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PROHIBITIONS Facts: Philippine Veterans Bank (PVB)

UCPB VS. PPI extended pension loan product in favour of


Facts: Layson entered into an agreement its bona fide veterans and salary loan
with PPI for the delivery to her of fertilizer. product for teachers and low-salaried
The payment is stipulated to be taken from employees. The bank also imposed
the proceeds of the loan extended to collection of premiums and placed them in
Layson by UCPB (as evidenced by the a Credit Redemption Fund, naming the bank
pagares on the dorsal portion of the UCPB as beneficiary. Such fund was to be used to
Promissory Note.) Such undertaking was pay the outstanding obligation of the
guaranteed by the bank’s branch manager. borrowers in case of death.
Layson promised that should there be no BSP notified the PVB that such fund was in
payment by the bank, she will pay. However, the form of an insurance, which the bank
she withdrew the amount of the loan with could not undertake. Hence, the board
the connivance of the bank manager. PPI ordered its discontinuance and directed the
delivered the fertilizers on the strength of return of the premiums to the owners.
the documents but were not paid by Layson The respondents filed a petition for
or the bank. On the other hand, UCPB declaratory relief based on the provision in
denied liability saying that the manager’s the law (SEC. 54 on the Gen Bank Law – on
act (guaranteeing the loan) was invalid and banks as insurer)
could not bind the bank. Issue: Whether the petition for declaratory
Issue: Is UCPB bound to deliver? relief was proper.
Ruling: NO. Ruling: NO.
A corporation like UCPB is liable to innocent The only issue that may be raised in such a
third persons where it knowingly permits its petition is the question of construction or
officer, or any other agent, to perform acts validity of provisions in an instrument or
within the scope of his general or apparent statute.
authority, holding him out to the public as The MB Resolution cannot be a proper
possessing power to do those acts. subject matter for a petition for declaratory
However, in this case it is plain from the relief since it was issued by the BSP
guarantee Grey (manager) executed that he Monetary Board in the exercise of its quasi-
was acting for himself, not in judicial powers or functions. If it involves
representation of UCPB. judicial or quasi-judicial body, it may avail of
A bank guarantee is a contract that binds the various remedies provided by the Rules
the bank and so may be entered into only of Court.
under authority granted by its board of
directors. Such authority does not appear
on any document. Indeed, PPI had no right
to expect branch manager Grey to issue one
without such authorization.

