Case Digests

JUDITH ELISCIA E.
YACOB JD-3B
TOPIC: Section 20, Article VII of the Constitution
TITLE: Constantino v. Cuisia; GR # 10664; October 13, 2005
DOCTRINE:
Under Section 20, Article VII of the Constitution, the President may contract or guarantee
foreign loans in behalf of the Republic of the Philippines with prior consent of the Monetary
Board and subject to the limitations set forth by law.
FACTS:
A Petition for Certiorari, Prohibition and Mandamus was filed by Spouses Constantino and their
minor Children and the Freedom from debt coalition against respondents who were tasked to
negotiate with the foreign creditors of the country.
Petitioners alleged that even prior to the execution of the Financial Programs instituted during
the term of Former President Corazon Aquino, respondents had already implemented its buy
back component. It was also alleged that the buy back and bond conversion schemes do not
constitute the loan “contract” or “guarantee” contemplated by the Constitution.
ISSUE:
Whether or not the President can contract and guarantee foreign loans.
RULING:
Yes. Under Section 20, Article VII of the Constitution, the President may contract or guarantee
foreign loans in behalf of the Republic of the Philippines with prior consent of the Monetary
Board and subject to the limitations set forth by law.
It is clear that the Constitution does not make any prohibition on the issuance of certain kinds of
loans or distinctions as to which kinds of debt instruments are more onerous than others. The
only prohibition that the Constitution provides is that the loans must be subject to limitations
provided by law. Republic Act no. 245 provides such limitation. It provides that sovereign bonds
may not be issued not only to supplement government expenditure but also provide for the
purchase, redemption, or refunding of any obligation, either direct or guaranteed, of the
Philippine Government.
Page 1 of 54
JUDITH ELISCIA E. YACOB JD-3B
TOPIC: Diligence required of banks
TITLE: SIMEX International v. Court of Appeals; GR # 88013; March 19, 1990
DOCTRINE:
Businesses affected with public interest with the nature of its functions like the bank is under
obligation to treat the accounts of its depositors with meticulous care, always having in mind the
fiduciary nature of their relationship.
FACTS:
The petitioner is a private corporation engaged in the exportation of food products. It buys
products from various local suppliers and sells them abroad. Petitioner was a depositor of
respondent bank where it maintained a checking account in its branch at Romulo, Avenue. The
petitioner deposited the amount of P100,000 increasing its balance to P190. 380.74.
Subsequently, petitioner issued several checks against its deposit but was surprised to learn that
they have been dishonored. As a consequence, a letter of demand to the petitioner was sent by
California Manufacturing Corporation if the dishonored checks issued to it was not good.
ISSUE:
Whether or not the petitioner is entitled to moral damages.
RULING:
Yes. The banking system is an indispensable institution in the modern world and plays a vital
role in the economic life of every civilized nation. As business entities, the bank is a trusted and
active associate that can help in the running in their affairs, not only in the form of loans when
needed but more often in the conduct of their day-to-day transactions like the issuance or
encashment of checks.
In every case, a depositor has an expectation that the bank is going to treat his account with the
utmost fidelity, no matter how much it consists. The bank must record every single transaction
accurately, down to the last centavo. This has to be done if the account is to reflect at any given
time the amount of money the depositor can dispose of as he sees fit. A blunder on the part, such
as the dishonor of a check without good reason, can cause the depositor not a little
embarrassment if not also financial loss and perhaps even civil and criminal litigation.
In this case, it is obvious that the respondent bank was remiss in their duty and violated the
relationship. It was emphasized that the record does not contain any satisfactory explanation of
why the error was made in the first place and why it was not corrected immediately after its
discovery.
Page 2 of 54
TITLE: Gregorio Reyes v. Court of Appeals; GR # 118492; August 15, 2001
DOCTRINE:
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.
FACTS:
The Philippine Racing Club sent 4 delegates to the 20 th Racing Conference. Godofredo Reyes
was sent to the respondent bank to apply for a foreign exchange demand draft in Australian
dollars. He was attended to by the assistant cashier, Mr. Yasis, who first denied the application
for the reason that the respondent bank did not have an Australian Dollar Account in any bank in
Sydney. Yasis advised that the respondent bank would draw a demand draft against West Pac
Bank in Sydney and have the latter reimburse itself from the US Dollar account of the
respondent. The parties agreed upon this scheme. However, upon due presentment of the foreign
exchange demand draft, the same was dishonored twice which resulted to the delegates not being
able to register.
ISSUE:
Whether or not the respondent bank should have exercised a higher degree of diligence than that
of ordinary prudent person.
RULING:
No. It was settled that the degree of diligence required of a bank is more than that of a good
father of a family where the fiduciary nature of their relationship with their depositors is
concerned. This degree of diligence shall only be applied to banks acting under their fiduciary
capacity. Nut the degree of diligence is not expected by banks in commercial transactions. In the
case at bar, it does not involve the handling of petitioners deposit, if any, with the respondent
bank.
Page 3 of 54
TITLE: Sps. Carbonell v. Metropolitan Bank and Trust Company; GR No. 178467; April 26,
2017
DOCTRINE:
It is a negligence characterized by the want of even slight care, acting or omitting to act in a
situation where there is duty to act, not inadvertently but willfully and intentionally, with a
conscious indifference to consequences insofar as other persons may be affected.
FACTS:
The petitioners initiated against the respondent an action for damages. They alleged that they had
experienced emotional shock, mental anguish, public ridicule, humiliation, insults and
embarrassment during their trip to Thailand because of the respondent's release to them of five
US$ 100 bills that later on turned out to be counterfeit. They claimed that they had travelled to
Bangkok, Thailand after withdrawing US$ l ,000.00 in US$ 100 notes from their dollar account
at the respondent's Pateros branch. While in Bangkok, they had exchanged five US$ 100 bills
into Baht, but only four of the US$ 100 bills had been accepted by the foreign exchange dealer
because the fifth one was "no good".
The petitioners argue that the respondent was liable for failing to observe the diligence required
from it by not doing an act from which the material damage had resulted by reason of
inexcusable lack of precaution in the performance of its duties.
ISSUE:
Whether or not the respondent bank’s failure to exercise the degree of diligence required in
handling the affairs of its clients showed that it was liable for negligence.
RULING:
No. The General Banking Act of 2000 demands of banks the highest standards of integrity and
performance. As such, the banks are under obligation to treat the accounts of their depositors
with meticulous care. However, the banks' compliance with this degree of diligence is to be
determined in accordance with the particular circumstances of each case.
The relationship existing between the petitioners and the respondent that resulted from a contract
of loan was that of a creditor-debtor. Even if the law imposed a high standard on the latter as a
bank by virtue of the fiduciary nature of its banking business, bad faith or gross negligence
amounting to bad faith was absent. Hence, there simply was no legal basis for holding the
respondent liable for moral and exemplary damages. In breach of contract, moral damages may
be awarded only where the defendant acted fraudulently or in bad faith.
Page 4 of 54
TITLE: BPI and Ana Gonzales v. Sps. Quiaoit; GR no. 199562; January 16, 2019
DOCTRINE:
The General Banking Act of 2000 demands of banks the highest standards of integrity and
performance. The Court ruled that banks are under obligation to treat the accounts of their
depositors with meticulous care.
FACTS:
In a complaint filed by Spouses Quiaot, they alleged that when they travelled to Jerusalem and
Europe, Nora was placed in a shameful and embarrassing situation when several banks in
Madrid, Spain refused to exchanged some of the dollar bills because they were counterfeit. Nora
was aksi threatened that she would be taken to the Police Station when she tried to purchase an
item in a shop with the dollar bills.
ISSUE:
Whether or not BPI exercised due diligence in handling the withdrawal of the US dollar bills.
RULING:
No. BPI failed to exercise the highest degree of diligence that is not only expected but required
of a banking institution. The Supreme Court ruled that the action of BPI is the proximate cause
of the loss suffered by the spouses Quiaot. Proximate cause is defined as the cause which, in
natural and continuous sequence, unbroken by any efficient intervening cause, produces injury
and without which the result would not have occurred. Granting that Lambayong counted the
two bundles of the US$100 bills she received from the bank, there was no way for her, or for the
spouses Quiaoit, to determine whether the dollar bills were genuine or counterfeit.
Page 5 of 54
TITLE: Poole-Blunden v. Union Bank of the Philippines; GR no. 205838; November 29, 2017
DOCTRINE:
Banks assume a degree of prudence and diligence higher than that of a good father of a family,
because their business is imbued with public interest and is inherently fiduciary. Thus, banks
have the obligation to treat the accounts of its clients "meticulously and with the highest degree
of care."
FACTS:
Poole-Blunden placed his bid and won the unit for P2,650,000.00. Poole-Blunden entered into a
Contract to Sell with Union Bank. This Contract stipulated that Poole-Blunden would pay 10%
of the purchase price as down payment and that the balance shall be paid over a period of 15
years in equal monthly instalments, with interest of 15% per annum starting July 7, 2001.
Upon examining it, he noticed apparent problems in its dimensions. He took rough
measurements of the Unit, which indicated that its floor area was just about 70 square meters, not
95 square meters, as advertised by Union Bank.
Poole-Blunden got in touch with an officer of Union Bank to raise the matter, but no action was
taken.16 On July 12, 2004, Poole-Blunden wrote to Union Bank, informing it of the discrepancy.
He asked for a rescission of the Contract to Sell, along with a refund of the amounts he had paid,
in the event that it was conclusively established that the area of the unit was less than 95 square
meters.
ISSUE:
Whether or not the bank callously remiss its duties as a bank.
RULING:
Yes. It was so grossly negligent that its recklessness amounts to a wrongful willingness to
engender a situation where any buyer in petitioner's shoes would have been insidiously induced
into buying a unit with an actual area so grossly short of its advertised space.
The high degree of diligence required of banks equally holds true in their dealing with
mortgaged real properties, and subsequently acquired through foreclosure, such as the Unit
purchased by petitioner. In the same way that banks are "presumed to be familiar with the rules
on land registration," given that they are in the business of extending loans secured by real estate
mortgage, banks are also expected to exercise the highest degree of diligence.
Page 6 of 54
TITLE: Comsavings Bank vs. Spouses Capistrano; GR no. 170942; August 28, 2013
DOCTRINE:
A banking institution like Comsavings Bank is obliged to exercise the highest degree of
diligence as well as high standards of integrity and performance in all its transactions because its
business is imbued with public interest.
FACTS:
Desirous of building their own house on the lot, they availed themselves of the UHLP
implemented by the National Home Mortgage Finance Corporation (NHMFC). To finance the
construction, GCB Builders facilitated their loan application with Comsavings Bank, an
NHFMC-accredited originator. As proof of their qualifications to avail themselves of a loan
under the UHLP and to comply with the conditions prescribed for the approval of their
application, they submitted their record of employment, the amount of their income, and a
clearance from the Social Security System (SSS) to the effect that they had no existing loans.
They executed in favor of GCB Builders a deed of assignment of the amount of the ₱300,000.00
proceeds of the loan from Comsavings Bank.
ISSUE:
Whether or not Comsavings Bank was grossly negligent in its dealings with the respondents.
RULING:
Yes. A banking institution like Comsavings Bank is obliged to exercise the highest degree of
diligence as well as high standards of integrity and performance in all its transactions because its
business is imbued with public interest.
There is no question that Comsavings Bank was grossly negligent in its dealings with
respondents because it did not comply with its legal obligation to exercise the required diligence
and integrity. It was fully aware that the purpose of the signed certificate was to affirm that the
house had been completely constructed according to the approved plans and specifications, and
that respondents had thereby accepted the delivery of the complete house.
Page 7 of 54
TITLE: Genaro Ursal vs. Court of Tax Appeals; GR no. 142411; October 14, 2005
DOCTRINE:
A banking institution is expected to exercise due diligence before entering into a mortgage
contract. The ascertainment of the status or condition of a property offered to it as security for a
loan must be a standard and indispensable part of its operations.
FACTS:
The spouses Monesets are the registered owners of a 333-square meter land together with a
house thereon situated at Sitio Laguna, Basak, Cebu City. On January 9, 1985, they executed a
'Contract to Sell Lot & House in favor of petitioner Winifreda Ursal. Petitioner paid the down
payment and took possession of the property. She immediately built a concrete perimeter fence
and an artesian well, and planted fruit bearing trees and flowering plants thereon. After paying
six monthly installments, petitioner stopped paying due to the Monesets' failure to deliver to her
the transfer certificate of title of the property.
Unknown to petitioner, the Monesets executed an absolute deed of sale in favor of Dr. Rafael
Canora, Jr. over the said property. The Monesets executed another sale, this time with pacto de
retro with Restituto Bundalo. On the same day, Bundalo, as attorney-in-fact of the Monesets,
executed a real estate mortgage over said property with Rural Bank of Larena located in Siquijor.
For the failure of the Monesets to pay the loan, the Bank served a notice of extrajudicial
foreclosure.
ISSUE:
Whether or not the bank shall be liable for negligence.
RULING:
Yes. Banks cannot merely rely on certificates of title in ascertaining the status of mortgaged
properties. As their business is impressed with public interest, they are expected to exercise more
care and prudence in their dealings than private individuals. Indeed, the rule that persons dealing
with registered lands can rely solely on the certificate of title does not apply to banks.
A banking institution is expected to exercise due diligence before entering into a mortgage
contract. The ascertainment of the status or condition of a property offered to it as security for a
loan must be a standard and indispensable part of its operations.
Page 8 of 54
TITLE: Philippine National Bank vs. Juan Villa; GR no. 213241; August 01, 2016
DOCTRINE:
Before approving a loan application, it is standard operating procedure for banks and financial
institutions to conduct an ocular inspection of the property offered for mortgage and to determine
the real owner(s) thereof.
FACTS:
Spouses Cornista obtained a loan from Traders Royal Bank. To secure the said obligation, the
Spouses Cornista mortgaged to the bank a parcel of land. For failure of the Spouses Cornista to
make good of their loan obligation after it has become due, Traders Bank foreclosed the
mortgage constituted on the security of the loan. After the notice and publication requirements
were complied with, the subject property was sold at the public. During the public sale,
respondent was declared as the highest bidder after he offered to buy the subject property for
P50,000.00. Despite the lapse of the redemption period and the fact of issuance of a Certificate
of Final Sale to Vila, the Spouses Cormsta were nonetheless allowed to buy back the subject
property by tendering the amount of P50,000.00.
ISSUE:
Whether or not the PNB is liable for damages for not exercising the degree of diligence expected
from banks and financial institutions.
RULING:
Yes. PNB failed to observe the exacting standards required of banking institutions which are
behooved by statutes and jurisprudence to exercise greater care and prudence before entering
into a mortgage contract.
Before approving a loan application, it is standard operating procedure for banks and financial
institutions to conduct an ocular inspection of the property offered for mortgage and to determine
the real owner(s) thereof. The apparent purpose of an ocular inspection is to protect the "true
owner" of the property as well as innocent third parties with a right, interest or claim thereon
from a usurper who may have acquired a fraudulent certificate of title thereto.
Page 9 of 54
TITLE: Citystate Savings Bank vs. Teresita Tobias; GR NO. 227990
DOCTRINE:
A bank is liable for wrongful acts of its officers done in the interests of the bank or in the course
of dealings of the officers in their representative capacity but not for acts outside the scope of
their authority.
FACTS:
Respondent Teresita Tobias, a meat vendor at the Baliuag Public Market, was introduced by her
youngest son to Robies, branch manager of petitioner's Baliuag, Bulacan branch. Tobias was
later offered by Robies to sign-up in petitioner's back-to-back scheme which is supposedly
offered only to petitioner's most valued clients. Under the scheme, the depositors authorize the
bank to use their bank deposits and invest the same in different business ventures that yield high
interest.
Robies failed to remit to respondents the interest as scheduled. Respondents tried to reach Robies
but he can no longer be found; their calls were also left unanswered. In a meeting with Robies'
siblings, it was disclosed to the respondents that Robies withdrew the money and appropriated it
for personal use.
ISSUE:
Whether or not Citysavings Banks shall still be held liable for the acts of their employee.
RULING:
Yes. Petitioner is estopped from denying Robles' authority.
A banking corporation is liable to innocent third persons where the representation is made in the
course of its business by an agent acting within the general scope of his authority even though, in
the particular case, the agent is secretly abusing his authority and attempting to perpetrate a fraud
upon his principal or some other person, for his own ultimate benefit.
Page 10 of 54
TITLE: Onofre Andres vs, PNB; GR no. 173548; October 15, 2014
DOCTRINE:
The standard operating practice for banks when acting on a loan application is "to conduct an
ocular inspection of the property offered for mortgage and to verify the genuineness of the title to
determine the real owner(s) thereof.”
FACTS:
This case involves a 4,634-square-meter parcel of land in Nueva Ecija mortgaged to respondent
Philippine National Bank (PNB). PNB later foreclosed the property and consolidated title in its
name. Petitioner Onofre Andres, the uncle of mortgagors Reynaldo Andres and his wife, Janette
de Leon, filed a complaint for cancellation of title and reconveyance of the property alleging that
title in mortgagor's name was based on a falsified document denominated as "Self-Adjudication
of Sole Heir."
ISSUE:
Whether or not PNB exercised due diligence required of it.
RULING:
Yes. The general rule allows every person dealing with registered land to rely on the face of the
title when determining its absolute owner. However, the banking industry belongs to a different
category than private individuals. Banks are considered businesses impressed with public
interest, requiring "high standards of integrity and performance." Consequently, banks must
exercise greater care, prudence, and due diligence in their property dealings. The standard
operating practice for banks when acting on a loan application is "to conduct an ocular inspection
of the property offered for mortgage and to verify the genuineness of the title to determine the
real owner(s) thereof.”
In this case, it is undisputed that PNB sent its appraiser and credit investigator Gerardo Pestaño
to conduct an ocular inspection of the property. He also went to the relevant government offices
to verify the ownership status of the property. These acts complied with the standard operating
practice expected of banks when dealing with real property.
Page 11 of 54
TITLE: PNB vs. Mercedes Corpuz; GR no. 180945; Febraury 12, 2010
DOCTRINE:
Banks are expected to be more cautious than ordinary individuals in dealing with lands, even
registered ones, since the business of banks is imbued with public interest.
FACTS:
Respondent delivered her owner’s duplicate copy of Transfer Certificate of Title (TCT) 32815 to
Dagupan City Rural Bank as security against any liability she might incur as its cashier. She later
left her job and went to the United States.
Subsequently, the rural bank where she worked cancelled its lien on Corpuz’s title, she having
incurred no liability to her employer. Without Corpuz’s knowledge and consent, however,
Natividad Alano, the rural bank’s manager, turned over Corpuz’s title to Julita Camacho and
Amparo Callejo. Conniving with someone from the assessor’s office, Alano, Camacho, and
Callejo prepared a falsified deed of sale, making it appear that on February 23, 1995 Corpuz sold
her land to one "Mary Bondoc" for ₱50,000.00.
ISSUE:
Whether or not PNB is a mortgage in good faith, entitling it to its lien on the title to the property
in dispute.
RULING:
Yes. As a rule, the Court would not expect a mortgagee to conduct an exhaustive investigation of
the history of the mortgagor’s title before he extends a loan. But petitioner PNB is not an
ordinary mortgagee; it is a bank. Banks are expected to be more cautious than ordinary
individuals in dealing with lands, even registered ones, since the business of banks is imbued
with public interest. It is of judicial notice that the standard practice for banks before approving a
loan is to send a staff to the property offered as collateral and verify the genuineness of the title
to determine the real owner or owners.
Page 12 of 54
TITLE: Anna Gumabon vs. PNB; GR no. 202514; July 25, 2016
DOCTRINE:
The bank is not absolved from liability by the fact that it was the bank's employee who
committed the wrong and caused damage to the depositor.
FACTS:
Anna Marie, together with her mother Angeles and her siblings Anna Elena and Santiago
deposited with the PNB Delta Branch $10,945.28 and $16,830.91. The Gumabons also
maintained eight (8) savings accounts in the same bank. Anna Marie decided to consolidate the
eight (8) savings accounts and to withdraw from the consolidated savings account to help her
sister's financial needs.
Anna Marie called the PNB employee handling her accounts, Reino Antonio Salvoro, to
facilitate the consolidation of the savings accounts and the withdrawal. When she went to the
bank on April 14, 2003, she was informed that she could not withdraw from the savings accounts
since her bank records were missing and Salvoro could not be contacted.
ISSUE:
Whether or not PNB is liable to the petitioner for her deposits.
RULING:
Yes. PNB was negligent for its failure to update and properly handle Anna Marie's accounts.
This is patent from the PNB's letter to Anna Marie, admitting the error and unauthorized
withdrawals from her account. Moreover, Anna Marie was led to believe that the amounts she
has in her accounts would remain because of the Deed of Waiver and Quitclaim executed by her,
her mother, and PNB.
The Court has established in a number of cases the standard of care required from banks, and the
bank's liability for the damages sustained by the depositor. The bank is not absolved from
liability by the fact that it was the bank's employee who committed the wrong and caused
damage to the depositor. Article 2180 of the New Civil Code provides that the owners and
managers of an establishment are responsible for damages caused by their employees while
performing their functions.
Page 13 of 54
TITLE: PNB v. Pablo Raymundo; GR no. 208672; December 7, 2016
DOCTRINE:
A bank's disregard of its own banking policy amounts to gross negligence, which is described as
negligence characterized by the want of even slight care, acting or omitting to act in a situation
where there is duty to act, not inadvertently but willfully and unintentionally with a conscious
indifference to consequences insofar as other persons may be affected.
FACTS:
Raymundo approved for deposit a foreign draft check issued by Solomen Guggenheim
Foundation, drawn against Morgan Guaranty Company of New York, payable to Merry May
Juan in the opening of the latter’s checking account with PNB San Pedro Branch. Consequently,
after the issuance of a check booklet, Ms. Juan drew six checks against such account. However,
PNB Foreign Checks Unit informed her that the draft check was dishonored for being fraudulent.
ISSUE:
Whether or not PNB is negligent.
RULING:
Yes. A bank's disregard of its own banking policy amounts to gross negligence, which is
described as negligence characterized by the want of even slight care, acting or omitting to act in
a situation where there is duty to act, not inadvertently but willfully and unintentionally with a
conscious indifference to consequences insofar as other persons may be affected. Payment of the
amounts of checks without previously clearing them with the drawee bank, especially so where
the drawee bank is a foreign bank and the amounts involved were large, is contrary to normal or
ordinary banking practice.
If Raymundo did not disregard the bank's foreign check clearing policy when he approved
crediting of the peso conversion of Ms. Juan's foreign check in her newly-opened peso checking
account, the PNB would not have suffered losses due to the irregular encashment of the six (6)
checks.
Page 14 of 54
TITLE: Games and Garments Developers, Inc. vs. Allied Banking Corporation; GR no. 181426;
July 13, 2015
DOCTRINE:
Banks, their business being impressed with public interest, are expected to exercise more care
and prudence than private individuals in their dealings, even those involving registered lands.
FACTS:
Bienvenida, married to Benedicto Pantaleon, agreed to purchase a parcel of land located at

