Banking Case Digests
G.R. No. 162336
February 1, 2010
Facts: Soriano was charged for estafa through falsification of commercial documents for allegedly securing a loan of 48 million in the name of two (2) persons when in fact these individuals did not make any loan in the bank, nor did the bank's officers approved or had any information about the said loan. The state prosecutor conducted a Preliminary Investigation on the basis of letters sent by the officers of Special Investigation of BSP together with 5 affidavits and filed two (2) separate information against Soriano for estafa through falsification of commercial documents and violation of DORSI law. 1.
Soriano moved for the quashal of the two (2) informations based on the ground: that the court has no jurisdiction over the offense charged, for the letter transmitted by the BSP to the DOJ constituted the complaint and was defective for failure to comply with the mandatory requirements of Sec. 3(a), Rule 112 of the Rules of Court, such as statment of address of the petitioner and oath of subscription and the signatories were not authorized persons to file the complaint; and that the facts charged do not constitute an offense, for the commission of estafa uner par. 1(b) of Art. 315 of the RPC is inherently incompatible with the violation of DORSI law (Sec. 83 or RA 337 as amended by PD 1795), and therefore a person cannot be charged of both offenses. Issue: Whether or not the complaint filed complied with the mandatory requirements of law. Whether or not the petition for certiorari under Rule 65 is the proper remedy in an order denying a Motion to Quash. Ruling: Yes, the letters transmitted were not intended to be the complaint but merely transmitted for preliminary investigation. The affidavits and not the letter transmitting them initiated the preliminary investigation and therefore is the complaint which substantially complied with the manadory requirements of law. No. The proper procedure in such a case is for the accused to enter a plea, go to trial without prejudice on his part to present special defenses he had invoked in his motion to quash and if after trial on the merits, an adverse decision is rendered, to appeal therefrom in the manner authorized by law.
AGAN VS PIATCO EN BANC Posted by kaye lee on 3:33 PM G.R. No. 155001. May 5, 2003 En Banc [Non-legislative power of Congress; Police Power; Delegation of emergency powers]
On September 17, 2002, the workers of the international airline service providers, claiming that they would lose their job upon the implementation of the questioned agreements, filed a petition for prohibition. Several employees of MIAA likewise filed a petition assailing the legality of the various agreements. During the pendency of the cases, PGMA, on her speech, stated that she will not “honor (PIATCO) contracts which the Executive Branch’s legal offices have concluded (as) null and void.”
FACTS: On October 5, 1994, AEDC submitted an unsolicited proposal to the Government through the DOTC/MIAA for the development of NAIA International Passenger Terminal III (NAIA IPT III). DOTC constituted the Prequalification Bids and Awards Committee (PBAC) for the implementation of the project and submitted with its endorsement proposal to the NEDA, which approved the project.
ISSUE: Whether or not the State can temporarily take over a business affected with public interest.
On June 7, 14, and 21, 1996, DOTC/MIAA caused the publication in two daily newspapers of an invitation for competitive or comparative proposals on AEDC’s unsolicited proposal, in accordance with Sec. 4-A of RA 6957, as amended.
RULING: Yes. PIATCO cannot, by mere contractual stipulation, contravene the Constitutional provision on temporary government takeover and obligate the government to pay “reasonable cost for the use of the Terminal and/or Terminal Complex.”
On September 20, 1996, the consortium composed of People’s Air Cargo and Warehousing Co., Inc. (Paircargo), Phil. Air and Grounds Services, Inc. (PAGS) and Security Bank Corp. (Security Bank) (collectively, Paircargo Consortium) submitted their competitive proposal to the PBAC. PBAC awarded the project to Paircargo Consortium. Because of that, it was incorporated into Philippine International Airport Terminals Co., Inc.
Article XII, Section 17 of the 1987 Constitution provides: Section 17. In times of national emergency, when the public interest so requires, the State may, during the emergency and under reasonable terms prescribed by it, temporarily take over or direct the operation of any privately owned public utility or business affected with public interest.
AEDC subsequently protested the alleged undue preference given to PIATCO and reiterated its objections as regards the prequalification of PIATCO. On July 12, 1997, the Government and PIATCO signed the “Concession Agreement for the Build-Operate-and-Transfer Arrangement of the NAIA Passenger Terminal III” (1997 Concession Agreement). The Government granted PIATCO the franchise to operate and maintain the said terminal during the concession period and to collect the fees, rentals and other charges in accordance with the rates or schedules stipulated in the 1997 Concession Agreement. The Agreement provided that the concession period shall be for twenty-five (25) years commencing from the in-service date, and may be renewed at the option of the Government for a period not exceeding twenty-five (25) years. At the end of the concession period, PIATCO shall transfer the development facility to MIAA. Meanwhile, the MIAA which is charged with the maintenance and operation of the NAIA Terminals I and II, had existing concession contracts with various service providers to offer international airline airport services, such as in-flight catering, passenger handling, ramp and ground support, aircraft maintenance and provisions, cargo handling and warehousing, and other services, to several international airlines at the NAIA.
