Part 1 - Trust Receipts Warehouse Law
Part 1 - Trust Receipts Warehouse Law
G.R. No. 110844 April 27, 2000 far from complying with the terms of the trust
HON. COURT OF APPEALS, HON. ZOSIMO Z. and benefit the said goods and/or the proceeds of
ANGELES, RTC- BR. 58, MAKATI, METRO the sale. Despite repeated demands, Ching failed
MANILA, PEOPLE OF THE PHILIPPINES AND and refused to remit the proceeds of sale to Allied
Topic: Trust Receipts Law; Definition and Purpose Petitioner Ching, together with Philippine
Principle: A trust receipt is considered a security Blooming Mills Co. Inc., filed a case before the
transaction intended to aid in financing importers RTC-Manila, Branch 53, for declaration of nullity
and retail dealers who do not have sufficient funds of documents and for damages against Allied
or resources to finance the importation or purchase Banking Corporation. Petitioner now asks before
of merchandise, and who may not be able to acquire this Court to suspend the criminal proceedings on
credit except through utilization, as collateral, of the ground of prejudicial question in a civil action
the merchandise imported or purchased. It could and to declare the trust receipts null and void.
receipt agreement could easily renege on its action for damages and declaration of nullity of
obligations thereunder, thus undermining the documents warrants the suspension of criminal
importance and defeating with impunity the proceedings instituted for violation of Article 315
purpose of such an indispensable tool in commercial 1(b) of the RPC, in relation to P.D. 115
transactions.
Ruling:
Petitioner was charged before the RTC- uncertain terms, requires the concurrence of two
Makati, Branch 58, with four counts of estafa essential requisites, to wit:
punishable under Article 315 par. 1(b) of the a) The civil action involves an issue similar or
Revised Penal Code, in relation to P.D. 115, intimately related to the issue raised in the
believe that it was valid and binding, hence the goods, the Vintolas cannot justifiably claim that because
they have surrendered the goods to IBAA and subsequently
granting of the request for further availments.
deposited them in the custody of the court, they are
Anent petitioners-sureties contention that
absolutely relieved of their obligation to pay their loan
they obtained no consideration whatsoever on the because of their inability to dispose of the goods. The fact
surety agreements, the Court pointed out that the that they were unable to sell the seashells in question does
consideration for the surety is the very not affect IBAA's right to recover the advances it had made
consideration for the principal obligor, MICO, in under the Letter of Credit.
necessary that a guarantor or surety should their account drafts drawn by their supplier, one Stalin
receive any part or benefit, if such there be, Tan, on Dax Kin International for the purchase of puka
and olive seashells.
accruing to his principal.
On the same day, having received from Stalin
Tan the puka and olive shells, the Vintolas executed a
J. Return of goods, documents or instruments
Trust Receipt agreement with IBAA. Under that
in case of non-sale Agreement, the Vintolas agreed to hold the goods in
trust for IBAA as the "latter's property with liberty to
SPOUSES TIRSO I. VINTOLA AND LORETO DY sell the same for its account, and "in case of sale" to turn
VINTOLA, DEFENDANTS-APPELLANTS, - over the proceeds as soon as received to (IBAA).
VERSUSINSULAR
Having defaulted on their obligation, IBAA
BANK OF ASIA AND AMERICA, PLAINTIFF-
demanded payment from the Vintolas. The Vintolas,
APPELLEE.
who were unable to dispose of the shells, responded by
G.R. No. 73271, FIRST DIVISION,
offering to return the goods. IBAA refused to accept the
May 29, 1987, MELENCIO-HERRERA, J.
merchandise, and due to the continued refusal of the property and they hold it at their own risk. The trust
Vintolas to make good their undertaking, IBAA charged receipt arrangement did not convert the IBAA into an
them with estafa. During the trial of the criminal case investor; the latter remained a lender and creditor.
the VINTOLAS turned over the seashells to the custody Since the IBAA is not the factual owner of the
of the trial court. goods, the Vintolas cannot justifiably claim that because
The trial court acquitted the Vintolas of the they have surrendered the goods to IBAA and
crime charged, after finding that the element of subsequently deposited them in the custody
misappropriation or conversion was inexistent. Shortly of the court, they are absolutely relieved of their
thereafter, IBAA commenced the present civil action to obligation to pay their loan because of their inability to
recover the value of the goods before the Regional Trial dispose of the goods. The fact that they were unable to
Court. Holding that the complaint was barred by the sell the seashells in question does not affect IBAA's right
judgment of acquittal in the criminal case, said Court to recover the advances it had made under the Letter of
dismissed the complaint. However, on IBAA's motion, Credit.
the Court granted reconsideration and hold the Vintolas The acquittal of the Vintolas in the estafa case
civilly liable. is no bar to the institution of a civil action for collection.
The VINTOLAS rest their present appeal on the It is inaccurate for the Vintolas to claim that the
principal allegation that their acquittal in the estafa case judgment in the estafa case had declared that the facts
bars IBAA's filing of the civil action because IBAA had from which the civil action might arise, did not exist, for,
not reserved in the criminal case its right to enforce it will be recalled that the decision of acquittal expressly
separately their civil liability. Further, the VINTOLAS declared that "the remedy of the Bank is civil and not
take the position that their obligation to IBAA has been criminal in nature." This amounts to a reservation of the
extinguished inasmuch as, through no fault of their own, civil action in IBAA's favor, for the Court would nothave
they were unable to dispose of the seashells, and that dwelt on a civil liability that it had intended to
they have relinquished possession thereof to the IBAA, extinguish by the same decision.
as owner of the goods, by depositing them with the The Vintolas are liable ex contractu for breach
Court. of the Letter of Credit — Trust Receipt, whether they
This case was appealed to the Intermediate did or they did not "misappropriate, misapply or
Appellate Court which, however, certified the same to convert" the merchandise as charged in the criminal
this Court, the issue involved being purely legal. case. Their civil liability does not arise ex delicto, the
action for the recovery of which would have been
ISSUE deemed instituted with the criminal-action (unless
Whether or not the Vintolas’ obligation with IBAA is waived or reserved) and where acquittal based on a
extinguished on the ground that they deposited the judicial declaration that the criminal acts charged do not
subject goods with the court? (NO) exist would have extinguished the civil action.
FACTS: Petitioner Land Bank of the Philippines (LBP) The CA ruled in favor of Perez ratiocinating
is a government financial institution and the official in this wise: the case did not involve a trust receipt
depository of the Philippines. Respondents are the transaction, but a mere loan. It emphasized that
officers and representatives of Asian Construction and construction materials, the subject of the trust receipt
Development Corporation (ACDC), a corporation transaction, were delivered to ACDC even before the
incorporated under Philippine law and engaged in the trust receipts were executed. Also, LBP did not offer
construction business. proof that the goods were received by ACDC, and that
LBP extended a credit accommodation to the trust receipts did not contain a description of the
ACDC. In various instances, ACDC used the Letters goods, their invoice value, the amount of the draft to
of Credit/Trust Receipts Facility of the Agreement to be paid, and their maturity dates. It also adopted
buy construction materials. The respondents, as ACDC’s argument that since no payment for the
officers and representatives of ACDC, executed trust construction projects had been received by ACDC, its
receipts in connection with the construction materials. officers could not have been guilty of misappropriating
The trust receipts matured, but ACDC failed to return any payment.
No. Petitioners' stance, however, Appeals, and PNB vs. Pineda, the Court held that:
cloak of the separate corporate personality of PBMI. the latter with "survival bolos."
Topic:
Facts:
Trust Receipt Law
L. Penal sanctions of directors, officers
and agents After granting the petitioner’s
application and issued Letter of Credit to
b. Directors and officers of the
corporation not civilly liable unless they Tanchaoco Incorporated and Letter of Credit to
assume personal
Maresco Corporation, petitioners signed trust
Liability
receipts in favor of respondent bank.
Principle:
The corporate representatives signing as a Petitioners did not comply with their
solidary guarantee as corporate representative undertaking under the trust receipts.
did not undertake to guarantee personally the Respondent bank made several demands for
payment of the corporation's debt. Debts payments but El Oro Corporation made partial
incurred by directors, officers and employees payments only. On 27 June 1983 and 28 June
acting as such corporate agents are not theirs 1983, respondent bank’s counsel and its
but the direct liability of the corporation they representative respectively sent final demand
represent. As an exception, directors or letters to El Oro Corporation. El Oro
officers are personally liable for the Corporation replied that it could not fully pay
corporation's debt if they so contractually its debt because the Armed Forces of the
agree or stipulate. Philippines had delayed paying for the survival
bolos.
Parties:
Respondent bank charged petitioners
Petitioners : Jose C. Tupaz IV and with estafa under Section 13, Presidential
Petronila C. Tupaz - Vice-President for Decree No. 115 ("Section 13") or Trust
Operations and Vice-President/Treasurer, Receipts Law ("PD 115").
respectively, of El Oro Engraver Corporation
Issue: found on the dorsal portion of the trust
receipts. Petitioner placed his signature after
Whether or not the corporate officers make the typewritten words "ARMCO INDUSTRIAL
themselves personally liable for El Oro CORPORATION" found at the end of the
Corporation’s debts under the trust receipts. solidary guarantee clause. Evidently, petitioner
did not undertake to guaranty personally the
Ruling: payment of the principal and interest of
ARMAGRI’s debt under the two trust receipts.
No, A corporation, being a juridical
entity, may act only through its directors, Hence, for the trust receipt dated 9
officers, and employees; and the debts October 1981, we sustain petitioners’ claim
incurred by these individuals, acting as such that they are not personally liable for El Oro
corporate agents, are not theirs but the direct Corporation’s obligation.
liability of the corporation they represent. As
an exception, directors or officers are For the trust receipt dated 30
personally liable for the corporation’s debts September 1981, the dorsal portion of which
only if they so contractually agree or stipulate. petitioner Jose Tupaz signed alone, we find
that he did so in his personal capacity.
In the trust receipt dated 9 October Petitioner Jose Tupaz did not indicate that he
1981, petitioners signed below this clause as was signing as El Oro Corporation’s Vice-
officers of El Oro Corporation. Thus, under President for Operations. Hence, petitioner
petitioner Petronila Tupaz’s signature are the Jose Tupaz bound himself personally liable for
words "Vice-Pres–Treasurer" and under El Oro Corporation’s debts. Not being a party
petitioner Jose Tupaz’s signature are the words to the trust receipt dated 30 September 1981,
"Vice-Pres–Operations." By so signing that petitioner Petronila Tupaz is not liable under
trust receipt, petitioners did not bind such trust receipt.
themselves personally liable for El Oro
Corporation’s obligation. E. Ownership of the goods, documents and
instruments under a trust receipt
In Ong v. Court of Appeals, a corporate
representative signed a solidary guarantee Spouses RAMON R. NACU and LOURDES I.
clause in two trust receipts in his capacity as NACU, petitioners,
corporate representative. There, the Court held vs.
that the corporate representative did not THE COURT OF APPEALS and PILIPINAS BANK,
TOPIC: TRUST RECEIPTS LAW; Letters of business. Upon said letters of credit,
forth in the petition as well as in the petitioners Appeals erred in awarding to RCBC the minimal
main and reply briefs are not disputed by the sum of P3 Million instead of P18 Million granted
respondent; and (10) when the findings of fact by the trial court.
