September 19, 2020 - Banking Laws Cases

September 19, 2020 – Banking Laws (SpecCom)
1. Banco Filipino Savings and Mortgage Bank v. BSP and MB, G.R. No. 200678, June 4, 2018
2. BSP Monetary Board v. Hon. Antonio-Valenzuela, G.R. No. 184778, 2 October 2009
3. Tetangco v. COA, GR No. 215061, 6 June 2017
4. Soriano v. People, GR No. 240458, 8 January 2020
5. Spouses Panlilio v. Citibank NA, G.R. No. 156335, 11/28/2007
6. Reyes v. CA, G.R. No. 118492, 8/15/01
7. Citibank NA v. Spouses Cabamongan, 146918, 5/2/06
G.R. No. 200678, June 04, 2018
BANCO FILIPINO SAVINGS AND MORTGAGE BANK, Petitioner, v. BANGKO SENTRAL NG

PILIPINAS AND THE MONETARY BOARD, Respondents.
DECISION
LEONEN, J.:
A bank which has been ordered closed by the Bangko Sentral ng Pilipinas (Bangko Sentral) is placed
under the receivership of the Philippine Deposit Insurance Corporation. As a consequence of the
receivership, the closed bank may sue and be sued only through its receiver, the Philippine Deposit
Insurance Corporation. Any action filed by the closed bank without its receiver may be dismissed.
This is a Petition for Review on Certiorari 1 assailing the Court of Appeals July 28, 2011 Decision2 and
February 16, 2012 Resolution3 in CA-G.R. SP No. 116905, which dismissed Civil Case No. 10-1042 and
held that the trial court had no jurisdiction over Bangko Sentral and the Monetary Board.
On December 11, 1991, this Court promulgated Banco Filipino Savings & Mortgage Bank v. Monetary
Board and Central Bank of the Philippines,4 which declared void the Monetary Board's order for closure
and receivership of Banco Filipino Savings & Mortgage Bank (Banco Filipino). This Court also directed the
Central Bank of the Philippines and the Monetary Board to reorganize Banco Filipino and to allow it to
resume business under the comptrollership of both the Central Bank and the Monetary Board. 5
Banco Filipino subsequently filed several Complaints before the Regional Trial Court, among them a claim
for damages in the total amount of P18,800,000,000.00. 6
On June 14, 1993, Congress passed Republic Act No. 7653, 7 providing for the establishment and
organization of Bangko Sentral as the new monetary authority.
On November 6, 1993, pursuant to this Court's 1991 Banco Filipino Decision, the Monetary Board issued
Resolution No. 427, which allowed Banco Filipino to resume its business. 8
In 2002, Banco Filipino suffered from heavy withdrawals, prompting it to seek the help of Bangko Sentral.
In a letter dated October 9, 2003, Banco Filipino asked for financial assistance of more than
P3,000,000,000.00 through emergency loans and credit easement terms. 9 In a letter10 dated November
21, 2003, Bangko Sentral informed Banco Filipino that it should first comply with certain conditions
imposed by Republic Act No. 7653 before financial assistance could be extended. Banco Filipino was also
required to submit a rehabilitation plan approved by Bangko Sentral before emergency loans could be
granted.
1
In a letter11 dated April 14, 2004, Banco Filipino submitted its Long-Term Business Plan to Bangko
Sentral. It also claimed that Bangko Sentral already extended similar arrangements to other banks and
that it was still awaiting the payment of P18,800,000,000.00 in damage claims, "the entitlement to which
the Supreme Court has already decided with finality." 12
In response, Bangko Sentral informed Banco Filipino that its business plan could not be acted upon since
it was neither "confirmed nor approved by [Banco Filipino's Board of Directors]." 13
On July 8, 2004, Banco Filipino filed a Petition for Revival of Judgment with the Regional Trial Court of
Makati to compel Bangko Sentral to approve its business plan. The case was docketed as Civil Case No.
04-823 and was raffled to Branch 62.14
During the pendency of its Petition, Banco Filipino entered into discussions and negotiations with Bangko
Sentral, which resulted to seven (7) revisions in the business plan. Thus, Banco Filipino filed a Proposal
for Settlement dated September 21, 2007 before Branch 62, Regional Trial Court, Makati City to settle the
issues between the parties.15
On April 8, 2009, Banco Filipino submitted its 8 th Revised Business Plan to Bangko Sentral for
evaluation.16 In this business plan, Banco Filipino requested, among others, a P25,000,000,000.00 income
enhancement loan. Unable to come to an agreement, the parties constituted an Ad Hoc Committee
composed of representatives from both parties to study and act on the proposals. The Ad Hoc Committee
produced an Alternative Business Plan, which was accepted by Banco Filipino, but was subject to the
Monetary Board's approval.17
In a letter18 dated December 4, 2009, Bangko Sentral informed Banco Filipino that the Monetary Board
issued Resolution No. 1668 granting its request for the P25,000,000,000.00 Financial Assistance and
Regulatory Reliefs to form part of its Revised Business Plan and Alternative Business Plan. The approval
was also subject to certain terms and conditions, among which was the withdrawal or dismissal with
prejudice to all pending cases filed by Banco Filipino against Bangko Sentral and its officials. 19 The terms
also included the execution of necessary quitclaims and commitments to be given by Banco Filipino's
principal stockholders, Board of Directors, and duly authorized officers "not to revive or refile such similar
cases in the future."20
In a letter21 dated January 20, 2010, Banco Filipino requested reconsideration of the terms and conditions
of the P25,000,000,000.00 Financial Assistance and Regulatory Reliefs package, noting that the salient
features of the Alternative Business Plan were materially modified. 22 However, in a letter23 dated April 8,
2010, Banco Filipino informed Bangko Sentral that it was constrained to accept the "unilaterally whittled
down version of the [P25,000,000,000.00] Financial Assistance Package and Regulatory Reliefs." 24 It,
however, asserted that it did not agree with the condition to dismiss and withdraw its cases since this
would require a separate discussion.25
In a letter26 dated April 19, 2010, Bangko Sentral informed Banco Filipino that it was surprised by the
latter's hesitation in accepting the terms and conditions, in particular, the withdrawal of the cases against
it, since this condition had already been discussed from the start of the negotiations between the parties. 27
In a letter28 dated June 21, 2010, Banco Filipino informed Bangko Sentral that it never accepted the
condition of the withdrawal of the cases in prior negotiations but was willing to discuss this condition as a
separate and distinct matter.
In a letter29 dated August 10, 2010, Bangko Sentral and the Monetary Board, through counsel CVC Law,
informed Banco Filipino that its rejection of certain portions of Resolution No. 1668, particularly its refusal
2
to withdraw all cases filed against Bangko Sentral, was deemed as a failure to reach a mutually
acceptable settlement.
In a letter30 dated August 13, 2010, Banco Filipino questioned the legality of referring the matter to private
counsel and stated that it had not been notified of the action taken on the acceptance of its Business Plan.
In a letter31 dated September 13, 2010, CVC Law told Banco Filipino that the matter was referred to it as
an incident of Civil Case No. 04-823, which it was handling on behalf of Bangko Sentral. It also informed
Banco Filipino that the latter's rejection of the terms and conditions of Resolution No. 1668 made this
Resolution legally unenforceable.
Banco Filipino sent letters32 dated September 22, 2010 and September 28, 2010, questioning the legality
of Bangko Sentral's referral to private counsel and reiterating that the terms and conditions embodied in
Resolution No. 1668 were not meant to be a settlement of its P18,800,000,000.00 damage claim against
Bangko Sentral.
In a letter33 dated October 4, 2010, Bangko Sentral reiterated that its referral of the matter to CVC Law
was due to the matter being incidental to the civil case pending before the Regional Trial Court.
On October 20, 2010, Banco Filipino filed a Petition For Certiorari and Mandamus with prayer for issuance
of a temporary restraining order and writ of preliminary injunction 34 before Branch 66, Regional Trial Court,
Makati City, docketed as Civil Case No. 10-1042. It assailed the alleged "arbitrary, capricious and illegal
acts"35 of Bangko Sentral and of the Monetary Board in coercing Banco Filipino to withdraw all its present
suits in exchange of the approval of its Business Plan. In particular, Banco Filipino alleged that Bangko
Sentral and the Monetary Board committed grave abuse of discretion in imposing an additional condition
in Resolution No. 1668 requiring it to withdraw its cases and waive all future cases since it was
unconstitutional and contrary to public policy. It prayed that a writ of mandamus be issued to compel
Bangko Sentral and the Monetary Board to approve and implement its business plan and release its
Financial Assistance and Regulatory Reliefs package. 36
The trial court issued a Notice of Hearing on the prayer for a temporary restraining order on the same day,
setting the hearing on October 27, 2010.37
On October 27, 2010, Bangko Sentral and the Monetary Board filed their Motion to Dismiss Ad
Cautelam,38 assailing the Regional Trial Court's jurisdiction over the subject matter and over the persons
of Bangko Sentral and the Monetary Board. Banco Filipino, on the other hand, filed its Opposition 39 to this
Petition.
In its October 28, 2010 Order,40 the Regional Trial Court granted the request for the issuance of a
temporary restraining order against Bangko Sentral and the Monetary Board. The dispositive portion of
this Order read:
WHEREFORE, premises considered and pursuant to Rule 58 of the Revised Rules of Court, Petitioner's
prayer for a Temporary Restraining Order is hereby GRANTED. Respondent[s] Ban[gk]o Sentral ng
Pilipinas and [t]he Monetary Board, as well as [their] representatives, agents, assigns and/or third person
or entity acting for and [their] behalf are hereby enjoined from (a) employing acts inimical to the
enforcement and implementation of the approv[ed] Business Plan, (b) continuing and committing acts
prejudicial to Petitioner's operations, (c) withdrawing or threatening to withdraw the approval of the
Business Plan containing financial assistance, and package of regulatory reliefs, and (d) otherwise
enforcing other regulatory measures and abuses calculated to coerce Banco Filipino Savings and
3
Mortgage Bank into agreeing to drop and/or withdraw its suits and damage claims against BSP and MB,
and to waive future claims against Respondents or their official[s] and employees.
Further, the Court directs Sheriff Leodel N. Roxas to personally serve a copy of this Order to the herein
Respondent Ban[gk]o Sentral ng Pilipinas and [t]he Monetary Board. Finally, let this case be set on
November 11, 2010 and November 12, 2010 both at 2:00 in the afternoon for hearing on the prayer for
issuance of a Writ of Preliminary Mandatory Injunction.
SO ORDERED.41
On the same day or on October 28, 2010, summons was served on Bangko Sentral through a staff
member of the Office of the Governor, as certified by the Process Server's Return dated November 4,
2010.42
On November 5, 2010, Bangko Sentral and the Monetary Board filed a Petition For Certiorari with prayer
for temporary restraining order and/or writ of preliminary injunction 43 with the Court of Appeals, assailing
the Regional Trial Court's October 28, 2010 Order for having been issued without jurisdiction. The Petition
was docketed as CA-G.R. SP No. 116627.44
On November 17, 2010, the trial court issued an Order 45 denying the Bangko Sentral and the Monetary
Board's Motion to Dismiss Ad Cautelam, stating that the acts complained of pertained to Bangko Sentral 's
regulatory functions, not its adjudicatory functions. 46 It likewise stated that as requested in the handwritten
letter47 dated October 21, 2010 by Bangko Sentral's general counsel requesting for an advanced copy of
Banco Filipino's Petition, it furnished Bangko Sentral a copy of the Petition. It also held that Bangko
Sentral's subsequent participation in the preliminary hearing and its receipt of the summons on October
28, 2010 satisfied the requirements of procedural due process. 48
The trial court likewise found that litis pendencia and forum shopping were not present in the case, that
Bangko Sentral's verification and certification of non-forum shopping were validly signed by the Executive
Committee, and that Banco Filipino's Petition did not fail to state a cause of action. 49
On November 25, 2010, Bangko Sentral and the Monetary Board filed another Petition for Certiorari 50 with
prayer for temporary restraining order and writ of preliminary injunction with the Court of Appeals, this time
assailing the November 17, 2010 Order. The case was docketed as CA-G.R. SP No. 116905. However,
the trial court issued a writ of preliminary injunction on November 18, 2010 51 so they filed their Urgent
Motion to Admit Attached Amended Petition52 with the Court of Appeals to include the Issuance.
In the meantime, or on November 23, 2010, Bangko Sentral and the Monetary Board filed a Motion to
Admit Attached Supplemental Petition for Certiorari with Application for Interim Relief 53 in CA-G.R. SP No.
116627 seeking to include the trial court's October 28, 2010 Order.
In its December 28, 2010 Resolution, 54 the Court of Appeals granted55 Bangko Sentral and the Monetary
Board's Urgent Motion to Admit Attached Amended Petition in CA-G.R. SP No. 116905.
Meanwhile, Banco Filipino filed its Opposition dated January 18, 2011 in CA-G.R. SP No. 116905. 56
After oral arguments were held on February 7, 2011, 57 the Court of Appeals issued its February 14, 2011
Resolution58 in CA-G.R. SP No. 116905. It granted the application for a writ of preliminary injunction and
enjoined the trial court from conducting further proceedings in Civil Case No. 10-1042 pending a decision
on the merits.
4
On February 16, 2011, Banco Filipino filed an Urgent Motion for Consolidation 59 in CA-G.R. SP No.
116905, requesting for the consolidation of the two (2) Petitions for Certiorari filed by Bangko Sentral and
the Monetary Board before the Court of Appeals. On March 1, 2011, it also filed a Motion for
Reconsideration60 of the Court of Appeals February 14, 2011 Resolution.
In its June 2, 2011 Resolution, 61 the Court of Appeals in CA-G.R. SP No. 116905 denied Banco Filipino's
Motion for Reconsideration, holding that special civil actions against quasi-judicial agencies should be
filed before the Court of Appeals, not before a trial court. 62 The Court of Appeals also denied the Urgent
Motion for Consolidation for the following reasons:
1) [I]t would cause not only further congestion of the already congested docket of the ponente of CA-G.R.
SP No. 116627, but also in the delay in the disposition of both cases; 2) the subject matters and issues
raised in the instant petition are different from those set forth in CA-G.R. SP No. 116627, hence, they can
be the subject of separate: petitions; and 3) Since a writ of preliminary injunction was earlier issued,
Section 2 (d), Rule VI of the 2009 IRCA requires that the instant petition remain with the
undersigned ponente for decision on the merits with dispatch. 63
On July 28, 2011, the Court of Appeals rendered its Decision 64 in CA-G.R. SP No. 116905 granting
Bangko Sentral and the Monetary Board's Amended Petition. According to the Court of Appeals, the trial
court had no jurisdiction over the Petition for Certiorari and Mandamus filed by Banco Filipino since
special civil actions against quasi-judicial agencies are only cognizable by the Court of Appeals. 65 It also
found that the trial court gravely abused its discretion in acquiring jurisdiction over Bangko Sentral and the
Monetary Board by reason of their voluntary appearance in the preliminary hearing since their counsel
had made it clear that the appearance was specifically to question the absence of a service of summons. 66
The Court of Appeals likewise found that the delegation of authority from Banco Filipino's Board of
Directors to the Executive Committee to sign pleadings on its behalf validated the verification and
certification of non-forum shopping signed only by the Executive Vice Presidents. 67 It also ruled that there
was no litis pendencia or forum shopping in the case docketed as Civil Case No. 10-1042 despite the
pendency of Civil Case No. 04-823 since the causes of action and the reliefs prayed for were not the
same.68 The dispositive portion of the Court of Appeals July 28, 2011 Decision read:
WHEREFORE, the petition is GRANTED. The Order dated November 17, 2010 issued by respondent
Judge Joselito C. Villarosa of the Regional Trial Court (RTC), Branch 66, Makati City, in Civil Case No.
10-1042, is ANNULLED and SET ASIDE. In lieu thereof, judgment is hereby rendered. DISMISSING Civil
Case No. 10-1042 on the ground of the RTC's lack of jurisdiction over the same.
Accordingly, the writ of preliminary injunction issued by this Court on February 14, 2011, enjoining
respondent Judge, private respondent and their representatives from conducting further proceedings in
Civil Case No. 10-1042, is hereby made PERMANENT.
SO ORDERED.69
Banco Filipino filed a Motion for Reconsideration, 70 which was denied by the Court of Appeals in its
February 16, 2012 Resolution.71 Hence, it filed this Petition 72 on April 10, 2012 against Bangko Sentral and
the Monetary Board before this Court.
Petitioner claims that it had the authority to file this Petition since the Court of Appeals promulgated its
January 27, 2012 Decision in CA-G.R. SP No. 118599, finding petitioner's closure and receivership to
have been illegal.73 It argues that to dismiss its Petition now pending before this Court for lack of authority
from its receiver Philippine Deposit Insurance Corporation would be "an absurd and unjust
5
situation."74 Petitioner admits, however, that this decision was eventually overturned on
reconsideration75 in the Court of Appeals November 21, 2012 Amended Decision. 76
Petitioner points out that there was nothing in the Philippine Deposit Insurance Corporation Charter or in
Republic Act No. 7653 that precludes its Board of Directors from suing on its behalf. It adds that there was
an obvious conflict of interest in requiring it to seek Philippine Deposit Insurance Corporation's authority to
file the case considering that Philippine Deposit Insurance Corporation was under the control of herein
respondent Monetary Board.77
Petitioner asserts that the trial court had jurisdiction over special civil actions against respondents,
accordingly with Merchants Rural Bank of Talavera v. Monetary Board, et al.,78 a decision promulgated by
the Court of Appeals in 2006.79
Petitioner likewise argues that the trial court acquired jurisdiction over respondents considering that they
were able to participate in the summary hearing. It points out that respondents questioned before the trial
court the service of the petition on October 21, 2010 but never actually questioned the service of
summons on October 28, 2010 until it filed its petition with the Court of Appeals. 80 It argues that
respondents' private counsel was present during the raffle of the case on October 21, 2010 and even
assisted respondents' general counsel in receiving copies of the petition that the latter requested, showing
that respondents' due process was never violated. 81 It asserts that the Court of Appeals should have
dismissed outright respondents' Petition for Certiorari for "maliciously omitt[ing]" the handwritten letter
dated October 21, 2010 of their general counsel. 82 It likewise points out that respondents failed to file a
motion for reconsideration before the trial court before filing their petition for certiorari with the Court of
Appeals.83
Respondents, on the other hand, counter that the Petition should be dismissed outright for being filed
without Philippine Deposit Insurance Corporation's authority. It asserts that petitioner was placed under
receivership on March 17, 2011, and thus, petitioner's Executive Committee would have had no authority
to sign for or on behalf of petitioner absent the authority of its receiver, Philippine Deposit Insurance
Corporation.84 They also point out that both the Philippine Deposit Insurance Corporation Charter and
Republic Act No. 7653 categorically state that the authority to file suits or retain counsels for closed banks
is vested in the receiver.85 Thus, the verification and certification of non-forum shopping signed by
petitioner's Executive Committee has no legal effect. 86
Respondents likewise claim that the Court of Appeals did not err in finding that the trial court had no
jurisdiction over respondents. It cited this Court's ruling in United Coconut Planters Bank v. E. Ganzon,
Inc.87 and National Water Resources Board v. A. L. Ang Network,88 where this Court categorically stated
that special civil cases filed against quasi-judicial agencies must be filed before the Court of
Appeals.89 They argue that there was no showing that Merchants Rural Bank of Talavera was ever upheld
by this Court.90 They contend that petitioner should be estopped from raising the issue of jurisdiction
considering that during the pendency of this case, or on March 21, 2011 and November 20, 2011, it filed
two (2) separate petitions for certiorari against respondent Monetary Board directly before the Court of
Appeals.91
Respondents maintain that the trial court did not acquire jurisdiction over them since there was no valid
service of summons. They argue that when they filed their Motion to Dismiss on October 27, 2010, they
could not have validly argued the propriety of the summons on them on October 28, 2010. 92 They likewise
contend that their voluntary appearance in the summary hearing before the trial court was not a
submission to the trial court's jurisdiction since they consistently manifested that their appearance would
be special and limited to raise the issues of jurisdiction. 93 They also assert that the service of summons to
a staff member of the Office of the Governor General is not equivalent to the service of summons to the
Governor General, making the service of summons ineffective. 94
6
Respondents likewise claim that their filing of their Petition before the Court of Appeals without a prior
motion for reconsideration was justified by certain exceptional circumstances. They mention, among
others, the trial court's lack of jurisdiction, the fact that the issues have already been raised and passed
upon by the trial court, the prejudice to government interest in delaying the case, and their denied due
process because of the improper service of summons. 95 They further argue that the only significance of
the October 21, 2010 handwritten letter was to show that respondents were informed that a Petition was
filed, and not that the trial court had. already acquired jurisdiction over their persons. 96
From the arguments of the parties, this Court is asked to resolve the following issues:
First, whether or not trial courts have jurisdiction to take cognizance of a petition for certiorari against acts
and omissions of the Monetary Board;
Second, whether or not respondents Bangko Sentral ng Pilipinas and the Monetary Board should have
filed a motion for reconsideration of the trial court's denial of their motion to dismiss before filing their
petition for certiorari before the Court of Appeals; and
Finally, whether or not the trial court validly acquired jurisdiction over respondents Bangko Sentral ng
Pilipinas and the Monetary Board.
However, before any of these issues can be addressed, this Court must first resolve the issue of whether
or not petitioner Banco Filipino, as a closed bank under receivership, could file this Petition for Review
without joining its statutory receiver, the Philippine Deposit Insurance Corporation, as a party to the case.
A closed bank under receivership can only sue or be sued through its receiver, the Philippine Deposit
Insurance Corporation.
Under Republic Act No. 7653,97 when the Monetary Board finds a bank insolvent, it may "summarily and
without need for prior hearing forbid the institution from doing business in the Philippines and designate
the Philippine Deposit Insurance Corporation as receiver of the banking institution." 98
Before the enactment of Republic Act No. 7653, an insolvent bank under liquidation could not sue or be
sued except through its liquidator. In Hernandez v. Rural Bank of Lucena:99
[A]n insolvent bank, which was under the control of the finance commissioner for liquidation, was without
power or capacity to sue or be sued, prosecute or defend, or otherwise function except through the
finance commissioner or liquidator.100
This Court in Manalo v. Court of Appeals101 reiterated this principle:
A bank which had been ordered closed by the monetary board retains its juridical personality which can
sue and be sued through its liquidator. The only limitation being that the prosecution or defense of the
action must be done through the liquidator. Otherwise, no suit for or against an insolvent entity would
prosper.102
Under the old Central Bank Act, or Republic Act No. 265, 103 as amended,104 the same principle applies to
the receiver appointed by the Central Bank. The law explicitly stated that a receiver shall "represent the
[insolvent] bank personally or through counsel as he [or she] may retain in all actions or proceedings for or
against the institution." Section 29 of the old law states:
7
Section 29. Proceedings upon insolvency. — Whenever, upon examination by the head of the appropriate
supervising or examining department or his examiners or agents into the condition of any bank or non-
bank financial intermediary performing quasi-banking functions, it shall be disclosed that the condition of
the same is one of insolvency, or that its continuance in business would involve probable loss to its
depositors or creditors, it shall be the duty of the department head concerned forthwith, in writing, to
inform the Monetary Board of the facts. The Board may, upon finding the statements of the department
head to be true, forbid the institution to do business in the Philippines and designate an official of the
Central Bank or a person of recognized competence in banking or finance, as receiver to immediately take
charge of its assets and liabilities, as expeditiously as possible collect and gather all the assets and
administer the same for the benefit of its creditors, and represent the bank personally or through counsel
as he [or she] may retain in all actions or proceedings for or against the institution, exercising all the
powers necessary for these purposes including, but not limited to, bringing and foreclosing mortgages in
the name of the bank or non-bank financial intermediary performing quasi-banking functions.
In Republic Act No. 7653, this provision is substantially altered. Section 30 now states, in part:
The receiver shall immediately gather and take charge of all the assets and liabilities of the institution,
administer the same for the benefit of its creditors, and exercise the general powers of a receiver under
the Revised Rules of Court but shall not, with the exception of administrative expenditures, pay or commit
any act that will involve the transfer or disposition of any asset of the institution: Provided, That the
receiver may deposit or place the funds of the institution in non-speculative investments. The receiver
shall determine as soon as possible, but not later than ninety (90) days from take-over, whether the
institution may be rehabilitated or otherwise placed in such a condition so that it may be permitted to
resume business with safety to its depositors and creditors and the general public: Provided, That any
determination for the resumption of business of the institution shall be subject to prior approval of the
Monetary Board.
If the receiver determines that the institution cannot be rehabilitated or permitted to resume business in
accordance with the next preceding paragraph, the Monetary Board shall notify in writing the board of
directors of its findings and direct the receiver to proceed with the liquidation of the institution. The
receiver shall:
(1) file ex parte with the proper regional trial court, and without requirement of prior notice or any other
action, a petition for assistance in the liquidation of the institution pursuant to a liquidation plan adopted by
the Philippine Deposit Insurance Corporation for general application to all closed banks. In case of quasi-
banks, the liquidation plan shall be adopted by the Monetary Board. Upon acquiring jurisdiction, the court
shall, upon motion by the receiver after due notice, adjudicate disputed claims against the institution,
assist the enforcement of individual liabilities of the stockholders, directors and officers, and decide, on
other issues as may be material to implement the liquidation plan adopted. The receiver shall pay the cost
of the proceedings from the assets of the institution.
(2) convert the assets of the institution to money, dispose of the same to creditors and other parties, for
the purpose of paying the debts of such institution in accordance with the rules on concurrence and
preference of credit under the Civil Code of the Philippines and he may, in the name of the institution, and
with the assistance of counsel as he may retain, institute such actions as may be necessary to collect and
recover accounts and assets of, or defend any action against, the institution. The assets of an institution
under receivership or liquidation shall be deemed in custodia legis in the hands of the receiver and shall,
from the moment the institution was placed under such receivership or liquidation, be exempt from any
order of garnishment, levy, attachment, or execution. (Emphasis supplied)
The relationship between the Philippine Deposit Insurance Corporation and a closed bank is fiduciary in
nature. Section 30 of Republic Act No. 7653 directs the receiver of a closed bank to "immediately gather
8
and take charge of all the assets and liabilities of the institution" and "administer the same for the benefit
of its creditors."105
The law likewise grants the receiver "the general powers of a receiver under the Revised Rules of
Court."106 Under Rule 59, Section 6 of the Rules of Court, "a receiver shall have the power to bring and
defend, in such capacity, actions in his [or her] own name." 107 Thus, Republic Act No. 7653 provides that
the receiver shall also "in the name of the institution, and with the assistance of counsel as [it] may retain,
institute such actions as may be necessary to collect and recover accounts and assets of, or defend any
action against, the institution." 108 Considering that the receiver has the power to take charge of all the
assets of the closed bank and to institute for or defend any action against it, only the receiver, in its
fiduciary capacity, may sue and be sued on behalf of the closed bank.
In Balayan Bay Rural Bank v. National Livelihood Development Corporation,109 this Court explained that a
receiver of a closed bank is tasked with the duty to hold the assets and liabilities in trust for the benefit of
the bank's creditors.
As fiduciary of the insolvent bank, Philippine Deposit Insurance Corporation conserves and manages the
assets of the bank to prevent the assets' dissipation. This includes the power to bring and defend any
action that threatens to dissipate the closed bank's assets. Balayan Bay Rural Bank explained that
Philippine Deposit Insurance Corporation does so, not as the real party-in-interest, but as a representative
party, thus:
As the fiduciary of the properties of a closed bank, the PDIC may prosecute or defend the case by or
against the said bank as a representative party while the bank will remain as the real party in interest
pursuant to Section 3, Rule 3 of the Revised Rules of Court which provides:
SEC. 3. Representatives as parties. — Where the action is allowed to be prosecuted or defended by a

