Mod 8 - 9 - Banking Law
Mod 8 - 9 - Banking Law
Mod 8 - 9 - Banking Law
1 BPI v. First Metro, G.R. "A bank holding out its officers and agent as worthy of confidence will not be
No. 132390, December 8, permitted to profit by the frauds they may thus be enabled to perpetrate in the
2004, 429 SCRA 30 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.
(MEMAID, p. 362, 374)
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."
A bank will be held liable for the: negligence of its officers or agents when
acting within the course and scope of their. employment. However, if a corporation
knowingly permits its officér, or any other agent, to perform acts within the scope of
an apparent authority, holding him out to the the public as possessing powers to
those acts, the corporation will, as against,any person who has dealt in good faith
with the ‘corporation through such agent, be estopped from denying such authority
2 Vitug vs. Court of Certainly, the spouses are not prohibited by law to invest conjugal property, say, by
Appeals, 29 March 1990 way of a joint and several bank account, more commonly denominated in banking
parlance as an "and/or" account.
"And/or" accounts are jointly owned by several owners and either owners can
withdraw from the account
3 Intengan vs. Court of Under R.A. No. 6426 (Foreign Currency Deposit Act of the Philippines) there is
Appeals, 15 February only a single exception to the secrecy of foreign currency deposits, that is,
2002 (MEMAID. P. 357) disclosure is allowed only upon the written permission of the depositor.
4 China Bank vs. Ortega, The prohibition against examination of or inquiry into a bank deposit under Republic
49 SCRA 356 (MEMAID, Act 1405 does not preclude its being garnished to insure satisfaction of a
p. 357) judgment. Indeed there is no real inquiry in such a case, and if the existence of the
deposit is disclosed the disclosure is purely incidental to the execution process.
Republic Act No. 1405, Sec. 2. All deposits of whatever nature with banks or
banking institutions in the Philippines including investments in bonds issued by the
Government of the Philippines, its political subdivisions and its instrumentalities, are
hereby considered as of absolutely confidential nature and may not be
examined, inquired or looked into by any person, government official, bureau or
office, except upon written permission of the depositor, or in cases of impeachment,
or upon order of a competent court in cases of bribery or dereliction of duty of public
officials, or in cases where the money deposited or invested is the subject matter of
the litigation.
5 Salvacion vs. Central Deposit account to satisfy the judgment rendered against the depositor (Bartelli) who
Bank, 21 August 1997 appeared to have abused the petitioner Salvacion. The Court explained that the
(MEMAID, p. 357) 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. 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
6 Ejercito vs. Cases of unexplained wealth are similar to cases of bribery or dereliction of
Sandiganbayan, 30 duty and no reason is seen why these two classes of cases cannot be excepted from
November 2006 the rule making bank deposits confidential. The policy as to one cannot be different
(MEMAID, p. 355) from the policy as to the other. This policy expresses the notion that a public office
is a public trust and any person who enters upon its discharge does so with the full
knowledge that his life, so far as relevant to his duty, is open to public scrutiny.
Plunder being thus analogous to bribery, the exception to R.A. 1405 applicable
in cases of bribery must also apply to cases of plunder.
7 People vs. Ejercito Bank deposits under RA 1405 are statutorily protected or recognized zone of
Estrada, 2 April 2009 privacy. - Given the private nature of Estrada’s act of signing the document as Jose
(MEMAID, p. 357) Velarda related to the opening of the trust account, the people cannot claim that there
is already a public use of alias when Ocampo and Curato witnessed the signing.
8 Marquez v. Desierto, G.R. In Union Bank of the Philippines v. Court of Appeals, we held that "Section 2 of
No. 135882, June 27, the Law on Secrecy of Bank Deposits, as amended, declares bank deposits to
2001) (MEMAID, p. 355, be "absolutely confidential" except:
356)
(1) In an examination made in the course of a special or general examination of a
bank that is specifically authorized by the Monetary Board after being satisfied that
there is reasonable ground to believe that a bank fraud or serious irregularity has
been or is being committed and that it is necessary to look into the deposit to
establish such fraud or irregularity,
(6) In cases where the money deposited or invested is the subject matter of the
litigation".
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The inspection would be done "in camera" wherein the bank records would be
examined without bringing the documents outside the bank premises. Its purpose
was to identify the specific bank records prior to the issuance of the required
information not in any manner needed in or relevant to the investigation.