FACTS: Alfa RTW applied for four the agreed interest rates, service charges and
Letters of Credit with petitioner to facilitate its penalties in case of any breach thereof. CA
failed to apply the time-honored doctrine that computed shall earn interest of 12% per annum
which is agreed to in a contract is the law until satisfied.
between the parties. Thus, the obligations
arising from contracts have the force of law Ratio:
between the contracting parties and should be The case now before us involves an
complied with in good faith. The Court cannot obligation arising from a letter of credit-trust
vary the terms and conditions therein stipulated receipt transaction. Under this arrangement, a
unless such stipulation is contrary to law, bank extends to a borrower a loan covered by
morals, good customs, public order or public the letter of credit, with the trust receipt as
policy. security of the loan. A trust receipt is a security
The present case involves an obligation transaction intended to aid in financing importers
arising from a letter of credit-trust receipt and retail dealers who do not have sufficient
transaction. Under this arrangement, a bank funds or resources to finance the importation or
extends to a borrower a loan covered by the purchase of merchandise, and who may not be
letter of credit, with the trust receipt as security able to acquire credit except thru utilization, as
of the loan. In contracts contained in trust collateral, of the merchandise imported or
receipts, the contracting parties may establish purchased.
agreements, terms and conditions they may In contracts contained in trust receipts,
deem advisable, provided they are not contrary the contracting parties may establish
to law, morals or public order. In the computation agreements, terms and conditions they may
of interest, the principal amount of loans deem advisable, provided they are not contrary
corresponding to each trust receipt must earn an to law, morals or public order. 12 In the case at
interest rate of 16% per annum with the bar, there are specific amounts of interest,
stipulated service charge of 2% per annum on service charges and penalties agreed upon by
the loan principal or the outstanding balance the parties. Pertinent provisions in the four (4)
thereof, from the date of execution until finality of trust receipts
court’s Decision. A penalty of 6% per annum of
the amount due and unpaid must also be
WAREHOUSE
imposed computed from the date of demand
RECEIPTS LAW
until the finality of court’s Judgment. The (Act No. 2137, as amended)
interest of 16% per annum, as long as unpaid,
also earns interest which is computed from the A. General concepts (Sec. 1-7)
date of filing of the complaint until finality of the a. Purpose and coverage
court’s decision. From such finality the total
b. Definition
unpaid amount (principal + interest + service
charge + penalty + interest on the interest) Warehouse receipt. — a contract or receipt for
goods deposited with a warehouseman
containing the latter’s undertaking to hold and (i) A statement of the amount of advances made
deliver the said goods to a specified person, to and of liabilities incurred for which the
warehouseman claims a lien. If the precise
order, or to bearer. Quedan is a warehouse
amount of such advances made or of such
receipt usually for sugar received by a liabilities incurred is, at the time of the issue of,
warehouseman. unknown to the warehouseman or to his agent
who issues it, a statement of the fact that
advances have been made or liabilities incurred
"Warehouseman" means a person lawfully and the purpose thereof is sufficient.
engaged in the business of storing goods for
A warehouseman shall be liable to any person
profit. injured thereby for all damages caused by the
omission from a negotiable receipt of any of the
c. Who may issue warehouse receipts? (Sec. terms herein required.
1)
- Warehouse receipts may be issued by any e. Effect of omission of any of the essential
warehouseman. terms
d. Form and content of warehouse receipts Topic: Warehouse Receipts Law; Effect of
(Sec. 2)
- Warehouse receipts need not be in any omission of any of the essential terms
particular form but every such receipt must
embody within its written or printed terms:
Principle: Any deposit made with a bonded
(a) The location of the warehouse where the warehouseman must necessarily be governed
goods are stored, by the provisions of Act No. 3893. The kind or
nature of the receipts issued by him for the
(b) The date of the issue of the receipt,
deposits is not very material, much less decisive.
(c) The consecutive number of the receipt, Though it is desirable that receipts issued by a
bonded warehouseman should conform to the
(d) The undertaking - a statement whether the
provisions of the Warehouseman Receipts Law,
goods received will be delivered to the bearer, to
a specified person or to a specified person or his said provisions are not mandatory, and
order, indispensable in the sense that if they fell short
of the requirement of the Warehouse Receipts
(e) The rate of storage charges,
Act, then the commodities delivered for storage
(f) A description of the goods or of the packages become ordinary deposits and will not be
containing them,
governed by the provisions of the Bonded
(g) The signature of the warehouseman which Warehouse Act. Under Section 1 of the
may be made by his authorized agent, Warehouse Receipts Act, the issuance of a
warehouse receipt in the form provided by it is
(h) If the receipt is issued for goods of which the
warehouseman is owner, either solely or jointly merely permissive and directory and not
or in common with others, the fact of such obligatory.
ownership, and
Gonzales v. Go Tiong At the time of the fire, there were 5,847 sacks of
G.R. No. L-11776, 30 Aug 1958 palay in the warehouse, in excess of the 5,000
Facts: sacks authorized under his license. The receipts
Go Tiong owned a rice mill and warehouse, issued by Go Tiong to Gonzales were ordinary
located at Mabini, Urdaneta, Pangasinan. On receipts, not the "warehouse receipts" defined
February 4, 1953, he obtained a license to by the Warehouse Receipts Act.
engage in the business of a bonded After the burning of the warehouse, the
warehouseman. To secure the performance of depositors of palay, including plaintiff Gonzales,
his obligations as such bonded warehouseman, filed their claims with the Bureau of Commerce,
the Luzon Surety Co. executed Guaranty Bond and it would appear that with the proceeds of the
No. 294 in the sum of P18,334, conditioned insurance policy, the Bureau of Commerce paid
particularly on the fulfillment by Go Tiong of his off some of the claims. Thereafter, Gonzales
duty or obligation to deliver to the depositors in filed the present action against Go Tiong and the
his storage warehouse, the palay received by Luzon Surety for the sum of P8,600, the value of
him for storage, at any time demand is made, or his palay, with legal interest, damages in the
to pay the market value thereof, in case he was sum of P5,000 and P1,500 as attorney's fees.
unable to return the same. Go Tiong insured the The Court of First Instance of Manila rendered
warehouse and the palay deposited therein with judgment against Go Tiong and Luzon Surety
the Alliance Surety and Insurance Company. Co. Hence, they appealed to the Court of
But prior to the issuance of the license to Go Appeals. However, since the issues raised were
Tiong to operate as bonded warehouseman, he purely questions of law, the CA indorsed the
had on several occasions received palay for case to the Supreme Court.
deposit from plaintiff Ramon Gonzales, totalling
368 sacks, for which he issued receipts. After he Issue: Whether or not the failure of Go Tiong to
was licensed as a bonded warehouseman, Go issue the warehouse receipts contemplated by the
Tiong again received various deliveries of palay Warehouse Receipts Act precluded plaintiff from
from Ramon Gonzales, totalling 492 sacks, for suing on the bond?
which he issued the corresponding receipts, all
the deliveries having a grand total of 860 sacks, Ruling:
valued at P8,600 at the rate of P10 per sack.
Eventually, plaintiff Gonzales demanded from No. The Supreme Court held that the surety
Go Tiong the value of his deposits in the amount cannot avoid liability from the mere failure of the
of P8,600. However, he was told to return after warehouseman to issue the prescribed receipt.
two days, which he did. But upon his return, he The law does not require as indispensable that a
was once again told to come back. A few days warehouse receipt be issued to be liable under
later, the warehouse burned to the ground. Act No. 3893 or the Bonded Warehouse Act.
Act No. 3893 as amended is a special law obligation is secured by a bond, said depositor
regulating the business of receiving commodities may sue on said bond.
for storage and defining the rights and In the case of Andreson vs. Krueger, 212 N.W.
obligations of a bonded warehouseman and 198, 199, it was held:
those transacting business with him. "The surety company concedes that the bond
Consequently, any deposit made with him as a which it gave contains the statutory conditions.
bonded warehouseman must necessarily be The statute . . . requires that the bond — 'shall
governed by the provisions of Act No. 3893. The be conditioned upon the faithful performance of
kind or nature of the receipts issued by him for the public local grain warehouseman of all the
the deposits is not very material, much less provisions of law relating to the storage of grain
decisive. Though it is desirable that receipts by such warehouseman.'
issued by a bonded warehouseman should "The surety company thereby made itself
conform to the provisions of the Warehouse responsible for the performance by the
Receipts Law, said provisions in our opinion are warehouseman of all the duties and obligations
not mandatory and indispensable in the sense imposed upon him by the statute; and, if he
that if they fell short of the requirements of the failed to perform any such duty to the loss or
Warehouse Receipts Act, then the commodities detriment of those who delivered grain for
delivered for storage become ordinary deposits storage, the surety company became liable
and will not be governed by the provisions of the therefor. Where the warehouseman receives
Bonded Warehouse Act. Under Section 1 of the grain for storage and refuses to return or pay it,
Warehouse Receipts Act, one would gather the the fact that he failed to issue the receipt, when
impression that the issuance of a warehouse the statute required him to issue on receiving it,
receipt in the form provided by it is merely is not available to the surety as a defense
permissive and directory and not obligatory: against an action on the bond. The obligation of
"SECTION 1. Persons who may issue receipts. the surety covers the duty of the warehouseman
— Warehouse receipts may be issued by any to issue the prescribed receipt, as well as the
warehouseman.", other duties imposed upon him by the statute."
and the Bonded Warehouse Act as amended In view of the foregoing, the appealed decision
permits the warehouseman to issue any receipt, was affirmed.
thus:
". . . receipt' as any receipt issued by a f. Terms that cannot be included (Sec. 3)
warehouseman for commodity delivered to him."
Sec. 3. Form of receipts. – What terms may be
Furthermore, Section 7 of said law provides that inserted. – A warehouseman may insert in a
as long as the depositor is injured by a breach of receipt issued by him any other terms and
any obligation of the warehouseman, which conditions provided that such terms and
conditions shall not:
(a) Be contrary to the provisions of this Act. establish the existence of a lawful excuse for
(b) In any wise impair his obligation to exercise such refusal.
that degree of care in the safe-keeping of the
goods entrusted to him which is reasonably Sec. 9. Justification of warehouseman in
careful man would exercise in regard to similar delivering. – A warehouseman is justified in
goods of his own. delivering the goods, subject to the provisions of
the three following sections, to one who is:
B. Obligations and rights of a warehouseman
(a) The person lawfully entitled to the
a. Obligation to deliver (Secs. 8-19, 36, & 58) possession of the goods, or his agent;
Sec. 11. Negotiable receipt must be cancelled If the alteration was authorized, the
when goods delivered. – Except as provided in warehouseman shall be liable according to the
section thirty-six, where a warehouseman terms of the receipt as altered. If the alteration
delivers goods for which he had issued a was unauthorized but made without fraudulent
negotiable receipt, the negotiation of which intent, the warehouseman shall be liable
would transfer the right to the possession of the according to the terms of the receipt as they
goods, and fails to take up and cancel the were before alteration.
receipt, he shall be liable to anyone who
purchases for value in good faith such receipt, Material and fraudulent alteration of a
for failure to deliver the goods to him, whether receipt shall not excuse the warehouseman who
such purchaser acquired title to the receipt issued it from liability to deliver according to the
before or after the delivery of the goods by the terms of the receipt as originally issued, the
warehouseman. goods for which it was issued but shall excuse
him from any other liability to the person who
Sec. 12. Negotiable receipts must be cancelled made the alteration and to any person who took
or marked when part of goods delivered. – with notice of the alteration. Any purchaser of
Except as provided in Section 36, where a the receipt for value without notice of the
warehouseman delivers part of the goods for alteration shall acquire the same rights against
which he had issued a negotiable receipt and the warehouseman which such purchaser would
fails either to take up and cancel such receipt or have acquired if the receipt had not been altered
to place plainly upon it a statement of what at the time of purchase.
goods or packages have been delivered, he
shall be liable to any one who purchases for Sec. 14. Lost or destroyed receipts. – Where a
value in good faith such receipt, for failure to negotiable receipt has been lost or destroyed, a
deliver all the goods specified in the receipt, court of competent jurisdiction may order the
delivery of the goods upon satisfactory proof of refusing to deliver the goods according to the
such loss or destruction and upon the giving of a terms of the receipt.
bond with sufficient sureties to be approved by
the court to protect the warehouseman from any Sec. 17. Interpleader of adverse claimants. – If
liability or expense, which he or any person more than one person claims the title or
injured by such delivery may incur by reason of possession of the goods, the warehouseman
the original receipt remaining outstanding. The may, either as a defense to an action brought
court may also in its discretion order the against him for non-delivery of the goods or as
payment of the warehouseman's reasonable an original suit, whichever is appropriate, require
costs and counsel fees. all known claimants to interplead.
