BANKING LAWS

BANKING LAWS
SEC. 20, ART. XII of the 1987 Constitution

Section 20. The Congress shall establish an independent central monetary authority, the members of whose
governing board must be natural-born Filipino citizens, of known probity, integrity, and patriotism, the majority of
whom shall come from the private sector. They shall also be subject to such other qualifications and disabilities as
may be prescribed by law. The authority shall provide policy direction in the areas of money, banking, and credit. It
shall have supervision over the operations of banks and exercise such regulatory powers as may be provided by
law over the operations of finance companies and other institutions performing similar functions.
Until the Congress otherwise provides, the Central Bank of the Philippines operating under existing laws, shall
function as the central monetary authority.
GENERAL BANKING
LAWS
Q: What are the three primary functions of the central monetaryRA 8791
authority as provided under
Section 20, Article XII of the 1987 Constitution?
Under Section 20, Article XII of the 1987 Constitution, the three primary functions of the central
monetary authority are as follows:
(1) Policy direction in the areas of money, banking, and credit;
(2) Supervision over the operations of banks;
(3) Exercise of such regulatory powers as may be provided by law over the operations of finance
companies and other institutions performing similar functions.
DECLARED POLICY OF THE STATE
“The State recognizes the vital role of banks in providing for an environment conducive to the
sustained development of the national economy and the fiduciary nature of banking that requires high
standards of integrity and performance. In furtherance thereof, the State shall promote and maintain a
stable and efficient banking system that is globally competitive, dynamic and responsive to the
demands of a developing economy. “(Section 2 of RA 8791, General Banking Law of 2000)
BANKS are entities engaged in the lending of funds - A moneyed institute founded to facilitate
obtained in the form of deposits. (Sec.3.1 of GBL) the borrowing, lending and self-keeping of
money and to deal, in notes, bills of
GOVERNING LAW exchange, and credits.
 GENERAL BANKING LAWS (GBL - RA 8791) - - An investment company which loans out
 NEW CENTRAL BANK ACT (NCBA - RA 7653) the money of its customers, collects the
 SECRECY OF BANK DEPOSIT ACT (SBA - RA 1405) interest and charges a commission to both
 PHILIPPINE DEPOSIT INSURANCE CORP lender and borrower, is a bank.
(PDIC - RA 4093) - - Any person engaged in the business
 TRUTH IN LENDING ACT (TILA - RA 3765) carried on by banks of deposit, of discount,
 UNIFORM CURRENCY ACT (UCA - RA. 8183) or of circulation is doing a banking business,
 FOREIGN CURRENCY DEPOSIT ACT (FCDA) although but one of these functions is
 ANTI-MONEY LAUNDERING ACT (AMLA) exercised.
BANKING LAWS ESQUIERRA | MADRIGAL

NATURE OF BANKING BUSINESS
(A) Debtor- Creditor Relationship (E) Impressed with Public Interest

Art. 1980. Fixed, savings, and current The stability of banks largely depends on the
deposits of money in banks and similar confidence of the people in the honesty and
institutions shall be governed by the efficiency of banks
provisions concerning loan.
(F) Degree of Diligence
(B) Fiduciary Duty Degree of diligence higher than that of a good
“fiduciary nature of banking which father of a family, as prescribed by Section 2 of
requires high standards of integrity and the GBL
performance.”
(G) Treatment of Accounts with Meticulous Care
(C) Not a Trust Agreement In every case, the depositor expects the bank to
The fiduciary nature of a bank-depositor treat his account with the utmost fidelity,
relationship does not convert the whether such account consist only of a few
contract between the bank and its hundred pesos or of millions.
depositors from a simple loan to a trust
agreement, whether express or implied. (H) Duty to Keep Records
A bank has a fiduciary duty to keep efficiently a
(D) Indispensable Institution record of its transactions with its depositors.
Plays a vital role in the economic life of Banks shall have a true and accurate account,
every civilized nation. record or statement of their daily transactions,
particularly those referring to their deposit
liabilities.
CLASSIFICATION OF BANKS (CUT-RICO)
Q: There are 6 classes of banks identified in the General Banking Law of 2000. Name at least 4 of them
and explain the distinguishing characteristic or function of each one. (2002 Bar)
1. Commercial Banks — these are ordinary or 2. Universal Banks — these are those which used
regular commercial banks, as distinguished from a to be called expanded commercial banks and the
universal bank. They have a lower capitalization operations of which are now primarily governed by
requirement than universal banks and cannot the GBL of 2000. They can exercise the powers of
exercise the powers of an investment house and an investment house and invest in non-allied
invest in non- allied enterprises. enterprises. They have the highest capitalization
requirement.
3. Thrift banks — these banks may exercise most of 4. Rural Banks — these are those which are
the powers and functions of a commercial bank organized primarily to extend loans and other
except that they cannot, among others, open credit facilities to farmers, fishermen or farm
current or check accounts without prior Monetary families, as well as cooperatives, merchants, and
Board approval, and they cannot issue letter of private and public employees and whose
credit. Their operations are governed primarily by operations are primarily governed by the Rural
the Thrift Banks Act of 1995 Banks Act of 1992
5. Islamic Banks — these are those which are 6. Cooperative Banks — these are those which are organized
organized primarily to provide financial and primarily to provide financial and credit services to cooperatives
credit services in a manner or transaction and whose operations are primarily governed by the Cooperative
consistent with the Islamic Shari’a. Code of the Philippines
Other Banks (O) - The Monetary Board is authorized to make other classification of banks, as it may deem proper.

OTHER CLASSIFICATION OF BANKS OTHER THAN MENTIONED IN SECTION 3 of GBL
1. Non-Stock Savings and Loan Associations - Is a non-stock, non-profit corporation engaged in the
business of accumulating engaged in the business of accumulating the savings of its members and using
such accumulations for loans to members to service the needs of households by providing long-term
financing for home building and development and for personal finance.
2. Quasi-Banks - Refers to entities engaged in the borrowing of funds through the issuance, endorsement
or assignment with recourse or acceptance of deposit substitutes for purposes of relending or purchasing
of receivables and other obligations.
3. Offshore Banks - Refers to the conduct of banking transactions in foreign currencies involving the
receipt of funds from external sources and the utilization of such funds.
Q: A commercial bank wants to acquire shares in a cement manufacturing company. Do you think it can do
that? Why or why not? (2015 Bar)
A commercial bank cannot acquire shares in a cement manufacturing company because a commercial bank can
only invest in the equity of allied undertakings, meaning, undertakings related to banking.
(Section 30 of RA 8791).
Deposit Function of Banks BASIC FUNCTIONS: DEPOSIT FUNCTION & LOAN FUNCTION
Kinds of Deposits
1) Demand Deposits – all those liabilities of the Bangko Sentral and of other banks which are
denominated in Philippine currency and are subject to payment in legal tender upon demand by the
presentation of (depositor’s) checks.
2) Savings Deposits - Servicing deposits  Banks may be authorized by the BSP to solicit and accept
deposits outside their bank premises
3) Negotiable Order of Withdrawal (NOW) Accounts
NOW accounts – interest bearing accounts that combine the payable on demand feature of checks and
investment feature of savings account
4) Time Deposits – one the payment of which cannot legally be required within such a specified number
of days.
5) Deposit Substitute Operations (Quasi-Banking Functions)
6) Foreign Currency Deposits - authority to deposit foreign currencies, any person may deposit with such
Phil. Banks in good standing.
7) Anonymous and Numbered Accounts – should not be allowed. In case where numbered accounts are
allowed, banks or financial institutions should ensure that the client is identified in an official or other
identifying documents.
General Rule:
- When a depositor is indebted to a bank, and the debts are mutual, the bank may apply the deposit or
such portion thereof as may be necessary to the payment of the debt due it by the depositor.
Exception:
- There is no express agreement.
- The deposit is not specifically applicable to some other particular purpose

Loan Function of Banks
CLASSIFICATIONS OF LOANS:
Unclassified Loans
Those that do not have a greater-than-normal risk and the borrower has apparent ability to
satisfy it in full and no loss in ultimate collection is anticipated (Circular No. 247, S2, Series of 2000)
Classified Loans
Those that have extra ordinary risks of loss in collection due some defects such as bad debts or
those under litigation. They are divided into:
Q: What is the single borrower’s limit?
a. Loans especially mentioned;
b. Substandard; Under the single borrower’s limit, the total amount
c. Doubtful; and of loans, credit accommodations and guarantee that
d. the2000
Loss (Circular No. 247, S2, Series of bank may extend to any person shall not exceed
25% of the bank’s net worth. While the law sets the
ceiling at 20% of the bank’s net worth, it also
Limit on Loans, Credit Accommodation & empowers the BSP to modify the ceiling. The current
Guarantees SBL as set by BSP is 25% of the Bank’s net worth.
Q: As part of the safeguards against imprudent banking, the General Banking Law imposes limits or
restrictions on loans and credit accommodations which may be extended by banks. Identify at least
2 of these limits or restrictions and explain the rationale of each of them. (2002 Bar)
Any 2 of the following limits or restrictions on loan and credit transaction which may be extended by
banks, as part of the safeguard against imprudent banking, to wit:
(1) SBL Rules
(2) DOSRI Rules—These are rules promulgated by the BSP, upon authority of Section 5 of the GBL of
2000, which regulate the amount of credit accommodations that a bank may extend to its directors,
officers, stockholders and their related interests. Generally, a bank’s credit accommodations to its
DOSRI must be in the regular course of business and on terms not less favorable to the bank than
those offered to non-DOSRI borrowers.
(3) No commercial bank shall make any loan or discount on the security of shares of its own capital
stock.
Republic v. Sandiganbayan (G.R. No. 166859, 169203, 180702) April 12, 2011
Violation of DOSRI is a crime and carries with it penal sanction. It does not
make the transaction void but only renders the responsible officers and
directors criminally liable.

Section 47. Foreclosure of Mortgage: In the event of foreclosure, whether judicially or
extrajudicially, of any mortgage on real estate which is security for any loan or other credit
accommodation granted, the mortgagor or debtor whose real property has been sold for
the full or partial payment of his obligation shall have the right within one year after the
sale of the real estate, to redeem the property by paying the amount due under the
mortgage deed, with interest thereon at the rate specified in the mortgage, and all the
costs and expenses incurred by the bank or institution from the sale and custody of said
property less the income derived therefrom. However, the purchaser at the auction sale
concerned whether in a judicial or extrajudicial foreclosure shall have the right to enter
upon and take possession of such property immediately after the date of the confirmation
of the auction sale and administer the same in accordance with law. Any petition in court
to enjoin or restrain the conduct of foreclosure proceedings instituted pursuant to this
provision shall be given due course only upon the filing by the petitioner of a bond in an
amount fixed by the court conditioned that he will pay all the damages which the bank
may suffer by the enjoining or the restraint of the foreclosure proceeding.
Equity Redemption Right of Redemption

 Right of the mortgagor to redeem the  To re-acquire mortgaged property after
mortgaged property after his default in the registration of the foreclosure sale
performance of the conditions of the
mortgage but before the sale of the  Exists only in the case of the extrajudicial
property or the confirmation of the sale foreclosure of the mortgage.
after judicial foreclosure thereof.
 No such right is recognized in a judicial
 This is the right of the defendant mortgagor foreclosure except only where the
to extinguish the mortgage and retain mortgagee is the Philippine National Bank
ownership of the property by paying the or a bank or banking institution.
secured debt within a 90-day period after
the judgment becomes final or after the  Where a mortgage is foreclosed extra
foreclosure sale but prior to its confirmation judicially, Act 3135 grants to the mortgagor
the right of redemption within one (1) year
from the registration of the sheriff’s
certificate of foreclosure sale.
JUDICIAL FORECLOSURE VS. EXTRA JUDICIAL FORECLOSURE

Equity of Redemption Right of Redemption
 Mortgagor is a natural person – Within one year
after the registration of sale with the Register of
Deeds (Sec. 1(3) SC Cir. AM No. 99-10-05)
 The redemption period is one (1) year from
the date of registration of the certificate of  Mortgagor is a juridical person – At any time
sale. before the registration of the certificate of
foreclosure sale with the applicable Register of
Deeds which in no case shall be more than 3
months after foreclosure, whichever is earlier.

