JOSE C. GO, Petitioner, vs.BANGKO SENTRAL NG PILIPINAS, Respondent. guarantor for the same loan at the same time.

oan at the same time. It agreed with the prosecution’s stand

that the second paragraph of Section 83 of RA 337 is not an exception to the first
paragraph. Hence, this petition.
G.R. No. 178429              

October 23, 2009

Issue: whether or not the allegation that Go acted as borrower or gurantor rendered
Go, the Director and CEO of Orient Bank, was charged with violation of Sec. 83 of the information defective?
the General Banking Act for borrowing the deposits/funds of the bank and using
Whether or not the failure to state that Go borrowed beyond the limit of his
them to act as grant credit lines/loans to New Zealand accounts without the written
outstanding deposits and book value of the paid-in capital contribution in the bank
approval of the majority of the Board of Directors of the bank. Go moved to quash
rendered the Information defective?
the information on various grounds (not relevant to topic). Court held that the
information was valid and that the law encompasses either the act of borrowing or
guaranteeing, or both, by the bank director or officer. The Court mentioned the 3
Ruling: No, the information was not defective. The following elements of violation
restrictions imposed by the DOSRI law (relevant topic).
of Section 83 of RA 337 which must be present to constitute a violation of its first
Facts: Jose Go, the Director and the President and Chief Executive Officer of the paragraph: 1. the offender is a director or officer of any banking institution; 2. the
Orient Commercial Banking Corporation (Orient Bank) was charged before the RTC offender, either directly or indirectly, for himself or as representative or agent of
for violation of Section 83 of RA 337 or the General Banking Act. Go allegedly another, performs any of the following acts: a. he borrows any of the deposits or
borrowed the deposits/funds of the Orient Bank and/or acting as guarantor, indorser funds of such bank; or b. he becomes a guarantor, indorser, or surety for loans from
of obligor for loans to other persons. He then used the borrowed deposits/funds in such bank to others, or c. he becomes in any manner an obligor for money borrowed
facilitating and granting and/or of credit lines/loans to the New Zealand Accounts from bank or loaned by it; 3. the offender has performed any of such acts without the
loans in the total amount of PHP 2,754,905,857. He completed the alleged written approval of the majority of the directors of the bank, excluding the offender,
transaction without the written approval of the majority of the Board of Directors of as the director concerned.
said Orient Bank. Go then filed a motion to quash the Information. He averred that
the use of the word "and/or" meant that he was charged for being either a borrower
or a guarantor, or for being both. Thus the charge do not constitute an offense. That The language of the law is broad enough to encompass either act of borrowing or
the Section 83 of RA 337 penalized only directors and officers xxx who acted either guaranteeing, or both. Banks were not created for the benefit of their directors and
as borrower or as guarantor, but not as both. Also that the Information did not officers; they cannot use the assets of the bank for their own benefit, except as may
constitute an offense since the information failed to state the amount he purportedly be permitted by law. Congress has thus deemed it essential to impose restrictions on
borrowed. According to Go, the second paragraph of Section 83, serves as an borrowings by bank directors and officers in order to protect the public, especially
exception to the first paragraph which allows the banks to extend credit the depositors. Hence, when the law prohibits directors and officers of banking
accommodations to their directors, officers, and stockholders, provided it is "limited institutions from becoming in any manner an obligor of the bank (unless with the
to an amount equivalent to the respective outstanding deposits and book value of the approval of the board), the terms of the prohibition shall be the standards to be
paid-in capital contribution in the bank." The RTC granted Go’s motion to quash the applied to directors’ transactions such as those involved in the present case.
Information.

Credit accommodation limit is not an exception nor is it an element of the offense as

The prosecution filed a petition for certiorari before the CA. The CA granted the contrary to Go’s claims.
petition. It explained that the allegation that Go acted either as a borrower or a
guarantor or both did not necessarily mean that Go acted both as borrower and
Section 83 of RA 337 actually imposes three restrictions: approval, reportorial, and
ceiling requirements.

The law on DOSRI imposes three restrictions:

1.) Approval requirement- refers to the written approval of the majority of

the bank’s 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.

2.) reportorial requirement, - 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.
3.) ceiling requirement - 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.

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.
PDIC v. Citibank deposit liabilities under Sections 3 and 4 of R.A. No. 3591 (the PDIC Charter) and,
PDIC V CITIBANK ET.AL. as a consequence, the deficiency assessments made by PDIC were improper and
erroneous. RTC ruled in favor of Citibank and BA which reasoned that there was no
Topic: Foreign Currency Deposit
depositor-depository relationship between the respondents and their head office or
other branches. Also, the placements were deposits made outside the Philippines
which are excluded under Section 3.05(b) of the PDIC Rules and Regulations and
PHILIPPINE DEPOSIT INSURANCE CORPORATION Section 3(f) of the PDIC Charter likewise excludes from the definition of the term
deposit any obligation of a bank payable at the office of the bank located outside
vs.
the Philippines. 
CITIBANK, N.A. and BANK OF AMERICA, S.T. & N.A.,

PDIC argues that the head offices of Citibank and BA and their individual
G.R. No. 170290, April 11, 2012 foreign branches are separate and independent entities hence not exempt in Section
3(b) of R.A. No. 3591.

Ponente: Associate Justice Jose Catral Mendoza

PDIC appealed to the CA which affirmed the ruling of the RTC.
Case Digest by: Mervic Al A. Tuble

Issues:
Facts: Citibank, N.A. (Citibank)  and Bank of America, S.T. & N.A. (BA)  are duly
organized corporations and existing under the laws of the United States of 1.) Whether or not the dollar deposits are money placements, thus, they are not
America and duly licensed to do business in the Philippines, with offices subject to the provisions of Republic Act No. 6426 otherwise known as the
in Makati City. Petitioner Philippine Deposit Insurance Foreign Currency Deposit Act of the Philippines.
Corporation (PDIC) conducted an examination of the books of account of Citibank 2.) Whether or not the Philippine branch of a foreign corporation has a separate
and BA  in 1977and 1979 respectively. It discovered that Citibank in the course of its legal personality from its foreign head office for the purpose of PDIC.
banking business, received from its head office and other foreign branches a total
of P11,923,163,908.00 in dollars from September 30, 1974 to June 30, 1977 covered
by Certificates of Dollar Time Deposit that were interest-bearing with corresponding Ruling: The court ruled that the funds in question are not deposits within the
maturity dates. And BA a total of P629, 311,869.10 in dollars, covered by definition of the PDIC Charter and are, thus, excluded from assessment. Pursuant to
Certificates of Dollar Time Deposit that were interest-bearing with corresponding Section 3(f) of the PDIC Charter, the term deposit means unpaid balance of money
maturity dates and lodged in their books under the account Due to Head or its equivalent received by a bank in the usual course of business and for which it
Office/Branches. For failure to report the said amounts as deposit liabilities that were has given or is obliged to give credit to a commercial, checking, savings, time or
subject to assessment for insurance, PDIC sought the remittance of deficiency thrift account or which is evidenced by its certificate of deposit, and trust funds held
premium assessments for dollar deposits. by such bank whether retained or deposited in any department of said bank or deposit
in another bank, together with such other obligations of a bank as the Board of
Directors shall find and shall prescribe by regulations to be deposit liabilities of the
Bank; Provided, that any obligation of a bank which is payable at the office of the
Citibank and BA each filed a petition for declaratory relief before the Court
bank located outside of the Philippines shall not be a deposit for any of the purposes
of First Instance stating that the money placements they received from their head
of this Act or included as part of the total deposits or of the insured deposits. As
office and other foreign branches were not deposits and did not give rise to insurable
explained by the respondents, the transfer of funds, which resulted from the inter-
branch transactions, took place in the books of account of the respective branches in
their head office located in the United States. Hence, because it is payable outside of
the Philippines, it is not considered a deposit.

The Court in resolving the controversy in the relationship of the Philippine

branches of Citibank and BA to their respective head offices and their other foreign
branches examined the manner by which a foreign corporation can establish its
presence in the Philippines. It may choose to incorporate its own subsidiary as a
domestic corporation, in which case such subsidiary would have its own separate and
independent legal personality to conduct business in the country. In the alternative, it
may create a branch in the Philippines, which would not be a legally independent
unit, and simply obtain a license to do business in the Philippines. It is apparent that
the respondent banks did not incorporate as a separate domestic corporation to
represent its business interests in the Philippines. Thus, being one and the same
entity, the funds placed by the respondents in their respective branches in
the Philippines should not be treated as deposits made by third parties subject to
deposit insurance under the PDIC Charter.

 
HILIPPINE DEPOSIT INSURANCE CORPORATION, PETITIONER, VS. MANU Rural Bank of Bais, Inc. 1639 12/11/08
GIDWANI, RESPONDENT. Rural Bank of Paranaque, Inc. 1616 12/09/08
Rural Bank of DARBCI, Inc. 1692 12/19/08
Rural Bank of Polangui, Inc. 353 02/26/10
DECISION
Respondent Manu, together with his wife Champa Gidwani and eighty-six (86) other
individuals, represented themselves to be owners of four hundred seventy-one (471)
VELASCO JR., J.:
deposit accounts with the Legacy Banks and filed claims with PDIC. The claims
Nature of the Case were processed and granted, resulting in the issuance of six hundred eighty-three
(683) Landbank of the Philippines (Landbank) checks in favor of the 86 individuals,
For the Court's consideration is the Petition for Review on Certiorari under Rule 45 excluding the spouses Gidwani, in the aggregate amount of P98,733,690.21.
of the Rules of Court filed by Philippine Deposit Insurance System (PDIC) and
docketed as G.R. No. 234616. The petition assails the January 31,2017 Two diagonal lines appeared in each of the Landbank checks, indicating that they
Decision[1] and October 6, 2017 Resolution[2] of the Court of Appeals (CA) in CA- were crossed-checks "Payable to the Payee's Account Only." Despite these explicit
G.R. SP No. 146439. The challenged rulings reversed the finding of probable cause instructions, the individuals did not deposit the crossed checks in their respective
to charge respondent Manu Gidwani (Manu) with estafa through falsification under bank accounts. Rather, the face value of all the checks were credited to a single
Art. 315(2)(a) in relation to Art. 172(1) and 171(4) of the Revised Penal Code account with Rizal Commercial Banking Corporation (RCBC)-RCBC Account No.
(RPC), and for money laundering as defined in Section 4(a) of Republic Act No. 1-419-86822-8, owned by Manu.
(RA) 9160, otherwise known as the Anti-Money Laundering Act of 2001 (AMLA).
PDIC alleges that it only discovered the foregoing circumstance when the checks
were cleared and returned to it. This prompted PDIC to conduct an investigation on
The Facts the true nature of the deposit placements of the 86 individuals. Based on available
bank documents, the spouses Gidwani and the 86 individuals maintained a total of
Pursuant to several resolutions of the Monetary Board (MB) of the Bangko Sentral 471 deposit accounts aggregating P118,187,500 with the different Legacy Banks,
ng Pilipinas (BSP), the following rural banks owned and controlled by the Legacy and that 142 of these accounts, with the total amount of P20,966,439.09, were in the
Group of Companies (Legacy Banks) were ordered closed and thereafter placed names of helpers and rank-and-file employees of the Gidwani spouses. Thus, they
under the receivership of petitioner Philippine Deposit Insurance Corporation allegedly did not have the financial capacity to deposit the amounts recorded under
(PDIC):[3] their names, let alone make the deposits in various Legacy Banks located nationwide.
PDIC likewise noted that advance interests on several of the deposits were paid to
the Gidwani spouses even though they are not the named owners of the accounts.
Name of Bank MB Resolution No. Date of Closure
Nation Bank, Inc. 1691 12/19/08
Rural Bank of Carmen, Inc. 1695 12/19/08 It is PDIC's contention, therefore, that the Gidwani spouses and the 86 individuals,
Dynamic Rural Bank, Inc. 1652 12/16/08 with the indispensable cooperation of RCBC, deceived PDIC into issuing the 683
San Pablo Development checks with the total face value of P98,733,690.21. Petitioner posits that the 86
1653 12/16/08
Bank, Inc. individuals are not entitled to the proceeds of the deposit insurance since they are not
Bank of East Asia, Inc. 1647 12/12/08 the true owners of the accounts with the Legacy Banks, albeit recorded under their
First Interstate Bank, Inc. 1648 12/12/08 names. Rather, it is the spouses Gidwani who are the true beneficial owners thereof
Philippine Countryside Rural and can only be entitled to a maximum deposit coverage of P250,000.00 each
1649 12/12/08
Bank, Inc. pursuant to Sec. 4(g) of the PDIC Charter, as amended. However, with wilful malice
Rural Bank of San Jose, Inc. 1637 12/11/08
and intent to circumvent the law, the Gidwani spouses made it appear that the
Pilipino Rural Bank, Inc. 1638 12/11/08
deposits for which the insurance was paid were owned by 86 distinct individuals
when, in truth and in fact, all the deposits were maintained for the sole benefit of the First, he explained that he funded the opening of some of the accounts in the name.
Gidwani spouses. of the depositors merely for convenience and practicality, and in order to avail of
better rates and freebies. He also lamented that PDIC left out the fact that the other
Pursuant to its mandate to safeguard the deposit insurance fund against illegal accounts were funded by respondents themselves.
schemes and machinations, PDIC, on November 6, 2012, lodged a criminal
complaint[4] before the Department of Justice (DOJ) Task Force on Financial Fraud Second, it was the Legacy Banks themselves that requested that advanced interests
(DOJ Task Force) for estafa through falsification under Art. 315(2)(a) in relation to for the accounts being managed by Manu as a group to be paid to him, to which set-
Art. 172(1) and 171(4) of the Revised Penal Code and for money laundering as up the individual depositors agreed for convemence.
defined in Section 4(a) of AMLA against the Gidwani spouses and the 86 other
individuals. To summarize, the complaint against the respondents, docketed as I.S. Third, the crossed-checks issued by PDIC ended up in his RCBC account because
No. XVI-INV-12K-00480, was built on the following circumstances: the other respondents did not have other accounts of their own. The payees then
requested him to advance the value of their checks in exchange thereof. Manu adds
that there was nothing illegal with the arrangement since the checks, although
a. 683 crossed-checks "for payees account only," representing deposit crossed, bore the endorsement of the payees or their duly authorized representatives.
insurance aggregating P98,733,690.21, were issued to the 86 individuals. Of
the amount stated, P97,733,690.21 was deposited to an account controlled Fourth, the depositors had been using Manu's business and residential address
by the Spouses Manu and Champa Gidwani; because some of them live abroad and stay at Manu's residence when in the
Philippines. This is aside from the fact that it is Manu who was managing their
accounts and had to deal with all concerns relating thereto.
b. The funds used to open the questioned deposit accounts were from a single
source;
Finally, respondent Manu pointed out that PDIC approved and realized the insurance
claims not because of any perceived misrepresentation, but because PDIC itself
c. Advance interests on deposits not in the name of the Gidwani spouses were verified that the individual respondents were in fact the owners of the subject bank
paid to Manu; accounts.

d. 55 of the 86 individual respondents used as their mailing addresses either or

both the home and business addresses of the principal respondents.[5] Resolutions of the Department of Justice

In their counter-affidavits, the Gidwani spouses denied the charges against them, On January 14, 2014, the DOJ Task Force promulgated a Resolution[9] dismissing the
particularly on being owners of the accounts in question.[6] In brief, they claimed that Complaint in the following manner:
there was no falsification committed by them since what was stated about the 86
individuals being the owners of their respective accounts was true. Manu merely had
WHEREFORE, on premises considered, the above-entitled complaint is
a fund management agreement with the depositors who got into investing with the
recommended DISMISSED for lack of probable cause.
Legacy Banks because of him. They sought his help in setting up investment
portfolios and in managing them. The funds that were remitted for him to manage
SO RESOLVED.
were then placed in the different Legacy Banks under their names to prevent co-
mingling of funds.[7] The DOJ Task Force's rationale in dismissing the complaint is that the voluminous
records of the case allegedly do not support the theory that Manu owned all of the
The circumstances brought to fore by the PDIC do not negate the fact of ownership accounts in question, much less falsified commercial and official documents in
of the other individual depositors, so Manu claimed.[8] claiming insurance deposits. It found that less than half of the accounts in question
were funded by Manu through his RCBC account while the rest were funded by the RCBC and Andrew Jereza and respondents Manu and Champa Gidwani; (3) file the
account holders themselves. corresponding informations for violation of Section 4(a) of the AntiMoney
Laundering Act of 2001 or R.A. 9160 against the 86 respondents and respondents
PDIC's motion for reconsideration from the January 14, 2014 Resolution was denied Spouses Manu and Champa Gidwani, and for violation of Section 4(c) of the Anti-
through the DOJ Task Force's Resolution[10] dated December 3, 2014. Unperturbed, Money Laundering Act against respondent Andrew Jereza; and (4) to report the
PDIC interposed a petition for review with the Office of the Secretary of Justice action taken thereon within ten (10) days from receipt hereof
(SOJ).
SO ORDERED.[15]
On September 11, 2015, then Undersecretary of Justice Jose F. Justiniano issued a
In so ruling, SOJ Caparas ratiocinated that, on the charge of estafa through
Resolution (Justiniano Resolution)[11] denying PDIC's appeal thusly:
falsification, the individual depositors committed false pretenses when they made it
appear that they were the legitimate owners of the subject bank accounts with the
WHEREFORE, premises considered, the petition is hereby DENIED.
Legacy Banks, which information was used in the processing of the insurance claims
with PDIC, even when in truth and in fact, the accounts were owned and controlled
SO ORDERED.[12]
by Manu. Had the depositors truthfully divulged to PDIC that the true and beneficial
Based on the Justiniano Resolution, PDIC failed to overcome the presumption of owner of the subject bank accounts was Manu, PDIC would not have been duped
ownership over the subject deposits. On the contrary, the respondents bolstered their into treating the bank accounts individually and separately. It would have only paid
position by proffering a practical and plausible set-up, pursuant to an internal fund the Gidwani Spouses P250,000.00, and not P98,733,690.21.[16]
management agreement, that resulted in Manu's relation with the subject deposits.[13]
SOJ Caparas did not give credence to the defense that there existed a fund
Moreover, PDIC allegedly failed to prove that respondents lied in their insurance management agreement between Manu, on the one hand, and the 86 respondents, on
claims. Respondents could not have worked fraud into the claims without detection the other. For aside for the self-serving and barren allegation, no other piece of
under the rigorous claims process. Rather, the fault in the perceived error in payment evidence was offered to support the claim. Besides, a .fund management agreement,
lies with PDIC for its negligence in processing the claims, in failing to conduct a being essentially an investment contract, would have required registration with the
thorough investigation, and in its failure to detect the red flags earlier on. Securities and Exchange Commission, so SOJ Caparas ruled.[17]

On June 3, 2016, then SOJ Emmanuel Caparas, however, overturned the Justianio Aggrieved, several of the respondents filed their respective motions for
Resolution through his own ruling granting PDIC's motion for reconsideration reconsiqeration of the Caparas Resolution. Meanwhile, herein respondent Manu
(Caparas Resolution).[14] The dispositive portion of the ruling states: immediately elevated the matter to the CA, ascribing grave abuse of discretion on the
part of SOJ Caparas in finding probable cause to charge him with estafa and for
violation of the AMLA. The case was docketed as CA-G.R. SP No. 149497.
WHEREFORE, the motion for reconsideration is hereby GRANTED. The
Resolution of this Office dated 11 September 2015, and the Resolutions dated 14
On November 29, 2016, SOJ Vitaliano N. Aguirre granted the motions for
January 2014 and 03 December 2014 of the DOJTask Force on Financial Fraud, are
reconsideration of several of Manu's co-respondents a quo, reinstating the Justiniano
hereby REVERSED and SET ASIDE.
Resolution.[18]
The Prosecutor General is hereby directed to: (1) file separate informations for the
complex crime of estafa under Article 315(2)(a) in relation to Articles 172(1) and
171(4) of the Revised Penal Code against each of the respondents pursuant to the Ruling of the Court of Appeals
attached Annex "A"; (2) file the corresponding informations for violation of Article
183 of the Revised Penal Code against the respondents, except as to respondents Through its challenged January 31, 2017 Decision, the CA reversed the Caparas
Resolution, thusly:

WHEREFORE, petition is GRANTED. The Resolution dated June 3, 2016 of then The Issues
DOJ Secretary Emmanuel L. Caparas is ANNULED and SET ASIDE. Resultantly,
the DOJ Resolutions dated September 11, 2015, dismissing the Complaint of PDIC's petition is hinged on the following assignment of errors:
Philippine Deposit Insurance Corporation is REINSTATED.
I.
The Prosecutor General is hereby DIRECTED to cause the withdrawal of any
Information that might have been filed in court against the petitioner, if any, based WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN
on the Resolution dated June 3, 2016. TAKING COGNIZANCE OF RESPONDENT MANU GIDWANI'S PETITION
FOR CERTIORARI UNDER RULE 65 OF THE 1997 RULES OF CIVIL
SO ORDERED. PROCEDURE TO ASSAIL THE CAPARAS RESOLUTION DESPITE HIS
FAILURE TO FILE A MOTION FOR RECONSIDERATION WITH THE DOJ
According to the CA, SOJ Caparas gravely abused his discretion when he reversed
PRIOR TO THE FILING OF THE PETITION FOR CERTIORARI
and set aside the earlier resolutions of the DOJ Task Force and of SOJ Justiniano
even though no new evidence was offered by PDIC to support its allegations against
Manu and his co-respondents.
II.
Additionally, the CA held that a review of PDIC's complaint would show that the
allegations against Manu were not sufficient to constitute the offense of estafa or WHETHER OR NOT THE CAPARAS RESOLUTION BECAME FINAL AND
money-laundering. PDIC could not be deemed to have been deceived by the Gidwani EXECUTORY INSOFAR AS RESPONDENT MANU GIDWANI IS
spouses and the 86 other individuals since the latter are the true owners and CONCERNED FOR FAILURE TO ASSAIL THE CAPARAS RESOLUTION
depositors of the accounts and monies involved. Their insurance claims were granted THROUGH A MOTION FOR RECONSIDERATION
after undergoing the tedious verification and investigation process performed by As can be gleaned, PDIC stated purely procedural issues in its petition for review.
PDIC itself. Based on PDIC's own evaluation then, the individual depositors were Nevertheless, the allegations in the petition are sufficient for Us to delve into the
indeed the true owners of the accounts.[19] issue of whether or not the CA erred in finding that SOJ Caparas acted in grave
abuse of discretion in overturning the Justiniano Resolution even though no
The CA upheld the presumption that a depositor is presumed to be the owner of additional evidence was adduced by PDIC to support its claim.
funds standing in his name in a bank deposit, and ruled that the circumstances
alleged by PDIC do not dovetail with its theory that the subject accounts were owned For his part, respondent Gidwani maintains that the complaint is based on nothing
solely by the spouses Gidwani. For the appellate court, the opening of the accounts, more than PDIC's suspicion that the subject bank accounts were actually owned by
the use of the mailing address, the transmittal of advance interests, and the him and his spouse; that the presumption that each individual depositor is the owner
subsequent deposit of the checks in the RCBC account of the Gidwani spouses are of the funds under his name in a bank deposit was not refuted by PDIC; that the
not indications of ownership. Rather, they confirm the defense that an arrangement circumstances surrounding the case confirm the arrangement for fund management
had been made between the spouses and the individual depositors on the between the spouses Gidwani and the individual depositors; that the individual
management of the latter's funds.[20] Consequently, the claims filed before the PDIC depositors confirmed their ownership over the deposited funds; and that PDIC itself
cannot. be deemed as falsified claims. acted on the applications of the individual claimants and effectively ruled on the
legitimacy of their claims by approving the same.
PDIC moved for reconsideration from this adverse ruling, but the CA affirmed its
earlier ruling through its October 6, 2017 Resolution. This brings us to the instant
recourse.
 The Court's Ruling affirmed by the DOJ Secretary through Undersecretary Justiniano, great restraint
should have been exercised by Secretary Caparas in reversing the findings of the
The petition is meritorious. investigating panel during the preliminary investigation. There were no new
evidence presented in the motion for reconsideration of PDIC that would compel
The CA erred in ruling that SOJ Caparas gravely abused his discretion In Secretary Caparas to rule otherwise. It must be stressed that the panel had already
reversing the Justiniano Resolution absent additional evidence from PDIC determined an independent finding or recommendation that no probable cause exists
against the petitioner. In overturning the said findings and recommendations of the
Hornbook doctrine is that courts of law are precluded from disturbing the findings of [DOJ Task Force], he acted in an arbitrary and despotic manner by reason of passion
public prosecutors and the DOJ on the existence or non existence of probable cause or personal hostility.
for the purpose of filing criminal informations, unless such findings are tainted with
grave abuse of discretion, amounting to lack or excess of jurisdiction.[21] As xxxx
explicated in Aguilar v. Department of Justice (Aguilar):[22]
x x x It must be pointed out that the petition for review was already resolved by the
[t]he rationale behind the general rule rests on the principle of separation of powers, DOJ Secretary through Undersecretary Justiniano. In other words the power of the
dictating that the determination of probable cause for the purpose of indicting a DOJ Secretary to review, approve, reverse or modify acts and decisions of his
suspect is properly an executive function; while the exception hinges on the limiting subordinate officials or unit had already been performed as in fact, the then Secretary
principle of checks and balances, whereby the judiciary, through a special civil believed on the theory of the petitioner through Undersecretary Justiniano. The
action of certiorari, has been tasked by the present Constitution "to determine question therefore may be asked - after he assumed the position of Acting Secretary
whether or not there has been a grave abuse of discretion amounting to lack or excess of Justice, can Caparas again make a second look on the said complaint and act
of jurisdiction on the part of any branch or instrumentality of the Government." favourably on PDIC's motion for reconsideration taking into account that what the
latter had presented in its motion are the same arguments and theories already
Grave abuse of discretion had been defined in jurisprudence to mean a "capricious or threshed out by his predecessor making its motion as a pro forma motion? Since a
whimsical exercise of judgment as is equivalent to lack of jurisdiction." The abuse of resolution had already been promulgated by the investigating panel and reviewed by
discretion must be patent and gross so as to amount to an evasion of a positive duty the previous Secretary of Justice, the motion for reconsideration has to be denied if
or a virtual refusal to perform a duty enjoined by law, or to act at all in contemplation only to write finis to this controversy, otherwise it will open gates to endless
of law.[23] The underlying principle behind the courts' power to review a public litigation and probable miscarriage of justice.[25] (words in brackets added)
prosecutor's determination of probable cause is to ensure that the latter acts within
the permissible bounds of his authority or does not gravely abuse the same. This The Court strongly disagrees with this pronouncement.
manner of judicial review is a constitutionally-enshrined form of check and balance
which underpins the very core of our system of government.[24] The filing of a motion for reconsideration is not mere formality, but an opportunity
for a judicial or quasi-judicial body to correct imputed errors, in fact or in law, in its
In the assailed Decision, the CA held that SOJ Caparas gravely abused his discretion findings and conclusions.[26] The office of the motion is precisely to grant the
when he superseded the earlier resolutions of the DOJ Task Force and of SOJ investigating body, the DOJ in this case, the opening to give a second hard look at
Justiniano even though there was no new evidence offered by PDIC to justify the the matter at hand, and to determine if its previous ruling is in accord with evidence
reversal. To quote the CA: on record and statute.

In resolving the motion for reconsideration lodged with his office and in exercising
There is nothing new in the evidence revisited, reviewed and reassessed by Secretary
jurisdiction, SOJ Caparas has the power and discretion to make his own personal
Caparas from those initially studied and examined by the investigating panel who
assessment of the pleadings and evidence subject of review. He is not bound by the
have the opportunity to sift first hand these evidence. Considering that the fact
rulings of his predecessors because there is yet to be a final resolution of the issue;
finding panel of the DOJ found no prima facie case against the petitioner, a fact
the matter is still pending before his office after all. To hold otherwise would render
the filing of the motion a futile exercise, and the recourse, pointless.
(a) Fraud, accident, mistake or excusable negligence which ordinary prudence could
Jurisprudence teaches, in a litany of cases, that a motion for reconsideration is not have guarded against and by reason of which such aggrieved party has probably
generally considered as the plain, speedy, and adequate remedy that is a been impaired in his rights; or
condition sine qua non to the filing of a petition for certiorari, [27] within the
contemplation of Rule 65, Section 1 of the Rules of Court.[28] But if the judicial or (b) Newly discovered evidence, which he could not, with reasonable diligence, have
quasi-judicial body would be precluded from overruling its earlier pronouncement on discovered and produced at the trial, and which if presented would probably alter the
reconsideration, then a motion for reconsideration would be no remedy at all, let result.
alone one that is plain, speedy, and adequate.
Within the same period, the aggrieved party may also move for reconsideration
The treatment of a motion for reconsideration is then not a ministerial function that upon the grounds that the damages awarded are excessive, that the evidence is
can only result in the denial thereof. It was therefore plain error on the part of the CA insufficient to justify the decision or final order, or that the decision or final
to have ruled that SOJ Caparas virtually had no option but to affirm the findings of order is contrary to law. (emphasis added)
the DOJ Task Force and of SOJ Justiniano as to the alleged absence of probable
As can be gleaned, a motion for reconsideration may be granted if (1) the damages
cause to charge respondent.
awarded are excessive, (2) the evidence is insufficient to justify the decision or final
order, or (3) the decision or final order is contrary to law. The judicial or quasi-
That no new evidence was offered by PDIC on reconsideration is of no moment. For
judicial body concerned may arrive at any of the three enumerated conclusions even
under Section 13 of Department Circular No. 70 of the DOJ, otherwise known as the
without requiring additional evidence. To be sure, the introduction of newly
2000 National Prosecutorial Service Rule on Appeal (2000 NPS Rules), the party
discovered additional evidence is a ground for new trial or a de novo appreciation of
aggrieved by the ruling of the SOJ during the preliminary investigation may file a
the case, but not for the filing of a motion for reconsideration. Judicial proceedings
motion for reconsideration within a non-extendible period of ten (10) days from
even prohibit the practice of introducing new evidence on reconsideration since it
notice. Quite conspicuous, however, is that the 2000 NPS Rules does not specify the
potentially deprives the opposing party of his or her right to due process. While
grounds for filing the said motion. In this regard, the Court refers to the Rules of
quasi-judicial bodies in administrative proceedings may extend leniency in this
Court for guidance.
regard and allow the admission of evidence offered on reconsideration or on appeal,
[30]
 this is merely permissive and does not translate to a requirement of attaching
Rule 1, Section 4 of the Rules of Court provides that the rules can be applied in a
additional evidence to support motions for reconsideration.
suppletory character. It means that the provisions in the Rules of Court will be made
to apply where there is deficiency or an insufficiency in the applicable rule.[29] Thus,
The CA erred in ruling that SOJ Caparas gravely abused his discretion in
even though the 2000 NPS Rules is lacking in specifics insofar as the grounds for a
finding probable cause
motion for reconsideration is concerned, Rule 37 of the Rules of Court bridges the
breach. Pertinently, Rule 37, Section 1 states:
Proceeding to the crux of the controversy, the Court now resolves whether or not the
CA erred in dismissing due to lack of probable cause the criminal complaint for
RULE 37
estafa through falsification under Art. 315(2)(a) in relation to Art. 172(1)[31] and
171(4)[32] of the RPC, and for money laundering as defined in Section 4(a) of RA
New Trial or Reconsiderations
9160. Here, the legal proscriptions purportedly violated by respondent read:

Section 1. Grounds of and period for filing motion for new trial or reconsideration. -
Article 315. Swindling (estafa). - x x x
Within the period for taking an appeal, the aggrieved party may move the trial court
to set aside the judgment or final order and grant a new trial for one or more of the
xxxx
following causes materially affecting the substantial rights of said party:
2. By means of any of the following false pretenses or fraudulent acts executed prior Manu was the sole beneficial owner of the bank accounts.
to or simultaneously with the commission of the fraud:
In the assailed Decision, the CA did not give credence to the allegations of PDIC. It
(a) By using fictitious name, or falsely pretending to possess power, influence, ruled instead that "PDIC failed to prove that [Manu] is the owner of all subject bank
qualifications, property, credit, agency, business or imaginary transactions, or by accounts or financed the same" and, as such, Manu could not be considered to have
means of other similar deceits. committed false pretenses or misrepresentation against PDIC.

xxxx We disagree.

Section 4. Money Laundering Offense. - Money laundering is a crime whereby the It must be recalled that the criminal case is still in the stage of preliminary
proceeds of an unlawful activity are transacted, thereby making them appear to have investigation. Under Rule 112, Section 1 of the Rules of Court, a preliminary
originated from legitimate sources. It is committed by the following: investigation is "an inquiry or proceeding to determine whether there is sufficient
ground to engender a well-founded belief that a crime has been committed and the
a. Any person knowing that any monetary instrument or property represents, respondent is probably guilty thereof, and should be held for trial." The investigation
involves, or relates to the proceeds of any unlawful activity, transacts or attempts to is advisedly called preliminary, because it is yet to be followed by the trial proper in
transact said monetary instrument or property. a court of law.[34] The occasion is not for the full and exhaustive display of the parties
since the function of the investigating prosecutor is not to determine the guilt or
Jurisprudence elucidates that the elements of estafa or swindling under paragraph 2
innocence of an accused.
(a) of Article 315 of the RPC are the following:[33]
In this case, the PDIC reportedly discovered that there was only one beneficial owner
of the 471 bank accounts with the Legacy Banks of the 86 individual depositors
1. That there must be a false pretense, fraudulent act or fraudulent means; respondent Manu. To illustrate, PDIC reportedly discovered that 142 of these 471
accounts, with the total amount of P20,966,439.09, were in the names of helpers and
2. That such false pretense, fraudulent act or fraudulent means must be made rank-and-file employees of the Gidwani spouses who do not have the financial
or executed prior to or simultaneously with the commission of the fraud; capacity to deposit the amounts recorded under their names, viz:[35]

3. That the offended party must have relied on the false pretense, fraudulent No. of Bank
Insurance Received
act, or fraudulent means, that is, he was induced to part with his money or Respondent Occupation Accounts/Checks
(Php)
property because of the false pretense, fraudulent act, or fraudulent means; Received
Julie Alib Helper 27 3,980,054.55
Erlyn Aragon Helper 22 3,106,040.63
4. That as a result thereof, the offended party suffered damage.
Lorlyn Arellano Helper 27 3,891,289.95
Sales Girl at Glory
According to PDIC, the crime charged was committed when the 86 other individuals Faith Jabagat 6 978,063.16
Bazar
fraudulently declared that they are the bona fide owners of 471 deposits with the Sales Manager at
Kenny Matani 24 3,513,734.40
legacy banks; that the purported depositors, in conspiracy with Manu, falsified Glory Bazar
official documents by making the untruthful statement of ownership in their deposit Sales Girl at Glory
Lourdes Matani 12 1,812,057.21
insurance claims; that PDIC relied on the representations of the claimants when it Bazar
released to them the deposit insurance proceeds amounting to P98,733,690.21, of Technician at Glory
Rodin Mixdon 2 250,000.00
which P97,733,690.21 was deposited to the RCBC account of Manu Gidwani; and Bazar
that the government suffered damage when PDIC discovered upon investigation that Gerline Molines Sales Girl at Glory 6 938,803.69
 Bazar Rural Bank of Bais, Inc.
Sales Clerk at Glory (Mandaue)
Francisca Talatala 6 908,242.61 Mandaue City, Cebu
Bazar Rural Bank of Polangui, Inc.
Sales Girl at Glory Polangui, Albay
Emily Taleon 10 1,588,152.94 Rural Bank of San Jose, Inc.
Bazar San Jose, Batangas
San Pablo Development
Total 142 20,966,439.09 San Pablo, Laguna
Bank, Inc.
Moreover, the helpers and rank-and-file employees who reside and are employed in Minglanilla, Cebu
Bank of East Asia, Inc.
Bacolod City maintained bank accounts in Legacy Banks located in different parts of Lapu-Lapu City, Cebu
Philippine Countryside Rural
the country:[36] Dumaguete City, Negros
Bank, Inc.
Oriental
Pilipino Rural Bank, Inc.
Respondent Banks Location South Cotabato
Rural Bank of DARBCI, Inc.
Rural Bank of Bais, Inc. Mandaue City, Cebu Pasig City, Metro Manila
Rural Bank of Paranaque,
Rural Bank of DARBCI, Inc. South Cotabato
Inc. (Pasig)
Rural Bank of San Jose, Inc. San Jose, Batangas Nation Bank, Inc. Bacolod City, Negros
San Pablo Development San Pablo, Laguna Faith Jabagat
Philippine Countryside Rural Occidental
Bank, Inc. Minglanilla, Cebu (2 accounts)
Bank, Inc. Lapu-Lapu City, Cebu
Julie Alib Bank of East Asia, Inc. Bacolod City, Negros Nation Bank, Inc.
(27 accounts) Nation Bank, Inc. Occidental Philippine Countryside Rural
Philippine Countryside Rural Lapu-Lapu City, Cebu Bacolod City, Negros
Bank, Inc.
Bank, Inc. Dumaguete City, Negros Occidental
Rural Bank of Bais, Inc.
Pilipino Rural Bank, Inc. Oriental Liloan, Cebu
(Mandaue)
Rural Bank of Carmen, Inc. West Cogon, Cebu Mandaue City, Cebu
Rural Bank of DARBCI, Inc.
Rural Bank of Polangui, Inc. Polangui, Albay Kenny Matani South Cotabato
Rural Bank of Carmen, Inc.
Pilipino Rural Bank, Inc. (24 accounts) West Cogon, Cebu
Rural Bank of San Jose, Inc.
Rural Bank of Bais, Inc. San Jose, Batangas
Bacolod City, Negros San Pablo Development
(Home Office) San Pablo, Laguna
Occidental Bank, Inc.
Rural Bank of Bais, Inc. Minglanilla, Cebu
Bais City, Negros Oriental Bank of East Asia, Inc.
(Mandaue) Pasig City, Metro Manila
Mandaue City, Cebu Rural Bank of Paranaque,
Rural Bank of Polangui, Inc. Inc. (Pasig)
Polangui, Albay
Rural Bank of San Jose, Inc. Nation Bank, Inc.
Erlyn Aragon San Jose, Batangas
San Pablo Development Philippine Countryside Rural
(22 accounts) San Pablo, Laguna Bacolod City, Negros
Bank, Inc. Bank, Inc.
Bacolod City, Negros Occidental
Nation Bank, Inc. Rural Bank of Bais, Inc.
Occidental Lourdes Matani Lapu-Lapu City, Cebu
Philippine Countryside Rural (Mandaue)
Lapu-Lapu City, Cebu (12 accounts) Mandaue City, Cebu
Bank, Inc. San Pablo Development
West Cogon, Cebu San Pablo, Laguna
Rural Bank of Carmen, Inc. Bank, Inc.
Pasig City, Metro Manila Pasig City, Metro Manila
Rural Bank of Paranaque, Rural Bank of Paranaque,
Inc. (Pasig) Inc. (Pasig)
Lorlyn Arellano Nation Bank, Inc. Bacolod City, Negros Rodin Mixdon Rural Bank of Bais, Inc.
(27 accounts) Rural Bank of Bais, Inc. Occidental Mandaue City, Cebu
(2 accounts) (Mandaue)
(Home Office) Bais City, Negros Oriental Gerline Molines Nation Bank, Inc. Bacolod City, Negros
 Philippine Countryside Rural as a warning to the holder that the check has been issued for a definite purpose and
Occidental
(6 accounts) Bank, Inc. he must inquire if he received the check pursuant to this purpose; otherwise, he is not
Lapu-Lapu City, Cebu
    Rural Bank of Bais, Inc. a holder in due course.[37] In other words, the crossing of a check is a warning that
Mandaue City, Cebu
(Mandaue) the check should be deposited only in the account of the payee.[38] Thus, to the
Nation Bank, Inc. mind of the Court, the act of depositing second-endorsed crossed-checks in the name
Bacolod City, Negros
Francisca Talatala Philippine Countryside Rural of 86 different payees under a single account is highly irregular if not potentially
Occidental
(6 accounts) Bank, Inc. criminal.
Lapu-Lapu City, Cebu
    Rural Bank of Bais, Inc.
Mandaue City, Cebu
(Mandaue) Respondent seeks to exonerate himself from the charges by claiming that PDIC was
Nation Bank, Inc. negligent in processing the insurance claims. This was, in fact, the ruling of the DOJ
Rural Bank of Bais, Inc. Task Force - that there was a clear paper trail by which PDIC could have traced and
Bacolod City, Negros
(Home Office) uncovered the status of the subject accounts before releasing the proceeds. The
Occidental
Emily Taleon Rural Bank of Bais, Inc. proposition, however, deserves scant consideration. For negligence on the part of the
Bais City, Negros Oriental
(10 accounts) (Mandaue) PDIC does not preclude the commission of fraud on the part of the claimants, and
Mandaue City, Cebu
    San Pablo Development could have even made the agency even more susceptible to abuse.
San Pablo, Laguna
Bank, Inc.
Lapu-Lapu City, Cebu
Philippine Countryside Rural Respondent likewise raised that he and the individual depositors entered into a fund
Bank, Inc. management scheme to facilitate the transactions with the Legacy Banks; he did not
That these individuals reported either respondent Manu's office or business address
deny opening and funding some of the accounts for the individual creditors, and even
as their own further arouses serious suspicion on the true ownership of the funds
admitted to receiving advance interests for the subject bank accounts that were meant
deposited. It gives the impression that they had been used by respondent as dummies,
for the actual depositors. Anent this contention, SOJ Caparas held that the allegation
and their purported ownership mere subterfuge, in order to increase the amount of his
of a fund management scheme is barren and self-serving, and that, in any event, the
protected deposit.
agreement partakes the nature of an investment contract that ought to have been
registered first with the Securities and Exchange Commission before it can be given
Under Republic Act No. 3591 (PDIC Charter), as amended, all deposits in a bank
effect.
maintained in the same right and capacity for a depositor's benefit, either in his name
or in the name of others, shall be added together for the purpose of determining the
Whether or not there indeed existed an agreement between respondent Manu and the
insured deposit amount due to a bona fide depositor, which amount should not
individual depositors is a matter best left ventilated during trial proper, where
exceed the maximum deposit insurance coverage (MDIC) of P250,000.00. Thus, the
evidence can be presented and appreciated fully. Suffice it to state for now that the
entitlement to a deposit insurance is based not on the number of bank accounts held,
Court herein finds probable cause to charge respondent for estafa and money
but on the number of beneficial owners. It is this government policy and P250,000.00
laundering.
threshold that respondent Manu purportedly circumvented by conspiring with the 86
individuals. If not for the fact that the 683 Landbank crossed checks amounting to
WHEREFORE, premises considered, the instant petition is hereby GRANTED.
P97,733,690.21 were deposited in the RCBC account of respondent Manu, petitioner
The January 31, 2017 Decision and October 6, 2017 Resolution of the Court of
would not have gotten wind of this probable concealment of true ownership over the
Appeals in CA-G.R. SP No. 146439 are hereby REVERSED and SET ASIDE. The
subject bank accounts.
June 3, 2016 Resolution of the Department of Justice, through then Secretary of
Justice Emmanuel L. Caparas, in NPS Docket No. XVI-INV-12K-00480 finding
A crossed check is one where two parallel lines are drawn across its face or across its
probable cause to charge respondent Manu Gidwani for estafa through falsification
comer, and carries with it the following effects: (a) the check may not be encashed
under Art. 315(2)(a) in relation to Art. 172(1) and 171(4) of the RPC in the amount
but only deposited in the bank; (b) the check may be negotiated only once to the
of P97,733,690.21, and for money laundering as defined in Section 4(a) of RA 9160
one who has an account with the bank; and (c) the act of crossing the check serves
is hereby REINSTATED.

SO ORDERED.
Agan v. PIATCO controlled bank, to operate under an expanded commercial banking
Agan vs. PIATCO │ Erika authority and by virtue thereof exercise, in addition to powers authorized
for commercial banks, the powers of an Investment House as provided in
May 5, 2003
Presidential Decree No. 129, invest in the equity of a non-allied
DEMOSTHENES P. AGAN, JR., et al., petitioners, vs. PHILIPPINE undertaking, or own a majority or all of the equity in a financial
INTERNATIONAL AIR TERMINALS CO., INC., MANILA intermediary other than a commercial bank or a bank authorized to
INTERNATIONAL AIRPORT AUTHORITY, DEPARTMENT OF providecommercial banking services: Provided, That (a) the
TRANSPORTATION AND COMMUNICATIONS and SECRETARY total investment in equities shall not exceed fifty percent (50%) of the net
LEANDRO M. MENDOZA, in his capacity as Head of the Department of worth of the bank; (b) the equity investment in any one enterprise whether
Transportation and Communications, respondents, allied or non-allied shall not exceed fifteen percent (15%) of the net
worth of the bank; (c) the equity investment of the bank, or of its wholly
MIASCOR GROUNDHANDLING CORPORATION, et al, petitioners-in- or majority-owned subsidiary, in a single non-allied undertaking shall not
intervention, [+ 2 other petitions by Baterina et al and Lopez et al] exceed thirty-five percent (35%) of the total equity in the enterprise nor
shall it exceed thirty-five percent (35%) of the voting stock in
PUNO, J.
that enterprise; and (d) the equity investment inother banks shall be
SUMMARY: The consortium composed of Paircargo, Phil. Air and Grounds deducted from the investing bank's net worth for purposes of computing the
Services, Inc, and Security Bank Corp. submitted their competitive proposal to the prescribed ratio of net worth to risk assets.
PBAC in relation to the development of NAIA International Passenger Terminal III  1993 Manual of Regulations for Banks : SECTION X383. Other
under a build-operate-and-transfer arrangement. The contract was subsequently Limitations and Restrictions. The following limitations and restrictions shall
awarded to the Paircargo consortium. The present petitions challenge such award on also apply regarding equity investments of banks. a. In any single
various grounds, including the fact that Paircargo consortium is not a qualified enterprise. The equity investments of banks in any single enterprise shall
bidder because Security Bank’s entire net worth cannot be validly invested in the not exceed at any time 15% of the net worth of the investing bank as
consortium, in line with the restriction in the General Banking Act. SC declared the defined in Sec. X106 and Subsec. X121.5.
contracts null and void. The maximum amount that Security Bank could validly
invest in the Paircargo Consortium is only P528,525,656.55, representing 15% of its
entire net worth. The total net worth of the Paircargo consortium, after considering NATURE: Petitions for prohibition under Rule 65
the maximum amounts that may be validly invested by each of its members  Petitioners Agan et al and petitioners-in-intervention Mascor et al seek to
is P558,384,871.55 or only 6.08% of the project cost, an amount substantially less prohibit the Manila International Airport Authority (MIAA) and the
than the prescribed minimum equity investment required for the project in the Department of Transportation and Communications (DOTC) and its
amount of P2,755,095,000 or 30% of the project cost. Secretary from implementing the ff. agreements executed by the Philippine
DOCTRINE: [With respect to Security Bank] the entire amount of its net worth Government through the DOTC and the MIAA and the Philippine
could not be invested in a single undertaking or enterprise, whether allied or non- International Air Terminals Co., Inc. (PIATCO):
allied o (1) the Concession Agreement signed on July 12, 1997
o (2) the Amended and Restated Concession Agreement dated Nov
 R.A. No. 337, as amended or the General Banking Act: Sec. 21-B. The 26, 1999
provisions in this or in any other Act to the contrary notwithstanding, the o (3) the First Supplement to the Amended and Restated Concession
Monetary Board, whenever it shall deem appropriate and necessary to Agreement dated Aug 27, 1999
further national development objectives or support national priority o (4) the Second Supplement to the Amended and Restated
projects, may authorize a commercial bank, a bank authorized to provide Concession Agreement dated Sept 4, 2000
commercial banking services, as well as a government-owned and
 o (5) the Third Supplement to the Amended and Restated Concession based on its ability to provide a minimum amount of equity to the
Agreement dated June 22, 2001 (collectively, the PIATCO project, and its capacity to secure external financing for the project.
Contracts).  Sept 20, 1996: the consortium composed of Paircargo, Phil. Air and
Grounds Services, Inc. (PAGS) and Security Bank Corp. submitted
their competitive proposal to the PBAC
FACTS:
 Sept 24, 1996: PBAC prequalified the Paircargo Consortium.
 Aug 1989: the DOTC engaged the services of Aeroport de Paris (ADP) to  Sept 26, 1996: AEDC informed the PBAC in writing of its reservations as
conduct a comprehensive study of NAIA and determine whether the present regards the Paircargo Consortium:
airport can cope with the traffic development up to the year 2010. o a. The lack of corporate approvals and financial capability of
 Dec 1989: ADP submitted a Draft Final Report to the DOTC PAIRCARGO;
 1993: six business leaders consisting of John Gokongwei, Andrew o b. The lack of corporate approvals and financial capability of
Gotianun, Henry Sy, Sr., Lucio Tan, George Ty and Alfonso Yuchengco PAGS;
met with then Pres. FVR to explore the possibility of investing in the o c. The prohibition imposed by RA 337, as amended (the
construction and operation of a new international airport terminal General Banking Act) on the amount that Security Bank could
o To signify their commitment, they formed the Asia’s Emerging legally invest in the project;
Dragon Corp. (AEDC) which was registered with the SEC on Sept o d. The inclusion of Siemens as a contractor of the PAIRCARGO
15, 1993. Joint Venture, for prequalification purposes; and
 Oct 5, 1994: AEDC submitted an unsolicited proposal to the Government o e. The appointment of Lufthansa as the facility operator, in view of
thru the DOTC/MIAA for the development of NAIA International the Philippine requirement in the operation of a public utility.
Passenger Terminal III (NAIA IPT III) under a build-operate-and-transfer  Oct 2, 1996: PBAC replied that it had considered the issues raised, and that
arrangement pursuant to RA 6957 as amended by RA 7718 (BOT Law) based on the documents submitted by Paircargo and the established
 Mar 27, 1995: then DOTC Sec. Jose Garcia endorsed the proposal of AEDC prequalification criteria, the PBAC had found that the challenger, Paircargo,
to NEDA. had prequalified to undertake the project. The Secretary of the DOTC
 Jan 5, 1996: the NEDA Investment Coordinating Council (NEDA approved the finding of the PBAC.
ICC) Technical Board favorably endorsed the project to the ICC Cabinet  Oct 3, 1996: AEDC reiterated its objections, particularly with respect to
Committee which approved the same, subject to certain conditions, on Jan Paircargo’s financial capability, in view of the restrictions imposed by Sec
19, 1996 21-B of the General Banking Act and Secs 1380 and 1381 of the Manual
 Feb 13, 1996: the NEDA passed Board Resolution No. 2 which approved Regulations for Banks and Other Financial Intermediaries.
the NAIA IPT III project.  Oct 7, 1996: AEDC again manifested its objections and requested that it be
 June 7, 14, and 21, 1996: DOTC/MIAA caused the publication in 2 daily furnished with excerpts of the PBAC meeting and the accompanying
newspapers of an invitation for competitive or comparative proposals on technical evaluation report where each of the issues they raised were
AEDCs unsolicited proposal, in accordance with Sec. 4-A of the BOT Law addressed.
 June 20, 1996: PBAC1 Bulletin No. 1 was issued, postponing the availment  Oct 16, 1996: the PBAC opened the 3 rd envelope submitted by AEDC and
of the Bid Documents and the submission of the comparative bid proposals the Paircargo Consortium containing their respective financial
 The Bid Documents issued by the PBAC provided among others that the proposals. Both proponents offered to build the NAIA Passenger Terminal
proponent must have adequate capability to sustain the financing III for at least $350 million at no cost to the government and to pay the
requirement for the detailed engineering, design, construction, operation, government: 5% share in gross revenues for the first 5 years of operation,
and maintenance phases of the project. The proponent would be evaluated 7.5% share in gross revenues for the next 10 years of operation, and 10%
share in gross revenues for the last 10 years of operation, in accordance with
1 Prequalification Bids and Awards Committee the Bid Documents.
 However, in addition to the foregoing, AEDC offered to pay the concession period, PIATCO shall transfer the development facility
government a total of P135 million as guaranteed payment for 27 years to MIAA.
while Paircargo Consortium offered to pay the government a total of P17.75  Nov 26, 1998: the Government and PIATCO signed an Amended and
billion for the same period. Restated Concession Agreement (ARCA).
 Thus, the PBAC formally informed AEDC that it had accepted the price  Subsequently, the Government and PIATCO signed 3 Supplements to the
proposal submitted by the Paircargo Consortium, and gave AEDC 30 ARCA
working days or until Nov 28, 1996 within which to match the said bid,  Sept 17, 2002: the workers of the international airline service providers,
otherwise, the project would be awarded to Paircargo. claiming that they stand to lose their employment upon the implementation
 Dec 11, 1996: as AEDC failed to match the proposal within the 30-day of the questioned agreements, filed before the SC a petition for prohibition
period, then DOTC Secretary Amado Lagdameo issued a notice to to enjoin the enforcement of said agreements.
Paircargo Consortium regarding AEDCs failure to match the proposal.  Oct 15, 2002: the service providers, joining the cause of the petitioning
 Feb 27, 1997: Paircargo Consortium incorporated into Philippine workers, filed a motion for intervention and a petition-in-intervention.
International Airport Terminals Co., Inc. (PIATCO).  Oct 24, 2002: Congressmen Salacnib Baterina, Clavel Martinez and
 AEDC subsequently protested the alleged undue preference given to Constantino Jaraula filed a similar petition
PIATCO and reiterated its objections as regards the prequalification of  Nov 6, 2002: several employees of the MIAA likewise filed a petition
PIATCO. assailing the legality of the various agreements
 Apr 11, 1997: DOTC submitted the concession agreement for the second-  Dec 11, 2002: another group of Congressmen, Hon. Jacinto V. Paras, Rafael
pass approval of the NEDA-ICC. P. Nantes, Eduardo C. Zialcita, Willie B. Villarama, Prospero C. Nograles,
 Apr 16, 1997: AEDC filed with the RTC of Pasig a Petition for Declaration Prospero A. Pichay, Jr., Harlin Cast Abayon and Benasing O. Macaranbon,
of Nullity of the Proceedings, Mandamus and Injunction against the moved to intervene in the case as Respondents-Intervenors. They filed their
Secretary of the DOTC, the Chairman of the PBAC, the voting members of Comment-In-Intervention defending the validity of the assailed agreements
the PBAC and Pantaleon D. Alvarez, in his capacity as Chairman of the and praying for the dismissal of the petitions.
PBAC Technical Committee.  During the pendency of the, then PGMA, in her speech at the 2002 Golden
 Apr 17, 1997: NEDA-ICC conducted an ad referendum to facilitate the Shell Export Awards at Malacanang Palace, stated that she will not honor
approval, on a no-objection basis, of the BOT agreement between the (PIATCO) contracts which the Executive Branch’s legal offices have
DOTC and PIATCO. As the ad referendum gathered only 4 of the required concluded (as) null and void
6 signatures, the NEDA merely noted the agreement.  OSG and OGCC (Consolidated Memorandum): prayed that the present
 July 9, 1997: DOTC issued the notice of award for the project to PIATCO. petitions be given due course and that judgment be rendered declaring the
 July 12, 1997: the Government, through then DOTC Secretary Arturo T. 1997 Concession Agreement, the ARCA and the Supplements thereto void
Enrile, and PIATCO, through its President, Henry T. Go, signed the for being contrary to the Constitution, the BOT Law and its Implementing
Concession Agreement for the Build-Operate-and-Transfer Rules and Regulations.
Arrangement of the NAIA Passenger Terminal III (1997 Concession  Mar 6, 2003: PIATCO informed the SC that PIATCO commenced
Agreement) arbitration proceedings before the International Chamber of Commerce,
o The Government granted PIATCO the franchise to operate and International Court of Arbitration (ICC) against the Government of the RP
maintain the said terminal during the concession period and to acting through the DOTC and MIAA
collect the fees, rentals and other charges in accordance with the
rates or schedules stipulated in the 1997 Concession Agreement.
ISSUE #1: W/N Agan et al have legal standing (YES)
o The concession period shall be for 25 years commencing from the
in-service date, and may be renewed at the option of the RATIO #1:
Government for a period not exceeding 25 years. At the end of the
  Agan et al raise the argument that the PIATCO Contracts contain  PIATCO: trial courts have concurrent jurisdiction with SC with respect to a
stipulations which directly contravene numerous provisions of the special civil action for prohibition
Constitution, specific provisions of the BOT Law and its IRR, and public  SC: the crux of the instant controversy involves significant legal questions.
policy; that the DOTC and the MIAA, by entering into said contracts, have The facts necessary to resolve these legal questions are well established and,
committed grave abuse of discretion amounting to lack or excess of hence, need not be determined by a trial court.
jurisdiction which can be remedied only by a writ of prohibition, there  The rule on hierarchy may be relaxed when the redress desired cannot be
being no plain, speedy or adequate remedy in the ordinary course of law. obtained in the appropriate courts or where exceptional and compelling
 With respect to the service providers and their employees, upon the circumstances justify availment of a remedy within and calling for the
commencement of operations of the NAIA IPT III, they allege that they will exercise of this Courts primary jurisdiction (i.e. transcendental importance)
be effectively barred from providing international airline airport services at
the NAIA Terminals I and II as all international airlines and passengers will
be diverted to the NAIA IPT III. ISSUE #3: W/N the arbitration proceedings commenced by PIATCO ousted SC of
jurisdiction (NO)
 The employees of various service providers on the other hand allege that
with the closure of the NAIA Terminals I and II as international passenger RATIO #3:
terminals under the PIATCO Contracts, they stand to lose employment.
 Agan et al have the requisite standing. They have a direct and substantial  As contracts produce legal effect between the parties, their assigns and
interest to protect by reason of the implementation of the PIATCO heirs, only the parties to the Agreement are bound by its terms, including
Contracts. They stand to lose their source of livelihood, a property right the arbitration clause stipulated therein. Considering that there are parties to
which is zealously protected by the Constitution. Moreover, subsisting the case who are neither parties to the Agreement nor heirs or assigns of the
concession agreements between MIAA and service contracts stand to be parties thereto, to tolerate the splitting of proceedings by allowing
nullified or terminated by the operation of the NAIA IPT III under the arbitration as to some of the parties on the one hand and trial for the others
PIATCO Contracts. The financial prejudice brought about by the PIATCO on the other hand would, in effect, result in multiplicity of suits, duplicitous
Contracts are legitimate interests sufficient to confer on them the requisite procedure and unnecessary delay.
standing to file the instant petitions.  Again et al, who have presented legitimate interests in the resolution of the
 As to the other petitioners (HoR members, citizens and taxpayers), they controversy are not parties to the PIATCO Contracts. Accordingly, they
allege that the Government obligations in the PIATCO Contracts which cannot be bound by the arbitration clause provided for in the ARCA and
compel government expenditure without appropriation is a curtailment of hence, cannot be compelled to submit to arbitration proceedings. 
their prerogatives as legislators
 Public interest demands that we take a more liberal view in determining ISSUE #4 [MAIN]: W/N PIATCO is a qualified bidder (NO)
whether the petitioners suing as legislators, taxpayers and citizens
have locus standi to file the instant petition. Even if, strictly speaking, they RATIO #4: [Security Bank’s entire networth could not be invested]
are not covered by the definition, it is still within the wide discretion of the
 OSG et al: Paircargo Consortium, PIATCOs predecessor, was not a duly
Court to waive the requirement and so remove the impediment to its
pre-qualified bidder on the unsolicited proposal submitted by AEDC as the
addressing and resolving the serious constitutional questions raised.
Paircargo Consortium failed to meet the financial capability required under
the BOT Law and the Bid Documents
ISSUE #2: W/N the present petition violates the hierarchy of Courts (NO) o in computing the ability of the Paircargo Consortium to meet
the minimum equity requirements for the project, the entire
RATIO #2:
net worth of Security Bank, a member of the consortium,
should not be considered.
 PIATCO: the Memorandum dated Oct 14, 1996 issued by the DOTC  Pursuant to this provision, the PBAC issued PBAC Bulletin No. 3 dated
Undersecretary Cal stating that the Paircargo Consortium is found to have a Aug 16, 1996 amending the financial capability requirements for pre-
combined net worth of P3.9B, sufficient to meet the equity requirements of qualification of the project proponent as follows: “The minimum amount of
the project equity to which the proponents financial capability will be based shall be
o The said Memorandum was in response to a letter from Mr. 30% of the project cost instead of the 20% specified in Sec 3.6.4 of the
Antonio Henson of AEDC to Pres. FVR questioning the financial Bid Documents.
capability of the Paircargo Consortium on the ground that it does  As the minimum project cost was estimated to be US$350M or
not have the financial resources to put up the required minimum roughly P9,183,650,000, the Paircargo Consortium had to show to the
equity of P2.7B satisfaction of the PBAC that it had the ability to provide the minimum
o This contention is based on the restriction under R.A. No. 337, equity for the project in the amount of at least P2,755,095,000
as amended or the General Banking Act that a commercial  Paircargos Audited Financial Statements as of 1993 and 1994 indicated that
bank cannot invest in any single enterprise in an amount more it had a net worth of P2,783,592 and P3,123,515 respectively.
than 15% of its net worth.  PAGS Audited Financial Statements as of 1995 indicate that it has
o In the said Memorandum, Undersecretary Cal opined: It is not a approximately P26,735,700 to invest as its equity for the project
requirement that the net worth must be unrestricted. To  Security Bank’s Audited Financial Statements as of 1995 show that it
impose that as a requirement now will be nothing less than unfair. has a net worth equivalent to its capital funds in the amount
The financial statement or the net worth is not the sole basis in of P3,523,504,377
establishing financial capability. As stated in Bid Bulletin No. 3,  We agree with OSG et al that with respect to Security Bank, the  entire
financial capability may also be established by testimonial letters amount of its net worth could not be invested in a single undertaking or
issued by reputable banks. The net worth reflected in the Financial enterprise, whether allied or non-allied
Statement should not be taken as the amount of the money to be  R.A. No. 337, as amended or the General Banking Act: Sec. 21-B. The
used to answer the required 30% equity of the challenger but rather provisions in this or in any other Act to the contrary notwithstanding, the
to be used in establishing if there is enough basis to believe that the Monetary Board, whenever it shall deem appropriate and necessary to
challenger can comply with the required 30% equity. In fact, proof further national development objectives or support national priority
of sufficient equity is required as one of the conditions for award projects, may authorize a commercial bank, a bank authorized to provide
of contract (Sec 12.1 IRR of the BOT Law) but not for pre- commercial banking services, as well as a government-owned and
qualification (Sec 5.4) controlled bank, to operate under an expanded commercial banking
 SC: agrees with OSG et al authority and by virtue thereof exercise, in addition to powers authorized
 BOT Law: the contract shall be awarded to the bidder who, having satisfied for commercial banks, the powers of an Investment House as provided in
the minimum financial, technical, organizational and legal Presidential Decree No. 129, invest in the equity of a non-allied
standards required by the law, has submitted the lowest bid and most undertaking, or own a majority or all of the equity in a financial
favorable terms of the project. intermediary other than a commercial bank or a bank authorized to
 1994 IRR of the BOT Law: Section 5.4 Pre-qualification Requirements. xxx providecommercial banking services: Provided, That (a) the
For purposes of pre-qualification, this capability shall be measured in terms total investment in equities shall not exceed fifty percent (50%) of the net
of (i) proof of the ability of the project proponent and/or the worth of the bank; (b) the equity investment in any one enterprise whether
consortium to provide a minimum amount of equity to the project, and allied or non-allied shall not exceed fifteen percent (15%) of the net
(ii) a letter testimonial from reputable banks attesting that the project worth of the bank; (c) the equity investment of the bank, or of its wholly
proponent and/or members of the consortium are banking with them, or majority-owned subsidiary, in a single non-allied undertaking shall not
that they are in good financial standing, and that they have adequate exceed thirty-five percent (35%) of the total equity in the enterprise nor
resources. shall it exceed thirty-five percent (35%) of the voting stock in
 that enterprise; and (d) the equity investment inother banks shall be the subsequent contracts entered by it in pursuance of the project, the Court
deducted from the investing bank's net worth for purposes of computing the feels that it is necessary to discuss in full the pressing issues of the present
prescribed ratio of net worth to risk assets. controversy for a complete resolution thereof. [THANKS A LOT JUSTICE
 1993 Manual of Regulations for Banks : SECTION X383. Other PUNO -_-]2
Limitations and Restrictions. The following limitations and restrictions shall
also apply regarding equity investments of banks. a. In any single
ISSUE #5: W/N the 1997 Concession Agreement is valid (NO)
enterprise. The equity investments of banks in any single enterprise shall
not exceed at any time 15% of the net worth of the investing bank as RATIO #5:
defined in Sec. X106 and Subsec. X121.5.
 Thus, the maximum amount that Security Bank could validly invest in  Agan et al and OSG et al: the 1997 Concession Agreement is invalid as it
the Paircargo Consortium is only P528,525,656.55, representing 15% of contains provisions that substantially depart from the draft Concession
its entire net worth. Agreement included in the Bid Documents.
 The total net worth therefore of the Paircargo Consortium, after considering o A substantial departure from the draft Concession Agreement is a
the maximum amounts that may be validly invested by each of its violation of public policy and renders the 1997 Concession
members is P558,384,871.55 or only 6.08% of the project cost, an amount Agreement null and void.
substantially less than the prescribed minimum equity investment required  PIATCO: the Concession Agreement attached to the Bid Documents is
for the project in the amount of P2,755,095,000 or 30% of the project cost. intended to be a draft, i.e., subject to change and that this intention was clear
 Disregarding the investment ceilings provided by applicable law would not to all participants
result in a proper evaluation of whether or not a bidder is pre-qualified to o said intention is expressed in Part C (6) of Bid Bulletin No. 3
undertake the project as for all intents and purposes, such ceiling or legal issued by the PBAC: Amendments to the Draft Concessions
restriction determines the true maximum amount which a bidder may Agreement shall be issued from time to time. Said amendments
invest in the project. shall only cover items that would not materially affect the
 Further, the determination of whether or not a bidder is pre-qualified to preparation of the proponents proposal.
undertake the project requires an evaluation of the financial capacity of the  SC: An essential element of a publicly bidded contract is that all bidders
said bidder at the time the bid is submitted based on the required documents must be on equal footing. Not simply in terms of application of the
presented by the bidder. The PBAC should not be allowed to speculate on procedural rules and regulations imposed by the relevant government
the future financial ability of the bidder to undertake the project on the basis agency, but more importantly, on the contract bidded upon. Each bidder
of documents submitted. This would open doors to abuse and defeat the must be able to bid on the same thing.
very purpose of a public bidding.  While we concede that a winning bidder is not precluded from modifying or
 Considering that at the pre-qualification stage, the maximum amounts amending certain provisions of the contract bidded upon, such changes must
which the Paircargo Consortium may invest in the project fell short of the not constitute substantial or material amendments that would alter the basic
minimum amounts prescribed by the PBAC, we hold that Paircargo parameters of the contract and would constitute a denial to the other bidders
Consortium was not a qualified bidder. Thus the award of the contract by of the opportunity to bid on the same terms.
the PBAC to the Paircargo Consortium, a disqualified bidder, is null and  Hence, the question that comes to fore is this: is the 1997 Concession
void. Agreement the same agreement that was offered for public bidding, i.e.,
the draft Concession Agreement attached to the Bid Documents? A close
comparison of the draft Concession Agreement attached to the Bid
 While it would be proper at this juncture to end the resolution of the instant Documents and the 1997 Concession Agreement reveals that the
controversy, as the legal effects of the disqualification of PIATCO’s documents differ in at least two material respects:
predecessor would come into play and necessarily result in the nullity of all
2 You could stop reading here :))
 o a. Modification on the Public Utility Revenues and Non-Public government guarantee, subsidy or equity is required, and (3) the
Utility Revenues that may be collected by PIATCO government agency or local government unit has invited by publication
o b. Assumption by the Government of the liabilities of PIATCO in other interested parties to a public bidding and conducted the same.
the event of the latter’s default thereof3  The BOT Law clearly and strictly prohibits direct government guarantee,
subsidy and equity in unsolicited proposals that the mere inclusion of a
provision to that effect is fatal and is sufficient to deny the proposal. 
Direct Government Guarantee
 This Court has long and consistently adhered to the legal maxim that those
 Clearly by providing that the Government assumes the attendant liabilities, that cannot be done directly cannot be done indirectly.
which consists of PIATCOs unpaid debts, the 1997 Concession Agreement
provided for a direct government guarantee for the debts incurred by Temporary takeover of business affected with public interest
PIATCO in the implementation of the NAIA IPT III project. It is of no
moment that the relevant sections are subsumed under the title of  Article XII, Section 17 of the 1987 Constitution provides: Section 17. In
assignment. The provisions providing for direct government guarantee times of national emergency, when the public interest so requires, the State
which is prohibited by law is clear from the terms thereof. may, during the emergency and under reasonable terms prescribed by it,
 It is clear from the foregoing contractual provisions that in the event that temporarily take over or direct the operation of any privately owned public
PIATCO fails to fulfill its loan obligations to its Senior Lenders, the utility or business affected with public interest.
Government is obligated to directly negotiate and enter into an agreement  The above provision pertains to the right of the State in times of national
relating to NAIA IPT III with the Senior Lenders, should the latter fail to emergency, and in the exercise of its police power, to temporarily take over
appoint a qualified nominee or transferee who will take the place of the operation of any business affected with public interest
PIATCO.   The temporary takeover by the government extends only to the operation of
 It is clear from the foregoing that the ARCA provides for a direct the business and not to the ownership thereof. As such the government is
guarantee by the government to pay PIATCOs loans not only to its not required to compensate the private entity-owner of the said
Senior Lenders but all other entities who provided PIATCO funds or business as there is no transfer of ownership, whether permanent or
services upon PIATCOs default in its loan obligation with its Senior temporary. The private entity-owner affected by the temporary takeover
Lenders. cannot, likewise, claim just compensation for the use of the said business
 The proscription against government guarantee in any form is one of and its properties as the temporary takeover by the government is in
the policy considerations behind the BOT Law. Clearly, in the present exercise of its police power and not of its power of eminent domain.
case, the ARCA obligates the Government to pay for all loans, advances  Article V, Section 5.10 (c) of the 1997 Concession Agreement provides:
and obligations arising out of financial facilities extended to PIATCO for xxx Concessionaire shall be entitled to reasonable compensation for the
the implementation of the NAIA IPT III project should PIATCO default in duration of the temporary take over by GRP, which compensation shall take
its loan obligations to its Senior Lenders and the latter fails to appoint a into account the reasonable cost for the use of the Terminal and/or
qualified nominee or transferee. This in effect would make the Government Terminal Complex, (which is in the amount at least equal to the debt
liable for PIATCOs loans should the conditions as set forth in the ARCA service requirements of Concessionaire xxx
arise. This is a form of direct government guarantee.  PIATCO cannot, by mere contractual stipulation, contravene the
 The BOT Law and its implementing rules provide that in order for an Constitutional provision on temporary government takeover and obligate
unsolicited proposal for a BOT project may be accepted, the following the government to pay reasonable cost for the use of the Terminal and/or
conditions must first be met: (1) the project involves a new concept in Terminal Complex.
technology and/or is not part of the list of priority projects, (2) no direct

Regulation of Monopolies
3 I omitted completely the discussion on these points so you don’t kill me when I submit a 10-page digest :))
  The 1987 Constitution strictly regulates monopolies, whether private or  The provisions under Secs 4.04(b) and (c) in relation to Sec 1.06 of the
public, and even provides for their prohibition if public interest so requires. 1997 Concession Agreement and Sec 4.04(c) in relation to Sec 1.06 of the
 Art 12, Sec 19 of the 1987 Constitution states: Sec. 19. The state shall ARCA, which constitute a direct government guarantee expressly
regulate or prohibit monopolies when the public interest so requires. No prohibited by, among others, the BOT Law and its Implementing Rules and
combinations in restraint of trade or unfair competition shall be allowed. Regulations are also null and void. The Supplements, being accessory
 In the cases at bar, PIATCO, under the 1997 Concession Agreement and the contracts to the ARCA, are likewise null and void.
ARCA, is granted the exclusive right to operate a commercial international
passenger terminal within the Island of Luzon at the NAIA IPT III. This is
DISPOSITION: The 1997 Concession Agreement, the Amended and Restated
with the exception of already existing international airports in Luzon such
Concession Agreement and the Supplements thereto are set aside for being null and
as those located in the Subic Bay Freeport Special Economic Zone
void.
(SBFSEZ), Clark Special Economic Zone (CSEZ) and in Laoag City.
 As such, upon commencement of PIATCOs operation of NAIA IPT III,
Terminals 1 and 2 of NAIA would cease to function as international
passenger terminals. The separate opinions did not discuss the GBA so I did not include them 
 The right granted to PIATCO to exclusively operate NAIA IPT III would
be for a period of 25 years from the In-Service Date and renewable for
another 25 years at the option of the government. Both the 1997 Concession
Agreement and the ARCA further provide that, in view of the exclusive
Dio v. Japor | Celine
right granted to PIATCO, the concession contracts of the service providers
July 8, 2005
currently servicing Terminals 1 and 2 would no longer be renewed and
TERESITA DIO, petitioner, vs. SPOUSES VIRGILIO and LUZ ROCES
those concession contracts whose expiration are subsequent to the In-
JAPOR and MARTA JAPOR, respondents.
Service Date would cease to be effective on the said date.
 While PIATCO may be authorized to exclusively operate NAIA IPT III as NATURE: Review on certiorari of the decision of the CA.
an international passenger terminal, the Government, through the MIAA,
has the right and the duty to ensure that it is done in accord with public SUMMARY: Petitioner Dio was the mortgagee of the land owned by the
interest. PIATCOs right to operate NAIA IPT III cannot also violate the respondents. Under their contract, Japors agreed to pay the Dio interest at the rate of
rights of third parties. five percent (5%) a month, within a period of two months, and 5% penalty rate for
every month of delay. Respondents failed to pay on the mortgage so petitioner Dio
CONCLUSION wanted to foreclose on the land. Respondents filed an action for Fixing of
Contractual Obligation with Prayer for Preliminary Mandatory
 In view of the absence of the requisite financial capacity of the Paircargo Injunction/Restraining Order, praying that judgment be rendered fixing he
Consortium, predecessor of respondent PIATCO, the award by the PBAC of contractual obligations of plaintiffs with defendant Dio, plus allowable interests +
the contract for the construction, operation and maintenance of the NAIA praying that the mortgage be declared null and void. The RTC, although granting
IPT III is null and void. Further, considering that the 1997 Concession Injunction on foreclosure, later dismissed the complaint. Respondents appealed and
Agreement contains material and substantial amendments, which the CA affirmed decision of the RTC, although FIXED THE INTERESTS at 12%
amendments per annum and additional 1% penalty per month. Petitioner Dio appealed the fixing
 had the effect of converting the 1997 Concession Agreement into an of the interests, saying that the CA erred in finding the interests unconscionable and
entirely different agreement from the contract bidded upon, the 1997 oppressive. The SC affirmed the fixing of the penalties, saying that although the
Concession Agreement is similarly null and void for being contrary to Usury Law was no longer in effect, this does not mean that the Courts shall sanction
public policy. interests which are clearly iniquitous and oppressive to one party.
  The Japors filed a Motion to Admit Amended Complaint with an attached copy
DOCTRINE: Under Terms of Loan. This case says that a Court will reduce interest of their Amended Complaint praying that the Deed of Real Estate Mortgage
rates which are clearly iniquitous, oppressive and unconscionable, even in the dated February 13, 1989 be declared null and void.
absence of a Usury Law. o RTC Ruling on motion: Denied.
 The Japors then filed a petition for certiorari with the CA, praying that the Court
FACTS: of Appeals direct the trial court to admit their Amended Complaint.
 Respondents Virgilio Japor and Luz Roces Japor owned land in Bgy. Ibabang o CA Ruling: Denied.
Mayao, Lucena (TCT No. T-39514)  RTC RULING: Dismissed the Japors’ complaint for failing to substantiate
 Marta Japor owned a parcel of land adjacent to theirs, titled under TCT No. T- affirmative allegations.
15018 o Declared Real Estate Mortgage between parties as valid binding
 They obtained a loan of Php 90,000 (later increased to 128,000) from the between them.
Quezon City Development Bank (QDB)  Japors filed an appeal and Petition for Temporary Restraining Order And/Or
o As security, they mortgaged both lots as evidence by a Deed of Real Mandatory Injunction in Aid of Appellate Jurisdiction with the Court of
Estate Mortgage Appeals.
o Respondents Japor (all three) failed to pay their aforesaid loans. o TRO was denied.
 Before QDB could foreclose the lands however, respondents, thru their broker,  On May 8, 1996, petitioner Dio as the sole bidder in an auction purchased the
one Lucia G. Orian, offered to mortgage their properties to petitioner Teresita properties for P3,500,000.
Dio.  CA RULING: affirmed the decision of the trial court with respect to the validity
o Petitioner prepared a Deed of Real Estate Mortgage, whereby of the Deed of Real Estate Mortgage, but modified the interest and penalty rates
respondents mortgaged anew the two properties already mortgaged for being unconscionable and exorbitant.
with QDB to secure the timely payment of a P350,000 loan that o Fixed the interest at 12% per annum and an additional 1% penalty
respondents had from petitioner Dio. charge per month such that plaintiffs-appellants contractual obligation
o TERMS: Japors agreed to pay the Dio interest at the rate of five under the deed of real estate mortgage would amount to P1,252,674.00
percent (5%) a month, within a period of two months or until April o Directing defendant-appellee Dio to give the surplus of P2,247,326.00
14, 1989.In the event of default, an additional interest equivalent to to plaintiffs-appellants
five percent (5%) of the amount then due, for every month of  Petitioner Dio now comes to this court saying that:
delay, would be charged on them. o The alleged iniquity of the stipulated interest and penalty was not raised
 The respondents failed to settle their obligation to petitioner on April 14, 1989, before the trial court nor assigned as an error in respondents appeal
the agreed deadline for settlement. o The stipulated interest and penalty are not excessive, iniquitous,
o Despite repeated demands, respondents did not pay, hence petitioner unconscionable, exorbitant and contrary to morals
applied for extrajudicial foreclosure of the mortgage. The auction of the o Payment of the surplus of Php 2,247,326.00 to respondents would
unredeemed properties was set for February 26, 1992. result in their unjust enrichment
 Respondents filed an action for Fixing of Contractual Obligation with Prayer for
Preliminary Mandatory Injunction/Restraining Order with the Regional Trial ISSUE #1: Did the Court of Appeals err when it held that the stipulations on
Court (RTC) of Lucena City. interest and penalty in the Deed of Real Estate Mortgage is contrary to morals,
o Respondents prayed that judgment be rendered fixing the contractual if not illegal? NO.
obligations of plaintiffs with the defendant Dio plus legal or allowable
interests thereon.  Petitioner Dio’s view: that The Usury Law has been rendered ineffective by
o RTC: Issued ordering enjoining the auction sale of the aforementioned Central Bank Circular No. 905, series of 1982 and accordingly, usury has
mortgaged properties.
 become legally non-existent in this jurisdiction, thus, interest rates may penalty rate to 1% per month, in accordance with Article 2227[18] of
accordingly be pegged at such levels or rates as the lender and the borrower may the Civil Code.
agree upon.
ISSUE #2: Were respondents entitled to any surplus on the auction sale price?
RATIO #1: NO.