The delivery of the goods under an Sec. 18. Warehouseman has reasonable time to
order of the court as provided in this section, determine validity of claims. – If someone other
shall not relieve the warehouseman from liability than the depositor or person claiming under him
to a person to whom the negotiable receipt has has a claim to the title or possession of goods,
been or shall be negotiated for value without and the warehouseman has information of such
notice of the proceedings or of the delivery of the claim, the warehouseman shall be excused from
goods. liability for refusing to deliver the goods, either to
the depositor or person claiming under him or to
Sec. 15. Effect of duplicate receipts. – A receipt the adverse claimant until the warehouseman
upon the face of which the word "duplicate" is has had a reasonable time to ascertain the
plainly placed is a representation and warranty validity of the adverse claim or to bring legal
by the warehouseman that such receipt is an proceedings to compel claimants to interplead.
accurate copy of an original receipt properly
issued and uncancelled at the date of the issue Sec. 19. Adverse title is no defense except as
of the duplicate, but shall impose upon him no above provided. – Except as provided in the two
other liability. preceding sections and in sections 9 & 36, no
right or title of a third person shall be a defense
Sec. 16. Warehouseman cannot set up title in to an action brought by the depositor or person
himself . – No title or right to the possession of claiming under him against the warehouseman
the goods, on the part of the warehouseman, for failure to deliver the goods according to the
unless such title or right is derived directly or terms of the receipt.
indirectly from a transfer made by the depositor
at the time of or subsequent to the deposit for b. Liability for goods (Secs. 20-26)
storage, or from the warehouseman's lien, shall Sec. 20. Liability for non-existence or
excuse the warehouseman from liability for misdescription of goods. – A warehouseman
shall be liable to the holder of a receipt for
damages caused by the non-existence of the Sec. 23. Fungible goods may be commingled if
goods or by the failure of the goods to warehouseman authorized. – If authorized by
correspond with the description thereof in the agreement or by custom, a warehouseman may
receipt at the time of its issue. If, however, the mingle fungible goods with other goods of the
goods are described in a receipt merely by a same kind and grade. In such case, the various
statement of marks or labels upon them or upon depositors of the mingled goods shall own the
packages containing them or by a statement that entire mass in common and each depositor shall
the goods are said to be goods of a certain kind be entitled to such portion thereof as the amount
or that the packages containing the goods are deposited by him bears to the whole.
said to contain goods of a certain kind or by
words of like purport, such statements, if true, Sec. 24. Liability of warehouseman to depositors
shall not make liable the warehouseman issuing of commingled goods. – The warehouseman
the receipt, although the goods are not of the shall be severally liable to each depositor for the
kind which the marks or labels upon them care and redelivery of his share of such mass to
indicate or of the kind they were said to be by the same extent and under the same
the depositor. circumstances as if the goods had been kept
separate.
Sec. 21. Liability for care of goods. – A
warehouseman shall be liable for any loss or Sec. 25. Attachment or levy upon goods for
injury to the goods caused by his failure to which a negotiable receipt has been issued. – If
exercise such care in regard to them as goods are delivered to a warehouseman by the
reasonably careful owner of similar goods would owner or by a person whose act in conveying
exercise, but he shall not be liable, in the the title to them to a purchaser in good faith for
absence of an agreement to the contrary, for any value would bind the owner, and a negotiable
loss or injury to the goods which could not have receipt is issued for them, they can not
been avoided by the exercise of such care. thereafter, while in the possession of the
warehouseman, be attached by garnishment or
Sec. 22. Goods must be kept separate. – Except otherwise, or be levied upon under an execution
as provided in the following section, a unless the receipt be first surrendered to the
warehouseman shall keep the goods so far warehouseman or its negotiation enjoined. The
separate from goods of other depositors and warehouseman shall in no case be compelled to
from other goods of the same depositor for deliver up the actual possession of the goods
which a separate receipt has been issued, as to until the receipt is surrendered to him or
permit at all times the identification and impounded by the court.
redelivery of the goods deposited.
Sec. 26. Creditor's remedies to reach negotiable
receipts. – A creditor whose debtor is the owner
of a negotiable receipt shall be entitled to such
aid from courts of appropriate jurisdiction, by (c) A demand that the amount of the claim as
injunction and otherwise, in attaching such stated in the notice of such further claim as shall
receipt or in satisfying the claim by means accrue, shall be paid on or before a day
thereof as is allowed at law or in equity in these mentioned, not less than ten days from the
islands in regard to property which cannot delivery of the notice if it is personally delivered,
readily be attached or levied upon by ordinary or from the time when the notice shall reach its
legal process. destination, according to the due course of post,
if the notice is sent by mail,
c. Warehouseman’s lien (Secs. 31-36)
Sec. 31. Warehouseman need not deliver until (d) A statement that unless the claim is paid
lien is satisfied. – A warehouseman having a lien within the time specified, the goods will be
valid against the person demanding the goods advertised for sale and sold by auction at a
may refuse to deliver the goods to him until the specified time and place.
lien is satisfied.
In accordance with the terms of a notice so
Sec. 32. Warehouseman's lien does not given, a sale of the goods by auction may be
preclude other remedies. – Whether a had to satisfy any valid claim of the
warehouseman has or has not a lien upon the warehouseman for which he has a lien on the
goods, he is entitled to all remedies allowed by goods. The sale shall be had in the place
law to a creditor against a debtor for the where the lien was acquired, or, if such place is
collection from the depositor of all charges and manifestly unsuitable for the purpose of the
advances which the depositor has expressly or claim specified in the notice to the depositor has
impliedly contracted with the warehouseman to elapsed, and advertisement of the sale,
pay. describing the goods to be sold, and stating the
name of the owner or person on whose account
Sec. 33. Satisfaction of lien by sale. – A the goods are held, and the time and place of
warehouseman's lien for a claim which has the sale, shall be published once a week for two
become due may be satisfied as follows: consecutive weeks in a newspaper published in
the place where such sale is to be held. The
(a) An itemized statement of the sale shall not be held less than fifteen days from
warehouseman's claim, showing the sum due at the time of the first publication. If there is no
the time of the notice and the date or dates newspaper published in such place, the
when it becomes due, advertisement shall be posted at least ten days
before such sale in not less than six
(b) A brief description of the goods against which conspicuous places therein.
the lien exists,
From the proceeds of such sale, the warehouseman may sell the goods at public or
warehouseman shall satisfy his lien including the private sale without advertising. If the
reasonable charges of notice, advertisement and warehouseman, after a reasonable effort, is
sale. The balance, if any, of such proceeds unable to sell such goods, he may dispose of
shall be held by the warehouseman and them in any lawful manner and shall incur no
delivered on demand to the person to whom he liability by reason thereof.
would have been bound to deliver or justified in
delivering goods. The proceeds of any sale made under the terms
of this section shall be disposed of in the same
At any time before the goods are so sold, any way as the proceeds of sales made under the
person claiming a right of property or possession terms of the preceding section.
therein may pay the warehouseman the amount
necessary to satisfy his lien and to pay the Sec. 35. Other methods of enforcing lien. – The
reasonable expenses and liabilities incurred in remedy for enforcing a lien herein provided does
serving notices and advertising and preparing for not preclude any other remedies allowed by law
the sale up to the time of such payment. The for the enforcement of a lien against personal
warehouseman shall deliver the goods to the property nor bar the right to recover so much of
person making payment if he is a person the warehouseman's claim as shall not be paid
entitled, under the provision of this Act, to the by the proceeds of the sale of the property.
possession of the goods on payment of charges
thereon. Otherwise, the warehouseman shall Sec. 36. Effect of sale. – After goods have been
retain the possession of the goods according to lawfully sold to satisfy a warehouseman's lien, or
the terms of the original contract of deposit. have been lawfully sold or disposed of because
of their perishable or hazardous nature, the
Sec. 34. Perishable and hazardous goods. – If warehouseman shall not thereafter be liable for
goods are of a perishable nature, or by keeping failure to deliver the goods to the depositor or
will deteriorate greatly in value, or, by their order, owner of the goods or to a holder of the receipt
leakage, inflammability, or explosive nature, will given for the goods when they were deposited,
be liable to injure other property , the even if such receipt be negotiable.
warehouseman may give such notice to the
owner or to the person in whose names the E. Kinds
goods are stored, as is reasonable and possible a. Negotiable warehouse receipt (Secs. 5-6 &
under the circumstances, to satisfy the lien upon 47)
such goods and to remove them from the
warehouse and in the event of the failure of such Sec. 5. Definition of negotiable receipt. – A
person to satisfy the lien and to receive the receipt in which it is stated that the goods
goods within the time so specified, the received will be delivered to the bearer or to the
order of any person named in such receipt is a that may be invoked against anyone who claims
negotiable receipt. a right of possession thereon. In this case, the
lien was lost when
No provision shall be inserted in a negotiable the respondents refused to deliver the goods,
receipt that it is non-negotiable. Such provision, which were not anchored to a valid excuse (i.e.
if inserted shall be void. non-satisfaction of warehouseman’s lien) but on
an adverse claim of ownership. HOWEVER, the
Sec. 6. Duplicate receipts must be so marked. – loss of Warehouseman’s lien does not
When more than one negotiable receipt is necessarily mean the extinguishment of the
issued for the same goods, the word "duplicate" obligation to pay the Warehouseman’s fees and
shall be plainly placed upon the face of every charges, which continues to be a personal
such receipt, except the first one issued. A liability of the owners, PNB in this case.
warehouseman shall be liable for all damages
caused by his failure so to do to any one who FACTS
purchased the subsequent receipt for value
supposing it to be an original, even though the In accordance with the Warehouse
purchase be after the delivery of the goods by Receipts Law, Noah's Ark Sugar Refinery issued
the warehouseman to the holder of the original on several dates Warehouse Receipts
receipt. (quedans) covering sugar deposited by Rosa Sy,
RNS Merchandising, and St. Therese
b. Non-negotiable warehouse receipt Merchandising. The receipts are substantially in
the form, and contain the terms, prescribed for
Sec. 4. Definition of non-negotiable receipt. – A negotiable warehouse receipts by Section 2 of
receipt in which it is stated that the goods the law.
received will be delivered to the depositor or to Subsequently, Warehouse Receipts
any other specified person, is a non-negotiable were negotiated and endorsed to Luis T. Ramos
receipt. and to Cresencia K. Zoleta. Ramos and Zoleta
then used the quedans as security for two loan
J. Warehouse defenses for non-delivery or agreements — one for P15.6 million and the
misdelivery other for P23.5 million — obtained by them from
a. Legal excuses the PNB. They endorsed the aforementioned
quedans to PNB.
PNB vs. Sayo
G.R. No. 129918; 09 Jul 1998 After the decision in G.R. No. 119231 (PNB v.
Se) became final and executory, various
Principle: The warehouseman is entitled to the incidents took place before the trial court. Noah’s
warehouseman’s lien that attaches to the goods Ark and its officers filed a Motion for Execution
of Defendants’ Lien as Warehouseman pursuant charges have ceased to accrue from the date of
to SC’s decision which was opposed by PNB. the rejection by Noah’s Ark to heed the lawful
The RTC, this time presided Hon. Marcelino L. demand for the release of the goods. While PNB
Sayo Jr., granted the Motion for Execution. PNB is entitled to the stocks of sugar as the endorsee
was immediately served with a Writ of Execution of the quedans, delivery to it shall be effected
for the amount of P662,548,611.50. PNB thus only upon payment of the storage fees.
filed an Urgent Motion seeking the deferment of
the enforcement of the Writ of Execution.
