Situaciones intercurrentes

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.

Facts:

Security Credit and Acceptance Corporation (SCAC) registered its articles of incorporation with the SEC. Upon request, the legal counsel of Superintendent of Banks of the Central Bank of the Philippines opined that the said corporation is a banking institution, within the purview of RA 337. Municipal Court of Manila issued search warrant upon application of members of the Manila Police Department and an agent of the Central Bank. The examination of seized documents disclosed that SCAC receives deposits from the public regularly. Such deposits are treated in the Corporation's financial statements as conditional subscription to capital stock. And that out of the funds obtained from the public, loans are made regularly to any person. The Solicitor General commenced quo warranto proceedings for the dissolution of the said corporation.

Whether SCAC is engaged in banking. Ruling:

YES. Although, admittedly, defendant corporation has not secured the requisite authority to engage in banking, defendants deny that its transactions partake of the nature of banking operations. It is conceded, however, that, in consequence of a propaganda campaign therefor, a total of 59,463 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 therefor. 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. Indeed, a bank has been defined as:

A moneyed institute founded to facilitate the borrowing, lending and safe-keeping of money and to deal, in notes, bills of exchange, and credits.

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.

Any person engaged in the business carried on by banks of deposit, of discount, or of circulation is doing a banking business, although but one of these functions is exercised.

Accordingly, the defendant corporation has violated the law by engaging in banking without securing the administrative authority required in Republic Act No. 337.

Distinction of Bank from Quasi-Banks and Trust Entities

TEODORO BAÑAS,* C. G. DIZON CONSTRUCTION, INC., and CENEN DIZON v. ASIA PACIFIC FINANCE CORPORATION, substituted by INTERNATIONAL CORPORATE

BANK now known as UNION BANK OF THE PHILIPPINES G.R. No. 128703 October 18, 2000 BELLOSILLO, J.

What is prohibited by law is for investment companies to lend funds obtained from the public through receipts of deposit.

Facts:

Teodoro Baas executed a promissory note in favor of C. G. Dizon Construction. Later, C. G. Dizon Construction endorsed with recourse the PN to Asia Pacific, and to secure payment, it executed a Deed of Chattel Mortgage. C. G. Dizon Construction defaulted in the payment of the remaining installments. As the demand was unheeded, Asia Pacific filed a complaint for a sum of money with prayer for a writ of replevin against Teodoro Baas, C. G. Dizon Construction and Cenen Dizon. They claimed, however, that since Asia Pacific could not directly engage in banking business, it proposed to them a scheme wherein Asia Pacific could extend a loan to them without violating banking laws.

Issue:

Whether the disputed transaction between petitioners and Asia Pacific violated banking laws.

Ruling:

NO. An investment company refers to any issuer which is or holds itself out as being engaged or proposes to engage primarily in the business of investing, reinvesting or trading

in securities. As defined in Sec. 2, par. (a), of the Revised Securities Act, securities "shall include commercial papers evidencing indebtedness of any person, financial or non-financial entity, irrespective of maturity, issued, endorsed, sold, transferred or in any manner conveyed to another with or without recourse, such as promissory notes"

Clearly, the transaction between petitioners and respondent was one involving not a loan but purchase of receivables at a discount, well within the purview of "investing, reinvesting or trading in securities" which an investment company, like ASIA PACIFIC, is authorized to perform and does not constitute a violation of the General Banking Act. Moreover, Sec. 2 of the General Banking Act provides:

Only entities duly authorized by the Monetary Board of the Central Bank may engage in the lending of funds obtained from the public through the receipt of deposits of any kind, and all entities regularly conducting such operations shall be considered as banking institutions and shall be subject to the provisions of this Act, of the Central Bank Act, and of other pertinent laws

Indubitably, what is prohibited by law is for investment companies to lend funds obtained from the public through receipts of deposit, which is a function of banking institutions. But here, the funds supposedly "lent" to petitioners have not been shown to have been obtained from the public by way of deposits, hence, the inapplicability of banking laws.

