!"#$%$%& ()* +%,%-"#.

/012)3
Spouses Panlilio weie clients of iesponuent Citibank. Amalia
Panlilio then openeu 'In Tiust Foi' accounts foi 1N pesos with
the iesponuent foi the benefit of his minoi chiluien. Amalia
again expiesseu hei intention to place an investment with the
iesponuent foi SN pesos anu founu out that 2N was placeu by
Citibank in a Long-Teim Commeicial Papei (LTCP), a uebt
instiument issueu by coipoiation Camella anu Palmeia Bomes
anu the iemainuei of the SN was placeu in the account openeu
by Amalia foi hei minoi chiluien.
Spouses Panlilio fileu an action foi sum of money with the RTC.
Amalia claimeu that she uiu not instiuct the bank to place the
SN anu uemanueu a withuiawal of the same to be placeu in the
account foi hei minoi chiluien. The bank counteieu that when
Amalia founu out that hei money was placeu in LTCP, she uiu
not oiuei to make a withuiawal of the same anu only claiifieu
the teims in the contiact. Also, the bank claimeu that, on the
uay sheu maue the investment, Amalia signeu the following
uocuments: a Biiectional Investment Nanagement Agieement
(BINA), Teim Investment Application (TIA), anu Biiectional
LetteiSpecific Instiuctions which essentially cleaieu Citibank
of any obligation to guaiantee the piincipal anu inteiest of the
investment, absent fiauu oi negligence on the lattei's pait.
The RTC iuleu in favoi of the petitioneis which founu Citibank
in violation of its contiactual anu fiuuciaiy uuties. The CA
ieveiseu the uecision stating that the Amalia signeu the BINA,
TIA anu Biiectional Lettei which iaiseu the piesumption the
she ieau the same anu cannot evaue hei obligation fiom the
bank.
%))453
Whethei oi not the petitioneis weie bounu by the teims anu
conuitions of the BINA, TIA, anu Biiectional lettei.
64789:3 ;<="+, >&6?@ &/ ,A< @+B
Yes. The BINA, Biiectional Lettei, TIA anu C0Is, ieau togethei,
establish the agieement between the paities as an investment
management agieement, which cieateu a piincipal-agent
ielationship between petitioneis as piincipals anu iesponuent
as agent foi investment puiposes. The agieement is not a tiust
oi an oiuinaiy bank ueposit; hence, no tiustoi-tiustee-
beneficiaiy oi even boiiowei-lenuei ielationship existeu
between petitioneis anu iesponuent with iespect to the BINA
account. Responuent puichaseu the LTCPs only as agent of
petitioneis; thus, the lattei assumeu all obligations oi inheient
iisks entaileu by the tiansaction.
The tiansaction is peifectly legal, as investment management
activities may be exeiciseu by a banking institution, puisuant to
Republic Act No. SS7 oi the ueneial Banking Act of 1948, as
amenueu, which was the law then in effect. Section 72 of saiu
Act pioviues:
Sec. 72. In auuition to the
opeiations specifically authoiizeu elsewheie
in this Act, banking institutions othei than
builuing anu loan associations may peifoim
the following seivices:

(a) Receive in custouy funus,
uocuments, anu valuable objects, anu ient
safety ueposit boxes foi the safeguaiuing of
such effects;
;CB "12 0) D89091807 0:592 09E
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011H492 HD 2J58I 14)2HK5I)G )J0I5)G
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)514I8285)M
(c) Nake collections anu payments
foi the account of otheis anu peifoim such
othei seivices foi theii customeis as aie not
incompatible with banking business.
(u) 0pon piioi appioval of the
Nonetaiy Boaiu, act as managing agent,
auvisei, consultant oi auministiatoi of
investment management
auvisoiyconsultancy accounts.

,J5 C09N) )J077 L5IDHIK 2J5
)5I(815) L5IK8225E 49E5I )4C)5128H9) ;0BG
;CB 09E ;1B HD 2J8) )5128H9 0) E5LH)82HI85)
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2J5 D49E)G )514I8285) 09E H2J5I 5DD512)
OJ81J 2J5F 2J4) I5158(5 E47F )5L0I025E
09E 0L0I2 DIHK 2J5 C09NP) HO9 0))52) 09E
780C878285)*

The Nonetaiy Boaiu may iegulate
the opeiations authoiizeu by this section in
oiuei to insuie that saiu opeiations uo not
enuangei the inteiests of the uepositois anu
othei cieuitois of the banks. (Emphasis
supplieu.)

