BANKING FULL CASES JULY 7, 2015GR 880313 simex intl vs ca118492 reyes vs carp vs security credit L-20583central bank vs morfe L-20119BPI family vs franco 123498bpi vs ca 104612Vitug vs Ca 82027BPI vs IAC 206 scra 408Go vs IAC 197 scra 22 1991firestone vs ca 113236PBCom v CA 269 scra 695 1997salvacion vs CB 94723rcbc v de castro 168 scra 49

G.R. No. 88013 March 19, 1990SIMEX INTERNATIONAL (MANILA), INCORPORATED,petitioner,vs.THE HONORABLE COURT OF APPEALS and TRADERS ROYAL BANK,respondents.CRUZ,J.:We are concerned in this case with the question of damages, specifically moral and exemplary damages. The negligence of the private respondent has already been established. All we have to ascertain is whether the petitioner is entitled to the said damages and, if so, in what amounts.The parties agree on the basic facts. The petitioner is a private corporation engaged in the exportation of food products. It buys these products from various local suppliers and then sells them abroad, particularly in the United States, Canada and the Middle East. Most of its exports are purchased by the petitioner on credit.The petitioner was a depositor of the respondent bank and maintained a checking account in its branch at Romulo Avenue, Cubao, Quezon City. On May 25, 1981, the petitioner deposited to its account in the said bank the amount of P100,000.00, thus increasing its balance as of that date to P190,380.74.1Subsequently, the petitioner issued several checks against its deposit but was suprised to learn later that they had been dishonored for insufficient funds.The dishonored checks are the following:1. Check No. 215391 dated May 29, 1981, in favor of California Manufacturing Company, Inc. for P16,480.00:2. Check No. 215426 dated May 28, 1981, in favor of the Bureau of Internal Revenue in the amount of P3,386.73:3. Check No. 215451 dated June 4, 1981, in favor of Mr. Greg Pedreo in the amount of P7,080.00;4. Check No. 215441 dated June 5, 1981, in favor of Malabon Longlife Trading Corporation in the amount of P42,906.00:5. Check No. 215474 dated June 10, 1981, in favor of Malabon Longlife Trading Corporation in the amount of P12,953.00:6. Check No. 215477 dated June 9, 1981, in favor of Sea-Land Services, Inc. in the amount of P27,024.45:7. Check No. 215412 dated June 10, 1981, in favor of Baguio Country Club Corporation in the amount of P4,385.02: and8. Check No. 215480 dated June 9, 1981, in favor of Enriqueta Bayla in the amount of P6,275.00.2As a consequence, the California Manufacturing Corporation sent on June 9, 1981, a letter of demand to the petitioner, threatening prosecution if the dishonored check issued to it was not made good. It also withheld delivery of the order made by the petitioner. Similar letters were sent to the petitioner by the Malabon Long Life Trading, on June 15, 1981, and by the G. and U. Enterprises, on June 10, 1981. Malabon also canceled the petitioner's credit line and demanded that future payments be made by it in cash or certified check. Meantime, action on the pending orders of the petitioner with the other suppliers whose checks were dishonored was also deferred.The petitioner complained to the respondent bank on June 10, 1981.3Investigation disclosed that the sum of P100,000.00 deposited by the petitioner on May 25, 1981, had not been credited to it. The error was rectified on June 17, 1981, and the dishonored checks were paid after they were re-deposited.4In its letter dated June 20, 1981, the petitioner demanded reparation from the respondent bank for its "gross and wanton negligence." This demand was not met. The petitioner then filed a complaint in the then Court of First Instance of Rizal claiming from the private respondent moral damages in the sum of P1,000,000.00 and exemplary damages in the sum of P500,000.00, plus 25% attorney's fees, and costs.After trial, Judge Johnico G. Serquinia rendered judgment holding that moral and exemplary damages were not called for under the circumstances. However, observing that the plaintiff's right had been violated, he ordered the defendant to pay nominal damages in the amount of P20,000.00 plus P5,000.00 attorney's fees and costs.5This decision was affirmedin totoby the respondent court.6The respondent court found with the trial court that the private respondent was guilty of negligence but agreed that the petitioner was nevertheless not entitled to moral damages. It said:The essential ingredient of moral damages is proof of bad faith (De Aparicio vs. Parogurga, 150 SCRA 280). Indeed, there was the omission by the defendant-appellee bank to credit appellant's deposit of P100,000.00 on May 25, 1981. But the bank rectified its records. It credited the said amount in favor of plaintiff-appellant in less than a month. The dishonored checks were eventually paid. These circumstances negate any imputation or insinuation of malicious, fraudulent, wanton and gross bad faith and negligence on the part of the defendant-appellant.It is this ruling that is faulted in the petition now before us.This Court has carefully examined the facts of this case and finds that it cannot share some of the conclusions of the lower courts. It seems to us that the negligence of the private respondent had been brushed off rather lightly as if it were a minor infraction requiring no more than a slap on the wrist. We feel it is not enough to say that the private respondent rectified its records and credited the deposit in less than a month as if this were sufficient repentance. The error should not have been committed in the first place. The respondent bank has not even explained why it was committed at all. It is true that the dishonored checks were, as the Court of Appeals put it, "eventually" paid. However, this took almost a month when, properly, the checks should have been paid immediately upon presentment.As the Court sees it, the initial carelessness of the respondent bank, aggravated by the lack of promptitude in repairing its error, justifies the grant of moral damages. This rather lackadaisical attitude toward the complaining depositor constituted the gross negligence, if not wanton bad faith, that the respondent court said had not been established by the petitioner.We also note that while stressing the rectification made by the respondent bank, the decision practically ignored the prejudice suffered by the petitioner. This was simply glossed over if not, indeed, disbelieved. The fact is that the petitioner's credit line was canceled and its orders were not acted upon pending receipt of actual payment by the suppliers. Its business declined. Its reputation was tarnished. Its standing was reduced in the business community. All this was due to the fault of the respondent bank which was undeniably remiss in its duty to the petitioner.Article 2205 of the Civil Code provides that actual or compensatory damages may be received "(2) for injury to the plaintiff s business standing or commercial credit." There is no question that the petitioner did sustain actual injury as a result of the dishonored checks and that the existence of the loss having been established "absolute certainty as to its amount is not required."7Such injury should bolster all the more the demand of the petitioner for moral damages and justifies the examination by this Court of the validity and reasonableness of the said claim.We agree that moral damages are not awarded to penalize the defendant but to compensate the plaintiff for the injuries he may have suffered.8In the case at bar, the petitioner is seeking such damages for the prejudice sustained by it as a result of the private respondent's fault. The respondent court said that the claimed losses are purely speculative and are not supported by substantial evidence, but if failed to consider that the amount of such losses need not be established with exactitude precisely because of their nature. Moral damages are not susceptible of pecuniary estimation. Article 2216 of the Civil Code specifically provides that "no proof of pecuniary loss is necessary in order that moral, nominal, temperate, liquidated or exemplary damages may be adjudicated." That is why the determination of the amount to be awarded (except liquidated damages) is left to the sound discretion of the court, according to "the circumstances of each case."From every viewpoint except that of the petitioner's, its claim of moral damages in the amount of P1,000,000.00 is nothing short of preposterous. Its business certainly is not that big, or its name that prestigious, to sustain such an extravagant pretense. Moreover, a corporation is not as a rule entitled to moral damages because, not being a natural person, it cannot experience physical suffering or such sentiments as wounded feelings, serious anxiety, mental anguish and moral shock. The only exception to this rule is where the corporation has a good reputation that is debased, resulting in its social humiliation.9We shall recognize that the petitioner did suffer injury because of the private respondent's negligence that caused the dishonor of the checks issued by it. The immediate consequence was that its prestige was impaired because of the bouncing checks and confidence in it as a reliable debtor was diminished. The private respondent makes much of the one instance when the petitioner was sued in a collection case, but that did not prove that it did not have a good reputation that could not be marred, more so since that case was ultimately settled.10It does not appear that, as the private respondent would portray it, the petitioner is an unsavory and disreputable entity that has no good name to protect.Considering all this, we feel that the award of nominal damages in the sum of P20,000.00 was not the proper relief to which the petitioner was entitled. Under Article 2221 of the Civil Code, "nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him." As we have found that the petitioner has indeed incurred loss through the fault of the private respondent, the proper remedy is the award to it of moral damages, which we impose, in our discretion, in the same amount of P20,000.00.Now for the exemplary damages.The pertinent provisions of the Civil Code are the following:Art. 2229. Exemplary or corrective damages are imposed, by way of example or correction for the public good, in addition to the moral, temperate, liquidated or compensatory damages.Art. 2232. In contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.The banking system is an indispensable institution in the modern world and plays a vital role in the economic life of every civilized nation. Whether as mere passive entities for the safekeeping and saving of money or as active instruments of business and commerce, banks have become an ubiquitous presence among the people, who have come to regard them with respect and even gratitude and, most of all, confidence. Thus, even the humble wage-earner has not hesitated to entrust his life's savings to the bank of his choice, knowing that they will be safe in its custody and will even earn some interest for him. The ordinary person, with equal faith, usually maintains a modest checking account for security and convenience in the settling of his monthly bills and the payment of ordinary expenses. As for business entities like the petitioner, the bank is a trusted and active associate that can help in the running of 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, the depositor expects the bank to treat his account with the utmost fidelity, whether such account consists only of a few hundred pesos or of millions. The bank must record every single transaction accurately, down to the last centavo, and as promptly as possible. 