EN BANC

[G.R. No. L-20583. January 23, 1967.]

REPUBLIC OF THE PHILIPPINES , petitioner, 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 R.
SEBASTIAN and VITO TANJUTCO , JR. , respondents.

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

Sycip, Salazar, Luna, Manalo & Feliciano for respondents.
Natalio M. Balboa and F. E. Evangelista for the receiver.

SYLLABUS

1. CORPORATION LAW; BANKING; TRANSACTIONS DEEMED TO BE IN THE

NATURE OF BANKING. — 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 59,643 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 those transactions partake of the
nature of banking, as the term is used in See. 2 of the General Banking Acts.
2. WORDS AND PHRASES; "BANK" DEFINED. — A bank has been de ned as "a
moneyed institute [Talmage vs. Pell, 7 N.Y. (3 Seld.) 328, 347, 248] founded to facilitate
the borrowing, lending, and safe-keeping of money (Smith vs. Kansas City Title & Trust
Co., 41 S. Ct. 243, 255 U.S. 180, 210, 65 L. Ed. 577) and to deal in notes, bills of
exchange, and credits (State vs. Cornings Sav. Bank, 115 N.W. 937, 139 Iowa, 388)."
(Banks & Banking, by Zellmann, Vol. 1, p. 46.)
3. ID.; ID.; WHEN INVESTMENT COMPANY IS CONSIDERED A BANK. — "An
investment company which loans out the money of its customers, collects the interests
and charges a commission to both borrower and lender is a bank."
4. ID.; ILLEGAL TRANSACTIONS BY CORPORATION WARRANT ITS
DISSOLUTION. — That the illegal transactions thus undertaken by defendant
corporation warrant its dissolution is apparent from the fact that the foregoing misuser
of the corporate funds and franchise affects the essence of its business, that it is willful
and has been repeated 59,643 times, and that its continuances in icts injury upon the
public, owing to the number of persons affected thereby.
5. JURISDICTION; IN QUO WARRANTO PROCEEDING, THE SUPREME COURT
IS VESTED WITH CONCURRENT ORIGINAL JURISDICTION WITH THE CFI. — The
Supreme Court is vested with original jurisdiction, concurrently with courts of rst
instance, to hear and decide quo warranto cases and, consequently, it is discretionary
for the Court either to entertain the present case or to require that the issues therein be
taken up in the lower court . . . In the case at bar, there is, however, no dispute as to the
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 principal facts or acts performed by the corporation in the conduct of its business. The
main issue here is one of law, namely, the legal nature of said facts or of the
aforementioned acts of the corporation. For this reason, and because public interest
demands an early disposition of the case, we have deemed it best to determine the
merits therefor.
6. ID.; ID.; WHEN ISSUES OF FACT REQUIRE PRESENTATION OF EVIDENCE,
CFI, IS APPROPRIATE FORUM. - Where there are issues of fact which require the
presentation of evidence, the courts of rst instance are, in general, better equipped
than appellate courts for the taking of testimony and the determination of questions of
fact.

DECISION

CONCEPCION, C.J : p

This is an original quo warranto proceeding, initiated by the Solicitor General, to

dissolve the Security Credit and Acceptance Corporation for allegedly engaging in
banking operations without the authority required therefore by the General Banking Act
(Republic Act No. 337). Named as respondents in the petition are, in addition to said
corporation, the following, as alleged members of its Board of Directors and/or
Executive Officers, namely:
"NAME POSITION
Rosendo T. Resuello President & Chairman of
the Board
Pablo Tanjutco Director
Arturo Soriano Director
Ruben Beltran Director
Bienvenido V. Zapa Director & Vice-President
Pilar G. Resuello Director & Secretary-Treasurer
Ricardo D. Balatbat Director & Auditor
Jose R. Sebastian Director & Legal Counsel
Vito Tanjutco, Jr Director & Personnel Manager"

The record shows that the Articles of Incorporation of defendant corporation 1

were registered with the Securities and Exchange Commission on March 27, 1961 that
the next day, the Board of Directors of the corporation adopted a set of by laws, 2 which
were led with said Commission on April 5, 1961; that on September 19, 1961, the
Superintendent of Banks of the Central Bank of the Philippines asked its legal counsel
an opinion on whether or not said corporation is a banking institution, within the
purview of Republic Act No. 337; that, acting upon this request, on October 11, 1961,
said legal counsel rendered an opinion resolving the query in the a rmative; that in a
letter, dated January 15, 1962, addressed to said Superintendent of Banks, the
corporation through its president, Rosendo T. Resuello, one of defendants herein,
sought a reconsideration of the aforementioned opinion, which reconsideration was
denied on March 16, 1962; that, prior thereto, or on March 9, 1961, the corporation had
applied with the Securities and Exchange Commission for the registration and licensing
of its securities under the Securities Act; that, before acting on this application, the
Commission referred it to the Central Bank, which, in turn, gave the former a copy of the
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 above-mentioned opinion, in line with which, the Commission advised the corporation
on December 5, 1961, to comply with the requirements of the General Banking Act; that,
upon application of members of the Manila Police Department and an agent of the
Central Bank, on May 18, 1962, the Municipal Court of Manila issued Search Warrant
No. A-1019; that, pursuant thereto, members of the intelligence division of the Central
Bank and of the Manila Police Department searched the premises of the corporation
and seized documents and records thereof relative to its business operations; that,
upon the return of said warrant, the seized documents and records were, with the
authority of the court, placed under the custody of the Central Bank of the Philippines;
that, upon examination and evaluation of said documents and records, the intelligence
division of the Central Bank submitted, to the Acting Deputy Governor thereof, a
memorandum dated September 10, 1962, finding that the corporation is:
"1. Performing banking functions, without requisite certi cate of
authority from the Monetary Board of the Central Bank, in violation of Secs.
2 and 6 of Republic Act 337, in that it is soliciting and accepting deposit
from the public and lending out the funds so received;
"2. Soliciting and accepting savings deposits from the general
public when the company's articles of incorporation authorize it only to
engage primarily in nancing agricultural, commercial and industrial
projects, and secondarily, in buying and selling stocks and bonds of any
corporation, thereby exceeding the scope of its powers and authority as
granted under its charter; consequently such acts are ultra-vires;

"3. Soliciting subscriptions to the corporate shares of stock and

accepting deposits on account thereof, without prior registration and/or
licensing of such shares or recurring exemption therefore, in violation of the
Securities Act; and
"4. That being a private credit and nancial institution, it should
come under the supervision of the Monetary Board of the Central Bank, by
virtue of the transfer of the authority, power, duties and functions of the
Secretary of Finance, Bank Commissioner and the defunct Bureau of
Banking, to the said Board, pursuant to Secs. 139 and 140 of Republic Act
265 and Secs. 88 and 89 of Republic Act 337." (Italics supplied.)

that upon examination and evaluation of the same records of the corporation, as well as
of other documents and pertinent papers obtained elsewhere, the Superintendent of
Banks, submitted to the Monetary Board of the Central Bank a memorandum dated
August 28, 1962, stating inter alia:
"11. Pursuant to the request for assistance by the Chief,
Intelligence Division, contained in his Memorandum to the Governor dated
May 23, 1962 and in accordance with the written instructions of Governor
Castillo dated May 31, 1962, an examination of the books and records of the
Security Credit and Loans Organizations, Inc. seized by the combined MPD-
CB team was conducted by this Department. The examination disclosed the
following findings:
a. Considering the extent of its operations, the Security
Credit and Acceptance Corporation, Inc. receives deposits from the
public regularly. Such deposits are treated in the Corporation's
nancial statements as conditional subscriptions to capital stock .
Accumulated deposits of P5,000 of an individual depositor may be
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 converted into stock subscription to the capital stock of the Security
Credit and Acceptance Corporation at the option of the depositor.
Sale of its shares of stock or subscriptions to its capital stock are
offered to the public as part of its regular operations.
b. That out of the funds obtained from the public through
the receipt of deposits and/or the sale of securities, loans are made
regularly to any person by the Security Credit and Acceptance
Corporation.
A copy of the Memorandum Report dated July 30, 1962 of the
examination made by Examiners of this Department of the seized
books and records of the Corporation is attached hereto.

"12. Section 2 of Republic Act No. 337, otherwise known as the

General Banking Act, defines the term 'banking institution' as follows:

'Sec. 2. Only duly authorized persons and entities may

engage in the lending of funds obtained from the public through the
receipt of deposits or the sale of bonds, securities, or obligations of
any kind and all entities regularly conducting 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 . . .