Bayanan, Muntinlupa, in the name of petitioner Games and Garments Developers, Inc. (GGDI).
The parties executed a Memorandum of Agreement. Upon the spouses Pantaleon's request, and
assured by Mercado's letter dated August 22, 1996, GGDI executed a Deed of Sale. When GGDI
deposited the two Allied Bank checks dated March 28, 1997 issued by Bienvenida, said.checks
were dishonored for being "Drawn Against Insufficient Funds."
ISSUE:
Whether or not Allied Bank exercise the due diligence required from it.
RULING:
Yes. Allied Bank is a mortgagee in bad faith and the foreclosure on the real estate mortgage and
public auction sale of the subject property are null and void. Banks, their business being
impressed with public interest, are expected to exercise more care and prudence than private
individuals in their dealings, even those involving registered lands.
Because Allied Bank was a mortgagee in bad faith, its foreclosure on the mortgage and the
subsequent public auction sale of the subject property, in which the bank was the highest bidder,
are null and void. Allied Bank asseverates that its title to the subject property cannot be
collaterally attacked in this case, which is for breach of contract, rescission, and damages.
Page 15 of 54
TITLE: Prudential Bank vs. Ronald Rapanot; GR no. 191636; January 16, 2017
DOCTRINE:
It has been ruled that a bank cannot argue that simply because the titles offered as security were
clean of any encumbrances or lien, it was relieved of taking any other step to verify the
implications should the same be sold by the developer. While it is not expected to conduct an
exhaustive investigation of the mortgagor's title, it cannot be excused from the duty of exercising
the due diligence required of banking institutions, for banks are expected to exercise more care
and prudence than private individuals in their dealings, even those involving registered property,
for their business is affected with public interest.
FACTS:
Golden Dragon is the developer of Wack-Wack Twin Towers Condominium, located in