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, confident that the bank will deliver it as and to whomever he directs. A blunder on the part of the bank, 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.The point is that as a business affected with public interest and because of the nature of its functions, 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. In the case at bar, it is obvious that the respondent bank was remiss in that duty and violated that relationship. What is especially deplorable is that, having been informed of its error in not crediting the deposit in question to the petitioner, the respondent bank did not immediately correct it but did so only one week later or twenty-three days after the deposit was made. It bears repeating 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. Such ineptness comes under the concept of the wanton manner contemplated in the Civil Code that calls for the imposition of exemplary damages.After deliberating on this particular matter, the Court, in the exercise of its discretion, hereby imposes upon the respondent bank exemplary damages in the amount of P50,000.00, "by way of example or correction for the public good," in the words of the law. It is expected that this ruling will serve as a warning and deterrent against the repetition of the ineptness and indefference that has been displayed here, lest the confidence of the public in the banking system be further impaired.ACCORDINGLY, the appealed judgment is hereby MODIFIED and the private respondent is ordered to pay the petitioner, in lieu of nominal damages, moral damages in the amount of P20,000.00, and exemplary damages in the amount of P50,000.00 plus the original award of attorney's fees in the amount of P5,000.00, and costs.SO ORDERED.SIMEX INTERNATIONAL (MANILA), INCORPORATED,petitioner,vs.THE HONORABLE COURT OF APPEALS and TRADERS ROYAL BANK,respondents.BOTTOMLINE: You got preexisting 90K and you deposited 100K, but it was not updated by the bank, 8 checks bounced and you lost business partners. (burn down the bank? hahaha) Can you demand moral and exemplary damages?FACTS: We are concerned in this case with the question of damages, specifically moral and exemplary damages The petitioner is a private corporation engaged in the exportation of food products. It buys these products from various local suppliers and then sells them abroad, particularly in the United States, Canada and the Middle East. Most of its exports are purchased by the petitioner on credit. The petitioner was a depositor of the respondent bank and maintained a checking account in its branch at Romulo Avenue, account in the said bank the amount of P100,000.00, thus increasing its balance as of that date to P190,380.74. , the petitioner issued several checks against its deposit but was surprised to learn later that they had been dishonored for insufficient funds. There were 8 dishonored checks. The California Manufacturing Corporation sent on June 9, 1981, a letter of demand to the petitioner, threatening prosecution if the dishonored check issued to it was not made good. . Malabon also canceled the petitioner's credit line and demanded that future payments be made by it in cash or certified check The petitioner complained to the respondent bank on June 10, 1981.3Investigation disclosed that the sum of P100,000.00 deposited by the petitioner on May 25, 1981, had not been credited to it. The error was rectified on June 17, 1981, and the dishonored checks were paid after they were re-deposited , the petitioner demanded reparation from the respondent bank for its "gross and wanton negligence." This demand was not met. Court of First Instance of Rizal claiming from the private respondent moral damages in the sum of P1,000,000.00 and exemplary damages in the sum of P500,000.00, plus 25% attorney's fees, and costs.Judge Johnico G. Serquinia rendered judgment holding that moral and exemplary damages were not called for under the circumstances. However, observing that the plaintiff's right had been violated, he ordered the defendant to pay nominal damages in the amount of P20,000.00 plus P5,000.00 attorney's fees and costs. The respondent court found with the trial court that the private respondent was guilty of negligence but agreed that the petitioner was nevertheless not entitled to moral damages The error should not have been committed in the first place. The respondent bank has not even explained why it was committed at all. It is true that the dishonored checks were, as the Court of Appeals put it, "eventually" paid. However, this took almost a month when, properly, the checks should have been paid immediately upon presentment.ISSUE: After all that you went through, the judge only awarded you 20k and 5k, can you demand for 1,000,000 damage?RULING:We also note that while stressing the rectification made by the respondent bank, the decision practically ignored the prejudice suffered by the petitioner. Article 2205 of the Civil Code provides that actual or compensatory damages may be received "(2) for injury to the plaintiff s business standing or commercial credit." We agree that moral damages are not awarded to penalize the defendant but to compensate the plaintiff for the injuries he may have suffered From every viewpoint except that of the petitioner's, its claim of moral damages in the amount of P1,000,000.00 is nothing short of preposterous. Its business certainly is not that big, or its name that prestigious, to sustain such an extravagant pretense Considering all this, we feel that the award of nominal damages in the sum of P20,000.00 was not the proper relief to which the petitioner was entitled. Under Article 2221 of the Civil Code, "nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him." the proper remedy is the award to it of moral damages, which we impose, in our discretion, in the same amount of P20,000.00.After deliberating on this particular matter, the Court, in the exercise of its discretion, hereby imposes upon the respondent bank exemplary damages in the amount of P50,000.00, ACCORDINGLY, the appealed judgment is hereby MODIFIED and the private respondent is ordered to pay the petitioner, in lieu of nominal damages, moral damages in the amount of P20,000.00, and exemplary damages in the amount of P50,000.00 plus the original award of attorney's fees in the amount of P5,000.00, and costs.SECOND DIVISION[G.R. No. 118492.August 15, 2001]GREGORIO H. REYES and CONSUELO PUYAT-REYES,petitioners, vs.THE HON. COURT OF APPEALS and FAR EAST BANK AND TRUST COMPANY,respondents.D E C I S I O NDE LEON, JR.,J.:Before us is a petition for review of the Decision[1]dated July 22, 1994 and Resolution[2]dated December 29, 1994 of the Court of Appeals[3]affirming with modification the Decision[4]dated November 12, 1992 of the Regional Trial Court of Makati, Metro Manila, Branch 64, which dismissed the complaint for damages of petitioners spouses Gregorio H. Reyes and Consuelo Puyat-Reyes against respondent Far East Bank and Trust Company.The undisputed facts of the case are as follows:In view of the 20thAsian Racing Conference then scheduled to be held in September, 1988 in Sydney, Australia, the Philippine Racing Club, Inc. (PRCI, for brevity) sent four (4) delegates to the said conference.Petitioner Gregorio H. Reyes, as vice-president for finance, racing manager, treasurer, and director of PRCI, sent Godofredo Reyes, the clubs chief cashier, to the respondent bank to apply for a foreign exchange demand draft in Australian dollars.Godofredo went to respondent banks Buendia Branch in Makati City to apply for a demand draft in the amount One Thousand Six Hundred Ten Australian Dollars (AU$1,610.00) payable to the order of the 20thAsian Racing Conference Secretariat of Sydney, Australia.He was attended to by respondent banks assistant cashier, Mr. Yasis, who at first denied the application for the reason that respondent bank did not have an Australian dollar account in any bank in Sydney.Godofredo asked if there could be a way for respondent bank to accommodate PRCIs urgent need to remit Australian dollars to Sydney.Yasis of respondent bank then informed Godofredo of a roundabout way of effecting the requested remittance to Sydney thus: the respondent bank would draw a demand draft against Westpac Bank in Sydney, Australia (Westpac-Sydney for brevity) and have the latter reimburse itself from the U.S. dollar account of the respondent in Westpac Bank in New York, U.S.A (Westpac-New York for brevity).This arrangement has been customarily resorted to since the 1960s and the procedure has proven to be problem-free.PRCI and the petitioner Gregorio H. Reyes, acting through Godofredo, agreed to this arrangement or approach in order to effect the urgent transfer of Australian dollars payable to the Secretariat of the 20thAsian Racing Conference.On July 28, 1988, the respondent bank approved the said application of PRCI and issued Foreign Exchange Demand Draft (FXDD) No. 209968 in the sum applied for, that is, One Thousand Six Hundred Ten Australian Dollars (AU$1,610.00), payable to the order of the 20thAsian Racing Conference Secretariat of Sydney, Australia, and addressed to Westpac-Sydney as the drawee bank.On August 10, 1988, upon due presentment of the foreign exchange demand draft, denominated as FXDD No. 209968, the same was dishonored, with the notice of dishonor stating the following: xxx No account held with Westpac. Meanwhile, on August 16, 1988, Westpac-New York sent a cable to respondent bank informing the latter that its dollar account in the sum of One Thousand Six Hundred Ten Australian Dollars (AU$1,610.00) was debited.On August 19, 1988, in response to PRCIs complaint about the dishonor of the said foreign exchange demand draft, respondent bank informed Westpac-Sydney of the issuance of the said demand draft FXDD No. 209968, drawn against the Westpac-Sydney and informing the latter to be reimbursed from the respondent banks dollar account in Westpac-New York.The respondent bank on the same day likewise informed Westpac-New York requesting the latter to honor the reimbursement claim of Westpac-Sydney.On September 14, 1988, upon its second presentment for payment, FXDD No. 209968 was again dishonored by Westpac-Sydney for the same reason, that is, that the respondent bank has no deposit dollar account with the drawee Westpac-Sydney.On September 17, 1988 and September 18, 1988, respectively, petitioners spouses Gregorio H. Reyes and Consuelo Puyat-Reyes left for Australia to attend the said racing conference.When petitioner Gregorio H. Reyes arrived in Sydney in the morning of September 18, 1988, he went directly to the lobby of Hotel Regent Sydney to register as a conference delegate.At the registration