LOAN FUNCTION OF BANKS
9 Soriano vs. People of the There can still be a charge for Directors, Officers, Stockholders and. Related
Phils., 30 June 2009 Interests (DOSRI) violation even where the accused bank officer did not secure
(MEMAID, p. 383, 385) a loan in his own name, but used the name of another person in order to
indirectly secure a loan from the bank. The DOSRI Rule under Section is broad
enough to cover various modes of borrowing, whether direct or indirect borrowing
10 BPI vs. Sps. Yu, 20 The Consolidated Bank ruling declared valid the penalty charges that were
January 2010 stipulated in the promissory notes.
The DBP vs. Arcilla, jr. has affirmed that financial charges are amply disclosed if
stated in the promissory note
Truth in Lending Act , SEC. 4. Any creditor shall furnish to each person to whom
credit is extended, prior to the consummation of the transaction, a clear statement in
writing setting forth, to the extent applicable and in accordance with rules and
regulations prescribed by the Board, the following information:
11 DBP vs. Arcilla, G.R. No. If the borrower is not duly informed of the data required by the law (7 items in
161397, 30 June 2005 RA 3765; signature of debtor in CB Circular No. 158) prior to the consummation of
the availment or drawdown, the lender will have no right to collect such charge or
increases thereof, even if stipulated in the promissory note. However, such failure
shall not affect the validity or enforceability of any contract or transaction.
MODULE 9: (PART 2)
BANK REGULATIONS
1. Tala Realty Corp. vs. General Banking Act of 2000, Section 51. Ceiling on Investments in Certain
Banco Filipino, 7 April Assets. - Any bank may acquire real estate as shall be necessary for its own use in
2009 (MEMAID, p. 386) the conduct of its business: Provided, however, That the total investment in such
real estate and improvements thereof including bank equipment, shall not
exceed fifty percent (50%) of combined capital accounts: Provided, further, That
the equity investment of a bank in another corporation engaged primarily in real
estate shall be considered as part of the bank's total investment in real estate, unless
otherwise provided by the Monetary Board. (25a)
The Supreme Court ruled that Banco Filipino’s suit for reconveyance cannot prosper
because the trust agreement was used to circumvent the general banking law.
The.Bank and Tala are in pari delicto: thus, no affirmative relief should be given to
one against the other
BANKS IN DISTRESS
R.A. No. 265, Section 29. Proceedings upon Insolvency – Whenever, upon examination by the head of the
appropriate supervising or examining department or his examiners or agents into the condition of any bank or non-
bank financial intermediary performing quasi-banking functions, it shall be disclosed that the condition of the
same is one of insolvency, or that its continuance in business would involve probable loss to its depositors or
creditors, it shall be the duty of the department head concerned forthwith, in writing, to inform the Monetary
Board of the facts.
The Board may, upon finding the statements of the department head to be true, forbid the institution “to do
business” in the Philippines and designate the official of the Central Bank or a person of recognized competence
in banking or finance, as receiver to immediately take charge its assets and liabilities, as expeditiously as possible,
collect and gather all the assets and administer the same for the benefit of its creditors, and represent the bank
personally or through counsel as he may retain in all actions or proceedings for or against the institution, exercising
all the powers necessary for these purposes including, but not limited to, bringing and foreclosing mortgages in
the name of the bank.
1 Central Bank vs. Court of This "close now and hear later" scheme is grounded on practical and legal
Appeals, 30 March 1993; considerations to prevent unwarranted dissipation of the bank's assets and as a
(MEMAID, p. 346) valid exercise of police power to protect the depositors, creditors, stockholders and
the general public.
ISSUE:
May a Monetary Board resolution placing a private bank under receivership be
annulled on the ground of lack of prior notice and hearing?
RULING:
NO. Contrary to the notion of private respondent, Sec. 29 does not contemplate
prior notice and hearing before a bank may be directed to stop operations and
placed under receivership.
Rural Bank of Lucena, Inc. v. Arca [1965], We held that a previous hearing is
nowhere required in Sec. 29 nor does the constitutional requirement of due process
demand that the correctness of the Monetary Board's resolution to stop operation
and proceed to liquidation be first adjudged before making the resolution effective. It
is enough that a subsequent judicial review be provided.
Even in Banco Filipino, We reiterated that Sec. 29 of R.A. 265 does not require a
previous hearing before the Monetary Board can implement its resolution closing a
bank, since its action is subject to judicial scrutiny as provided by law.
MEMAID, p. 346:
Legal Standing to Assail Closure Order
Only stockholders of record representing the majority of the capital stock have
the personality to file a petition for certiorari to be filed within 10 days from receipt
by the board of directors of the institution of the order directing receivership,
liquidation or conservatorship (NCBA, ’Sec, 30).
2 Cudiamat vs. Batangas GR: The Court, in Valenzuela v. Court of Appeals, held that as a general rule, if there
Savings, 9 March 2010; is a judicial liquidation of an insolvent bank, all claims against the bank should
(MEMAID, p. 350) be filed in the liquidation proceeding.
