Banking

1. Register of Deeds Manila vs. China Banking CorporationG.R. No. L-11964, April 28, 1962

Facts: Alfonso Pangilinan and one Guillermo Chua were charged with qualified theft, the money involved amounting to P275,000.00 in the Court of First Instance of Manila. After admitting his civil liability in favor of his employer, the China Banking Corporation, in relation to the offense, he ceded and transferred to the latter, in satisfaction thereof, a parcel of land located in the City of Manila, registered in the name of "Belen Sta. Ana, married to Alfonso Pangilinan”. The Deed of Transfer executed by Pangilinan was presented for registration but the register of deeds, after finding that China Banking Corporation, as an alien-owned corporation, is barred from acquiring lands in the Philippines under Sec. 5, Art. XIII of the Constitution, submitted the matter to the Land Registration Commission for resolution which, in turn, denied the registration. Hence, respondent herein filed the present appeal to question the resolution of the Commission.

Issue: Whether or not respondent — an alien-owned bank — can acquire ownership of the residential lot by virtue of the deed of transfer executed by Pangilinan to satisfy his civil liability arising from the crime.

Held: No. Paragraph (c), Section 25 of Republic Act 337 allows a commercial bank to purchase and hold such real estate as shall be conveyed to it in satisfaction of debts previously contracted in the course of its dealings. However, the "debts" referred to in this provision are only those resulting from previous loans and other similar transactions made or entered into by a commercial bank in the ordinary course of its business as such. Obviously, whatever "civil liability" — arising from the criminal offense of qualified theft — was admitted in favor of appellant bank by its former employee, Alfonso Pangilinan, was not a debt resulting from a loan or a similar transaction had between the two parties in the ordinary course of banking business. The resolution was affirmed.

2. Republic of the Philippines vs. Security Credit and Acceptance CorporationG.R. No. L-20583, January 23, 1967

Facts: Articles of Incorporation of defendant corporation were registered with the Securities and Exchange Commission. When they applied with SEC for the registration and licensing of their securities under the Securities Act, the latter referred it to the Central Bank which in turn rendered an opinion classifying defendant corporation as engaged in banking. SEC then advised the corporation to comply with the requirements under the General Banking Act.

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. In lieu of the memorandum, the Monetary Board issued a resolution declaring that the corporation is performing banking operations without first complying with the provisions of Republic Act No. 337.

Notwithstanding such resolution, the corporation, have been and still are performing the functions and activities which had been declared to constitute illegal banking operations; the corporation had 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.

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

Held. Yes. 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. Accordingly, the defendant corporation was ordered dissolved and appointment of receiver was made permanent.

3. Damaso Perez vs. Monetary BoardG.R. No. L-23307, June 30, 1967

Facts: Petitioner-appellant Perez, for himself and in a derivative capacity on behalf of the Republic Bank, instituted mandamus proceedings in the Court of First Instance of Manila against the Monetary Board, the Superintendent of Banks, the Central Bank and the Secretary of Justice. His object was to compel these respondents to prosecute, among others, Pablo Roman and several other Republic Bank officials for violations of the General Banking Act and the Central Bank Act, and for falsification of public or commercial documents in connection with certain alleged anomalous loans amounting to P1,303,400.00 authorized by Roman and the other bank officials.

Issue: Whether or not these respondents may be compelled to prosecute criminally the alleged violators of banking laws.

Held: No. Petitioners cannot seek by mandamus to compel respondents to prosecute criminally those alleged violators of the banking laws. Although the Central Bank and its respondent officials may have the duty under the Central Bank Act and the General Banking Act to cause the prosecution of those alleged violators, yet there is nothing in said laws that imposes a clear, specific duty on the former to do the actual prosecution of the latter. The Central Bank is a government corporation created principally to administer the monetary and banking system of the Republic, not a prosecution agency like the fiscal's office. Being an artificial person, The Central Bank is limited to its statutory powers and the nearest power to which prosecution of violators of banking laws may be attributed is its power to sue and be sued. But this corporate power of litigation evidently refers to civil cases only. Central Bank and its officers have already done what they can by referring the matter to the special prosecutors of the Department of Justice for prosecution and investigation. Moreover, it is a settled rule that mandamus will not lie to compel a prosecuting officer, like the Secretary of Justice, to prosecute a case in court.

Lastly, violations of banking laws constitute a public offense, the prosecution of which is a matter of public interest and hence, anyone — even private individuals — can denounce such violations before the prosecuting authorities. Since Perez himself could cause the filing of criminal complaints against those allegedly involved in the anomalous loans, if any, then he has a plain, adequate and speedy remedy in the ordinary course of law, which makes mandamus against respondents improper. Hence, the order of the lower court dismissing the petition was affirmed.

4. Simex International (Manila) Inc. vs. Court of AppealsG.R. No. 88013, March 19, 1990

Facts: The petitioner is a private corporation engaged in the exportation of food products. It buys these products from various local suppliers and then sells them abroad. Most of its exports are purchased by the petitioner on credit.

The petitioner was a depositor of the respondent bank and maintained a checking account in its branch in Cubao, Quezon City which issued several checks against its deposit but was surprised to learn later that they had been dishonored for insufficient funds. As a consequence, several suppliers sent a letter of demand to the petitioner, threatening prosecution if the dishonored check issued to it was not made good and also withheld delivery of the order made by the petitioner. One supplier also cancelled the petitioner's credit line and demanded that future payments be made by it in cash or certified check.

The petitioner complained to the respondent bank. Investigation disclosed that the sum of P100,000.00 deposited by the petitioner on May 25, 1981, had not been credited to it. The error was rectified only a month after, and the dishonored checks were paid after they were re-deposited. The petitioner then filed a complaint in the then Court of First Instance of Rizal against the bank for its gross and wanton negligence.

Issue: Whether or not the bank can be held liable for negligence

Held: The depositor expects the bank to treat his account with the utmost fidelity whether such account consists only of a few hundred pesos or of millions. The bank must record every single transaction accurately, down to the last centavo, and as promptly as possible. This has to be done if the account is to reflect at any given time the amount of money the depositor can dispose of as he sees fit, confident that the bank will deliver it as and to whomever he directs. A blunder on the part of the bank, such as the dishonour of a check without good reason, can cause the depositor not a little embarrassment if not also financial loss and perhaps even civil and criminal litigation.

5. Fidelity Savings and Mortgage Bank vs. CenzonG.R. No. L-46208, April 5, 1990

Facts: Timoteo and Olimpia Santiago deposited with the defendant Fidelity Savings Bank the amount of P50,000.00 under a savings account and another P50,000 under a certificate of time deposit. Hence, the aggregate amount of the spouse’s deposit is P100,000. However, the Monetary Board subsequently issued a resolution declaring Fidelity Savings Mortgage Bank insolvent and forbidden the bank from doing business in the Philippines. Since February 19, 1969, the Superintendent of Banks has been taking charge of the assets of petitioner bank. Philippine Deposit Insurance Corporation (PDIC) was only able to pay the spouses the amount of P10,000, leaving a deposit balance of P90,000. Through another resolution of the Monetary Board, the liquidation of the bank was ordered and is still pending up to the

present. After demand for the payment of the deposit balance, the spouses filed an action for sum of money with damages against petitioner bank. The lower court ruled in favor of spouses and ordered the bank to pay interest on unpaid deposits even after its closure plus moral and exemplary damages with attorney’s fees and costs.