desk, in the presence of other delegates from various member countries, he was told by a lady member of the conference secretariat that he could not register because the foreign exchange demand draft for his registration fee had been dishonored for the second time.A discussion ensued in the presence and within the hearing of many delegates who were also registering.Feeling terribly embarrassed and humiliated, petitioner Gregorio H. Reyes asked the lady member of the conference secretariat that he be shown the subject foreign exchange demand draft that had been dishonored as well as the covering letter after which he promised that he would pay the registration fees in cash.In the meantime he demanded that he be given his name plate and conference kit.The lady member of the conference secretariat relented and gave him his name plate and conference kit.It was only two (2) days later, or on September 20, 1988, that he was given the dishonored demand draft and a covering letter.It was then that he actually paid in cash the registration fees as he had earlier promised.Meanwhile, on September 19, 1988, petitioner Consuelo Puyat-Reyes arrived in Sydney.She too was embarrassed and humiliated at the registration desk of the conference secretariat when she was told in the presence and within the hearing of other delegates that she could not be registered due to the dishonor of the subject foreign exchange demand draft.She felt herself trembling and unable to look at the people around her.Fortunately, she saw her husband coming toward her.He saved the situation for her by telling the secretariat member that he had already arranged for the payment of the registration fees in cash once he was shown the dishonored demand draft.Only then was petitioner Puyat-Reyes given her name plate and conference kit.At the time the incident took place, petitioner Consuelo Puyat-Reyes was a member of the House of Representatives representing the lone Congressional District of Makati, Metro Manila.She has been an officer of the Manila Banking Corporation and was cited by Archbishop Jaime Cardinal Sin as the top lady banker of the year in connection with her conferment of the Pro-Ecclesia et Pontifice Award.She has also been awarded a plaque of appreciation from the Philippine Tuberculosis Society for her extraordinary service as the Societys campaign chairman for the ninth (9th) consecutive year.On November 23, 1988, the petitioners filed in the Regional Trial Court of Makati, Metro Manila, a complaint for damages, docketed as Civil Case No. 88-2468, against the respondent bank due to the dishonor of the said foreign exchange demand draft issued by the respondent bank.The petitioners claim that as a result of the dishonor of the said demand draft, they were exposed to unnecessary shock, social humiliation, and deep mental anguish in a foreign country, and in the presence of an international audience.On November 12, 1992, the trial court rendered judgment in favor of the defendant (respondent bank) and against the plaintiffs (herein petitioners), the dispositive portion of which states:WHEREFORE, judgment is hereby rendered in favor of the defendant, dismissing plaintiffs complaint, and ordering plaintiffs to pay to defendant, on its counterclaim, the amount of P50,000.00, as reasonable attorneys fees.Costs against the plaintiff.SO ORDERED.[5]The petitioners appealed the decision of the trial court to the Court of Appeals.On July 22, 1994, the appellate court affirmed the decision of the trial court but in effect deleted the award of attorneys fees to the defendant (herein respondent bank) and the pronouncement as to the costs.The decretal portion of the decision of the appellate court states:WHEREFORE, the judgment appealed from, insofar as it dismisses plaintiffs complaint, is hereby AFFIRMED, but is hereby REVERSED and SET ASIDE in all other respect.No special pronouncement as to costs.SO ORDERED.[6]According to the appellate court, there is no basis to hold the respondent bank liable for damages for the reason that it exerted every effort for the subject foreign exchange demand draft to be honored.The appellate court found and declared that:xxxxxxxxxThus, the Bank had every reason to believe that the transaction finally went through smoothly, considering that its New York account had been debited and that there was no miscommunication between it and Westpac-New York.SWIFT is a world wide associationused by almost all banks and is known to be the most reliable mode of communication in the international banking business.Besides, the above procedure, with the Bank as drawer and Westpac-Sydney as drawee, and with Westpac-New York as the reimbursement Bank had been in place since 1960s and there was no reason for the Bank to suspect that this particular demand draft would not be honored by Westpac-Sydney.From the evidence, it appears that the root cause of the miscommunications of the Banks SWIFT message is the erroneous decoding on the part of Westpac-Sydney of the Banks SWIFT message as an MT799 format.However, a closer look at the Banks Exhs. 6 and 7 would show that despite what appears to be an asterisk written over the figure before 99, the figure can still be distinctly seen as a number 1 and not number 7, to the effect that Westpac-Sydney was responsible for the dishonor and not the Bank.Moreover, it is not said asterisk that caused the misleading on the part of the Westpac-Sydney of the numbers 1 to 7, since Exhs. 6 and 7 are just documentary copies of the cable message sent to Westpac-Sydney.Hence, if there was mistake committed by Westpac-Sydney in decoding the cable message which caused the Banks message to be sent to the wrong department, the mistake was Westpacs, not the Banks.The Bank had done what an ordinary prudent person is required to do in the particular situation, although appellants expect the Bank to have done more. The Bank having done everything necessary or usual in the ordinary course of banking transaction, it cannot be held liable for any embarrassment and corresponding damage that appellants may have incurred.[7]xxxxxxxxxHence, this petition, anchored on the following assignment of errors:ITHE HONORABLE COURT OF APPEALS ERRED IN FINDING PRIVATE RESPONDENT NOT NEGLIGENT BY ERRONEOUSLY APPLYING THE STANDARD OF DILIGENCE OF AN ORDINARY PRUDENT PERSON WHEN IN TRUTH A HIGHER DEGREE OF DILIGENCE IS IMPOSED BY LAW UPON THE BANKS.IITHE HONORABLE COURT OF APPEALS ERRED IN ABSOLVING PRIVATE RESPONDENT FROM LIABILITY BY OVERLOOKING THE FACT THAT THE DISHONOR OF THE DEMAND DRAFT WAS A BREACH OF PRIVATE RESPONDENTS WARRANTY AS THE DRAWER THEREOF.IIITHE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT AS SHOWN OVERWHELMINGLY BY THE EVIDENCE, THE DISHONOR OF THE DEMAND DRAFT WAS DUE TO PRIVATE RESPONDENTS NEGLIGENCE AND NOT THE DRAWEE BANK.[8]The petitioners contend that due to the fiduciary nature of the relationship between therespondent bank and its clients, the respondent bank should have exercised a higher degree of diligence than that expected of an ordinary prudent person in the handling of its affairs as in the case at bar.The appellate court, according to petitioners, erred in applying the standard of diligence of an ordinary prudent person only.Petitioners also claim that the respondent bank violated Section 61 of the Negotiable Instruments Law[9]which provides the warranty of a drawer that xxx on due presentment, the instrument will be accepted or paid, or both, according to its tenor xxx. Thus, the petitioners argue that respondent bank should be held liable for damages for violation of this warranty.The petitioners pray this Court to re-examine the facts to cite certain instances of negligence.It is our view and we hold that there is no reversible error in the decision of the appellate court.Section 1 of Rule 45 of the Revised Rules of Court provides that (T)he petition (for review) shall raiseonly questions of lawwhich must be distinctly set forth. Thus, we have ruled that factual findings of the Court of Appeals are conclusive on the parties and not reviewable by this Court and they carry even more weight when the Court of Appeals affirms the factual findings of the trial court.[10]The courtsa quofound that respondent bank did not misrepresent that it was maintaining a deposit account with Westpac-Sydney.Respondent banks assistant cashier explained to Godofredo Reyes, representating PRCI and petitioner Gregorio H. Reyes, how the transfer of Australian dollars would be effected through Westpac-New York where the respondent bank has a dollar account to Westpac-Sydney where the subject foreign exchange demand draft (FXDD No. 209968) could be encashed by the payee, the 20thAsian Racing Conference Secretatriat.PRCI and its Vice-President for finance, petitioner Gregorio H. Reyes, through their said representative, agreed to that arrangement or procedure.In other words, the petitioners are estopped from denying the said arrangement or procedure.Similar arrangements have been a long standing practice in banking to facilitate international commercial transactions.In fact, the SWIFT cable message sent by respondent bank to the drawee bank, Westpac-Sydney, stated that it may claim reimbursement from its New York branch, Westpac-New York where respondent bank has a deposit dollar account.The facts as found by the courtsa quoshow that respondent bank did not cause an erroneous transmittal of its SWIFT cable message to Westpac-Sydney.It was the erroneous decoding of the cable message on the part of Westpac-Sydney that caused the dishonor of the subject foreign exchange demand draft.An employee of Westpac-Sydney in Sydney, Australia mistakenly read the printed figures in the SWIFT cable message of respondent bank as MT799 instead of as MT199.As a result, Westpac-Sydney construed the said cable message as a format for a letter of credit, and not for a demand draft.The appellate court correctly found that the figure before 99 can still be distinctly seen as a number 1 and not number 7. Indeed, the line of a 7 is in a slanting position while the line of a 1 is in a horizontal position.Thus, the number 1 in MT199 cannot be construed as 7.[11]The evidence also shows that the respondent bank exercised that degree of diligenceexpected of an ordinary prudent person under the circumstances obtaining.Prior to the first dishonor of the subject foreign exchange demand draft, the respondent bank advised Westpac-New York to honor the reimbursement claim of Westpac-Sydney and to debit the dollar account[12]of respondent bank with the former.As soon as the demand draft was dishonored, the respondent bank, thinking that the problem was with the reimbursement and without any idea that it was due to miscommunication, re-confirmed the authority of Westpac-New York to debit its dollar account for the purpose of reimbursing Westpac-Sydney.[13]Respondent bank also sent two (2) more cable messages to Westpac-New York inquiring why the demand draft was not honored.