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General Banking Law Reviewer
General Banking Law Reviewer
Comment [WU1]:
I
BANGKO SENTRAL NG PILIPINAS LAW
RA 7653 (1993).
1.1
Topics
State policies (Sec. 1)
SECTION 1. DECLARATION OF POLICY. - THE STATE SHALL MAINTAIN A CENTRAL
MONETARY AUTHORITY THAT SHALL
A. FUNCTION AND OPERATE AS AN INDEPENDENT AND ACCOUNTABLE BODY
CORPORATE IN THE DISCHARGE OF ITS MANDATED RESPONSIBILITIES
CONCERNING MONEY, BANKING AND CREDIT.
B. 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,
ENJOY FISCAL AND ADMINISTRATIVE AUTONOMY.
How State policies are to be achieved (compare, e.g., Secs. 2, 6, 9, 11, 15, 16,
18 and 47 of RA 7653 with similar provisions in RA 265) [SEE PAGE 2 OF BOOK]
A. Capital [Sec. 2]
SECTION 2. CREATION OF THE BANGKO SENTRAL. - THE CAPITAL OF THE BANGKO
SENTRAL SHALL BE FIFTY BILLION PESOS (P50,000,000,000.
B. MB Composition [Sec. 6]
SECTION 6. COMPOSITION OF THE MONETARY BOARD. - (C) FIVE (5) MEMBERS
WHO SHALL COME FROM THE PRIVATE SECTOR, ALL OF WHOM SHALL SERVE FULLTIME: PROVIDED, HOWEVER, THAT OF THE MEMBERS FIRST APPOINTED UNDER
THE PROVISIONS OF THIS SUBSECTION, THREE (3) SHALL HAVE A TERM OF SIX (6)
YEARS, AND THE OTHER TWO (2), THREE (3) YEARS.
C. Reappointment of MB Members [Sec. 6]
SECTION 6. COMPOSITION OF THE MONETARY BOARD. - NO MEMBER OF THE
MONETARY BOARD MAY BE REAPPOINTED MORE THAN ONCE.
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THE MEMBERS OF THE MONETARY BOARD COMING FROM THE PRIVATE SECTOR
SHALL NOT HOLD ANY OTHER PUBLIC OFFICE OR PUBLIC EMPLOYMENT DURING
THEIR TENURE.
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SECTION
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A. MAY THE MONETARY BOARD ORDER THE CLOSURE OF THE MPBC RURAL
BANKS RELYING ONLY ON THE SED REPORT, WITHOUT NEED OF AN
EXAMINATION?
B. IF MPBC HIRES YOU AS A LAWYER BECAUSE THE MONETARY BOARD HAS
FORBIDDEN IT FROM CARRYING ON ITS BUSINESS DUE TO ITS IMMINENT
INSOLVENCY, WHAT ACTION WILL YOU INSTITUTE TO QUESTION THE
MONETARY BOARDS ORDER?
SUGGESTED ANSWER:
A. Yes. Upon receipt of the report of the SED, the Monetary Board is
authorized to take any of the actions enumerated under the Sec. 30,
RA 7653, otherwise known as the New Central Bank Act, leading to
the receivership and liquidation of a bank or quasi-bank. There is no
requirement that an examination be first conducted before a banking
institution may be placed under receivership. [RURAL BANK OF SAN
MIGUEL V. MONETARY BOARD, 2007]
B. The order of the Monetary Board may be questioned on a petition for
certiorari on the ground that the action taken was in excess of
jurisdiction or with grave abuse of discretion amounting to lack or
excess of jurisdiction. The petition of certiorari may only be filed by the
stockholders representing the majority of the capital stock within 10
days from receipt by the board of directors of MPBC of the order
directing receivership, liquidation or conservatorship. [SEC. 30, PAR.
[2], RA 7653]
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(1) FILE EX PARTE WITH THE PROPER REGIONAL TRIAL COURT, AND
WITHOUT REQUIREMENT OF PRIOR NOTICE OR ANY OTHER ACTION, A
PETITION FOR ASSISTANCE IN THE LIQUIDATION OF THE INSTITUTION
PURSUANT TO A LIQUIDATION PLAN ADOPTED BY THE PHILIPPINE DEPOSIT
INSURANCE CORPORATION FOR GENERAL APPLICATION TO ALL CLOSED
BANKS. IN CASE OF QUASI-BANKS, THE LIQUIDATION PLAN SHALL BE
ADOPTED BY THE MONETARY BOARD. UPON ACQUIRING JURISDICTION,
THE COURT SHALL, UPON MOTION BY THE RECEIVER AFTER DUE NOTICE,
ADJUDICATE DISPUTED CLAIMS AGAINST THE INSTITUTION, ASSIST THE
ENFORCEMENT OF INDIVIDUAL LIABILITIES OF THE STOCKHOLDERS,
DIRECTORS AND OFFICERS, AND DECIDE ON OTHER ISSUES AS MAY BE
MATERIAL TO IMPLEMENT THE LIQUIDATION PLAN ADOPTED. THE RECEIVER
SHALL PAY THE COST OF THE PROCEEDINGS FROM THE ASSETS OF THE
INSTITUTION.
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ACT: PROVIDED, THAT THE PETITIONER OR PLAINTIFF FILES WITH THE CLERK
OR JUDGE OF THE COURT IN WHICH THE ACTION IS PENDING A BOND,
EXECUTED IN FAVOR OF THE BANGKO SENTRAL, IN AN AMOUNT TO BE FIXED
BY THE COURT. THIS SECTION SHALL ALSO APPLY TO THE EXTENT POSSIBLE
TO THE RECEIVERSHIP AND LIQUIDATION PROCEEDINGS OF QUASI-BANKS. (N)
SECTION 70. RA 8791. PENALTY FOR TRANSACTIONS AFTER A BANK
BECOMES INSOLVENT. - ANY DIRECTOR OR OFFICER OF ANY BANK DECLARED
INSOLVENT OR PLACED UNDER RECEIVERSHIP BY THE MONETARY BOARD WHO
REFUSES TO TURN OVER THE BANK'S RECORDS AND ASSETS TO THE
DESIGNATED RECEIVERS, OR WHO TAMPERS WITH BANKS RECORDS, OR WHO
APPROPRIATES FOR HIMSELF FOR ANOTHER PARTY OR DESTROYS OR CAUSES
THE MISAPPROPRIATION AND DESTRUCTION OF THE BANK'S ASSETS, OR WHO
RECEIVES OR PERMITS OR CAUSES TO BE RECEIVED IN SAID BANK ANY
DEPOSIT, COLLECTION OF LOANS AND/OR RECEIVABLES, OR WHO PAYS OUT
OR PERMITS OR CAUSES TO BE TRANSFERRED ANY SECURITIES OR PROPERTY
OF SAID BANK SHALL BE SUBJECT TO THE PENAL PROVISIONS OF THE NEW
CENTRAL BANK ACT. (85A)
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Functions of the BSP (e.g., Secs. 49-60; 61-63, 81-89, 109; 64-66; 82-84; 94 and
103; 102; 110-116; 117-122; 123-124)
Exclusive issue power (Sec. 50); liability for notes and coins (Sec. 51); legal
tender power (Sec. 53)
SECTION 50. EXCLUSIVE ISSUE POWER. - THE BANGKO SENTRAL SHALL HAVE
THE SOLE POWER AND AUTHORITY TO ISSUE CURRENCY, WITHIN THE
TERRITORY OF THE PHILIPPINES. NO OTHER PERSON OR ENTITY, PUBLIC OR
PRIVATE, MAY PUT INTO CIRCULATION NOTES, COINS OR ANY OTHER OBJECT
OR DOCUMENT WHICH, IN THE OPINION OF THE MONETARY BOARD, MIGHT
CIRCULATE AS CURRENCY, NOR REPRODUCE OR IMITATE THE FACSIMILES OF
BANGKO SENTRAL NOTES WITHOUT PRIOR AUTHORITY FROM THE BANGKO
SENTRAL. XXX.
SECTION 51. LIABILITY FOR NOTES AND COINS. - NOTES AND COINS ISSUED
BY THE BANGKO SENTRAL SHALL BE LIABILITIES OF THE BANGKO SENTRAL
AND MAY BE ISSUED ONLY AGAINST, AND IN AMOUNTS NOT EXCEEDING, THE
ASSETS OF THE BANGKO SENTRAL. SAID NOTES AND COINS SHALL BE A FIRST
AND PARAMOUNT LIEN ON ALL ASSETS OF THE BANGKO SENTRAL.
THE BANGKO SENTRAL'S HOLDINGS OF ITS OWN NOTES AND COINS SHALL NOT
BE CONSIDERED AS PART OF ITS CURRENCY ISSUE AND, ACCORDINGLY, SHALL
NOT FORM PART OF THE ASSETS OR LIABILITIES OF THE BANGKO SENTRAL.
SECTION 52. LEGAL TENDER POWER. - ALL NOTES AND COINS ISSUED BY THE
BANGKO SENTRAL SHALL BE FULLY GUARANTEED BY THE GOVERNMENT OF
THE REPUBLIC OF THE PHILIPPINES AND SHALL BE LEGAL TENDER IN THE
PHILIPPINES FOR ALL DEBTS, BOTH PUBLIC AND PRIVATE: PROVIDED,
HOWEVER, THAT, UNLESS OTHERWISE FIXED BY THE MONETARY BOARD,
COINS SHALL BE LEGAL TENDER IN AMOUNTS NOT EXCEEDING FIFTY PESOS
(P50.00) FOR DENOMINATIONS OF TWENTY-FIVE CENTAVOS AND ABOVE, AND
IN AMOUNTS NOT EXCEEDING TWENTY PESOS (P20.00) FOR DENOMINATIONS
OF TEN CENTAVOS OR LESS.
DTC SUPPLEMENT TO PARAGRAPH 1.17 (A), PP. 12-13
On account of the issuance by the BSP of new coins in higher
denominations after the affectivity of the BSP Law in 1993, the BSP,
pursuant to Section 52 of the BSP Law and Monetary Board
Resolution No. 862, dated July 6, 2006, issued Circular No. 537,
dated July 18, 2006, which adjusted the maximum amount of coins to
be considered as legal tender as follows:
1.
2.
Instruments of action (e.g., Secs. 68; 69-79; 81-89, 93; 90-92; 94-103; 104-108)
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SECTION 97. REQUIRED RESERVES AGAINST FOREIGN CURRENCY DEPOSITS. THE MONETARY BOARD IS SIMILARLY AUTHORIZED TO PRESCRIBE AND MODIFY
THE MINIMUM RESERVE RATIOS APPLICABLE TO DEPOSITS DENOMINATED IN
FOREIGN CURRENCIES.
SECTION 98. RESERVES AGAINST UNUSED BALANCES OF OVERDRAFT LINES. IN ORDER TO FACILITATE BANGKO SENTRAL CONTROL OVER THE VOLUME OF
BANK CREDIT, THE MONETARY BOARD MAY ESTABLISH MINIMUM RESERVE
REQUIREMENTS FOR UNUSED BALANCES OF OVERDRAFT LINES.