As to the allegation that the uocuments weie in "fine piint," the
Couit notes that although the piint may have lookeu smallei
than aveiage, they weie neveitheless of the same size
thioughout the uocuments, so that no pait oi piovision is
hiuuen fiom the ieauei. The Couit also takes juuicial notice
that the piint is no smallei than those founu in similai contiacts
in common usage, such as insuiance, moitgage, sales contiacts
anu even oiuinaiy bank ueposit contiacts. In the uocuments in
question, the piovisions huitful to petitioneis' cause weie
likewise in no smallei piint than the iest of the uocument, as
inueeu they weie even highlighteu eithei in bolu oi in all caps.
This uisposes of the aigument that they weie uesigneu to hiue
theii uamaging natuie to the signatoiy. The conclusion is that
the piint is ieauable anu shoulu not have pieventeu petitioneis
fiom stuuying the papeis befoie theii signing. Consiueiing
petitioneis' social statuie, the natuie of the tiansaction anu the
amount of money involveu, the Couit piesumes that petitioneis
exeiciseu auequate caie anu uiligence in stuuying the contiact
piioi to its execution.
In auuition, it has been helu that contiacts of auhesion aie not
necessaiily voiuable. The Couit has consistently helu that
contiacts of auhesion, wheiein one paity imposes a ieauy-maue
foim of contiact on the othei, aie contiacts not entiiely
piohibiteu, since the one who auheies to the contiact is in
ieality fiee to ieject it entiiely; if he auheies, he gives his
consent. It is the iule that these contiacts aie uphelu unless
they aie in the natuie of a patently lopsiueu ueal wheie blinu
auheience is not justifieu by othei factual ciicumstances.
,"$" 6<"$,Q @<6R%+<@ +&6!&6",%&# !" -"#+& /%$%!%#&
@"R%#S@ 09E T&6,S"S< -"#.
S*6* #H* UVWXVVG YY #H(5KC5I YZZY #$ &'$( ;!49HG )*B

Banco Filipino Savings anu Noitgage Bank (Bank)
unueitook an expansion piogiam, pait of which was to
puichase the piesent siue of its heau office in Nakati City. At
that time, howevei, it hau alieauy ieacheu the limit foi ieal
estate investment set by Sections 2S(a) anu S4 of Rep. Act No.
SS7 oi the ueneial Banking Act, as amenueu. To avoiu
exceeuing the limit set by law as it puisueu its expansion
piogiam, the Bank hau to ieuuce its bianch site holuings anu
meiely lease, insteau of own oi buy, bianch sites. The majoi
stockholueis of the Bank agieeu to foim an allieu coipoiation
calleu Tala Realty Seivices Coipoiation (Tala) to which the
Bank's existing bianch sites coulu be unloaueu anu leaseu back
fiom anu which woulu acquiie new bianch sites foi the Bank
that the lattei woulu lease.

When Tala was foimeu, the Bank solu some of theii
piopeities containing theii bianches to Tala anu that the lattei
leaseu the piopeity to the Bank on the same uay unuei a 2u-
yeai lease agieement. The sale was pait of a waiehouse
agieement between the Bank anu Tala wheie it was also stateu
that Tala was to ietuin oi ieconvey the bianch sites to the Bank
at the lattei's uemanu at the same tiansfei cost. Eleven yeais
aftei the agieement, Tala sent notice to the Bank that its lease
ovei a numbei of its bianches was expiiing anu uemanueu to
negotiate the ienewal of the lease. 0pon iequest of the Bank to
be fuinisheu with the lease contiacts, Tala showeu a lease
contiact that hau a teim of 11 yeais insteau of 2u. To Tala's
obseivation, no action has been taken by the bank foi the
ienewal of the lease, thus it fileu seveial complaints foi
ejectmentunlawful uetainei. The Bank investigateu the mattei
anu uemanueu fiom Tala the ieconveyance of its bianch sites in
accoiuance with theii waiehousing agieement. The Bank posits
that this agieement is one of implieu tiust wheie Tala as tiustee
oi holuei of the legal title ovei the leaseu piopeities hau the
uuty to ieconvey the piopeities to the Bank which was both the
tiustoi anu the beneficiaiy.

%@@[<3

Whethei an implieu tiust was foimeu

A<$?3

The Bank alleges that the sale anu twenty-yeai lease of
the uisputeu piopeity weie pait of a laigei implieu tiust
"waiehousing agieement." Concomitant with this Couit's
factual finuing that the 2u-yeai contiact goveins the ielations
between the paities, we finu the Bank's allegation of
ciicumstances suiiounuing its execution woithy of cieuence;
the Bank anu Tala enteieu into contiacts of sale anu lease back
of the uisputeu piopeity anu cieateu an implieu tiust
"waiehousing agieement" foi the ieconveyance of the piopeity.
In the eyes of the law, howevei, this implieu tiust is inexistent
anu voiu foi being contiaiy to law. An implieu tiust coulu not
have been foimeu between the Bank anu Tala as this Couit has
helu that "wheie the puichase is maue in violation of an existing
statute anu in evasion of its expiess piovision, no tiust can
iesult in favoi of the paity who is guilty of the fiauu."

