PRUDENTIAL BANK vs CA and SPOUSES VALENZUELAFOR: Payment of damages by a bank due to its negligence FACTS: Leticia Tupasi-Valenzuela opened Savings Account No. 5744 and Current Account No. 01016-3 in Prudential Bank, with automatic transfer of funds from the savings account to the current account.On June 1, 1988, she deposited in her savings account Check No. 666B the amount of P35,271.60. Taking into account that deposit and a series of withdrawals, she, as of June 21, 1988 had a balance of P35,993.48 in her savings account and P776.93 in her current account, or total deposits of P36,770.41, with petitioner.Thereafter, private respondent issued Prudential Bank Check No. 983395 in the amount of P11,500.00 post-dated June 20, 1988, in favor of one Belen Legaspi. It was issued to Legaspi as payment for jewelry which private respondent had purchased. Legaspi, who was in jewelry trade, endorsed the check to one Philip Lhuillier, a businessman also in the jewelry business. When Lhuillier deposited the check in his account with the PCIB, Pasay Branch, it was dishonored for being drawn against insufficient funds. Lhuillier's secretary informed the secretary of Legaspi of the dishonor. The latter told the former to redeposit the check. Letecia was surprised to learn of the dishonor of the check. She went to the Valenzuela Branch of Prudential Bank on July 4, 1988, to inquire why her check was dishonored. She approached one Albert Angeles Reyes, the officer in charge of current account, and requested him for the ledger of her current account. She discovered a debit of P300.00 penalty for the dishonor of her Prudential Check No. 983395. She asked why her check was dishonored when there were sufficient funds in her account as reflected in her passbook. Reyes told her that there was no need to review the passbook because the bank ledger was the best proof that she did not have sufficient funds. Then, he abruptly faced his typewriter and started typing.S-Later, it was found out that the check in the amount of P35,271.60 deposited by private respondent on June 1, 1988, was credited in her savings account only on June 24, 1988, or after a period of 23 days. Thus the P11,500.00 check was redeposited by Lhuillier on June 24, 1988, and properly cleared on June 27, 1988.Because of this incident, the bank tried to mollify private respondent by explaining to Legaspi and Lhuillier that the bank was at fault. Since this was not the first incident she had experienced with the bank, she was unmoved by the bank's apologies and she commenced the present suit for damages.ISSUE: Is she entitled to indemnification by the bank for the latters negligence?RULING: Yes. The bank had committed a mistake. It misposted private respondent's check deposit to another account and delayed the posting of the same to the proper account of the Leticia. The mistake resulted to the dishonor of her check. The trial court found "that the misposting of plaintiffs check deposit to another account and the delayed posting of the same to the account of the plaintiff is a clear proof of lack of supervision on the part of the defendant bank."Similarly, the appellate court also found that "while it may be true that the bank's negligence in dishonoring the properly funded check of appellant might not have been attended with malice and bad faith, as appellee [bank] submits, nevertheless, it is the result of lack of due care and caution expected of an employee of a firm engaged in so sensitive and accurately demanding task as banking. In the recent case ofPhilippine National Bank vs. Court of Appeals,the court held that "a bank is under obligation to treat the accounts of its depositors with meticulous care whether such account consists only of a few hundred pesos or of millions of pesos. Responsibility arising from negligence in the performance of every kind of obligation is demandable. While petitioner's negligence in this case may not have been attended with malice and bad faith, nevertheless, it caused serious anxiety, embarrassment and humiliation". Hence the court ruled that the offended party in said case was entitled to recover reasonable moral damages. Even if malice or bad faith was not sufficiently proved in the instant case, the fact remains that petitioner has committed a serious mistake. It dishonored the check issued by the private respondent who turned out to have sufficient funds with petitioner. The bank's negligence was the result of lack of due care and caution required of managers and employees of a firm engaged in so sensitive and demanding business as banking. Accordingly, the award of moral damages by the respondent Court of Appeals could not be said to be in error nor in grave abuse of its discretion.

G.R. No. 102970 May 13, 1993LUZAN SIA,petitioner,vs.COURT OF APPEALS and SECURITY BANK and TRUST COMPANY,respondents.

Civil Law; Deposit; Contract for the use of safety deposit box is a special kind of deposit and the relationship between the parties thereto, with respect to the contents of the box, is that of a bailor and bailee, the bailment being for hire and mutual benefit.

FACTS:The plaintiff rented Safety Deposit Box of the defendant bank at its Binondo Branch wherein he placed his collection of stamps. The said safety deposit box leased by the plaintiff was at the bottom or at the lowest level of the safety deposit boxes of the defendant bank at its aforesaid Binondo Branch. During the floods that took place in 1985 and 1986, floodwater entered into the defendant bank's premises, seeped into the safety deposit box leased by the plaintiff and caused, according to the plaintiff, damage to his stamps collection. The defendant bank rejected the plaintiff's claim for compensation for his damaged stamps collection, so, the plaintiff instituted an action for damages against the defendant bank.

ISSUE:Whether or not the contract that governs the renting of a safety deposit box is that of a lease agreement

HELD:In the recent caseCA Agro-Industrial Development Corp. vs. Court of Appeals,this Court explicitly rejected the contention that a contract for the use of a safety deposit box is a contract of lease governed by Title VII, Book IV of the Civil Code. Nor did We fully subscribe to the view that it is a contract of deposit to be strictly governed by the Civil Code provision on deposit;14it is, as We declared, a special kind of deposit. The prevailing rule in American jurisprudence that the relation between a bank renting out safe deposit boxes and its customer with respect to the contents of the box is that of a bailor and bailee, the bailment for hire and mutual benefit15 has been adopted in this jurisdictionG.R. No. 73765August 26, 1991

HANG LUNG BANK, LTD., petitioner, vs.HON. FELINTRIYE G. SAULOG, Presiding Judge, Regional Trial Court, National Capital Judicial Region, Branch CXLII, Makati, Metro Manila, and CORDOVA CHIN SAN, respondents.

Facts:On July 18, 1979, petitioner Hang Lung Bank, Ltd., which was not doing business in the Philippines, entered into two (2) continuing guarantee agreements with Cordova Chin San in Hongkong whereby the latter agreed to pay on demand all sums of money which may be due the bank from Worlder Enterprises to the extent of the total amount of two hundred fifty thousand Hongkong dollars (HK $250,000).

Worlder Enterprises having defaulted in its payment, petitioner filed in the Supreme Court of Hongkong a collection suit against Worlder Enterprises and Chin San. The Supreme Court of Hongkong issued that Worlder Enterprises and Chin San to pay damages.

Thereafter, petitioner through counsel sent a demand letter to Chin San at his Philippine address but again, no response was made thereto. Hence, on October 18, 1984, petitioner instituted in the court below an action seeking "the enforcement of its just and valid claims against private respondent, who is a local resident, for a sum of money based on a transaction which was perfected, executed and consummated abroad."

