JOSE C. GO, Petitioner, vs.BANGKO SENTRAL NG PILIPINAS, Respondent. bank to others, or c.
bank to others, or c. he becomes in any manner an obligor for money borrowed from
G.R. No. 178429
October 23, 2009
Facts: Jose Go, the Director and the President and Chief Executive Officer of the Orient
Commercial Banking Corporation (Orient Bank) was charged before the RTC for
violation of Section 83 of RA 337 or the General Banking Act. Go allegedly borrowed
the deposits/funds of the Orient Bank and/or acting as guarantor, indorser of obligor
for loans to other persons. He then used the borrowed deposits/funds in facilitating
and granting and/or of credit lines/loans to the New Zealand Accounts loans in the
total amount of PHP 2,754,905,857. He completed the alleged transaction without the
written approval of the majority of the Board of Directors of 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 Section 83 of RA 337
penalized only directors and officers xxx who acted either as borrower or as
guarantor, but not as both. Also that the Information did not constitute an offense
since the information failed to state the amount he purportedly borrowed. According
to Go, the second paragraph of Section 83, serves as an exception to the first
paragraph which allows the banks to extend credit accommodations to their directors,
officers, and stockholders, provided it is "limited to an amount equivalent to the
respective outstanding deposits and book value of the paid-in capital contribution in
the bank." The RTC granted Gos motion to quash the Information.
The prosecution filed a petition for certiorari before the CA. The CA granted the
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
guarantor for the same loan at the same time. It agreed with the prosecutions stand
that the second paragraph of Section 83 of RA 337 is not an exception to the first
paragraph. Hence, this petition.
Issue: whether or not the allegation that Go acted as borrower or gurantor rendered
the information defective?
Whether or not the failure to state that Go borrowed beyond the limit of his
outstanding deposits and book value of the paid-in capital contribution in the bank
rendered the Information defective?
Ruling: No, the information was not defective. The following elements of violation of
Section 83 of RA 337 which must be present to constitute a violation of its first
paragraph: 1. the offender is a director or officer of any banking institution; 2. the
offender, either directly or indirectly, for himself or as representative or agent of
another, performs any of the following acts: a. he borrows any of the deposits or funds
of such bank; or b. he becomes a guarantor, indorser, or surety for loans from such
bank or loaned by it; 3. the offender has performed any of such acts without the
written approval of the majority of the directors of the bank, excluding the offender,
as the director concerned.
The language of the law is broad enough to encompass either act of borrowing or
guaranteeing, or both. Banks were not created for the benefit of their directors and
officers; they cannot use the assets of the bank for their own benefit, except as may be
permitted by law. Congress has thus deemed it essential to impose restrictions on
borrowings by bank directors and officers in order to protect the public, especially the
depositors. Hence, when the law prohibits directors and officers of banking
institutions from becoming in any manner an obligor of the bank (unless with the
approval of the board), the terms of the prohibition shall be the standards to be
applied to directors transactions such as those involved in the present case.
Credit accommodation limit is not an exception nor is it an element of the offense as
contrary to Gos claims.
Section 83 of RA 337 actually imposes three restrictions: approval, reportorial, and
ceiling requirements.
The approval requirement (found in the first sentence of the first paragraph of the
law) refers to the written approval of the majority of the banks board of directors
required before bank directors and officers can in any manner be an obligor for money
borrowed from or loaned by the bank. Failure to secure the approval renders the bank
director or officer concerned liable for prosecution and, upon conviction, subjects him
to the penalty provided in the third sentence of first paragraph of Section 83.
The reportorial requirement, on the other hand, mandates that any such approval
should be entered upon the records of the corporation, and a copy of the entry be
transmitted to the appropriate supervising department. The reportorial requirement is
addressed to the bank itself, which, upon its failure to do so, subjects it to quo
warranto proceedings under Section 87 of RA 337.