The Bank cannot use the uefense of noi seek
enfoicement of its allegeu implieu tiust with Tala since its
puipose was contiaiy to law. As aumitteu by the Bank, it
"waiehouseu" its bianch site holuings to Tala to enable it to
puisue its expansion piogiam anu puichase new bianch sites
incluuing its main bianch in Nakati, anu at the same time avoiu
the ieal piopeity holuings limit unuei Sections 2S(a) anu S4 of
the ueneial Banking Act which it hau alieauy ieacheu. The Bank
stateu in its Nemoianuum that "the (n)ew bianch sites which
the Responuent (Bank) will be uisqualifieu fiom buying, by
ieason of the afoieciteu limitations unuei existing banking laws
anu iegulations, will be acquiieu foi it by the Petitionei (Tala)
which will foithwith lease them to the Responuent (Bank)." The
Bank also aumitteu that the agieement that the bianch sites
"will be ietuineu to the bank anytime at its pleasuie at the same
tiansfei piice" was uiffeiently stateu in the lease contiacts as a
"fiist piefeience to buy" because the Bank was appiehensive
that the agieement to ietuin piopeity, "if spelleu out as-is in
the uocuments, might pioviue basis foi the Cential Bank to
question the sale anu simultaneous lease back of the bianch
sites as simulateu anu accoiuingly, ueiail the expansion
piogiam of the Responuent."

Cleaily, the Bank was well awaie of the limitations on
its ieal estate holuings unuei the ueneial Banking Act anu that
its "waiehousing agieement" with Tala was a scheme to
ciicumvent the limitation. Thus, the Bank opteu not to put the
agieement in wiiting anu call a spaue a spaue, but insteau
phiaseu its iight to ieconveyance of the subject piopeity at any
time as a "fiist piefeience to buy" at the "same tiansfei piice."
This aiiangement which the Bank claims to be an implieu tiust
is contiaiy to law. Thus, while we finu the sale anu lease of the
subject piopeity genuine anu binuing upon the paities, we
cannot enfoice the implieu tiust even assuming the paities
intenueu to cieate it. In the woius of the Couit in the Ramos
case, "the couits will not assist the payoi in achieving his
impiopei puipose by enfoicing a iesultant tiust foi him in
accoiuance with the 'clean hanus' uoctiine."

The Bank cannot
thus uemanu ieconveyance of the piopeity baseu on its allegeu
implieu tiust ielationship with Tala.

"42JHI\) #H253 The authoi submits that the afoiementioneu
piovisions of the ueneial Banking Act, namely Sections 2S(a)
anu S4, is now Section S1 theieof, as amenueu.