MONETARY BOARD VS. PHILIPPINE


VETERANS BANK BPI EMPLOYEES UNION VS. BPI
Facts: BOMC was created primarily to increased diversification of functions, some
engage in providing and/or handling of these non-banking functions were
support services for banks and other merely transferred to the BOMC without
financial institutions, and is a subsidiary of affecting the union membership. It is to be
the Bank of Philippine Islands (BPI). emphasized that contracting out of services
A service agreement was executed between is not illegal per se. It is an exercise of
the BOMC and BPI. Not a single BPI business judgment or management
employee was displaced and those prerogative.
performing the functions, which were SECOND ISSUE: NO.
transferred to BOMC, were given other The Court is of the view, however, that there
assignments. This move was opposed to by is no confict between D.O. No. 10
the union. However, this was not granted (provides that those not integral to the main
merit since the court held that BPI business can be outsourced) and CBP
transferred the employees in the affected Circular No. 1388 (enumerated functions
departments in the pursuit of its legitimate that can be outsourced). In fact, they
business. complement each other.
Another service agreement of the same The competence in determining which
nature was entered into by BPI and FEBTC. banking functions may or may not be
Twelve (12) former FEBTC employees were outsourced lies with the BSP.
transferred to BOMC to complete the Thus, the subject functions appear to be not
latter's service complement. The Union in in any way directly related to the core
the BPI in Davao contended that the activities of banks. They are functions in a
functions rightfully belonged to the BPI processing center of BPI which does not
employees and that the Union was deprived handle or manage deposit transactions.
of membership of former FEBTC personnel Clearly, the functions outsourced are not
who, by virtue of the merger, would have inherent banking functions, and, thus, are
formed part of the bargaining unit. well within the permissible services under
Issue: the circular.
1) Whether there was curtailment of the
right to self-organization CITIBANK VS. SABENIANO
2) Whether there was a conflict between Facts: Sabeniano had several deposits and
D.O. No. 10 and CBP Circular No. 1388 market placements with petitioners, among
on functions to be outsourced which were her savings account with the
local branch of petitioner Citibank (Citibank-
Ruling:
Manila); money market placements with
FIRST ISSUE: NO.
petitioner FNCB Finance; and dollar
It is incomprehensible how the "reduction
accounts with the Geneva branch of
of positions in the collective bargaining
petitioner Citibank (Citibank- Geneva). At
unit" interferes with the employees' right to
the same time, she had outstanding loans
self-organization because the employees
with petitioner Citibank. Despite repeated
themselves were neither transferred nor
demands by petitioner Citibank, respondent
dismissed from the service.
failed to pay her outstanding loans. Thus,
In the process of the consolidation or
petitioner Citibank used respondent's
merger of the two banks which resulted in
deposits and money market placements to
off-set and liquidate her outstanding adhesion, the PNs being in standard printed
obligations. Respondent sought to recover form prepared by petitioner Citibank.
her deposits considering that she did not It bears to note that the original of the
authorize nor had knowledge of the Declaration of Pledge is with Citibank-
offsetting. Geneva, a branch of petitioner Citibank. As
Issue: Is the offsetting allowed? between respondent and petitioner
Ruling: NO. Citibank, the latter has better access to the
Section 20 of the General Banking Law of document.
2000 expressly states that the bank and its Respondent made several attempts to have
branches shall be treated as one unit. It the original copy of the pledge produced
should be pointed out, however, that the before the RTC so as to have it examined by
said provision applies to a universal or experts. Yet, despite several Orders by the
commercial bank, duly established and RTC, petitioner Citibank failed to comply
organized as a Philippine corporation in with the production of the original
accordance with Section 8 of the same Declaration of Pledge. It is admitted that
statute, and authorized to establish Citibank-Geneva had possession of the
branches within or outside the Philippines. original copy of the pledge. While petitioner
It does not make the same categorical Citibank in Manila and its branch in Geneva
statement as regards to foreign banks and may be separate and distinct entities, they
their branches in the Philippines. are still incontestably related, and between
As to the HEAD OFFICE GUARANTEE - Since petitioner Citibank and respondent, the
the head office of the bank is located in former had more influence and resources to
another country or state, such a guarantee convince Citibank-Geneva to return, albeit
is necessary so as to bring the head office temporarily, the original Declaration of
within Philippine jurisdiction, and to hold Pledge.
the same answerable for the liabilities of its
Philippine branches. Hence, the principle of NEW CENTRAL BANK ACT
the singular identity of that the local FIRST PHIL. INTERNATIONAL BANK VS. CA
branches and the head office of a foreign Facts:
bank are more often invoked by the clients Producers Bank of the PH acquired 6 parcels
in order to establish the accountability of of land at Laguna. The property used to be
the head office for the liabilities of its local owned by BYME Investment and
branches. Development Corporation which had tem
The Court in this case cannot be persuaded mortgaged with the bank as collateral for a
to declare that these Philippine branches loan. Demetrio Demetria and Jose Janolo
are likewise a single unit with the Geneva wanted to purchase the property and thus
branch. initiated negotiations. They met the
No offsetting as there was no authority manager of the property – Rivera and
upon signing the PNs (not even upon discuss their plan to buy. This happened
signing of a declaration of pledge.) while the bank was under conservatorship.
Reference to Citibank, N.A. cannot be Petitioner insisted that the conservator has
extended to all other branches of petitioner the power to revoke or overrule actions of
Citibank all over the world. Moreover, the the management or the board of directors
PNs can be considered a contract of of the bank.
Issue: May the Conservator Revoke the (infusion of additional capital). To this, the
perfected and enforceable contract? banks failed to comply. The SED informed
Ruling: No. them that the SED found that the banks
The Central Bank gives vast and far-reaching failed to carry out the required remedial
powers to the conservator of a bank, it must measures. The banks requested that the
be pointed out that such powers must be basis for the capital infusion figures be
related to the preservation of the assets of disclosed, and noted that none of them had
the bank, (the reorganization of \) the received the Report of Examination (ROE)
management thereof and (the restoration which fnalizes the audit fndings.
of ) its viability. Such powers, enormous and The banks filed a complaint for nullification
extensive as they are, cannot extend to the of the BSP ROE with application for a TRO