Issues: Whether or not an insolvent bank may be adjudged to pay interest on unpaid deposits even after its closure by the Central Bank by reason of insolvency without violating the provisions of the Civil Code on preference of credits; and

Whether or not an insolvent bank may be adjudged to pay moral and exemplary damages, attorney's fees and costs when the insolvency is caused because of the anomalous real estate transactions without violating the provisions of the Civil Code on preference of credits.

Held: No. Petitioner cannot be held liable for interest on bank deposits which accrued from the time it was prohibited by the Central Bank to continue with its banking operations. It is settled jurisprudence that a banking institution which has been declared insolvent and subsequently ordered closed by the Central Bank of the Philippines cannot be held liable to pay interest on bank deposits which accrued during the period when the bank is actually closed and non-operational.

What enables a bank to pay stipulated interest on money deposited with it is that thru the other aspects of its operation it is able to generate funds to cover the payment of such interest. Unless a bank can lend money, engage in international transactions, acquire foreclosed mortgaged properties or their proceeds and generally engage in other banking and financing activities from which it can derive income, it is inconceivable how it can carry on as a depository obligated to pay stipulated interest.

Awards of moral and exemplary damages and attorney's fees are likewise erroneous. In the absence of fraud, bad faith, malice or wanton attitude, petitioner bank may, therefore, not be held responsible for damages which may be reasonably attributed to the non-performance of the obligation. Wherefore, the decision appealed from was modified. Bank is only liable to pay the deposit balance of P90,000 with accrued interest until the date it was prohibited from doing business by the Central Bank with no other damages and costs.

6. Sia vs. Court of AppealsG.R. No. 102970, May 13, 1990

Facts: Plaintiff Luzon Sia rented a safety deposit box of the defendant bank at its Binondo Branch wherein he placed his collection of stamps. The said safety deposit box leased by the plaintiff was at the bottom or at the lowest level of the safety deposit boxes of the defendant bank.

During the floods that took place in 1985 and 1986, floodwater entered into the defendant bank's premises, seeped into the safety deposit box leased by the plaintiff and caused, according damage to his stamps collection. The defendant bank rejected the plaintiff's claim for compensation for his damaged stamps collection, so, the plaintiff instituted an action for damages against the defendant bank.

The defendant bank contended that its contract with the plaintiff over safety deposit box was one of lease and not of deposit and, therefore, governed by the lease agreement which should be the applicable law; the destruction of the plaintiff's stamps collection was due to a calamity beyond obligation on its part to notify the plaintiff about the floodwaters that inundated its premises at Binondo branch which allegedly seeped into the safety deposit box leased to the plaintiff. The trial court rendered in favor of plaintiff Sia and ordered SBTC to pay damages. In an appeal, the Court of Appeals absolved SBTC from any liability. Hence this petition.

Issue: Whether or not SBTC is liable for negligence

Held: Yes. Some provisions of the lease agreement which are meant to exempt SBTC from any liability for damage, loss or destruction of the contents of the safety deposit box which may arise from its own agents’ fraud, negligence or delay must be stricken down for being contrary to law and public policy.

As correctly held by the trial court, SBTC was guilty of negligence. SBTC's negligence aggravated the injury or damage to the stamp collection. SBTC was aware of the floods of 1985 and 1986; it also knew that the floodwaters inundated the room where the safe deposit box was located. In view thereof, it should have lost no time in notifying the petitioner in order that the box could have been opened to retrieve the stamps, thus saving the same from further deterioration and loss. In this respect, it failed to exercise the reasonable care and prudence expected of a good father of a family, thereby becoming a party to the aggravation of the injury or loss. Accordingly, the aforementioned fourth characteristic of a fortuitous event is absent. Article 1170 of the Civil Code, which reads “Those who in the performance of their obligation are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages” is applicable. Hence, the petition was granted.

7. Banas vs. Asia Pacific Finance CorporationG.R. No. 128703, October 18, 2000

Facts: Teodoro Bañas executed a Promissory Note in favor of C. G. Dizon Construction whereby for value received he promised to pay to the order of C. G. Dizon Construction the sum of P390,000.00 in installments of "P32,500.00 every 25th day of the month starting from September 25, 1980 up to August 25, 1981."

Later, C. G. Dizon Construction endorsed with recourse the Promissory Note to ASIA PACIFIC, and to secure payment thereof, C. G. Dizon Construction, through its corporate officers, Cenen Dizon, President, and Juliette B. Dizon, Vice President and Treasurer, executed a Deed of Chattel Mortgage covering three heavy equipment units of Caterpillar Bulldozer Crawler Tractors Moreover, Cenen Dizon executed a Continuing Undertaking wherein he bound himself to pay the obligation jointly and severally with C. G. Dizon Construction.

In compliance thereof, C. G. Dizon Construction made three installment payments to ASIA PACIFIC for a total of P130,000.00. Thereafter, however, C. G. Dizon Construction defaulted in the payment of the remaining installments, prompting ASIA PACIFIC to send a Statement of Account to Cenen Dizon for the unpaid balance of P267,737.50 inclusive of interests and charges, and P66,909.38 representing attorney's fees. As the demand was unheeded, ASIA PACIFIC filed a complaint for a sum of money with prayer for a writ of replevin against Teodoro Bañas, C. G. Dizon Construction and Cenen Dizon.

The trial court issued a writ of replevin against defendant C. G. Dizon Construction for the surrender of the bulldozer crawler tractors. Of the three bulldozer crawler tractors, only two were actually turned over by defendants which units were subsequently foreclosed by ASIA PACIFIC to satisfy the obligation. The two bulldozers were sold both to ASIA PACIFIC as the highest bidder.

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. The Regional Trial Court ruled in favor of ASIA

PACIFIC holding the defendants jointly and severally liable for the unpaid balance of the obligation under the Promissory Note. The Court of Appeals affirmed the decision of the trial court

Issues: Whether the disputed transaction between petitioners and ASIA PACIFIC violated banking laws, hence, null and void

Held: 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. As defined in Revised Securities Act, securities "shall include commercial papers evidencing indebtedness of any person, financial or non-financial entity, irrespective of maturity, issued, endorsed, sold, transferred or in any manner conveyed to another with or without recourse, such as promissory notes" 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.

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. Wherefore, the assailed decision of the Court of Appeals was affirmed.

8. Reyes vs. Court of AppealsG.R. No. 118492, August 15, 2001

Facts: In view of the 20th Asian Racing Conference then scheduled to be held in Sydney, Australia, the Philippine Racing Club, Inc. (PRCI) sent four delegates to the said conference. PRCI, through its officers, applied to the respondent bank for a foreign exchange demand draft in Australian dollars.

