Centra| 8ank v.

Court of Appea|s
8 May 1992, uavlde, !.
ulgesL prepared by !eLhro koon
Doctr|ne
!"#$% #'( )(*(+,-. .-/ ,001( ,0 !"2 '3/(4() 15+() 6'( 07..-8102 9)3:; <4(5- -.03
,5=.1+(+ "";
I. Iacts
1hls case consolldaLes Lwo peLlLlons by roducers 8ank of Lhe hll. (8): a
>(6,6,35 :3) )(4,(/ 35 =()6,3)-), of Lhe 81C granLlng Lhe moLlon for a prellmlnary
wrlL of ln[uncLlon agalnsL Lhe CenLral 8ank (C8) from lmplemenLlng Lhelr Clrculars
(a rehablllLaLlon plan), and a >(6,6,35 :3) )(4,(/ agalnsL Lhe CA LhaL afflrmed Lhe
81C declslon and [usL addlLlonally dlrecLed 8 Lo amend lLs complalnL and sLaLe
an exacL amounL of damages LhaL lL susLalned.
1. 1he C8, durlng a regular examlnaLlon, found ouL LhaL 8 managemenL
exLended 300mll ln flcLlonal and hlghly quesLlonable loans Lo several
enLlLles.
1. 1hese are flcLlonal because Lhey were lenL Lo lnLeresLs of Lhe 8
owners Lhemselves, wlLhouL collaLeral.
2. Also, Lhe pald-ln caplLal of 8 aL LhaL Llme was only 140.3mll,
meanlng LhaL Lhey used an addlLlonal 160mll of deposlLors'
money Lo fund Lhese unsecured loans.
3. Several bllnd lLems
1
laLer came ouL and Lhls Lhen Lrlggered a bank-run
2
ln
8.
4. 1o compensaLe for Lhe bank-run, 8 kepL wlLhdrawlng from lLs demand
deposlL accounL ln Lhe C8, Lo Lhe polnL LhaL lL used all of LhaL up and Lhe
overdrafL was already aL 144mll.
3. Seven monLhs from Lhe bllnd lLems, 8 had a negaLlve neL worLh of
424mll.
6. 1he C8 and 8 Lrled Lo negoLlaLe a rehablllLaLlon plan buL 8 dld noL
submlL one (a flnal one LhaL lL wlll lmplemenL) for Lhree years, aL whlch
polnL Lhelr overdrafL was aL 1.023bll.
7. 1he C8 noLlfled 8 of Lhe provlslon ln 8ep. AcL no. 263 whlch allows Lhe
C8 Lo Lake such acLlon agalnsL Lhe bank as may be warranLed under Lhls
AcL" lf a bank wlLh slgnlflcanL overdrafLs who do noL seLLle Lhelr accounLs,
advance a plan of paymenL, or converL Lhe overdrafL lnLo an emergency

1 A family-owned bank in Binondo granted fictitious loans to its
stockholders
2 Depositors withdrawing their money all at the same time because
they think/expect that it will fail soon; their money will be lost.
loan.
8. A few days laLer, wlLhouL respondlng Lo communlcaLlons of Lhe C8, flled a
complalnL wlLh Lhe 81C asserLlng LhaL Lhe conservaLorshlp was
unwarranLed, lll-moLlvaLed, lllegal, uLLerly unnecessary, eLc. and praylng
LhaL Lhe C8 pay Lhem for Lhe damages, Lhe quanLlflable exLenL of whlch ls
108,479,771.00, excluslve of loss of proflLs and loss of goodwlll.
9. Cnly 102.00 pesos (one hundred and Lwo pesos) was pald as flllng fee.
1he C8 flled a moLlon Lo dlsmlss on Lhe grounds LhaL:
1. Lhe amended complalnL sLaLes no cause of acLlon, M8 8esoluLlon nos.
649 and 731 are merely advlsory, Lhus, nelLher effecL lmpalrmenL of
plalnLlffs' rlghLs nor cause lL pre[udlce, loss or damage, furLhermore,
Lhere ls no basls for Lhe avermenLs on Lhe legallLy or lllegallLy of Lhe
conservaLorshlp slnce Lhe amended complalnL does noL seek lLs
annulmenL,
2. Lhe amended complalnL ls noL auLhorlzed by Lhe managemenL of 8,
and
3. Lhe lower courL dld noL acqulre [urlsdlcLlon over Lhe case excepL Lo order
Lhe amended complalnL expunged from Lhe records because Lhe proper
flllng fee was noL pald.