representative or someone acting in a fiduciary capacity, the beneficiary shall be included in the title of the
case and shall be deemed to be the real party in interest. A representative may be a trustee of an express
trust, a guardian, an executor or administrator, or a party authorized by law or these Rules. An agent
acting in his own name and for the benefit of an undisclosed principal may sue or be sued without joining
the principal except when the contract involves things belonging to the principal.
The inclusion of the PDIC as a representative party in the case is therefore grounded on its statutory role
as the fiduciary of the closed bank which, under Section 30 of R.A. 7653 (New Central Bank Act), is
authorized to conserve the latter's property for the benefit of its creditors. 110 (Citation omitted)
For this reason, Republic Act No. 3591,111 or the Philippine Deposit Insurance Corporation Charter, as
amended,112 grants Philippine Deposit Insurance Corporation the following powers as a receiver:
(c) In addition to the powers of a receiver pursuant to existing laws, the Corporation is empowered to:
(1) bring suits to enforce liabilities to or recoveries of the closed bank;
....
(6) hire or retain private counsels as may be necessary;
....
9
(9) exercise such other powers as are inherent and necessary for the effective discharge of the duties of
the Corporation as a receiver.113
Balayan Bay Rural Bank summarized, thus:
[T]he legal personality of the petitioner bank is not ipso facto dissolved by insolvency; it is not divested of
its capacity to sue and be sued after it was ordered by the Monetary Board to cease operation. The law
mandated, however, that the action should be brought through its statutory liquidator/receiver which in this
case is the PDIC. The authority of the PDIC to represent the insolvent bank in legal actions emanates
from the fiduciary relation created by statute which reposed upon the receiver the task of preserving and
conserving the properties of the insolvent for the benefit of its creditors. 114
Petitioner contends that it was not a closed bank at the time of the filing of this Petition on April 10, 2012
since the Court of Appeals January 27, 2012 Decision, docketed as CA-G.R. SP No. 118599, found the
closure to have been illegal.115
This Court of Appeals Decision, however, was not yet final since the Monetary Board filed a timely motion
for reconsideration.116 There is also nothing in its dispositive portion which states that it was immediately
executory.117 Through its November 21, 2012 Amended Decision, the Court of Appeals reversed its
January 27, 2012 Decision,118 confirming petitioner's status as a closed bank under receivership. It was,
therefore, erroneous for petitioner to presume that it was not a closed bank on April 10, 2012 when it filed
its Petition with this Court considering that there was no final declaration yet on the matter.
Petitioner should have attempted to comply after the promulgation of the November 21, 2012 Amended
Decision. Its substantial compliance would have cured the initial defect of its Petition.
Petitioner likewise claims that there was "an obvious conflict of interest" 119 if it was required to sue
respondents only through Philippine Deposit Insurance Corporation, considering that respondent
Monetary Board appointed Philippine Deposit Insurance Corporation as petitioner's receiver. This is a fact,
however, that petitioner failed to address when it filed its Petition, signifying that petitioner had no intention
of complying with the law when it filed its Petition or anytime after.
It was speculative on petitioner's part to presume that it could file this Petition without joining its receiver
on the ground that Philippine Deposit Insurance Corporation might not allow the suit. At the very least,
petitioner should have shown that it attempted to seek Philippine Deposit Insurance Corporation's
authorization to file suit. It was possible that Philippine Deposit Insurance Corporation could have granted
its permission to be joined in the suit. If it had refused to allow petitioner to file its suit, petitioner still had a
remedy available to it. Under Rule 3, Section 10 of the Rules of Court, 120 petitioner could have made
Philippine Deposit Insurance Corporation an unwilling co-petitioner and be joined as a respondent to this
case.
Petitioner's suit concerned its Business Plan, a matter that could have affected the status of its insolvency.
Philippine Deposit Insurance Corporation's participation would have been necessary, as it had the duty to
conserve petitioner's assets and to examine any possible liability that petitioner might undertake under the
Business Plan.
Philippine Deposit Insurance Corporation also safeguards the interests of the depositors in all legal
proceedings. Most bank depositors are ordinary people who have entrusted their money to banks in the
hopes of growing their savings. When banks become insolvent, depositors are secure in the knowledge
that they can still recoup some part of their savings through Philippine Deposit Insurance
10
Corporation.121 Thus, Philippine Deposit Insurance Corporation's participation in all suits involving the
insolvent bank is necessary and imbued with the public interest.
In any case, petitioner's verification and certification of non-forum shopping was signed by its Executive
Vice Presidents Maxy S. Abad and Atty. Francisco A. Rivera, as authorized by its Board of
Directors.122 Under Section 10(b) of the Philippine Deposit Insurance Corporation Charter, as amended:
b. The Corporation as receiver shall control, manage and administer the affairs of the closed bank.
Effective immediately upon takeover as receiver of such bank, the powers, functions and duties, as well
as all allowances, remunerations and prerequisites of the directors, officers, and stockholders of such
bank are suspended, and the relevant provisions of the Articles of Incorporation and By-laws of the closed
bank are likewise deemed suspended.123 (Emphasis supplied)
When petitioner was placed under receivership, the powers of its Board of Directors and its officers were
suspended. Thus, its Board of Directors could not have validly authorized its Executive Vice Presidents to
file the suit on its behalf. The Petition, not having been properly verified, is considered an unsigned
pleading.124 A defect in the certification of non-forum shopping is likewise fatal to petitioner's cause. 125
Considering that the Petition was filed by signatories who were not validly authorized to do so, the Petition
does not produce any legal effect.126 Being an unauthorized pleading, this Court never validly acquired
jurisdiction over the case. The Petition, therefore, must be dismissed.
II
Even assuming that the Petition did not suffer from procedural infirmities, it must still be denied for lack of
merit.
Unless otherwise provided for by law and the Rules of Court, petitions for certiorari against a quasi-judicial
agency are cognizable only by the Court of Appeals. The Regional Trial Court had no jurisdiction over the
Petition for Certiorari filed by petitioner against respondents.
Pursuant to Article XII, Section 20 of the Constitution, 127 Congress constituted Bangko Sentral 128 as an
independent central monetary authority. As an administrative agency, it is vested with quasi-judicial
powers, which it exercises through the Monetary Board. In United Coconut Planters Bank v. E. Ganzon,
Inc.:129
A quasi-judicial agency or body is an organ of government other than a court and other than a legislature,
which affects the rights of private parties through either adjudication or rule-making. The very definition of
an administrative agency includes its being vested with quasi-judicial powers. The ever increasing variety
of powers and functions given to administrative agencies recognizes the need for the active intervention of
administrative agencies in matters calling for technical knowledge and speed in countless controversies
which cannot possibly be handled by regular courts. A "quasi-judicial function" is a term which applies to
the action, discretion, etc., of public administrative officers or bodies, who are required to investigate facts,
or ascertain the existence of facts, hold hearings, and draw conclusions from them, as a basis for their
official action and to exercise discretion of a judicial nature.
Undoubtedly, the BSP Monetary Board is a quasi-judicial agency exercising quasi-judicial powers or
functions. As aptly observed by the Court of Appeals, the BSP Monetary Board is an independent central
monetary authority and a body corporate with fiscal and administrative autonomy, mandated to provide
policy directions in the areas of money, banking and credit. It has power to issue subpoena, to sue for
contempt those refusing to obey the subpoena without justifiable reason, to administer oaths and compel
11
presentation of books, records and others, needed in its examination, to impose fines and other sanctions
and to issue cease and desist order. Section 37 of Republic Act No. 7653, in particular, explicitly provides
that the BSP Monetary Board shall exercise its discretion in determining whether administrative sanctions
should be imposed on banks and quasi-banks, which necessarily implies that the BSP Monetary Board
must conduct some form of investigation or hearing regarding the same. 130
Bangko Sentral's Monetary Board is a quasi-judicial agency. Its decisions, resolutions, and orders are the
decisions, resolutions, and orders of a quasi-judicial agency. Any action filed against the Monetary Board
is an action against a quasi-judicial agency.
This does not mean, however, that Bangko Sentral only exercises quasi-judicial functions. As an
administrative agency, it likewise exercises "powers and/or functions which may be characterized as
administrative, investigatory, regulatory, quasi-legislative, or quasi-judicial, or a mix of these five, as may
be conferred by the Constitution or by statute." 131
In this case, the issue between the parties was whether the trial court had jurisdiction over petitions for
certiorari against Bangko Sentral and the Monetary Board. Rule 65, Section 4 of the Rules of Court
provides:
Section 4. Where and when petition to be filed. — The petition shall be filed not later than sixty (60) days
from notice of the judgment, order or resolution. In case a motion for reconsideration or new trial is timely
filed, whether such motion is required or not, the sixty (60) day period shall be counted from notice of the
denial of said motion.
The petition shall be filed in the Supreme Court or, if it relates to the acts or omissions of a lower court or
of a corporation, board, officer or person, in the Regional Trial Court exercising jurisdiction over the
territorial area as defined by the Supreme Court. It may also be filed in the Court of Appeals whether or
not the same is in aid of its appellate jurisdiction, or in the Sandiganbayan if it is in aid of its appellate
jurisdiction. If it involves the acts or omissions of a quasi-judicial agency, unless otherwise provided by
law or these Rules, the petition shall be filed in and cognizable only by the Court of Appeals . (Emphasis
supplied)
The Rules of Court categorically provide that petitions for certiorari involving acts or omissions of a quasi-
judicial agency "shall be filed in and cognizable only by the Court of Appeals."
As previously discussed, respondent Bangko Sentral exercises a myriad of functions, including those that
may not be necessarily exercised by a quasi-judicial agency. It is settled, however, that it exercises its
quasi judicial functions through respondent Monetary Board. Any petition for certiorari against an act or
omission of Bangko Sentral, when it acts through the Monetary Board, must be filed with the Court of
Appeals. Thus, this Court in Vivas v. Monetary Board and Philippine Deposit Insurance
Corporation132 held that the proper remedy to question a resolution of the Monetary Board is through a
petition for certiorari filed with the Court of Appeals.
The Court of Appeals, therefore, did not err in dismissing the case before the Regional Trial Court since
the trial court did not have jurisdiction over the Petition for Certiorari filed by petitioner against
respondents.
This Court cannot subscribe to petitioner's contention that a Court of Appeals decision already provided
for an exception to Rule 65. A Court of Appeals decision, no matter how persuasive or well written, does
not function as stare decisis.133 Neither can a Court of Appeals decision amend the Rules of Court. 134 As it
12
stands, Rule 65 and jurisprudence hold that petitions for certiorari against the Monetary Board must be
filed with the Court of Appeals.
III
While this Petition is considered dismissed, this Court takes the opportunity to address other lingering
procedural issues raised by the parties in their pleadings.
Petitioner assails respondents' failure to file a motion for reconsideration of the trial court's denial of its
motion to dismiss before filing a petition for certiorari with the Court of Appeals. 135
Rule 65, Section 1 of the Rules of Court requires that there be "no appeal, or any plain, speedy, and
adequate remedy in the ordinary course of law" available before a petition for certiorari can be filed. An
order denying a motion to dismiss is merely an interlocutory order of the court as it does not finally
dispose of a case.136 In BA Finance Corporation v. Pineda,137 a case citing the 1964 Rules of Court:
It must be remembered that, normally, when an interlocutory order is sought to be reviewed or annulled by
means of any of the extra legal remedies of prohibition or certiorari, it is required that a motion for
reconsideration of the question[ed] order must first be filed, such being considered a speedy and
adequate remedy at law which must first be resorted to as a condition precedent for filing of any of such
proceedings (Secs. 1 and 2, Rule 65, Rules of Court). 138
In contrast, Rule 41, Section 1(c) of the Revised Rules of Court now provides:
Section 1. Subject of appeal. — An appeal may be taken from a judgment or final order that completely
disposes of the case, or of a particular matter therein when declared by these Rules to be appealable.
No appeal may be taken from:
....
(c) An interlocutory order;
....
In all the above instances where the judgment or final order is not appealable, the aggrieved party may file
an appropriate special civil action under Rule 65.
It would appear that the Revised Rules of Court allow a direct filing of a petition for certiorari of an
interlocutory order without need of a motion for reconsideration. However, in Estate of Salvador Serra
Serra v. Primitivo Hernaez,139 a case decided after the Rules of Court were revised in 1997:
The settled rule is that a motion for reconsideration is a sine qua non condition for the filing of a petition for
certiorari. The purpose is to grant an opportunity to public respondent to correct any actual or perceived
error attributed to it by the re-examination of the legal and factual circumstances of the case. 140
This rule evolved from several labor cases of this Court. Estate of Salvador Serra Serra cited Interorient
Maritime Enterprises v. National Labor Relations Commission 141 as basis for this rule, which in turn,
cited Palomado v. National Labor Relations Commission142 and Pure Foods Corporation v. National Labor
Relations Commission.143 This Court, in formulating the rule in Palomado, declared:
13
The unquestioned rule in this jurisdiction is that certiorari will lie only if there is no appeal or any other
plain, speedy and adequate remedy in the ordinary course of law against the acts of public respondent. In
the instant case, the plain and adequate remedy expressly provided by [Sec. 9, Rule X, New Rules of the
National Labor Relations Commission] was a motion for reconsideration of the assailed decision, based
on palpable or patent errors, to be made under oath and filed within ten (10) calendar days from receipt of
the questioned decision.144
Pure Foods Corporation, on the other hand, stated:
In the present case, the plain and adequate remedy expressly provided by law was a motion for
reconsideration of the assailed decision and the resolution thereof, which was not only expected to be but
would actually have provided adequate and more speedy remedy than the present petition for certiorari.
This remedy was actually sought to be availed of by petitioner when it filed a motion for reconsideration
albeit beyond the 10-day reglementary period. For all intents and purposes, petitioner cannot now be
heard to say that there was no plain, speedy and adequate remedy available to it and that it must,
therefore, be allowed to seek relief by certiorari. This contention is not only untenable but would even
place a premium on a party's negligence or indifference in availing of procedural remedies afforded by
law.145
In labor cases, it was necessary to first file a motion for reconsideration before resorting to a petition for
certiorari since the National Labor Relations Commission's rules of procedure provided for this remedy.
The same rule has since applied to civil cases through Estate of Salvador Serra Serra, regardless of the
absence of a provision in the Rules of Court requiring a motion for reconsideration even for interlocutory
orders.
Thus, the general rule, in all cases; "is that a motion for reconsideration is a sine qua non condition for the
filing of a petition for certiorari."146 There are, however, recognized exceptions to this rule, namely:
(a) where the order is a patent nullity, as where the Court a quo had no jurisdiction; (b) where the
questions raised in the certiorari proceeding have been duly raised and passed upon by the lower court,
or are the same as those raised and passed upon in the lower court; (c) where there is an urgent
necessity for the resolution of the question and any further delay would prejudice the interests of the
Government or of the petitioner or the subject matter of the action is perishable; (d) where, under the
circumstances, a motion for reconsideration would be useless; (e) where petitioner was deprived of due
process and there is extreme urgency for relief; (f) where, in a criminal case, relief from an order of arrest
is urgent and the granting of such relief by the trial court is improbable; (g) where the proceedings in the
lower court are a nullity for lack of due process; (h) where the proceedings [were] ex parte or in which the
petitioner had no opportunity to object; and (i) where the issue raised is one purely of law or where public
interest is involved.147 (Citations omitted)
In this instance, the trial court had no jurisdiction over the petition filed by petitioner against respondents,
an issue which respondents properly asserted before the Court of Appeals when they filed their Petition
for Certiorari.148 They were, thus, excused from filing the requisite motion for reconsideration.
Considering that there is sufficient basis to dismiss this Petition outright, this Court finds it unnecessary to
address the other issues raised.
In sum, this Court holds that petitioner did not have the legal capacity to file this Petition absent any
authorization from its statutory receiver, Philippine Deposit Insurance Corporation. Even assuming that the
Petition could be given due course, it would still be denied. The Court of Appeals did not err in dismissing
14
the action pending between the parties before the trial court since special civil actions against quasi-
judicial agencies must be filed with the Court of Appeals.
WHEREFORE, the Petition is DISMISSED on the ground of petitioner's lack of capacity to sue.
SO ORDERED.
G.R. No. 184778 October 2, 2009
BANGKO SENTRAL NG PILIPINAS MONETARY BOARD and CHUCHI FONACIER, Petitioners,

