PHILIPPINE VETERANS BANK V.

COURT OF APPEALS, 317 SCRA

510 (1999)
FACTS: In 1983, Phil Veterans Bank (PVB) was placed under
receivership by BSP by virtue of a resolution issued by the Monetary
Board. Petitioner bank was subsequently placed under liquidation in
1985.
1. Consequently, the banks employees including private respondent
Molina were terminated from work and given their respective
separation pay and other benefits.
2. To assist in the liquidation, Molina and other former employees of
PVB were rehired.
3. Molina filed an action against petitioner banks liquidation team
arguing that he was entitled an increase in his salary by virtue of
Work Order 1 (P17 increase in the daily wage in 1990) and Work
Order 2 (P12 increase in 1991)
4. Petitioner bank argued that when it was placed under liquidation,
it lost its juridical personality, as such it could no longer enter into
contracts or transact business, since all its assets and liabilities
were turned over to the Central Bank. Since Molinas complaint
pertained to acts committed during the liquidation, the
substitution of PVB as party-respondent was erroneous

ISSUE: WON the bank is liable to pay Molinas claims

HELD: Yes. When a bank is declared insolvent and placed under
receivership, the Monetary Board determines whether to proceed with
the liquidation or reorganization of the financially distressed bank. A
receiver takes control and possession of the assets of the bank for the
benefit of its creditors and concurrently represents the bank. On the
other hand, a liquidator assumes the role of the receiver upon the
determination by the Monetary Board that the bank can no longer
resume business. The liquidators task is to dispose all of the assets of
the bank and effect partial payments of its obligations in accordance
with their legal priority. In both receivership and liquidation
proceedings, the bank retains its juridical personality despite the closure
of its business; in fact, the bank may be even sued. Its corporate
existence is assumed by the receiver or liquidator. The latter, however,
acts not only for the benefit of the bank, but for the banks creditors as
well.

CAB: PVB was initially closed and put under receivership and liquidation.
Upon its rehabilitation, petitioner assumed the rights and obligations of
the receiver and liquidator. This includes Molinas claim for unpaid
wages. It must be borne in mind that all the acts of the receiver and
liquidator pertain to the petitioner, having assumed petitioners
corporate existence. Petitioner cannot disclaim liability by arguing that
the non-payment of Molinas wages was committed by the liquidators
during the liquidation period.













BANGKO SENTRAL NG PILIPINAS V. VALENZUELA, 602 SCRA 698
(2009)
FACTS: In September 2007, the Supervision and Examination
Department of BSP conducted examinations of the books of the
following banks: Rural Bank of Paranaque Inc (RBPI), Rural Bank of San
Jose (Batangas), Rural Bank of Carmen Cebu Inc, Pilipino Rural Bank
Inc, Phil Countryside Rural Bank Inc, Rural Bank of Calatagan
(Batangas), Rural Bank of Darbci Inc, Rural bank of Kananga (Leyte),
Rural Bank de Bisayas Minglanilla, and San Pablo City Development
Bank Inc
1. After the examinations, SED officers provided the banks with
copies of Lists of Findings. These banks were then required to
comment and undertake the remedial measures within 30 days
from their receipt of the lists, including the infusion of additional
capital. However, according to SED, said banks failed to carry out
the required remedial measures
2. In response, the banks requested that the basis for the capital
infusion be disclosed and noted that none of them received the
Report of Examination (ROE) which finalizes the audit findings.
3. RBPI then filed an action to nullify the BSP ROE with an
application for a TRO and a writ of preliminary injunction. RBPI
prayed that petitioners be enjoined from submitting the ROE or
any similar report to the Monetary Board; or if the ROE had
already been submitted, that the Monetary Board be enjoined
them from acting on the basis of the said ROE (due process). The
other banks filed a similar suit.
4. SED and BSP filed an opposition to the application for a TRO and
writ of preliminary injunction. However, respondent judge granted
RBPIs prayer for the issuance of a TRO. When the cases were
consolidated, respondent judge issued an order granting the
issuance of TROs
5. RTC ruled that the banks were entitled to writs of preliminary
injunction. It ruled that it had been the practice of SED to provide
ROES to the banks before the submission to the Monetary Board.
And since the banks are the subject of said examinations, they are
entitled to the copies of the ROEs and denial of such constitute a
denial of their right to due process.
6. CA affirmed the same, ruling that the principles fairness and
transparency dictate that the respondent banks are entitled to
copies of ROE