Chin San filed a motion to dismiss based on the grounds that petitioner had no legal capacity to sue and that venue was improperly laid and said motion to dismiss is granted.Petitioner filed a motion for the reconsideration of said order but it was denied for lack of merit. Hence, the instant petition.

Issue:Whether petitioner foreign banking corporation has the capacity to file the action.

Held:This Court has not interpreted in prohibiting a foreign corporation not licensed to do business in the Philippines from suing or maintaining an action in Philippine courts. What it seeks to prevent is a foreign corporation doing business in the Philippines without a license from gaining access to Philippine courts.

Since petitioner foreign banking corporation was not doing business in the Philippines, it may not be denied the privilege of pursuing its claims against private respondent for a contract which was entered into and consummated outside the Philippines. Otherwise we will be hampering the growth and development of business relations between Filipino citizens and foreign nationals. Worse, we will be allowing the law to serve as a protective shield for unscrupulous Filipino citizens who have business relationships abroad.

The complaint therefore appears to be one of the enforcement of the Hongkong judgment because it prays for the grant of the affirmative relief given by said foreign judgment.

However, a foreign judgment may not be enforced if it is not recognized in the jurisdiction where affirmative relief is being sought. Hence, in the interest of justice, the complaint should be considered as a petition for the recognition of the Hongkong judgment under Section 50 (b), Rule 39 of the Rules of Court in order that the defendant, private respondent herein, may present evidence of lack of jurisdiction, notice, collusion, fraud or clear mistake of fact and law, if applicable.

WHEREFORE, the questioned orders of the lower court are hereby set aside. Civil Case No. 8762 is reinstated and the lower court is directed to proceed with dispatch in the disposition of said case. This decision is immediately executory. No costs.

HILARIO P. SORIANO VS. PEOPLE ET. AL.G.R. No. 162336 February 01, 2010FACTS:Sometime in 2000, the Office of Special Investigation (OSI) of the Bangko Sentral ng Pilipinas (BSP), through its officers, transmitted a letter dated March 27, 2000 to Jovencito Zuo, Chief State Prosecutor of the Department of Justice (DOJ). The letter attached as annexes five affidavits,[10] which would allegedly serve as bases for filing criminal charges for Estafa thru Falsification of Commercial Documents, in relation to Presidential Decree (PD) No. 1689, and for Violation of Section 83 of RA 337, as amended by PD 1795,[12] against, inter alia, petitioner herein Hilario P. Soriano. These five affidavits, along with other documents, stated that spouses Enrico and Amalia Carlos appeared to have an outstanding loan of P8 million with the Rural Bank of San Miguel (Bulacan), Inc. (RBSM), but had never applied for nor received such loan; that it was petitioner, who was then president of RBSM, who had ordered, facilitated, and received the proceeds of the loan; and that the P8 million loan had never been authorized by RBSM's Board of Directors and no report thereof had ever been submitted to the Department of Rural Banks, Supervision and Examination Sector of the BSP. The letter of the OSI, which was not subscribed under oath, ended with a request that a preliminary investigation be conducted and the corresponding criminal charges be filed against petitioner at his last known address.

Acting on the letter-request and its annexes, State Prosecutor Albert R. Fonacier proceeded with the preliminary investigation and issued a Resolution finding probable cause and correspondingly filed two separate informations against petitioner before the Regional Trial Court (RTC) of Malolos, Bulacan.

The first Information, dated November 14, 2000 was for estafa through falsification of commercial documents, under Article 315, paragraph 1(b), of the Revised Penal Code (RPC), in relation to Article 172 of the RPC and PD 1689. It basically alleged that petitioner and his co-accused, in abuse of the confidence reposed in them as RBSM officers, caused the falsification of a number of loan documents, making it appear that one Enrico Carlos filled up the same, and thereby succeeded in securing a loan and converting the loan proceeds for their personal gain and benefit.The other Information dated November 10, 2000 was for violation of Section 83 of RA 337, as amended by PD 1795. The said provision refers to the prohibition against the so-called DOSRI loans. The information alleged that, in his capacity as President of RBSM, petitioner indirectly secured an P8 million loan with RBSM, for his personal use and benefit, without the written consent and approval of the bank's Board of Directors, without entering the said transaction in the bank's records, and without transmitting a copy of the transaction to the supervising department of the bank. On June 8, 2001, petitioner moved to quash these informations on two grounds: that the court had no jurisdiction over the offense charged, and that the facts charged do not constitute an offense.

Essentially, the petitioner theorized that the characterization of possession is different in the two offenses. If petitioner acquired the loan as DOSRI, he owned the loaned money and therefore, cannot misappropriate or convert it as contemplated in the offense of estafa. Conversely, if petitioner committed estafa, then he merely held the money in trust for someone else and therefore, did not acquire a loan in violation of DOSRI rules.

On August 8, 2001, the trial court denied petitioner's Motion to Quash for lack of merit. Petitioner's Motion for Reconsideration was likewise denied in an Order dated September 5, 2001. Aggrieved, petitioner filed a Petition for Certiorari with the CA, reiterating his arguments before the trial court.

The CA denied the petition. Petitioner's Motion for Reconsideration was likewise denied for lack of merit.

Hence, this petition.ISSUE:Whether the complaint complied with the mandatory requirements provided under Section 3(a), Rule 112 of the Rules of Court and Section 18, paragraphs (c) and (d) of Republic Act No. 7653.

HELD:Yes.

Following the foregoing rulings in Soriano v. Hon. Casanova and Santos-Concio v. Department of Justice, the court holds that the BSP letter, taken together with the affidavits attached thereto, comply with the requirements provided under Section 3(a), Rule 112 of the Rules of Court and Section 18, paragraphs (c) and (d) of RA 7653.The Court held in Soriano v. Hon. Casanova, after a close scrutiny of the letters transmitted by the BSP to the DOJ, that these were not intended to be the complaint, as envisioned under the Rules. They did not contain averments of personal knowledge of the events and transactions constitutive of any offense. The letters merely transmitted for preliminary investigation the affidavits of people who had personal knowledge of the acts of petitioner. The Court ruled that these affidavits, not the letters transmitting them, initiated the preliminary investigation. Since these affidavits were subscribed under oath by the witnesses who executed them before a notary public, then there was substantial compliance with Section 3(a), Rule 112 of the Rules of Court.

Anent the contention that there was no authority from the BSP Governor or the Monetary Board to file a criminal case against Soriano, the court held that the requirements of Section 18, paragraphs (c) and (d) of RA 7653 did not apply because the BSP did not institute the complaint but merely transmitted the affidavits of the complainants to the DOJ.The court further held that since the offenses for which Soriano was charged were public crimes, authority holds that it can be initiated by "any competent person" with personal knowledge of the acts committed by the offender. Thus, the witnesses who executed the affidavits clearly fell within the purview of "any competent person" who may institute the complaint for a public crime.

