June 30, 1987
parte motion for execution of the default judgment, which the lower court granted in an
G.R. No. L-48955
BERNARDO BUSUEGO, petitioner,
vs.
HONORABLE COURT OF APPEALS, JOSE LAZARO, ROMEO LAZARO and VIVENCIO
LOPEZ, respondents.
Roque O. Santos for petitioner.
Oliver O. Lozano for respondents.
FELICIANO, J.:
In this petition for review on certiorari, petitioner asks us to set aside the decision of the
Court of Appeals in CA-G.R. No. SP-06556, declaring null and void the judgment by default
and the orders issued by the Court of First Instance of Pasig 1 in Civil Case No. 18860.
On 20 January 1974, petitioner Bernardo Busuego commenced action 2 before the Pasig
Court of First Instance against Jose Lazaro, Romeo Lazaro, Ernesto Lazaro, and Vivencio Lopez
(three of whom are respondents herein), to recover possession of a parcel of land and a
three (3) unit apartment house standing thereon, situated at No. 260-A. Bonifacio Avenue,
Bo. Jesus de la Pena Marikina, Rizal.
Immediately thereafter, summons was issued in the name of the four defendants and per
sheriff's return, was personally served at the address given in the complaint, upon the
defendants "through [defendant] Dr. Ernesto Lazaro, personally."
On 13 February 1974, defendants, through Atty. Gerardo B. Roldan, Jr., filed a motion for an
extension of fifteen (15) days to file answer, stating that "his [Atty. Roldan's] services was
(sic) secured by the defendants formally only the other day," and that he "need[ed] sufficient
time to study the case, before filing any responsive pleading or pleadings." 3 The motion was
granted by the lower court in an order dated 6 March 1974.
On 28 February 1974, defendants through Atty. Roldan asked for another extension of ten
(10) days to answer, as "[Atty. Roldan] has not yet conferred with all of [the four (4)
defendants] which [was] necessary before any responsive pleading [could be] filed by
him." 4 The lower court granted this second extension in an order dated 14 March 1974.
Notwithstanding the extensions granted, no answer was filed by the defendants, for which
reason, and upon motion of plaintiff Busuego, the lower court declared the defendants in
default in an order dated 20 May 1974. Subsequently, plaintiff's case was heard and his
evidence received, and on the basis of that evidence the trial court rendered its decision 5 on
26 August 1974 in favor of the plaintiff.
Almost two years later, on 12 July 1976, plaintiff filed before the lower court an ex
order dated 18 August 1976.
On 3 September 1976, Romeo Lazaro, one of the defendants and a respondent herein, "on
his [own] behalf and on behalf of other defendants," filed a motion to hold execution in
abeyance praying that "for humanitarian reasons, an extension of 30 days, within which to
vacate the premises [be allowed] to give them sufficient time to look for another place where
the five families composed mostly of little children, can reside. 6
On 18 September 1976, the lower court granted Romeo's motion and accordingly, the
execution of the default judgment was held in abeyance.
On 28 September 1976, the defendants through Atty. Roldan filed with the lower court a
motion for reconsideration of the judgment by default and/or to dissolve the writ of
execution, solely on the ground that neither the defendants nor their counsel were ever
furnished a copy of the judgment by default. This motion was verified by Romeo Lazaro who
described himself as "one of the defendants in the-case" and as "representing them [the
defendants] in the instant pleadings (sic]," and stated that "we [the defendants] have caused
the filing of this motion, have read the contents thereof and that all the allegations [therein]
are true and correct to the best of our knowledge and belief " 7(Italics and brackets supplied).
Upon opposition of petitioner, the lower court denied the motion by order of 11 October
1976, finding the above-motion to be purely dilatory in nature and plain harassment on the
part of the defendants.
On 3 November 1976, the respondents, through their new counsel, Atty. Oliver Lozano, filed
with the same court an omnibus motion, which included a motion to lift the order of default,
a second motion for reconsideration and a motion to quash the writ of execution issued
pursuant to the default judgment, alleging for the first time that their failure to answer was
due to lack of notice.
Petitioner opposed vigorously the above motion contending that, the defendants could not
pretend absence of proper notice after they, through counsel, had filed the two motions for
extension of time to answer.
On 27 December 1976, the lower court denied the omnibus motion, holding the motion for
extension of time to vacate filed by respondent Romeo Lazaro for all the defendants to be
equivalent to waiver of service of summons.
On 10 January 1977, defendants, through their new counsel, filed what in effect was a third
motion for reconsideration of the judgment by default, alleging that: the lower court never
acquired jurisdiction over their persons because of lack of proper service of summons; and
that the motion for extension of time to vacate the premises, filed by their co-defendant
Romeo Lazaro, after the judgment by default had become executory, was not equivalent to
waiver of summons.
The third motion for reconsideration having been denied, defendants brought a petition for
certiorari before the Court of Appeals, asserting that the orders, judgment and writs
complained of were all void for want of jurisdiction over their persons.
On 13 July 1978, the Court of Appeals promulgated its decision, 8 basically upholding the
respondents' contention and providing, in its dispositive portion, as follows:
WHEREFORE, this Court hereby renders judgment as follows:
(a) insofar as the petitioner Ernesto Lazaro is concerned, dismissing the petition; and
(b) insofar as the petitioners Romeo Lazaro, Jose Lazaro and Vivencio Lopez, are concerned,
granting the petition and the writs prayed for, declaring null and void the order of default,
judgment by default, order of execution, writ of execution, notice to vacate, order of
December 27, 1976, and order of March 21, 1977, issued in Civil Case No. 18860 of the court
below (Annexes B, D, E, I and M, petition, and Annexes 6-A and 9, answer), and making
permanent the restraining order heretofore issued in these proceedings.
Hence, the petition before us.
In their respective briefs, the parties posed the following issues:
1. whether or not there was a valid service of summons upon the persons of respondents
Romeo Lazaro, Jose Lazaro and Vivencio Lopez.
2. whether or not there was voluntary appearance by the respondents as defendants below,
through Atty. Gerardo B. Roldan and their co-respondent Romeo Lazaro.
The issues raised may be further simplified into whether or not jurisdiction was lawfully
acquired by the court a quoover the persons of the respondents Jose Lazaro, Romeo Lazaro
and Vivencio Lazaro.
Basically, there are two (2) ways by which a court acquires jurisdiction over the person of the
defendant or respondent: (a) by service of summons upon the defendant; and (b) by
voluntary appearance of the defendant in court and his submission to its authority.
With respect to service of summons, the Revised Rules of Court prescribe that a copy of the
summons be served personally upon the defendant by "handing him a copy thereof in person
or if he refuses to receive it, by tendering it to him. 9 Personal service, however, may be
dispensed with and substituted service may be availed of if the defendant cannot be served
personally "within a reasonable time." 10
In the present case, it appears that the sheriff had availed of substituted service in seeking to
serve the summons upon all the defendants by serving a copy thereof "through Dr. Ernesto
Lazaro personally." Perusal, however, of the sheriff's return 11 reveals that the sheriff failed
to specify therein what prior efforts, if any, had been exerted to serve summons upon the
other defendants personally within a reasonable period of time, and the lack of success of
such efforts, before proceeding to substituted service. Such specification in the sheriff's
return is essential for enforcement of the rule under the Revised Rules of Court that
substituted service may be resorted to only where it is not possible to serve the defendant or
defendants promptly in person. As this Court ruled in Keister vs. Navarro. 12
[T]he impossibility of prompt service in person should be shown by stating the efforts made to
find the defendant personally and the fact that such efforts failed This statement should be
made in the proof of service. This is necessary because substituted service is in derogation of
the usual method of service. —
We therefore uphold the respondent appellate court's finding that, while Ernesto Lazaro was
validly served, with respect to respondents Jose Lazaro, Romeo Lazaro and Vivencio Lopez,
there was no valid service of summons effected. We are, nonetheless, unable to sustain its
conclusion that the trial court never acquired jurisdiction over the persons of the said
respondents.
As earlier noted, jurisdiction over the person of the defendant can also be acquired by his
voluntary appearance in court and his submission to its authority, for voluntary appearance is
equivalent to service of summons. 13
As long ago as 1918, the essence of voluntary appearance was explained by this Court
through Mr. Justice Johnson in Flores vs. Zurbito, 14 as follows:
A voluntary appearance is a waiver of the necessity of a formal notice. An appearance in
whatever form, without explicitly objecting to the jurisdiction of the court over the person is a
submission to the jurisdiction of the court over the person. While the formal method of
entering an appearance in a cause pending in the courts is to deliver to the clerk a written
direction ordering him to enter the appearance of the person who subscribes it, an
appearance may be made by simply filing a formal motion, or plea or answer. This formal
method of appearance is not necessary. He may appear without such formal appearance and
thus submit himself to the jurisdiction of the court. He may appear by presenting a motion,
for example, and unless by such appearance he specifically objects to the jurisdiction of the
court, he thereby gives his assent to the jurisdiction of the court over his person. When the
appearance is by motion objecting to the jurisdiction of the court over his person, it must be
for the sole and separate purpose of objecting to the jurisdiction of the court. If his motion is
for any other purpose than to object to the jurisdiction of the court over his person he thereby
submits himself to the jurisdiction of the court. . . .
In the case before us, the defendants appeared before the trial court a number of times
without raising any objection to the improper service of summons: (1) the defendants,
through Atty. Gerardo Roldan, appeared in court and filed two successive motions for
extension of time to file an answer to the complaint; (2) more than two years after rendition
of the judgment by default by the trial court, defendants, through their co-defendant Romeo
Lazaro, filed a motion for extension of time within which to vacate the premises involved and
to look for another place to live in, raising no question concerning the jurisdiction of the trial
court over the persons of the defendants; and (3) the defendants, through their counsel Atty.
Roldan, moved for reconsideration of the judgment of the trial court and for dissolution of
the writ of execution, again without contesting the jurisdiction of the court over their
persons. We hold that by anyone or more of these acts, and certainly by the whole series of
acts, the defendants, respondents herein, effectively waived the initial lack of jurisdiction
over their persons and submitted to the authority of the trial court.
The respondents assert that only voluntary appearance during trial is equivalent to waiver of
service, and that therefore, the motion for extension of time within which to vacate the
premises filed by Romeo Lazaro after trial and after rendition of judgment, was not
equivalent to waiver of Summons.
We are not persuaded by this argument of the respondents. In Soriano vs. Palacio, 15 this
Court, speaking through Mr. Justice J.B.L. Reyes, held that:
Assuming, arguendo, that the court below originally did not acquire jurisdiction over
petitioner Soriano, the latter certainly submitted to it when he filed his first motion for
reconsideration and for annulment of previous proceedings on 14 March 1960. Therefore, the
denial of that motion, by the order of 19 March 1960, was binding on petitioner Soriano.
The respondents also cite a joint affidavit dated 5 February 1977 executed by some of them:
Jose Lazaro, Ernesto Lazaro and Vivencio Lopez, stating that they had not authorized Atty.
Roldan nor Romeo Lazaro to file any pleading on their behalf. 16 In another joint affidavit
dated 10 January 1977, Jose Lazaro and Romeo Lazaro asserted that Romeo Lazaro had no
authority to file the motion of 3 September 1976 seeking "for humanitarian reasons" an
extension of time to vacate the premises in question. In a third affidavit dated 5 February
1977, Atty. Roldan in effect repudiates the motion for extension of time that he had filed on
14 February 1974 with the trial court. In his 1977 affidavit, Atty. Roldan states that he had
instructed Mr. Romeo Lazaro to secure the conformity of the other defendants to his serving
as their counsel before agreeing to represent them, that he had asked for an extension of
time to file an answer without the knowledge of the defendants to gain time to confer with
them and obtain a written agreement with respect to his "proposed legal service;" that when
the defendants again failed to meet with him, he filed his second motion for extension to file
an answer to have "another opportunity to find out if the said defendants would agree that
[he] represent them;" that he eventually abandoned the Idea of representing the
defendants. 17
The affidavit of Atty. Roldan is particularly deplorable. An attorney is presumed to be
authorized by his client in a case in which he appears. 18 Thus, Atty. Roldan was correctly
presumed by the trial court to have been authorized by the defendants below to appear on
their behalf when he filed the motions for extension of time to answer and, what is more,
when he filed the first motion for reconsideration of the judgment of the trial court. Either
Atty. Roldan's 1977 affidavit is plain perjury or he was misleading and trifling with and
imposing upon the trial court back in 1974. Even when an attorney is employed by an
unauthorized person to represent a client, the client will be bound where he has knowledge
of the fact that he is being represented by an attorney in a particular litigation and takes no
prompt measure to repudiate the assumed authority. The security and finality of judicial
proceedings are matters of insistent public policy and require that the evasions and
tergiversations of unsuccessful litigants and their counsel be firmly rejected and not
permitted to overcome the presumption of authority on the part of an attorney. 19
WHEREFORE, the decision of the Court of Appeals is hereby REVERSED and SET ASIDE insofar
as concerns respondents Romeo Lazaro, Jose Lazaro and Vivencio Lopez. With respect,
however, to defendant Ernesto Lazaro, same decision is hereby AFFIRMED. This decision is
immediately executory. Costs against respondents.
Furthermore, Atty. Gerardo B. Roldan, Jr. and Atty. Oliver O. Lozano are hereby required to
show cause, within ten (10) days from notice hereof, why they should not be subject to
disciplinary action for abusing court proceedings.
SO ORDERED.

We are unable to give the above affidavits any credence or weight. They appear to Us as very
late second thoughts, transparently devised to conform with the posture of "no voluntary
appearance" adopted by the defendants' subsequent counsel. Those affidavits were
submitted too late in the day, as it were, to avoid the effect of their voluntary appearance
before the trial court. The affidavits concerning lack of authority of respondent Romeo Lazaro
to file the motion pleading "for humanitarian reasons" for an extension of time to locate an
alternative residence are thoroughly unpersuasive. We note, in this connection, that all the
defendants were not only immediate neighbors residing in adjacent units of a single
apartment house but also members of the same family. Ernesto Lazaro is the father of
respondents Jose Lazaro and Romeo Lazaro. Thus, the natural tendency of Ernesto Lazaro,
upon receipt of the summons issued by the trial court, must have been to inform his children
living beside him about the summons; similarly, the natural tendency of Romeo Lazaro must
have been to inform his father and brother and other relatives living in the same apartment
house about the steps taken to defer their ejectment.
SECOND DIVISION The transfer of the first set of seven CB bills

G.R. Nos. 154470-71 September 24, 2012 i. CB bill nos. 45351-53

BANK OF COMMERCE, Petitioner, On April 20, 1994, according to the BOC, it "sold back"11 to the PDB three of the seven CB
vs. bills. In turn, the PDB transferred these three CB bills to Bancapital Development Corporation
PLANTERS DEVELOPMENT BANK and BANGKO SENTRAL NG PILIPINAS, Respondent. (Bancap). On April 25, 1994, the BOC bought the three CB bills from Bancap – so, ultimately,
the BOC reacquired these three CB bills,12 particularly described as follows:
x-----------------------x

G.R. Nos. 154589-90 Serial No.: 2BB XM 045351

2BB XM 045352
BANGKO SENTRAL NG PILIPINAS, Petitioner, 2BB XM 045353
vs.
PLANTERS DEVELOPMENT BANK, Respondent.
Quantity: Three (3)
DECISION
Denomination: Php 10 million
BRION, J.:

Before the Court are two consolidated petitions for review on certiorari under Rule 45,1 on
pure questions of law, filed by the petitioners Bank of Commerce (BOC) and the Bangko
Sentral ng Pilipinas (BSP). They assail the January 10, 2002 and July 23, 2002 Orders (assailed
orders) of the Regional Trial Court (RTC) of Makati City, Branch 143, in Civil Case Nos. 94-
3233 and 94-3254. These orders dismissed (i) the petition filed by the Planters Development
Bank (PDB), (ii) the "counterclaim" filed by the BOC, and (iii) the counter-complaint/cross-
claim for interpleader filed bythe BSP; and denied the BOC’s and the BSP’s motions for
reconsideration.
THE ANTECEDENTS
The Central Bank bills
Total Face Value: Php 30 million
ii. CB bill nos. 45347-50
On April 20, 1994, the BOC sold the remaining four (4) CB bills to Capital One Equities
Corporation13 which transferred them to All-Asia Capital and Trust Corporation (All Asia). On
September 30, 1994, All Asia further transferred the four CB bills back to the RCBC.14
On November 16, 1994, the RCBC sold back to All Asia one of these 4 CB bills. When the BSP
refused to release the amount of this CB bill on maturity, the BOC purchased from All Asia
this lone CB bill,15 particularly described as follows:16

