Republic vs. Security Credit & Assurance Corp

8/12/2019 Republic vs. Security Credit & Assurance Corp.

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Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-20583 January 23, 196

REPU!L"C O# T$E P$"L"PP"NES, petitioner,vs.SECUR"T% CRE&"T 'N& 'CCEPT'NCE CORPOR'T"ON, ROSEN&O T.RESUELLO, P'!LO T'NJUTCO, 'RTURO SOR"'NO, RU!EN !ELTR'N,!"EN(EN"&O (. )'P', P"L'R G. RESUELLO, R"C'R&O &. !'L'T!'T,JOSE SE!'ST"'N an* ("TO T'NJUTCO JR., respondents.

Office of the Solicitor General Arturo A. Alafriz and Solicitor E. M. Salva for petitioner.

Sycip, Salazar, Luna, Manalo & Feliciano for respondents. Natalio M. al!oa and F. E. Evan"elista for the receiver.

CONCEPC"ON, C.J.:

This is an original #uo $arranto proceeding, initiated by the olicitor !eneral, todissolve the ecurity and Acceptance Corporation for allegedly engaging in ban"ingoperations #ithout the authority re$uired therefor by the !eneral Ban"ing Act %RepublicAct No. &&'(. Na)ed as respondents in the petition are, in addition to said corporation,

the follo#ing, as alleged )e)bers of its Board of *irectors and+or E ecutive -fficers,na)ely

N'ME POS"T"ON

Rosendo T. Resuello %resident & hair'an of the oard

Pablo Tan/utco (irector

Arturo oriano (irector

Ruben Beltran (irector

Bienvenido 0. 1apa (irector & )ice*%resident Pilar !. Resuello (irector & Secretary*+reasurer

Ricardo *. Balatbat (irector & Auditor

2ose R. ebastian (irector & Le"al ounsel

0ito Tan/utco 2r. (irector & %ersonnel Mana"er


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of the authority, po#er, duties and functions of the ecretary of inance, Ban"Co))issioner and the defunct Bureau of Ban"ing, to the said Board, pursuant to

ecs. 4&6 and 4@= of Republic Act 57: and ecs. ;; and ;6 of Republic Act &&'.%E)phasis upplied.( that upon e a)ination and evaluation of the sa)e recordsof the corporation, as #ell as of other docu)ents and pertinent pipers obtained

else#here, the uperintendent of Ban"s, sub)itted to the Monetary Board of theCentral Ban" a )e)orandu) dated August 5;, 4675, stating inter alia .

44. Pursuant to the re$uest for assistance by the Chief, 3ntelligence *ivision,contained in his Me)orandu) to the !overnor dated May 5&, 4675 and inaccordance #ith the #ritten instructions of !overnor Castillo dated May &4,4675, an e a)ination of the boo"s and records of the ecurity Credit and oans-rgani>ations, 3nc. sei>ed by the co)bined MP*9CB tea) #as conducted by this*epart)ent. The e a)ination disclosed the follo#ing findings

a. Considering the e tent of its operations, the ecurity Credit and

Acceptance Corporation, 3nc., receives deposits fro' the pu!lic re"ularly.Such deposits are treated in the orporation/s financial state'ents asconditional su!scription to capital stoc . Accu)ulated deposits of P:,===of an individual depositor )ay be converted into stoc" subscription to thecapital stoc" of the ecurity Credit and Acceptance Corporation at theoption of the depositor. ale of its shares of stoc" or subscriptions to itscapital stoc" are offered to the pu!lic as part of its re"ular operations .

b. That out of the funds obtained fro) the public through the receipt ofdeposits and+or the sale of securities, loans are 'ade re"ularly to any

person !y the Security redit and Acceptance orporation .

A copy of the Me)orandu) Report dated 2uly &=, 4675 of the e a)ination )ade by E a)iners of this *epart)ent of the sei>ed boo"s and records of theCorporation is attached hereto.

45. ection 5 of Republic Act No. &&', other#ise "no#n as the !eneral Ban"ingAct, defines the ter), ban"ing institution as follo#s

ec. 5. -nly duly authori>ed persons and entities )ay engage in thelending of funds obtained fro) the public through the receipts of depositsor the sale of bonds, securities, or obligations of any "ind and all entities

regularly conducting operations shall be considered as ban"ing institutionsand shall be sub/ect to the provisions of this Act, of the Central Ban" Act,and of other pertinent la#s. ...

4&. Pre)ises considered, the e a)ination disclosed that the ecurity Credit andAcceptance Corporation is re"ularly lendin" funds o!tained fro' the receipt ofdeposits and-or the sale of securities. +he orporation therefore is perfor'in"


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/!an in" functions/ as conte'plated in 0epu!lic Act No. 112, $ithout havin" firstco'plied $ith the provisions of said Act .

0eco''endations3

3n vie# of all the foregoing, it is reco))ended that the Monetary Board decideand declare

4. That the ecurity Credit and Acceptance Corporation is perfor)ing ban"ingfunctions #ithout having first co)plied #ith the provisions of Republic Act No.&&', other#ise "no#n as the !eneral Ban"ing Act, in violation of ections 5 and7 thereof8 and

5. That this case be referred to the pecial Assistant to the !overnor % egalCounsel( for #hatever legal actions are #arranted, including, if #arrantedcri)inal action against the Persons cri)inally liable and+or #uo $arranto

proceedings #ith preli)inary in/unction against the Corporation for itsdissolution. %E)phasis supplied.(

that, acting upon said )e)orandu) of the uperintendent of Ban"s, onepte)ber 4@, 4675, the Monetary Board pro)ulgated its Resolution No. 4=6:,

declaring that the corporation is perfor)ing ban"ing operations, #ithout havingfirst co)plied #ith the provisions of ections 5 and 7 of Republic Act No. &&'8 & that on epte)ber 5:, 4675, the corporation #as advised of the afore)entionedresolution, but, this not#ithstanding, the corporation, as #ell as the )e)bers ofits Board of *irectors and the officers of the corporation, have been and still are

perfor)ing the functions and activities #hich had been declared to constitute

illegal ban"ing operations8 that during the period fro) March 5', 4674 to May 4;,4675, the corporation had established '@ branches in principal cities and to#nsthroughout the Philippines8 that through a syste)atic and vigorous ca)paignunderta"en by the corporation, the sa)e had )anaged to induce the public to open:6,@7& savings deposit accounts #ith an aggregate deposit of P4,7;6,4&7.'@8 that,in conse$uence of the foregoing deposits #ith the corporation, its original capitalstoc" of P:==,===, divided into 5=,=== founders? shares of stoc" and ;=,===

preferred shares of stoc", both of #hich had a par value of P:.== each, #asincreased, in less than one %4( year, to P&,===,=== divided into 4&=,=== founders?shares and @'=,=== preferred shares, both #ith a par value of P:.== each8 and that,according to its state)ent of assets and liabilities, as of *ece)ber &4, 4674, thecorporation had a capital stoc" aggregating P4,5'&,57:.6; and suffered, duringthe year 4674, a loss of P67,7;:.56. Accordingly, on *ece)ber 7, 4675, the

olicitor !eneral co))enced this #uo $arranto proceedings for the dissolutionof the corporation, #ith a prayer that, )ean#hile, a #rit of preli)inary in/unction

be issued e parte, en/oining the corporation and its branches, as #ell as itsofficers and agents, fro) perfor)ing the ban"ing operations co)plained of, andthat a receiver be appointed pendente lite.


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Dpon /oint )otion of both parties, on August 5=, 467&, the uperintendent of Ban"s ofthe Central Ban" of the Philippines #as appointed by this Court receiver pendente lite ofdefendant corporation, and upon the filing of the re$uisite bond, said officer assu)ed hisfunctions as such receiver on epte)ber 47, 467&.

3n their ans#er, defendants ad)itted practically all of the allegations of fact )ade in the petition. They, ho#ever, denied that defendants Tan/utco %Pablo and 0ito, 2r.(, oriano,Beltran, 1apa, Balatbat and ebastian, are directors of the corporation, as #ell as thevalidity of the opinion, ruling, evaluation and conclusions, rendered, )ade and+or reached

by the legal counsel and the intelligence division of the Central Ban", the ecurities andE change Co))ission, and the uperintendent of Ban"s of the Philippines, or inResolution No. 4=6: of the Monetary Board, or of earch ure )ade thereunder. By #ay ofaffir)ative allegations, defendants averred that, as of 2uly ', 4674, the Board of *irectorsof the corporation #as co)posed of defendants Rosendo T. Resuello, A$uilino . 3lleraand Pilar !. Resuello8 that on 2uly 44, 4675, the corporation had filed #ith the

uperintendent of Ban"s an application for conversion into a ecurity avings andMortgage Ban", #ith defendants 1apa, Balatbat, Tan/utco %Pablo and 0ito, 2r.(, oriano,Beltran and ebastian as proposed directors, in addition to the defendants first na)edabove, #ith defendants Rosendo T. Resullo, 1apa, Pilar !. Resuello, Balatbat and

ebastian as proposed president, vice9president, secretary9treasurer, auditor and legalcounsel, respectively8 that said additional officers had never assu)ed their respectiveoffices because of the pendency of the approval of said application for conversion8 thatdefendants oriano, Beltran, ebastian, 0ito Tan/utco 2r. and Pablo Tan/utco hadsubse$uently #ithdra#n fro) the proposed )ortgage and savings ban"8 that on

Nove)ber 56, 4675 or before the co))ence)ent of the present proceedings thecorporation and defendants Rosendo T. Resuello and Pilar !. Resuello had instituted

Civil Case No. :5&@5 of the Court of irst 3nstance of Manila against Purificacion antosand other )e)bers of the savings plan of the corporation and the City iscal for adeclaratory relief and an in/unction8 that on *ece)ber &, 4675, 2udge !audencio Cloribelof said court issued a #rit directing the defendants in said case No. :5&@5 and theirrepresentatives or agents to refrain fro) prosecuting the plaintiff spouses and otherofficers of the corporation by reason of or in connection #ith the acceptance by the sa)eof deposits under its savings plan8 that acting upon a petition filed by plaintiffs in saidcase No. :5&@5, on *ece)ber 7, 4675, the Court of irst 3nstance of Manila hadappointed 2ose Ma. Ra)ire> as receiver of the corporation8 that, on *ece)ber 45, 4675,said Ra)ire> $ualified as such receiver, after filing the re$uisite bond8 that, e cept as toone of the defendants in said case No. :5&@5, the issues therein have already been /oined8that the failure of the corporation to honor the de)ands for #ithdra#al of its depositorsor )e)bers of its savings plan and its for)er e)ployees #as due, not to )is)anage)entor )isappropriation of corporate funds, but to an abnor)al situation created by the )assde)and for #ithdra#al of deposits, by the attach)ent of property of the corporation byits creditors, by the suspension by debtors of the corporation of the pay)ent of their debtsthereto and by an order of the ecurities and E change Co))ission dated epte)ber 57,4675, to the corporation to stop soliciting and receiving deposits8 and that the #ithdra#alof deposits of )e)bers of the savings plan of the corporation #as understood to be


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sub/ect, as to ti)e and a)ounts, to the financial condition of the corporation as aninvest)ent fir).

3n its reply, plaintiff alleged that a photostat copy, attached to said pleading, of theanniversary publication of defendant corporation sho#ed that defendants Pablo Tan/utco,

Arturo oriano, Ruben Beltran, Bienvenido 0. 1apa, Ricardo *. Balatbat, 2ose R.ebastian and 0ito Tan/utco 2r. are officers and+or directors thereof8 that this is confir)ed by the )inutes of a )eeting of stoc"holders of the corporation, held on epte)ber 5',4675, sho#ing that said defendants had been elected officers thereof8 that the vie#s of thelegal counsel of the Central Ban", of the ecurities and E change Co))ission, the3ntelligence *ivision, the uperintendent of Ban"s and the Monetary Board abovereferred to have been e pressed in the la#ful perfor)ance of their respective duties andhave not been assailed or i)pugned in accordance #ith la#8 that neither has the validityof earch ation of

P&,===,=== and its deposits a)ounting to not less than P4,7;6,4&7.'@8 and that theafore)entioned petition of the corporation, in Civil Case No. :5&@5 of the Court of irst3nstance of Manila, for a declaratory relief is no# highly i)proper, the defendants havingalready co))itted infractions and violations of the la# /ustifying the dissolution of thecorporation.

Although, ad)ittedly, defendant corporation has not secured the re$uisite authority toengage in ban"ing, defendants deny that its transactions parta"e of the nature of ban"ingoperations. 3t is conceded, ho#ever, that, in conse$uence of a propaganda ca)paigntherefor, a total of :6,@7& savings account deposits have been )ade by the public #ith thecorporation and its '@ branches, #ith an aggregate deposit of P4,7;6,4&7.'@, #hich has

been lent out to such persons as the corporation dee)ed suitable therefor. 3t is clear thatthese transactions parta"e of the nature of ban"ing, as the ter) is used in ection 5 of the!eneral Ban"ing Act. 3ndeed, a ban" has been defined as

... a )oneyed institute FTal)age vs. Pell ' N.G. %& eld. ( &5;, &@', &@;H foundedto facilitate the borro#ing, lending and safe9"eeping of )oney % )ith vs. IansasCity Title J Trust Co., @4 . Ct. 5@&, 5:: D. . 4;=, 54=, 7: . Ed. :''( and todeal, in notes, bills of e change, and credits % tate vs. Cornings av. Ban", 44:

N. 54:.(

... any person engaged in the business carried on by ban"s of deposit, of discount,or of circulation is doing a ban"ing business, although but one of these functions


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is e ercised. %Mac aren vs. tate, 45@ N.