Godofredo, club’s chief cashier, went to respondent bank to apply for a demand draft in the amount AU$1,610.00 payable to the order of the 20th Asian Racing Conference Secretariat of Sydney, Australia. He was attended to by respondent bank's assistant cashier, Mr. Yasis, who at first denied the application for the reason that respondent bank did not have an Australian dollar account in any bank in Sydney. Godofredo asked if there could be a way for respondent bank to accommodate PRCI's urgent need to remit Australian dollars to Sydney. Yasis of respondent bank then informed Godofredo of a roundabout way of effecting the requested remittance to Sydney thus: the respondent bank would draw a demand draft against Westpac Bank in Sydney, Australia (Westpac-Sydney) and have the latter reimburse itself from the U.S. dollar account of the respondent in Westpac Bank in New York, U.S.A. (Westpac-New York). This arrangement has been customarily resorted to since the 1960's and the procedure has proven to be problem-free. PRCI and the petitioner Gregorio H. Reyes, acting through Godofredo, agreed to this arrangement or approach in order to effect the urgent transfer of Australian dollars payable to the Secretariat of the 20th Asian Racing Conference. Pursuant thereto, respondent bank approved the said application of PRCI and issued foreign exchange demand draft in the sum applied for payable to the order of the 20th Asian Racing Conference Secretariat of Sydney, Australia, and addressed to Westpac-Sydney as the drawee bank.

However, upon due presentment of the foreign exchange demand draft, the same was dishonored, with the notice of dishonor stating that there is “No account held with Westpac." Meanwhile, Wespac-New York sent a cable to respondent bank informing the latter that its dollar account in the sum of AU$ 1,610.00 was debited. In response to PRCI's complaint about the dishonor of

the said foreign exchange demand draft, respondent bank informed Westpac-Sydney of the issuance of the said demand draft, drawn against the Wespac-Sydney and informing the latter to be reimbursed from the respondent bank's dollar account in Westpac-New York. The respondent bank on the same day likewise informed Wespac-New York requesting the latter to honor the reimbursement claim of Wespac-Sydney. Upon its second presentment for payment, the demand draft was again dishonored by Westpac-Sydney for the same reason, that is, that the respondent bank has no deposit dollar account with the drawee Wespac-Sydney.

Petitioners Gregorio Reyes and Consuelo Puyat-Reyes arrived in Sydney on a separate date and both were humiliated and embarrassed in the presence of international audience after being denied registration of the conference secretariat since the foreign exchange draft was dishonored. Petitioners were only able to attend the conference after promising to pay in cash instead which they fulfilled

Petitioners filed in the Regional Trial Court a complaint for damages against the respondent bank. The trial court rendered judgment in favor of the respondent bank. The appellate court affirmed the decision of the trial court.

Issue: Whether or not respondent bank is liable for damages due to the dishonor of the foreign exchange demand drafts.

Held: No. The facts as found by the courts a quo show that respondent bank did not cause an erroneous transmittal of its SWIFT cable message to Westpac-Sydney. It was the erroneous decoding of the cable message on the part of Westpac-Sydney that caused the dishonor of the subject foreign exchange demand draft.

The evidence also shows that the respondent bank exercised that degree of diligence expected of an ordinary prudent person under the circumstances obtaining; the respondent bank advised Westpac-New York to honor the reimbursement claim of Westpac-Sydney and to debit the dollar account of respondent bank with the former. As soon as the demand draft was dishonored, the respondent bank, thinking that the problem was with the reimbursement and without any idea that it was due to miscommunication, re-confirmed the authority of Westpac-New York to debit its dollar account for the purpose of reimbursing Westpac-Sydney. Respondent bank also sent two more cable messages to Westpac-New York inquiring why the demand draft was not honored.

The degree of diligence required of banks, is more than that of a good father of a family where the fiduciary nature of their relationship with their depositors is concerned. In other words banks are duty bound to treat the deposit accounts of their depositors with the highest degree of care. But the said ruling applies only to cases where banks act under their fiduciary capacity, that is, as depositary of the deposits of their depositors. But the same higher degree of diligence is not expected to be exerted by banks in commercial transactions that do not involve their fiduciary relationship with their depositors. The case at bar does not involve the handling of petitioners' deposit, if any, with the respondent bank. Instead, the relationship involved was that of a buyer and seller. Wherefore, the decision of the Court of Appeals was affirmed.

9. Consolidated Bank and Trust Corporation vs. Court of AppealsG.R. No. 138569, September 11, 2003

Facts: Solidbank is a domestic banking corporation while private respondent L.C. Diaz and Company, CPA’s (“L.C. Diaz”), is a professional partnership engaged in the practice of accounting and which opened a savings account with Solidbank. Diaz through its cashier, Mercedes Macaraya , filled up a

savings cash deposit slip and a savings checks deposit slip. Macaraya instructed the messenger of L.C. Diaz, Ismael Calapre, to deposit the money with Solidbank and give him the Solidbank passbook.

Calapre went to Solidbank and presented to Teller No. 6 the two deposit slips and the passbook. The teller acknowledged receipt of the deposit by returning to Calapre the duplicate copies of the two deposit slips. Since the transaction took time and Calapre had to make another deposit for L.C. Diaz with Allied Bank, he left the passbook with Solidbank. When Calapre returned to Solidbank to retrieve the passbook, Teller No. 6 informed him that somebody got the passbook. Calapre went back to L.C. Diaz and reported the incident to Macaraya.

The following day,, L.C. Diaz through its Chief Executive Officer, Luis C. Diaz, called up Solidbank to stop any transaction using the same passbook until L.C. Diaz could open a new account followed by a formal written request later that day. It was also on the same day that L.C. Diaz learned of the unauthorized withdrawal the day before of P300,000 from its savings account. The withdrawal slip bore the signatures of the authorized signatories of L.C. Diaz, namely Diaz and Rustico L. Murillo. The signatories, however, denied signing the withdrawal slip. A certain Noel Tamayo received the P300,000.

L.C. Diaz demanded from Solidbank the return of its money but to no avail. Hence, L.C. Diaz filed a Complaint for Recovery of a Sum of Money against Solidbank with the Regional Trial Court. After trial, the trial court rendered a decision absolving Solidbank and dismissing the complaint. Court of Appeals reversed the decision of the trial court.

Issue: Whether or not Solidbank must be held liable for the fraudulent withdrawal on private respondent’s account.

Held: The petition is partly meritorious. Solidbank is liable for breach of contract due to negligence, or culpa contractual.

The contract between the bank and its depositor is governed by the provisions of the Civil Code on simple loan. There is a debtor-creditor relationship between the bank and its depositor. The bank is the debtor and the depositor is the creditor. The law imposes on banks high standards in view of the fiduciary nature of banking. RA 8791 declares that the State recognizes the “fiduciary nature of banking that requires high standards of integrity and performance.” This new provision in the general banking law, introduced in 2000, is a statutory affirmation of Supreme Court decisions holding that “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.”

However, the fiduciary nature of a bank-depositor relationship does not convert the contract between the bank and its depositors from a simple loan to a trust agreement, whether express or implied. Failure by the bank to pay the depositor is failure to pay a simple loan, and not a breach of trust.