[14]With these established facts, we now determine the degree of diligence that banks are required to exert in their commercial dealings.InPhilippine Bank of Commerce v. Court of Appeals[15]upholding a long standing doctrine, we ruled that the degree of diligence required of banks, is more than that of agood father of a familywhere 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 thehighest degree of care.But the said ruling applies only to cases where banks act under their fiduciary capacity, that is, as depositary of the deposits of their depositors.But the same higher degree of diligence is not expected to be exerted by banks in commercial transactions that do not involve their fiduciary relationship with their depositors.Considering the foregoing, the respondent bank was not required to exert more than the diligence of a good father of a family in regard to the sale and issuance of the subject foreign exchange demand draft.The case at bar does not involve the handling of petitioners deposit, if any, with the respondent bank.Instead, the relationship involved was that of a buyer and seller, that is, between the respondent bank as the seller of the subject foreign exchange demand draft, and PRCI as the buyer of the same, with the 20thAsian Racing Conference Secretariat in Sydney, Australia as the payee thereof.As earlier mentioned, the said foreign exchange demand draft was intended for the payment of the registration fees of the petitioners as delegates of the PRCI to the 20thAsian Racing Conference in Sydney.The evidence shows that the respondent bank did everything within its power to prevent the dishonor of the subject foreign exchange demand draft.The erroneous reading of its cable message to Westpac-Sydney by an employee of the latter could not have been foreseen by the respondent bank.Being unaware that its employee erroneously read the said cable message, Westpac-Sydney merely stated that the respondent bank has no deposit account with it to cover for the amount of One Thousand Six Hundred Ten Australian Dollar (AU$1610.00) indicated in the foreign exchange demand draft.Thus, the respondent bank had the impression thatWestpac-New York had not yet made available the amount for reimbursement to Westpac-Sydney despite the fact that respondent bank has a sufficient deposit dollar account with Westpac-New York.That was the reason why the respondent bank had to re-confirm and repeatedly notify Westpac-New York to debit its (respondent banks) deposit dollar account with it and to transfer or credit the corresponding amount to Westpac-Sydney to cover the amount ofthe said demand draft.In view of all the foregoing, and considering that the dishonor of the subject foreign exchange demand draft is not attributable to any fault of the respondent bank, whereas the petitioners appeared to be under estoppel as earlier mentioned, it is no longer necessaryto discuss the alleged application of Section 61 of the Negotiable Instruments Law to the case at bar.In any event, it was established that the respondent bank acted in good faith and that it did not cause the embarrassment of the petitioners in Sydney, Australia.Hence, the Court of Appeals did not commit any reversable error in its challenged decision.WHEREFORE, the petition is hereby DENIED, and the assailed decision of the Court of Appeals is AFFIRMED.Costs against the petitioners.SO ORDERED.Reyes VS. CAFacts: By virtue of the erroneous reading of the cable message by its employee, Westpac- Sydney asserted that the respondent Bank had no deposit account with it to cover for the amount of AU$1610.00 indicated in the foreign exchange demand draft. Consequently, the respondent Bank had the impression that Westpac- New York had not yet made available the amount for reimbursement to Westpac Sidney despite the fact that Respondent Bank has a sufficient deposit dollar account with Westpac New York. Nevertheless, the demand draft was not served. Can the Respondent Bank be held liable?Held: No, when the circumstances show that all efforts were made by the respondent bank to avoid such mistakes.In Phil. Bank of Commerce v. CA, upholding a long standing doctrine, it was ruled that the degree of diligence required of bank is more than that of 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 test the deposit accounts of their depositors. But the same higher degree of diligence is not expected to be executed by banks in commercial instruction that do not involve their fiduciary relationship with their depositors.

Republic of the PhilippinesSUPREME COURTManilaEN BANCG.R. No. L-20583 January 23, 1967REPUBLIC OF THE PHILIPPINES,petitioner,vs.SECURITY CREDIT AND ACCEPTANCE CORPORATION, ROSENDO T. RESUELLO, PABLO TANJUTCO, ARTURO SORIANO, RUBEN BELTRAN, BIENVENIDO V. ZAPA, PILAR G. RESUELLO, RICARDO D. BALATBAT, JOSE SEBASTIAN and VITO TANJUTCO JR.,respondents.Office of the Solicitor General Arturo A. Alafriz and Solicitor E. M. Salva for petitioner.Sycip, Salazar, Luna, Manalo & Feliciano for respondents.Natalio M. Balboa and F. E. Evangelista for the receiver.CONCEPCION,C.J.:This is an originalquo warrantoproceeding, initiated by the Solicitor General, to dissolve the Security and Acceptance Corporation for allegedly engaging in banking operations without the authority required therefor by the General Banking Act (Republic Act No. 337). Named as respondents in the petition are, in addition to said corporation, the following, as alleged members of its Board of Directors and/or Executive Officers, namely:NAMEPOSITION

Rosendo T. ResuelloPresident & Chairman of the Board

Pablo TanjutcoDirector

Arturo SorianoDirector

Ruben BeltranDirector

Bienvenido V. ZapaDirector & Vice-President

Pilar G. ResuelloDirector & Secretary-Treasurer

Ricardo D. BalatbatDirector & Auditor

Jose R. SebastianDirector & Legal Counsel

Vito Tanjutco Jr.Director & Personnel Manager

The record shows that the Articles of Incorporation of defendant corporation1were registered with the Securities and Exchange Commission on March 27, 1961; that the next day, the Board of Directors of the corporation adopted a set of by-laws,2which were filed with said Commission on April 5, 1961; that on September 19, 1961, the Superintendent of Banks of the Central Bank of the Philippines asked its legal counsel an opinion on whether or not said corporation is a banking institution, within the purview of Republic Act No. 337; that, acting upon this request, on October 11, 1961, said legal counsel rendered an opinion resolving the query in the affirmative; that in a letter, dated January 15, 1962, addressed to said Superintendent of Banks, the corporation through its president, Rosendo T. Resuello, one of defendants herein, sought a reconsideration of the aforementioned opinion, which reconsideration was denied on March 16, 1962; that, prior thereto, or on March 9, 1961, the corporation had applied with the Securities and Exchange Commission for the registration and licensing of its securities under the Securities Act; that, before acting on this application, the Commission referred it to the Central Bank, which, in turn, gave the former a copy of the above-mentioned opinion, in line with which, the Commission advised the corporation on December 5, 1961, to comply with the requirements of the General Banking Act; that, upon application of members of the Manila Police Department and an agent of the Central Bank, on May 18, 1962, the Municipal Court of Manila issued Search Warrant No. A-1019; that, pursuant thereto, members of the intelligence division of the Central Bank and of the Manila Police Department searched the premises of the corporation and seized documents and records thereof relative to its business operations; that, upon the return of said warrant, the seized documents and records were, with the authority of the court, placed under the custody of the Central Bank of the Philippines; that, upon examination and evaluation of said documents and records, the intelligence division of the Central Bank submitted, to the Acting Deputy Governor thereof, a memorandum dated September 10, 1962, finding that the corporation is:1. Performing banking functions, without requisite certificate of authority from the Monetary Board of the Central Bank, in violation of Secs. 2 and 6 of Republic Act 337, in thatit is soliciting and accepting deposit from the public and lending out the funds so received;2.Soliciting and accepting savings deposits from the general publicwhen the company's articles of incorporation authorize it only to engage primarily in financing agricultural, commercial and industrial projects, and secondarily, in buying and selling stocks and bonds of any corporation, thereby exceeding the scope of its powers and authority as granted under its charter; consequently such acts areultra-vires:3.Soliciting subscriptions to the corporate shares of stock and accepting deposits on account thereof, without prior registration and/or licensing of such shares or securing exemption therefor, in violation of the Securities Act; and4. That being a private credit and financial institution,it should come under the supervision of the Monetary Board of the Central Bank, by virtue of the transfer of the authority, power, duties and functions of the Secretary of Finance, Bank Commissioner and the defunct Bureau of Banking, to the said Board, pursuant to Secs. 139 and 140 of Republic Act 265 and Secs. 88 and 89 of Republic Act 337." (Emphasis Supplied.) that upon examination and evaluation of the same records of the corporation, as well as of other documents and pertinent pipers obtained elsewhere, the Superintendent of Banks, submitted to the Monetary Board of the Central Bank a memorandum dated August 28, 1962, statinginter alia.11. Pursuant to the request for assistance by the Chief, Intelligence Division, contained in his Memorandum to the Governor dated May 23, 1962 and in accordance with the written instructions of Governor Castillo dated May 31, 1962, an examination of the books and records of the Security Credit and Loans Organizations, Inc. seized by the combined MPD-CB team was conducted by this Department. The examination disclosed the following findings:a. Considering the extent of its operations, the Security Credit and Acceptance Corporation, Inc.,receives deposits from the public regularly. Such deposits are treated in the Corporation's financial statements as conditional subscription to capital stock. Accumulated deposits of P5,000 of an individual depositor may be converted into stock subscription to the capital stock of the Security Credit and Acceptance Corporation at the option of the depositor. Sale of its shares of stock or subscriptions to its capital stock areoffered to the public as part of its regular operations.b. That out of the funds obtained from the public through the receipt of deposits and/or the sale of securities,loans are made regularly to any person by the Security Credit and Acceptance Corporation.A copy of the Memorandum Report dated July 30, 1962 of the examination made by Examiners of this Department of the seized books and records of the Corporation is attached hereto.12. Section 2 of Republic Act No. 337, otherwise known as the General Banking Act, defines the term, "banking institution" as follows:Sec. 2. Only duly authorized persons and entities may engage in the lending of funds obtained from the public through the receipts of deposits or the