CASES:
Nevertheless, the Sheriff levied on execution
several properties of PNB. The said bank also LIBERATA ANTONIO ESTRADA, CANUTO
CENIZAN, NAZARIO DE LA CRUZ, GENARO
filed a MR with Urgent Prayer for Quashal of
ALVARO, ET AL. v. COURT OF AGRARIAN
Writ of Execution. After several exchanges of RELATIONS and FAUSTINO F. GALVAN G.R.
motions, Judge Sayo denied with finality for lack Nos. L-17481 and L-17537 to L-17559, August
of merit the motions filed by PNB.
15, 1961
#81
Sec. 12. This Act shall take effect on its
approval.
13!
sale, which Wong signed. Ocampo received the
P2,500 from the sale and applied it as payment
for the rentals in arrears.
,-
of the Bulk Sales Law, declaring that he willfully
and voluntarily sold his shop, and that he
received the purchase price thereof, without
HELD
No. Wong was pressed to sign the deed Liwanag v. Menghraj, G.R. No. 47588, 20
Jun 1941
of sale by his creditor Ocampo. With threats of
closing the shop and court action for eviction, FACTS:
the accused was practically forced into signing Jose L. Liwanag, plaintiff and appellant
the deed of sale. BUT, even if he hadn’t been in this case, claims from Tolaram Menghraj and
forced to sign the deed, he still would not be others, defendants and appellants, the payment
criminally liable. Act No. 3925 is penal in nature of the sum of P550, with its legal interests from
and should be construed strictly against the April 1936 until its full payment, as the amount of
State. The object of sale was not covered by the the consigned assets in Exhibit A of the claim, in
provision. What was sold was the shop itself, addition to P500 for damages. Once the matter
together with the goodwill, credits, equipments, was ruled by the Manila Court of First Instance,
tools, machineries, which are not the stock of which acquitted the defendant of the claim, the
merchandise, goods, wares, provisions or plaintiff appealed the sentence before the Court
materials in bulk contemplated in the provision. of Appeal, and this certified the matter to this
Superiority, as it arose in the constitutionality of
the Law No. 3952.
Din has not complied with the conditions
ISSUE: Whether or not the trial court erred in prescribed by the aforementioned Law No. 3952
stating that the pending suit of Tolaram in cases such as this, before proceeding with the
Menghraj against Khaira Din as well as the claim sale of his goods, it is evident that the Exhibit B
of Lim Tek Chuan are claims or credits covered sale contract is null and void. right over the
by Act No. 3952, the Bulk Sales Law. goods, the amount of which is claimed in this
matter.
RULING:
Finally, as regards whether Law No. 3952 is People v. Mapoy,
unconstitutional, the appellant maintains that this G.R. No. 48336, 21 Sep 1942
law violates a person's right to dispose of their
property; restricts without due legal process your VIOLATION OF BULK SALES LAW (Act No.
constitutional right to dispose of your 3952); WHEN PAYMENT OF INDEMNITY TO
property; and that is a class legislation. OFFENDED PARTY DOES NOT LIE,
Defendants were charged with violation of the
The constitutional right to freely dispose of one's Bulk Sales Law in that they mortgaged all of
property is not absolute, as is not, generally, any their stock of goods, etc., without any notice to
right; it recognizes by limits the rights of others Daido Boeki Kaisha, Ltd., one of the offended
and those of the State itself. One and the other parties, to which they were indebted in the sura
demand protection. The creditor must be of P2,568.85. They pleaded guilty and each
protected in his rights against the debtor. What sentenced by the Court of First Instance of
the State, in the exercise of its police powers, Manila to pay a fine of P100, and the costs, and
has proposed through the legislative power, with to indemnify Daido Boeki Kaisha, Ltd., jointly
Law No. 3952, was not to deny citizens the and severally in the sum of P2,568.85, with
exercise of their rights recognized by the subsidiary imprisonment in case of insolvency.
Constitution, but rather, under certain Held: That it was error for the (rial court to
circumstances , that is, when in a case like this, consider said indebtedness as a liability arising
there are created rights that may be affected by from the crime charged, and to order defendants
the exercise of other rights, such exercise is to indemnify Daido Boeki Kaisha, Ltd., in the
done under certain conditions with the sole sum of P2,568.85, with subsidiary imprisonment
purpose of protecting and protecting the rights of in case of insolvency.
others.
The execution of a deed purporting to convey WHEREFORE. the appealed decision of the
ownership of a realty is in itself prima facie Intermediate Appellate Court should be, as it is
evidence of the existence of a valuable hereby AFFIRMED, with costs against herein
consideration, the party alleging lack of petitioners.
consideration has the burden of proving such
allegation.
representative if said donation does not contain considering its unique functions and
any condition. In simple and pure donation, the responsibilities, the central monetary
authority established under this Act, while offender from holding office or from being employed
being a government-owned corporation, with the CB, or placing the names of the offenders in
autonomy.
FACTS
provide policy directions in the areas of the President of the Philippines. Whenever the
designated Cabinet Member is unable to attend
money, banking, and credit. It shall have
a meeting of the Board, he shall designate an
supervision over the operations of banks
Undersecretary in his Department to attend as
and exercise such regulatory powers as
his alternate; and
provided in this Act and other pertinent laws
over the operations of finance companies (c) five (5) members who shall come from the
and non-bank financial institutions private sector, all of whom shall serve full-time:
performing quasi-banking functions, Provided, however, That of the members first
hereafter referred to as quasi-banks, and appointed under the provisions of this
institutions performing similar functions. subsection, three (3) shall have a term of six (6)
years, and the other two (2), three (3) years.
D. Monetary board (MB); its powers and
functions (Secs. 6-16) No member of the Monetary Board may
Section 6. Composition of the Monetary Board. - be reappointed more than once.
The powers and functions of the Bangko Sentral
shall be exercised by the Bangko Sentral Section 7. Vacancies. - Any vacancy in the
Monetary Board, hereafter referred to as the Monetary Board created by the death,
Monetary Board, composed of seven (7) resignation, or removal of any member shall be
members appointed by the President of the filled by the appointment of a new member to
Philippines for a term of six (6) years. complete the unexpired period of the term of the
member concerned.
The seven (7) members are:
Section 8. Qualifications. - The members of the
(a) the Governor of the Bangko Sentral, who Monetary Board must be natural-born citizens of
shall be the Chairman of the Monetary Board. the Philippines, at least thirty-five (35) years of
The Governor of the Bangko Sentral shall be age, with the exception of the Governor who
head of a department and his appointment shall should at least be forty (40) years of age, of
be subject to confirmation by the Commission on good moral character, of unquestionable
Appointments. Whenever the Governor is unable integrity, of known probity and patriotism, and
to attend a meeting of the Board, he shall with recognized competence in social and
designate a Deputy Governor to act as his economic disciplines.
alternate: Provided, That in such event, the
Monetary Board shall designate one of its Section 9. Disqualifications. - In addition to the
members as acting Chairman; disqualifications imposed by Republic Act No.
6713, a member of the Monetary Board is
disqualified from being a director, officer, (c) If the member is guilty of acts or operations
employee, consultant, lawyer, agent or which are of fraudulent or illegal character or
stockholder of any bank, quasi-bank or any other which are manifestly opposed to the aims and
institution which is subject to supervision or interests of the Bangko Sentral; or
examination by the Bangko Sentral, in which
case such member shall resign from, and divest (d) If the member no longer possesses the
himself of any and all interests in such institution qualifications specified in Section 8 of this Act.
before assumption of office as member of the
Monetary Board. Section 11. Meetings. - The Monetary Board
The members of the Monetary Board shall meet at least once a week. The Board may
coming from the private sector shall not hold any be called to a meeting by the Governor of the
other public office or public employment during Bangko Sentral or by two (2) other members of
their tenure. the Board.
No person shall be a member of the
Monetary Board if he has been connected The presence of four (4) members shall
directly with any multilateral banking or financial constitute a quorum: Provided, That in all cases
institution or has a substantial interest in any the Governor or his duly designated alternate
private bank in the Philippines, within one (1) shall be among the four (4).
year prior to his appointment; likewise, no
member of the Monetary Board shall be Unless otherwise provided in this Act, all
employed in any such institution within two (2) decisions of the Monetary Board shall require
years after the expiration of his term except the concurrence of at least four (4) members.
when he serves as an official representative of
the Philippine Government to such institution. The Bangko Sentral shall maintain and
preserve a complete record of the proceedings
Section 10. Removal. - The President may and deliberations of the Monetary Board,
remove any member of the Monetary Board for including the tapes and transcripts of the
any of the following reasons: stenographic notes, either in their original form
or in microfilm.
(a) If the member is subsequently disqualified
under the provisions of Section 8 of this Act; or Section 12. Attendance of the Deputy
Governors. - The Deputy Governors may attend
(b) If he is physically or mentally incapacitated the meetings of the Monetary Board with the
that he cannot properly discharge his duties and right to be heard.
responsibilities and such incapacity has lasted
for more than six (6) months; or
Section 13. Salary. - The salary of the Governor the Bangko Sentral shall be under the exclusive
and the members of the Monetary Board from supervision and control of the Monetary Board;
the private sector shall be fixed by the President
of the Philippines at a sum commensurate to the (c) establish a human resource management
importance and responsibility attached to the system which shall govern the selection, hiring,
position. appointment, transfer, promotion, or dismissal of
all personnel. Such system shall aim to establish
Section 14. Withdrawal of Persons Having a professionalism and excellence at all levels of
Personal Interest. - In addition to the the Bangko Sentral in accordance with sound
requirements of Republic Act No. 6713, any principles of management.
member of the Monetary Board with personal or
pecuniary interest in any matter in the agenda of A compensation structure, based on job
the Monetary Board shall disclose his interest to evaluation studies and wage surveys and
the Board and shall retire from the meeting when subject to the Board's approval, shall be
the matter is taken up. The decision taken on the instituted as an integral component of the
matter shall be made public. The minutes shall Bangko Sentral's human resource development
reflect the disclosure made and the retirement of program: Provided, That the Monetary Board
the member concerned from the meeting. shall make its own system conform as closely as
possible with the principles provided for under
Section 15. Exercise of Authority. - In the Republic Act No. 6758: Provided, however, That
exercise of its authority, the Monetary Board compensation and wage structure of employees
shall: whose positions fall under salary grade 19 and
below shall be in accordance with the rates
(a) issue rules and regulations it considers prescribed under Republic Act No. 6758.
necessary for the effective discharge of the
responsibilities and exercise of the powers On the recommendation of the Governor,
vested upon the Monetary Board and the appoint, fix the remunerations and other
Bangko Sentral. The rules and regulations emoluments, and remove personnel of the
issued shall be reported to the President and the Bangko Sentral, subject to pertinent civil service
Congress within fifteen (15) days from the date laws: Provided, That the Monetary Board shall
of their issuance; have exclusive and final authority to promote,
transfer, assign, or reassign personnel of the
(b) direct the management, operations, and Bangko Sentral and these personnel actions are
administration of the Bangko Sentral, reorganize deemed made in the interest of the service and
its personnel, and issue such rules and not disciplinary: Provided, further, That the
regulations as it may deem necessary or Monetary Board may delegate such authority to
convenient for this purpose. The legal units of
the Governor under such guidelines as it may the Monetary Board that he is not entitled to be
determine. indemnified as provided in this subsection.