Mandaluyong City. On May 9, 1995, Rapanot paid Golden Dragon a reservation fee for a
41.1050-square meter unit in said condominium. The Bank extended a loan to Golden Dragon
amounting to P50,000,000.008 to be utilized by the latter as additional working capital. To
secure the loan, Golden Dragon executed a Mortgage Agreement in favor of the Bank, which had
the effect of constituting a real estate mortgage over several condominium units owned and
registered under Golden Dragon's name. Golden Dragon executed a Deed of Absolute Sale in
favor of Rapanot of the same date. Thereafter, Rapanot made several verbal demands for the
delivery of Unit 2308-B2.
Golden Dragon sent a letter to the Bank dated March 17, 1998, requesting for a substitution of
collateral for the purpose of replacing Unit 2308-B2 with another unit with the same area.
However, the Bank denied Golden Dragon's request due to the latter's unpaid accounts.
ISSUE:
Whether or not the bank exercised due diligence before it entered into a mortgage contract.
RULING:
No. The doctrine of "mortgagee in good faith" is based on the rule that all persons dealing with
property covered by a certificate of title, as mortgagees, are not required to go beyond what
appears on the face of the title.
However, while a mortgagee is not under obligation to look beyond the certificate of title, the
nature of petitioner's business requires it to take further steps to assure that there are no
encumbrances or liens on the mortgaged property, especially since it knew that it was dealing
with a condominium developer. It should have inquired deeper into the status of the properties
offered as collateral and verified if the HLURB's authority to mortgage was in fact previously
obtained.
Page 16 of 54
TOPIC: Financial Intermediaries
TITLE: First Planters Pawnshop. Inc. vs. Commissioner of Internal Revenue; GR no. 174134;
July 30, 2008
DOCTRINE:
That pawnshops are to be treated as non-bank financial intermediaries is further bolstered by the
fact that pawnshops are under the regulatory supervision of the Bangko Sentral ng Pilipinas and
covered by its Manual of Regulations for Non-Bank Financial Institutions.
FACTS:
In a pre-assessment notice, petitioner was informed by the BIR that it has an existing tax
deficiency on its VAT and DST liabilities for the year 2000. The deficiency value are as follows:
(a) P541, 102.79 for VAT; (b) P23, 646.33 for DST. Petitioner contested the assessment.
Subsequently, petitioner received a Final Assessment Notice directing them to pay the
deficiency. Petitioner filed a protest, which was denied by the Acting Regional Director.
ISSUE:
Whether or pawnshops are financial intermediaries.
RULING:
No. Financial intermediaries are defined as "persons or entities whose principal functions include
the lending, investing or placement of funds or evidences of indebtedness or equity deposited
with them, acquired by them, or otherwise coursed through them, either for their own account or
for the account of others.”
That pawnshops are to be treated as non-bank financial intermediaries is further bolstered by the
fact that pawnshops are under the regulatory supervision of the Bangko Sentral ng Pilipinas and
covered by its Manual of Regulations for Non-Bank Financial Institutions.
Since petitioner is a non-bank financial intermediary, it is subject to 10% VAT for the tax years
1996 to 2002. However, with the levy, assessment and collection of VAT from non-bank
financial intermediaries being specifically deferred by law, then petitioner is not liable for VAT
during these tax years.
Page 17 of 54
TOPIC: Deposit Substitutes
TITLE: BDO vs. Republic; GR no. 198756; August 16, 2016
DOCTRINE:
Deposit substitutes shall mean an alternative form of obtaining funds from the public (the term
'public' means borrowing from twenty (20) or more individual or corporate lenders at any one
time) other than deposits, through the issuance, endorsement, or acceptance of debt instruments
for the borrower’s own account, for the purpose of relending or purchasing of receivables and
other obligations, or financing their own needs or the needs of their agent or dealer.
FACTS:
This resolves separate motions for reconsideration and clarification filed by the Office of the
Solicitor General and petitioners-intervenors Rizal Commercial Banking Corporation and RCBC
Capital Corporation of our Decision dated January 13, 2015, which: (1) granted the Petition and
Petitions-in-Intervention and nullified Bureau of Internal Revenue (BIR) Ruling Nos. 370-2011
and DA 378-2011; and (2) reprimanded the Bureau of Treasury for its continued retention of the
amount corresponding to the 20% final withholding tax that it withheld on October 18, 2011, and
ordered it to release the withheld amount to the bondholders.
ISSUE:
Whether or not government or the Bureau of Internal Revenue is estopped from imposing and/or
collecting the 20% final withholding tax from the face value of these Bonds.
RULING:
Yes. It must be stressed that interest income, derived by individuals from long-term deposits or
placements made with banks in the form of deposit substitutes, is exempt from income tax.
Consequently, it is likewise exempt from the final withholding tax under Sections 24(B)(1) and
25(A)(2) of the National Internal Revenue Code. However, when it is preterminated by the
individual investor, graduated rates of 5%, 12%, or 20%, depending on the remaining maturity of
the instrument, will apply on the entire income, to be deducted and withheld by the depository
bank.
The reckoning of the phrase "20 or more lenders" should be at the time when petitioner-
intervenor RCBC Capital sold the PEACe bonds to investors. Should the number of investors to
whom petitioner-intervenor RCBC Capital distributed the PEACe bonds, therefore, be found to
be 20 or more, the PEACe Bonds are considered deposit substitutes subject to the 20% final
withholding tax. Petitioner-intervenors RCBC/CODE-NGO and RCBC Capital, as well as the
final bondholders who have recourse to government upon maturity, are liable to pay the 20%
final withholding tax.
Page 18 of 54
TOPIC: Deposit Substitutes
TITLE: BDO vs. Republic; GR no. 198756; January 13, 2015
DOCTRINE:
Deposit substitutes shall mean an alternative form of obtaining funds from the public (the term
'public' means borrowing from twenty (20) or more individual or corporate lenders at any one
time) other than deposits, through the issuance, endorsement, or acceptance of debt instruments
for the borrower’s own account, for the purpose of relending or purchasing of receivables and
other obligations, or financing their own needs or the needs of their agent or dealer.
FACTS:
On October 7, 2011, the Commissioner of Internal Revenue issued 2011 BIR Ruling declaring
that the PEACe Bonds being deposit substitutes are subject to the 20% final withholding tax.
CODE-NGO, with assistance of its financial advisors, requested an approval from the DOF for
the issuance of 10-year zero-coupon treasury certificates. The T-notes would initially be
purchased by special purpose vehicle on behalf of CODE-NGO, repacked and sold at a premium
to investors as the PEACe bonds. Prior to the proposal of CODE-NGO, other proposals of the
issuance of zero-coupon bonds were also presented by banks and financial institutions.
ISSUE:
Whether or not PEACe bonds are deposit substitutes and thus subject to 20% final withholding
tax under the 1997 National Internal Revenue Code.
RULING:
The term ‘deposit substitutes’ shall mean an alternative form of obtaining funds from the public
(the term 'public' means borrowing from twenty (20) or more individual or corporate lenders at
any one time) other than deposits, through the issuance, endorsement, or acceptance of debt
instruments for the borrower’s own account, for the purpose of relending or purchasing of
receivables and other obligations, or financing their own needs or the needs of their agent or
dealer. Hence, the number of lenders is determinative of whether a debt instrument should be
considered a deposit substitute and consequently subject to the 20% final withholding tax.
Page 19 of 54
TOPIC: Nature of bank deposits; legal compensation; Unauthorized payment of checks
TITLE: Areza vs. Express Savings Bank; GR NO. 176697; September 10, 2014
DOCTRINE:
Article 1980 of the New Civil Code provides that fixed, savings and current deposits of money in
banks and similar institutions shall be governed by the provisions concerning simple loans. The
bank is the debtor and the depositor is the creditor. The depositor lends the bank money and the
bank agrees to pay the depositor on demand. The savings deposit agreement between the bank
and the depositor is the contract that determines the rights and obligations of the parties.
FACTS:
Petitioners Cesar V. Areza and Lolita B. Areza maintained two bank deposits with respondent
Express Savings Bank’s Biñan branch. They were engaged in the business of "buy and sell" of
brand new and second-hand motor vehicles. On 2 May 2000, they received an order from a
certain Gerry Mambuay for the purchase of a second-hand Mitsubishi Pajero and a brand-new
Honda CRV. The buyer, Mambuay, paid petitioners with nine (9) Philippine Veterans Affairs
Office (PVAO) checks payable to different payees and drawn against the Philippine Veterans
Bank.
Petitioners deposited the said checks in their savings account with the Bank. The Bank, inturn,
deposited the checks with its depositary bank, Equitable-PCI Bank, in Biñan,Laguna. Equitable-
PCI Bank presented the checks to the drawee, the Philippine Veterans Bank, which honored the
checks. Potenciano informed petitioners that the checks they deposited with the Bank
werehonored. He allegedly warned petitioners that the clearing of the checks pertained only to
the availability of funds and did not mean that the checks were not infirmed.
ISSUE:
Whether or not the Bank cannot be considered as a creditor of the petitioners.
RULING:
A depositary bank is the first bank to take an item even though it is also the payor bank, unless
the item is presented for immediate payment over the counter. It is also the bank to which a
check is transferred for deposit in an account at such bank, even if the check is physically
received and indorsed first by another bank. A collecting bank is defined as any bank handling
an item for collection except the bank on which the check is drawn.
As collecting banks, the Bank and Equitable-PCI Bank are both liable for the amount of the
materially altered checks. Since Equitable-PCI Bank is not a party to this case and the Bank
allowed its account with EquitablePCI Bank to be debited, it has the option toseek recourse
against the latter in another forum.
It is well-settled that the relationship of the depositors and the Bank or similar institution is that
of creditor-debtor. Article 1980 of the New Civil Code provides that fixed, savings and current
deposits of money in banks and similar institutions shall be governed by the provisions
concerning simple loans. The bank is the debtor and the depositor is the creditor.
Petitioners are not liable for the deposit of the altered checks. The Bank, asthe depositary and
collecting bank ultimately bears the loss. Thus, there being no indebtedness to the Bank on the
part of petitioners, legal compensation cannot take place.
Page 20 of 54
Page 21 of 54
TOPIC: Legal compensation
TITLE: Citibank, N.A. vs. Sabeniano; GR NO. 156132; February 6, 2007
DOCTRINE:
It is true that the afore-quoted Section 20 of the General Banking Law of 2000 expressly states
that the bank and its branches shall be treated as one unit. It should be pointed out, however, that
the said provision applies to a universal or commercial bank, duly established and organized as a
Philippine corporation in accordance with Section of the same statute, and authorized to establish
branches within or outside the Philippines.
FACTS:
Respondent was a client of petitioners. She had several deposits and market placements with
petitioners. These are her savings account with the local branch of petitioner Citibank (Citibank-
Manila); money market placements with petitioner FNCB Finance; and dollar accounts with the
Geneva branch of petitioner Citibank (Citibank-Geneva). At the same time, respondent had
outstanding loans with petitioner Citibank, incurred at Citibank-Manila, the principal amounts
aggregating to ₱1,920,000.00, all of which had become due and demandable by May 1979.
Despite repeated demands by petitioner Citibank, respondent failed to pay her outstanding loans.
Thus, petitioner Citibank used respondent’s deposits and money market placements to off-set
and liquidate her outstanding obligations.
Respondent, however, denied having any outstanding loans with petitioner Citibank. She
likewise denied that she was duly informed of the off-setting or compensation thereof made by
petitioner Citibank using her deposits and money market placements with petitioners.
ISSUE:
Whether or not Citibank may set off deposits to cover the obligation.
RULING:
No. It is true that the afore-quoted Section 20 of the General Banking Law of 2000 expressly
states that the bank and its branches shall be treated as one unit. It should be pointed out,
however, that the said provision applies to a universal or commercial bank, duly established and
organized as a Philippine corporation in accordance with Section of the same statute, and
authorized to establish branches within or outside the Philippines. The General Banking Law of
2000, however, does not make the same categorical statement as regards to foreign banks and
their branches in the Philippines.
The Supreme Court maintained that the off-setting or compensation of respondent’s loans with
Citibank-Manila using her dollar accounts with Citibank-Geneva cannot be effected. The parties
cannot be considered principal creditor of the other. As for the dollar accounts, respondent was
the creditor and Citibank-Geneva was the debtor; and as for the outstanding loans, petitioner
Citibank, particularly Citibank-Manila, was the creditor and respondent was the debtor.
Page 22 of 54
TOPIC: Nature of Bank Deposits
TITLE: Guigona vs. City of Manila; GR NO. L-60033; April 4, 1984
DOCTRINE:
Bank deposits are in the nature of irregular deposits. They are really 'loans because they earn
interest. All kinds of bank deposits, whether fixed, savings, or current are to be treated as loans
and are to be covered by the law on loans. Current and saving deposits, are loans to a bank
because it can use the same.
FACTS:
David alleged that he was convinced by an Australian National to invest several deposits with
the Nation Savings and Loan Association. On 1981, NSLA was placed under receivership but the
Central Bank. Therefore, David filed claims for his and his sister’s investments. On June 1981,
Guingona and Martin assumed the bank’s obligation to David by executing a joint promissory
note and subsequently receive a report that only a portion of his investments was entered.
ISSUE:
Whether or not the investment of David is considered as a bank deposit.
RULING:
Yes. It must be pointed out that when private respondent David invested his money on nine. and
savings deposits with the aforesaid bank, the contract that was perfected was a contract of simple
loan or mutuum and not a contract of deposit.
Bank deposits are in the nature of irregular deposits. They are really 'loans because they earn
interest. All kinds of bank deposits, whether fixed, savings, or current are to be treated as loans
and are to be covered by the law on loans. Current and saving deposits, are loans to a bank
because it can use the same.
Hence, the relationship between the private respondent and the Nation Savings and Loan
Association is that of creditor and debtor; consequently, the ownership of the amount deposited
was transmitted to the Bank upon the perfection of the contract and it can make use of the
amount deposited for its banking operations, such as to pay interests on deposits and to pay
withdrawals. While the Bank has the obligation to return the amount deposited, it has, however,
no obligation to return or deliver the same money that was deposited.
Page 23 of 54
TITLE: Central Bank vs. Citytrust Banking; GR NO. 141835; February 4, 2009
DOCTRINE:
The Contract of the bank and the depositor shall be governed by the provisions of simple loan.
There is a debtor-creditor relationship between the bank and the depositor.
FACTS:
The respondent gave the petitioner a list of signatures of its officers who were authorized to sign
checks and serve as drawers and endorsers for its account. Flores presented two checks to the
Central Bank’s senior teller and was subsequently approved. Instead of signing his own, he
signed as one Rosauro Cayabyab, and this fact was missed by Dela Cruz (petitioner). It was
given to the Cash Department and the signatures were examined and paid to Flores.
Subsequently, Citibank demanded that the checks be cancelled and the funds be taken out to be
returned because the check was stolen before.
ISSUE:
Whether or not the nature of the transaction is a simple loan.
RULING:
Yes. The Contract of the bank and the depositor shall be governed by the provisions of simple
loan. There is a debtor-creditor relationship between the bank and the depositor. In line with this
principle, the Supreme Court deemed it proper to allocate the loss between the parties. The
depositor lends the bank money and the bank agrees to pay the depositor on demand. The
savings deposit agreement between the bank and the depositor is the contract that determines the
rights and obligations of the parties.
Page 24 of 54
TITLE: Allied Banking Corporation vs. Lim Sio Wan
DOCTRINE:
The relationship between the bank and a client is one of a debtor and a creditor. Fixed, savings,
and current deposits of money in banks and similar financial institutions are to be governed by
the provisions concerning simple loan.
FACTS:
Filipinas Cement Corporation had deposited a money market placement for respondent
Producers Bank which was received, acknowledged, and demanded for payment of proceeds in
the same day. Thereafter, Lim Sio Wan deposited with herein petitioner Allied Banking Corp. a
money market placement for a 31-day term, when a person claiming to be Lim Sio Wan
instructed allied to issue a managers cheque representing the proceeds and give it to one Deborah
Dee Santos. The said check was deposited to FCC’s account at Metropolitan Bank and Trust Co.
with the forged signature of Lim Sio Wan as indorser.
ISSUE:
Whether or not Allied bank should be solidarily liable with Metrobank for damages being caused
to Lim Sio Wan.
RULING:
Yes. Allied bank is concurrently liable with Metrobank and Producer’s bank for the damages
produced to Lim Sio Wan. A person who receives a loan of money or any other fungible thing
acquires the ownership thereof, and is bound to pay the creditor an equal amount of the same
kind and quality. When Metrobank indorsed the check in compliance with the PCHC Rules and
Regulations without verifying the authenticity of Lim Sio Wan’s indorsement and when it
accepted the check despite the fact that it was cross-checked payable to payee’s account only, its
negligent and cavalier indorsement contributed to the easier release of Lim Sio Wan’s money
and perpetuation of the fraud.
The relationship between the bank and a client is one of a debtor and a creditor. Fixed, savings,
and current deposits of money in banks and similar financial institutions are to be governed by
the provisions concerning simple loan.
Page 25 of 54
TOPIC: Certificate of Deposit
TITLE: Far East Bank vs. Querimit; GR NO. 148582;Januray 16, 2002
DOCTRINE:
A certificate of deposit is defined as a written acknowledgment by a bank or banker of the
receipt of a sum of money on deposit which the bank or banker promises to pay to the depositor,
to the order of the depositor, or to some other person or his order, whereby the relation of debtor
and creditor between the bank and the depositor is created.
FACTS:
Respondent, an internal auditor of the Philippine Savings Bank, opened a dollar savings account
in petitioner’s bank in Harrison Plaza. She was issued 4 Certificates of Deposit. The certificates
bore the word “accrued” which meant that if they were not presented for encashment or pre-
terminated prior to maturity, the money deposited with accrued interest would be rolled over by
the bank and annual interest would accumulate automatically. Eventually, her husband whom she
accompanied to the US for medical treatment died and upon returning to the Philippines, she
went to petitioner FEBTC to withdraw her deposit but, to her dismay, she was told that her
husband had withdrawn the money in deposit.
ISSUE:
Whether or not the subject certificates of deposit have already been paid by the petitioner.
RULING:
No. A certificate of deposit is defined as a written acknowledgment by a bank or banker of the

