Archive for January, 2011


CASE 2011-0020: (DENIAL OF MOTION FOR RECONSIDERATION) ANTONIO LEJANO VS. PEOPLE OF THE PHILIPPINES (G.R. NO. 176389); PEOPLE OF THE PHILIPPINES VS. HUBERT JEFFREY P. WEBB, ANTONIO LEJANO, MICHAEL A. GATCHALIAN, HOSPICIO FERNANDEZ, MIGUEL RODRIGUEZ, PETER ESTRADA and GERARDO BIONG (18 JANUARY 2011, ABAD, J.)

Filed under: LATEST SUPREME COURT CASES — Leave a comment
January 25, 2011

 (DENIAL OF MOTION FOR RECONSIDERATION) ANTONIO LEJANO VS.  PEOPLE OF THE PHILIPPINES (G.R. NO. 176389); PEOPLE OF THE PHILIPPINES VS. HUBERT JEFFREY P. WEBB, ANTONIO LEJANO, MICHAEL A. GATCHALIAN, HOSPICIO FERNANDEZ, MIGUEL RODRIGUEZ, PETER ESTRADA and GERARDO BIONG (18 JANUARY 2011, ABAD, J.)

 

x ———————————————————- x

 

 

DOCTRINES:

 

AS A GENERAL RULE CAN JUDGMENT OF ACQUITTAL BE RECONSIDERED? NO, BECAUSE IT IS PROHIBITED BY THE CONSTITUTION.

          But, as a rule, a judgment of acquittal cannot be reconsidered because it places the accused under double jeopardy.  The Constitution provides in Section 21, Article III, that:

            Section 21.  No person shall be twice put in jeopardy of punishment for the same offense.  x x x

 

WHAT IS THE EFFECT IF A JUDGMENT OF ACQUITTAL BE RECONSIDERED? IT WILL PUT HIM TWICE IN JEOPARDY OF BEING PUNISHED FOR THE SAME CRIME. THIS SCHEME IF ALLOWED CAN MAKE THE GOVT AN INSTRUMENT OF OPPRESSION.

To reconsider a judgment of acquittal places the accused twice in jeopardy of being punished for the crime of which he has already been absolved.  There is reason for this provision of the Constitution.  In criminal cases, the full power of the State is ranged against the accused.  If there is no limit to attempts to prosecute the accused for the same offense after he has been acquitted, the infinite power and capacity of the State for a sustained and repeated litigation would eventually overwhelm the accused in terms of resources, stamina, and the will to fight.  

As the Court said in People of the Philippines v. Sandiganbayan:[1][2]

[A]t the heart of this policy is the concern that permitting the sovereign freely to subject the citizen to a second judgment for the same offense would arm the government with a potent instrument of oppression.  The provision therefore guarantees that the State shall not be permitted to make repeated attempts to convict an individual for an alleged offense, thereby subjecting him to embarrassment, expense, and ordeal and compelling him to live in a continuing state of anxiety and insecurity, as well as enhancing the possibility that even though innocent he may be found guilty.  Society’s awareness of the heavy personal strain which a criminal trial represents for the individual defendant is manifested in the willingness to limit the government to a single criminal proceeding to vindicate its very vital interest in the enforcement of criminal laws.[2][3] 

 

BUT IS THERE AN EXCEPTION TO THE RULE THAT  JUDGMENT OF ACQUITTAL WILL NOT BE RECONSIDERED? YES, IF THERE IS GRAVE ABUSE OF DISCRETION.

Of course, on occasions, a motion for reconsideration after an acquittal is possible.  But the grounds are exceptional and narrow as when the court that absolved the accused gravely abused its discretion, resulting in loss of jurisdiction, or when a mistrial has occurred. In any of such cases, the State may assail the decision by special civil action of certiorari under Rule 65.[3][4]

 

DID VIZCONDE PROVE GRAVE ABUSE OF DISCRETION? NO. HE DID NOT SPECIFY THE ACTS CONSTITUTING GRAVE ABUSE OF DISCRETION. HIS CLAIM IS MERE CONCLUSION DRAWN FROM PERSONAL PERCEPTION.

Here, although complainant Vizconde invoked the exceptions, he has been unable to bring his pleas for reconsideration under such exceptions.  For instance, he avers that the Court “must ensure that due process is afforded to all parties and there is no grave abuse of discretion in the treatment of witnesses and the evidence.”[4][5]  But he has not specified the violations of due process or acts constituting grave abuse of discretion that the Court supposedly committed.  His claim that “the highly questionable and suspicious evidence for the defense taints with serious doubts the validity of the decision”[5][6] is, without more, a mere conclusion drawn from personal perception. 