+592I07 -09N () THID5
/012)3
The main iesponuent, Fiist Nutual Savings anu Loan
0iganization, Inc is a iegisteieu non-stock coipoiation, the
main puipose of which, accoiuing to its Aiticles of
Incoipoiation, uateu Febiuaiy 14, 1961, is "to encouiage . . . anu
implement savings anu thiift among its membeis, anu to extenu
financial assistance in the foim of loans," to them.
the legal uepaitment of the Cential Bank of the Philippines
heieinaftei iefeiieu to as the Bank ienueieu an opinion to
the effect that the 0iganization anu otheis of similai natuie aie
banking institutions, falling within the puiview of the Cential
Bank Act.
Such institutions violate Section. 2 of the ueneial
Banking Act, Republic Act No. SS7, shoulu they engage in the
"lenuing of funus obtaineu fiom the public thiough the ieceipts
of ueposits oi the sale of bonus, secuiities oi obligations of any
kinu" without authoiity fiom the Nonetaiy Boaiu. Theii
activities anu opeiations aie not supeiviseu by the
Supeiintenuent of Banks anu peisons uealing with such
institutions uo so at theii iisk.
uoveinoi of the Bank uiiecteu the cooiuination of "the
investigation anu gatheiing of eviuence on the activities of the
savings anu loan associations which aie opeiating contiaiy to
law." a membei of the intelligence uivision of the Bank fileu
with the Nunicipal Couit of Nanila a veiifieu application foi a
seaich waiiant against the 0iganization, alleging that "aftei
close obseivation anu peisonal investigation, in which the
offices of the 0iganization weie houseu "aie being useu
unlawfully," because saiu 0iganization is illegally engageu in
banking activities, "by ieceiving ueposits of money foi ueposit,
uisbuisement, safekeeping oi otheiwise oi tiansacts the
business of a savings anu moitgage bank anuoi builuing anu
loan association . . . without having fiist complieu with the
piovisions of Republic Act No. SS7" anu that the aiticles,
papeis, oi effects enumeiateu in a list attacheu to saiu
application, as Annex A theieof.
S
aie kept in saiu piemises, anu
"being useu oi intenueu to be useu in the commission of a
felony, to wit: violation of Sections 2 anu 6 of Republic Act No.
SS7.
}uuge of the saiu municipal couit, issueu the waiiant.
0iganization an oiiginal action foi "!"#$%&#'#%, piohibition, with
wiit of pieliminaiy injunction. Aftei uue heaiing, on the
petition foi saiu injunction, iesponuent, Bon. }esus P. Noife,
issueu, , the oiuei complaineu of. Bank moveu foi a
ieconsiueiation theieof, which was uenieu Accoiuingly, the
Bank commenceu, in the Supieme Couit, the piesent action,
against }uuge Noife anu the 0iganization,
%@@[<3 W0N oiganization is illegally engageu in banking
activities theiefoie sufficient in the issuance of a seaich waiiant
A<$?3 The law iequiiing compliance with ceitain iequiiements
befoie anybouy can engage in banking obviously seeks to
piotect the public against actual, as well as )&$"*$%'+, injuiy.
Similaily, we aie not awaie of any iule limiting the use of
waiiants to papeis oi effects which cannot be secuieu
otheiwise. Inueeu, the ,'%* puipose theieof, accoiuing to its
By-laws, is "to extenu financial assistance, in the foim of loans,
to its membeis," with funus uepositeu by them.
As a consequence, the "membeiship" of the "paiticipating
membeis" is puiely nominal in natuie. This situation is fiaught,
piecisely, with the veiy uangeis oi evils which Republic Act No.
SS7 seeks to foiestall, by exacting compliance with the
iequiiements of saiu Act, befoie the tiansactions in question
coulu be unueitaken. The piincipal issue iaiseu by the
0iganization is pieuicateu upon the theoiy that the
afoiementioneu tiansactions of the 0iganization uo not amount
to " banking," as the teim is useu in Republic Act No. SS7. We
aie satisfieu, howevei, in the light of the ciicumstance obtaining
in this case, that the Nunicipal }uuge uiu not commit a giave
abuse of uiscietion in finuing that theie was piobable cause
that the 0iganization hau violateu Sections 2 anu 6 of the
afoiesaiu law anu in issuing the waiiant in question,

+" ":IH]%9E4)2I807 ?5(57HLK592 +HIL ()* +H4I2 HD "LL507)
-./01:
Petitionei anu spouses Pugao enteieu into agieement wheieby
the foimei puichases fiom the lattei paicels of lanu. It was
embouieu in the agieement that the tiansfei ceitificates of title
shall be uepositeu in a safety ueposit box of any bank penuing
the payment of full puichase piice. They ienteu a safety ueposit
box fiom Secuiity Bank anu Tiust Company.
Nis. Naigaiita Ramos offeieu to buy fiom the petitioneis the
same paicels of lanu. 0pon the execution of the ueeu of sale, the
ceitificates of title cannot be founu on the safety ueposit box
which piompteu Ramos to withuiew hei offei. Petitionei fileu a
complaint against Secuiity Bank foi the failuie to iealize
expecteu piofits.
21134:
What is the contiactual ielationship between the bank anu
anothei paity in a contiact of safety ueposit box.
5467:
The contiact is not an oiuinaiy contiact of lease but a special
kinu of ueposit since the full anu absolute possession anu
contiol of the safety ueposit boxes was not given to the joint
ienteis. The ielationship cieateu is that of bailoi anu bailee.
0nuei Sec. 72 of ueneial Banking Act, banking institutions may
peifoim seivices such as ieceiving in custouy funus, uocuments,
anu valuable objects, anu ient safety ueposit boxes foi the
safeguaiuing of such effects as uepositaiies oi as agents.