THE POWERS OF THE MONETARY BOARD TO PRESCRIBE AND MODIFY
RESERVE REQUIREMENTS AGAINST UNUSED BALANCES OF OVERDRAFT LINES
SHALL BE THE SAME AS ITS POWERS WITH RESPECT TO RESERVE
REQUIREMENTS AGAINST DEMAND DEPOSITS.
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EXCESS RESERVES WHICH THEY MAY HOLD ON OTHER DAYS OF THE SAME
WEEK AND SHALL BE REQUIRED TO PAY THE PENALTY ONLY ON THE AVERAGE
DAILY DEFICIENCY DURING THE WEEK. IN CASES OF ABUSE, THE MONETARY
BOARD MAY DENY ANY BANK OR QUASI-BANK THE PRIVILEGE OF OFFSETTING
RESERVE DEFICIENCIES IN THE AFORESAID MANNER.
THE MONETARY BOARD MAY MODIFY OR SET ASIDE THE RESERVE DEFICIENCY
PENALTIES PROVIDED IN THIS SECTION, FOR PART OR THE ENTIRE PERIOD OF A
STRIKE OR LOCKOUT AFFECTING A BANK OR A QUASI-BANK AS DEFINED IN THE
LABOR CODE, OR OF A NATIONAL EMERGENCY AFFECTING OPERATIONS OF
BANKS OR QUASI-BANKS. THE MONETARY BOARD MAY ALSO MODIFY OR SET
ASIDE RESERVED DEFICIENCY PENALTIES FOR REHABILITATION PROGRAM OF A
BANK.
SECTION 103. EXEMPTION FROM ATTACHMENT AND OTHER PURPOSES. DEPOSITS MAINTAINED BY BANKS WITH THE BANGKO SENTRAL AS PART OF
THEIR RESERVE REQUIREMENTS SHALL BE EXEMPT FROM ATTACHMENT,
GARNISHMENTS, OR ANY OTHER ORDER OR PROCESS OF ANY COURT,
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Control of bank credit (Secs. 104-108; Secs. 37-38 and 43, RA 8791)
SECTION 104. GUIDING PRINCIPLE. - THE MONETARY BOARD SHALL USE THE
POWERS GRANTED TO IT UNDER THIS ACT TO ENSURE THAT THE SUPPLY,
AVAILABILITY AND COST OF MONEY ARE IN ACCORD WITH THE NEEDS OF THE
PHILIPPINE ECONOMY AND THAT BANK CREDIT IS NOT GRANTED FOR
SPECULATIVE PURPOSES PREJUDICIAL TO THE NATIONAL INTERESTS.
REGULATIONS ON BANK OPERATIONS SHALL BE APPLIED TO ALL BANKS OF THE
SAME CATEGORY UNIFORMLY AND WITHOUT DISCRIMINATION.
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1.2
Cases
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FACTS: On January 10, 1980, a general examination of the bank's affairs and operations was
conducted and there were found by the Rural Banks and Savings and Loan Association
[DRBSLA] represented byConsolacion V. Odra, Director of DRBSLA, among others,
massive irregularities in its operations consisting of loans to unknown and fictitious
borrowers, where the sum of P 1,704,782.00 was past due and another sum
of P1,130,000.00 was also past due in favor of the Central Bank. The promissory notes
evidencing these loans were rediscounted with the Central Bank for cash. As a result
thereof, the bank became insolvent and prejudiced its depositors and creditors.
Consolacion V. Odra, submitted a report recommending to the Monetary Board of the
Central Bank the placing of Buhi under receivership in accordance with Section 29 of
Republic Act No. 265, as amended, the designation of the Director, DRBSLA, as receiver
thereof. On March 28, 1980, the Monetary Board, finding the report to be true, adopted
Resolution No. 583 placing Buhi, petitioner herein, under receivership and designated
respondent, Consolacion V. Odra, as Receiver, pursuant to the provisions of Section 29 of
Republic Act No. 265 as amended.
ssue: Petitioner Rural Bank's position is to the effect that due process was not observed by
the Monetary Board before said bank was placed under receivership. Said Rural Bank
claimed that it was not given the chance to deny and disprove such claim of insolvency
and/or any other ground which the Monetary Board used in justification of its action.
HELD: Prior hearing not required under the law.
It will be observed from the foregoing provision of law, that there is no requirement whether
express or implied, that a hearing be first conducted before a banking institution may be
placed under receivership. On the contrary, the law is explicit as to the conditions
prerequisite to the action of the Monetary Board to forbid the institution to do business in the
Philippines and to appoint a receiver to immediately take charge of the bank's assets and
liabilities. They are: (a) an examination made by the examining department of the Central
Bank; (b) report by said department to the Monetary Board; and (c) prima facie showing that
the bank is in a condition of insolvency or so situated that its continuance in business would
involve probable loss to its depositors or creditors.
Due process does not necessarily require a prior hearing; a hearing or an opportunity to be
heard may be subsequent to the closure. One can just imagine the dire consequences of a
prior hearing: bank runs would be the order of the day, resulting in panic and hysteria. In the
process, fortunes may be wiped out, and disillusionment will run the gamut of the entire
banking community.
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Section 30 of the BSP Law merely requires a report, not an examination, by the head of the
supervising or examining department before a bank could be closed
RURAL BANK OF SAN MIGUEL, ET AL. VS. MONETARY BOARD, ET AL.,
G.R. 150886, FEBRUARY 16, 2007.
FACTS: On the basis of the comptrollership/monitoring report as of October 31, 1999 as
reported by Mr. Wilfredo B. Domo-ong, Director, Department of Rural Banks, in his
memorandum dated January 20, 2000, which report showed that [RBSM] (a) is unable to
pay its liabilities as they become due in the ordinary course of business; (b) cannot continue
in business without involving probable losses to its depositors and creditors; that the
management of the bank had been accordingly informed of the need to infuse additional
capital to place the bank in a solvent financial condition and was given adequate time within
which to make the required infusion and that no infusion of adequate fresh capital was
made, Monetary Board (MB), the governing board of respondent Bangko Sentral ng Pilipinas
(BSP), issued Resolution No. 105 prohibiting RBSM from doing business in the Philippines,
placing it under receivership and designating respondent Philippine Deposit Insurance
Corporation (PDIC) as receiver.
ISSUE: Petitioners argue that Resolution No. 105 was bereft of any basis considering that no
complete examination had been conducted before it was issued. This case essentially boils
down to one core issue: whether Section 30 of RA 7653 (also known as the New Central
Bank Act) and applicable jurisprudence require a current and complete examination of the
bank before it can be closed and placed under receivership.
HELD: In RA 7653, only a "report of the head of the supervising or examining department"
is necessary. It is an established rule in statutory construction that where the words of a
statute are clear, plain and free from ambiguity, it must be given its literal meaning and
applied without attempted interpretation.
Laying down the requisites for the closure of a bank under the law is the prerogative of the
legislature and what its wisdom dictates. The lawmakers could have easily retained the word
"examination" (and in the process also preserved the jurisprudence attached to it) but they
did not and instead opted to use the word "report." The insistence on an examination is not
sanctioned by RA 7653 and we would be guilty of judicial legislation were we to make it a
requirement when such is not supported by the language of the law.
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BSP, not RTC, has jurisdiction over acts complained of that pertain to banks
business
KORUGA VS. ARCENAS, ET AL.,
G.R. 168332, JUNE 19, 2009.
FACTS: Korugas Complaint charged defendants with violation of Sections 31 to 34 of the
Corporation Code, prohibiting self-dealing and conflict of interest of directors and officers;
invoked her right to inspect the corporations records under Sections 74 and 75 of the
Corporation Code; and prayed for Receivership and Creation of a Management Committee,
pursuant to Rule 59 of the Rules of Civil Procedure, the Securities Regulation Code, the
Interim Rules of Procedure Governing Intra-Corporate Controversies, the General Banking
Law of 2000, and the New Central Bank Act.
ISSUE: Who has jurisdiction over the complaint [BSP or RTC]?
HELD: Whether the loans referred to in Korugas complaint are covered by the prohibition
on self-dealing or not is a matter for the BSP to determine [not the RTC]. These are not
ordinary intra-corporate matters. The acts complained of pertain to the conduct of Banco
Filipinos banking business. A bank, as defined in the General Banking Law, refers to an
entity engaged in the lending of funds obtained in the form of deposits. The law vests in the
BSP the supervision over operations and activities of banks.
Also, it is the BSP [and not the RTC] which has jurisdiction to hear and decide the suit that
seeks to place Banco Filipino under receivership. Following the principle of generalia
specialibus non derogant, is not the Interim Rules of Procedure on Intra-Corporate
Controversies nor Rule 59 of the Rules of Civil Procedure on Receivership, that would apply
to this case. Instead, Sections 29 and 30 of the New Central Bank Act should be followed.
Crystal clear in Section 30 is the provision that says the "appointment of a receiver under
this section shall be vested exclusively with the Monetary Board." The term "exclusively"
connotes that only the Monetary Board can resolve the issue of whether a bank is to be
placed under receivership and, upon an affirmative finding, it also has authority to appoint a
receiver. This is further affirmed by the fact that the law allows the Monetary Board to take
action "summarily and without need for prior hearing." And, as a clincher, the law explicitly
provides that "actions of the Monetary Board taken under this section or under Section 29 of
this Act shall be final and executory, and may not be restrained or set aside by the court
except on a 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."
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Additional Materials
BSP Circular No. 537, dated July 18, 2006, re adjustment of maximum amount of
coins to be considered as legal tender.
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II
THE GENERAL BANKING LAW OF 2000
RA 8791 (2000).
2.1
Topics
State policy
SECTION 2. DECLARATION OF POLICY. - THE STATE RECOGNIZES THE VITAL ROLE
OF BANKS PROVIDING AN ENVIRONMENT CONDUCIVE TO THE SUSTAINED
DEVELOPMENT OF THE NATIONAL ECONOMY AND THE FIDUCIARY NATURE OF
BANKING THAT REQUIRES HIGH STANDARDS OF INTEGRITY AND PERFORMANCE. IN
FURTHERANCE THEREOF, THE STATE SHALL PROMOTE AND MAINTAIN A STABLE
AND EFFICIENT BANKING AND FINANCIAL SYSTEM THAT IS GLOBALLY COMPETITIVE,
DYNAMIC AND RESPONSIVE TO THE DEMANDS OF A DEVELOPING ECONOMY. (N)
Concept of intermediation
Distinction between banks (Sec. 3) and quasi-banks (Sec. 4)
SECTION 3.1. "BANKS" SHALL REFER TO ENTITIES ENGAGED IN THE LENDING OF
FUNDS OBTAINED IN THE FORM OF DEPOSITS. (2A)
SECTION 4. FOR THE PURPOSES OF THIS ACT, "QUASI-BANKS" SHALL REFER TO
ENTITIES ENGAGED IN THE BORROWING OF FUNDS THROUGH THE ISSUANCE,
ENDORSEMENT OR ASSIGNMENT WITH RECOURSE OR ACCEPTANCE OF DEPOSIT
SUBSTITUTES AS DEFINED IN SECTION 95 OF REPUBLIC ACT NO. 7653
(HEREAFTER THE "NEW CENTRAL BANK ACT") FOR PURPOSES OF RE-LENDING OR
PURCHASING OF RECEIVABLES AND OTHER OBLIGATIONS. (2-DA)
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Distinction between universal banks and commercial banks (Secs. 23, 24 and 30)
SECTION 23. POWERS OF A UNIVERSAL BANK - A UNIVERSAL BANK SHALL HAVE
THE AUTHORITY TO EXERCISE, IN ADDITION TO THE POWERS AUTHORIZED FOR A
COMMERCIAL BANK IN SECTION 29,
1. THE POWERS OF AN INVESTMENT HOUSE AS PROVIDED IN EXISTING LAWS
AND
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Distinction between universal or commercial banks and other banks (Sec. 33)
SECTION 33. ACCEPTANCE OF DEMAND DEPOSITS. - A BANK OTHER THAN A
UNIVERSAL OR COMMERCIAL BANK CANNOT ACCEPT OR CREATE DEMAND
DEPOSITS EXCEPT UPON PRIOR APPROVAL OF, AND SUBJECT TO SUCH
CONDITIONS AND RULES AS MAY BE PRESCRIBED BY THE MONETARY BOARD. (72AA)
SECTION 58, RA 7653. DEFINITION. - FOR PURPOSES OF THIS ACT, THE TERM
"DEMAND DEPOSITS" MEANS 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
CHECKS.