Complainant Vizconde cites the decision in Galman v. Sandiganbayan[6][7] as authority that the Court can set aside the acquittal of the accused in the present case.  But the government proved in Galman that the prosecution was deprived of due process since the judgment of acquittal in that case was “dictated, coerced and scripted.”[7][8]  It was a sham trial.  Here, however, Vizconde does not allege that the Court held a sham review of the decision of the CA.  He has made out no case that the Court held a phony deliberation in this case such that the seven Justices who voted to acquit the accused, the four who dissented, and the four who inhibited themselves did not really go through the process. 

 

WHAT WAS THE SUBSTANCE OF VIZCONDE’S MOTION FOR RECON? IT QUESTIONS THE COURT’S APPRECIATION OF THE EVIDENCE. IT WANTS THE COURT TO RE-EVALUATE THE EVIDENCE. IT IS A REPEATED ATTEMPT TO SECURE THE CONVICTION OF WEBB ET AL. IT IS PROHIBITED.

          Ultimately, what the complainant actually questions is the Court’s appreciation of the evidence and assessment of the prosecution witnesses’ credibility.  He ascribes grave error on the Court’s finding that Alfaro was not a credible witness and assails the value assigned by the Court to the evidence of the defense. In other words, private complainant wants the Court to review the evidence anew and render another judgment based on such a re-evaluation.  This is not constitutionally allowed as it is merely a repeated attempt to secure Webb, et al’s conviction.  The judgment acquitting Webb, et al is final and can no longer be disturbed.

[1][2]  G.R. Nos. 168188-89, June 16, 2006, 491 SCRA 185.

[2][3]  Id. at 207. 

[3][4]  Castro v. People, G.R. No. 180832, July 23, 2008, 559 SCRA 676, 683-684.

[4][5]  Supra note 1, at 7.

[5][6]  Id. at 12.

[6][7]  228 Phil. 42 (1986).

[7][8]  Id. at 89.

X———————————————————X

RESOLUTION

 

ABAD, J.:

 

On December 14, 2010 the Court reversed the judgment of the Court of Appeals (CA) and acquitted the accused in this case, Hubert Jeffrey P. Webb, Antonio Lejano, Michael A. Gatchalian, Hospicio Fernandez, Miguel Rodriguez, Peter Estrada, and Gerardo Biong of the charges against them on the ground of lack of proof of their guilt beyond reasonable doubt.

On December 28, 2010 complainant Lauro G. Vizconde, an immediate relative of the victims, asked the Court to reconsider its decision, claiming that it “denied the prosecution due process of law; seriously misappreciated the facts; unreasonably regarded Alfaro as lacking credibility; issued a tainted and erroneous decision; decided the case in a manner that resulted in the miscarriage of justice; or committed grave abuse in its treatment of the evidence and prosecution witnesses.”[1][1] 

          But, as a rule, a judgment of acquittal cannot be reconsidered because it places the accused under double jeopardy.  The Constitution provides in Section 21, Article III, that:

            Section 21.  No person shall be twice put in jeopardy of punishment for the same offense.  x x x

To reconsider a judgment of acquittal places the accused twice in jeopardy of being punished for the crime of which he has already been absolved.  There is reason for this provision of the Constitution.  In criminal cases, the full power of the State is ranged against the accused.  If there is no limit to attempts to prosecute the accused for the same offense after he has been acquitted, the infinite power and capacity of the State for a sustained and repeated litigation would eventually overwhelm the accused in terms of resources, stamina, and the will to fight.  

As the Court said in People of the Philippines v. Sandiganbayan:[2][2]

[A]t the heart of this policy is the concern that permitting the sovereign freely to subject the citizen to a second judgment for the same offense would arm the government with a potent instrument of oppression.  The provision therefore guarantees that the State shall not be permitted to make repeated attempts to convict an individual for an alleged offense, thereby subjecting him to embarrassment, expense, and ordeal and compelling him to live in a continuing state of anxiety and insecurity, as well as enhancing the possibility that even though innocent he may be found guilty.  Society’s awareness of the heavy personal strain which a criminal trial represents for the individual defendant is manifested in the willingness to limit the government to a single criminal proceeding to vindicate its very vital interest in the enforcement of criminal laws.[3][3] 

Of course, on occasions, a motion for reconsideration after an acquittal is possible.  But the grounds are exceptional and narrow as when the court that absolved the accused gravely abused its discretion, resulting in loss of jurisdiction, or when a mistrial has occurred. In any of such cases, the State may assail the decision by special civil action of certiorari under Rule 65.[4][4]

          Here, although complainant Vizconde invoked the exceptions, he has been unable to bring his pleas for reconsideration under such exceptions.  For instance, he avers that the Court “must ensure that due process is afforded to all parties and there is no grave abuse of discretion in the treatment of witnesses and the evidence.”[5][5]  But he has not specified the violations of due process or acts constituting grave abuse of discretion that the Court supposedly committed.  His claim that “the highly questionable and suspicious evidence for the defense taints with serious doubts the validity of the decision”[6][6] is, without more, a mere conclusion drawn from personal perception. 