(d) adopt an annual budget for and authorize Section 16. Responsibility. - Members of the
such expenditures by the Bangko Sentral as are Monetary Board, officials, examiners, and
in the interest of the effective administration and employees of the Bangko Sentral who willfully
operations of the Bangko Sentral in accordance violate this Act or who are guilty of negligence,
with applicable laws and regulations; and abuses or acts of malfeasance or misfeasance
or fail to exercise extraordinary diligence in the
(e) indemnify its members and other officials of performance of his duties shall be held liable for
the Bangko Sentral, including personnel of the any loss or injury suffered by the Bangko Sentral
departments performing supervision and or other banking institutions as a result of such
examination functions against all costs and violation, negligence, abuse, malfeasance,
expenses reasonably incurred by such persons misfeasance or failure to exercise extraordinary
in connection with any civil or criminal action, diligence.
suit or proceedings to which he may be, or is,
made a party by reason of the performance of Similar responsibility shall apply to
his functions or duties, unless he is finally members, officers, and employees of the
adjudged in such action or proceeding to be Bangko Sentral for: (1) the disclosure of any
liable for negligence or misconduct. information of a confidential nature, or any
information on the discussions or resolutions of
In the event of a settlement or the Monetary Board, or about the confidential
compromise, indemnification shall be provided operations of the Bangko Sentral, unless the
only in connection with such matters covered by disclosure is in connection with the performance
the settlement as to which the Bangko Sentral is of official functions with the Bangko Sentral, or is
advised by external counsel that the person to with prior authorization of the Monetary Board or
be indemnified did not commit any negligence or the Governor; or (2) the use of such information
misconduct. for personal gain or to the detriment of the
Government, the Bangko Sentral or third parties:
The costs and expenses incurred in Provided, however, That any data or information
defending the aforementioned action, suit or required to be submitted to the President and/or
proceeding may be paid by the Bangko Sentral the Congress, or to be published under the
in advance of the final disposition of such action, provisions of this Act shall not be considered
suit or proceeding upon receipt of an confidential.
undertaking by or on behalf of the member,
officer, or employee to repay the amount E. How the BSP handles banks in
distress (The New Central Bank Act)
advanced should it ultimately be determined by
a. Conservatorship (Secs. 29 & 30; Sec. the conservatorship is terminated on other
67, R.A. No. 8791) grounds, the conservator shall not be entitled to
such remaining balance. The Monetary Board
Section 29. Appointment of Conservator. -
may appoint a conservator connected with the
Whenever, on the basis of a report submitted by
Bangko Sentral, in which case he shall not be
the appropriate supervising or examining
entitled to receive any remuneration or
department, the Monetary Board finds that a
emolument from the Bangko Sentral during the
bank or a quasi-bank is in a state of continuing
conservatorship. The expenses attendant to the
inability or unwillingness to maintain a condition
conservatorship shall be borne by the bank or
of liquidity deemed adequate to protect the
quasi-bank concerned
interest of depositors and creditors, the
The Monetary Board shall terminate the
Monetary Board may appoint a conservator with
conservatorship when it is satisfied that the
such powers as the Monetary Board shall deem
institution can continue to operate on its own
necessary to take charge of the assets,
and the conservatorship is no longer necessary.
liabilities, and the management thereof,
The conservatorship shall likewise be terminated
reorganize the management, collect all monies
should the Monetary Board, on the basis of the
and debts due said institution, and exercise all
report of the conservator or of its own findings,
powers necessary to restore its viability. The
determine that the continuance in business of
conservator shall report and be responsible to
the institution would involve probable loss to its
the Monetary Board and shall have the power to
depositors or creditors, in which case the
overrule or revoke the actions of the
provisions of Section 30 shall apply.
previous management and board of directors
of the bank or quasi-bank.
Section 30. Proceedings in Receivership and
The conservator should be competent
Liquidation. - Whenever, upon report of the head
and knowledgeable in bank operations and
of the supervising or examining department, the
management. The conservatorship shall not
Monetary Board finds that a bank or quasi-bank:
exceed one (1) year.
The conservator shall receive
(a) is unable to pay its liabilities as they become
remuneration to be fixed by the Monetary Board
due in the ordinary course of business:
in an amount not to exceed two-thirds (2/3) of
Provided, That this shall not include inability to
the salary of the president of the institution in
pay caused by extraordinary demands induced
one (1) year, payable in twelve (12) equal
by financial panic in the banking community;
monthly payments: Provided, That, if at any time
within one-year period, the conservatorship is
(b) has insufficient realizable assets, as
terminated on the ground that the institution can
determined by the Bangko Sentral, to meet its
operate on its own, the conservator shall receive
liabilities; or
the balance of the remuneration which he would
have received up to the end of the year; but if
(c) cannot continue in business without involving If the receiver determines that the
probable losses to its depositors or creditors; or institution cannot be rehabilitated or permitted to
resume business in accordance with the next
(d) has willfully violated a cease and desist order preceding paragraph, the Monetary Board shall
under Section 37 that has become final, notify in writing the board of directors of its
involving acts or transactions which amount to findings and direct the receiver to proceed with
fraud or a dissipation of the assets of the the liquidation of the institution. The receiver
institution; in which cases, the Monetary Board shall:
may summarily and without need for prior
hearing forbid the institution from doing business (1) file ex parte with the proper regional trial
in the Philippines and designate the Philippine court, and without requirement of prior notice or
Deposit Insurance Corporation as receiver of the any other action, a petition for assistance in the
banking institution. liquidation of the institution pursuant to a
For a quasi-bank, any person of liquidation plan adopted by the Philippine
recognized competence in banking or finance Deposit Insurance Corporation for general
may be designed as receiver. application to all closed banks. In case of quasi-
The receiver shall immediately gather banks, the liquidation plan shall be adopted by
and take charge of all the assets and liabilities of the Monetary Board. Upon acquiring jurisdiction,
the institution, administer the same for the the court shall, upon motion by the receiver after
benefit of its creditors, and exercise the general due notice, adjudicate disputed claims against
powers of a receiver under the Revised Rules of the institution, assist the enforcement of
Court but shall not, with the exception of individual liabilities of the stockholders, directors
administrative expenditures, pay or commit any and officers, and decide on other issues as may
act that will involve the transfer or disposition of be material to implement the liquidation plan
any asset of the institution: Provided, That the adopted. The receiver shall pay the cost of the
receiver may deposit or place the funds of the proceedings from the assets of the institution.
institution in non-speculative investments. The
receiver shall determine as soon as possible, but (2) convert the assets of the institutions to
not later than ninety (90) days from takeover, money, dispose of the same to creditors and
whether the institution may be rehabilitated or other parties, for the purpose of paying the debts
otherwise placed in such a condition so that it of such institution in accordance with the rules
may be permitted to resume business with on concurrence and preference of credit under
safety to its depositors and creditors and the the Civil Code of the Philippines and he may, in
general public: Provided, That any determination the name of the institution, and with the
for the resumption of business of the institution assistance of counsel as he may retain, institute
shall be subject to prior approval of the Monetary such actions as may be necessary to collect and
Board. recover accounts and assets of, or defend any
action against, the institution. The assets of an
First Philippine International Bank vs.
institution under receivership or liquidation shall
Court of Appeals
be deemed in custodia legis in the hands of the
G.R. No. 115849, January 24, 1996
receiver and shall, from the moment the
institution was placed under such receivership or
PRINCIPLE:
liquidation, be exempt from any order of While admittedly, the Central Bank law gives
garnishment, levy, attachment, or execution. vast and far-reaching powers to the conservator
of a bank, it must be pointed out that such
The actions of the Monetary Board taken powers must be related to the "(preservation of)
under this section or under Section 29 of this Act the assets of the bank, (the reorganization of)
shall be final and executory, and may not be the management thereof and (the restoration of)
restrained or set aside by the court except on its viability." Such powers, enormous and
petition for certiorari on the ground that the extensive as they are, cannot extend to the post-
action taken was in excess of jurisdiction or with facto repudiation of perfected transactions,
such grave abuse of discretion as to amount to otherwise they would infringe against the non-
lack or excess of jurisdiction. The petition for impairment clause of the Constitution.
certiorari may only be filed by the stockholders In the case, it is not disputed that the bank
of record representing the majority of the capital was under a conservator placed by the Central
stock within ten (10) days from receipt by the Bank of the Philippines during the time that the
board of directors of the institution of the order negotiation and perfection of the contract of sale
directing receivership, liquidation or took place. Moreover, there was absolutely no
conservatorship. evidence that the Conservator, at the time the
The designation of a conservator under contract was perfected, actually repudiated or
Section 29 of this Act or the appointment of a overruled said contract of sale. The bank never
receiver under this section shall be vested objected to the sale, what it unilaterally
exclusively with the Monetary Board. repudiated was—not the contract —but the
Furthermore, the designation of a conservator is authority of Rivera to make a binding offer —and
not a precondition to the designation of a which unarguably came months after the
receiver. perfection of the contract.
(d) has willfully violated a cease and desist order If the receiver determines that the
under Section 37 that has become final, institution cannot be rehabilitated or permitted to
involving acts or transactions which amount to resume business in accordance with the next
fraud or a dissipation of the assets of the preceding paragraph, the Monetary Board shall
institution; in which cases, the Monetary Board notify in writing the board of directors of its
may summarily and without need for prior findings and direct the receiver to proceed with
hearing forbid the institution from doing business the liquidation of the institution. The receiver
in the Philippines and designate the Philippine shall:
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
For a quasi-bank, any person of any other action, a petition for assistance in the
recognized competence in banking or liquidation of the institution pursuant to a
finance may be designated as receiver. liquidation plan adopted by the Philippine
Deposit Insurance Corporation for general
The receiver shall immediately gather application to all closed banks. In case of quasi-
and take charge of all the assets and liabilities of banks, the liquidation plan shall be adopted by
the institution, administer the same for the the Monetary Board. Upon acquiring jurisdiction,
benefit of its creditors, and exercise the general the court shall, upon motion by the receiver after
powers of a receiver under the Revised Rules of due notice, adjudicate disputed claims against
Court but shall not, with the exception of the institution, assist the enforcement of
administrative expenditures, pay or commit any individual liabilities of the stockholders, directors
act that will involve the transfer or disposition of and officers, and decide on other issues as may
any asset of the institution: Provided, That the be material to implement the liquidation plan
receiver may deposit or place the funds of the adopted. The receiver shall pay the cost of the
institution in non-speculative investments. The proceedings from the assets of the institution.
receiver shall determine as soon as possible, but
not later than ninety (90) days from take over, (2) convert the assets of the institutions to
whether the institution may be rehabilitated or money, dispose of the same to creditors and
otherwise placed in such a condition so that it other parties, for the purpose of paying the debts
of such institution in accordance with the rules
on concurrence and preference of credit under Section 69. Receivership and Involuntary
the Civil Code of the Philippines and he may, in Liquidation. - The grounds and procedures for
the name of the institution, and with the placing a bank under receivership or liquidation,
assistance of counsel as he may retain, institute as well as the powers and duties of the receiver
such actions as may be necessary to collect and or liquidator appointed for the bank shall be
recover accounts and assets of, or defend any governed by the provisions of Sections 30, 31,
action against, the institution. The assets of an 32, and 33 of the New Central Bank Act:
institution under receivership or liquidation shall Provided, That the petitioner or plaintiff files with
be deemed in custodia legis in the hands of the the clerk or judge of the court in which the action
receiver and shall, from the moment the is pending a bond, executed in favor of the
institution was placed under such receivership or Bangko Sentral, in an amount to be fixed by the
liquidation, be exempt from any order of court. This Section shall also apply to the extent
garnishment, levy, attachment, or execution. possible to the receivership and liquidation
proceedings of quasi-banks
The actions of the Monetary Board taken
under this section or under Section 29 of this Act i. Governing law
shall be final and executory, and may not be
restrained or set aside by the court except on In Re: Petition for Assistance in the
petition for certiorari on the ground that the Liquidation of the Rural Bank of Bokod
action taken was in excess of jurisdiction or with (Benguet), Inc.