Solidbank’s tellers must exercise a high degree of diligence in insuring that they return the passbook only to the depositor or his authorized representative. The tellers know, or should know, that the rules on savings account provide that any person in possession of the passbook is presumptively its owner. If the tellers give the passbook to the wrong person, they would be clothing that person presumptive ownership of the passbook, facilitating unauthorized withdrawals by that person. For failing to return the passbook to Calapre, the authorized representative of L.C. Diaz, Solidbank and Teller No. 6 presumptively failed to observe such high degree of diligence in safeguarding the passbook, and in insuring its return to the party authorized to receive the same.

However, L.C. Diaz was guilty of contributory negligence in allowing a withdrawal slip signed by its authorized signatories to fall into the hands of an impostor. Thus, the liability of Solidbank should be reduced. Hence, the liability of Solidbank for actual damages was reduced to only 60%, the remaining 40% was borne by private respondent.

10. Banco de Oro vs. JAPRL Development Corporation G.R. No. 179901, April 14, 2008

Facts: Banco de Oro extended financial facilities to respondent JAPRL amounting to P230,000,000 with co-respondents Rapid Forming Corporation (RFC) and Jose Arollado acting as sureties. JAPRL defaulted in the payment of four trust receipts. Petitioner bank subsequently found out that JAPRL altered and falsified its financial statements to project itself as a viable investment. Because the demand for payment was unheeded, petitioner bank sued JAPRL and the sureties for payment of the balance due on the trust receipts in RTC Makati. Respondents then hastily filed a petition for rehabilitation and stay order in Calamba of RTC which were granted. As a result, the complaint was dismissed with respect to JAPRL and RFC. Arollado remained as defendant. Respondents filed a petition for certiorari before the CA, contending that the trial court did not acquire jurisdiction over them as the summons were served on a mere administrative assistant. CA granted the petition and dismissed petitioner’s motion for reconsideration. Hence this petition.

Issues: Whether or not jurisdiction over the defendants was acquired and whether or not they are liable to pay their obligations

Held: Petition granted. When respondents moved for the suspension of proceedings of the civil case before the Makati RTC, on the basis of the stay order of the Calamba RTC, they waived whatever defect there was in the service of summons and were deemed to have submitted themselves voluntarily to the jurisdiction of the Makati RTC.

Considering the amount of petitioner's exposure in JAPRL, justice and fairness dictate that the Makati RTC hear whether or not respondents indeed committed fraud in securing the credit accomodation. In this event, petitioner can use the finding of fraud to move for the dismissal of the rehabilitation case in the Calamba RTC.

Moreover, under Sec. 40 of the General Banking Law, should such statements (financial) prove to be false or incorrect in any material detail, the bank may terminate any loan or credit accommodation granted on the basis of said statements and shall have the right to demand immediate repayment or liquidation of the obligation. Meanwhile, trial court should proceed with the case against three defendants.

11. Philippines National Bank vs. Erlando T. Rodriguez, et al. G.R. No. 170325, September 26, 2008

Facts: Respondents-spouses maintained a savings and demand/checking accounts with petitioners Philippines National Bank (PNB). They were engaged in the informal lending business and had a discounting arrangement with the Philnabank Employees Savings and Loan Association (PEMSLA), an association of PNB employees, which likewise maintained current and savings accounts with petitioner bank. PEMSLA regularly granted loans to its members. Spouses Rodriguez would rediscount the postdated checks issued to members whenever the association was short of funds. As was customary, the spouses would replace the postdated checks with their own checks issued in the name of the members.

It was PEMSLA’s policy not to approve applications for loans of members with outstanding debts. To subvert this policy, some PEMSLA officers devised a scheme to obtain additional loans despite their outstanding loan accounts. They took out loans in the names of unknowing members, without the

knowledge or consent of the latter. The PEMSLA checks issued for these loans were then given to the spouses for rediscounting. The officers carried this out by forging the indorsement of the named payees in the checks. In return, the spouses issued their personal checks (Rodriguez checks) in the name of the members and delivered the checks to an officer of PEMSLA. The PEMSLA checks, on the other hand, were deposited by the spouses to their account. Meanwhile, the Rodriguez checks were deposited directly by PEMSLA to its savings account without any indorsement from the named payees. This usual irregular procedure is made possible through the facilitation of Edmundo Palermo, Jr., treasurer of PEMSLA and bank teller in the PNB Branch.

The spouses issued 69 checks, in the total amount of P2,345,804.00, payable to 47 members of PEMSLA. After finding out such fraudulent act, PNB closed the current account of PEMSLA. As a result, the PEMSLA checks deposited by the spouses were returned or dishonored for the reason "Account Closed." The corresponding Rodriguez checks, however, were deposited as usual to the PEMSLA savings account. The amounts were duly debited from the Rodriguez account. Thus, because the PEMSLA checks given as payment were returned, spouses Rodriguez incurred losses from the rediscounting transactions.

Spouses Rodriguez sued PEMSLA and PNB. They contended that because PNB credited the checks to the PEMSLA account even without indorsements, PNB violated its contractual obligation to them as depositors. PNB paid the wrong payees, hence, it should bear the loss. Trial court ruled in favor of spouses and ordered PNB to pay. CA affirmed the decision. Hence this petition

Issue: Whether or not PNB can be made liable to pay the amount of checks which were deposited to the PEMSLA savings account.

Held: Yes. The Rodriguez checks are payable to order since the bank failed to prove that the named payees therein are fictitious. Hence, the fictitious-payee rule which will make the instrument payable to bearer does not apply. PNB accepted the 69 checks for deposit to the PEMSLA account even without any indorsement from the named payees. It bears stressing that order instruments can only be negotiated with a valid indorsement.

A bank that regularly processes checks that are neither payable to the customer nor duly indorsed by the payee is apparently grossly negligent in its operations. This Court has recognized the unique public interest possessed by the banking industry and the need for the people to have full trust and confidence in their banks. For this reason, banks are minded to treat their customer’s accounts with utmost care, confidence, and honesty. In a checking transaction, the drawee bank has the duty to verify the genuineness of the signature of the drawer and to pay the check strictly in accordance with the drawer’s instructions, i.e., to the named payee in the check. It should charge to the drawer’s accounts only the payables authorized by the latter. Otherwise, the drawee will be violating the instructions of the drawer and it shall be liable for the amount charged to the drawer’s account.

12. Bank of America, NT and SA vs. Associated Citizens BankG.R. No. 141001, May 21, 2009

Facts: BA-Finance Corporation granted Miller Offset Press, Inc. a credit line facility through which the latter could assign or discount its trade receivables with the former. The representatives of Miller (Uy Kiat Chung, Ching Uy Seng, and Uy Chung Guan Seng) executed a Continuing Suretyship Agreement with BA-Finance whereby they jointly and severally guaranteed the full and prompt payment of any and all indebtedness which Miller may incur with BA-Finance.