Complainant Vizconde cites the decision in Galman v. Sandiganbayan[7][7] as authority that the Court can set aside the acquittal of the accused in the present case.  But the government proved in Galman that the prosecution was deprived of due process since the judgment of acquittal in that case was “dictated, coerced and scripted.”[8][8]  It was a sham trial.  Here, however, Vizconde does not allege that the Court held a sham review of the decision of the CA.  He has made out no case that the Court held a phony deliberation in this case such that the seven Justices who voted to acquit the accused, the four who dissented, and the four who inhibited themselves did not really go through the process. 

          Ultimately, what the complainant actually questions is the Court’s appreciation of the evidence and assessment of the prosecution witnesses’ credibility.  He ascribes grave error on the Court’s finding that Alfaro was not a credible witness and assails the value assigned by the Court to the evidence of the defense. In other words, private complainant wants the Court to review the evidence anew and render another judgment based on such a re-evaluation.  This is not constitutionally allowed as it is merely a repeated attempt to secure Webb, et al’s conviction.  The judgment acquitting Webb, et al is final and can no longer be disturbed.

WHEREFORE, the Court DENIES for lack of merit complainant Lauro G. Vizconde’s motion for reconsideration dated December 28, 2010.

For essentially the same reason, the Court DENIES the motions for leave to intervene of Fr. Robert P. Reyes, Sister Mary John R. Mananzan, Bishop Evangelio L. Mercado, and Dante L.A. Jimenez, representing the Volunteers Against Crime and Corruption and of former Vice President Teofisto Guingona, Jr.

No further pleadings shall be entertained in this case.

SO ORDERED.  

 

ROBERTO A. ABAD

                                                              Associate Justice

 

 

WE CONCUR:

 

 

                                                                                                                                                                       I vote to grant the M.R.

RENATO C. CORONA

Chief Justice

 

 

 

No part, prior inhibition

      ANTONIO T. CARPIO              CONCHITA CARPIO MORALES    

  Associate Justice                                               Associate Justice

 

 

No part due to relastionship to a party           No part; filed pleading as Sol Gen

PRESBITERO J. VELASCO, JR.     ANTONIO EDUARDO B. NACHURA

               Associate Justice                                     Associate Justice

 

 

 

I vote to grant the motion for reconsideration                   Same vote as J. Villarama

TERESITA J. LEONARDO-DE CASTRO       ARTURO D. BRION

                     Associate Justice                                 Associate Justice

 

 

                      

       DIOSDADO M. PERALTA                     LUCAS P. BERSAMIN

                 Associate Justice                                      Associate Justice        

No part                                     I vote to grant the motion for reconsideration

 MARIANO C. DEL CASTILLO             MARTIN S. VILLARAMA, JR.

              Associate Justice                                     Associate Justice

  JOSE PORTUGAL PEREZ                           JOSE CATRAL MENDOZA

            Associate Justice                                       Associate Justice

See concurring Opinion

MARIA LOURDES P. A. SERENO

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Resolution had been reached in consultation before the case was assigned to the writer of the opinion of the Court.

RENATO C. CORONA

          Chief Justice

 

 

[1][1]  Private Complainant’s Motion for Reconsideration, p. 8.

[2][2]  G.R. Nos. 168188-89, June 16, 2006, 491 SCRA 185.

[3][3]  Id. at 207. 

[4][4]  Castro v. People, G.R. No. 180832, July 23, 2008, 559 SCRA 676, 683-684.

[5][5]  Supra note 1, at 7.

[6][6]  Id. at 12.

[7][7]  228 Phil. 42 (1986).

[8][8]  Id. at 89.

Comment

LEGAL NOTE 0013: WHAT ARE THE IMPLEMENTING RULES OF RA 9474 GOVERNING LENDING COMPANIES?

Filed under: LEGAL NOTES — 1 Comment

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IMPLEMENTING RULES AND REGULATIONS OF

LENDING COMPANY REGULATION ACT OF 2007

(REPUBLIC ACT NO. 9474)

 

 

RULE 1. Title

These Rules shall be known as the Implementing Rules and

Regulations of Republic Act No. 9474, otherwise known as the

“Lending Company Regulation Act of 2007” promulgated pursuant to

Section 10 thereof.