such grave abuse of discretion as to amount to G.R. No. 158261, 18 Dec 2006
lack or excess of jurisdiction. The petition for
certiorari may only be filed by the stockholders ii. Grounds (Secs. 30 & 36 of RA 7653; Sec. 53,
of record representing the majority of the capital R.A. No. 8791)
stock within ten (10) days from receipt by the
board of directors of the institution of the order See – Sec. 30
directing receivership, liquidation or
conservatorship. Section 36. Proceedings Upon Violation of This
Act and Other Banking Laws, Rules,
The designation of a conservator under Regulations, Orders or Instructions. - Whenever
Section 29 of this Act or the appointment of a a bank or quasi-bank, or whenever any person
receiver under this section shall be vested or entity willfully violates this Act or other
exclusively with the Monetary Board. pertinent banking laws being enforced or
Furthermore, the designation of a conservator is implemented by the Bangko Sentral or any
not a precondition to the designation of a order, instruction, rule or regulation issued by
receiver. the Monetary Board, the person or persons
responsible for such violation shall unless
otherwise provided in this Act be punished by a management/advisory/consultancy accounts;
fine of not less than Fifty thousand pesos and
(P50,000) nor more than Two hundred thousand
pesos (P200,000) or by imprisonment of not less 53.5. Rent out safety deposit boxes.
than two (2) years nor more than ten (10) years,
or both, at the discretion of the court. The bank shall perform the services permitted
under Subsections 53.1, 53.2,53.3 and 53.4 as
Whenever a bank or quasi-bank persists depositary or as an agent. Accordingly, it shall
in carrying on its business in an unlawful or keep the funds, securities and other effects
unsafe manner, the Board may, without which it receives duly separate from the bank's
prejudice to the penalties provided in the own assets and liabilities: The Monetary Board
preceding paragraph of this section and the may regulate the operations authorized by this
administrative sanctions provided in Section 37 Section in order to ensure that such operations
of this Act, take action under Section 30 of this do not endanger the interests of the depositors
Act. (Provision on receivership and liquidation) and other creditors of the bank. In case a bank
or quasi-bark notifies the Bangko Sentral or
Section 53. Other Banking Services. - In addition publicly announces a bank holiday, or in any
to the operations specifically authorized in this manner suspends the payment of its deposit
Act, a bank may perform the following services: liabilities continuously for more than thirty (30)
days, the Monetary Board may summarily and
53.1. Receive in custody funds, documents and without need for prior hearing close such
valuable objects; banking institution and place it under
receivership of the Philippine Deposit Insurance
53.2. Act as financial agent and buy and sell, by Corporation.
order of and for the account of their customers,
shares, evidences of indebtedness and all types iii. Who may be receiver? (Sec. 30)
of securities; For a quasi-bank, any person of recognized
competence in banking or finance may be
53.3. Make collections and payments for the designed as receiver.
account of others and perform such other
services for their customers as are not iv. Duties of receiver
incompatible with banking business;
Spouses Larrobis, Jr. v. Philippine Veterans
53.4 Upon prior approval of the Monetary Board, Bank, G.R. No. 135706, 01 Oct 2004
act as managing agent, adviser, consultant or
administrator of investment
FACTS:
Petitioner spouses contracted a acts not only for the benefit of the bank, but for
monetary loan with herein respondent bank its creditors as well.
secured by a REM executed on their lot.
Respondent bank then went bankrupt and was The receiver of the bank is in fact
placed under receivership/liquidation by the obliged to collect debts owing to the bank, which
Central Bank. Sometime after, respondent bank debts form part of the assets of the bank. The
sent a demand letter for the amount of the receiver must assemble the assets and pay the
insurance premiums advanced by it over the obligation of the bank under receivership, and
mortgaged property of petitioners. More than 14 take steps to prevent dissipation of such assets.
years from the time the loan became due and Accordingly, the receiver of the bank is obliged
demandable, respondent bank moved for the to collect pre-existing debts due to the bank, and
extrajudicial foreclosure of the mortgaged in connection therewith, to foreclose mortgages
property and was sold to it as being the lone securing such debts.
bidder. Petitioners moved to declare the
foreclosure null and void contending that the
respondent bank being placed under
receivership did not interrupt the running of the v. “Close Now-Hear Later” doctrine
prescriptive period. RTC ruled in favor of
respondents.
Central Bank of the Philippines v. Court of
RULING: Appeals, G.R. No. 76118, 30 Mar 1993
This is consistent with the purpose of FACTS:
receivership proceedings, i.e., to receive The Monetary Board (MB) issued on 31
collectibles and preserve the assets of the bank May 1985 Resolution No. 596 ordering the closure of
in substitution of its former management, and Triumph Savings Bank (TSB), forbidding it from
prevent the dissipation of its assets to the
doing business in the Philippines, placing it under
detriment of the creditors of the bank.
receivership, and appointing Ramon V. Tiaoqui as
When a bank is declared insolvent and
receiver.
placed under receivership, the Central Bank,
through the Monetary Board, determines On 11 June 1985, TSB filed a complaint
whether to proceed with the liquidation or with the RTC against Central Bank and Ramon V.
reorganization of the financially distressed bank. Tiaoqui to annul MB Resolution No. 596, with prayer
A receiver, who concurrently represents the
for injunction, challenging in the process the
bank, then takes control and possession of its
assets for the benefit of the bank’s creditors. A constitutionality of Sec. 29 of R.A. 269, otherwise
liquidator meanwhile assumes the role of the known as "The Central Bank Act," as amended,
receiver upon the determination by the Monetary
insofar as it authorizes the Central Bank to take over
Board that the bank can no longer resume
business. His task is to dispose of all the assets a banking institution even if it is not charged with
of the bank and effect partial payments of the violation of any law or regulation, much less found
bank’s obligations in accordance with legal guilty thereof.
priority. In both receivership and liquidation
proceedings, the bank retains its juridical
personality notwithstanding the closure of its ISSUE(S):
business and may even be sued as its corporate WON the absence of prior notice and hearing may be
existence is assumed by the receiver or
considered acts of arbitrariness and bad faith
liquidator. The receiver or liquidator meanwhile
sufficient to annul a Monetary Board resolution
enjoining a bank from doing business and placing it FACTS:
under receivership. The Rural Bank of Buhi was placed
under receivership and designated respondent
RULING: Odra as Receiver pursuant to the provisions of
No. A previous hearing is nowhere Section 29 of Republic Act No. 265, as
required in Sec. 29 nor does the constitutional amended. Odra implemented and carried out
requirement of due process demand that the said Monetary Board Resolution No. 583 by
correctness of the Monetary Board’s resolution authorizing deputies of the receiver to take
to stop operation and proceed to liquidation of control, possession, and charge of the Bank, its
first adjudged before making the resolution assets and liabilities. The Bank filed a petition for
effective. It is enough that a subsequent judicial injunction with Restraining Order against
review be provided. respondent Odra and DRBSLA assailing the
It may be emphasized that Sec. 29 does action of herein respondent Odra in
not altogether divest a bank or a non-bank recommending the receivership over the Bank
financial institution placed under receivership of as a violation of the provisions of Sections 28
the opportunity to be heard and present and 29 of Republic Act No. 265 as amended and
evidence on arbitrariness and bad faith because Section 10 of Republic Act No. 720 (The Rural
within ten (10) days from the date the receiver Banks Act), and as being ultra vires and done
takes charge of the assets of the bank, resort to with grave abuse of discretion and in excess of
judicial review may be had by filing an jurisdiction. Respondents filed their motion to
appropriate pleading with the court. Respondent dismiss alleging that the petition did not allege a
TSB did in fact avail of this remedy by filing a cause of action and is not sufficient in form and
complaint with the RTC of Quezon City on the substance. Petitioner Bank filed an opposition to
8th day following the takeover by the receiver of the motion to dismiss averring that the petition
the bank’s assets on 3 June 1985. This "close alleged a valid cause of action and that
now and hear later" scheme” is grounded on respondents have violated the due process
practical and legal considerations to prevent clause of the Constitution. Thereafter the Central
unwarranted dissipation of the bank’s assets and Bank Monetary Board issued a Resolution
as a valid exercise of police power to protect the ordering the liquidation of the Bank. RTC ruled in
depositors, creditors, stockholders and the favor of the Bank and issued a writ of execution.
general public. Banks are affected with public CA however restrained the enforcement of the
interest because they receive funds from the execution.
general public in the form of deposits.
ISSUE(S):
Rural Bank of Buhi, Inc. v. Court of Appeals, WON due process was violated.
G.R. No. 61689, 20 Jun 1988
RULING:
NO. Republic Act No. 265 does not disillusionment will run the gamut of the entire
require that a hearing be first conducted before a banking community.
banking institution may be placed under Furthermore, a banking institution's
receivership. Rather, it provides the conditions claim that a resolution of the Monetary Board
prerequisite to the action of the Monetary Board under Section 29 of the Central Bank Act should
to forbid the institution to do business in the be set aside as plainly arbitrary and made in bad
Philippines and to appoint a receiver to faith, may be asserted as an affirmative defense
immediately take charge of the bank's assets (Sections 1 and 4[b], Rule 6, Rules of Court) or a
and liabilities. They are: (a) an examination counterclaim (Section 6, Rule 6; Section 2, Rule
made by the examining department of the 72 of the Rules of Court) in the proceedings for
Central Bank; (b) report by said department to assistance in liquidation or as a cause of action
the Monetary Board; and (c) prima facie showing in a separate and distinct action where the latter
that the bank is in a condition of insolvency or so was filed ahead of the petition for assistance in
situated that its continuance in business would liquidation.
involve probable loss to its depositors or
creditors. vi. Liquidation
The petitioner’s contention that no
property shall be taken without due process of 1. As opposed to rehabilitation
law is guaranteed under the constitution is
without merit. It has long been established that Philippine Veterans Bank Employees Union
the closure and liquidation of a bank may be v. Vega, G.R. No. 105364, 28 Jun 2001
considered as an exercise of police power. Such
exercise may, however, be subject to judicial 2. Actions to take (Sec. 30)
inquiry and could be set aside if found to be
capricious, discriminatory, whimsical, arbitrary,
3. How assets are distributed (Secs. 31 & 32)
unjust or a denial of the due process and equal
protection clauses of the Constitution. Hence, Section 31. Distribution of Assets. - In case of
appointment of a receiver may be made by the liquidation of a bank or quasi-bank, after
Monetary Board without notice and hearing but payment of the cost of proceedings, including
its action is subject to judicial inquiry. Due reasonable expenses and fees of the receiver to
process does not necessarily require a prior be allowed by the court, the receiver shall pay
hearing; a hearing or an opportunity to be heard the debts of such institution, under order of the
may be subsequent to the closure. One can just court, in accordance with the rules on
imagine the dire consequences of a prior concurrence and preference of credit as
hearing: bank runs would be the order of the provided in the Civil Code.
day, resulting in panic and hysteria. In the
process, fortunes may be wiped out and
Section 32. Disposition of Revenues and liquidation proceedings of its money market
Earnings. - All revenues and earnings realized obligations to petitioner. Omnibus Finance, Inc.,
by the receiver in winding up the affairs and not having seasonably settled its obligations to
administering the assets of any bank or quasi- petitioner, the latter proceeded to effect the
bank within the purview of this Act shall be used extrajudicial foreclosure of said mortgages and
to pay the costs, fees and expenses mentioned the city sheriff of TagaytayCity issued a
in the preceding section (debts), salaries of such certificate of sale in favor of petitioner which
personnel whose employment is rendered were duly registered.
necessary in the discharge of the liquidation Respondents failed to seasonably
together with other additional expenses caused redeem said parcels of land, for which reason,
thereby. The balance of revenues and earnings, petitioner has executed an affidavit of
after the payment of all said expenses, shall consolidation of ownership which has not been
form part of the assets available for payment to submitted to the Registry of Deeds of Tagaytay
creditors. City, in view of the fact that possession of the
aforesaid titles or owner’s duplicate certificates
4. All claims filed in liquidation court of title remains with the RBO. To date, petitioner
has not been able to effect the registration of
Ong v. Court of Appeals, G.R. No. 112830, 01 said parcels of land in his name in view of the
Feb 1996 persistent refusal of respondents to surrender
RBO’s copies of its owner’s certificates of title for
All claims against the insolvent bank should be filed in the parcels of land covered by the two TCTs.
the liquidation proceeding. The judicial liquidation is Respondent RBO filed a motion to
intended to prevent multiplicity of actions against the dismiss on the ground of res judicata and that it
insolvent bank. It is a pragmatic arrangement designed was undergoing liquidation and it is the
to establish due process and orderliness in the
liquidation court which has exclusive jurisdiction
liquidation of the bank, to obviate the proliferation of
to take cognizance of petitioner’s claim. Trial
litigations and to avoid injustice and arbitrariness.
court denied the motion to dismiss because it
found that the causes of action in the previous
Facts:
and present cases were different although it was
Jerry Ong filed with the Regional Trial
silent on the jurisdictional issue. RBO filed a
Court of Quezon City a petition for the surrender
motion for reconsideration but was similarly
of 2 TCTs against Rural Bank of Olongapo, Inc.
rejected. The Court of Appeals, through a
(RBO), represented by its liquidator Guillermo G.
certiorari filed by RBO, annulled the challenged
Reyes, Jr. and deputy liquidator Abel Allanigue.
orders of the trial court which sustained the
The complaint stemmed from 2 parcels of land
jurisdiction of the trial court and denied
which was duly mortgaged by RBO in favor of
reconsideration thereof. Moreover, the trial judge
petitioner to guarantee the payment of Omnibus
was ordered to dismiss the civil case without
Finance, Inc., which is likewise now undergoing
prejudice to the right of petitioner to file his claim and arbitrariness. It is not necessary that a claim
in the liquidation proceedings pending before the be initially disputed in a court or agency before it
Regional Trial Court of Olongapo City. is filed with the liquidation court.
