BANKING LAW CASES

GO vs BSP
 Director and the President and Chief Executive Officer of Orient Bank borrowed from
the funds of the bank and/or become a guarantor for loans without approval.
ISSUE: W/N Section 83 of RA 337 as penalizing a director or officer of a banking
institution for either borrowing the deposits or funds of the bank, or guaranteeing or
indorsing loans to others, but not for assuming both capacities

RULING: No. 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. The essence of the
crime is becoming an obligor of the bank without securing the necessary written
approval of the majority of the bank’s directors. Under Section 83, RA 337, the following
elements must be present to constitute a violation of its first paragraph:

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.

Section 83 of RA 337 actually imposes three restrictions: approval (written approval of

the majority of the bank’s board of directors), reportorial (approval should be entered
upon the records of the corporation, and a copy of the entry be transmitted to the
appropriate supervising department), and ceiling requirements (amount equivalent to
the respective outstanding deposits and book value of the paid-in capital contribution in
the bank).

SORIANO vs BSP
Soriano as president of Rural Bank of San Miguel Bulacan approved and obtained a
loan named after sps Carlos and was never authorized by the bank’s BOD. An estafa
was filed against him.
ISSUE: W/N there can also be, at the same time, a charge for DOSRI violation in such a
situation wherein the accused bank officer did not secure a loan in his own name, but
was alleged to have used the name of another person in order to indirectly secure a
loan from the bank.

RULING: Yes, informations filed do not negate each other. A bank officer violates the
DOSRI2 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. 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 elements54 for a violation of Section 83, even if petitioner did not secure the
loan in his own name.

The broad interpretation of the prohibition in Section 83 is justified by the fact that it
even expressly covers loans to third parties where the third parties are aware of the
transaction (such as principals represented by the DOSRI), and where the DOSRI’s
interest does not appear to be beneficial but even burdensome (such as in cases when
the DOSRI acts as a mere guarantor or surety).

CENTRAL BANK vs CA
Triumph Savings Bank was ordered by the Central Bank to close and be put to
receivership, Tiaoqui as receiver. TSB filed a complaint to annul the resolution
challenging the constitutionality of Sec. 29 of R.A. 269, otherwise known as "The
Central Bank Act," insofar as it authorizes the Central Bank to take over a banking
institution even if it is not charged with violation of any law or regulation, much less
found guilty thereof.
ISSUE: whether absence of prior notice and hearing may be considered acts of
arbitrariness and bad faith sufficient to annul a Monetary Board resolution enjoining a
bank from doing business and placing it under receivership. 
RULING: Sec. 29 does not contemplate prior notice and hearing before a bank may be
directed to stop operations and placed under receivership. When par. 4 (now par. 5, as
amended by E.O. 289) provides for the filing of a case within ten (10) days after the
receiver takes charge of the assets of the bank, it is unmistakable that the assailed
actions should precede the filing of the case. This "close now and hear later" scheme is
grounded on practical and legal considerations to prevent unwarranted dissipation of
the bank's assets and as a valid exercise of police power to protect the depositors,
creditors, stockholders and the general public.

BANCO FILIPINO SAVINGS vs MONETARY BOARD

These are nine (9) consolidated cases concerning the legality of the closure and
receivership of petitioner Banco Filipino Savings and Mortgage Bank (Banco Filipino for
brevity) pursuant to the order of respondent Monetary Board.

ISSUE: W/N the liquidator appointed by the respondent Central Bank (CB for brevity)
has the authority to prosecute as well as to defend suits, and to foreclose mortgages for
and in behalf of the bank while the issue on the validity of the receivership and
liquidation of the latter is pending resolution; whether or not the Central Bank and the
Monetary Board acted arbitrarily and in bad faith in finding and thereafter concluding
that petitioner bank is insolvent