ISSUE: WON the issuance of a writ of preliminary injunction is proper

HELD: No. The requisites for preliminary injunctive relief are: (a) the
invasion of right sought to be protected is material and substantial; (b)
the right of the complainant is clear and unmistakable; and (c) there is
an urgent and paramount necessity for the writ to prevent serious
damage. Such requirements are absent in the present case.

The respondent banks failed to show that they are entitled to the copies
of ROEs. There is no provision of law, no section in the procedures of
BSP that shows that BSP is required to give them copies of ROEs. Sec
28 NCBA, which governs the examinations of banking institutions,
provides that the ROE shall be submitted to the Monetary Board; the
bank examined is not mentioned as a recipient of the ROE.

The issuance by the RTC of writs of preliminary injunction is an
unwarranted interference with the powers of the Monetary Board. Sec
29 and 30 NCBA refer to the appointment of a conservator or a receiver
for a bank, which is a power of the Monetary Board for which they need
the ROEs done by the supervising or examining department. The writs
of preliminary injunction issued by the RTC hinder the Monetary Board
from fulfilling its function under the law. The actions of the Monetary
Board under Sec 29 and 30 NCBA may not be restrained or set aside
except on petition for certiorari on the ground that the action taken was
in excess of jurisdiction, or with such grave abuse of discretion
tantamount to lack or excess of jurisdiction. Therefore, the writs of
preliminary injunction cannot enjoin the Monetary Board from taking
action under the provisions of NCBA.

As to the third requirement, the banks have shown no necessity for the
preliminary injunctive relief to prevent serious damage. The serious
damage contemplated by the RTC was the possibility of imposition of
sanctions upon respondent bank, even the imposition of closure.
However, under the law, the sanction of closure could be imposed by
BSP even without notice and hearing. The close now, hear later,
scheme is grounded on practical and legal considerations to prevent
unwarranted dissipation of the banks assets and as a valid exercise of
police power to protect depositors, creditors, stockholders and the
general public.













PDIC V. PHIL COUNTRYSIDE RURAL BANK, 640 SCRA 322 (2011)
FACTS: In May 2005, the Board of Directors of PDIC adopted a
resolution approving the conduct of an investigation in accordance with
Sec 9(b-1) RA 3591, on the basis of the ROE of BSP on 10 banks. The
notice of investigation as then served on the president of respondent
Phil Countryside Rural Bank Inc (PCRBI).
1. In the course of its investigation, PDIC found that PCRBI granted
loans to certain individuals, which were settled by way of dacion of
properties. These properties, however, had already been
previously foreclosed and consolidated. A similar investigation was
sought against PRBI, RBCI and BEAI because said banks were
among the 10 banks collectively known as the legacy banks
(Legacy scam)
2. However, PRBI, RBCI and BEAI refused access to their records and
documents.
3. The banks then filed an action against PDIC and prayed for a
judgment interpreting Sec 9(b-1) PDIC charter to require prior
Monetary Board approval before PDIC could exercise
investigation/examination power over the banks
4. PDIC filed a motion to dismiss alleging that RTC had no
jurisdiction over said petition since a breach had already been
committed by the banks when they received the notices of
investigation and because PDIC need not secure prior MB approval
since examination and investigation are two different terms.
5. Later, the banks withdrew their application for TRO reasoning that
the lower courts cannot issue injunctions against PDIC. The banks
then filed a petition for injunction and TRO with CA-Manila
6. But before CA-Manila could rule on the petition, RTC Makati
dismissed the petition on the ground that there already existed a
breach of law that isolated the case from the jurisdiction of the
trial court. As such, CA-Manila dismissed the petition for being
moot and academic
7. The banks then filed their petition for injunction and preliminary
injunction with CA-Cebu. CA-Cebu granted the TRO. It ruled that
the definition of examination and investigation pertain to the
same thing.