Miller discounted and assigned several trade receivables to BA-Finance by executing Deeds of Assignment in favor of the latter. In consideration thereof, BA-Finance issued four checks payable to the order of Miller with the notation "For Payee’s Account Only." These checks were drawn against Bank of America. The four checks were deposited by Ching Uy Seng in Associated Citizens Bank with his joint account with Uy Chung Seng. Associated Bank stamped the checks and guaranteed all prior endorsements and/or lack of endorsements and sent them through clearing. Later, Bank of America as drawee bank honored the checks and paid the proceeds to Associated Bank as the collecting bank. When Miller failed to deliver to BA-Finance the proceeds of the assigned trade receivables, BA-Finance filed a collection suit against Miller and impleaded the three representative of the latter.

Miller, Uy Kiat Chung, and Uy Chung Guan Seng filed a joint answer with cross-claim against Ching Uy Seng, wherein they denied that (1) they received the amount covered by the four Bank of America checks, and (2) they authorized their co-defendant Ching Uy Seng to transact business with BA-Finance on behalf of Miller. Uy Kiat Chung and Uy Chung Guan Seng also denied having signed the Continuing Suretyship Agreement with BA-Finance. BA-Finance filed an Amended Complaint impleading Bank of America as additional defendant for allegedly allowing encashment and collection of the checks by person or persons other than the payee named thereon. Ching Uy Seng did not file his Answer to the complaint.

Bank of America filed a third party complaint against Associated Bank. In its answer to the third party complaint, Associated Bank admitted having received the four checks for deposit in the joint account of Ching Uy Seng and Uy Chung Guan Seng, but alleged that Ching Uy Seng, being one of the corporate officers of Miller, was duly authorized to act for and on behalf of Miller. RTC rendered judgment ordering Bank of America to pay BA-Finance the value of the four checks. CA affirmed the trial court’s ruling with modification that Associated Bank should reimburse Bank of America. Hence this petition.

Issues: Whether or not Bank of America is liable to pay BA-Finance and whether or not Associated Bank should reimburse Bank of America the amount of the four checks.

Held: Yes. The bank on which a check is drawn, known as the drawee bank, is under strict liability, based on the contract between the bank and its customer (drawer), to pay the check only to the payee or the payee’s order. The drawer’s instructions are reflected on the face and by the terms of the check. When the drawee bank pays a person other than the payee named on the check, it does not comply with the terms of the check and violates its duty to charge the drawer’s account only for properly payable items.

On the part of Associated Bank, the law imposes a duty of diligence on the collecting bank to scrutinize checks deposited with it for the purpose of determining their genuineness and regularity. The collecting bank being primarily engaged in banking holds itself out to the public as the expert and the law holds it to a high standard of conduct. In presenting the checks for clearing and for payment, the defendant [collecting bank] made an express guarantee on the validity of "all prior endorsements." Thus, stamped at the back of the checks are the defendant’s clear warranty. As the warranty has proven to be false and inaccurate, Associated Bank is liable for any damage arising out of the falsity of its representation.

Closure of Banks

1. Ramos vs. Central Bank of the PhilippinesG.R. No. L-29352, October 4, 1971

Facts: Petitioners are the majority and controlling stockholders of Overseas Bank of Manila (OBM), a commercial banking corporation. The OBM had been suspended by respondent from clearing with the CB and from lending operations for various violations of the banking laws and implementing regulations. Petitioners charged that the OBM became financially distressed because of this suspension and the deprivation by the CB of all the usual credit facilities and accommodations accorded to the other banks. Because the financial situation of the OBM had caused mounting concern in the CB, petitioner Ramos and the OBM management met with respondent CB on the necessity and urgency of rehabilitating the OBM through the extension of necessary financial assistance. In lieu thereof, the Monetary Board issued a resolution demanding the stockholders to mortgage their properties or assign the same to the CB and to execute a voting trust agreement whereby they will pass the management to Philippine National Bank in order “to stave of liquidation”.

Hence, the petitioners executed the voting trust agreement prepared by CB with petitioners as cestuis que trust and respondent CB's Superintendent of Banks as the Trustee. Petitioners likewise conveyed by way of mortgage to the CB all their private properties and holdings to secure the obligations of the OBM to the CB. Accordingly, new directors and officers were elected and installed and they took over the management and control of the Overseas bank.

However, after 8 months, the Central Bank did not make any positive action to reorganize and resume OBM’s normal operations. Instead, CB issued a resolution excluding OBM from clearing with it and authorizing the nominee board of directors to suspend operations. Worse, CB Monetary Board issued a resolution ordering the liquidation the bank. Hence this petition for certiorari, prohibition and mandamus with prayer for the issuance of a writ of preliminary injunction to restrain respondent Central Bank of the Philippines from enforcing and implementing the Monetary Board Resolutions.

Issue: Whether or not the CB had agreed to rehabilitate, normalize and stabilize OBM and whether or not the CB resolutions were adopted in abuse of discretion.

Held: Yes. Petition granted. CB did agree and commit itself to the continued operation of, and rehabilitation of, the OBM. CB made express representations to petitioners herein that it would support the OBM, and avoid its liquidation if the petitioners would execute (a) the voting trust agreement turning over the management of OBM to the CB or its nominees, and (b) mortgage or assign their properties to the Central Bank to cover the overdraft balance of OBM. The petitioners having complied with these conditions and parted with value to the profit of the CB (which thus acquired additional security for its own advances), the CB may not now renege on its representations and liquidate the OBM, to the detriment of its stockholders, depositors and other creditors, under the rule of promissory estoppels.

The conduct of the CB reveals a calculated attempt to evade rehabilitating OBM despite its promises. Hence, respondent Central Bank of the Philippines is directed to comply with it obligations under the voting trust agreement, and to desist from taking action in violation thereof.

2. Central Bank vs. Court of Appeals106 SCRA 143, 1981

Facts: Plaintiffs Isidro Fernandez and Jesus Jayme are the majority and controlling stockholders of Provident Bank. When Provident Savings Bank experienced bankrun, it was forced to borrow funds from other banks and the Central Bank. Despite the borrowing, the funds remained insufficient to satisfy the withdrawals. Hence, the plaintiffs appealed to Central Bank for further assistance. However, CB replied to them stating that they have to relinquish and turnover the management and control of the bank to

Iglesia ni Kristo (INK) in order for it to assist the distressed provident. Because plaintiffs were left with no other choice, they agreed to the proposal and executed a memorandum of agreement with Eagle Broadcasting Corporation (EBC), a company identified with INK.

However, EBC did not comply with its obligation to organize the bank. Instead, it made several irregularities in managing the bank. These acts were made despite the presence of CB examiners. Subsequently, CB Monetary Board issued a resolution declaring the closure of Provident Savings Bank and ordering its liquidation. Hence, Fernandez and Jayme filed with the Court of First Instance a petition for certiorari, prohibition, and mandamus against Central Bank to annul the resolution and restrain CB from proceeding with the liquidation which the court granted. Court of Appeals affirmed lower court’s decision. Hence this appeal.

Issue: Whether or not the closure of the bank may be subject to judicial inquiry and whether or not the resolution was issued arbitrarily and in bad faith.

Held: Yes. Decision affirmed. While the closure and liquidation of a bank may be considered an exercise of police power, the validity of such exercise of police power is subject to judicial inquiry and could be set aside if it is either capricious, discriminatory, whimsical, arbitrary, unjust, or a denial of due process and equal protection clauses of the Constitution.