NEW CENTRAL BANK
ACT
(NCBA, R.A. 7653) as amended by R.A. 11211)
State Policy
The State shall maintain a central monetary authority that shall function and operate as an independent
and accountable body corporate in the discharge of its mandated responsibilities concerning money, banking and
credit. In line with this policy, and considering its unique functions and responsibilities, the central monetary
authority established under this Act, while being a government-owned corporation, shall enjoy fiscal and
administrative autonomy. (sec. 1, NCBA)
Bangko Sentral ng
Pilipinas (BSP)
It is the State’s central monetary authority. It is the government agency
charged with the responsibility of administering the monetary, banking and
credit system of the country and is granted the power of supervision and
examination over bank and nonbank financial institutions performing quasi-
banking functions, including savings and loan associations (Busuego v. CA, G.R.
No. L-48955, June 30, 1987).
Responsibilities of BSP (1992, 1998 Bar)

1. To provide policy directions in the areas of money, banking, and credit.
2. To supervise bank operations.
3. To exercise regulatory and examination powers over quasi-banking
operations of non-bank financial institutions, money service businesses, credit
granting businesses and payment system operators.
Monetary Board
It is the body through which the powers and functions of the BSP are
exercised (NCBA, Sec 6).
Powers and functions of the Monetary Board:
1. Issue Rules and regulations it considers necessary for the effective

discharge of the responsibilities and exercise of its powers.
2. Direct the management, operations, and Administration of the BSP,

reorganize its personnel, and issue such rules and regulations as it may
deem necessary or convenient for this purpose.
3. Establish a human resource management System.
4. Adopt an annual Budget for and authorize such expenditures by the BSP as
are in the interest of the effective administration and operations of the BSP
in accordance with applicable laws and regulations.
5. Indemnify its members and other officials of the BSP, including personnel of
the departments performing supervision and examination functions against all
costs and expenses reasonably incurred by such persons in connection with
any civil or criminal action (NCBA, Sec 15).
Composition of the Monetary Board
The MB shall be composed of 7 members appointed by the President with a 6-
year term. No member of the MB may be reappointed more than once (NCBA, Sec.
6).
Members.
a. The BSP Governor or his designated alternate (a deputy governor);
b. A Cabinet member to be designated by the President or his designated
alternate
(an undersecretary in his department);
c. Five (5) members from the private sector
Qualifications Disqualifications
a. Citizenship- In addition to the disqualifications

natural-born imposed by Republic Act No. 6713, a member of
citizens of the the Monetary Board is disqualified from being a
Philippines director, officer, employee, consultant, lawyer,
agent or stockholder of any bank, quasi-bank or
b. Age GR: at least any other institution which is subject to
35 years old XPN: supervision or examination by the Bangko
Governor must Sentral, in which case such member shall resign
be at least 40 from, and divest himself of any and all interests in
years old; such institution before assumption of office as
member of the Monetary Board.
c. Of good moral
character The members of the Monetary Board coming
from the private sector shall not hold any other
d. Of public office or public employment during their
unquestionable tenure.
integrity
No person shall be a member of the Monetary
e. Of known probity Board if he has been connected directly with any
and patriotism; multilateral banking or financial institution or has
a substantial interest in any private bank in the
f. With recognized Philippines, within one (1) year prior to his
competence in appointment; likewise, no member of the
social and Monetary Board shall be employed in any such
economic institution within two (2) years after the
disciplines expiration of his term except when he serves as
(NCBA, Sec. 8). an official representative of the Philippine
Government to such institution.
Removal
- The President may remove any member of the Monetary Board for
any of the following reasons:
(a) If the member is subsequently disqualified under the provisions of
Section 8 of this Act; or

(b)If he is physically or mentally incapacitated that he cannot
properly discharge his duties and responsibilities and such
incapacity has lasted for more than six (6) months; or
(c) If the member is guilty of acts or operations which are of
fraudulent or illegal character or which are manifestly opposed to
the aims and interests of the Bangko Sentral; or
(d) If the member no longer possesses the qualifications specified in
Section 8 of this Act.
Conservatorship vs. Receivership vs. Liquidation

CONSERVATORSHI RECEIVERSHIP LIQUIDATION
P
DEFINITIO -Attempt to save the -Summary closure of - No hope in
N bank from the Bank by the BSP rehabilitating the
bankruptcy and without prior notice and bank; At this point,
ultimate liquidation; hearing after a finding it determines and
Manner of helping a that continuation in pays the claims of
bank by effective business will involve the bank’s
management probable loss to its creditors
reforms and/or depositors and
infusion of additional creditors.
capital.
INSTANCE -Based on the report - Upon finding of the -Voluntary

S WHEN of MB that bank is in MB that: liquidation under
PLACED the state of inability 1. Unable to pay sec. 68 of GBL or
UNDER or unwillingness to liabilities upon finding that
SUCH maintain a condition 2. Insufficient bank can no longer
of liquidity deemed realizable assets be rehabilitated
adequate to protect to meet its and cannot
the interest of its liabilities continue business
depositors and 3. Cannot continue after the 90day
creditors business without receivership
involving period.
probable loss to
depositors and
creditors
4. Willfully violated
cease and desist
order under sec.
37 of NCBA that
has become final
involving acts
and transactions
which amount to
fraud or
dissipation of
assets of
institution

5. Notifies BSP or
publicly
announces Bank
Holiday
DURATION -1 year, no -90 days, no extensions -No period stated
extensions in law. May take
some time
depending on the
determination and
payment of claims
to creditors.
CONSERVATORSHIP
Conservator (2006 Bar)

-One appointed if the bank is in the state of illiquidity or the bank fails or
refuses to maintain a state of liquidity adequate to protect its depositors and
creditors. The bank still has more assets than its liabilities, but its assets are not
liquid or not in cash thus it cannot pay its obligation when it falls due. The bank, not
the BSP, pays for fees.
Powers of a conservator:
1. Collect all monies and debts due to the said bank
2. To take charge of the Assets, liabilities, and the management
thereof
3. Reorganize, the management thereof
4. And such other powers as the monetary Board deems necessary
5. Exercise all powers necessary to restore its viability, with the
power to overrule or revoke the actions of the previous
management and board of directors of the bank or quasi-bank
6. To bring court actions to Assail or Repudiate contracts entered
Termination of conservatorship:
a. Conservatorship is terminated when the Monetary Board is satisfied that

the bank can operate on its own and the conservatorship is no longer
necessary; or
b. When the Monetary Board, on the basis of the report of the conservator
or of its own findings, determine that the continuance in business of the
institution would involve probable losses to its depositors or creditors
(effect: the bank or quasi-bank would then be place under receivership)
RECEIVERSHIP
Receiver (2006 Bar)

One appointed if the bank is already insolvent which means that its liabilities
are greater than its assets. The Court has no authority to appoint a receiver for a

bank if the latter will function as such under BSP law. The power to appoint belongs
to BSP.
NOTE: For banks, the receiver would be the Philippine Deposit Insurance Corporation; for quasi-
banks, it could be any person of recognized competence in banking or finance (NCBA, Sec. 30).
Duties of a receiver:
1. Immediately gather and take charge of all the assets and liabilities of
the institution;
2. Administer the same for the benefit of the creditors, and exercise the
general powers of a receiver under the Revised Rules of Court;
3. Not, with the exception of administrative expenditures, pay or commit
any act that will involve the transfer or disposition of any asset of
the institution: Provided that the receiver may deposit or place the
funds of the institution in non-speculative investments;
4. Within 90 days from the take-over, the receiver shall determine
whether the institution may be rehabilitated or otherwise placed in
such a condition that it may be permitted to resume business with
safety to its depositors and creditors and the general public; and
5. If the receiver determines that the institution cannot be rehabilitated
or permitted to resume business, then the Monetary Board shall
notify in writing the board of directors of the institution of its findings
and direct the receiver to proceed with liquidation of the institution
(NCBA, Sec 30).
Nature of order of
receivership
While resolutions of the Monetary Board forbidding a bank to do business
on account of a condition of insolvency and appointing a receiver to take
charge of the bank’s assets or determining whether the bank may be
rehabilitated or should be liquidated are by law “final and executory.”
However, they can be set aside by the court on one specific ground - if the
action is plainly arbitrary and made in bad faith. Such contention can be
asserted as an affirmative defense or a counterclaim in the proceeding for
assistance in liquidation (Salud v. Central Bank, G.R. No. L-17630, August
The actions of the Monetary Board taken under this Section 29 and 30 of
this Act shall be final and executory, and may not be restrained or set aside
by the court except on petition for certiorari on the ground that the action
taken was in excess of jurisdiction or with such grave abuse of discretion as
to amount to lack or excess of jurisdiction. The petition for certiorari may
only be filed by the stockholders of record representing the majority of the
capital stock within ten (10) days from receipt by the board of directors of
the institution of the order directing receivership, liquidation or
 The insolvency of a bank and the consequent appointment of a

receiver restrict the bank's capacity to act, especially in relation
to its property

- appointment of a receiver operates to suspend the authority of the bank
and of its directors and officers over its property and effects, such
authority being reposed in the receiver.
 The receiver is not authorized to transact business in connection
with the bank’s assets and property
- a receiver can only perform acts of administration and not acts of
dominion. The receiver cannot approve an option to purchase real
property.
LIQUIDATION
Acts of liquidation are those which constitute the conversion of the assets of
the banking institution to money or the sale, assignment or disposition of the
same to creditors and other parties for the purpose of paying debts of such
institution.
Filing of the claims against the insolvent bank

GR: All claims against the insolvent bank should be filed in the liquidation
proceeding. It is not necessary that a claim be initially disputed in a court or
agency before it is filed with the liquidation court.
XPN: Where it is the bank that files a claim against another person or legal
entity, the claim should be filed in the regular courts.
Bank Deposits vs. Deposit Substitutes (BAR 2010)

Bank deposits are funds obtained by a bank from the public which are
relent by such bank to its own borrowers. Deposit substitutes are alternative
forms of obtaining funds from the public, other than deposits, through the
issuance, endorsement, or acceptance of debt instruments for the own account
of the borrower, for the purpose of relending or purchasing of receivables and
other obligations. These instruments may include, but need not be limited to,
banker’s acceptances, promissory notes, participations, certificates of
assignment and similar instruments with recourse, and repurchase agreements
Purposes for Requiring Banks to Maintain Reserves:

(1) To control the volume of money created by the credit operations of
the banking system
(2) It is to enable the banks to answer any withdrawal;
(3) To help Government to finance its operation;
(4) To help the Government control money supply. (Section 94 of the New
Central Bank Act)
Villanueva v. CA, G.R. No. 114870, May 26, 1995