1he 81C dld noL granL Lhe moLlon because lL found LhaL:
1. Lhe amended complalnL alleges ulLlmaLe facLs showlng LhaL plalnLlff has a
rlghL and LhaL such a rlghL has been vlolaLed by defendanL (Lhe
quesLloned M8 8esoluLlons were lssued arblLrarlly and wlLh bad falLh,
"belng a parL of a scheme Lo dlvesL plalnLlff's presenL sLockholders of
Lhelr conLrol of 8 and Lo award Lhe same Lo Lhe ulC or lLs unknown
Lransferees")
2. whlle lL ls Lrue LhaL under SecLlon 28-A of Lhe CenLral 8ank AcL Lhe
conservaLor Lakes over Lhe managemenL of a bank, Lhe 8oard of ulrecLors
of such bank ls noL prohlblLed from flllng a sulL Lo llfL Lhe conservaLorshlp
and from quesLlonlng Lhe valldlLy of boLh Lhe conservaLor's fraudulenL
acLs and abuses and lLs prlnclpal's (C8) arblLrary acLlon
3. plalnLlffs have pald Lhe correcL flllng fees slnce "Lhe value of Lhe case
cannoL be esLlmaLed".
II. Whether the act|on for ||ft|ng the conservatorsh|p has prescr|bed. LS
1he 81C mlsLakenly LhoughL LhaL LhaL peLlLlon was for Lhe llfLlng of Lhe
conservaLorshlp
3
, buL looklng aL Lhe complalnL, 8 begrudglngly submlLs Lo Lhe

3 Section 28-A of the Central Bank Act, a conservator, once appointed,
takes over the management of the bank and assumes exclusive
powers to oversee every aspect of the bank's operations and affairs.
Petitioners now maintain that this power includes the authority to
determine "whether or not to maintain suit in the bank's name.
same and only asks for recovery for Lhe damages broughL by lL. 1he SC dlscusses
Lhls anyway because Lhe reckonlng of Lhe prescrlpLlve perlod ls Lhe same for all
Lhe causes of acLlon, real and lmaglned.
1he followlng requlslLes culled from [urslprudence as well as Sec. 29 of Lhe CenLral
8ank AcL, musL be presenL before Lhe order of conservaLorshlp may be seL aslde
by a courL:
1. 1he approprlaLe pleadlng musL be flled by Lhe sLockholders of record
represenLlng Lhe ma[orlLy of Lhe caplLal sLock of Lhe bank ln Lhe proper
courL,
2. Sald pleadlng musL be flled wlLhln Len (10) days from recelpL of noLlce by
sald ma[orlLy sLockholders of Lhe order placlng Lhe bank under
conservaLorshlp, and
3. 1here musL be convlnclng proof, afLer hearlng, LhaL Lhe acLlon ls plalnly
arblLrary and made ln bad falLh.
ln Lhe lnsLanL case, 8 was placed under conservaLorshlp on 20 !anuary 1984.
1he orlglnal complalnL ln Clvll Case no. 17692 was flled only on 27 AugusL 1987, or
Lhree (3) years, seven (7) monLhs and seven (7) days laLer, long afLer Lhe
explraLlon of Lhe 10-day perlod referred Lo above.
III. Whether the act|on for damages for be|ng p|aced |n conservatorsh|p has
prescr|bed. LS
1hls klnd of damages may be clalmed only lf Lhe C8's acLlon ls plalnly arblLrary and
made ln bad falLh, and LhaL Lhe acLlon Lherefor ls lnseparable from an acLlon Lo seL
aslde Lhe conservaLorshlp.