"13. Premises considered, the examination disclosed that the

Security Credit and Acceptance Corporation is regularly lending funds
obtained from the receipt of deposits and/or the sale of securities. The
Corporation therefore is performing 'banking functions' as contemplated in
Republic Act No. 337, without having rst complied with the provisions of
said Act.
Recommendations:
"In view of all the foregoing, it is recommended that the Monetary
Board decide and declare:

'1. That the Security Credit and Acceptance Corporation is

performing banking functions without having rst complied with the
provisions of Republic Act No. 337, otherwise known as the General Banking
Act, in violation of Sections 2 and 6 thereof ; and
'2. That this case be referred to the Special Assistant to the
Governor (Legal Counsel) for whatever legal actions are warranted,
including, if warranted criminal action against the persons criminally liable
and/or quo warranto proceedings with preliminary injunction against the
Corporation for its dissolution'." (Italics supplied.)

that, acting upon said memorandum of the Superintendent of Banks, on September 14,
1962, the Monetary Board promulgated its Resolution No. 1095, declaring that the
corporation is performing banking operations, without having rst complied with the
provisions of Sections 2 and 6 of Republic Act No. 337; 3 that on September 25, 1962,
the corporation was advised of the aforementioned resolution, but, this
notwithstanding, the corporation, as well as the members of its Board of Directors and
the o cers of the corporation, have been and still are performing the functions and
activities which had been declared to constitute illegal banking operations; that during
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 the period from March 27, 1961 to May 18, 1962, the corporation had established 74
branches in principal cities and towns throughout the Philippines; that through a
systematic and vigorous campaign undertaken by the corporation, the same had
managed to induce the public to open 59,463 savings deposit accounts with an
aggregate deposit of P1,689,136.74; that, in consequence of the foregoing deposits
with the corporation, its original capital stock of P500,000, divided into 20,000
founders' shares of stock and 80,000 preferred shares of stock, both of which had a
par value of P5.00 each, was increased, in less than one (1) year, to P3,000,000 divided
into 130,000 founders' shares and 470,000 preferred shares, both with a par value of
P5.00 each; and that, according to its statement of assets and liabilities, as of
December 31, 1961, the corporation had a capital stock aggregating P1,273,265.98
and suffered, during the year 1961, a loss of P96,685.29. Accordingly, on December 6,
1962, 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
o cers and agents, from performing the banking operations complained of, and that a
receiver be appointed pendente lite.
Upon joint motion of both parties, on August 20, 1963, the Superintendent of
Banks of the Central Bank of the Philippines was appointed by this Court receiver
pendente lite of defendant corporation, and upon the ling of the requisite bond, said
officer assumed his functions as such receiver on September 16, 1963.
In their answer, defendants admitted practically all of the allegations of fact
made in the petition. They, however, denied that defendants Tanjutco (Pablo and Vito,
Jr.) Soriano, Beltran, Zapa, Balatbat and Sebastian, are directors of the corporation, as
well as the validity of the opinion, ruling, evaluation and conclusions rendered, made
and/or reached by the legal counsel and the intelligence division of the Central Bank, the
Securities and Exchange Commission, and the Superintendent of Banks of the
Philippines, or in Resolution No. 1095 of the Monetary Board, or of Search Warrant No.
A- 1019 of the Municipal Court of Manila, and of the search and seizure made
thereunder. By way of a rmative allegations, defendants averred that, as of July 7,
1961, the Board of Directors of the corporation was composed of defendants Rosendo
T. Resuello, Aquilino L. Illera and Pilar G. Resuello; that on July 11, 1962, the corporation
had led with the Superintendent of Banks an application for conversion into a Security
Savings and Mortgage Bank, with defendants Zapa, Balatbat, Tanjutco (Pablo and Vito,
Jr.), Soriano, Beltran and Sebastian as proposed directors, in addition to the defendants
rst named above, with defendants Rosendo T. Resuello, Zapa, Pilar G. Resuello,
Balatbat and Sebastian as proposed president, vice-president, secretary-treasurer,
auditor and legal counsel, respectively; that said additional o cers had never assumed
their respective o ces because of the pendency of the approval of said application for
conversion; that defendants Soriano, Beltran, Sebastian, Vito Tanjutco Jr. and Pablo
Tanjutco had subsequently withdrawn from the proposed mortgage and savings bank;
that on November 29, 1962 — or before the commencement of the present
proceedings — the corporation and defendants Rosendo T. Resuello and Pilar G.
Resuello had instituted Civil Case No. 52342 of the Court of First Instance of Manila
against Puri cation Santos and other members of the savings plan of the corporation
and the City Fiscal, for a declaratory relief and an injunction; that on December 3, 1962,
Judge Gaudencio Cloribel of said court issued a writ directing the defendants in said
case No. 52342 and their representatives or agents to refrain from prosecuting the
plaintiff spouses and other o cers of the corporation by reason of or in connection
with the acceptance by the same of deposits under its savings plan; that acting upon a
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 petition led by plaintiffs in said case No. 52342, on December 6, 1962, the Court of
First Instance of Manila had appointed Jose Ma. Ramirez as receiver of the corporation;
that, on December 12, 1962, said Ramirez quali ed as such receiver, after ling the
requisite bond; that, except as to one of the defendants in said case No. 52342, the
issues therein have already been joined; that the failure of the corporation to honor the
demands for withdrawal of its depositors or members of its savings plan and its
former employees was due, not to mismanagement or misappropriation of corporate
funds, but to an abnormal situation created by the mass demand for withdrawal of
deposits, by the attachment of property of the corporation by its creditors, by the
suspension by debtors of the corporation of the payment of their debts thereto and by
an order of the Securities and Exchange Commission dated September 26 1962, to the
corporation to stop soliciting and receiving deposits; and that the withdrawal of
deposits of members of the savings plan of the corporation was understood to be
subject, as to time and amounts, to the nancial condition of the corporation as an
investment firm.
In its reply, plaintiff alleged that a photostat copy, attached to said pleading, of
the anniversary publication of defendant corporation showed that defendants Pablo
Tanjutco, Arturo Soriano, Ruben Beltran, Bienvenido V. Zapa, Ricardo D. Balatbat, Jose R.
Sebastian and Vito Tanjutco, Jr. are o cers and/or directors thereof; that this is
con rmed by the minutes of a meeting of stockholders of the corporation, held on
September 27, 1962, showing that said defendants had been elected o cers thereof;
that the views of the legal counsel of the Central Bank, of the Securities and Exchange
Commission, the Intelligence Division, the Superintendent of Banks and the Monetary
Board above referred to have been expressed in the lawful performance of their
respective duties and have not been assailed or impugned in accordance with law; that
neither has the validity of Search Warrant No. A-1019 been contested as provided by
law; that the only assets of the corporation now consist of accounts receivable
amounting approximately to P500,000, and its o ce equipment and appliances,
despite its increased capitalization of P3,000,000 and its deposits amounting to not
less than P1,689,136.74; and that the aforementioned petition of the corporation, in
Civil Case No. 52342 of the Court of First Instance of Manila, for a declaratory relief is
now highly improper, the defendants having already committed infractions and
violations of the law justifying the dissolution of the corporation.
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 [Talmage vs. Pell, 7 N.Y. (2 Seld.) 328, 347,
348] founded to facilitate the borrowing, lending, and safe- keeping of
money (Smith vs. Kansas City Title & Trust Co., 41 S. Ct. 243, 255 U.S. 180,
210, 65 L. Ed. 577) and to deal in notes, bills of exchange, and credits (state
vs. Cornings Sav. Bank, 115 N.W. 937, 139 Iowa, 338)." (Banks & Banking, by
Zellmann Vol. I, p. 46.)

