whether that
property is included in the estate of a deceased is merely provisional in character and cannot be the
subject of execution.
Central Bank v. Morfe

Monetary Board found the Fidelity Savings Bank to be insolvent. The Board forbade the bank to do
business and ask the court's assistant and supervision in the liquidation. Before liquidation but after the
declaration of the insolvency, Spouses Elizes and Padilla were able to obtain judgments from lower
courts for the payment of deposits with the Fidelity Savings Bank.

The stand of the Central Bank is that all depositors and creditors of the insolvent bank should file their
actions with the liquidation court.

Whether a final judgment for the payment of a time deposit in a savings bank which judgment was
obtained after the bank was declared insolvent, is a preferred claim against the bank?

No. It should be noted that fixed, savings, and current deposits of money in banks and similar
institutions are not true deposits. They are considered simple loans and, as such, are not preferred
credits.

That purpose would be nullified if, as in this case, after the bank is declared insolvent, suits by some
depositors could be maintained and judgments would be rendered for the payment of their deposits
and then such judgments would be considered preferred credits under article 2244 (14) (b) of the Civil
Code.

We are of the opinion that such judgments cannot be considered preferred and that article 2244(14)(b)
does not apply to judgments for the payment of the deposits in an insolvent savings bank which were
obtained after the declaration of insolvency.

A contrary rule or practice would be productive of injustice, mischief and confusion. To recognize such
judgments as entitled to priority would mean that depositors in insolvent banks, after learning that the
bank is insolvent as shown by the fact that it can no longer pay withdrawals or that it has closed its
doors or has been enjoined by the Monetary Board from doing business, would rush to the courts to
secure judgments for the payment of their deposits.

In such an eventuality, the courts would be swamped with suits of that character.
Gullas v. Philippine National Bank

Gullas endorsed a check issued by Treasurer of the United States for the United States Veterans Bureau.
Later on, it was cashed by the Philippine National Bank. Subsequently the treasury warrant was
dishonored by the Insular Treasurer.

As a result, the outstanding balance of Gullas with PNB was applied for the payment of the check. Notice
was sent by the bank but was not delivered because Gullas was in Manila. Before he left Cebu, he issued
checks against his account with PNB.

Whether the PNB can apply a deposit to a debt of a depositor to the bank?

Yes. As a general rule, a bank has a right of set off of the deposits in its hands for the payment of any
indebtedness to it on the part of a depositor. However, bank has no right, without an order from or
special assent of the depositor to retain out of his deposit an amount sufficient to meet his
indebtedness.

Starting, therefore, from the premise that the Philippine National Bank had with respect to the deposit
of Gullas a right of set off, we next consider if that remedy was enforced properly. The fact we believe is
undeniable that prior to the mailing of notice of dishonor, and without waiting for any action by Gullas,
the bank made use of the money standing in his account to make good for the treasury warrant. At this
point recall that Gullas was merely an indorser and had issued in good faith.

As to a depositor who has funds sufficient to meet payment of a check drawn by him in favor of a
third party, it has been held that he has a right of action against the bank for its refusal to pay such a
check in the absence of notice to him that the bank has applied the funds so deposited in
extinguishment of past due claims held against him.

We accordingly are of the opinion that the action of the bank was prejudicial to Gullas.
Lucman v. Malawi

Respondents were the incumbent Brgy. Chairman prior to the election of May 12, 1997. The election
resulted in a failure and respondents remained in a holdover capacity. LBP was then selected as
government depository bank for Internal Revenue Allotment (IRA). Public officials had to open new
accounts in behalf of their government units. Respondent was refused by LBP to withdraw their
respective barangay’s IRA bank accounts for failure to show their individual certifications showing their
right to continue serving as Barangay Chairmen and the requisite Municipal Accountant's Advice,
giving respondents the authority to withdraw IRA deposits.

Then on 4 August 1997, five (5) other persons presented themselves before petitioner as the newly
proclaimed Punong Barangays of the five barangays concerned, each of them presenting a certification
of his election as Punong Barangay issued by the provincial director of the DILG-ARMM and another
Certification issued by the Local Government Operations Officer attesting, among others, to the
revocation of the certification previously issued to respondents. Without verifying the authenticity of
the certifications presented by these third persons, petitioner proceeded to release the IRA funds for
the 2nd and 3rd quarters of 1997 to them.

Respondents filed mandamus to compel petitioner to allow them to open and maintain deposit
accounts covering the IRAs of their respective barangays and to withdraw therefrom.

Are there indispensable parties which were not impleaded?

Yes. The IRA funds for which the bank accounts were created belong to the barangays headed by
respondents. The barangays are the only lawful recipients of these funds. Consequently, any transaction
or claim involving these funds can be done only through the proper authorization from the barangays
as juridical entities.

The determination, therefore, of whether or not the IRA funds were unlawfully withheld or
improperly released to third persons can only be determined if the barangays participated as parties
to this action. These questions cannot be resolved with finality without the involvement of the
barangays. After all, these controversies involve funds rightfully belonging to the barangays. Hence, the
barangays are indispensable parties in this case.