RULING: Yes. Section 29 of the Republic Act No. 265, provides that when a bank is
placed under receivership, the person designated as receiver shall immediately take
charge of the bank’s assets and liabilities, as expeditiously as possible, collect and
gather all the assets and administer the same for the benefit of its creditors, and
represent the bank personally or through counsel as he may retain in all actions or
proceedings for or against the institution, exercising all the powers necessary for these
purposes including, but not limited to, bringing and foreclosing mortgages in the name
of the bank. If the Monetary Board shall later determine and confirm that the banking
institution is insolvent or cannot resume business with safety to depositors, creditors
and the general public, it shall, if public interest requires, order its liquidation and
appoint a liquidator who shall take over and continue the functions of the receiver
previously appointed by Monetary Board. Section 29 of the Central Bank Act, the
following are the mandatory requirements to be complied with before a bank found to
be insolvent is ordered closed and forbidden to do business in the Philippines: Firstly,
an examination shall be conducted by the head of the appropriate supervising or
examining department or his examiners or agents into the condition of the bank;
secondly, it shall be disclosed in the examination that the condition of the bank is one
of insolvency, or that its continuance in business would involve probable loss to its
depositors or creditors; thirdly, the department head concerned shall inform the
Monetary Board in writing, of the facts; and lastly, the Monetary Board shall find the
statements of the department head to be true. Tiaoqui based his report on an
incomplete examination of petitioner bank and outrightly concluded therein that the
latter’s financial status was one of insolvency or illiquidity. It is evident from the
foregoing circumstances that the examination contemplated in Sec. 29 of the CB Act as
a mandatory requirement was not completely and fully complied with. The closure of
the petitioner bank was arbitrary and committed with grave abuse of discretion.
Granting in gratia argumenti that the closure was based on justified grounds to protect
the public, the fact that petitioner bank was suffering from serious financial problems
should not automatically lead to its liquidation.

CENTRAL BANK OF THE PHILIPPINES vs COURT OF APPEALS

Central Bank discovered that certain questionable loans extended by Producer’s Bank of
the Philippines (PBP) were fictitious as they were extended, without collateral, to certain
interests related to PBP owners themselves. Monetary Board (MB), placed PBP under
conservatorship.
ISSUE: W/N the order of conservatorship still be assailed by PBP
RULING: No. The following requisites must be present before the order of conservatorship
may be set aside by a court: (1) The appropriate pleading must be filed by the stockholders
of record representing the majority of the capital stock of the bank in the proper court; (2)
Said pleading must be filed within ten (10) days from receipt of notice by said majority
stockholders of the order placing the bank under conservatorship; and (3) There must be
convincing proof, after hearing, that the action is plainly arbitrary and made in bad faith. In
the instant case, the original complaint was filed more than 3 years after PBP was placed
under conservator, long after the expiration of the 10-day period deferred to above.

RURAL BANK OF SAN MIGUEL vs MONETARY BOARD

Petitioner bank was a domestic corporation engaged in banking. Respondent Monetary

Board issued a resolution prohibiting petitioner from doing business in the Philippines
and placed it under receivership with PDIC as its receiver. On the basis of reports
prepared by the PDIC stating that petitioner bank could not resume business, the
Monetary Board directed PDIC to proceed with the liquidation.  Petitioner filed a special
civil action for certiorari and prohibition with the CA, contending that there was no
complete examination conducted before the bank was closed.

ISSUE: Whether Section 30 of RA 7653 require a current and complete examination of

the bank before it can be closed and placed under receivership
RULING: No. In RA 7653, only a “report of the head of the supervising or examining
department” is necessary. This Court cannot look for or impose another meaning on the
term “report” or to construe it as synonymous with “examination.” From the words used
in Section 30, it is clear that RA 7653 no longer requires that an examination be made
before the MB can issue a closure order.

KORUGA vs ARCENAS

Koruga's Complaint charged defendants with violation of Sections

31 to 34 of the Corporation Code, prohibiting self-dealing and
conflict of interest of directors and officers; invoked her right to
inspect the corporation's records under Sections 74 and 75 of the
Corporation Code; and prayed for Receivership and Creation of a
Management Committee, pursuant to Rule 59 of the Rules of Civil
Procedure, the Securities Regulation Code, the Interim Rules of
Procedure Governing Intra-Corporate Controversies, the General
Banking Law of 2000, and the New Central Bank Act. She accused
the directors and officers of Banco Filipino of engaging in unsafe,
unsound, and fraudulent banking practices, more particularly, acts
that violate the prohibition on self-dealing.