The ruling in Soriano v. Hon. Casanova has been adopted and elaborated upon in the recent case of Santos-Concio v. Department of Justice, the Court held:The Court is not unaware of the practice of incorporating all allegations in one document denominated as "complaint-affidavit." It does not pronounce strict adherence to only one approach, however, for there are cases where the extent of one's personal knowledge may not cover the entire gamut of details material to the alleged offense. The private offended party or relative of the deceased may not even have witnessed the fatality, in which case the peace officer or law enforcer has to rely chiefly on affidavits of witnesses. The Rules do not in fact preclude the attachment of a referral or transmittal letter similar to that of the NBI-NCR. Thus, in Soriano v. Casanova, the Court held:A close scrutiny of the letters transmitted by the BSP and PDIC to the DOJ shows that these were not intended to be the complaint envisioned under the Rules. It may be clearly inferred from the tenor of the letters that the officers merely intended to transmit the affidavits of the bank employees to the DOJ. Nowhere in the transmittal letters is there any averment on the part of the BSP and PDIC officers of personal knowledge of the events and transactions constitutive of the criminal violations alleged to have been made by the accused. In fact, the letters clearly stated that what the OSI of the BSP and the LIS of the PDIC did was to respectfully transmit to the DOJ for preliminary investigation the affidavits and personal knowledge of the acts of the petitioner. These affidavits were subscribed under oath by the witnesses who executed them before a notary public. Since the affidavits, not the letters transmitting them, were intended to initiate the preliminary investigation, we hold that Section 3(a), Rule 112 of the Rules of Court was substantially complied with.

Citing the ruling of this Court in Ebarle v. Sucaldito, the Court of Appeals correctly held that a complaint for purposes of preliminary investigation by the fiscal need not be filed by the offended party. The rule has been that, unless the offense subject thereof is one that cannot be prosecuted de oficio, the same may be filed, for preliminary investigation purposes, by any competent person. The crime of estafa is a public crime which can be initiated by "any competent person." The witnesses who executed the affidavits based on their personal knowledge of the acts committed by the petitioner fall within the purview of "any competent person" who may institute the complaint for a public crime.FIRST PHILIPPINE INTERNATIONAL BANK252 SCRA 259Producers Bank (now called First Philippine International Bank), which has been under conservatorship since 1984, is the owner of 6 parcels of land. The Bank had an agreement with Demetrio Demetria and Jose Janolo for the two to purchase the parcels of land for a purchase price of P5.5 million pesos. The said agreement was made by Demetria and Janolo with the Banks manager, Mercurio Rivera. Later however, the Bank, through its conservator, Leonida Encarnacion, sought the repudiation of the agreement which came months after the perfection of the contract and it alleged that Rivera was not authorized to enter into such an agreement, hence there was no valid contract of sale. Subsequently, Demetria and Janolo sued Producers Bank. The regional trial court ruled in favor of Demetria et al. The Bank filed an appeal with the Court of Appeals. Meanwhile, Henry Co, who holds 80% shares of stocks with the said Bank, filed a motion for intervention with the trial court. The trial court denied the motion since the trial has been concluded already and the case is now pending appeal. Subsequently, Co, assisted by ACCRA law office, filed a separate civil case against Demetria and Janolo seeking to have the purported contract of sale be declared unenforceable against the Bank. Demetria et al argued that the second case constitutes forum shopping.ISSUES:

1. Whether or not there is forum shopping.2. Whether or not there is a perfected contract of sale.3. Did the bank conservator have the unilateral power to repudiate the authority of the bank officers and/or to revoke the said contract?

HELD:1. Yes. There is forum shopping because there is identity of interest and parties between the first case and the second case. There is identity of interest because both cases sought to have the agreement, which involves the same property, be declared unenforceable as against the Bank. There is identity of parties even though the first case is in the name of the bank as defendant, and the second case is in the name of Henry Co as plaintiff. There is still forum shopping here because Henry Co essentially represents the bank. Both cases aim to have the bank escape liability from the agreement it entered into with Demetria et al. The Supreme Court did not lay down any disciplinary action against the ACCRA lawyers but they were warned that a repetition will be dealt with more severely.2. Yes. There is a perfected contract of sale because the bank manager, Rivera, entered into the agreement with apparent authority. This apparent authority has been duly proved by the evidence presented which showed that in all the dealings and transactions, Rivera participated actively without the opposition of the conservator. In fact, in the advertisements and announcements of the bank, Rivera was designated as the go-to guy in relation to the disposition of the Banks assets.It is definite that the plaintiffs wanted to purchase the property and it was precisely for this purpose that they met with defendant Rivera, Manager of the Property Management Department of the defendant bank, in early August 1987. the plaintiffs' acceptance of the price on September 30, 1987, are not, in themselves, formal contracts of sale. They are however clear embodiments of the fact that a contract of sale was perfected between the parties, such contract being binding in whatever form it may have been entered into3. No. he bank conservator don't have the unilateral power to repudiate the authority of the bank officers and/or to revoke the said contract.The petitioner Bank was under a conservator placed by the Central Bank during the time that the negotiation took place. Petitioners invoked Section 28-A of Republic Act No. 265 (otherwise known as the Central Bank Act) contended that the conservator has the power to revoke or overrule actions of the management or the board of directors of a bank. Section 28-A states that:Monetary Board may appoint a conservator to take charge of the assets, liabilities, and the management of that institution, collect all monies and debts due said institution and exercise all powers necessary to preserve the assets of the institution, reorganize the management thereof, and restore its viability. He shall have the power to overrule or revoke the actions of the previous management and board of directors of the bank or non-bank financial intermediary performing quasi-banking functions, any provision of law to the contrary notwithstanding, and such other powers as the Monetary Board shall deem necessary.While admittedly, the Central Bank law gives vast and far-reaching powers to the conservator of a bank, it must be pointed out that such powers must be related to the "(preservation of) the assets of the bank, (the reorganization of) the management thereof and (the restoration of) its viability." Such powers, enormous and extensive as they are, cannot extend to the post-facto repudiation of perfected transactions, otherwise they would infringe against the non-impairment clause of the Constitution. Obviously, therefore, Section 28-A merely gives the conservator power to revoke contracts that are, under existing law, deemed to be defective i.e., void, voidable, unenforceable or rescissible. Hence, the conservator merely takes the place of a bank's board of directors. What the said board cannot do such as repudiating a contract validly entered into under the doctrine of implied authority the conservator cannot do either. Ineluctably, his power is not unilateral and he cannot simply repudiate valid obligations of the Bank. His authority would be only to bring court actions to assail such contracts as he has already done so in the instant case. A contrary understanding of the law would simply not be permitted by the Constitution. Neither by common sense. To rule otherwise would be to enable a failing bank to become solvent, at the expense of third parties, by simply getting the conservator to unilaterally revoke all previous dealings which had one way or another or come to be considered unfavorable to the Bank, yielding nothing to perfected contractual rights nor vested interests of the third parties who had dealt with the Bank.Abacus Real Estate Development v Manila Banking Corp G.R. No. 162270. April 06,2005