The arbitrariness and bad faith of Central Bank is evident from the fact that it pressured Fernandez and Jayme into relinquishing the management and control of Provident Savings Bank to Iglesia Ni Kristo which did not have any intention of restoring the bank into its former sound financial condition but whose interest was merely to recover its deposits from the bank and thereafter allowing INK to mismanage the bank until the bank’s financial deterioration and subsequent closure. Central Bank acted whimsically and withdrew its commitment to support the bank to the detriment of the latter.

3. Salud vs. Central BankG.R. No. L-17620, August 19, 1986

Facts: The Monetary Board adopted 2 resolutions forbidding the Muntinlupa Bank to do business, designating a statutory receiver, and ordering the liquidation of the same bank after confirmation that it is insolvent. Muntinlupa bank opposed the liquidation and alleged that the action of the Monetary Board was premature and void since there was no prior effort to reorganize the management of the bank and restore its viability and that it was made arbitrarily and in bad faith. The Regional Trial Court, treating the opposition of the bank as a motion to dismiss, ruled in favor of it and declared the action of the Monetary Board arbitrary after finding that the bank had more assets than liabilities. The Intermediate Appellate Court reversed the decision and gave due course to the petition for liquidation. Hence this petition

Issue: Whether or not the action of the Monetary Board is within the jurisdiction of the Regional Trial Court and may rule on its validity based on arbitrariness and bad faith.

Held: Yes. Resolutions of the Monetary Board forbidding banking institutions to do business; or appointing a receiver to take charge of the bank's assets and liabilities; or determining whether the banking institutions may be rehabilitated, or should be liquidated and appointing a liquidator towards this end are by law final and executory. But they can be set aside by the court on one specific ground, and that is, if there is convincing proof that the action is plainly arbitrary and made in bad faith. The Central Bank concedes this power in the court, but insists that that setting aside cannot be done in the

same proceeding for assistance in liquidation, but in a separate action instituted specifically for the purpose. However, there is no provision of law which expressly or even by implication imposes the requirement for a separate proceeding exclusively occupied with adjudicating this issue. Hence, such action may be asserted as an affirmative defense of a counterclaim in the proceeding for assistance in liquidation that the Central Bank has filed in the Regional Trial Court. The case is remanded back to the RTC for further proceeding.

4. Lipana vs. Development Bank of the PhilippinesG.R. No. 73884, September 24, 1987

Facts: Petitioners opened and maintained both time and savings deposits with the respondent Development Bank of Rizal. When some of the time deposit certificates matured, petitioners were not able to cash them but instead were issued a manager's check which was dishonored upon presentment. Demands for the payment of both time and savings deposits have failed. Hence, petitioners filed with the RTC a collection suit with prayer for issuance of a writ of preliminary attachment which was granted by the court. The RTC rendered judgment in favor of petitioners.Meanwhile, the Monetary Board placed the respondent bank under receivership. Subsequently, the motion for execution pending appeal filed by petitioners was granted by the court but was also stayed by the trial judge. The motion filed by petitioners to lift the stay order having been denied, this petition was filed.

Issue: Whether or not respondent judge could legally stay execution of judgment that has already become final and executor

Held: Yes. Petition dismissed. 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. To execute the judgment would unduly deplete the assets of respondent bank to the obvious prejudice of other depositors and creditors,

5. Overseas Bank of Manila vs. Court of AppealsG.R. No. L-45866, April 19, 1989

Facts: In relation to a contract of sale between NAWASA, as vendor and a certain Bonifacio Regalado, as vendee, the amount corresponding to the first payment by Regalado was placed on a time deposit with the Overseas Bank by the NAWASA Treasurer for a period of 6 months. A second payment having been made by Regalado, another time deposit was made by the NAWASA Treasurer with the Overseas Bank, this time in the amount respresenting the balance of the purchase price due from Regalado. The period of this second deposit was fixed 1 year.

Subsequently, NAWASA's Acting General Manager wrote to the Overseas Bank advising that (1) as regards the first time deposit which had already matured, NAWASA wished to withdraw it immediately, and (2) with respect to the second time deposit of, it intended to withdraw it 60 days thereafter as authorized by the parties' agreement set forth in the certificate of the deposit. Despite

several letter request, nothing was heard from the Overseas Bank. It did however pay to NAWASA interest on its time deposits.

After maturity of the second time deposit and Overseas Bank not responding to the letter request of NAWASA for the remittance of the time deposits, NAWASA then wrote to the Central Bank Governor about the matter. Apparently, even the Central Bank was ignored by Overseas Bank. One last letter was written by NAWASA to the Overseas Bank, reiterating its demand for the return of its money. Again the letter went unheeded.

NAWASA thus brought suit to recover its deposits and damages. CFI Manila rendered judgment in favor of NAWASA and ordered the bank to pay. CA affirmed the trial court’s ruling. Hence this petition.

Issue: Whether or not Overseas Bank is liable to pay.

Held: Yes. Judgment affirmed. The bank’s contention that the punitive actions taken by the Central Bank prevented the bank from conducting its business is devoid of merit. There is absolutely no evidence of these facts in the record. Moreover, the suspension of operations in 1968 could not possibly excuse non-compliance with the obligations in question which matured in 1966. Again, the claim that the Central Bank, by suspending the Overseas Bank's banking operations, had made it impossible for the Overseas Bank to pay its debts, whatever validity might be accorded thereto, or the further claim that it had fallen into a distressed financial situation, cannot in any sense excuse it from its obligation to the NAWASA, which had nothing whatever to do with the Central Bank's actuations or the events leading to the bank's distressed state.

6. Banco Filipino Savings and Mortgage Bank vs. Central BankG.R. No. 70054, December 11, 1911

Facts: Petitioners Top Management Programs Corporation and Pilar Development Corporation are corporations engaged in the business of developing residential subdivisions.Top Management and Pilar Development obtained several loans from Banco Filipino all secured by real estate mortgage in their various properties in Cavite.

The Monetary Board issued a resolution finding Banco Filipino insolvent and placing it under receivership. Subsequently, the Monetary Board issued another resolution placing the bank under liquidation and designated a liquidator. By virtue of her authority as liquidator, Valenzuela appointed the law firm of Sycip, Salazar, et al. to represent Banco Filipino in all litigations.

Banco Filipino filed the petition for certiorari questioning the validity of the resolutions issued by the Monetary Board authorizing the receivership and liquidation of Banco Filipino.A temporary restraining order was issued enjoining the respondents from executing further acts of liquidation of the bank. However, acts and other transactions pertaining to normal operations of a bank are not enjoined.