The above provision pertains to the right of the State in times of national emergency, and in the exercise of its police power, to temporarily take over the operation of any business affected with public interest. The duration of the emergency itself is the determining factor as to how long the temporary takeover by the government would last. The temporary takeover by the government extends only to the operation of the business and not to the ownership thereof. As such the government is not required to compensate the private entity-owner of the said business as there is no transfer of ownership, whether permanent or temporary. The private entity-owner affected by the temporary takeover cannot, likewise, claim just compensation for the use of the said business and its properties as the temporary takeover by the government is in exercise of its police power and not of its power of eminent domain.
Article XII, section 17 of the 1987 Constitution envisions a situation wherein the exigencies of the times necessitate the government to “temporarily take over or direct the operation of any privately owned public utility or business affected with public interest.” It is the welfare and interest of the public which is the paramount consideration in determining whether or not to temporarily take over a particular business. Clearly, the State in effecting the temporary takeover is exercising its police
power. Police power is the “most essential, insistent, and illimitable of powers.” Its exercise therefore must not be unreasonably hampered nor its exercise be a source of obligation by the government in the absence of damage due to arbitrariness of its exercise. Thus, requiring the government to pay reasonable compensation for the reasonable use of the property pursuant to the operation of the business contravenes the Constitution.
RCBC vs. Hi-Tri Development G.R. No. 192413 June 13, 2012
FACTS: Before the Court is a Rule 45 Petition for Review on Certiorari filed by petitioner Rizal Commercial Banking Corporation (RCBC) against respondents Hi-Tri Development Corporation (Hi-Tri) and Luz R. Bakunawa (Bakunawa). Petitioner seeks to appeal from the 26 November 2009 Decision and 27 May 2010 Resolution of the Court of Appeals (CA),1 which reversed and set aside the 19 May 2008 Decision and 3 November 2008 Order of the Makati City Regional Trial Court (RTC) in Civil Case No. 06-244. The case before the RTC involved the Complaint for Escheat filed by the Republic of the Philippines (Republic) pursuant to Act No. 3936, as amended by Presidential Decree No. 679 (P.D. 679), against certain deposits, credits, and unclaimed balances held by the branches of various banks in the Philippines. The trial court declared the amounts, subject of the special proceedings, escheated to the Republic and ordered them deposited with the Treasurer of the Philippines (Treasurer) and credited in favor of the Republic. The assailed RTC judgments included an unclaimed balance in the amount of P 1,019,514.29, maintained by RCBC in its Ermita Business Center branch.
ISSUE: Whether or not the allocated funds may be escheated in favor of the Republic?
liable only after it accepts or certifies the check. After the check is accepted for payment, the bank would then debit the amount to be paid to the holder of the check from the account of the depositor-drawer. There are checks of a special type called manager’s or cashier’s checks. These are bills of exchange drawn by the bank’s manager or cashier, in the name of the bank, against the bank itself. Typically, a manager’s or a cashier’s check is procured from the bank by allocating a particular amount of funds to be debited from the depositor’s account or by directly paying or depositing to the bank the value of the check to be drawn. Since the bank issues the check in its name, with itself as the drawee, the check is deemed accepted in advance. Ordinarily, the check becomes the primary obligation of the issuing bank and constitutes its written promise to pay upon demand.
Nevertheless, the mere issuance of a manager’s check does not ipso facto work as an automatic transfer of funds to the account of the payee. In case the procurer of the manager’s or cashier’s check retains custody of the instrument, does not tender it to the intended payee, or fails to make an effective delivery, we find the following provision on undelivered instruments under the Negotiable Instruments Law applicable: Sec. 16. Delivery; when effectual; when presumed. – Every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. As between immediate parties and as regards a remote party other than a holder in due course, the delivery, in order to be effectual, must be made either by or under the authority of the party making, drawing, accepting, or indorsing, as the case may be; and, in such case, the delivery may be shown to have been conditional, or for a special purpose only, and not for the purpose of transferring the property in the instrument. But where the instrument is in the hands of a holder in due course, a valid delivery thereof by all parties prior to him so as to make them liable to him is conclusively presumed. And where the instrument is no longer in the possession of a party whose signature appears thereon, a valid and intentional delivery by him is presumed until the contrary is proved.