ISSUE: W/N, the BSP has jurisdiction over the case

RULING: Yes. The law vests in the BSP the supervision over
operations and activities of banks. The New Central Bank Act
provides:

Section 25. Supervision and Examination. - The Bangko Sentral

shall have supervision over, and conduct periodic or special
examinations of, banking institutions and quasi-banks, including
their subsidiaries and affiliates engaged in allied activities.24

Specifically, the BSP's supervisory and regulatory powers include:

4.1 The issuance of rules of conduct or the establishment of

standards of operation for uniform application to all institutions or
functions covered, taking into consideration the distinctive character
of the operations of institutions and the substantive similarities of
specific functions to which such rules, modes or standards are to be
applied;

4.2 The conduct of examination to determine compliance with

laws and regulations if the circumstances so warrant as
determined by the Monetary Board;

4.3 Overseeing to ascertain that laws and Regulations are

complied with;
4.4 Regular investigation which shall not be oftener than
once a year from the last date of examination to determine
whether an institution is conducting its business on a safe or
sound basis: Provided,  That the deficiencies/irregularities found by
or discovered by an audit shall be immediately addressed;

4.5 Inquiring into the solvency and liquidity of the

institution (2-D); or

4.6 Enforcing prompt corrective action.

The authority to determine whether a bank is conducting business in

an unsafe or unsound manner is also vested in the Monetary Board.

CENTRAL BANK vs DELA CRUZ

It is noteworthy that the actions of the Monetary Board in proceedings on insolvency

are explicitly declared by law to be "final and executory." They may not be set aside, or
restrained, or enjoined by the courts, except upon "convincing proof that the action is
plainly arbitrary and made in bad faith"

FACTS: Department of Rural Banks and Savings and Loan Associations (DRBSLA) of the
Central Bank of the Philippines (or CB) conducted examinations of the books and affairs
of Libmanan Bank. They found serious irregularities in its lending and deposit
operations, including false entries and false statements in the bank’s records to give it
the appearance of solidity and soundness which it did not possess. As a result of its
questionable transactions, the bank became insolvent.  Judge De la Cruz declared the
CB, Et Al., in default for failure to file a responsive pleading to the petition in Civil Case
No. 1309. He pointed out that "the projected move to bring the court’s denial of the
motion to dismiss to the Supreme Court on certiorari did not stop the period given to
the respondents to answer

ISSUE: W/N there was disregard of the provision of Section 29 of Central Bank Act

RULING: Respondent Judge acted in plain disregard of the fourth paragraph of Section
29 of the Central Bank Act, when he restrained the petitioners from closing and
liquidating the Rural Bank of Libmanan, prevented them from performing their
functions, and ordered them to return the management and control of the rural bank to
its board of directors (p. 51, Rollo) without receiving convincing proof that the action of
the CB was plainly arbitrary and made in bad faith.

CENTRAL BANK OF THE PHILIPPINES vs CA

 Central Bank discovered that certain questionable loans extended by Producer’s Bank of the Philippines
(PBP), were fictitious as they were extended, without collateral, to certain interests related to PBP owners
themselves.  Without responding to the communications of the CB, PBP filed a complaint with the
Regional Trial Court of Makati against the CB, the MB and CB Governor alleging that the resolutions
issued were arbitraty and made in bad faith. Respondent Judge issued a temporary restraining order and
subsequently a writ of preliminary injunction. CB filed a motion to dismiss but was denied and ruled that
the MB resolutions were arbitrarily issued.

ISSUE: W/N the trial court erred in declaring the MB resolutions as arbitrary

RULING: No. The following requisites must be present before the order of conservatorship may be set
aside by a court: (1) The appropriate pleading must be filed by the stockholders of record representing the
majority of the capital stock of the bank in the proper court; (2) Said pleading must be filed within ten (10)
days from receipt of notice by said majority stockholders of the order placing the bank under
conservatorship; and (3) There must be convincing proof, after hearing, that the action is plainly arbitrary
and made in bad faith.

In the instant case, the original complaint was filed more than 3 years after PBP was placed under
conservator, long after the expiration of the 10-day period deferred to above. It is also beyond question
that the complaint and the amended complaint were not initiated by the stockholders of record
representing the majority of the capital stock. 

BANGKO SENTRAL vs VALENZUELA