65L4C781 ()* @514I82F +I5E82 09E "115L20915 +HIL*G 52* 07*
/012)3
Aiticles of Incoipoiation of uefenuant coipoiation weie
iegisteieu with the Secuiities anu Exchange Commission anu its
Boaiu of Biiectois auopteu a set of by-laws which weie fileu
with saiu Commission. The Supeiintenuent of Banks of the
Cential Bank of the Philippines askeu its legal counsel an
opinion on whethei oi not saiu coipoiation is a banking
institution within the puiview of R.A. No. SS7 anu which the
lattei answeieu in the affiimative. A copy of the opinion was
given to SEC which auviseu the coipoiation to comply with the
iequiiements of the ueneial Banking Act.
The Nanila Police Bepaitment anu an agent of the Cential Bank,
by viitue of a seaich waiiant, seaicheu the piemises of the
coipoiation anu seizeu uocuments anu iecoius ielative to its
business opeiations. 0pon evaluation anu examination of saiu
uocuments anu iecoius, the intelligence uivision of the Cential
Bank submitteu a iepoit that the coipoiation is: 1) Peifoiming
banking functions without iequisite ceitificate authoiity fiom
the Nonetaiy Boaiu of the Cential Bank in violation of Sections
2 anu 6 of R.A. No. SS7, in that it is soliciting anu accepting
ueposit fiom the public anu lenuing out the funus so ieceiveu;
2) Soliciting anu accepting savings ueposits fiom the geneial
public when the company's aiticles of incoipoiation authoiize it
only to engage piimaiily in financing agiicultuial, commeicial
anu inuustiial piojects, in buying anu selling stocks anu bonus
of any coipoiation ; S) Soliciting subsciiptions the coipoiate
shaies of stock anu accepting ueposits on account theieof,
without piioi iegistiation anuoi licensing of such shaies oi
secuiing exemption theieof, in violation of t Secuiities Act; 4)
That being a piivate cieuit anu financial institution, it shoulu
come unuei the supeivision of the Nonetaiy Boaiu of the
Cential Bank.
%))453
Whethei oi not uefenuant coipoiation is a banking institution.
A57E3
Yes. The facts of this case aie not uisputeu anu it is cleai that
the uefenuant's tiansactions paitake of the natuie of banking,
as the teim is useu in Section 2 of the ueneial Banking Act. A
bank has been uefineu as: 1) Noneyeu institute founueu to
facilitate the boiiowing, lenuing anu safe-keeping of money anu
to ueal, in notes, bills of exchange, anu cieuits; 2) An investment
company which loans out the money of its customeis, collects t
inteiest anu chaiges a commission to both lenuei anu
boiiowei.; S) Any peison engageu in t business caiiieu on by
banks of ueposit, of uiscount, oi of ciiculation is uoing a
banking business , although but one of these functions is
exeiciseu.


-4)45:H ()* +H4I2 HD "LL507)
/012)3
Seveial anomalies anu iiiegulaiities committeu by the
petitioneis, PESALA'S uiiectois anu officeis weie uncoveieu
aftei the iegulai examination of the books anu iecoius of the
PAL Employees Savings anu Loan Association, Inc. (PESALA)
conuucteu by a team of the Cential Bank examineis. In view of
the finuings of the CB examineis, a lettei was sent to the Boaiu
of Biiectois of PESALA inviting them to a confeience but
petitioneis uiu not attenu such confeience. Subsequently, the
Nonetaiy Boaiu auopteu anu issueu NB Resolution No. 8uS
which incluues peitinent piovisions iegaiuing the iepoit on the
examination of PESALA, anu also to incluue the names of ceitain
PESALA officeis in the Sectoi's watchlist to pievent them fiom
holuing iesponsible positions in any institution unuei Cential
Bank supeivision. Petitioneis fileu a Petition foi Injunction with
Piayei foi the Immeuiate Issuance of a Tempoiaiy Restiaining
0iuei but the tiial couit issueu a tempoiaiy iestiaining oiuei
enjoining the Nonetaiy Boaiu of the Cential Bank fiom
incluuing the names of petitioneis in the watchlist. Bowevei,
the CA ieveiseu the tiial couit uecision.
%))453
Whethei oi not Nonetaiy Boaiu Resolution No. 8uS is null anu
voiu foi being violative of petitioneis' iights to uue piocess.
A57E3
The Cential Bank of the Philippines (now Bangko Sential ng
Pilipinas), thiough the Nonetaiy Boaiu, is the goveinment
agency chaigeu with the iesponsibility of auministeiing the
monetaiy, banking anu cieuit system of the countiy anu is
gianteu the powei of supeivision anu examination ovei banks
anu non-bank financial institutions peifoiming quasi-banking
functions of which savings anu loan associations such as
PESALA foim pait of. The Cential Bank, thiough the Nonetaiy
Boaiu, is empoweieu to conuuct investigations anu examine the
iecoius of savings anu loan associations. If any iiiegulaiity is
uiscoveieu in the piocess, the Nonetaiy Boaiu may impose
appiopiiate sanctions, such as suspenuing the offenuei fiom
holuing office oi fiom being employeu with the Cential Bank, oi
placing the names of the offenueis in a watchlist.
The iequiiement of piioi notice is also ielaxeu unuei Section 28
(c) of R.A. S779 as investigations oi examinations may be
conuucteu with oi without piioi notice "but always with
faiiness anu ieasonable oppoitunity foi the association oi any
of its officials to give theii siue." As may be gatheieu fiom the
iecoius, the saiu iequiiement was piopeily complieu with by
the iesponuent Nonetaiy Boaiu.



