HELD: Survivorship agreement is a contract that impose a mere

BANKING LAWS obligation with a term, the term being death. Such agreements are
permitted under Art 2012 of the Civil Code, an aleatory contract. But
DEPOSIT FUNCTION although the survivorship agreement is per se not contrary to law, its
operation or effect may be violative of the law. For instance, if it be
shown in a given case that such agreement is a mere cloak to hide an
1. Vitug vs. Court of Appeals, G.R. No. 82027, 29 March 1990; inofficious donation, to transfer property in fraud of creditors, or to
defeat the legitime of a forced heir, it may be assailed and annulled
FACTS: The late Dolores Vitug who died in New York, USA in Nov upon such grounds.
1980. She named therein private respondent Rowena Corona
(Executrix) while Nenita Alonte was co-special administrator together In the case at bar, there is no demonstration that the
with petitioner Romarico pending probate. Executrix Rowena Corona survivorship agreement had been executed for such unlawful
sought for the ouster of widower Romarico G. Vitug, as co-special purposes, or in order to frustrate our laws on wills, donations, and
administrator of Mrs. Dolores Vitug's estate, for failure to include the conjugal partnership. Mrs. Vitug having predeceased her husband,
amounts in savings account of the Bank of America for inventory and the latter has acquired upon her death a vested right over the
for "concealment of funds belonging to the estate. In January 1985, amounts under savings account of the Bank of America. Being the
Romarico filed a motion asking for authorization of the probate court separate property of petitioner, it forms no more part of the estate of
to sell shares of stocks and real property of the estate as the deceased.
reimbursements for advances he made to the estate. The said amount
was spent for payment of estate tax from a savings account in the
Bank of America. Rowena Corona opposed the motion to sell
contending that from the said account are conjugal funds, hence
part of the estate. Vitug insisted saying that the said funds are his
exclusive property acquired by virtue of a survivorship agreement
executed with his late wife and the bank previously. In the said
agreement, they agreed that in the event of death of either, the funds
will become the sole property of the survivor. The lower court upheld
the validity of the survivorship agreement and granted Romarico's
motion to sell. The Court of Appeals however held that said
agreement constituted a conveyance mortis causa which did not
comply with the formalities of a valid will. Further, assuming that it is
donation inter vivos, it is a prohibited donation. Vitug petitioned to the
Court contending that the said agreement is an aleatory contract.
Vitug insists that the said funds are his exclusive property having
acquired the same through a survivorship agreement executed with
his late wife and the bank.

ISSUE:
Whether a bank deposit with survivorship agreement
consisting of conjugal funds changes its nature to exclusive property
when one of the contracting parties dies.

2. Salvacion vs. Central Bank, G.R. No. 94723, 21 August 1997;

Banking Laws: Case Digest – Commercial Law Review 2019 - Page 1 of 11

FACTS:
Karen Salvacion, 12-year old girl was raped 10 times in the
span of 4 days by an American tourist Greg Bartelli. Bartelli was able to
escape from the jail and avoid punishment. Salvacion, having
received a favorable judgment in the Civil Case for damages, tried to
execute judgment on Bartelli's dollar deposit with China Banking
Corporation. The bank invoked Section 113 of Central Bank Circular
No. 960 to the effect that the dollar deposits or defendant Greg
Bartelli are exempt from attachment, garnishment, or any other order
or process of any court, legislative body, government agency or any
administrative body, whatsoever.
ISSUE: Should Section 113 of Central Bank Circular No. 960 and Section
8 of R.A. 6426, as amended by P.D. 1246, otherwise known as the
Foreign Currency Deposit Act be made applicable to a foreign
transient?
HELD: The provisions of Section 113 of CB Circular No. 960 and PD No.
1246, insofar as it amends Section 8 of R.A. No. 6426 are held to be
INAPPLICABLE to this case because of its peculiar circumstances.
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.”