Institutions subject to BSP supervisory and regulatory powers (Sec. 4; see Sec. 25,
RA 7653)
SECTION 4. SUPERVISORY POWERS. THE OPERATIONS AND ACTIVITIES OF BANKS
SHALL BE SUBJECT TO SUPERVISION OF THE BANGKO SENTRAL.
THE BANGKO SENTRAL SHALL ALSO HAVE SUPERVISION OVER THE OPERATIONS
OF AND EXERCISE REGULATORY POWERS OVER QUASI-BANKS, TRUST ENTITIES
AND OTHER FINANCIAL INSTITUTIONS WHICH UNDER SPECIAL LAWS ARE SUBJECT
TO BANGKO SENTRAL SUPERVISION. (2-CA)
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MB certificate of authority
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POWER TO INVEST
ENTERPRISES
OR
DEMAND DEPOSITS;
CREATING
4. RECEIVING OTHER
TYPES OF
DEPOSIT
DEPOSITS
AND
SUBSTITUTES;
BANK OR A
ENTERPRISE.
IN
FINANCIAL
ALLIED
ALLIED
A PUBLICLY-LISTED UNIVERSAL OR
COMMERCIAL BANK MAY OWN UP
TO 100% OF THE VOTING STOCK
OF ONLY ONE OTHER UNIVERSAL
OR COMMERCIAL BANK.
SECTION
27.
THE EQUITY
INVESTMENT OF A UNIVERSAL
BANK, OR OF ITS WHOLLY OR
MAJORITY-OWNED SUBSIDIARIES,
IN
A
SINGLE
NON-ALLIED
ENTERPRISE SHALL NOT EXCEED
35% OF THE TOTAL EQUITY IN
THAT ENTERPRISE NOR SHALL IT
EXCEED 35% OF THE VOTING
STOCK IN THAT ENTERPRISE. (21B)
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30.2. THE EQUITY INVESTMENT IN ANY ONE ENTERPRISE SHALL NOT EXCEED
TWENTY-FIVE PERCENT (25%) OF TILE NET WORTH OF THE BANK. THE
ACQUISITION OF SUCH EQUITY OR EQUITIES IS SUBJECT TO THE PRIOR
APPROVAL OF THE MONETARY BOARD WHICH SHALL PROMULGATE
APPROPRIATE GUIDELINES TO GOVERN SUCH INVESTMENT.(2LA-A; 21-CA)
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SHARES OF ITS OWN CAPITAL STOCK OR ACCEPT ITS OWN SHARES AS A SECURITY
FOR A LOAN, EXCEPT WHEN AUTHORIZED BY THE MONETARY BOARD: PROVIDED,
THAT IN EVERY CASE THE STOCK SO PURCHASED OR ACQUIRED SHALL, WITHIN SIX
(6) MONTHS FROM THE TIME OF ITS PURCHASE OR ACQUISITION, BE SOLD OR
DISPOSED OF AT A PUBLIC OR PRIVATE SALE. (24A)
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Qualifications of directors and officers: the fit and proper rule (Sec. 16)
SECTION 16. FIT AND PROPER RULE. - TO MAINTAIN THE QUALITY OF BANK
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THE MINIMUM RATIO WHICH THE NET WORTH OF A BANK MUST BEAR TO ITS TOTAL
RISK ASSETS WHICH MAY INCLUDE CONTINGENT ACCOUNTS. FOR PURPOSES OF
THIS SECTION, THE MONETARY BOARD MAY REQUIRE SUCH RATIO BE DETERMINED
ON THE BASIS OF THE NET WORTH AND RISK ASSETS OF A BANK AND ITS
SUBSIDIARIES, FINANCIAL OR OTHERWISE, AS WELL AS PRESCRIBE THE
COMPOSITION AND THE MANNER OF DETERMINING THE NET WORTH AND TOTAL
RISK ASSETS OF BANKS AND THEIR SUBSIDIARIES:
DISTRIBUTION OF NET PROFITS BY SUCH BANK AND MAY REQUIRE THAT PART OR
ALL OF THE NET PROFITS BE USED TO INCREASE THE CAPITAL ACCOUNTS OF THE
BANK UNTIL THE MINIMUM REQUIREMENT HAS BEEN MET.
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OF THE PHILIPPINES, UNTIL THE MINIMUM REQUIRED CAPITAL RATIO HAS BEEN
RESTORED.
2.
3.
4.
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OTHER
CREDIT
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AND THEIR RELATED INTERESTS SHALL BE UPON TERMS NOT LESS FAVORABLE TO
THE BANK THAN THOSE OFFERED TO OTHERS.
AFTER DUE NOTICE TO THE BOARD OF DIRECTORS OF THE BANK, THE OFFICE OF
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THE MONETARY BOARD SHALL DEFINE THE TERM "RELATED INTERESTS." THE
LIMIT ON LOANS, CREDIT ACCOMMODATIONS AND GUARANTEES PRESCRIBED
HEREIN SHALL NOT APPLY TO LOANS, CREDIT ACCOMMODATIONS AND
GUARANTEES EXTENDED BY A COOPERATIVE BANK TO ITS COOPERATIVE
SHAREHOLDERS. (83A)
BAR Q [2006]: PIO IS THE PRESIDENST OF WESTERN BANK. HIS WIFE APPLIED
FOR A LOAN WITH THE SAID BANK TO FINANCE AN INTERNET CAFE. THE LOAN
OFFICER TOLD HER THAT HER APPLICATION WILL NOT BE APPROVED BECAUSE
THE GRANT OF LOANS TO RELATED INTERESTS OF BANK DIRECTORS, OFFICERS,
AND STOCKHOLDERS IS PROHIBITED BY THE GENERAL BANKING LAW. EXPLAIN
WHETHER THE LOAN OFFICER IS CORRECT. (5%)
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SECTION 44. AMORTIZATION ON LOANS AND OTHER CREDIT ACCOMMODATIONS. THE AMORTIZATION SCHEDULE OF BANK LOANS AND OTHER CREDIT
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ADMINISTER THE FUNDS OR PROPERTY UNDER ITS CUSTODY WITH THE DILIGENCE
THAT A PRUDENT MAN WOULD EXERCISE IN THE CONDUCT OF AN ENTERPRISE OF A
LIKE CHARACTER AND WITH SIMILAR AIMS. NO TRUST ENTITY SHALL, FOR THE
ACCOUNT OF THE TRUSTOR OR THE BENEFICIARY OF THE TRUST, PURCHASE OR
ACQUIRE PROPERTY FROM, OR SELL, TRANSFER, ASSIGN, OR LEND MONEY OR
PROPERTY TO, OR PURCHASE DEBT INSTRUMENTS OF, ANY OF THE DEPARTMENTS,
DIRECTORS, OFFICERS, STOCKHOLDERS, OR EMPLOYEES OF THE TRUST ENTITY,
RELATIVES WITHIN THE FIRST DEGREE OF CONSANGUINITY OR AFFINITY, OR THE
RELATED INTERESTS, OF SUCH DIRECTORS, OFFICERS AND STOCKHOLDERS,
UNLESS THE TRANSACTION IS SPECIFICALLY AUTHORIZED BY THE TRUSTOR AND
THE RELATIONSHIP OF THE TRUSTEE AND THE OTHER PARTY INVOLVED IN THE
TRANSACTION IS FULLY DISCLOSED TO THE TRUSTOR OF BENEFICIARY OF THE
TRUST PRIOR TO THE TRANSACTION. THE MONETARY BOARD SHALL PROMULGATE
SUCH RULES AND REGULATIONS AS MAY BE NECESSARY TO PREVENT
CIRCUMVENTION OF THIS PROHIBITION OR THE EVASION OF THE RESPONSIBILITY
HEREIN IMPOSED ON A TRUST ENTITY. (56)
Deposit required as security for faithful performance of trust duties (Sec. 84)
SECTION 84. DEPOSIT FOR THE FAITHFUL PERFORMANCE OF TRUST DUTIES. BEFORE TRANSACTING TRUST BUSINESS, EVERY TRUST ENTITY SHALL DEPOSIT
WITH THE BANGKO SENTRAL, AS SECURITY FOR THE FAITHFUL PERFORMANCE OF
ITS TRUST DUTIES, CASH OR SECURITIES APPROVED BY THE MONETARY BOARD IN
AN AMOUNT EQUAL TO OR NOT LESS THAN FIVE HUNDRED THOUSAND PESOS
(P500,000.00) OR SUCH HIGHER AMOUNT AS MAY FIXED BY THE MONETARY
BOARD: PROVIDED, HOWEVER, THAT THE MONETARY BOARD SHALL REQUIRE
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AND, FROM TIME TO TIME, WITH THE APPROVAL OF THE BANGKO SENTRAL, TO
EXCHANGE THE SECURITIES FOR OTHERS. IF THE TRUST ENTITY FAILS TO COMPLY
WITH ANY LAW OR REGULATION, THE BANGKO SENTRAL SHALL RETAIN SUCH
INTEREST ON THE SECURITIES DEPOSITED WITH IT FOR THE BENEFIT OF RIGHTFUL
CLAIMANTS. AL CLAIMS RISING OUT OF THE TRUST BUSINESS OF A TRUST ENTITY
SHALL HAVE PRIORITY OVER ALL OTHER CLAIMS AS REGARDS THE CASH OR
SECURITIES DEPOSITED AS ABOVE PROVIDED. THE MONETARY BOARD MAY NOT
PERMIT THE CASH OR SECURITIES DEPOSITED IN ACCORDANCE WITH THE
PROVISIONS OF THIS SECTION TO BE REDUCED BELOW THE PRESCRIBED MINIMUM
AMOUNT UNTIL THE DEPOSITING ENTITY SHALL DISCONTINUE ITS TRUST BUSINESS
AND SHALL SATISFY THE MONETARY BOARD THAT IT HAS COMPLIED WITH ALL ITS
OBLIGATIONS IN CONNECTION WITH SUCH BUSINESS. (65A)
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2.2
Cases
Fiduciary nature of banking requires high standards of integrity and performance
Philippine Banking Corporation vs. CA,
G.R. 127469, January 15, 2004.
The BANK is liable to Marcos for offsetting his time deposits with a fictitious promissory note.