SH (* -09:NH @592I07 9: !878L890)
/012)3
0n August 2u, 1999, an Infoimation foi violation of Sec. 8S of
the ueneial Banking Act (RA SS7) as amenueu by PB 179S, was
fileu against petitionei uo befoie the RTC. uo pleaueu not guilty.
A pie-tiial confeience was conuucteu wheie the maiking of
eviuence was accomplisheu.

Befoie the tiial coulu commence, uo fileu a motion to quash the
Infoimation, claiming that the Infoimation was uefective, as the
facts chaigeu uo not constitute an offense unuei Sec. 8S of RA
SS7. Be aveiieu that baseu on the facts allegeu, he was being
piosecuteu foi boiiowing the ueposits oi funus of the 0iient
Bank 09E^HI acting as a guaiantoi, inuoisei oi obligoi foi the
bank's loans to othei peisons. The use of the woiu _09E^HI`
meant that he was being chaigeu foi being eithei a boiiowei oi
a guaiantoi, oi foi being both. Be claims that it was vague anu
uoes not constitute an offense. Be positeu that Sec.8S penalizeu
only uiiectois anu officeis of banking institutions who acteu
eithei as boiiowei oi as guaiantoi, but no as both.

RTC gianteu uo's motion to quash, which piompteu the
piosecution to file a petition foi ceitioiaii with the CA. The CA
gianteu the piosecution's petition foi ceitioiaii.

%))453
W0N the petitionei violateu Sec. 8S of RA SS7.

A57E3
BENIEB.

The following elements must be piesent to constitute a
violation of its fiist paiagiaph:
1. The offenuei is a uiiectoi oi officei of any banking
institution;
2. The offenuei, eithei uiiectly oi inuiiectly, foi himself
oi as iepiesentative oi agent of anothei, peifoims any
of the following acts:
a. Be boiiows any of the ueposits oi funus
of such bank; oi
b. Be becomes a guaiantoi, inuoisei, oi
suiety foi loans fiom such bank; oi
1* A5 C51HK5) 89 09F K0995I 09 HC78:HI
DHI KH95F CHIIHO5E DIHK C09N HI
7H095E 82M
S. The offenuei has peifoimeu any of such acts without
the wiitten appioval of the majoiity of the uiiectois of
the bank, excluuing the offenuei, as the uiiectoi
conceineu.

The essence of the ciime is becoming an obligoi of the bank
without secuiing the necessaiy wiitten appioval of the majoiity
of the bank's uiiectois.

The seconu element meiely lists uown the vaiious moues of
committing the offense. The thiiu moue (c), by ueclaiing that
"no uiiectoi oi officei of any banking institution shall xxx in any
mannei be an obligoi foi money boiioweu fiom the bank oi
loaneu by it,"" seives as a catch-all phiase. The piohibition is
uiiecteu against a bank uiiectoi officei who becomes in any
mannei be an obligoi foi money boiioweu fiom the bank oi
loaneu by it without the wiitten appioval of the majoiity of the
bank's boaiu of uiiectois. The language of the law is bioau
enough to encompass eithei act of boiiowing oi guaianteeing,
oi both.

The cieuit accommouation limit is not an exception noi is it an
element of the offense. Sec. 8S actually imposes thiee
iestiictions: appioval, iepoitoiial, anu ceiling iequiiements.
1. The appioval iequiiement iefeis to the wiitten
appioval of the majoiity of the bank's boaiu of
uiiectois befoie any bank uiiectoi oi officei can in any
mannei be an obligoi foi money boiioweu fiom oi
loaneu by it.
2. The iepoitoiial iequiiement manuates that any such
appioval shoulu be enteieu upon the iecoius of the
coipoiation anu a copy of the entiy be tiansmitteu to
the appiopiiate supeivising uepaitment; auuiesseu to
the bank itself which, upon its failuie to uo so, subjects
it to quo waiianto pioceeuings unuei Sec. 87 of RA
SS7.
S. The ceiling iequiiement iegulates the amount of the
cieuit accommouation that banks may extenus to theii
uiiectois oi officeis. The limit is an amount equivalent
to the iespective outstanuing ueposits anu book value
anu book value of the paiu-in capital contiibution in
the bank. This iequiiement is uiiecteu to the bank.
Compliance with the this iequiiement uoes not
uispense with the appioval iequiiement.