ISSUE: WON prior approval of the Monetary Board is necessary before
PDIC may conduct an investigation of respondent banks

HELD: No. The disagreement stems from the interpretation of meaning
of examination and investigation, which are two distinct procedures
under the charter of PDIC and BSP. Under the PDIC charter, an
examination of banks requires the prior consent of the Monetary Board
whereas an investigation based on an examination report does not.

Examination involves an evaluation of the current status of a bank and
determines its compliance with the set standards regarding solvency,
liquidity, asset valuation, operations, systems, management, and
compliance with banking laws, rules and regulations.

Investigation, on the other hand, is conducted based on specific findings
of certain acts or omissions whicha re subject of a complaint of a final
ROE.

It is clear then that investigation does not involve the general evaluation
of the status of a bank. An investigation zeroes in on specific acts and
omissions uncovered via an examination, or which are cited in a
complaint.
An examination entails a review of essentially all the functions and
facets of a bank and its operation. It necessitates poring through
voluminous documents, and requires a detailed evaluation thereof. Such
a process then involves an intrusion into banks records. In contrast, an
investigation centers on specific acts or omissions, and thus, requires a
less invasive treatment.



























CENTRAL BANK V. MORFE, 62 SCRA 114 (1975)
FACTS: On February 18, 1969, the Monetary Board found Fidelity
Savings Bank (FSB) to be insolvent. As such, MB directed the
Superintendent of Banks to take charge of its assets and forbade it to do
business.
1. On December 9, 1969, MB sought the courts assistance in the
liquidation of the bank. The resolution was implemented only on
January 25, 1972 when Central Bank filed the petition for
assistance before CFI Manila
2. Prior to the institution of the liquidation proceedings but after the
declaration of insolvency (March 1971), spouses Elizes and Padilla
filed an action against FSB for recovery of sum of money
3. CFI ordered Central Bank, as liquidator, to pay private
respondents time deposits as preferred credits within the meaning
of Art 2244(14-b) NCC, if there are enough funds in the
liquidators custody in excess of the credits more preferred under
Sec 30 NCBA in relation to Art 2244 and 225a NCC.
4. Central Bank contended that after MB has declared that ah bank is
insolvent and has ordered it to cease operations, the Board
becomes the trustee of its assets for the equal benefit of all
creditors, including the depositors. As such, one cannot obtain an
advantage or preference over another by attachment, execution
or otherwise.

ISSUE: WON deposits are considered preferred credits

HELD: No. Sec 29 Central Banks charter explicitly provides that when a
bank is found to be insolvent, MB shall forbid it to do business and shall
take charge of its assets. One purpose in prohibiting the insolvent bank
from doing business is to prevent some depositors from having an
undue or fraudulent preference over other creditors and depositors.
That purpose would be nullified if, as in this case, after the bank is
declared insolvent, suits by some depositors could be maintained and
judgments would be rendered for the payments of their deposits and
then such judgments could be considered preferred credits under Art
2244 (14-b) NCC. To recognize such judgments as entitled to priority
would mean that depositors in insolvent banks, after learning that the
bank is insolvent as shown by the fact that it can no longer pay
withdrawals or that it has closed its doors or has been enjoined by MB
from doing business, would rush to the courts to secure judgments for
the payment of their deposits.




