receipt of a sum of money on deposit which the bank or banker promises to pay to the depositor,
to the order of the depositor, or to some other person or his order, whereby the relation of debtor
and creditor between the bank and the depositor is created.
In the case at bar, certificates are marked as payable to bearer which clearly connotes that before
the deposit be payable, the certificates must be in the possession of the bearer.
Page 26 of 54
TOPIC: Certificate of Deposits
TITLE: BPI vs. Fernandez; GR NO. 173134; September 2, 2015
DOCTRINE:
The certificates of deposit contain provisions on the amount of interest, period of maturity, and
stressed that endorsement and presentation of the certificate of deposit is indispensable to their
termination. In other words, the accounts may only be terminated upon endorsement and
presentation of the certificates of deposit.
FACTS:
The controversy arose when respondent claimed that BPI release her proportionate share from
four joint accounts to her estranged husband. Without presentation of the certificate of deposits.
In her complaint, respondent alleged that BPI’s payment to Manuel of the pre-terminated
deposits were invalid and BPI was in bad faith for allowing the pretermination of the time
deposits based on Manuel’s affidavit of loss when the bank has actual knowledge that the
certificates of deposit were in her possession.
ISSUE:
Whether or not BPI breach its obligation under the certificates of deposit.
RULING:
Yes. The accounts may only be terminated upon endorsement and presentation of the certificates
of deposit. Thus, BPI may only terminate the certificates of deposit after it has diligently
completed and ensure d the identity of the account holder and demand the surrender of the
certificates of deposit. In the case at bar, BPI substantially breached its obligations to the expense
of respondent because it allowed the termination of the accounts without demanding the
surrender of the certificates of deposit.
Page 27 of 54
TOPIC: In Trust for Account
TITLE: Goyanko vs UCPB; GR NO. 179096; February 06, 2013
DOCTRINE:
Intention to create an express trust must be firmly established; merely designating a bank account
as an “ITF” (In Trust For) account is not sufficient to establish an express trust.
FACTS:
The late Joseph Goyanko, Sr. invested Two Million Pesos (P2,000,000.00) with Philippine Asia
Lending Investors, Inc. (PALII). After his death, both the petitioner Goyanko Jr. (son) and
Goyanko Sr.’s illegitimate family filed a claim as well over the investment to PALII. Pending the
investigation of the conflicting claims, PALII deposited the proceeds of the investment with
UCPB on October 29, 1996 under the name "Phil Asia: ITF (In Trust For) The Heirs of Joseph
Goyanko, Sr." (ACCOUNT). Thereafter, UCPB allowed PALII to withdraw P1.5M under that
account. When the heirs were about to claim the proceeds of the investment, UCPB refused to
restore the amount to the petitioner.
ISSUE:
Whether or not a trust agreement occurred between UCPB and PALII.
RULING:
No. In order for a trust to come into being, Article 1444 of the Civil Code must be satisfied.
From the facts, the Supreme Court found insufficiency since the following elements must exist:
1.) A competent trustor and trustee; 2.) an ascertainable trust res; and 3.) sufficiently certain
beneficiaries. There must also be some power of administration other than a mere duty to
perform a contract although the contract is for a third-party beneficiary.
Page 28 of 54
TOPIC: Certificate of Deposits
TITLE: Dominador Apique vs, Evangeline Fahnenstich; GR NO. 205705; August 5, 2015
DOCTRINE:
The common banking practice is that regardless of who puts the money into the account, each of
the named account holder has an undivided right to the entire balance, and any of them may
deposit and/or withdraw, partially or wholly, the funds without the need or consent of the other,
during their lifetime. Nevertheless, as between the account holders, their right against each other
may depend on what they have agreed upon, and the purpose for which the account was opened
and how it will be operated.
FACTS:
Evangeline, who was then in Germany, executed General and Special Powers of Attorney
constituting Dominador, her brother, as her attorney-in-fact to purchase real property for her, and
to manage or supervise her business affairs in the Philippines. As Evangeline was always in
Germany, she opened a joint savings account with Dominador at the PCI Bank, which later
became Equitable PCI Bank (EPCIB), and now Banco de Oro.
Dominador withdrew from the subject account and, thereafter, deposited the money to his own
savings account with the same bank. Evangeline learned of such withdrawal and likewise
discovered that Dominador had deposited the amount withdrawn to his own account with the
same bank and that he had withdrawn various amounts from the said account. Evangeline
demanded the return of the amount withdrawn from the joint account, but to no avail.
ISSUE:
Whether or not Evangeline is entitled to the return of the amount Dominador withdrew from
their joint savings account with EPCIB.
RULING:
Yes. Evangeline is entitled to the return of the said amount. The common banking practice is that
regardless of who puts the money into the account, each of the named account holder has an
undivided right to the entire balance, and any of them may deposit and/or withdraw, partially or
wholly, the funds without the need or consent of the other, during their lifetime. Nevertheless, as
between the account holders, their right against each other may depend on what they have agreed
upon, and the purpose for which the account was opened and how it will be operated. Here,
Dominador’s right to obtain funds from the subject account was conditioned on the necessity of
funds for Evangeline’s projects. Admittedly, at the time he withdrew the amount of P980,000.00
from the subject account, there was no project being undertaken for Evangeline.
Page 29 of 54
TOPIC: Joint Accoount
TITLE: In the Matter of the Intestate Estate of Rodriguez; G.R. No. 230404; January 31, 2018
DOCTRINE:
A joint account is one that is held jointly by two or more natural persons, or by two or more
juridical persons or entities. Under such setup, the depositors are joint owners or co-owners of
the said account, and their share in the deposits shall be presumed equal, unless the contrary is
proved. The nature of joint accounts is governed by the rule on co-ownership embodied in
Article 485 of the Civil Code.
FACTS:
Reynaldo and Ester left several properties to their surviving children. On the other hand, Anita is
a co-depositor in a Joint Account under the name Anita Ong Tan and Reynaldo in BPI. When
Reynaldo passed away, said joint account continued to be in active status. BPI informed Anita
that her joint account with Reynaldo would become dormant if no transaction will be made.
Anita decided to withdraw her funds. BPI, however, required her to submit requirements, one of
which is the extrajudicial settlement of the heirs of Reynaldo. To comply, Anita approached
respondents and asked them to sign a waiver of rights. Respondents refused to sign the waiver.
Respondents then submitted documents to BPI for the release of half of the funds deposited in
said joint account. BPI withheld the release of the funds because of the conflicting claims.
ISSUE:
Whether or not the relationship of the two depositors is that of a co-owner.
RULING:
Yes. A joint account is one that is held jointly by two or more natural persons, or by two or more
juridical persons or entities. Under such setup, the depositors are joint owners or co-owners of
the said account, and their share in the deposits shall be presumed equal, unless the contrary is
proved. The nature of joint accounts is governed by the rule on co-ownership embodied in
Article 485 of the Civil Code. However, evidence presented, the mere fact that the account is
joint is not conclusive of the fact that the owners thereof have equal claims over the funds in
question. In this case, Anita sufficiently proved that she owns the funds in the BPI Joint Account
exclusively.
Page 30 of 54
TOPIC: Survivorship Agreement
TITLE: Romarico Vitug vs. Court of Appeals; GR NO. 82027; March 29, 1990
DOCTRINE:
Survivorship Agreement is neither a donation mortis causa nor a donation inter vivos.
FACTS:
Spouses Dolores and Romarico Vitug entered into a survivorship agreement with the Bank
of American National Trust and Savings Association. Dolores died naming Rowena Corona in
her wills as executrix, however, Romarico later filed a motion asking authority to sell certain
shares of stock and real property belonging to the estate to cover his advances to the estate which
he claimed were personal funds withdrawn from their savings account. Rowena opposed on the
ground that the same funds withdrawn from the savings account were conjugal partnership
properties and part of the estate.
ISSUE:
Whether or not funds of the savings account subject of the survivorship agreement
were conjugal partnership properties and part of the estate.
RULING:
No. The Supreme Court ruled that a survivorship agreement is neither a donation mortis causa or
a donation inter vivos. There is no showing that the funds exclusively belonged to one party, and
hence it must be presumed to be conjugal, having been acquired during the existence of the
marital relations.
Under the Article 2010, NCC, the fulfillment of an aleatory contract depends on either the
happening of an event which is (1) "uncertain," (2) "which is to occur at an indeterminate time."
A survivorship agreement, the sale of a sweepstake ticket, a transaction stipulating on the value
of currency, and insurance have been held to fall under the first category, while a contract for life
annuity or pension under Article 2021, et sequentia, has been categorized under the second.
Page 31 of 54
TOPIC: Unauthorized payments of Checks
TITLE: BDO Unibank vs. Selwyn Lao; GR NO. 227005; June 19, 2017
DOCTRINE:
The certificates of deposit contain provisions on the amount of interest, period of maturity, and
stressed that endorsement and presentation of the certificate of deposit is indispensable to their
termination. In other words, the accounts may only be terminated upon endorsement and
presentation of the certificates of deposit.
FACTS:
In his complaint, Lao alleged that he entered into a transaction with Everlink, through its
authorized representative Wu, under which, Everlink would supply him with "HCG sanitary
wares". For the down payment, he issued two (2) Equitable crossed checks payable to Everlink.
Lao further averred that when the checks were encashed, he contacted Everlink for the
immediate delivery of the sanitary wares, but the latter failed to perform its obligation. Later,
Lao learned that the checks were deposited in two different bank accounts at respondent
International Exchange Bank, now respondent Union Bank of the Philippines. He was later
informed that the two bank accounts belonged to Wu and a company named New Wave Plastic
ISSUE:
Whether or not BDO should be held liable for allowing encashments of two (2) checks not the
payee stated in the checks.
RULING:
Yes. The Supreme Court agreed with the appellate court that in cases of unauthorized payment of
checks to a person other than the payee named therein, the drawee bank may be held liable to the
drawer. The drawee bank, in turn, may seek reimbursement from the collecting bank for the
amount of the check.
It has been repeatedly held that in check transactions, the collecting bank generally suffers the
loss because it has the duty to ascertain the genuineness of all prior endorsements considering
that the act of presenting the check for payment to the drawee is an assertion that the party
making the presentment has done its duty to ascertain the genuineness of the endorsements.
In the present case, BDO paid the value of Check to Union Bank, which, in turn, credited the
amount to New Wave's account. The payment by BDO was in violation of Lao's instruction
because the same was not issued in favor of Everlink, the payee named in the check.
Page 32 of 54
TOPIC: Stipulations on Interest
TITLE: Dario Nacar vs. Gallery Frames; GR NO. 189871; August 13, 2013
DOCTRINE:
When the judgment of the court awarding a sum of money becomes final and executory, the rate
of legal interest shall be 6% per annum from such finality until its satisfaction, this interim
period being deemed to be by then an equivalent to a forbearance of credit.
FACTS:
Petitioner Dario Nacar filed a complaint for constructive dismissal before the Arbitration Branch
of the National Labor Relations Commission (NLRC) against respondents Gallery Frames (GF)
and/or Felipe Bordey, Jr. Labor Arbiter rendered a Decision3 in favor of petitioner and found
that he was dismissed from employment without a valid or just cause. Thus, petitioner was
awarded backwages and separation pay in lieu of reinstatement.
Petitioner argued that notwithstanding the fact that there was a computation of backwages in the
Labor Arbiter’s decision, the same is not final until reinstatement is made or until finality of the
decision, in case of an award of separation pay.
ISSUE:
Whether or not the petitioner is entitled to the payment of interest.
RULING:
Yes. It should be noted, nonetheless, that the new rate could only be applied prospectively and
not retroactively. Consequently, the twelve percent (12%) per annum legal interest shall apply
only until June 30, 2013. Come July 1, 2013 the new rate of six percent (6%) per annum shall be
the prevailing rate of interest when applicable.
When the judgment of the court awarding a sum of money becomes final and executory, the rate