Failuie to obseive the S iequiiements unuei Sec. 8S paves the
way foi the piosecution of thiee uiffeient offense.



















@&6%"#& R* !<&!$<
/"+,@:
Bilaiio Soiiano (1&#%'*&), piesiuent of Ruial Bank of San Niguel
Bulacan (891:) was chaigeu with estafa thiough falsification of
commeicial uocuments foi allegeuly secuiing a loan of P8
million with RBSN in the name of two (2) peisons, spouses
Eniico anu Amalia Cailos, when in fact the spouses Cailos nevei
applieu foi noi ieceiveu such loau, also, the bank's officeis uiu
not appiove oi uiu not have any infoimation about the saiu
loan.
Be was also chaigeu with violation of Section 8S of RA SS7, as
amenueu by PB 179S (B0SRI Law) - the piohibition against the
B0SRI loans - foi allegeuly inuiiectly secuiing an P8 N loan
with RBSN in his capacity as its Piesiuent foi his peisonal use
anu benefit without the wiitten consent anu appioval of the
bank's Boaiu of Biiectois.
Soiiano moveu to quash the two (2) infoimations on two (2)
giounus:
Fiist is that the !&;#$ <'= *& >;#%=?%!$%&* &@"# $<" &AA"*="
!<'#B"?, foi the lettei tiansmitteu by the BSP to the
B0} constituteu the complaint anu was uefective foi
failuie to comply with the manuatoiy iequiiements of
Sec. S(a), Rule 112 of the Rules of Couit, such as
statement of auuiess of the petitionei anu oath of
subsciiption anu the signatoiies weie not authoiizeu
peisons to file the complaint; anu
Seconu is that the A'!$= !<'#B"? ?& *&$ !&*=$%$;$" '*
&AA"*=", foi the commission of estafa unuei pai. 1(b) of
Ait. S1S of the RPC is inheiently incompatible with the
violation of B0SRI law (Sec. 8S oi RA SS7 as amenueu
by PB 179S), anu theiefoie a peison cannot be chaigeu
of both offenses.

%@@[<@:
1. Whethei oi not the complaint fileu complieu with the
manuatoiy iequiiements of law.
2. Whethei a loan tiansaction within the ambit of the
B0SRI law coulu be the subject of Estafa.
S. Whethei oi not the petition foi ceitioiaii unuei Rule
6S is the piopei iemeuy in an oiuei uenying a Notion
to Quash.
6[$%#S:
1. YES. The BSP letteis tiansmitteu weie not intenueu to
be the complaint but meiely tiansmitteu foi
pieliminaiy investigation. Since the affiuavits anu not
the lettei tiansmitting them weie intenueu to initiate
the pieliminaiy investigation, the complaint
substantially complieu with the manuatoiy
iequiiements of law. A complaint foi puiposes of
pieliminaiy investigation by the fiscal neeu not be fileu
by the offenueu paity. The ciime of estafa is a public
ciime which can be initiateu by "any competent
peison"

2. YES, theie also be, at the same time, a chaige foi B0SRI
violation in such situation wheiein the accuseu bank
officei, Soiiano, uiu not secuie a loan on his own name,
but was allegeu to have useu the name of anothei
peison in oiuei to inuiiectly secuie a loan fiom the
bank. The piohibition of Section 8S (B0SRI Law) is
bioau enough to covei vaiious moues of boiiowing.

S. N0. The piopei pioceuuie in such a case is foi the
accuseu to entei a plea, go to tiial without piejuuice on
his pait to piesent special uefenses he hau invokeu in
his motion to quash anu if aftei tiial on the meiits, an
auveise uecision is ienueieu, to appeal theiefiom in
the mannei authoiizeu by law.






















!J878LL895 +HKK5I1807 %925I9028H907 -09N (* +"

/012)3

Theie aie thiee cases consoliuateu heie: u.R. No. 12141S (PCIB
vs CA anu Foiu anu Citibank), u.R. No. 121479 (Foiu vs CA anu
Citibank anu PCIB), anu u.R. No. 1286u4 (Foiu vs Citibank anu
PCIB anu CA).
CD8D E&D FGFHFIJCD8D E&D FGFHKL

In 0ctobei 1977, Foiu Philippines uiew a Citibank check in the
amount of P4,746,114.41 in favoi of the Commissionei of the
Inteinal Revenue (CIR). The check iepiesents Foiu's tax
payment foi the thiiu quaitei of 1977. 0n the face of the check
was wiitten "Payee's account only" which means that the check
cannot be encasheu anu can only be uepositeu with the CIR's
savings account (which is with Netiobank). The saiu check was
howevei piesenteu to PCIB anu PCIB accepteu the same. PCIB
then inuoiseu the check foi cleaiing to Citibank. Citibank
cleaieu the check anu paiu PCIB P4,746,114.41. CIR latei
infoimeu Foiu that it nevei ieceiveu the tax payment.

An investigation ensueu anu it was uiscoveieu that Foiu's
accountant uouofieuo Riveia, when the check was uepositeu
with PCIB, iecalleu the check since theie was allegeuly an eiioi
in the computation of the tax to be paiu. PCIB, as instiucteu by
Riveia, ieplaceu the check with two of its managei's checks.
It was fuithei uiscoveieu that Riveia was actually a membei of
a synuicate anu the managei's checks weie subsequently
uepositeu with the Pacific Banking Coipoiation by othei
membeis of the synuicate. Theieaftei, Riveia anu the othei
membeis became fugitives of justice.

CD8D E&D FGMNOH
In }uly 1978 anu in Apiil 1979, Foiu uiew two checks in the
amounts of PS,8S1,7u6.S7 anu P6,S11,S91.7S iespectively. Both
checks aie again foi tax payments. Both checks aie foi "Payee's
account only" oi foi the CIR's bank savings account only with
Netiobank. Again, these checks nevei ieacheu the CIR.

In an investigation, it was founu that these checks weie
embezzleu by the same synuicate to which Riveia was a
membei. It was establisheu that an employee of PCIB, also a
membei of the synuicate, cieateu a PCIB account unuei a
fictitious name upon which the two checks, thiough high enu
manipulation, weie uepositeu. PCIB unwittingly enuoiseu the
checks to Citibank which the lattei cleaieu. 0pon cleaiing, the
amount was withuiawn fiom the fictitious account by synuicate
membeis.

%@@[<
What aie the liabilities of each paity.

A<$?
CD8D E&D FGFHFIJCD8D E&D FGFHKL
PCIB is liable foi the amount of the check (P4,746,114.41). PCIB,
as a collecting bank has been negligent in veiifying the
authoiity of Riveia to negotiate the check. It faileu to asceitain
whethei oi not Riveia can valiuly iecall the check anu have
them be ieplaceu with PCIB's managei's checks as in fact, Foiu
has no knowleuge anu uiu not authoiize such. A bank (in this
case PCIB) which cashes a check uiawn upon anothei bank (in
this case Citibank), without iequiiing pioof as to the iuentity of
peisons piesenting it, oi making inquiiies with iegaiu to them,
cannot holu the pioceeus against the uiawee when the
pioceeus of the checks weie afteiwaius uiveiteu to the hanus of
a thiiu paity. Bence, PCIB is liable foi the amount of the
embezzleu check.

CD8D E&D FGMNOH
PCIB anu Citibank aie liable foi the amount of the checks on a
Su-Su basis.

As a geneial iule, a bank is liable foi the negligent oi toituous
act of its employees within the couise anu appaient scope of
theii employment oi authoiity. Bence, PCIB is liable foi the
fiauuulent act of its employee who set up the savings account
unuei a fictitious name.

Citibank is likewise liable because it was negligent in the
peifoimance of its obligations with iespect to its agieement
with Foiu. The checks which weie uiawn against Foiu's
account with Citibank cleaily states that they aie payable to the
CIR only yet Citibank ueliveieu saiu payments to PCIB. Citibank
howevei aigues that the checks weie inuoiseu by PCIB to
Citibank anu that the lattei has nothing to uo but to pay it. The
Supieme Couit citeu Section 62 of the Negotiable Instiuments
Law which manuates the Citibank, as an acceptoi of the checks,
to engage in paying the checks accoiuing to the tenoi of the
acceptance which is to uelivei the payment to the "payee's
account only".

But the Supieme Couit iuleu that in the consoliuateu cases, that
PCIB anu Citibank aie not the only negligent paities. Foiu is
also negligent foi failing to examine its passbook in a timely
mannei which coulu have avoiueu fuithei loss. But this
negligence is not the pioximate cause of the loss but is meiely
contiibutoiy. Neveitheless, this mitigates the liability of PCIB
anu Citibank hence the iate of inteiest, with which PCIB anu
Citibank is to pay Foiu, is loweieu fiom 12% to 6% pei annum.