vs.
HON. NINA G. ANTONIO-VALENZUELA, in her capacity as Regional Trial Court Judge of Manila,
Branch 28; RURAL BANK OF PARAÑAQUE, INC.; RURAL BANK OF SAN JOSE (BATANGAS), INC.;
RURAL BANK OF CARMEN (CEBU), INC.; PILIPINO RURAL BANK, INC.; PHILIPPINE
COUNTRYSIDE RURAL BANK, INC.; RURAL BANK OF CALATAGAN (BATANGAS), INC. (now
DYNAMIC RURAL BANK); RURAL BANK OF DARBCI, INC.; RURAL BANK OF KANANGA (LEYTE),
INC. (now FIRST INTERSTATE RURAL BANK); RURAL BANK OF BISAYAS MINGLANILLA (now
BANK OF EAST ASIA); and SAN PABLO CITY DEVELOPMENT BANK, INC., Respondents.
DECISION
VELASCO, JR., J.:
The Case
This is a Petition for Review on Certiorari under Rule 45 with Prayer for Issuance of a Temporary
Restraining Order (TRO)/Writ of Preliminary Injunction, questioning the Decision dated September 30,
20081 of the Court of Appeals (CA) in CA-G.R. SP No. 103935. The CA Decision upheld the Order 2 dated
June 4, 2008 of the Regional Trial Court (RTC), Branch 28 in Manila, issuing writs of preliminary injunction
in Civil Case Nos. 08-119243, 08-119244, 08-119245, 08-119246, 08-119247, 08-119248, 08-119249, 08-
119250, 08-119251, and 08-119273, and the Order dated May 21, 2008 that consolidated the civil cases.
The Facts
In September of 2007, the Supervision and Examination Department (SED) of the Bangko Sentral ng
Pilipinas (BSP) conducted examinations of the books of the following banks: Rural Bank of Parañaque,
Inc. (RBPI), Rural Bank of San Jose (Batangas), Inc., Rural Bank of Carmen (Cebu), Inc., Pilipino Rural
Bank, Inc., Philippine Countryside Rural Bank, Inc., Rural Bank of Calatagan (Batangas), Inc. (now
Dynamic Rural Bank), Rural Bank of Darbci, Inc., Rural Bank of Kananga (Leyte), Inc. (now First Interstate
Rural Bank), Rural Bank de Bisayas Minglanilla (now Bank of East Asia), and San Pablo City
Development Bank, Inc.
15
After the examinations, exit conferences were held with the officers or representatives of the banks
wherein the SED examiners provided them with copies of Lists of Findings/Exceptions containing the
deficiencies discovered during the examinations. These banks were then required to comment and to
undertake the remedial measures stated in these lists within 30 days from their receipt of the lists, which
remedial measures included the infusion of additional capital. Though the banks claimed that they made
the additional capital infusions, petitioner Chuchi Fonacier, officer-in-charge of the SED, sent separate
letters to the Board of Directors of each bank, informing them that the SED found that the banks failed to
carry out the required remedial measures. In response, the banks requested that they be given time to
obtain BSP approval to amend their Articles of Incorporation, that they have an opportunity to seek
investors. They requested as well that the basis for the capital infusion figures be disclosed, and noted
that none of them had received the Report of Examination (ROE) which finalizes the audit findings. They
also requested meetings with the BSP audit teams to reconcile audit figures. In response, Fonacier
reiterated the banks’ failure to comply with the directive for additional capital infusions.
On May 12, 2008, the RBPI filed a complaint for nullification of the BSP ROE with application for a TRO
and writ of preliminary injunction before the RTC docketed as Civil Case No. 08-119243 against Fonacier,
the BSP, Amado M. Tetangco, Jr., Romulo L. Neri, Vicente B. Valdepenas, Jr., Raul A. Boncan, Juanita
D. Amatong, Alfredo C. Antonio, and Nelly F. Villafuerte. RBPI prayed that Fonacier, her subordinates,
agents, or any other person acting in her behalf be enjoined from submitting the ROE or any similar report
to the Monetary Board (MB), or if the ROE had already been submitted, the MB be enjoined from acting
on the basis of said ROE, on the allegation that the failure to furnish the bank with a copy of the ROE
violated its right to due process.
The Rural Bank of San Jose (Batangas), Inc., Rural Bank of Carmen (Cebu), Inc., Pilipino Rural Bank,
Inc., Philippine Countryside Rural Bank, Inc., Rural Bank of Calatagan (Batangas), Inc., Rural Bank of
Darbci, Inc., Rural Bank of Kananga (Leyte), Inc., and Rural Bank de Bisayas Minglanilla followed suit,
filing complaints with the RTC substantially similar to that of RBPI, including the reliefs prayed for, which
were raffled to different branches and docketed as Civil Cases Nos. 08-119244, 08-119245, 08-119246,
08-119247, 08-119248, 08-119249, 08-119250, and 08-119251, respectively.
On May 13, 2008, the RTC denied the prayer for a TRO of Pilipino Rural Bank, Inc. The bank filed a
motion for reconsideration the next day.
On May 14, 2008, Fonacier and the BSP filed their opposition to the application for a TRO and writ of
preliminary injunction in Civil Case No. 08-119243 with the RTC. Respondent Judge Nina Antonio-
Valenzuela of Branch 28 granted RBPI’s prayer for the issuance of a TRO.
The other banks separately filed motions for consolidation of their cases in Branch 28, which motions
were granted. Judge Valenzuela set the complaint of Rural Bank of San Jose (Batangas), Inc. for hearing
on May 15, 2008. Petitioners assailed the validity of the consolidation of the nine cases before the RTC,
alleging that the court had already prejudged the case by the earlier issuance of a TRO in Civil Case No.
08-119243, and moved for the inhibition of respondent judge. Petitioners filed a motion for reconsideration
regarding the consolidation of the subject cases.
On May 16, 2008, San Pablo City Development Bank, Inc. filed a similar complaint against the same
defendants with the RTC, and this was docketed as Civil Case No. 08-119273 that was later on
consolidated with Civil Case No. 08-119243. Petitioners filed an Urgent Motion to Lift/Dissolve the TRO
and an Opposition to the earlier motion for reconsideration of Pilipino Rural Bank, Inc.
On May 19, 2008, Judge Valenzuela issued an Order granting the prayer for the issuance of TROs for the
other seven cases consolidated with Civil Case No. 08-119243. On May 21, 2008, Judge Valenzuela
16
issued an Order denying petitioners’ motion for reconsideration regarding the consolidation of cases in
Branch 28. On May 22, 2008, Judge Valenzuela granted the urgent motion for reconsideration of Pilipino
Rural Bank, Inc. and issued a TRO similar to the ones earlier issued.
On May 26, 2008, petitioners filed a Motion to Dismiss against all the complaints (except that of the San
Pablo City Development Bank, Inc.), on the grounds that the complaints stated no cause of action and that
a condition precedent for filing the cases had not been complied with. On May 29, 2008, a hearing was
conducted on the application for a TRO and for a writ of preliminary injunction of San Pablo City
Development Bank, Inc.
The Ruling of the RTC
After the parties filed their respective memoranda, the RTC, on June 4, 2008, ruled that the banks were
entitled to the writs of preliminary injunction prayed for. It held that it had been the practice of the SED to
provide the ROEs to the banks before submission to the MB. It further held that as the banks are the
subjects of examinations, they are entitled to copies of the ROEs. The denial by petitioners of the banks’
requests for copies of the ROEs was held to be a denial of the banks’ right to due process.
The dispositive portion of the RTC’s order reads:
WHEREFORE, the Court rules as follows:
1) Re: Civil Case No. 08-119243. Pursuant to Rule 58, Section 4(b) of the Revised Rules of Court,
plaintiff Rural Bank of Paranaque Inc. is directed to post a bond executed to the defendants, in the
amount of P500,000.00 to the effect that the plaintiff will pay to the defendants all damages which
they may sustain by reason of the injunction if the Court should finally decide that the plaintiff was
not entitled thereto. After posting of the bond and approval thereof, let a writ of preliminary
injunction be issued to enjoin and restrain the defendants from submitting the Report of
Examination or any other similar report prepared in connection with the examination conducted on
the plaintiff, to the Monetary Board. In case such a Report on Examination [sic] or any other similar
report prepared in connection with the examination conducted on the plaintiff has been submitted
to the Monetary Board, the latter and its members (i.e. defendants Tetangco, Neri, Valdepenas,
Boncan, Amatong, Antonio, and Villafuerte) are enjoined and restrained from acting on the basis of
said report.
plaintiff Rural Bank of San Jose (Batangas), Inc. is directed to post a bond executed to the
defendants, in the amount of P500,000.00 to the effect that the plaintiff will pay to the defendants
all damages which they may sustain by reason of the injunction if the Court should finally decide
that the plaintiff was not entitled thereto. After posting of the bond and approval thereof, let a writ of
preliminary injunction be issued to enjoin and restrain the defendants from submitting the Report of
said report.
plaintiff Rural Bank of Carmen (Cebu), Inc. is directed to post a bond executed to the defendants,
in the amount of P500,000.00 to the effect that the plaintiff will pay to the defendants all damages
17
which they may sustain by reason of the injunction if the Court should finally decide that the plaintiff
was not entitled thereto. After posting of the bond and approval thereof, let a writ of preliminary
said report.
plaintiff Pilipino Rural Bank Inc. is directed to post a bond executed to the defendants, in the
said report.
plaintiff Philippine Countryside Rural Bank Inc. is directed to post a bond executed to the
said report.
plaintiff Dynamic Bank Inc. (Rural Bank of Calatagan) is directed to post a bond executed to the
said report.
plaintiff Rural Bank of DARBCI, Inc. is directed to post a bond executed to the defendants, in the
18
said report.
plaintiff Rural Bank of Kananga Inc. (First Intestate Bank), is directed to post a bond executed to
the defendants, in the amount of P500,000.00 to the effect that the plaintiff will pay to the
defendants all damages which they may sustain by reason of the injunction if the Court should
finally decide that the plaintiff was not entitled thereto. After posting of the bond and approval
thereof, let a writ of preliminary injunction be issued to enjoin and restrain the defendants from
submitting the Report of Examination or any other similar report prepared in connection with the
examination conducted on the plaintiff, to the Monetary Board. In case such a Report on
Examination [sic] or any other similar report prepared in connection with the examination
conducted on the plaintiff has been submitted to the Monetary Board, the latter and its members
(i.e. defendants Tetangco, Neri, Valdepenas, Boncan, Amatong, Antonio, and Villafuerte) are
enjoined and restrained from acting on the basis of said report.
plaintiff Banco Rural De Bisayas Minglanilla (Cebu) Inc. (Bank of East Asia) is directed to post a
bond executed to the defendants, in the amount of P500,000.00 to the effect that the plaintiff will
pay to the defendants all damages which they may sustain by reason of the injunction if the Court
should finally decide that the plaintiff was not entitled thereto. After posting of the bond and
approval thereof, let a writ of preliminary injunction be issued to enjoin and restrain the defendants
from submitting the Report of Examination or any other similar report prepared in connection with
the examination conducted on the plaintiff, to the Monetary Board. In case such a Report on
Examination [sic] or any other similar report prepared in connection with the examination
conducted on the plaintiff has been submitted to the Monetary Board, the latter and its members
(i.e. defendants Tetangco, Neri, Valdepenas, Boncan, Amatong, Antonio, and Villafuerte) are
enjoined and restrained from acting on the basis of said report.
10) Re: Civil Case No. 08-119273. Pursuant to Rule 58, Section 4(b) of the Revised Rules of
Court, plaintiff San Pablo City Development Bank, Inc. is directed to post a bond executed to the
said report.3
The Ruling of the CA
19
Petitioners then brought the matter to the CA via a petition for certiorari under Rule 65 claiming grave
abuse of discretion on the part of Judge Valenzuela when she issued the orders dated May 21, 2008 and
June 4, 2008.
The CA ruled that the RTC committed no grave abuse of discretion when it ordered the issuance of a writ
of preliminary injunction and when it ordered the consolidation of the 10 cases.
It held that petitioners should have first filed a motion for reconsideration of the assailed orders, and failed
to justify why they resorted to a special civil action of certiorari instead.
The CA also found that aside from the technical aspect, there was no grave abuse of discretion on the
part of the RTC, and if there was a mistake in the assessment of evidence by the trial court, that should be
characterized as an error of judgment, and should be correctable via appeal.
The CA held that the principles of fairness and transparency dictate that the respondent banks are entitled
to copies of the ROE.
Regarding the consolidation of the 10 cases, the CA found that there was a similarity of facts, reliefs
sought, issues raised, defendants, and that plaintiffs and defendants were represented by the same sets
of counsels. It found that the joint trial of these cases would prejudice any substantial right of petitioners.
Finding that no grave abuse of discretion attended the issuance of the orders by the RTC, the CA denied
the petition.
On November 24, 2008, a TRO was issued by this Court, restraining the CA, RTC, and respondents from
implementing and enforcing the CA Decision dated September 30, 2008 in CA-G.R. SP No. 103935. 4
By reason of the TRO issued by this Court, the SED was able to submit their ROEs to the MB. The MB
then prohibited the respondent banks from transacting business and placed them under receivership
under Section 53 of Republic Act No. (RA) 8791 5 and Sec. 30 of RA
76536 through MB Resolution No. 1616 dated December 9, 2008; Resolution Nos. 1637 and 1638 dated
December 11, 2008; Resolution Nos. 1647, 1648, and 1649 dated December 12, 2008; Resolution Nos.
1652 and 1653 dated December 16, 2008; and Resolution Nos. 1692 and 1695 dated December 19,
2008, with the Philippine Deposit Insurance Corporation as the appointed receiver.
Now we resolve the main petition.
Grounds in Support of Petition
I. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING THAT THE
INJUNCTION ISSUED BY THE REGIONAL TRIAL COURT VIOLATED SECTION 25 OF THE NEW
CENTRAL BANK ACT AND EFFECTIVELY HANDCUFFED THE BANGKO SENTRAL FROM
DISCHARGING ITS FUNCTIONS TO THE GREAT AND IRREPARABLE DAMAGE OF THE
COUNTRY’S BANKING SYSTEM;
II. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT RESPONDENTS
ARE ENTITLED TO BE FURNISHED COPIES OF THEIR RESPECTIVE ROEs BEFORE THE SAME IS
SUBMITTED TO THE MONETARY BOARD IN VIEW OF THE PRINCIPLES OF FAIRNESS AND
TRANSPARENCY DESPITE LACK OF EXPRESS PROVISION IN THE NEW CENTRAL BANK ACT
REQUIRING BSP TO DO THE SAME
20
III. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN DEPARTING FROM WELL-
ESTABLISHED PRECEPTS OF LAW AND JURISPRUDENCE
A. THE EXCEPTIONS CITED BY PETITIONER JUSTIFIED RESORT TO PETITION FOR

CERTIORARI UNDER RULE 65 INSTEAD OF FIRST FILING A MOTION FOR
RECONSIDERATION
B. RESPONDENT BANKS’ ACT OF RESORTING IMMEDIATELY TO THE COURT WAS

PREMATURE SINCE IT WAS MADE IN UTTER DISREGARD OF THE PRINCIPLE OF
PRIMARY JURISDICTION AND EXHAUSTION OF ADMINISTRATIVE REMEDY
C. THE ISSUANCE OF A WRIT OF PRELIMINARY INJUNCTION BY THE REGIONAL

TRIAL COURT WAS NOT ONLY IMPROPER BUT AMOUNTED TO GRAVE ABUSE OF
DISCRETION7
Our Ruling
The petition is meritorious.
In Lim v. Court of Appeals it was stated:
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.
As such, a writ of preliminary injunction may be issued only upon clear showing of an actual existing right
to be protected during the pendency of the principal action. The twin requirements of a valid injunction are
the existence of a right and its actual or threatened violations. Thus, to be entitled to an injunctive writ, the
right to be protected and the violation against that right must be shown. 8
These requirements are absent in the present case.
In granting the writs of preliminary injunction, the trial court held that the submission of the ROEs to the
MB before the respondent banks would violate the right to due process of said banks.
This is erroneous.
The respondent banks have failed to show that they are entitled to copies of the ROEs. They can point to
no provision of law, no section in the procedures of the BSP that shows that the BSP is required to give
them copies of the ROEs. Sec. 28 of RA 7653, or the New Central Bank Act, which governs examinations
of banking institutions, provides that the ROE shall be submitted to the MB; the bank examined is not
mentioned as a recipient of the ROE.
The respondent banks cannot claim a violation of their right to due process if they are not provided with
copies of the ROEs. The same ROEs are based on the lists of findings/exceptions containing the
deficiencies found by the SED examiners when they examined the books of the respondent banks. As
found by the RTC, these lists of findings/exceptions were furnished to the officers or representatives of the
respondent banks, and the respondent banks were required to comment and to undertake remedial
measures stated in said lists. Despite these instructions, respondent banks failed to comply with the
SED’s directive.
21
Respondent banks are already aware of what is required of them by the BSP, and cannot claim violation
of their right to due process simply because they are not furnished with copies of the ROEs. Respondent
banks were held by the CA to be entitled to copies of the ROEs prior to or simultaneously with their
submission to the MB, on the principles of fairness and transparency. Further, the CA held that if the
contents of the ROEs are essentially the same as those of the lists of findings/exceptions provided to said
banks, there is no reason not to give copies of the ROEs to the banks. This is a flawed conclusion, since if
the banks are already aware of the contents of the ROEs, they cannot say that fairness and transparency
are not present. If sanctions are to be imposed upon the respondent banks, they are already well aware of
the reasons for the sanctions, having been informed via the lists of findings/exceptions, demolishing that
particular argument. The ROEs would then be superfluities to the respondent banks, and should not be
the basis for a writ of preliminary injunction. Also, the reliance of the RTC on Banco Filipino v. Monetary
Board9 is misplaced. The petitioner in that case was held to be entitled to annexes of the Supervision and
Examination Sector’s reports, as it already had a copy of the reports themselves. It was not the subject of
the case whether or not the petitioner was entitled to a copy of the reports. And the ruling was made after
the petitioner bank was ordered closed, and it was allowed to be supplied with annexes of the reports in
order to better prepare its defense. In this instance, at the time the respondent banks requested copies of
the ROEs, no action had yet been taken by the MB with regard to imposing sanctions upon said banks.
The issuance by the RTC of writs of preliminary injunction is an unwarranted interference with the powers
of the MB. Secs. 29 and 30 of RA 7653 10 refer to the appointment of a conservator or a receiver for a
bank, which is a power of the MB for which they need the ROEs done by the supervising or examining
department. The writs of preliminary injunction issued by the trial court hinder the MB from fulfilling its
function under the law. The actions of the MB under Secs. 29 and 30 of RA 7653 "may not be restrained
or set aside by the court except on petition for certiorari on the ground that the action taken was in excess
of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of jurisdiction." The
writs of preliminary injunction order are precisely what cannot be done under the law by preventing the MB
from taking action under either Sec. 29 or Sec. 30 of RA 7653.
As to the third requirement, the respondent banks have shown no necessity for the writ of preliminary
injunction to prevent serious damage. The serious damage contemplated by the trial court was the
possibility of the imposition of sanctions upon respondent banks, even the sanction of closure. Under the
law, the sanction of closure could be imposed upon a bank by the BSP even without notice and hearing.
The apparent lack of procedural due process would not result in the invalidity of action by the MB. This
was the ruling in Central Bank of the Philippines v. Court of Appeals. 11 This "close now, hear later"
scheme is grounded on practical and legal considerations to prevent unwarranted dissipation of the bank’s
assets and as a valid exercise of police power to protect the depositors, creditors, stockholders, and the
general public. The writ of preliminary injunction cannot, thus, prevent the MB from taking action, by
preventing the submission of the ROEs and worse, by preventing the MB from acting on such ROEs.
The trial court required the MB to respect the respondent banks’ right to due process by allowing the
respondent banks to view the ROEs and act upon them to forestall any sanctions the MB might impose.
Such procedure has no basis in law and does in fact violate the "close now, hear later" doctrine. We held
in Rural Bank of San Miguel, Inc. v. Monetary Board, Bangko Sentral ng Pilipinas:
It is well-settled that the closure of a bank may be considered as an exercise of police power. The action
of the MB on this matter is final and executory. Such exercise may nonetheless be subject to judicial
inquiry and can be set aside if found to be in excess of jurisdiction or with such grave abuse of discretion
as to amount to lack or excess of jurisdiction. 12
The respondent banks cannot—through seeking a writ of preliminary injunction by appealing to lack of due
process, in a roundabout manner— prevent their closure by the MB. Their remedy, as stated, is a
subsequent one, which will determine whether the closure of the bank was attended by grave abuse of
22
discretion. Judicial review enters the picture only after the MB has taken action; it cannot prevent such
action by the MB. The threat of the imposition of sanctions, even that of closure, does not violate their
right to due process, and cannot be the basis for a writ of preliminary injunction.
The "close now, hear later" doctrine has already been justified as a measure for the protection of the
public interest. Swift action is called for on the part of the BSP when it finds that a bank is in dire straits.
Unless adequate and determined efforts are taken by the government against distressed and
mismanaged banks, public faith in the banking system is certain to deteriorate to the prejudice of the
national economy itself, not to mention the losses suffered by the bank depositors, creditors, and
stockholders, who all deserve the protection of the government. 13
The respondent banks have failed to show their entitlement to the writ of preliminary injunction. It must be
emphasized that an application for injunctive relief is construed strictly against the pleader. 14 The
respondent banks cannot rely on a simple appeal to procedural due process to prove entitlement. The
requirements for the issuance of the writ have not been proved. No invasion of the rights of respondent
banks has been shown, nor is their right to copies of the ROEs clear and unmistakable. There is also no
necessity for the writ to prevent serious damage. Indeed the issuance of the writ of preliminary injunction
tramples upon the powers of the MB and prevents it from fulfilling its functions. There is no right that the
writ of preliminary injunction would protect in this particular case. In the absence of a clear legal right, the
issuance of the injunctive writ constitutes grave abuse of discretion. 15 In the absence of proof of a legal
right and the injury sustained by the plaintiff, an order for the issuance of a writ of preliminary injunction
will be nullified.16
Courts are hereby reminded to take greater care in issuing injunctive relief to litigants, that it would not
violate any law. The grant of a preliminary injunction in a case rests on the sound discretion of the court
with the caveat that it should be made with great caution. 17 Thus, the issuance of the writ of preliminary
injunction must have basis in and be in accordance with law. All told, while the grant or denial of an
injunction generally rests on the sound discretion of the lower court, this Court may and should intervene
in a clear case of abuse.18
WHEREFORE, the petition is hereby GRANTED. The assailed CA Decision dated September 30, 2008 in
CA-G.R. SP No. 103935 is hereby REVERSED. The assailed order and writ of preliminary injunction of
respondent Judge Valenzuela in Civil Case Nos. 08-119243, 08-119244, 08-119245, 08-119246, 08-
119247, 08-119248, 08-119249, 08-119250, 08-119251, and 08-119273 are hereby declared NULL and
VOID.
SO ORDERED.
23
G.R. No. 215061
AMANDO M. TETANGCO, JR., PETER B. FAVILA, JUANITA D. AMATONG, NELLY A. FAVIS-