XP: (FII)
1. When re-filing.and Ffe-litigating the pending case before the liquidation court
would be an exercise in Futility in view of the number of years the case has
been on trial and the additional expenses to the party who is living in poverty
(Valenzuela v.CA; G:R, No.L-56168, December 22, 1988);
2. When more Inconveniences would be caused to the parties, entailing
waste of more money and precious time (Carandang v. CA, G.R. No. L-
44932, April 15, 1988); and
3. When the Issue is the validity of contracts upon which a claim is based
(Carandang v. CA, G.R. No. L-44932, April 15, 1988).
NOTE: Even if the case falls within the aforementioned exceptions, the claimant
should still file the adjudicated claim with the liquidator or liquidation court for
processing of claims to determine the proper concurrence and preference of credit
among the different creditors and debtors of the bank (Cudiamat v. Batangas
Savings and Loan Bank, G.R. No. 182403, March 9, 2010).
RULING:
Estoppel bars the bank from raising the issue of lack of jurisdiction of the Balayan
RTC.
In the present case, the Balayan RTC, sitting as a court of general jurisdiction,
had jurisdiction over the complaint for quieting of title filed by petitioners on August
9, 1999. The Nasugbu RTC, as a liquidation court, assumed jurisdiction over the
claims against the bank only on May 25, 2000, when PDIC’s petition for assistance in
the liquidation was raffled thereat and given due course.
While it is well-settled that lack of jurisdiction on the subject matter can be raised at
any time and is not lost by estoppel by laches, the present case is an exception. To
compel petitioners to re-file and relitigate their claims before the Nasugbu RTC
when the parties had already been given the opportunity to present their respective
evidence in a full-blown trial before the Balayan RTC which had, in fact, decided
petitioners’ complaint (about two years before the appellate court rendered the
assailed decision) would be an exercise in futility and would unjustly burden
petitioners.
3 Lipana vs. Development ISSUE:
Bank of Rizal, 24 Whether or not respondent judge could legally stay execution of judgment that has
September 1987; already become final and executory.
(MEMAID, p. 349)
RULING:
YES. The rule that once a decision becomes final and executory, it is the ministerial
duty of the court to order its execution, admits of certain exceptions as in cases of
special and exceptional nature where it becomes imperative in the higher interest of
justice to direct the suspension of its execution
In the instant case, the stay of the execution of judgment is warranted by the fact
that respondent bank was placed under receivership.
To execute the judgment would unduly deplete the assets of respondent bank to
the obvious prejudice of other depositors and creditors, since, as aptly stated in
Central Bank of the Philippines vs. Morfe (63 SCRA 114), after the Monetary Board
has declared that a bank is insolvent and has ordered it to cease operations, the
Board becomes the trustee of its assets for the equal benefit of all the
creditors, including depositors.
The assets of the insolvent banking institution are held in trust for the equal benefit
of all creditors, and after its insolvency, one cannot obtain an advantage or a
preference over another by an attachment, execution or otherwise.
FACTS:
Petitioner spouses contracted a monetary loan with herein respondent bank
secured by a REM executed on their lot.
Sometime after, respondent bank sent a demand letter for the amount of the
insurance premiums advanced by it over the mortgaged property of petitioners. More
than 14 years from the time the loan became due and demandable, respondent
bank moved for the extrajudicial foreclosure of the mortgaged property and was
sold to it as being the lone bidder.
Petitioners moved to declare the foreclosure null and void contending that the
respondent bank being placed under receivership did not interrupt the running of
the prescriptive period. RTC ruled in favor of respondents.
ISSUE#1:
(1) Whether or not foreclosure of mortgage is included in the acts prohibited
during receivership/liquidation proceedings.
RULING:
(1) While it is true that foreclosure falls within the broad definition of “doing
business,” it should not be considered included, however, in the acts prohibited
whenever banks are “prohibited from doing business” during receivership and
liquidation proceedings. This is consistent with the purpose of receivership
proceedings, i.e., to receive collectibles and preserve the assets of the bank in
substitution of its former management, and prevent the dissipation of its assets to
the detriment of the creditors of the bank.
ISSUE#2:
(2) Whether or not the period within which the respondent bank was placed under
receivership and liquidation proceedings interrupted the running of the
prescriptive period in bringing actions.
RULING:
(2) NO, the period of prescription was not interrupted and the foreclosure of the
mortgage is null and void. In the Provident case, 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, thus the period of
prescription did not apply.
Unlike Provident Savings Bank, there was no legal prohibition imposed upon
herein respondent 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.