HELD: The Court held in the negative. An ordinary check refers to a bill of exchange drawn by a depositor (drawer) on a bank (drawee), requesting the latter to pay a person named therein (payee) or to the order of the payee or to the bearer, a named sum of money.25 The issuance of the check does not of itself operate as an assignment of any part of the funds in the bank to the credit of the drawer. 26 Here, the bank becomes
Petitioner acknowledges that the Manager’s Check was procured by respondents, and that the amount to be paid for the check would be sourced from the deposit account of Hi-Tri. When Rosmil did not accept the Manager’s Check offered by respondents, the latter retained custody of the instrument instead of cancelling it. As the Manager’s Check neither went to the hands of Rosmil nor was it further negotiated to other
persons, the instrument remained undelivered. Petitioner does not dispute the fact that respondents retained custody of the instrument.
Since there was no delivery, presentment of the check to the bank for payment did not occur. An order to debit the account of respondents was never made. In fact, petitioner confirms that the Manager’s Check was never negotiated or presented for payment to its Ermita Branch, and that the allocated fund is still held by the bank. As a result, the assigned fund is deemed to remain part of the account of Hi-Tri, which procured the Manager’s Check. The doctrine that the deposit represented by a manager’s check automatically passes to the payee is inapplicable, because the instrument – although accepted in advance – remains undelivered. Hence, respondents should have been informed that the deposit had been left inactive for more than 10 years, and that it may be subjected to escheat proceedings if left unclaimed.
After a careful review of the RTC records, we find that it is no longer necessary to remand the case for hearing to determine whether the claim of respondents was valid. There was no contention that they were the procurers of the Manager’s Check. It is undisputed that there was no effective delivery of the check, rendering the instrument incomplete. In addition, we have already settled that respondents retained ownership of the funds. As it is obvious from their foregoing actions that they have not abandoned their claim over the fund, we rule that the allocated deposit, subject of the Manager’s Check, should be excluded from the escheat proceedings. We reiterate our pronouncement that the objective of escheat proceedings is state forfeiture of unclaimed balances. We further note that there is nothing in the records that would show that the OSG appealed the assailed CA judgments. We take this failure to appeal as an indication of disinterest in pursuing the escheat proceedings in favor of the Republic.
Development Bank of the Philippines v. Arcilla
Petition for certiorari June 30, 2005 Ponente: Callejo, Sr., J.
Atty. Felipe P. Arcilla, Jr. was employed by the Development Bank of the Philippines (DBP) in October 1981. He availed of an Individual Housing Project loan sometime in 1982. In 1983, DBP and Arcilla executed a Deed of Conditional Sale over a parcel of land, including the house to be constructed on the property, for P160,000.00. Arcilla borrowed the amount from DBP for the purchase of the lot and the construction of the house. The loan was payable in 25 years, with a P1,417.91 amortization per month, at 9% interest per annum.
DBP gave Arcilla the option of converting his loan into a regular loan if he retired early. By 1985, the amortization amount increased to P1,691.51. Arcilla opted for early retirement in 1986, and so the loan was converted into a regular loan. In 1987, Arcilla signed three promissory notes amounting to P186,364.15, and was obliged to pay service charges and interest. DBP reserved the right to increase or decrease the interest rate of the loan as well as other charges and fees, with prior notice to Arcilla. DBP later granted Arcilla a cash advance of P32,000.00, at 9% per annum, which was consolidated to the oustanding balance of Arcilla’s original balance.
Arcilla later defaulted on payments. As of October 31, 1990, the outstanding balance was P241,940.93, including interest, fees, and penalties. DBP rescinded the Conditional Sale Agreement in 1990, but in January 1992 DBP offered Arcilla the opportunity to repurchase the lot upon full payment of the current appraisal or the updated total, whichever was higher. This offer was reiterated in October 7, 1992. Arcilla did not respond. DBP placed the property up for sale at public bidding on February 14, 1994.
Arcilla filed a case against DBP, alleging that DBP failed to furnish him with the disclosure statement required by Republic Act (R.A.) No. 3765 1 and Central Bank (CB) Circular No. 1582 prior to the execution of the deed of conditional sale and the
1 From the case: Section 1 of R.A. No. 3765 provides that prior to the consummation of a loan transaction, the bank, as creditor, is obliged to furnish a client with a clear statement, in writing, setting forth, to the extent applicable and in accordance with the rules and regulations prescribed by the Monetary Board of the Central Bank of the Philippines, the following information: (1) the cash price or delivered price of the property or service to be acquired; (2) the amounts, if any, to be credited as down payment and/or trade-in; (3) the difference between the amounts set forth under clauses (1) and (2) (4) the charges, individually itemized, which are paid or to be paid by such person in connection with the transaction but which are not incident to the extension of credit; (5) the total amount to be financed; (6) the finance charges expressed in terms of pesos and centavos; and (7) the percentage that the finance charge bears to the total amount to be financed expressed as a simple annual rate on the outstanding unpaid balance of the obligation.
2 Also from the case: Under Circular No. 158 of the Central Bank, the information required by R.A. No. 3765 shall be included in the contract covering the credit transaction or any other document to be acknowledged and signed by the debtor, thus: The contract covering the credit transaction, or any other document to be acknowledged and signed by the debtor, shall indicate the above seven items of information. In addition, the contract or document shall specify additional charges, if any, which will be collected in case certain stipulations in the contract are not met by the debtor. Furthermore, the contract or document shall specify additional charges, if any, which will be collected in case certain stipulations in the contract are not met by the debtor.
conversion of his loan account with the bank into a regular housing loan account. DBP countered that it substantially complied with R.A. No. 3765 and CB Circular No. 158 because the details required were disclosed in the promissory notes, deed of conditional sale and the required notices sent to Arcilla. DBP further argued that its failure to comply strictly with R.A. No. 3765 did not affect the validity and enforceability of the loan agreement. DBP interposed a counterclaim for the possession of the property.
The RTC ruled in Arcilla’s favor, ordering DBP to furnish Arcilla with the required disclosures, and rendered DBP’s rescission null and void. On appeal, however, the Court of Appeals reversed the RTC, ruling that DBP substantially complied with R.A. No. 3765 and CB Circular No. 158. Both parties appealed to the Supreme Court: Arcilla, for a reversal of the CA ruling and reversion to the RTC ruling, and DBP for partial reconsideration in asking the CA to order Arcilla to vacate the property. Issues:
1. Was DBP compliant with R.A. No. 3765 and CB Circular No. 158? 2. Was Arcilla liable to vacate the property and pay rentals for his occupation of the property from the time of the notarial rescission? Ratio: 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.
1. Yes, DBP substantially complied with R.A. No. 3765 and CB Circular No. 158. The Court found that DBP failed to disclose the requisite information in the disclosure statement form. Ordinarily, the lender has no right to collect any interest, charges, or fees without due notice to the borrower. However, DBP , did include such information on interests, charges, fees, and penalties in the loan transaction documents between it and Arcilla. The Court considered this as subtantial compliance. Additionally, there was no evidence that DBP sought to collect interest, charges, or fees beyond what was contained in the documents provided to Arcilla.
2. Yes, Arcilla is liable to vacate the property, but the Court made no ruling on the issue of rentals. The Court adopted the findings of the CA, stating that had Arcilla
been an ordinary borrower, it would have been inclined to be stricter in the application of the Truth in Lending Act, insisting that the borrower be fully informed of what he is entering into. However, the Court noted that Arcilla was a lawyer, and so presumed that Arcilla would not be so negligent as to sign papers he had not carefully studied. Additionally, as an employee of DBP, Arcilla ought to have known the terms of the loan he was applying for. The Court remanded the matter of the determination of rental payments to the RTC, as no evidence was adduced by DBP with respect to such rentals.
Disposition: Arcilla’s appeal is DENIED, CA ruling is UPHELD; case remanded to RTC for determination of reasonable rental payments.
SAMPAGUITA BUILDERS v PNB Mini digest: Sampaguita loaned money from PNB. PNB unilaterally increased rates of interest in the loan w/o informing Sampaguita. PNB claimed they were authorized to do it as there was a clause in the agreement that they may do so. Besides, Usury law was no longer in force = SC said NO! PNB cannot do so; it will violate mutuality of contracts under 1308. Besides, SC may intervene when amount of interest is unconscionable. Facts: Sampaguita secured a loan from PNB in an aggregate amount of 8M pesos, mortgaging the properties of Sampaguita’s president and chairman of the board. Sampaguita also executed several promissory notes due on different dates (payment dates). The first promissory note had 19.5% interest rate. The 2 nd and 3rd had 21.5%. a uniform clause therein permitted PNB to increase the rate “within the limits allowed by law at any time depending on whatever policy it may adopt in the future x x x,” without even giving prior notice to petitioners. There was also a clause in the promissory note that stated that if the same is not paid 2 years after release then it shall be converted to a medium term loan – and the interest rate for such loan would apply. Later on, Sampaguita defaulted on its payments and failed to comply with obligations on promissory notes. Sampaguita thus requested for a 90 day extension to pay the loan. Again they defaulted, so they asked for loan restructuring. It partly paid the loan and promised to pay the balance later on. AGAIN they failed to pay so PNB extrajudicially foreclosed the mortgaged properties. It was sold for 10M. PNB claimed that Sampaguita owed it 12M so they filed a case in court asking sampaguita to pay for deficiency. RTC found that Sampaguita was automatically entitled to the debt relief package of PNB and ruled that the latter had no cause of action against the former. CA reversed, saying Sampaguita was not entitled, thus ordered them to pay the deficiency – Appeal = Went to SC. Sampaguita claims the loan was bloated so they don’t really owe PNB anymore, but it just overcharged them! Issues/Ruling: W/N the loan accounts are bloated: YES. There is no deficiency; there is actually an overpayment of more than 3M based on the computation of the SC. Whether PNB could unilaterally increase interest rates: NO Ratio: Sampaguita’s accessory duty to pay interest did not give PNB unrestrained freedom to charge any rate other than that which was agreed upon. No interest shall be due, unless expressly stipulated in writing. It would be the zenith of farcicality to specify and agree upon rates that could be subsequently upgraded at whim by only one party to the agreement. The “unilateral determination and imposition” of increased rates is “violative of the principle of mutuality of contracts ordained in Article 1308 of the Civil Code.” Onesided impositions do not have the force of law between the parties, because such impositions are not based on the parties’ essential equality.
Although escalation clauses are valid in maintaining fiscal stability and retaining the value of money on long-term contracts, giving respondent an unbridled right to adjust the interest independently and upwardly would completely take away from petitioners the “right to assent to an important modification in their agreement” and would also negate the element of mutuality in their contracts. The clause cited earlier made the fulfillment of the contracts “dependent exclusively upon the uncontrolled will” of respondent and was therefore void. Besides, the pro forma promissory notes have the character of a contract d’adhésion, “where the parties do not bargain on equal footing, the weaker party’s [the debtor’s] participation being reduced to the alternative ‘to take it or leave it.’” Circular that lifted the ceiling of interest rates of usury law did not authorize either party to unilaterally raise the interest rate without the other’s consent. the interest ranging from 26 percent to 35 percent in the statements of account -“must be equitably reduced for being iniquitous, unconscionable and exorbitant.” Rates found to be iniquitous or unconscionable are void, as if it there were no express contract thereon. Above all, it is undoubtedly against public policy to charge excessively for the use of money. It cannot be argued that assent to the increases can be implied either from the June 18, 1991 request of petitioners for loan restructuring or from their lack of response to the statements of account sent by respondent. Such request does not indicate any agreement to an interest increase; there can be no implied waiver of a right when there is no clear, unequivocal and decisive act showing such purpose. Besides, the statements were not letters of information sent to secure their conformity; and even if we were to presume these as an offer, there was no acceptance. No one receiving a proposal to modify a loan contract, especially interest -- a vital component -- is “obliged to answer the proposal.” Besides, PNB did not comply with its own stipulation that should the loan not be paid 2 years after release of money then it shall be converted to a medium term loan. *Court applied 12% interest rate instead for being a forbearance of money (there were some pieces of evidence presented by PNB in court that sampaguita objected to. Lower courts overruled the objections but SC said the objections were correct and the evidence should not have been admitted. i.e. contract wasn’t signed by the parties, a part of the contract wasn’t properly annexed/no reference was made in the main contract.) In addition to the preceding discussion, it is then useless to labor the point that the increase in rates violates the impairment clause of the Constitution, because the sole purpose of this provision is to safeguard the integrity of valid contractual agreements against unwarranted interference by the State in the form of laws. Private individuals’ intrusions on interest rates is governed by statutory enactments like the Civil Code
SECOND DIVISION THE FACTS JOSE C. GO,
G.R. No. 178429 Petitioner, Present: On August 20, 1999, an Information  for violation of Section 83 of Republic Act No. 337 (RA 337) or the General Banking Act, as amended by Presidential Decree No. 1795, QUISUMBING, J., Chairperson, was filed against Go before the RTC. The charge reads: -
CARPIO MORALES, BRION, and ABAD, JJ.
BANGKO SENTRAL NG PILIPINAS, Respondent. Promulgated:
October 23, 2009 x ------------------------------------------------------------------------------------------x
Through the present petition for review on certiorari, petitioner Jose C. Go (Go) assails the October 26, 2006 decision of the Court of Appeals (CA) in CA-G.R. SP No. 79149, as well as its June 4, 2007 resolution. The CA decision and resolution annulled and set aside the May 20, 2003 and June 30, 2003 orders of the Regional Trial Court (RTC), Branch 26, Manila which granted Gos motion to quash the Information filed against him.
That on or about and during the period comprised between June 27, 1996 and September 15, 1997, inclusive, in the City of Manila, Philippines, the said accused, being then the Director and the President and Chief Executive Officer of the Orient Commercial Banking Corporation (Orient Bank), a commercial banking institution created, organized and existing under Philippines laws, with its main branch located at C.M. Recto Avenue, this City, and taking advantage of his position as such officer/director of the said bank, did then and there wilfully, unlawfully and knowingly borrow, either directly or indirectly, for himself or as the representative of his other related companies, the deposits or funds of the said banking institution and/or become a guarantor, indorser or obligor for loans from the said bank to others, by then and there using said borrowed deposits/funds of the said bank in facilitating and granting and/or caused the facilitating and granting of credit lines/loans and, among others, to the New Zealand Accounts loans in the total amount of TWO BILLION AND SEVEN HUNDRED FIFTY-FOUR MILLION NINE HUNDRED FIVE THOUSAND AND EIGHT HUNDRED FIFTYSEVEN AND 0/100 PESOS, Philippine Currency, said accused knowing fully well that the same has been done by him without the written approval of the majority of the Board of Directors of said Orient Bank and which approval the said accused deliberately failed to obtain and enter the same upon the records of said banking institution and to transmit a copy of which to the supervising department of the said bank, as required by the General Banking Act.
CONTRARY TO LAW. [Emphasis supplied.]
On May 28, 2001, Go pleaded not guilty to the offense charged.
After the arraignment, both the prosecution and accused Go took part in the pre-trial conference where the marking of the voluminous evidence for the parties was accomplished. After the completion of the marking, the trial court ordered the parties to proceed to trial on the merits.
Before the trial could commence, however, Go filed on February 26, 2003 a motion to quash the Information, which motion Go amended on March 1, 2003. Go claimed that the Information was defective, as the facts charged therein do not constitute an offense under Section 83 of RA 337 which states:
No director or officer of any banking institution shall either directly or indirectly, for himself or as the representative or agent of another, borrow any of the deposits of funds of such banks, nor shall he become a guarantor, indorser, or surety for loans from such bank, to others, or in any manner be an obligor for money borrowed from the bank or loaned by it, except with the written approval of the majority of the directors of the bank, excluding the director concerned. Any such approval shall be entered upon the records of the corporation and a copy of such entry shall be transmitted forthwith to the appropriate supervising department. The office of any director or officer of a bank who violates the provisions of this section shall immediately become vacant and the director or officer shall be punished by imprisonment of not less than one year nor more than ten years and by a fine of not less than one thousand nor more than ten thousand pesos.
The Monetary Board may regulate the amount of credit accommodations that may be extended, directly or indirectly, by banking institutions to their directors, officers, or stockholders.However, the outstanding credit accommodations which a bank may extend to each of its stockholders owning two percent (2%) or more of the subscribed capital stock, its directors, or its officers, shall be limited to an amount equivalent to the respective outstanding deposits and book value of the paid-in capital contribution in the bank. Provided, however, that loans and advances to officers in the form of fringe benefits granted in accordance with rules and regulations as may be prescribed by Monetary Board shall not be subject to the preceding limitation. (As amended by PD 1795)
In addition to the conditions established in the preceding paragraph, no director or a building and loan association shall engage in any of the operations mentioned in said paragraphs, except upon the pledge of shares of the association having a total withdrawal value greater than the amount borrowed. (As amended by PD 1795)
In support of his motion to quash, Go averred that based on the facts alleged in the Information, he was being prosecuted for borrowing the deposits or funds of the Orient Bank and/or acting as a guarantor, indorser or obligor for the banks loans to other persons. The use of the word and/or meant that he was charged for being either a borrower or a guarantor, or for being both a borrower and guarantor. Go claimed that the charge was not only vague, but also did not constitute an offense. He posited that Section 83 of RA 337 penalized only directors and officers of banking institutions who acted either as borrower or as guarantor, but not as both.
Go further pointed out that the Information failed to state that his alleged act of borrowing and/or guarantying was not among the exceptions provided for in the law.According to Go, the second paragraph of Section 83 allowed banks to extend credit accommodations to their directors, officers, and stockholders, provided it is limited to an amount equivalent to the respective outstanding deposits and book value of the paid-in capital contribution in the bank. Extending credit accommodations to bank directors, officers, and stockholders is not per se prohibited, unless the amount exceeds the legal limit. Since the Information failed to state that the amount he purportedly borrowed and/or guarantied was beyond the limit set by law, Go insisted that the acts so charged did not constitute an offense.
Finding Gos contentions persuasive, the RTC granted Gos motion to quash the Information on May 20, 2003. It denied on June 30, 2003 the motion for reconsideration filed by the prosecution.
The prosecution did not accept the RTC ruling and filed a petition for certiorari to question it before the CA. The Information, the prosecution claimed, was sufficient. The word and/or did not materially affect the validity of the Information, as it merely stated a mode of committing the crime penalized under Section 83 of RA 337. Moreover, the prosecution asserted that the second paragraph of Section 83 (referring to the credit accommodation limit) cannot be interpreted as an exception to what the first paragraph provided. The second paragraph only sets borrowing limits that, if violated, render the bank, not the director-borrower, liable. A violation of the second paragraph of Section 83 under which Go is being prosecuted is therefore separate and distinct from a violation of the first paragraph. Thus, the prosecution prayed that the orders of the RTC quashing the Information be set aside and the criminal case against Go be reinstated.