VILLAFUERTE, ALFREDO C. ANTONIO, IGNACIO R. BUNYE, MARIE MICHELLE N. ONG, BELLA M.
PRUDENCIO, ESMEGARDO S. REYES, MA. CORAZON G. CATARROJA, Petitioners
vs.
COMMISSION ON AUDIT, Respondent
In this Petition for Certiorari under Rule 64 in relation to Rule 65, 1 petitioners assail the Commission on
Audit's (COA) Resolution 2 dated August 12, 2014, denying the petitioners' Motion for
Reconsideration 3 and Supplemental 4 Motion for Reconsideration, affirming COA's Decision No. 2013-
227 dated December 23, 2013 5 and sustaining the Notices of Disallowance (ND) Nos. 10-004 GF (2007-
2008) 6 and 10-004 GF (2007- 2009) 7 both dated August 13, 2010.
The Facts
This case stemmed from the COA's act of disallowing theExtraordinary and Miscellaneous Expenses
(EMEs) of the ex officio members of the Monetary Board (MBM), allegedly in violation of their respective
constitutional rights.
Petitioner Amanda M. Tetangco, Jr., (Tetangco Jr.) is the Governor of the Banko Sentral ng Pilipinas
(BSP). Petitioners Peter B. Favila (Favila), Juanita D. Amatong (Amatong), Nelly A. Favis-Villafuerte
(Favis-Villafuerte ), Alfredo C. Antonio (Antonio) and Ignacio R. Bunye (Bunye). Were the MBM at the time
that the allowance· for EMEs was approved. Petitioners Marie Michelle N. Ong (Ong), Bella M. Prudencio
(Prudencio), Esmegardo S. Reyes (Reyes) and Ma. Corazon G. Catarroja (Catarroja) were employees of
the BSP who participated in the processing and approval of the EME.
COA's March 23, 2010 Decision No. 2010-048, 8 on the Performance Audit Report on the allocation and
utilization of EME of the MBM, stated, among others, that " x x x the ex-officio member of the Monetary
Board x x x shall not be entitled to additional EMEs, other than that appropriated for him or her under the
GAA as a cabinet member x x x."9
24
Pursuant to this Decision, COA conducted an actual audit of the specific accounts that allegedly exceeded
the prescribed limitations and/or were not properly documented/justified.
As a consequence, the EMEs of MBM Neri and Favila were disallowed and became the subject of ND
dated August 13, 2010. Eventually, the MBM and BSP personnel, which include the petitioners, were held
personally liable under ND Nos. 10-004 GF (2007-2008) and 10- 004 GF (2007-2009).
Petitioners filed a Motion for Reconsideration and/or Appeal with the COA Director on May 26, 2011, but
the same was denied. They filed a Petition for Review 10 with the COA, but the same was likewise denied
in the COA's December 23, 2013 Decision No. 2013-227. 11
With their Motion for Reconsideration and Supplemental Motion for Reconsideration having been denied
in the COA's Resolution dated August 12, 2014, they filed the instant petition.
The petitioners alleged that the COA acted without or in excess of its jurisdiction, and/or with grave abuse
of discretion amounting to lack or excess of jurisdiction: (A) in disallowing the EMEs of the ex officio MB
Ms: (1) because the March 23, 2010 COA Decision No. 2010-048, should not be applied since the
disallowed EMEs were incurred by the ex officio MBMs in the years 2007, 2008 and 2009, which years
are prior to the date of finality (May 5, 2010) of the ·said decision; (2) since as MBMs, they incur
extraordinary and miscellaneous expenses in the discharge of their functions, separate and distinct from
the expenses they incur in relation to their · principal office; (3) since it cannot be said that the MB Ms
failed to exercise the highest degree of responsibility in approving the grant of EMEs; (4) since it violates
the equal protection clause under Article III, Section 1 of the 1987 Constitution; and (B) in including
Petitioner Favila as one of the persons solidarily liable under ND No. 10-004 GF (2007-2008), despite the
fact that he had no participation in the approval of the EMEs covered by the ND.
For its part, the COA countered that: Petitioners failed to show grave abuse of discretion on the part of
COA in rendering its assailed Decision and subsequent Resolution; COA did not gravely abuse its
discretion in disallowing the EMEs of the ex officio MBM, because the allowances were based on the
applicable laws, jurisprudence, rules and regulations; the defense of good faith in approving the grant of
EMEs to the ex officio MBM with reliance on BSP's independence and autonomy is unavailing; there was
no violation of the equal protection clause in the subject disallowances; and petitioner Favila is solidarily
liable with other officials of the BSP under ND No. 10-004 GF (2007-2009) because he was a member of
the Monetary Board and also the recipient of the irregular EMEs.
The Issue
Simply, the core issue boils down to whether or not the COA gravely abused its discretion when it
disallowed the EMEs of the ex officio MBM.
The nature of EME, however, was not the foremost reason for the disallowance, but the limitations
imposed by law in availing such allowance. x x x the ex officio members of the Monetary Board are
entitled to EMEs to the extent of that appropriated in the General Appropriations Act (GAA). Since the ex
officio members already received their EMEs from their respective Departments (as appropriated in the
GAA), the additional EMEs from BSP are no longer necessary. It must be stressed that the ex officio
position is actually and, in legal contemplation, part of the principal office; hence, the ex officio member is
no longer entitled to receive any form of compensation, allowance or other euphemism from the extended
agency. x x x we quote the pertinent discussion of the subject COA Decision: [Emphasis .Supplied.]
x x x In fact, the ex officio membership of the cabinet member in the Monetary Board does not comprise
'another office' but rather annexed to or is required by the primary functions of his or her official position as
25
cabinet member. Of equal significance, too, is that the ex officio member of the Monetary Board already
receives separate appropriations under the GAA for EMEs, he or she being a member of the cabinet.
Being such, it is highly irregular that the said ex officio member of the Monetary Board, who performs only
additional duties by virtue of his or her primary functions, will be provided with additional EMEs, which in
this case, appear much higher than his or her appropriations for the same expenses under the GAA as a
cabinet member. x x x 12
xxxx
x x x the irregularity of giving additional compensation or allowances to ex officio members was no longer
a hovel issue during the time that the subject allowances were authorized by BSP. As early as 1991, the
issue was already ruled on by the Supreme Court in the case of Civil Liberties Union vs. Executive
Secretary, 13 followed by several jurisprudence in the cases of Dela Cruz, et. al. vs.
COA, 14 and NationalAmnesty Commission vs. COA, 15 to name a few. 16 (Emphasis supplied)
Absent any showing that COA capriciously, arbitrarily or whimsically exercised its discretion that would be
tantamount to evasion of a positive duty or a virtual refusal to perform the duty or to act at all in
contemplation of law resulting to the prejudice of the rights of the claimants, the Court finds no reason to
set aside its decision.
In the absence of grave abuse of discretion; the factual findings of the COA, which are undoubtedly
supported by the evidence on record, must be accorded great respect and finality. COA, as the duly
authorized agency to adjudicate money claims against government agencies and instrumentalities has
acquired special knowledge and expertise in handling matters falling under its specialized jurisdiction. 17
Verily, the Court has sustained the decisions of administrative authorities like the COA as a matter of
general policy, not only on the basis of the doctrine of separation of powers but also upon the recognition
that such administrative authorities held the expertise as to the laws they are entrusted to enforce. 18 The
Court has accorded not only respect but also finality to their findings especially when their decisions are
not tainted with unfairness or arbitrariness that would amount to grave abuse of discretion. 19 Only when
the COA acted without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or
excess of jurisdiction, may this Court entertain and grant a petition for certiorari brought to assail its
actions. 20 However, we find no grave abuse of discretion on the part of the COA in issuing the assailed
decision.
Anent petitioners' defense of good faith in approving the grant of EMEs to the ex officio. members of the
Monetary Board, this Court opines that said defense is unavailing.
As correctly pointed out by the COA:
This Commission finds that the Petitioners MBM, in approving the irregular allowance, were remiss in their
duty to protect the interest of the Bank. x x x they ought to know that the ex officio members of
theMonetary Board were already receiving the same allowance from their respective Departments, hence,
they were no longer entitled to the additional EMEs.
It must be emphasized that the degree of diligence required from bank employees and officials is not
ordinary but requires the highest standards of integrity and performance. Section 2 of R.A. No. 8791, also
known as the General Banking Law of 2000, provides for the degree of diligence expected from the
industry, to wit:
26
Section 2. Declaration of Policy. - The State recognizes the vital role of banks providing an environment
conducive to the sustained development of the national economy and the fiduciary nature of banking that
requires high standards of integrity and performance. xxx
In support of the above privision of the law, the Supreme Court, in the case of Philippine National Bank v.
Rodriguez, et.al. (G.R. No. 170325, September 26, 2008), ruled, viz:
Banks handle daily transactions involving millions of pesos. By the very nature of their work the degree of
responsibility, care and trustworthiness expected of their employees and officials is far greater than those
of ordinary clerks and employees. For obvious reasons, the banks are expected to exercise the highest
degree of diligence in the selection and supervision of their employees. x x x
xx x for failure of the Petitioners MBM to exercise the highest degree of responsibility required by law,
their defense of good faith fails. 21 [Emphasis Supplied.]
By jurisprudence, the patent disregard of several case laws and COA directives, as in this case. amounts
to gross negligence; hence, petitionerk ' cannot be presumed in good faith. In TESDA vs. The
Commission on Audit) et.al.,22 this Court ruled that:
In. Casal v. COA, 23 x x x we held the approving officials liable for the refund of the incentive award due to
their patent disregard of the issuances of the President and the directives of COA. In Casal, we ruled
that the officials' failure to observe the issuances amounted to gross negligence, which is inconsistent
with the presumption of good faith. We applied the Casal ruling in Velasco v. COA, 24 to wit:
x x x the blatant failure of the petitioners-approving officers to abide with the provisions of AO 103 and AO
161 overcame the presumption of good faith. The deliberate disregard of these issuances is equivalent to
gross negligence amounting to bad faith. Therefore, the petitioners-approving officers are accountable for
the refund of the subject incentives which they received. [Emphasis Supplied]
Applying by analogy the above rulings, we hold the petitioners approving officers of the Monetary Board
are liable for the excess EMEs which they received.
As the records bear out, the petitioners who approve the EMEs failed to observe the following: first, there
is already a law, the GAA, that limits the grant of EMEs; second; COA Memorandum No. 97-038 dated
September 19, 1997 is a directive issued by the COA to its auditors to enforce the self-executing
prohibition imposed by Section 13, Article VII of the Constitution 25 on the President and his official family,
their deputies and assistants, or their representatives from holding multiple offices and receiving double.
compensation; and third, the irregularity of giving additional compensation or allowances to ex
officio members was already settled by jurisprudence, 26 during the time that the subject allowances were
authorized by the BSP.
Indeed, the petitioners-approving officers' disregard of the aforementioned case laws, COA issuances,
and the Constitution, cannot be deemed as a mere lapse consistent with the presumption of good faith.
In line with this, we cannot subscribe to petitioner Favila's insistence that he should not be liable in the
approving, processing and receiving of EMEs on the basis that he did not participate in the adoption of the
resolutions authorizing the payment of the EMEs.
As pointed out during the deliberation by Our learned colleague, Hon. Justice Lucas P. Bersamin, the
doctrine on the non-liability of recipients of disallowed benefits based on good faith did not extend to
petitioner Favila for the following reasons: first, there was precisely a law (the relevant GAAs) that
27
expressly limited the amounts of the EMEs to be received by the ex officio members; and second, in so
far as ND No. 10-004GF (2007- 2008) 27 is concerned, his liability arose from his receipt of the subject
allowances in 2008, when he was an ex officio member of the Board. Hence, · good faith did not favor him
not only because he had failed to exercise the highest degree of responsibility, but also because as a
cabinet member he was aware of the extent of the benefits he was entitled to.
Verily, petitioners Tetangco, Jr., Favila, Amatong, Pavis-Villafuerte, Antonio, and Bunye, who were
members of the Monetary Board were expected to keep abreast of the laws that may affect the
performance of their functions. The law, jurisprudence and COA issuances subject of this case are of such
clearness that the concerned officials could not have mistaken their meaning. It was incumbent upon them
to instruct Petitioners On &, Prudencio, Reyes and Catarroja who participated in the processing of the
EMEs, to comply with these laws. Unfortunately, they did not. Thus, they cannot find shelter in the
defense of good faith.
WHEREFORE, the Petition is DISMISSED. The Commission oμ Audit's Resolution dated August 12,

2014, denying the petitioners' Motion for Reconsideration 28 and Supplemental Motion for
Reconsideration, · affirming its Decision No. 2013-227 dated December 23, 2013 and sustaining the
Notices of Disallowance Nos. 10-004 GF (2007-2008) and 10-004 GF (2007-2009) both dated August 13,
2010, are hereby AFFIRMED in toto.
SO ORDERED.
[ G.R. No. 240458, January 08, 2020 ]

HILARIO P. SORIANO, PETITIONER, V. PEOPLE OF THE PHILIPPINES, RESPONDENT.
Before this Court is a Petition for Review on Certiorari,[1] assailing the Decision[2] dated February 28, 2018
of the Court of Appeals (CA) in CA-G.R. CR No. 39252, which affirmed with modification, only as to the
penalty imposed, the Decision[3] dated October 13, 2015 of the Regional Trial Court (RTC) of Malolos City,
Bulacan, finding petitioner Hilario P. Soriano (petitioner) guilty beyond reasonable doubt of violating
Section 83 of Republic Act (R.A.) No. 337, as amended by Presidential Decree (P.D.) No. 1795 or the
General Banking Act, and of estafa thru falsification of commercial documents.
Factual Antecedents
Two separate Information were filed against petitioner as follows:
Criminal Case No. 1719-M-2000

That on or about June 27, 1997 and thereafter and within the jurisdiction of this Honorable Court, the said
accused, in his capacity as president of the Rural Bank of San Miguel (Bulacan), Inc., did then and there,
unlawfully and feloniously, indirectly borrow or secure a loan with the Rural Bank of San Miguel, San
Miguel Branch, a domestic rural banking institution created, organized and existing under Philippine Laws,
amounting to Ph[P]15 million, knowing fully well that the same has been done by him without
the written consent and approval of the majority of the board of directors of the said bank, and which
consent and approval the said accused deliberately failed to obtain and enter the same upon the records
of said banking institution and to transmit a copy of which to the supervising department of the said bank
as required by the General Banking Act, by using the name of one depositor VIRGILIO J. MALANG of San
Miguel, Bulacan, who have no knowledge of the said loan, and once in possession of the said amount of
Ph[P]14,775,000.00 net of interest, converted the same to his own personal use and benefit, m flagrant
violation of the said law.
28
Criminal Case No. 1720-M-2000
That on or about June 27, 1997 and thereafter, in San Miguel, Bulacan and within the jurisdiction of this
Honorable Court, the said accused HILARIO P. SORIANO and ROSALINDA ILAGAN, as principals by
direct participation, with unfaithfulness or abuse of confidence and taking advantage of their position as
president of the Rural Bank of San Miguel (Bulacan) Inc., and Manager of the Rural Bank of San Miguel-
San Miguel Branch, a duly organized banking institutions (sic) under Philippine laws, conspiring,
confederating and mutually helping one another, did then and there, willfully and feloniously falsify loan
documents consisting of loan application/information sheet, promissory note dated June 27, 1997,
disclosure statement on loan/credit transaction, credit proposal report, manager's check no. 06514 (sic)
dated June 27, 1997 and undated RBSM-San Miguel Branch check voucher, by making it appear that one
VIRGILIO J. MALANG filed the aforementioned loan documents when in truth and in fact, VIRGILIO J.
MALANG did not participate in the execution of the said loan documents and that by virtue of the said
falsification and with deceit and intent to cause damage, the accused credited the loan proceeds of the
loan (sic) amounting to Ph[P]14,777,000.00, (sic) net of interest to the account of VIRGILIO J. MALANG
with the RBSM and thereafter converted the same amount to their own personal gain and benefit, to the
damage and prejudice of the Rural Bank of San Miguel-San Miguel Branch, its creditors and the Bangko
Sentral ng Pilipinas in the amount of Ph[P]14,775,000.00.
Petitioner was charged of securing an indirect loan from Rural Bank of San Miguel (RBSM) while being an
officer thereof by falsifying loan documents and making it appear that a certain Virgilio Malang (Malang)
obtained the same, and thereafter, converting the proceeds for his personal gain and benefit.
To prove the charges, the prosecution presented, aside from pertinent documentary evidence, the
following witnesses, to wit: (1) Herminio Principio (Principio) of the Department of Rural Bank Supervision
and Examination Section, Bangko Sentral ng Pilipinas (DRB-BSP); [6] (2) Malang, a businessman and
depositor of the (RBSM) in Bulacan;[7] (3) Andres Santillana (Santillana), president of Mechants Rural
Bank of Talavera, Inc. (MRBTI);[8] (4) Epifanio Posada (Posada), branch manager of MRBTI, Sta. Rosa
Branch;[9] (5) Evelyn Ramos (Ramos), a representative of the Land Bank of the Philippines (Land Bank),
Gapan Branch;[10] (6) Nancy Angeles (Angeles), a cashier from Land Bank-Gapan; [11] (7) Francisco
Gementiza (Gementiza) of the Philippine Clearing House (PCH); [12] (8) Nonito Cristobal (Cristobal), former
branch manager of Land Bank-Gapan;[13] and (9) Elmer Haber (Haber) of the Philippine Deposit Insurance
Corporation (PDIC).[14]
Principio testified that he was tasked to ascertain the financial conditions of rural banks and determine if
these banks comply with the banking laws and the regulations, as well as the directives of the BSP. He
became in-charge of RBSM. During the general examination, RBSM was found to have several violations,
particularly the grant of loans "without proper and complete loan documentation" and "clean or unsecured
loans were being granted in such a large amount that would be considered excessive for the substance of
needs of the borrowers."[15]
Upon further investigation, it was discovered that on June 27, 1997, RBSM released an unsecured loan
with a principal amount of P15,000,000.00 to Malang, without a co-maker and collateral; without approval
from the Credit Committee or the Board of Directors; and through an incomplete loan application, the
same being signed in blank except for the name and address. [16] In a Letter[17] dated September 15, 1997
addressed to the BSP, petitioner stated that said loan was "approved/confirmed under BR No. 64A-1997
dated July 9, 1997" and that the same was "secured with the following collaterals: TCT-RT25807 (T-
111040) situated in San Miguel, Bulacan, TCT-T34464 situated in Baliuag, Bulacan, [and] TCT-285848
situated in Caloocan City." [18] Records, however, show that no report regarding said loan was submitted to
the DRB-BSP and that there were no annotations on the transfer certificates of title purportedly subject of
the real estate mortgage.[19]
29
Principio demanded from petitioner's co-accused, Rosalinda Ilagan (Ilagan), RBSM General Manager, to
produce the credit folder of the subject loan. Ilagan furnished Principio the following documents: (a) Loan
Application/Information Sheet, signed in blank and without any information except the name and address
of the alleged borrower; (b) Promissory Note No. 101-97-110 dated June 27, 1997, in the principal amount
of P15,000,000.00, purportedly executed by Malang; (c) Disclosure Statement on Loan/Credit
Transaction, purportedly signed by Malang; and (d) unnumbered Credit Proposal Report dated May 14,
1997, for spouses Malang, which was prepared, recommended for approval and signed by Hagan,
approved by petitioner as member of the Board of Directors of RBSM, and does not bear the signatures of
the majority of the Board of Directors of RBSM. [20]
Pursuant to the said loan, Manager's Check No. 016514 [21] dated June 27, 1997 in the amount of
P14,775,000.00 payable to Malang was released.
Malang, however, denied having applied for and received any proceeds of the said loan. This was
corroborated by an Affidavit[22] executed by Hagan. Instead, Malang testified that he knew petitioner as the
president of RBSM and because they were both stockholders of MRBTI. He narrated that petitioner
encouraged him to apply for a loan and gave him documents to fill up and sign. He, however, withdrew the
application later on due to his wife's objection thereto, and also due to their lawyer's advice that the loan
will not be granted because of the insufficient collateral. He was, thus, surprised to discover that the loan
proceeds were deposited to his purported current account with RBSM, when he does not have one. Two
personal checks with Nos. 0122077[23] and 0122076[24] dated July 1, 1997, amounting to P12,409,791.99
and P2,365,000.00, respectively, payable to himself, were thereafter issued and drawn from the said
current account.[25] These checks were then deposited to another purported account of Malang in MRBTI.
[26]
Upon confronting Santillana, MRBTI's president, about the deposit, he found out that it was Ilagan, upon
petitioner's instruction, who deposited the two checks to the account. [27]
Santillana testified that, indeed, sometime m July 1997, Ilagan deposited checks in Malang's account and
thereafter, also withdrawn by Ilagan, per petitioner's instruction. According to Santillana, petitioner
instructed him as follows: "x x x Andy may padadala akong tseke riyan ideposito mo [sa] account ni
Malang pagka clear ika, pababalikan ko kay Rose dyan, kukunin sayo ipalit mo ng kuwan ipakiusap mo
sa Landbank na ipalit ng tseke sa ganong pangalan."[28] Thus, the deposited amount was withdrawn
through the issuance of 30 MRBTI checks, [29] drawn against MRBTI's Land Bank account, payable to
Malang. Thereafter, as arranged, said checks were taken by a certain Diosa Marquez with Ilagan and
used to buy two Land Bank cashier's checks, amounting to P12,409,791.99 (Check No. 000000992) and
P2,365,000.00 (000000993) both dated July 3, 1997, payable to Norma Rayo (Rayo) and Teresa
Villacorta (Villacorta), respectively.[30]
Ramos and Angeles of Land Bank-Gapan corroborated this testimony. [31]
These Land Bank checks, among others, were then deposited to RBSM to pay off petitioner's previous
irregular loans. Said payments were evidenced by official receipts issued by RBSM. [32]
Despite several opportunities given, the defense failed to file its formal offer of evidence. [33]
Incidentally, on May 18, 2014, the RTC received a copy of the Certificate of Death dated February 13,
2014 of Ilagan.[34]
In a Decision[35] dated October 13, 2015, the RTC found petitioner guilty as charged, viz.:
WHEREFORE, judgment is hereby rendered finding the accused Hilario P. Soriano:
a) [I]n Criminal Case No. 1719-M-2000, GUILTY beyond reasonable doubt for violation of Section 83, R.A.
No. 337 as amended by P.D. No. 1795 (General Banking Act) and hereby sentences him to suffer
imprisonment of ten years and a fine of Ph[P]200,000.00;
b) In Criminal Case No. 1720-M-2000, GUILTY beyond reasonable doubt of Estafa thru Falsification of
Commercial Documents and hereby sentences him to an indeterminate prison sentence ranging from ten
years and one day of prision mayor as minimum, to twenty years of reclusion temporal as maximum, and
30
to indemnify the Rural Bank of San Miguel-San Miguel Branch, its creditors and Bangko Sentral ng
Pilipinas the total sum of Php14,775,000.00, with interests thereon at the rate of 12% per annum from the
filing of the Informations until paid, plus costs. Further, the accessory penalties as provided by law shall be
imposed upon the accused.
On the other hand, the liability of accused, Rosalinda Ilagan, is extinguished in view of her death, as per
Death Certificate dated 13 February 2014.
SO ORDERED.[36]
On appeal, the CA affirmed the RTC's Decision with modification only as to the penalties imposed as
follows:
WHEREFORE, the foregoing considered, the appeal is DENIED. The Decision dated 13 October 2015 of
the Regional Trial Court (Branch 17, Malolos City) in Crim. Case Nos. 1719-M-2000 and 1720-M-2000
is AFFIRMED WITH MODIFICATION as to the following penalties prescribed:
(a) In Criminal Case No. 1719-M-2000, accused-appellant Hilario P. Soriano is found GUILTY beyond
reasonable doubt for violation of Section 83, R.A. No. 337 as amended by P.D. No. 1795 (General
Banking Act) and is hereby sentenced to suffer imprisonment of Ten (10) Years and a fine of Ten
Thousand Pesos (P10,000.00); and
(b) In Criminal Case No. 1720-M-2000, accused-appellant Hilario P. Soriano is found GUILTY beyond

reasonable doubt for the complex crime of Estafa thru Falsification of Commercial Documents and is
hereby sentenced to an indeterminate sentence of imprisonment ranging from Four (4) Years and Two (2)
Months of prision correccional as minimum to Thirteen (13) Years of reclusion temporal as maximum, and
to indemnify the Rural Bank of San Miguel-San Miguel Branch, its creditors and Bangko Sentral ng
Pilipinas the total sum of P14,775,000.00, with interests thereon at the rate of 12% per annum from the
filing of the Informations until paid, plus costs. Further, the accessory penalties as provided by law shall be
imposed upon the accused.
SO ORDERED.[37]
Petitioner's motion for reconsideration was likewise denied by the CA in its June 26, 2018 assailed
Resolution.[38] Hence, this petition.
Issues
1. Was petitioner's guilt in Criminal Case No. 1719-M-2000 for violation of Section 83 of R.A. No. 337, as
amended, proved beyond reasonable doubt?
2. Was petitioner's guilt in Criminal Case No. 1720-M-2000 for the complex crime of estafa thru
falsification of commercial documents proved beyond reasonable doubt?
Petitioner maintains that he did not violate Section 83 of R.A. No. 337, as amended, or the DOSRI [39] law.
Specifically, petitioner avers that the prosecution attempted to establish that he obtained an indirect loan
under Malang's name in the net amount of P14,775,000.00 but its evidence, namely the General
Examination Report, refers to a different loan, i.e., his irregular loan amounting to P34,000,000.00.
Petitioner also argues that the prosecution's failure to present Rayo as witness was fatal to its case.
Petitioner also points out that the prosecution failed to check his bank account to see if the subject went
straight to his coffers to prove that it inured to his benefit.
Petitioner also argues that the prosecution evidence was insufficient to prove his participation in the
commission of the crime of estafa through falsification of commercial documents. Specifically, petitioner
stresses the fact that it was actually Malang who signed the loan application was established. Further,
31
petitioner points out that as RBSM's president, he was not engaged in frontline services for him to be able
to process loan applications.
The Court's Ruling