post-facto repudiation of perfected and writ of preliminary injunction to enjoin
transactions, otherwise they would infringe submission of the reports to the BSP
against the non-impairment clause of the Monetary Board. By reason of the TRO
Constitution. issued by this Court, the SED was able to
Sec 28-A merely gives the submit their ROEs to the MB. The MB then
conservator power to revoke contracts that prohibited the respondent banks from
are, under existing law, deemed to be transacting business and placed them
defective – i.e., void, voidable, under receivership under Section 53 of
unenforceable or rescissble, hence, the Republic Act No. (RA) 8791.
conservator merely takes the place of a Issue:
banks board of directors. What the said 1) Whether the banks are entitled to be
board cannot do – such as repudiating a furnished with the ROEs
contract validly entered into under the 2) Whether a writ of preliminary
doctrine of implied authority 0 the injunction should issue
conservator cannot do either. To rule 3) Whether the sanction of closure could
otherwise will enable a failing bank to be be imposed without notice and hearing
considered unfavourable to the Bank, Ruling:
yielding nothing to perfected contractual The requisites for preliminary injunctive
rights nor vested interest of the rights relief are: (a) the invasion of right sought to
parties who had dealt with the Bank. be protected is material and substantial; (b)
the right of the complainant is clear and
BSP vs. ANTONIO-VALENZUELA unmistakable; and (c) there is an urgent
Facts: The Supervision and Examination and paramount necessity for the writ to
Department (SED) of the Bangko Sentral ng prevent serious damage.
Pilipinas (BSP) conducted examinations of First Issue: NO.
the books of certain banks. Exit conferences The respondent banks have failed to show
were held with the officers or that they are entitled to copies of the ROEs.
representatives of the banks wherein the They can point to no provision of law, no
SED examiners provided them with copies section in the procedures of the BSP that
of Lists of Findings/Exceptions containing shows that the BSP is required to give them
the deficiencies discovered during the copies of the ROEs.
examinations. The banks were also
obligated to undertake remedial measures
The respondent banks cannot claim a valid exercise of police power to protect
violation of their right to due process if they the depositors, creditors, stockholders, and
are not provided with copies of the ROEs. the general public.
The same ROEs are based on the lists of The writ of preliminary injunction cannot,
fndings/exceptions containing the thus, prevent the MB from taking action, by
deficiencies found by the SED examiners preventing the submission of the ROEs and
when they examined the books of the worse, by preventing the MB from acting on
respondent banks. As found by the RTC, such ROEs. Judicial review enters the
these lists of fndings/exceptions were picture only after the MB has taken action;
furnished to the ofcers or representatives it cannot prevent such action by the MB.
of the respondent banks, and the
respondent banks were required to RBSM vs. MB
comment and to undertake remedial Facts: Petitioner Rural Bank of San Miguel,
measures stated in said lists. Despite these Inc. (RBSM) was a domestic corporation
instructions, respondent banks failed to engaged in banking. The Monetary Board
comply with the SED's directive. (MB), the governing board of respondent
The ROEs would then be superfluities to the Bangko Sentral ng Pilipinas (BSP), issued
respondent banks, and should not be the Resolution No. 105 prohibiting RBSM from
basis for a writ of preliminary injunction. doing business in the Philippines, placing it
Second Issue: NO. under receivership and designating
The issuance by the RTC of writs of respondent Philippine Deposit Insurance
preliminary injunction is an unwarranted Corporation (PDIC) as receiver. PDIC, then
interference with the powers of the MB. implemented a closure order and took over
Secs. 29 and 30 of RA 7653 refer to the the management of the bank’s asset.
appointment of a conservator or a receiver On the basis of reports prepared by PDIC
for a bank, which is a power of the MB for stating that RBSM could not resume
which they need the ROEs done by the business with sufficient assurance of
supervising or examining department. protecting the interest of its depositors,
The actions of the MB under Secs. 29 and creditors and the general public, the MB
30 of RA 7653 "may not be restrained or set passed Resolution No. 966 directing PDIC to
aside by the court except on petition for proceed with the liquidation of RBSM under
certiorari on the ground that the action Section 30 of RA 7653.
taken was in excess of jurisdiction or with Issue:
such grave abuse of discretion as to amount 1) Whether notice and hearing is required
to lack or excess of jurisdiction". The writs before a closure of a bank is
of preliminary injunction order are precisely implemented
what cannot be done under the law by 2) Whether there was sufficient basis to
preventing the MB from taking action under order the closure of the bank.
either Sec. 29 or Sec. 30 of RA 7653.
Ruling:
Third Issue: YES.
FIRST ISSUE: NO.
This "close now, hear later" scheme is
It is well-settled that the closure of a bank
grounded on practical and legal
may be considered as an exercise of police
considerations to prevent unwarranted
power. The action of the MB on this matter
dissipation of the bank's assets and as a
is fnal and executory. Such exercise may Corporation are corporations engaged in the
nonetheless be subject to judicial inquiry business of developing
and can be set aside if found to be in excess residential subdivisions.Top Management
of jurisdiction or with such grave abuse of and Pilar Development obtained several
discretion as to amount to lack or excess of loans from Banco Filipino all secured by real
jurisdiction. estate mortgage in their various properties
In Banco Filipino, we ruled that an in Cavite.
"examination [conducted] by the head of The Monetary Board by Ramon Tiaoqui,
the appropriate supervising or examining Special Assistant to the Governor and Head,
department or his examiners or agents into SES Department III submitted a report
the condition of the bank" is necessary finding that the bank is insolvent and
before the MB can order its closure. recommending the appointment of a
However, RA 265, including Section 29 receiver. The Monetary Board, based on
thereof, was expressly repealed by RA 7653 the Tiaoqui report, issued a resolution
which took effect in 1993. Resolution No. finding Banco Filipino insolvent and placing
105 was issued on January 21, 2000. Hence, it under receivership. Subsequently, the
petitioners' reliance on Banco Filipino which Monetary Board issued another resolution
was decided under RA 265 was misplaced. placing the bank under liquidation and
The lawmakers could have easily retained designated a liquidator. By virtue of her
the word "examination" (and in the process authority as liquidator, Valenzuela
also preserved the jurisprudence attached appointed the law firm of Sycip, Salazar, et
to it) but they did not and instead opted to al. to represent Banco Filipino in all
use the word "report." The insistence on an litigations.
examination is not sanctioned by RA 7653. Banco Filipino filed the petition for certiorari
SECOND ISSUE: YES. questioning the validity of the resolutions