Issue: Whether or not the civil case against - Vda. de Manalo v. Court of Appeals, G.R.
RBO may proceed independently from the No. 129242, 16 Jan 2001
liquidation proceedings.
5. Disposition of banking franchise (Sec. 33)
Held: Section 29, par. 3, of R.A. 265 as
amended by P. D. 1827 provides –If the Section 33. Disposition of Banking
Monetary Board shall determine and confirm Franchise. - The Bangko Sentral may, if public
within (sixty days) that the bank x x x is insolvent interest so requires, award to an institution,
or cannot resume business with safety to its upon such terms and conditions as the
depositors, creditors and the general public, it Monetary Board may approve, the banking
shall, if the public interest requires, order its franchise of a bank under liquidation to
liquidation, indicate the manner of its liquidation
operate in the area where said bank or its
and approve a liquidation plan. The Central
branches were previously operating: Provided,
Bank shall, by the Solicitor General, file a
That whatever proceeds may be realized from
petition in the Court of First Instance[7] reciting
such award shall be subject to the appropriate
the proceedings which have been taken and
exclusive disposition of the Monetary Board.
praying the assistance of the court in the
liquidation of such institution. The court shall
TOPIC:LIQUIDATION AS OPPOSED TO
have jurisdiction in the same proceedings to
adjudicate disputed claims against the bank x x
REHABILITATION
manifest that petitioner cannot be held liable Appeals. The petitioner bank claim that since it
for interest on bank deposits which accrued was placed under receivership and prohibited
from the time it was prohibited by the Central from doing business in the Philippines it should
no longer be held liable for interests and
Bank to continue with its banking operations,
penalties on its account to the respondent bank.
that is, when Resolution No. 350 to that effect
However, CA rendered judgment affirming the
was issued on February 18, 1969.
decision of the RTC.
Inc., in the Regional Trial Court for the collection proscribed from seeking a modification or
of the sum of P2,809,280.25, capitalized and reversal of the assailed decision on the basis of
accrued interests, penalties and surcharges, and the evidence submitted by him in the Court of
for such other equitable reliefs. For its failure to Appeals, for if it were otherwise, he would
file its answer to the complaint, the trial court thereby be allowed to regain his right to adduce
declared the petitioner bank in default. Despite evidence, a right which he lost in the trial court
its receipt of the copy of the said order, the when he was declared in default, and which he
petitioner bank failed to file a motion to set aside failed to have vacated. In this case, the
In the meantime, the Monetary Board approved submitted by it only in the Court of Appeals.
the placement of the petitioner bank’s assets Petitioner was served with a copy of
under receivership. The Philippine Deposit summons and the complaint, but failed to file its
Insurance Corporation (PDIC) was designated answer thereto. It also failed to file a verified
as receiver (conservator) of the petitioner, and motion to set aside the order of default despite
the latter was prohibited from doing business in its receipt of a copy thereof. We note that the
the Philippines. Unaware of the action of the CB, trial court rendered judgment only on April 7,
the trial court rendered judgment by default 1998 or more than a year after the issuance of
against the petitioner bank ordering the bank to the default order; yet, the petitioner failed to file
any verified motion to set aside the said order Certiorari, Prohibition, & Mandamus
before the rendition of the judgment of default. Section 4. When and where petition filed.
The PDIC was designated by the Central Bank — The petition shall be filed not later than
of the Philippines as receiver (conservator) as
sixty (60) days from notice of the judgment,
early as January 14, 1998, and in the course of
order or resolution. In case a motion for
its management of the petitioner bank’s affairs, it
reconsideration or new trial is timely filed,
should have known of the pendency of the case
whether such motion is required or not, the
against the latter in the trial court. Moreover, the
petitioner, through the PDIC, received a copy of sixty (60) day period shall be counted from
the decision of the trial court but did not bother notice of the denial of said motion.
filing a motion for partial reconsideration
appending thereto the orders of the Monetary d. Who may question?
Board or a motion to set aside the order of Central Bank of the Philippines v. Court
default. Instead, the petitioner appealed the of Appeals, G.R. No. 76118, 30 Mar 1993
decision, and even failed to assign as an error
1. Bank Officers
the default order of the trial court. The petitioner
2. Stockholders representing
is, thus, barred from relying on the orders of the
majority of the capital stock
Monetary Board of the Central Bank of the
Philippines placing its assets and affairs under
receivership and ordering its liquidation. Quoted:
In regard to lack of capacity to sue
G. Judicial review on the part of Triumph Savings Bank we
view such argument as being specious, for
a. Availability of remedy (Sec. 30) if we get the drift of petitioners’ argument,
they mean to convey the impression that
only the CB appointed receiver himself may
b. Ground
question the CB resolution appointing him
as such. This may be asking for the
Central Bank of the Philippines v. Court
impossible, for it cannot be expected that
of Appeals,
the master, the CB, will allow the receiver it
G.R. No. L-50031-32, 27 Jul 1981
has appointed to question that very
appointment. Should the argument of
Banco Filipino Savings and Mortgage
petitioners be given circulation, then judicial
Bank v. Monetary Board
review of actions of the CB would be
effectively checked and foreclosed to the
c. Jurisdiction (Sec. 4, Rule 65, Rules of
very bank officials who may feel, as in the
Court)
case at bar, that the CB action ousting them
General Banking Act
from the bank deserves to be set aside.
(R.A. No. 8791, as amended)
Securities and Exchange Commission (SEC): X234, Manual of Regulations for Banks)
undertaken by a separate and distinct banks" shall refer to entities engaged in the
department or other similar unit in the UB: borrowing of funds through the issuance,
such functions both directly and indirectly acceptance of deposit substitutes as defined in
c. Methods of borrowing are issuance, ii. Funds obtained from the public (Sec. 8.2)
d. The purpose of which is established within three (3) years from the
(2) purchasing receivables or other obligations. authority granted herein, the Monetary Board
shall take into consideration their capability in
advertise or hold itself out as being engaged in amount of P750,000.00 was delayed the
the business of such bank, quasi-bank, trust same having been released to Plaintiff
Corporation, but this was because of the
entity, or association, or use in connection with
shortfall in the collateral cover of Plaintiffs
its business title, the word or words "bank",
loan.
"banking", "banker", "quasi-bank", "quasi-
Respondent Bank sent a demand
banking", "quasi-banker", "savings and loan letter to Petitioner spouses informing them
association", "trust corporation", "trust that since they have defaulted in paying their
company" or words of similar import or transact obligation, their mortgage will now be
in any manner the business of any such bank, foreclosed; that when Petitioners still failed to
corporation or association. pay, Respondent Bank initiated extrajudicial
Exc: Unless duly authorized to engage in the foreclosure of the real estate mortgage
executed by Plaintiff spouses. The instant
business of a bank, quasi-bank, trust entity, or
complaint was filed to forestall the extrajudicial
savings and loan association as defined in this
foreclosure sale of a piece of land mortgaged
Act, or other banking laws,
by Petitioner Corporation in favor of First
Summa Savings and Mortgage Bank which
d. Change in name bank was later renamed as PAIC Savings and
P.C. Javier & Sons Inc. v. Court of Mortgage Bank, Inc.
Appeals
G.R. No. 129552, 29 Jun 2005 ISSUE:
Sons Services, Inc., applied with First Summa Summa Savings and Mortgage Bank and
Savings and Mortgage Bank, later on PAIC Savings and Mortgage Bank, Inc. of
renamed as PAIC Savings and Mortgage their change in name in order to treat them as
Bank, Respondent Bank, for a loan one and the same entity and comply with their
loan releases were delayed; that the amount NO. There is no such requirement
of P 250, 000.00 was deducted from the IGLF provided in the Corporation Code and Banking
loan of P1.5 Million and placed under time Laws. After going over the Corporation Code
deposit. Respondent Bank, however, claims and Banking Laws, as well as the regulations
and circulars of both the SEC and the Bangko
Sentral ng Pilipinas (BSP), this Court finds may be dissolved by quo warranto proceedings
that there is no such requirement. instituted by the Solicitor General.
This Court cannot impose on a bank
that changes its corporate name to notify a
H. Nature of banking business (Sec. 2)
debtor of such change absent any law,
“It is fiduciary nature of banking that requires
circular or regulation requiring it. Such act
high standards of integrity and performance.”
would be judicial legislation. The formal
notification is, therefore, discretionary on the
a. Vital role in economy
bank. Unless there is a law, regulation or i. Subject to reasonable regulation by the State
circular from the SEC or BSP requiring the Central Bank of the Phils. v. Court
formal notification of all debtors of banks of of Appeals, G.R. Nos. 88353 &
any change in corporate name, such 92943, 08 May 1992
notification remains to be a mere internal The banking business is properly subject to
policy that banks may or may not adopt.
reasonable regulation under the police power
This Court finds that petitioners failed
of the state because of its nature and relation to
to comply with what is incumbent upon them
the fiscal affairs of the people and the revenues
to pay their loans when they became due. The
of the state. Banks are affected with public
lame excuse they belatedly advanced for their
non-payment cannot and should not prevent interest because they receive funds from the
respondent bank from exercising its right to general public in the form of deposits. Due to
foreclose the real estate mortgages executed the nature of their transactions and functions, a
in its favor. fiduciary relationship is created between the
banking institutions and their depositors.
e. Sanctions for operating without authority Therefore, banks are under the obligation to
Section 66. Penalty for Violation of treat with meticulous care and utmost fidelity
this Act. - Unless otherwise herein provided, the accounts of those who have reposed their
the violation of any of the provisions of this Act trust and confidence in them.
shall be subject to Sections 34, 35, 36 and 37 of
the New Central Bank Act. If the offender is a ii. Strikes and lockouts (Sec. 22; Article 278[g],
director or officer of a bank, quasi-bank or trust Labor Code, as amended)
entity, the Monetary Board may also suspend or Section 22. Strikes and Lockouts. - The banking
remove such director or officer. If the violation industry is hereby declared as indispensable to
is committed by a corporation, such corporation the national interest and, notwithstanding the
provisions of any law to the contrary, any strike
or lockout involving banks, if unsettled after Bank of the Philippine Islands v.