Subsequently, Top Management and Pilar Development failed to pay their loans on the due date. Hence, the law firm of Sycip, Salazar, et al. acting as counsel for Banco Filipino under authority of the liquidator, applied for extra-judicial foreclosure of the mortgage over Top Management and Pilar Development’s properties. Thus, the Ex-Officio Sheriff of the Regional Trial Court of Cavite issued a notice of extra-judicial foreclosure sale of the properties. Top Management and Pilar Development filed 2 separate petitions for injunction and prohibition with the respondent appellate court seeking to enjoin the Regional Trial Court of Cavite, the ex-officio sheriff of said court and Sycip, Salazar, et al. from proceeding with foreclosure sale which were subsequently dismissed by the court. Hence this petition

Issue: Whether or not the liquidator has the authority to prosecute as well as to defend suits and to foreclose mortgages for and behalf of the bank while the issue on the validity of the receivership and liquidation is still pending resolution

Held: Yes. Section 29 of the Republic Act No. 265, as amended known as the Central Bank Act, provides that when a bank is forbidden to do business in the Philippines and placed under receivership, the person designated as receiver shall immediately take charge of the bank's 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. Pendency of the case did not diminish the powers and authority of the designated liquidator to effectuate and carry on the administration of the bank.

However, the assailed order of the Monetary Board liquidating the bank was annulled and set aside. Central Bank and the Monetary Board were ordered to reorganize petitioner bank and allow the latter to resume business under their comptrollership.

7. Central Bank of the Philippines vs. Court of AppealsG.R. No. 88353, May 8, 1992

Facts: Central Bank discovered that certain questionable loans extended by Producer’s Bank of the Philippines (PBP), totalling approximately P300 million (the paid-in capital of PBP amounting only to P 140.544 million), were fictitious as they were extended, without collateral, to certain interests related to PBP owners themselves.

Subsequently and during the same year, several blind items about a family-owned bank in Binondo which granted fictitious loans to its stockholders appeared in major newspapers which triggered a bank-run in PBP and resulted in continuous over-drawings on the bank's demand deposit account with the Central Bank; reaching to P 143.955 million. Hence, on the basis of the report submitted by the Supervision and Examination Sector, the Monetary Board (MB), placed PBP under conservatorship.

PBP submitted a rehabilitation plan to the CB which proposed the transfer to PBP of 3 buildings owned by Producers Properties, Inc. (PPI), its principal stockholder and the subsequent mortgage of said properties to the CB as collateral for the bank's overdraft obligation but which was not approved due to disagreements between the parties.

Since no other rehabilitation program was submitted by PBP for almost 3 years its overdrafts with the CB continued to accumulate and swelled to a staggering P1.023 billion. Consequently, the CB Monetary Board decided to approve in principle what it considered a viable rehabilitation program for PBP. There being no response from both PBP and PPI on the proposed rehabilitation plan, the MB issued a resolution instructing Central Bank management to advise the bank that the conservatorship may be lifted if PBP complies with certain conditions.

Without responding to the communications of the CB, PBP filed a complaint with the Regional Trial Court of Makati against the CB, the MB and CB Governor alleging that the resolutions issued were arbitraty and made in bad faith. Respondent Judge issued a temporary restraining order and subsequently a writ of preliminary injunction. CB filed a motion to dismiss but was denied and ruled that

the MB resolutions were arbitrarily issued. CB filed a petition for certiorari before the Court of Appeals seeking to annul the orders of the trial court but CA affirmed the said orders. Hence this petition.Issue: Whether or not the trial court erred in not dismissing the case for lack of cause of action and declaring the MB resolutions as arbitrary.

Held: Yes. Assailed decisions are annulled and set aside. The following requisites must be present before the order of conservatorship may be set aside by a court: (1) The appropriate pleading must be filed by the stockholders of record representing the majority of the capital stock of the bank in the proper court; (2) Said pleading must be filed within ten (10) days from receipt of notice by said majority stockholders of the order placing the bank under conservatorship; and (3) There must be convincing proof, after hearing, that the action is plainly arbitrary and made in bad faith. In the instant case, the original complaint was filed more than 3 years after PBP was placed under conservator, long after the expiration of the 10-day period deferred to above. It is also beyond question that the complaint and the amended complaint were not initiated by the stockholders of record representing the majority of the capital stock.

8. First Philippine National Bank vs. Court of Appeals

9. Ong vs. Court of AppealsG.R. No. 112830, February 1, 1996

Facts: Jerry Ong filed with the Regional Trial Court of Quezon City a petition for the surrender of 2 TCTs against Rural Bank of Olongapo, Inc. (RBO), represented by its liquidator Guillermo G. Reyes, Jr. and deputy liquidator Abel Allanigue. According to the petition, said 2 parcels of land were duly mortgaged by RBO in favor of petitioner to guarantee the payment of Omnibus Finance, Inc., which is likewise now undergoing liquidation proceedings of its money market obligations to petitioner. Omnibus Finance, Inc., not having seasonably settled its obligations to petitioner, the latter proceeded to effect the extrajudicial foreclosure of said mortgages and the city sheriff of Tagaytay City issued a certificate of sale in favor of petitioner which were duly registered.

Respondents failed to seasonably redeem said parcels of land, for which reason, petitioner has executed an affidavit of consolidation of ownership which has not been submitted to the Registry of Deeds of Tagaytay City, in view of the fact that possession of the aforesaid titles or owner's duplicate certificates of title remains with the RBO. To date, petitioner has not been able to effect the registration of said parcels of land in his name in view of the persistent refusal of respondentsto surrender RBO's copies of its owner's certificates of title for the parcels of land covered by the two TCTs.

Respondent RBO filed a motion to dismiss on the ground of res judicata and that it was undergoing liquidation and it is the liquidation court which has exclusive jurisdiction to take cognizance of petitioner's claim. Trial court denied the motion to dismiss because it found that the causes of action in the previous and present cases were different although it was silent on the jurisdictional issue. RBO filed a motion for reconsideration but was similarly rejected. The Court of Appeals, through a certiorari filed by RBO, annulled the challenged orders of the trial court which sustained the jurisdiction of the trial court and denied reconsideration thereof. Moreover, the trial judge was ordered to dismiss the civil case without prejudice to the right of petitioner to file his claim in the liquidation proceedings pending before the Regional Trial Court of Olongapo City.

Issue: Whether or not the civil case against RBO may proceed independently from the liquidation proceedings.

Held: No.Petition denied. All claims against the insolvent bank should be filed in the liquidation proceeding. The judicial liquidation is intended to prevent multiplicity of actions against the insolvent bank. It is a pragmatic arrangement designed to establish due process and orderliness in the liquidation of the bank, to obviate the proliferation of litigations and to avoid injustice and arbitrariness. It is not necessary that a claim be initially disputed in a court or agency before it is filed with the liquidation court.

10. Manalo vs. Court of AppealsG.R. No. 141297, October 8, 2001

Facts: S. Villanueva Enterprises, represented by its president, Therese Villanueva Vargas, obtained a loan of three million pesos and one million pesos from the respondent PAIC Savings and Mortgage Bank and the Philippine American Investments Corporation (PAIC), respectively. To secure payment of both debts, Vargas executed in favor of the respondent and PAIC a joint first mortgage over two parcels of land registered under her name. One of the lots is the subject of the present case. S. Villanueva Enterprises failed to settle its loan obligation. Accordingly, respondent instituted extrajudicial foreclosure proceedings over the mortgaged lots and acquired the same as the highest bidder. After the lapse of one year, title was consolidated in respondent's name for failure of Vargas to redeem.