We find no merit in the instant petition.
At the outset, it must be noted that the arguments raised by petitioner inarguably require to inquire into the
sufficiency of the evidence presented by the prosecution, a course of action which this Court will,
generally, not do, consistent with our repeated holding that this Court is not a trier of facts. It is basic that
factual findings of trial courts, including their assessment of witnesses' credibility, are entitled to great
weight and respect by this Court, especially when affirmed by the CA. [40] None of the jurisprudential
exceptions[41] to this rule obtain in this case.
We find no cogent reason to deviate from the courts a quo's ruling that petitioner was guilty beyond
reasonable doubt of violating the DOSRI law, as well as of the complex crime of estafa through
falsification of commercial documents. The clear, positive, and categorical testimonies of the nine
prosecution witnesses that corroborate each other on all material points, coupled with the voluminous
documentary evidence on record clearly establish petitioner's guilt on the offenses charged.
Violation of the DOSRI Law
Section 83 of R.A. No. 337, as amended, states:
SEC. 83. No director or officer of any banking institution shall, either directly or indirectly, for himself or as
the representative or agent of others, borrow any of the deposits of funds of such bank, nor shall he
become a guarantor, indorser, or surety for loans from such bank to others, or in any manner be an
obligor for moneys borrowed from the bank or loaned by it, except with the written approval of the majority
of the directors of the bank, excluding the director concerned. Any such approval shall be entered upon
the records of the corporation and a copy of such entry shall be transmitted forthwith to the
Superintendent of Banks. The office of any director or officer of a bank who violates the provisions of this
section shall immediately become vacant and the director or officer shall be punished by imprisonment of
not less than one year nor more than ten years and by a fine of not less than one thousand nor more than
ten thousand pesos.
x x x x.
From the foregoing, the following elements must be present to constitute a violation of the above-quoted
provision: (1) the offender is a director or officer of any banking institution; (2) the offender, either directly
or indirectly, for himself or as a representative or agent of another, performs any of the following acts: (a)
he borrows any of the deposits or funds of such bank; or (b) he becomes a guarantor, indorser, or surety
for loans from such bank to others; or (c) he becomes in any manner an obligor for money borrowed from
bank or loaned by it; and (3) the offender has performed any of such acts without the written approval of
the majority of the directors of the bank, excluding the offender, as the director concerned. [42]
The essence of the crime is becoming an obligor of the bank without securing the necessary written
approval of the majority of the bank's directors. The DOSRI law was enacted as the Congress deemed it
essential to impose certain restrictions on the borrowings undertaken by directors and officers in order to
protect the public, especially the depositors. Such restriction is necessary because of the advantage these
bank officers have because of their position, in acquiring loans or borrowing funds from the bank funds.
Indeed, banks were not created for the benefit of their directors and officers; they cannot use the assets of
the bank for their own benefit, except as may be permitted by law. [43]
As borne by the records, the aforecited elements were established beyond reasonable doubt in this case.
There is no question that petitioner was a director and officer of RBSM, being the president thereof. It was
also established that the subject loan had no approval from RBSM's board of directors. Petitioner,
however, questions the existence of the second element. Petitioner argues that the evidence of the
32
prosecution was not able to prove that the subject loan under Malang's name, was his indirect loan as the
prosecution evidence pertained to a different loan; nor was the prosecution able to establish that the
alleged proceeds of said loan inured to his benefit to make him an obligor thereof.
According to petitioner, the prosecution evidence, particularly the General Examination Report of RBSM
as of September 15, 1996, pertained to the another irregular loan under his name amounting to
P34,000,000.00, which was divided into two names: his and Rayo's. Put differently, petitioner avers that
what the prosecution was able to prove was his previous irregular loans, not the indirect loan under
Malang's name, which was the subject of the Information in Criminal Case No. 1719-M-2000. Petitioner
avers that the prosecution was "muddling the issues".
Contrary to petitioner's position, it is not the prosecution, but his averments, which muddle the factual
circumstances.
Indeed, petitioner was charged and convicted under the DOSRI law because of his indirect loan under
Malang's name. This was established through the testimonies of the prosecution witnesses, found
credible by the trial court and the CA, coupled with the documentary evidence presented. Evidence on
record clearly establish that petitioner orchestrated the release of the subject fictitious loan under
Malang's name, the proceeds thereof were used to pay petitioner's other irregular loans from RBSM. The
prosecution witnesses testified that the whole process - from the loan application, the purported approval
thereof, the release, up to the use of the proceeds were made to happen through the direct instructions of
petitioner.
Contrary to what petitioner attempts to impress to this Court, the General Examination Report was not the
only evidence presented by the prosecution to prove his hand in the indirect loan under Malang's name.
There was no error on the part of the prosecution in finding it relevant to prove petitioner's previous
irregular loans to establish his interest or motive in obtaining the subject indirect loan, i.e., to apply the
same to said previous loans, among others. Indeed, as found by the courts a quo, the prosecution's
evidence was sufficient, not only to prove that petitioner orchestrated the whole process to obtain the
subject loan, but also to prove that the proceeds thereof were used to pay off his previous irregular loans.
Principio testified:
Q: Now, you pointed to a hand-written notation appearing at the dorsal portion of Exh. HH which dorsal
portion was marked Exh. HH-1-a and the written notation which are O.R. No. 187038 and another O.R. is
187039, what are these ORs all about?
(Witness examining)
A: These [receipts] were issued by the Rural Bank of San Miguel, Plaridel Branch, sir.
Q: Why did the Rural Bank of San Miguel, Plaridel Branch issued said O.R.[s]?
A: [They are] for the receipt of the check[s] in the name of Teresa Villacorta and Norma Rayo, sir.
[These] checks [were] applied to the loan[sl of Norma Rayo, Hilario Soriano and other names, sir.
Q: Now, let's go to the two checks, one by one, to which loan was the check marked as Exh. HH in the
amount of P2,365,000.00 applied to?
(Witness examining)
A: The check No. 00992 in the amount of P12,409,791.99 was applied to the loan of Norma Rayo
and Hilario Soriano, sir.
Q: How about the check marked Exh. HH?
33
A: It was applied to the loan of Hilario P. Soriano, E. Perdigonez, C. de Guzman, and R. Carlos and
M.V. Tecson, sir.[44] (Emphasis supplied)
Neither was the non-presentation of Rayo as a witness fatal to the prosecution's case. The testimonies of
the prosecution witnesses which were corroborative of each other in all the relevant and material points,
coupled with the documentary evidence on record, established in detail, not only petitioner's connection
with Rayo, as well as Villacorta, but also the scheme perpetrated by petitioner to obtain the fictitious loan
under Malang's name.
That the proceeds of the subject loan did not go "straight to his coffers," as petitioner points out, is of no
moment. The established fact remains that petitioner obtained the subject indirect loan and used the
proceeds thereof to pay his other obligations, among others. To this Court's mind, it would be absurd for a
high-ranking bank officer to orchestrate the processing and acquisition of a fictitious loan and to deposit
the proceeds thereof straight to his personal bank account only to leave paper trails and put himself at the
risk of easy apprehension. Precisely, petitioner resorted to a circuitous scheme to perpetrate his plan.
As held by this Court in the related case of Soriano v. People,[45] the prohibition under the DOSRI law is
broad enough to cover various modes of borrowing, viz.:
It covers loans by a bank director or officer (like herein petitioner) which are made either: (1) directly,
(2) indirectly, (3) for himself, (4) or as the representative or agent of others. It applies even if the director
or officer is a mere guarantor, indorser or surety for someone else's loan or is in any manner an obligor for
money borrowed from the bank or loaned by it. The covered transactions are prohibited unless
the approval, reportorial and ceiling requirements under Section 83 are complied with. The prohibition is
intended to protect the public, especially the depositors, from the overborrowing of bank funds by bank
officers, directors, stockholders and related interests, as such overborrowing may lead to bank failures. It
has been said that "banking institutions are not created for the benefit of the directors [or officers]. While
directors have great powers as directors, they have no special privileges as individuals. They cannot use
the assets of the bank for their own benefit except as permitted by law. Stringent restrictions are placed
about them so that when acting both for the bank and for one of themselves at the same time, they must
keep within certain prescribed lines regarded by the legislature as essential to safety in the banking
business.
A direct borrowing is obviously one that is made in the name of the DOSRI himself or where the DOSRI is
a named party, while an indirect borrowing includes one that is made by a third party, but the DOSRI has
a stake in the transaction. The latter type - indirect borrowing - applies here. x x x (Citations omitted)
Considering all the foregoing established circumstances, we find that the courts a quo correctly ruled that
the prosecution evidence proved beyond reasonable doubt that petitioner, as president of RBSM,
indirectly borrowed or secured a loan with RBSM without the written consent and approval of the majority
of the board of directors, which consent and approval petitioner deliberately failed to obtain, by using the
name of one depositor Malang, the latter having no knowledge of said loan, and thereafter converted the
same to his own personal use and benefit.
Estafa through Falsification of Commercial Documents
The elements of falsification of documents under paragraph 1, Article 172 of the Revised Penal Code
(RPC) are: (1) that the offender is a private individual or a public officer or employee who did not take
advantage of his official position; (2) that he committed any of the acts of falsification enumerated in
Article 171 of the RPC;[46] and (3) that the falsification was committed in a public, official or commercial
document.[47]
All these elements were likewise established in this case beyond reasonable doubt.
First, petitioner is a private individual.
34
Second, petitioner committed one of the acts of falsification under Article 171 of the RPC, i.e., he caused it
to appear that Malang applied for the subject loan when he, in fact, did not do so. Records show that
petitioner was able to convince Malang to sign the loan application, promissory note, and disclosure
statement in blank, and together with his now deceased co-accused Ilagan, processed and approved the
loan even if the same was retracted and discontinued by Malang, not to mention that the documents and
requirements therefor were incomplete. Checks were later on issued and the proceeds thereof withdrawn
under Malang's name, again without the latter's knowledge. Petitioner also made it appear, as can be
gleaned from the Letter dated September 15, 1997 addressed to the BSP signed by petitioner, that the
purported loan application of Malang was approved by RBSM board of directors and secured by real
estate properties. Records, however, show that there was no such approval from the board nor was there
any collateral for the subject loan.
Third, the falsification was committed in bank loan application, promissory note, checks and disclosure
statement, among others, which are commercial documents. Commercial documents are, in general,
documents or instruments which are "used by merchants or businessmen to promote or facilitate trade or
credit transactions" such as the above-said documents and instruments. [48]
This committed falsification was also established to have been a necessary means to commit estafa.
In Tanenggee[49] the Court explained that:

The falsification of a public, official, or commercial document may be a means of committing estafa,
because before the falsified document is actually utilized to defraud another, the crime of falsification has
already been consummated, damage or intent to cause damage not being an element of the crime of
falsification of public, official or commercial document. In other words, the crime of falsification has already
existed. Actually utilizing that falsified public, official or commercial document to defraud another is estafa.
But the damage is caused by the commission of estafa, not by the falsification of the document.
Therefore, the falsification of the public, official or commercial document is only a necessary means to
commit estafa.
Estafa is generally committed when (a) the accused defrauded another by abuse of confidence, or by
means of deceit, and (b) the offended party or a third party suffered damage or prejudice capable of
pecuniary estimation." "[D]eceit is the false representation of a matter of fact, whether by words or
conduct, by false or misleading allegations, or by concealment of that which should have been disclosed
which deceives or is intended to deceive another so that he shall act upon it to his legal injury." (Citations
omitted)
As in this case, the crime of falsification was already consummated, and the falsified documents were,
thereafter, used to defraud the bank to release money purportedly to Malang.
Records show that the elements of estafa obtain in this case. Petitioner falsely represented that Malang
pursued the loan application and promissory note that were signed in blank through petitioner's prodding;
and orchestrating the whole process until he, with his now deceased co-accused Ilagan, succeeded in
withdrawing the proceeds thereof from RBSM, coursing them through MRBTI and Land Bank, and
thereafter applying the same to his previous irregular loans also with RBSM. Clearly, petitioner employed
deceit to acquire money, on another person's account, and use the same for his personal use and benefit,
which resulted to the damage and prejudice of the RBSM in the amount of P14,775,000.00.
Again, petitioner could not have acquired the said amount to pay off his previous loans without the act of
falsification. The falsification was, therefore, a necessary means to commit estafa, and falsification was
already consummated even before the falsified documents were used to defraud the bank. [50]
Thus, the complex crime of estafa through falsification of documents is committed when the offender
commits on a public, official or commercial document any of the acts of falsification enumerated in Article
171 as a necessary means to commit estafa. [51]
35
The fact that the loan application was actually signed by Malang, not by petitioner, could not belie his
direct hand in perpetrating the crime. To reiterate, it was established that the loan application was signed
by Malang in blank and processed through petitioner's instructions, to make it appear that Malang
purportedly participated in applying for the subject loan, despite the fact that the purported loan application
was withdrawn by Malang. It was likewise established that it was petitioner's scheme that made the
issuance of the check in the name of Malang, and thereafter, the checks in the names of Rayo and
Villacorta, possible. Hence, as correctly found by the RTC and the CA, one of the acts of falsification
under Article 171 of the RPC, particularly paragraph 2 thereof- causing it to appear that a person has
participated in any act when he did not in fact participate - is present in this case.
Also, while it may be true that petitioner, as RBSM president, was not engaged in frontline services for him
to be able to actually process loan applications, his direct participation in the "circuitous scheme" which
perpetrated the falsification and deception cannot be denied as borne by the records. Again, the
prosecution's evidence established beyond reasonable doubt that said nefarious scheme was devised by
petitioner and was successfully executed through his direct instructions to the working participants.
In fine, as correctly synthesized by the appellate court:
There is overwhelming evidence to establish the fact that upon the instructions of [petitioner] Soriano, a
fictitious loan in the amount of P15,000,000.00 was made to appear to have been granted by RBSM and
released to Malang, and later on, the money was misappropriated by [petitioner] Soriano. From the extant
evidence, it is indubitable that this intricate process was orchestrated by [petitioner] Soriano, with the help
of accused Ilagan, to the detriment of Malang and RBSM. Earlier on, [petitioner] Soriano was able to
convince Malang to sign the loan application, promissory note, and disclosure statement in blank and,
together with accused Ilagan, processed and approved the loan, even though the same was retracted and
discontinued by Malang, not to mention that the documents were incomplete, and the loan was not
approved by the Board of Directors nor was it secured by any collateral. It was also established that it was
[petitioner] Soriano who instructed Santillana to accept the RBSM manager's check in the amount of
P14,775,000.00, and to issue in its stead thirty (30) manager's checks that were negotiated with Land
Bank-Gapan Branch to secure the two (2) checks under the names of Rayo and Villacorta, for whatever
purpose [petitioner] Soriano wanted to achieve. [52]
Imposable Penalty
For the violation of the DOSRI law, Section 83 of R.A. No. 337, as amended provides for the penalty of
imprisonment of not less than one year nor more than 10 years and a fine of not less than P1,000.00 nor
more than P10,000.00. Hence the imposed penalty of 10 years of imprisonment and a fine of P10,000.00
is well within the range of the prescribed penalty.
For the crime of estafa through falsification of commercial documents, being a complex crime, the penalty
for the more serious crime, which is estafa in this case, shall be imposed in its maximum period. The CA
correctly modified the penalty imposed by the RTC pursuant to the amendments under R.A. No. 10951,
[53]
the same being applicable retroactively as held in the recent case of Hernan v. Sandiganbayan.
[54]
Thus, under Section 85 of R.A. No. 10951, the penalty for estafa is prision correccional in its maximum
period to prision mayor in its minimum period if the amount of the fraud is over P2,400,000.00 but does
not exceed P4,400,000.00. If the amount of the fraud exceeds the latter sum, the penalty shall be imposed
in its maximum period, adding one year for each additional P2,000,000.00 but the total penalty shall not
exceed 20 years. In such cases, and also for purposes of the imposition of accessory penalties, the
imposable penalty shall be termed prision mayor or reclusion temporal, as the case may be.
Applying the Indeterminate Sentence Law and considering that the amount involved herein is
P14,775,000.00, the minimum term of the imposable penalty should be within the range of the penalty
next lower to that prescribed by law for the offense, i.e., prision correccional in its minimum and medium
36
periods applied in its maximum period, which is 2 years, 11 months, and 11 days to 4 years and 2 months.
The CA, thus, correctly imposed the penalty of 4 years and 2 months of prision correccional as minimum.
On the other hand, the maximum term of the imposable penalty shall be taken from the maximum of the
prescribed penalty[55] or 6 years, 8 months, and 21 days to 8 years, adding one year to the floor or the
ceiling of the prescribed penalty at the discretion of the court, [56] for each additional P2,000,000.00 from
the threshold amount of P4,400,000.00. Thus, as P14,775,000.00 exceeded P4,400,00.00 by
P10,375,000.00, the difference shall be divided by P2,000,000.00 to bring us to the number of years to be
added as incremental penalty, i.e., 5.1875. Prevailing jurisprudence dictates that any fraction of a year
shall be discarded, hence, we only add 5 years either to the floor of the prescribed penalty or 6 years, 8
months, and 21 days or to the ceiling, which is 8 years. Thus, again, the CA correctly imposed the penalty
of 13 years of reclusion temporal as maximum.
We, however, find it proper to modify the 12% interest imposed by the CA on the civil indemnity pursuant
to recent jurisprudence[57] and BSP Circular No. 799. Thus, the interest rate of 6% per annum shall be
imposed on the amount of P14,775,000.00 from the date of the finality of this Decision until full payment.
WHEREFORE, premises considered, the petition is DENIED. Accordingly, the Decision dated February
28, 2018 of the Court of Appeals is hereby AFFIRMED with MODIFICATION only as to the interest
imposed. Accordingly, an interest of 6% per annum shall be IMPOSED on the amount of Fourteen Million
Seven Hundred Seventy-Five Thousand (P14,775,000.00) Pesos from the date of the finality of this
Decision until full payment.
SO ORDERED.
THIRD DIVISION
[G.R. NO. 156335 : November 28, 2007]
SPOUSES RAUL and AMALIA PANLILIO, Petitioners, v. CITIBANK, N.A., Respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking to
reverse the Decision1 of the Court of Appeals (CA) dated May 28, 2002 in CA-G.R. CV No. 66649 and its
Resolution of December 11, 2002, which reversed and set aside the Decision of the Regional Trial Court
(RTC) of Makati City.
37
The case originated as a Complaint2 for a sum of money and damages, filed with the RTC of Makati City
on March 2, 1999, by the spouses Raul and Amalia Panlilio (petitioners) against Citibank N.A.
(respondent).
The factual antecedents are as follows:
On October 10, 1997, petitioner Amalia Panlilio (Amalia) visited respondent's Makati City office and
deposited one million pesos (PhP1 million) in the bank's "Citihi" account, a fixed-term savings account
with a higher-than-average interest.3 On the same day, Amalia also opened a current or checking account
with respondent, to which interest earnings of the Citihi account were to be credited. 4 Respondent
assigned one of its employees, Jinky Suzara Lee (Lee), to personally transact with Amalia and to handle
the accounts.5
Amalia opened the accounts as ITF or "in trust for" accounts, as they were intended to benefit her minor
children, Alejandro King Aguilar and Fe Emanuelle C. Panlilio, in case she would meet an untimely
death.6 To open these accounts, Amalia signed two documents: a Relationship Opening Form (ROF) 7 and
an Investor Profiling and Suitability Questionnaire (Questionnaire). 8
Amalia's initial intention was to invest the money in a Citibank product called the Peso Repriceable
Promissory Note (PRPN), a product which had a higher interest. However, as the PRPN was not available
that day, Amalia put her money in the Citihi savings account. 9
More than a month later, or on November 28, 1997, Amalia phoned Citibank saying she wanted to place
an investment, this time in the amount of three million pesos (PhP3 million). Again, she spoke with Lee,
the bank employee, who introduced her to Citibank's various investment offerings. After the phone
conversation, apparently decided on where to invest the money, Amalia went to Citibank bringing a
PCIBank check in the amount of three million pesos (PhP3 million). During the visit, Amalia instructed Lee
on what to do with the PhP3 million. Later, she learned that out of the said amount, PhP2,134,635.87 was
placed by Citibank in a Long-Term Commercial Paper (LTCP), a debt instrument that paid a high interest,
issued by the corporation Camella and Palmera Homes (C&P Homes). 10 The rest of the money was
placed in two PRPN accounts, in trust for each of Amalia's two children. 11
Allegations differ between petitioners and respondent as to whether Amalia instructed Lee to place the
money in the LTCP of C&P Homes.12
An LTCP is an evidence of indebtedness, with a maturity period of more than 365 days, issued by a
corporation to any person or entity.13 It is in effect a loan obtained by a corporation (as borrower) from the
investing public (as lender)14 and is one of many instruments that investment banks can legally buy on
behalf of their clients, upon the latter's express instructions, for investment purposes. 15 LTCPs' attraction
is that they usually have higher yields than most investment instruments. In the case of the LTCP issued
by C&P Homes, the gross interest rate was 16.25% per annum at the time Amalia made her investment. 16
On November 28, 1997, the day she made the PhP3million investment, Amalia signed the following
documents: a Directional Investment Management Agreement (DIMA), 17 Term Investment Application
(TIA),18 and Directional Letter/Specific Instructions. 19 Key features of the DIMA and the Directional Letter
are provisions that essentially clear Citibank of any obligation to guarantee the principal and interest of the
investment, absent fraud or negligence on the latter's part. The provisions likewise state that all risks are
to be assumed by the investor (petitioner).
As to the amount invested, only PhP2,134,635.87 out of the PhP3 million brought by Amalia was placed in
the LTCP since, according to Lee, this was the only amount of LTCP then available. 20 According to Lee,
38
the balance of the PhP3 million was placed in two PRPN accounts, each one in trust for Amalia's two
children, per her instructions.21
Following this investment, respondent claims to have regularly sent confirmations of investment (COIs) to
petitioners.22 A COI is a one-page, computer generated document informing the customer of the
investment earlier made with the bank. The first of these COIs was received by petitioners on or about
December 9, 1997, as admitted by Amalia, which is around a week after the investment was
made.23 Respondent claims that other succeeding COIs were sent to and received by petitioners.
Amalia claims to have called Lee as soon as she received the first COI in December 1997, and demanded
that the investment in LTCP be withdrawn and placed in a PRPN. 24 Respondent, however, denies this,
claiming that Amalia merely called to clarify provisions in the COI and did not demand a withdrawal. 25
On August 6, 1998, petitioners met with respondent's other employee, Lizza Colet, to preterminate the
LTCP and their other investments. Petitioners were told that as to the LTCP, liquidation could be made
only if there is a willing buyer, a prospect which could be difficult at that time because of the economic
crisis. Still, petitioners signed three sets of Sales Order Slip to sell the LTCP and left these with Colet. 26
On August 18, 1998, Amalia, through counsel, sent her first formal, written demand to respondent "for a
withdrawal of her investment as soon as possible." 27 The same was followed by another letter dated
September 7, 1998, which reiterated the same demands. 28 In answer to the letters, respondent noted that
the investment had a 2003 maturity, was not a deposit, and thus, its return to the investor was not
guaranteed by respondent; however, it added that the LTCP may be sold prior to maturity and had in fact
been put up for sale, but such sale was "subject to the availability of buyers in the secondary market." 29 At
that time, respondent was not able to find a buyer for the LTCP. As this response did not satisfy
petitioners, Amalia again wrote respondent, this time a final demand letter dated September 21, 1998,
asking for a reconsideration and a return of the money she invested. 30 In reply, respondent wrote a letter
dated October 12, 1998 stating that despite efforts to sell the LTCP, no willing buyers were found and that
even if a buyer would come later, the price would be lower than Amalia's original investment. 31
Thus, petitioners filed with the RTC their complaint against respondent for a sum of money and damages.
The Complaint32 essentially demanded a return of the investment, alleging that Amalia never instructed
respondent's employee Lee to invest the money in an LTCP; and that far from what Lee executed,
Amalia's instructions were to invest the money in a "trust account" with an "interest of around 16.25% with
a term of 91 days." Further, petitioners alleged that it was only later, or on December 8, 1997, when
Amalia received the first confirmation of investment (COI) from respondent, that she and her husband
learned of Lee's infidelity to her orders. The COI allegedly informed petitioners that the money was placed
in an LTCP of C&P Homes with a maturity in 2003, and that the investment was not guaranteed by
respondent. Petitioners also claimed that as soon as Amalia received the COI, she immediately called
Lee; however, the latter allegedly convinced her to ignore the COI, that C&P Homes was an Ayala
company, that the investment was secure, and that it could be easily "withdrawn"; hence, Amalia decided
not to immediately "withdraw" the investment. Several months later, or on August 6, 1998, petitioners
allegedly wanted to "withdraw" the investment to buy a property; however, they failed to do so, since
respondent told them the LTCP had not yet matured, and that no buyers were willing to buy it. Hence,
they sent various demand letters to respondent, asking for a return of their money; and when these went
unheeded, they filed the complaint.
In its Answer,33 respondent admitted that, indeed, Amalia was its client and that she invested the amounts
stated in the complaint. However, respondent disputed the claim that Amalia opened a "trust account" with
a "request for an interest rate of around 16.25% with a term of 91 days;" instead, respondent presented
39
documents stating that Amalia opened a "directional investment management account," with investments
to be made in C&P Homes' LTCP with a 2003 maturity. Respondent disputed allegations that it violated
petitioners' express instructions. Respondent likewise denied that Amalia, upon her receipt of the COI,
immediately called respondent and protested the investment in LTCP, its 2003 maturity and Citibank's
lack of guarantee. According to respondent, no such protest was made and petitioners actually decided to
liquidate their investment only months later, after the newspapers reported that Ayala Land, Inc. was
cancelling plans to invest in C&P Homes.
The rest of respondent's Answer denied (1) that it convinced Amalia not to liquidate or "withdraw" her
investment or to ignore the contents of the COI; (2) that it assured Amalia that the investment could be
easily or quickly "withdrawn" or sold; (3) that it misrepresented that C&P was an Ayala company, implying
that C&P had secure finances; and (4) that respondent had been unfaithful to and in breach of its
contractual obligations.
After trial, the RTC rendered its Decision,34 dated February 16, 2000, the dispositive portion of which
states:
The foregoing considered, the court hereby rules in favor of plaintiffs and order defendant to pay:
1. The sum of PhP2,134,635.87 representing the actual amount deposited by plaintiffs with defendant plus
interest corresponding to time deposit during the time material to this action from date of filing of this case
until fully paid;
2. The sum of PhP300,000.00 representing moral damages;
3. The sum of PhP100,000.00 representing attorney's fees;
4. Costs.
SO ORDERED.35
The RTC upheld all the allegations of petitioners and concluded that Amalia never instructed Citibank to
invest the money in an LTCP. Thus, the RTC found Citibank in violation of its contractual and fiduciary
duties and held it liable to return the money invested by petitioners plus damages.
Respondent appealed to the CA.
On appeal, in its Decision promulgated on May 28, 2002, the CA reversed the Decision of the RTC, thus:
WHEREFORE, premises considered, the assailed decision dated 16 February 2000 is REVERSED and
SET ASIDE and a new one entered DISMISSING Civil Case No. 99-500. 36
The CA held that with respect to the amount of PhP2,134,635.87, the account opened by Amalia was an
investment management account; as a result, the money invested was the sole and exclusive obligation of
C&P Homes, the issuer of the LTCP, and was not guaranteed or insured by herein respondent
Citibank;37 that Amalia opened such an account as evidenced by the documents she executed with
Citibank, namely, the Directional Investment Management Agreement (DIMA), Term Investment
Application (TIA), and Directional Letter/Specific Instructions, which were all dated November 28, 1997,
the day Amalia brought the money to Citibank. Further, the CA brushed aside petitioners' arguments that
Amalia failed to understand the true nature of the LTCP investment, and that she failed to read the
documents as they were written in fine print. The CA ruled that petitioners could not seek the court's aid to
40
extricate them from their contractual obligations. Citing jurisprudence, the CA held that the courts
protected only those who were innocent victims of fraud, and not those who simply made bad bargains or
exercised unwise judgment.
On petitioners' motion for reconsideration, the CA reiterated its ruling and denied the motion in a
Resolution38 dated December 11, 2002.
Thus, the instant petition which raises issues, summarized as follows: (1) whether petitioners are bound
by the terms and conditions of the Directional Investment Management Agreement (DIMA), Term
Investment Application (TIA), Directional Letter/Specific Instructions, and Confirmations of Investment
(COIs); (2) and whether petitioners are entitled to take back the money they invested from respondent
bank; or stated differently, whether respondent is obliged to return the money to petitioners upon their
demand prior to maturity.
Petitioners contend that they are not bound by the terms and conditions of the DIMA, Directional Letter
and COIs because these were inconsistent with the TIA and other documents they signed. 39 Further, they
claim that the DIMA and the Directional letter were signed in blank or contained unauthorized
intercalations by Citibank.40 Petitioners argue that contrary to the contents of the documents, they did not
instruct Citibank to invest in an LTCP or to put their money in such high-risk, long-term instruments. 41
The Court notes the factual nature of the questions raised in the petition. Although the general rule is that
only questions of law are entertained by the Court in Petitions for Review on Certiorari, 42 as the Court is
not tasked to repeat the lower courts' analysis or weighing of evidence, 43 there are instances when the
Court may resolve factual issues, such as (1) when the trial court misconstrued facts and circumstances
of substance which if considered would alter the outcome of the case; 44 and (2) when the findings of facts
of the CA and the trial court differ.45
In the instant case, the CA completely reversed the findings of facts of the trial court on the ground that
the RTC failed to appreciate certain facts and circumstances. Thus, applying the standing jurisprudence
on the matter,46 the Court proceeded to examine the evidence on record.
The Court's Ruling
The Court finds no merit in the petition. After a careful examination of the records, the Court affirms the
CA's ruling for being more in accord with the facts and evidence on record.
On the first issue of whether petitioners are bound by the terms and conditions of the DIMA, TIA,
Directional Letter and COIs, the Court holds in the affirmative and finds for respondent.
The DIMA, Directional Letter and COIs are evidence of the contract between the parties and are binding
on them, following Article 1159 of the Civil Code which states that contracts have the force of law between
the parties and must be complied with in good faith. 47 In particular, petitioner Amalia affixed her signatures
on the DIMA, Directional Letter and TIA, a clear evidence of her consent which, under Article 1330 of the
same Code, she cannot deny absent any evidence of mistake, violence, intimidation, undue influence or
fraud.48
As the documents have the effect of law, an examination is in order to reveal what underlies petitioners'
zeal to exclude these from consideration.
Under the DIMA, the following provisions appear:
41
4. Nature of Agreement - THIS AGREEMENT IS AN AGENCY AND NOT A TRUST AGREEMENT. AS
SUCH, THE PRINCIPAL SHALL AT ALL TIMES RETAIN LEGAL TITLE TO THE FUNDS AND
PROPERTIES SUBJECT OF THE ARRANGEMENT.
THIS AGREEMENT IS FOR FINANCIAL RETURN AND FOR THE APPRECIATION OF ASSETS OF
THE ACCOUNT. THIS AGREEMENT DOES NOT GUARANTEE A YIELD, RETURN OR INCOME BY
THE INVESTMENT MANAGER. AS SUCH, PAST PERFORMANCE OF THE ACCOUNT IS NOT A
GUARANTY OF FUTURE PERFORMANCE AND THE INCOME OF INVESTMENTS CAN FALL AS
WELL AS RISE DEPENDING ON PREVAILING MARKET CONDITIONS.
IT IS UNDERSTOOD THAT THIS INVESTMENT MANAGEMENT AGREEMENT IS NOT COVERED BY