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 3. Ejercito vs. Sandiganbayan, 30 November 2006;
System were designed to draw deposits from foreign lenders and FACTS:
investors and, subsequently, to give the latter protection. However, the
Banking Laws: Case Digest – Commercial Law Review 2019 - Page 2 of 11
 When ousted president Estrada was charged with Plunder,
Sandiganbayan granted the request of the special prosecution panel
for the issuance of Subpoena duces tecum/ad testificandum directed
to Equitable-PCI Bank to produce documents relating to the trust
accounts and savings account of Jose Velarde. Estrada filed for the
quashal of the motion, claiming that his bank accounts are covered
by secrecy of Bank Deposits Law and do not fall under any of the
exceptions stated therein.
ISSUE:
Whether petitioner’s Trust Account No. 858 is covered by the
term "deposit" as used in R.A. 1405 and whether the case of Plunder
be excepted from the rule making bank deposits confidential.
HELD:
The term "deposits" used on RA 1405 is to be understood
broadly and not limited only to accounts which give rise to a creditor-
debtor relationship between the depositor and the bank. If the
money deposited under an account may be used by banks for
authorized loans to third persons, then such account, regardless of
whether it creates a creditor-debtor relationship between the
depositor and the bank, falls under the category of accounts which
the law precisely seeks to protect for the purpose of boosting the
economic development of the country.
The crime of bribery and the overt acts constitutive of plunder are
crimes committed by public officers, and in either case the noble idea
that "a public office is a public trust and any person who enters upon
its discharge does so with the full knowledge that his life, so far as
relevant to his duty, is open to public scrutiny" applies with equal
force. Plunder being thus analogous to bribery, the exception to R.A.
1405 applicable in cases of bribery must also apply to cases of
plunder.
4. People vs. Ejercito Estrada, 2 April 2009
FACTS:
Banking Laws: Case Digest – Commercial Law Review 2019 - Page 3 of 11
When an Information for Plunder was filed against Estrada, a
separate information was filed against him for Illegal Use of Alias. The
Sandiganbayan ruled that the use of an alias within the context of a
bank transaction, specifically, the opening of a numbered account
made before bank officers, is protected by the secrecy provisions of
R.A. No. 1405. The People posits, on appeal, that R.A. No. 1405 does
not apply to trust transactions, as it applies only to traditional deposits.
A trust account, according to the People, may not be considered a
deposit because it does not create the juridical relation of creditor
and debtor.
ISSUE:
Whether or not trust account is covered by the term deposit as
used in RA 1405.
HELD:
The nature of the transaction on which the indictment rests,
affords Estrada a reasonable expectation of privacy, as the alleged
criminal act related to the opening of a trust account – a transaction
that R.A. No. 1405 considers absolutely confidential in nature. We
previously stated, in Ejercito v. Sandiganbayan, that An examination
of the law shows that the term "deposits" used therein is to be
understood broadly and not limited only to accounts which give rise
to a creditor-debtor relationship between the depositor and the bank.
If the money deposited under an account may be used by bank for
authorized loans to third persons, then such account, regardless of
whether it creates a creditor-debtor relationship between the