FIRST PHILIPPINE INTERNATIONAL BANK V. CA, 252 SCRA 258
(1996)
FACTS: First Phil Intl Bank (FPIB) which has been in conservatorship
since 1984, is the owner of 6 parcels of land. The bank had an
agreement with Demetrio and Janolo for the two to purchase the parcels
of land for P5.5 million. The said agreement was made by Demetria and
Janolo with the Banks manager, Rivera.
1. Later, the bank, through its new conservator, Encarnacion,
sought the repudiation of the agreement as it alleged that
Rivera was not authorized to enter into such an agreement,
hence there was no valid contract of sale.
2. Subsequently, Demetria and Janolo sued FPIB. The RTC ruled in
favor of Demetria.
3. CA affirmed the RTC decision that there was a perfected
contract of sale between plaintiffs and the bank

ISSUES:
1. WON there was a perfected contract of sale in this case
2. WON the conservator can revoke the contract

HELD:
FIRST ISSUE:
SECOND ISSUE: No. In the first place, the issue of the conservators
alleged authority or repudiate the perfected contract of sale was raised
for the first timeit was not litigated in the trial court or CA. It is well-
settled that issues not raised in the trial court cannot be raised for the
first time on appeal as it would be offensive to the basic rules of fair
play, justice and due process.

Moreover, there is no evidence that the conservator, at the time the
contract was perfected, actually repudiated or overruled said contract.
The banks acting conservator at the time never objected to the sale of
the property to Demetria and Janolo. What petitioners are really
referring to is the letter of the new conservator Encarnacion, who took
over after the sale was perfected which unilaterally repudiatednot the
contractbut the authority of Rivera to make a binding offer.

SECOND ISSUE: No. Sec 28-A merely gives the conservator power to
revoke the contracts that are, under the existing law, deemed to be
defective, i.e. void, voidable, unenforceable or rescissible. Hence, the
conservator merely takes the place of a banks board of directors. What
the board cannot dosuch as repudiating a contract it validly entered
into under the doctrine of implied authoritythe conservator cannot do
either. His power is not unilateral and he cannot simply repudiate valid
obligations of the Bank. His authority would be only to bring court
actions to assail such contracts. A contrary understanding of the law
would not simply be permitted by the Constitution. To rule otherwise
would be to enable a failing bank to become solvent, at the expense of
third parties, by simply getting the conservator to unilaterally revoke all
previous dealings with the which had become one way or another come
to be considered unfavorable to the Bank, yielding nothing to perfected
contractual rights nor vested interests of the third who had dealt with
the Bank.








IN RE RURAL BANK OF BOKOD INC (RBBI) V. PDIC, 511 SCRA
123 (2006)
FACTS: 1986, The Supervision and Examination Sector (SES)
Department of BSP discovered several loan irregularities in petitioner
RBBI. The bank was given 30 days within which to infuse fresh capital
into the bank but no concrete action was taken by RBBI.
1. SES filed a report to the Monetary Board finding that the bank
remained insolvent and that it can no longer safely resume
business with the depositors, creditors and the general public. As
such, MB ordered the liquidation of the bank and designated SES
director as liquidator
2. In 1991, the banks liquidator filed with RTC a petition for
assistance in the liquidation of RBBI. Subsequently, MB assigned
PDIC as liquidator of RBBI
3. During the hearing, respondent BIR manifested that PDIC should
first secure a tax clearance certificate from BIR pursuant to Sec
52(C) Tax Code of 1997, before it could proceed with the
dissolution of RBBI. RTC ordered PDIC to comply with Sec 52(C)
Tax Code.
4. PDIC argues that the closure of banks under Sec 30 NCBA is
summary in nature and procurement of tax clearance under Sec
52(C) is not a condition precedent thereto; under Sec 30 NCBA,
asset distribution of a closed bank requires only the approval of
the liquidation court
5. BIR, on the other hand, contends that Sec 52(C) applies to all
corporations, including banks ordered closed by MB; that RTC
may order PDIC to obtain a tax clearance before proceeding to
rule on the motion for approval of project of distribution of assets
of RBBI

ISSUE: WON a bank closed and placed under receivership by MB still
needs to secure a tax clearance certificate from BIR before the
liquidation court approves the project of distribution of the banks assets

HELD: No. Sec 52(C) refer to a voluntary dissolution and/or liquidation
of a corporation through its adoption of a resolution or plan to that
effect, or an involuntary dissolution of a corporation by order of SEC.
They make no reference at all to a situation similar to the one at bar in
which a banking corporation is closed and placed under receivership by
BSP and its assets judicially liquidated. To replace SEC with BSP in Sec
52 would be to read into law and regulations something that is not
there, tantamount to judicial legislation.