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FIRST PLANTERS PAWNSHOP, INC. v. COMMISSIONER OF INTERNAL REVENUE G.R. No. 174134 July 30, 2008 AUSTRIA-MARTINEZ, J.

It need not be elaborated that pawnshops are non-banks/banking institutions. Moreover, the nature of their business activities partakes that of a financial intermediary in that its principal function is lending.

Facts:

First Planters Pawnshop (FPP) received Pre-Assessment Notice from the BIR that it has an existing tax deficiency on its VAT and DST liabilities for the year 2000. It subsequently received a Formal Assessment Notice directing payment of VAT deficiency. It filed protest on both notices which were denied on the ground that it is considered as a non-bank financial intermediary thus subject to VAT.

Issue:

Whether pawnshops are non-bank financial intermediaries. Ruling:

YES. R.A. No. 337, as amended, or the General Banking Act characterizes the terms banking institution and bank as synonymous and interchangeable and specifically include commercial banks, savings bank, mortgage banks, development banks, rural banks, stock savings and loan associations, and branches and agencies in the Philippines of foreign banks. R.A. No. 8791 or the General Banking Law of 2000, meanwhile, provided that banks shall refer to entities engaged in the lending of funds obtained in the form of deposits. R.A. No. 8791 also included cooperative banks, Islamic banks and other banks as determined by the Monetary Board of the Bangko Sentral ng Pilipinas in the classification of banks.

Financial intermediaries, on the other hand, are defined as persons or entities whose principal functions include the lending, investing or placement of funds or evidences of indebtedness or equity deposited with them, acquired by them, or otherwise coursed through them, either for their own account or for the account of others.

A pawnshop's business and operations are governed by Presidential Decree (P.D.) No. 114 or the Pawnshop Regulation Act and Central Bank Circular No. 374 (Rules and Regulations for Pawnshops). Section 3 of P.D. No. 114 defines pawnshop as a person or entity engaged in the business of lending money on personal property delivered as security for loans and shall be synonymous, and may be used interchangeably, with pawnbroker or pawn brokerage.

Bank Powers and Liabilities

REGISTER of DEEDS OF MANILA v. CHINA BANKING CORPORATION G.R. No.L-11964 April 28, 1962 DIZON, J.

Foreign owned banks may only register lands in its name under certain circumstances.

Facts:

Alfonso Pangilinan and one Guillermo Chua were charged with qualified theft. Pangilinan and his wife, Belen Sta. Ana, executed a public instrument entitled DEED OF TRANSFER whereby, after admitting his civil liability in favor of his employer, the China Banking Corporation, in relation to the offense aforesaid, he ceded and transferred to the latter a parcel of land. The deed was presented for registration but because the transferee was alien-owned and, as such, barred from acquiring lands in the Philippines.

Issue:

Whether the land is registrable. Ruling:

NO. Paragraph (c), Section 25 of Republic Act 337 allows a commercial bank to purchase and hold such real estate as shall be conveyed to it in satisfaction of debts previously contracted in the course of its dealings, We deem it quite clear and free from doubt that the "debts" referred to in this provision are only those resulting from previous loans and other similar transactions made or entered into by a commercial bank in the ordinary course of its business as such. Obviously, whatever "civil liability" — arising from the criminal offense of qualified theft — was admitted in favor of appellant bank by its former employee, Alfonso Pangilinan, was not a debt resulting from a loan or a similar transaction had between the two parties in the ordinary course of banking business.

Neither do the provisions of paragraph (d) of the Same section apply to the present case because the deed of transfer in question can in no sense be considered as a sale made by virtue of a judgment, decree, mortgage, or trust deed held by appellant bank. In the same manner it cannot be said that the real property in question was purchased by appellant "to secure debts due to it", considering that, as stated heretofore, the term debt employed in the pertinent legal provision can logically refer only to such debts as may become payable to appellant bank as a result of a banking transaction.

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BANCO DE ORO-EPCI, INC. v. JAPRL DEVELOPMENTCORPORATION, RAPIDFORMING CORPORATIONand JOSE U. AROLLADO