Subsequently, Central Bank of the Philippines filed a petition for assistance in the liquidation of the respondent PAIC with the Regional Trial Court. After a few years, respondent petitioned the Regional Trial Court of Pasay City for the issuance of a writ of possession for the subject property. However, during the pendency of civil case for the issuance of a writ of possession, Vargas executed a deed of absolute sale selling, transferring, and conveying ownership of the disputed lot in favor of a certain Armando Angsico. Notwithstanding this sale, Vargas, still representing herself to be the lawful owner of the property, leased the same to petitioner Domingo R. Manalo. Later, Armando Angsico, as buyer of the property, assigned his rights therein to petitioner.

The court subsequently issued the writ of possession but Villanueva Enterprises and Vargas moved for its quashal. Petitioner, on the strength of the lease contract and deed of assignment made in his favor, submitted a permission to file an ex-parte motion to intervene. Both motions were denied by the court. Court of Appeals upheld the order of the lower court. Hence this petition.

Issue: Whether or not the jurisdiction for the issuance of the writ of possession filed by the respondent bank is vested solely on the liquidation court.

Held: No. Petition dismissed. Although the law provides that all claims against the insolvent bank should be filed in the liquidation proceeding, such legal provision only finds operation in cases where there are claims against an insolvent bank. In fine, the exclusive jurisdiction of the liquidation court pertains only to the adjudication of claims against the bank. It does not cover the reverse situation where it is the bank which files a claim against another person or legal entity.

Moreover, a bank which had been ordered closed by the monetary board retains its juridical personality which can sue and be sued through its liquidator. The only limitation being that the prosecution or defense of the action must be done through the liquidator. Otherwise, no suit for or against an insolvent entity would prosper. In such situation, banks in liquidation would lose what justly belongs to them through a mere technicality.

11. Rural Bank of Sta. Catalina vs. Land Bank of the PhilippinesG.R. No. 148019, July 26, 2004

Facts: Respondent Land Bank of the Philippines filed a complaint against the petitioner, Sta. Catalina Rural Bank, Inc., in the Regional Trial Court for the collection of sum of money. For its failure to file its answer to the complaint, the trial court declared the petitioner bank in default. Despite its receipt of the copy of the said order, the petitioner bank failed to file a motion to set aside the order of default.

Respondent bank presented 2 witnesses. The first witness, Mr. Mervin Sison, the chief loans and creditor of the Land Bank of the Philippines, testified that he knows of the rediscounting line agreements entered into by and between the plaintiff and the defendant. Said agreements were identified by him in court for P 3,500,000.00. In case of defendant's default, the availments shall be subject to 3% penalty per month from due date of note as agreed upon. During the effectivity of the first and second rediscounting line agreement, defendant made several separate availments, each is subject to a certain interest per annum and with a term of 180 days. The second witness, Ms. Elenita del Castillo, corroborated the testimony of Mr. Sison. The grand total of all the availments plus corresponding penalties amounted more than P 5 million.

In the meantime, the Monetary Board approved the placement of the petitioner bank's assets under receivership. The Philippine Deposit Insurance Corporation (PDIC) was designated as receiver (conservator) of the petitioner, and the latter was prohibited from doing business in the Philippines. Unaware of the action of the CB, the trial court rendered judgment by default against the petitioner bank ordering the bank to pay its obligation to respondent LBP plus interests and damages.

The petitioner, through the PDIC, appealed the decision to the Court of Appeals. The petitioner bank claim that since it was placed under receivership and prohibited from doing business in the Philippines it should no longer be held liable for interests and penalties on its account to the respondent bank. However, CA rendered judgment affirming the decision of the RTC.

Issue: Whether or not an insolvent bank placed under receivership and prohibited from doing business in the Philippines may be held liable to pay interests and penalties after being declared in default.

Held. Yes. Petition dismissed. Petitioner was served with a copy of summons and the complaint, but failed to file its answer thereto. It also failed to file a verified motion to set aside the order of default despite its receipt of a copy thereof. We note that the trial court rendered judgment only on April 7, 1998 or more than a year after the issuance of the default order; yet, the petitioner failed to file any verified motion to set aside the said order before the rendition of the judgment of default. The PDIC was designated by the Central Bank of the Philippines as receiver (conservator) as early as January 14, 1998, and in the course of its management of the petitioner bank's affairs, it should have known of the pendency of the case against the latter in the trial court. Moreover, the petitioner, through the PDIC, received a copy of the decision of the trial court but did not bother filing a motion for partial reconsideration appending thereto the orders of the Monetary Board or a motion to set aside the order of default. Instead, the petitioner appealed the decision, and even failed to assign as an error the default order of the trial court. The petitioner is, thus, barred from relying on the orders of the Monetary Board of the Central Bank of the Philippines placing its assets and affairs under receivership and ordering its liquidation.

12. Miranda vs. Court of AppealsG.R. No. 169334, September 8, 2006Facts: Petitioner Leticia G. Miranda was a depositor of Prime Savings Bank. She withdrew substantial amounts from her account, but instead of cash she opted to be issued a crossed cashier's check in the sum of P2,500,000 and cashier's check in the amount of P3,002,000. Petitioner deposited the two checks into her account in another bank on the same day, however, Bangko Sentral ng Pilipinas (BSP) suspended the clearing privileges of Prime Savings Bank effective 2:00 p.m. of June 3, 1999. The two checks of petitioner were returned to her unpaid.

On June 4, 1999, Prime Savings Bank declared a bank holiday. On January 7, 2000, the BSP placed Prime Savings Bank under the receivership of the Philippine Deposit Insurance Corporation (PDIC).

Petitioner filed a civil action for sum of money in the Regional Trial Court to recover the funds from her unpaid checks against Prime Savings Bank, PDIC and the BSP. The court rendered judgment against defendants and ordered them to pay the plaintiff. On appeal, the Court of Appeals reversed the trial court and ruled in favor of the PDIC and BSP, dismissing the case against them, without prejudice to the right of petitioner to file her claim before the court designated to adjudicate on claims against Prime Savings Bank. Petitioner's motion for reconsideration was denied. Hence, this petition.

Issue: Whether or not the respondents are solidarily liable to pay the petitioner.

Held: No. Only Prime Savings Bank that is liable to pay for the amount of the two cashier's checks. Solidary liability cannot attach to the BSP, in its capacity as government regulator of banks, and the PDIC as statutory receiver under R.A. No. 7653, because they are the principal government agencies mandated by law to determine the financial viability of banks and quasi-banks, and facilitate receivership and liquidation of closed financial institutions, upon a factual determination of the latter's insolvency. However, in a situation involving the element of fraud, where a cashier's check is purchased from a bank at a time when it is insolvent, as its officers know or are bound to know by the exercise of reasonable diligence, it has been held that the purchase is entitled to a preference in the assets of the bank on its liquidation before the check is paid. Hence, the CA decision is affirmed with modification that the claim of petitioner Miranda is entitled to preference in the assets of PSB in its liquidation.