The absence of an examination before the issued by the Monetary Board authorizing
closure of RBSM did not mean that there the receivership and liquidation of Banco
was no basis for the closure order. Filipino.A temporary restraining order was
MB had sufficient basis to arrive at a sound issued enjoining the respondents from
conclusion that there were grounds that executing further acts of liquidation of the
would justify RBSM's closure. It relied on bank. However, acts and other transactions
the report of Mr. Domoong, the head of the pertaining to normal operations of a bank
supervising or examining department, with are not enjoined. Subsequently, Top
the findings that: (1) RBSM was unable to Management and Pilar Development failed
pay its liabilities as they became due in the to pay their loans on the due date. Hence,
ordinary course of business and (2) that it the law firm of Sycip, Salazar, et al. acting as
could not continue in business without counsel for Banco Filipino under authority
incurring probable losses to its depositors of the liquidator, applied for extra-judicial
and creditors. foreclosure of the mortgage over Top
BANCO FILIPINO SAVINGS AND MORTGAGE Management and Pilar Development’s
BANK VS. MB **nicopy ra ko online kay dli properties. Thus, the Ex-Officio Sheriff of
ko kamao unsaon huhu sarreh* the Regional Trial Court of Cavite issued a
Facts: Top Management Programs notice of extra-judicial foreclosure sale of
Corporation and Pilar Development the properties. Top Management and Pilar
Development filed 2 separate petitions for requires, order its liquidation and appoint
injunction and prohibition with the a liquidator who shall take over and
respondent appellate court seeking to continue the functions of receiver previously
enjoin the Regional Trial Court of Cavite, the appointed by Monetary Board. The liquid for
ex-officio sheriff of said court and Sycip, may, in the name of the bank and with the
Salazar, et al. from proceeding with assistance counsel as he may retain,
foreclosure sale which were subsequently institute such actions as may necessary in
dismissed by the court. Hence this petition the appropriate court to collect and recover
Issue/s: 1) Whether or not the liquidator a counts and assets of such institution or
has the authority to prosecute as well as to defend any action ft against the institution.
defend suits and to foreclose mortgages for Pendency of the case did not diminish the
and behalf of the bank while the issue on powers and authority of the designated
the validity of the receivership and liquidator to effectuate and carry on the
liquidation is still pending resolution. administration of the bank. The Court did
2) Whether or not the closure of the not prohibit however acts a as receiving
bank based on the Tiaoqui report is correct. collectibles and receivables or paying off
Ruling: credits claims and other transactions
1) Whether or not the liquidator has the pertaining to normal operate of a bank.
authority to prosecute as well as to defend There is no doubt that the prosecution of
suits and to foreclose mortgages for and suits collection and the foreclosure of
behalf of the bank while the issue on the mortgages against debtors the bank by the
validity of the receivership and liquidation is liquidator are among the usual and ordinary
still pending resolution. transactions pertaining to the
Section 29 of the Republic Act No. 265, as administration of a bank.
amended known as the Central Bank 2) Whether or not the closure of the bank
Act, provides that when a bank is forbidden based on the Tiaoqui report is correct.
to do business in the Philippines and placed Clearly, Tiaoqui based his report on an
under receivership, the person designated incomplete examination of petitioner bank
as receiver shall immediately take charge of and outrightly concluded therein that the
the bank’s assets and liabilities, as latter’s financial status was one of
expeditiously as possible, collect and gather insolvency or illiquidity. In the instant case,
all the assets and administer the same for the basic standards of substantial due
the benefit of its creditors, and represent process were not observed. Time and again,
the bank personally or through counsel as We have held in several cases, that the
he may retain in all actions or proceedings procedure of administrative tribunals must
for or against the institution, exercising all satisfy the fundamentals of fair play and
the powers necessary for these purposes that their judgment should express a well-
including, but not limited to, bringing and supported conclusion.The test of insolvency
foreclosing mortgages in the name of the laid down in Section 29 of the Central Bank
bank. If the Monetary Board shall later Act is measured by determining whether
determine and confirm that banking the realizable assets of a bank are leas than
institution is insolvent or cannot resume its liabilities. Hence, a bank is solvent if the
business safety to depositors, creditors and fair cash value of all its assets, realizable
the general public, it shall, public interest within a reasonable time by a reasonable
prudent person, would equal or exceed its Petitioner Rural Bank's position is to the
total liabilities exclusive of stock liability; but effect that due process was not observed by
if such fair cash value so realizable is not the Monetary Board before said bank was
placed under receivership. Said Rural Bank
sufficient to pay such liabilities within a
claimed that it was not given the chance to
reasonable time, the bank is insolvent. deny and disprove such claim of insolvency
Examination appraises the soundness of the and/or any other ground which the Monetary
institution’s assets, the quality and Board used in justification of its action.
character of management and determines
the institution’s compliance with laws, rules ISSUE:
and regulations. Audit is a detailed Whether Section 30 and applicable
jurisprudence require a current and complete
inspection of the institution’s books,
examination of the bank before it can be
accounts, vouchers, ledgers, etc. to closed and placed under receivership
determine the recording of all assets and
liabilities. Hence, examination concerns RULING:
itself with review and appraisal, while audit Under Section 29 of the Central Bank Act the
concerns itself with verification. following are the mandatory requirements to
be complied with before a bank found to be
insolvent is ordered closed and forbidden to
Rural Bank of San Miguel vs do business in the Philippines:
Monetary Board
Firstly, an examination shall be conducted by
FACTS: the head of the appropriate supervising or
examining department or his examiners or
A general examination of the bank’s affairs agents into the condition of the bank;
and operations was conducted and was found secondly, it shall be disclosed in
by the Rural Banks and Savings and Loan
Association (DRBSLA) to have massive However, RA 265, including Section 29
irregularities in its operations consisting of thereof, was expressly repealed by RA 7653
loans to unknown and fictitious borrowers. which took effect in 1993. Resolution No. 105
was issued on January 21, 2000.
Odra, the Director of DRBSLA submitted a
report recommending to the Monetary Board In RA 7653, only a "report of the head of the
of the Central Bank the placing of Buhi under supervising or examining department" is
receivership necessary.