On October 26, 2006, the CA rendered the assailed decision granting the prosecutions petition for certiorari. The CA declared that the RTC misread the law when it decided to quash the Information against Go. It explained that the allegation that Go acted either as a borrower or a guarantor or as both borrower and guarantor merely set forth the different modes by which the offense was committed. It did not necessarily mean that Go acted both as borrower and guarantor for the same loan at the same time. It agreed with the prosecutions stand that the second paragraph of Section 83 of RA 337 is not an exception to the first paragraph. Thus, the failure of the Information to state that the amount of the loan Go borrowed or guaranteed exceeded the legal limits was, to the CA, an irrelevant issue. For these reasons, the CA annulled and set aside the RTCs orders and ordered the reinstatement of the criminal charge against Go. After the CAs denial of his motion for reconsideration,  Go filed the present appeal by certiorari.
In its Comment, the prosecution raises the same defenses against Gos contentions. It insists on the sufficiency of the allegations in the Information and prays for the denial of Gos petition.
THE COURTS RULING
The Court does not find the petition meritorious and accordingly denies it.
The Accuseds Right to be Informed THE PETITION
In his petition, Go alleges that the appellate court legally erred in overturning the trial courts orders. He insists that the Information failed to allege the acts or omissions complained of with sufficient particularity to enable him to know the offense being charged; to allow him to properly prepare his defense; and likewise to allow the court to render proper judgment.
Repeating his arguments in his motion to quash, Go reads Section 83 of RA 337 as penalizing a director or officer of a banking institution for either borrowing the deposits or funds of the bank, or guaranteeing or indorsing loans to others, but not for assuming both capacities. He claimed that the prosecutions shotgun approach in alleging that he acted as borrower and/or guarantor rendered the Information highly defective for failure to specify with certainty the specific act or omission complained of. To petitioner Go, the prosecutions approach was a clear violation of his constitutional right to be informed of the nature and cause of the accusation against him.
Additionally, Go reiterates his claim that credit accommodations by banks to their directors and officers are legal and valid, provided that these are limited to their outstanding deposits and book value of the paid-in capital contribution in the bank. The failure to state that he borrowed deposits and/or guaranteed loans beyond this limit rendered the Information defective. He thus asks the Court to reverse the CA decision to reinstate the criminal charge.
Under the Constitution, a person who stands charged of a criminal offense has the right to be informed of the nature and cause of the accusation against him.  The Rules of Court, in implementing the right, specifically require that the acts or omissions complained of as constituting the offense, including the qualifying and aggravating circumstances, must be stated in ordinary and concise language, not necessarily in the language used in the statute, but in terms sufficient to enable a person of common understanding to know what offense is being charged and the attendant qualifying and aggravating circumstances present, so that the accused can properly defend himself and the court can pronounce judgment.  To broaden the scope of the right, the Rules authorize the quashal, upon motion of the accused, of an Information that fails to allege the acts constituting the offense.  Jurisprudence has laid down the fundamental test in appreciating a motion to quash an Information grounded on the insufficiency of the facts alleged therein. We stated in People v. Romualdez that:
The determinative test in appreciating a motion to quash xxx is the sufficiency of the averments in the information, that is, whether the facts alleged, if hypothetically admitted, would establish the essential elements of the offense as defined by law without considering matters aliunde. As Section 6, Rule 110 of the Rules of Criminal Procedure requires, the information only needs to state the ultimate facts; the evidentiary and other details can be provided during the trial.
To restate the rule, an Information only needs to state the ultimate facts constituting the offense, not the finer details of why and how the illegal acts alleged amounted to undue injury or damage matters that are appropriate for the trial. [Emphasis supplied]
The facts and circumstances necessary to be included in the Information are determined by reference to the definition and elements of the specific crimes. The Information must allege clearly and accurately the elements of the crime charged.
Elements Violation of
Section 83 of RA 337
Under Section 83, RA 337, the following elements must be present to constitute a violation of its first paragraph: 1.
the offender is a director or officer of any banking institution;
the offender, either directly or indirectly, for himself or as representative or agent of another, performs any of the following acts:
he borrows any of the deposits or funds of such bank; or
he becomes a guarantor, indorser, or surety for loans from such bank to others, or
he becomes in any manner an obligor for money borrowed from bank or loaned by it;
the offender has performed any of such acts without the written approval of the majority of the directors of the bank, excluding the offender, as the director concerned.
A simple reading of the above elements easily rejects Gos contention that the law penalizes a bank director or officer only either for borrowing the banks deposits or funds or for guarantying loans by the bank, but not for acting in both capacities. The essence of the crime is becoming an obligor of the bank without securing the necessary written approval of the majority of the banks directors.