8ecause lL ls lnseparable from an acLlon Lo seL aslde Lhe conservaLorshlp, lL musL
be flled wlLhln Len (10) days from recelpL of noLlce of Lhe order placlng Lhe bank
under conservaLorshlp. CLherwlse, Lhe provlslon of Lhe flfLh paragraph of SecLlon
29 of Lhe CenLral 8ank AcL could be rendered meanlngless and lllusory by Lhe
bank's flllng, beyond Lhe prescrlbed Len-day perlod, of an acLlon osLenslbly
clalmlng damages buL ln reallLy quesLlonlng Lhe conservaLorshlp.
IV. Whether the act|on for damages for the acts of the conservator and for
|n[unct|on to restra|n the enforcement of the C8's |mp|ement|ng reso|ut|ons has
prescr|bed. LS
1he 10 day perlod equally applles because Lhe quesLloned acLs are buL lncldenLal
Lo Lhe conservaLorshlp.
V. Whether the p|a|nt|ffs had author|ty to f||e the comp|a|nt. NC
Cnly Lhe sLockholders of record (ma[orlLy) may flle an acLlon Lo lmpugn Lhe
conservaLorshlp. 1hls was noL Lhe case here.
1. 1he purpose of Lhe law ln requlrlng LhaL only Lhe sLockholders of record
represenLlng Lhe ma[orlLy of Lhe caplLal sLock may brlng Lhe acLlon Lo seL
aslde a resoluLlon Lo place a bank under conservaLorshlp ls Lo ensure LhaL
lL be noL frusLraLed or defeaLed by Lhe lncumbenL 8oard of ulrecLors or
offlcers who may lmmedlaLely resorL Lo courL acLlon Lo prevenL lLs
lmplemenLaLlon or enforcemenL.
2. lL ls presumed LhaL such a resoluLlon ls dlrecLed prlnclpally agalnsL acLs of
sald ulrecLors and offlcers whlch place Lhe bank ln a sLaLe of conLlnulng
lnablllLy Lo malnLaln a condlLlon of llquldlLy.
VI-A. Whether the acqu|red [ur|sd|ct|on over the case
4
. NC
?-5='(06() @(4(.3>*(56 A3)>; 4; A31)6 3: <>>(-.02 (6 -.;, declded Lhree (3)
monLhs and LwenLy (20) days before Lhe flllng of Lhe orlglnal complalnL and flve (3)
monLhs and elghLeen (18) days before Lhe flllng of Lhe amended complalnL ruled
LhaL:
"1he CourL acqulres [urlsdlcLlon over any case only
upon Lhe paymenL of Lhe prescrlbed dockeL fee. An
amendmenL of Lhe complalnL or slmllar pleadlng wlll
noL Lhereby vesL [urlsdlcLlon ln Lhe CourL, much less
Lhe paymenL of Lhe dockeL fee based on Lhe amounLs
soughL ln Lhe amended pleadlng.
1he 81C sald LhaL Lhe clalm for damages ls merely lncldenLal ls "lncapable of
pecunlary esLlmaLlon" because Lhe value of Lhe losses lncurred by Lhe 8 "cannoL
be callbraLed nor plnned down Lo a speclflc amounL ln vlew of Lhe damage LhaL
may be caused by Lhe appolnLmenL of a conservaLor Lo lLs goodwlll and sLandlng
ln Lhe communlLy.
Powever, Lhe perLlnenL porLlons of paragraph 27 of boLh Lhe orlglnal and
amended complalnL has Lhe ff:
(v) 1oLal of only Lhe foregolng menLloned losses and
only of Lhose LhaL can be quanLlfled ls
108,479,771.00. And LhaL excludes loss of proflLs LhaL
8 could have reallzed lf LhaL dlsasLrous
conservaLorshlp had noL been lmposed on lL and loss
of goodwlll.
And Lhese are Lhe very damages referred Lo ln Lhe prayer:
"x x x Lo fully repalr Lhe damages lnfllcLed on 8
conslsLlng of losses of operaLlon and Lhe conservaLors
bank frauds and abuses, x x x."
1o Lhe CourL's mlnd, Lhls was done Lo evade Lhe paymenL of Lhe correspondlng
flllng fees whlch, as compuLed by peLlLloner on Lhe basls alone of Lhe speclfled
losses of 108,479,771.00, would amounL Lo abouL 437,000.00.