THE PHILIPPINE DEPOSIT INSURANCE CORPORATION (PDIC) AND THAT LOSSES, IF ANY, SHALL
BE FOR THE ACCOUNT OF THE PRINCIPAL. (Underscoring supplied.)
xxx
6. Exemption from Liability. - In the absence of fraud, bad faith, or gross or willful negligence on the part
of the INVESTMENT MANAGER or any person acting in its behalf, the INVESTMENT MANAGER shall
not be liable for any loss or damage to the Portfolio arising out of or in connection with any act done or
omitted or caused to be done or omitted by the INVESTMENT MANAGER pursuant to the terms and
conditions herein agreed upon, and pursuant to and in accordance with the written instructions of the
PRINCIPAL to carry out the powers, duties and purposes for which this Agreement is executed. The
PRINCIPAL will hold the INVESTMENT MANAGER free and harmless from any liability, claim, damage or
fiduciary responsibility that may arise from any investment made pursuant to this Agreement and to such
letters or instructions under Paragraph 3 hereof due to the default, bankruptcy or insolvency of the
Borrower/Issuer or the Broker/Dealer handling the transaction and or their failure in any manner to comply
with any of their obligations under the aforesaid transactions, it being the PRINCIPAL'S understanding
and intention that the investments/reinvestments under this account shall be strictly for his/its account and
risk except as indicated above.
The INVESTMENT MANAGER shall manage the Portfolio with the skill, care, prudence, and diligence
necessary under the prevailing circumstances that a good father of the family, acting in a like capacity and
familiar with such matters, would exercise in the conduct of an enterprise of like character and with similar
aims. (Underscoring supplied.)
xxx
11. Withdrawal of Income/Principal ' Subject to availability of funds and taking into consideration the
commitment of this account to third parties, the PRINCIPAL may withdraw the income/principal of the
Portfolio or portion thereof upon request or application thereof from the Bank. The INVESTMENT
MANAGER shall not be required to inquire as to the income/principal so withdrawn from the Portfolio. Any
income of the Portfolio not withdrawn shall be accumulated and added to the principal of the Portfolio for
further investment and reinvestment.49 (Underscoring supplied.)
Under the Directional Letter, which constituted petitioners' instructions to respondent, the following
provisions are found:
In the absence of fraud, bad faith or gross or willful negligence on your part or any person acting in your
behalf, you shall not be held liable for any loss or damage arising out of or in connection with any act done
or performed or caused to be done or performed by you pursuant to the terms and conditions of our
Agreement. I/We shall hold you free and harmless from any liability, claim, damage, or fiduciary
42
responsibility that may arise from this investment made pursuant to the foregoing due to the default,
bankruptcy or insolvency of the Borrower/Issuer, or the Broker/Dealer handling the aforesaid
transactions/s, it being our intention and understanding that the investment/reinvestment under these
transaction/s shall be strictly for my/our account and risk.
In case of default of the Borrower/Issuers, we hereby authorize you at your sole option, to terminate the
investment/s therein and deliver to us the securities/loan documents then constituting the assets of my/our
DIMA/trust account with you for me/us to undertake the necessary legal action to collect and/or recover
from the borrower/issuers.50 (Underscoring supplied.)
The documents, characterized by the quoted provisions, generally extricate respondent from liability in
case the investment is lost. Accordingly, petitioners assumed all risks and the task of collecting from the
borrower/issuer C&P Homes.
In addition to the DIMA and Directional Letter, respondent also sent petitioners the COIs on a regular
basis, the first of which was received by petitioners on December 9, 1997. The COIs have the following
provisions in common:
xxxx
NATURE OF TRANSACTION INVESTMENT IN LTCP
NAME OF BORROWER/ISSUER C&P HOMES
xxxx
TENOR 91 DAYS
xxxx
MATURITY DATE 11/05/03
xxxx
OTHERS REPRICEABLE EVERY 91 DAYS
PURSUANT TO THE BANGKO SENTRAL REGULATIONS, THE PRINCIPAL AND INTEREST OF YOUR
INVESTMENT ARE OBLIGATIONS OF THE BORROWER AND NOT OF THE BANK. YOUR
INVESTMENT IS NOT A DEPOSIT AND IS NOT GUARANTEED BY CITIBANK N.A.
xxx
Please examine this Confirmation and notify us in writing within seven (7) days from receipt hereof of any
deviation from your prior conformity to the investment. If no notice is received by us within this period, this
Confirmation shall be deemed correct and approved by you, and we shall be released and discharged as
to all items, particulars, matters and things set forth in this Confirmation. 51
Petitioners admit receiving only the first COI on December 8, 1997. 52 The evidence on record, however,
supports respondent's contentions that petitioners received the three other COIs on February 12,
1998,53 May 14, 1998,54 and August 14, 1998,55 before petitioners' first demand letter dated August 18,
1998.56
The DIMA, Directional Letter, TIA and COIs, read together, establish the agreement between the parties
as an investment management agreement, which created a principal-agent relationship between
petitioners as principals and respondent as agent for investment purposes. The agreement is not a trust or
an ordinary bank deposit; hence, no trustor-trustee-beneficiary or even borrower-lender relationship
existed between petitioners and respondent with respect to the DIMA account. Respondent purchased the
43
LTCPs only as agent of petitioners; thus, the latter assumed all obligations or inherent risks entailed by
the transaction under Article 1910 of the Civil Code, which provides:
Article 1910. The principal must comply with all the obligations which the agent may have contracted
within the scope of his authority.
As for any obligation wherein the agent has exceeded his power, the principal is not bound except when
he ratifies it expressly or tacitly.
The transaction is perfectly legal, as investment management activities may be exercised by a banking
institution, pursuant to Republic Act No. 337 or the General Banking Act of 1948, as amended, which was
the law then in effect.chanrobles virtual law library Section 72 of said Act provides:
Sec. 72. In addition to the operations specifically authorized elsewhere in this Act, banking institutions
other than building and loan associations may perform the following services:
(a) Receive in custody funds, documents, and valuable objects, and rent safety deposit boxes for the
safeguarding of such effects;
(b) Act as financial agent and buy and sell, by order of and for the account of their customers,
shares, evidences of indebtedness and all types of securities;
(c) Make collections and payments for the account of others and perform such other services for their
customers as are not incompatible with banking business.
(d) Upon prior approval of the Monetary Board, act as managing agent, adviser, consultant or
administrator of investment management/ advisory/consultancy accounts.
The banks shall perform the services permitted under subsections (a), (b) and (c) of this section as
depositories or as agents. Accordingly, they shall keep the funds, securities and other effects
which they thus receive duly separated and apart from the bank's own assets and liabilities.
The Monetary Board may regulate the operations authorized by this section in order to insure that said
operations do not endanger the interests of the depositors and other creditors of the banks. (Emphasis
supplied.)
while Section 74 prohibits banks from guaranteeing obligations of any person, thus:
Sec. 74. No bank or banking institution shall enter, directly, or indirectly into any contract of
guaranty or suretyship, or shall guarantee the interest or principal of any obligation of any person,
copartnership, association, corporation or other entity. The provisions of this section shall, however,
not apply to the following: (a) borrowing of money by banking institution through the rediscounting of
receivables; (b) acceptance of drafts or bills of exchange (c) certification of checks; (d) transactions
involving the release of documents attached to items received for collection; (e) letters of credit
transaction, including stand-by arrangements; (f) repurchase agreements; (g) shipside bonds; (h) ordinary
guarantees or indorsements in favor of foreign creditors where the principal obligation involves loans and
credits extended directly by foreign investment purposes; and (i) other transactions which the Monetary
Board may, by regulation, define or specify as not covered by the prohibition. (Emphasis supplied.)
44
Nothing also taints the legality of the LTCP bought in behalf of petitioners. C&P Homes' LTCP was duly
registered with the Securities and Exchange Commission while the issuer was accredited by the
Philippine Trust Committee.57
The evidence also sustains respondent's claim that its trust department handled the account only because
it was the department tasked to oversee the trust, and other fiduciary and investment management
services of the bank.58 Contrary to petitioners' claim, this did not mean that petitioners opened a "trust
account." This is consistent with Bangko Sentral ng Pilipinas (BSP) regulations, specifically the Manual of
Regulations for Banks (MORB), which groups a bank's trust, and other fiduciary and investment
management activities under the same set of regulations, to wit:
PART FOUR: TRUST, OTHER FIDUCIARY BUSINESS AND INVESTMENT MANAGEMENT

ACTIVITIES
xxx
Sec. X402 Scope of Regulations. These regulations shall govern the grant of authority to and the
management, administration and conduct of trust, other fiduciary business and investment management
activities (as these terms are defined in Sec. X403) of banks. The regulations are divided into three (3)
Sub-Parts where:
A. Trust and Other Fiduciary Business shall apply to banks authorized to engage in trust and other
fiduciary business including investment management activities;
B. Investment Management Activities shall apply to banks without trust authority but with
authority to engage in investment management activities; and
C. General Provisions shall apply to both.
xxx
Sec. X403 Definitions. For purposes of regulating the operations of trust and other fiduciary business and
investment management activities, unless the context clearly connotes otherwise, the following shall have
the meaning indicated.
A. Trust business shall refer to any activity resulting from a trustor-trustee relationship (trusteeship)
involving the appointment of a trustee by a trustor for the administration, holding, management of funds
and/or properties of the trustor by the trustee for the use, benefit or advantage of the trustor or of others
called beneficiaries.
b. Other fiduciary business shall refer to any activity of a trust-licensed bank resulting from a
contract or agreement whereby the bank binds itself to render services or to act in a
representative capacity such as in an agency, guardianship, administratorship of wills, properties
and estates, executorship, receivership, and other similar services which do not create or result in
a trusteeship. It shall exclude collecting or paying agency arrangements and similar fiduciary
services which are inherent in the use of the facilities of the other operating departments of said
bank. Investment management activities, which are considered as among other fiduciary
business, shall be separately defined in the succeeding item to highlight its being a major source
of fiduciary business.
45
c. Investment management activity shall refer to any activity resulting from a contract or
agreement primarily for financial return whereby the bank (the investment manager) binds itself to
handle or manage investible funds or any investment portfolio in a representative capacity as
financial or managing agent, adviser, consultant or administrator of financial or investment
management, advisory, consultancy or any similar arrangement which does not create or result in
a trusteeship. (Emphasis supplied.)
The Court finds no proof to sustain petitioners' contention that the DIMA and Directional Letter contradict
other papers on record, or were signed in blank, or had unauthorized intercalations. 59 Petitioners
themselves admit that Amalia signed the DIMA and the Directional Letter, which bars them from
disowning the contract on the belated claim that she signed it in blank or did not read it first because of the
"fine print."60 On the contrary, the evidence does not support these latter allegations, and it is highly
improbable that someone fairly educated and with investment experience would sign a document in blank
or without reading it first.61 Petitioners owned various businesses and were clients of other banks, which
omits the possibility of such carelessness.62 Even more damning for petitioners is that, on record, Amalia
admitted that it was not her habit to sign in blank and that the contents of the documents were explained
to her before she signed.63
Testimonial evidence and the complaint itself contained allegations that petitioners' reason for transferring
their money from local banks to respondent is because it is safer to do so, 64 a clear indicia of their
intelligence and keen business sense which they could not have easily surrendered upon meeting with
respondent.
Nothing irregular or illegal attends the execution or construction of the DIMA and the Directional Letter, as
their provisions merely conform with BSP regulations governing these types of transactions. Specifically,
the MORB mandates that investment managers act as agents, not as trustees, of the investor; 65 that the
investment manager is prohibited from guaranteeing returns on the funds or properties; 66 that a written
document should state that the account is not covered by the PDIC; and that losses are to be borne by
clients.67 That these legal requirements were communicated to petitioners is evident in Amalia's signatures
on the documents and in testimony to this effect. 68
As to the allegation that the documents were in "fine print," the Court notes that although the print may
have looked smaller than average, they were nevertheless of the same size throughout the documents, so
that no part or provision is hidden from the reader. The Court also takes judicial notice that the print is no
smaller than those found in similar contracts in common usage, such as insurance, mortgage, sales
contracts and even ordinary bank deposit contracts. In the documents in question, the provisions hurtful to
petitioners' cause were likewise in no smaller print than the rest of the document, as indeed they were
even highlighted either in bold or in all caps. This disposes of the argument that they were designed to
hide their damaging nature to the signatory. 69 The conclusion is that the print is readable and should not
have prevented petitioners from studying the papers before their signing. Considering petitioners' social
stature, the nature of the transaction and the amount of money involved, the Court presumes that
petitioners exercised adequate care and diligence in studying the contract prior to its execution. 70
In Sweet Lines, Inc. v. Teves,71 the Court pronounced the general rule regarding contracts of adhesion,
thus:
x x x there are certain contracts almost all the provisions of which have been drafted only by one party,
usually a corporation. Such contracts are called contracts of adhesion, because the only participation of
the other party is the signing of his signature or his 'adhesion' thereto. Insurance contracts, bills of lading,
contracts of sale of lots on the installment plan fall into this category.
46
x x x it is drafted only by one party, usually the corporation, and is sought to be accepted or adhered to by
the other party x x x who cannot change the same and who are thus made to adhere hereto on the 'take it
or leave it' basis.
x x x it is hardly just and proper to expect the passengers to examine their tickets received from
crowded/congested counters, more often than not during rush hours, for conditions that may be printed
thereon, much less charge them with having consented to the conditions, so printed, especially if there are
a number of such conditions in fine print, as in this case.
However, Sweet Lines72 further expounded that the validity and/or enforceability of contracts of adhesion
will have to be determined by the peculiar circumstances obtaining in each case and the nature of the
conditions or terms sought to be enforced. 73 Thus, while any ambiguity, obscurity or doubt in a contract of
adhesion is construed or resolved strictly against the party who prepared it, 74 it is also equally obvious that
in a case where no such ambiguity, obscurity or doubt exists, no such construction is warranted. This was
the case in the DIMA and the Directional Letter signed by Amalia in the instant controversy.
The parties to this case only disagree on whether petitioners were properly informed of the contents of the
documents. But as earlier stated, petitioners were free to read and study the contents of the papers before
signing them, without compulsion to sign immediately or even days after, as indeed the parties were even
free not to sign the documents at all. Unlike in Sweet Lines, where the plaintiffs had no choice but to take
the services of monopolistic transport companies during rush hours, in the instant case, petitioners were
under no such pressure; petitioners were free to invest anytime and through any of the dozens of local
and foreign banks in the market.
In addition, it has been held that contracts of adhesion are not necessarily voidable. The Court has
consistently held that contracts of adhesion, wherein one party imposes a ready-made form of contract on
the other, are contracts not entirely prohibited, since the one who adheres to the contract is in reality free
to reject it entirely; if he adheres, he gives his consent. 75 It is the rule that these contracts are upheld
unless they are in the nature of a patently lopsided deal where blind adherence is not justified by other
factual circumstances.76
Petitioners insist that other documents Amalia signed - - that is, the ROF, 77 Questionnaire78 and TIA79 - -
contradict the DIMA and Directional Letter. Specifically, they argue that under the ROF and the
Questionnaire, they manifested an intent to invest only in a time deposit in the medium term of over a year
to three years, with no risk on the capital, or with returns in line with a time deposit. 80 However, this
contention is belied by the evidence and testimony on record. Respondent explains that investors fill up
the ROF and Questionnaire only when they first visit the bank and only for the account they first
opened,81 as confirmed by the evidence on record and the fact that there were no subsequent ROFs and
Questionnaires presented by petitioners.
The ROF and Questionnaire were filled up when the PhP1 million "Citihi" savings account was opened by
Amalia on October 10, 1997, during her first visit to the bank. When Amalia returned more than a month
later on November 28, 1997, a change in her investment attitude occurred in that she wanted to invest an
even bigger amount (PhP3 million) and her interest had shifted to high-yield but riskier long-term
instruments like PRPNs and LTCPs. When Amalia proceeded to sign new documents like the DIMA and
the Directional Letter for the LTCP investment, despite their obviously different contents from those she
was used to signing for ordinary deposits, she essentially confirmed that she knew what she was agreeing
to and that it was different from all her previous transactions.
In addition, even the ROF and Questionnaire signed by Amalia during the first visit contained provisions
that clearly contradict petitioners' claims. The ROF contained the following:
47
I/We declare the above information to be correct. I/We hereby acknowledge to have received, read,
understood and agree to be bound by the general terms and conditions applicable and governing
my/our account/s and/or investment/s which appear in a separate brochure/manual as well as
separate documents relative to said account/s and/or investment/s. Said terms and conditions shall
likewise apply to all our existing and future account/s and/or investment/s with Citibank. I/We hereby
further authorize Citibank to open additional account/s and/or investment/s in the future with the same
account title as contained in this relationship opening form subject to the rules governing the
aforementioned account/s and/or investment/s and the terms and conditions therein or herein. I/We agree
to notify you in writing of any change in the information supplied in this relationship opening
form.82 (Emphasis supplied.)
while the Questionnaire had the following provisions:
I am aware that investment products are not bank deposits or other obligations of, or guaranteed or
insured by Citibank N.A., Citicorp or their affiliates. I am aware that the principal and interest of my
investments are obligations of the borrower/issuer. They are subject to risk and possible loss of
principal. Past performance is not indicative of future performance. In addition, investments are not
covered by the Philippine Deposit Insurance Corporation (PDIC) or the Federal Deposit Insurance
Corporation (FDIC).83
which do not need further elaboration on the matter.
Petitioners contend that the Term Investment Application (TIA), viz:
TERM INVESTMENT APPLICATION