Petitioner’s arguments: Verba legis

Petitioners argue that Resolution No. 105 was The word "report" has a definite and
bereft of any basis considering that no unambiguous meaning which is clearly
complete examination had been conducted different from "examination."
before it was issued.
A report, as a noun- "something that gives
Petitioners assert that an examination is information" or "a usually detailed account or
necessary and not a mere report, otherwise statement."
the decision to close a bank would be
arbitrary. An examination is "a search, investigation or
scrutiny."
From the words used in Section 30, it is clear (SES), Department II, of the Central Bank (CB)
that RA 7653 no longer requires that an "that the financial condition of Triumph
examination be made before the MB can issue Savings Bank (TSB) is one of insolvency and
a closure order. its continuance in business would involve
probable loss to its depositors and creditors,"
The purpose of the law is to make the closure MB issued a resolution ordering the closure of
of a bank summary and expeditious in order TSB and forbidding it from doing business
to protect public interest. This is also why placing it under receivership.
prior notice and hearing are no longer
required before a bank can be closed. Petitioners claim that it is the essence of Sec.
29 of R.A. 265 that prior notice and hearing in
The absence of an examination before the cases involving bank closures should not be
closure of RBSM did not mean that there was required since in all probability a hearing
no basis for the closure order. Needless to say, would not only cause unnecessary delay but
the decision of the MB and BSP, like any other also provide bank "insiders" and stockholders
administrative body, must have something to the opportunity to further dissipate the
support itself and its ndings of fact must be bank's resources, create liabilities for the
supported by substantial evidence. But it is bank up to the insured amount of P40,000.00,
clear under RA 7653 that the basis need not and even destroy evidence of fraud or
arise from an examination as required in the irregularity in the bank's operations to the
old law. prejudice of its depositors and creditors.

Petitioners further argue that the legislative


intent of Sec. 29 is to repose in the Monetary
It relied on the report of Mr. Domo- ong, the Board exclusive power to determine the
existence of statutory grounds for the closure
head of the supervising or examining and liquidation of banks, having the required
department expertise and specialized competence to do
so.

ISSUE: May the Monetary Board resolution


placing a private bank under receivership be
annulled on the ground of lack of prior notice
and hearing?

RULING:

The fourth paragraph, which was then in


effect at the time the action was commenced,
allows the filing of a case to set aside the
actions of the Monetary Board which are
tainted with arbitrariness and bad faith.