The Corporation Code is a general law applying to all types of
corporations while NCBA regulates specifically banks and other financial
institutions. Between a general and special law, the latter shall prevail.

Corporation Code
1. SEC may dissolve a corporation upon filing of verified complaint
and after proper notice and hearing
2. Upon receipt of order of suspension, corporation is to submit copy
of order and file its final tax return.
3. BIR shall issue a tax clearance certificate 30 days from receipt
4. Final order of dissolution shall be issued by SEC only after the
corporation has submitted its final tax clearance
5. Corporation is allowed to continue as a body corporate for 3 years
after dissolution

New Central Bank Act
1. MB may summarily and without need for prior hearing, forbid the
banking corporation from doing business in the Philippines for
causes under Sec 30 NCBA
2. MB shall appoint PDIC as receiver of the bank
3. PDIC shall immediately gather and take charge of all the assets
and liabilities of the closed bank and administer the same for the
benefit of its creditors
4. Actions of MB under Sec 29 NCBA shall be final and executory and
may only be restrained or set aside on a petition for certiorari filed
by the stockholders representing the majority of the capital stock
5. PDIC as receiver shall file ex parte with proper RTC a petition for
assistance in the liquidation

Liquidation proceedings cannot be summary in nature. It requires the
holding of hearings and presentation of evidence of the parties
concerned. It also allows for multiple appeals, so that each creditor may
appeal a final order rendered against its claim.













FIDELITY SAVINGS & MORTGAGE BANK V. CENZON, 184 SCRA
141 (1990)
FACTS: Spouses Santiago deposited with Fidelity Savings & Mortgage
Bank (FSMB) P50,000 under a savings account and another P50,000
time deposit.
1. Subsequently, MB issued a resolution declaring FSMB insolvent
and forbid the bank from doing business
2. PDIC as liquidator was only able to pay the spouses P10,000
leaving a deposit balance of P90,000.
3. After a demand for the payment of the deposit balance, the
spouses filed an action for sum of money with damages against
the bank. The lower court ruled in favor of the spouses Santiago
and ordered the bank to pay interest on unpaid deposits even
after its closure plus moral and exemplary damages with
attorneys fees and costs

ISSUES:
1. WON an insolvent bank may be adjudged to pay interest on
unpaid deposits even after its closure by reason of insolvency
2. WON an insolvent bank may be adjudged to pay moral and
exemplary damages when the insolvency is because of the
anomalous real estate transactions

HELD:
FIRST ISSUE: No. It is well-settled that a banking institution which has
been declared insolvent and subsequently closed by the Central Bank
cannot be liable to pay interest on bank deposits which accrued during
the period when the bank is actually closed and non-operational.

Unless a bank can lend money, engage in international transactions,
acquire foreclosed mortgage properties or their process and generally
engage in other banking and financing activities from which it can derive
income, it is inconceivable how it can carry on as a depository obligated
to pay stipulated interest. Therefore, the order of the Central bank
allowing the claims of depositors and creditors to earn interest up to the
date of its closure in February 1969 is in line with jurisprudence.

SECOND ISSUE: No, the award of moral and exemplary damages is
erroneous. It is not disputed that there was no fraud or bad faith on the
part of the bank in accepting deposits of private respondents. Petitioner
bank could not even be faulted in not immediately returning the amount
considering that the case was filed several months after Central Bank
ordered FSMBs closure. By that time, the bank was no longer in a
position to comply with its obligations to its creditors. Moreover, this
case is not one of the specified or analogous cases wherein moral
damages may be recovered.

In the absence of fraud, bad faith, malice or wanton attitude, petitioner
bank cannot be held responsible for damages which may be reasonably
attributed to the nonperformance of the obligation.