RULE 2. Definition of Terms

As used in these Implementing Rules, the following definitions shall

apply:

(a) Act shall refer to Lending Company Regulation Act of 2007.

(b) Affilliate shall refer to a corporation, the voting stock of which,

to the extent of fifty percent (50%) or less, is owned by a bank or

quasi-bank which is related or linked to such institution

through common stockholders or such other factors as may be

determined by the Monetary Board of the BSP.

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(c) Subsidiary shall refer to a corporation more than fifty percent

(50%) of the voting stock of which is owned by a bank or quasibank.

(d) Branch Office – shall include an extension office, unit, satellite

office, etc. of a lending company with a Certificate of Authority

to operate as such.

(e) BSP shall refer to the Bangko Sentral ng Pilipinas.

(f) Certificate of Authority (CA) shall refer to a certificate issued by

the SEC in favor of a lending company to engage in the business

of lending regulated by R.A. No. 9474 and its Implementing

Rules and Regulations.

(g) Charges on loan shall refer to agreed upon interest rate, service

charge, penalty, discount, and such other charges incidental to

lending activity.

(h) Debtor shall refer to a borrower or person granted a loan by a

lending company.

(i) Monetary Assets shall refer to total assets inclusive of valuation

reserves and deferred income but shall not include investments

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in real estate, in shares of stock of real estate development

corporations or in real estate based projects, leasehold rights

and improvements, fixed assets, foreclosed properties and

prepayments.

(j) Lending company shall refer to a corporation engaged in

granting loans from its own capital funds or from funds sourced

from not more than nineteen (19) persons. It shall not be

deemed to include banking institutions, investment houses,

savings and loan associations, financing companies,

pawnshops, insurance companies, cooperatives and other credit

institutions already regulated by law. The term lending company

shall be synonymous with lending investor.

(k) Networth shall refer to the excess of assets over liabilities, net

of appraisal surplus, unbooked valuation reserves, capital

adjustments, overstatement of assets and unrecorded liabilities.

(l) Quasi-Bank shall refer to a non-bank financial institution

authorized by the BSP to engage in quasi-banking functions and

to borrow funds from more than nineteen (19) lenders through

the issuance, endorsement or assignment with recourse or

acceptance of deposit substitutes as defined in Section 95 of

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Republic Act No.7653 (the “New Central Bank Act”) for purposes

of relending or purchasing of receivables and other obligations.

(m) SEC or Commission shall refer to the Securities and

Exchange Commission

RULE 3. Requirements for Organization

(a) Form of Organization

A lending company shall be established as a stock corporation.

i. Existing Lending Companies organized as single

proprietorships or partnerships shall, within a period of

one (1) year from the effectivity of the Act, organize

themselves as a stock corporation with the minimum

capitalization prescribed under the Act and secure a

Certificate of Authority to operate a lending company.

Otherwise, they shall be disallowed from engaging in the

business of granting loans to the public.

ii. The words “Lending Company” or “Lending Investor” or

any other word descriptive of its primary activity of

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granting loans to the public except words commonly used

to identify financing companies shall always be included

in the corporate and trade name.

(b) Requirements for Securing an Authority – A lending company

shall file with SEC four (4) copies of a duly accomplished

application form to operate as a lending company, signed under

oath by the President, together with the following documents in

the prescribed form:

i. Information Sheet;

ii. NBI clearance of each director/officer;

iii. Foreign directors/officers, in addition to the NBI

Clearance, shall submit a clearance from the Bureau of

Immigration (BI), a photocopy of his passport showing a

valid visa or stay in the Philippines, ACR i-card, and a

work permit issued by the Department of Labor and

Employment;

iv. President’s Sworn Statement and Undertaking that the

corporation will not accept or solicit investments, other

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than loans, from more than 19 persons without SEC

approval, and upon presentation of valid claims, it shall

immediately indemnify or return the investments of

persons from said unauthorized public solicitation of

funds; Moreover, the sworn statement shall likewise

contain an undertaking that the country or state of the

foreign applicant allows Filipino citizens and corporations

to do lending business therein.

v. For an existing lending investor applying for a Certificate

of Authority, it shall submit an external auditor’s sworn

statement and undertaking that based on his/her

examination of the corporate books of accounts and other

related records of the corporation, it has not accepted or

solicited investments, other than loans, from more than 19

persons without prior compliance with Sections 8 and 12

of the Securities Regulation Code and its Amended

Implementing Rules and Regulations.

vi. Business plan including method of marketing its product

and sources of the funds and maturities of credit; and

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vii. Statement of its compliance with Rule 17.1(2)(A)(i) and (ii)

of the Amended Implementing Rules and Regulations of

the Securities Regulation Code.

(c) Branches, Extension or Satellites Offices or Units.

i. Loan transactions shall be booked in the authorized offices of

the lending company;

ii. No lending company shall establish or operate a branch,

extension office or unit or satellite office without prior

approval by the SEC. The following documents shall be

submitted for the opening of a branch office:

1) Information Sheet on the proposed branch;

2) NBI clearance of the manager, cashier and

administrative officer of the proposed branch;

iii. The Certificate of Authority to operate a branch, extension

office, unit or satellite office shall be coterminous with that of

the Head Office.

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(d) Licensing Fees:

i.Initial Application Fees shall be paid to SEC at the time of

filing of application

1) Head Office –

A fee of 1/10 of 1% of the paid-up capital of the

lending company shall be paid for the issuance of

a Certificate of Authority to Operate as a Lending

Company.

2) Branch, extension office, unit or satellite office

A fee of 1/10 of 1% of the assigned capital of the

branch, extension office, unit or satellite office

shall likewise be paid for the issuance of an

original Certificate of Authority.

ii. Annual fee –

An annual fee shall be paid not later than forty five (45) days

before the anniversary date of the CA.

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1) Head Office – 1/8 of 1% of the required paid-up

capital

2) Branch Office – 1/8 of 1% of the required paid-up

capital

(e) Commencement of Operations

A corporation/company that has been duly registered and

granted a Certificate of Authority to Operate as a Lending

Company shall commence operations within one hundred

twenty (120) days from date of grant of such authority.

Failure to commence operations within said period shall be a

ground for the suspension of its CA.

(f) Lending Companies shall use at least 51% of their funds for

direct lending purposes.

(g) The total investment of a lending company in real estate and in

shares of stock in a real estate development corporation and

other real estate based projects shall not at any time exceed

twenty-five (25%) percent of its networth.

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RULE 4. Capital

(a) A Lending Company shall have a minimum paid-up capital of

One Million Pesos (PhP1,000,000.00), unless the SEC prescribes

a higher minimum capitalization, if warranted by the

circumstances.

i. Lending companies established and in operation with a

lower paid-up capital prior to the effectivity of the Act shall

comply with the capital requirement within three (3) years

from the date of effectivity of the Act. For this purpose,

said lending companies shall, within sixty (60) days from

effectivity of these Rules, provide the SEC a sworn

statement by the President, indicating the schedule of their

capital build-up within the three (3) year period.

ii. Should a branch, extension, satellite office or unit be

established, the excess of the required minimum paid-up

capital may be applied to the additional capital requirement

for the proposed branch, extension, satellite office or unit,

as follows:

PhP300,000.00 : Metro Manila and other first

class cities;

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PhP150,000.00 : Second class and other cities;

and

PhP 75,000.00 : Municipalities

(b) In case of failure to comply with the aforementioned capital

requirement, the authority of a lending company to operate as

such shall be suspended, after due notice and hearing, for a

period of thirty (30) days.

RULE 5. Citizenship Requirements

(a) A majority of the voting stock of the lending company shall be

owned by citizens of the Philippines.

(b) The percentage of foreign-owned voting stocks in any lending

company shall be determined by the citizenship of the

individual stockholders. In the case of corporations owning

shares in a lending company, the citizenship of the individual

owners of voting stock in such corporations shall be the basis

in the computation of the percentage.

(c) If the percentage of foreign owned voting stock in any Lending

Company existing prior to the effectivity of the Act is in excess

12

of forty-nine (49%), it shall not be increased but may be

reduced and once reduced, shall not be increased thereafter

beyond 49% of the voting stock.

(d) No foreign national may be allowed to own stock unless the

country of which he is a national accords reciprocal rights to

Filipinos.

RULE 6. Amount and Charges on Loans

(a) A lending company may grant loans in such amounts and

interest rates and charges as may be agreed upon between the

lending company and the debtor:

(b) In accordance with the Truth in Lending Act and prior to the

consummation of the transaction, a lending company shall

furnish each debtor a disclosure statement, setting forth, to

the extent applicable, the following information:

i. The principal amount of loan;

ii. Rate of interest of the loan;

iii. Service or processing fee, if any;

iv. Amortization schedule;

v. Any penalty charge for late amortization payment;

13

vi. Collection fee, if any;

vii. Notarial fee;

viii. All other fees in connection with the loan transaction;

ix. Description of the collection and lien enforcement

procedures; and

x. Method of calculating the total amount of obligation in case

of default.

RULE 7. Maintenance of Books of Accounts and Records

(a) Every lending company shall maintain books of accounts and

records as may be required by the SEC and prescribed by the

Bureau of Internal Revenue and other government agencies. In

case a lending company engages in other businesses, it shall

maintain separate books of accounts for these businesses.

(b) The Manual of Accounts prescribed by the BSP for lending

investors shall continue to be adopted by lending companies

for uniform recording and reporting of their operations, until a

new Manual of Accounts shall have been prescribed by the

SEC.

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RULE 8. Authority of the SEC

Lending Companies shall be under the supervision and regulation of the

SEC.

(a) Reports – Lending companies shall file with the SEC the

following reports / manuals in accordance with the following

schedules:

Kind of report / manual Due Date

General Information Sheet (GIS)

Within thirty (30)

days from annual

meeting, as stated in

its SEC approved bylaws

Audited Financial Statements

prepared by an external auditor

accredited by the SEC

Within One Hundred

Twenty (120) days

from end of fiscal

year, as stated in its

SEC approved bylaws

Special Forms for Financial

Statements in Electronic Format

Within thirty (30)

days from the last day

of submission of the

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annual Audited

Financial Statements

Interim semi-annual financial

statements (using Special Form)

including the following:

  • • Balance Sheet;
  • • Income and Expense

statement;

  • • Cash flow
  • • Statement of Changes in

Equity

  • • Schedule of Liabilities
  • • List of Directors and Officers
  • • Aging of Receivables

Every July 15 and

January 15

(b) The SEC may examine the Books of Accounts and other

records of the lending company.

(c) Administrative Sanctions – The SEC shall, at its discretion,

impose upon any lending company a basic fine of P10,000.00

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and P100.00 for each day of continuing violation but such

daily fine shall not exceed P50,000.00 for the following:

i. Violation of the Act and its Implementing Rules and

Regulations;

ii. Violation of the terms and conditions of the Certificate of

Authority;

iii. Violation of any lawful order, decision, or ruling of the

Commission;

iv. Unjustified refusal to have its bank of accounts audited;

and

v. Continuous failure to comply with SEC requirements.

The penalty of suspension shall be imposed in case of three

(3) violations and revocation in case of four (4) violations.

RULE 9. Delineation of Authority between SEC and the BSP

Lending companies shall be under the supervision and regulation of

the SEC, Provided, those lending companies which are subsidiaries

and affiliates of banks and quasi-banks shall be subject to BSP

supervision and examination in accordance with Republic Act

No.7653.

17

RULE 10. Acts Punishable and Persons Liable

A fine of not less than Ten Thousand Pesos (PhP10,000.00) and not

more than Fifty Thousand Pesos (PhP50,000.00) or imprisonment of

not less than six months but not more than ten (10) years or both, at

the discretion of the court, shall be imposed upon:

(a) Any person who shall engage in the business of a lending

company without a validly subsisting authority to operate from

the SEC;

(b) The president, treasurer and other officers of a corporation,

including the managing officer thereof, who shall knowingly

and willingly

i. Engage in the business of a lending company without a

validly subsisting authority from the SEC;

ii. Hold themselves out to be a lending company, either

through advertisement on whatever form, whether in its

stationery, commercial paper, or other document, or

through other representations;

iii. Make use of a trade or firm name containing the words

lending company or “lending investor” or any other

18

designation that would give the public the impression that

it is engaged in the business of a lending company as

defined in the Act without the appropriate SEC authority;

and

(c) Violators or violations of the provisions of the Act;

(d) Any officer, employee or agent of a lending company who shall:

i. Knowingly and willingly make any statement in any

application, report, or document required to be filled under

the Act, which statement is false or misleading with respect

to any material fact;

ii. Overvalue or aid in overvaluing any security for the purpose

of influencing in any way the action of the company in any

loan;

(e) Any officer, employee or examiner of the SEC directly charged

with the implementation of the Act or of other government

agencies who shall commit, connive, aid, or assist in the

commission of acts enumerated under Subsection 1 and 2 of

this Rule.

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RULE 11. Applicability of Other Laws

The provisions of Republic Act No. 3765, otherwise known as the

“Truth in Lending Act of the Philippines,” Republic Act No. 7394 or the

“Consumer Act of the Philippines” and other existing laws, insofar as

they are not in conflict with any provisions of this Act, shall have a

suppletory applicability to Lending Companies.

RULE 12. Effectivity of Implementing Rules and Regulations

These Implementing Rules and Regulations shall take effect fifteen

(15) days from publication in two (2) newspapers of general

circulation.

Adopted by the Commission En Banc on August 23, 2007.

Mandaluyong City, Philippines.

FE B. BARIN

Chairperson

MA. JUANITA E. CUETO

Commissioner

JESUS ENRIQUE G. MARTINEZ

Commissioner

RAUL J. PALABRICA

Commissioner

THADDEUS E. VENTURANZA

Commissioner

Comment

LEGAL NOTE 0012: WHAT IS THE LAW GOVERNING LENDING COMPANIES? R.A. 9474.