MAKATI Date 1/28/97
Branch and Service Area
CIF Keys
TITLE OF ACCOUNT
_________________
________________________________________
_________________
PANLILIO, AMALIA ITF
_________________
ALEJANDRO KING AGUILAR & FE
_________________
EMMANUELLE PANLILIO
Address ______________________________________________________
For corporations, c/o _______________________ Tel. No. ____________
Dear Sir:
THIS IS TO AUTHORIZE CITIBANK, N. A. TO: ( ) open ( ) rollover
( ) rollover w/
added funds
( ) rollover w/
payout
Ref. No. ____
[] Confirmation of Sale
[] Peso Time Depositories [] Dollar TD
[] CITIHI-Yielder
[] NNPN [] Multicurrency TD
TRUST
NEW ADDED FUNDS WILL COME FROM: for P/$ _______________
48
( ) debit my/our account no. ________________
( ) Check No. ____________________________ for P/$ _______________
( ) Cash deposit __________________________ for P/$ _______________
IN THE AMOUNT AND TERMS SPECIFIED AS FOLLOWS:
PRINCIPAL/Money In P/$ 3,000,000 Value 11/28/97
MATURITY AMOUNT/Par Value P/$____________ Maturity Date _______
INTEREST RATE around 16.25% Term 91 days 84
(Emphasis supplied.)
clearly contradicts the DIMA, Directional Letter and COIs.
Petitioners insist that the amount PhP3 million in the TIA does not tally with the actual value of the
investment which appeared on the first COI, which was PhP2,134,635.87. Petitioners add that the TIA's
interest rate of "around 16.25%" with the term "91 days" contradicts the COI's interest rate of 16.95% with
a tenor of 75 days repriceable after 91 days. 85 Further, petitioners claim that the word "TRUST" inscribed
on the TIA obviously meant that they opened a trust account, and not any other account. 86
The explanation of respondent is plausible. Only PhP2,134,635.87 out of the PhP3 million was placed in
the LTCP since this was the only amount of LTCP then available, while the balance was placed in two
PRPN accounts, each one in trust for Amalia's two children, upon her instructions. 87 The disparity in the
interest rate is also explained by the fact that the 16.95% rate placed in the COI is gross and not net
interest,88 and that it is subject to repricing every 91 days.
The Court gives credence to respondent's explanation that the word "TRUST" appearing on the TIA
simply means that the account is to be handled by the bank's trust department, which handles not only the
trust business but also the other fiduciary business and investment management activities of the bank,
while the "ITF" or "in trust for" appearing on the other documents only signifies that the money was
invested by Amalia in trust for her two children, a device that she uses even in her ordinary deposit
accounts with other banks.89 The ITF device allows the children to obtain the money without need of
paying estate taxes in case Amalia meets a premature death. 90 However, it creates a trustee-beneficiary
relationship only between Amalia and her children, and not between Amalia, her children, and Citibank.
All the documents signed by Amalia, including the DIMA and Directional Letter, show that her agreement
with respondent is one of agency, and not a trust.
The DIMA, TIA, Directional Letter and COIs, viewed altogether, establish without doubt the transaction
between the parties, that on November 28, 1997, with PhP3 million in tow, Amalia opened an investment
management account with respondent, under which she instructed the latter as her agent to invest the
bulk of the money in LTCP.
Aside from their bare allegations, evidence that supports petitioners' contentions that no such deal took
place, or that the agreement was different, simply does not exist in the records.
Petitioners were experienced and intelligent enough to be able to demand and sign a different document
to signify their real intention; but no such document exists. Thus, petitioners' acts and omissions negate
their allegations that they were essentially defrauded by the bank.
49
Petitioners had other chances to protest respondent's alleged disregard of their instructions. The COIs
sent by respondent to petitioners encapsulate the spirit of the DIMA and Directional Letter, with the
proviso that should there be any deviations from petitioners' instructions, they may inform respondent in
writing within seven days. Assuming arguendo that respondent violated the instructions, petitioners did
not file a single timely written protest, however, despite their admission that they received the first COI on
December 8, 1997.91 It took eight months for petitioners to formally demand the return of their investment
through their counsel in a letter dated August 18, 1998. 92 The letter, however, did not even contest the
placement of the money in an LTCP, but merely its maturity in the year 2003. Prior to the letter, it has
been shown that petitioners had received COIs on February 12, 1998, 93 May 14, 1998,94 and August 14,
1998,95 and in between, petitioners never demanded a return of the money they invested.
Petitioners' acts and omissions strongly indicate that they in fact conformed to the agreement in the
months after the signing. In that period, they were receiving their bank statements and earning interest
from the investment, as in fact, C&P Homes under the LTCP continuously paid interest even up to the
time the instant case was already on trial. 96 When petitioners finally contested the contract months after its
signing, it was suspiciously during the time when newspaper reports came out that C&P Homes' stock had
plunged in value and that Ayala Land was withdrawing its offer to invest in the company. 97 The connection
is too obvious to ignore. It is reasonable to conclude that petitioners' repudiation of the agreement was
nothing more than an afterthought, a reaction to the negative events in the market and an effort to flee
from a losing investment.
Anent the second issue, whether petitioners are entitled to recover from respondent the amount of
PhP2,134,635.87 invested under the LTCP, the Court agrees with the CA in dismissing the complaint filed
by petitioners.
Petitioners may not seek a return of their investment directly from respondent at or prior to maturity. As
earlier explained, the investment is not a deposit and is not guaranteed by respondent. Absent any fraud
or bad faith, the recourse of petitioners in the LTCP is solely against the issuer, C&P Homes, and only
upon maturity. The DIMA states, thus:
11. Withdrawal of Income/Principal ' Subject to availability of funds and taking into consideration

the commitment of this account to third parties, the PRINCIPAL may withdraw the
income/principal of the Portfolio or portion thereof upon request or application thereof from the
Bank. The INVESTMENT MANAGER shall not be required to inquire as to the income/principal so
withdrawn from the Portfolio. Any income of the Portfolio not withdrawn shall be accumulated and added
to the principal of the Portfolio for further investment and reinvestment. 98 (Emphasis supplied.)
It is clear that since the money is committed to C&P Homes via LTCP for five years, or until 2003,
petitioners may not seek its recovery from respondent prior to the lapse of this period. Petitioners must
wait and meanwhile just be content with receiving their interest regularly. If petitioners want the immediate
return of their investment before the maturity date, their only way is to find a willing buyer to purchase the
LTCP at an agreed price, or to go directly against the issuer C&P Homes, not against the respondent.
The nature of the DIMA and the other documents signed by the parties calls for this condition. The DIMA
states that respondent is a mere agent of petitioners and that losses from both the principal and interest of
the investment are strictly on petitioners' account. Meanwhile, the Directional Letter clearly states that the
investment is to be made in an LTCP which, by definition, has a term of more than 365 days. 99 Prior to the
expiry of the term, which in the case of the C&P Homes LTCP is five years, petitioners may not claim back
their investment, especially not from respondent bank.
50
Having bound themselves under the contract as earlier discussed, petitioners are governed by its
provisions. Petitioners as principals in an agency relationship are solely obliged to observe the solemnity
of the transaction entered into by the agent on their behalf, absent any proof that the latter acted beyond
its authority.100 Concomitant to this obligation is that the principal also assumes the risks that may arise
from the transaction.101 Indeed, as in the instant case, bank regulations prohibit banks from guaranteeing
profits or the principal in an investment management account. 102 Hence, the CA correctly dismissed
petitioners' complaint against respondent.
WHEREFORE, the Petition is DENIED. For lack of evidence, the Decision of the Court of Appeals dated
dated May 28, 2002 and its Resolution of December 11, 2002, are AFFIRMED.
Costs against the petitioners.
SO ORDERED.
G.R. No. 118492 August 15, 2001
GREGORIO H. REYES and CONSUELO PUYAT-REYES, petitioners,

vs.
THE HON. COURT OF APPEALS and FAR EAST BANK AND TRUST COMPANY, respondents.
DE LEON, JR., J.:
51
Before us is a petition for review of the Decision 1 dated July 22, 1994 and Resolution2 dated December 29,
1994 of the Court of Appeals3 affirming with modification the Decision4 dated November 12, 1992 of the
Regional Trial Court of Makati, Metro Manila, Branch 64, which dismissed the complaint for damages of
petitioners spouses Gregorio H. Reyes and Consuelo Puyat-Reyes against respondent Far East Bank and
Trust Company.
The undisputed facts of the case are as follows:
In view of the 20th Asian Racing Conference then scheduled to be held in September, 1988 in Sydney,
Australia, the Philippine Racing Club, Inc. (PRCI, for brevity) sent four (4) delegates to the said
conference. Petitioner Gregorio H. Reyes, as vice-president for finance, racing manager, treasurer, and
director of PRCI, sent Godofredo Reyes, the club's chief cashier, to the respondent bank to apply for a
foreign exchange demand draft in Australian dollars.
Godofredo went to respondent bank's Buendia Branch in Makati City to apply for a demand draft in the
amount One Thousand Six Hundred Ten Australian Dollars (AU$1,610.00) payable to the order of the
20th Asian Racing Conference Secretariat of Sydney, Australia. He was attended to by respondent bank's
assistant cashier, Mr. Yasis, who at first denied the application for the reason that respondent bank did not
have an Australian dollar account in any bank in Sydney. Godofredo asked if there could be a way for
respondent bank to accommodate PRCI's urgent need to remit Australian dollars to Sydney. Yasis of
respondent bank then informed Godofredo of a roundabout way of effecting the requested remittance to
Sydney thus: the respondent bank would draw a demand draft against Westpac Bank in Sydney, Australia
(Westpac-Sydney for brevity) and have the latter reimburse itself from the U.S. dollar account of the
respondent in Westpac Bank in New York, U.S.A. (Westpac-New York for brevity). This arrangement has
been customarily resorted to since the 1960's and the procedure has proven to be problem-free. PRCI
and the petitioner Gregorio H. Reyes, acting through Godofredo, agreed to this arrangement or approach
in order to effect the urgent transfer of Australian dollars payable to the Secretariat of the 20 th Asian
Racing Conference.
On July 28, 1988, the respondent bank approved the said application of PRCI and issued Foreign
Exchange Demand Draft (FXDD) No. 209968 in the sum applied for, that is, One Thousand Six Hundred
Ten Australian Dollars (AU$ 1,610.00), payable to the order of the 20 th Asian Racing Conference
Secretariat of Sydney, Australia, and addressed to Westpac-Sydney as the drawee bank.1âwphi1.nêt
On August 10, 1988, upon due presentment of the foreign exchange demand draft, denominated as
FXDD No. 209968, the same was dishonored, with the notice of dishonor stating the following: "xxx No
account held with Westpac." Meanwhile, on August 16, 1988, Wespac-New York sent a cable to
respondent bank informing the latter that its dollar account in the sum of One Thousand Six Hundred Ten
Australian Dollars (AU$ 1,610.00) was debited. On August 19, 1988, in response to PRCI's complaint
about the dishonor of the said foreign exchange demand draft, respondent bank informed Westpac-
Sydney of the issuance of the said demand draft FXDD No. 209968, drawn against the Wespac-Sydney
and informing the latter to be reimbursed from the respondent bank's dollar account in Westpac-New
York. The respondent bank on the same day likewise informed Wespac-New York requesting the latter to
honor the reimbursement claim of Wespac-Sydney. On September 14, 1988, upon its second
presentment for payment, FXDD No. 209968 was again dishonored by Westpac-Sydney for the same
reason, that is, that the respondent bank has no deposit dollar account with the drawee Wespac-Sydney.
On September 17, 1988 and September 18, 1988, respectively, petitioners spouses Gregorio H. Reyes
and Consuelo Puyat-Reyes left for Australia to attend the said racing conference. When petitioner
Gregorio H. Reyes arrived in Sydney in the morning of September 18, 1988, he went directly to the lobby
of Hotel Regent Sydney to register as a conference delegate. At the registration desk, in the presence of
other delegates from various member of the conference secretariat that he could not register because the
52
foreign exchange demand draft for his registration fee had been dishonored for the second time. A
discussion ensued in the presence and within the hearing of many delegates who were also registering.
Feeling terribly embarrassed and humiliated, petitioner Gregorio H. Reyes asked the lady member of the
conference secretariat that he be shown the subject foreign exchange demand draft that had been
dishonored as well as the covering letter after which he promised that he would pay the registration fees in
cash. In the meantime he demanded that he be given his name plate and conference kit. The lady
member of the conference secretariat relented and gave him his name plate and conference kit. It was
only two (2) days later, or on September 20, 1988, that he was given the dishonored demand draft and a
covering letter. It was then that he actually paid in cash the registration fees as he had earlier promised.
Meanwhile, on September 19, 1988, petitioner Consuelo Puyat-Reyes arrived in Sydney. She too was
embarassed and humiliated at the registration desk of the conference secretariat when she was told in the
presence and within the hearing of other delegates that she could not be registered due to the dishonor of
the subject foreign exchange demand draft. She felt herself trembling and unable to look at the people
around her. Fortunately, she saw her husband, coming toward her. He saved the situation for her by
telling the secretariat member that he had already arranged for the payment of the registration fee in cash
once he was shown the dishonored demand draft. Only then was petitioner Puyat-Reyes given her name
plate and conference kit.
At the time the incident took place, petitioner Consuelo Puyat-Reyes was a member of the House of
Representatives representing the lone Congressional District of Makati, Metro Manila. She has been an
officer of the Manila Banking Corporation and was cited by Archbishop Jaime Cardinal Sin as the top lady
banker of the year in connection with her conferment of the Pro-Ecclesia et Pontifice Award. She has also
been awarded a plaque of appreciation from the Philippine Tuberculosis Society for her extraordinary
service as the Society's campaign chairman for the ninth (9 th) consecutive year.
On November 23, 1988, the petitioners filed in the Regional Trial Court of Makati, Metro Manila, a
complaint for damages, docketed as Civil Case No. 88-2468, against the respondent bank due to the
dishonor of the said foreign exchange demand draft issued by the respondent bank. The petitioners claim
that as a result of the dishonor of the said demand draft, they were exposed to unnecessary shock, social
humiliation, and deep mental anguish in a foreign country, and in the presence of an international
audience.
On November 12, 1992, the trial court rendered judgment in favor of the defendant (respondent bank) and
against the plaintiffs (herein petitioners), the dispositive portion of which states:
WHEREFORE, judgment is hereby rendered in favor of the defendant, dismissing plaintiff's

complaint, and ordering plaintiffs to pay to defendant, on its counterclaim, the amount of
P50,000.00, as reasonable attorney's fees. Costs against the plaintiff.
The petitioners appealed the decision of the trial court to the Court of Appeals. On July 22, 1994, the
appellate court affirmed the decision of the trial court but in effect deleted the award of attorney's fees to
the defendant (herein respondent bank) and the pronouncement as to the costs. The decretal portion of
the decision of the appellate court states:
WHEREFORE, the judgment appealed from, insofar as it dismissed plaintiff's complaint, is hereby
AFFIRMED, but is hereby REVERSED and SET ASIDE in all other respect. No special
pronouncement as to costs.
53
According to the appellate court, there is no basis to hold the respondent bank liable for damages for the
reason that it exerted every effort for the subject foreign exchange demand draft to be honored. The
appellate court found and declared that:
xxx xxx xxx
Thus, the Bank had every reason to believe that the transaction finally went through smoothly,
considering that its New York account had been debited and that there was no miscommunication
between it and Westpac-New York. SWIFT is a world wide association used by almost all banks
and is known to be the most reliable mode of communication in the international banking business.
Besides, the above procedure, with the Bank as drawer and Westpac-Sydney as drawee, and with
Westpac-New York as the reimbursement Bank had been in place since 1960s and there was no
reason for the Bank to suspect that this particular demand draft would not be honored by Westpac-
Sydney.
From the evidence, it appears that the root cause of the miscommunications of the Bank's SWIFT
message is the erroneous decoding on the part of Westpac-Sydney of the Bank's SWIFT message
as an MT799 format. However, a closer look at the Bank's Exhs. "6" and "7" would show that
despite what appears to be an asterick written over the figure before "99", the figure can still be
distinctly seen as a number "1" and not number "7", to the effect that Westpac-Sydney was
responsible for the dishonor and not the Bank.
Moreover, it is not said asterisk that caused the misleading on the part of the Westpac-Sydney of
the numbers "1" to "7", since Exhs. "6" and "7" are just documentary copies of the cable message
sent to Wespac-Sydney. Hence, if there was mistake committed by Westpac-Sydney in decoding
the cable message which caused the Bank's message to be sent to the wrong department, the
mistake was Westpac's, not the Bank's. The Bank had done what an ordinary prudent person is
required to do in the particular situation, although appellants expect the Bank to have done more.
The Bank having done everything necessary or usual in the ordinary course of banking transaction,
it cannot be held liable for any embarrassment and corresponding damage that appellants may
have incurred.7
xxx xxx xxx
Hence, this petition, anchored on the following assignment of errors:
THE HONORABLE COURT OF APPEALS ERRED IN FINDING PRIVATE RESPONDENT NOT

NEGLIGENT BY ERRONEOUSLY APPLYING THE STANDARD OF DILIGENCE OF AN
"ORDINARY PRUDENT PERSON" WHEN IN TRUTH A HIGHER DEGREE OF DILIGENCE IS
IMPOSED BY LAW UPON THE BANKS.
II
THE HONORABLE COURT OF APPEALS ERRED IN ABSOLVING PRIVATE RESPONDENT

