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CA Agro-Industrial vs CA G.R. No.

90027 March 3, 1993 Facts

Petitioner (through its President) purchased 2 parcels of land from spouses Pugao for P350 K with a downpayment of P75 K. Per agreement, the land titles will be transferred upon full payment and will be placed in a safety deposit box (SBDB) of any bank. Moreover, the same could be withdrawn only upon the joint signatures of a representative of the Petitioner and the Pugaos upon full payment of the purchase price. Generally, the Civil Code provides that the Thereafter, Petitioner and spouses placed the titles in depositary (Respondent Bank) would be liable if, in SDB of Respondent Security Bank and signed a lease performing its obligation, it is found guilty of fraud, contract which substantially states that the Bank will negligence, delay or contravention of the tenor of not assume liability for the contents of the SDB. the agreement. Subsequently, 2 renter's keys were given to the renters In the absence of any stipulation, the diligence of a one to the Petitioner and the other to the Pugaos. A good father of a family is to be observed. guard key remained in the possession of the Respondent Hence, any stipulation exempting the depositary Bank. The SDB can only be opened using these 2 keys from any liability arising from the loss of the thing simultaneously. deposited on account of fraud, negligence or delay Afterwards, a certain Mrs. Ramos offered to buy from would be void for being contrary to law and public the Petitioner the 2 lots that would yield a profit of policy (which is present in the disputed contract) P285K. Said provisions are inconsistent with the Mrs. Ramos demanded the execution of a deed of sale Respondent Bank's responsibility as a depositary which necessarily entailed the production of the under Section 72(a) of the General Banking Act. certificates of title. Thus, Petitioner with the spouses went to Respondent Bank to retrieve the titles. 3. NO. SC ruled that: However, when opened in the presence of the Bank's no competent proof was presented to show that representative, the SDB yielded no such certificates. Respondent Bank was aware of the private Because of the delay in the reconstitution of the title, agreement between the Petitioner and the Pugaos Mrs. Ramos withdrew her earlier offer to purchase the that the Land titles were withdrawable from the lots; as a consequence, the Petitioner allegedly failed to SDB only upon both parties' joint signatures, realize the expected profit of P285K. and that no evidence was submitted to reveal that Hence, Petitioner filed a complaint for damages against the loss of the certificates of title was due to the Respondent Bank. fraud or negligence of the Respondent Bank. Lower courts ruled in favour of Respondent Bank. Thus, this petition. Banco de Oro v. JAPRL Development Corporation, 551 SCRA 342 (2008) Issues: FACTS: 1. Whether or not the disputed contract is an ordinary -After evaluating the financial statements of respondent contract of lease? JAPRL Development Corporation (JAPRL) for fiscal 2. Whether or not the provisions of the cited contract are years1998, 1999 and 2000, Banco de Oro-EPCI, Inc. valid? 3. Whether or not Respondent Bank is liable for damages? extended credit facilities to it. Rapid Forming Corporation (RFC) andJose U. Arollado acted as JAPRLs sureties.Despite its seemingly strong financial position, JAPRL Ruling: defaulted in the payment of four trust receipts soon after the 1. No. SC ruled that it is a special kind of deposit because: approval of its loan BDO later learned from MRM Management, JAPRLs financial adviser, that JAPRL had the full and absolute possession and control of the alteredand falsified its financial statements. It allegedly SDB was not given to the joint renters the bloated its sales revenues to post a big income from Petitioner and the Pugaos. operations for the concerned fiscal years to project itself as

The guard key of the box remained with the Respondent Bank; without this key, neither of the renters could open the box and vice versa. In this case, the said key had a duplicate which was made so that both renters could have access to the box. Moreover, the renting out of the SDBs is not independent from, but related to or in conjunction with, the principal function of a contract of deposit the receiving in custody of funds, documents and other valuable objects for safekeeping. 2. NO. SC opined that it is void.

a viable investment. The information alarmed BDO. Citing relevantprovisions of the Trust Receipt Agreement, it demanded immediate payment of JAPRLs outstanding obligations.-JAPRL (and its subsidiary, RFC) filed a petition for rehabilitation in the Regional Trial Court (RTC) of Quezon City,Branch 90 (Quezon City RTC. It disclosed that it had been experiencing a decline in sales for the three precedingyears and a staggering loss in 2002.-Because the petition was sufficient in form and substance, a stay order was issued. However, the proposedrehabilitation plan for JAPRL and RFC was eventually rejected by the Quezon City RTC.-Because JAPRL ignored its demand for payment, BDO filed a complaint for sum of money with an application for the issuance of a writ of preliminary attachment against JAPRL. BDO essentially asserted that JAPRL was guilty of fraud because it (JAPRL) altered and falsified its financial statements. ISSUE: -Whether or not BDO may annul the credit accommodations it extended to JAPRL and demand immediate paymentdue to the alteration and falsification of JAPRLs financial statement.

Requirement for Grant of Loans or Other Credit Accommodations. Before grantinga loan or other credit accommodation, a bank must ascertain that the debtor is capable of fulfilling his commitments to the bank.Towards this end, a bank may demand from its credit applicants a statement of their assets and liabilities and of their income and expenditures and such information as may beprescribed by law or by rules and regulations of the Monetary Board to enable the bank toproperly evaluate the credit application which includes the corresponding financial statements submitted for taxation purposes to the Bureau of Internal Revenue. Should such statementsprove to be false or incorrect in any material detail, the bank may terminate any loan or creditaccommodation granted on the basis of said statements and shall have the right to demandimmediate repayment or liquidation of the obligation. In formulating the rules and regulations under this Section, the Monetary Board shallrecognize the peculiar characteristics of microfinancing, such as cash flow-based lending to thebasic sectors that are not covered by traditional collateral.Under this provision, banks have the right to annul any credit accommodation or loan, and demand the immediatepayment thereof, from borrowers proven to be guilty of fraud

HELD: -Banks are entities engaged in the lending of funds obtained through deposits from the public. They borrow thepublics excess money (i.e., deposits) and lend out the same. Banks therefore redistribute wealth in the economy bychanneling idle savings to profitable investments.-Banks operate (and earn income) by extending credit facilities financed primarily by deposits from the public. Theyplough back the bulk of said deposits into the economy in the form of loans. Since banks deal with the publicsmoney, their viability depends largely on their ability to return those deposits on demand. For this reason, banking isundeniably imbued with public interest. Consequently, much importance is given to sound lending practices andgood corporate governance.Protecting the integrity of the banking system has become, by large, the responsibility of banks. The role of thepublic, particularly individual borrowers, has not been emphasized. Nevertheless, we are not unaware of therampant and unscrupulous practice of obtaining loans without intending to pay the same.-In this case, petitioner alleged that JAPRL fraudulently altered and falsified its financial statements in order toobtain its credit facilities. Considering the amount of petitioners exposure in JAPRL, justice and fairness dictate thatthe Makati RTC hear whether or not respondents indeed committed fraud in securing the credit accommodation.-Section 40 of the General Banking Law which states: Section 40.

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