Bank leases – Manila Bulletin

   A bank wants to establish itself in the prime commercial district and decides to erect a multi-storey building on the lot it owns there. It needs only the ground and second floors for its offices. Can it rent out the other floors to other tenants? According to foreign and Philippine jurisprudence, the answer is yes. These jurisprudence were cited in The Banking Laws of the Philippines, Book II, published by the Bangko Sentral, pp.316-317 (Perth Amboy National Bank v. Brodsky, 207 F. Supp 785, citing Brown V.Scheier, 118 F. 981; Government of the Philippines vs. El Hogar Filipino, 50 Phil. 399).

   In the Perth Amboy National Bank case, the U. S. court upheld the right of a bank to lease or construct a building in good faith, for banking purposes, even though it intends to occupy only a part thereof and to rent out a large partof the building toothers.

The court said: “If the land which it purchases or leases for the accommodation of its business is very valuable, it should be accorded the same rights that belong toother landowners of improving it in a way that will yield the largest income, lessenits own rent, and render part of the funds which are invested in realty most productive.There is nothing, we think, in the national bank act, when rightly construed, whichprecludes national banks, so long as they act in good faith, from pursuing the policyabove outlined”.

   In the El Hogar Filipino case, the Philippine Supreme Court, citing the SupremeCourt of Kentucky in the case of “Home Savings Building Association vs. Driver(129 Ky. 754), elaborately held: “The limitation which the statute imposes is that it shall not own more real estate than is necessary for the proper conduct of its business, but it does not attempt to place any restriction or limitation upon the right of the corporation or association as to the character of the building it shall erect on said real estate, and while the Constitution and the statutes provide that no corporation shall engage in any business other than expressly authorized by its charter, we are of opinion that, in renting out the unoccupied and unused portions of the building so erected, the association could not be said to be engaged in any other business than that authorized by its charter.  The renting of the unused portions of the building is a mere incident in the conduct of its real business. We would not say that a building association might embark in the business of building houses and renting or leasing them, but there is quite a difference in building or renting a house in which to conduct its business and leasing the unused portion thereof for the time being, or until such time as may be needed by the association, and in building houses for the purposes of renting or leasing them. The one might properly be said to be the proper exercise of a power incident to the conduct of its legitimate business, whereas the other would be a clear violation of that provision of the statute which denies to any corporation the right to conduct any business otherthan that authorized by its charter. To hold otherwise would be to charge most of the banking institutions, trust companies and other corporations, such as title guaranty companies, etc., doing business in the state, and especially in the large cities, with violating the law”.

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The above comments are the personal views of the writer. His email address is [email protected]





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