The ceiling requirement under the second paragraph of Section 83 regulates the
amount of credit accommodations that banks may extend to their directors or officers
by limiting these to an amount equivalent to the respective outstanding deposits and
book value of the paid-in capital contribution in the bank. Again, this is a requirement
directed at the bank. In this light, a prosecution for violation of the first paragraph of
Section 83, such as the one involved here, does not require an allegation that the loan
exceeded the legal limit. Even if the loan involved is below the legal limit, a written
approval by the majority of the banks directors is still required; otherwise, the bank
director or officer who becomes an obligor of the bank is liable. Compliance with the
ceiling requirement does not dispense with the approval requirement.
 fraudulent act or fraudulent means must be made or executed prior to or
Evidently, the failure to observe the three requirements under Section 83 paves the simultaneously with the commission of the fraud; (iii) that the offended party must
way for the prosecution of three different offenses, each with its own set of elements. have relied on the false pretense, fraudulent act, or fraudulent meansthat is, he was
A successful indictment for failing to comply with the approval requirement will not induced to part with his money or property because of the false pretense, fraudulent
necessitate proof that the other two were likewise not observed. act, or fraudulent means; and (iv) that, as a result thereof, the offended party suffered
damage. There are differences between the two (2) offenses. A DOSRI violation
HILARIO P. SORIANO and ROSALINDA ILAGAN v. consists in the failure to observe and comply with procedural, reportorial or ceiling
requirements prescribed by law in the grant of a loan to a director, officer, stockholder
PEOPLE OF THE PHILS., BSP, and PDIC and other related interests in the bank, i.e. lack of written approval of the majority of
the directors of the bank and failure to enter such approval into corporate records and
G.R. No. 159517-18 June 30, 2009 to transmit a copy thereof to the BSP supervising department. The elements of abuse
of confidence, deceit, fraud or false pretenses, and damage, which are essential to the
Estafa 315 (1)b and 315 (2)a prosecution for estafa, are not elements of a DOSRI violation. The filing of several
charges against Soriano was proper.
FACTS Hilario P. Soriano (Soriano) and Rosalinda Ilagan (Ilagan) were the President
and General Manager, respectively, of the Rural Bank of San Miguel (Bulacan).
Allegedly, on June 27, 1997 and August 21, 1997, during their incumbency as Agan v PIATCO G.R. No. 155001. May 5, 2003
president and manager of the bank, petitioners indirectly obtained loans from RBSM.
They falsified the loan applications and other bank records, and made it appear that
Virgilio J. Malang and Rogelio Maaol obtained loans of P15,000,000.00 each, when in
In August 1989, the DOTC engaged the services of Aeroport de Paris (ADP) to
fact they did not. Soriano was faced not with one information charging more than one
conduct a comprehensive study of the Ninoy Aquino International Airport (NAIA)
offense, but with more than one information, each charging a different offense -
and determine whether the present airport can cope with the traffic development up
violation of DOSRI rules in one, and estafa thru falsification of commercial documents
to the year 2010.
in the others. Ilagan, on the other hand, was charged with estafa thru falsification of
commercial documents in separate informations. Thus, petitioners erroneously invoke
On March 27, 1995, then DOTC Secretary Jose Garcia endorsed the proposal of
duplicity of charges as a ground to quash the Informations. ISSUE Is there
Asia's Emerging Dragon Corp. (unsolicited proposal dated Oct. 5, 1994) to the
justification for the quashal of the Information filed against petitioners for complex
National Economic and Development Authority (NEDA). A revised proposal,
crime of estafa thru falsification of commercial documents? RULING No. The
however, was forwarded by the DOTC to NEDA on December 13, 1995. On January 5,
information filed contains material allegations charging Soriano with violation of
1996, the NEDA Investment Coordinating Council (NEDA ICC) Technical Board
DOSRI rules and estafa thru falsification of commercial documents. The RTC
favorably endorsed the project to the ICC Cabinet Committee which approved the
committed no grave abuse of discretion in denying the motions. Petitioners made it
same, subject to certain conditions, on January 19, 1996. On February 13, 1996, the
appear that Virgilio J. Malang and Rogelio Maaol obtained loans and received the
NEDA passed Board Resolution No. 2 which approved the NAIA IPT III Project.