Even if the barangays themselves had filed the case, still it would not prosper. The case involves
government funds and as such, any release therefrom can only be done in accordance with the
prevailing rules and procedures.

This prescribed legal framework governing the release and disbursement of IRA funds to the respective
barangays disabuses from the notion that a barangay chairman, relying solely on his authority as a local
executive, has the right to demand physical possession of the IRA funds allocated by the national
government to the barangay. The right to demand for the funds belongs to the local government itself
through the authorization of their Sanggunian.
International Exchange Bank v. Commission of Internal Revenue

Petitioner received from CIR a notice to taxpayer notifying it of its tax liabilities. Petitioner filed a protest
alleging, among others, that there is no law imposing Documentary Stamp Tax on its Fixed Saving
Deposit.

Tax Code provides that DST shall be collected from certificates of deposits drawing interest.

Court ruled in FEBTC v. Querimit that a certificate of deposit is defined as a written acknowledgment by
a bank or banker of the receipt of a sum of money on deposit which the bank or banker promises to
pay to the depositor, to the order of the depositor, or to some other person or his order, whereby the
relation of debtor and creditor between the bank and the depositor is created

Petitioner posits that its FSD is not a certificate of deposit since there is nothing in the terms and
conditions printed on the passbook evidencing it that can be construed to mean that the bank or banker
acknowledges the receipt of a sum of money on deposit.

Petitioner moreover posits that the FSD, unlike a certificate of deposit, is not negotiable or payable to
the order of some other person or his order but is "only withdrawable by the depositor or his authorized
representative."

Whether FSD is subject to DST?

Yes. Petitioner’s FSD has the same nature and characteristics as a time deposit. Depositor of a savings
deposit-FSD is required to keep the money with the bank for at least thirty (30) days in order to yield a
higher interest rate. Otherwise, the deposit earns interest pertaining only to a regular savings deposit.

The same feature is present in a time deposit. A depositor is allowed to withdraw his time deposit even
before its maturity subject to bank charges on its pre-termination and the depositor loses his
entitlement to earn the interest rate corresponding to the time deposit. The only difference lies on the
evidence of deposit, a savings deposit-FSD is evidenced by a passbook, while a time deposit is
evidenced by a certificate of time deposit."

We agree with the finding that the SA-FSD is a deposit account with a fixed term. Withdrawal before the
expiration of said fixed term results in the reduction of the interest rate. Having a fixed term and
reduction of interest rate in case of pre-termination are essentially the features of a time deposit.
Chinabank v. Commission of Internal Revenue

From 1982-1986, Petitioner was engaged in transaction involving sale of foreign exchange to Central
Bank known as SWAP. Petitioners did not file tax returns on the SWAP transactions. BIR issued an
assessment for deficiency DST on the sales of foreign bills of exchange against Petitioner. Petitioner filed
a protest and requested a reinvestigation. More than 12 years, after the filing of the protest, CIR
rendered a decision reiterating the deficiency DST.

Whether the right to collect by the BIR is barred by prescription?

Yes. NIRC 1977 provides that the time limit for the government to collect the assessed tax is set at three
years, to be reckoned from the date when the BIR mails/releases/sends the assessment notice to the
taxpayer.

In this case, the records do not show when the assessment notice was mailed, released or sent to CBC.
Nevertheless, the latest possible date that the BIR could have released, mailed or sent the assessment
notice was on the same date that CBC received it, 19 April 1989.

The demand was made almost thirteen years from the date from which the prescriptive period is to be
reckoned. Thus, the attempt to collect the tax was made way beyond the three-year prescriptive period.
(attempt of demand was made through answer in the CTA)

The fact that the taxpayer in this case may have requested a reinvestigation did not toll the running of
the three-year prescriptive period. A request for reinvestigation alone will not suspend the statute of
limitations. Two things must concur: there must be a request for reinvestigation and the CIR must have
granted it.
Allied Bank v. Lim Sio Wan

Lim Sio Wan deposited with Petitioner bank a money market placement amounting to 1.1M for 31 days
of maturity. A person claiming to be Respondent, called Cristina, an officer of the bank to pre-terminate
the money market placement, issue a manager’s check and to give it to a certain Deborah Santos.

The bank issued a manager’s check in the name of Lim Sio Wan as payee. The check was cross-checked
"For Payee's Account Only" and given to Santos.

The check was deposited in the account of FCC at Metrobank with the forged signature of Respondent
as endorser.

Earlier, on September 21, 1983, FCC had deposited a money market placement for PhP 2 million with
respondent Producers Bank. Santos was the money market trader assigned to handle FCC's account.

the Allied check was deposited with Metrobank in the account of FCC as Producers Bank's payment of its
obligation to FCC.

Metrobank stamped a guaranty on the check, which reads: "All prior endorsements and/or lack of
endorsement guaranteed."