MIRANDA V. PDIC, 5O1 SCRA 188 (2006)
FACTS: Petitioner Miranda was a depositor of Prime Savings Bank
(PSB). On June 3, 1999, she withdrew substantial amounts from her
account but instead of cash, she opted to be issued a crossed cashiers
check
1. On the same day she deposited the check, BSP suspended the
clearing privileges of PSB. The checks were then returned to her
unpaid
2. Subsequently, BSP placed PSB under receiveship of PDIC
3. Petitioner then filed an action for sum of money with RTC to
recover her funds from her unpaid checks against PSB, PDIC and
BSP
4. Petitioner argued that by the mere issuance of the cashiers check,
the funds represented by the check are transferred from the credit
of the maker to that of the payee or holder. Hence, she cannot be
placed in the same footing with the ordinary creditors of the bank
because Sec 30 NCBA is for equality among creditors
5. Respondents contend that the instant case involves a disputed
claim of sum of money against a closed financial institution. Sec
30-31 NCBA vests BSP with authority to evaluate and determine
the condition of any bank while PDIC has the primary
responsibility of acting as receiver or liquidator of the closed
financial institution. Since the relationship between Miranda and
PSB is one of creditor and debtor, petitioner should file her claim
with the liquidation court constituted precisely for purposes of
adjudicating claims against the bank in accordance with the rules
on concurrence and preference of credits.

ISSUE: WON petitioners claim falls within the provisions of Sec 30
NCBA and therefore under the jurisdiction of the liquidation court
HELD: Yes, petitioners claim qualifies as a disputed claim subject to the
jurisdiction of the liquidation court. Regular courts do not have
jurisdiction over actions filed by claimants under an insolvent bank,
unless there is clear showing that the action taken by the BSP in the
closure of the financial institution was in excess of jurisdiction or with
grave abuse of discretion.

The rationale behind judicial liquidation is intended to prevent
multiplicity of actions against insolvent bank. The Congress
contemplated that for convenience, only one court, if possible, should
pass upon the claims against the insolvent bank and that the liquidation
court should assist the Superintendent of Banks and regulate his
operations.

Consequently, it is only PSB is liable to pay for the amount of the two
checks. Solidary liability cannot attach to BSP in its capacity as
government liquidator of banks and PDIC as statutory receiver under
NCBA, because they are the principal government agencies mandated
by law to determine the financial viability of banks and quasi-banks and
facilitate receivership and liquidation of closed financial institutions,
upon a factual determination of the latters insolvency.










REYES V. RURAL BANK OF SAN MIGUEL (BULACAN), 399 SCRA
226 (2004)
FACTS: Petitioners are officials of BSP. At the time Reyes was Deputy
Governor and Head of SES, Domo-ong was Director of the Department
of Rural Banks, while Principio was examiner of DRB.
1. Rural Bank of San Miguel (RBSM) which had a history of major
violations, underwent periodic examinations by BSP.
2. Upon a Rural Bank Directors (Ilagan) request, she was furnished
a list of violations found by Principio. This, however, was made
unreadable making it impossible to react
3. During the exit conference, RBSM found about the findings and
requested for a 30 day extension
4. Based on the report, MB issued a resolution requiring the bank to
explain in writing and directed DRB to monitor the bank until the
violations have been corrected
5. Another examination team, headed by Principi conducted another
examination of the bank
a. During this examination, RBSM president claimed that he was
pressured into issuing a memo to bank employees authorizing
Principio to review the banks accounting and internal control
system. Then later, Reyes urged him to sell the bank
b. Soriano also alleged that Reyes introduced Soriano (RBSM
president) to TA Bank president Villacorta.
c. Reyes even asked him (Soriano) whether he wanted another
buyer and introduced Soriano to Castillo of Export & Industry
Bank (EIB)
6. In a resolution, MB ordered RBSM to correct the vioaltons within
30 days and remit P2 million fines. RBSM asked for the reversal of
the penalty to be debited on its demand deposit because at the
time, Soriano was under a state of extreme pressure to sell the
bank at a low price
7. RBSM charged petitioners with violating RA 3019 (Anti-graft and
corrupt practices Act) and RA 6713 (Code of Conduct and Ethical
Standards for Public Officials and Employees).