The appointment of a receiver operates to suspend the authority of the bank and of its directors and officers over its property and effects, such authority being reposed in the receiver, and in this respect, the receivership is equivalent to an injunction to restrain the bank officers from intermeddling with the property of the bank in any way.Facts: Manila Banking Corporation (Manila Bank, for brevity), owns a 1,435-square meter parcel of land located along Gil Puyat Avenue Extension, Makati City and covered by Transfer Certificate of Title (TCT) No. 132935 of the Registry of Deeds of Makati. Prior to 1984, the bank began constructing on said land a 14-storey building. Not long after, however, the bank encountered financial difficulties that rendered it unable to finish construction of the building. Central Bank of the Philippines, nowBangko Sentral ng Pilipinas, ordered the closure of Manila Bank and placed it under receivership, with Feliciano Miranda, Jr. being initially appointed as Receiver. The legality of the closure was contested by the bank before the proper court. Manila Banks then acting president, the late Vicente G. Puyat, in a bid to save the banks investment, started scouting for possible investors who could finance the completion of the building earlier mentioned.A group of investors, represented by Calixto Y. Laureano (hereafter referred to asLaureano group), wrote Vicente G. Puyat offering to lease the building for ten (10) years and to advance the cost to complete the same, with the advanced cost to be amortized and offset against rental payments during the term of the lease. Likewise, the letter-offer stated that in consideration of advancing the construction cost, the group wanted to be given the exclusive option to purchase the building and the lot on which it was constructed. Vicente G. Puyat accepted the Laureano groups offer and granted it an exclusive option to purchase the lot and building for One Hundred Fifty Million Pesos (P150,000,000.00). Later, or on October 31, 1989, the building was leased to MEQCO for a period of ten (10) years pursuant to a contract of lease bearing that date. MEQCO subleased the property to petitionerAbacus Real Estate Development Center, Inc. (Abacus, for short), a corporation formed by the Laureano group for the purpose, under identical provisions as that of the October 31, 1989 lease contract between Manila Bank and MEQCO.Issue: Whether or not Vicente Puyat, acting as president of Manila Bank, has the power to sell the disputed properties.Held: There can be no quibbling that respondent Manila Bank was under receivership, pursuant to Central Banks MB Resolution No. 505 dated May 22, 1987, at the time the late Vicente G. Puyat granted the exclusive option to purchase to the Laureano group of investors. Owing to this defining reality, the appellate court was correct in declaring that Vicente G. Puyat was without authority to grant the exclusive option to purchase the lot and building in question. The invocation by the appellate court of the following pronouncement inVillanueva vs. Court of Appealswas apropos, to say the least the assets of the bank pass beyond its control into the possession and control of the receiver whose duty it is to administer the assets for the benefit of the creditors of the bank. Thus, the appointment of a receiver operates to suspend the authority of the bank and of its directors and officers over its property and effects, such authority being reposed in the receiver, and in this respect, the receivership is equivalent to an injunction to restrain the bank officers from intermeddling with the property of the bank in any way. With respondent bank having been already placed under receivership, its officers, inclusive of its acting president, Vicente G. Puyat, were no longer authorized to transact business in connection with the banks assets and property. Clearly then, the exclusive option to purchase granted by Vicente G. Puyat was and still is unenforceable against Manila Bank.Concededly, a contract unenforceable for lack of authority by one of the parties may be ratified by the person in whose name the contract was executed. However, even assuming, ingratiaargumenti, that Atty. Renan Santos, Manila Banks receiver, approved the exclusive option to purchase granted by Vicente G. Puyat, the same would still be of no force and effect.SAlud vs cbp GR. L- 17630, August 19, 1986

Facts: The Monetary Board adopted 2 resolutions forbidding the Muntinlupa Bank to do business, designating a statutory receiver, and ordering the liquidation of the same bank after confirmation that it is insolvent.

Muntinlupa bank opposed the liquidation and alleged that the action of the Monetary Board was premature and void since there was no prior effort to reorganize the management of the bank and restore its viability and that it was made arbitrarily and in bad faith.

The Regional Trial Court, treating the opposition of the bank as a motion to dismiss, ruled in favor of it and declared the action of the Monetary Board arbitrary after finding that the bank had more assets than liabilities. The Intermediate Appellate Court reversed the decision and gave due course to the petition for liquidation. Hence this petition.Issue:1. Whether or not the action of the Monetary Board is within the jurisdiction of the Regional Trial Court and may rule on its validity based on arbitrariness and bad faith.

Held:1. Resolutions of the Monetary Board forbidding banking institutions to do business; or appointing a receiver to take charge of the banks assets and liabilities; or determining whether the banking institutions may be rehabilitated, or should be liquidated and appointing a liquidator towards this end are by law final and executory.

But they can be set aside by the court on one specific ground, and that is, if there is convincing proof that the action is plainly arbitrary and made in bad faith.

The Central Bank concedes this power in the court, but insists that that setting aside cannot be done in the same proceeding for assistance in liquidation, but in a separate action instituted specifically for the purpose. However, there is no provision of law which expressly or even by implication imposes the requirement for a separate proceeding exclusively occupied with adjudicating this issue. Hence, such action may be asserted as an affirmative defense of a counterclaim in the proceeding for assistance in liquidation that the Central Bank has filed in the Regional Trial Court.Rural bank of buhi vs CAGR L-616189 June 20, 1988

Facts:

The petitioner Rural Bank of Buhi, Inc. is a juridical entity existing under the laws of the Philippines.

An examination of the books and affairs ofBuhiwas ordered conducted by the Rural Banks and Savings and Loan Association (DRBSLA), Central Bank of the Philippines, which by law, has charge of the supervision and examination of rural banks and savings and loan associations in the Philippines. However, said petitioner refused to be examined and as a result thereof, financial assistance was suspended.

Later, a general examination of the bank's affairs and operations was conducted and there were found by DRBSLA, massive irregularities in its operations consisting of loans to unknown and fictitious borrowers and past due amounts in favor of the Central Bank. The promissory notes evidencing these loans were rediscounted with the Central Bank for cash. As a result thereof, the bank became insolvent and prejudiced its depositors and creditors.

A report submitted recommending to the Monetary Board of the Central Bank the placing ofBuhiunder receivership in accordance with Section 29 of Republic Act No. 265, as amended, the designation of the Director, DRBSLA, as receiver thereof. The Monetary Board, finding the report to be true, adopted Resolution No. 583 placingBuhi,petitioner herein, under receivership and designated respondent as Receiver, pursuant to the provisions of Section 29 of Republic Act No. 265 as amended.

In a letter, the respondent, as receiver, implemented and carried out said Monetary Board Resolution No. 583 by authorizing deputies of the receiver to take control, possession and charge ofBuhi,its assets and liabilities.