The BANKs failure to explain the absence of the original documents and to maintain a
record of the offsetting of this loan with the time deposits bring to fore the BANKs dismal
failure to fulfill its fiduciary duty to Marcos.
Section 2 of Republic Act No. 8791 (General Banking Law of 2000) expressly imposes this
fiduciary duty on banks when it declares that the State recognizes the "fiduciary nature of
banking that requires high standards of integrity and performance." This statutory
declaration merely echoes the earlier pronouncement of the Supreme Court in Simex
International (Manila) Inc. v. Court of Appeals requiring banks to "treat the accounts of its
depositors with meticulous care, always having in mind the fiduciary nature of their
relationship." The Court reiterated this fiduciary duty of banks in subsequent cases.
The fiduciary nature of banking requires banks to assume a degree of diligence
higher than that of a good father of a family.
Thus, the BANKs fiduciary duty imposes upon it a higher level of accountability than that
expected of Marcos, a businessman, who negligently signed blank forms and entrusted his
certificates of time deposits to Pagsaligan without retaining copies of the certificates. As the
BANKs depositor, Marcos had the right to expect that the BANK was accurately recording
his transactions with it. Upon the maturity of his time deposits, Marcos also had the right to
withdraw the amount due him after the BANK had correctly debited his outstanding
obligations from his time deposits.
By the very nature of its business, the BANK should have had in its possession the original
copies of the disputed promissory note and the records and ledgers evidencing the offsetting
of the loan with the time deposits of Marcos. The BANK inexplicably failed to produce the
original copies of these documents. Clearly, the BANK failed to treat the account of Marcos
with meticulous care.
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Banks have the duty to exercise the highest degree of diligence when transacting
with the public
Solidbank Corporation, et al. vs. Spouses Tan,
G.R. 167346, April 2, 2007.
FACTS: The private respondents are accusing Solidbank Corp. of negligence as the latter
allegedly lost one of 10 checks they were trying to deposit with the bank. [Private
respondents delivered 10 checks; but only 9 checks were credited to their account.] The lost
check was later on discovered to have been deposited by a certain Dolores Lagsac in
Premier Bank in San Pedro, Laguna.
The lower court found Solidbank negligent; it awarded exemplary damages to the Spouses
Tan, among others. Petitioner argues the award of exemplary damages was without basis.
According to it, such award is justified only when the act complained of was done in a
wanton, fraudulent and oppressive manner.
ISSUE: W/N THE SPOUSES TAN ARE ENTITLED TO EXEMPLARY DAMAGES?
HELD:
As to the award of exemplary damages, the law allows it by way of example for the public
good. The business of banking is impressed with public interest and great reliance is
made on the banks sworn profession of diligence and meticulousness in giving
irreproachable service. For petitioners failure to carry out its responsibility and to account
for respondents lost check, we hold that the lower courts did not err in awarding exemplary
damages to the latter.
Interpretation of Section 83 of RA 337 (now Sec. 36 of RA 8791)
Go vs. Bangko Sentral,
G.R. 178429, October 23, 2009.
FACTS: Go, President and CEO of Oriental Bank] was charged with violating Section 83 of
RA 337 [for being a borrower and/or a guarantor for loans borrowed from Oriental Bank
without Board approval].
He filed a motion to quash on the ground that the facts allged do not constitute a crime.
According to him, Sec. 83 of RA 337 penalized only directors and officers of banking
institutions who acted either as borrower or as guarantor, but not as both.
Go further pointed out that the Information failed to state that his alleged act of
borrowing and/or guarantying was not among the exceptions provided for in the law.
According to Go, the second paragraph of Section 83 allowed banks to extend credit
accommodations to their directors, officers, and stockholders, provided it is "limited to an
amount equivalent to the respective outstanding deposits and book value of the paid-in
capital contribution in the bank." Extending credit accommodations to bank directors,
officers, and stockholders is not per se prohibited, unless the amount exceeds the legal limit.
Since the Information failed to state that the amount he purportedly borrowed and/or
guarantied was beyond the limit set by law, Go insisted that the acts so charged did not
constitute an offense.
HELD: MOTION TO QUASH WITHOUT MERIT.
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Under Section 83, RA 337, the following elements must be present to constitute a violation
of its first paragraph:
1. the offender is a director or officer of any banking institution;
2. the offender, either directly or indirectly, for himself or as representative or agent
of another, performs any of the following acts:
a. he borrows any of the deposits or funds of such bank; or
b. he becomes a guarantor, indorser, or surety for loans from such bank to
others, or
c. he becomes in any manner an obligor for money borrowed from bank or
loaned by it
3. the offender has performed any of such acts without the written approval of the
majority of the directors of the bank, excluding the offender, as the director
concerned.
A simple reading of the above elements easily rejects Gos contention that the law penalizes
a bank director or officer only either for borrowing the banks deposits or funds or for
guarantying loans by the bank, but not for acting in both capacities. The essence of the
crime is becoming an obligor of the bank without securing the necessary written approval of
the majority of the banks directors. The second element merely lists down the various
modes of committing the offense. The third mode, by declaring that "[no director or officer of
any banking institution shall xxx] in any manner be an obligor for money borrowed from the
bank or loaned by it," in fact serves a catch-all phrase that covers any situation when a
director or officer of the bank becomes its obligor. The prohibition is directed against a bank
director or officer who becomes in any manner an obligor for money borrowed from or
loaned by the bank without the written approval of the majority of the banks board of
directors. To make a distinction between the act of borrowing and guarantying is
therefore unnecessary because in either situation, the director or officer concerned
becomes an obligor of the bank against whom the obligation is juridically
demandable. The language of the law is broad enough to encompass either act of
borrowing or guaranteeing, or both.
The approval requirement (found in the first sentence of the first paragraph of the law)
refers to the written approval of the majority of the banks board of directors required before
bank directors and officers can in any manner be an obligor for money borrowed from or
loaned by the bank. Failure to secure the approval renders the bank director or officer
concerned liable for prosecution and, upon conviction, subjects him to the penalty provided
in the third sentence of first paragraph of Section 83.
As to his second ground for the quashal: Credit accommodation limit is not an exception nor
is it an element of the offense. Contrary to Gos claims, the second paragraph of Section 83,
RA 337 does not provide for an exception to a violation of the first paragraph thereof, nor
does it constitute as an element of the offense charged. Section 83 of RA 337 actually
imposes three restrictions: approval, reportorial, and ceiling requirements.
The reportorial requirement, on the other hand, mandates that any such approval should
be entered upon the records of the corporation, and a copy of the entry be transmitted to the
appropriate supervising department. The reportorial requirement is addressed to the bank
itself, which, upon its failure to do so, subjects it to quo warranto proceedings under Section
87 of RA 337.
The ceiling requirement under the second paragraph of Section 83 regulates the amount of
credit accommodations that banks may extend to their directors or officers by limiting these
to an amount equivalent to the respective outstanding deposits and book value of the paid-in
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capital contribution in the bank. Again, this is a requirement directed at the bank. In this light,
a prosecution for violation of the first paragraph of Section 83, such as the one involved
here, does not require an allegation that the loan exceeded the legal limit. Even if the loan
involved is below the legal limit, a written approval by the majority of the banks directors is
still required; otherwise, the bank director or officer who becomes an obligor of the bank is
liable. Compliance with the ceiling requirement does not dispense with the approval
requirement.
Evidently, the failure to observe the three requirements under Section 83 paves the way for
the prosecution of three different offenses, each with its own set of elements.
PNB not a mortgagee in good faith for failure to conduct exhaustive investigation of
mortgagors title before extending a loan
PNB vs. Corpuz,
G.R. 180945, February 12, 2010.
ISSUE: The sole issue presented in this case is whether or not petitioner PNB is a mortgagee
in good faith, entitling it to its lien on the title to the property in dispute. Petitioner PNB points
out that, since it did a credit investigation, inspected the property, and verified the clean
status of the title before giving out the loan to the Songcuans, it should be regarded as a
mortgagee in good faith. PNB claims that the precautions it took constitute sufficient
compliance with the due diligence required of banks when dealing with registered lands.
HELD: As a rule, the Court would not expect a mortgagee to conduct an exhaustive
investigation of the history of the mortgagors title before he extends a loan. But petitioner
PNB is not an ordinary mortgagee; it is a bank. Banks are expected to be more cautious
than ordinary individuals in dealing with lands, even registered ones, since the business of
banks is imbued with public interest. It is of judicial notice that the standard practice for
banks before approving a loan is to send a staff to the property offered as collateral and
verify the genuineness of the title to determine the real owner or owners.
One of the CAs findings in this case is that in the course of its verification, petitioner PNB
was informed of the previous TCTs covering the subject property. And the PNB has not
categorically contested this finding. It is evident from the faces of those titles that the
ownership of the land changed from Corpuz to Bondoc, from Bondoc to the Palaganases,
and from the Palaganases to the Songcuans in less than three months and mortgaged to
PNB within four months of the last transfer. The above information in turn should have driven
the PNB to look at the deeds of sale involved. It would have then discovered that the
property was sold for ridiculously low prices: Corpuz supposedly sold it to Bondoc for
justP50,000.00; Bondoc to the Palaganases for just P15,000.00; and the Palaganases to the
Songcuans also for justP50,000.00. Yet the PNB gave the property an appraised value
of P781,760.00. Anyone who deliberately ignores a significant fact that would create
suspicion in an otherwise reasonable person cannot be considered as an innocent
mortgagee for value.
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2.3
Additional Materials
(a) BSP Circulars Nos. 488 (issued June 21, 2005), 493 (issued September 16,
2005), 543 (issued September 8, 2006), 548 (issued September 25, 2006), and
642 (issued January 30, 2009) re functions that banks could outsource;
(b) BSP Circular No. 341 (issued August 6, 2002) and 640 (issued January 16,
2009) re unsafe and unsound banking practices;
(c) BSP Circular No. 650 (issued March 9, 2009) re authority of thrift banks to issue
foreign letters of credit, etc.
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III
PHILIPPINE DEPOSIT INSURANCE CORPORATION ACT
RA 3591 (1963), as amended by RA 6037 (1969), PD 120 (1973), PD 1094 (1977), PD 1451 (1978),
PD 1935 (1984), RA 7400 (1992), RA 8791 (2000), RA 9302 (2004), and RA 9576 (2009).
3.1
Topics
Basic policy (Sec. 1)
SECTION 1. THERE IS HEREBY CREATED A PHILIPPINE DEPOSIT INSURANCE
CORPORATION HEREINAFTER REFERRED TO AS THE CORPORATION WHICH SHALL
INSURE, AS HEREIN PROVIDED, THE DEPOSITS OF ALL BANKS WHICH ARE ENTITLED
TO THE BENEFITS OF INSURANCE UNDER THIS ACT, AND WHICH SHALL HAVE THE
POWERS HEREINAFTER GRANTED.
Main functions
Insurance of banks (Sec. 5, et seq.)