sale of bonds, securities, or obligations of any kind and all entities regularly conducting operations shall be considered as banking institutions and shall be subject to the provisions of this Act, of the Central Bank Act, and of other pertinent laws. ...13. Premises considered, the examination disclosed that the Security Credit and Acceptance Corporation isregularly lending funds obtained from the receipt of deposits and/or the sale of securities. The Corporation therefore is performing 'banking functions' as contemplated in Republic Act No. 337, without having first complied with the provisions of said Act.Recommendations:In view of all the foregoing, it is recommended that the Monetary Board decide and declare:1. That the Security Credit and Acceptance Corporation is performing banking functions without having first complied with the provisions of Republic Act No. 337, otherwise known as the General Banking Act, in violation of Sections 2 and 6 thereof; and2. That this case be referred to the Special Assistant to the Governor (Legal Counsel) for whatever legal actions are warranted, including, if warranted criminal action against the Persons criminally liable and/orquo warrantoproceedings with preliminary injunction against the Corporation for its dissolution. (Emphasis supplied.)that, acting upon said memorandum of the Superintendent of Banks, on September 14, 1962, the Monetary Board promulgated its Resolution No. 1095, declaring that the corporation is performing banking operations, without having first complied with the provisions of Sections 2 and 6 of Republic Act No. 337;3that on September 25, 1962, the corporation was advised of the aforementioned resolution, but, this notwithstanding, the corporation, as well as the members of its Board of Directors and the officers of the corporation, have been and still are performing the functions and activities which had been declared to constitute illegal banking operations; that during the period from March 27, 1961 to May 18, 1962, the corporation had established 74 branches in principal cities and towns throughout the Philippines; that through a systematic and vigorous campaign undertaken by the corporation, the same had managed to induce the public to open 59,463 savings deposit accounts with an aggregate deposit of P1,689,136.74; that, in consequence of the foregoing deposits with the corporation, its original capital stock of P500,000, divided into 20,000 founders' shares of stock and 80,000 preferred shares of stock, both of which had a par value of P5.00 each, was increased, in less than one (1) year, to P3,000,000 divided into 130,000 founders' shares and 470,000 preferred shares, both with a par value of P5.00 each; and that, according to its statement of assets and liabilities, as of December 31, 1961, the corporation had a capital stock aggregating P1,273,265.98 and suffered, during the year 1961, a loss of P96,685.29. Accordingly, on December 6, 1962, the Solicitor General commenced thisquo warrantoproceedings for the dissolution of the corporation, with a prayer that, meanwhile, a writ of preliminary injunction be issued ex parte, enjoining the corporation and its branches, as well as its officers and agents, from performing the banking operations complained of, and that a receiver be appointed pendente lite.Upon joint motion of both parties, on August 20, 1963, the Superintendent of Banks of the Central Bank of the Philippines was appointed by this Court receiver pendente lite of defendant corporation, and upon the filing of the requisite bond, said officer assumed his functions as such receiver on September 16, 1963.In their answer, defendants admitted practically all of the allegations of fact made in the petition. They, however, denied that defendants Tanjutco (Pablo and Vito, Jr.), Soriano, Beltran, Zapa, Balatbat and Sebastian, are directors of the corporation, as well as the validity of the opinion, ruling, evaluation and conclusions, rendered, made and/or reached by the legal counsel and the intelligence division of the Central Bank, the Securities and Exchange Commission, and the Superintendent of Banks of the Philippines, or in Resolution No. 1095 of the Monetary Board, or of Search Warrant No. A-1019 of the Municipal Court of Manila, and of the search and seizure made thereunder. By way of affirmative allegations, defendants averred that, as of July 7, 1961, the Board of Directors of the corporation was composed of defendants Rosendo T. Resuello, Aquilino L. Illera and Pilar G. Resuello; that on July 11, 1962, the corporation had filed with the Superintendent of Banks an application for conversion into a Security Savings and Mortgage Bank, with defendants Zapa, Balatbat, Tanjutco (Pablo and Vito, Jr.), Soriano, Beltran and Sebastian as proposed directors, in addition to the defendants first named above, with defendants Rosendo T. Resullo, Zapa, Pilar G. Resuello, Balatbat and Sebastian as proposed president, vice-president, secretary-treasurer, auditor and legal counsel, respectively; that said additional officers had never assumed their respective offices because of the pendency of the approval of said application for conversion; that defendants Soriano, Beltran, Sebastian, Vito Tanjutco Jr. and Pablo Tanjutco had subsequently withdrawn from the proposed mortgage and savings bank; that on November 29, 1962 or before the commencement of the present proceedings the corporation and defendants Rosendo T. Resuello and Pilar G. Resuello had instituted Civil Case No. 52342 of the Court of First Instance of Manila against Purificacion Santos and other members of the savings plan of the corporation and the City Fiscal for a declaratory relief and an injunction; that on December 3, 1962, Judge Gaudencio Cloribel of said court issued a writ directing the defendants in said case No. 52342 and their representatives or agents to refrain from prosecuting the plaintiff spouses and other officers of the corporation by reason of or in connection with the acceptance by the same of deposits under its savings plan; that acting upon a petition filed by plaintiffs in said case No. 52342, on December 6, 1962, the Court of First Instance of Manila had appointed Jose Ma. Ramirez as receiver of the corporation; that, on December 12, 1962, said Ramirez qualified as such receiver, after filing the requisite bond; that, except as to one of the defendants in said case No. 52342, the issues therein have already been joined; that the failure of the corporation to honor the demands for withdrawal of its depositors or members of its savings plan and its former employees was due, not to mismanagement or misappropriation of corporate funds, but to an abnormal situation created by the mass demand for withdrawal of deposits, by the attachment of property of the corporation by its creditors, by the suspension by debtors of the corporation of the payment of their debts thereto and by an order of the Securities and Exchange Commission dated September 26, 1962, to the corporation to stop soliciting and receiving deposits; and that the withdrawal of deposits of members of the savings plan of the corporation was understood to be subject, as to time and amounts, to the financial condition of the corporation as an investment firm.In its reply, plaintiff alleged that a photostat copy, attached to said pleading, of the anniversary publication of defendant corporation showed that defendants Pablo Tanjutco, Arturo Soriano, Ruben Beltran, Bienvenido V. Zapa, Ricardo D. Balatbat, Jose R. Sebastian and Vito Tanjutco Jr. are officers and/or directors thereof; that this is confirmed by the minutes of a meeting of stockholders of the corporation, held on September 27, 1962, showing that said defendants had been elected officers thereof; that the views of the legal counsel of the Central Bank, of the Securities and Exchange Commission, the Intelligence Division, the Superintendent of Banks and the Monetary Board above referred to have been expressed in the lawful performance of their respective duties and have not been assailed or impugned in accordance with law; that neither has the validity of Search Warrant No. A-1019 been contested as provided by law; that the only assets of the corporation now consist of accounts receivable amounting approximately to P500,000, and its office equipment and appliances, despite its increased capitalization of P3,000,000 and its deposits amounting to not less than P1,689,136.74; and that the aforementioned petition of the corporation, in Civil Case No. 52342 of the Court of First Instance of Manila, for a declaratory relief is now highly improper, the defendants having already committed infractions and violations of the law justifying the dissolution of the corporation.Although, admittedly, defendant corporation has not secured the requisite authority to engage in banking, defendants deny that its transactions partake of the nature of banking operations. It is conceded, however, that, in consequence of a propaganda campaign therefor, a total of 59,463 savings account deposits have been made by the public with the corporation and its 74 branches, with an aggregate deposit of P1,689,136.74, which has been lent out to such persons as the corporation deemed suitable therefor. It is clear that these transactions partake of the nature of banking, as the term is used in Section 2 of the General Banking Act. Indeed, a bank has been defined as:... a moneyed institute [Talmage vs. Pell 7 N.Y. (3 Seld. ) 328, 347, 348] founded to facilitate the borrowing, lending and safe-keeping of money (Smith vs. Kansas City Title & Trust Co., 41 S. Ct. 243, 255 U.S. 180, 210, 65 L. Ed. 577) and to deal, in notes, bills of exchange, and credits (State vs. Cornings Sav. Bank, 115 N.W. 937, 139 Iowa 338). (Banks & Banking, by Zellmann Vol. 1, p. 46).Moreover, it has been held that:An investment company which loans out the money of its customers, collects the interest and charges a commission to both lender and borrower, is a bank. (Western Investment Banking Co. vs. Murray, 56 P. 728, 730, 731; 6 Ariz 215.)