Filed under: LEGAL NOTES — 4 Comments

RA 9474:  AN ACT GOVERNING THE ESTABLISHMENT, OPERATION AND REGULATION OF LENDING COMPANIES (22 MAY 2007)

Be it enacted by the Senate and the House of Representatives of the Philippines in Congress assembled:

SECTION 1. Title. – This Act shall be known as the “”Lending Company Regulation Act of 2007″”.

SEC. 2. Declaration of Policy. – It is hereby declared the policy of the State to regulate the establishment of lending companies and to place their operation on a sound, efficient and stable condition to derive the optimum advantages from them as an additional source of credit; to prevent and mitigate, as far as practicable, practices prejudicial to public interest; and to lay down the minimum requirements and standards under which they may be established and do business.

SEC. 3. Definition of Terms. – For purposes of implementing this Act, the following definitions shall apply:

(a) Lending Company shall refer to a corporation engaged in granting loans from its own capital funds or from funds sourced from not more than nineteen (19) persons. It shall not be deemed to include banking institutions, investment houses, savings and loan associations, financing companies, pawnshops, insurance companies, cooperatives and other credit institutions already regulated by law. The term shall be synonymous with lending investors.

(b) Debtor shall refer to a borrower or person granted a loan by the lending company.

(c) Quasi-Bank shall refer to a non-bank financial institution authorized by the BSP to engage in quasi-banking functions and to borrow funds from more than nineteen (19) lenders through the issuance, endorsement or assignment with recourse or acceptance of deposit substitutes as defined in Section 95 of Republic Act No. 7653 (the “:New Central Bank Act”:) for purposes of relending or purchasing of receivables and other obligations.

(d) Subsidiary shall refer to a corporation more than fifty percent (50%) of the voting stock of which is owned by a bank or quasi-bank.

(e) Affiliate shall refer to a corporation, the voting stock of which, to the extent of fifty percent (50%) or less, is owned by a bank or quasi-bank which is related or linked to such institution through common stockholders or such other factors as may be determined by the Monetary Board of the BSP.

(f) SEC shall refer to the Securities and Exchange Commission.

(g) BSP shall refer to the Bangko Sentral ng Pilipinas.

SEC. 4. Form of Organization. – A lending company shall be established only as a corporation: Provided That existing lending investors organized as single proprietorships or partnerships shall be disallowed from engaging in the business of granting loans to the public one year after the date of effectivity of this Act.

No lending company shall conduct business unless granted an authority to operate by the SEC.

SEC. 5. Capital. – The minimum paid in capital of any lending company which may be established after the effectivity of this Act shall be One million pesos (P1,000,000.00): Provided, however, That lending companies established and in operation prior thereto shall comply with the minimum capitalization required under the provisions of this Section within such time as may be prescribed by the SEC which time shall, in no case, be less than three years from the date of effectivity of this Act and: Provided, further, That the SEC may prescribe a higher minimum capitalization if warranted by circumstances.

SEC. 6. Citizenship Requirements. – Upon the effectivity of this Act, at least a majority of the voting capital stock shall be owned by citizens of the Philippines.

The percentage of foreign-owned voting stock in any lending company existing prior to the effectivity of this Act, if such percentage is in excess of forty-nine percent (49%) of the voting stock, shall not be increased but may be reduced and, once reduced, shall not be increased thereafter beyond forty-nine percent (49%) of the voting stock of the lending company. The percentage of foreign-owned voting stocks in any lending company shall be determined by the citizenship of the individual stockholders. In the case of corporations owning shares in a lending company, the citizenship of the individual owners of voting stock in such corporations shall be the basis in the computation of the percentage.

No foreign national may be allowed to own stock unless the country of which he is a national accords reciprocal rights to Filipinos.

SEC. 7. Amount and Charges on Loans. – A lending company may grant loans in such amounts and reasonable interest rates and charges as may be agreed upon between the lending company and the debtor: Provided, That the agreement shall be in compliance with the provisions of Republic Act No. 3765, otherwise known as the “Truth in Lending Act” and Republic Act 7394, otherwise known as the “Consumer Act of the Philippines”: Provided, further, That the Monetary Board, in consultation with the SEC and the industry, may prescribe such interest rate as may be warranted by prevailing economic and social conditions.

SEC. 8. Maintenance of Books of Accounts and Records. – Every lending company shall maintain books of accounts and records as may be required by the SEC and prescribed by the Bureau of Internal Revenue and other government agencies. In case a lending company engages in other businesses, it shall maintain separate books of accounts for these businesses.