proceeds thereof when they did not in fact secure said loans or receive the amounts
reflected in the promissory notes and other bank records. The information in Criminal
On August 29, 1996, the Second Pre-Bid Conference was held where certain
Case No.1720, the elements of estafa under Article 315 (1)(b) of the RPC to wit: (i) that
clarifications were made. Upon the request of prospective bidder People's Air Cargo
money, goods or other personal property be received by the offender in trust, or on
& Warehousing Co., Inc (Paircargo), the PBAC warranted that based on Sec. 11.6, Rule
commission, or for administration, or under any other obligation involving the duty
11 of the Implementing Rules and Regulations of the BOT Law, only the proposed
to make delivery of or to return the same; (ii) that there be misappropriation or
Annual Guaranteed Payment submitted by the challengers would be revealed to
conversion of such money or property by the offender, or denial on his part of such
AEDC, and that the challengers' technical and financial proposals would remain
receipt; (iii) that such misappropriation or conversion or denial is to the prejudice of
confidential. The PBAC also clarified that the list of revenue sources contained in
another; and (iv) that there is demand made by the offended party to the
Annex 4.2a of the Bid Documents was merely indicative and that other revenue
offender. The information in Criminal Case No. 1981, further alleged the following
sources may be included by the proponent, subject to approval by DOTC/MIAA.
essential elements of estafa under Article 315 (2) (a) of the RPC: (i) that there must be a
Furthermore, the PBAC clarified that only those fees and charges denominated as
false pretense, fraudulent act or fraudulent means; (ii) that such false pretense,
Public Utility Fees would be subject to regulation, and those charges which would be period not exceeding twenty-five (25) years. At the end of the concession period,
actually deemed Public Utility Fees could still be revised, depending on the outcome PIATCO shall transfer the development facility to MIAA.
of PBAC's query on the matter with the Department of Justice.
During the pendency of the case before this Court, President Gloria Macapagal
On September 26, 1996, AEDC informed the PBAC in writing of its reservations as Arroyo, on November 29, 2002, in her speech at the 2002 Golden Shell Export Awards
regards the Paircargo Consortium, which include: at Malacaang Palace, stated that she will not "honor (PIATCO) contracts which the
a. The lack of corporate approvals and financial capability of PAIRCARGO; Executive Branch's legal offices have concluded (as) null and void."
b. The lack of corporate approvals and financial capability of PAGS;
c. The prohibition imposed by RA 337, as amended (the General Banking Act) on Issue: Did the PIATCO agreements the 1997 Concession Agreement, the ARCA, and
the amount that Security Bank could legally invest in the project; the three supplemental agreements violate the Constitution and the BOT Law?
d. The inclusion of Siemens as a contractor of the PAIRCARGO Joint Venture, for Held/Decision: YES.
prequalification purposes; and Is PIATCO a qualified bidder?
e. The appointment of Lufthansa as the facility operator, in view of the Philippine Public respondents argue that the Paircargo Consortium, PIATCO's predecessor,
requirement in the operation of a public utility. was not a duly pre-qualified bidder on the unsolicited proposal submitted by AEDC
as the Paircargo Consortium failed to meet the financial capability required under the
The PBAC gave its reply on October 2, 1996, informing AEDC that it had BOT Law and the Bid Documents. They allege that in computing the ability of the
considered the issues raised by the latter, and that based on the documents submitted Paircargo Consortium to meet the minimum equity requirements for the project, the
by Paircargo and the established prequalification criteria, the PBAC had found that entire net worth of Security Bank, a member of the consortium, should not be
the challenger, Paircargo, had prequalified to undertake the project. The Secretary of considered. R.A. No. 337, as amended or the General Banking Act that a commercial
the DOTC approved the finding of the PBAC. bank cannot invest in any single enterprise in an amount more than 15% of its net
worth.
On October 16, 1996, the PBAC opened the third envelope submitted by AEDC and
the Paircargo Consortium containing their respective financial proposals. Both We agree with public respondents that with respect to Security Bank, the entire
proponents offered to build the NAIA Passenger Terminal III for at least $350 million amount of its net worth could not be invested in a single undertaking or enterprise,
at no cost to the government and to pay the government: 5% share in gross revenues whether allied or non-allied in accordance with the provisions of R.A. No. 337
for the first five years of operation, 7.5% share in gross revenues for the next ten years The PBAC should not be allowed to speculate on the future financial ability of the
of operation, and 10% share in gross revenues for the last ten years of operation, in bidder to undertake the project on the basis of documents submitted. This would open
accordance with the Bid Documents. doors to abuse and defeat the very purpose of a public bidding

As AEDC failed to match the proposal within the 30-day period, then DOTC
Secretary Amado Lagdameo, on December 11, 1996, issued a notice to Paircargo
Consortium regarding AEDC's failure to match the proposal. AEDC subsequently
protested the alleged undue preference given to PIATCO and reiterated its objections
as regards the prequalification of PIATCO.