Issue:1. MAY THE MONETARY BOARD (MB) OF THE CENTRAL BANK (CB) PLACE A RURAL BANK UNDER RECEIVERSHIP WITHOUT PRIOR NOTICE TO SAID RURAL BANK TO ENABLE IT TO BE HEARD ON THE GROUND RELIED UPON FOR SUCH RECEIVERSHIP?

2. WHERE THE MONETARY BOARD (MB) OF THE CENTRAL BANK (CB) HAS PLACED A RURAL BANK UNDER RECEIVERSHIP, IS SUCH ACTION OF THE MONETARY BOARD (MB) SUBJECT TO JUDICIAL REVIEW?

Held:

1. Yes, there is no requirement whether express or implied, that a hearing be first conducted before a banking institution may be placed under receivership. On the contrary, the law is explicit as to the conditions prerequisite to the action of the Monetary Board to forbid the institution to do business in the Philippines.

2. Yes, a receiver may be made by the Monetary Board without notice and hearing but its action is subject to judicial inquiry to insure the protection of the banking institution.

FIDELITY SAVINGS AND MORTGAGE BANK vs. HON. PEDRO D. CENZON & SPOUSES TIMOTEO AND OLIMPIA SANTIAGOG.R. No. L-46208, April 5, 1990

Facts:Private respondent spouses deposited with the petitioner bank the amount of P50,000.00 under savings and another P50,000.00 under time deposit with the aggregate amount of P100,000.00 in deposits. The Monetary Board found that the petitioner bank is insolvent, thus, prohibited to do business in the Philippines and that the Acting Superintendent of Banks to take charge, in the name of the Monetary Board, of the bank's assets. The PDIC paid the plaintiffs P10,000.00 on the aggregate deposits of P100,000.00, leaving a deposit balance of P90,000.00.

Thereafter, the Monetary Board directed the liquidation of the affairs of petitioner bank. However, the liquidation proceeding has not been terminated. Thus, private respondents, through their counsel, sent demand letters to petitioner, demanding the immediate payment of the savings and time deposits.

Issues: 1. Whether or not an insolvent bank may be adjudged to pay interest on unpaid deposits even after its closure by the Central Bank?2. Whether or not an insolvent bank may be adjudged to pay moral and exemplary damages, attorney's fees and costs?

Held:1. No. It is settled jurisprudence that a banking institution which has been declared insolvent and subsequently ordered closed by the Central Bank of the Philippines cannot be held liable to pay interest on bank deposits which accrued during the period when the bank is actually closed and non-operational.

In The Overseas Bank of Manila vs. Court of Appeals and Tony D. Tapia, it was held that: Unless a bank can lend money, engage in international transactions, acquire foreclosed mortgaged properties or their proceeds and generally engage in other banking and financing activities from which it can derive income, it is inconceivable how it can carry on as a depository obligated to pay stipulated interest.Consequently, it should be deemed read into every contract of deposit with a bank that the obligation to pay interest on the deposit ceases the moment the operation of the bank is completely suspended by the duly constituted authority, the Central Bank.

2. No. There was no fraud or bad faith on the part of petitioner bank and the other defendants in accepting the deposits of private respondents. There is no valid basis for the award of exemplary damages which is supposed to serve as a warning to other banks from dissipating their assets in anomalous transactions. It was not proven by private respondents, and neither was there a categorical finding made by the trial court, that petitioner bank actually engaged in anomalous real estate transactions.

In the absence of fraud, bad faith, malice or wanton attitude, petitioner bank may, therefore, not be held responsible for damages which may be reasonably attributed to the non-performance of the obligation. Thus, it is apparent that private respondents are not justifiably entitled to the payment of moral and exemplary damages and attorney's fees.KAREN E. SALVACION, minor, thru Federico N. Salvacion, Jr., father and Natural Guardian, and Spouses FEDERICO N. SALVACION, JR., and EVELINA E. SALVACION vs. CENTRAL BANK OF THE PHILIPPINES, CHINA BANKING CORPORATION and GREG BARTELLI y NORTHCOTTG.R. No. 94723 August 21, 1997

FACTS: Greg Bartelli, an American tourist, was arrested for committing four counts of rape and serious illegal detention against Karen Salvacion. Police recovered from him several dollar checks and a dollar account in the China Banking Corp. He was, however, able to escape from prison. In a civil case filed against him, the trial court awarded Salvacion moral, exemplary and attorneys fees amounting to almost P1,000,000.00.Salvacion tried to execute the judgment on the dollar deposit of Bartelli with the China Banking Corp. but the latter refused arguing that Section 11 of Central Bank Circular No. 960 exempts foreign currency deposits from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever. Salvacion therefore filed this action for declaratory relief in the Supreme Court.ISSUE: Should Section 113 of Central Bank Circular No. 960 and Section 8 of Republic Act No. 6426, as amended by PD 1246, otherwise known as the Foreign Currency Deposit Act be made applicable to a foreign transient?HELD: NO.The provisions of Section 113 of Central Bank Circular No. 960 and PD No. 1246, insofar as it amends Section 8 of Republic Act No. 6426, are hereby held to be INAPPLICABLE to this case because of its peculiar circumstances. Respondents are hereby required to comply with the writ of execution issued in the civil case and to release to petitioners the dollar deposit of Bartelli in such amount as would satisfy the judgment.Supreme Court ruled that the questioned law makes futile the favorable judgment and award of damages that Salvacion and her parents fully deserve. It then proceeded to show that the economic basis for the enactment of RA No. 6426 is not anymore present; and even if it still exists, the questioned law still denies those entitled to due process of law for being unreasonable and oppressive. The intention of the law may be good when enacted. The law failed to anticipate the iniquitous effects producing outright injustice and inequality such as the case before us.The SC adopted the comment of the Solicitor General who argued that the Offshore Banking System and the Foreign Currency Deposit System were designed to draw deposits from foreign lenders and investors and, subsequently, to give the latter protection. However, the foreign currency deposit made by a transient or a tourist is not the kind of deposit encouraged by PD Nos. 1034 and 1035 and given incentives and protection by said laws because such depositor stays only for a few days in the country and, therefore, will maintain his deposit in the bank only for a short time. Considering that Bartelli is just a tourist or a transient, he is not entitled to the protection of Section 113 of Central Bank Circular No. 960 and PD No. 1246 against attachment, garnishment or other court processes.Further, the SC said: In fine, the application of the law depends on the extent of its justice. Eventually, if we rule that the questioned Section 113 of Central Bank Circular No. 960 which exempts from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever, is applicable to a foreign transient, injustice would result especially to a citizen aggrieved by a foreign guest like accused Greg Bartelli. This would negate Article 10 of the New Civil Code which provides that in case of doubt in the interpretation or application of laws, it is presumed that the lawmaking body intended right and justice to prevail.

