Wednesday, May 17, 2006

Banking Laws - New Cases

Spouses Larobis vs Philippine Veterans Bank
(GR No 135705, October 1, 2004, Martinez)

The Spouses Larobis applied for a loan with the PVB. Shortly thereafter, PVB was placed under receivership at the instance of the CB. 14 years after the loan was obtained, PVB initiated foreclosure on the mortgage earlier instituted by the spouses. Spouses contended that foreclosure is not in order because under the Civil Code, PVB only has 10 years to initiate the foreclosure proceedings. PVB contended that they were placed under receivership by the CB and this constitute fortuitous event which effectively suspended the running of the 10-year period.

The SC did not find PVB’s argument persuasive. The SC held that the fact that the bank was held under receivership does not amount to caso fortuito that effectively suspends the running of period of 10-year period of which to foreclose the mortgage.

SC further held that foreclosure or mortgages is not amount those activities which a corporation under receivership is prevented from performing.

DBP vs West Negros (May 21, 2004)/
Ibaan Rural Bank vs CA (Dec 17, 1999)
SC held that an agreement between the parties extending the period to redeem foreclosed properties shall be valid and this shall take precedence over the period to redeem set forth by law. The party who voluntarily agreed thereto shall be estopped from ascertaining otherwise.

Intengan, et al vs CA
(GR No 128996, Feb 15, 2002, Tinga)

Citibank sued two of its officers for violation of the Corp Code contending that these officers are persuading their clients to transfer their dollar deposits to competitor banks because the latter gives higher interests. A complaint was filed by Mr. Lim in behalf of Citibank and such complaint includes an affidavit containing the names and the amount allegedly transferred from Citibank to other banks. Because of the affidavit, the petitioners are now complaining against Citibank claiming that it is in violation of the Secrecy of Bank Deposit Act.

The SC held that since the deposits involved therein are foreign currency deposits, there is no violation here of Secrecy of Bank Deposit Act but of the Foreign Currency Deposit Act. If the case was filed in violation of FCDA, the court may give due course to case for Citibank violated FCDA because there was no written permission from the petitioners. Further, the case can no longer be re-filed because the action has already prescribed.

There are now 2 exceptions for which a bank may disclose foreign currency deposits:
upon the written assent or permission of the depositor; and
in cases covered by the Anti-Money Laundering Act

Estrada vs Desierto
(GR No 159160, Dec 9, 2001)

In this case, the petitioners foreign currency deposits with Citibank are placed in a constructive restraint by the BIR. Petitoners claim that the restraint is in violation of the FCDA.

Absolute confidentiality of foreign currency deposit under RA 6426 does not apply to foreign currency deposits to the petitioners in this case for the reason that petitioners are residents of the Philippines. The protection is intended only to depositors who are non-residents and are not engaged in trade or business in the Philippines.

Benedicto vs Court of Appeals
(GR No 125359, Sept 4, 2001)

The FCDA does not apply to foreign currency deposits maintained in foreign banks.

Salvacion vs Central Bank
(GR No 94723, Aug 21, 1997)

Salvacion was frequently abused by Barteli, a foreigner. Salvacion filed a case against Barteli for which she won and awarded damages. However, the only property found by the sheriff is a foreign currency deposit with China Bank. When a notice of garnishment was presented with China Bank, the bank did not honor the writ contending that it is a violation of FCDA and there was no written permission coming from Barteli.

Whether in this particular case, garnishment of Barteli’s foreign currency deposit with China Bank is in order.

The SC departed from the literal meaning of the FCDA and resorted to the intrinsic aids (whereas clauses appearing in the FCDA). It ruled that the protection of the framers is to give that protection to foreign investors and lenders. Barteli is neither an investor nor a lender so he is not the foreign depositor contemplated under the FCDA. His deposit is not the one that deserved protection of the FCDA. Justice and righteousness dictates that the deposit be garnished in favor of Salvacion.

BPI Family Savings Bank vs First Metro Investment
(GR No 132390, May 21, 2004, Sandoval-Gutierrez)

Whether or not the deposit in question may be treated as demand deposit or time deposit.
If it is to be considered a demand deposit, is it legally proscribed from earning interest?

The deposit in question is a time deposit because the deposit of Php 100 million is not withdrawable for one year provided that an advance interest of 17% is paid.
No. Demand Deposits are not legally proscribed from earning interest. Under CB Cir 22 s 1994, demand deposits shall not be subject to any rate ceiling. This, according to the SC is an open authority to pay interest even on demand deposit and with more reason because interest is not even subject to any ceiling.

Time Deposit – is one where the payment of which cannot be legally required within a specified number of days.
Demand Deposit (Current Account) – is one where the liability of the bank is denominated in Philippine currency subject to payment in legal tender upon presentation of the depositor’s check.


  1. wow. pretty useful. I'm a law student myself! :D but not working.

  2. Good brief and this post helped me alot in my college assignement. Say thank you you on your information.

  3. nice work! thanks