of legal interest shall be 6% per annum from such finality until its satisfaction, this interim
period being deemed to be by then an equivalent to a forbearance of credit.
Page 33 of 54
TOPIC: Interest Rate Stipulation
TITLE: Macalinao vs. BPI; GR NO.175490; September 17, 2009
DOCTRINE:
In a plethora of cases that stipulated interest rates of 3% per month and higher are excessive. The
suspension of Usury law does is not carte blanche authority to lenders to raise interest rates to
levels which would either enslave their borrowers.
FACTS:
Petitioner Ileana Macalinao was an approved cardholder of BPI Mastercard, one of the credit
card facilities of respondent Bank of the Philippine Islands (BPI). Petitioner Macalinao made
some purchases through the use of the said credit card and defaulted in paying for said
purchases. She subsequently received a letter dated January 5, 2004 from respondent BPI,
demanding payment.
Under the Terms and Conditions Governing the Issuance and Use of the BPI Credit and BPI
Mastercard, the charges or balance thereof remaining unpaid after the payment due date
indicated on the monthly Statement of Accounts shall bear interest at the rate of 3% per month
and an additional penalty fee equivalent to another 3% per month.
ISSUE:
Whether or not the interest rate stipulated is unconscionable.
RULING:
Yes. Indeed, in the Terms and Conditions Governing the Issuance and Use of the BPI Credit
Card, there was a stipulation on the 3% interest rate. Nevertheless, it should be noted that this is
not the first time that this Court has considered the interest rate of 36% per annum as excessive
and unconscionable. Since the stipulation on the interest rate is void, it is as if there was no
express contract thereon. Hence, courts may reduce the interest rate as reason and equity
demand.
In the instant case, the records would reveal that petitioner Macalinao made partial payments to
respondent BPI, as indicated in her Billing Statements. Further, the stipulated penalty charge of
3% per month or 36% per annum, in addition to regular interests, is indeed iniquitous and
unconscionable.
Page 34 of 54
TITLE: Philippine National Bank v. Manalo; GR NO. 174433; February 24, 2014
DOCTRINE:
Although banks are free to determine the rate of interest they could impose on their borrowers,
they can do so only reasonably. Hence, any stipulation on interest unilaterally imposed and
increased by them shall be struck down as violative of the principle of mutuality of contracts.
FACTS:
Respondent Spouses Enrique Manalo and Rosalinda Jacinto applied for an All-Purpose Credit
Facility in the amount of ₱1,000,000.00 with Philippine National Bank (PNB) to finance the
construction of their house. After PNB granted their application, they executed a Real Estate
Mortgage on November 3, 1993 in favor of PNB over their property.
It was agreed upon that the Spouses Manalo would make monthly payments on the interest.
However, PNB claimed that their last recorded payment was made on December, 1997. Thus,
PNB sent a demand letter to them on their overdue account and required them to settle the
account. PNB sent another demand letter because they failed to heed the first demand. After the
Spouses Manalo still failed to settle their unpaid account despite the two demand letters, PNB
foreclose the mortgage. During the foreclosure sale, PNB was the highest bidder.
ISSUE:
Whether or not the imposition of interest rates on the respondent spouses’ loan was not valid
because there was no mutuality of consent.
RULING:
Yes. The credit agreement executed succinctly stipulated that the loan would be subjected to
interest at a rate "determined by the Bank to be its prime rate plus applicable spread, prevailing
at the current month." This stipulation was carried over to or adopted by the subsequent renewals
of the credit agreement. PNB thereby arrogated unto itself the sole prerogative to determine and
increase the interest rates imposed on the Spouses Manalo. Such a unilateral determination of the
interest rates contravened the principle of mutuality of contracts embodied in Article 1308 of the
Civil Code.
The Court has declared that a contract where there is no mutuality between the parties partakes
of the nature of a contract of adhesion, and any obscurity will be construed against the party who
prepared the contract, the latter being presumed the stronger party to the agreement, and who
caused the obscurity.
Page 35 of 54
TITLE: Cabanting vs. BPI Family Savings Bank; GR NO. 201927; February 17, 2016
DOCTRINE:
Rates found to be iniquitous or unconscionable are void, as if it there were no express contract
thereon. Above all, it is undoubtedly against public policy to charge excessively for the use of
money.
FACTS:
Petitioners bought on installment basis from Diamond Motors Corporation a 2002 Mitsubishi
Adventure SS MT and for value received, petitioners also signed, executed and delivered to
Diamond Motors a Promissory Note with Chattel Mortgage. Petitioners jointly and severally
obligated themselves to pay Diamond Motors the sum, payable in monthly installments in
accordance with the schedule of payment indicated therein, and which obligation is secured by a
chattel mortgage on the aforementioned motor vehicle. On the day of the execution of the
document, Diamond Motors, with notice to petitioners, executed a Deed of Assignment, thereby
assigning to BPI Family Savings Bank, Inc. (BPI Family) all its rights, title and interest to the
Promissory Note with Chattel Mortgage.
ISSUE:
Whether or not the Court of Appeals is correct in lowering the interest rate.
RULING:
Yes. The Court ruled that "the interest ranging from 26 percent to 35 percent in the statements of
account - 'must be equitably reduced for being iniquitous, unconscionable and exorbitant.' Rates
found to be iniquitous or unconscionable are void, as if it there were no express contract thereon.
Above all, it is undoubtedly against public policy to charge excessively for the use of money.
Thus, legal interest, effective July 1, 2013, was set at six percent (6%) per annum in accordance
with Bangko Sentral ng Pilipinas - Monetary Board Circular No. 799, Series of 2013.
Page 36 of 54
TITLE: Louh vs. Bank of the Philippines; GR NO. 225562; March 8, 2017
DOCTRINE:
The stipulated penalty charge of 31% per month or 36% per annum, in addition to regular
interests, is indeed iniquitous and unconscionable.
FACTS:
The herein respondent, Bank of the Philippine Islands (BPI), issued a credit card in William's
name, with Irene as the extension card holder. Pursuant to the terms and conditions of the cards'
issuance, 3.5% finance charge and 6% late payment charge shall be imposed monthly upon
unpaid credit availments.
The Spouses Louh made purchases from the use of the credit cards and paid regularly based on
the amounts indicated in the Statement of Accounts (SOAs). However, they were remiss in their
obligations.
ISSUE:
Whether or not the 3.5% interest imposed by BPI is valid.
RULING:
No. The stipulated penalty charge of 31% per month or 36% per annum, in addition to regular
interests, is indeed iniquitous and unconscionable. In the case at bench, BPI imposed a
cumulative annual interest of 114%, plus 25% of the amount due as attorney's fees. Inevitably,
the RTC and the CA aptly reduced the charges imposed by BPI upon the Spouses Louh.
Since the stipulation on the interest rate is void, it is as if there was no express contract thereon.
Hence, courts may reduce the interest rate as reason and equity demand.
Page 37 of 54
TITLE: Catalina Isla vs. Genevira Estorga; GR NO. 233974; July 2, 2018
DOCTRINE:
The stipulated penalty charge of 31% per month or 36% per annum, in addition to regular
interests, is indeed iniquitous and unconscionable.
FACTS:
Petitioners obtained a loan from respondent, payable anytime from six (6) months to one (1) year
and subject to interest at the rate of ten percent (10%) per month, payable on or before the end of
each month. As security, a real estate mortgage was constituted over a parcel of land. When
petitioners failed to pay the said loan, respondent sought assistance from the barangay, and
consequently, a Kasulatan ng Pautang dated December 8, 2005 was executed. Petitioners,
however, failed to comply with its terms, prompting respondent to send a demand letter8 dated
November 16, 2006.
Petitioners maintained that the subject mortgage was not a real estate mortgage but a mere loan,
and that the stipulated interest of ten percent (10%) per month was exorbitant and grossly
unconscionable.
ISSUE:
Whether or not the CA erred in awarding the twelve percent interest on the Principal obligation
until full payment.
RULING:
Yes. Anent monetary interest, the parties are free to stipulate their preferred rate. However,
courts are allowed to equitably temper interest rates that are found to be excessive, iniquitous,
unconscionable, and/or exorbitant. In such instances, it is well to clarify that only the
unconscionable interest rate is nullified and deemed not written in the contract; whereas the
parties' agreement on the payment of interest on the principal loan obligation subsists.
In this case, petitioners and respondent entered into a loan obligation and clearly stipulated for
the payment of monetary interest. However, the stipulated interest of ten percent (10%) per
month was found to be unconscionable, and thus, the courts a quo struck down the same and
pegged a new monetary interest of twelve percent (12%) per annum.
Page 38 of 54
TOPIC: DOSRI loans
TITLE: Soriano vs. People; GR NO. 162336; February 1, 2010
DOCTRINE:
A bank officer violates the DOSRI law when he acquires bank funds for his personal benefit,
even if such acquisition was facilitated by a fraudulent loan application. Directors, officers,
stockholders, and their related interests cannot be allowed to interpose the fraudulent nature of
the loan as a defense to escape culpability for their circumvention of Section 83 of Republic Act
(RA) No. 337.
FACTS:
The BSP transmitted a letter to the DOJ where five affidavits were attached. The affidavit would
allegedly serve as bases for filing criminal charges for Estafa thru Falsification of Commercial
Documents and violation of RA 337. It was alleged that the spouses Carlos appeared to have an
outstanding loan with Rural Bank of San Miguel but never applied nor received such loan. It was
the petitioner who had ordered, facilitated, and received proceeds of the loan. The ₱8 million
loan had never been authorized by RBSM's Board of Directors and no report thereof had ever
been submitted to the Department of Rural Banks, Supervision and Examination Sector of the
BSP.
ISSUE:
Whether or not a loan transaction within the ambit of the DOSRI law (violation of Section 83 of
RA 337, as amended) could also be the subject of Estafa under Article 315 (1) (b) of the Revised
Penal Code.
RULING:
Yes. The prohibition in Section 83 is broad enough to cover various modes of borrowing. 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 foregoing information describes the manner of securing the loan as indirect; names
petitioner as the benefactor of the indirect loan; and states that the requirements of the law were
not complied with. It contains all the required elements for a violation of Section 83, even if
petitioner did not secure the loan in his own name. Therefore, the information filed against the
petitioner does not negate each other.
Page 39 of 54
TOPIC: DOSRI loans
TITLE: Jose Go vs. Bangko Sentral ng Pilipinas; GR NO. 178429; October 23, 2009
DOCTRINE:
The prohibition is directed against a bank director or officer who becomes in any manner an
obligor for money borrowed from or loaned by the bank without the written approval of the
majority of the bank’s board of directors.
FACTS:
On August 20, 1999, an Information for violation of Section 83 of Republic Act No. 337 (RA
337) or the General Banking Act, as amended by Presidential Decree No. 1795, was filed against
Go before the RTC. Go claimed that the Information was defective, as the facts charged therein
do not constitute an offense under Section 83 of RA 337. Go claimed that credit accommodations
by banks to their directors and officers are legal and valid, provided that these are limited to their
outstanding deposits and book value of the paid-in capital contribution in the bank. The failure to
state that he borrowed deposits and/or guaranteed loans beyond this limit rendered the
Information defective.
ISSUE:
Whether or not there is a violation of RA 337.
RULING:
Yes. The following elements must be present to constitute a violation: (1.) the offender is a
director or officer of any banking institution; (2.) the offender, either directly or indirectly, for
himself or as 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; (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.
The prohibition is directed against a bank director or officer who becomes in any manner an
obligor for money borrowed from or loaned by the bank without the written approval of the
majority of the bank’s board of directors. To make a distinction between the act of borrowing
and guarantying is therefore unnecessary because in either situation, the director or officer
concerned becomes an obligor of the bank against whom the obligation is juridically
demandable.
Page 40 of 54
TOPIC: DOSRI loans
TITLE: Republic vs. Sandiganbayan; GR NO. 166859; April 12, 2011
DOCTRINE:
The bank or the officers responsible for the approval and grant of the DOSRI loan would be
subject only to sanctions under the law.
FACTS:
The Republic commenced Civil Case in the Sandiganbayan by complaint, impleading as