Contrary to the notion of private respondent,


Central Bank vs CA Sec. 29 does not contemplate prior notice and
hearing before a bank may be directed to stop
operations and placed under receivership.
FACTS: When par. 4 (now par. 5, as amended by E.O.
Based on examination reports submitted by 289) provides for the filing of a case within
the Supervision and Examination Sector ten (10) days alter the receiver takes charge
of the assets of the bank, it is unmistakable Bank owns a parcel of land and began
that the assailed actions should precede the constructing a building on it but was unable
filing of the case. Plainly, the legislature could to finish the construction due to financial
not have intended to authorize "no prior difficulties.
notice and hearing" in the closure of the bank
and at the same time allow a suit to annul it BSP ordered the closure of the bank and
on the basis of absence thereof. placed it under receivership. CB ordered its
liquidation.
In the early case of Rural Bank of Lucena, Inc.
v. Area [1965], 17 We held that a previous President of the bank, Puyat, in a bid to save
hearing is nowhere required in Sec. 29 nor the bank’s investment, started scouting for
does the constitutional requirement of due possible investors who could finance the
process demand that the correctness of the completion of the building.
Monetary Board's resolution to stop
operation and proceed to liquidation of first A group of investors Laureano group, wrote
adjudged before making the resolution Vicente G. Puyat offering to lease the building
effective. It is enough that a subsequent for ten (10) years and to advance the cost to
judicial review be provided. complete the same, with the advanced cost to
be amortized and offset against rental
It may be emphasized that Sec. 29 does not payments during the term of the lease.
altogether divest a bank or a non-bank Likewise, the letter-offer stated that in
financial institution placed under consideration of advancing the construction
receivership of the opportunity to be heard cost, the group wanted to be given the
and present evidence on arbitrariness and "exclusive option to purchase" the building
bad faith because within ten (10) days from and the lot on which it was constructed.
the date the receiver takes charge of the
assets of the bank, resort to judicial review Since no disposition of assets could be made
may be had by filing an appropriate pleading due to the litigation concerning Manila Bank's
with the court. Respondent closure, an arrangement was thought of
whereby the property would rst be leased to
Manila Equities Corporation (MEQCO, for
The procedure prescribed in Sec. 29 is truly brevity), a wholly-owned subsidiary of Manila
designed to protect the interest of all Bank, with MEQCO thereafter subleasing the
concerned, i.e., the depositors, creditors and property to the Laureano group.
stockholders, the bank itself, and the general
public, and the summary closure pales in Plaintiff Abacus prayed for a judgment
comparison to the protection afforded public ordering Manila Bank, inter alia, to sell,
interest. At any rate, the bank is given full transfer and convey unto it for
opportunity to prove arbitrariness and bad P150,000,000.00 the land and building in
faith in placing the bank under receivership, dispute "free from all liens and
in which event, the resolution may properly encumbrances", plus payment of damages
nullified and the receivership lifted as the trial and attorney's fees.
court may determine.
Abacus vs Manila Banking Petitioner insists that the option to purchase
the lot and building in question granted to it
Corp by the late Puyat, then acting president of
Manila Bank, was binding upon the latter.
FACTS:
ISSUE:
WHETHER ABACUS HAS ACQUIRED THE
RIGHT TO PURCHASE THE LOT AND
BUILDING IN QUESTION VILLANUEVA vs CA
FACTS: This case involves two parcels of
RULING:
land owned by the spouse Villanueva.
Manila Bank was under receivership at the Miguela Villanueva sought the help of one
time Puyat granted the "exclusive option to Jose Viudez, then officer-in charge of the
purchase" to the Laureano group of investors. PVB branch in Makati if she could obtain a
Therefore, Puyat was without authority to loan from said bank. Jose told Miguela to
grant the exclusive option to purchase the lot surrender the titles of said lots as
and building in question.
collaterals. In connivance with one Andres
. . . the assets of the bank pass beyond its Sebastian, they were able to convince
control into the possession and control of the Miguela to execute a deed of sale covering
receiver whose duty it is to administer the the two disputed lots. Miguela however
assets for the benefit of the creditors of the never got the loan she was expecting.
bank. Thus, the appointment of a receiver Thereafter, new titles were issued to Jose
operates to suspend the authority of the bank Viudez. It was then transferred in the name
and of its directors and officers over its of Andres Sebastian until finally new titles
property and effects, such authority being
reposed in the receiver, and in this respect,
were issued in the name of PVB after the
the receivership is equivalent to an injunction lots were foreclosed for failure to pay the
to restrain the bank officers from loan granted in the name of Andres
intermeddling with the property of the bank Sebastian.
in any way.
With respondent bank having been already Ong, on the other hand, expounds on his
placed under receivership, its officers, claim over the lots and said that he offered
inclusive of its acting president, Vicente G.
to purchase two pieces of land that had
Puyat, were no longer authorized to transact
business in connection with the bank's assets been acquired by PVB through foreclosure.
and proper While appellant was still abroad, PVB
approved his subject offer. It was only
Clearly, the receiver appointed by the Central around mid of 1985 when Ong returned to
Bank to take charge of the properties of the country that he was informed that the
Manila Bank only had authority to administer same had already been approved. PVB was
the same for the bene t of its creditors.
placed under receivership and later under
Granting or approving an "exclusive option to
purchase" is not an act of administration, but liquidation. However, prior to that, PVB was
an act of strict ownership, involving, as it placed under receivership and later under
does, the disposition of property of the bank. liquidation.
Not being an act of administration, the so-
called "approval" by Atty. Renan Santos ISSUE: Who between Villanueva and Ong
amounts to no approval at all, a bank receiver has the better right over the two parcels of
not being authorized to do so on his own. land?
For sure, Congress itself has recognized that a
bank receiver only has powers of RULING: The Villanueva. There is no doubt
administration. that the approval of Ong’s offer constitutes
an acceptance. However, he did not receive
any notice of the approval of the offer. It Pacific Banking Corp was placed under
was only sometime when he returned from Recievership and then placed under
the US. It must be recalled that the OVB was liquidation.
placed under receivership. PVB was then
(Union for short), petitioner in G.R. No.
prohibited from doing business in the 109373, led a complaint-in-intervention
Philippines. Under Article 1323 of the CC, an seeking payment of holiday pay, 13th month
offer becomes ineffective upon the xxx pay differential, salary increase differential,
insolvency of either party before Christmas bonus, and cash equivalent of Sick
acceptance is conveyed. Leave Benefits due its members as employees
of PaBC.
It has been said that where upon the
In his order of February 10, 1992, respondent
insolvency of a bank a receiver therefor is judge disallowed the Liquidator's Notice of
appointed, the assets of the bank pass Appeal on the ground that it was late, i.e.,
beyond its control into the possession and more than 15 days after receipt of the
control of the receiver whose duty it is to decision. The judge declared his September
administer the assets for the benefit of the 13, 1991 order and subsequent orders to be
creditors of the bank. Thus, the final and executory and denied
appointment of a receiver operates to reconsideration.
suspend the authority of the bank and of its Ang Keong Lan and E.J. Ang Int'l., private
directors and officers over its property and respondents in G.R. No. 112991, likewise
effects. In a nutshell, the insolvency of a filed claims for the payment of investment in
bank and the consequent appointment of a the PaBC allegedly in the form of shares of
receiver restrict the bank’s capacity to act stocks
especially in relation to its property.
Applying Article 1323, Ong’s offer to ISSUE:
Whether a petition for liquidation, is a special
purchase the subject lots became
proceeding or an ordinary civil action
ineffective because the PVB became
insolvent before the bank’s acceptance of If special proceeding- 30 days; notice + record
the offer came to his knowledge. of appeal
If ordinary civil action- 15 days; only notice of
appeal

Action- an ordinary suit in a court of justice,


by which one party prosecutes another for
the enforcement or protection of a right, or
the prevention or redress of a wrong; formal
demand of a right by one against the other

Special proceeding distinguished- every


other remedy, including one to establish the
status or right of a party or a particular fact,
shall be by special proceeding; a petition for a
Pacific Banking Corp vs CA declaration of a status, right or fact.