Moreover, it has been held that:

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 "An investment company which loans out the money of its customers,
collects the interests, and charges a commission to both lender and
borrower is a bank." (Western Investment Banking Co. vs. Murray, 56 P. 728,
730, 731; 6 Ariz. 215.)
". . . 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." (MacLaren vs. State, 124 N.W. 667,
141 Wis. 577, 135 Am. S.R. 55, 18 Ann. Cas. 826; 9 C.J.S. 30.)

Accordingly, defendant corporation has violated the law by engaging in banking

without securing the administrative authority required in Republic Act No. 337.
That the illegal transactions thus undertaken by defendant corporation warrant
its dissolution is apparent from the fact that the foregoing misuser of the corporate
funds and franchise affects the essence of its business, that it is willful and has been
repeated 59,643 times, and that its continuance in icts injury upon the public, owing to
the number of persons affected thereby.
It is urged, however, that this case should be remanded to the Court of First
Instance of Manila upon the authority of Veraguth vs. Isabela Sugar Co. (57 Phil. 266).
In this connection, it should be noted that this Court is vested with original jurisdiction,
concurrently with courts of rst instance, to hear and decide quo warranto cases and,
that, consequently, it is discretionary for us to entertain the present case or to require
that the issues therein be taken up in said Civil Case No. 52342. The Veraguth case
cited by herein defendants, in support of the second alternative, is not in point, because
in said case there were issues of fact which required the presentation of evidence, and
courts of rst instance are, in general, better equipped than appellate courts for the
taking of testimony and the determination of questions of fact. In the case at bar, there
is, however, no dispute as to the principal facts or acts performed by the corporation in
the conduct of its business. The main issue here is one of law, namely, the legal nature
of said facts or of the aforementioned acts of the corporation. For this reason, and
because public interest demands an early disposition of the case, we have deemed it
best to determine the merits thereof.
Wherefore, the writ prayed for should be, as it is hereby granted and defendant
corporation is, accordingly, ordered dissolved. The appointment of receiver herein
issued pendente lite is hereby made permanent, and the receiver is, accordingly,
directed to administer the properties, deposits, and other assets of defendant
corporation and wind up the affairs thereof conformably to Rules 59 and 66 of the
Rules of Court. It is so ordered.
Reyes, J.B.L., Dizon, Regala, Makalintal, Bengzon, J.P., Zaldivar, Sanchez and Ruiz
Castro, JJ., concur.
Footnotes
1. Which, as amended on May 8, 1961, authorized it:
"1. To extend credit facilities for home building and agricultural, commercial and
industrial projects;
2. To extend credit, give loans, mortgages and pledges, either as principal, agent,
broker or attorney-in-fact, upon every and all kinds and classes of products, materials,
goods, merchandise, and other properties, real or personal of every kind and nature;

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 3. To draw, accept, endorse, purchase, own, sell, discount, mortgage, assign or
otherwise dispose of, negotiate or collect accounts or notes receivables, negotiable
instruments, letters of credit and other evidence of indebtedness;
4. To purchase, acquire, and take over, all or any part of the rights, assets and
business of any person, partnership, corporation or association, and to undertake and
assume the liabilities and obligations of such person, partnership, corporation or
association whose rights, assets, business or property may be purchased, acquired or
taken over;
5. To issue bonds, debentures, securities, collaterals and other obligations or otherwise
incur indebtedness in such manner as may be ascertained by the corporation; and
6. To undertake the management, promotion, financing and/or collection services of
the operation of the business, industry or enterprises of any person, partnership,
corporation or association in so far as may be permitted under the laws of the
Philippines." (Italics supplied)
2. Empowering said Board, inter alia:
"c. To pay for any property or rights acquired by the corporation or to discharge
obligations of the corporation either wholly or partly in money or in stock, bonds,
debentures or other securities of the corporation;
"d. To lend or borrow money for the corporation with or without security and for
such purpose to accept or create, make and issue mortgages, bonds, deeds of trust and
negotiable instruments or securities, secured by mortgage or pledge of property
belonging to the corporation; provided, that as hereinafter provided, the proper officers of
the corporation shall have these powers, unless expressly limited by the Board of
Directors; . . ."; (Italics supplied).
3. "Sec. 2. Only duly authorized persons and entities may engage in the lending of
funds obtained from the public through the receipt of deposits of the sale of bonds,
securities, or obligations 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 General Bank Act, and of other pertinent laws. The terms
'banking institution' and 'bank' as used in this Act, are synonymous and interchangeable
and specially include banks, banking institutions, commercial banks, saving banks,
mortgage banks, trust companies, building and loan associations, branches and
agencies in the Philippines of foreign banks hereinafter called Philippine branches, and
all other corporations, companies, partnerships, and associations performing banking
functions in the Philippines.
"Persons and entities which receive deposits only occasionally shall not be
considered as banks, but such persons and entities shall be subject to regulation by the
Monetary Board of the Central Bank; nevertheless in no case may the Central Bank
authorize the drawing of checks against deposits not maintained in banks, or branches
or agencies thereof.
"The Monetary Board may similarly regulate the activities of persons and entities
which act as agents of banks.
"Sec. 6. No person, association or corporation not conducting the business of a
commercial banking corporation, trust corporation, savings and mortgage banks, or
building and loan association, as de ned in this Act, shall advertise or hold itself out as
being engaged in the business of such bank, corporation or association, or use in
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 connection with its business title the word or words bank, 'banking,' 'banker,' 'building
and loan association,' 'trust corporation,' 'trust company,' or words of similar import, or
solicit or receive deposits of money for deposit, disbursement, safekeeping, or otherwise,
or transact in any manner the business of any such bank, corporation or association
without having rst complied with the provisions of this Act in so far as it relates to
commercial banking corporations, trust corporations, savings and mortgage banks, or
building and loan associations, as the case may be. For any violation of the provisions
of this section by a corporation, the o cers and directors thereof shall be jointly and
severally liable. Any violation of the provisions of this section shall be punished by a ne
of ve hundred pesos for each day during which such violation is continued or repeated,
and, in default of the payment thereof, subsidiary imprisonment as prescribed by law."

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