defendants-respondent Cojuangco and 59 individual defendants. For over two decades, the issue
of whether the sequestered sizable block of shares representing 20% of the outstanding capital
stock of San Miguel Corporation (SMC) at the time of acquisition belonged to their registered
owners or to the coconut farmers has remained unresolved.
During the pendency of the Republic's motion for execution, Cojuangco, et al. filed a Motion for
Authority to Sell San Miguel Corporation (SMC) shares, praying for leave to allow the sale of
SMC shares to proceed, exempted from the conditions.
The Republic suggested that Cojuangco had been enabled to obtain the loans buy the issuance of
LOI 926 exempting the UCPB from the DOSRI and the Single Borrower’s Limit restrictions.
ISSUE:
Whether or not there is a violation of DOSRI law.
RULING:
No. The Republic failed to establish any evidence on the significant particulars of the supposed
loan. It did not also establish whether or not the loans were DOSRI or issued in violation of the
Single Borrower’s Limit. The Republic could not outrightly assume that President Marcos had
issued LOI 926 for the purpose of allowing the loans by the UCPB in favor of Cojuangco. There
must be competent evidence to that effect. And, finally, the loans, assuming that they were of a
DOSRI nature or without the benefit of the required approvals or in excess of the Single
Borrower's Limit, would not be void for that reason.
Page 41 of 54
TOPIC: Grant of Loans
TITLE: Hongkong Bank Independent Labor Union vs. Hongkong and Shanghai Banking
Corporation Limited; GR NO. 218390; February 28, 2018
DOCTRINE:
A bank shall grant loans or other credit accommodations only in amounts and for the periods of
time essential for the effective completion of the operation to be financed. Before granting loans
or other credit accommodations, a bank must ascertain that the borrower, co-maker, endorser,
surety, and/or guarantor, if applicable, is/are financially capable of fulfilling his/their
commitments to the bank.
FACTS:
Respondent submitted its Financial Assistance Plan (Plan) to the BSP for approval. The Plan
allegedly contained a credit checking proviso stating that “repayment defaults on existing loans
and adverse information on outside loans will be considered in the evaluation of loan
applications."
HBILU vigorously objected to the proposed amendments in the collective bargaining agreement,
claiming that their insertions would curtail its members' availment of salary loans.
HBILU member Vince Mananghaya applied for a loan under the provisions of Article XI of the
CBA. His first loan application in March 2012 was approved, but adverse findings from the
external checks on his credit background resulted in the denial of his September application..
ISSUE:
Whether or not Salary loans subject of this case are covered by the credit checking requirement
under the MORB.
RULING:
No. All loans or other credit accommodations to bank officers and employees, except those
granted under the fringe benefit program of the bank, shall be subject to the same terms and
conditions imposed on the regular lending operations of the bank.
HSBC, being a bank, is statutorily required to conduct a credit check on all of its borrowers, even
though it be made under a loan accommodation scheme, applying Section 40 of Republic Act
No. (RA) 8791 (General Banking Law of 2000). However, loan accommodations to employees
are not covered by said statute.
Furthermore, it is inaccurate to state that credit checking is necessary, or even indispensable, in

the grant of salary loans to the bank's employees, since the business of banking is imbued with
public interest and there is a fiduciary relationship between the depositor and the bank. It is also
incorrect to state that allowing bank employees to borrow funds from their employer via salary
loans without the prior conduct of a credit check is inconsistent with this fiduciary obligation.
Page 42 of 54
TOPIC: Redemption Period
TITLE: Goldenway Merchandising Corporation v. PCI Bank; GR NO. 195540; March 13, 2013
DOCTRINE:
Juridical persons whose property is being sold pursuant to an extrajudicial foreclosure, shall have
the right to redeem the property in accordance with this provision until, but not after, the
registration of the certificate of foreclosure sale with the applicable Register of Deeds which in
no case shall be more than three (3) months after foreclosure, whichever is earlier.
FACTS:
Goldenway Merchandising Corporation (petitioner) executed a Real Estate Mortgage in favor of

Equitable PCI Bank (respondent) over its real properties situated in Valenzuela, Bulacan. The
mortgage secured the Two Million Pesos (P2,000,000.00) loan granted by respondent to
petitioner and was duly registered.
As petitioner failed to settle its loan obligation, respondent extrajudicially foreclosed the
mortgage. It was sold on a public auction to respondent and was later issued a Certificate of Sale
which was later on annotated on the title.
Petitioner wished to redeem the property. However, they were told that it would not be possible
because the certificate of sale had already been registered. This prompt the petition to file a
complaint for specific performance and damages asserting that it is the one-year period of
redemption which should be applied and not the shorter redemption period.
ISSUE:
Whether or not the petitioner still has the right to redeem the property.
RULING:
No. Juridical persons whose property is being sold pursuant to an extrajudicial foreclosure, shall
have the right to redeem the property in accordance with this provision until, but not after, the
registration of the certificate of foreclosure sale with the applicable Register of Deeds which in
no case shall be more than three (3) months after foreclosure, whichever is earlier.
The new redemption period commences from the date of foreclosure sale, and expires upon
registration of the certificate of sale or three months after foreclosure, whichever is earlier. There
is likewise no retroactive application of the new redemption period because Section 47 exempts
from its operation those properties foreclosed prior to its effectivity and whose owners shall
retain their redemption rights under Act No. 3135.
Page 43 of 54
TITLE: White Marketing Development Corporation vs. Grandwood Furniture; GR NO. 222407;
November 23, 2016
DOCTRINE:
When a property of a juridical person is sold pursuant to an extrajudicial foreclosure, it shall

have the right to redeem the property until, but not after, the registration of the Certificate of
foreclosure sale with the applicable Register of Deeds which in no case shall be more than three
(3) months after foreclosure, whichever is earlier.
FACTS:
Respondent Grandwood Furniture & Woodwork, Inc. (Grandwood) obtained a loan in the
amount of P40,000,000.00 from Metropolitan Bank and Trust Company (Metrobank). The loan
was secured by a real estate mortgage over a parcel of land. After Grandwood failed to pay the
loan, the bank initiated extrajudicial foreclosure proceedings of the real estate mortgage. White
Marketing was declared the highest bidder and a certificate of sale was issued in its favor. Such
certificate of sale was registerers and annotated on the title. White Marketing received a letter
from the sheriff informing it that Grandwood intended to redeem the foreclosed property. In
response, White Marketing sent a letter informing the sheriff that Grandwood no longer had the
right to redeem.
ISSUE:
Whether or not the petitioner still has the right to redeem the property.
RULING:
No. The mortgage between Grandwood and Metrobank, as the original mortgagee, was subject to
the provisions of Section 47 of R.A. No. 8791. Section 47 provides that when a property of a
juridical person is sold pursuant to an extrajudicial foreclosure, it "shall have the right to redeem
the property in accordance with this provision until, but not after, the registration of the
Certificate of foreclosure sale with the applicable Register of Deeds which in no case shall be
more than three (3) months after foreclosure, whichever is earlier."
The Court found Grandwood’s redemption was made out of time as it was done after the
certificate of sale was made our of time as it was done after the certificate of sale was registered.
Pursuant to Section 47 of R.A. No. 8791, it only had three (3) months from foreclosure or before
the registration of the certificate of foreclosure sale, whichever came first, to redeem the property
sole in the extrajudicial sale.
Page 44 of 54
TITLE: Spouses Alan Limso vs. Philippine National Bank; GR NO. 158622; January 27, 2016
DOCTRINE:
Act No. 3135 provides that the period of redemption is one (1) year after the sale. On the other
hand, Republic Act No. 8791 provides a shorter period of three (3) months to redeem in cases
involving juridical persons.
FACTS:
Spouses Alan and Davao Investment and Development Corporation took out a loan secured by
real estate mortgages from Philippine National Bank. To secure the loan, real estate mortgages
were constituted over four (4) parcels of land. However, Spouses Limso sold the property to
Davao Investment. Spouses Limso and Davao Investment struggle in fulfilling their obligation.
They requested that their loan be restricted. The restricted loan was secured by the properties in
the original loan. Petitioners are still unable to pay, resulting to the filing of a Petition for
Estrajudicai Foreclosure of Real Estatge Mortgage. PNB was the highest bidder.
After the foreclosure sale, but before the Sheriff could issue the Provisional Certificate of Sale,
Spouses Limso and Davao Sunrise filed a Complaint for Reformation or Annulment of contract
against PNB. In view of the dissolution of the writ of preliminary injunction, the Sheriff’s
Provisional Certificate of Sale dated February 4, 2002 was issued. However, the Sheriff’s
Provisional Certificate of Sale did not state the applicable redemption period and the redemption
price payable by the mortgagor or redemptioner.
ISSUE:
Whether or not the redemption period is one (1) year under Act no. 3135.
RULING:
No. Act No. 3135 provides that the period of redemption is one (1) year after the sale. On the
other hand, Republic Act No. 8791 provides a shorter period of three (3) months to redeem in
cases involving juridical persons.
In the loan agreement, natural and juridical persons are co-debtors, while the properties
mortgaged to secure the loan are owned by Davao Sunrise. The Supreme Court ruled that the
period of redemption for this case should be not more than three (3) months in accordance with
Section 47 of Republic Act No. 8791. The mortgaged properties are all owned by Davao Sunrise.
The law itself provides that the right to redeem belongs to the owner of the property mortgaged.
As the mortgaged properties all belong to Davao Sunrise, the shorter period of three (3) months
is the applicable redemption period.
Page 45 of 54
TOPIC: Redemption Price
TITLE: Arnel Sy vs. Court of Appeals; GR NO. 83139; April 12, 1989
DOCTRINE:
The General Banking Act partakes of the nature of an amendment to Act No. 3135 insofar as the
redemption price is concerned, when the mortgagee is a bank or banking or credit institution,
Section 6 of Act No. 3135 being, in this respect, inconsistent with Section 78 of the General
Banking Act. Said Section 78 of the General Banking Act, as amended, provides the amount at
which the subject property is redeemable from mortgagee, which is, the amount due under the
mortgage deed, plus interest and expenses.
FACTS:
Carlos Coquinco executed in favor of private respondent State Investment House, Inc. a real
estate mortgage over a 952 square-meter parcel of land in San Juan, Metro-Manila, together with
all the improvements thereon. For failure of Carlos Coquinco to pay his outstanding balance, the
mortgaged property extrajudicially foreclosed by SIHI and was sold at public auction to SIHI as
the bidder. The certificate of sale in favor of SIHI was registered with the Registry of Deeds of
Pasig.
Before the expiration of the one-year redemption period, petitioner offered to redeem the
foreclosed property from SIHI by tendering to the latter two (2) manager’s checks issued by
SOLIDBANK, one for P760,000.00 representing the purchase price, and another for P91,200.00
representing interest at the rate of 1% per month for 12 months, totalling P851,200.00. SIHI
rejected this offer. Petitioner filed an action for consignation of the aforesaid amount with the
RTC, docketed as Civil Case No. 84-22839, to compel SIHI to accept the P851,200.00 as
payment of the redemption price for the foreclosed property, to order SIHI to surrender the title
over the property and to issue a certificate of redemption in favor of petitioner.
ISSUE:
Whether Act No. 3135, as amended, in relation to Section 30, Rule 39 of the Revised Rules of
Court, or Section 78 of Rep. Act No. 337 (General Banking Act), as amended by PD. No. 1828,
is the applicable law in determining the redemption price.
RULING:
No. It was settled that the General Banking Act partakes of the nature of an amendment to Act
No. 3135 insofar as the redemption price is concerned, when the mortgagee is a bank or banking
or credit institution, Section 6 of Act No. 3135 being, in this respect, inconsistent with Section 78
of the General Banking Act.
Thus, inasmuch as petitioner failed to tender and pay the required amount for the redemption of
the subject property pursuant to Section 78 of the General Banking Act, as amended, no valid
redemption was effected by him. Consequently, there was no legal obstacle to the consolidation
of title by SIHI.
Page 46 of 54
TOPIC: Redemption Price
TITLE: Union Bank of the Philippines vs. Court of Appeals; GR NO. 134068; June 25, 2001
DOCTRINE:
The General Banking Act partakes of the nature of an amendment to Act No. 3135 insofar as the
redemption price is concerned, when the mortgagee is a bank or banking or credit institution,
Section 6 of Act No. 3135 being, in this respect, inconsistent with Section 78 of the General
Banking Act. Said Section 78 of the General Banking Act, as amended, provides the amount at
which the subject property is redeemable from mortgagee, which is, the amount due under the
mortgage deed, plus interest and expenses.
FACTS:
Respondents-spouses Gonzalo and Trinidad Vincoy mortgaged their residence in favor of