depositor and the bank, falls under the category of accounts which
the law precisely seeks to protect for the purpose of boosting the
economic development of the country.
R.A. 1405 is broad enough to cover Trust Account. We have
consistently ruled that bank deposits under R.A. No. 1405 (the Secrecy
of Bank Deposits Law) are statutorily protected or recognized zones of
privacy. Given the private nature of Estrada’s act of signing the
documents as "Jose Velarde" related to the opening of the trust
account, the People cannot claim that there was already a public
use of alias when the bank officers, his Chief of Staff with whom he
shared matters of the highest and strictest confidence, and his lawyer-
friend witnessed the signing.
LOAN FUNCTION OF BANKS
5. DBP vs. Arcilla, GR No. 161397, 30 June 2005
FACTS:
Atty. Felipe P. Arcilla, Jr. was employed by DBP and availed a
loan under the Individual Housing Project (IHP) of the bank. DBP
obliged itself to transfer the title of the property upon the payment of
the loan, including any increments thereof. It was also agreed therein
that if Arcilla availed of optional retirement, he could elect to
continue paying the loan, provided that the loan/amount would be
converted into a regular real estate loan account with the prevailing
interest assigned on real estate loans, payable within the remaining
term of the loan account. Upon resignation, he failed to pay his loan
account, advances, penalty charges and interests which resulted the
property to be advertised for sale at public bidding. He then filed a
complaint against DBP alleging that DBP failed to furnish him with the
disclosure statement required by Republic Act (R.A.) No. 3765 and
Central Bank (CB) Circular No. 158 prior to the execution of the deed
of conditional sale and the conversion of his loan account with the
bank into a regular housing loan account. DBP answered that it
substantially complied with R.A. No. 3765 and CB Circular No. 158
because the details required in said statements were particularly
disclosed in the promissory notes, deed of conditional sale and the
required notices sent to Arcilla. In any event, its failure to comply
strictly with R.A. No. 3765 did not affect the validity and enforceability
of the subject contracts or transactions.
shall specify additional charges, if any, which will be collected in case
certain stipulations in the contract are not met by the debtor. If the
borrower is not duly informed of the data required by the law prior to
the consummation of the availment or drawdown, the lender will have
no right to collect such charge or increases thereof, even if stipulated
in the promissory note. However, such failure shall not affect the
validity or enforceability of any contract or transaction.
In the present case, DBP failed to disclose the requisite information in
the disclosure statement form authorized by the Central Bank, but did
so in the loan transaction documents between it and Arcilla. There is
no evidence on record that DBP sought to collect or collected any
interest, penalty or other charges, from Arcilla other than those
disclosed in the said deeds/documents. Despite the notarial rescission
of the conditional sale in 1990, and DBPs subsequent repeated offers
to repurchase the property, the latter maintained his silence. Arcilla
filed his complaint only on February 21, 1994, or four years after the
said notarial rescission.
Thus, there was a substantial compliance with the disclosure
requirement and even if there was none, the contract of loan remain
valid.