... any person engaged in the business carried on by banks of deposit, of discount, or of circulation is doing a banking business, although but one of these functions is exercised. (MacLaren vs. State, 124 N.W. 667, 141 Wis. 577, 135 Am. S.R. 55, 18 Ann. Cas. 826; 9 C.J.S. 30.)Accordingly, defendant corporation has violated the law by engaging in banking without securing the administrative authority required in Republic Act No. 337.That the illegal transactions thus undertaken by defendant corporation warrant its dissolution is apparent from the fact that the foregoing misuser of the corporate funds and franchise affects the essence of its business, that it is willful and has been repeated 59,463 times, and that its continuance inflicts injury upon the public, owing to the number of persons affected thereby.It is urged, however, that this case should be remanded to the Court of First Instance of Manila upon the authority ofVeraguth vs. Isabela Sugar Co. (57 Phil. 266). In this connection, it should be noted that this Court is vested with original jurisdiction, concurrently with courts of first instance, to hear and decidequo warrantocases and, that, consequently, it is discretionary for us to entertain the present case or to require that the issues therein be taken up in said Civil Case No. 52342. The Veraguth case cited by herein defendants, in support of the second alternative, is not in point, because in said case there were issues of fact which required the presentation of evidence, and courts of first instance are, in general, better equipped than appellate courts for the taking of testimony and the determination of questions of fact. In the case at bar, there is, however, no dispute as to the principal facts or acts performed by the corporation in the conduct of its business. The main issue here is one of law, namely, the legal nature of said facts or of the aforementioned acts of the corporation. For this reason, and because public interest demands an early disposition of the case, we have deemed it best to determine the merits thereof.Wherefore, the writ prayed for should be, as it is hereby granted and defendant corporation is, accordingly, ordered dissolved. The appointment of receiver herein issuedpendente liteis hereby made permanent, and the receiver is, accordingly, directed to administer the properties, deposits, and other assets of defendant corporation and wind up the affairs thereof conformably to Rules 59 and 66 of the Rules of Court. It is so ordered.Republic of the Philippines vs. Security Credit and Acceptance Corporation G.R. No. L-20583, January 23,1967MARCH 16, 2014LEAVE A COMMENTAn investment company which loans out the money of its customers, collects the interest and charges a commission to both lender and borrower, is a bank. It is conceded that a total of 59,463 savings account deposits have been made by the public with the corporation and its 74 branches, with an aggregate deposit of P1,689,136.74, which has been lent out to such persons as the corporation deemed suitable therefore. It is clear that these transactions partake of the nature of banking, as the term is used in Section 2 of the General Banking Act.Facts: The Solicitor General filed a petition for quo warranto to dissolve the Security and Acceptance Corporation, alleging that the latter was engaging in banking operations without the authority required therefor by the General Banking Act (Republic Act No. 337). Pursuant to a search warrant issued by MTC Manila, members of Central Bank intelligence division and Manila police seized documents and records relative to the business operations of the corporation. After examination of the same, the intelligence division of the Central Bank submitted a memorandum to the then Acting Deputy Governor of Central Bank finding that the corporation is engaged in banking operations. It was found that Security and Acceptance Corporation established 74 branches in principal cities and towns throughout the Philippines; that through a systematic and vigorous campaign undertaken by the corporation, the same had managed to induce the public to open 59,463 savings deposit accounts with an aggregate deposit of P1,689,136.74; Accordingly, the Solicitor General commenced this quo warranto proceedings for the dissolution of the corporation, with a prayer that, meanwhile, a writ of preliminary injunction be issued ex parte, enjoining the corporation and its branches, as well as its officers and agents, from performing the banking operations complained of, and that a receiver be appointed pendente lite. Superintendent of Banks of the Central Bank was then appointed by the Supreme Court as receiver pendente lite of defendant corporation.In their defense, Security and Acceptance Corporation averred that the the corporation had filed with the Superintendent of Banks an application for conversion into a Security Savings and Mortgage Bank, with defendants Zapa, Balatbat, Tanjutco (Pablo and Vito, Jr.), Soriano, Beltran and Sebastian as proposed directors.Issue: Whether or not defendant corporation was engaged in banking operations.Held. An investment company which loans out the money of its customers, collects the interest and charges a commission to both lender and borrower, is a bank. It is conceded that a total of 59,463 savings account deposits have been made by the public with the corporation and its 74 branches, with an aggregate deposit of P1,689,136.74, which has been lent out to such persons as the corporation deemed suitable therefore. It is clear that these transactions partake of the nature of banking, as the term is used in Section 2 of the General Banking Act. Hence, defendant corporation has violated the law by engaging in banking without securing the administrative authority required in Republic Act No. 337.That the illegal transactions thus undertaken by defendant corporation warrant its dissolution is apparent from the fact that the foregoing misuser of the corporate funds and franchise affects the essence of its business, that it is willful and has been repeated 59,463 times, and that its continuance inflicts injury upon the public, owing to the number of persons affected thereby.Republic of the PhilippinesSUPREME COURTManilaEN BANCG.R. No. L-20119 June 30, 1967CENTRAL BANK OF THE PHILIPPINES,petitioner,vs.THE HONORABLE JUDGE JESUS P. MORFE and FIRST MUTUAL SAVING AND LOAN ORGANIZATION, INC.,respondents.Natalio M. Balboa, F. E. Evangelista and Mariano Abaya for petitioner.Halili, Bolinao, Bolinao and Associates for respondents.CONCEPCION,C.J.:This is an original action forcertiorari, prohibition and injunction, with preliminary injunction, against an order of the Court of First Instance of Manila, the dispositive part of which reads:WHEREFORE, upon the petitioner filing an injunction bond in the amount of P3,000.00, let a writ of preliminary preventive and/or mandatory injunction issue, restraining the respondents, their agents or representatives, from further searching the premises and properties and from taking custody of the various documents and papers of the petitioner corporation, whether in its main office or in any of its branches; and ordering the respondent Central Bank and/or its co-respondents to return to the petitioner within five (5) days from service on respondents of the writ of preventive and/or mandatory injunction, all the books, documents, and papers so far seized from the petitioner pursuant to the aforesaid search warrant.1wph1.tUpon the filing of the petition herein and of the requisite bond, we issued, on August 14, 1962, a writ of preliminary injunction restraining and prohibiting respondents herein from enforcing the order above quoted.The main respondent in this case, the First Mutual Savings and Loan Organization, Inc. hereinafter referred to as the Organization is a registered non-stock corporation, the main purpose of which, according to its Articles of Incorporation, dated February 14, 1961, is "to encourage . . . and implement savings and thrift among its members, and to extend financial assistance in the form of loans," to them. The Organization has three (3) classes of "members,"1namely: (a)founder members who originally joined the organization and have signed the pre-incorporation papers withthe exclusiverightto vote and be voted for ; (b)participating members with"noright to vote or be voted for" to which categoryallothermembers belong; except (c)honorary members, so made by the board of trustees, "at the exclusive discretion" thereof due to "assistance, honor, prestige or help extended in the propagation" of the objectives of the Organization without any pecuniary expenses on the part of said honorary members.On February 14, 1962, the legal department of the Central Bank of the Philippines hereinafter referred to as the Bank rendered an opinion to the effect that the Organization and others of similar nature are banking institutions, falling within the purview of the Central Bank Act.2Hence, on April 1 and 3, 1963, the Bank caused to be published in the newspapers the following:A N N O U N C E M E N TTo correct any wrong impression which recent newspaper reports on "savings and loan associations" may have created in the minds of the public and other interested parties, as well as to answer numerous inquiries from the public, the Central Bank of the Philippines wishes to announce that all "savings and loan associations" now in operation and other organizations using different corporate names, but engaged in operations similar in nature to said "associations" HAVE NEVER BEEN AUTHORIZED BY THE MONETARY BOARD OF THE CENTRAL BANK OF THE PHILIPPINES TO ACCEPT DEPOSIT OF FUNDS FROM THE PUBLIC NOR TO ENGAGE IN THE BANKING BUSINESS NOR TO PERFORM ANY BANKING ACTIVITY OR FUNCTION IN THE PHILIPPINES.Such institutions violate Section. 2 of the General Banking Act, Republic Act No. 337, should they engage in the "lending of funds obtained from the public through the receipts of deposits or the sale of bonds, securities or obligations of any kind" without authority from the Monetary Board. Their activities and operations are not supervised by the Superintendent of Banks and persons dealing with such institutions do so at their risk.CENTRAL BANK OF THE PHILIPPINESMoreover, on April 23, 1962, the Governor of the Bank directed the coordination of "the investigation and gathering of evidence on the activities of the savings and loan associations which are operating contrary to law." Soon thereafter, or on May 18, 1962, a member of the intelligence division of the Bank filed with the Municipal Court of Manila a verified application for a search warrant against the Organization, alleging that "after close observation and personal investigation, the premises at No. 2745 Rizal Avenue, Manila" in which the offices of the Organization were housed "are being used unlawfully," because said Organization is illegally engaged in banking activities, "by receiving deposits of money for deposit, disbursement, safekeeping or otherwise or transacts the business of a savings and mortgage bank and/or building and loan association . . . without having first complied with the provisions of Republic Act No. 337" and that the articles, papers, or effects enumerated in a list attached to said application, as Annex A thereof.3are kept in said premises, and "being used or intended to be used in the commission of a felony, to wit: violation of Sections 2 and 6 of Republic Act No. 337."4Said articles, papers or effects are described in the aforementioned Annex A, as follows:I. BOOKS OF ORIGINAL ENTRY(1) General Journal(2) Columnar Journal or Cash Book(a) Cash Receipts Journal or Cash Receipt Book(b) Cash Disbursements Journal or Cash Disbursement BookII. BOOKS OF FINAL ENTRY(1) General Ledger(2) Individual Deposits and Loans Ledgers(3) Other Subsidiary LedgersIII. OTHER ACCOUNTING RECORDS(1) Application for Membership(2) Signature Card(3) Deposit Slip(4) Passbook Slip(5) Withdrawal Slip(6) Tellers Daily Deposit Report(7) Application for Loan Credit Statement(8) Credit Report(9) Solicitor's Report(10) Promissory Note(11) I n d o r s e m e n t(12) Co-makers' Statements(13) Chattel Mortgage Contracts(14) Real Estate Mortgage Contracts(15) Trial Balance(16) Minutes Book Board of DirectorsIV. FINANCIAL STATEMENTS(1) Income and Expenses Statements(2) Balance Sheet or Statement of Assets and LiabilitiesV. OTHERS(1) Articles of Incorporation(2) By-Laws(3) Prospectus, Brochures Etc.