REPUBLICvs CABRINI GREEN & ROSS, INC., MICHAEL J. FINDLAY and JANE GELBERGG.R.No. 154522, May 5 2006Doctrine: Freeze order on bank account used related to unlawful activities regarding anti-money laundering; It is solely the CA which has the authority to issue a freeze order as well as to extend itseffectivity.Facts:The Anti-Money Laundering Council (AMLC) issued freeze orders against various bank accounts of respondents Cabrini Green & Ross, et al. whose bank accounts were previously foundprima facieto be related to the unlawful activities of respondents.RA 9160 provides that a freeze order issued by the AMLC is effective for a period not exceeding 15 days unless extendedupon order of the court. So AMLC filed with the CA petitions for extension ofeffectivityof its freeze orders before the lapse of the period ofeffectivity.

TheAMLC invoked the jurisdiction of the CA in the belief that the power given to the CA to issue a temporary restraining order (TRO) or writ of injunction against any freeze order issued by the AMLC carried with it the power to extend theeffectivityof a freeze order.

However, the CA disagreed and dismissed the petitions. Thus, AMLC filed petitions with the SC.Congress enacted RA 9194 (An Act Amending Republic Act No. 9160, Otherwise Known as the Anti-Money Laundering Act of 2001) which amended Section 10 of RA 9160 as follows:

SEC. 7.Section 10 of [RA 9160] is hereby amended to read as follows:SEC. 10.Freezing of Monetary Instrument or Property.TheCourt of Appeals, upon applicationexparteby the AMLC and after determination that probable cause exists that any monetary instrument or property is in any way related to an unlawful activity as defined in Sec. 3(i) hereof, may issue a freeze order which shall be effective immediately. The freeze order shall be for a period of twenty (20) daysunless extended by the court.

Section 12 of RA 9194 further provides:SEC 12.Transitory Provision.Existing freeze orders issued by the AMLC shall remain in force for a period of thirty (30) days after theeffectivityof this Act, unless extended by theCourt of Appeals.

Issue: Is the CA vested with jurisdiction to extend theeffectivityof a freeze order?

Held: Yes. The amendment by RA 9194 of RA 9160 erased any doubt on the jurisdiction of the CA over the extension of freeze orders. As the law now stands, it is solely the CA which has the authority to issue a freeze order as well as to extend itseffectivity. It also has the exclusive jurisdiction to extend existing freeze orders previously issued by the AMLCvis--visaccounts and deposits related to money-laundering activities.Bank of America, NT &SA v. Court of AppealsG.R. No. 105395 December 10, 1993

FACTS:Bank of America, NT & SA, Manila, received by registered mail art Irrevocable Letter of Credit purportedly issued by Bank of Ayudhya, Sarnyaek Branch, for the account of General Chemicals, Ltd., of Thailand in the amount to coverthe sale of Plastic ropes and "agricultural files," with the Bank of America as advising bank and Inter-Resin Industrial Corporation as beneficiary. Upon receipt of the letter-advice with the letter of credit, Inter-Resin sent its lawyer to Bank of America to have the letter of credit confirmed. The bank did not confirm the same. The bank employee in charge of letters of credit, explained that there was no need to confirm because the letter of credit would not have been transmitted if it were not genuine. Inter-Resin sought to make a partial availment under the letter of credit by submitting to Bank of America invoices, covering the shipment of 24,000 bales of polyethylene rope to General Chemicals valued at US$1,320,600.00, the corresponding packing list, export declaration and bill of lading. Finally, after being satisfied that Inter-Resin's documents conformed with the conditions expressed in the letter of credit, Bank of America issued in favor of Inter-Resin a Cashier's Check the peso equivalent of the draft. Bank of America wrote Bank of Ayudhya advising the latter of the availment under the letter of credit and sought the corresponding reimbursernent therefor. Meanwhile, Inter-Resin, presented to Bank of America the documents for the second availment under the same letter of credit. Immediately upon receipt of a telex from Bank of Ayudhya declaring the letter of credit fraudulent, Bank of America stopped the processing of Inter-Resin's documents and sent a telex to its branch office in Bangkok, Thailand, requesting assistance in determining the authenticity of the letter of credit. Bank of America sued Inter-Resin for the recovery of the peso equivalent of the draft on the partial availment of the now disowned letter of credit.

ISSUE:Whether or not Bank of America acted merely as an advising bank or a confirming bank.HELD:Bank of America has, in fact, only been an advising, and not a confirming bank, and is clearly evident, among other things, by the provisions of the letter of credit itself, the petitioner bank's letter of advice, its request for payment of advising fee, and the admission of Inter-Resin that it has paid the same. That Bank of America has asked Inter-Resin to submit documents required by the letter of credit and eventually has paid the proceeds thereof, did not obviously make it a confirming bank. In addition, the fact, that the draft required by the letter of credit is to be drawn under the account of General Chemicals (buyer) only means that the same had to be presented to Bank of Ayudhya (issuing, bank) for payment. It may be significant to recall that the letter of credit is an engagement of the issuing bank, not the advising bank, to pay the draft. No less important is that Bank of America's letter of 11 March 1981 has expressly stated that the enclosure is solely an advise of credit opened by the abovementioned correspondent and conveys no engagement by us." This written reservation by Bank of America in limiting its obligation only to being an advising bank is in consonance with the provisions of U.C.P.As anadvising or notifying bank,Bankof America didnot incur anyobligation more than just notifyingInter-Resinofthe letter of credit issued in its favor, let alone to confirm the letter of credit. The bare statement of the bank employee, mentioned above, in responding to the inquiry made by Atty. Tanay, Inter-Resin's representative, on the authenticity of the letter of credit certainly did not have the effect of novation as regards the letter of credit and Bank ofAmerica's letter of advise, nor can it justify the conclusion that the bank must now assume total liability on the letterof credit. Indeed, Inter-Resin itself cannot claim to have been free from fault. As the seller, the issuance ofthe letter of credit should have obviously been a great concern to it. It would have, in fact, been strange if it did not, prior to the letter of credit, enter into a contract, or negotiated at the very least, with General Chemicals. In the ordinary course of business, the perfection of contract precedes the issuance of a letter of credit.