On July 12, 1997, the Government, through then DOTC Secretary Arturo T. Enrile,
and PIATCO, through its President, Henry T. Go, signed the "Concession Agreement
for the Build-Operate-and-Transfer Arrangement of the Ninoy Aquino International
Airport Passenger Terminal III" (1997 Concession Agreement). The Government
granted PIATCO the franchise to operate and maintain the said terminal during the
concession period and to collect the fees, rentals and other charges in accordance with
the rates or schedules stipulated in the 1997 Concession Agreement. The Agreement
provided that the concession period shall be for twenty-five (25) years commencing
from the in-service date, and may be renewed at the option of the Government for a
Ratio:
In the first place, PIATCO was not a qualified bidder. The minimum project cost was
estimated to be P9.183 billion, which meant that Paircargo Consortium had to prove it
could provide at least P2.755 billion. Paircargos audited financial statement for 1994
showed it had a net worth of P3.123 billion, but that was because it included in the
computation the total net worth of Security Bank, which as of 1995 was at P3.523
billion. Since banks are allowed to invest only 15% of it entire net worth, Security
Bank could only invest P528 million, which brings down Paircargos equity to
P558.384 million, or only 6% of the project cost.
Disregarding the investment ceilings provided by applicable law would not result in
a proper evaluation of whether or not a bidder is pre-qualified to undertake the
project as for all intents and purposes, such ceiling or legal restriction determines the
true maximum amount which a bidder may invest in the projectIf the maximum
amount of equity that a bidder may invest in the project at the time the bids are
submitted falls short of the minimum amounts required to be put up by the bidder,
said bidder should be properly disqualifiedwe hold that Paircargo Consortium was
not a qualified bidder. Thus the award of the contract by the PBAC to the Paircargo
consortium is null and void.
Other issues:
1. The signed agreement was different from the draft that was bidded on. Under the
law, substantial changes require another bidding. The three principles in public
bidding are: an offer to the public; opportunity for competition; and basis for the exact
comparison of bids. Changing the parameters would change the agreement, which
might have changed the technical and financial parameters of other bidders had they
known that such terms were available.
The 1997 Concession Agreement signed between PIATCO and the government was
substantially different from the draft concession agreement that was bidded on. While
it was a draft and was expected to amended from time to time, the PBAC bid bulletin
also said that the amendments should only cover items that would not materially
affect the preparation of the proposal. The changes should not be substantial or
material enough to alter the basic parameters of the contract, and constitute a denial to
the other bidders of the opportunity to bid on the same terms.
There were two main differences between the draft agreement and the one that was
signed. These concerned the fees that may be imposed and collected by PIATCO, and
the extent of control and regulation that MIAA has over the fees that PIATCO will
charge.
The draft agreement classified aircraft parking and tacking fees, groundhandling fees,
rentals and airlines offices, check-in counter rentals and porterage fees under those
that are regulated subject to periodic adjustment of once every two years and in
accordance to a certain formula. The signed agreement said fees subject to MIAA
approval are public utility fees and took out groundhandling and rentals and
airlines offices from the list. There was also an obvious relaxation of the extent of
control and regulation by MIAA with respect to the particular fees that may be
charged by PIATCO. The signed agreement also allowed PIATCO to charge in US
dollars, while paying the government in pesos.
When taken as a whole, the changes under the 1997 Concession Agreement with
respect to reduction in the types of fees that are subject to MIAA regulation and the
relaxation of such regulation with respect to other fees are significant amendments
that substantially distinguish the draft Concession Agreement from the 1997
Concession Agreement. The 1997 Concession Agreement, in this respect, clearly gives
PIATCO more favorable terms than what was available to other bidders at the time
the contract was bidded out. It is not very difficult to see that the changes in the 1997
Concession Agreement translate to direct and concrete financial advantages for
PIATCO which were not available at the time the contract was offered for bidding. It
cannot be denied that under the 1997 Concession Agreement only Public Utility
Revenues are subject to MIAA regulation. Adjustments of all other fees imposed and
collected by PIATCO are entirely within its control. Moreover, with respect to
terminal fees, under the 1997 Concession Agreement, the same is further subject to
Interim Adjustments not previously stipulated in the draft Concession Agreement.
Finally, the change in the currency stipulated for Public Utility Revenues under the
1997 Concession Agreement, except terminal fees, gives PIATCO an added benefit
which was not available at the time of bidding.
2. Under the draft Concession Agreement, default by PIATCO of its obligations does
not result in the assumption by government of these liabilities. Under the signed
agreement, default by PIATCO of its loans used to finance the project eventually leads
to government assumption of the liability for the loans.
This is in violation of the BOT Law, which prohibits direct government guarantees. If
a proposal can be denied by reason of the existence of direct government guarantee,
then its inclusion in the contract executed after the said proposal has been accepted is
likewise sufficient to invalidate the contract itselfTo declare the PIATCO contracts
valid despite the clear statutory prohibition against a direct government guarantee
would not only make a mockery of what the BOT Law seeks to prevent which is to
expose the government to the risk of incurring a monetary obligation resulting from a
contract of loan between the project proponent and its lenders and to which the
Government is not a party to but would also render the BOT Law useless for what it
seeks to achieve to make use of the resources of the private sector in the financing,
operation and maintenance of infrastructure and development projects which are
necessary for national growth and development but which the government,
unfortunately, could ill-afford to finance at this point in time.
3. Sec. 5.10 of the 1997 Concession Agreement violates Article XII, Sec. 12 of the 1987
Constitution.
The Constitutional provision allows for temporary takeover of public facilities in
times of national emergency. Since the takeover is temporary and extends only to the
operation of the business and not the ownership, government is not required to
compensate the owner. Neither can the owner claim just compensation for the use of
the business and its properties because the takeover is in exercise of the States police
power and not of its power of eminent domain.
The 1997 Concession Agreement, on the other hand, says that in the event of a
takeover, Concessionaire shall be entitled to reasonable compensation for the
duration of the temporary takeover
PIATCO cannot, by mere contractual stipulation, contravene the Constitutional
provision on temporary government and obligate the government pay reasonable cost
for the use of Terminal and/or Terminal Complex.
Police power is the most essential, insistent, and illimitable of powers. Its exercise
must not be unreasonably hampered nor its exercise be a source of obligation by the
government in the absence of damage due to arbitrariness of its exercise.
4. The 1987 Constitution strictly regulates monopolies. Art XII, Sec. 19 says: The State
shall regulate or prohibit monopolies when the public interest so requires.
The 1997 Concession Agreement gave PIATCO the exclusive right to operate a
commercial international passenger terminal within the island of Luzon, with the
exception of already existing terminals such as those in the Subic Bay Freeport, Clark
Special Economic Zone, and in Laoag City. This privilege, however, is subject to
reasonable regulation and supervision and should not violate the rights of third
parties.
There are service providers at the NAIA I with existing contracts with the MIAA valid
until 2010; since the 1997 Concession Agreement says PIATCO is not bound to honor
existing contracts with MIAA, transferring operations from NAIA I to NAIA III would
unduly prejudice them. PIATCO cannot, by law and certainly not by contract, render
a valid and binding contract nugatory. PIATCO, by the mere expedient claiming an
exclusive right to operate, cannot require the Government to break its contractual
obligations to the service providers.
IN SUM, THIS COURT RULES THAT IN VIEW OF THE ABSENCE OF THE
REQUISITE FINANCIAL CAPACITY OF THE PAIRCARGO CONSORTIUM,
PREDECESSOR OF RESPONDENT PIATCO, THE AWARD BY THE PBAC OF THE
CONTRACT FOR THE CONSTRUCTION, OPERATION AND MAINTENANCE OF
THE NAIA IPT III IS NULL AND VOID. FURTHER, CONSIDERING THAT THE
1997 CONCESSION AGREEMENT CONTAINS MATERIAL AND SUBSTANTIAL
AMENDMENTS, WHICH AMENDMENTS HAD THE EFFECT OF CONVERTING
THE 1997 CONCESSION AGREEMENT INTO AN ENTIRELY DIFFERENT
AGREEMENT FROM THE CONTRACT BIDDED UPON, THE 1997 CONCESSION
AGREEMENT IS SIMILARLY NULL AND VOID FOR BEING CONTRARY TO
PUBLIC POLICY. THE PROVISIONS UNDER SECTIONS 4.04(B) AND (C) IN
RELATION TO SECTION 1.06 OF THE 1997 CONCESSION AGREEMENT AND
SECTION 4.04 (C) IN RELATION TO SECTION 1.06 OF THE ARCA, WHICH
CONSTITUTE A DIRECT GOVERNMENT GUARANTEE EXPRESSLY PROHIBITED
BY, AMONG OTHERS, THE BOT LAW AND ITS IMPLEMENTING RULES AND
REGULATIONS ARE ALSO NULL AND VOID. THE SUPPLEMENTS, BEING
ACCESSORY CONTRACTS TO THE ARCA, ARE LIKEWISE NULL AND VOID.
JUDGMENT: The 1997 Concession Agreement, the Amended and Restated
Concession Agreement and the Supplements thereto are set aside for being null and
void.
DBP vs Arcilla
Date: June 30, 2005
Petitioner: DBP
Respondent: Felipe Arcilla
Ponente: Callejo Sr
Facts: Atty. Felipe P. Arcilla, Jr. was employed by the DBP. He decided to avail of a
loan under the Individual Housing Project (IHP) of the bank. DBP and Arcilla
executed a Deed of Conditional Sale over a parcel of land, as well as the house to be
constructed thereon, for P160,000.00. Arcilla borrowed the amount from DBP for the
purchase of the lot and the construction of a residential building. He obliged himself
to pay the loan in 25 years, with a monthly amortization of P1,417.91, with 9% interest
per annum, to be deducted from his monthly salary.
DBP obliged itself to transfer the title of the property upon the payment of
the loan, including any increments thereof. It was also agreed therein that if Arcilla
availed of optional retirement, he could elect to continue paying the loan, provided
that the loan/amount would be converted into a regular real estate loan account with
the prevailing interest assigned on real estate loans, payable within the remaining
term of the loan account.
Arcilla opted to resign from the bank in December 1986. Conformably with
the Deed of Conditional Sale, the bank informed him that the balance of his loan
account with the bank had been converted to a regular housing loan. Arcilla signed
three PNs for the total amount of P186,364.15. Arcilla also agreed to pay to DBP
insurance premiums, taxes, etc.
However, Arcilla also agreed to the reservation by the DBP of its right to
increase (with notice to him) the rate of interest on the loan, as well as all other fees
and charges on loans and advances pursuant to such policy as it may adopt from time
to time during the period of the loan; Provided, that the rate of interest on the loan
shall be reduced by law or by the Monetary Board; Provided, further, that the
adjustment in the rate of interest shall take effect on or after the effectivity of the
increase or decrease in the maximum rate of interest. Upon his request, DBP agreed
to grant Arcilla an additional cash advance of P32,000.00. Thereafter, a Supplement to
the Conditional Sale Agreement was executed
However, he failed to pay his loan account, advances, penalty charges and
interests which, as of October 31, 1990, amounted to P241,940.93. DBP rescinded the
Deed of Conditional Sale by notarial act on November 27, 1990. DBP tried to give
Arcilla a chance to repurchase the property. Arcilla failed to respond. Consequently,
the property was advertised for sale at public bidding on February 14, 1994.
Arcilla filed a complaint against DBP with the RTC. He alleged that DBP
failed to furnish him with the disclosure statement required by RA 3765 and CB
Circular No. 158 prior to the execution of the deed of conditional sale and the
conversion of his loan account with the bank into a regular housing loan account.
Despite this, DBP immediately deducted the account from his salary as early as 1984.
Moreover, the bank applied its own formula and imposed its usurious interests,
penalties and charges on his loan account and advances.
DBP alleged that it substantially complied with R.A. No. 3765 and CB
Circular No. 158 because the details required in said statements were particularly
disclosed in the promissory notes, deed of conditional sale and the required notices
sent to Arcilla. In any event, its failure to comply strictly with R.A. No. 3765 did not
affect the validity and enforceability of the subject contracts or transactions. DBP
interposed a counterclaim for the possession of the property. The trial court ruled in
favor of Arcilla and nullified the notarial rescission of the deeds. The CA reversed.
