Banco Filipino Savings and Mortgage Bank vs.
The The Monetary Board ordered the closure of Banco
Monetary Board
G.R. No. 70054 December 11, 1991
Facts
Banco Filipino Savings and Mortgage Bank
commenced operations on July 9, 1964. It has 89
operating branches with more than 3 million
depositors. It has an approved emergency
advance of P119.7 million.
The Monetary Board placed Banco Filipino
Savings and Mortgage Bank under
conservatorship of Basilio Estanislao. He was
later replaced by Gilberto Teodoro as conservator
on August 10, 1984. Gilberto Teodoro submitted
a report dated January 8, 1985 to respondent
The Monetary Board on the conservatorship of
the bank.
Subsequently, another report dated January 23,
1985 was submitted to the Monetary Board by
Ramon Tiaoqui regarding the major findings of
examination on the financial condition of Banco
Filipino Savings and Mortgage Bank as of July 31,
1984, finding the bank one of insolvency and
illiquidity and provides sufficient justification for
forbidding the bank from engaging in banking.
Filipino and designated Mrs. Carlota P.
Valenzuela as Receiver.
Banco Filipino filed a complaint with the RTC to
set aside the action of the Monetary Board
placing the bank under receivership and filed
with the SC the petition for certiorari and
mandamus.
Carlota Valenzuela, as Receiver and Arnulfo
Aurellano and Ramon Tiaoqui as Deputy
Receivers of Banco Filipino submitted their report
on the receivership of the bank to the Monetary
Board, finding that the condition of the banking
institution continues to be one of insolvency, i.e.,
its realizable assets are insufficient to meet all its
liabilities and that the bank cannot resume
business with safety to its depositors, other
creditors and the general public, and
recommends the liquidation of the bank.
Banco Filipino filed a motion before the SC
praying that a restraining order or a writ of
preliminary injunction be issued to enjoin
respondents from causing the dismantling of
Banco Filipino signs in its main office and 89
branches. The SC ordered the issuance of the
temporary restraining order.
The SC directed the Monetary Board and Central
Bank hold hearings at which the Banco Filipino
should be heard.
Issue
Whether or not the Central Bank and the Monetary
Board acted arbitrarily and in bad faith in finding and
thereafter concluding that Banco Filipino Savings and
Mortgage Bank is insolvent, and in ordering its closure
Ruling
The SC granted the petitions, annulled and set aside the
order of the Central Bank and the Monetary Board. The
Central Bank and the Monetary Board are ordered to
reorganize Banco Filipino Savings and Mortgage Bank
and allow the latter to resume business in the
Philippines under the comptrollership of both the
Central Bank and the Monetary Board.
The closure and receivership of Banco Filipino Savings
and Mortgage Bank, which was ordered by the Monetary
Board on is null and void.
The Monetary Board may order the cessation of
operations of a bank in the Philippine and place it under
receivership upon a finding of insolvency or when its
continuance in business would involve probable loss its
depositors or creditors. If the Monetary Board shall
determine and confirm within 60 days that the bank is
insolvent or can no longer resume business with safety
to its depositors, creditors and the general public, it
shall, if public interest will be served, order its
liquidation.
Under Section 29 of the Central Bank Act, the following
are the mandatory requirements to be complied with
before a bank found to be insolvent is ordered closed
and forbidden to do business in the Philippines: (1)an
examination shall be conducted by the head of the
appropriate supervising or examining department or his
examiners or agents into the condition of the bank; (2)
it shall be disclosed in the examination that the
condition of the bank is one of insolvency, or that its
continuance in business would involve probable loss to
its depositors or creditors; (3) the department head
concerned shall inform the Monetary Board in writing,
of the facts; and (4) the Monetary Board shall find the
statements of the department head to be true.
Clearly, Tiaoqui based his report on an incomplete
examination of the bank and outrightly concluded that
the latter's financial status was one of insolvency or
illiquidity. He arrived at the conclusion: that as of July
31, 1984, total capital accounts consisting of paid-in
capital and other capital accounts such as surplus,
surplus reserves and undivided profits aggregated
351.8 million; that capital adjustments, however,
wiped out the capital accounts and placed the bank with
a capital deficiency amounting to 334.956 million; that market value of its assets which is not the proper
the biggest adjustment which contributed to the deficit procedure contemplated in Sec. 29 of the Central Bank
is the provision for estimated losses on accounts Act. The receivership of Banco Filipino, indicates that
classified as doubtful and loss which was computed at total liabilities of 4,540.84 million does not exceed the
600.4 million pursuant to the examination. The total assets of 4,981.53 million. Likewise, the
valuation which was set up or deducted against the consolidated statement of condition of the bank
capital accounts of the bank in arriving at the latter's prepared by the Central Bank Authorized Deputy
financial condition. Tiaoqui admits the insufficiency and Receiver Artemio Cruz shows that total assets
unreliability of the findings of the examiner as to the amounting to 4,981,522,996.22 even exceeds total
setting up of recommended valuation reserves from the liabilities amounting to 4,540,836,834.15. Based on
assets of the bank. the foregoing, there was no valid reason for the
Valenzuela, Aurellano and Tiaoqui report to finally
recommend the liquidation of Banco Filipino instead of
The examination contemplated in Sec. 29 of the CB Act its rehabilitation.
as a mandatory requirement was not completely and
fully complied with. Despite the existence of the partial
list of findings in the examination of the bank, there
were still highly significant items to be weighed and
determined such as the matter of valuation reserves,
before these can be considered in the financial condition
of the bank. It would be a drastic move to conclude
prematurely that a bank is insolvent if the basis for such
conclusion is lacking and insufficient, especially if doubt
exists as to whether such bases or findings faithfully
represent the real financial status of the bank.

In arriving at the computation of realizable assets of

Banco Filipino, respondents used its books which
undoubtedly are not reflective of the actual cash or fair