SECTION 5. THE DEPOSIT LIABILITIES OF ANY BANK OR BANKING INSTITUTION,
Receivership of closed banks (Secs. 8 and 10; see also Sec. 30, RA 7653)
SECTION 8.THE CORPORATION AS A CORPORATE BODY SHALL HAVE THE POWER
-NINTH - TO ACT AS RECEIVER;
SECTION 10.
a. THE PROVISIONS OF OTHER LAWS, GENERAL OR SPECIAL, TO THE CONTRARY
OTWITHSTANDING, WHENEVER IT SHALL BE APPROPRIATE FOR THE MONETARY
BOARD OF THE BANGKO SENTRAL NG PILIPINAS TO APPOINT A RECEIVER OF
ANY BANKING INSTITUTION PURSUANT TO EXISTING LAWS, THE MONETARY
BOARD SHALL GIVE PRIOR NOTICE AND APPOINT THE CORPORATION AS
RECEIVER. (AS AMENDED/RENUMBERED FROM SEC. 9-A BY R.A. 9302, 12
AUGUST 2004)
b. THE CORPORATION AS RECEIVER SHALL CONTROL, MANAGE AND ADMINISTER
THE AFFAIRS OF THE CLOSED BANK. EFFECTIVE IMMEDIATELY UPON TAKEOVER
AS RECEIVER OF SUCH BANK, THE POWERS, FUNCTIONS AND DUTIES, AS WELL
AS ALL ALLOWANCES, REMUNERATIONS AND PERQUISITES OF THE DIRECTORS,
OFFICERS, AND STOCKHOLDERS OF SUCH BANK ARE SUSPENDED, AND THE
RELEVANT PROVISIONS OF THE ARTICLES OF INCORPORATION AND BY-LAWS
OF THE CLOSED BANK ARE LIKEWISE DEEMED SUSPENDED. (AS ADDED BY R.A.
9302, 12 AUGUST 2004)
THE ASSETS OF THE CLOSED BANK UNDER RECEIVERSHIP SHALL BE DEEMED
IN CUSTODIA LEGIS IN THE HANDS OF THE RECEIVER. FROM THE TIME THE
CLOSED BANK IS PLACED UNDER SUCH RECEIVERSHIP, ITS ASSETS SHALL NOT
BE SUBJECT TO ATTACHMENT, GARNISHMENT, EXECUTION, LEVY OR ANY
OTHER COURT PROCESSES. THEREFORE, A JUDGE, OFFICER OF THE COURT
OR ANY PERSON WHO SHALL ISSUE, ORDER, PROCESS OR CAUSE THE
ISSUANCE OR IMPLEMENTATION OF THE WRIT OF GARNISHMENT, LEVY,
ATTACHMENT OR EXECUTION SHALL BE LIABLE UNDER SECTION 21
HEREOF. (AS
ADDED
BY R.A. 9302, 12 AUGUST 2004)
c. IN ADDITION TO THE POWERS OF A RECEIVER PURSUANT TO EXISTING LAWS,
THE CORPORATION IS EMPOWERED TO:
1. BRING SUITS TO ENFORCE LIABILITIES TO OR RECOVERIES OF THE
CLOSED BANK; (AS AMENDED BY R.A. 9302, 12 AUGUST 2004)
2. APPOINT AND HIRE PERSONS OR ENTITIES OF RECOGNIZED
3.
4.
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5.
6.
7.
8.
9.
2004)
CASES, THE MONETARY BOARD MAY SUMMARILY AND WITHOUT NEED FOR
PRIOR HEARING FORBID THE INSTITUTION FROM DOING BUSINESS IN THE
PHILIPPINES AND DESIGNATE THE PHILIPPINE DEPOSIT INSURANCE
CORPORATION AS RECEIVER OF THE BANKING INSTITUTION.
(1) FILE EX PARTE WITH THE PROPER REGIONAL TRIAL COURT, AND WITHOUT
REQUIREMENT OF PRIOR NOTICE OR ANY OTHER ACTION, A PETITION FOR
ASSISTANCE IN THE LIQUIDATION OF THE INSTITUTION PURSUANT TO A
LIQUIDATION PLAN ADOPTED BY THE PHILIPPINE DEPOSIT INSURANCE
CORPORATION FOR GENERAL APPLICATION TO ALL CLOSED BANKS. IN CASE OF
QUASI-BANKS, THE LIQUIDATION PLAN SHALL BE ADOPTED BY THE MONETARY
BOARD. UPON ACQUIRING JURISDICTION, THE COURT SHALL, UPON MOTION BY
THE RECEIVER AFTER DUE NOTICE, ADJUDICATE DISPUTED CLAIMS AGAINST
THE INSTITUTION, ASSIST THE ENFORCEMENT OF INDIVIDUAL LIABILITIES OF
THE STOCKHOLDERS, DIRECTORS AND OFFICERS, AND DECIDE ON OTHER
ISSUES AS MAY BE MATERIAL TO IMPLEMENT THE LIQUIDATION PLAN ADOPTED.
THE RECEIVER SHALL PAY THE COST OF THE PROCEEDINGS FROM THE ASSETS
OF THE INSTITUTION.
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THE ACTIONS OF THE MONETARY BOARD TAKEN UNDER THIS SECTION OR UNDER
SECTION 29 OF THIS ACT SHALL BE FINAL AND EXECUTORY, AND MAY NOT BE
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Liability to depositors
Deposit liabilities required to be insured with PDIC (Sec. 5)
SECTION 5. THE DEPOSIT LIABILITIES OF ANY BANK OR BANKING INSTITUTION,
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THE CORPORATION SHALL NOT PAY DEPOSIT INSURANCE FOR THE FOLLOWING
ACCOUNTS OR TRANSACTIONS, WHETHER DENOMINATED, DOCUMENTED,
RECORDED OR BOOKED AS DEPOSIT BY THE BANK:
1. INVESTMENT PRODUCTS SUCH AS BONDS AND SECURITIES, TRUST
ACCOUNTS, AND OTHER SIMILAR INSTRUMENTS;
2. DEPOSIT ACCOUNTS OR TRANSACTIONS WHICH ARE UNFUNDED, OR THAT
ARE FICTITIOUS OR FRAUDULENT;
3. DEPOSIT ACCOUNTS OR TRANSACTIONS CONSTITUTING, AND/OR
EMANATING FROM, UNSAFE AND UNSOUND BANKING PRACTICE/S, AS
DETERMINED BY THE CORPORATION, IN CONSULTATION WITH THE BSP,
AFTER DUE NOTICE AND HEARING, AND PUBLICATION OF A CEASE AND
DESIST ORDER ISSUED BY THE CORPORATION AGAINST SUCH DEPOSIT
ACCOUNTS OR TRANSACTIONS; AND
4. DEPOSITS THAT ARE DETERMINED TO BE THE PROCEEDS OF AN UNLAWFUL
ACTIVITY AS DEFINED UNDER REPUBLIC ACT 9160, AS AMENDED.
THE ACTIONS OF THE CORPORATION TAKEN UNDER THIS SECTION SHALL BE FINAL
AND EXECUTORY, AND MAY NOT BE RESTRAINED OR SET ASIDE BY THE COURT,
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SECTION 16.
a. THE CORPORATION SHALL COMMENCE THE DETERMINATION OF INSURED
DEPOSITS DUE THE DEPOSITORS OF A CLOSED BANK UPON ITS ACTUAL
TAKEOVER OF THE CLOSED BANK. THE CORPORATION SHALL GIVE NOTICE TO
THE DEPOSITORS OF THE CLOSED BANK OF THE INSURED DEPOSITS DUE THEM
BY WHATEVER MEANS DEEMED APPROPRIATE BY THE BOARD OF DIRECTORS:
PROVIDED, THAT THE CORPORATION SHALL PUBLISH THE NOTICE ONCE A
WEEK FOR AT LEAST THREE (3) CONSECUTIVE WEEKS IN A NEWSPAPER OF
GENERAL CIRCULATION OR, WHEN APPROPRIATE, IN A NEWSPAPER
CIRCULATED IN THE COMMUNITY OR COMMUNITIES WHERE THE CLOSED BANK
OR ITS BRANCHES ARE LOCATED. (AS ADDED BY R.A. 9302, 12 AUGUST 2004)
CLOSED BANK SHALL FAIL TO CLAIM HIS INSURED DEPOSITS WITH THE
CORPORATION WITHIN TWO (2) YEARS FROM ACTUAL TAKEOVER OF THE
CLOSED BANK BY THE RECEIVER, OR DOES NOT ENFORCE HIS CLAIM FILED
WITH THE CORPORATION WITHIN TWO (2) YEARS AFTER THE TWO-YEAR
PERIOD TO FILE A CLAIM AS MENTIONED HEREINABOVE, ALL RIGHTS OF THE
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Calculation of liability (Sec. 4[g]; see also PDIC Bulletin No. 2004-04, dated
August 12, 2004)
Per depositor, per capacity rule
Joint accounts
A JOINT ACCOUNT, REGARDLESS OF WHETHER THE CONJUNCTION AND, OR,
OR AND/OR IS USED, SHALL BE INSURED SEPARATELY FROM ANY
INDIVIDUALLY-OWNED DEPOSIT ACCOUNT. THE MAXIMUM INSURED DEPOSIT OF
P250,000 SHALL BE DIVIDED INTO AS MANY EQUAL SHARES AS THERE ARE
DEPOSITORS UNLESS A DIFFERENT SHARING IS STIPULATED IN THE DOCUMENT
OF DEPOSIT.
Example: Pedro and Mario have P400,000 in a joint savings account with
ABC Bank. Pedro also has P300,000 in another savings account that he
maintains with the same bank solely in his name. Marios total deposit is
P200,000 while that of Pedro is P500,000. If ABC Bank were closed,
Mario could claim P125,000 from PDIC (representing his 50% share of
the maximum insured deposit of the joint account with Pedro) while Pedro
could claim a total of P250,000 (P125,000, representing his 50% share of
the maximum insured deposit of the joint account with Mario), plus
P125,000 out of the savings account solely in his name.
IF THE ACCOUNT WERE HELD BY A JURIDICAL PERSON JOINTLY WITH ONE OR
MORE NATURAL PERSONS, THE MAXIMUM INSURED DEPOSIT SHALL BE
PRESUMED TO BELONG ENTIRELY TO SUCH JURIDICAL PERSON OR ENTITY.
Example: XYZ Corporation and Pedro have P250,000 in a joint savings
account with ABC Bank. Pedro also has P250,000 in another savings
account that he maintains with the same bank solely in his name. If ABC
Bank were closed, XYZ Corporation could claim P250,000 from PDIC.
The P250,000 in the joint account would be presumed to belong entirely
to XYZ Corporation.
IN CASE ONE OF THE CO-DEPOSITORS IN A JOINT AND/OR OR OR ACCOUNT
HAS AN OBLIGATION TO THE CLOSED BANK COVERED BY A HOLD-OUT
AGREEMENT (I.E., A SECURITY ARRANGEMENT WHEREBY THE OBLIGATION IS
SECURED BY THE ACCOUNT), THE OBLIGATION SECURED BY THE AGREEMENT
SHALL BE DEDUCTED FROM THE BALANCE OF THE JOINT ACCOUNT
REGARDLESS OF THE FACT THAT ONLY ONE OF THE CO-DEPOSITORS IS
INDEBTED TO THE BANK.
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Payments of insured deposits as preferred credit under Art. 2244, Civil Code
(Sec. 15)
All payments by the PDIC of insured deposits in closed banks partake of
the nature of public funds, as such, must be considered a preferred credit
similar to taxes due to the National Government in the order of preference
under Article 2244 of the NCC.
