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REPUBLIC OF THE PHILIPPINES, vs.

SECURITY CREDIT AND


ACCEPTANCE CORPORATION, ROSENDO T. RESUELLO, PABLO
TANJUTCO, ARTURO SORIANO, RUBEN BELTRAN, BIENVENIDO V. ZAPA,
PILAR G. RESUELLO, RICARDO D. BALATBAT, JOSE SEBASTIAN and VITO
TANJUTCO JR., respondents. G.R. No. L-20583 , January 23, 1967
Facts:

When defendant corporation applied with SEC for the registration and licensing
of their securities under the Securities Act, the latter referred it to the Central
Bank which in turn rendered an opinion classifying defendant corporation as
engaged in banking. SEC then advised the corporation to comply with the
requirements under the General Banking Act. Pursuant to a search warrant
issued by MTC Manila, members of Central Bank intelligence division and
Manila police seized documents and records relative to the business operations
of the corporation. After examination of the same, the intelligence division of
the Central Bank submitted a memorandum to the then Acting Deputy
Governor of Central Bank finding that the corporation is engaged in banking
operations. In lieu of the memorandum, the Monetary Board issued a
resolution declaring that the corporation is performing banking operations
without first complying with the provisions of Republic Act No.337.

Despite Central Bank’s such resolution, the corporation, was still performing
the functions and activities which had been declared to constitute illegal
banking operations; the corporation had even established 74 branches in
principal cities and towns throughout the Philippines; that through a
systematic and vigorous campaign undertaken by the corporation, it had even
managed to induce the public to open 59,463 savings deposit accounts with an
aggregate deposit of P1,689,136.74; Accordingly, the Solicitor General
commenced this quo warranto proceedings for the dissolution of the
corporation, with a prayer that, meanwhile, a writ of preliminary injunction be
issued ex parte, enjoining the corporation and its branches, as well as its
officers and agents, from performing the banking operations complained of,
and that a receiver be appointed pendente lite. Superintendent of Banks of the
Central Bank was then appointed by the Supreme Court as receiver pendente
lite of defendant corporation.

Issue: Whether or not defendant corporation was engaged in banking


operations.
Ruling: Yes. An investment company which loans out the money of its
customers, collects the interest and charges a commission to both lender and
borrower ,is a bank. It is conceded that its total savings account deposits have
been made by the public with the corporation and its 74 branches, with an
aggregate deposit of P1,689,136.74, which has been lent out to such persons
as the corporation deemed suitable therefore. It is clear that these transactions
partake of the nature of banking, as the term is used in Section 2 of the
General Banking Act. Hence, Defendant Corporation has violated the law by
engaging in banking without securing the administrative authority required in
Republic Act No.337. Accordingly, the defendant corporation was ordered
dissolved and appointment of receiver was made permanent.

Central Bank of the Phil Vs. The Honorable Judge Jesus P. Morfe and First
Mutual Saving and Loan Organization, Inc., 1967 20 SCRA 507

Facts:

First Mutual Saving and Loan Organization, Inc has the purpose of
encouraging, implementing savings and thrift among its members and
extending financial assistance in the form of loans as stipulated in its Articles
of Incorporation. However, in an investigation conducted by the Central Bank,
it was alleged that the organization violated Section 2 and 6 of the General
Banking Act, RA No. 337 because the organization is said to be illegally
engaged in banking activities by receiving deposits of money for deposits,
disbursement, safekeeping or otherwise or transacts the business of a savings
and mortgage bank and/or building loan associations without first complying
with the provisions of the RA 337.

In 1962, Hon. Cancinco issued a warrant commanding the search and seizure
of the articles which were said to be used or intended to be used in the
commission of a felony after a close observation and personal investigation of a
member of the intelligence divisions of the Bank. The organization filed a civil
case presided by respondent Judge Morfe for the annulment of the said
warrant which then issued a writ of preliminary injunction restraining the
search and seizure.

Issues:

WON the transactions of the organization amount to ‘banking’ as used in RA


337.
WON the municipal Judge committed a grave abuse in finding that there was
probable cause that the organization has violated Sec. 2 & 6 of RA 337.
Ruling: As to the first issue, the court ruled that the transactions of the
respondent organization do not amount to ‘banking’ as termed in RA 337. The
main purpose of the organization according to its By-Laws is to extend
financial assistance in the form of loans to its members with funds deposited
by them. Though such funds are referred as savings and that the depositors
thereof are designated as members, the documents will readily show that
anybody can be a depositor and thus be a participating member. In other
words, it is open to the public for deposit account, and the funds so raised may
be lent by the organization.

Further, the Municipal Judge did not commit a grave abuse of discretion in
finding that there was a probable cause that the organization had violated
Sections 2 & 6 of aforesaid law and in issuing the warrant in question. The law
requiring compliance with certain requirements before anybody can engage in
banking seeks to protect the public against actual, as well as potential injury.

Thus, the order of respondent Judge dated July 2, 1962 and the writ of
preliminary mandatory injunction issued are hereby annulled.

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