RTC: On April 27, 2001, the trial court rendered judgment in favor of
Arcilla and nullified the notarial rescission of the deeds executed by
the parties.

CA: CA rendered judgment setting aside and reversing the decision of

the RTC. In ordering the dismissal of the complaint, the appellate court
ruled that DBP substantially complied with R.A. No. 3765 and CB
Circular No. 158.

ISSUES: Whether or not petitioner DBP complied with the disclosure

requirement of R.A. No. 3765 and CB Circular No. 158, Series of 1978, in
the execution of the deed of conditional sale, the supplemental deed
of conditional sale, as well as the promissory notes; and

HELD: Under Circular 158 of the Central Bank, the lender is required to
include the information required by R.A. 3765 in the contract covering BANKS IN DISTRESS
the credit transaction or any other document to be acknowledged
and signed by the borrower. In addition, the contract or document
Banking Laws: Case Digest – Commercial Law Review 2019 - Page 4 of 11
6. Sps. Larrobis, Jr. vs. Philippine Veterans Bank, GR No. 135706, 1
October 2004;
FACTS:
Sps. Larrobis contracted a monetary loan with Phil. Veterans
Bank (the bank), secured by a real estate mortgage. Respondent
bank then went bankrupt and was placed under
receivership/liquidation by the Central Bank.
Sometime after, respondent bank sent a demand letter for the
amount of the insurance premiums advanced by it over the
mortgaged property of petitioners. More than14 years from the time
the loan became due and demandable, the bank executed an
extrajudicial foreclosure of the mortgaged property.
SPS. Larrobis filed an action for the declaration of the said
foreclosure and the subsequent sale null and void ab initio since they
are already barred by prescription. The bank claims that because of
a fortuitous event, it was not able to exercise its right to foreclose the
mortgage on petitioners’ property; and that since it was banned from
pursuing its business and was placed under receivership, it could not
foreclose the mortgage on petitioners’ property within such period
since foreclosure is embraced in the phrase "doing business,"
RTC ruled in favor of the bank.
ISSUE:
(1) Whether or not foreclosure of mortgage is included in the acts
prohibited during receivership/liquidation proceedings.
(2) Whether or not the period within which the respondent bank was
placed under receivership and liquidation proceedings interrupted
the running of the prescriptive period in bringing actions.
HELD: NO.
(1) While it is true that foreclosure falls within the broad definition of
“doing business,” it should not be considered included, however, in
the acts prohibited whenever banks are “prohibited from doing
business” during receivership and liquidation proceedings. This is
consistent with the purpose of receivership proceedings, i.e., to
receive collectibles and preserve the assets of the bank in substitution
Banking Laws: Case Digest – Commercial Law Review 2019 - Page 5 of 11
of its former management, and prevent the dissipation of its assets to
the detriment of the creditors of the bank.
There is also no truth to respondent’s claim that it could not continue
doing business from the time it was under receivership. As correctly
pointed out by petitioner, respondent was even able to send
petitioners a demand letter, through Francisco Go, for the insurance
premiums advanced by respondent bank over the mortgaged
property of petitioners. How it could send a demand letter on unpaid
insurance premiums and not foreclose the mortgage during the time it
was “prohibited from doing business” was not adequately explained
by respondent.
(2) A close scrutiny of the Provident case shows that the Court arrived
at said conclusion, which is an exception to the general rule, due to
the peculiar circumstances of Provident Savings Bank at the time. The
Superintendent of Banks, which was instructed to take charge of the
assets of the bank in the name of the Monetary Board, had no power
to act as a receiver of the bank and carry out the obligations
specified in Sec. 29 of the Central Bank Act.
In this case, it is not disputed that Philippine Veterans Bank was placed
under receivership by the Monetary Board of the Central Bank
pursuant to Section 29 of the Central Bank Act on insolvency of banks.
Unlike Provident Savings Bank, there was no legal prohibition imposed
upon herein respondent to deter its receiver and liquidator from
performing their obligations under the law. Thus, the ruling laid down in
the Provident case cannot apply in the case at bar.
7. Fidelity Savings Bank vs. Cenzon, 5 April 1990;
FACTS: Respondent spouses TImoteo and Olimpia Santiago
maintained a savings and time deposit with petitioner bank.
The Monetary Board found petitioner bank to be insolvent and
ordered for its assets to be taken charged of by the Acting
Superintendent. The PDIC paid spouses for their deposits with
petitioner bank but there was still a remaining balance. The Monetary
Board then directed the liquidation of the affairs of petitioner bank
and a subsequent petition for assistance and supervision in liquidation
was filed in the court. The liquidation proceedings still pending,
respondent spouses sent demand letters to petitioner bank for the
payment of their deposits.
When Fidelity Savings Bank (the bank) was placed under receivership
due to its insolveny, one of its depositors Sps. Santiago instituted an
action for a sum of money against the bank.
deposit money in banks are aware of such a simple economic
proposition. 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.
From the aforecited authorities, it is manifest that petitioner cannot be
held liable for interest on bank deposits which accrued from the time it
was prohibited by the Central Bank to continue with its banking
operations. The order, therefore, of the Central Bank as
receiver/liquidator of petitioner bank allowing the claims of depositors
and creditors to earn interest up to the date of its closure is in line with
the doctrine laid down in the jurisprudence above cited.

The lower court ordered for the payment of the aggregate amount of
the Sps. Santiago’s deposit and the accrued interest.

ISSUE:
Whether or not an insolvent bank may be adjudged to pay
interest on unpaid deposits even after its closure by the Central Bank
by reason of insolvency.

HELD: 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, we held that:

It is a matter of common knowledge, which We take judicial notice of,

that what enables a bank to pay stipulated interest on money
deposited with it is that thru the other aspects of its operation it is able
to generate funds to cover the payment of such interest. Unless a
bank can lend money, engage in international transactions, acquire
foreclosed mortgaged properties or their proceeds and generally 8. Philippine National Bank vs. Vila, 799 SCRA 90, G.R. No. 213241, August 1,
engage in other banking and financing activities from which it can 2016;
derive income, it is inconceivable how it can carry on as a depository
FACTS: Sometime in 1986, Spouses Reynaldo Cormsta and Erlinda Gamboa
obligated to pay stipulated interest. Conventional wisdom dictates this
Cornista (Spouses Cornista) obtained a loan from Traders Royal Bank (Traders
inexorable fair and just conclusion. And it can be said that all who
Banking Laws: Case Digest – Commercial Law Review 2019 - Page 6 of 11
Bank).5 To secure the said obligation, the Spouses Cornista mortgaged to the
bank a parcel of registered under the Register of Deeds of Pangasinan.
MORTGAGE 1: For failure of the Spouses Cornista to make good of their loan
obligation after it has become due, Traders Bank foreclosed the mortgage
constituted on the security of the loan. After the notice and publication
requirements were complied with, the subject property was sold at the public
auction on 23 December 1987. During the public sale, respondent Juan F. Vila
(Vila) was declared as the highest bidder after he offered to buy the subject
property for P50,000.00. To exercise his right of ownership, Vila immediately
took possession of the subject property and paid the real estate taxes
corresponding thereon.
Despite the lapse of the redemption period and the fact of issuance of a
Certificate of Final Sale to Vila, the Spouses Cormsta were nonetheless
allowed to buy back the subject property by tendering the amount of
P50,000.00. A Certificate of Redemption dated 14 March 1989 was issued for
this purpose.
Claiming that the Spouses Cornista already lost their right to redeem the
subject property, Vila filed an action for nullification of redemption, transfer of
title and damages against the Spouses Cornista and Alfredo Vega in his
capacity as the Register of Deeds of Pangasinan.
On 3 February 1995, the RTC rendered a Decision in favor of Vila thereby
ordering the Register of Deeds to cancel the registration of the certificate of
redemption and the annotation on TCT No. 131498. The said decision was
affirmed by the CA on 19 October 1997 . The decision of the appellate court
became final and executory on 19 November 1997. In order to enforce the
favorable decision, Vila filed before the RTC a Motion for the Issuance of Writ
of Execution which was granted by the court. Accordingly, a Writ of
Execution11 was issued by the RTC on 14 December 1997.
By unfortunate turn of events, the Sheriff could not successfully enforce the
decision because the certificate of title covering the subject property was no
longer registered under the names of the Spouses Cornista. Hence, the
judgment was returned unsatisfied.
MORTGAGE 2: Upon investigation it was found out that during the interregnum
the Spouses Cornista were able to secure a loan from the PNB in the amount
of P532,000.00 using the same property subject of litigation as security. The
Real Estate Mortgage (REM) was recorded on 28 September 1992 a month
before the Notice of Lis Pendens was annotated.
Eventually, the Spouses Cornista defaulted in the payment of their loan
obligation with the PNB prompting the latter to foreclose the property offered
as security. The bank emerged as the highest bidder during the public sale as
shown at the Certificate of Sale issued by the Sheriff. As with the prior
Banking Laws: Case Digest – Commercial Law Review 2019 - Page 7 of 11
mortgage, the Spouses Cornista once again failed to exercise their right of
redemption within the required period allowing PNB to consolidate its
ownership over the subject property. Accordingly, TCT in favor of Spouses
Cornista was cancelled and a new one under TCT No. 21677115 under the
name of the PNB was issued.
ISSUE: Whether or not the PNB is a mortgagee in good faith.
HELD: NO. The RTC, which possessed the first hand opportunity to observe the
demeanor of the witnesses and admit the documentary evidence, found that
PNB accepted outright the collateral offered by the Spouses Cornista without
making farther inquiry as to the real status of the subject property. Had the
bank been prudent and diligent enough in ascertaining the condition of the
property, it could have discovered that the same was in the possession of Vila
who, at that time, possessed a colorable title thereon being a holder of a Final
Certificate of Sale. The RTC further exposed the frailty of PNB's claim by
pointing to the fact that it was Vila who was paying the realty tax on the
property, a crucial information that the bank could have easily discovered
had it exercised due diligence. Resonating the findings of the RTC, the CA also
declared that PNB fell short in exercising the degree of diligence expected
from bank and financial Institutions.
We hereby quote with approval the disquisition of the appellate:
Thus, before approving a loan application, it is a standard operating practice for these
institutions to conduct an ocular inspection of the property offered for mortgage and to
verify the genuineness of the title to determine the real owner thereof. The apparent