(4) And other documents and articles which are being used or intended to be used in unauthorized banking activities and operations contrary to law.Upon the filing of said application, on May 18, 1962, Hon. Roman Cancino, as Judge of the said municipal court, issued the warrant above referred to,5commanding the search of the aforesaid premises at No. 2745 Rizal Avenue, Manila, and the seizure of the foregoing articles, there being "good and sufficient reasons to believe" upon examination, under oath, of a detective of the Manila Police Department and said intelligence officer of the Bank that the Organization has under its control, in the address given, the aforementioned articles, which are the subject of the offense adverted to above or intended to be used as means for the commission of said off offense.Forthwith, or on the same date, the Organization commenced Civil Case No. 50409 of the Court of First Instance of Manila, an original action for "certiorari, prohibition, with writ of preliminary injunction and/or writ of preliminary mandatory injunction," against said municipal court, the Sheriff of Manila, the Manila Police Department, and the Bank, to annul the aforementioned search warrant, upon the ground that, in issuing the same, the municipal court had acted "with grave abuse of discretion, without jurisdiction and/or in excess of jurisdiction" because: (a) "said search warrant is a roving commission general in its terms . . .;" (b) "the use of the word 'and others' in the search warrant . . . permits the unreasonable search and seizure of documents which have no relation whatsoever to any specific criminal act . . .;" and (c) "no court in the Philippines has any jurisdiction to try a criminal case against a corporation . . ."The Organization, likewise, prayed that, pending hearing of the case on the merits, a writ of preliminary injunction be issuedex parterestraining the aforementioned search and seizure, or, in the alternative, if the acts complained of have been partially performed, that a writ of preliminary mandatory injunction be forthwith issuedex parte, ordering the preservation of thestatus quoof the parties, as well as the immediate return to the Organization of the documents and papers so far seized under, the search warrant in question. After due hearing, on the petition for said injunction, respondent, Hon. Jesus P. Morfe, Judge, who presided over the branch of the Court of First Instance of Manila to which said Case No. 50409 had been assigned, issued, on July 2, 1962, the order complained of.Within the period stated in said order, the Bank moved for a reconsideration thereof, which was denied on August 7, 1962. Accordingly, the Bank commenced, in the Supreme Court, the present action, against Judge Morfe and the Organization, alleging that respondent Judge had acted with grave abuse of discretion and in excess of his jurisdiction in issuing the order in question.At the outset, it should be noted that the action taken by the Bank, in causing the aforementioned search to be made and the articles above listed to be seized, was predicated upon the theory that the Organization was illegally engaged in banking by receiving money for deposit, disbursement, safekeeping or otherwise, or transacting the business of a savings and mortgage bank and/or building and loan association, without first complying with the provisions of R.A. No. 337, and that the order complained of assumes that the Organization had violated sections 2 and 6 of said Act.6Yet respondent Judge found the searches and, seizures in question to be unreasonable, through the following process of reasoning: the deposition given in support of the application for a search warrant states that the deponent personally knows that the premises of the Organization, at No. 2745 Rizal Avenue, Manila,7were being used unlawfully for banking and purposes. Respondent judge deduce, from this premise, that the deponent " knows specific banking transactions of the petitioner with specific persons," and, then concluded that said deponent ". . . could have, if he really knew of actual violation of the law, applied for a warrant to search and seize only books" or records:covering the specific purportedly illegal banking transactions of the petitioner withspecific personswho are the supposed victims of said illegal banking transactions according to his knowledge. To authorize and seizeallthe records listed in Annex A to said application for search warrant, without reference to specific alleged victims of the purported illegal banking transactions, would be to harass the petitioner, and its officers with a roving commission or fishing expedition for evidence which could be discovered by normal intelligence operations or inspections (not seizure) of books and records pursuant to Section 4 of Republic Act No 337 . . ."The concern thus shown by respondent judge for the civil liberty involved is, certainly, in line with the function of courts, as ramparts of justice and liberty and deserves the greatest encouragement and warmest commendation. It lives up to the highest traditions of the Philippine Bench, which underlies the people's faith in and adherence to the Rule of Law and the democratic principle in this part of the World.At the same time, it cannot be gainsaid the Constitutional injunction against unreasonable searches and seizures seeks to forestall, not purely abstract or imaginary evils, but specific and concrete ones. Indeed, unreasonableness is, in the very nature of things, a condition dependent upon the circumstances surrounding each case, in much the same way as the question whether or not "probable cause" exists is one which must be decided in the light of the conditions obtaining in given situations.Referring particularly to the one at bar, it is not clear from the order complained of whether respondent Judge opined that the above mentioned statement of the deponent to the effect that the Organization was engaged in the transactions mentioned in his deposition deserved of credence or not. Obviously, however, a mere disagreement with Judge Cancino, who issued the warrant, on the credibility of said statement, would not justify the conclusion that said municipal Judge had committed a grave abuse of discretion, amounting to lack of jurisdiction or excess of jurisdiction. Upon the other hand, the failure of the witness to mention particular individuals does not necessarily prove that he had no personal knowledge ofspecificillegal transactions of the Organization, for the witness might be acquainted with specific transactions, even if thenamesof the individuals concerned were unknown to him.Again, the aforementioned order would seem to assume that an illegal banking transaction, of the kind contemplated in the contested action of the officers of the Bank, must always connote the existence of a "victim." If this term is used to denote a party whose interests have beenactually injured, then the assumption is not necessarily justified. The law requiring compliance with certain requirements before anybody can engage in banking obviously seeks to protect the public against actual, as well aspotential, injury. Similarly, we are not aware of any rule limiting the use of warrants to papers or effects which cannot be secured otherwise.The line of reasoning of respondent Judge might, perhaps, be justified if the acts imputed to the Organization consisted ofisolatedtransactions, distinct and different from the type of business in which it is generally engaged. In such case, it may be necessary to specify or identify the parties involved in said isolated transactions, so that the search and seizure be limited to the records pertinent thereto. Such, however, isnotthe situation confronting us. The records suggest clearly that the transactions objected to by the Bank constitute thegeneral patternof the business of the Organization. Indeed, themainpurpose thereof, according to its By-laws, is "to extend financial assistance, in the form of loans, to its members," with funds deposited by them.It is true, that such funds are referred to in the Articles of Incorporation and the By-laws as their "savings." and that the depositors thereof are designated as "members," but, even a cursory examination of said documents will readily show that anybody can be a depositor and thus be a "participating member." In other words, the Organization is, in effect, open to the "public" for deposit accounts, and the funds so raised may be lent by the Organization. Moreover, the power to so dispose of said funds is placed under theexclusiveauthority of the "founder members," and "participating members" areexpressly denied the right to vote or be voted for, their "privileges and benefits," if any, being limited to those which the board of trustees may,in its discretion, determine from time to time. As a consequence, the "membership" of the "participating members" is purely nominal in nature. This situation is fraught, precisely, with the very dangers or evils which Republic Act No. 337 seeks to forestall, by exacting compliance with the requirements of said Act, before the transactions in question could be undertaken.It is interesting to note, also, that the Organization does not seriously contest the main facts, upon which the action of the Bank is based. The principal issue raised by the Organization is predicated upon the theory that the aforementioned transactions of the Organization do not amount to " banking," as the term is used in Republic Act No. 337. We are satisfied, however, in the light of the circumstance obtaining in this case, that the Municipal Judge did not commit a grave abuse of discretion in finding that there was probable cause that the Organization had violated Sections 2 and 6 of the aforesaid law and in issuing the warrant in question, and that, accordingly, and in line withAlverez vs. Court of First Instance(64 Phil. 33), the search and seizure complained of have not been proven to be unreasonable.Wherefore, the order of respondent Judge dated July 2, 1962, and the writ of preliminary mandatory injunction issued in compliance therewith are hereby annulled, and the writ of preliminary injunction issued by this Court on August 14, 1962, accordingly, made permanent, with costs against respondent First Mutual Savings and Loan Organization, Inc. It is so ordered.CENTRAL BANK v. MORFEJuly 5, 2013Leave a commentCENTRAL BANK v. MORFEFACTS: First Mutual Savings and Loan Organization encourage savings among its members and extend financial assistance thru loans. Central bank said that the Organization and others with similar nature are banking institutions and that the Org have never been authorized. CB applied for SW because of the Orgs illegal receipt of deposits of money for deposit, disbursementswithout compliance with RA 337. The SW includes articles such as book of original entryand others. They said that the SW is general in its terms and that the use of the word and others permits the unreasonable search and seizure of documents which have no relation to any specific criminal act.