FACTS:
RULING:
filed a notice of appeal and a motion for
A petition for liquidation of an insolvent extension to file a record appeal on December
corporation should be classified a special 10, 1991, i.e., within 30 days of his receipt of
proceeding and not an ordinary action. Such the order granting the Union's claim. Without
petition does not seek the enforcement or waiting for the resolution of his motion for
protection of a right nor the prevention or extension, he filed on December 20, 1991
redress of a wrong against a party. It does not within the extension sought a record on
pray for affirmative relief for injury arising appeal. Respondent judge thus erred in
from a party's wrongful act or omission nor disallowing the notice on appeal and
state a cause of action that can be enforced
against any person. A liquidation proceedings do not resemble
petitions for interpleader. For one, an action
What it seeks is merely a declaration by the for interpleader involves claims on a subject
trial court of the corporation's insolvency so matter against a person who has no interest
that its creditors may be able to file their therein. 12 This is not the case in a liquidation
claims in the settlement of the corporation's proceeding where the Liquidator, as
debts and obligations. Put in another way, the representative of the corporation, takes
petition only seeks a declaration of the charge of its assets and liabilities for the bene
corporation's debts and obligations. Put in t of the creditors. 13 He is thus charged with
another way, the petition only seeks a insuring that the assets of the corporation are
declaration of the corporation's state of paid only to rightful claimants and in the
insolvency and the concomitant right of order of payment provided by law.
creditors and the order of payment of their
claims in the disposition of the corporation's Rather, a liquidation proceeding resembles
assets. the proceeding for the settlement of estate of
deceased persons under Rules 73 to 91 of the
In G.R. No. 112991 (the case of the Rules of Court. The two have a common
Stockholders/Investors), the Liquidator's purpose: the determination of all the assets
notice of appeal was filed on time, having and the payment of all the debts and liabilities
been led on the 23rd day of receipt of the of the insolvent corporation or the estate. The
order granting the claims of the Liquidator and the administrator or executor
Stockholders/Investors. However, the are both charged with the assets for the bene
Liquidator did not file a record on appeal with t of the claimants. In both instances, the
the result that he failed to perfect his appeal. liability of the corporation and the estate is
As already stated, a record on appeal is not disputed. The court's concern is with the
required under the Interim Rules and declaration of creditors and their rights and
Guidelines in special proceedings and for the determination of their order of payment.
cases where multiple appeals are allowed.
The reason for this is that the several claims
are actually separate ones and a decision or
final order with respect to any claim can be
appealed. Necessarily the original record on
appeal must remain in the trial court where
other claims may still be pending.

On the other hand, in G.R. No. 109373 (case of


the Labor Union), we find that the Fifth
Division correctly granted the Liquidator's
Petition for Certiorari, Prohibition and PNB vs Vega
Mandamus. As already noted, the Liquidator
On the opposite end of the spectrum is
rehabilitation which connotes a reopening or
FACTS:
reorganization. Rehabilitation contemplates a
In 1985, Central Bank filed a Petition for
continuance of corporate life and activities in
Assistance in the Liquidation of the Philippine
an effort to restore and reinstate the
Veterans Bank
corporation to its former position of
successful operation and solvency.
In 1992, Congress enacted Republic Act No.
7169 providing for the rehabilitation of the
It is crystal clear that the concept of
Philippine Veterans Bank.
liquidation is diametrically opposed or
contrary to the concept of rehabilitation, such
Despite the legislative mandate for
that both cannot be undertaken at the same
rehabilitation and reopening of PVB,
time. To allow the liquidation proceedings to
respondent judge continued with the
continue would seriously hinder the
liquidation proceedings of the bank.
rehabilitation of the subject bank.
Moreover, petitioners

Vivas vs Monetary Board and


ISSUE: PDIC
May a liquidation court continue with
liquidation proceedings of the Philippine
Veterans Bank (PVB) when Congress had FACTS:
mandated its rehabilitation and reopening?
After extending the corporate life of the bank
Petitioners argue that with the passage of R.A. and after changing its name, the Integrated
7169, the liquidation court became functus Supervision Department II (ISD II) of the BSP
officio, and no longer had the authority to conducted a general examination on ECBI
continue with liquidation proceedings. (EuroCredit Community Bank, Incorporated).