Failure of depositor to claim insured deposit (Sec. 16[e]); Is there a prescriptive
period for the filing of claims with the PDIC by the depositors of a closed
bank? (Sec. 16[e])
Yes. A depositor of a closed bank must file his claim with the PDIC within
2 years from actual takeover of the closed bank by PDIC. If he does not,
all his rights against the PDIC in respect of the insured deposits shall be
barred. However, all the rights of the depositor against the closed bank
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and its shareholders or the receivership estate to which PDIC may have
become subrogated shall thereupon revert to the depositor
Examination of banks and deposit accounts (Sec. 8, Paragraph 8, as amended by
Sec. 5, RA 9576)
SECTION 8.THE CORPORATION AS A CORPORATE BODY SHALL HAVE THE
POWER - EIGHTH TO CONDUCT EXAMINATION OF BANKS WITH PRIOR
APPROVAL OF THE MONETARY BOARD: PROVIDED, THAT NO EXAMINATION CAN
BE CONDUCTED WITHIN TWELVE (12) MONTHS FROM THE LAST EXAMINATION
DATE: PROVIDED, HOWEVER, THAT THE CORPORATION MAY, IN COORDINATION
WITH THE BANGKO SENTRAL, CONDUCT A SPECIAL EXAMINATION AS THE
BOARD OF DIRECTORS, BY AN AFFIRMATIVE VOTE OF A MAJORITY OF ALL OF
ITS MEMBERS, IF THERE IS A THREATENED OR IMPENDING CLOSURE OF A
BANK; PROVIDED, FURTHER, THAT, NOTWITHSTANDING THE PROVISIONS OF
REPUBLIC ACT NO. 1405, AS AMENDED, REPUBLIC ACT NO. 6426, AS
AMENDED, REPUBLIC ACT NO. 8791, AND OTHER LAWS, THE CORPORATION
AND/OR THE BANGKO SENTRAL, MAY INQUIRE INTO OR EXAMINE DEPOSIT
ACCOUNTS AND ALL INFORMATION RELATED THERETO IN CASE THERE IS A
FINDING OF UNSAFE OR UNSOUND BANKING PRACTICE; PROVIDED, FINALLY,
THAT TO AVOID OVERLAPPING OF EFFORTS, THE EXAMINATION SHALL
MAXIMIZE THE EFFICIENT USE OF THE RELEVANT REPORTS, INFORMATION, AND
FINDINGS OF THE BANGKO SENTRAL, WHICH IT SHALL MAKE AVAILABLE TO THE
CORPORATION; (AS AMENDED BY R.A. 9302, 12 AUGUST 2004, R.A. 9576,29
APRIL 2009)
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3.2
Case
Nature of liquidation proceedings
Pacific Banking Corporation Employees Organization, et al. vs. CA, et al.,
G.R. 109373, March 20, 1995.
ISSUE: The principal question involved is the same: whether a petition for liquidation under
29 of Rep. Act No. 265, otherwise known as the Central Bank Act, is a special proceeding
or an ordinary civil action.
[This is relevant to determine the proper period to be followed in making an appeal.] If it
were a special proceeding, the period for appealing from any decision or final order rendered
therein is 30 days [and the party appealing must, in addition to a notice of appeal, file with
the trial court a record on appeal in order to perfect his appeal]. If it were a liquidation
proceeding, the period for appealing from any decision or final order rendered therein is 15
days since a liquidation proceeding is an ordinary action.
HELD: Considering this distinction, a petition for liquidation of an insolvent corporation should
be classified a special proceeding and not an ordinary action. Such petition does not seek
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the enforcement or protection of a right nor the prevention or redress of a wrong against a
party. It does not pray for affirmative relief for injury arising from a party's wrongful act or
omission nor state a cause of action that can be enforced against any person.
What it seeks is merely a declaration by the trial court of the corporation's insolvency so that
its creditors may be able to file their claims in the settlement of the corporation's debts and
obligations. Put in another way, the petition only seeks a declaration of the corporation's
debts and obligations. Put in another way, the petition only seeks a declaration of the
corporation's state of insolvency and the concomitant right of creditors and the order of
payment of their claims in the disposition of the corporation's assets.
Contrary to the rulings of the Fourteenth Division, liquidation proceedings do not resemble
petitions for interpleader. Rather, a liquidation proceeding resembles the proceeding for the
settlement of state of deceased persons under Rules 73 to 91 of the Rules of Court.
The two have a common purpose: the determination of all the assets and the payment of all
the debts and liabilities of the insolvent corporation or the estate. The Liquidator and the
administrator or executor are both charged with the assets for the benefit of the claimants. In
both instances, the liability of the corporation and the estate is not disputed. The court's
concern is with the declaration of creditors and their rights and the determination of their
order of payment
As in the settlement of estates, multiple appeals are allowed in proceedings for liquidation of
an insolvent corporation. As the Fifth Division of the Court of Appeals, quoting the Liquidator,
correctly noted:
A liquidation proceeding is a single proceeding which consists of a number of cases
properly classified as "claims." It is basically a two-phased proceeding. The first
phase is concerned with the approval and disapproval of claims. Upon the approval
of the petition seeking the assistance of the proper court in the liquidation of a close
entity, all money claims against the bank are required to be filed with the liquidation
court. This phase may end with the declaration by the liquidation court that the claim
is not proper or without basis. On the other hand, it may also end with the liquidation
court allowing the claim. In the latter case, the claim shall be classified whether it is
ordinary or preferred, and thereafter included Liquidator. In either case, the order
allowing or disallowing a particular claim is final order, and may be appealed by the
party aggrieved thereby.
The second phase involves the approval by the Court of the distribution plan
prepared by the duly appointed liquidator. The distribution plan specifies in detail the
total amount available for distribution to creditors whose claim were earlier allowed.
The Order finally disposes of the issue of how much property is available for
disposal. Moreover, it ushers in the final phase of the liquidation proceeding
payment of all allowed claims in accordance with the order of legal priority and the
approved distribution plan.
Verily, the import of the final character of an Order of allowance or disallowance of a
particular claim cannot be overemphasized. It is the operative fact that constitutes a
liquidation proceeding a "case where multiple appeals are allowed by law." The
issuance of an Order which, by its nature, affects only the particular claims involved,
and which may assume finality if no appeal is made therefrom, ipso facto creates a
situation where multiple appeals are allowed.
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IV
LAW ON SECRECY OF BANK DEPOSITS
RA 1405 (1955), as amended by PD 1792 (1981), RA 6832 (1990) and RA 7653 (1993);
see also Sec. 6 (f), NIRC, and Sec. 15 (8), RA 6770 (Ombudsman Act of 1989);
Sec. 11, RA 9160 (Anti-Money Laundering Act of 2001), as amended by
Sec. 8 of RA 9194 (2003); and RA 9576 (2009).
4.1
Topics
Purpose
SECTION 1. IT IS HEREBY DECLARED TO BE THE POLICY OF THE GOVERNMENT TO
GIVE ENCOURAGEMENT TO THE PEOPLE TO DEPOSIT THEIR MONEY IN BANKING
INSTITUTIONS AND TO DISCOURAGE PRIVATE HOARDING SO THAT THE SAME MAY
BE PROPERLY UTILIZED BY BANKS IN AUTHORIZED LOANS TO ASSIST IN THE
ECONOMIC DEVELOPMENT OF THE COUNTRY.
Prohibited acts
SECTION 2. ALL DEPOSITS OF WHATEVER NATURE WITH BANKS OR BANKING
INSTITUTIONS IN THE PHILIPPINES INCLUDING INVESTMENTS IN BONDS ISSUED BY
THE GOVERNMENT OF THE PHILIPPINES, ITS POLITICAL SUBDIVISIONS AND ITS
INSTRUMENTALITIES, ARE HEREBY CONSIDERED AS OF AN ABSOLUTELY
CONFIDENTIAL NATURE AND MAY NOT BE EXAMINED, INQUIRED OR LOOKED INTO BY
ANY PERSON, GOVERNMENT OFFICIAL, BUREAU OR OFFICE, EXCEPT UPON
WRITTEN PERMISSION OF THE DEPOSITOR, OR IN CASES OF IMPEACHMENT, OR
UPON ORDER OF A COMPETENT COURT IN CASES OF BRIBERY OR DERELICTION OF
DUTY OF PUBLIC OFFICIALS, OR IN CASES WHERE THE MONEY DEPOSITED OR
INVESTED IS THE SUBJECT MATTER OF THE LITIGATION.
Exceptions
SECTION 2. XXX EXCEPT UPON
1. WRITTEN PERMISSION OF THE DEPOSITOR, OR
2. IN CASES OF IMPEACHMENT, OR
3. UPON ORDER OF A COMPETENT COURT IN CASES OF BRIBERY OR
DERELICTION OF DUTY OF PUBLIC OFFICIALS, OR
4. IN CASES WHERE THE MONEY DEPOSITED OR INVESTED IS THE SUBJECT
MATTER OF THE LITIGATION.
SEC. 6, NIRC. (F) AUTHORITY OF THE COMMISSIONER TO INQUIRE INTO BANK
DEPOSIT ACCOUNTS. - NOTWITHSTANDING ANY CONTRARY PROVISION OF
REPUBLIC ACT NO. 1405 AND OTHER GENERAL OR SPECIAL LAWS, THE
COMMISSIONER IS HEREBY AUTHORIZED TO INQUIRE INTO THE BANK DEPOSITS
OF:(1) A DECEDENT TO DETERMINE HIS GROSS ESTATE; AND(2) ANY TAXPAYER
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WHO HAS FILED AN APPLICATION FOR COMPROMISE OF HIS TAX LIABILITY UNDER
SEC. 204 (A) (2) OF THIS CODE BY REASON OF FINANCIAL INCAPACITY TO PAY HIS
TAX LIABILITY.IN CASE A TAXPAYER FILES AN APPLICATION TO COMPROMISE THE
PAYMENT OF HIS TAX LIABILITIES ON HIS CLAIM THAT HIS FINANCIAL POSITION
DEMONSTRATES A CLEAR INABILITY TO PAY THE TAX ASSESSED, HIS APPLICATION
SHALL NOT BE CONSIDERED UNLESS AND UNTIL HE WAIVES IN WRITING HIS
PRIVILEGE UNDER REPUBLIC ACT NO. 1405 OR UNDER OTHER GENERAL OR
SPECIAL LAWS, AND SUCH WAIVER SHALL CONSTITUTE THE AUTHORITY OF THE
COMMISSIONER TO INQUIRE INTO THE BANK DEPOSITS OF THE TAXPAYER.