The second element merely lists down the various modes of committing the offense. The third mode, by declaring that [no director or officer of any banking institution shall xxx] in any manner be an obligor for money borrowed from the bank or loaned by it, in fact serves a catch-all phrase that covers any situation when a director or officer of the bank becomes its obligor. The prohibition is directed against a bank director or officer who becomes in any manner an obligor for money borrowed from or loaned by the bank without the written approval of the majority of the banks board of directors. To make a distinction between the act of borrowing and guarantying is therefore unnecessary because in either situation, the director or officer concerned becomes an obligor of the bank against whom the obligation is juridically demandable.
The language of the law is broad enough to encompass either act of borrowing or guaranteeing, or both. While the first paragraph of Section 83 is penal in nature, and by principle should be strictly construed in favor of the accused, the Court is unwilling to adopt a liberal construction that would defeat the legislatures intent in enacting the statute.The objective of the law should allow for a reasonable flexibility in its construction. Section 83 of RA 337, as well as other banking laws adopting the same prohibition, was enacted to ensure that loans by banks and similar financial institutions to their own directors, officers, and stockholders are above board.  Banks were not created for the benefit of their directors and officers; they cannot use the assets of the bank for their own benefit, except as may be permitted by law. Congress has thus deemed it essential to impose restrictions on borrowings by bank directors and officers in order to protect the public, especially the depositors.  Hence, when the law prohibits directors and officers of banking institutions from becoming in any manner an obligor of the bank (unless with the approval of the board), the terms of the prohibition shall be the standards to be applied to directors transactions such as those involved in the present case.
limit is not an exception nor is it an element of the
required; otherwise, the bank director or officer who becomes an obligor of the bank is liable. Compliance with the ceiling requirement does not dispense with the approval requirement.
offense Evidently, the failure to observe the three requirements under Section 83 paves the way for the prosecution of three different offenses, each with its own set of elements. A successful indictment for failing to comply with the approval requirement will not necessitate proof that the other two were likewise not observed. Contrary to Gos claims, the second paragraph of Section 83, RA 337 does not provide for an exception to a violation of the first paragraph thereof, nor does it constitute as an element of the offense charged. Section 83 of RA 337 actually imposes three restrictions: approval, reportorial, and ceiling requirements.
The approval requirement (found in the first sentence of the first paragraph of the law) refers to the written approval of the majority of the banks board of directors required before bank directors and officers can in any manner be an obligor for money borrowed from or loaned by the bank. Failure to secure the approval renders the bank director or officer concerned liable for prosecution and, upon conviction, subjects him to the penalty provided in the third sentence of first paragraph of Section 83.
The reportorial requirement, on the other hand, mandates that any such approval should be entered upon the records of the corporation, and a copy of the entry be transmitted to the appropriate supervising department. The reportorial requirement is addressed to the bank itself, which, upon its failure to do so, subjects it to quo warrantoproceedings under Section 87 of RA 337.
The ceiling requirement under the second paragraph of Section 83 regulates the amount of credit accommodations that banks may extend to their directors or officers by limiting these to an amount equivalent to the respective outstanding deposits and book value of the paid-in capital contribution in the bank. Again, this is a requirement directed at the bank. In this light, a prosecution for violation of the first paragraph of Section 83, such as the one involved here, does not require an allegation that the loan exceeded the legal limit. Even if the loan involved is below the legal limit, a written approval by the majority of the banks directors is still
Rules of Court allow amendment of insufficient Information Assuming that the facts charged in the Information do not constitute an offense, we find it erroneous for the RTC to immediately order the dismissal of the Information, without giving the prosecution a chance to amend it. Section 4 of Rule 117 states:
SEC. 4. Amendment of complaint or information.If the motion to quash is based on an alleged defect of the complaint or information which can be cured by amendment, the court shall order that an amendment be made.
If it is based on the ground that the facts charged do not constitute an offense, the prosecution shall be given by the court an opportunity to correct the defect by amendment. The motion shall be granted if the prosecution fails to make the amendment, or the complaint or information still suffers from the same defect despite the amendment. [Emphasis supplied]
Although an Information may be defective because the facts charged do not constitute an offense, the dismissal of the case will not necessarily follow. The Rules specifically
require that the prosecution should be given a chance to correct the defect; the court can order the dismissal only upon the prosecutions failure to do so. The RTCs failure to provide the prosecution this opportunity twice constitutes an arbitrary exercise of power that was correctly addressed by the CA through the certiorari petition. This defect in the RTCs action on the case, while not central to the issue before us, strengthens our conclusion that this criminal case should be resolved through fullblown trial on the merits.
WHEREFORE, we DENY the petitioners petition for review on certiorari and AFFIRM the decision of the Court of Appeals in CA-G.R. SP No. 79149, promulgated on October 26, 2006, as well as its resolution of June 4, 2007. The Regional Trial Court, Branch 26, Manila is directed to PROCEED with the hearing of Criminal Case No. 99-178551. Costs against the petitioner.