ISD conducted a general examination on ECBI,


RULING: and then an exit conference was held at the
BSP during which the BSP officials and
The Court was with the Petitioners. examiners apprised Vivas, the Chairman and
President of ECBI of the advance findings
The enactment of Republic Act No. 7169, as noted during the examination.
well as the subsequent developments has
rendered the liquidation court functus offcio. Thereafter, the Monetary Board placed ECBI
Consequently, respondent judge has been under Prompt Corrective Action (PCA)
stripped of the authority to issue orders framework because of their negative capital
involving acts of liquidation. of P14.674 million and serious supervisory
concerns particularly on activities seemed
Liquidation, in corporation law, connotes a unsafe or unsound.
winding up or settling with creditors and
debtors.9 It is the winding up of a corporation Vivas moved for a reconsideration on the
so that assets are distributed to those entitled grounds of non- observance of due process
to receive them. It is the process of reducing and arbitrariness.
assets to cash, discharging liabilities and
dividing surplus or loss. Vivas’s arguments:
Vivas submits that the respondents in the banking system deteriorate to the
committed grave abuse of discretion when prejudice of the national economy.
they erroneously applied Section 30 of R.A.
No. 7653, instead of Sections 11 and 14 of the ECBI was given every opportunity to be heard
Rural Bank Act of 1992 or R.A. No. 7353. He and improve on its financial standing. The
argues that despite the deficiencies, records disclose that BSP officials and
inadequacies and oversights in the conduct of examiners met with the representatives of
the affairs of ECBI, it has not committed any ECBI, including Vivas, and discussed their
financial fraud and, hence, its placement findings. There were also reminders that ECBI
under receivership was unwarranted and submit its financial audit reports for the years
improper. 2007 and 2008 with a warning that failure to
submit them and a written explanation of
He contends that the implementation of the such omission shall result in the imposition of
questioned resolution was tainted with a monetary penalty. 35 More importantly,
arbitrariness and bad faith, stressing that ECBI was heard on its motion for
ECBI was placed under receivership without reconsideration. For failure of ECBI to comply,
due and prior hearing in violation of his and the MB came out with Resolution No. 1548
the bank's right to due process. denying its request for reconsideration of
Resolution No. 726. Having been heard on its
Lastly, Vivas assails the constitutionality of motion for reconsideration, ECBI cannot
Section 30 of R.A. No. 7653 claiming that said claim that it was deprived of its right under
provision vested upon the BSP the unbridled the Rural Bank Act.
power to close and place under receivership a
hapless rural bank instead of aiding its
financial needs. He is of the view that such ***Due process does not necessarily require a
power goes way beyond its constitutional prior hearing; a hearing or an opportunity to
limitation and has transformed the BSP to a be heard may be subsequent to the closure.
sovereign in its own "kingdom of banks."
Accordingly, the MB can immediately
ISSUE: implement its resolution prohibiting a
Whether the Monetary Board committed banking institution to do business in the
grave abuse of discretion for the issuance of Philippines and, thereafter, appoint the PDIC
Resolution No. 276 as receiver. The procedure for the involuntary
closure of a bank is summary and expeditious
in nature. Such action of the MB shall be final
RULING: NO. and executory, but may be later subjected to a
judicial scrutiny via a petition for certiorari to
be filed by the stockholders of record of the
Close Now, Hear Later Doctrine bank representing a majority of the capital
stock.
The doctrine is founded on practical and legal
considerations to obviate unwarranted
dissipation of the bank's assets and as a valid
exercise of police power to protect the
depositors, creditors, stockholders, and the
general public.40 Swift, adequate and
determined actions must be taken against
financially distressed and mismanaged banks
by government agencies lest the public faith
Domingo Manalo vs CA
RULING:

FACTS: The pertinent portion of Section 29 states:


". . . The liquidator designated as hereunder
Vargas obtained a loan of 3M from the bank provided shall, by the Solicitor General, file a
and defaulted in paying so the bank instituted petition in the Regional Trial Court reciting
extrajudicial foreclosure proceeding over the the proceedings which have been taken and
mortgaged lots. Bank tendered the highest praying the assistance of the court in the
bid. For failure of Vargas to redeem, title was liquidation of such institution. The court
consolidated in the bank’s name. shall have jurisdiction in the same
proceedings to assist in the adjudication of
Central Bank filed a petition for assistance in disputed claims against the bank or non-
the liquidation of the respondent bank with bank financial intermediary performing
the RTC. quasi-banking functions and the enforcement
of individual liabilities of the stockholders
Vargas tried to repurchase the property but and do all that is necessary to preserve the
failed because of he cannot afford the assets of such institution and to implement
appraised value. Bank then filed with the RTC the liquidation plan approved by the
an Ex-Parte Petition for Issuance of Writ of Monetary Board. . . ." 2(emphasis supplied.)
Possession.
The legal provision only finds operation in
During the pendency of the case for the cases where there are claims against an
issuance of a writ of possession, Vargas insolvent bank. In fine, the exclusive
executed a deed of absolute sale to Armando jurisdiction of the liquidation court pertains
who the assigned his rights to Manalo., herein only to the adjudication of claims against the
Petitioner. bank. It does not cover the reverse situation
where it is the bank which files a claim
Petitioner’s arguments: against another person or legal entity.

Petitioner postulates that the lower court The requirement that all claims against the
should have dismissed respondent's "Ex-Parte bank be pursued in the liquidation
Petition for Issuance of Writ of Possession" proceedings filed by the Central Bank is
for want of jurisdiction over the subject intended to prevent multiplicity of actions
matter of the claim. The power to hear the against the insolvent bank and designed to
same, he insists, exclusively vests with the establish due process and orderliness in the
Liquidation Court pursuant to Section 29 of liquidation of the bank, to obviate the
Republic Act No. 265, otherwise known as proliferation of litigations and to avoid
The Central Bank Act. injustice and arbitrariness.

He then cites our decision in Valenzuela v. Petitioner next casts doubt on the capacity of
Court of Appeals, where we held that "if there the respondent to continue litigating the
is a judicial liquidation of an insolvent bank, petition for the issuance of the writ. He
all claims against the bank should be filed in asserts that, being under liquidation,
the liquidation proceeding." For going to respondent bank is already a "dead"
another court can be considered forum corporation that cannot maintain the suit in
shopping.
the RTC. Hence, no writ may be issued in its
favor.

The argument is devoid of merit. A bank


which had been ordered closed by the
monetary board retains its juridical
personality which can sue and be sued
through its liquidator. The only limitation
being that the prosecution or defense of the
action must be done through the liquidator.

That the law allows a bank under liquidation


to participate in an action can be clearly
inferred from the third paragraph of the same
Section 29 of The Central Bank Act earlier
quoted, which authorizes or empowers a
liquidator to institute actions, thus:

". . . and he (liquidator) may in the name of


the bank or non-bank financial intermediary
performing quasi-banking functions and with
the assistance of counsel as he may retain,
institute such actions as may be necessary
in the appropriate court to collect and
recover accounts and assets of such
institution or defend any action filed against
the institution."

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