ISSUE: WON Reyes commit any act of unprofessionalism by reason of
his alleged illegal and unethical act of brokering the sale of RBSM

HELD: Yes, Reyes cannot escape administrative liability for the charge
of having displayed undue interest in brokering the sale of petitioner
bank. His acts are unprofessional as he concerned himself with
transactions that had nothing to do with his official function as BSP
Deputy Governor.

It is not correct to say that Reyes did not act as a broker simply because
he was not paid. There is no law which defines brokering, in terms of
payment. It is enough that Reyes introduced and brought the parties
together to try to negotiate a sale. A brokers duty is mainly to bring
prospective buyers and sellers together.

The circulars presented by Reyes indicate that it is indeed BSPs policy
to promote mergers and consolidations by providing incentives for
banks which would undergo such corporate combinations. However,
these circulars did not state the BSP officials should take an active role
in bringing parties together for the possibility of a buy-in or sell-out

Sec 4(A)(b) RA 6713: Norms of Conduct of Public Officials and
Employees (A) Every public official and employee shall observe the
following as standards of personal conduct in the discharge and
execution of official duties.

(b) Professionalism Public officials and employees shall perform and
discharge their duties with the highest degree of excellence,
professionalism, intelligence and skill. They shall enter public service
with utmost devotion and dedication to duty. The shall endeavor to
discourage wrong perceptions of their roles as dispensers or peddlers of
undue patronage.

Soriano was not subjected to undue pressure since he was also
interested in selling the bank. Still, Reyes active participation in looking
for possible buyers for RBSM was a violation of standards of
professionalism.




















PAPA V. VALENCIA, 284 SCRA 643 (1998)
FACTS: Papa, acting as attorney-in-fact of Angela Butte, allegedly sold
a parcel of land to Penarroyo. However, prior to the alleged sale, the
land was mortgaged by Butte to Associated Banking Corp along with
other properties. After the alleged sale but prior to the propertys
release by delivery, Butte died.
1. The bank refused to release the property to Penarroyo unless
and until the other mortgaged properties by Butte had been
redeemed and because of this, Penarroyo caused the annotation
on the title of an adverse claim
2. It was later discovered that the mortgage rights of the bank
were transferred to Parpana, the administrator of the estate of
Ramon Papa Jr. and he has been since then collecting monthly
rents. Despite repeated demands of Penarroyo and Valencia,
Papa refused to deliver the property which led to an action for
specific performance. The court rule in favor of Penarroyo and
Valencia
3. Papa alleged that the sale was not consummated since the
check issued by Penarroyo for payment was not encashed by
him. However, CA saw that Papa did in fact encashed the check
by means of a receipt
4. Papa also argued that Art 1249 NCC provides that payment of
checks only produce effect once they have been encashed and
he insisted that he never encashed the check. It must be noted
that Papa was in possession of the check for 10 years from the
time payment was made to him

ISSUE: WON the check can be considered as payment

HELD: Yes. While it is true that the delivery of a check produces the
effect of payment only when it is cashed, pursuant to Art 1249 NCC, the
rule is otherwise if the debtor is prejudiced by the creditors
unreasonable delay in presentment. The acceptance of a check implies
an undertaking of due diligence in presenting it for payment, and if he
from whom it is received sustains loss by want of such diligence, it will
be held to operate as actual payment of the debt or obligation for which
it was given.
]
It has, likewise, been held that if no presentment is made
at all, the drawer cannot be held liable irrespective of loss or
injury unless presentment is otherwise excused. This is in harmony with
Art 1249 NCC under which payment by way of check or other negotiable
instrument is conditioned on its being cashed, except when through the
fault of the creditor, the instrument is impaired. The payee of a check
would be a creditor under this provision and if its non-payment is
caused by his negligence, payment will be deemed effected and the
obligation for which the check was given as conditional payment will be
discharge.
