Issue: WON DBP complied with the disclosure requirement
Held: Yes
Ratio: On the first issue, Arcilla avers that under R.A. No. 3765 and CB Circular No.
158, the DBP, as the creditor bank, was mandated to furnish him with the requisite
information in such form prescribed by the Central Bank before the commutation of
the loan transaction. He avers that the disclosure of the details of the loan contained
in the deed of conditional sale and the supplement thereto, the promissory notes and
release sheet, do not constitute substantial compliance with the law and the CB
Circular.
DBP, on the other hand, avers that all the information required by R.A. No.
3765 was already contained in the loan transaction documents. Also, even if it failed
to comply strictly with the disclosure requirement of R.A. No. 3765, nevertheless,
under Section 6(b) of the law, the validity and enforceability of any action or
transaction is not affected. It asserts that Arcilla was estopped from invoking R.A. No.
3765 because he failed to demand compliance with R.A. No. 3765 from the bank
before the consummation of the loan transaction, until the time his complaint was
filed with the trial court.
Section 1 of R.A. No. 3765 provides that prior to the consummation of a loan
transaction, the bank, as creditor, is obliged to furnish a client with a clear statement,
in writing, setting forth, to the extent applicable and in accordance with the rules and
regulations prescribed by the Monetary Board of the Central Bank of the Philippines,
the following information:
(1) the cash price or delivered price of the property or service to be acquired;
(2) the amounts, if any, to be credited as down payment and/or trade-in;
(3) the difference between the amounts set forth under clauses (1) and (2);
(4) the charges, individually itemized, which are paid or to be paid by such person in
connection with the transaction but which are not incident to the extension of credit;
(5) the total amount to be financed;
(6) the finance charges expressed in terms of pesos and centavos; and
(7) the percentage that the finance charge bears to the total amount to be financed
expressed as a simple annual rate on the outstanding unpaid balance of the obligation.
Under Circular No. 158 of the Central Bank, the information required by
R.A. No. 3765 shall be included in the contract covering the credit transaction or any
other document to be acknowledged and signed by the debtor. If the borrower is not
duly informed of the data required by the law prior to the consummation of the
availment or drawdown, the lender will have no right to collect such charge or
increases thereof, even if stipulated in the promissory note. However, such failure
shall not affect the validity or enforceability of any contract or transaction.
In the present case, DBP failed to disclose the requisite information in the
disclosure statement form authorized by the Central Bank, but did so in the loan
transaction documents between it and Arcilla. There is no evidence on record that
DBP sought to collect or collected any interest, penalty or other charges, from Arcilla
other than those disclosed in the said deeds/documents.
The Court is convinced that Arcillas claim of not having been furnished the
data/information required by R.A. No. 3765 and CB Circular No. 158 was but an
afterthought. Despite the notarial rescission of the conditional sale in 1990, and DBPs
subsequent repeated offers to repurchase the property, the latter maintained his
silence. Moreover, Arcilla, a lawyer, would not be so gullible or negligent as to sign
documents without knowing fully well the legal implications and consequences of his
actions, and that appellee was a former employee of appellant. As such employee, he
is as well presumed knowledgeable with matters relating to appellants business and
fully cognizant of the terms of the loan he applied for, including the charges that had
to be paid.
Issue: WON Arcilla, Jr. is mandated to vacate the property and pay rentals for his
occupation thereof after the notarial rescission of the deed of conditional sale was
rescinded by notarial act, as well as the supplement executed by DBP.
Ratio: Anent the prayer of DBP to order Arcilla to vacate the property and pay rentals
therefor from 1990, a review of the records has shown that it failed to adduce evidence
on the reasonable amount of rentals for Arcillas occupancy of the property. Hence,
the Court orders a remand of the case to the court of origin, for the parties to adduce
their respective evidence on the banks counterclaim.
UCPB v Beluso
On Apr. 16, 1996, UCPB granted the spouses Beluso a Promissory Notes
Line under a Credit Agreement whereby the spouses could avail from the
UCPB, credit of up to a maximum amount of P1.2 M for a term ending
on Apr. 30, 1997. The spouses Beluso constituted, other than their
promissory notes, a real estate mortgage over parcels of land in Roxas City,
as additional security for the obligation.