purpose of an ocular inspection is to protect the "true owner" of the property as well as
innocent third parties with a right, interest or claim thereon from a usurper who may
have acquired a fraudulent certificate of title thereto. Here, [the] PNB has failed to
exercise the requisite due diligence in ascertaining the status and condition of the
property being offered to it as security for the loan before it approved the same.
Clearly, the PNB failed to observe the exacting standards required of banking
institutions which are behooved by statutes and jurisprudence to exercise
greater care and prudence before entering into a mortgage contract. No
credible proof on the records could substantiate the claim of PNB that a
physical inspection of the property was conducted. We agree with, both the
RTC and CA that if in fact it were true that ocular inspection was conducted,
a suspicion could have been raised as to the real status of property. By failing
to uncover a crucial fact that the mortgagors were not the possessors of the
subject property. The failure of the mortgagee to take precautionary steps
would mean negligence on his part and would thereby preclude it from
invoking that it is a mortgagee in good faith.
DOSRI RULES
9. Soriano vs. People of the Phils., 30 June 2009;
FACTS:
 Hilario P. Soriano, President of the Rural Bank of San Miguel
(Bulacan), Inc. (RBSM) falsified the loan applications and other bank
records. SEnrico 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.
Information contends a 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. His ruse
was facilitated by placing the loan in the name of an unsuspecting
RBSM depositor, one Enrico Carlos. Soriano was charged with violation
of DOSRI Rules and with estafa thru falsification of commercial
document for allegedly obtaining loans from RBSM.
Soriano contended that the commission of estafa under
paragraph 1(b) of Article 315 of the RPC is inherently incompatible
with the violation of DOSRI law (as set out in Section 83[23] of RA 337,
as amended by PD 1795), hence a person cannot be charged for
both offenses. He argued that a violation of DOSRI law requires the
offender to obtain a loan from his bank, without complying with
procedural, reportorial, or ceiling requirements. On the other hand,
estafa under par. 1(b), Article 315 of the RPC requires the offender to
misappropriate or convert something that he holds in trust, or on
commission, or for administration, or under any other obligation
involving the duty to return the same. 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.
Banking Laws: Case Digest – Commercial Law Review 2019 - Page 8 of 11
ISSUE: Whether a loan transaction within the ambit of the DOSRI law
(violation of Section 83 of RA 337, as amended) could be the subject
of Estafa under Article 315 (1) (b) of the Revised Penal Code
HELD:
The SC examined the two informations against petitioner and
we find that they contain allegations which, if hypothetically
admitted, would establish the essential elements of the crime of DOSRI
violation and estafa thru falsification of commercial documents.
DOSRI: Whether there can also be, at the same time, a charge for
DOSRI violation in such a situation wherein the accused bank officer
did not secure a loan in his own name, but was alleged to have used
the name of another person in order to indirectly secure a loan from
the bank: YES. A DOSRI violation consists in the failure to observe and
comply with procedural, reportorial or ceiling requirements prescribed
by law in the grant of a loan to a director, officer, stockholder and
other related interests in the bank. The prohibition in Section 83 is
broad enough to cover various modes of borrowing. It covers loans by
a bank director or officer (like herein petitioner) which are made
either: (1) directly, (2) indirectly, (3) for himself, (4) or as the
representative or agent of others. It applies even if the director or
officer is a mere guarantor, indorser or surety for someone else's loan
or is in any manner an obligor for money borrowed from the bank or
loaned by it. The covered transactions are prohibited unless the
approval, reportorial and ceiling requirements under Section 83 are
complied with. The prohibition is intended to protect the public,
especially the depositors, from the overborrowing of bank funds by
bank officers, directors, stockholders and related interests, as such
overborrowing may lead to bank failures. It has been said that
banking institutions are not created for the benefit of the directors [or
officers]. While directors have great powers as directors, they have no
special privileges as individuals. They cannot use the assets of the
bank for their own benefit except as permitted by law. Stringent
restrictions are placed about them so that when acting both for the
bank and for one of themselves at the same time, they must keep
within certain prescribed lines regarded by the legislature as essential
to safety in the banking business. A direct borrowing is obviously one
that is made in the name of the DOSRI himself or where the DOSRI is a
named party, while an indirect borrowing includes one that is made
by a third party, but the DOSRI has a stake in the transaction. The latter
type indirect borrowing applies here. The foregoing information
describes the manner of securing the loan as indirect; names
petitioner as the benefactor of the indirect loan; and states that the
requirements of the law were not complied with. It contains all the
required elements[54] for a violation of Section 83, even if petitioner
did not secure the loan in his own name.