HELD: SW is upheld. Depending on the circumstances, while in one instance the particular wording of the warrant may make it assume the character of a general warrant, in another context it may be considered perfectly alright. SW only for one offense, if issued for more than two, it is void.Scatter shot warrant. In illegal possession of shabu, marijuana, paraphernalia- one SW ok! SW may be partially void Undetermined amount of marijuana ok! Purpose of Particularity of Description:1. Readily identify the items to be seized, thus prevent them from seizing the wrong items2. Leave officers with no discretion regarding articles to be seized and thus prevent unreasonable searches and seizure Not required that technical precision of description be required narcotics paraphernalia, any and all narcotics, and a quantity of loose heroin- ok! and the like- not necessarily general warrant Where should the requisite description appear- in the caption or body of the warrant? Body sufficient. What if theres discrepancy between the address in the caption and in the body? Not sufficient to invalidate. It is sufficient as long as you can identify the place intended and distinguish it from other places in the community.Republic of the PhilippinesSUPREME COURTManilaTHIRD DIVISIONG.R. No. 123498 November 23, 2007BPI FAMILY BANK,Petitioner,vs.AMADO FRANCO and COURT OF APPEALS,Respondents.D E C I S I O NNACHURA,J.:Banks are exhorted to treat the accounts of their depositors with meticulous care and utmost fidelity. We reiterate this exhortation in the case at bench.Before us is a Petition for Review on Certiorari seeking the reversal of the Court of Appeals (CA) Decision1in CA-G.R. CV No. 43424 which affirmed with modification the judgment2of the Regional Trial Court, Branch 55, Manila (Manila RTC), in Civil Case No. 90-53295.This case has its genesis in an ostensible fraud perpetrated on the petitioner BPI Family Bank (BPI-FB) allegedly by respondent Amado Franco (Franco) in conspiracy with other individuals,3some of whom opened and maintained separate accounts with BPI-FB, San Francisco del Monte (SFDM) branch, in a series of transactions.On August 15, 1989, Tevesteco Arrastre-Stevedoring Co., Inc. (Tevesteco) opened a savings and current account with BPI-FB. Soon thereafter, or on August 25, 1989, First Metro Investment Corporation (FMIC) also opened a time deposit account with the same branch of BPI-FB with a deposit ofP100,000,000.00, to mature one year thence.Subsequently, on August 31, 1989, Franco opened three accounts, namely, a current,4savings,5and time deposit,6with BPI-FB. The current and savings accounts were respectively funded with an initial deposit ofP500,000.00 each, while the time deposit account hadP1,000,000.00 with a maturity date of August 31, 1990. The total amount ofP2,000,000.00 used to open these accounts is traceable to a check issued by Tevesteco allegedly in consideration of Francos introduction of Eladio Teves,7who was looking for a conduit bank to facilitate Tevestecos business transactions, to Jaime Sebastian, who was then BPI-FB SFDMs Branch Manager. In turn, the funding for theP2,000,000.00 check was part of theP80,000,000.00 debited by BPI-FB from FMICs time deposit account and credited to Tevestecos current account pursuant to an Authority to Debit purportedly signed by FMICs officers.It appears, however, that the signatures of FMICs officers on the Authority to Debit were forged.8On September 4, 1989, Antonio Ong,9upon being shown the Authority to Debit, personally declared his signature therein to be a forgery. Unfortunately, Tevesteco had already effected several withdrawals from its current account (to which had been credited theP80,000,000.00 covered by the forged Authority to Debit) amounting toP37,455,410.54, including theP2,000,000.00 paid to Franco.On September 8, 1989, impelled by the need to protect its interests in light of FMICs forgery claim, BPI-FB, thru its Senior Vice-President, Severino Coronacion, instructed Jesus Arangorin10to debit Francos savings and current accounts for the amounts remaining therein.11However, Francos time deposit account could not be debited due to the capacity limitations of BPI-FBs computer.12In the meantime, two checks13drawn by Franco against his BPI-FB current account were dishonored upon presentment for payment, and stamped with a notation "account under garnishment." Apparently, Francos current account was garnished by virtue of an Order of Attachment issued by the Regional Trial Court of Makati (Makati RTC) in Civil Case No. 89-4996 (Makati Case), which had been filed by BPI-FB against Franco et al.,14to recover theP37,455,410.54 representing Tevestecos total withdrawals from its account.Notably, the dishonored checks were issued by Franco and presented for payment at BPI-FB prior to Francos receipt of notice that his accounts were under garnishment.15In fact, at the time the Notice of Garnishment dated September 27, 1989 was served on BPI-FB, Franco had yet to be impleaded in the Makati case where the writ of attachment was issued.It was only on May 15, 1990, through the service of a copy of the Second Amended Complaint in Civil Case No. 89-4996, that Franco was impleaded in the Makati case.16Immediately, upon receipt of such copy, Franco filed a Motion to Discharge Attachment which the Makati RTC granted on May 16, 1990. The Order Lifting the Order of Attachment was served on BPI-FB on even date, with Franco demanding the release to him of the funds in his savings and current accounts. Jesus Arangorin, BPI-FBs new manager, could not forthwith comply with the demand as the funds, as previously stated, had already been debited because of FMICs forgery claim. As such, BPI-FBs computer at the SFDM Branch indicated that the current account record was "not on file."With respect to Francos savings account, it appears that Franco agreed to an arrangement, as a favor to Sebastian, wherebyP400,000.00 from his savings account was temporarily transferred to Domingo Quiaoits savings account, subject to its immediate return upon issuance of a certificate of deposit which Quiaoit needed in connection with his visa application at the Taiwan Embassy. As part of the arrangement, Sebastian retained custody of Quiaoits savings account passbook to ensure that no withdrawal would be effected therefrom, and to preserve Francos deposits.On May 17, 1990, Franco pre-terminated his time deposit account. BPI-FB deducted the amount ofP63,189.00 from the remaining balance of the time deposit account representing advance interest paid to him.These transactions spawned a number of cases, some of which we had already resolved.FMIC filed a complaint against BPI-FB for the recovery of the amount ofP80,000,000.00 debited from its account.17The case eventually reached this Court, and in BPI Family Savings Bank, Inc. v. First Metro Investment Corporation,18we upheld the finding of the courts below that BPI-FB failed to exercise the degree of diligence required by the nature of its obligation to treat the accounts of its depositors with meticulous care. Thus, BPI-FB was found liable to FMIC for the debited amount in its time deposit. It was ordered to payP65,332,321.99 plus interest at 17% per annum from August 29, 1989 until fully restored. In turn, the 17% shall itself earn interest at 12% from October 4, 1989 until fully paid.In a related case, Edgardo Buenaventura, Myrna Lizardo and Yolanda Tica (Buenaventura, et al.),19recipients of aP500,000.00 check proceeding from theP80,000,000.00 mistakenly credited to Tevesteco, likewise filed suit. Buenaventura et al., as in the case of Franco, were also prevented from effecting withdrawals20from their current account with BPI-FB, Bonifacio Market, Edsa, Caloocan City Branch. Likewise, when the case was elevated to this Court docketed as BPI Family Bank v. Buenaventura,21we ruled that BPI-FB had no right to freeze Buenaventura, et al.s accounts and adjudged BPI-FB liable therefor, in addition to damages.Meanwhile, BPI-FB filed separate civil and criminal cases against those believed to be the perpetrators of the multi-million peso scam.22In the criminal case, Franco, along with the other accused, except for Manuel Bienvenida who was still at large, were acquitted of the crime of Estafa as defined and penalized under Article 351, par. 2(a) of the Revised Penal Code.23However, the civil case24remains under litigation and the respective rights and liabilities of the parties have yet to be adjudicated.Consequently, in light of BPI-FBs refusal to heed Francos demands to unfreeze his accounts and release his deposits therein, the latter filed on June 4, 1990 with the Manila RTC the subject suit. In his complaint, Franco prayed for the following reliefs: (1) the interest on the remaining balance25of his current account which was eventually released to him on October 31, 1991; (2) the balance26on his savings account, plus interest thereon; (3) the advance interest27paid to him which had been deducted when he pre-terminated his time deposit account; and (4) the payment of actual, moral and exemplary damages, as well as attorneys fees.BPI-FB traversed this complaint, insisting that it was correct in freezing the accounts of Franco and refusing to release his deposits, claiming that it had a better right to the amounts which consisted of part of the money allegedly fraudulently withdrawn from it by Tevesteco and ending up in Francos accounts. BPI-FB asseverated that the claimed consideration ofP2,000,000.00 for the introduction facilitated by Franco between George Daantos and Eladio Teves, on the one hand, and Jaime Sebastian, on the other, spoke volumes of Francos participation in the fraudulent transaction.On A