NEW PACIFIC TIMBER V. SENERIS, 101 SCRA 686 (1980)
FACTS: New Pacific failed to comply with its judgment obligation. Judge
issued writ of execution for P63,130 to which the Sheriff levied upon
personal properties and set the auction sale on January 15. Prior to the
scheduled sale, New Timber deposited with the Clerk of Court the
P50,000 check and P13,130 in cash. Seneris refused to accept check
and cash. Sheriff proceeded with the auction sale.

ISSUE: WON Seneris can validly refuse acceptance of the payment of
the judgment obligation made by New Timber, consisting of the
Cashiers check and cash.

HELD: Yes. Sec 63 of Central Bank act provides that checks
representing money are not considered legal tender and acceptance is
at the option of the creditor. However, a check that has been cleared
and credited to the account of the creditor is equivalent to delivery of
cash.

What was issued is a cashiers check from a bank of good standing and
reputation. It is a well-known and accepted practice in business that a
cashiers check is deemed as cash. Moreover, since the check had been
certified by the drawee bank, by the certification, the funds represented
by the checks are transferred from the credit of the maker to that of the
payee or holder, and for all intents and purposes, the latter becomes the
depositor of the drawee bank, with rights and duties of one in such
situation. The certification is equivalent to acceptance.

Said certification implies that the check is drawn upon sufficient
funds the hands of the drawee, that they have been set apart for
its satisfaction, and that they shall be so applied whenever the
check is presented for payment. The object of certifying a check
as to both parties is to enable the holder to use it as money.

CAB: The present case is an except to Sec 63 Central Bank Act



























FEBTC V. DIAZ REALTY, 363 SCRA 659 (2001)

FACTS: Diaz and Co. obtained a loan from Pacific Banking Corp. in 1974
in the amount of P720,000 at 12% interest p.a. which was increased
thereafter. The said loan was secured with a real estate mortgage over
two parcels of land owned by Diaz Realty, herein respondent.
Subsequently, the loan account was purchased by the petitioner Far
East Bank (FEBTC).
1. Two years after, the respondent through its President inquired
about its obligation and upon learning of the outstanding
obligation, it tendered payment in the form of an Interbank check
in the amount of P1,450,000 in order to avoid the further
imposition of interests. T
2. he payment was with a notation for the full settlement of the
obligation.
3. The petitioner accepted the check but it alleged in its defense that
it was merely a deposit. When the petitioner refused to release
the mortgage, the respondent filed a suit.
4. The lower court ruled that there was a valid tender of payment
and ordered the petitioner to cancel the mortgage. Upon appeal,
the appellate court affirmed the decision.

ISSUE: WON there was a valid tender of payment to extinguish the
obligation of the respondent

RULING: Yes. Although jurisprudence tells us that a check is not a legal
tender and a creditor may validly refuse it, this dictum does not prevent
a creditor from accepting a check as payment. Herein, the petitioner
accepted the check and the same was cleared.

A tender of payment is the definitive act of of offering the creditor what
is due him or her, together with the demand that he accepts it. More
important is that there must be a concurrence of intent, ability and
capability to make good such offer, and must be absolute and must
cover the amount due. The acts of the respondent manifest its intent,
ability and capability. Hence, there was a valid tender of payment.

Meanwhile, the transfer of credit from Pacific Bank to the petitioner did
not involve an effective novation but an assignment of credit.
Petitioners acquisition of respondents credit did not involve any
changes in the original agreement between PaBC and respondent;
neither did it vary the rights and the obligations of the parties. Thus, no
novation by conventional subrogation could have taken place.

An assignment of credit is an agreement by virtue of which the owner of
a credit (known as the assignor), by a legal cause -- such as sale, dation
in payment, exchange or donation -- and without the need of the
debtors consent, transfers that credit and its accessory rights to
another (known as the assignee), who acquires the power to enforce it,
to the same extent as the assignor could have enforced it against the
debtor. As such, the petitioner has the right to collect the full value of
the credit from the respondent subject to the conditions of the
promissory note previously executed.