ESTAFA: The elements of abuse of confidence, deceit, fraud or false

pretenses, and damage, which are essential to the prosecution for
estafa, are not elements of a DOSRI violation. The filing of several
charges against Soriano was, therefore, proper.

10. Philippine National Bank vs. Cheah Chee Chong, G.R. No. 170865,
April 25, 2012;

FACTS:
On November 4, 1992, Ofelia Cheah (Ofelia) and her friend Adelina
Guarin (Adelina) were having a conversation in the latters office when
Banking Laws: Case Digest – Commercial Law Review 2019 - Page 9 of 11
Adelinas friend, Filipina Tuazon (Filipina), approached her to ask if she
could have Filipinas check cleared and encashed for a service fee of
2.5%.
The check is Bank of America Check under the account of Alejandria
Pineda and Eduardo Rosales and drawn by Atty. Eduardo Rosales
against Bank of America Alhambra Branch in California, USA, with a
face amount of $300,000.00, payable to cash. Because Adelina does
not have a dollar account in which to deposit the check, she asked
Ofelia if she could accommodate Filipinas request since she has a
joint dollar savings account with her Malaysian husband Cheah Chee
Chong (Chee Chong) under Account No. 265-705612-2 with PNB
Buendia Branch.
Ofelia agreed. That same day, Ofelia and Adelina went to PNB
Buendia Branch. They met with Perfecto Mendiola of the Loans
Department who referred them to PNB Division Chief Alberto Garin
(Garin). Garin discussed with them the process of clearing the subject
check and they were told that it normally takes 15 days. Assured that
the deposit and subsequent clearance of the check is a normal
transaction, Ofelia deposited Filipinas check.
PNB then sent it for clearing through its correspondent bank,
Philadelphia National Bank. Five days later, PNB received a credit
advice from Philadelphia National Bank that the proceeds of the
subject check had been temporarily credited to PNBs account as of
November 6, 1992. On November 16, 1992, Garin called up Ofelia to
inform her that the check had already been cleared. The following
day, PNB Buendia Branch, after deducting the bank charges, credited
$299,248.37 to the account of the spouses Cheah. Acting on Adelinas
instruction to withdraw the credited amount, Ofelia that day
personally withdrew $180,000.00. Adelina was able to withdraw the
remaining amount the next day after having been authorized by
Ofelia. Filipina received all the proceeds.
In the meantime, the Cable Division of PNB Head Office in Escolta,
Manila received a SWIFT[13] message from Philadelphia National Bank
dated November 13, 1992 with Transaction Reference Number (TRN)
46506218, informing PNB of the return of the subject check for
insufficient funds. PNB Buendia Branch learned about the bounced
check when it received on November 20, 1992 a debit advice,
followed by a letter on November 24, 1992, from Philadelphia National
Bank to which the November 13, 1992 SWIFT message was attached.
Informed about the bounced check and upon demand by PNB
Banking Laws: Case Digest – Commercial Law Review 2019 - Page 10 of 11
Buendia Branch to return the money withdrawn, Ofelia immediately
contacted Filipina to get the money back. But the latter told her that
all the money had already been given to several people who asked
for the checks encashment.
In their effort to recover the money, spouses Cheah then sought the
help of the NBI. NBI’s Anti-Fraud and Action Division was later able to
apprehend some of the beneficiaries of the proceeds of the check
and recover from them $20,000.00. Criminal charges were then filed
against these suspect beneficiaries. Meanwhile, Spouses Cheah are
offering their condominium units as collaterals for the amount
withdrawn. Under this setup, the amount withdrawn would be treated
as a loan account with deferred interest while the spouses try to
recover the money from those who defrauded them. Although some
of the officers of PNB were amenable to the proposal, the same did
not materialize. Subsequently, PNB sent a demand letter to spouses
Cheah for the return of the amount of the check, PNB froze their peso
and dollar deposits and filed a complaint against them for Sum of
Money with Regional Trial Court (RTC) of Manila. In said complaint,
PNB demanded payment of around P8,202,220.44, plus interests and
attorneys fees, from the spouses Cheah.
As their main defense, the spouses Cheah claimed that the proximate
cause of PNBs injury was its own negligence of paying a US dollar