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products, )aterials, goods, )erchandise, and other properties, real or personal of every "ind and nature8

&. To dra#, accept, endorse, purchase, o#n, sell, discount, )ortgage,assign or other#ise dispose of, negotiate or collect accounts or notes

receivables, negotiable instru)ents, letters of credit and other evidence ofindebtedness8

@. To purchase, ac$uire, and ta"e over, all or any part of the rights, assetsand business of any person, partnership, corporation or association, and tounderta"e and assu)e the liabilities and obligations of such person,

partnership, corporation or association #hose rights, assets, business or property )ay be purchased, ac$uired or ta"en over8

:. To issue bonds, debentures, securities, collaterals and other obligationsor other#ise incur indebtedness in such )anner as )ay be ascertained by

the corporation8 and

7. To underta"e the )anage)ent, pro)otion, financing and+or collectionservices of the operation of the business, industry or enterprises of any

person, partnership, corporation or association in so far as )ay be per)itted under the la#s of the Philippines. %E)phasis supplied.(.

5E)po#ering said Board, inter alia

c( To pay for any property or rights ac$uired by the corporation or todischarge obligations of the corporation either #holly or partly in )oney

or in stoc", bonds, debentures or other securities of the corporation8

d( To lend or borro# )oney for the corporation #ith or #ithout securityand for such purpose to accept or create, )a"e and issue )ortgages,

bonds, deeds of trust and negotiable instru)ents or securities, secured by)ortgage or pledge of property belonging to the corporation8 provided,that as hereinafter provided, the proper officers of the corporation shallhave these po#ers, unless e pressly li)ited by the Board of *irectors ...%E)phasis supplied(.

& ec. 5. -nly duly authori>ed persons and entities )ay engage in the lending of

funds obtained fro) the public through the receipts of deposits or the sale of bonds, securities, or obligations of any "ind, and all entities regularly conductingsuch operations shall be considered as ban"ing institutions and shall be sub/ect tothe provisions of this Act, of the !eneral Ban" Act, and of other pertinent la#s.The ter)s ?ban"ing institution and ?ban"?, as used in this Act, are synony)ous andinterchangeable and specially include ban"s, ban"ing institutions, co))ercial

ban"s, savings ban"s, )ortgage ban"s, trust co)panies, building and loanassociations, branches and agencies in the Philippines of foreign ban"s,


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hereinafter called Philippine branches, and all other corporations, co)panies, partnerships, and associations perfor)ing ban"ing functions in the Philippines.

Persons and entities #hich receive deposits only occasionally shall not beconsidered as ban"s, but such persons and entities shall be sub/ect to

regulation by the Monetary Board of the Central Ban"8 nevertheless in nocase )ay the Central Ban" authori>e the dra#ing of chec"s againstdeposits not )aintained in ban"s, or branches or agencies thereof.

The Monetary Board )ay si)ilarly regulate the activities of persons andentities #hich act as agents of ban"s.

ec. 7. No person, association or corporation not conducting the businessof a co))ercial ban"ing corporation, trust corporation, savings and)ortgage ban"s, or building and loan association, as defined in this Act,shall advertise or hold itself out as being engaged in the business of such

ban", corporation or association, or use in connection #ith its businesstitle the #ord or #ords, ?ban"?, ?ban"ing,? ?ban"er,? ?building and loanassociation,? ?trust corporation,? ?trust co)pany,? or #ords of si)ilar i)port,or solicit or receive deposits of )oney for deposit, disburse)ent,safe"eeping, or other#ise, or transact in any )anner the business of anysuch ban", corporation or association #ithout having first co)plied #iththe provisions of this Act in so far as it relates to co))ercial ban"ingcorporations, trust corporations, savings and )ortgage ban"s, or buildingand loan association as the case )ay be. or any violation of the

provisions of this section by a corporation, the officers and directorsthereof shall be /ointly and severally liable. Any violation of the provisions

of this section shall be punished by a fine of five hundred pesos for eachday during #hich such violation is continued or repeated, and, in defaultof the pay)ent thereof, subsidiary i)prison)ent as prescribed by la#.

Documents

Republic vs. Security Credit & Assurance Corp