The Credit Agreement was subsequently amended to increase the amount
of the Promissory Notes Line to a maximum of P2.35 M and to extend the
term to Feb. 28, 1998.
The spouses executed three promissory notes which were renewed several
times.
In 1997, the payment of the principal and interest of the latter two
promissory notes were debited from the spouses Belusos account with
UCPB; yet, a consolidated loan for P 1.3 Million was again released to the
spouses Beluso under one promissory note with a due date of Feb. 28, 1998.
To completely avail themselves of the P 2.35 M credit line extended to them
by UCPB, the spouses Beluso executed two more promissory notes for a
total of P 350, 000.
In any case, UCPB applied interest rates on the different promissory notes
ranging from 18% to 34%.
During the term of these promissory notes, the spouses were able to pay the
total sum of about P 763,692.03. However, they failed to pay for the interest
and penalty on their obligations.
As a result, UCPB demanded that they pay their total obligation of P 2.9
million but the spouses Beluso failed to comply therewith.
 UCPB foreclosed the properties mortgaged by the spouses to secure their
credit line, which, by that time, already ballooned to P3.7 M
On Feb. 9, 1999, the spouses Beluso filed a Petition for Annulment,
Accounting and Damages against UCPB with the RTC of Makati City.
RTC: interest rate provided in the promissory notes are void.
CA: affirmed because the rates were determined solely by UCPB.
Issue:
W/N the interest rates provided in the promissory notes are void.
Held:
YES
Ratio:
Article 1308 of the Civil Code provides:
Art. 1308. The contract must bind both contracting
parties; its validity or compliance cannot be left to the will of one
of them.
Philippine National Bank v. Court of Appeals:
In order that obligations arising from contracts may
have the force of law between the parties, there must be mutuality
between the parties based on their essential equality. A contract
containing a condition, which makes its fulfillment dependent
exclusively upon the uncontrolled will of one of the contracting
parties, is void.
The provision stating that the interest shall be at the rate indicative of DBD
retail rate or as determined by the Branch Head is indeed dependent solely
on the will of petitioner UCPB.
o Under such provision, petitioner UCPB has two choices on what
the interest rate shall be:
(1) a rate indicative of the DBD retail rate; or
(2) a rate as determined by the Branch Head.
o As UCPB is given this choice, the rate should be categorically
determinable in both choices.
If either of these two choices presents an opportunity for UCPB to fix the
rate at will, the bank can easily choose such an option, thus making the
entire interest rate provision violative of the principle of mutuality of
contracts.
Not just one, but rather both, of these choices are dependent solely on the
will of UCPB.
o As determined by the Branch Head- gives the latter unfettered
discretion on what the rate may be. The Branch Head may choose
any rate he or she desires.
o Indicative of the DBD retail rate, the same cannot be considered
as valid for being akin to a prevailing rate because the
provision in the case at bar does not specify any margin above or
below the DBD retail rate. UCPB can peg the interest at any
percentage above or below the DBD retail rate, again giving it
unfettered discretion in determining the interest rate.
The stipulation in the promissory notes subjecting the interest rate to review
does not render the imposition by UCPB of interest rates on the obligations
of the spouses Beluso valid. According to said stipulation:
The interest rate shall be subject to review and may be increased or
decreased by the LENDER considering among others the prevailing
financial and monetary conditions; or the rate of interest and charges which
other banks or financial institutions charge or offer to charge for similar
accommodations; and/or the resulting profitability to the LENDER after
due consideration of all dealings with the BORROWER.
It should be pointed out that the authority to review the interest rate was
given UCPB alone as the lender. Moreover, UCPB may apply the
considerations enumerated in this provision as it wishes. As worded in the
above provision, UCPB may give as much weight as it desires to each of the
following considerations:
(1) The prevailing financial and monetary condition;
(2) The rate of interest and charges which other banks or financial
institutions charge or offer to charge for similar accommodations; and/or
(3) The resulting profitability to the LENDER (UCPB) after due
consideration of all dealings with the BORROWER (the spouses Beluso).
Again, as in the case of the interest rate provision, there is no fixed margin
above or below these considerations.
Additional: Spouses cannot be estopped from questioning the interest rates because
estoppel cannot be predicated on an illegal act. As between the parties to a contract,
validity cannot be given to it by estoppel if it is prohibited by law or is against public
policy.