The Manual of Accounts prescribed by the BSP for lending investors shall continue to be adopted by lending companies for uniform recording and reporting of their operations, until a new Manual of Accounts shall have been prescribed by the SEC.

It shall issue the appropriate instruments and documents to the parties concerned to evidence its lending and borrowing transactions.

SEC. 9. Authority of the SEC. – The SEC is hereby authorized to:

(a) Create a new division or bureau within its control to regulate and supervise the operations and activities of lending companies in the country;

(b) Issue rules and regulations to implement the provisions contained herein;

(c) Issue rules and regulations on, among other things, minimum capitalization, uses of funds received, method of marketing and distribution, maturity of funds received, restrictions or outright prohibition of purchases or sales of receivables with or without recourse basis;

(d) Require from lending companies reports of condition and such other reports necessary to determine compliance with the provisions of this Act;

(e) Exercise visitorial powers whenever deemed necessary; and

(f) Impose such administrative sanctions including suspension or revocation of the lending company’s authority to operate and the imposition of fines for violations of this Act and regulations issued by the SEC in pursuance thereto.

SEC. 10. Implementing Rules and Regulations. ? Within three months after the approval of this Act, the SEC shall promulgate the necessary rules and regulations implementing the provisions of this Act.

SEC. 11. Delineation of Authority between SEC and the BSP. – Lending companies shall be under the supervision and regulation of the SEC: Provided, however, That lending companies which are subsidiaries and affiliates of banks and quasi-banks shall be subject to BSP supervision and examination in accordance with Republic Act No. 7653: Provider further, That the Monetary Board, after being satisfied that there is reasonable ground to believe that a lending company is being used as a conduit by a bank, quasi-bank or their subsidiary/affiliate to circumvent or violate BSP rules and regulations, may order an examination of the lending company’s books and accounts.

SEC. 12. Penalty. – A fine of not less than Ten Thousand Pesos (P10,000.00) and not more than Fifty thousand pesos(P50,000.00) or imprisonment of not less than six months but not more than ten (10) years or both, at the discretion of the court, shall be imposed upon:

1. Any person who shall engage in the business of a lending company without a validly subsisting authority to operate from the SEC.

2. The president, treasurer and other officers of the corporation, including the managing officer thereof, who shall knowingly and willingly:

a. Engage in the business of a lending company without a validly subsisting authority to operate from the SEC;

b. Hold themselves out to be a lending company, either through advertisement in whatever form, whether in its stationery, commercial paper, or other document, or through other representations without authority;

c. Make use of a trade or firm name containing the words “lending company” or “lending investor” or any other designation that would give the public the impression that it is engaged in the business of a lending company as defined in this Act without authority; and

d. Violate the provisions of this Act.

3. Any officer, employee, or agent of a lending company who shall:

a. Knowingly and willingly make any statement in any application, report, or document required to be filed under this Act, which statement is false or misleading with respect to any material fact; and

b. Overvalue or aid in overvaluing any security for the purpose of influencing in any way the action of the company in any loan, or discounting line.

4. Any officer, employee or examiner of the SEC directly charged with the implementation of this Act or of other government agencies who shall commit, connive, aid, or assist in the commission of acts enumerated under Subsections 1 and 2 of this Section.

SEC. 13. Matters not Covered by this Act. ? The provisions of Republic Act No. 3765, otherwise known as the “Truth in Lending Act”, Republic Act No. 7394 or the “Consumer Act of the Philippines” and other existing laws, insofar as they are not in conflict with any provision of this Act, shall apply in matters not otherwise specifically provided in this Act.

SEC. 14. Repealing Clause. – All laws, executive orders, letters of instruction, rules and regulations, or provisions thereof which are inconsistent with the provisions of this Act are hereby repealed, amended or modified accordingly.

SEC. 15. Separability Clause. – If any portion hereof shall be held invalid or unconstitutional, such invalidity or unconstitutionality shall not affect the other provisions which shall remain in full force and effect.

SEC. 16. Effectivity. – This Act shall take effect fifteen (15) days after its publication in at least two national newspapers of general circulation.

Approved,

MANNY VILLAR

President of the Senate

JOSE DE VENECIA JR.

Speaker of the House of Representatives

This Act which is a consolidation of Senate Bill No. 1949 and House Bill No. 6073 was finally passed by the Senate and the House of Representatives on December 19, 2006 and February 20, 2007, respectively.

OSCAR G. YABES

Secretary of Senate

ROBERTO P. NAZARENO

Secretary General

House of Representatives

Approved: May 22, 2007

GLORIA MACAPAGAL-ARROYO

President of the Philippines

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