 Central Bank Circular No. 905, which took effect on January 1, 1983, RATIO #2:
effectively removed the ceiling on interest rates for both secured and unsecured
loans, regardless of maturity.  The surplus was the result of the computation by the Court of Appeals of
 However, nothing in said Circular grants lenders carte blanche authority to respondents outstanding liability based on a reduced interest rate of 12% per
impose interest rates which would result in the enslavement of their annum and the reduced penalty rate of 1% per month.
borrowers or to the hemorrhaging of their assets. o CA applied Sulit v. Court of Appeals: in case of surplus in the purchase
o While a stipulated rate of interest may not technically and necessarily price, the mortgagee is liable for such surplus as actually comes into his
be usurious under Circular No. 905, usury now being legally non- hands, but where he sells on credit instead of cash, he must still account
existent in our jurisdiction, nonetheless, said rate may be equitably for the proceeds as if the price were paid in cash, for such surplus
reduced should the same be found to be iniquitous, unconscionable, and stands in the place of the land itself with respect to liens thereon or
exorbitant, and hence, contrary to morals (contra bonos mores), if not vested rights therein particularly those of the mortgagor or his assigns.
against the law  In the instant case, however, there is no surplus to speak of.
o What is iniquitous, unconscionable, and exorbitant shall depend upon o In adjusting the interest and penalty rates to equitable and conscionable
the factual circumstances of each case. levels, what the Court did was merely to reflect the true price of the
 In the instant case, the Court of Appeals found that the 5% interest rate per land in the foreclosure sale.
month and 5% penalty rate per month for every month of default or delay is in o The amount of the petitioners bid merely represented the true amount
reality interest rate at 120% per annum. of the mortgage debt.
o This Court has held that a stipulated interest rate of 5.5% per month or o No surplus in the purchase price was thus created to which the
66% per annum is void for being iniquitous or unconscionable. respondents as the mortgagors have a vested right.
o We have likewise ruled that an interest rate of 6% per month or 72%
per annum is outrageous and inordinate. CA DECISION AFFIRMED.
o Conformably to these precedent cases, a combined interest and penalty
rate at 10% per month or 120% per annum, should be deemed
iniquitous, unconscionable, and inordinate.
o Hence, we sustain the appellate court when it found the interest and
penalty rates in the Deed of Real Estate Mortgage in the present case
excessive, hence legally impermissible.
 But what should the interest and penalty rates be?
o The evidence shows that it was indeed the respondents who proposed
the 5% interest rate per month for two (2) months. Having agreed to
said rate, the parties are now estopped from claiming otherwise.
o For the succeeding period after the two months, however, the Court of
Appeals correctly reduced the interest rate to 12% per annum and the
Consolidated Bank v. CA | Gab  Claiming that private respondents failed to turn over the goods covered by
April 19, 2001 the trust receipt or the proceeds thereof, CBT filed a complaint for sum of
The Consolidated Bank and Trust Corporation (Solidbank), Petitioner, vs. The money with application for preliminary attachment before the Manila
Court of Appeals, Continental Cement Corporation, Gregory T. Lim and RTC.
Spouse, Respondents  In answer, private respondents averred that the transaction between them
Ynares-Santiago, J. and CBT was a simple loan, not a trust receipt transaction, and that the
amount claimed by CBT did not take into account payments already made
NATURE: Petition for review by them. Lim also denied any personal liability in the subject transactions.
SUMMARY: Continental Cement Corp. (CCC) and Gregory Lim obtained from  In a Supplemental Answer, private respondents prayed for the
Consolidated Bank and Trust Corp. (CBT) a Letter of Credit. The letter of credit was reimbursement of alleged overpayment to CBT of P490,228.90.
used to purchase around 500,000 L of bunker fuel oil from Petrophil Corp., which  At the pre-trial conference, the parties agreed on certain issues:
Petrophil delivered directly to CCC’s in its Bulacan plant. In relation to the same o W/N the transaction involved is a loan transaction or a trust receipt
transaction, a trust receipt for P1,001,520.93 was executed by CCC, with Gregory transaction
Lim as signatory. CBT later filed a complaint for sum of money with application for o W/N the interest rates charged against the respondents by CBT are
preliminary attachment before the Manila RTC, which ruled dismissed the proper under the letter of credit, trust receipt, and under existing
complaint. The CA merely partially modified the Decision. The SC denied the rules or regulations of the Central Bank
petition for review and affirmed the SC’s Decision, ruling that the agreement among o W/N CBT properly applied the previous payment of P300,456.27
the parties as to the floating of interest rate was invalid.
by CCC on July 13, 1982 as payment for the CCC account
DOCTRINES (related to topic):
o W/N the private respondents are personally liable under the
 While it may be acceptable for practical reasons, given the fluctuating
transaction sued for
economic conditions, for banks to stipulate that interest rates on a loan
 The RTC dismissed the Complaint and ordered CBT to pay private
not be fixed and, instead, be made dependent upon prevailing market
respondents the following under their counterclaim: P490,228.90
conditions, there should always be a reference rate upon which to peg
(representing overpayment of CCC), with interest thereon at the legal rate
such variable interest rates.
from July 26, 1988 until fully paid; P10,000 as attorneys fees; and costs.
 A stipulation ostensibly signifying an agreement to any increase or
 Both parties appealed to the CA, which partially modified the Decision by
decrease in the interest rate, without more, cannot be accepted as valid
deleting the award of attorney’s fees in favor of private respondents and,
for it leaves solely to the creditor the determination of what interest rate
instead, ordering CCC to pay CBT P37,469.22 as and for attorney’s fees
to charge against an outstanding loan.
and litigation expenses.
FACTS:
 CBT then filed the present petition for review.
 July 13, 1982:
ISSUE #1 (MAIN):
o Continental Cement Corp. (CCC) and Gregory Lim obtained
 W/N the agreement among the parties as to the floating of interest rate
from Consolidated Bank and Trust Corp. (CBT) Letter of
is valid under applicable jurisprudence and the rules and regulations of
Credit DOM-23277 worth P1,068,150.
the Central Bank (NO)
o CCC paid a marginal deposit of P320,445 to CBT.
RATIO #1:
 The letter of credit was used to purchase around 500,000 L of bunker
 Relevant provision in the trust receipt agreement of the parties fixing
fuel oil from Petrophil Corp., which Petrophil delivered directly to CCC’s the interest rate:
in its Bulacan plant.
o In relation to the same transaction, a trust receipt for “I, WE jointly and severally agree to any increase or decrease in the interest rate
P1,001,520.93 was executed by CCC, with Gregory Lim as which may occur after July 1, 1981, when the Central Bank floated the interest
signatory. rate, and to pay additionally the penalty of 1% per month until the amount/s or
installment/s due and unpaid under the trust receipt on the reverse side hereof is/are RATIO #3:
fully paid.”  CBT’s contention that the marginal deposit made by CCC should not be
 The foregoing stipulation is invalid, there being no reference rate set deducted outright from the amount of the letter of credit is untenable.
either by it or by the Central Bank, leaving the determination thereof at  CBT: The marginal deposit should be considered only after computing the
the sole will and control of CBT. principal plus accrued interests and other charges.
 While it may be acceptable for practical reasons, given the fluctuating  To sustain CBT would mean allowing a case of unjust enrichment since
economic conditions, for banks to stipulate that interest rates on a loan while a marginal deposit earns no interest in favor of the debtor-depositor,
not be fixed and, instead, be made dependent upon prevailing market the bank is not only able to use the same for its own purposes, interest-free,
conditions, there should always be a reference rate upon which to peg but is also able to earn interest on the money loaned to CCC.
such variable interest rates.  It would be onerous to compute interest and other charges on the face value
 Example of such a valid variable interest rate: Polotan, Sr. v. CA The of the letter of credit, which CBT issued without first crediting or setting off
contractual provision stating that if there occurs any change in the the marginal deposit, which the CCC paid to it.
prevailing market rates, the new interest rate shall be the guiding rate in  Compensation is proper and should take effect by operation of law because
computing the interest due on the outstanding obligation without need of the requisites in NCC, Art. 1279 are present and should extinguish both
serving notice to the Cardholder other than the required posting on the debts to the concurrent amount.
monthly statement served to the Cardholder  The interests and other charges on the subject letter of credit should be
 Unlike the stipulation at bar, the interest rate involved in Polotan, Sr. v. CA computed only on the balance of P681,075.93, which was the portion
is designed to be based on the prevailing market rate. actually loaned by CBT to CCC.
 A stipulation ostensibly signifying an agreement to any increase or ISSUE #4:
decrease in the interest rate, without more, cannot be accepted as valid  W/N the CA grievously erred in not considering the transaction at bar
for it leaves solely to the creditor the determination of what interest rate as a trust receipt transaction on the basis of the judicial admissions of
to charge against an outstanding loan. the private respondents and for which private respondents are liable
ISSUE #2: therefor (NO)
 W/N the CA acted incorrectly or committed a reversible error in RATIO #4:
holding that there was an overpayment by private respondents to CBT  Colinares v. CA is foursquare with the facts at bar.
of P490,228.90 despite the absence of any computation made in the o As the debtor received the goods subject of the trust receipt before
Decision and the erroneous application of payments, which is in the trust receipt itself was entered into, the transaction was a
violation of the NCC (NO) simple loan, not a trust receipt agreement.
RATIO #2: o Prior to the execution of the trust receipt, ownership over the goods
 While a computation may not have appeared in the Decision itself, the was already transferred to the debtor.
RTC’s finding of overpayment is supported by evidence presented before it. o This situation is inconsistent with what normally obtains in a pure
 After reviewing and computing the payments together with the interest and trust receipt transaction, wherein the goods belong in ownership to
penalty charges due thereon, the SC found that the amount of overpayment the bank and are only released to the importer in trust after the loan
made by CCC to CBT, i.e., P563,070.13, was more than what was ordered is granted.
reimbursed by the lower court.  In the case at bar, as in Colinares, the delivery to CCC of the goods subject
 However, since the private respondents did not file an appeal in this case, of the trust receipt occurred long before the trust receipt itself was executed.
the amount ordered reimbursed by the lower court should stand. o Delivery of the bunker fuel oil to CCC’s Bulacan plant
ISSUE #3: commenced on July 7, 1982 and was completed by July 19, 1982.
 W/N the manner of computation of the marginal deposit by the CA is in o The oil was used up by CCC in its normal operations by August
accordance with banking practice (YES) 1982.
 o The subject trust receipt was only executed on September 2, 1982. RATIO #5:
 The danger in characterizing a simple loan as a trust receipt transaction was  CBT’s argument that CCC and the Spouses Lim are one and the same
explained in Colinares: cannot be sustained.
o The Trust Receipts Law does not seek to enforce payment of the  The transactions sued upon were clearly entered into by Gregory Lim in his
loan; it punishes the dishonesty and abuse of confidence in the capacity as Executive Vice President of CCC.
handling of money or goods to the prejudice of another, regardless  The Spouses Lim cannot be made personally liable since Gregory Lim
of whether the latter is the owner. entered into and signed the contract clearly in his official capacity as
o The practice of banks of making borrowers sign trust receipts to Executive Vice President.
facilitate collection of loans and place them under the threats of  The personality of the corporation is separate and distinct from the persons
criminal prosecution should they be unable to pay it may be unjust composing it.
and inequitable, if not reprehensible. DISPOSITION
 Such agreements are contracts of adhesion, which  The Petition for Review was denied. The CA’s Decision was affirmed.
borrowers have no option but to sign, lest their loan be
disapproved.
 The resort to this scheme leaves poor and hapless
borrowers at the mercy of banks and this scheme is prone
to misinterpretation.
 CCC cannot be said to have been dishonest in its dealings with CBT.
 Neither has it been shown that CCC has evaded payment of its obligations.
o It continually endeavored to meet the same, as shown by the
various receipts issued by CCBT acknowledging payment on the
loan.
 Certainly, the payment of P1,832,158.38 on a loan with a principal amount
of only P681,075.93 negates any badge of dishonesty, abuse of confidence,
or mishandling of funds on CCC’s part, which are the gravamen of a trust
receipt violation.
 CCC is not an importer which acquired the bunker fuel oil for re-sale; it
needed the oil for its own operations.
 At no time did title over the oil pass to CBT; title passed directly to CCC, to
which the oil was directly delivered long before the trust receipt was
executed.
 The fact that ownership of the oil belonged to CCC, through its President,
Gregory Lim, was acknowledged by CBT’s own account officer on the
witness stand.
 There was really no trust receipt transaction that took place.
o CCC was required to sign the trust receipt simply to facilitate
collection by CBT of the loan it had extended to CCC.
ISSUE #5:
 W/N the CA grievously erred in not holding the Spouses Lim liable
under the trust receipt transaction (NO)
Macalinao v BPI |CM  For failure of petitioner Macalinao to settle her obligations, respondent
September 17, 2009 BPI filed with the MeTC of Makati City a complaint for a sum of money
ILEANA DR. MACALINAO, Petitioner, against her and her husband, Danilo SJ. Macalinao.
versus  BPI prayed for the payment of PhP 154,608.78 (includes previous interest
BANK OF THE PHILIPPINEISLANDS, Respondent. and penalties) plus 3.25% finance charges and late payment charges
VELASCO, JR., J.: equivalent to 6% of the amount due from February 29, 2004 and an
SUMMARY: Macalinao failed to pay her credit card debts. BPI filled a suit for the amount equivalent to 25% of the total amount due as attorneys fees, and of
collection of money. BPI’s rate of 9.25% per month or 111% per annum was the cost of suit.
declared unconscionable by the lower courts for being clearly excessive, and was  The Sps. failed to file their Answer. Thus, respondent BPI moved that
thus reduced to 2% per month or 24% per annum. CA modified the rate of interest judgment be rendered in accordance with Section 6 of the Rule on Summary
and penalty charge and increased them to 3% per month or 36% per annum based on Procedure.
the Terms and Conditions Governing the Issuance and Use of the BPI Credit Card.  MeTC ruled in favor of respondent BPI and ordered petitioner Macalinao
SC held that it is equitable to reduce the interest rate to 1% monthly or a total of 2% and her husband to pay the amount of PhP 141,518.34 plus interest and
per month or 24% per annum. penalty charges of 2% per month, P10,000.00 attorneys fees; and Cost of
DOCTRINE: We need not unsettle the principle we had affirmed in a plethora of suit.
cases that stipulated interest rates of 3% per month and higher are excessive,  RTC affirmed in toto the decision of the MeTC
iniquitous, unconscionable and exorbitant. Such stipulations are void for being  The CA affirmed with modification the Decision of the RTC:
contrary to morals, if not against the law. 1.      The amount of One Hundred Twenty Six
FACTS: Thousand Seven Hundred Six Pesos and
 Petitioner Ileana Macalinao was an approved cardholder of BPI Mastercard Seventy Centavos plus interest and penalty
Macalinao made some purchases through the use of the said credit card and
Cardholder to pay the charges made through the CARD within the payment period as
defaulted in paying for said purchases. stated in the SOA or within thirty (30) days from actual date or dates of purchase
 She received a letter dated January 5, 2004 from respondent BPI, whichever occur earlier, shall render him in default without the necessity of demand
from BCC, which the Cardholder expressly waives. The charges or balance thereof
demanding payment of PhP 141,518.34 *see original case for chart of remaining unpaid after the payment due date indicated on the monthly Statement
of Accounts shall bear interest at the rate of 3% per month for BPI Express
payments, but as I see it, it basically shows the breakdown and that the Credit, BPI Gold Mastercard and an additional penalty fee equivalent to another
interest is compounded. 3% of the amount due for every month or a fraction of a months
delay. PROVIDED that if there occurs any change on the prevailing market rates, BCC
 Under the Terms and Conditions Governing the Issuance and Use shall have the option to adjust the rate of interest and/or penalty fee due on the
outstanding obligation with prior notice to the cardholder. The Cardholder hereby
of the BPI Credit and BPI Mastercard, the charges or balance authorizes BCC to correspondingly increase the rate of such interest [in] the event of
thereof remaining unpaid after the payment due date indicated on changes in the prevailing market rates, and to charge additional service fees as may
be deemed necessary in order to maintain its service to the Cardholder. A CARD with
the monthly Statement of Accounts shall bear interest at the rate outstanding balance unpaid after thirty (30) days from original billing statement date
shall automatically be suspended, and those with accounts unpaid after ninety (90)
of 3% per month and an additional penalty fee equivalent to days from said original billing/statement date shall automatically be cancel (sic),
another 3% per month. 4 without prejudice to BCCs right to suspend or cancel any card anytime and for
whatever reason. In case of default in his obligation as provided herein, Cardholder
shall surrender his/her card to BCC and in addition to the interest and penalty charges
aforementioned , pay the following liquidated damages and/or fees (a) a collection fee
4 8. PAYMENT OF CHARGES BCC shall furnish the Cardholder a monthly of 25% of the amount due if the account is referred to a collection agency or attorney;
Statement of Account (SOA) and the Cardholder agrees that all charges made through (b) service fee for every dishonored check issued by the cardholder in payment of his
the use of the CARD shall be paid by the Cardholder as stated in the SOA on or before account without prejudice, however, to BCCs right of considering Cardholders account,
the last day for payment, which is twenty (20) days from the date of the said SOA, and and (c) a final fee equivalent to 25% of the unpaid balance, exclusive of litigation
such payment due date may be changed to an earlier date if the Cardholders account expenses and judicial cost, if the payment of the account is enforced though court
is considered overdue and/or with balances in excess of the approved credit limit, or to action. Venue of all civil suits to enforce this Agreement or any other suit directly or
such other date as may be deemed proper by the CARD issuer with notice to the indirectly arising from the relationship between the parties as established herein,
Cardholder on the same monthly SOA. If the last day fall on a Saturday, Sunday or a whether arising from crimes, negligence or breach thereof, shall be in the process of
holiday, the last day for the payment automatically becomes the last working day prior courts of the City of Makati or in other courts at the option of BCC. [4] (Emphasis
to said payment date. However, notwithstanding the absence or lack of proof of service supplied.)
of the SOA of the Cardholder, the latter shall pay any and all charges made through
the use of the CARD within thirty (30) days from date or dates thereof. Failure of the
 charges of 3% per month from January 5, 2004 to 1% per month or 12% per annum. We need not
until fully paid; unsettle the principle we had affirmed in a plethora of
2.      P10,000.00 as and by way of attorneys fees; and cases that stipulated interest rates of 3% per month
3.      Cost of Suit. and higher are excessive, iniquitous, unconscionable
 CA held that the PhP 141,518.34 (the amount sought to be satisfied in the and exorbitant. Such stipulations are void for being
demand letter of respondent BPI) is clearly not the result of the re- contrary to morals, if not against the law. While C.B.
computation at the reduced interest rate as previous higher interest rates Circular No. 905-82, which took effect on January 1,
were already incorporated in the said amount. Thus, the said amount should 1983, effectively removed the ceiling on interest rates for
not be made as basis in computing the total obligation of petitioner both secured and unsecured loans, regardless of maturity,
Macalinao. Further, the CA also emphasized that respondent BPI should nothing in the said circular could possibly be read as
not compound the interest in the instant case absent a stipulation to that granting carte blanche authority to lenders to raise
effect. The CA also held, however, that the MeTC erred in modifying the interest rates to levels which would either enslave their
amount of interest rate from 3% monthly to only 2% considering that borrowers or lead to a hemorrhaging of their assets.
petitioner Macalinao freely availed herself of the credit card facility offered  Since the stipulation on the interest rate is void, it is as if there was no
by respondent BPI to the general public. It explained that contracts of express contract thereon. Hence, courts may reduce the interest rate as
adhesion are not invalid per se and are not entirely prohibited. reason and equity demand.
ISSUE/ HELD: WON the reduction of interest rate, from 9.25% to 2%,  The same is true with respect to the penalty charge.
should be upheld since the stipulated rate of interest was unconscionable  Article 1229 of the Civil Code states:
and iniquitous, and thus illegal. o Art. 1229. The judge shall equitably reduce the penalty
RATIO: when the principal obligation has been partly or
SC: The petition is partly meritorious. irregularly complied with by the debtor. Even if there has
The Interest Rate and Penalty Charge of 3% Per Month or 36% Per Annum been no performance, the penalty may also be reduced by
Should Be Reduced to 2% Per Month or 24% Per Annum the courts if it is iniquitous or unconscionable.
 Macalinao claims that the interest rate and penalty charge of 3% per month  In exercising this power to determine what is iniquitous and
imposed by the CA is iniquitous as the same translates to 36% per annum or unconscionable, courts must consider the circumstances of each case
thrice the legal rate of interest. since what may be iniquitous and unconscionable in one may be totally
 BPI asserts that said interest rate and penalty charge are reasonable as the just and equitable in another.
same are based on the Terms and Conditions Governing the Issuance and  CAB: Macalinao made partial payments. Further, the stipulated penalty
Use of the BPI Credit Card. charge of 3% per month or 36% per annum, in addition to regular interests,
 SC: We find for petitioner. We are of the opinion that the interest rate and is indeed iniquitous and unconscionable.
penalty charge of 3% per month should be equitably reduced to 2% per  Thus, under the circumstances, the Court finds it equitable to reduce the
month or 24% per annum. interest rate pegged by the CA at 1.5% monthly to 1% monthly and penalty
 Indeed, in the Terms and Conditions Governing the Issuance and Use of the charge fixed by the CA at 1.5% monthly to 1% monthly or a total of 2% per
BPI Credit Card, there was a stipulation on the 3% interest rate. month or 24% per annum in line with the prevailing jurisprudence and in
Nevertheless, it should be noted that this is not the first time that this accordance with Art. 1229 of the Civil Code.
Court has considered the interest rate of 36% per annum as excessive There Is No Basis for the Dismissal of the Case, Much Less a Remand of the
and unconscionable. Same for Further Reception of Evidence
 Chua vs. Timan:  Petitioner Macalinao claims that the basis of the re-computation of the CA,
o The stipulated interest rates of 7% and 5% per month that is, the amount of PhP 94,843.70 stated on the October 27, 2002
imposed on respondents loans must be equitably reduced Statement of Account, was not the amount of the principal obligation. Thus,
 this allegedly necessitates a re-examination of the evidence presented by the
parties. For this reason, petitioner Macalinao further contends that the
dismissal of the case or its remand to the lower court would be a more
appropriate disposition of the case.
 SC: No. The Sps failed to file their Answer. Revised Rule on Summary
Procedure:
o Sec.  6.  Effect of failure to answer. Should the
defendant fail to answer the complaint within the
period above provided, the court, motu proprio, or on
motion of the plaintiff, shall render judgment as may
be warranted by the facts alleged in the complaint and
limited to what is prayed for therein: Provided,
however, that the court may in its discretion reduce the
amount of damages and attorneys fees claimed for being
excessive or otherwise unconscionable. This is without
prejudice to the applicability of Section 3(c), Rule 10 of
the Rules of Court, if there are two or more defendants.
(As amended by the 1997 Rules of Civil Procedure;
emphasis supplied.)
 BPI should not be made to suffer for petitioner Macalinaos failure
to file an answer
 Macalinao herself admitted the existence of her obligation to
respondent BPI
A remand of the case for further reception of evidence would
unduly prolong the proceedings
 CA correctly used the beginning balance of PhP 94,843.70 as basis
for the re-computation of the interest considering that this was the
first amount which appeared on the Statement of Account of
petitioner Macalinao.
 In view of the ruling that only 1% monthly interest and 1% penalty charge
can be applied to the beginning balance of PhP 94,843.70 (see original for
chart, interest not compounded anymore.)
 
DISPOSITIVE. PARTLY GRANTED. Macalinao to pay BPI:
(1) The amount of  PhP 112,309.52 plus interest and penalty charges of 2% per
month from January 5, 2004 until fully paid;
(2) PhP 10,000 as and by way of attorneys fees; and
(3) Cost of suit.
Chinabank vs. CA| Karl  Petitioner filed another Motion to Dismiss, this time invoking prescription.
June 23, 2005 The lower court denied said motion to dismiss for lack of merit. It held that
it was not apparent in the complaint whether or not prescription had set in.
CHINA BANKING CORPORATION, petitioner, vs. HON. COURT OF APPEALS  Petitioner insists that upon the face of the complaint, prescription has set in.
and ARMED FORCES AND POLICE SAVINGS & LOAN ASSOCIATION, INC. o It claims that the Home Notes annexed to the pleading bearing a
(AFPSLAI),respondents. uniform maturity date of December 2, 1983 indicate the date of
QUISUMBING, J.: accrual of the cause of action.
o Hence, argues petitioner, private respondents filing of the
NATURE: Petition for review on certiorari complaint for sum of money on September 24, 1996, is way
beyond the prescriptive period of ten years under Article 1144 of
SUMMARY: the Civil Code.
 Respondents tried to claim the amount on the Home Notes. CBC refused, o Citing Soriano v. Ubat, petitioner maintains the prescription period
claiming that their claim prescribed. SC ruled that the claim has not yet starts from the time when the creditor may file an action, not from
prescribed since the accrual of the cause of action in this case was well the time he wishes to do so.
within the 10 year prescriptive period.  However, private respondent counters that prescription is not apparent in
DOCTRINE (related to topic): the complaint because the maturity date of the Home Notes attached thereto
 It bears stressing that it is only when the last element occurs that a cause of is not the time of accrual of petitioners action.
action arises. Accordingly, a cause of action on a written contract accrues  Relying on Elido, Sr. v. Court of Appeals, private respondent insists that the
only when an actual breach or violation thereof occurs. action accrued only on July 20, 1995, when demand to pay was made on
 Applying the foregoing principle to the instant case, we rule that private petitioner.
respondents cause of action accrued only on July 20, 1995, when its demand  Private respondent also points out that since both the trial court and the
for payment of the Home Notes was refused by petitioner. It was only at appellate court found that prescription is not apparent on the face of the
that time, and not before that, when the written contract was breached and complaint, such factual finding should therefore be binding on this Court.
private respondent could properly file an action in court. ISSUE #1:

FACTS: Whether or not the complaint should be dismissed on the ground of prescription--NO
 On September 24, 1996, private respondent Armed Forces and Police
Savings and Loan Association, Inc. (AFPSLAI) filed a complaint for a sum RATIO#1:
of money against petitioner China Banking Corporation (CBC) with the  Well-settled is the rule that since a cause of action requires, as essential
Regional Trial Court. elements, not only a legal right of the plaintiff and a correlative duty of the
 In its Answer, the petitioner admitted being the registered owner of the defendant but also an act or omission of the defendant in violation of said
Home Notes, the subject matter of the complaint. These are instruments of legal right, the cause of action does not accrue until the party obligated
indebtedness issued in favor of a corporation named Fund Centrum Finance, refuses, expressly or impliedly, to comply with its duty.
Inc. (FCFI) and were sold, transferred and assigned to private respondent.  Otherwise stated, a cause of action has three elements, to wit, (1) a right in
 Thus, the petitioner filed a Motion to Dismiss alleging that the real party in favor of the plaintiff by whatever means and under whatever law it arises or
interest was FCFI, which was not joined in the complaint, and that is created; (2) an obligation on the part of the named defendant to respect or
petitioner was a mere trustee of FCFI. not to violate such right; and (3) an act or omission on the part of such
 TC, CA, SC- denied. defendant violative of the right of the plaintiff or constituting a breach of the
obligation of the defendant to the plaintiff.
  It bears stressing that it is only when the last element occurs that a cause of
action arises. Accordingly, a cause of action on a written contract accrues
only when an actual breach or violation thereof occurs.
 Applying the foregoing principle to the instant case, we rule that private
respondents cause of action accrued only on July 20, 1995, when its demand
for payment of the Home Notes was refused by petitioner. It was only at
that time, and not before that, when the written contract was breached and
private respondent could properly file an action in court.
 The cause of action cannot be said to accrue on the uniform maturity date of
the Home Notes as petitioner posits because at that point, the third essential
element of a cause of action, namely, an act or omission on the part of
petitioner violative of the right of private respondent or constituting a
breach of the obligation of petitioner to private respondent, had not yet
occurred.
 The subject Home Notes, in fact, specifically states that payment of the
principal and interest due on the notes shall be made only upon presentation
for notation and/or surrender for cancellation of the notes, thus:
Payment of the principal amount and interest due on this Note shall be made by
the Company at the principal office of the Trustee herein referred to or at such
other office or agency that the Company may designate for the purpose, in such
coin or currency of the Republic of the Philippines as at the time of payment shall
be legal tender for payment of public and private debts, upon presentation for
notation and/or surrender for cancellation of this Note.

 Thus, the maturity date of the Home Notes is not controlling as far as
accrual of cause of action is concerned. What said date indicates is the
time when the obligation matures, when payment on the Notes would
commence, subject to presentation, notation and/or cancellation of
those Notes.
 The date for computing when prescription of the action for collection
begins to set in is properly a function related to the date of actual
demand by the holder of the Notes for payment by the obligor, herein
petitioner bank.
 Since the demand was made only on July 20, 1995, while the civil action for
collection of a sum of money was filed on September 24, 1996, within a
period of not more than ten years, such action was not yet barred by
prescription.

DISPOSITION: Petition denied.

Mondragon v. CA / Ish o MLRC pledged in favor of respondents US$20M worth of MIPI
June 15, 2005 shares of stocks; assigned, transferred and delivered all rights, title
MONDRAGON LEISURE AND RESORTS CORPORATION, petitioner, VS. to and interest in the pledged shares.
COURT OF APPEALS, ASIAN BANK CORPORATION, FAR EAST BANK o It also assigned by way of security its leasehold rights over the
AND TRUST COMPANY, and UNITED COCONUT PLANTERS BANK, project and all the rights, title, interests and benefits in, to and
respondents. under any and all agreements in connection with the project.
QUISUMBING, J.  On July 3, 1997, MLRC fully availed of and received the full amount of the
syndicated loan agreement.
SUMMARY: Petitioner MLRC and its affiliate companies MIPI and MSC entered  MLRC was able to pay the monthly interest only until October 1998.
into a lease agreement with CDC for the development of the Mimosa Leisure Estate. o Consequently, on January 6 and February 5, 1999, written notices
To finance the project, MLRC executed an Omnibus Loan and Security Agreement of default, acceleration of payment and demand letters were sent
with respondent banks. Under the agreement, payments were to be made within a by the lenders to MLRC.
six-year period. As security, MLRC pledged shares of stock in MIPI in favor of  In August 1999, respondents filed Civil Case No. 9527 for foreclosure of
respondent banks. Come October 1998, MLRC failed to make payments. The lender leasehold rights.
banks thereafter filed two civil cases, for foreclosure of security and for collection of
 MLRC filed a motion to dismiss based on the following grounds:
the balance of the loan, respectively. MLRC filed a motion to dismiss contending
o (1) a condition precedent for the filing of the complaint has not
that respondent banks (1) executed a defective verification and certification, (2)
been complied with and/or the instant complaint failed to state a
engaged in forum shopping, and (3) had no cause of action against petitioner. RTC
cause of action, or otherwise the filing was premature;
denied the motion. On certiorari, the CA affirmed. SC affirmed as well, finding that
o (2) the certification of non-forum shopping appended to the
(1) the verification and certification were executed by bank officers authorized to
complaint was fatally defective since one of the plaintiffs, UCPB,
represent respondent banks, (2) the two civil cases did not have the same subject
deliberately failed to mention that it had previously filed another
matter and cause of action, and (3) MLRC was already in default, thus respondent
complaint; and
banks were entitled to avail of legal remedies under the Omnibus Agreement.
o (3) plaintiffs had engaged in forum shopping in filing the instant
DOCTRINE (related to topic): No doctrinal pronouncements in this case, just an
complaint.
application of the contract and law to the facts.
FACTS:  The trial court denied the motion to dismiss. MLRC’s MR was likewise
denied.
 On February 28, 1994, Mondragon International Philippines, Inc. (MIPI),
Mondragon Securities Corporation (MSC) and herein petitioner Mondragon  MLRC elevated the matter to the CA by way of a petition for certiorari via
Leisure and Resorts Corporation (MLRC) entered into a lease agreement Rule 65.
with the Clark Development Corporation (CDC) for the development of  The CA dismissed the petition and denied the subsequent MR.
what is now known as the Mimosa Leisure Estate.  Hence, this petition.
 To help finance the project, MLRC, on June 30, 1997, entered into an ISSUE #1:
Omnibus Loan and Security Agreement (hereafter Omnibus Agreement)  W/N the certificate of non-forum shopping was defective. (NO)
with respondent banks for a syndicated term loan in the aggregate principal RATIO #1:
amount of US$20M.  Petitioner asserts that the verification and certificate of forum shopping
o The proceeds of the loan were to be released through advances were defective because there was no proof as to the authority of the
evidenced by promissory notes to be executed by petitioner in signatories to file the complaint.
favor of each lender-bank, and to be paid within a six-year period  Respondents, on the other hand, contend that the lack of authority of the
from the date of initial advance inclusive of a one year and two persons who verified and certified the complaint was neither raised in the
quarters grace period. motion to dismiss nor in the motion for reconsideration of the petitioner.
 They aver that the verification and certification of non-forum shopping
contained a statement by the persons who signed it that they had been so (a) Payment Default – The BORROWER defaults in the payment when
authorized by the board of directors of their respective corporations. due at stated maturity, by acceleration or otherwise, of any amount
 The Court agrees with respondents. payable under the Loan Documents.
 The issue concerning the signatories’ authorization was never raised before
the trial court. Neither was it put at issue before the Court of Appeals.  Under this provision, MLRC may be validly declared in default for failure
ISSUE #2: to pay the interest.
 W/N UCPB engaged in forum shopping. (NO)  The Agreement further provides:
RATIO #2:
 Petitioner claims that respondent UCPB engaged in forum shopping since it 6.02 Consequences of Default
earlier instituted an action for foreclosure of mortgage and/or collection,
docketed as Civil Case No. 9510. If an event of Default shall have occurred then at any time thereafter, if
 The claim is untenable. any such event shall then be continuing, the Majority Lenders, upon
 Civil Case No. 9510 pertains to an Omnibus Credit and Security Agreement written notice to the Borrower, may [i] declare all Commitments to be
executed by and between the petitioner and respondent UCPB on November terminated whereupon the obligation of the LENDERS to make or
23, 1995. This is separate and distinct from the Omnibus Agreement maintain the Advances hereunder shall forthwith terminate, [ii]
involved in Civil Case No. 9527. Moreover, respondents Asian Bank and accelerate payment and declare the Loan, all interest accrued and unpaid
Far East Bank are not among the parties to Civil Case No. 9510. thereon and all other amounts payable hereunder, and default interest
 There is, therefore, no identity of parties, no identity of rights asserted/relief hereunder, to be forthwith due and payable, whereupon the same shall
sought, and identity such that judgment in one case would result in res become immediately due and payable, without demand, protest or
judicata in the other. further notice of any kind, all of which are hereby expressly waived
ISSUE #3 (MAIN): by the BORROWER, [iii] foreclose on the Collaterals or take such
 W/N respondents have a cause of action against MLRC. (YES) other necessary steps conformably with the Collaterals, or [iv]
RATIO #3: immediately, without notice to the BORROWER, apply and compensate
or set-off toward the partial or full liquidation of such amount or
 MLRC is clearly in default, and respondents are entitled to avail of legal
amounts, any funds, securities, or other property of the BORROWER
remedies.
held by the LENDERS in deposit or under any other concept without
ISSUE #3.1:
prejudice to the adoption by the Majority Lenders of any other steps
 W/N the full amount of the loan under the Omnibus Agreement is
or action, which, in the Majority Lender’s sole discretion, is needed to
already due and demandable. (YES)
protect the LENDERS’ rights and interests, and without prejudice to
RATIO #3.1:
the application of the provisions of the Collaterals, as provided in
 Petitioner MLRC insists that the obligation is not yet due since the period to
Section 3 of Part A. For purposes of this provision, the BORROWER
pay is six years. Moreover, respondent banks failed to give written notice of
hereby appoints each LENDER as its attorney-in-fact with full power and
default required under their agreement.
authority to do any and all acts required to give full force and effect to
 The Court is unable to agree with the MLRC.
this provision.
 The Omnibus Agreement provides:
 The four remedies are alternative, with the right of choice given to the
6.01 Events of Default lenders, in this case the respondents.
ISSUE #3.2:
Each of the following events shall constitute an Event of Default under
this Omnibus Agreement:
  W/N respondents complied with the written notice requirement under oMLRC, as a long established corporation, should have been well
§6.02 of the Omnibus Agreement. (YES) aware of the economic environment at that time, yet it still took the
RATIO #3.2: risk to expand operations.
 Under Article 1201 of the Civil Code, the choice shall produce no effect o Likewise, the closure of the Mimosa Regency Casino was not an
except from the time it has been communicated. This is the reason why a unforeseeable or unavoidable event, in the context of the contract
written notice is required under Section 6.02 of the Omnibus Agreement. of lease between petitioner and CDC.
 The Court finds that respondents indeed complied.  Moreover, the obligation requires the assumption of risks.
 The notices clearly indicate respondents’ choice of remedy: to accelerate all DISPOSITION: Appeal denied for lack of merit. CA affirmed.
payments payable under the loan agreement. On January 6, 1999,
respondents notified petitioner that it was in default, and demanded
payment of the stated amount within five days from receipt of the letter,
otherwise all outstanding availments of the US$20M term loan together
with interests and other sum payable shall be declared due and demandable.
 Even though subsequent demand is waived by the petitioner in Section 6.02
of Part B of the Omnibus Agreement, on February 5, 1999, the respondents
nevertheless actually made their demand in writing for the payment of the
principal plus interest and penalty charges due on or before February 28,
1999, with express notice that they would take all legal remedies available
to protect the interests of their clients.
ISSUE #3.3:
 W/N fortuitous events excused MLRC from complying with its
obligations under the Omnibus Agreement. (NO)
RATIO #3.3:
 MLRC considers the following as fortuitous events:
o Asian Financial Crisis
o Closure of the Mimosa Regency Casino
 The Court disagrees. They are not among the events contemplated under
Art. 1174 of the Civil Code.
 To exempt the obligor from liability for a breach of an obligation by reason
of a fortuitous event, the following requisites must concur:
o (a) the cause of the breach of the obligation must be independent of
the will of the debtor;
o (b) the event must be either unforeseeable or unavoidable;
o (c) the event must be such as to render it impossible for the debtor
to fulfill his obligation in a normal manner; and
o (d) the debtor must be free from any participation in, or
aggravation of the injury to the creditor.
 As pointed out by the respondents, the loan agreement was entered into on
June 30, 1997, or when the Asian economic crisis had already started.