FROM LIABILITY BY OVERLOOKING THE FACT THAT THE DISHONOR OF THE DEMAND
DRAFT WAS A BREACH OF PRIVATE RESPONDENT'S WARRANTY AS THE DRAWER
THEREOF.
III
54
THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT AS SHOWN
OVERWHELMINGLY BY THE EVIDENCE, THE DISHONOR OF THE DEMAND DRAFT AS DUE
TO PRIVATE RESPONDENT'S NEGLIGENCE AND NOT THE DRAWEE BANK.8
The petitioners contend that due to the fiduciary nature of the relationship between the respondent bank
and its clients, the respondent should have exercised a higher degree of diligence than that expected of
an ordinary prudent person in the handling of its affairs as in the case at bar. The appellate court,
according to petitioners, erred in applying the standard of diligence of an ordinary prudent person only.
Petitioners also claim that the respondent bank violate Section 61 of the Negotiable Instruments
Law9 which provides the warranty of a drawer that "xxx on due presentment, the instrument will be
accepted or paid, or both, according to its tenor xxx." Thus, the petitioners argue that respondent bank
should be held liable for damages for violation of this warranty. The petitioners pray this Court to re-
examine the facts to cite certain instances of negligence.
It is our view and we hold that there is no reversible error in the decision of the appellate court.
Section 1 of Rule 45 of the Revised Rules of Court provides that "(T)he petition (for review) shall
raise only questions of law which must be distinctly set forth." Thus, we have ruled that factual findings of
the Court of Appeals are conclusive on the parties and not reviewable by this Court – and they carry even
more weight when the Court of Appeals affirms the factual findings of the trial court. 10
The courts a quo found that respondent bank did not misrepresent that it was maintaining a deposit
account with Westpac-Sydney. Respondent bank's assistant cashier explained to Godofredo Reyes,
representing PRCI and petitioner Gregorio H. Reyes, how the transfer of Australian dollars would be
effected through Westpac-New York where the respondent bank has a dollar account to Westpac-Sydney
where the subject foreign exchange demand draft (FXDD No. 209968) could be encashed by the payee,
the 20th Asian Racing Conference Secretariat. PRCI and its Vice-President for finance, petitioner Gregorio
H. Reyes, through their said representative, agreed to that arrangement or procedure. In other words, the
petitioners are estopped from denying the said arrangement or procedure. Similar arrangements have
been a long standing practice in banking to facilitate international commercial transactions. In fact, the
SWIFT cable message sent by respondent bank to the drawee bank, Westpac-Sydney, stated that it may
claim reimbursement from its New York branch, Westpac-New York, where respondent bank has a
deposit dollar account. The facts as found by the courts a quo show that respondent bank did not cause
an erroneous transmittal of its SWIFT cable message to Westpac-Sydney. It was the erroneous decoding
of the cable message on the part of Westpac-Sydney that caused the dishonor of the subject foreign
exchange demand draft. An employee of Westpac-Sydney in Sydney, Australia mistakenly read the
printed figures in the SWIFT cable message of respondent bank as "MT799" instead of as "MT199". As a
result, Westpac-Sydney construed the said cable message as a format for a letter of credit, and not for a
demand draft. The appellate court correct found that "the figure before '99' can still be distinctly seen as a
number '1' and not number '7'." Indeed, the line of a "7" is in a slanting position while the line of a "1" is in
a horizontal position. Thus, the number "1" in "MT199" cannot be construed as "7". 11
The evidence also shows that the respondent bank exercised that degree of diligence expected of an
ordinary prudent person under the circumstances obtaining. Prior to the first dishonor of the subject
foreign exchange demand draft, the respondent bank advised Westpac-New York to honor the
reimbursement claim of Westpac-Sydney and to debit the dollar account 12 of respondent bank with the
former. As soon as the demand draft was dishonored, the respondent bank, thinking that the problem was
with the reimbursement and without any idea that it was due to miscommunication, re-confirmed the
authority of Westpac-New York to debit its dollar account for the purpose of reimbursing Westpac-
Sydney.13 Respondent bank also sent two (2) more cable messages to Westpac-New York inquiring why
the demand draft was not honored.14
55
With these established facts, we now determine the degree of diligence that banks are required to exert in
their commercial dealings. In Philippine Bank of Commerce v. Court of Appeals 15 upholding a long
standing doctrine, we ruled that the degree of diligence required of banks, is more than that of a good
father of a family where the fiduciary nature of their relationship with their depositors is concerned. In other
words banks are duty bound to treat the deposit accounts of their depositors with the highest degree of
care. But the said ruling applies only to cases where banks act under their fiduciary capacity, that is, as
depositary of the deposits of their depositors. But the same higher degree of diligence is not expected to
be exerted by banks in commercial transactions that do not involve their fiduciary relationship with their
depositors.
Considering the foregoing, the respondent bank was not required to exert more than the diligence of a
good father of a family in regard to the sale and issuance of the subject foreign exchange demand draft.
The case at bar does not involve the handling of petitioners' deposit, if any, with the respondent bank.
Instead, the relationship involved was that of a buyer and seller, that is, between the respondent bank as
the seller of the subject foreign exchange demand draft, and PRCI as the buyer of the same, with the
20th Asian Racing conference Secretariat in Sydney, Australia as the payee thereof. As earlier mentioned,
the said foreign exchange demand draft was intended for the payment of the registration fees of the
petitioners as delegates of the PRCI to the 20 th Asian Racing Conference in Sydney.
The evidence shows that the respondent bank did everything within its power to prevent the dishonor of
the subject foreign exchange demand draft. The erroneous reading of its cable message to Westpac-
Sydney by an employee of the latter could not have been foreseen by the respondent bank. Being
unaware that its employee erroneously read the said cable message, Westpac-Sydney merely stated that
the respondent bank has no deposit account with it to cover for the amount of One Thousand Six Hundred
Ten Australian Dollar (AU $1610.00) indicated in the foreign exchange demand draft. Thus, the
respondent bank had the impression that Westpac-New York had not yet made available the amount for
reimbursement to Westpac-Sydney despite the fact that respondent bank has a sufficient deposit dollar
account with Westpac-New York. That was the reason why the respondent bank had to re-confirm and
repeatedly notify Westpac-New York to debit its (respondent bank's) deposit dollar account with it and to
transfer or credit the corresponding amount to Westpac-Sydney to cover the amount of the said demand
draft.
In view of all the foregoing, and considering that the dishonor of the subject foreign exchange demand
draft is not attributable to any fault of the respondent bank, whereas the petitioners appeared to be under
estoppel as earlier mentioned, it is no longer necessary to discuss the alleged application of Section 61 of
the Negotiable Instruments Law to the case at bar. In any event, it was established that the respondent
bank acted in good faith and that it did not cause the embarrassment of the petitioners in Sydney,
Australia. Hence, the Court of Appeals did not commit any reversable error in its challenged decision.
WHEREFORE, the petition is hereby DENIED, and the assailed decision of the Court of Appeals
is AFFIRMED. Costs against the petitioners.
SO ORDERED
G.R. No. 146918 May 2, 2006
CITIBANK, N.A., Petitioner,
vs.
56
SPS. LUIS and CARMELITA CABAMONGAN and their sons LUISCABAMONGAN, JR. and LITO
CABAMONGAN, Respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a petition for review on certiorari of the Decision 1 dated January 26, 2001 and the
Resolution2 dated July 30, 2001 of the Court of Appeals (CA) in CA-G.R. CV No. 59033.
The factual background of the case is as follows:
On August 16, 1993, spouses Luis and Carmelita Cabamongan opened a joint "and/or" foreign currency
time deposit in trust for their sons Luis, Jr. and Lito at the Citibank, N.A., Makati branch, with Reference
No. 60-22214372, in the amount of $55,216.69 for a term of 182 days or until February 14, 1994, at
2.5625 per cent interest per annum.3 Prior to maturity, or on November 10, 1993, a person claiming to be
Carmelita went to the Makati branch and pre-terminated the said foreign currency time deposit by
presenting a passport, a Bank of America Versatele Card, an ATM card and a Mabuhay Credit Card. 4 She
filled up the necessary forms for pre-termination of deposits with the assistance of Account Officer Yeye
San Pedro. While the transaction was being processed, she was casually interviewed by San Pedro about
her personal circumstances and investment plans. 5 Since the said person failed to surrender the original
Certificate of Deposit, she had to execute a notarized release and waiver document in favor of Citibank,
pursuant to Citibank's internal procedure, before the money was released to her. 6 The release and waiver
document7 was not notarized on that same day but the money was nonetheless given to the person
withdrawing.8 The transaction lasted for about 40 minutes. 9
After said person left, San Pedro realized that she left behind an identification card. 10 Thus, San Pedro
called up Carmelita's listed address at No. 48 Ranger Street, Moonwalk Village, Las Pinas, Metro Manila
on the same day to have the card picked up. 11 Marites, the wife of Lito, received San Pedro's call and was
stunned by the news that Carmelita preterminated her foreign currency time deposit because Carmelita
was in the United States at that time.12 The Cabamongan spouses work and reside in California. Marites
made an overseas call to Carmelita to inform her about what happened. 13 The Cabamongan spouses
were shocked at the news. It seems that sometime between June 10 and 16, 1993, an unidentified person
broke in at the couple's residence at No. 3268 Baldwin Park Boulevard, Baldwin Park, California. Initially,
they reported that only Carmelita's jewelry box was missing, but later on, they discovered that other items,
such as their passports, bank deposit certificates, including the subject foreign currency deposit, and
identification cards were also missing.14 It was only then that the Cabamongan spouses realized that their
passports and bank deposit certificates were lost. 15
Through various overseas calls, the Cabamongan spouses informed Citibank, thru San Pedro, that
Carmelita was in the United States and did not preterminate their deposit and that the person who did so
was an impostor who could have also been involved in the break-in of their California residence. San
Pedro told the spouses to submit the necessary documents to support their claim but Citibank concluded
nonetheless that Carmelita indeed preterminated her deposit. In a letter dated September 16, 1994, the
Cabamongan spouses, through counsel, made a formal demand upon Citibank for payment of their
preterminated deposit in the amount of $55,216.69 with legal interests. 16 In a letter dated November 28,
1994, Citibank, through counsel, refused the Cabamongan spouses' demand for payment, asserting that
the subject deposit was released to Carmelita upon proper identification and verification. 17
57
On January 27, 1995, the Cabamongan spouses filed a complaint against Citibank before the Regional
Trial Court of Makati for Specific Performance with Damages, docketed as Civil Case No 95-163 and
raffled to Branch 150 (RTC).18
In its Answer dated April 20, 1995, Citibank insists that it was not negligent of its duties since the subject
deposit was released to Carmelita only upon proper identification and verification. 19
At the pre-trial conference the parties failed to arrive at an amicable settlement. 20 Thus, trial on the merits
ensued.
For the plaintiffs, the Cabamongan spouses themselves and Florenda G. Negre, Documents Examiner II
of the Philippine National Police (PNP) Crime Laboratory in Camp Crame, Quezon City, testified. The
Cabamongan spouses, in essence, testified that Carmelita could not have preterminated the deposit
account since she was in California at the time of the incident. 21 Negre testified that an examination of the
questioned signature and the samples of the standard signatures of Carmelita submitted in the RTC
showed a significant divergence. She concluded that they were not written by one and the same person. 22
For the respondent, Citibank presented San Pedro and Cris Cabalatungan, Vice-President and In-Charge
of Security and Management Division. Both San Pedro and Cabalatungan testified that proper bank
procedure was followed and the deposit was released to Carmelita only upon proper identification and
verification.23
On July 1, 1997, the RTC rendered a decision in favor of the Cabamongan spouses and against Citibank,
the dispositive portion of which reads, thus:
WHEREFORE, premises considered, defendant Citibank, N.A., is hereby ordered to pay the plaintiffs the
following:
1) the principal amount of their Foreign Currency Deposit (Reference No. 6022214372) amounting
to $55,216.69 or its Phil. Currency equivalent plus interests from August 16, 1993 until fully paid;
2) Moral damages of P50,000.00;
3) Attorney's fees of P50,000.00; and
4) Cost of suit.
SO ORDERED.24
The RTC reasoned that:
xxx Citibank, N.A., committed negligence resulting to the undue suffering of the plaintiffs. The forgery of
the signatures of plaintiff Carmelita Cabamongan on the questioned documents has been categorically
established by the handwriting expert. xxx Defendant bank was clearly remiss in its duty and obligations to
treat plaintiff's account with the highest degree of care, considering the nature of their relationship. Banks
are under the obligation to treat the accounts of their depositors with meticulous care. This is the reason
for their established procedure of requiring several specimen signatures and recent picture from potential
depositors. For every transaction, the depositor's signature is passed upon by personnel to check and
countercheck possible irregularities and therefore must bear the blame when they fail to detect the forgery
or discrepancy.25
58
Despite the favorable decision, the Cabamongan spouses filed on October 1, 1997 a motion to partially
reconsider the decision by praying for an increase of the amount of the damages awarded. 26 Citibank
opposed the motion.27 On November 19, 1997, the RTC granted the motion for partial reconsideration and
amended the dispositive portion of the decision as follows:
From the foregoing, and considering all the evidence laid down by the parties, the dispositive portion of
the court's decision dated July 1, 1997 is hereby amended and/or modified to read as follows:
WHEREFORE, defendant Citibank, N.A., is hereby ordered to pay the plaintiffs the following:
1) the principal amount of their foreign currency deposit (Reference No. 6022214372) amounting to
$55,216.69 or its Philippine currency equivalent (at the time of its actual payment or execution)
plus legal interest from Aug. 16, 1993 until fully paid.
2) moral damages in the amount of P200,000.00;
3) exemplary damages in the amount of P100,000.00;
4) attorney's fees of P100,000.00;
5) litigation expenses of P200,000.00;
6) cost of suit.
SO ORDERED.28
Dissatisfied, Citibank filed an appeal with the CA, docketed as CA-G.R. CV No. 59033. 29 On January 26,
2001, the CA rendered a decision sustaining the finding of the RTC that Citibank was negligent,
ratiocinating in this wise:
In the instant case, it is beyond dispute that the subject foreign currency deposit was pre-terminated on 10
November 1993. But Carmelita Cabamongan, who works as a nursing aid (sic) at the Sierra View Care
Center in Baldwin Park, California, had shown through her Certificate of Employment and her Daily Time
Record from the [sic] January to December 1993 that she was in the United States at the time of the
incident.
Defendant Citibank, N.A., however, insists that Carmelita was the one who pre-terminated the deposit
despite claims to the contrary. Its basis for saying so is the fact that the person who made the transaction
on the incident mentioned presented a valid passport and three (3) other identification cards. The
attending account officer examined these documents and even interviewed said person. She was satisfied
that the person presenting the documents was indeed Carmelita Cabamongan. However, such conclusion
is belied by these following circumstances.
First, the said person did not present the certificate of deposit issued to Carmelita Cabamongan. This
would not have been an insurmountable obstacle as the bank, in the absence of such certificate, allows
the termination of the deposit for as long as the depositor executes a notarized release and waiver
document in favor of the bank. However, this simple procedure was not followed by the bank, as it
terminated the deposit and actually delivered the money to the impostor without having the said document
notarized on the flimsy excuse that another department of the bank was in charge of notarization. The
said procedure was obviously for the protection of the bank but it deliberately ignored such precaution. At
the very least, the conduct of the bank amounts to negligence.
59
Second, in the internal memorandum of Account Officer Yeye San Pedro regarding the incident, she
reported that upon comparing the authentic signatures of Carmelita Cabamongan on file with the bank
with the signatures made by the person claiming to be Cabamongan on the documents required for the
termination of the deposit, she noticed that one letter in the latter [sic] signatures was different from that in
the standard signatures. She requested said person to sign again and scrutinized the identification cards
presented. Presumably, San Pedro was satisfied with the second set of signatures made as she
eventually authorized the termination of the deposit. However, upon examination of the signatures made
during the incident by the Philippine National Police (PNP) Crime Laboratory, the said signatures turned
out to be forgeries. As the qualifications of Document Examiner Florenda Negre were established and she
satisfactorily testified on her findings during the trial, we have no reason to doubt the validity of her
findings. Again, the bank's negligence is patent. San Pedro was able to detect discrepancies in the
signatures but she did not exercise additional precautions to ascertain the identity of the person she was
dealing with. In fact, the entire transaction took only 40 minutes to complete despite the anomalous
situation. Undoubtedly, the bank could have done a better job.
Third, as the bank had on file pictures of its depositors, it is inconceivable how bank employees could
have been duped by an impostor. San Pedro admitted in her testimony that the woman she dealt with did
not resemble the pictures appearing on the identification cards presented but San Pedro still went on with
the sensitive transaction. She did not mind such disturbing anomaly because she was convinced of the
validity of the passport. She also considered as decisive the fact that the impostor had a mole on her face
in the same way that the person in the pictures on the identification cards had a mole. These explanations
do not account for the disparity between the pictures and the actual appearance of the impostor. That said
person was allowed to withdraw the money anyway is beyond belief.
The above circumstances point to the bank's clear negligence. Bank transactions pass through a
successive [sic] of bank personnel, whose duty is to check and countercheck transactions for possible
errors. While a bank is not expected to be infallible, it must bear the blame for failing to discover mistakes
of its employees despite established bank procedure involving a battery of personnel designed to
minimize if not eliminate errors. In the instant case, Yeye San Pedro, the employee who primarily dealt
with the impostor, did not follow bank procedure when she did not have the waiver document notarized.
She also openly courted disaster by ignoring discrepancies between the actual appearance of the
impostor and the pictures she presented, as well as the disparities between the signatures made during
the transaction and those on file with the bank. But even if San Pedro was negligent, why must the other
employees in the hierarchy of the bank's work flow allow such thing to pass unnoticed and unrectified? 30
The CA, however, disagreed with the damages awarded by the RTC. It held that, insofar as the date from
which legal interest of 12% is to run, it should be counted from September 16, 1994 when extrajudicial
demand was made. As to moral damages, the CA reduced it to P100,000.00 and deleted the awards of
exemplary damages and litigation expenses. Thus, the dispositive portion of the CA decision reads:
WHEREFORE, the decision of the trial court dated 01 July 1997, and its order dated 19 November 1997,
are hereby AFFIRMED with the MODIFICATION that the legal interest for actual damages awarded in the
amount of $55,216.69 shall run from 16 September 1994; exemplary damages amounting to P100,000.00
and litigation expenses amounting to P200,000.00 are deleted; and moral damages is reduced
to P100,000.00.
Costs against defendant.
SO ORDERED.31
60
The Cabamongan spouses filed a motion for partial reconsideration on the matter of the award of
damages in the decision.32 On July 30, 2001, the
CA granted in part said motion and modified its decision as follows:
1. The actual damages in amount of $55,216.69, representing the amount of appellees' foreign
currency time deposit shall earn an interest of 2.5625% for the period 16 August 1993 to 14
February 1994, as stipulated in the contract;
2. From 16 September 1994 until full payment, the amount of $55,216.69 shall earn interest at the
legal rate of 12% per annum, and;
3. The award of moral damages is reduced to P50,000.00.33
Dissatisfied, both parties filed separate petitions for review on certiorari with this Court. The Cabamongan
spouses' petition, docketed as G.R. No. 149234, was denied by the Court per its Resolution dated
October 17, 2001.34 On the other hand, Citibank's petition was given due course by the Court per
Resolution dated December 10, 2001 and the parties were required to submit their respective
memoranda.35
Citibank poses the following errors for resolution:
1. THE HONORABLE COURT OF APPEALS GRAVELY ERRED AND GRAVELY ABUSED ITS
DISCRETION IN UPHOLDING THE LOWER COURT'S DECISION WHICH IS NOT BASED ON
CLEAR EVIDENCE BUT ON GRAVE MISAPPREHENSION OF FACTS.
2. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN UPHOLDING THE DECISION

OF THE TRIAL COURT AWARDING MORAL DAMAGES WHEN IN FACT THERE IS NO BASIS
IN LAW AND FACT FOR SAID AWARD.
3. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE

PRINCIPAL AMOUNT OF US$55,216.69 SHOULD EARN INTEREST AT THE RATE OF 12%
PER ANNUM FROM 16 SEPTEMBER 1994 UNTIL FULL PAYMENT.36
Anent the first ground, Citibank contends that the CA erred in affirming the RTC's finding that it was
negligent since the said courts failed to appreciate the extra diligence of a good father of a family
exercised by Citibank thru San Pedro.
As to the second ground, Citibank argues that the Cabamongan spouses are not entitled to moral
damages since moral damages can be awarded only in cases of breach of contract where the bank has
acted willfully, fraudulently or in bad faith. It submits that it has not been shown in this case that Citibank
acted willfully, fraudulently or in bad faith and mere negligence, even if the Cabamongan spouses suffered
mental anguish or serious anxiety on account thereof, is not a ground for awarding moral damages.
On the third ground, Citibank avers that the interest rate should not be 12% but the stipulated rate of
2.5625% per annum. It adds that there is no basis to pay the interest rate of 12% per annum from
September 16, 1994 until full payment because as of said date there was no legal ground yet for the
Cabamongan spouses to demand payment of the principal and it is only after a final judgment is issued
declaring that Citibank is obliged to return the principal amount of US$55,216.69 when the right to
demand payment starts and legal interest starts to run.
61
On the other hand, the Cabamongan spouses contend that Citibank's negligence has been established by
evidence. As to the interest rate, they submit that the stipulated interest of 2.5635% should apply for the
182-day contract period from August 16, 1993 to February 14, 1993; thereafter, 12% should apply. They
further contend that the RTC's award of exemplary damages of P100,000.00 should be maintained. They
submit that the CA erred in treating the award of litigation expenses as lawyer's fees since they have
shown that they incurred actual expenses in litigating their claim against Citibank. They also contend that
the CA erred in reducing the award of moral damages in view of the degree of mental anguish and
emotional fears, anxieties and nervousness suffered by them. 37
Subsequently, Citibank, thru a new counsel, submitted a Supplemental Memorandum, 38 wherein it posits
that, assuming that it was negligent, the Cabamongan spouses were guilty of contributory negligence
since they failed to notify Citibank that they had migrated to the United States and were residents thereat
and after having been victims of a burglary, they should have immediately assessed their loss and
informed Citibank of the disappearance of the bank certificate, their passports and other identification
cards, then the fraud would not have been perpetuated and the losses avoided. It further argues that since
the Cabamongan spouses are guilty of contributory negligence, the doctrine of last clear chance is
inapplicable.
Citibank's assertion that the Cabamongan spouses are guilty of contributory negligence and non-
application of the doctrine of last clear chance cannot pass muster since these contentions were raised for
the first time only in their Supplemental Memorandum. Indeed, the records show that said contention were
neither pleaded in the petition for review and the memorandum nor in Citibank's Answer to the complaint
or in its appellant's brief filed with the CA. To consider the alleged facts and arguments raised belatedly in
a supplemental pleading to herein petition for review at this very late stage in the proceedings would
amount to trampling on the basic principles of fair play, justice and due process. 391avvphil.net
The Court has repeatedly emphasized that, since the banking business is impressed with public interest,
of paramount importance thereto is the trust and confidence of the public in general. Consequently, the
highest degree of diligence40 is expected,41 and high standards of integrity and performance are even
required, of it.42 By the nature of its functions, a bank is "under obligation to treat the accounts of its
depositors with meticulous care,43 always having in mind the fiduciary nature of their relationship." 44
In this case, it has been sufficiently shown that the signatures of Carmelita in the forms for pretermination
of deposits are forgeries. Citibank, with its signature verification procedure, failed to detect the forgery. Its
negligence consisted in the omission of that degree of diligence required of banks. The Court has held
that a bank is "bound to know the signatures of its customers; and if it pays a forged check, it must be
considered as making the payment out of its own funds, and cannot ordinarily charge the amount so paid
to the account of the depositor whose name was forged." 45 Such principle equally applies here.
Citibank cannot label its negligence as mere mistake or human error. Banks handle daily transactions
involving millions of pesos.46 By the very nature of their works the degree of responsibility, care and
trustworthiness expected of their employees and officials is far greater than those of ordinary clerks and
employees.47 Banks are expected to exercise the highest degree of diligence in the selection and
supervision of their employees.48
The Court agrees with the observation of the CA that Citibank, thru Account Officer San Pedro, openly
courted disaster when despite noticing discrepancies in the signature and photograph of the person
claiming to be Carmelita and the failure to surrender the original certificate of time deposit, the
pretermination of the account was allowed. Even the waiver document was not notarized, a procedure
meant to protect the bank. For not observing the degree of diligence required of banking institutions,
whose business is impressed with public interest, Citibank is liable for damages.
62
As to the interest rate, Citibank avers that the claim of the Cabamongan spouses does not constitute a
loan or forbearance of money and therefore, the interest rate of 6%, not 12%, applies.
The Court does not agree.
The time deposit subject matter of herein petition is a simple loan. The provisions of the New Civil Code
on simple loan govern the contract between a bank and its depositor. Specifically, Article 1980 thereof
categorically provides that ". . . savings . . . deposits of money in banks and similar institutions shall be
governed by the provisions concerning simple loan." Thus, the relationship between a bank and its
depositor is that of a debtor-creditor, the depositor being the creditor as it lends the bank money, and the
bank is the debtor which agrees to pay the depositor on demand.
The applicable interest rate on the actual damages of $55,216.69, should be in accordance with the
guidelines set forth in Eastern Shipping Lines, Inc. v. Court of Appeals 49 to wit:
I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-
delicts is breached, the contravenor can be held liable for damages. The provisions under Title
XVIII on "Damages" of the Civil Code govern in determining the measure of recoverable damages.
II. With regard particularly to an award of interest, in the concept of actual and compensatory
damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a
loan or forbearance of money, the interest due should be that which may have been
stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the
time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12%
per annum to be computed from default, i.e., from judicial or extrajudicial demand under and
subject to the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an

interest on the amount of damages awarded may be imposed at the discretion of the court
at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims
or damages except when or until the demand can be established with reasonable certainty.
Accordingly, where the demand is established with reasonable certainty, the interest shall
begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil
Code) but when such certainty cannot be so reasonably established at the time the demand
is made, the interest shall begin to run only from the date the judgment of the court is made
(at which time the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in any case, be on
the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory,
the rate of legal interest whether the case falls under paragraph 1 or paragraph 2, above,
shall be 12% per annum from such finality until its satisfaction, this interim period being
deemed to be by then an equivalent to a forbearance of credit. 50
Thus, in a loan or forbearance of money, the interest due should be that stipulated in writing, and in the
absence thereof, the rate shall be 12% per annum counted from the time of demand. Accordingly, the
stipulated interest rate of 2.562% per annum shall apply for the 182-day contract period from August 16,
1993 to February 14, 1994. For the period from the date of extra-judicial demand, September 16, 1994,
until full payment, the rate of 12% shall apply. As for the intervening period between February 15, 1994 to
63
September 15, 1994, the rate of interest then prevailing granted by Citibank shall apply since the time
deposit provided for roll over upon maturity of the principal and interest.
As to moral damages, in culpa contractual or breach of contract, as in the case before the Court, moral
damages are recoverable only if the defendant has acted fraudulently or in bad faith, 52 or is found guilty of
gross negligence amounting to bad faith, or in wanton disregard of his contractual obligations. 53 The act of
Citibank's employee in allowing the pretermination of Cabamongan spouses' account despite the noted
discrepancies in Carmelita's signature and photograph, the absence of the original certificate of time
deposit and the lack of notarized waiver dormant, constitutes gross negligence amounting to bad faith
under Article 2220 of the Civil Code.
There is no hard-and-fast rule in the determination of what would be a fair amount of moral damages
since each case must be governed by its own peculiar facts. The yardstick should be that it is not palpably
and scandalously excessive.54 The amount of P50,000.00 awarded by the CA is reasonable and just.
Moreover, said award is deemed final and executory insofar as respondents are concerned considering
that their petition for review had been denied by the Court in its final and executory Resolution dated
October 17, 2001 in G.R. No. 149234.
Finally, Citibank contends that the award of attorney's fees should be deleted since such award appears
only in the dispositive portion of the decision of the RTC and the latter failed to elaborate, explain and
justify the same.
Article 2208 of the New Civil Code enumerates the instances where such may be awarded and, in all
cases, it must be reasonable, just and equitable if the same were to be granted. Attorney's fees as part of
damages are not meant to enrich the winning party at the expense of the losing litigant. They are not
awarded every time a party prevails in a suit because of the policy that no premium should be placed on
the right to litigate.55 The award of attorney's fees is the exception rather than the general rule. As such, it
is necessary for the court to make findings of facts and law that would bring the case within the exception
and justify the grant of such award. The matter of attorney's fees cannot be mentioned only in the
dispositive portion of the decision.56 They must be clearly explained and justified by the trial court in the
body of its decision. Consequently, the award of attorney's fees should be deleted.
WHEREFORE, the instant petition is PARTIALLY GRANTED. The assailed Decision and Resolution
are AFFIRMED with MODIFICATIONS, as follows:
1. The interest shall be computed as follows:
a. The actual damages in principal amount of $55,216.69, representing the amount of

foreign currency time deposit shall earn interest at the stipulated rate of 2.5625% for the
period August 16, 1993 to February 14, 1994;
b. From February 15, 1994 to September 15, 1994, the principal amount of $55,216.69 and
the interest earned as of February 14, 1994 shall earn interest at the rate then prevailing
granted by Citibank;
c. From September 16, 1994 until full payment, the principal amount of $55,216.69 and the
interest earned as of September 15, 1994, shall earn interest at the legal rate of 12% per
annum;
2. The award of attorney's fees is DELETED.
64
No pronouncement as to costs.
SO ORDERED.
65

September 19, 2020 - Banking Laws Cases

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September 19, 2020 – Banking Laws (SpecCom)

G.R. No. 200678, June 04, 2018

BANCO FILIPINO SAVINGS AND MORTGAGE BANK, Petitioner, v. BANGKO SENTRAL NG

This Court in Manalo v. Court of Appeals101 reiterated this principle:

SEC. 3. Representatives as parties. — Where the action is allowed to be prosecuted or defended by a

(1) bring suits to enforce liabilities to or recoveries of the closed bank;

(6) hire or retain private counsels as may be necessary;

Balayan Bay Rural Bank summarized, thus:

No appeal may be taken from:

(c) An interlocutory order;

Pure Foods Corporation, on the other hand, stated:

G.R. No. 184778 October 2, 2009

BANGKO SENTRAL NG PILIPINAS MONETARY BOARD and CHUCHI FONACIER, Petitioners,

The Ruling of the RTC

The dispositive portion of the RTC’s order reads:

WHEREFORE, the Court rules as follows:

The Ruling of the CA

Now we resolve the main petition.

Grounds in Support of Petition

A. THE EXCEPTIONS CITED BY PETITIONER JUSTIFIED RESORT TO PETITION FOR

B. RESPONDENT BANKS’ ACT OF RESORTING IMMEDIATELY TO THE COURT WAS

C. THE ISSUANCE OF A WRIT OF PRELIMINARY INJUNCTION BY THE REGIONAL

The petition is meritorious.

In Lim v. Court of Appeals it was stated:

These requirements are absent in the present case.

AMANDO M. TETANGCO, JR., PETER B. FAVILA, JUANITA D. AMATONG, NELLY A. FAVIS-

As correctly pointed out by the COA:

WHEREFORE, the Petition is DISMISSED. The Commission oμ Audit's Resolution dated August 12,

[ G.R. No. 240458, January 08, 2020 ]

Criminal Case No. 1719-M-2000

(b) In Criminal Case No. 1720-M-2000, accused-appellant Hilario P. Soriano is found GUILTY beyond

The Court's Ruling

Estafa through Falsification of Commercial Documents

First, petitioner is a private individual.

In Tanenggee[49] the Court explained that:

In fine, as correctly synthesized by the appellate court:

[G.R. NO. 156335 : November 28, 2007]

SPOUSES RAUL and AMALIA PANLILIO, Petitioners, v. CITIBANK, N.A., Respondent.

The factual antecedents are as follows:

2. The sum of PhP300,000.00 representing moral damages;

3. The sum of PhP100,000.00 representing attorney's fees;

Respondent appealed to the CA.

The Court's Ruling

Under the DIMA, the following provisions appear:

IT IS UNDERSTOOD THAT THIS INVESTMENT MANAGEMENT AGREEMENT IS NOT COVERED BY

PART FOUR: TRUST, OTHER FIDUCIARY BUSINESS AND INVESTMENT MANAGEMENT

C. General Provisions shall apply to both.

while the Questionnaire had the following provisions:

which do not need further elaboration on the matter.

Petitioners contend that the Term Investment Application (TIA), viz:

TERM INVESTMENT APPLICATION

clearly contradicts the DIMA, Directional Letter and COIs.

11. Withdrawal of Income/Principal ' Subject to availability of funds and taking into consideration

Costs against the petitioners.

G.R. No. 118492 August 15, 2001

GREGORIO H. REYES and CONSUELO PUYAT-REYES, petitioners,

The undisputed facts of the case are as follows:

WHEREFORE, judgment is hereby rendered in favor of the defendant, dismissing plaintiff's

Hence, this petition, anchored on the following assignment of errors:

THE HONORABLE COURT OF APPEALS ERRED IN FINDING PRIVATE RESPONDENT NOT

THE HONORABLE COURT OF APPEALS ERRED IN ABSOLVING PRIVATE RESPONDENT

G.R. No. 146918 May 2, 2006

The factual background of the case is as follows: