The document contains 7 questions regarding banking and commercial law in the Philippines. The questions cover topics such as the authority of the Monetary Board to order the closure of banks, prohibited activities during bank receivership, secrecy of bank deposits, disclosure requirements under the Truth in Lending Act, applicability of bulk sales law, validity of sales that violate bulk sales law, and loss of lien for warehouses upon surrendering possession of goods. For each question, a suggested answer is provided explaining the applicable law.
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2009 Bar Questions 2009 Bar Questions 2009 Bar Questions
The document contains 7 questions regarding banking and commercial law in the Philippines. The questions cover topics such as the authority of the Monetary Board to order the closure of banks, prohibited activities during bank receivership, secrecy of bank deposits, disclosure requirements under the Truth in Lending Act, applicability of bulk sales law, validity of sales that violate bulk sales law, and loss of lien for warehouses upon surrendering possession of goods. For each question, a suggested answer is provided explaining the applicable law.
The document contains 7 questions regarding banking and commercial law in the Philippines. The questions cover topics such as the authority of the Monetary Board to order the closure of banks, prohibited activities during bank receivership, secrecy of bank deposits, disclosure requirements under the Truth in Lending Act, applicability of bulk sales law, validity of sales that violate bulk sales law, and loss of lien for warehouses upon surrendering possession of goods. For each question, a suggested answer is provided explaining the applicable law.
1. Banks; Insolvency; Actions of the Monetary Board
Q: Maharlikang Pilipino Banking Corporation (MPBC) operates several branches of Maharlikang Pilipino Rural Bank in Eastern Visayas. Almost all the branch managers are close relatives of the members of the Board of Directors of the corporation. Many undeserving relatives of the branch managers were granted loans. In time, the branches could not settle their obligations to depositors and creditors. Receiving reports of these irregularities, the Supervising and Examining Department (SED) of the Monetary Board prepared a detailed report (SED Report) specifying the facts and the chronology of events relative to the problems that beset MPBC rural bank branches. The report concluded that the bank branches were unable to pay their liabilities as they fell due, and could not possibly continue in business without incurring substantial losses to its depositors and creditors. (A) May the Monetary Board order the closure of the MPBC rural banks relying only on the SED Report, without need of an examination? Explain. (3%) SUGGESTED ANSWER: Yes. Upon receipt of the report of the SED, the Monetary Board is authorized to take any of the actions enumerated under Sec. 30, Republic Act No. 7653, otherwise known as the New Central Bank Act, leading to the receivership and liquidation of a bank or quasi-bank. There is no requirement that an examination be first conducted before a banking institution may be placed under receivership ( Rural Bank of Buhi v. Court of Appeals, 162 SCRA 288 (1988)). (B) If MPBC hires you as lawyer because the Monetary Board has forbidden it from carrying on its business due to its imminent insolvency, what action will you institute to question the Monetary Boards order? Explain. (3%)] SUGGESTED ANSWER: The order of the Monetary Board may be questioned on a petition for certiorari on the ground that the action taken was in excess of jurisdiction or with grave abuse of discretion amounting to lack or excess of jurisdiction. The petition of certiorari may only be filed by the stockholders of record representing the majority of the capital stock within ten (10) days from receipt by the board of directors of MPBC of the order directing receivership, liquidation or conservatorship (Sec. 30, par. (2), R.A. No. 7653).
2. Banks; Receivership; Prohibited Transaction
Q: A bank under receivership can still grant new loans and accept new deposits. SUGGESTED ANSWER: False. During the receivership, the assets and properties of the corporation are being gathered for conversion into cash in preparation for distribution to creditors. Granting new loans and accepting new deposits would constitute doing business for the bank in the ordinary course of business which is contrary to the purpose and nature of a receivership proceeding. 3. Banks; Secrecy of Bank Deposits Q: If the Ombudsman is convinced that there is a violation of law after investigating a complaint alleging illicit bank deposits of public officer, the Ombudsman may order the bank concerned to allow in camera inspection of bank records and documents. SUGGESTED ANSWER: False. The Bank Secretary Law prohibits the inspection of a bank account unless the permission of the account holder is obtained, or upon lawful order of the court or when the deposit is the subject of litigation. Investigation by the Ombudsman is not considered as a pending litigation to allow the examination of the bank records and documents (Marquez v. Desierto, 359 SCRA 772 (2001)). 4. Truth in Lending Act Q: A loan agreement which provides that the debtor shall pay interest at the rate determined by the banks branch manager violates the disclosure requirement of the Truth in Lending Act. SUGGESTED ANSWER: True. This contrary to the duty of the creditor to disclose in detail the interests, charges and other figures indicating in detail the cost of the credit granted to the debtor (United Coconut Planters Bank v. Beluso, 530 SCRA 567 (2007)). 5. Bulk Sales Law; Covered Transactions Q: XXX Corporation (XXX) and its sister company, YYY Corporation (YYY), are both under judicial receivership. The receiver has the option to sell or substantially all of the properties of YYY to XX, or simply merges the two Corporations. Under either option, the requirements under the Corporation Code have to be complied with. The receiver seeks your advice on whether the Bulk Sales law will apply to either, or both, options. What will your advice be? Explain (4%) SUGGESTED ANSWER: I will advice the receiver that the Bulk Sales law does not apply to both options. Sect. 8 of the Bulk Sales Law expressly provides that it will not
apply executors, administrators, receivers, and assignees in insolvency, or public officers,
acting under judicial process. In this case, the receiver is acting under judicial process. 6. Bulk Sales Law; Validity Q: Even if the seller and the buyer in a sale in bulk violate the Bulk Sales Law, the sale would still be valid. SUGGESTED ANSWER: False. When the Bulk Sales Law is violated, the sale is null and void. When the provisions of the said law have not been complied with, the sale is considered as being fraudulent and void and even when coupled with delivery, the title over the goods does not transfer to the buyer. However, the civil liabilities arising from the transaction remain enforceable between the parties thereto. 7. Warehouse Receipt: Surrendering of Possession; Lien Q: Under the Warehouse loses his lien upon the goods when he surrenders possession thereof. SUGGESTED ANSWER: True. A lien is dependent on possession. When a warehouseman surrenders possession, he thereby loses his lien on the goods over which hi no longer has possession (Sec.29 (a), Warehouse Receipts Law).
In Re Marjec, Inc., T/a Shawnee-Land, Debtor, Marjec, Inc., T/a Shawnee-Land, and Donald R. Lamborne, Jean Lamborne v. Estate of Nicholas C. Miller, B.K. Haynes Corporation, John G. Leake, Trustee, 833 F.2d 1005, 4th Cir. (1987)