I. First set of CB bills Serial No.: 2BB XM 045348

The Rizal Commercial Banking Corporation (RCBC) was the registered owner of seven Central
Bank (CB) bills with a total face value of ₱ 70 million, issued on January 2, 1994 and would Quantity: One (1)
mature on January 2, 1995.2 As evidenced by a "Detached Assignment" dated April 8,
1994,3 the RCBC sold these CB bills to the BOC.4 As evidenced by another "Detached Denomination: Php 10 million
Assignment"5 of even date, the BOC, in turn, sold these CB bills to the PDB.6 The BOC
delivered the Detached Assignments to the PDB.7
Total Face Value: Php 10 million
On April 15, 1994 (April 15 transaction), the PDB, in turn, sold to the BOC Treasury Bills worth
₱ 70 million, with maturity date of June 29, 1994, as evidenced by a Trading Order 8 and a As the registered owner of the remaining three CB bills, the RCBC sold them to IVI Capital and
Confirmation of Sale.9 However, instead of delivering the Treasury Bills, the PDB delivered the Insular Savings Bank. Again, when the BSP refused to release the amount of this CB bill on
seven CB bills to the BOC, as evidenced by a PDB Security Delivery Receipt, bearing a maturity, the RCBC paid back its transferees, reacquired these three CB bills and sold them to
"note: ** substitution in lieu of 06-29-94" – referring to the Treasury Bills.10 Nevertheless, the the BOC – ultimately, the BOC acquired these three CB bills.
PDB retained possession of the Detached Assignments. It is basically the nature of this April
15 transaction that the PDB and the BOC cannot agree on. All in all, the BOC acquired the first set of seven CB bills.
II. Second set of CB bills
On April 19, 1994, the RCBC, as registered owner, (i) sold two CB bills with a total face value
of ₱ 20 million to the PDB and (ii) delivered to the PDB the corresponding Detached
Assignment.17 The two CB bills were particularly described as follows:
Serial No.: BB XM 045373
BB XM 045374
Issue date: January 3, 1994
Maturity date: January 2, 1995
Denomination: Php 10 million
Total Face value: Php 20 million
On even date, the PDB delivered to Bancap the two CB bills18 (April 19 transaction). In turn,
Bancap sold the CB bills to Al-Amanah Islamic Investment Bank of the Philippines, which in
turn sold it to the BOC.19
PDB’s move against the transfer of
the first and second sets of CB bills
On June 30, 1994, upon learning of the transfers involving the CB bills, the PDB
informed20 the Officer-in-Charge of the BSP’s Government Securities Department,21 Lagrimas
Nuqui, of the PDB’s claim over these CB bills, based on the Detached Assignments in its
possession. The PDB requested the BSP22 to record its claim in the BSP’s books, explaining
that its non-possession of the CB bills is "on account of imperfect negotiations thereof and/or
subsequent setoff or transfer."23
Nuqui denied the request, invoking Section 8 of CB Circular No. 28 (Regulations Governing
Open Market Operations, Stabilization of the Securities Market, Issue, Servicing and
Redemption of the Public Debt)24 which requires the presentation of the bond before a
registered bond may be transferred on the books of the BSP.25
In a July 25, 1994 letter, the PDB clarified to Nuqui that it was not "asking for the transfer of
the CB Bills…. rather it intends to put the BSP on formal notice that whoever is in possession
of said bills is not a holder in due course," and, therefore the BSP should not make payment
upon the presentation of the CB bills on maturity.26 Nuqui responded that the BSP was "not
in a position at that point in time to determine who is and who is not the holder in due
course since it is not privy to all acts and time involving the transfers or negotiation" of the
CB bills. Nuqui added that the BSP’s action shall be governed by CB Circular No. 28, as
amended.27
On November 17, 1994, the PDB also asked BSP Deputy Governor Edgardo Zialcita that (i) a
notation in the BSP’s books be made against the transfer, exchange, or payment of the bonds
and the payment of interest thereon; and (ii) the presenter of the bonds upon maturity be
required to submit proof as a holder in due course (of the first set of CB bills). The PDB relied
on Section 10 (d) 4 of CB Circular No. 28.28 This provision reads:
(4) Assignments effected by fraud – Where the assignment of a registered bond is secured by
fraudulent representations, the Central Bank can grant no relief if the assignment has been
honored without notice of fraud. Otherwise, the Central Bank, upon receipt of notice that the
assignment is claimed to have been secured by fraudulent representations, or payment of
the bond the payment of interest thereon, and when the bond is presented, will call upon
the owner and the person presenting the bond to substantiate their respective claims.If it
then appears that the person presenting the bond stands in the position of bonafide holder
for value, the Central Bank, after giving the owner an opportunity to assert his claim, will pass
the bond for transfer, exchange or payments, as the case may be, without further question.
In a December 29, 1994 letter, Nuqui again denied the request, reiterating the BSP’s previous
stand.
In light of these BSP responses and the impending maturity of the CB bills, the PDB
filed29 with the RTC two separate petitions for Mandamus, Prohibition and Injunction with
prayer for Preliminary Injunction and Temporary Restraining Order, docketed as Civil Case
No. 94-3233 (covering the first set of CB bills) and Civil Case 94-3254 (covering the second set
of CB bills) against Nuqui, the BSP and the RCBC.30
The PDB essentially claims that in both the April 15 transaction (involving the first set of CB
bills) and the April 19 transaction (involving the second set of CB bills), there was no intent on
its part to transfer title of the CB bills, as shown by its non-issuance of a detached assignment
in favor of the BOC and Bancap, respectively. The PDB particularly alleges that it merely
"warehoused"31 the first set of CB bills with the BOC, as security collateral.
On December 28, 1994, the RTC temporarily enjoined Nuqui and the BSP from paying the
face value of the CB bills on maturity.32 On January 10, 1995, the PDB filed an Amended
Petition, additionally impleading the BOC and All Asia.33 In a January 13, 1995 Order, the
cases were consolidated.34 On January 17, 1995, the RTC granted the PDB’s application for a
writ of preliminary prohibitory injunction.35 In both petitions, the PDB identically prayed:
WHEREFORE, it is respectfully prayed x x x that, after due notice and hearing, the Writs of
Mandamus, Prohibition and Injunction, be issued; (i) commanding the BSP and Nuqui, or
whoever may take her place -
(a) to record forthwith in the books of BSP the claim of x x x PDB on the [two sets of] CB Bills
in accordance with Section 10 (d) (4) of revised C.B. Circular No. 28; and
(b) also pursuant thereto, when the bills are presented on maturity date for payment, to call
(i) x x x PDB, (ii) x x x RCBC x x x, (iii) x x x BOC x x x, and (iv) x x x ALL-ASIA x x x; or whoever
will present the [first and second sets of] CB Bills for payment, to submit proof as to who
stands as the holder in due course of said bills, and, thereafter, act accordingly;
and (ii) ordering the BSP and Nuqui to pay jointly and severally to x x x PDB the following:
(a) the sum of ₱ 100,000.00, as and for exemplary damages;
(b) the sum of at least ₱ 500,000.00, or such amount as shall be proved at the trial, as and for
attorney’s fees;
(c) the legal rate of interest from the filing of this Petition until full payment of the sums
mentioned in this Petition; and
(d) the costs of suit.36
After the petitions were filed, the BOC acquired/reacquired all the nine CB bills – the first and
second sets of CB bills (collectively, subject CB bills).
Defenses of the BSP and of the BOC37
The BOC filed its Answer, praying for the dismissal of the petition. It argued that the PDB has
no cause of action against it since the PDB is no longer the owner of the CB bills. Contrary to
the PDB’s "warehousing theory,"38 the BOC asserted that the (i) April 15 transaction and the
(ii) April 19 transaction – covering both sets of CB bills - were valid contracts of sale, followed
by a transfer of title (i) to the BOC (in the April 15 transaction) upon the PDB’s delivery of the
1st set of CB bills in substitution of the Treasury Bills the PDB originally intended to sell, and
(ii) to Bancap (in the April 19 transaction) upon the PDB’s delivery of the 2nd set of CB bills to
Bancap, likewise by way of substitution.
The BOC adds that Section 10 (d) 4 of CB Circular No. 28 cannot apply to the PDB’s case
because (i) the PDB is not in possession of the CB bills and (ii) the BOC acquired these bills
from the PDB, as to the 1st set of CB bills, and from Bancap, as to the 2nd set of CB bills, in
good faith and for value. The BOC also asserted a compulsory counterclaim for damages and
attorney’s fees.
On the other hand, the BSP countered that the PDB cannot invoke Section 10 (d) 4 of CB
Circular No. 28 because this section applies only to an "owner" and a "person presenting the
bond," of which the PDB is neither. The PDB has not presented to the BSP any assignment of
the subject CB bills, duly recorded in the BSP’s books, in its favor to clothe it with the status
of an "owner."39 According to the BSP –
Section 10 d. (4) applies only to a registered bond which is assigned. And the issuance of CB
Bills x x x are required to be recorded/registered in BSP’s books. In this regard, Section 4 a.
(1) of CB Circular 28 provides that registered bonds "may be transferred only by an
assignment thereon duly executed by the registered owner or his duly authorized
representative x x x and duly recorded on the books of the Central Bank."
xxxx
The alleged assignment of subject CB Bills in PDB’s favor is not recorded/registered in BSP’s
books.40(underscoring supplied)
Consequently, when Nuqui and the BSP refused the PDB’s request (to record its claim), they
were merely performing their duties in accordance with CB Circular No. 28.
Alternatively, the BSP asked that an interpleader suit be allowed between and among the
claimants to the subject CB bills on the position that while it is able and willing to pay the
subject CB bills’ face value, it is duty bound to ensure that payment is made to the rightful
owner. The BSP prayed that judgment be rendered:
a. Ordering the dismissal of the PDB’s petition for lack of merit;
b. Determining which between/among [PDB] and the other claimants is/are lawfully entitled
to the ownership of the subject CB bills and the proceeds thereof;
c. x x x;
d. Ordering PDB to pay BSP and Nuqui such actual/compensatory and exemplary damages…
as the RTC may deem warranted; and
e. Ordering PDB to pay Nuqui moral damages… and to pay the costs of the suit.41
Subsequent events
The PDB agreed with the BSP’s alternative response for an interpleader –
4. PDB agrees that the various claimants should now interplead and substantiate their
respective claims on the subject CB bills. However, the total face value of the subject CB bills
should be deposited in escrow with a private bank to be disposed of only upon order of the
RTC.42
Accordingly, on June 9, 199543 and August 4, 1995,44 the BOC and the PDB entered into two
separate Escrow Agreements.45 The first agreement covered the first set of CB bills, while the
second agreement covered the second set of CB bills. The parties agreed to jointly collect
from the BSP the maturity proceeds of these CB bills and to deposit said amount in escrow,
"pending final determination by Court judgment, or amicable settlement as to who shall be
eventually entitled thereto."46 The BOC and the PDB filed a Joint Motion,47 submitting these
Escrow Agreements for court approval. The RTC gave its approval to the parties’ Joint
Motion.48 Accordingly, the BSP released the maturity proceeds of the CB bills by crediting the
Demand Deposit Account of the PDB and of the BOC with 50% each of the maturity proceeds
of the amount in escrow.49
In view of the BOC’s acquisition of all the CB bills, All Asia50 moved to be dropped as a
respondent (with the PDB’s conformity51 ), which the RTC granted.52 The RCBC subsequently
followed suit.53
In light of the developments, on May 4, 1998, the RTC required the parties to manifest their
intention regarding the case and to inform the court of any amicable settlement; "otherwise,
th[e] case shall be dismissed for lack of interest."54 Complying with the RTC’s order, the BOC
moved (i) that the case be set for pre-trial and (ii) for further proceeding to resolve the
remaining issues between the BOC and the PDB, particularly on "who has a better right over
the subject CB bills."55 The PDB joined the BOC in its motion.56
On September 28, 2000, the RTC granted the BSP’s motion to interplead and, accordingly,
required the BOC to amend its Answer and for the conflicting claimants to comment
thereon.57 In October 2000, the BOC filed its Amended Consolidated Answer with Compulsory
Counterclaim, reiterating its earlier arguments asserting ownership over the subject CB
bills.58
In the alternative, the BOC added that even assuming that there was no effective transfer of
the nine CB bills ultimately to the BOC, the PDB remains obligated to deliver to the BOC, as
buyer in the April 15 transaction and ultimate successor-in-interest of the buyer (Bancap) in
the April 19 transaction, either the original subjects of the sales or the value thereof, plus
whatever income that may have been earned during the pendency of the case.59
That BOC prayed:
1. To declare BOC as the rightful owner of the nine (9) CB bills and as the party entitled to the
proceeds thereof as well as all income earned pursuant to the two (2) Escrow Agreements
entered into by BOC and PDB.
2. In the alternative, ordering PDB to deliver the original subject of the sales transactions or
the value thereof and whatever income earned by way of interest at prevailing rate.
Without any opposition or objection from the PDB, on February 23, 2001, the RTC
admitted60 the BOC’s Amended Consolidated Answer with Compulsory Counterclaims.
In May 2001, the PDB filed an Omnibus Motion,61 questioning the RTC’s jurisdiction over the
BOC’s "additional counterclaims." The PDB argues that its petitions pray for the BSP (not the
RTC) to determine who among the conflicting claimants to the CB bills stands in the position
of the bona fide holder for value. The RTC cannot entertain the BOC’s counterclaim,
regardless of its nature, because it is the BSP which has jurisdiction to determine who is
entitled to receive the proceeds of the CB bills.
The BOC opposed62 the PDB’s Omnibus Motion. The PDB filed its Reply.63
In a January 10, 2002 Order, the RTC dismissed the PDB’s petition, the BOC’s counterclaim
and the BSP’s counter-complaint/cross-claim for interpleader, holding that under CB Circular
No. 28, it has no jurisdiction (i) over the BOC’s "counterclaims" and (ii) to resolve the issue of
ownership of the CB bills.64 With the denial of their separate motions for
Reconsideration,65 the BOC and the BSP separately filed the present petitions for review on
certiorari.66
THE BOC’S and THE BSP’S PETITIONS
The BOC argues that the present cases do not fall within the limited provision of Section 10
(d) 4 of CB Circular No. 28, which contemplates only of three situations: first, where the
fraudulent assignment is not coupled with a notice to the BSP, it can grant no relief; second,
where the fraudulent assignment is coupled with a notice of fraud to the BSP, it will make a
notation against the assignment and require the owner and the holder to substantiate their
claims; and third, where the case does not fall on either of the first two situations, the BSP
will have to await action on the assignment pending settlement of the case, whether by
agreement or by court order.
The PDB’s case cannot fall under the first two situations. With particular regard to the second
situation, CB Circular No. 28 requires that the conflict must be between an "owner" and a
"holder," for the BSP to exercise its limited jurisdiction to resolve conflicting claims; and the
word "owner" here refers to the registered owner giving notice of the fraud to the BSP. The
PDB, however, is not the registered owner nor is it in possession (holder) of the CB
bills.67Consequently, the PDB’s case can only falls under the third situation which leaves the
RTC, as a court of general jurisdiction, with the authority to resolve the issue of ownership of
a registered bond (the CB bills) not falling in either of the first two situations.
The BOC asserts that the policy consideration supportive of its interpretation of CB Circular
No. 28 is to have a reliable system to protect the registered owner; should he file a notice
with the BSP about a fraudulent assignment of certain CB bills, the BSP simply has to look at
its books to determine who is the owner of the CB bills fraudulently assigned. Since it is only
the registered owner who complied with the BSP’s requirement of recording an assignment
in the BSP’s books, then "the protective mantle of administrative proceedings" should
necessarily benefit him only, without extending the same benefit to those who chose to
ignore the Circular’s requirement, like the PDB.68
Assuming arguendo that the PDB’s case falls under the second situation – i.e., the BSP has
jurisdiction to resolve the issue of ownership of the CB bills – the more recent CB Circular No.
769-80 (Rules and Regulations Governing Central Bank Certificates of Indebtedness) already
superseded CB Circular No. 28, and, in particular, effectively amended Section 10 (d) 4 of CB
Circular No. 28. The pertinent provisions of CB Circular No. 769-80 read:
Assignment Affected by Fraud. – Any assignment for transfer of ownership of registered
certificate obtained through fraudulent representation if honored by the Central Bank or any
of its authorized service agencies shall not make the Central Bank or agency liable therefore
unless it has previous formal notice of the fraud. The Central Bank, upon notice under oath
that the assignment was secured through fraudulent means, shall immediately issue and
circularize a "stop order" against the transfer, exchange, redemption of the Certificate
including the payment of interest coupons. The Central Bank or service agency concerned
shall continue to withhold action on the certificate until such time that the conflicting claims
have been finally settled either by amicable settlement between the parties or by order of
the Court.
Unlike CB Circular No. 28, CB Circular No. 769-80 limited the BSP’s authority to the mere
issuance and circularization of a "stop order" against the transfer, exchange and redemption
upon sworn notice of a fraudulent assignment. Under this Circular, the BSP shall only
continue to withhold action until the dispute is ended by an amicable settlement or by
judicial determination. Given the more passive stance of the BSP – the very agency tasked to
enforce the circulars involved - under CB Circular No. 769-80, the RTC’s dismissal of the BOC’s
counterclaims is palpably erroneous.
Lastly, since Nuqui’s office (Government Securities Department) had already been
abolished,69 it can no longer adjudicate the dispute under the second situation covered by CB
Circular No. 28. The abolition of Nuqui’s office is not only consistent with the BSP’s Charter
but, more importantly, with CB Circular No. 769-80, which removed the BSP’s adjudicative
authority over fraudulent assignments.
THE PDB’S COMMENT
The PDB claims that jurisdiction is determined by the allegations in the complaint/petition
and not by the defenses set up in the answer.70 In filing the petition with the RTC, the PDB
merely seeks to compel the BSP to determine, pursuant to CB Circular No. 28, the party
legally entitled to the proceeds of the subject CB bills, which, as the PDB alleged, have been
transferred through fraudulent representations – an allegation which properly recognized
the BSP’s jurisdiction to resolve conflicting claims of ownership over the CB bills.
The PDB adds that under the doctrine of primary jurisdiction, courts should refrain from
determining a controversy involving a question whose resolution demands the exercise of
sound administrative discretion. In the present case, the BSP’s special knowledge and
experience in resolving disputes on securities, whose assignment and trading are governed
by the BSP’s rules, should be upheld.
The PDB counters that the BOC’s tri-fold interpretation of Section 10 (d) 4 of CB Circular No.
28 sanctions split jurisdiction which is not favored;but even this tri-fold interpretation which,
in the second situation, limits the meaning of the "owner" to the registered owner is flawed.
Section 10 (d) 4 aims to protect not just the registered owner but anyone who has been
deprived of his bond by fraudulent representation in order to deter fraud in the secondary
trading of government securities.
The PDB asserts that the existence of CB Circular No. 769-80 or the abolition of Nuqui’s office
does not result in depriving the BSP of its jurisdiction: first, CB Circular No. 769-80 expressly
provides that CB Circular No. 28 shall have suppletory application to CB Circular No. 769-80;
and second, the BSP can always designate an office to resolve the PDB’s claim over the CB
bills.
Lastly, the PDB argues that even assuming that the RTC has jurisdiction to resolve the issue of
ownership of the CB bills, the RTC has not acquired jurisdiction over the BOC’s so-called
"compulsory" counterclaims (which in truth is merely "permissive") because of the BOC’s
failure to pay the appropriate docket fees. These counterclaims should, therefore, be
dismissed and expunged from the record.
THE COURT’S RULING
We grant the petitions.
At the outset, we note that the parties have not raised the validity of either CB Circular No.
28 or CB Circular No. 769-80 as an issue. What the parties largely contest is the applicable
circular in case of an allegedly fraudulently assigned CB bill. The applicable circular, in turn, is
determinative of the proper remedy available to the PDB and/or the BOC as claimants to the
proceeds of the subject CB bills.
Indisputably, at the time the PDB supposedly invoked the jurisdiction of the BSP in 1994 (by
requesting for the annotation of its claim over the subject CB bills in the BSP’s books), CB
Circular No. 769-80 has long been in effect. Therefore, the parties’ respective interpretations
of the provision of Section 10 (d) 4 of CB Circular No. 28 do not have any significance unless it
is first established that that Circular governs the resolution of their conflicting claims of
ownership. This conclusion is important, given the supposed repeal or modification of
Section 10 (d) 4 of CB Circular No. 28 by the following provisions of CB Circular No. 769-80:
ARTICLE XI
SUPPLEMENTAL RULES
Section 1. Central Bank Circular No. 28 – The provisions of Central Bank Circular No. 28 shall
have suppletory application to matters not specially covered by these Rules.
ARTICLE XII
EFFECTIVITY
Effectivity – The rules and regulations herein prescribed shall take effect upon approval by
the Monetary Board, Central Bank of the Philippines, and all circulars, memoranda, or office
orders inconsistent herewith are revoked or modified accordingly. (Emphases added)
We agree with the PDB that in view of CB Circular No. 28’s suppletory application, an attempt
to harmonize the apparently conflicting provisions is a prerequisite before one may possibly
conclude that an amendment or a repeal exists.71 Interestingly, however, even the PDB itself
failed to submit an interpretation based on its own position of harmonization.
The repealing clause of CB Circular No. 769-80 obviously did not expressly repeal CB Circular
No. 28; in fact, it even provided for the suppletory application of CB Circular No. 28 on
"matters not specially covered by" CB Circular No. 769-80. While no express repeal exists, the
intent of CB Circular No. 769-80 to operate as an implied repeal,72or at least to amend earlier
CB circulars, is supported by its text "revoking" or "modif[ying" "all circulars" which are
inconsistent with its terms.
At the outset, we stress that none of the parties disputes that the subject CB bills fall within
the category of a certificate or evidence of indebtedness and that these were issued by the
Central Bank, now the BSP. Thus, even without resorting to statutory construction aids,
matters involving the subject CB bills should necessarily be governed by CB Circular No. 769-
80. Even granting, however, that reliance on CB Circular No. 769-80 alone is not enough, we
find that CB Circular No. 769-80 impliedly repeals CB Circular No. 28.
An implied repeal transpires when a substantial conflict exists between the new and the prior
laws. In the absence of an express repeal, a subsequent law cannot be construed as repealing
a prior law unless an irreconcilable inconsistency and repugnancy exist in the terms of the
new and the old laws.73 Repeal by implication is not favored, unless manifestly intended by
the legislature, or unless it is convincingly and unambiguously demonstrated, that the laws or
orders are clearly repugnant and patently inconsistent with one another so that they cannot
co-exist; the legislature is presumed to know the existing law and would express a repeal if
one is intended.74
There are two instances of implied repeal. One takes place when the provisions in the two
acts on the same subject matter are irreconcilably contradictory, in which case, the later act,
to the extent of the conflict, constitutes an implied repeal of the earlier one. The other
occurs when the later act covers the whole subject of the earlier one and is clearly intended
as a substitute; thus, it will operate to repeal the earlier law.75
A general reading of the two circulars shows that the second instance of implied repeal is
present in this case. CB Circular No. 28, entitled "Regulations Governing Open Market
Operations, Stabilization of Securities Market, Issue, Servicing and Redemption of Public
Debt," is a regulation governing the servicing and redemption of public debt, including the
issue, inscription, registration, transfer, payment and replacement of bonds and securities
representing the public debt.76 On the other hand, CB Circular No. 769-80, entitled "Rules and
Regulations Governing Central Bank Certificate of Indebtedness," is the governing regulation
on matters77 (i) involving certificate of indebtedness78issued by the Central Bank itself and (ii)
which are similarly covered by CB Circular No. 28.
The CB Monetary Board issued CB Circular No. 28 to regulate the servicing and redemption of
public debt, pursuant to Section 124 (now Section 119 of Republic Act R.A. No. 7653) of the
old Central Bank law79 which provides that "the servicing and redemption of the public debt
shall also be effected through the Bangko Sentral." However, even as R.A. No. 7653
continued to recognize this role by the BSP, the law required a phase-out of all fiscal agency
functions by the BSP, including Section 119 of R.A. No. 7653.
In other words, even if CB Circular No. 28 applies broadly to both government-issued bonds
and securities and Central Bank-issued evidence of indebtedness, given the present state of
law, CB Circular No. 28 and CB Circular No. 769-80 now operate on the same subject –
Central Bank-issued evidence of indebtedness. Under Section 1, Article XI of CB Circular No.
769-80, the continued relevance and application of CB Circular No. 28 would depend on the
need to supplement any deficiency or silence in CB Circular No. 769-80 on a particular
matter.
In the present case, both CB Circular No. 28 and CB Circular No. 769-80 provide the BSP with
a course of action in case of an allegedly fraudulently assigned certificate of indebtedness.
Under CB Circular No. 28, in case of fraudulent assignments, the BSP would have to "call
upon the owner and the person presenting the bond to substantiate their respective claims"
and, from there, determine who has a better right over the registered bond. On the other
hand, under CB Circular No. 769-80, the BSP shall merely "issue and circularize a ‘stop order’
against the transfer, exchange, redemption of the [registered] certificate" without any
adjudicative function (which is the precise root of the present controversy). As the two
circulars stand, the patent irreconcilability of these two provisions does not require
elaboration. Section 5, Article V of CB Circular No. 769-80 inescapably repealed Section 10 (d)
4 of CB Circular No. 28.
The issue of BSP’s jurisdiction, lay hidden
On that note, the Court could have written finis to the present controversy by simply
sustaining the BSP’s hands-off approach to the PDB’s problem under CB Circular No. 769-80.
However, the jurisdictional provision of CB Circular No. 769-80 itself, in relation to CB Circular
No. 28, on the matter of fraudulent assignment, has given rise to a question of jurisdiction -
the core question of law involved in these petitions - which the Court cannot just treat sub-
silencio.
Broadly speaking, jurisdiction is the legal power or authority to hear and determine a
cause.80 In the exercise of judicial or quasi-judicial power, it refers to the authority of a court
to hear and decide a case.81 In the context of these petitions, we hark back to the basic
principles governing the question of jurisdiction over the subject matter.
First, jurisdiction over the subject matter is determined only by the Constitution and by
law.82 As a matter of substantive law, procedural rules alone can confer no jurisdiction to
courts or administrative agencies.83 In fact, an administrative agency, acting in its quasi-
judicial capacity, is a tribunal of limited jurisdiction and, as such, could wield only such
powers that are specifically granted to it by the enabling statutes. In contrast, an RTC is a
court of general jurisdiction, i.e., it has jurisdiction over cases whose subject matter does not
fall within the exclusive original jurisdiction of any court, tribunal or body exercising judicial
or quasi-judicial functions.84
Second, jurisdiction over the subject matter is determined not by the pleas set up by the
defendant in his answer85but by the allegations in the complaint,86 irrespective of whether
the plaintiff is entitled to favorable judgment on the basis of his assertions. 87 The reason is
that the complaint is supposed to contain a concise statement of the ultimate facts
constituting the plaintiff's causes of action.88
Third, jurisdiction is determined by the law in force at the time of the filing of the
complaint.89
Parenthetically, the Court observes that none of the parties ever raised the issue of whether
the BSP can simply disown its jurisdiction, assuming it has, by the simple expedient of
promulgating a new circular (specially applicable to a certificate of indebtedness issued by
the BSP itself), inconsistent with an old circular, assertive of its limited jurisdiction over
ownership issues arising from fraudulent assignments of a certificate of indebtedness. The
PDB, in particular, relied solely and heavily on CB Circular No. 28.
In light of the above principles pointing to jurisdiction as a matter of substantive law, the
provisions of the law itself that gave CB Circular 769-80 its life and jurisdiction must be
examined.
The Philippine Central Bank
On January 3, 1949, Congress created the Central Bank of the Philippines (Central Bank) as a
corporate body with the primary objective of (i) maintaining the internal and external
monetary stability in the Philippines; and (ii) preserving the international value and the
convertibility of the peso.90 In line with these broad objectives, the Central Bank was
empowered to issue rules and regulations "necessary for the effective discharge of the
responsibilities and exercise of the powers assigned to the Monetary Board and to the
Central Bank."91 Specifically, the Central Bank is authorized to organize (other) departments
for the efficient conduct of its business and whose powers and duties "shall be determined
by the Monetary Board, within the authority granted to the Board and the Central
Bank"92 under its original charter.
With the 1973 Constitution, the then Central Bank was constitutionally made as the country’s
central monetary authority until such time that Congress93 shall have established a central
bank. The 1987 Constitution continued to recognize this function of the then Central Bank
until Congress, pursuant to the Constitution, created a new central monetary authority which
later came to be known as the Bangko Sentral ng Pilipinas.
Under the New Central Bank Act (R.A. No. 7653),94 the BSP is given the responsibility of
providing policy directions in the areas of money, banking and credit; it is given, too, the
primary objective of maintaining price stability, conducive to a balanced and sustainable
growth of the economy, and of promoting and maintaining monetary stability and
convertibility of the peso.95
The Constitution expressly grants the BSP, as the country’s central monetary authority, the
power of supervision over the operation of banks, while leaving with Congress the authority
to define the BSP’s regulatory powers over the operations of finance companies and other
institutions performing similar functions. Under R.A. No. 7653, the BSP’s powers and
functions include (i) supervision over the operation of banks; (ii) regulation of operations of
finance companies and non-bank financial institutions performing quasi banking functions;
(iii) sole power and authority to issue currency within the Philippine territory; (iv) engaging in
foreign exchange transactions; (v) making rediscounts, discounts, loans and advances to
banking and other financial institutions to influence the volume of credit consistent with the
objective of achieving price stability; (vi) engaging in open market operations; and (vii) acting
as banker and financial advisor of the government.1âwphi1
On the BSP’s power of supervision over the operation of banks, Section 4 of R.A. No. 8791
(The General Banking Law of 2000) elaborates as follows:
CHAPTER II
AUTHORITY OF THE BANGKO SENTRAL
SECTION 4. Supervisory Powers. — The operations and activities of banks shall be subject to
supervision of the Bangko Sentral. "Supervision" shall include the following:
4.1. The issuance of rules of conduct or the establishment of standards of operation for
uniform application to all institutions or functions covered, taking into consideration the
distinctive character of the operations of institutions and the substantive similarities of
specific functions to which such rules, modes or standards are to be applied;
4.2. The conduct of examination to determine compliance with laws and regulations if the
circumstances so warrant as determined by the Monetary Board;
4.3. Overseeing to ascertain that laws and regulations are complied with;
4.4. Regular investigation which shall not be oftener than once a year from the last date of
examination to determine whether an institution is conducting its business on a safe or
sound basis: Provided, That the deficiencies/irregularities found by or discovered by an audit
shall be immediately addressed;
4.5. Inquiring into the solvency and liquidity of the institution (2-D); or
4.6. Enforcing prompt corrective action. (n)
The Bangko Sentral shall also have supervision over the operations of and exercise regulatory
powers over quasi-banks, trust entities and other financial institutions which under special
laws are subject to Bangko Sentral supervision. (2-Ca)
For the purposes of this Act, "quasi-banks" shall refer to entities engaged in the borrowing of
funds through the issuance, endorsement or assignment with recourse or acceptance of
deposit substitutes as defined in Section 95 of Republic Act No. 7653 (hereafter the "New
Central Bank Act") for purposes of relending or purchasing of receivables and other
obligations. [emphasis ours]
While this provision empowers the BSP to oversee the operations and activities of banks to
"ascertain that laws and regulations are complied with," the existence of the BSP’s
jurisdiction in the present dispute cannot rely on this provision. The fact remains that the BSP
already made known to the PDB its unfavorable position on the latter’s claim of fraudulent
assignment due to the latter’s own failure to comply96 with existing regulations:
In this connection, Section 10 (b) 2 also requires that a "Detached assignment will be
recognized or accepted only upon previous notice to the Central Bank x x x." In fact, in a
memo dated September 23, 1991 xxx then CB Governor Jose L. Cuisia advised all banks
(including PDB) xxx as follows:
In view recurring incidents ostensibly disregarding certain provisions of CB circular No. 28 (as
amended) covering assignments of registered bonds, all banks and all concerned are
enjoined to observe strictly the pertinent provisions of said CB Circular as hereunder quoted:
xxxx
Under Section 10.b. (2)
x x x Detached assignment will be recognized or accepted only upon previous notice to the
Central Bank and its use is authorized only under the following circumstances:
(a) x x x
(b) x x x
(c) assignments of treasury notes and certificates of indebtedness in registered form which
are not provided at the back thereof with assignment form.
(d) Assignment of securities which have changed ownership several times.
(e) x x x
Non-compliance herewith will constitute a basis for non-action or withholding of action on
redemption/payment of interest coupons/transfer transactions or denominational exchange
that may be directly affected thereby. [Boldfacing supplied]
Again, the books of the BSP do not show that the supposed assignment of subject CB Bills
was ever recorded in the BSP’s books. [Boldfacing supplied]
However, the PDB faults the BSP for not recording the assignment of the CB bills in the PDB’s
favor despite the fact that the PDB already requested the BSP to record its assignment in the
BSP’s books as early as June 30, 1994.97
The PDB’s claim is not accurate. What the PDB requested the BSP on that date was not the
recording of the assignment of the CB bills in its favor but the annotation of its claim over the
CB bills at the time when (i) it was no longer in possession of the CB bills, having been
transferred from one entity to another and (ii) all it has are the detached assignments, which
the PDB has not shown to be compliant with Section 10 (b) 2 above-quoted. Obviously, the
PDB cannot insist that the BSP take cognizance of its plaint when the basis of the BSP’s
refusal under existing regulation, which the PDB is bound to observe, is the PDB’s own failure
to comply therewith.
True, the BSP exercises supervisory powers (and regulatory powers) over banks (and quasi
banks). The issue presented before the Court, however, does not concern the BSP’s
supervisory power over banks as this power is understood under the General Banking Law. In
fact, there is nothing in the PDB’s petition (even including the letters it sent to the BSP) that
would support the BSP’s jurisdiction outside of CB Circular No. 28, under its power of
supervision, over conflicting claims to the proceeds of the CB bills.
BSP has quasi-judicial powers over a
class of cases which does not include
the adjudication of ownership of the
CB bills in question
In United Coconut Planters Bank v. E. Ganzon, Inc.,98 the Court considered the BSP as an
administrative agency,99exercising quasi-judicial functions through its Monetary Board. It
held:
A quasi-judicial agency or body is an organ of government other than a court and other than
a legislature, which affects the rights of private parties through either adjudication or rule-
making. The very definition of an administrative agency includes its being vested with quasi-
judicial powers. The ever increasing variety of powers and functions given to administrative
agencies recognizes the need for the active intervention of administrative agencies in
matters calling for technical knowledge and speed in countless controversies which cannot
possibly be handled by regular courts. A "quasi-judicial function" is a term which applies to
the action, discretion, etc., of public administrative officers or bodies, who are required to
investigate facts, or ascertain the existence of facts, hold hearings, and draw conclusions
from them, as a basis for their official action and to exercise discretion of a judicial nature.
Undoubtedly, the BSP Monetary Board is a quasi-judicial agency exercising quasi-judicial
powers or functions. As aptly observed by the Court of Appeals, the BSP Monetary Board is
an independent central monetary authority and a body corporate with fiscal and
administrative autonomy, mandated to provide policy directions in the areas of money,
banking and credit. It has power to issue subpoena, to sue for contempt those refusing to
obey the subpoena without justifiable reason, to administer oaths and compel presentation
of books, records and others, needed in its examination, to impose fines and other sanctions
and to issue cease and desist order. Section 37 of Republic Act No. 7653, in particular,
explicitly provides that the BSP Monetary Board shall exercise its discretion in determining
whether administrative sanctions should be imposed on banks and quasi-banks, which
necessarily implies that the BSP Monetary Board must conduct some form of investigation or
hearing regarding the same. [citations omitted]
The BSP is not simply a corporate entity but qualifies as an administrative agency created,
pursuant to constitutional mandate,100 to carry out a particular governmental function.101 To
be able to perform its role as central monetary authority, the Constitution granted it fiscal
and administrative autonomy. In general, administrative agencies exercise powers and/or
functions which may be characterized as administrative, investigatory, regulatory, quasi-
legislative, or quasi-judicial, or a mix of these five, as may be conferred by the Constitution or
by statute.102
While the very nature of an administrative agency and the raison d'être for its creation103 and
proliferation dictate a grant of quasi-judicial power to it, the matters over which it may
exercise this power must find sufficient anchorage on its enabling law, either by express
provision or by necessary implication. Once found, the quasi-judicial power partakes of the
nature of a limited and special jurisdiction, that is, to hear and determine a class of cases
within its peculiar competence and expertise. In other words, the provisions of the enabling
statute are the yardsticks by which the Court would measure the quantum of quasi-judicial
powers an administrative agency may exercise, as defined in the enabling act of such
agency.104
Scattered provisions in R.A. No. 7653 and R.A. No. 8791, inter alia, exist, conferring
jurisdiction on the BSP on certain matters.105 For instance, under the situations contemplated
under Section 36, par. 2106 (where a bank or quasi bank persists in carrying on its business in
an unlawful or unsafe manner) and Section 37107 (where the bank or its officers willfully
violate the bank’s charter or by-laws, or the rules and regulations issued by the Monetary
Board) of R.A. No. 7653, the BSP may place an entity under receivership and/or liquidation or
impose administrative sanctions upon the entity or its officers or directors.
Among its several functions under R.A. No. 7653, the BSP is authorized to engage in open
market operations and thereby "issue, place, buy and sell freely negotiable evidences of
indebtedness of the Bangko Sentral" in the following manner.
SEC. 90. Principles of Open Market Operations. – The open market purchases and sales of
securities by the Bangko Sentral shall be made exclusively in accordance with its primary
objective of achieving price stability.
xxxx
SEC. 92. Issue and Negotiation of Bangko Sentral Obligations. – In order to provide the
Bangko Sentral with effective instruments for open market operations, the Bangko Sentral
may, subject to such rules and regulations as the Monetary Board may prescribe and in
accordance with the principles stated in Section 90 of this Act, issue, place, buy and sell freely
negotiable evidences of indebtedness of the Bangko Sentral: Provided, That issuance of such
certificates of indebtedness shall be made only in cases of extraordinary movement in price
levels. Said evidences of indebtedness may be issued directly against the international
reserve of the Bangko Sentral or against the securities which it has acquired under the
provisions of Section 91 of this Act, or may be issued without relation to specific types of
assets of the Bangko Sentral.
The Monetary Board shall determine the interest rates, maturities and other characteristics
of said obligations of the Bangko Sentral, and may, if it deems it advisable, denominate the
obligations in gold or foreign currencies.
Subject to the principles stated in Section 90 of this Act, the evidences of indebtedness of the
Bangko Sentral to which this section refers may be acquired by the Bangko Sentral before
their maturity, either through purchases in the open market or through redemptions at par
and by lot if the Bangko Sentral has reserved the right to make such redemptions. The
evidences of indebtedness acquired or redeemed by the Bangko Sentral shall not be included
among its assets, and shall be immediately retired and cancelled.108 (italics supplied;
emphases ours)
The primary objective of the BSP is to maintain price stability.109 The BSP has a number of
monetary policy instruments at its disposal to promote price stability. To increase or reduce
liquidity in the financial system, the BSP uses open market operations, among others.110 Open
market operation is a monetary tool where the BSP publicly buys or sells government
securities111 from (or to) banks and financial institutions in order to expand or contract the
supply of money. By controlling the money supply, the BSP is able to exert some influence on
the prices of goods and services and achieve its inflation objectives.112
Once the issue and/or sale of a security is made, the BSP would necessarily make a
determination, in accordance with its own rules, of the entity entitled to receive the
proceeds of the security upon its maturity. This determination by the BSP is an exercise of its
administrative powers113 under the law as an incident to its power to prescribe rules and
regulations governing open market operations to achieve the "primary objective of achieving
price stability."114As a matter of necessity, too, the same rules and regulations facilitate
transaction with the BSP by providing for an orderly manner of, among others, issuing,
transferring, exchanging and paying securities representing public debt.
Significantly, when competing claims of ownership over the proceeds of the securities it has
issued are brought before it, the law has not given the BSP the quasi-judicial power to resolve
these competing claims as part of its power to engage in open market operations. Nothing in
the BSP’s charter confers on the BSP the jurisdiction or authority to determine this kind of
claims, arising out of a subsequent transfer or assignment of evidence of indebtedness – a
matter that appropriately falls within the competence of courts of general jurisdiction. That
the statute withholds this power from the BSP is only consistent with the fundamental
reasons for the creation of a Philippine central bank, that is, to lay down stable monetary
policy and exercise bank supervisory functions. Thus, the BSP’s assumption of jurisdiction
over competing claims cannot find even a stretched-out justification under its corporate
powers "to do and perform any and all things that may be necessary or proper to carry out
the purposes" of R.A. No. 7653. 115
To reiterate, open market operation is a monetary policy instrument that the BSP employs,
among others, to regulate the supply of money in the economy to influence the timing, cost
and availability of money and credit, as well as other financial factors, for the purpose of
stabilizing the price level.116 What the law grants the BSP is a continuing role to shape and
carry out the country’s monetary policy – not the authority to adjudicate competing claims of
ownership over the securities it has issued – since this authority would not fall under the
BSP’s purposes under its charter.
While R.A. No. 7653117 empowers the BSP to conduct administrative hearings and render
judgment for or against an entity under its supervisory and regulatory powers and even
authorizes the BSP Governor to "render decisions, or rulings x x x on matters regarding
application or enforcement of laws pertaining to institutions supervised by the BSP and laws
pertaining to quasi-banks, as well as regulations, policies or instructions issued by the
Monetary Board," it is precisely the text of the BSP’s own regulation (whose validity is not
here raised as an issue) that points to the BSP’s limited role in case of an allegedly fraudulent
assignment to simply (i) issuing and circularizing a ‘"stop order" against the transfer,
exchange, redemption of the certificate of indebtedness, including the payment of interest
coupons, and (ii) withholding action on the certificate.
A similar conclusion can be drawn from the BSP’s administrative adjudicatory power in cases
of "willful failure or refusal to comply with, or violation of, any banking law or any order,
instruction or regulation issued by the Monetary Board, or any order, instruction or ruling by
the Governor."118 The non-compliance with the pertinent requirements under CB Circular No.
28, as amended, deprives a party from any right to demand payment from the BSP.
In other words, the grant of quasi-judicial authority to the BSP cannot possibly extend to
situations which do not call for the exercise by the BSP of its supervisory or regulatory
functions over entities within its jurisdiction.119
The fact alone that the parties involved are banking institutions does not necessarily call for
the exercise by the BSP of its quasi-judicial powers under the law.120
The doctrine of primary jurisdiction
argues against BSP’s purported
authority to adjudicate ownership
issues over the disputed CB bills
Given the preceding discussions, even the PDB’s invocation of the doctrine of primary
jurisdiction is misplaced.
In the exercise of its plenary legislative power, Congress may create administrative agencies
endowed with quasi-legislative and quasi-judicial powers. Necessarily, Congress likewise
defines the limits of an agency’s jurisdiction in the same manner as it defines the jurisdiction
of courts.121 As a result, it may happen that either a court or an administrative agency has
exclusive jurisdiction over a specific matter or both have concurrent jurisdiction on the same.
It may happen, too, that courts and agencies may willingly relinquish adjudicatory power that
is rightfully theirs in favor of the other. One of the instances when a court may properly defer
to the adjudicatory authority of an agency is the applicability of the doctrine of primary
jurisdiction.122
As early as 1954, the Court applied the doctrine of primary jurisdiction under the following
terms:
6. In the fifties, the Court taking cognizance of the move to vest jurisdiction in administrative
commissions and boards the power to resolve specialized disputes xxx ruled that Congress in
requiring the Industrial Court's intervention in the resolution of labor-management
controversies xxx meant such jurisdiction to be exclusive, although it did not so expressly
state in the law. The Court held that under the "sense-making and expeditious doctrine of
primary jurisdiction ... the courts cannot or will not determine a controversy involving a
question which is within the jurisdiction of an administrative tribunal, where the question
demands the exercise of sound administrative discretion requiring the special knowledge,
experience, and services of the administrative tribunal to determine technical and intricate
matters of fact, and a uniformity of ruling is essential to comply with the purposes of the
regulatory statute administered."123 (emphasis ours)
In Industrial Enterprises, Inc. v. Court of Appeals,124 the Court ruled that while an action for
rescission of a contract between coal developers appears to be an action cognizable by
regular courts, the trial court remains to be without jurisdiction to entertain the suit since the
contract sought to be rescinded is "inextricably tied up with the right to develop coal-bearing
lands and the determination of whether or not the reversion of the coal operating contract
over the subject coal blocks to [the plaintiff] would be in line with the country’s national
program and objective on coal-development and over-all coal-supply-demand balance." It
then applied the doctrine of primary jurisdiction –
In recent years, it has been the jurisprudential trend to apply the doctrine of primary
jurisdiction in many cases involving matters that demand the special competence of
administrative agencies. It may occur that the Court has jurisdiction to take cognizance of a
particular case, which means that the matter involved is also judicial in character. However, if
the case is such that its determination requires the expertise, specialized skills and
knowledge of the proper administrative bodies because technical matters or intricate
questions of facts are involved, then relief must first be obtained in an administrative
proceeding before a remedy will be supplied by the courts even though the matter is within
the proper jurisdiction of a court. This is the doctrine of primary jurisdiction. It applies
"where a claim is originally cognizable in the courts, and comes into play whenever
enforcement of the claim requires the resolution of issues which, under a regulatory scheme,
have been placed within the special competence of an administrative body."
Clearly, the doctrine of primary jurisdiction finds application in this case since the question of
what coal areas should be exploited and developed and which entity should be granted coal
operating contracts over said areas involves a technical determination by the Bureau of
Energy Development as the administrative agency in possession of the specialized expertise
to act on the matter. The Trial Court does not have the competence to decide matters
concerning activities relative to the exploration, exploitation, development and extraction of
mineral resources like coal. These issues preclude an initial judicial determination. [emphases
ours]
The absence of any express or implied statutory power to adjudicate conflicting claims of
ownership or entitlement to the proceeds of its certificates of indebtedness finds
complement in the similar absence of any technical matter that would call for the BSP’s
special expertise or competence.125 In fact, what the PDB’s petitions bear out is essentially
the nature of the transaction it had with the subsequent transferees of the subject CB bills
(BOC and Bancap) and not any matter more appropriate for special determination by the BSP
or any administrative agency.
In a similar vein, it is well-settled that the interpretation given to a rule or regulation by those
charged with its execution is entitled to the greatest weight by the courts construing such
rule or regulation.126 While there are exceptions127 to this rule, the PDB has not convinced us
that a departure is warranted in this case. Given the non-applicability of the doctrine of
primary jurisdiction, the BSP’s own position, in light of Circular No. 769-80, deserves respect
from the Court.
Ordinarily, cases involving the application of doctrine of primary jurisdiction are initiated by
an action invoking the jurisdiction of a court or administrative agency to resolve the
substantive legal conflict between the parties. In this sense, the present case is quite unique
since the court’s jurisdiction was, originally, invoked to compel an administrative agency (the
BSP) to resolve the legal conflict of ownership over the CB bills - instead of obtaining a
judicial determination of the same dispute.
The remedy of interpleader
Based on the unique factual premise of the present case, the RTC acted correctly in initially
assuming jurisdiction over the PDB’s petition for mandamus, prohibition and
injunction.128 While the RTC agreed (albeit erroneously) with the PDB’s view (that the BSP has
jurisdiction), it, however, dismissed not only the BOC’s/the BSP’s counterclaims but the PDB’s
petition itself as well, on the ground that it lacks jurisdiction.
This is plain error.
Not only the parties themselves, but more so the courts, are bound by the rule on non-
waiver of jurisdiction.129believes that jurisdiction over the BOC’s counterclaims and the BSP’s
counterclaim/crossclaim for interpleader calls for the application of the doctrine of primary
jurisdiction, the allowance of the PDB’s petition even becomes imperative because courts
may raise the issue of primary jurisdiction sua sponte.130
Of the three possible options available to the RTC, the adoption of either of these two would
lead the trial court into serious legal error: first, if it granted the PDB’s petition, its decision
would have to be set aside on appeal because the BSP has no jurisdiction as previously
discussed; and second when it dismissed the PDB’s petitions and the BOC’s counterclaims on
the ground that it lacks jurisdiction, the trial court seriously erred because precisely, the
resolution of the conflicting claims over the CB bills falls within its general jurisdiction.
Without emasculating its jurisdiction, the RTC could have properly dismissed the PDB’s
petition but on the ground that mandamus does not lie against the BSP; but even this correct
alternative is no longer plausible since the BSP, as a respondent below, already properly
brought before the RTC the remaining conflicting claims over the subject CB bills by way of a
counterclaim/crossclaim for interpleader. Section 1, Rule 62 of the Rules of Court provides
when an interpleader is proper:
SECTION 1. When interpleader proper. – Whenever conflicting claims upon the same subject
matter are or may be made against a person who claims no interest whatever in the subject
matter, or an interest which in whole or in part is not disputed by the claimants, he may bring
an action against the conflicting claimants to compel them to interplead and litigate their
several claims among themselves.
The remedy of an action of interpleader131 is designed to protect a person against double
vexation in respect of a single liability.7 It requires, as an indispensable requisite, that
conflicting claims upon the same subject matter are or may be made against the stakeholder
(the possessor of the subject matter) who claims no interest whatever in the subject matter
or an interest which in whole or in part is not disputed by the claimants.132
Through this remedy, the stakeholder can join all competing claimants in a single proceeding
to determine conflicting claims without exposing the stakeholder to the possibility of having
to pay more than once on a single liability.133
When the court orders that the claimants litigate among themselves, in reality a new action
arises,134 where the claims of the interpleaders themselves are brought to the fore, the
stakeholder as plaintiff is relegated merely to the role of initiating the suit. In short, the
remedy of interpleader, when proper, merely provides an avenue for the conflicting claims
on the same subject matter to be threshed out in an action. Section 2 of Rule 62 provides:
SEC. 2. Order. – Upon the filing of the complaint, the court shall issue an order requiring the
conflicting claimants to interplead with one another. If the interests of justice so require, the
court may direct in such order that the subject matter be paid or delivered to the court.
This is precisely what the RTC did by granting the BSP’s motion to interplead. The PDB itself
"agreed that the various claimants should now interplead." Thus, the PDB and the BOC
subsequently entered into two separate escrow agreements, covering the CB bills, and
submitted them to the RTC for approval.
In granting the BSP’s motion, the RTC acted on the correct premise that it has jurisdiction to
resolve the parties’ conflicting claims over the CB bills - consistent with the rules and the
parties’ conduct - and accordingly required the BOC to amend its answer and for the PDB to
comment thereon. Suddenly, however, the PDB made an about-face and questioned the
jurisdiction of the RTC. Swayed by the PDB’s argument, the RTC dismissed even the PDB’s
petition - which means that it did not actually compel the BSP to resolve the BOC’s and the
PDB’s claims.
Without the motion to interplead and the order granting it, the RTC could only dismiss the
PDB’s petition since it is the RTC which has jurisdiction to resolve the parties’ conflicting
claims – not the BSP. Given that the motion to interplead has been actually filed, the RTC
could not have really granted the relief originally sought in the PDB’s petition since the RTC’s
order granting the BSP’s motion to interplead - to which the PDB in fact acquiesced into -
effectively resulted in the dismissal of the PDB’s petition. This is not altered by the fact that
the PDB additionally prayed in its petition for damages, attorney’s fees and costs of suit
"against the public respondents" because the grant of the order to interplead effectively
sustained the propriety of the BSP’s resort to this procedural device.
Interpleader
1. as a special civil action
What is quite unique in this case is that the BSP did not initiate the interpleader suit through
an original complaint but through its Answer. This circumstance becomes understandable if it
is considered that insofar as the BSP is concerned, the PDB does not possess any right to have
its claim recorded in the BSP’s books; consequently, the PDB cannot properly be considered
even as a potential claimant to the proceeds of the CB bills upon maturity. Thus, the
interpleader was only an alternative position, made only in the BSP’s Answer.135
The remedy of interpleader, as a special civil action, is primarily governed by the specific
provisions in Rule 62 of the Rules of Court and secondarily by the provisions applicable to
ordinary civil actions.136 Indeed, Rule 62 does not expressly authorize the filing of a
complaint-in-interpleader as part of, although separate and independent from, the answer.
Similarly, Section 5, Rule 6, in relation to Section 1, Rule 9 of the Rules of Court137 does not
include a complaint-in-interpleader as a claim,138 a form of defense,139 or as an objection that
a defendant may be allowed to put up in his answer or in a motion to dismiss. This does not
mean, however, that the BSP’s "counter-complaint/cross-claim for interpleader" runs
counter to general procedures.
Apart from a pleading,140 the rules141 allow a party to seek an affirmative relief from the court
through the procedural device of a motion. While captioned "Answer with counter
complaint/cross-claim for interpleader," the RTC understood this as in the nature of a
motion,142 seeking relief which essentially consists in an order for the conflicting claimants to
litigate with each other so that "payment is made to the rightful or legitimate owner"143 of
the subject CB bills.
The rules define a "civil action" as "one by which a party sues another for the enforcement or
protection of a right, or the prevention or redress of a wrong." Interpleader may be
considered as a stakeholder’s remedy to prevent a wrong, that is, from making payment to
one not entitled to it, thereby rendering itself vulnerable to lawsuit/s from those legally
entitled to payment.
Interpleader is a civil action made special by the existence of particular rules to govern the
uniqueness of its application and operation. Under Section 2, Rule 6 of the Rules of Court,
governing ordinary civil actions, a party’s claim is asserted "in a complaint, counterclaim,
cross-claim, third (fourth, etc.)-party complaint, or complaint-in-intervention." In an
interpleader suit, however, a claim is not required to be contained in any of these pleadings
but in the answer-(of the conflicting claimants)-in-interpleader. This claim is different from
the counter-claim (or cross-claim, third party-complaint) which is separately allowed under
Section 5, par. 2 of Rule 62.
2. the payment of docket fees covering BOC’s counterclaim
The PDB argues that, even assuming that the RTC has jurisdiction over the issue of ownership
of the CB bills, the BOC’s failure to pay the appropriate docket fees prevents the RTC from
acquiring jurisdiction over the BOC’s "counterclaims."
We disagree with the PDB.
To reiterate and recall, the order granting the "PDB’s motion to interplead," already resulted
in the dismissal of the PDB’s petition. The same order required the BOC to amend its answer
and for the conflicting claimants to comment, presumably to conform to the nature of an
answer-in interpleader. Perhaps, by reason of the BOC’s denomination of its claim as a
"compulsory counterclaim" and the PDB’s failure to fully appreciate the RTC’s order granting
the "BSP’s motion for interpleader" (with the PDB’s conformity), the PDB mistakenly treated
the BOC’s claim as a "permissive counterclaim" which necessitates the payment of docket
fees.
As the preceding discussions would show, however, the BOC’s "claim" - i.e., its assertion of
ownership over the CB bills – is in reality just that, a "claim" against the stakeholder and not
as a "counterclaim,"144 whether compulsory145or permissive. It is only the BOC’s alternative
prayer (for the PDB to deliver to the BOC, as the buyer in the April 15 transaction and the
ultimate successor-in-interest of the buyer in the April 19 transaction, either the original
subjects of the sales or the value thereof plus whatever income that may have been earned
pendente lite) and its prayer for damages that are obviously compulsory counterclaims
against the PDB and, therefore, does not require payment of docket fees. 146
The PDB takes a contrary position through its insistence that a compulsory counterclaim
should be one where the presence of third parties, of whom the court cannot acquire
jurisdiction, is not required. It reasons out that since the RCBC and All Asia (the intervening
holders of the CB bills) have already been dropped from the case, then the BOC’s
counterclaim must only be permissive in nature and the BOC should have paid the correct
docket fees.
We see no reason to belabor this claim. Even if we gloss over the PDB’s own conformity to
the dropping of these entities as parties, the BOC correctly argues that a remedy is provided
under the Rules. Section 12, Rule 6 of the Rules of Court reads:
SEC. 12. Bringing new parties. – When the presence of parties other than those to the original
action is required for the granting of complete relief in the determination of a counterclaim
or cross-claim, the court shall order them to be brought in as defendants, if jurisdiction over
them can be obtained.
Even then, the strict characterization of the BOC’s counterclaim is no longer material in
disposing of the PDB’s argument based on non-payment of docket fees.
When an action is filed in court, the complaint must be accompanied by the payment of the
requisite docket and filing fees by the party seeking affirmative relief from the court. It is the
filing of the complaint or appropriate initiatory pleading, accompanied by the payment of the
prescribed docket fee, that vests a trial court with jurisdiction over the claim or the nature of
the action.147 However, the non-payment of the docket fee at the time of filing does not
automatically cause the dismissal of the case, so long as the fee is paid within the applicable
prescriptive or reglementary period, especially when the claimant demonstrates a willingness
to abide by the rules prescribing such payment.148
In the present case, considering the lack of a clear guideline on the payment of docket fee by
the claimants in an interpleader suit, compounded by the unusual manner in which the
interpleader suit was initiated and the circumstances surrounding it, we surely cannot
deduce from the BOC’s mere failure to specify in its prayer the total amount of the CB bills it
lays claim to (or the value of the subjects of the sales in the April 15 and April 19 transactions,
in its alternative prayer) an intention to defraud the government that would warrant the
dismissal of its claim.149
At any rate, regardless of the nature of the BOC’s "counterclaims," for purposes of payment
of filing fees, both the BOC and the PDB, properly as defendants-in-interpleader, must be
assessed the payment of the correct docket fee arising from their respective claims. The
seminal case of Sun Insurance Office, Ltd. v. Judge Asuncion150 provides us guidance in the
payment of docket fees, to wit:
1. x x x Where the filing of the initiatory pleading is not accompanied by payment of the
docket fee, the court may allow payment of the fee within a reasonable time but in no case
beyond the applicable prescriptive or reglementary period.
2. The same rule applies to permissive counterclaims, third-party claims and similar
pleadings, which shall not be considered filed until and unless the filing fee prescribed
therefor is paid. The court may also allow payment of said fee within a reasonable time but
also in no case beyond its applicable prescriptive or reglementary period. [underscoring ours]
This must be the rule considering that Section 7, Rule 62 of which reads:
SEC. 7. Docket and other lawful fees, costs and litigation expenses as liens. – The docket and
other lawful fees paid by the party who filed a complaint under this Rule, as well as the costs
and litigation expenses, shall constitute a lien or charge upon the subject matter of the
action, unless the court shall order otherwise.

only pertain to the docket and lawful fees to be paid by the one who initiated the
interpleader suit, and who, under the Rules, actually "claims no interest whatever in the
subject matter." By constituting a lien on the subject matter of the action, Section 7 in effect
only aims to actually compensate the complainant-in-interpleader, who happens to be the
stakeholder unfortunate enough to get caught in a legal crossfire between two or more
conflicting claimants, for the faultless trouble it found itself into. Since the defendants-in-
interpleader are actually the ones who make a claim - only that it was extraordinarily done
through the procedural device of interpleader - then to them devolves the duty to pay the
docket fees prescribed under Rule 141 of the Rules of Court, as amended.151

The importance of paying the correct amount of docket fee cannot be overemphasized:

The matter of payment of docket fees is not a mere triviality. These fees are necessary to
defray court expenses in the handling of cases. Consequently, in order to avoid tremendous
losses to the judiciary, and to the government as well, the payment of docket fees cannot be
made dependent on the outcome of the case, except when the claimant is a pauper-
litigant.152

WHEREFORE, premises considered the consolidated PETITIONS are GRANTED. The Planters
Development Bank is hereby REQUIRED to file with the Regional Trial Court its comment or
answer-in-interpleader to Bank of Commerce’s Amended Consolidated Answer with
Compulsory Counterclaim, as previously ordered by the Regional Trial Court. The Regional
Trial Court of Makati City, Branch 143, is hereby ORDERED to assess the docket fees due from
Planters Development Bank and Bank of Commerce and order their payment, and to resolve
with DELIBERATE DISPATCH the parties’ conflicting claims of ownership over the proceeds of
the Central Bank bills.

The Clerk of Court of the Regional Trial Court of Makati City, Branch 143, or his duly
authorized representative is hereby ORDERED to assess and collect the appropriate amount
of docket fees separately due the Bank of Commerce and Planters Development Bank as
conflicting claimants in Bangko Sentral ng Pilipinas’ interpleader suit, in accordance with this
decision.

SO ORDERED.
Republic of the Philippines (a) For engaging in unsafe, unsound, and fraudulent banking practices that have jeopardized
SUPREME COURT the welfare of the Bank, its shareholders, who includes among others, the Petitioner, and
Manila depositors. (sic)

THIRD DIVISION (b) For granting and approving loans and/or "loaned" sums of money to six (6) "dummy"
borrower corporations ("Borrower Corporations") which, at the time of loan approval, had no
G.R. No. 168332 June 19, 2009 financial capacity to justify the loans. (sic)
ANA MARIA A. KORUGA, Petitioner, (c) For approving and accepting a dacion en pago, or payment of loans with property instead
vs. of cash, resulting to a diminished future cumulative interest income by the Bank and a
TEODORO O. ARCENAS, JR., ALBERT C. AGUIRRE, CESAR S. PAGUIO, FRANCISCO A. RIVERA, decline in its liquidity position. (sic)
and THE HONORABLE COURT OF APPEALS, THIRD DIVISION, Respondents.
(d) For knowingly giving "favorable treatment" to the Borrower Corporations in which some
x - - - - - - - - - - - - - - - - - - - - - - -x or most of them have interests, i.e. interlocking directors/officers thereof, interlocking
G.R. No. 169053 June 19, 2009 ownerships. (sic)

TEODORO O. ARCENAS, JR., ALBERT C. AGUIRRE, CESAR S. PAGUIO, and FRANCISCO A.
RIVERA,Petitioners,
vs.
HON. SIXTO MARELLA, JR., Presiding Judge, Branch 138, Regional Trial Court of Makati City,
and ANA MARIA A. KORUGA, Respondents.
DECISION
NACHURA, J.:
Before this Court are two petitions that originated from a Complaint filed by Ana Maria A.
Koruga (Koruga) before the Regional Trial Court (RTC) of Makati City against the Board of
Directors of Banco Filipino and the Members of the Monetary Board of the Bangko Sentral ng
Pilipinas (BSP) for violation of the Corporation Code, for inspection of records of a
corporation by a stockholder, for receivership, and for the creation of a management
committee.
G.R. No. 168332
The first is a Petition for Certiorari under Rule 65 of the Rules of Court, docketed as G.R. No.
168332, praying for the annulment of the Court of Appeals (CA) Resolution1 in CA-G.R. SP No.
88422 dated April 18, 2005 granting the prayer for a Writ of Preliminary Injunction of therein
petitioners Teodoro O. Arcenas, Jr., Albert C. Aguirre, Cesar S. Paguio, and Francisco A. Rivera
(Arcenas, et al.).
(e) For employing their respective offices and functions as the Bank’s officers and directors,
or omitting to perform their functions and duties, with negligence, unfaithfulness or abuse of
confidence of fiduciary duty, misappropriated or misapplied or ratified by inaction the
misappropriation or misappropriations, of (sic) almost ₱1.6 Billion Pesos (sic) constituting the
Bank’s funds placed under their trust and administration, by unlawfully releasing loans to the
Borrower Corporations or refusing or failing to impugn these, knowing before the loans were
released or thereafter that the Bank’s cash resources would be dissipated thereby, to the
prejudice of the Petitioner, other Banco Filipino depositors, and the public.
10.2 Right of a stockholder to inspect the records of a corporation (including financial
statements) under Sections 74 and 75 of the Code, as implemented by the Interim Rules;
(a) Unlawful refusal to allow the Petitioner from inspecting or otherwise accessing the
corporate records of the bank despite repeated demand in writing, where she is a
stockholder. (sic)
10.3 Receivership and Creation of a Management Committee pursuant to:
(a) Rule 59 of the 1997 Rules of Civil Procedure ("Rules");
(b) Section 5.2 of R.A. No. 8799;
(c) Rule 1, Section 1(a)(1) of the Interim Rules;
(d) Rule 1, Section 1(a)(2) of the Interim Rules;

Koruga is a minority stockholder of Banco Filipino Savings and Mortgage Bank. On August 20, (e) Rule 7 of the Interim Rules;
2003, she filed a complaint before the Makati RTC which was raffled to Branch 138, presided
over by Judge Sixto Marella, Jr.2Koruga’s complaint alleged: (f) Rule 9 of the Interim Rules; and

10. 1 Violation of Sections 31 to 34 of the Corporation Code ("Code") which prohibit self- (g) The General Banking Law of 2000 and the New Central Bank Act.3
dealing and conflicts of interest of directors and officers, thus: On September 12, 2003, Arcenas, et al. filed their Answer raising, among others, the trial
court’s lack of jurisdiction to take cognizance of the case. They also filed a Manifestation and
Motion seeking the dismissal of the case on the following grounds: (a) lack of jurisdiction
over the subject matter; (b) lack of jurisdiction over the persons of the defendants; (c) forum-
shopping; and (d) for being a nuisance/harassment suit. They then moved that the trial court
rule on their affirmative defenses, dismiss the intra-corporate case, and set the case for
preliminary hearing.
In an Order dated October 18, 2004, the trial court denied the Manifestation and Motion,
ruling thus:
The result of the procedure sought by defendants Arcenas, et al. (sic) is for the Court to
conduct a preliminary hearing on the affirmative defenses raised by them in their Answer.
This [is] proscribed by the Interim Rules of Procedure on Intracorporate (sic) Controversies
because when a preliminary hearing is conducted it is "as if a Motion to Dismiss was filed"
(Rule 16, Section 6, 1997 Rules of Civil Procedure). A Motion to Dismiss is a prohibited
pleading under the Interim Rules, for which reason, no favorable consideration can be given
to the Manifestation and Motion of defendants, Arcenas, et al.
The Court finds no merit to (sic) the claim that the instant case is a nuisance or harassment
suit.
WHEREFORE, the Court defers resolution of the affirmative defenses raised by the
defendants Arcenas, et al.4
Arcenas, et al. moved for reconsideration5 but, on January 18, 2005, the RTC denied the
motion.6 This prompted Arcenas, et al. to file before the CA a Petition for Certiorari and
Prohibition under Rule 65 of the Rules of Court with a prayer for the issuance of a writ of
preliminary injunction and a temporary retraining order (TRO).7
On February 9, 2005, the CA issued a 60-day TRO enjoining Judge Marella from conducting
further proceedings in the case.8
On February 22, 2005, the RTC issued a Notice of Pre-trial9 setting the case for pre-trial on
June 2 and 9, 2005. Arcenas, et al. filed a Manifestation and Motion10 before the CA,
reiterating their application for a writ of preliminary injunction. Thus, on April 18, 2005, the
CA issued the assailed Resolution, which reads in part:
(C)onsidering that the Temporary Restraining Order issued by this Court on February 9, 2005
expired on April 10, 2005, it is necessary that a writ of preliminary injunction be issued in
order not to render ineffectual whatever final resolution this Court may render in this case,
after the petitioners shall have posted a bond in the amount of FIVE HUNDRED THOUSAND
(₱500,000.00) PESOS.
SO ORDERED.11
Dissatisfied, Koruga filed this Petition for Certiorari under Rule 65 of the Rules of Court.
Koruga alleged that the CA effectively gave due course to Arcenas, et al.’s petition when it
issued a writ of preliminary injunction without factual or legal basis, either in the April 18,
2005 Resolution itself or in the records of the case. She prayed that this Court restrain the CA
from implementing the writ of preliminary injunction and, after due proceedings, make the
injunction against the assailed CA Resolution permanent.12
In their Comment, Arcenas, et al. raised several procedural and substantive issues. They
alleged that the Verification and Certification against Forum-Shopping attached to the
Petition was not executed in the manner prescribed by Philippine law since, as admitted by
Koruga’s counsel himself, the same was only a facsimile.
They also averred that Koruga had admitted in the Petition that she never asked for
reconsideration of the CA’s April 18, 2005 Resolution, contending that the Petition did not
raise pure questions of law as to constitute an exception to the requirement of filing a
Motion for Reconsideration before a Petition for Certiorari is filed.
They, likewise, alleged that the Petition may have already been rendered moot and academic
by the July 20, 2005 CA Decision,13 which denied their Petition, and held that the RTC did not
commit grave abuse of discretion in issuing the assailed orders, and thus ordered the RTC to
proceed with the trial of the case.
Meanwhile, on March 13, 2006, this Court issued a Resolution granting the prayer for a TRO
and enjoining the Presiding Judge of Makati RTC, Branch 138, from proceeding with the
hearing of the case upon the filing by Arcenas, et al. of a ₱50,000.00 bond. Koruga filed a
motion to lift the TRO, which this Court denied on July 5, 2006.
On the other hand, respondents Dr. Conrado P. Banzon and Gen. Ramon Montaño also filed
their Comment on Koruga’s Petition, raising substantially the same arguments as Arcenas, et
al.
G.R. No. 169053
G.R. No. 169053 is a Petition for Review on Certiorari under Rule 45 of the Rules of Court,
with prayer for the issuance of a TRO and a writ of preliminary injunction filed by Arcenas, et
al.
In their Petition, Arcenas, et al. asked the Court to set aside the Decision14 dated July 20,
2005 of the CA in CA-G.R. SP No. 88422, which denied their petition, having found no grave
abuse of discretion on the part of the Makati RTC. The CA said that the RTC Orders were
interlocutory in nature and, thus, may be assailed by certiorari or prohibition only when it is
shown that the court acted without or in excess of jurisdiction or with grave abuse of
discretion. It added that the Supreme Court frowns upon resort to remedial measures against
interlocutory orders.
Arcenas, et al. anchored their prayer on the following grounds: that, in their Answer before
the RTC, they had raised the issue of failure of the court to acquire jurisdiction over them due
to improper service of summons; that the Koruga action is a nuisance or harassment suit;
that there is another case involving the same parties for the same cause pending before the
Monetary Board of the BSP, and this constituted forum-shopping; and that jurisdiction over
the subject matter of the case is vested by law in the BSP.15
Arcenas, et al. assign the following errors:
I. THE COURT OF APPEALS, IN "FINDING NO GRAVE ABUSE OF DISCRETION COMMITTED BY
PUBLIC RESPONDENT REGIONAL TRIAL COURT OF MAKATI, BRANCH 138, IN ISSUING THE
ASSAILED ORDERS," FAILED TO CONSIDER AND MERELY GLOSSED OVER THE MORE
TRANSCENDENT ISSUES OF THE LACK OF JURISDICTION ON THE PART OF SAID PUBLIC
RESPONDENT OVER THE SUBJECT MATTER OF THE CASE BEFORE IT, LITIS PENDENTIA AND
FORUM SHOPPING, AND THE CASE BELOW BEING A NUISANCE OR HARASSMENT SUIT,
EITHER ONE AND ALL OF WHICH GOES/GO TO RENDER THE ISSUANCE BY PUBLIC
RESPONDENT OF THE ASSAILED ORDERS A GRAVE ABUSE OF DISCRETION.
II. THE FINDING OF THE COURT OF APPEALS OF "NO GRAVE ABUSE OF DISCRETION
COMMITTED BY PUBLIC RESPONDENT REGIONAL TRIAL COURT OF MAKATI, BRANCH 138, IN
ISSUING THE ASSAILED ORDERS," IS NOT IN ACCORD WITH LAW OR WITH THE APPLICABLE
DECISIONS OF THIS HONORABLE COURT.16
Meanwhile, in a Manifestation and Motion filed on August 31, 2005, Koruga prayed for,
among others, the consolidation of her Petition with the Petition for Review on Certiorari
under Rule 45 filed by Arcenas, et al., docketed as G.R. No. 169053. The motion was granted
by this Court in a Resolution dated September 26, 2005.
Our Ruling
Initially, we will discuss the procedural issue.
Arcenas, et al. argue that Koruga’s petition should be dismissed for its defective Verification
and Certification Against Forum-Shopping, since only a facsimile of the same was attached to
the Petition. They also claim that the Verification and Certification Against Forum-Shopping,
allegedly executed in Seattle, Washington, was not authenticated in the manner prescribed
by Philippine law and not certified by the Philippine Consulate in the United States.
This contention deserves scant consideration.
On the last page of the Petition in G.R. No. 168332, Koruga’s counsel executed an
Undertaking, which reads as follows:
In view of that fact that the Petitioner is currently in the United States, undersigned counsel
is attaching a facsimile copy of the Verification and Certification Against Forum-Shopping
duly signed by the Petitioner and notarized by Stephanie N. Goggin, a Notary Public for the
Sate (sic) of Washington. Upon arrival of the original copy of the Verification and Certification
as certified by the Office of the Philippine Consul, the undersigned counsel shall immediately
provide duplicate copies thereof to the Honorable Court.17
Thus, in a Compliance18 filed with the Court on September 5, 2005, petitioner submitted the
original copy of the duly notarized and authenticated Verification and Certification Against
Forum-Shopping she had executed.19 This Court noted and considered the Compliance
satisfactory in its Resolution dated November 16, 2005. There is, therefore, no need to
further belabor this issue.
We now discuss the substantive issues in this case.
First, we resolve the prayer to nullify the CA’s April 18, 2005 Resolution.
We hold that the Petition in G.R. No. 168332 has become moot and academic. The writ of
preliminary injunction being questioned had effectively been dissolved by the CA’s July 20,
2005 Decision. The dispositive portion of the Decision reads in part:
The case is REMANDED to the court a quo for further proceedings and to resolve with
deliberate dispatch the intra-corporate controversies and determine whether there was
actually a valid service of summons. If, after hearing, such service is found to have been
improper, then new summons should be served forthwith.20
Accordingly, there is no necessity to restrain the implementation of the writ of preliminary
injunction issued by the CA on April 18, 2005, since it no longer exists.
However, this Court finds that the CA erred in upholding the jurisdiction of, and remanding
the case to, the RTC.
The resolution of these petitions rests mainly on the determination of one fundamental
issue: Which body has jurisdiction over the Koruga Complaint, the RTC or the BSP?
We hold that it is the BSP that has jurisdiction over the case.
A reexamination of the Complaint is in order.
Koruga’s Complaint charged defendants with violation of Sections 31 to 34 of the
Corporation Code, prohibiting self-dealing and conflict of interest of directors and officers;
invoked her right to inspect the corporation’s records under Sections 74 and 75 of the
Corporation Code; and prayed for Receivership and Creation of a Management Committee,
pursuant to Rule 59 of the Rules of Civil Procedure, the Securities Regulation Code, the
Interim Rules of Procedure Governing Intra-Corporate Controversies, the General Banking
Law of 2000, and the New Central Bank Act. She accused the directors and officers of Banco
Filipino of engaging in unsafe, unsound, and fraudulent banking practices, more particularly,
acts that violate the prohibition on self-dealing.
It is clear that the acts complained of pertain to the conduct of Banco Filipino’s banking
business. A bank, as defined in the General Banking Law,21 refers to an entity engaged in the
lending of funds obtained in the form of deposits.22The banking business is properly subject
to reasonable regulation under the police power of the state because of its nature and
relation to the fiscal affairs of the people and the revenues of the state. Banks are affected
with public interest because they receive funds from the general public in the form of
deposits. It is the Government’s responsibility to see to it that the financial interests of those
who deal with banks and banking institutions, as depositors or otherwise, are protected. In
this country, that task is delegated to the BSP, which pursuant to its Charter, is authorized to
administer the monetary, banking, and credit system of the Philippines. It is further
authorized to take the necessary steps against any banking institution if its continued
operation would cause prejudice to its depositors, creditors and the general public as well.23
The law vests in the BSP the supervision over operations and activities of banks. The New
Central Bank Act provides:
Section 25. Supervision and Examination. - The Bangko Sentral shall have supervision over,
and conduct periodic or special examinations of, banking institutions and quasi-banks,
including their subsidiaries and affiliates engaged in allied activities.24
Specifically, the BSP’s supervisory and regulatory powers include:
4.1 The issuance of rules of conduct or the establishment of standards of operation for
uniform application to all institutions or functions covered, taking into consideration the
distinctive character of the operations of institutions and the substantive similarities of
specific functions to which such rules, modes or standards are to be applied;
4.2 The conduct of examination to determine compliance with laws and regulations if the
circumstances so warrant as determined by the Monetary Board;
4.3 Overseeing to ascertain that laws and Regulations are complied with;
4.4 Regular investigation which shall not be oftener than once a year from the last date of
examination to determine whether an institution is conducting its business on a safe or
sound basis: Provided, That the deficiencies/irregularities found by or discovered by an audit
shall be immediately addressed;
4.5 Inquiring into the solvency and liquidity of the institution (2-D); or
4.6 Enforcing prompt corrective action.25
Koruga alleges that "the dispute in the trial court involves the manner with which the
Directors’ (sic) have handled the Bank’s affairs, specifically the fraudulent loans and dacion
en pago authorized by the Directors in favor of several dummy corporations known to have
close ties and are indirectly controlled by the Directors."26 Her allegations, then, call for the
examination of the allegedly questionable loans. Whether these loans are covered by the
prohibition on self-dealing is a matter for the BSP to determine. These are not ordinary intra-
corporate matters; rather, they involve banking activities which are, by law, regulated and
supervised by the BSP. As the Court has previously held:
It is well-settled in both law and jurisprudence that the Central Monetary Authority, through
the Monetary Board, is vested with exclusive authority to assess, evaluate and determine the
condition of any bank, and finding such condition to be one of insolvency, or that its
continuance in business would involve a probable loss to its depositors or creditors, forbid
bank or non-bank financial institution to do business in the Philippines; and shall designate
an official of the BSP or other competent person as receiver to immediately take charge of its
assets and liabilities.27
Correlatively, the General Banking Law of 2000 specifically deals with loans contracted by
bank directors or officers, thus:
SECTION 36. Restriction on Bank Exposure to Directors, Officers, Stockholders and Their
Related Interests. — No director or officer of any bank shall, directly or indirectly, for himself
or as the representative or agent of others, borrow from such bank nor shall he become a
guarantor, indorser or surety for loans from such bank to others, or in any manner be an
obligor or incur any contractual liability to the bank except with the written approval of the
majority of all the directors of the bank, excluding the director concerned: Provided, That
such written approval shall not be required for loans, other credit accommodations and
advances granted to officers under a fringe benefit plan approved by the Bangko Sentral. The
required approval shall be entered upon the records of the bank and a copy of such entry
shall be transmitted forthwith to the appropriate supervising and examining department of
the Bangko Sentral.
Dealings of a bank with any of its directors, officers or stockholders and their related
interests shall be upon terms not less favorable to the bank than those offered to others.
After due notice to the board of directors of the bank, the office of any bank director or
officer who violates the provisions of this Section may be declared vacant and the director or
officer shall be subject to the penal provisions of the New Central Bank Act.
The Monetary Board may regulate the amount of loans, credit accommodations and
guarantees that may be extended, directly or indirectly, by a bank to its directors, officers,
stockholders and their related interests, as well as investments of such bank in enterprises
owned or controlled by said directors, officers, stockholders and their related interests.
However, the outstanding loans, credit accommodations and guarantees which a bank may
extend to each of its stockholders, directors, or officers and their related interests, shall be
limited to an amount equivalent to their respective unencumbered deposits and book value
of their paid-in capital contribution in the bank: Provided, however, That loans, credit
accommodations and guarantees secured by assets considered as non-risk by the Monetary
Board shall be excluded from such limit: Provided, further, That loans, credit
accommodations and advances to officers in the form of fringe benefits granted in
accordance with rules as may be prescribed by the Monetary Board shall not be subject to
the individual limit.
The Monetary Board shall define the term "related interests."
The limit on loans, credit accommodations and guarantees prescribed herein shall not apply
to loans, credit accommodations and guarantees extended by a cooperative bank to its
cooperative shareholders.28
Furthermore, the authority to determine whether a bank is conducting business in an unsafe
or unsound manner is also vested in the Monetary Board. The General Banking Law of 2000
provides:
SECTION 56. Conducting Business in an Unsafe or Unsound Manner. — In determining
whether a particular act or omission, which is not otherwise prohibited by any law, rule or
regulation affecting banks, quasi-banks or trust entities, may be deemed as conducting
business in an unsafe or unsound manner for purposes of this Section, the Monetary Board
shall consider any of the following circumstances:
56.1. The act or omission has resulted or may result in material loss or damage, or abnormal
risk or danger to the safety, stability, liquidity or solvency of the institution;
56.2. The act or omission has resulted or may result in material loss or damage or abnormal
risk to the institution's depositors, creditors, investors, stockholders or to the Bangko Sentral
or to the public in general;
56.3. The act or omission has caused any undue injury, or has given any unwarranted
benefits, advantage or preference to the bank or any party in the discharge by the director or
officer of his duties and responsibilities through manifest partiality, evident bad faith or gross
inexcusable negligence; or
56.4. The act or omission involves entering into any contract or transaction manifestly and
grossly disadvantageous to the bank, quasi-bank or trust entity, whether or not the director
or officer profited or will profit thereby.
Whenever a bank, quasi-bank or trust entity persists in conducting its business in an unsafe
or unsound manner, the Monetary Board may, without prejudice to the administrative
sanctions provided in Section 37 of the New Central Bank Act, take action under Section 30 of
the same Act and/or immediately exclude the erring bank from clearing, the provisions of law
to the contrary notwithstanding.
Finally, the New Central Bank Act grants the Monetary Board the power to impose
administrative sanctions on the erring bank:
Section 37. Administrative Sanctions on Banks and Quasi-banks. - Without prejudice to the
criminal sanctions against the culpable persons provided in Sections 34, 35, and 36 of this
Act, the Monetary Board may, at its discretion, impose upon any bank or quasi-bank, their
directors and/or officers, for any willful violation of its charter or by-laws, willful delay in the
submission of reports or publications thereof as required by law, rules and regulations; any
refusal to permit examination into the affairs of the institution; any willful making of a false
or misleading statement to the Board or the appropriate supervising and examining
department or its examiners; any willful failure or refusal to comply with, or violation of, any
banking law or any order, instruction or regulation issued by the Monetary Board, or any
order, instruction or ruling by the Governor; or any commission of irregularities, and/or
conducting business in an unsafe or unsound manner as may be determined by the Monetary
Board, the following administrative sanctions, whenever applicable:
(a) fines in amounts as may be determined by the Monetary Board to be appropriate, but in
no case to exceed Thirty thousand pesos (₱30,000) a day for each violation, taking into
consideration the attendant circumstances, such as the nature and gravity of the violation or
irregularity and the size of the bank or quasi-bank;
(b) suspension of rediscounting privileges or access to Bangko Sentral credit facilities;
(c) suspension of lending or foreign exchange operations or authority to accept new deposits
or make new investments;
(d) suspension of interbank clearing privileges; and/or
(e) revocation of quasi-banking license.
Resignation or termination from office shall not exempt such director or officer from
administrative or criminal sanctions.
The Monetary Board may, whenever warranted by circumstances, preventively suspend any
director or officer of a bank or quasi-bank pending an investigation: Provided, That should
the case be not finally decided by the Bangko Sentral within a period of one hundred twenty
(120) days after the date of suspension, said director or officer shall be reinstated in his
position: Provided, further, That when the delay in the disposition of the case is due to the
fault, negligence or petition of the director or officer, the period of delay shall not be counted
in computing the period of suspension herein provided.
The above administrative sanctions need not be applied in the order of their severity.
Whether or not there is an administrative proceeding, if the institution and/or the directors
and/or officers concerned continue with or otherwise persist in the commission of the
indicated practice or violation, the Monetary Board may issue an order requiring the
institution and/or the directors and/or officers concerned to cease and desist from the
indicated practice or violation, and may further order that immediate action be taken to
correct the conditions resulting from such practice or violation. The cease and desist order
shall be immediately effective upon service on the respondents.
The respondents shall be afforded an opportunity to defend their action in a hearing before
the Monetary Board or any committee chaired by any Monetary Board member created for
the purpose, upon request made by the respondents within five (5) days from their receipt of
the order. If no such hearing is requested within said period, the order shall be final. If a
hearing is conducted, all issues shall be determined on the basis of records, after which the
Monetary Board may either reconsider or make final its order.
The Governor is hereby authorized, at his discretion, to impose upon banking institutions, for
any failure to comply with the requirements of law, Monetary Board regulations and policies,
and/or instructions issued by the Monetary Board or by the Governor, fines not in excess of
Ten thousand pesos (₱10,000) a day for each violation, the imposition of which shall be final
and executory until reversed, modified or lifted by the Monetary Board on appeal.29
Koruga also accused Arcenas, et al. of violation of the Corporation Code’s provisions on self-
dealing and conflict of interest. She invoked Section 31 of the Corporation Code, which
defines the liability of directors, trustees, or officers of a corporation for, among others,
acquiring any personal or pecuniary interest in conflict with their duty as directors or
trustees, and Section 32, which prescribes the conditions under which a contract of the
corporation with one or more of its directors or trustees – the so-called "self-dealing
directors"30 – would be valid. She also alleged that Banco Filipino’s directors violated Sections
33 and 34 in approving the loans of corporations with interlocking ownerships, i.e., owned,
directed, or managed by close associates of Albert C. Aguirre.
Sections 31 to 34 of the Corporation Code provide:
Section 31. Liability of directors, trustees or officers. - Directors or trustees who wilfully and
knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of
gross negligence or bad faith in directing the affairs of the corporation or acquire any
personal or pecuniary interest in conflict with their duty as such directors or trustees shall be
liable jointly and severally for all damages resulting therefrom suffered by the corporation, its
stockholders or members and other persons.
When a director, trustee or officer attempts to acquire or acquires, in violation of his duty,
any interest adverse to the corporation in respect of any matter which has been reposed in
him in confidence, as to which equity imposes a disability upon him to deal in his own behalf,
he shall be liable as a trustee for the corporation and must account for the profits which
otherwise would have accrued to the corporation.
Section 32. Dealings of directors, trustees or officers with the corporation. - A contract of the
corporation with one or more of its directors or trustees or officers is voidable, at the option
of such corporation, unless all the following conditions are present:
1. That the presence of such director or trustee in the board meeting in which the contract
was approved was not necessary to constitute a quorum for such meeting;
2. That the vote of such director or trustee was not necessary for the approval of the
contract;
3. That the contract is fair and reasonable under the circumstances; and
4. That in case of an officer, the contract has been previously authorized by the board of
directors.
Where any of the first two conditions set forth in the preceding paragraph is absent, in the
case of a contract with a director or trustee, such contract may be ratified by the vote of the
stockholders representing at least two-thirds (2/3) of the outstanding capital stock or of at
least two-thirds (2/3) of the members in a meeting called for the purpose: Provided, That full
disclosure of the adverse interest of the directors or trustees involved is made at such
meeting: Provided, however, That the contract is fair and reasonable under the
circumstances.
Section 33. Contracts between corporations with interlocking directors. - Except in cases of
fraud, and provided the contract is fair and reasonable under the circumstances, a contract
between two or more corporations having interlocking directors shall not be invalidated on
that ground alone: Provided, That if the interest of the interlocking director in one
corporation is substantial and his interest in the other corporation or corporations is merely
nominal, he shall be subject to the provisions of the preceding section insofar as the latter
corporation or corporations are concerned.
Stockholdings exceeding twenty (20%) percent of the outstanding capital stock shall be
considered substantial for purposes of interlocking directors.
Section 34. Disloyalty of a director. - Where a director, by virtue of his office, acquires for
himself a business opportunity which should belong to the corporation, thereby obtaining
profits to the prejudice of such corporation, he must account to the latter for all such profits
by refunding the same, unless his act has been ratified by a vote of the stockholders owning
or representing at least two-thirds (2/3) of the outstanding capital stock. This provision shall
be applicable, notwithstanding the fact that the director risked his own funds in the venture.
Koruga’s invocation of the provisions of the Corporation Code is misplaced. In an earlier case
with similar antecedents, we ruled that:
The Corporation Code, however, is a general law applying to all types of corporations, while
the New Central Bank Act regulates specifically banks and other financial institutions,
including the dissolution and liquidation thereof. As between a general and special law, the
latter shall prevail – generalia specialibus non derogant.31
Consequently, it is not the Interim Rules of Procedure on Intra-Corporate Controversies,32 or
Rule 59 of the Rules of Civil Procedure on Receivership, that would apply to this case. Instead,
Sections 29 and 30 of the New Central Bank Act should be followed, viz.:
Section 29. Appointment of Conservator. - Whenever, on the basis of a report submitted by
the appropriate supervising or examining department, the Monetary Board finds that a bank
or a quasi-bank is in a state of continuing inability or unwillingness to maintain a condition of
liquidity deemed adequate to protect the interest of depositors and creditors, the Monetary
Board may appoint a conservator with such powers as the Monetary Board shall deem
necessary to take charge of the assets, liabilities, and the management thereof, reorganize
the management, collect all monies and debts due said institution, and exercise all powers
necessary to restore its viability. The conservator shall report and be responsible to the
Monetary Board and shall have the power to overrule or revoke the actions of the previous
management and board of directors of the bank or quasi-bank.
xxxx
The Monetary Board shall terminate the conservatorship when it is satisfied that the
institution can continue to operate on its own and the conservatorship is no longer
necessary. The conservatorship shall likewise be terminated should the Monetary Board, on
the basis of the report of the conservator or of its own findings, determine that the
continuance in business of the institution would involve probable loss to its depositors or
creditors, in which case the provisions of Section 30 shall apply.
Section 30. Proceedings in Receivership and Liquidation. - Whenever, upon report of the head
of the supervising or examining department, the Monetary Board finds that a bank or quasi-
bank:
(a) is unable to pay its liabilities as they become due in the ordinary course of business:
Provided, That this shall not include inability to pay caused by extraordinary demands
induced by financial panic in the banking community;
(b) has insufficient realizable assets, as determined by the Bangko Sentral, to meet its
liabilities; or
(c) cannot continue in business without involving probable losses to its depositors or
creditors; or
(d) has willfully violated a cease and desist order under Section 37 that has become final,
involving acts or transactions which amount to fraud or a dissipation of the assets of the
institution; in which cases, the Monetary Board may summarily and without need for prior
hearing forbid the institution from doing business in the Philippines and designate the
Philippine Deposit Insurance Corporation as receiver of the banking institution.
xxxx
The actions of the Monetary Board taken under this section or under Section 29 of this Act
shall be final and executory, and may not be restrained or set aside by the court except on
petition for certiorari on the ground that the action taken was in excess of jurisdiction or with
such grave abuse of discretion as to amount to lack or excess of jurisdiction. The petition for
certiorari may only be filed by the stockholders of record representing the majority of the
capital stock within ten (10) days from receipt by the board of directors of the institution of
the order directing receivership, liquidation or conservatorship.
The designation of a conservator under Section 29 of this Act or the appointment of a
receiver under this section shall be vested exclusively with the Monetary Board.
Furthermore, the designation of a conservator is not a precondition to the designation of a
receiver.33
On the strength of these provisions, it is the Monetary Board that exercises exclusive
jurisdiction over proceedings for receivership of banks.
Crystal clear in Section 30 is the provision that says the "appointment of a receiver under this
section shall be vested exclusively with the Monetary Board." The term "exclusively"
connotes that only the Monetary Board can resolve the issue of whether a bank is to be
placed under receivership and, upon an affirmative finding, it also has authority to appoint a
receiver. This is further affirmed by the fact that the law allows the Monetary Board to take
action "summarily and without need for prior hearing."
And, as a clincher, the law explicitly provides that "actions of the Monetary Board taken
under this section or under Section 29 of this Act shall be final and executory, and may not be
restrained or set aside by the court except on a petition for certiorari on the ground that the
action taken was in excess of jurisdiction or with such grave abuse of discretion as to amount
to lack or excess of jurisdiction."1avvphi1
From the foregoing disquisition, there is no doubt that the RTC has no jurisdiction to hear
and decide a suit that seeks to place Banco Filipino under receivership.
Koruga herself recognizes the BSP’s power over the allegedly unlawful acts of Banco Filipino’s
directors. The records of this case bear out that Koruga, through her legal counsel, wrote the
Monetary Board34 on April 21, 2003 to bring to its attention the acts she had enumerated in
her complaint before the RTC. The letter reads in part:
Banco Filipino and the current members of its Board of Directors should be placed under
investigation for violations of banking laws, the commission of irregularities, and for
conducting business in an unsafe or unsound manner. They should likewise be placed under
preventive suspension by virtue of the powers granted to the Monetary Board under Section
37 of the Central Bank Act. These blatant violations of banking laws should not go by without
penalty. They have put Banco Filipino, its depositors and stockholders, and the entire banking
system (sic) in jeopardy.
xxxx
We urge you to look into the matter in your capacity as regulators. Our clients, a minority
stockholders, (sic) and many depositors of Banco Filipino are prejudiced by a failure to
regulate, and taxpayers are prejudiced by accommodations granted by the BSP to Banco
Filipino35
In a letter dated May 6, 2003, BSP Supervision and Examination Department III Director
Candon B. Guerrero referred Koruga’s letter to Arcenas for comment.36 On June 6, 2003,
Banco Filipino’s then Executive Vice President and Corporate Secretary Francisco A. Rivera
submitted the bank’s comments essentially arguing that Koruga’s accusations lacked legal
and factual bases.37
On the other hand, the BSP, in its Answer before the RTC, said that it had been looking into
Banco Filipino’s activities. An October 2002 Report of Examination (ROE) prepared by the
Supervision and Examination Department (SED) noted certain dacion payments, out-of-the-
ordinary expenses, among other dealings. On July 24, 2003, the Monetary Board passed
Resolution No. 1034 furnishing Banco Filipino a copy of the ROE with instructions for the
bank to file its comment or explanation within 30 to 90 days under threat of being fined or of
being subjected to other remedial actions. The ROE, the BSP said, covers substantially the
same matters raised in Koruga’s complaint. At the time of the filing of Koruga’s complaint on
August 20, 2003, the period for Banco Filipino to submit its explanation had not yet expired.38
Thus, the court’s jurisdiction could only have been invoked after the Monetary Board had
taken action on the matter and only on the ground that the action taken was in excess of
jurisdiction or with such grave abuse of discretion as to amount to lack or excess of
jurisdiction.
Finally, there is one other reason why Koruga’s complaint before the RTC cannot prosper.
Given her own admission – and the same is likewise supported by evidence – that she is
merely a minority stockholder of Banco Filipino, she would not have the standing to question
the Monetary Board’s action. Section 30 of the New Central Bank Act provides:
The petition for certiorari may only be filed by the stockholders of record representing the
majority of the capital stock within ten (10) days from receipt by the board of directors of the
institution of the order directing receivership, liquidation or conservatorship.