petitioner to secure the payment of a loan to Delco Industries (Phils.), Incorporated 1 in the
amount of Two Million Pesos (P2,000,000.00). For failure of the respondents to pay the loan at
its date of maturity, petitioner extrajudicially foreclosed the mortgage and scheduled the
foreclosure sale on April 10, 1991.
Petitioner contended that the respondents had already lost their right to redeem the foreclosed
property when they failed to exercise their right of redemption by paying the redemption price
within the period provided for by law.
ISSUE:
Whether or not the contention of the petitioner is correct.
RULING:
Yes. Petitioner’s contention that Section 78 of the General Banking Act governs the
determination of the redemption price of the subject property is meritorious.
Pursuant to Section 78 of the General Banking Act, a mortgagor whose real property has been
sold at a public auction, judicially or extrajudicially, for the full or partial payment of an
obligation to any bank, shall have the right, within one year after the sale of the real estate to
redeem the property.
The one-year period is actually to be reckoned from the date of the registration of the sale. 22
Clearly therefore, respondents had only until May 8, 1992 to redeem the subject foreclosed
property. Their failure to exercise that right of redemption by paying the redemption price within
the period prescribed by law effectively divested them of said right.
In this case, during the one year redemption period, respondents failed to manifest their desire to
redeem the property but instead filed a complaint on the basis that the mortgage is null and void.
Page 47 of 54
TOPIC: Issuance of Credit Cards
TITLE: Bank of the Philippines Islands vs. Spouses Sarda; GR NO. 239092; June 26, 2019
DOCTRINE:
All credit card arrangements are simple loan arrangements between the card issuer and the card
holder. Simply put, every credit card transaction involves three contracts, namely: (a) the sales
contract between the credit card holder and the merchant or the business establishment which
accepted the credit card; (b) the loan agreement between the credit card issuer and the credit card
holder; and lastly, (c) the promise to pay between the credit card issuer and the merchant or
business establishment.
FACTS:
BPI filed a Complaint against spouses Ram M. Sarda and "Jane Doe" Sarda. BPI alleged that it
issued a credit card to Mr. Sarda under terms and conditions attached to the card upon its
delivery. Respondents availed of BPI's credit accommodations by using the said credit card and
thereafter incurred an outstanding obligation. Based on the bank's records, Mr. Sarda's last
payment prior to the cancellation of the BPI credit card was on March 15, 2013, as shown in the
March 20, 2013 statement of account. Despite demands for payment, Mr. Sarda refused to settle
the obligation.
BPI asserted that there was due diligence on its part, as required by law, as well as those of the
merchants/establishments where respondents utilized the credit cards.
ISSUE:
Whether or not Mr. Sarda should be held liable to pay the total amounts due under the principal
and supplementary credit cards issued by BPI.
RULING:
No. In relation to the duty imposed on banks to exercise a high degree of diligence in their
business transactions, the Bangko Sentral ng Pilipinas (BSP) issued Circular No. 702, Series of
2010 pursuant to Monetary Board Resolution No. 1728, dated December 2, 2010, which
amended the provisions of the Manual of Regulations for Banks (MORB) and the Manual of
Regulations for Non-Bank Financial Institutions (MORNBFI). Banks, quasi-banks and credit
card companies are now prohibited from issuing pre approved credit cards.
Presently, the governing law is R.A. No. 10870, otherwise known as the Philippine Credit Card
Industry Regulation Law. Before issuing credit cards, issuers are now mandated to conduct
"know-your-client" procedures and to exercise proper diligence in ascertaining that applicants
possess good credit standing and are financially capable of fulfilling their credit commitments.
In this case, the Court found that BPI failed to exercise proper diligence in the issuance of the
primary and supplementary cards and thus bear the resulting loss or damage caused by its own
acts and policies.
Page 48 of 54
TOPIC: Contracts involved in Credit Card
TITLE: Bankard, Inc. vs. Luz Alarte; GR NO. 202573; April 19, 2017
DOCTRINE:
FACTS:
In its Complaint, petitioner alleged that respondent applied for and was granted credit
accommodations under Bankard myDream JCB. Respondent, using the said Bankard myDream
JCB credit card, availed herself of credit accommodations by "purchasing various products".
Respondent's credit availments amounted to a total of P67,944.82, inclusive of unbilled monthly
installments, charges and penalties or at least the minimum amount due under the credit card.
Respondent failed and refuses to pay her obligations despite her receipt of a written demand.
Thus, it prayed that respondent be ordered to pay the amount of P67,944.82, with interest,
attorney's fees equivalent to 25% of the sum due, and costs of suit.
ISSUE:
Whether or not the petitioner, Bankard Inc. presented sufficient evidence to support its pecuniary
claim against respondent Luz P. Alarte.
RULING:
No. It merely contains the information of the previous statement balance, late and interest
charges, amounting to ₱67,944.82. However, the Court held that the manner in which the
statement of account is worded indicates that it is a running balance, a continuing and mounting
bill of charges consisting of a combined principal amount with finance and penalty charges
imposed, which respondent appears to have failed to pay in the past.
Page 49 of 54
TOPIC: Damages
TITLE: BPI Express Card Corporation vs. Ma. Antonia Armovit; GR NO. 163654; October 8,
2014
DOCTRINE:
The relationship between the credit card issuer and the credit card holder is a contractual one that
is governed by the terms and conditions found in the card membership agreement. Such terms
and conditions constitute the law between the parties. In case of their breach, moral damages
may be recovered where the defendant is shown to have acted fraudulently or in bad faith.
FACTS:
Armovit, then a depositor of the Bank of the Philippine Islands at its Cubao Branch, was issued
by BPI Express Credit a pre-approved BPI Express Credit Card. She treated her British friends
from Hong Kong to lunch at Mario’s Restaurant in the Ortigas Center in Pasig. As the host, she
handed to the waiter her credit card to settle the bill, but the waiter soon returned to inform her
that her credit card had been cancelled upon verification with BPI Express Credit and would not
be honored.
Armovit called BPI Express Credit to verify the status of her credit card. She learned that her
credit card had been summarily cancelled for failure to pay her outstanding obligations. She
vehemently denied having defaulted on her payments. She demanded compensation for the
shame, embarrassment and humiliation she had suffered in the amount of ₱2,000,000.00.
ISSUE:
Whether or not the CA erred in sustaining the award of moral and exemplary damages in favor
of Armovit.
RULING:
No. The relationship between the credit card issuer and the credit card holder is a contractual one
that is governed by the terms and conditions found in the card membership agreement. Such
terms and conditions constitute the law between the parties. In case of their breach, moral
damages may be recovered where the defendant is shown to have acted fraudulently or in bad
faith.
The letter of BPI Express Credit did not clearly and categorically inform Armovit that the
submission of the new application form was the pre-condition for the reactivation of her credit
card. The statement in the letter merely raised doubt as to whether the requirement had really
been a pre-condition or not. With BPI Express Credit being the party causing the confusion, the
interpretation of the contract could not be done in its favor.
Thus, the Supreme Court held that the CA rightfully sustained the award of moral damages to
Armovit.
Page 50 of 54
TOPIC: Use of Credit Card
TITLE: Spouses Yulo vs. Bank of the Philippine Islands; GR NO. 217044; January 16, 2019
DOCTRINE:
When issuing a pre-screened or pre-approved credit card, the credit card provider must prove
that its client read and consented to the terms and conditions governing the credit card's use.
Failure to prove consent means that the client cannot be bound by the provisions of the terms and
conditions, despite admitted use of the credit card.
FACTS:
Bank of the Philippine Islands issued Rainier a pre-approved credit card. His wife, Juliet, was
also given a credit card as an extension of his account. Spouses Yulo used their respective credit
cards by regularly charging goods and services on them. The Yulo Spouses regularly settled their
accounts with the Bank of the Philippine Islands at first, but started to be delinquent with their
payments.
Yulo Spouses admitted that they used the credit cards issued by the Bank of the Philippine
Islands but claimed that their total liability was only P20,000.00. They also alleged that the Bank
of the Philippine Islands did not fully disclose to them the Terms and Conditions on their use of
the issued credit cards.
ISSUE:
Whether or not Spouses Yulo are bound by the Terms and Conditions on their use of credit cards
issued by respondent.
RULING:
No. When a credit card provider issues a credit card to a pre-approved or pre-screened client, the
usual screening processes "such as the filing of an application form and submission of other
relevant documents prior to the issuance of a credit card, are dispensed with and the credit card is
issued outright." As the recipient of an unsolicited credit card, the pre-screened client can then
choose to either accept or reject it.
As a pre-screened client, petitioner Rainier did not submit or sign any application form as a
condition for the issuance of a credit card in his account. Thus, respondent, as the credit card
provider, had the burden of proving its allegation that petitioner Rainier consented to the Terms
and Conditions surrounding the use of the credit card issued to him.
Page 51 of 54
TOPIC: Use of Counterfeit Credit Cards
TITLE: Anthony De Silva Cruz vs. People of the Philippines; GR NO. 210266; June 7, 2017
DOCTRINE:
The possession and use of a counterfeit credit card is considered access device fraud and is
punishable by law. To successfully sustain a conviction for possession and use of a counterfeit
access device, the prosecution must present not only the access device but also any evidence that
proves that the access device is counterfeit.
FACTS:
According to the prosecution, on April 18, 2006, at around 7:30 p.m., Cruz allegedly tried to
purchase two (2) bottles of Calvin Klein perfume worth US$96.00 from Duty Free Philippines
Fiesta Mall. Danilo Wong (Wong), the cashier at the Perfume Section, testified that Cruz paid for
the purchase using a Citibank Visa credit card.
Upon verification, Citibank informed Lim that the credit card was counterfeit and that the real
Gerry Santos was the Head of Citibank's Fraud Risk Management Division. Lim was advised to
transfer the matter to the Security Department.
Gerardo T. Santos testified that he first heard of Cruz's name in May 2004. Cruz and his wife
Aileen were then managing Antonely's Fabric Warehouse and were involved in incidents related
to credit card fraud. Santos did not file a case against them for lack of basis. He came across
Cruz's name again in 2005, with regard to a fraudulent transaction with a Thai restaurant in
Shoemart Megamall.
ISSUE:
Whether or not Spouses Cruz violated Republic Act No. 8484.
RULING:
Yes. Since a credit card is "any card, plate, coupon book, or other credit device existing for the
purpose of obtaining money, goods, property, labor or services or anything of value on credit," it
is considered an access device. Under Section 9(a) and (e) of Republic Act No. 8484, the
possession and use of an access device is not illegal. Rather, what is prohibited is the possession
and use of a counterfeit access device. Therefore, the corpus delicti of the crime is not merely the
access device, but also any evidence that proves that it is counterfeit. Petitioner was found in
possession of Citibank Visa credit card number 4539 7207 8677 7008, which bore the name
"Gerry Santos."
Page 52 of 54
TOPIC: Safety Deposit Box
TITLE: CA Agro-Industrial Development Corp vs. Court of Appeals; GR NO. 900027; March 3,
1993
DOCTRINE:
The contract for the rent of the safety deposit box is not an ordinary contract of lease as defined
in Article 1643 of the Civil Code.
FACTS:
Petitioner and the spouses Ramon and Paula Pugao entered into an agreement whereby the
former purchased from the latter two (2) parcels of land for a consideration. Petitioner, through
Sergio Aguirre, and the Pugaos then rented Safety Deposit Box No. 1448 of private respondent
Security Bank and Trust Company, a domestic banking corporation hereinafter referred to as the
respondent Bank. After the execution of the contract, two (2) renter's keys were given to the
renters — one to Aguirre and the other to the Pugaos. A guard key remained in the possession of
the respondent Bank. Petitioners claimed that the certificates of title were places inside the said
box. The lots were sold and when the titles were to be presented, these certificates are not in the
deposit box.
ISSUE:
Whether or not the rent of the safety deposit box is not an ordinary contract of lease.
RULING:
Yes. It is not an ordinary contract of lease. It cannot be characterized as an ordinary contract of

lease under Article 1643 because the full and absolute possession and control of the safety
deposit box was not given to the joint renters, the petitioner and the Pugaos.
Accordingly, the depositary would be liable if, in performing its obligation, it is found guilty of
fraud, negligence, delay or contravention of the tenor of the agreement. In the absence of any
stipulation prescribing the degree of diligence required, that of a good father of a family is to be
observed. Hence, any stipulation exempting the depositary from any liability arising from the
loss of the thing deposited on account of fraud, negligence or delay would be void for being
contrary to law and public policy.
Page 53 of 54
TOPIC: Safety Deposit Box
TITLE: Luzan Sia vs. Court of Appeals; GR NO. 102970; May 13, 1993
DOCTRINE:
It is settled that the contract to use of a security deposit box is not a contract of lease, but that of
a special kind of deposit. The renting out of the safety deposit boxes is not independent from, but
related to or in conjunction with, this principal function. A contract of deposit may be entered
into orally or in writing.
FACTS:
The plaintiff rented on March 22, 1985 the Safety Deposit Box No. 54 of the defendant bank at
its Binondo Branch. During the floods that took place in 1985 and 1986, floodwater entered into
the defendant bank's premises, seeped into the safety deposit box leased by the plaintiff and
caused, according to the plaintiff, damage to his stamps collection. The defendant bank rejected
the plaintiff's claim for compensation for his damaged stamps collection. The plaintiff instituted
an action for damages against the defendant bank.
ISSUE:
Whether or not the respondent SBTC failed to exercise the required diligence in maintaining the
safety deposit box of the petitioner.
RULING:
Yes. SBTC failed to exercise the required diligence in maintaining the safety deposit box of the
petitioner. SBTC's negligence aggravated the injury or damage to the stamp collection. SBTC
was aware of the floods of 1985 and 1986. It also knew that the floodwaters inundated the room
where Safe Deposit Box No. 54 was located. In view thereof, it should have lost no time in
notifying the petitioner in order that the box could have been opened to retrieve the stamps, thus
saving the same from further deterioration and loss. In this respect, it failed to exercise the
reasonable care and prudence expected of a good father of a family, thereby becoming a party to
the aggravation of the injury or loss.
The damage caused to the stamp collection caused pecuniary loss to the petitioner. Therefore, he
is entitled to compensation.
Page 54 of 54

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JUDITH ELISCIA E.

TOPIC: Section 20, Article VII of the Constitution

TITLE: Constantino v. Cuisia; GR # 10664; October 13, 2005

TOPIC: Diligence required of banks

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Whether or not the petitioner is entitled to moral damages.

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TITLE: Gregorio Reyes v. Court of Appeals; GR # 118492; August 15, 2001

TOPIC: Diligence required of banks

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Whether or not the bank callously remiss its duties as a bank.

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Whether or not the bank shall be liable for negligence.

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TOPIC: Diligence required of banks

Whether or not PNB exercised due diligence required of it.

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Whether or not PNB is liable to the petitioner for her deposits.

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TITLE: PNB v. Pablo Raymundo; GR no. 208672; December 7, 2016

Whether or not PNB is negligent.

TOPIC: Diligence required of banks

Bienvenida, married to Benedicto Pantaleon, agreed to purchase a parcel of land located at

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Golden Dragon is the developer of Wack-Wack Twin Towers Condominium, located in

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Whether or pawnshops are financial intermediaries.

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TOPIC: Deposit Substitutes

TITLE: BDO vs. Republic; GR no. 198756; January 13, 2015

TOPIC: Nature of bank deposits; legal compensation; Unauthorized payment of checks

Whether or not the Bank cannot be considered as a creditor of the petitioners.

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TITLE: Citibank, N.A. vs. Sabeniano; GR NO. 156132; February 6, 2007

TOPIC: Nature of Bank Deposits

TITLE: Guigona vs. City of Manila; GR NO. L-60033; April 4, 1984

Whether or not the investment of David is considered as a bank deposit.

TOPIC: Nature of Bank Deposits

Whether or not the nature of the transaction is a simple loan.

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TITLE: Allied Banking Corporation vs. Lim Sio Wan

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TOPIC: Certificate of Deposits

TOPIC: Joint Accoount