denominated check without waiting for the 15-day clearing period, in
violation of its bank practice as mandated by its own bank circular.
Because of this, spouses Cheah averred that PNB is barred from
claiming what it had lost. They further averred that it is unjust for them
to pay back the amount disbursed as they never really benefited
therefrom. As counterclaim, they prayed for the return of their frozen
deposits, the recoupment of P400,000.00 representing the amount
they had so far spent in recovering the value of the check, and
payment of moral and exemplary damages, as well as attorneys fees.
ISSUE:
Whether the filing of Estafa bars the filing of violation of DOSRI
rules or vice versa.
HELD:
RTC: The RTC held that spouses Cheah were guilty of contributory
negligence. RTC held that each party must suffer the consequences
of their own acts and thus left both parties as they are.
CA: While the CA recognized the spouses Cheah as victims of a scam
who nevertheless have to suffer the consequences of Ofelias lack of
care and prudence in immediately trusting a stranger, the appellate
court did not hold PNB scot-free. Applying the last clear chance
doctrine, the CA held that PNB had the last clear opportunity to avoid
the impending loss of the money and yet, it glaringly exhibited its
negligence in allowing the withdrawal of funds without exhausting the
15-day clearing period which has always been a standard banking
practice as testified to by PNBs own officers. Nevertheless, it also found
Ofelia guilty of contributory negligence. Thus, both parties should be
made equally responsible for the resulting loss.
SC: CA Affirmed.
Here, while PNB highlights Ofelias fault in accommodating a strangers
check and depositing it to the bank, it remains mum in its release of
the proceeds thereof without exhausting the 15-day clearing period,
an act which contravened established banking rules and practice.
was $300,000.00, a higher degree of care is expected of Ofelia which
she, however, failed to exercise under the circumstances. Another
circumstance which should have goaded Ofelia to be more
circumspect in her dealings was when a bank officer called her up to
inform that the Bank of America check has already been cleared way
earlier than the 15-day clearing period. The fact that the check was
cleared after only eight banking days from the time it was deposited
or contrary to what Garin told her that clearing takes 15 days should
have already put Ofelia on guard. She should have first verified the
regularity of such hasty clearance considering that if something goes
wrong with the transaction, it is she and her husband who would be
put at risk and not the accommodated party. However, Ofelia chose
to ignore the same and instead actively participated in immediately
withdrawing the proceeds of the check. Thus, we are one with the CA
in ruling that Ofelias prior consultation with PNB officers is not enough
to totally absolve her of any liability. In the first place, she should have
shunned any participation in that palpably shady transaction.

It is worthy of notice that the 15-day clearing period alluded to is

construed as 15 banking days. As declared by Josephine Estella, the
Administrative Service Officer who was the banks Remittance
Examiner, what was unusual in the processing of the check was that
the lapse of 15 banking days was not observed.

Even PNBs agreement with Philadelphia National Bank regarding the

rules on the collection of the proceeds of US dollar checks refers to
business/ banking days. Ofelia deposited the subject check on
November 4, 1992. Hence, the 15th banking day from the date of said
deposit should fall on November 25, 1992. However, what happened
was that PNB Buendia Branch, upon calling up Ofelia that the check
had been cleared, allowed the proceeds thereof to be withdrawn on
November 17 and 18, 1992, a week before the lapse of the standard
15-day clearing period.

This Court already held that the payment of the amounts of checks
without previously clearing them with the drawee bank especially so
where the drawee bank is a foreign bank and the amounts involved
were large is contrary to normal or ordinary banking practice.

Ofelia failed to observe caution in giving her full trust in

accommodating a complete stranger and this led her and her
husband to be swindled. Considering that Filipina was not personally
known to her and the amount of the foreign check to be encashed
Banking Laws: Case Digest – Commercial Law Review 2019 - Page 11 of 11