Where upon the insolvency of a bank, a receiver therefor is appointed, the
assets of the bank pass beyond its control into the possession and control
BANKING LAWS of the| MADRIGAL
ESQUIERRA
receiver whose duty it is to administer the assets for the benefit of the creditors of
the bank. Thus, the appointment of a receiver operates to suspend the authority of
Abacus Real Estate Development Center, Inc. v. Manila Banking Corp,
G.R. No. 162270, Apr. 6, 2005
A receiver can only perform acts of administration and not acts of dominion. The
receiver cannot approve an option to purchase real property. He has only the authority to
administer the same for the benefit of its creditors.
Salud v. Central Bank, G.R. No. L-17630, August 19, 1986
While resolutions of the Monetary Board forbidding a bank to do business on account of

a condition of insolvency and appointing a receiver to take charge of the bank’s assets or
determining whether the bank may be rehabilitated or should be liquidated are by law “final and
executory.” However, they can be set aside by the court on one specific ground - if the action is
plainly arbitrary and made in bad faith. Such contention can be asserted as an affirmative
defense or a counterclaim in the proceeding for assistance in liquidation.
LAW ON SECRECY OF PURPOSE:

BANK DEPOSITS 1. Encourage deposit in banking
(R.A. 1405, AS institutions; and
AMENDED) 2. Discourage private hoarding so

that banks may lend such funds and
assist in the economic development
of the country.
PROHIBITED ACTS:
 Examination/inquiry/looking into all deposits of whatever nature with

banks or banking institutions in the Philippines (including investment in
bonds issued by the government) by any person, government official or
office (RA 1405, Sec. 2).
 Disclosure by any official or employee of any banking institution to any

unauthorized person of any information concerning said deposit (RA
1405, Sec. 3).
ACTS NOT COVERED BY THE PROHIBITION

-Non-bank official or employee is not covered by the prohibition.
Neither
BANKING LAWSis
disclosure by a bank official or employee of informationESQUIERRA
about| MADRIGAL
bank deposit in favor of a co-employee in the course of the performance
of his duties covered by the prohibition.
DEPOSITS COVERED:
 All deposits of whatever nature with banks or banking institutions
found in the Philippines.
 Investments in bonds issued by the Philippine government, its
branches, and institutions
 Trust accounts
EXCEPTIONS:
1. Upon written consent of the depositor (RA 1405, Sec.
2)
2. In cases of impeachment
3. Upon order of competent court in cases of bribery or
dereliction of duty of public officials
4. In cases where the money deposited or invested is
the subject matter of the litigation
NOTE:
The Anti-Money Laundering Council (AMLC) may inquire into any deposit with any
bank in case of violation of the RA 9160 or the AMLA if there is probable cause
that it is related to an unlawful activity (RA 9160, as amended, Sec. 11)
With court order:
(A) In cases of unexplained wealth under Sec. 8 of the Anti-Graft and Corrupt
Practices Act (PNB v. Gancayco, L-18343, September 30, 1965)
(B) In cases filed by the Ombudsman and upon the latter’s authority to examine and
have access to bank accounts and records (Marquez v. Desierto, GR 138569,
September 11, 2003)
Without court order: If the AMLC determines that a particular deposit or

investment with any banking institution is related to the following:
a. Hijacking
b. Kidnapping
c. Murder
d. Destructive Arson
e. Violation of the Dangerous Drugs Act
f. Acts of Terrorism or in violation of Human Security Act.
Garnishment of a bank deposit does

not violate the law
The prohibition against examination
Penalties for violation of R.A. 1405
(1)Imprisonment of not more than five (5) years
(2)Fine of not more than P20,000.00
(3)Both, in the discretion of the court (RA 1405, Sec. 5)
BSB v. SALLY GO
Any exception to the rule of absolute confidentiality must be specifically legislated. Section 2
of the Bank Secrecy Act itself prescribes exceptions whereby these bank accounts may be
examined by "any person, government official, bureau or office"; namely when:
(1) upon written permission of the depositor;

(2) in cases of impeachment;
(3) the examination of bank accounts is upon order of a competent court in cases of bribery or
dereliction of duty of public officials; and
(4) the money deposited or invested is the subject matter of the litigation. Section 8 of R.A.
Act No. 3019, the Anti-Graft and Corrupt Practices Act, has been recognized by this Court as
constituting an additional exception to the rule of absolute confidentiality, and there have
been other similar recognitions as well.
PHILIPPINE DEPOSIT INSURANCE

CODERoles
(PDIC)
of PDIC
1) It shall ensure the deposits of all banks which are entitled to the benefits of
insurance and which shall have to powers granted by law
2) It shall promote and safeguard the interests of the depositing public by way of
providing permanent and continuing insurance coverage on all insured deposits
3) PDIC shall be entitled to the free use of Philippine mail in the same manner as
the other offices of the national government
What is the overall mandate of PDIC?

1. To promote and safeguard the interest of the depositing public by way of providing
permanent and continuing insurance coverage on all insured deposits
2. To strengthen public confidence in the banking system to foster financial stability
For purposes of computing the insured deposits, all obligations or loans of the depositor with the closed bank,
as of bank closure, shall be deducted from the depositor’s total deposits with the said bank.
(PDIC Regulatory Issuance No. 2011-04)
PROHIBITED ACTS: ACTS NOT COVERED BY THE

PROHIBITION
* Examination/inquiry/looking into all deposits of
whatever nature with banks or banking institutions Non-bank official or employee
in the Philippines (including investment in bonds is not covered by the prohibition.
issued by the government) by any person, Neither is disclosure by a bank official
DEPOSITS COVERED
1. All deposits of whatever nature with banks or banking institutions found in the Philippines.
2. Investments in bonds issued by the Philippine government, its branches, and institutions
(R.A. 1405, Sec.
3. Trust accounts (Ejercito v. Sandiganbayan, G.R. No. 157294-95, November 30, 2006).
EXCEPTIONS
Instances where examination or disclosure of information about deposits can be allowed: (BAR
1990-1992, 1994, 1995, 1997, 1998, 2000, 2001, 2004-2006)
1. Upon written consent of the depositor (RA 1405, Sec. 2)
2. In cases of impeachment
3. Upon order of competent court in cases of bribery or dereliction of duty of public officials
4. In cases where the money deposited or invested is the subject matter of the litigation
MAXIMUM DEPOSIT INSURANCE COVERAGE (MDIC)
PDIC pays deposit insurance on all valid deposits up to the Maximum Deposit Insurance Coverage
(MDIC) of Php500,000 per depositor of a closed bank. For purposes of computing deposit insurance,
accounts maintained in the same right and capacity for a depositor’s benefit, whether in his own
name or in the name of others, are added together and in no case shall exceed the MDIC. Deposits
are considered valid if, upon determination by PDIC, these deposits are recorded in the bank’s
records, and are evidenced by inflow of cash.
What are covered by PDIC deposit Q: When OCCIDENTAL Bank folded up due to
insolvency, Manuel had the following separate
insurance?
deposits in his name: P200,000 in savings deposit;
PDIC insures valid deposits in domestic P250,000 in time deposit; P50,000 in current account;
offices of its member banks, as follows: P1 million in a trust account and P3 million in money
market placement. Under the Philippine Deposit
By Deposit Type: Insurance Corporation Act, how much could Manuel
recover? Explain. (2010 BAR)
• Savings
• Special Savings A: Manuel can recover P500, 000.00, because this is the
• Demand/Checking total of his savings deposit, time deposit and current
• Negotiable
BANKING LAWS Order of Withdrawal (NOW) account (Section 4(g) of RepublicESQUIERRA
Act No. |3591, as
MADRIGAL
• Time Deposits amended). The trust account and the money market
placements are not included in the insured deposits
PDIC v. CA
The head office of a bank and its branches are considered as one under the eyes of the law.
While branches are treated as separate business units for commercial and financial
reporting purposes, in the end, the head office remains responsible and answerable for the
liabilities of its branches which are under its supervision and control.
TRUTH IN LENDING ACT

(TILA) SALIENT PROVISIONS OF REPUBLIC ACT NO. 3765
RA 3765 It is the policy of the state to protect its citizens from a lack of awareness of
the true cost of credit to the user by assuring a full disclosure of such cost
with a view of preventing the ununiformed use of credit to the detriment .
Disclosure; creditor shall furnish in a clear statement in writing:

 cash price/delivered price of property or service
 amounts credited as down-payment
 difference bet. amounts in 1 and 2
 charges, individually itemized, not incident to the extension of credit
 total amount to be financed
 finance charge in terms of pesos and centavos
 percentage/simple annual rate on the outstanding unpaid balance
Penalties for Failure to Disclose

 Civil; P100 or 2x finance charged. Limit is P2000.

 Criminal; if willfully violated, fine of P1,000-P5,000 and/or 6mos-1yr
imprisonment
Effect of Violation:
- violation shall NOT affect validity and enforceability of contract
Q: Dana Gianina purchased on a 36 month installment basis the latest model of the Nissan
Sentra Sedan car from the Jobel Cars Inc. In addition to the advertised selling price, the latter
imposed finance charges consisting of interests, fees and service charges. It did not,
however, submit to Dana a written statement setting forth therein the information required
by the Truth in Lending Act (RA 3765). Nevertheless, the conditional deed of sale which the
parties executed mentioned that the total amount indicated therein included such finance
charges. (1991 BAR)
(a) Has there been substantial compliance of the aforesaid Act?
There was no substantial compliance with the Truth in Lending Act. The law provides that the
creditor must make a full disclosure of the credit lost. The statement that the total amount
due includes the principal and the financial charges, without specifying the amounts due on
each portion thereof would be insufficient and unacceptable.
(b)If your answer to the foregoing question is in the negative, what is the effect of the
violation on the contract?
A violation of the Truth in Lending Act will not adversely affect the validity of the contract
itself.
UNIFORM CURRENCY
ACT
(RA. 8183)
Section 1. All monetary obligations shall be settled in the Philippine
currency which is legal tender in the Philippines. However, the parties may
agree that the obligation or transaction shall be settled in any other
currency at the time of payment.
***In cases of international obligations and transactions, the basis

of payment would be the rate of exchange prevailing at the time of
payment.
FOREIGN CURRENCY
DEPOSITSECRECY
ACT OF FOREIGN CURRENCY DEPOSITS
(RA. 6426)
GR: Foreign currency deposits cannot be inquired or looked into.
All foreign currency deposits are confidential (RA 6426, Sec. 8).

EXCEPTIONS:
1. The depositor has given his written permission.
2. A father who sued his daughter for illegally withdrawing funds from his
foreign currency deposit and transferring to another bank in the name of
her sister, can inquire into the deposit of the sister, because the money
deposited belongs to him (China Banking Corp. v. CA, G.R. No. 140687,
December 18, 2006).
3. The exemption from court process of foreign currency deposits under RA

6426 cannot be invoked by a foreign transient who raped a minor,
escaped and was held liable for damages to the victim. The garnishment
of his foreign currency deposit should be allowed to prevent an injustice
and for equitable grounds. The law was enacted to encourage foreign
currency deposit and not to benefit a wrongdoer (Salvacion v. Central
Bank of the Philippines, G.R. No. 94723, August 21, 1997).
4. The Commissioner of Internal Revenue is authorized to inquire into bank

deposits of the following: a. A decedent to determine his estate; and b.
Any taxpayer who has filed for an application for compromise of his tax
liability c. A specific taxpayer upon request for tax information from a
foreign tax authority pursuant to an international convention or
agreement on tax matters to which the Philippines is a party (NIRC, Sec. 6
[f]).
EXCEPTIONS:
6. Upon ex parte application by a law enforcer authorized by the Anti-
Terrorism Council, the justices of the CA designated as special court to
handle anti-terrorism cases may authorize the examination of deposits in
a financial institution upon finding probable cause of the commission of
terrorism or conspiracy to commit terrorism (RA 9372, Sec. 27-28).
7. PDIC and BSP may examine deposit accounts and all information related
to them in case of a finding of unsafe or unsound banking practices (RA
3591, as amended, Sec. 8).
8. AMLC can investigate (a) any property of funds related to financing

terrorism; (b) property or funds of any person if there is probable cause to
believe he is committing or attempting or conspiring to commit terrorism
GARNISHMENT OF FOREIGN CURRENCY DEPOSITS
GR: Foreign currency deposits shall be exempt from attachment,

garnishment, or any other order or process of any court, legislative
body, government agency or any administrative body whatsoever
BANKING LAWS (RA 6426, Sec 8). ESQUIERRA | MADRIGAL
XPN: The application of Sec. 8 of RA 6426 depends on
the extent of its justice. The garnishment of a foreign
currency deposit should be allowed to prevent injustice
and for equitable grounds, otherwise, it would negate
Article 10 of the New Civil Code which provides that “in
case of doubt in the interpretation or application of laws,
it is presumed that the lawmaking body intended right
and justice to prevail.
Salvacion v. Central Bank of the Philippines, G.R. 94723,

August 21, 1997
The foreign currency deposit of a transient foreigner who
illegally detained and raped a minor Filipina can be garnished to
satisfy the award for damages to the victim.
ANTI-MONEY LAUNDERING ACT

(AMLA) Money Laundering - a crime whereby the proceeds of an unlawful activity
are transacted thereby making them appear to have originated from
legitimate sources.
3 Steps of accomplishing:
1. Placement – inserts money into a legitimate financial institution

2. Layering – sending money through various financial transactions to change its form
3. Integration – money re-enters the mainstream economy in legitimate-looking form
Institutions Covered Policies of AMLA

* Banks and other institutions supervised and regulated by
1. Protect and preserve
BSP
integrity and
* Insurance Committees confidentiality of bank
accounts
* Securities, dealers, etc.
2. Ensure that Philippines
* Mutual
BANKING funds,
LAWS common-trust funds and other similar entities shall no be used as
ESQUIERRA | MADRIGAL
money laundering site
* Foreign Exchange corporations and other similar entities
3. Extend cooperation in
Money Laundering Offense
1. Person transacting or attempts to transact any monetary instrument purporting to the

proceeds of any unlawful activity
2. Performs or failure to perform any act as a result of which he facilitates the offense
mentioned in (1)
3. Failure to disclose as required by AMLC
Jurisdiction
RTC – private persons
Sandiganbayan – Public Officers and private person in conspiracy
AMLC Composition
1. Governor of BSP – Chairman
2. Commissioner of Insurance Commission – member
3. Chairman of SEC - member
Functions of AMLC
1. Require and receive covered or suspicious transaction from covered institutions
2. Issue orders addressed to appropriate Supervising Authority or covered institution to determine

true identity of the owner of questioned property
3. Institute civil forfeiture through Sol-Gen
4. File complaints with DOJ or Ombudsman
5. Investigation
6. Apply before CA for freezing any property alleged to be proceeds of unlawful activity
7. Implement measures necessary to counteract money laundering
8. Receive and take action in respect of any request for foreign assistance
9. Develop educational programs
10. Enlist assistance of any branch of government
11. Impose administrative sanctions for violation of rules
12. Establish by a secretariat headed by Executive director appointed by Council

Prevention of Money Laundering; Customer Identification Requirements and Record keeping
Customer Identification
1. Institutions shall establish Record Keeping

and record true identity of
All records of all transactions
its clients based on official Reporting of Covered and
of covered institutions shall
documents Suspicious Transactions
be maintained and safely
2. Maintain a system of stored for five (5) years from
verifying true identity of the dates of transactions. Covered institutions shall
their clients report to the Anti-Money
Laundering Council (AMLC) all
3. Anonymous accounts, With respect to closed covered or suspicious
accounts under fictitious accounts, the records on transactions within five (5)
names are prohibited customer identification, working days from occurrence
account files and business thereof, ceding fifteen (15)
4. Peso and foreign currency
correspondence, shall be working days.
non-checking numbered
preserved and safely stored
accounts shall be allowed
for at least five (5) years from
the dates when they were Conviction of the unlawful
closed. activity is not necessary
before report is made.
Freezing of Monetary Instrument or Property
- The CA upon application ex parte by AMLC after determination of probable cause

- Freeze period shall be for 20 days unless extended by the court
Authority to Inquire Bank Deposits
To complete legal measures to prevent money laundering, the AMLC may inquire
into or examine any particular deposit or investment with any banking institution or non-bank
financial institution upon order of any competent court in cases of violation, it must be
established that:
1. There is probable cause that deposits are related to unlawful Unlawful Activities
activity or Money laundering offense
No court order: (1) Kidnapping for Ransom
1. Kidnapping for Ransom (2) DDA
2. DDA (3) Anti-Graft and Corrupt
3. Hi-Jacking Practices Act
4. Destructive Arson and murder (4) Plunder
(5) Robbery and extortion
(6) Jueteng
BANKING LAWS (7) Piracy ESQUIERRA | MADRIGAL
(8) Qualified Theft
(9) Swindling
BSP may inquire into or examine any deposit when
examination is made in the course of a periodic or special
examination.
Civil Forfeiture
When there is a covered transaction report made, and the

court has ordered the seizure of any property related to said
report, the Revised Rules of Court on civil forfeiture applies.
Payment in Lieu of Forfeiture

Court may, instead of enforcing the order of forfeiture, order
the convicted offender to pay an amount equal to the value
when order cannot be enforced because:
1. Property cannot, with due diligence be located

2. Substantially altered, destroyed, diminished in value or otherwise rendered worthless
through an act attributable to the offender
3. Concealed, removed, converted or transferred to prevent from being found
4. Located outside the Philippines or has been placed or brought outside the jurisdiction of
the court
5. Commingled with other monetary instruments or property belonging to offender or third
persons rendering the same difficult to identify or segregated for purposes of forfeiture
China Banking Corporation and Tan Kim Liong vs. Hon. Wenceslao Ortega et. al
G.R. No. L-34964 31 January 1973
FACTS:
Tan Kim Liong was ordered to inform the Court whether or not there is a deposit in the China Banking Corporation
of defendant B & B Forest Development Corporation, and if there is any deposit, to hold the same intact and not
allow any withdrawal until further order from the Court. Petitioners in this case refuse to comply with a court
process garnishing the bank deposit of a judgment debtor by invoking the provisions of Republic Act No. 1405
( Secrecy of Bank Deposits Act) which allegedly prohibits the disclosure of any information concerning to bank
deposits.
ISSUE:
Whether or not a banking institution may validly refuse to comply with a court processes garnishing the bank
deposit of a judgment debtor, by invoking the provisions of Republic Act No. 1405.
HELD:
No. The lower court did not order an examination of or inquiry into deposit of B & B Forest Development
Corporation, as contemplated in the law. It merely required Tan Kim Liong to inform the court whether or not the

defendant B & B Forest Development Corporation had a deposit in the China Banking Corporation only for the
purposes of the garnishment issued by it, so that the bank would hold the same intact and not allow any
withdrawal until further order. It is sufficiently clear that the prohibition against examination of or inquiry into
bank deposit under RA 1405 does not preclude its being garnished to insure satisfaction of a judgment. Indeed
there is no real inquiry in such a case, and the existence of the deposit is disclosed the disclosure is purely
incidental to the execution process. WHEREFORE, the orders of the lower court dated March 4 and 27, 1972,
respectively, are hereby affirmed, with costs against the petitioners-appellants.
Bańas et. al. vs. Asia Pacific Finance Corporation
G.R. No. 128703 18 October 2000
FACTS:
Sometime in August 1980, 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 "P32,500.00every 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 Finance Corporation (Asia Pacific),
and to secure its payment, it, through its corporate officers, Dizon, President, executed a Deed of Chattel
Mortgage covering three (3) heavy equipment units of Caterpillar Bulldozer Crawler Tractors in favor of Asia
Pacific. Dizon also executed a Continuing Undertaking wherein he bound himself to pay the obligation jointly and
severally with C. G. Dizon Construction.
In compliance with the provisions of the Promissory Note, C. G. Dizon Construction made the installment
payments to Asia Pacific totaling P130,000, but thereafter defaulted in the payment of the remaining installments,
prompting Asia Pacific to send a Statement of Account to Dizon for the unpaid balance. As the demand was
unheeded, Asia Pacific sued Bañas, C. G. Dizon Construction and Dizon.
While they admitted the genuineness and due execution of the Promissory Note, the Deed of Chattel Mortgage
and the Continuing Undertaking, they nevertheless maintained that these documents were never intended by the
parties to be legal, valid and binding but a mere subterfuge to conceal the loan with usurious interests and
claimed that since Asia Pacific could not directly engage in banking business, it proposed to them a scheme
wherein it could extend a loan to them without violating banking laws.
The RTC issued writ of replevin against C. G. Dizon Construction for the surrender of the bulldozer crawler tractors
subject of the Deed of Chattel Mortgage, which of the 3, only 2 were actually turned over and were subsequently
foreclosed by Asia Pacific to satisfy the obligation. The RTC ruled in favor of Asia Pacific holding them to pay jointly
and severally the unpaid balance. On appeal, the CA affirmed in toto the decision.
ISSUE:
Whether or not they can be held liable under the said documents
HELD:
They CAN BE HELD LIABLE UNDER THE SAID DOCUMENTS BUTTHE COURT MITIGATED THE AMOUNT OF DAMAGES
AS IT WASSHOWN THAT THERE WAS A PARTIAL COMPLIANCE ON THEIR PART. Indubitably, what is prohibited by
law is for investment companies to lend funds obtained from the public through receipts of deposit, which is a
function of banking institutions. But here, the funds supposedly "lent" to petitioners have not been shown to have
been obtained from the public by way of deposits, hence, the inapplicability of banking laws.
On their submission that the true intention of the parties was to enter into a contract of loan, the Court examined
the Promissory Note and failed to discern anything therein that would support such theory. On the contrary, the
terms and conditions of the instrument clear, free from any ambiguity, and expressive of the real intent and
agreement of the parties. Likewise, the Deed of Chattel Mortgage and Continuing Undertaking were duly
acknowledged before a notary public and, as such, have in their favor the presumption of regularity. To contradict
them there must be clear, convincing and more than merely preponderant evidence. In the instant case, the
records do not show even a preponderance of evidence in their favor that the Deed of Chattel Mortgage and
Continuing Undertaking were never intended by the parties to be legal, valid and binding.
With regard to the computation of their liability, the records show that they actually paid a total sum of
P130,000.00 in addition to the P180,000.00 proceeds realized from the sale of the bulldozer crawler tractors at
public auction. Deducting these amounts from the principal obligation of P390,000.00 leaves a balance
of P80,000.00, to which must be added P7,637.50 accrued interests and charges, or a total unpaid balance of
P87,637.50 for which they are jointly and severally liable. Furthermore, the unpaid balance should earn 14%
interest per annum as stipulated in the Promissory Note, computed from 20 March 1981 until fully paid.

Simex International Incorporated vs. CA and Traders Royal Bank
G.R. No. 88013 - 19 March 1990
FACTS:
Simex International is a private corporation engaged in the exportation of food products. It buys
these products from various local suppliers and then sells them abroad, particularly in the United States, Canada
and the Middle East. Most of its exports are purchased by the petitioner on credit. Simex is a depositor of TRB and
maintained a checking account in its Cubao branch. Simex maintained an account in the amount ofP100,000.00,
thus increasing its balance as of that date to P190,380.74. Subsequently, the petitioner issued several (8) checks
against its deposit but was surprised to learn later that they had been dishonored for insufficient funds. As a
consequence, actions on the pending orders of SIMEX with the other suppliers (California Manufacturing Comp.,
Malabon Longlife Trading Corp., etc.) whose checks were dishonored were deferred. And thus made these
companies send demand letters to SIMEX threatening prosecution if the checks were not made good. SIMEX
complained to TRB and found out that the sum of P100,000.00 deposited had not been credited. The error was
rectified on June 17, 1981, and the dishonored checks were paid after they were re-deposited. SIMEX sent
demand letter for reparation against TRB, which was not met, thus a complaint was filed in CFI Rizal by SIMEX. The
court denied the moral & exemplary damages but upheld and ordered TRB to pay for nominal damages in
the amount of P20,000.00 plus attys fees & costs, which was then affirmed by the CA. The CA found with the trial
court that the private respondent was guilty of negligence but agreed that the petitioner was nevertheless not
entitled to moral damages. It said: The essential ingredient of moral damages is proof of bad faith (De Aparicio vs.
Parogurga, 150 SCRA 280).

Indeed, there was the omission by the defendant-appellee bank to credit appellant'sdeposit of P100,000.00 on
May 25, 1981. But the bank rectified its records. It credited the said amount in favor of plaintiff-appellant in less
than a month. The dishonored checks were eventually paid. These circumstances negate any imputation or
insinuation of malicious, fraudulent, wanton and gross bad faith and negligence on the part of the defendant-
appellant.
ISSUE:
Whether or not TRB is guilty of negligence which warrants SIMEX reparation for damages.
HELD:
YES. Award SIMEX with moral damages (P20,000) and exemplary damages (P50,000). The initial carelessness of
the respondent bank, aggravated by the lack of promptitude in repairing its error, justifies the grant of moral
damages. This rather lackadaisical attitude toward the complaining depositor constituted the gross negligence, if
not wanton bad faith, that the respondent court said had not been established by the petitioner. There was also
prejudice suffered by SIMEX in the fact that the petitioner's credit line was canceled and its orders were not acted
upon pending receipt of actual payment by the suppliers. Its business declined. Its reputation was tarnished. Its
standing was reduced in the business community. All this was due to the fault of the respondent bank which was
undeniably remiss in its duty to the petitioner.
In the case at bar, it is obvious that the respondent bank was remiss in that duty and violated that relationship.
What is especially deplorable is that, having been informed of its error in not crediting the deposit in question to
the petitioner, the respondent bank did not immediately correct it but did so only one week later or twenty-three
days after the deposit was made. It bears repeating that the record does not contain any satisfactory explanation
of why the error was made in the first place and why it was not corrected immediately after its discovery. Such
ineptness comes under the concept of the wanton manner contemplated in the Civil Code that calls for the
imposition of exemplary damages.
Teofisto Guingona vs. The City Fiscal of Manila
G.R. No. L-60033 4 April 1984
FACTS:
From March 1979 to March 1981, Clement David made several investments with the National Savings and Loan
Association. On March 21, 1981, the bank was placed under receivership by the Bangko Sentral. Upon David’s
request, petitioners Guingona and Martin issued a joint promissory note, absorbing the obligations of the bank.
On July 17, 1981, they divided the indebtedness. David filed a complaint for estafa and violation of Central Bank
Circular No. 364 and related regulations regarding foreign exchange transactions before the Office of the City
Fiscal of Manila. Petitioners filed the herein petition for prohibition and injunction with a prayer for immediate
issuance of restraining order and/or writ of preliminary injunction to enjoin the public respondents to proceed
with the preliminary investigation on the ground that the petitioners’ obligation is civil in nature.
ISSUE/S:
(1) Whether the contract between NSLA and David is a contract of depositor a contract of loan, which answer
determines whether the City Fiscal has the jurisdiction to file a case for estafa
(2) Whether there was a violation of Central Bank Circular No. 364
HELD:

(1) When private respondent David invested his money on nine. and savings deposits with the aforesaid bank, the
contract that was perfected was a contract of simple loan or mutuum and not a contract of deposit. Hence, the
relationship between the private respondent and the Nation Savings and Loan Association is that of creditor and
debtor; consequently, the ownership of the amount deposited was transmitted to the Bank upon the perfection of
the contract and it can make use of the amount deposited for its banking operations, such as to pay interests on
deposits and to pay withdrawals. While the Bank has the obligation to return the amount deposited, it has,
however, no obligation to return or deliver the same money that was deposited. And, the failure of the Bank to
return the amount deposited will not constitute estafa through misappropriation punishable under Article 315,
par. l(b) of the Revised Penal Code, but it will only give rise to civil liability over which the public respondents have
no jurisdiction.
But even granting that the failure of the bank to pay the time and savings deposits of private respondent David
would constitute a violation of paragraph 1(b) of Article 315 of the Revised Penal Code, nevertheless any incipient
criminal liability was deemed avoided, because when the aforesaid bank was placed under receivership by the
Central Bank, petitioners Guingona and Martin assumed the obligation of the bank to private respondent David,
thereby resulting in the novation of the original contractual obligation arising from deposit into a contract of loan
and converting the original trust relation between the bank and private respondent David into an ordinary debtor-
creditor relation between the petitioners and private respondent. Consequently, the failure of the bank or
petitioners Guingona and Martin to pay the deposits of private respondent would not constitute a breach of trust
but would merely be a failure to pay the obligation as a debtor. Moreover, while it is true that novation does not
extinguish criminal liability, it may however, prevent the rise of criminal liability as long as it occurs prior to the
filing of the criminal information in court. In the case at bar, there is no dispute that petitioners Guingona and
Martin executed a promissory note on June 17, 1981 assuming the obligation of the bank to private respondent
David; while the criminal complaint for estafa was filed on December 23, 1981 with the Office of the City Fiscal.
Hence, it is clear that novation occurred long before the filing of the criminal complaint with the Office of the City
Fiscal. Consequently, as aforestated, any incipient criminal liability would be avoided but there will still be a civil
liability on the part of petitioners Guingona and Martin to pay the assumed obligation.
(2) Petitioner Guingona merely accommodated the request of the Nation Savings and loan Association in order to
clear the bank draft through his dollar account because the bank did not have a dollar account. Immediately after
the bank draft was cleared, petitioner Guingona authorized Nation Savings and Loan Association to withdraw the
same in order to be utilized by the bank for its operations. It is safe to assume that the U.S. dollars were converted
first into Philippine pesos before they were accepted and deposited in Nation Savings and Loan Association,
because the bank is presumed to have followed the ordinary course of the business which is to accept deposits in
Philippine currency only, and that the transaction was regular and fair, in the absence of a clear and convincing
evidence to the contrary.
In conclusion, considering that the liability of the petitioners is purely civil in nature and that there is no clear
showing that they engaged in foreign exchange transactions, We hold that the public respondents acted without
jurisdiction when they investigated the charges against the petitioners. Consequently, public respondents should
be restrained from further proceeding with the criminal case for to allow the case to continue, even if the
petitioners could have appealed to the Ministry of Justice, would work great injustice to petitioners and would
render meaningless the proper administration of justice.

Paulino Gullas vs. Philippine National Bank
G.R. No. L-43191 13 November 1935
FACTS:
The United States Veterans Bureau issued a warrant payable to the order of Francico Sabectoria Bacos. Paulino
Gullas and Pedro Lopez signed as endorsers of the aforementioned check. Thereupon, it was cashed by the
Philippine National Bank. Subsequently, the treasury warrant was dishonored. The bank sent notices by mail to
Mr. Gullas which could not be delivered to him at that time because he was in Manila. The bank then proceeded
to apply the outstanding balances of Mr. Gullas account with the part payment of the subject check.
ISSUE:
Whether or not PNB properly set off the account of Gullas with the payment of the indorsed check.
HELD:
No. Although PNB had with respect to the deposit of Gullas a right of set off, its remedy was not enforced
properly.
Notice of dishonor is necessary in order to charge an indorser and that the right of action against him does not
accrue until the notice is given. Prior to the mailing of notice of dishonor, and without waiting for any action by
Gullas, the bank made use of the money standing in his account to make good for the treasury warrant. The action
of the bank was prejudicial to Gullas. As such,Gullas should be awarded nominal damages because of the
premature action of the bank.
Romarico G. Vitug
G.R. No. 82027 March 29, 1990
FACTS:
The case is a chapter in an earlier suit involving the issue on two (2) wills of the late Dolores Vitug who died in New
York, USA in Nov 1980. She named therein private respondent Rowena Corona (Executrix) while Nenita Alonte was
co-special administrator together with petitioner Romarico pending probate.
In January 1985, Romarico filed a motion asking for authorization of the probate court to sell shares of stocks and
real property of the estate as reimbursements for advances he made to the estate. The said amount was spent for
payment of estate tax from a savings account in the Bank of America.
Rowena Corona opposed the motion to sell contending that from the said account are conjugal funds, hence part
of the estate. Vitug insisted saying that the said funds are his exclusive property acquired by virtue of a
survivorship agreement executed with his late wife and the bank previously. In the said agreement, they agreed
that in the event of death of either, the funds will become the sole property of the survivor.
The lower court upheld the validity of the survivorship agreement and granted Romarico's motion to sell. The
Court of Appeals however held that said agreement constituted a conveyance mortis causa which did not comply

with the formalities of a valid will. Further, assuming that it is donation inter vivos, it is a prohibited donation.
Vitug petitioned to the Court contending that the said agreement is an aleatory contract.
ISSUE:
Whether or not the conveyance is one of mortis causa hence should conform to the form required of wills.
HELD:
No. The survivorship agreement is a contract which imposed a mere obligation with a term--being death. Such
contracts are permitted under Article 2012 on aleatory contracts. When Dolores predeceased her husband the
latter acquired upon her death a vested right over the funds in the account. The conveyance is therefore not
mortis causa.
Banco Filipino vs. Purisima
G.R. No. L-56429 May 28, 1988
FACTS:
Customs special agent Manuel Caturla is accused by the Bureau of Internal Revenue of having violated R.A. No.
3019 of the "Anti-Graft and Corrupt Practices Act" for having allegedly acquired property manifestly out of
proportion to his salary and other lawful income. In the course of the preliminary investigation thereof, the
Tanodbayan issued a subpoena duces tecum to the Banco Filipino Savings & Mortgage Bank, commanding its
representative to appear at a specified time at the Office of the Tanodbayan and furnish the latter with duly
certified copies of the records in all its branches and extension offices, of the loans, savings and time deposits and
other banking transactions, dating back to 1969, appearing in the names of Caturla, His wife, Purita Caturla, their
Children; Manuel, Jr., Marilyn and Michael and Pedro Escuyos,
Caturla moved to quash the subpoena duces tecum but was denied by Tanodbayan Vicente Ericta. Petitioner
Banco Filipino filed a complaint for declaratory relief with the Court of First Instance of Manila but was denied for
lack of merit by respondent Judge Purisima.

ISSUE:
Whether or not the RA 1405 “Law on Secrecy of Bank Deposits” precludes production by subpoena duces tecum of
bank records of transactions by or in the names of the wife, children and friends of the accused.
HELD:
No. The inquiry into illegally acquired property or property NOT "legitimately acquired” extends to cases where
such property is concealed by being held by or recorded in the name of other persons. This proposition is made
clear by R.A. No. 3019 which quite categorically states that the term, "legitimately acquired property of a public
officer or employee shall not include... property unlawfully acquired by the respondent, but its ownership is
concealed by its being recorded in the name of, or held by, respondent's spouse, ascendants, descendants,
relatives or any other persons.”
To sustain the petitioner's theory, and restrict the inquiry only to property held by or in the name of the
government official or employee, or his spouse and unmarried children is unwarranted in the light of the
provisions of the statutes in question, and would make available to persons in government who illegally acquire
property an easy and fool-proof means of evading investigation and prosecution; all they would have to do would
be to simply place the property in the possession or name of persons other than their spouse and unmarried
children. This is an absurdity that we will not ascribe to the lawmakers.
Joseph Victor Ejercito vs. Sandiganbayan
G.R. Nos. 157294-95 - 30 November 2006
FACTS:
The Office of the Ombudsman requested the Sandiganbayan to issue subpoena duces tecum against the Urban
Bank relative to the case against President Joseph Estrada. Ms. Dela Paz, receiver of the Urban Bank, furnished the
Office of the Ombudsman certified copies of manager checks detailed in the subpoena duces tecum. The
Sandiganbayan granted the same.
However, Ejercito claims that the subpoenas issued by the Sandiganbayan are invalid and may not be enforced
because the information found therein, given their extremely detailed character and could only have been
obtained by the Special Prosecution Panel through an illegal disclosure by the bank officials. Ejercito thus
contended that, following the fruit of the poisonous tree doctrine, the subpoenas must be quashed. Moreover,
the extremely-detailed information obtained by the Ombudsman from the bank officials concerned during a
previous investigation of the charges against him, such inquiry into his bank accounts would itself be illegal.

ISSUE:
Whether or not subpoena duces tecum/ad testificandum may be issued to order the production of statement of
bank accounts even before a case for plunder is filed in court
HELD:
The Supreme Court held that plunder is analogous to bribery, and therefore, the exception to R.A. 1405 must also
apply to cases of plunder. The court also reiterated the ruling in Marquez v. Desierto that before an in camera
inspection may be allowed there must be a pending case before a court of competent jurisdiction. Further, the
account must be clearly identified, the inspection limited to the subject matter of pending case before the court of
competent jurisdiction.
As no plunder case against then President Estrada had yet been filed before a court of competent jurisdiction at
the time the Ombudsman conducted an investigation, he concludes that the information about his bank accounts
were acquired illegally, hence, it may not be lawfully used to facilitate a subsequent inquiry into the same bank
accounts. Thus, his attempt to make the exclusionary rule applicable to the instant case fails.
The high Court, however, rejected the arguments of the petitioner Ejercito that the bank accounts which where
demanded from certain banks even before the case was filed before the proper court is inadmissible in evidence
being fruits of poisonous tree. This is because the Ombudsman issued the subpoenas bearing on the bank
accounts of Ejercito about four months before Marquez was promulgated on June 27, 2001. While judicial
interpretations of statutes, such as that made in Marquez with respect to R.A. No. 6770 or the Ombudsman Act of
1989, are deemed part of the statute as of the date it was originally passed, the rule is not absolute. Thus, the
Court referred to the teaching of Columbia Pictures Inc., v. Court of Appeals, that: It is consequently clear that a
judicial interpretation becomes a part of the law as of the date that law was originally passed, subject only to the
qualification that when a doctrine of this Court is overruled and a different view is adopted, and more so when
there is a reversal thereof, the new doctrine should be applied prospectively and should not apply to parties who
relied on the old doctrine and acted in good faith.
BSB Group Inc. vs. Sally Go
G.R. No. 168644 February 16, 2010
FACTS:
Petitioner, the BSB Group, Inc., is a duly organized domestic corporation presided by its herein representative,
Ricardo Bangayan (Bangayan). Respondent Sally Go, alternatively referred to as Sally Sia Go and Sally Go-
Bangayan, is Bangayan's wife, who was employed in the company as a cashier, and was engaged, among others, to
receive and account for the payments made by the various customers of the company.
In 2002, Bangayan filed with the Manila Prosecutor's Office a complaint for estafaand/or qualified theft against
respondent, alleging that several checks representing the aggregate amount of P1,534,135.50 issued by the
company's customers in payment of their obligation were, instead of being turned over to the company's coffers,
indorsed by respondent who deposited the same to her personal banking account maintained at Security Bank
and Trust Company (Security Bank) in Divisoria, Manila Branch. Upon a finding that the evidence adduced was

uncontroverted, the assistant city prosecutor recommended the filing of the Information for qualified theft against
respondent.
Accordingly, respondent was charged before the Regional Trial Court of Manila. She was found guilty; that in the
commission of the said offense, said accused acted with grave abuse of confidence, being then employed as
cashier by said complainant at the time of the commission of the said offense and as such she was entrusted with
the said amount of money.
Respondent entered a negative plea when arraigned. The trial ensued. On the premise that respondent had
allegedly encashed the subject checks and deposited the corresponding amounts thereof to her personal banking
account.
Petitioner, opposing respondent's move, argued for the relevancy of the Metrobank account on the ground that
the complaint-affidavit showed that there were two checks which respondent allegedly deposited in an account
with the said bank. To this, respondent filed a supplemental motion to quash, invoking the absolutely confidential
nature of the Metrobank account under the provisions of Republic Act(R.A.) No. 1405. The trial court did not
sustain respondent; hence, it denied the motion to quash for lack of merit.
Meanwhile, the prosecution was able to present in court the testimony of Elenita Marasigan (Marasigan), the
representative of Security Bank. In a nutshell ,Marasigan's testimony sought to prove that between 1988 and
1989, respondent ,while engaged as cashier at the BSB Group, Inc., was able to run away with the checks issued to
the company by its customers, endorse the same, and credit the corresponding amounts to her personal deposit
account with Security Bank. In the course of the testimony, the subject checks were presented to Marasigan for
identification and marking as the same checks received by respondent, endorsed, and then deposited in her
personal account with Security Bank. CA affirmed RTC’s decision.
ISSUE:
Whether or not there is no difference between cash and check for purposes of prosecuting respondent for theft of
cash
HELD:
In theft, the act of unlawful taking connotes deprivation of personal property of one by another with intent to
gain, and it is immaterial that the offender is able or unable to freely dispose of the property stolen because the
deprivation relative to the offended party has already ensued from such act of execution.
The allegation of theft of money, hence, necessitates that evidence presented must have a tendency to prove that
the offender has unlawfully taken money belonging to another. Interestingly, petitioner has taken pains
in attempting to draw a connection between the evidence subject of the instant review, and the allegation of theft
in the Information by claiming that respondent had fraudulently deposited the checks in her own name. But this
line of argument works more prejudice than favor, because it in effect, seeks to establish the commission, not of
theft, but rather of some other crime probably estafa.
Moreover, that there is no difference between cash and check is true in other instances. In estafa by conversion,
for instance, whether the thing converted is cash or check, is immaterial in relation to the formal allegation in an
information for that offense; a check, after all, while not regarded as legal tender, is normally accepted under
commercial usage as a substitute for cash, and the credit it represents instated monetary value is properly capable
of appropriation. And it is in this respect that what the offender does with the check subsequent to the act of
unlawfully taking it becomes material inasmuch as this offense is a continuing one. In other words, in pursuing a
case for this offense, the prosecution may establish its cause by the presentation of the checks involved. These
checks would then constitute the best evidence to establish their contents and to prove the elemental act of
conversion in support of the proposition that the offender has indeed indorsed the same in his own name.
Intengan vs. Court of Appeals
G.R. No. 128996 February 15, 2002
FACTS:
On September 21, 1993, Citibank filed a complaint for violation of section 31 in relation to section 144 of the
Corporation Code against two (2) of its officers, Dante L. Santos and Marilou Genuino. Attached to the complaint
was an affidavit executed by private respondent Vic Lim, a vice-president of Citibank.
As evidence, Lim annexed bank records purporting to establish the deception practiced by Santos and Genuino.
Some of the documents pertained to the dollar deposits of petitioners Carmen Ll. Intengan, Rosario Ll. Neri, and
Rita P. Brawner. In turn, private respondent Joven Reyes, vice-president/business manager of the Global
Consumer Banking Group of Citibank, admits to having authorized Lim to state the names of the clients involved

and to attach the pertinent bank records, including those of petitioners. Petitioners aver that respondents violated
RA 1405.
ISSUE:
Whether or not Respondents are liable for violation of Secrecy of Bank Deposits Act, RA 1405.
HELD:
No. The accounts in question are U.S. dollar deposits; consequently, the applicable law is not Republic Act No.
1405 but Republic Act (RA) No. 6426, known as the “Foreign Currency Deposit Act of the Philippines,” However,
applying Act No. 3326, the offense prescribes in eight years, therefore, per available records, private respondents
may no longer be haled before the courts for violation of Republic Act No. 6426.
PCIB vs. Court of Appeals
G.R. No. 121413 January 29, 2001
FACTS:
This case is composed of three consolidated petitions involving several checks, payable to the Bureau of Internal
Revenue, but was embezzled allegedly by an organized syndicate.
I. G. R. Nos. 121413 and 121479
On October 19, 1977, plaintiff Ford issued a Citibank check amounting to P4,746,114.41 in favor of the
Commissioner of Internal Revenue for the payment of manufacturer’s taxes. The check was deposited with
defendant IBAA (now PCIB), subsequently cleared the the Central Bank, and paid by Citibank to IBAA. The

proceeds never reached BIR, so plaintiff was compelled to make a second payment. Defendant refused to
reimburse plaintiff, and so the latter filed a complaint. An investigation revealed that the check was recalled by
Godofredo Rivera, the general ledger accountant of Ford, and was replaced by a manager’s check. Alleged
members of a syndicate deposited the two manager’s checks with Pacific Banking Corporation. Ford filed a third
party complaint against Rivera and PBC. The case against PBC was dismissed. The case against Rivera was likewise
dismissed because summons could not be served. The trial court held Citibank and PCIB jointly and severally liable
to Ford, but the Court of Appeals only held PCIB liable.
II. G. R. No. 128604
Ford drew two checks in favor of the Commissioner of Internal Revenue, amounting to P5,851,706.37 and
P6,311,591.73. Both are crossed checks payable to payee’s account only. The checks never reached BIR, so plaintiff
was compelled to make second payments. Plaintiff instituted an action for recovery against PCIB and Citibank.
On investigation of NBI, the modus operandi was discovered. Gorofredo Rivera made the checks but instead of
delivering them to BIR, passed it to Castro, who was the manager of PCIB San Andres. Castro opened a checking
account in the name of a fictitious person “Reynaldo Reyes”. Castro deposited a worthless Bank of America check
with the same amount as that issued by Ford. While being routed to the Central Bank for clearing, the worthless
check was replaced by the genuine one from Ford.
The trial court absolved PCIB and held Citibank liable, which decision was affirmed in toto by the Court of Appeals.
ISSUES:
(1) Whether there is contributory negligence on the part of Ford
(2) Has petitioner Ford the right to recover from the collecting bank (PCIBank) and the drawee bank (Citibank) the
value of the checks intended as payment to the Commissioner of Internal Revenue?
HELD:
(1) The general rule is that if the master is injured by the negligence of a third person and by the concurring
contributory negligence of his own servant or agent, the latter's negligence is imputed to his superior and
will defeat the superior's action against the third person, assuming, of course that the contributory
negligence was the proximate cause of the injury of which complaint is made.
As defined, proximate cause is that which, in the natural and continuous sequence, unbroken by any
efficient, intervening cause produces the injury and without the result would not have occurred. It appears
that although the employees of Ford initiated the transactions attributable to an organized syndicate, in
our view, their actions were not the proximate cause of encashing the checks payable to the CIR. The
degree of Ford's negligence, if any, could not be characterized as the proximate cause of the injury to the
parties. The mere fact that the forgery was committed by a drawer-payor's confidential employee or
agent, who by virtue of his position had unusual facilities for perpertrating the fraud and imposing the
forged paper upon the bank, does notentitle the bank toshift the loss to the drawer-payor, in the absence
of some circumstance raising estoppel against the drawer. This rule likewise applies to the checks
fraudulently negotiated or diverted by the confidential employees who hold them in their possession.
(2) We have to scrutinize, separately, PCIBank's share of negligence when the syndicate achieved its ultimate
agenda of stealing the proceeds of these checks.
a. G. R. Nos. 121413 and 121479.

On record, PCIBank failed to verify the authority of Mr. Rivera to negotiate the checks. The neglect of PCIBank
employees to verify whether his letter requesting for the replacement of the Citibank Check No. SN-04867 was
duly authorized, showed lack of care and prudence required in the circumstances. Furthermore, it was admitted
that PCIBank is authorized to collect the payment of taxpayers in behalf of the BIR. As an agent of BIR, PCIBank is
duty bound to consult its principal regarding the unwarranted instructions given by the payor or its agent. It is a
well-settled rule that the relationship between the payee or holder of commercial paper and the bank to which it
is sent for collection is, in the absence of an argreement to the contrary, that of principal and agent. A bank which
receives such paper for collection is the agent of the payee or holder.
Indeed, the crossing of the check with the phrase "Payee's Account Only," is a warning that the check should be
deposited only in the account of the CIR. Thus, it is the duty of the collecting bank PCIBank to ascertain that the
check be deposited in payee's account only. Therefore, it is the collecting bank (PCIBank) which is bound to
scrutinize the check and to know its depositors before it could make the clearing indorsement "all prior
indorsements and/or lack of indorsement guaranteed".
Lastly, banking business requires that the one who first cashes and negotiates the check must take some
precautions to learn whether or not it is genuine. And if the one cashing the check through indifference or other
circumstance assists the forger in committing the fraud, he should not be permitted to retain the proceeds of the
check from the drawee whose sole fault was that it did not discover the forgery or the defect in the title of the
person negotiating the instrument before paying the check. For this reason, a bank which cashes a check drawn
upon another bank, without requiring proof as to the identity of persons presenting it, or making inquiries with
regard to them, cannot hold the proceeds against the drawee when the proceeds of the checks were afterwards
diverted to the hands of a third party. In such cases the drawee bank has a right to believe that the cashing bank
(or the collecting bank) had, by the usual proper investigation, satisfied itself of the authenticity of the negotiation
of the checks. Thus, one who encashed a check which had been forged or diverted and in turn received payment
thereon from the drawee, is guilty of negligence which proximately contributed to the success of the fraud
practiced on the drawee bank. The latter may recover from the holder the money paid on the check.
b. G. R. No. 128604
In this case, there was no evidence presented confirming the conscious participation of PCIBank in the
embezzlement. As a general rule, however, a banking corporation is liable for the wrongful or tortuous acts and
declarations of its officers or agents within the course and scope of their employment.
A bank will be held liable for the negligence of its officers or agents when acting within the course and scope of
their employment. It may be liable for the tortuous acts of its officers even as regards that species of tort of which
malice is an essential element. In this case, we find a situation where the PCIBank appears also to be the victim of
the scheme hatched by a syndicate in which its own management employees had participated. But in this case,
responsibility for negligence does not lie on PCIBank's shoulders alone.
Citibank failed to notice and verify the absence of the clearing stamps. For this reason, Citibank had indeed failed
to perform what was incumbent upon it, which is to ensure that the amount of the checks should be paid only to
its designated payee. The point is that as a business affected with public interest and because of the nature of its
functions, the bank is under obligation to treat the accounts of its depositors with meticulous care, always having
in mind the fiduciary nature of their relationship. Thus, invoking the doctrine of comparative negligence, we are of
the view that both PCIBank and Citibank failed in their respective obligations and both were negligent in the
selection and supervision of their employees resulting in the encashment of Citibank Check Nos. SN 10597 AND
16508. Thus, we are constrained to hold them equally liable for the loss of the proceeds of said checks issued by
Ford in favor of the CIR.

Philippine Deposit Insurance Corporation vs. Citibank
GR NO.170290 April 11, 2012
FACTS:
Petitioner Philippine Deposit Insurance Corporation (PDIC) is a government instrumentality created by virtue of

Republic Act (R.A.) No. 3591, as amended by R.A. No. 9302.
Respondent Citibank, N.A. (Citibank) is a banking corporation while respondent Bank of America, S.T. &
N.A. (BA) is a national banking association, both of which are duly organized and existing under the laws of
the United States of America and duly licensed to do business in the Philippines, with offices in Makati City.

In 1977, PDIC conducted an examination of the books of account of Citibank. It discovered that Citibank, in
the course of its banking business, from September 30, 1974 to June 30, 1977, received from its head office and
other foreign branches a total of P11,923,163,908.00 in dollars, covered by Certificates of Dollar Time Deposit that
were interest-bearing with corresponding maturity dates. These funds, which were lodged in the books of
Citibank under the account “Their Account-Head Office/Branches-Foreign Currency,” were not reported to PDIC as
deposit liabilities that were subject to assessment for insurance. As such, in a letter dated March 16, 1978, PDIC
assessed Citibank for deficiency in the sum of P1,595,081.96.
Similarly, sometime in 1979, PDIC examined the books of accounts of BA which revealed that from
September 30, 1976 to June 30, 1978, BA received from its head office and its other foreign branches a total
of P629,311,869.10 in dollars, covered by Certificates of Dollar Time Deposit that were interest-bearing with
corresponding maturity dates and lodged in their books under the account “Due to Head Office/Branches.”
Because BA also excluded these from its deposit liabilities, PDIC wrote to BA on October 9, 1979, seeking the
remittance of P109,264.83 representing deficiency premium assessments for dollar deposits.
Believing that litigation would inevitably arise from this dispute, Citibank and BA each filed a petition for
declaratory relief before the Court of First Instance (now the Regional Trial Court) of Rizal on July 19,
1979 and December 11, 1979, respectively. In their petitions, Citibank and BA sought a declaratory judgment
stating that the money placements they received from their head office and other foreign branches were not
deposits and did not give rise to insurable deposit liabilities under Sections 3 and 4 of R.A. No. 3591 (the PDIC
Charter) and, as a consequence, the deficiency assessments made by PDIC were improper and erroneous. The
cases were then consolidated.
On June 29, 1998, the Regional Trial Court, Branch 163, Pasig City (RTC) promulgated its Decision in favor
of Citibank and BA. Aggrieved, PDIC appealed to the CA which affirmed the ruling of the RTC in its October 27,
2005 Decision. Hence, this petition.
ISSUE:
Whether or not a branch of a bank has a separate legal Personality.
HELD:
No. A branch has no separate legal personality. This Court is of the opinion that the key to the resolution of this
controversy is the relationship of the Philippine branches of Citibank and BA to their respective head offices and
their other foreign branches.
The Court begins by examining the manner by which a foreign corporation can establish its presence in
the Philippines. It may choose to incorporate its own subsidiary as a domestic corporation, in which case such
subsidiary would have its own separate and independent legal personality to conduct business in the country. In
the alternative, it may create a branch in the Philippines, which would not be a legally independent unit, and
simply obtain a license to do business in the Philippines.
In the case of Citibank and BA, it is apparent that they both did not incorporate a separate domestic
corporation to represent its business interests in the Philippines. Their Philippine branches are, as the name
implies, merely branches, without a separate legal personality from their parent company, Citibank and BA. Thus,
being one and the same entity, the funds placed by the respondents in their respective branches in
the Philippines should not be treated as deposits made by third parties subject to deposit insurance under the
PDIC Charter. The purpose of the PDIC is to protect the depositing public in the event of a bank closure. It has

already been sufficiently established by US jurisprudence and Philippine statutes that the head office shall answer
for the liabilities of its branch. Now, suppose the Philippine branch of Citibank suddenly closes for some
reason. Citibank N.A. would then be required to answer for the deposit liabilities of Citibank Philippines. If the
Court were to adopt the posture of PDIC that the head office and the branch are two separate entities and that
the funds placed by the head office and its foreign branches with the Philippine branch are considered deposits
within the meaning of the PDIC Charter, it would result to the incongruous situation where Citibank, as the head
office, would be placed in the ridiculous position of having to reimburse itself, as depositor, for the losses it may
incur occasioned by the closure of Citibank Philippines. Surely our law makers could not have envisioned such a
preposterous circumstance when they created PDIC.
Finally, the Court agrees with the CA ruling that there is nothing in the definition of a “bank” and a
“banking institution” in Section 3(b) of the PDIC Charter which explicitly states that the head office of a foreign
bank and its other branches are separate and distinct from their Philippine branches.
There is no need to complicate the matter when it can be solved by simple logic bolstered by law and
jurisprudence. Based on the foregoing, it is clear that the head office of a bank and its branches are considered as
one under the eyes of the law. While branches are treated as separate business units for commercial and financial
reporting purposes, in the end, the head office remains responsible and answerable for the liabilities of its
branches which are under its supervision and control. As such, it is unreasonable for PDIC to require the
respondents, Citibank and BA, to insure the money placements made by their home office and other
branches. Deposit insurance is superfluous and entirely unnecessary when, as in this case, the institution holding
the funds and the one which made the placements are one and the same legal entity.
Philippine Deposit Insurance Corporation vs. Court of Appeals
G.R. No. 118917 - December 22, 1997
FACTS:
On September 22, 1983, plaintiffs-appellees invested in money market placements with the Premiere Financing
Corporation (PFC) in the sum of P10,000.00 each for which they were issued by the PFC corresponding promissory
notes and checks. On the same date (September 22, 1983), John Francis Cotaoco, for and in behalf of plaintiffs-
appellees, went to the PFC to encash the promissory notes and checks, but the PFC referred him to the Regent
Saving Bank (RSB). Instead of paying the promissory notes and checks, the RSB, upon agreement of Cotaoco,
issued the subject 13 certificates of time deposit with Nos. 09648 to 09660, inclusive, each stating, among others,
that the same certifies that the bearer thereof has deposited with the RSB the sum of P10,000.00; that the
certificate shall bear 14% interest per annum; that the certificate is insured up toP15,000.00 with the PDIC; and
that the maturity date thereof is on November 3, 1983 (Exhs. “B”, “B-1” to “B-12”).
On the aforesaid maturity dated (November 3, 1983), Cotaoco went to the RSB to encash the said
certificates. Thereat, RSB Executive Vice President Jose M. Damian requested Cotaoco for a deferment or an
extension of a few days to enable the RSB to raise the amount to pay for the same (Exh. “D”). Cotaoco
agreed. Despite said extension, the RSB still failed to pay the value of the certificates. Instead, RSB advised
Cotaoco to file a claim with the PDIC.
Meanwhile, on June 15, 1984, the Monetary Board of the Central Bank issued Resolution No. 788 (Exh. ‘2’,
Records, p. 159) suspending the operations of the RSB. Eventually, the records of RSB were secured and its
deposit liabilities were eventually determined. On December 7, 1984, the Monetary Board issued Resolution No.
1496 (Exh. ‘1’) liquidating the RSB. Subsequently, a masterlist or inventory of the RSB assets and liabilities was
prepared. However, the certificates of time deposit of plaintiffs-appellees were not included in the list on the
ground that the certificates were not funded by the PFC or duly recorded as liabilities of RSB.
On September 4, 1984, plaintiffs-appellees filed with the PDIC their respective claims for the amount of the
certificates (Exhs. “C”, “C-1”, to “C-12”). Sabina Yu, James Ngkaion, Elaine Ngkaion and Jeffrey Ngkaion, who have
similar claims on their certificates of time deposit with the RSB, likewise filed their claims with the PDIC. To their
dismay, PDIC refused the aforesaid claims on the ground that the Traders Royal Bank Check No. 299255 dated
September 22, 1983 for the amount of P125,846.07 (Exh. “B”) issued by PFC for the aforementioned certificates
was returned by the drawee bank for having been drawn against insufficient funds; and said check was not
replaced by the PFC, resulting in the cancellation of the certificates as indebtedness or liabilities of RSB.
Consequently, on March 31, 1987, private respondents filed an action for collection against PDIC, RSB and the
Central Bank.
On September 14, 1987, the trial court, declared the Central Bank in default for failing to file an answer.
On May 29, 1989, the trial court rendered its decision ordering the defendants therein to pay plaintiffs, jointly and
severally, the amount corresponding to the latter’s certificates of time deposit.
Both PDIC and RSB appealed.
ISSUE:
Whether or not PDIC can be held liable for value of the certificates of time deposit held by the petitioners.
HELD:
NO. Whenever an insured bank shall have been closed on account of insolvency,
payment of the insured deposits in such bank shall be made by the Corporation as soon as possible. The term
“deposit” means the unpaid balance of money or its equivalent received by a bank in the usual course of business
and for which it has given or is obliged to give credit to a commercial, checking, savings, time or thrift account or
which is evidence by passbook, check and/or certificate of deposit printed or issued in accordance with Central
Bank rules and regulations and other applicable laws, together with such other obligations of a bank which,
consistent with banking usage and practices, the Board of Directors shall determine and prescribe by regulations
to be deposit liabilities of the Bank. These pieces of evidence convincingly show that the subject CTDs were indeed
issued without RSB receiving any money therefor. No deposit, as defined in Section 3 (f) of R.A. No. 3591,
therefore came into existence. Accordingly, petitioner PDIC cannot be held liable for value of the certificates of
time deposit held by private respondents.
Philippine Deposit Insurance Corporation vs. Court of Appeals
G.R. No. 126911 April 30, 2003
FACTS:
Prior to May 22, 1997, respondents had 71 certificates of time deposits denominated as "Golden Time Deposits"
(GTD) with an aggregate face value of P1,115,889.96. May 22, 1987, a Friday, the Monetary Board (MB) of the
Central Bank of the Philippines, now Bangko Sentral ng Pilipinas, issued Resolution 5052 prohibiting Manila
Banking Corporation to do business in the Philippines, and placing its assets and affairs under receivership. The
Resolution, however, was not served on MBC until Tuesday the following week, or on May 26, 1987, when
the designated Receiver took over. On May 25, 1987 - the next banking day following the issuance of the MB
Resolution, respondent Jose Abad was at the MBC at 9:00 a.m. for the purpose of pre-terminating the71
aforementioned GTDs and re-depositing the fund represented thereby into 28 new GTDs in denominations of
P40,000.00 or less under the names of herein respondents individually or jointly with each others Of the 28
new GTDs, Jose Abad pre-terminated 8 and withdrew the value thereof in the total amount of P320,000.00.
Respondents thereafter filed their claims with the PDIC for the payment of the remaining 20 insured GTDs.
February 11, 1988, PDIC paid respondents the value of 3 claims in the total amount of P120,000.00. PDIC,
however, withheld payment of the 17 remaining claims after Washington Solidum, Deputy Receiver of MBC-Iloilo,
submitted a report to the PDIC that there was massive conversion and substitution of trust and deposit accounts
on May 25, 1987 at MBC-Iloilo. Because of the report, PDIC entertained serious reservation in recognizing
respondents' GTDs as deposit liabilities of MBC-Iloilo. Thus, PDIC filed a petition for declaratory relief against
respondents with the RTC of Iloilo City, for a judicial declaration determination of the insurability of respondents'
GTD sat MBC-Iloilo. In their Answer respondents set up a counterclaim against PDIC whereby they asked for
payment of their insured deposits. The Trial Court ordered petitioners to pay the balance of the deposit insurance
to respondents. The Court of Appeals affirmed the decision of the lower court. Petitioner posits that the trial court
erred in ordering it to pay the balance of the deposit insurance to respondents, maintaining that the instant
petition stemmed from a petition for declaratory relief which does not essentially entail an executory process, and
the only relief that should have been granted by the trial court is a declaration of the parties' rights and duties. As
such, petitioner continues, no order of payment may arise from the case as this is beyond the office of declaratory
relief proceedings.

ISSUE:
Whether or not the trial court order the payment of the balance even if the petition stemmed from a petition for
declaratory relief which does not essentially entail an executor process.
HELD:
YES. Without doubt, a petition for declaratory relief does not essentially entail an executory process. There is
nothing in its nature, however, that prohibits a counter claim from being set-up in the same action. There is
nothing in the nature of a special civil action for declaratory relief that prescribes the filing of a counterclaim based
on the same transaction, deed or contract subject of the complaint. A special civil action is after all not essentially
different from an ordinary civil action, which is generally governed by Rules 1 to 56 of the Rules of Court, except
that the former deals with a special subject matter which makes necessary some special regulation. But the
identity between their fundamental nature is such that the same rules governing ordinary civil suits may and do
apply to special civil actions if not inconsistent with or if they may serve to supplement the provisions of the
peculiar rules governing special laws.
JURISPRUDENCE
GENERAL BANKING LAW NEW CENTRAL BANK ACT
Republic of the Philippines vs Busuego v. CA

Security Credit and Acceptance G.R. No. L-48955, June 30, 1987
Corp
G.R. No. L-20583, January 23, BSP Monetary Board and Chuchi
1967 Fonacier vs. Hon. Antonio-
Valenzuela, et. al.
Banas vs. Asia Pacific Finance
Corporation Salud v. Central Bank
G.R. No. 128703, October 18, G.R. No. L-17630, August 19, 1986
2000
Villanueva v. CA
First Planters Pawnshop, Inc. v G.R. No. 114870, May 26, 1995
Commissioner of Internal Revenue
GR No. 174134, July 30, 2008 Abacus Real Estate Development
Center, Inc. v. Manila Banking
Register of Deeds of Manila vs. Corp
China Banking Corporation G.R. No. 162270, Apr. 6, 2005
G.R. No. L-11964, April 28, 1962
Banco Filipino v. Central Bank
Games and Garments Developers, G.R. No. 70054, December 11,
Inc. vs. Allied Banking Corporation 1991
G.R. No. 181426, July 13, 2015
Ong v. CA
Spouses Panlilio v. Citibank G.R. No. 112830, Feb. 1, 1996
G.R. No. 156335 November 28,
2007 FOREIGN CURRENCY DEPOSIT ACT
Simex International Incorporated China Banking Corp. v. CA, G.R.

vs CA No. 140687, December 18, 2006
G.R. No. 88013, March 19, 1990
Salvation v. Central Bank of the
Sia vs. Court of Appeals Philippines, G.R. No. 94723,
G.R. No. 102970, May 13, 1993 August 21, 1997
Reyes vs. CA PHILIPPINE DEPOSIT INSURANCE

G.R. No. 118492. August 15, 2001 CODE
Philippine Savings Bank v. PDIC vs CA

Chowking Food Corporation G.R. No. 118917, December 22,
G.R. No. 177526, July 4, 2008 1997
PNB vs. Rodriguez Linsangan vs. PDIC

G.R. No. 170325, September 26, G.R. No. 140687, December 18,
2008 2006
Equitable PCI Bank vs. Tan Miranda vs PDIC

G.R. No. 165339. August 23, 2010 G.R. No. 169334, September 8,
2006
LAW ON SECRECY OF BANK

DEPOSITS
Ejercito v. Sandiganbayan
G.R. No. 157294-95, November
30, 2006
PNB v. Gancayco
G.R. No. L-18343, September 30,
1965
Marquez v. Desierto,
G.R. No.138569, September 11,
2003
PCIB v. CA
G.R. No. 84526, January 28, 1991
BSB GROUP v. Sally Go

GR No. 168644, February 16,
2010

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What are the three primary functions of the central monetary authority as provided under Section 20, Article XII of the 1987 Constitution?

What are the three primary functions of the central monetary authority as provided under Section 20, Article XII of the 1987 Constitution?

What is the nature of the relationship between a bank and its depositor?

What is the nature of the relationship between a bank and its depositor?

SEC. 20, ART. XII of the 1987 Constitution

DECLARED POLICY OF THE STATE

BANKING LAWS ESQUIERRA | MADRIGAL

(A) Debtor- Creditor Relationship (E) Impressed with Public Interest

CLASSIFICATION OF BANKS (CUT-RICO)

BANKING LAWS ESQUIERRA | MADRIGAL

BANKING LAWS ESQUIERRA | MADRIGAL

(1) SBL Rules

BANKING LAWS ESQUIERRA | MADRIGAL

Equity Redemption Right of Redemption

JUDICIAL FORECLOSURE VS. EXTRA JUDICIAL FORECLOSURE

BANKING LAWS ESQUIERRA | MADRIGAL

Responsibilities of BSP (1992, 1998 Bar)

1. Issue Rules and regulations it considers necessary for the effective

2. Direct the management, operations, and Administration of the BSP,

3. Establish a human resource management System.

a. Citizenship- In addition to the disqualifications

BANKING LAWS ESQUIERRA | MADRIGAL

Conservatorship vs. Receivership vs. Liquidation

INSTANCE -Based on the report - Upon finding of the -Voluntary

BANKING LAWS ESQUIERRA | MADRIGAL

Conservator (2006 Bar)

a. Conservatorship is terminated when the Monetary Board is satisfied that

Receiver (2006 Bar)

BANKING LAWS ESQUIERRA | MADRIGAL

 The insolvency of a bank and the consequent appointment of a

BANKING LAWS ESQUIERRA | MADRIGAL

Filing of the claims against the insolvent bank

Bank Deposits vs. Deposit Substitutes (BAR 2010)

Purposes for Requiring Banks to Maintain Reserves:

Villanueva v. CA, G.R. No. 114870, May 26, 1995

Salud v. Central Bank, G.R. No. L-17630, August 19, 1986

While resolutions of the Monetary Board forbidding a bank to do business on account of

LAW ON SECRECY OF PURPOSE:

AMENDED) 2. Discourage private hoarding so

 Examination/inquiry/looking into all deposits of whatever nature with

 Disclosure by any official or employee of any banking institution to any

ACTS NOT COVERED BY THE PROHIBITION

Without court order: If the AMLC determines that a particular deposit or

Garnishment of a bank deposit does

(2)Fine of not more than P20,000.00

(3)Both, in the discretion of the court (RA 1405, Sec. 5)

(1) upon written permission of the depositor;

PHILIPPINE DEPOSIT INSURANCE

What is the overall mandate of PDIC?

PROHIBITED ACTS: ACTS NOT COVERED BY THE

MAXIMUM DEPOSIT INSURANCE COVERAGE (MDIC)

TRUTH IN LENDING ACT

Disclosure; creditor shall furnish in a clear statement in writing:

Penalties for Failure to Disclose

BANKING LAWS ESQUIERRA | MADRIGAL

***In cases of international obligations and transactions, the basis

BANKING LAWS ESQUIERRA | MADRIGAL