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.
5 Fidelity Savings Bank vs. In the absence of fraud, bad faith, malice or wanton attitude, petitioner bank may,
Cenzon, 5 April 1990; therefore, not be held responsible for damages which may be reasonably
(MEMAID, p. 348) attributed to the non-performance of the obligation.
7 Philippine International
Bank v. CA, G.R. No.
115849, January 24,
1996; (MEMAID, p. 345)
Financial Intermediaries as "persons or entities whose principal functions include the lending, investing or placement of
funds or evidences of indebtedness or equity deposited with them, acquired by them, or otherwise coursed through them
either for their own account or for the account of others.
"The financial markets that facilitate the transfer of debt securities are commonly classified by the maturity of the
securities[,]" namely: (1) the money market, which facilitates the flow of short-term funds (with maturities of one year or
less); and (2) the capital market, which facilitates the flow of long-term funds (with maturities of more than one year).
Whether referring to money market securities or capital market securities, transactions occur either in the primary market
or in the secondary market. "Primary markets facilitate the issliance of new securities. Secondary markets facilitate the
trading of existing securities, which allows for a change in the ownership of the securities."
The transactions in primary markets exist between issuers and investors, while secondary market transactions
exist among investors.
● Fund transfers are accomplished in three ways: (1) direct finance; (2)
● semi-direct finance; and (3) indirect finance
● With direct financing, the "borrower and lender meet each other and exchange funds in return
for :financial assets" (e.g., purchasing bonds directly from the company issuing them).
● In semi-direct financing, a securities broker or dealer brings surplus and deficit units together, thereby
reducing information costs.
○ A broker is "an individual or financial institution who provides information concerning possible
purchases and sales of securities.
GENERAL CONCEPTS
Banks refer to entities engaged in the lending of funds obtained in the form of deposits.' A bank must be a stock
corporation and its funds must be obtained from the public, meaning deposits of 20 or more persons
IMPEACHMENT
Power of Congress
HoR initiates
Senate is the Impeachment Court - 2/3rds vote of Senate
Impeachment is not criminal punishment, no imprisonment but the impeached official can still be charged criminal
under penal laws
DIRECT BRIBERY
Article 210. Direct bribery. - Any public officer who shall agree to perform an act constituting a crime, in
connection with the performance of this official duties, in consideration of any offer, promise, gift or present
received by such officer, personally or through the mediation of another x x x x
If the object for which the gift was received or promised was to make the public officer refrain from doing something which
it was his official duty to do
INDIRECT BRIBERY
Article 211. Indirect bribery. - The penalties of prision correccional in its medium and maximum periods, and
public censure shall be imposed upon any public officer who shall accept gifts offered to him by reason of his
office.
DERELICTION OF DUTY
JUDGE
Article 205. Judgment rendered through negligence. - Any judge who, by reason of inexcusable negligence or ignorance
shall render a manifestly unjust judgment in any case submitted to him for decision shall be punished by arresto mayor
and temporary special disqualification.
Article 206. Unjust interlocutory order. - Any judge who shall knowingly render an unjust interlocutory order or decree
shall suffer the penalty of arresto mayor in its minimum period and suspension; but if he shall have acted by reason of
inexcusable negligence or ignorance and the interlocutory order or decree be manifestly unjust, the penalty shall be
suspension.
Article 207. Malicious delay in the administration of justice. - The penalty of prision correccional in its minimum period
shall be imposed upon any judge guilty of malicious delay in the administration of justice.
PROSECUTORS
Article 208. Prosecution of offenses; negligence and tolerance. - The penalty of prision correccional in its minimum period
and suspension shall be imposed upon any public officer, or officer of the law, who, in dereliction of the duties of his office,
shall maliciously refrain from instituting prosecution for the punishment of violators of the law, or shall tolerate the
commission of offenses.
LAWYERS
Article 209. Betrayal of trust by an attorney or solicitor. - Revelation of secrets. - In addition to the proper administrative
action, the penalty of prision correccional in its minimum period, or a fine ranging from 200 to 1,000 pesos, or both, shall
be imposed upon any attorney-at-law or solicitor ( procurador judicial) who, by any malicious breach of professional duty
or of inexcusable negligence or ignorance, shall prejudice his client, or reveal any of the secrets of the latter learned by
him in his professional capacity.
● Prosecutors
● Lawyers
Marquez vs. Desierto - Ombudsman investigation is not a pending litigation and does not fall under exception of 1405
● Prosecutor and Congress (hearings in aid of legislation) cannot inquire into Bank Deposits; they are NOT pending
litigation
○ Congress is also not a competent court