ASSIGNMENT NO.

1-BANKING LAWS
COMMERCIAL LAW REVIEW
Atty. Myra-Diwata A. Rivera-Caroy

INSTRUCTIONS:

1. This assignment consists of FIVE (5) questions calling of the pertinent

provisions of the General Banking Law of 2000.
2. Answer the questions briefly yet completely; limit your answers to a
maximum of three sentences per item. Cite the legal basis for your answers,
and a mere “YES” or “NO” answer shall not be given any credit. Limit your
explanation to just one sentence each. Place your answers right after the
question/item.

I.
(10%)

MASAGANA Rural Bank has an outstanding capital stock of Php 200Million and which
maintains four branches in La Union.

Melissa Santiago is a member of the Board of Directors of MASAGANA who applied for the
following transactions with MASAGANA, thus: (1) a loan for Php 10Million purposely to
finance the chemotherapy treatments of her father Jacinto in the United States of America;
and (2) a loan with mortgage with his husband Joselito, for Php 30Million for the purpose of
purchasing a house and lot in Makati City. State the legal consequences of the transaction
entered into by Jose, and explain your answer.

 Under the DOSRI rule, Joselito, the husband of Melissa Santiago, as a general rule,
cannot enter into a loan agreement with MASAGANA for conflict of interest. The
exception is when there is a written approval of the majority of the Directors
excluding Melissa. Provided also, that the loan amount will not exceed the paid-in
capital of Melissa in the bank.
II.
(10%)

YAYAMANIN Banking Corporation is a bank which maintains 135 branches nationwide, and
which has an outstanding capital stock of Php 1Billion.

BUNGKAL Construction and Development Corporation, a domestic corporation, applied for a

loan with YAYAMANIN for Php 400Million and offered four prime real estate properties
collectively valued at Php 500Million as collateral for the loan. State the legal consequences
and the consequent legality of the transaction, and explain your answer.
 BUNGKAL Construction and Development Corporation can only avail of a loan of 75%
of the appraised value of the real estate security plus 60% of the insured
improvements if any. Further, under the Single Borrowers Limit, BUNGKAL
Construction and Development Corporation can only avail of the 25% limit.

III.
(10%)

Miranda is the President and Director of ABC Banking Corporation and who also holds 15% of
the outstanding voting shares within the bank. Miranda is married to Jesus, another banker,
with whom she has five children named Sofia, Stunner, Selina, Sunshine and Svetlana. Jesus
and the five children are also stockholders of ABC Banking Corporation with minimal shares to
the extent of 5%.
State the probable legal consequences of Miranda’s and her family’s shareholdings with ABC
Banking Corporation, taking into consideration the provisions of pertinent banking laws.
 Stockholdings of family group or related interest to each other, shall be considered
family group or related interest that must be fully disclosed in all their transactions
with the bank.

IV.
(10%)

Jason is a consultant of ABC Banking Corporation owing to his extensive experience in

banking which spans more or less forty years. Jason was subsequently being considered for a
post as a Director with the Bangko Sentral ng Pilipinas (BSP). Jason now comes to you for
advice on the following matters by asking the following questions: (1) Will his consultancy
position with ABC affect his assumption of office with the BSP?; and (2) Does the Monetary
Board of the BSP have the right to require him to divest his stockholdings in YAYAMANIN
Banking Corporation (10% shareholdings) and BEBEDOO Commercial Bank (16%
shareholdings)? Explain and cite the legal basis therefore.
 A Director of the Banko Sentral ng Pilipinas must not have any conflict of interest
either in the government or in the private sector.

V.
(10%)

Bernard maintains a safety deposit box at the MAYAMAN Commercial Banking Corporation-
San Fernando City, La Union Branch. The safety deposit box is installed within the premises
of Mayaman, specifically at the basement where all the other safety deposit boxes were also
installed. Each safety deposit box has two keyholes and can be opened only with two special
keys being inserted simultaneously inside the two keyhole slots. One keyhole corresponds to
a key which is in the possession of the client, in this case Bernard. The other keyhole
corresponds to a key which is in the possession of the Branch Manager of Mayaman. Each
client maintaining a safety deposit box is made to sign a contract, some of the provisions of
which state the following:

“Section 14. With this agreement, the client declares and so states that
he/she is in full possession and control of the contents of this safety deposit
box, and declares that the safety deposit box is one which is beyond the
scope of control and premises of the Bank; therefore, any loss or damage to
its contents shall solely be the liability of the client, without any recourse to
the bank.

Section 15. This agreement shall under no circumstances be construed to

mean any admission on the part of the bank of any liability, as in fact, the
client holds the Bank free from any liability arising from any loss or damage
to the items placed inside the safety deposit box.”

Bernard placed inside the safety deposit box in his name certain assorted diamond jewelry
sets belonging to his mother worth Php 10Million. One day, after a vacation in Paris, France,
Bernard decided to retrieve the contents of the safety deposit box for use by his mother for a
party to be held in Makati City, but was shocked to find several sets of diamond jewelry from
the safety deposit box. The missing jewelry amounted to Php 4Million. Bernard sued the Bank
for damages arising from the loss of the jewelry sets, claiming no negligence on his part
considering that the key to the safety deposit box (the one key given to the client) was in his
possession all along and had not otherwise been stolen or taken into possession by any other
party, it appearing that the same was hidden in a secure place. MAYAMAN countered and
invoked as defenses Sections 14 and 15 of the safety deposit box agreement, claiming that it
is not liable under the circumstances. Is MAYAMAN Bank correct? Explain.
 No, MAYAMAN is not correct. Any stipulation exempting the bank from any liability
arising from the loss of the thing deposited is void as it is contrary to law and public
order. Safety deposit is an special kind of deposit wherein the bank is the depository.
In the absent of any stipulation of diligence, the diligence of a good father of a family
shall apply.

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