SECTION 15, RA 6770. POWERS, FUNCTIONS AND DUTIES. THE OFFICE OF THE
OMBUDSMAN SHALL HAVE THE FOLLOWING POWERS, FUNCTIONS AND DUTIES: (8)
ADMINISTER OATHS, ISSUE SUBPOENA AND SUBPOENA DUCES TECUM, AND TAKE
TESTIMONY IN ANY INVESTIGATION OR INQUIRY, INCLUDING THE POWER TO
EXAMINE AND HAVE ACCESS TO BANK ACCOUNTS AND RECORDS;
SEC. 11, RA 9160. AUTHORITY TO INQUIRE INTO BANK DEPOSITS. -NOTWITHSTANDING THE PROVISIONS OF REPUBLIC ACT NO. 1405, AS AMENDED,
REPUBLIC ACT NO. 6426, AS AMENDED, REPUBLIC ACT NO. 8791, AND OTHER
LAWS, 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 OF
THIS ACT, WHEN IT HAS BEEN ESTABLISHED THAT THERE IS PROBABLE CAUSE
THAT THE DEPOSITS OR INVESTMENTS ARE RELATED TO AN UNLAWFUL ACTIVITIES
AS DEFINED IN SECTION 3(I) HEREOF OR A MONEY LAUNDERING OFFENSE UNDER
SECTION 4 HEREOF, EXCEPT THAT NO COURT ORDER SHALL BE REQUIRED IN
CASES INVOLVING UNLAWFUL ACTIVITIES DEFINED IN SECTIONS 3(I)1, (2) AND
(12).
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Garnishment of deposits
Safety deposit box
4.2
Cases
Unexplained wealth exception
PNB vs. Gancayco,
G.R. No. L-18343, September 30, 1965
ISSUE: The principal question presented in this case is whether a bank can be compelled to
disclose the records of accounts of a depositor who is under investigation for unexplained
wealth.
Defendants cite the Anti-Graft and Corrupt Practices Act (Republic Act No. 3019) in support
of their claim of authority
SEC. 8. Dismissal due to unexplained wealth. If in accordance with the provisions
of RA 1379, a public official has been found to have acquired during his incumbency,
whether in his name or in the name of other persons, an amount of property and/or
money manifestly out of proportion to his salary and to his other lawful income, that
fact shall be a ground for dismissal or removal. Properties in the name of the spouse
and unmarried children of such public official may be taken into consideration, when
their acquisition through legitimate means cannot be satisfactorily shown. Bank
deposits shall be taken into consideration in the enforcement of this section,
notwithstanding any provision of law to the contrary.
HELD: YES; THE BANK MAY BE COMPELLED TO DISCLOSE SUCH BANK RECORDS.
RA 1405 and RA 3019 [with respect to secrecy of bank accounts] are so repugnant to each
other than no reconciliation is possible. Thus, while Republic Act No. 1405 provides that
bank deposits are "absolutely confidential ... and [therefore] may not be examined, inquired
or looked into," except in those cases enumerated therein, the Anti-Graft Law directs in
mandatory terms that bank deposits "shall be taken into consideration in the enforcement of
this section, notwithstanding any provision of law to the contrary." The only conclusion
possible is that section 8 of the Anti-Graft Law is intended to amend section 2 of
Republic Act No. 1405 by providing additional exception to the rule against the
disclosure of bank deposits.
With regard to the claim that disclosure would be contrary to the policy making bank
deposits confidential, it is enough to point out that while section 2 of Republic Act 1405
declares bank deposits to be "absolutely confidential," it nevertheless allows such disclosure
in the following instances: (1) Upon written permission of the depositor; (2) In cases of
impeachment; (3) Upon order of a competent court in cases of bribery or dereliction of duty
of public officials; (4) In cases where the money deposited is the subject matter of the
litigation. Cases of unexplained wealth are similar to cases of bribery or dereliction of
duty and no reason is seen why these two classes of cases cannot be excepted from
the rule making bank deposits confidential.
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Garnishment of deposit
China Banking vs. Ortega,
G.R. L-34964, January 31, 1973
ISSUE: Whether or not a banking institution may validly refuse to comply with a court process
garnishing the bank deposit of a judgment debtor, by invoking the provisions of Republic Act
No. 1405.
The petitioners argue that the disclosure of the information required by the court does not fall
within any of the four (4) exceptions enumerated in Section 2, and that if the questioned
orders are complied with Tan Kim Liong may be criminally liable under Section 5 and the
bank exposed to a possible damage suit by B & B Forest Development Corporation.
Specifically referring to this case, the position of the petitioners is that the bank
deposit of judgment debtor B & B Forest Development Corporation cannot be subject
to garnishment to satisfy a final judgment against it in view of the aforequoted
provisions of law.
HELD: A BANK MAY NOT REFUSE TO COMPLY WITH ORDER OF GARNISHMENT SIMPLY BY INVOKING
THE SECRECY OF BANK ACCOUNTS UNDER RA 1405.
The lower court, in issuing an order of garnishment, did not order an examination of or
inquiry into the 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 purposes of the garnishment issued by it, so that the bank would hold the same intact
and not allow any withdrawal until further order. Indeed there is no real inquiry in such a
case, and if the existence of the deposit is disclosed the disclosure is purely incidental to the
execution process.
It will be noted from the discussion of the conference committee report on Senate Bill No.
351 and House Bill No. 3977, which later became Republic Act 1405, that it was not the
intention of the lawmakers to place bank deposits beyond the reach of execution to satisfy a
final judgment. It is hard to conceive that it was ever within the intention of Congress to
enable debtors to evade payment of their just debts, even if ordered by the Court, through
the expedient of converting their assets into cash and depositing the same in a bank.
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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.
Mellon Bank vs. Magsino, et al.,
G.R. No. 71479, October 18, 1990
FACTS: MELLON bank inadvertently caused the transfer of US$1,000,000.00 [instead of only
US$1,000.00] into Victoria Javiers account. Victoria Javier, transferred the wrongfully
transferred amount into several new accounts. Eventually, the amount was converted into
several cashiers checks, which Javier used to pay several of her obliglations. Mellon Bank
now wants to inquire into the bank accounts of the people who transacted with Javier [and
who deposited the cashiers checks received from her]; it filed Civil Case No. 26899.
ISSUE: WOULD THE INQUIRY INTO THE BANKS ACCOUNTS OF PEOPLE WHO WERE NOT
RESPONSIBLE FOR THE ILLEGAL ACQUISITION VIOLATE THE BANK SECRECY LAW?
HELD: NO.
Section 2 of RA 1405 allows the disclosure of bank deposits in cases where the money
deposited is the subject matter of the litigation. Inasmuch as Civil Case No. 26899 is aimed
at recovering the amount converted by the Javiers for their own benefit, necessarily, an
inquiry into the whereabouts of the illegally acquired amount extends to whatever is
concealed by being held or recorded in the name of persons other than the one responsible
for the illegal acquisition.
Case pending in court required before Ombudsman can examine bank accounts
Marquez vs. Desierto, et al.,
G.R. 135882, June 27, 2001.
The order of the Ombudsman to produce for in camera inspection the subject accounts with
the Union Bank of the Philippines, Julia Vargas Branch, is based on a pending investigation
at the Office of the Ombudsman against Amado Lagdameo, et. al. for violation of R.A. No.
3019, Sec. 3 (e) and (g) relative to the Joint Venture Agreement between the Public Estates
Authority and AMARI.
We rule 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 the pending case before the court of competent
jurisdiction. The bank personnel and the account holder must be notified to be present
during the inspection, and such inspection may cover only the account identified in the
pending case.
In the case at bar, there is yet no pending litigation before any court of competent authority.
What is existing is an investigation by the Office of the Ombudsman. In short, what the office
of the ombudsman would wish to do is to fish for additional evidence to formally charge
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Amado Lagdameo, et. al., with the Sandiganbayan. Clearly, there was no pending case in
court which would warrant the opening of the bank account for inspection.
Zone of privacy are recognized and protected in our laws. The Civil Code provides that"
[e]very person shall respect the dignity, personality, privacy and peace of mind of his
neighbors and other persons" and punishes as actionable torts several acts for meddling
and prying into the privacy of another. It also holds public officer or employee or any private
individual liable for damages for any violation of the rights and liberties of another person,
and recognizes the privacy of letters and other private communications. The Revised Penal
Code makes a crime of the violation of secrets by an officer, revelation of trade and
industrial secrets, and trespass to dwelling. Invasion of privacy is an offense in special laws
like the Anti-Wiretapping Law, the Secrecy of Bank Deposits Act, and the Intellectual
Property Code.
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4.3
Related statutes
(a) Foreign Currency Deposit Act - RA 6426 (1972), as amended by PD 1035 (1976),
PD 1246 (1977), PD 1453 (1978), and Sec. 11, RA 9160, as amended by Sec. 8
of RA 9194 (2003);
SECTION 8, FCDA. SECRECY OF FOREIGN CURRENCY DEPOSITS. ALL FOREIGN
CURRENCY DEPOSITS AUTHORIZED UNDER THIS ACT, AS AMENDED BY PD NO.
1035, AS WELL AS FOREIGN CURRENCY DEPOSITS AUTHORIZED UNDER PD NO.
1034, ARE HEREBY DECLARED AS AND CONSIDERED OF AN ABSOLUTELY
CONFIDENTIAL NATURE AND, EXCEPT UPON THE WRITTEN PERMISSION OF THE
DEPOSITOR, IN NO INSTANCE SHALL FOREIGN CURRENCY DEPOSITS BE EXAMINED,
INQUIRED OR LOOKED INTO BY ANY PERSON, GOVERNMENT OFFICIAL, BUREAU OR
OFFICE WHETHER JUDICIAL OR ADMINISTRATIVE OR LEGISLATIVE, OR ANY OTHER
ENTITY WHETHER PUBLIC OR PRIVATE; PROVIDED, HOWEVER, THAT SAID 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. (AS
AMENDED BY PD NO. 1035, AND FURTHER AMENDED BY PD NO. 1246, PROM.
NOV. 21, 1977.)
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WRITING TO FILE SUCH EX PARTE APPLICATION BY THE ANTITERRORISM COUNCIL CREATED IN SECTION 53 OF THIS ACT TO FILE
SUCH EX PARTE APPLICATION, AND UPON EXAMINATION UNDER OATH
OR AFFIRMATION OF THE APPLICANT AND, THE WITNESSES HE MAY
PRODUCE TO ESTABLISH THE FACTS THAT WILL JUSTIFY THE NEED AND
URGENCY OF EXAMINING AND FREEZING THE BANK DEPOSITS,
PLACEMENTS, TRUST ACCOUNTS, ASSETS, AND RECORDS: (1) OF THE
PERSON CHARGED WITH OR SUSPECTED OF THE CRIME OF TERRORISM
OR CONSPIRACY TO COMMIT TERRORISM; (2) OF A JUDICIALLY
DECLARED AND OUTLAWED TERRORIST ORGANIZATION, ASSOCIATION
OR GROUP OF PERSONS; OR (3) OF ANY MEMBER OF SUCH
ORGANIZATION, ASSOCIATION, OR GROUP OF PERSONS.
(iii)
IN
PROVIDED, THAT,
IF
ANY
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V
TRUTH IN LENDING ACT
RA 3765 (1963).
5.1
Topics
Purpose
SECTION 2. DECLARATION OF POLICY. IT IS HEREBY DECLARED TO BE 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 UNINFORMED USE OF CREDIT TO THE
DETRIMENT OF THE NATIONAL ECONOMY.