TOPIC: Whether Savings and Current Accounts are Preferred CreditsCase Name:Tan Tiong Tick vs American Apothecaries Co. et.al.G.R. No. L-43682, March 31, 1938

Facts:In the proceedings for the liquidation of the Mercantile Bank of China, the appellant presented a written claim alleging: that when this bank ceased to operate on September 19, 1931, his current account in said bank showed a balance of P9,657.50 in his favor; that on the same date his savings account in the said bank also showed a balance in his favor of P20,000 plus interest then due amounting to P194.78; that on the other hand, he owed the bank in the amount of P13,262.58, the amount of the trust receipts which he signed because of his withdrawal from the bank of certain merchandise consigned to him without paying the drafts drawn upon him by the remittors thereof; that the credits thus described should be set off against each other according to law, and on such set off being made it appeared that he was still the creditor of the bank in the sum of P16,589.70.The appellant ask the court that he be paid the aforementioned balance and that the same shall be declared as preferred credit.Issue: Whether or not the savings and current deposits of Tan Tiong Tick are to be considered as preferred credits.Ruling:No, the savings and current deposits of Tan Tiong Tick with Mercantile Bank of China is not considered to be a preferred credit. Thus, under the Code of Commerce, these accounts have converted into simple commercial loans.The Code of Commerce contains express provisions regulating deposits of the nature under consideration, and they are articles 303 to 310. The first and the second to the last of the said articles are as follows:ART. 303. In order that a deposit may be considered commercial, it is necessary 1. That the depositary, at least, be a merchant.2. That the things deposited be commercial objects.3. That the deposit constitute in itself a commercial transaction, or be made by reason or as a consequently of commercial transaction.ART. 309. Whatever, with the consent of the depositor, the depositary disposes of the articles on deposit either for himself or for his business, or for transactions intrusted to him by the former, the rights and obligations of the depositary and of the depositor shall cease, and the rules and provisions applicable to the commercial loans, commissions, or contract which took the place of the deposit shall be observed.In accordance with article 309, the so-called current account and savings deposits have lost the character of deposits properly so-called, and are converted into simple commercial loans, because the bank disposed of the funds deposited by the claimant for its ordinary transactions and for the banking business in which it was engaged. That the bank had the authority of the claimant to make use of the money deposited on current and savings account is deducible from the fact that the bank has been paying interest on both deposits, and the claimant himself asks that he be allowed interest up to the time when the bank ceased its operations. Moreover, according to section 125 of the Corporation Law and 9 of Act No. 3154, said bank is authorized to make use of the current account, savings, and fixed deposits provided it retains in its treasury a certain percentage of the amounts of said deposits. Said sections read:SEC. 125. Every such commercial banking corporation shall at all times have on hand in lawful money of the Philippines Islands or of the United States, an amount equal to at least eighteen per centum of the aggregate amount of its deposits in current which are payable on demand and of its fixed deposits coming due within thirty days. Such commercial banking corporations shall also at all times maintain equal in amount to at least five per centum of its total savings deposits. The said reserve may be maintained in the form of lawful money of the Philippines Islands of the United States, or in bonds issued or guaranteed by the Government of the Philippines Islands or to the United States. . . .The percentage of reserve to deposits in the case of the Philippine National Bank and Bank of the Philippine Islands is hereby fixed at eighteen per centum of demand deposits and fixed deposits payable within thirty days and five per centum of savings deposits, in the same manner as is prescribed in this section for commercial banking corporations in general, which reserve against savings deposit may consists of Philippine Government of United States Government Bonds.SEC. 9. Every bank organized under this Act shall at all times have on hand, in lawful money of the Philippine Islands of the United States, an amount equal to at least twenty per centum of the aggregate amount of its deposits. The Treasury certificates authorized by Act Numbered Three thousand and fifty-eight, and the term lawful money of the United States shall include gold and silver certificates of the United States and bank notes issued by the Federal Reserve Bank.Therefore, the bank, without the necessity of the claimant consent, was by law authorized to dispose of the deposits, subject to the limitations indicated.We, therefore, conclude that the law applicable to the appellant's claim is the Code of Commerce and that his current and savings account have converted into simple commercial loans.

BSP Monetary Board vs Antonio-ValenzuelaG.R. No. 184778 October 2, 2009

Facts:

This is a Petition for Review on Certiorari under Rule 45 with Prayer for Issuance of a Temporary Restraining Order (TRO)/Writ of Preliminary Injunction, questioning the Decision dated September 30, 20081 of the Court of Appeals (CA) in CA-G.R. SP No. 103935. The CA Decision upheld the Order2 dated June 4, 2008 of the Regional Trial Court (RTC), Branch 28 in Manila, issuing writs of preliminary injunction in Civil Case Nos. 08-119243, 08-119244, 08-119245, 08-119246, 08-119247, 08-119248, 08-119249, 08-119250, 08-119251, and 08-119273, and the Order dated May 21, 2008 that consolidated the civil cases.

Issues:

W/N the honorable court of appeals gravely erred in not finding that the injunction issued by the regional trial court violated section 25 of the new central bank act and effectively handcuffed the bangko sentral from discharging its functions to the great and irreparable damage of the countrys banking system.

W/N the honorable court of appeals gravely erred in finding that respondents are entitled to be furnished copies of their respective roes before the same is submitted to the monetary board in view of the principles of fairness and transparency despite lack of express provision in the new central bank act requiring bsp to do the same

W/N the issuance of a writ of preliminary injunction by the regional trial court was not only improper but amounted to grave abuse of discretion

Held:

The requisites for preliminary injunctive relief are: (a) the invasion of right sought to be protected is material and substantial; (b) the right of the complainant is clear and unmistakable; and (c) there is an urgent and paramount necessity for the writ to prevent serious damage.

As such, a writ of preliminary injunction may be issued only upon clear showing of an actual existing right to be protected during the pendency of the principal action. The twin requirements of a valid injunction are the existence of a right and its actual or threatened violations. Thus, to be entitled to an injunctive writ, the right to be protected and the violation against that right must be shown.

The issuance by the RTC of writs of preliminary injunction is an unwarranted interference with the powers of the Monetary Board (MB). Secs. 29 and 30 of RA 7653 refer to the appointment of a conservator or a receiver for a bank, which is a power of the MB for which they need the ROEs done by the supervising or examining department. The writs of preliminary injunction issued by the trial court hinder the MB from fulfilling its function under the law. The actions of the MB under Secs. 29 and 30 of RA 7653 may not be restrained or set aside by the court except on petition for certiorari on the ground that the action taken was in excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of jurisdiction. The writs of preliminary injunction order are precisely what cannot be done under the law by preventing the MB from taking action under either Sec. 29 or Sec. 30 of RA 7653.

As to the third requirement, the respondent banks have shown no necessity for the writ of preliminary injunction to prevent serious damage. The serious damage contemplated by the trial court was the possibility of the imposition of sanctions upon respondent banks, even the sanction of closure. Under the law, the sanction of closure could be imposed upon a bank by the BSP even without notice and hearing. The apparent lack of procedural due process would not result in the invalidity of action by the MB. This was the ruling in Central Bank of the Philippines v. Court of Appeals. This close now, hear later scheme is grounded on practical and legal considerations to prevent unwarranted dissipation of the banks assets and as a valid exercise of police power to protect the depositors, creditors, stockholders, and the general public. The writ of preliminary injunction cannot, thus, prevent the MB from taking action, by preventing the submission of the ROEs and worse, by preventing the MB from acting on such ROEs.