seven (7) calendar days shall be reported by the Intermediate Appellate Court,
Bangko Sentral to the secretary of Labor who G.R. No. 69162, 21 Feb 1992
may assume jurisdiction over the dispute or The bank is not expected to be infallible
decide it or certify the sane to the National but, as correctly observed by respondent
Labor Relations Commission for compulsory Appellate Court, in this instance, it must bear
arbitration. the blame for not discovering the mistake of its
The President of the Philippines may at teller despite the established procedure
any time intervene and assume jurisdiction over requiring the papers and bank books to pass
such labor dispute in order to settle or through a battery of bank personnel whose duty
terminate the same it is to check and countercheck them for
possible errors. Apparently, the officials and
b. Fiduciary nature of banking business employees tasked to do that did not perform
i. Degree of diligence required their duties with due care
Simex International, Inc. v. Court
of Appeals, 1. When utmost diligence required
G.R. No. 88013, 19 Mar 1990 a. In dealing with accounts of depositors
The depositor expects the bank to treat Philippine Banking Corp. v. Court
his account with the utmost fidelity whether of Appeals, G.R. No. 127469, 15
such account consists only of a few hundred Jan 2004
pesos or of millions. The bank must record In every case, the depositor expects the
every single transaction accurately, down to the bank to treat his account with the utmost
last centavo, and as promptly as possible. This fidelity, whether such account consists only of a
has to be done if the account is to reflect at any few hundred pesos or of millions. The bank
given time the amount of money the depositor must record every single transaction accurately,
can dispose of as he sees fit, confident that the down to the last centavo, and as promptly as
bank will deliver it as and to whomever he possible. This has to be done if the account is to
directs. A blunder on the part of the bank, such reflect at any given time the amount of money
as the dishonour of a check without good the depositor can dispose of as he sees fit,
reason, can cause the depositor not a little confident that the bank will deliver it as and to
embarrassment if not also financial loss and whomever he directs.
perhaps even civil and criminal litigation.
As the BANK’s depositor, Marcos had Banks handle daily transactions involving
millions of pesos. By the very nature of their
the right to expect that the BANK was
work the degree of responsibility, care and
accurately recording his transactions with it. trustworthiness expected of their employees
Upon the maturity of his time deposits, Marcos and officials is far greater than those of
ordinary clerks and employees. Banks are
also had the right to withdraw the amount due
expected to exercise the highest degree of
him after the BANK had correctly debited his diligence in the selection and supervision of
outstanding obligations from his time deposits. their employees.
only to cases where banks act under their institutions to disclose to any person
any info - deposits
fiduciary capacity, that is, as depositary of the
deposits of their depositors. But the same
Section 2. 1 All deposits of whatever nature
higher degree of diligence is not expected to be
with banks or banking institutions in the
exerted by banks in commercial transactions
Philippines including investments in bonds
that do not involve their fiduciary relationship
issued by the Government of the Philippines, its
with their depositors.
political subdivisions and its instrumentalities,
are hereby considered as of an absolutely
LAWONSECRECY confidential nature and may not be examined,
OF inquired or looked into by any person,
BANKDEPOSITS government official, bureau or office, except
(R.A. No. 1405, as amended)
upon written permission of the depositor, or in
cases of impeachment, or upon order of a
Section 28. Subject to reasonable conditions
competent court in cases of bribery or
prescribed by law, the State adopts and
dereliction of duty of public officials, or in cases
implements a policy of full public disclosure of
where the money deposited or invested is the
all its transactions involving public interest.
subject matter of the litigation.
B. Prohibited acts
Section 3. It shall be unlawful for any official or
1. Examination of deposits bec. They are
employee of a banking institution to disclose to
considered confidential in nature
any person other than those mentioned in
- Exc:
1.) upon written permission of the Section two hereof any information concerning
wealth. If in accordance with the provisions of possession of any person within the purview of
Republic Act Numbered One thousand three Section Two (2) hereof, acquired by him directly
hundred seventy-nine, a public official has been or indirectly through dummies, nominees,
found to have acquired during his incumbency, agents, subordinates and/or business associates
whether in his name or in the name of other by any combination or series of the following
(e) Household furniture and utensils necessary (l) The right to receive legal support, or money
for housekeeping, and used for that purpose by or property obtained as such support, or any
the judgment obligor and his family, such as the pension or gratuity from the Government;
judgment obligor may select, of a value not
exceeding one hundred thousand pesos; (m) Properties specially exempt by law.
But no article or species of property
(f) Provisions for individual or family use mentioned in his section shall be exempt from
sufficient for four months; execution issued upon a judgment recovered
for its price or upon a judgment of foreclosure
(g) The professional libraries and equipment of of a mortgage thereon.
judges, lawyers, physicians, pharmacists,
dentists, engineers, surveyors, clergymen, c. No violation of Law on Secrecy of Bank
teachers, and other professionals, not Deposits
exceeding three hundred thousand pesos in China Banking Corp. v. Ortega,
value; G.R. No. L-34964, 31 Jan 1973
FACTS:
(h) One fishing boat and accessories not Vicente Acaban won in a civil case for
exceeding the total value of one hundred sum of money against B & B Forest
thousand pesos owned by a fisherman and by Development Corporation. To satisfy the
the lawful use of which he earns his livelihood; judgment, the Acaban sought the garnishment
of the bank deposit of the B & B Forest Corporation only for the purposes of the
Development Corporation with the China garnishment issued by it, so that the bank
Banking Corporation (CBC). Accordingly, a would hold the same intact and not allow any
notice of garnishment was issued by the Deputy withdrawal until further order. It is sufficiently
Sheriff of the trial court and served on said bank clear that the prohibition against examination
through its cashier, Tan Kim Liong. Liong was of or inquiry into bank deposit under RA 1405
ordered to inform the Court whether or not does not preclude its being garnished to insure
there is a deposit in the CBC of B & B Forest satisfaction of a judgment. Indeed there is no
Development Corporation, and if there is any real inquiry in such a case, and the existence of
deposit, to hold the same intact and not allow the deposit is disclosed the disclosure is purely
any withdrawal until further order from the incidental to the execution process. It is hard to
Court. CBC and Liong refuse to comply with a conceive that it was ever within the intention of
court process garnishing the bank deposit of a Congress to enable debtors to evade payment
judgment debtor by invoking the provisions of of their just debts, even if ordered by the Court,
Republic Act No. 1405 ( Secrecy of Bank through the expedient of converting their assets
Deposits Act) which allegedly prohibits the into cash and depositing the same in a bank.
disclosure of any information concerning to
bank deposits. d. Liability for release
Rizal Commercial Banking Corp. v.
ISSUES: Whether or not a banking institution De Castro
may validly refuse to comply with a court G.R. No. L-34548, 29 Nov 1988
processes garnishing the bank deposit of a Facts:
judgment debtor, by invoking the provisions of Badoc Planters, Inc. filed an action for
Republic Act No. 1405. recovery of unpaid tobacco deliveries against
PVTA. Hon. Lourdes P. San Diego, then
RULING: NO. The lower court did not order an Presiding Judge, ordering the defendants
examination of or inquiry into deposit of B & B therein to pay jointly and severally, the plaintiff
Forest Development Corporation, as Badoc Planters, Inc. (hereinafter referred to as
contemplated in the law. It merely required Tan “BADOC”) within 48 hours the aggregate
Kim Liong to inform the court whether or not amount of P206,916.76, with legal interests
the defendant B & B Forest Development thereon. Accordingly, the Branch Clerk of Court
Corporation had a deposit in the China Banking on the very same day, issued a Writ of
Execution addressed to Special Sheriff Faustino essential to the proper conduct of such
Rigor, who then issued a Notice of Garnishment operations.” Among the specific powers vested
addressed to the General Manager and/or in the PVTA are: 1) to buy Virginia tobacco
Cashier of Rizal Commercial Banking grown in the Philippines for resale to local bona
Corporation (hereinafter referred to as RCBC). fide tobacco manufacturers and leaf tobacco
However, PVTA filed a Motion for dealers [Section 4(b), R.A. No. 2265]; 2) to
Reconsideration. The Judge set aside the Orders contracts of any kind as may be necessary or
of Execution and of Payment and the Writ of incidental to the attainment of its purpose with
Execution and ordering petitioner and BADOC any person, firm or corporation, with the
“to restore, jointly and severally, the account of Government of the Philippines or with any
PVTA with the said bank in the same condition foreign government, subject to existing laws
and state it was before. [Section 4(h), R.A. No. 22651; and 3) generally,
to exercise all the powers of a corporation
Issues: under the Corporation Law, insofar as they are
1) Whether or not PVTA funds are public funds not inconsistent with the provisions of this Act
not subject to garnishment; [Section 4(k), R.A. No. 2265.]
2) Whether or not the respondent Judge From the foregoing, it is clear that PVTA
correctly ordered the herein petitioner to has been endowed with a personality distinct
reimburse the amount paid to the Special Sheriff and separate from the government which owns
by virtue of the execution issued pursuant to the and controls it. Accordingly, this Court has
Order/Partial Judgment dated January 15, 1970. heretofore declared that the funds of the PVTA
can be garnished since “funds of public
1) Whether or not PVTA funds are public funds corporation which can sue and be sued were
not subject to garnishment; not exempt from garnishment. Inasmuch as the
Republic Act No. 2265 created the PVTA Tobacco Fund, a special fund, was by law,
as an ordinary corporation with all the earmarked specifically to answer obligations
attributes of a corporate entity subject to the incurred by PVTA in connection with its
provisions of the Corporation Law. Hence, it proprietary and commercial operations
possesses the power “to sue and be sued” and authorized under the law, it follows that said
“to acquire and hold such assets and incur such funds may be proceeded against by ordinary
liabilities resulting directly from operations judicial processes such as execution and
authorized by the provisions of this Act or as garnishment. Garnishment is considered as a
specie of attachment for reaching credits of the Writ of Execution and Order of Payment
belonging to the judgment debtor and owing to and so, the plaintiff alone should bear the
him from a stranger to the litigation. Under the consequences of a subsequent annulment of
above-cited rule, the garnishee [the third such court orders; hence, only the plaintiff can
person] is obliged to deliver the credits, etc. to be ordered to restore the account of the PVTA.
the proper officer issuing the writ and “the law
exempts from liability the person having in his E. Penalty for violation (Sec. 5)
possession or under his control any credits or SECTION 5. Any violation of this law will subject
other personal property belonging to the offender upon conviction, to an imprisonment
defendant, …, if such property be delivered or of not more than five years or a fine of not
transferred, …, to the clerk, sheriff, or other more than twenty thousand pesos or both, in
officer of the court in which the action is the discretion of the court.
pending.
F. Foreign Currency Deposit Act of the
2) Whether or not the respondent Judge Philippines (R.A. No. 6426)
correctly ordered the herein petitioner to a. Coverage/Prohibition (Sec. 8, R.A. No. 6426)
reimburse the amount paid to the Special Section 8. Secrecy of foreign currency deposits.
Sheriff – All foreign currency deposits authorized under
No. The bank was in no position to this Act, as amended by PD No. 1035, as well as
question the legality of the garnishment since it foreign currency deposits authorized under PD
was not even a party to the case. As correctly No. 1034, are hereby declared as and
pointed out by the petitioner, it had neither the considered of an absolutely confidential nature
personality nor the interest to assail or and, except upon the written permission of the
controvert the orders of respondent Judge. It depositor, in no instance shall foreign currency
had no choice but to obey the same inasmuch deposits be examined, inquired or looked into
as it had no standing at all to impugn the by any person, government official, bureau or
validity of the partial judgment rendered in office whether judicial or administrative or
favor of the plaintiff or of the processes issued legislative, or any other entity whether public or
in execution of such judgment. RCBC cannot private; Provided, however, That said foreign
therefore be compelled to make restitution currency deposits shall be exempt from
solidarily with the plaintiff BADOC. Plaintiff attachment, garnishment, or any other order or
BADOC alone was responsible for the issuance process of any court, legislative body,
government agency or any administrative body
whatsoever.