Obligation of creditors
SEC. 4. ANY CREDITOR SHALL FURNISH TO EACH PERSON TO WHOM CREDIT IS
EXTENDED, PRIOR TO THE CONSUMMATION OF THE TRANSACTION, A CLEAR
STATEMENT IN WRITING SETTING FORTH, TO THE EXTENT APPLICABLE AND IN
ACCORDANCE WITH RULES AND REGULATIONS PRESCRIBED BY THE BOARD, THE
FOLLOWING INFORMATION:
1. THE CASH PRICE OR DELIVERED PRICE OF THE PROPERTY OR SERVICE TO
BE ACQUIRED;
3. THE DIFFERENCE BETWEEN THE AMOUNTS SET FORTH UNDER CLAUSES (1)
AND (2);
5.
6.
7.
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(C) ANY PERSON WHO WILLFULLY VIOLATES ANY PROVISION OF THIS ACT OR ANY
REGULATION ISSUED THEREUNDER SHALL BE FINED BY NOT LESS THAN P1,00 OR
MORE THAN P5,000 OR IMPRISONMENT FOR NOT LESS THAN 6 MONTHS, NOR
MORE THAN ONE YEAR OR BOTH.
(D) NO PUNISHMENT OR PENALTY PROVIDED BY THIS ACT SHALL APPLY TO THE
PHILIPPINE GOVERNMENT OR ANY AGENCY OR ANY POLITICAL SUBDIVISION
THEREOF.
(E) A FINAL JUDGMENT HEREAFTER RENDERED IN ANY CRIMINAL PROCEEDING
UNDER THIS ACT TO THE EFFECT THAT A DEFENDANT HAS WILLFULLY VIOLATED
THIS ACT SHALL BE PRIMA FACIE EVIDENCE AGAINST SUCH DEFENDANT IN AN
ACTION OR PROCEEDING BROUGHT BY ANY OTHER PARTY AGAINST SUCH
DEFENDANT UNDER THIS ACT AS TO ALL MATTERS RESPECTING WHICH SAID
JUDGMENT WOULD BE AN ESTOPPEL AS BETWEEN THE PARTIES THERETO.
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5.2
Cases
Excessive interests, penalties and other charges not revealed in disclosure
statements issued by banks, even if stipulated in the promissory notes, cannot be
given effect under the Truth in Lending Act
NEW SAMPAGUITA BUILDERS CONSTRUCTION, INC., ET AL.
VS. PNB, G.R. 148753, JULY 30, 2004.
ISSUE: Whether or not PNB may collect penalty charges contained in the Promissory Notes,
but not in the Disclosure Statements issued prior to the execution of the notes.
HELD: No penalty charges or increases thereof appear either in the Disclosure Statements or
in any of the clauses in the second and the third Credit Agreements earlier discussed. While
a standard penalty charge of 6 percent per annum has been imposed on the amounts stated
in all three Promissory Notes still remaining unpaid or unrenewed when they fell due, there
is no stipulation therein that would justify any increase in that charges. The effect, therefore,
when the borrower is not clearly informed of the Disclosure Statements -- prior to the
consummation of the availment or drawdown -- is that the lender will have no right to
collect upon such charge or increases thereof, even if stipulated in the Notes.
Although the first Disclosure Statement was furnished Petitioner NSBCI prior to the
execution of the transaction, it is not a contract that can be modified by the related
Promissory Note, but a mere statement in writing that reflects the true and effective cost of
loans from respondent. Novation can never be presumed, and the animus novandi must
appear by express agreement of the parties, or by their acts that are too clear and
unequivocal to be mistaken. To allow novation will surely flout the policy of the State
to protect its citizens from a lack of awareness of the true cost of credit.
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5.3
Additional materials
(a) Implementing Rules: CB Circular No. 158-63, dated October 29, 1963;
(b) Additional Implementing Rules: CB Circular No. 431-74, dated September 2,
1974.
5.4
Related statute
Access Devices Regulation Act of 1998 (RA 8484)
(a) Disclosure required upon application or solicitation (Sec. 4);
SECTION 4. CREDIT CARD APPLICATION AND SOLICITATION. ANY APPLICATION
TO OPEN A CREDIT CARD ACCOUNT FOR ANY PERSON UNDER AN OPEN-END
CREDIT PLAN OR A SOLICITATION TO OPEN SUCH AN ACCOUNT, EITHER BY MAIL,
TELEPHONE OR OTHER MEANS, SHALL DISCLOSE IN WRITING OR ORALLY, AS THE
CASE MAY BE, THE FOLLOWING INFORMATION:
(A) ANNUAL PERCENTAGE RATE
1) EACH ANNUAL PERCENTAGE RATE OF INTEREST ON THE AMOUNT
2)
2)
3)
4)
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(b) Detailed explanation and clear illustration of computation of charges and fees
(Sec. 5);
SECTION 5. COMPUTATIONS. IN ADDITION TO THE FOREGOING, A CREDIT CARD
ISSUER MUST, TO THE EXTENT PRACTICABLE, PROVIDE A DETAILED EXPLANATION
AND A CLEAR ILLUSTRATION OF THE MANNER BY WHICH ALL CHARGES AND FEES
ARE COMPUTED.
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VI
ANTI-MONEY LAUNDERING ACT
RA 9160 (2001), as amended by RA 9194 (2003).
6.1
Topics
Background on money laundering and RAs 9160 and 9194;
Common stages of money laundering (i.e., placement, layering, and integration);
Covered institutions (Sec. 3[a]);
SECTION 3. DEFINITIONS. FOR PURPOSES OF THIS ACT, THE FOLLOWING TERMS
ARE HEREBY DEFINED AS FOLLOWS: (A) "COVERED INSTITUTION" REFERS TO:
1. BANKS, NON-BANKS, QUASI-BANKS, TRUST ENTITIES, AND ALL OTHER
INSTITUTIONS AND THEIR SUBSIDIARIES AND AFFILIATES SUPERVISED OR
REGULATED BY THE BANGKO SENTRAL NG PILIPINAS (BSP);
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11. VIOLATIONS UNDER REPUBLIC ACT NO. 8792, OTHERWISE KNOWN AS THE
ELECTRINIC COMMERCE ACT OF 2000;
12. HIJACKING AND OTHER VIOLATIONS UNDER REPUBLIC ACT NO. 6235;
DESTRUCTIVE ARSON AND MURDER, AS DEFINED UNDER THE REVISED
PENAL CODE, AS AMENDED, INCLUDING THOSE PERPETRATED BY
TERRORISTS AGAINST NON-COMBATANT PERSONS AND SIMILAR TARGETS;
13. FRAUDULENT PRACTICES AND OTHER VIOLATIONS UNDER REPUBLIC ACT
NO. 8799, OTHERWISE KNOWN AS THE SECURITIES REGULATION CODE OF
2000;
14. FELONIES OR OFFENSES OF A SIMILAR NATURE THAT ARE PUNISHABLE
UNDER THE PENAL LAWS OF OTHER COUNTRIES."
c.
IN
THE
DISCHARGE
OF
ITS
FUNCTIONS
AS
DEFINED
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Basic activities required of covered institutions to prevent money laundering (Sec. 9);
THE
PROVISIONS
OF
EXISTING
LAWS
TO
THE
CONTRARY
NOTWITHSTANDING,
ANONYMOUS
ACCOUNTS,
ACCOUNTS
UNDER
FICTITIOUS NAMES, AND ALL OTHER SIMILAR ACCOUNTS SHALL BE
ABSOLUTELY PROHIBITED. PESO AND FOREIGN CURRENCY NON-CHECKING
NUMBERED ACCOUNTS SHALL BE ALLOWED. THE BSP MAY CONDUCT
ANNUAL TESTING SOLELY LIMITED TO THE DETERMINATION OF THE
EXISTENCE AND TRUE IDENTITY OF THE OWNERS OF SUCH ACCOUNTS.
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NO CASE FOR MONEY LAUNDERING MAY BE FILED AGAINST AND NO ASSETS SHALL
BE FROZEN, ATTACHED OR FORFEITED TO THE PREJUDICE OF A CANDIDATE FOR AN
ELECTORAL OFFICE DURING AN ELECTION PERIOD.
6.2
Case:
Bank inquiry order under Section 11 cannot be made ex parte
Republic vs. Eugenio, et al.,
G.R. 174269, February 14, 2008
ISSUE1: Respondents posit that a bank inquiry order under Section 11 may be obtained only
upon the pre-existence of a money laundering offense case already filed before the
courts. The conclusion is based on the phrase upon order of any competent court in cases
of violation of this Act, the word cases generally understood as referring to actual cases
pending with the courts.
HELD1: We are unconvinced by this proposition, and agree instead with the then Solicitor
General who conceded that the use of the phrase in cases of was unfortunate, yet
submitted that it should be interpreted to mean in the event there are violations of the
AMLA, and not that there are already cases pending in court concerning such
violations. If the contrary position is adopted, then the bank inquiry order would be limited in
purpose as a tool in aid of litigation of live cases, and wholly inutile as a means for the
government to ascertain whether there is sufficient evidence to sustain an intended
prosecution of the account holder for violation of the AMLA. Should that be the situation, in
all likelihood the AMLC would be virtually deprived of its character as a discovery tool, and
thus would become less circumspect in filing complaints against suspect account holders.
After all, under such set-up the preferred strategy would be to allow or even encourage the
indiscriminate filing of complaints under the AMLA with the hope or expectation that the
evidence of money laundering would somehow surface during the trial. Since the AMLC
could not make use of the bank inquiry order to determine whether there is evidentiary basis
to prosecute the suspected malefactors, not filing any case at all would not be an
alternative. Such unwholesome set-up should not come to pass. Thus Section 11 cannot be
interpreted in a way that would emasculate the remedy it has established and encourage the
unfounded initiation of complaints for money laundering.
ISSUE2: Petitioner argues that a bank inquiry order necessitates a finding of probable cause,
a characteristic similar to a search warrant which is applied to and heard ex parte.
HELD2: Still, even if the bank inquiry order may be availed of without need of a preexisting case under the AMLA, it does not follow that such order may be availed of ex
parte. Such orders cannot be issued unless notice is given to the owners of the account,
allowing them the opportunity to contest the issuance of the order. Without such a
consequence, the legislated distinction between ex parte proceedings under Section 10 and
those which are not ex parte under Section 11 would be lost and rendered useless.
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Furthermore, the Court is unconvinced by the supposed analogy between a search warrant
and a bank inquiry forwarded by petitioner. The Constitution and the Rules of Court
prescribe particular requirements attaching to search warrants that are not imposed by the
AMLA with respect to bank inquiry orders. A constitutional warrant requires that the judge
personally examine under oath or affirmation the complainant and the witnesses he may
produce such examination being in the form of searching questions and answers. Those are
impositions which the legislative did not specifically prescribe as to the bank inquiry order
under the AMLA, and we cannot find sufficient legal basis to apply them to Section 11 of the
AMLA. Simply put, a bank inquiry order is not a search warrant or warrant of arrest as it
contemplates a direct object but not the seizure of persons or property.
Even as the Constitution and the Rules of Court impose a high procedural standard for the
determination of probable cause for the issuance of search warrants which Congress chose
not to prescribe for the bank inquiry order under the AMLA, Congress nonetheless
disallowed ex parte applications for the inquiry order. We can discern that in exchange for
these procedural standards normally applied to search warrants, Congress chose instead to
legislate a right to notice and a right to be heard characteristics of judicial proceedings
which are not ex parte. Absent any demonstrable constitutional infirmity, there is no reason
for us to dispute such legislative policy choices.
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