The trial court required the MB to respect the respondent banks right to due process by allowing the respondent banks to view the ROEs and act upon them to forestall any sanctions the MB might impose. Such procedure has no basis in law and does in fact violate the close now, hear later doctrine. held in Rural Bank of San Miguel, Inc. v. Monetary Board, Bangko Sentral ng Pilipinas:

It is well-settled that the closure of a bank may be considered as an exercise of police power. The action of the MB on this matter is final and executory. Such exercise may nonetheless be subject to judicial inquiry and can be set aside if found to be in excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of jurisdiction.

The respondent banks cannotthrough seeking a writ of preliminary injunction by appealing to lack of due process, in a roundabout manner prevent their closure by the MB. Their remedy, as stated, is a subsequent one, which will determine whether the closure of the bank was attended by grave abuse of discretion. Judicial review enters the picture only after the MB has taken action; it cannot prevent such action by the MB. The threat of the imposition of sanctions, even that of closure, does not violate their right to due process, and cannot be the basis for a writ of preliminary injunction.

The close now, hear later doctrine has already been justified as a measure for the protection of the public interest. Swift action is called for on the part of the BSP when it finds that a bank is in dire straits. Unless adequate and determined efforts are taken by the government against distressed and mismanaged banks, public faith in the banking system is certain to deteriorate to the prejudice of the national economy itself, not to mention the losses suffered by the bank depositors, creditors, and stockholders, who all deserve the protection of the government.

The respondent banks have failed to show their entitlement to the writ of preliminary injunction. It must be emphasized that an application for injunctive relief is construed strictly against the pleader. The respondent banks cannot rely on a simple appeal to procedural due process to prove entitlement. The requirements for the issuance of the writ have not been proved. No invasion of the rights of respondent banks has been shown, nor is their right to copies of the ROEs clear and unmistakable. There is also no necessity for the writ to prevent serious damage. Indeed the issuance of the writ of preliminary injunction tramples upon the powers of the MB and prevents it from fulfilling its functions. There is no right that the writ of preliminary injunction would protect in this particular case. In the absence of a clear legal right, the issuance of the injunctive writ constitutes grave abuse of discretion. In the absence of proof of a legal right and the injury sustained by the plaintiff, an order for the issuance of a writ of preliminary injunction will be nullified.

Courts are reminded to take greater care in issuing injunctive relief to litigants, that it would not violate any law. The grant of a preliminary injunction in a case rests on the sound discretion of the court with the caveat that it should be made with great caution. Thus, the issuance of the writ of preliminary injunction must have basis in and be in accordance with law. All told, while the grant or denial of an injunction generally rests on the sound discretion of the lower court, this Court may and should intervene in a clear case of abuse.

WHEREFORE, the petition is hereby GRANTED. The assailed CA Decision dated September 30, 2008 in CA-G.R. SP No. 103935 is hereby REVERSED. The assailed order and writ of preliminary injunction of respondent Judge Valenzuela in Civil Case Nos. 08-119243, 08-119244, 08-119245, 08-119246, 08-119247, 08-119248, 08-119249, 08-119250, 08-119251, and 08-119273 are hereby declared NULL and VOID.

ALLIED BANKING CORPORATION vs.HON. SECRETARY SEDFREY ORDOEZ and ALFREDO CHING

G.R. No. 82495 :December 10, 1990192 SCRA 246

Penal provision of PD 115, the Trust Receipts LawThe crime of estafa for violation of the Trust Receipts Law is a special offense or mala prohibita. It is a fundamental rule in criminal law that when the crime is punished by a special law, the act alone, irrespective of its motives, constitutes the offense. In the instant case the failure of the entrustee to pay complainant the remaining balance of the value of the goods covered by the trust receipt when the same became due constitutes the offense penalized under Section 13 of P.D. No. 115

FACTS

Alfredo Ching, a duly authorized officer of Philippine Blooming Mills, applied for the issuance of commercial letters of credit with petitioner's Makati branch to finance the purchase of 500 M/T Magtar Branch Dolomites and one (1) Lot High Fired Refractory Sliding Nozzle Bricks. Allied Banking Corporation issued an irrevocable letter of credit in favor of Nikko Industry Co., Ltd. (Nikko) by virtue of which the latter drew four (4) drafts which were accepted by PBM and duly honored and paid by the Allied bank.To secure payment of the amount covered by the drafts, and in consideration of the transfer by Allied bank of the possession of the goods to PBM, the latter as entrustee, thru private respondent, executed four (4) Trust Receipt Agreements with maturity dates acknowledging petitioner's ownership of the goods and its (PBM'S) obligation to turn over the proceeds of the sale of the goods, if sold, or to return the same, if unsold within the stated period.PBM defaulted in its payment of the obligation and despite repeated demands, PBM failed and refused to either turn over the proceeds of the sale of the goods or to return the same. Allied Banking Corporation filed a criminal complaint against private respondent for violation of PD 115 before the office of the Provincial Fiscal of Rizal, the Fiscal found a prima facie case for violation of PD 115 on four (4) counts. PBM contended that it was under rehabilitation receivership, thus, no criminal liability can be imputed to respondent Ching.

ISSUEWhether or not the penal provision of PD 115 (Trust Receipts Law) apply when the goods covered by a Trust Receipt do not form part of the finished products which are ultimately sold but are instead, utilized/used up in the operation of the equipment and machineries of the entrustee-manufacturer?

HELDYes. Section 4 of PD 115 says in part:"Sec. 4. What constitutes a trust receipt transaction. A trust receipt transaction, within the meaning of this Decree, is any transaction by and between a person referred to in this Decree as the entrustee, and another person referred to in this Decree as the entrustee, whereby the entruster, who owns or holds absolute title or security interests over certain specified goods, documents or instruments, releases the same to the possession of the entrustee upon the latter's execution and delivery to the entruster of a signed document called a 'trust receipt' wherein the entrustee binds himself to hold the designated goods, documents or instruments in trust for the entruster and to sell or otherwise dispose of the goods, documents or instruments with the obligation to turn over to the entruster the proceeds thereof to the extent of the amount owing to the entruster or as appears in the trust receipt or the goods, documents or instruments themselves, if they are unsold or not otherwise disposed of, in accordance with the terms and conditions specified in the trust receipt."The trust receipts, there is an obligation to repay the entruster. Their terms are to be interpreted in accordance with the general rules on contracts, the law being alert in all cases to prevent fraud on the part of either party to the transaction. The entrustee binds himself to sell or otherwise dispose of the entrusted goods with the obligation to turn over to the entruster the proceeds if sold, or return the goods if unsold or not otherwise disposed of, in accordance with the terms and conditions specified in the trust receipt. A violation of this undertaking constitutes estafa under Sec. 13, PD 115.nadThe penal provision of PD 115 encompasses any act violative of an obligation covered by the trust receipt; it is not limited to transactions in goods which are to be sold (retailed), reshipped, stored or processed as a component of a product ultimately sold.