1he 8 Lhen clearly acLed wlLh manlfesL bad falLh ln resorLlng Lo Lhe foregolng
clever sLraLegy Lo avold paylng Lhe correcL flllng fees
VI-8. Whether the acqu|red [ur|sd|ct|on over the case. NC
ln granLlng 8 an opporLunlLy Lo amend Lhelr amended complalnL Lo reflecL Lhe
speclflc amounL of damages ln Lhe prayer, respondenL CourL Look refuge under
Lhe rule lald down ln B15 C501)-5=( "::,=(2 D6+;2 (6 -.; 4; <015=,352 (6 -.; and

4 This is obiter.
9,.,>,5-0 B'(.. 9(6)3.(1* A3)>; 4; A31)6 3: <>>(-.02 (6 -.;.
1hese are no longer good law ln llghL of ManchesLer. Moreover, even granLlng for
Lhe sake of argumenL LhaL B15 C501)-5=( and 9,.,>,5-0 B'(.. may apply ln Lhls case,
we should noL lose slghL of Lhe facL LhaL ln Lhe former, lL was sald LhaL:
"1. lL ls noL slmply Lhe flllng of Lhe complalnL or
approprlaLe lnlLlaLory pleadlng, buL Lhe paymenL of
Lhe prescrlbed dockeL fee, LhaL vesLs a Lrlal courL wlLh
[urlsdlcLlon over Lhe sub[ecL-maLLer or naLure of Lhe
acLlon. Where Lhe flllng of Lhe lnlLlaLory pleadlng ls
noL accompanled by paymenL of Lhe dockeL fee, Lhe
courL may allow paymenL of Lhe fee wlLhln a
reasonable Llme buL ln no case beyond Lhe appllcable
prescrlpLlve or reglemenLary perlod."
1hls means LhaL ln every case, Lhe dockeL fee musL be pald before Lhe lapse of Lhe
prescrlpLlve perlod. 1here can be no quesLlon LhaL ln Lhe lnsLanL case, 8's clalms
for damages arlse ouL of an ln[ury Lo lLs rlghLs: ln ArL. 1146 Lhe acLlon Lherefore
musL be lnlLlaLed wlLhln four (4) years from Lhe Llme Lhe cause of acLlon accrued.
Slnce Lhe damages arose ouL of Lhe conservaLorshlp, Lhe cause of acLlon, flrsL
accrued ln 1984 and conLlnued unLll 27 AugusL 1987, when Lhe orlglnal complalnL
was flled. Lven lf We are Lo assume LhaL Lhe four-year perlod should sLarL runnlng
on 27 AugusL 1987, LhaL perlod lapsed on 27 AugusL 1991. 1here ls no showlng
LhaL 8 pald Lhe correcL flllng fee for Lhe clalm wlLhln Lhe prescrlbed perlod.
noLhlng can save Clvll Case no. 17692 from belng dlsmlssed.
VII. Cther |ssues
1he foregolng Crders were lssued wlLhouL due hearlng. Moreover, Lhese rellefs
were noL prayed for ln Lhe Amended ComplalnL. 1hey were noL even covered by
any speclflc allegaLlons Lhereln. ln shorL, Lhere was CAu.
1he 81C also held Lhe conservaLor ln dlrecL conLempL. Powever, lL ls clear from
8CC 8ule 71, sec.3 (lndlrecL conLempL, properly, Lhere belng dlsobedlence ln
followlng Lhe 81C order) LhaL lL ls necessary LhaL Lhere be a charge and LhaL Lhe
parLy clLed for conLempL be glven an opporLunlLy Lo be heard.
1. 1he reason for Lhls ls LhaL conLempL parLakes of Lhe naLure of a crlmlnal
offense. 8espondenL !udge dellberaLely dld away wlLh Lhe hearlng and
Lhls CourL flnds no [usLlflable reason Lherefor.
2. Lven lf Lhere was a hearlng, Lhe orders whlch were supposedly dlsobeyed
and from whlch Lhe moLlons for conLempL arose were, as earller
lndlcaLed, null and vold for havlng been lssued wlLh grave abuse of
dlscreLlon amounLlng Lo lack of [urlsdlcLlon. Such orders, Lherefore,
cannoL Lhen be characLerlzed as lawful.