All the foregoing discussion yields the inevitable conclusion that the CA erred in upholding
the jurisdiction of, and remanding the case to, the RTC. Given that the RTC does not have
jurisdiction over the subject matter of the case, its refusal to dismiss the case on that ground
amounted to grave abuse of discretion.

WHEREFORE, the foregoing premises considered, the Petition in G.R. No. 168332 is
DISMISSED, while the Petition in G.R. No. 169053 is GRANTED. The Decision of the Court of
Appeals dated July 20, 2005 in CA-G.R. SP No. 88422 is hereby SET ASIDE. The Temporary
Restraining Order issued by this Court on March 13, 2006 is made PERMANENT.
Consequently, Civil Case No. 03-985, pending before the Regional Trial Court of Makati City,
is DISMISSED.

SO ORDERED.
SECOND DIVISION
G.R. No. 154499 March 14, 2003
ALBERTO V. REYES, WILFREDO B. DOMO-ONG, and HERMINIO C. PRINCIPIO, petitioners,
vs.
RURAL BANK OF SAN MIGUEL (BULACAN), INC., represented by HILARIO P. SORIANO,
President and Principal Stockholder, respondent.
Mendoza, J.:
Petitioners are officials of the Bangko Sentral ng Pilipinas (BSP). At the time material to this
case, Alberto V. Reyes was Deputy Governor and Head of the Supervision and Examination
Sector (SES), Wilfredo B. Domo-ong was Director of the Department of Rural Banks (DRB),
while Herminio Principio was an Examiner of the DRB. They filed this petition for review on
certiorari of the decision1 of the Court of Appeals which found them administratively liable
for unprofessionalism under the Code of Conduct and Ethical Standards on Public Officials
and Employees and imposed upon each of them a fine equivalent to six months of their
salaries.
The case arose from a letter,2 dated May 19, 1999, which respondent Rural Bank of San
Miguel (Bulacan), Inc. (RBSMI) sent to then BSP Governor Gabriel Singson. In its letter, RBSMI
charged petitioners with violations of Republic Act No. 3019 (Anti-Graft and Corrupt Practices
Act) and Republic Act No. 6713 (Code of Conduct and Ethical Standards for Public Officials
and Employees). The Monetary Board of the BSP created a committee to investigate the
matter.
The ensuing investigation revealed that RBSMI had had a history of major
violations/exceptions dating back to 1995. The Report of Examination3 on RBSMI as of July
31, 1995, submitted by BSP Examiner Danilo J. Castillo, cited 10 major exceptions/violations
and deficiencies of RBSMI, for which reason the latter was directed to immediately desist
from conducting business in an unsound and unsafe manner. On March 15, 1996, RBSMI
undertook to take corrective measures and/or comply with the
instructions/recommendations of the BSP.4
In 1996, RBSMI was again examined. The examination team was led by petitioner Principio
who, in a "Report of Examination5 on RBSMI as of September 15, 1996," noted 20 serious
exceptions/violations and deficiencies of RBSMI. On January 9, 1997, upon her request, Rose
Ilagan, an RBSMI director, was given a copy of the list of exceptions/deficiencies found by
petitioner Principio. Ms. Ilagan, however, in a sworn affidavit,6 dated August 10, 1999,
claimed that the copy she was given was unreadable, "making it impossible for RBSMI to
immediately react to said list of exceptions."
The exit conference on the September 1996 General Examination on RBSMI was originally
scheduled on January 13, 1997, but on that date, RBSMI’s Legal Counsel and Corporate
Secretary requested a rescheduling of the conference "to allow RBSMI to review the findings/
exceptions and thereafter, prepare their comments/observations on the same."7 In a letter,
dated January 14, 1997, petitioner Domo-ong granted the request and the conference was
reset to January 21, 1997.
It is claimed that the board of RBSMI discussed the exceptions noted in the list given to them
on January 21, 1997, but as the copy sent to them was unreadable, "it was unable to
understand many exceptions." As the members of the board were furnished clear copies only
during the exit conference, RBSMI asked for 30 days within which to submit its answer to the
exceptions.
Meanwhile, an advance copy of the report of petitioner Principio was submitted to the
Monetary Board (MB) after review of said report by petitioner Domo-ong. The report, which
was dated January 23, 1997, was signed by petitioner Reyes and submitted to the MB on
January 27, 1997. Acting on this memorandum, the MB issued Resolution No. 968 requiring
RBSMI to explain in writing within 15 days the findings of the examiner. It also directed the
DRB to verify, monitor, and report to the Deputy Governor, petitioner Reyes, the
findings/exceptions noted until the same had been corrected.
On February 26, 1997, RBSMI submitted its comments on the
exceptions/deficiencies/findings noted by petitioners in a paper entitled "Concurrence,
Corrections and Comments on the Exceptions, Deficiencies and Recommendations of BSP in
its ‘General Examination of RBSMI’s Books of Accounts as of September 15, 1996 as
contained in the Report of Examiner Herminio C. Principio, dated December 23, 1996, initially
discussed on January 21, 1997.’"9
Pursuant to the MB’s directive in Resolution No. 96, another examination team conducted a
special examination on RBSMI from March 4, 1997 to March 26, 1997, with February 28,
1997 as the cut-off date of examination. The special examination team, headed by petitioner
Principio and assisted by Ms. Carmelita Reyes, was introduced to RBSMI through a letter of
petitioner Domo-ong dated February 14, 1997.
RBSMI president Hilario Soriano claims that he was pressured on March 4, 1997 into issuing a
memorandum to the bank employees authorizing petitioner Principio and Ms. Reyes to
review the bank’s accounting and internal control system. He likewise claims that sometime
in March 1997, petitioner Reyes urged him (Soriano) to consider selling the bank. Soriano
says that on or about May 28, 1997, Soriano, through a telephone introduction made by
petitioner Reyes the day before, met with Exequiel Villacorta, President and Chief Executive
Officer of TA Bank. In his sworn affidavit,10 Villacorta confirmed that he and Soriano indeed
met to discuss a possible corporate combination of RBSMI and TA Bank. The talks between
TA Bank and RBSMI never got past the exploratory stage. Their discussions were cut short as
Soriano wanted a "sell-out," while Villacorta was interested in a "buy-in."
Soriano continues: Around the last week of May, petitioner Reyes asked him (Soriano)
whether he wanted another buyer. When told that he did, petitioner Reyes introduced
Soriano by telephone to Benjamin P. Castillo of the Export and Industry Bank (EIB). Hence, he
and Castillo met on June 26, 1997, but their talks ended then and there because, as per his
affidavit11 dated July 12, 1999, Castillo alleged that Soriano insisted on an RBSMI sell-out
while he wanted a mere EIB buy-in and take-over of the management.
Meanwhile, on June 13, 1997, the MB approved Resolution No. 72412 noting the Report on
the examination of RBSMI submitted by petitioner Domo-ong. The MB confirmed the steps
taken or to be taken by the DRB. It also ordered RBSMI to correct the major exceptions noted
within 30 days from receipt of the advice and to remit to the BSP the amount of
P2,538,483.00 as fines and penalties for incurring deficiencies in reserves against deposit
liabilities.
In accordance with the MB resolution, petitioner Domo-ong wrote the bank on June 25,
1997, informing it of the prescriptions of the resolution. On July 21, 1997, Soriano submitted
RBSMI’s answers to the BSP exceptions/findings mentioned. Soriano said in the letter that
"the actions taken or to be taken by the bank (RBSMI) were deliberated and ratified by the
Board of Directors in its regular meeting held on July 9, 1997." With regard to the fines and
penalties amounting to P2,538,483.00, RBSMI requested the director of the DRB to debit its
demand deposit with the amount.13
On September 22, 1997, nearly six months after MB Resolution No. 96 had been issued,
RBSMI wrote petitioner Domo-ong seeking clarification of two specific issues:
1. May the scope/coverage of monitoring be expanded as to include verifications of bank
transactions, before and beyond the cut-off date of the general examinations as of
September 15, 1996? If so, to what extent?
2. Was there no pre-empting of the Monetary Board directive which was approved under
Resolution No. 96 dated January 29, 1997?14
In a letter, dated November 13, 1997, petitioner Domo-ong explained that "DRB’s monitoring
of the extent of corrective measures must necessarily cover bank transactions after the
examination cut-off date to be assured that the same exceptions have not been repeated."
As to the second issue, he explained that "there was no pre-empting of the MB directive as it
was approved on January 29, 1997, way ahead of the initial monitoring which was
undertaken from March 4 to 26, 1997 with a cut-off date of February 26, 1997." In
conclusion, petitioner Domo-ong said that "considering that ‘monitoring’ in this regard simply
means overseeing, observing or keeping track of the corrective measures being made by the
bank on the serious findings/exceptions noted, we do not see any reason for your
apprehensions on the matter. As soon as said findings/exceptions have been fully corrected,
then the DRB can immediately recommend the lifting of said monitoring."15
Meanwhile, petitioner Principio allegedly requested RBSMI on October 6, 1997 to authorize
him and a new BSP examiner, Ms. Zeny Cabais, to visit the bank from time to time to review
accounting and control systems. This was before a letter of introduction, dated October 10,
1997, was issued by DRB introducing the new examination team of petitioner Principio and
Ms. Cabais. The letter of instruction stated that both examiners were authorized, pursuant to
MB Resolution No. 96, to verify and monitor the corrective measures taken by RBSMI on the
findings/exceptions noted in the general examination of September 15, 1996.
When petitioner Principio presented the letter to Ms. Ilagan on October 22, 1997, the latter
allegedly asked for a specification of the scope of his examination. However, Ms. Ilagan
claimed in her sworn affidavit that on October 22, 1997 Soriano asked petitioner Principio to
make a formal request for the records which he wanted to examine in order to avoid
confusion. Nevertheless, Soriano subsequently allowed petitioner Principio to conduct the
examination without the formal request.
Soriano claims that sometime in November 1997, he accidentally met petitioner Reyes who
allegedly told him to sell out or RBSMI would suffer a bank run and it would be placed under
conservatorship. Early that month, the Monetary Board issued Resolution No. 1473,16 dated
November 5, 1997, ordering the continuous verification/monitoring of RBSMI until the major
exceptions were substantially corrected. It likewise warned the officers of the bank that
unless they ceased from conducting business in such an unsafe and unsound manner, drastic
actions might be taken against the bank, including the take-over of management without
prejudice to the prosecution of parties responsible pursuant to § 36 of R.A. No. 7653.
The action of the MB was followed on March 20, 1998 by the MB’s notation of DRB’s report
on the corrective measures taken by complainant on the serious findings/exceptions in the
September 15, 1996 General Examination. However, as there were some major and/or
serious exceptions/findings which remained uncorrected, the MB again ordered its DRB to
continue the verification/monitoring of RBSMI until the exceptions/findings were fully
corrected.
In another development, the Manila Electric Company (MERALCO) issued a
memorandum,17 dated April 6, 1998, to all of its collection officers enjoining them not to
accept RBSMI checks from customers and other payees of bills, service deposit, and other
payments until further advice from the Treasury. MERALCO thought that RBSMI had declared
a "bank holiday." The next day (April 7, 1998), MERALCO issued another memorandum18 to
its collection officers, informing them that RBSMI’s alleged bank holiday was not true and
instructing them to accept RBSMI checks from customers and other payees. This was after
the BSP had denied the news of pending RBSMI bank holiday. On the same date, MERALCO
issued a letter of apology to RBSMI Chairman Atty. Sedfrey A. Ordoñez.
Thereafter, more than one year after authorizing the BSP to debit its demand deposit up to
the extent of the fines and penalties imposed by BSP, RBSMI, through its counsel Atty. Rene
Saguisag, in a letter,19 dated November 4, 1998, appealed to the MB to reverse the
imposition of the P2.5 million penalty on the ground that "no Board Resolution [had been]
adopted to authorize the debit in the Demand Deposit maintained by the bank with the
Bangko Sentral ng Pilipinas."
RBSMI reiterated its request for the reversal of the imposition of penalty in another
letter.20 Atty. Saguisag said that "as for the letter of Mr. Hilario requesting the Bangko Sentral
ng Pilipinas to debit the account of our client, I would like to state that, at that time, he was
under a state of extreme pressure to sell the bank at an unreasonably low price, hence, the
reason for the said measure of desperation." The aforesaid letters of Atty. Saguisag were
answered by the BSP in its letter21 dated November 18, 1998, explaining to Atty. Saguisag the
bases for BSP’s imposition of the penalty on RBSMI.
On January 21, 1999, the MB, through Resolution No. 71, authorized the conditional reversal
of sixty percent (60%) of the penalty debited against RBSMI pending resolution of the dispute
on the findings on reserve deficiency. The conditional reversal was communicated to RBSMI
by petitioner Reyes through a letter, dated February 8, 1999. In a letter, dated March 29,
1999, RBSMI agreed to "the interim reversal of the penalty, such that said P2.5 million will be
credited to RBSMI, without prejudice to the outcome of the legal study regarding the
propriety of the imposition of the penalty." Later, on April 7, 1999, the MB approved the
interim reversal of the entire amount of the penalty "pending the outcome of the study on
the legal and factual basis for the imposition of the penalty." Accordingly, the BSP credited
RBSMI’s demand deposit account to the extent of the remaining forty percent (40%) of the
penalty.
On February 3, 1999, Atty. Sedfrey A. Ordoñez, RBSMI Chairman, and Soriano wrote the MB
regarding the release of the remaining proceeds of the emergency loans granted to RBSMI.
Later on, RBSMI would claim that this letter was somehow leaked to the press. The Manila
Times issue of March 10, 1999 carried a news article by Jun T. Ebias entitled "2 rural banks
seek emergency loans, investors,"22 which quoted certain portions of the February 3, 1999
letter of RBSMI to the MB. In addition, RBSMI alleged that supposedly forged directives from
Soriano addressed to all directors of the rural bank were faxed to the municipal mayors of
Bulacan. The undated fax message announced a special board meeting of the directors of
RBSMI on February 20, 1999 to discuss internal and external audit findings, unpaid savings
deposit withdrawals and matured time deposits, and the possible closure of the bank due to
insolvency.
In a letter, dated March 10, 1999, Soriano asked for an inquiry into the alleged leak of
sensitive information which can "logically be traced [to] Bangko Sentral ng Pilipinas sources."
After investigating the matter, BSP, through petitioner Reyes and BSP Deputy Governor and
General Counsel Armando L. Suratos, informed RBSMI in a letter, dated March 23, 1999, that
the BSP was unable to determine the source of information of the Manila Times.
On the basis of the foregoing, RBSMI, through counsel, filed its letter-complaint of May 19,
1999, which was referred by the MB to an Ad Hoc Committee it had created. After the parties
had submitted their respective pleadings, documents and memoranda, the Ad
Hoc Committee issued a resolution,23 dated February 16, 2000, the pertinent part of which
reads:
CONCLUSION AND RECOMMENDATION:
After a thorough review of the records, we find that complainant has not substantiated its
allegations of respondents’ unprofessionalism. It has failed to present sufficient factual and
legal bases to administratively charge respondents with the violation of any provision of R.A.
No. 3019 and/or R.A. No. 6713. The acts complained of were done by respondents in the
performance of their official duties.
IN VIEW WHEREOF, this Committee respectfully recommends that upon the approval of
these findings, the monetary Board of the Bangko Sentral ng Pilipinas dismiss the complaint
for lack of merit."
The MB adopted the recommendation of the Ad Hoc Committee, prompting RBSMI to appeal
to the Court of Appeals the dismissal of the complaint as well as the denial of its motion for
reconsideration and supplemental motion to vacate or reconsider. On December 14, 2001,
the Court of Appeals reversed. The dispositive portion of its decision states:
WHEREFORE, the instant petition is hereby GRANTED. Accordingly, Resolution No. 257 dated
February 18, 2000 and letter dated July 31, 2000 of the respondent Monetary Board are
hereby REVERSED and SET ASIDE and a new one entered finding respondents BSP Deputy
Governor Alberto V. Reyes, Director Wilfredo B. Domo-ong of the BSP Department of Rural
Bank, and bank examiner Herminio C. Principio, administratively liable for unprofessionalism
and are each meted the penalty of fine equivalent to six (6) months salary. 24
SO ORDERED.
Petitioners filed a motion for reconsideration. However, the motion was denied on July 29,
2002. Hence, this petition for review.
Petitioners submit the following issues:
I. Contrary to the baseless and illogical conclusion of the Court of Appeals, there exists no
substantial and convincing evidence to support the charge that Petitioners Reyes and Domo-
ong are guilty of unprofessionalism by reason of their alleged "careless handling of
confidential matters involving the internal problems of RBSMI."
II. Contrary to the conclusion of the Court of Appeals, Petitioner Reyes did not commit any
act of unprofessionalism by reason of his alleged "illegal and unethical act of brokering the
sale of RBSMI."
III. The conclusion of the Court of Appeals that petitioner Principio is liable for the charge of
undue pressure against RBSMI, as a consequence of the undue haste by which petitioner
Principio submitted his advance report to the MB, exposes the lack of knowledge of the Court
of Appeals on how BSP officials work and perform their functions and duties and/or lack of
full understanding of the facts of the case.
IV. The justification advanced by the Court of Appeals in declaring petitioners guilty of undue
pressure, unprofessionalism, and arrogance relative to the latter’s act of recommending
penalty charges for RBSMI’s reserve deficiency, is absolutely without any factual and legal
basis.
V. The findings of fact of the Ad Hoc Committee as approved by the Monetary Board of the
BSP in its Resolution No. 257 was not accorded due consideration by the Court of Appeals
despite the fact that said findings of fact are supported by substantial evidence.
VI. The questioned decision violates the constitutional provision that a decision should state
the facts and law on which it is based.
The present petition warrants the modification of the Court of Appeals’ decision.
First. Petitioners, particularly petitioner Reyes, are faulted with the careless handling of
confidential and vital information regarding the financial status of RBSMI. The Court of
Appeals ruled:
The respondent BSP officials cannot deny that the newspaper article in the Manila
Times which was brought to the attention of respondent Alberto V. Reyes unequivocably
states that the source of the information concerning the alleged financial needs of RBSMI
came from BSP and from an officer of the Monetary Board. If Reyes himself was not the
source of such a confidential information, he should have, at the very least and considering
his exalted position as no less than the BSP Deputy Governor, exerted efforts to discover the
leak and make accountable the concerned BSP officials or employees. . . . Unfortunately,
however, Reyes appeared to have done nothing to unmask and hold responsible the talkative
official or employee of the BSP. His unlawful act of omission on such a delicate and
confidential matter is no less censurable as an act of omission.
This is error. It is indeed unfortunate that information regarding the financial needs of RBSMI
came to the knowledge of the media. We realize that a bank’s lifeline depends largely on the
trust and confidence accorded to it by its depositors and the public in general. However, too
many possibilities exist on how word got to the press.
It is to be noted that before the Manila Times article came out in 1999, RBSMI had already
undergone several examinations and was subject to continuous monitoring for major
exceptions and violations found during the 1996 General Examination. Word could have
gotten around that the bank was being examined and that interested persons or entities
could have inquired into the purpose of the examinations and monitoring. RBSMI’s own
employees could have made remarks to friends and family members - maybe harmless -
without totally realizing the effect of such statements. Indeed, MERALCO said that the basis
of its memorandum was the information concerning RBSMI obtained from the Philippine
Clearing House, an entity distinct and separate from the BSP. In fact, it was the BSP which
dispelled the rumors which incited the second memorandum of recantation. The undated fax
message alleged to be a forged memorandum has not been sufficiently proven as having
been produced by any of the petitioners.
The article might have attributed the source to be an official or employee of the BSP if only to
appear more credible. In any case, an inquiry was conducted by an investigating committee
especially formed upon RBSMI’s request. But the committee was unable to determine the
source of the leak. We have to presume that the said committee had performed its tasks
with regularity and good faith, and thus it is entitled to due respect for its findings.
The issue of the training materials is a different matter. RBSMI claims that during one of the
BSP training seminars, the bank was used as a case study albeit not specifically mentioned in
the training materials. The Court of Appeals found that "the derision against RBSMI in the
seminar materials is truly an additional pound of salt to RBSMI’s already wounded
reputation."25 Petitioners allege that the seminar was for bank examiners who were bound
not to reveal any confidential information they learned in the performance of their duties.
They further claim that there is no evidence showing that petitioners Reyes and Domo-ong
were the ones who distributed and used the materials or that they harbored any ill will
against the bank to employ such means.
We agree with the appellate court. The facilitators of the seminar who prepared the
materials obviously applied little or no creativity at all as shown by the words used
therein, i.e., "Mrs. Ona I. Ros" which clearly is Soriano’s name in reverse, and "Rural Bank of
Barangay Ginebra" referring to the bank’s name - Rural Bank of San Miguel. While there was
indeed no evidence showing that either petitioner Reyes or petitioner Domo-ong distributed
or used the materials, the very fact that the seminar was conducted under their auspices is
enough to make them liable to a certain extent. Petitioner Reyes, as Head of the BSP
Supervision and Examination Sector, and petitioner Domo-ong, as Director of the BSP
Department of Rural Banks, should have exercised their power of control and supervision so
that the incident could have been prevented or at the very least remedied.
Second. On the charge that petitioner Reyes was brokering the sale of RBSMI, the Court of
Appeals ruled:
Nor can respondent Reyes escape administrative liability for the charge of having displayed
undue interest in brokering the sale of petitioner RBSM. In a number of occasions, such an
interest readily surfaced. . . . If anything else, Reyes’ actuations smack of unprofessionaliam
as he had concerned himself with transactions that had nothing to do with his official
function as BSP Deputy Governor.
...
Nor is it correct to say that respondent Alberto V. Reyes did no brokering simply because he
was not paid for his efforts. As rightly argued by petitioner, there is no law which defines
brokering in terms of payment thereof. To our mind, it suffices that respondent Reyes
introduced and brought the parties together to try to hammer out a sale of RBSMI. After all,
a broker’s duty is mainly to bring the prospective buyers and sellers together.
We agree with the foregoing ruling of the Court of Appeals. In introducing Soriano to the
presidents of TA Bank and EIB Bank, petitioner Reyes was clearly not acting in his official
capacity. It is enough that he brought the parties together to discuss the possibility of a sale
in order for him to be found guilty of brokering. Petitioner Reyes did not have to be paid for
what he did in order to be considered to have committed a breach of the requirement of
propriety expected of a BSP official. The circulars26 presented by petitioner Reyes indicate
that it is indeed BSP’s policy to promote mergers and consolidations by providing incentives
for banks who would undergo such corporate combinations. But nowhere in these circulars is
it stated that BSP officials should take an active role in bringing parties together for the
possibility of a buy-in or sell-out.
Section 4 (A)(b) of R.A. No. 6713 states:
Norms of Conduct of Public Officials and Employees. - (A) Every public official and employee
shall observe the following as standards of personal conduct in the discharge and execution
of official duties:
....
(b) Professionalism - Public officials and employees shall perform and discharge their duties
with the highest degree of excellence, professionalism, intelligence and skill. They shall enter
public service with utmost devotion and dedication to duty. They shall endeavor to
discourage wrong perceptions of their roles as dispensers or peddlers of undue patronage.
on the part of the BSP to ease the financial difficulties of RBSMI. More importantly, it was a
conditional reversal pending the resolution of the dispute on the finding of legal reserve
deficiency.
RBSMI likewise complains that petitioner Principio took part in three consecutive
examinations in violation of BSP’s own Manual of Examiners which states:

We do not think Soriano was subjected to undue pressure since he was also interested in
selling the bank.27However, petitioner Reyes’ active participation in looking for possible
buyers for RBSMI was clearly a violation of the standards of professionalism.
Third. For his part, petitioner Principio is charged with "undue haste" in submitting his report
to the Monetary Board. His recommendation for the imposition of a penalty of P2.5 million
on RBSMI is also complained of as a way of pressuring the bank. RBSMI points out that there
was an irregularity in the fact that petitioner Principio headed the three consecutive
examinations conducted on the bank.
We find no undue haste in the submission of petitioner Principio’s report. The 1996
examination on RBSMI was concluded on December 13, 1996. The list of exceptions prepared
by petitioner Principio was dated December 23, 1996, and a copy thereof was sent to RBSMI
on January 9, 1997. This was 18 days before petitioner Principio finally submitted the report
to the Monetary Board. Having had sufficient time to prepare its reply, RBSMI cannot
pretend ignorance of the findings of the examiner. It should have anticipated the actions it
needed to take considering the urgency of the matter.
Moreover, it is clear from the records that RBSMI was given not only one but two
opportunities to answer the findings in the report before the report was submitted to the
MB. It should be noted that the exit conference for the 1996 General Examination was
originally scheduled on January 13, 1997. However, upon the request of RBSMI’s corporate
counsel, the examination was postponed to January 21, 1997. RBSMI was furnished a copy of
the findings on January 9, 1997. Although RBSMI claimed that the copy it received was
unreadable, it made this accusation only after the complaint had been filed with the
Monetary Board.
G. ROTATION OF ASSIGNMENTS FOR EXAMINERS:
A Bank Examiner shall not be in charge of more than two consecutive examinations of any
financial institutions. No exception to this rule shall be permitted.
But, as petitioners explain, RBSMI was subjected only to one examination ¾ the 1996 General
Examination ¾ in which major exceptions and violations were found. The ensuing
examinations were "special examinations" meant to monitor the progress of the bank in
correcting the exceptions found. With the finding of serious violations by the bank, the MB,
through its Resolution No. 96, thought it best to put RBSMI under continuous monitoring
until the exceptions had been corrected. It is logical for petitioner Principio to be part of the
monitoring team considering that he was the initial examiner and was familiar with the
matters to be made in order.
By and large, therefore, we find that while there may have been some irregularities and
badges of unprofessionalism which can be held against petitioners, these are not so grave as
to merit the imposition of the penalty of fine equal to six months salary imposed by the
appellate court. The modification of the Court of Appeals decision is proper.
WHEREFORE, the decision of the Court of Appeals dated December 14, 2001 is AFFIRMED
with MODIFICATIONS. Petitioner Alberto V. Reyes is ordered to pay a fine equivalent to two
(2) months salary, while petitioner Wilfredo B Domo-ong is fined in an amount equivalent to
one (1) month salary. Petitioner Herminio C. Principio is found not administratively liable.
SO ORDERED.

The members of the Board of Directors only discussed their reply on the very day of the
rescheduled exit conference. Surely, RBSMI only had itself to blame. It was given a sporting
chance to react to the findings before it was confirmed by the MB, but it did not make use of
the opportunity. Again, it was given another chance after the exit conference when the MB,
upon review of the report of petitioner Principio, issued Resolution No. 96 requiring RBSMI to
answer the findings within 15 days from receipt of the advice.

On the other hand, the imposition of the P2.5 million fine was made on the basis of the
finding of legal reserve deficiencies. Soriano wrote to the BSP authorizing the latter to debit
its demand deposit in the amount of the penalty a few days after MB Resolution No. 96 was
issued. It took RBSMI more than one year before it contested the imposition of the penalty.
That the BSP subsequently reversed, albeit conditionally, the debiting of the amount of
penalty is not an admission that it erred in imposing the same. It was only an accommodation
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 184778 October 2, 2009
BANGKO SENTRAL NG PILIPINAS MONETARY BOARD and CHUCHI FONACIER, Petitioners,
vs.
HON. NINA G. ANTONIO-VALENZUELA, in her capacity as Regional Trial Court Judge of
Manila, Branch 28; RURAL BANK OF PARAÑAQUE, INC.; RURAL BANK OF SAN JOSE
(BATANGAS), INC.; RURAL BANK OF CARMEN (CEBU), INC.; PILIPINO RURAL BANK, INC.;
PHILIPPINE COUNTRYSIDE RURAL BANK, INC.; RURAL BANK OF CALATAGAN (BATANGAS),
INC. (now DYNAMIC RURAL BANK); RURAL BANK OF DARBCI, INC.; RURAL BANK OF
KANANGA (LEYTE), INC. (now FIRST INTERSTATE RURAL BANK); RURAL BANK OF BISAYAS
MINGLANILLA (now BANK OF EAST ASIA); and SAN PABLO CITY DEVELOPMENT BANK,
INC., Respondents.
DECISION
VELASCO, JR., J.:
The Case
This is a Petition for Review on Certiorari under Rule 45 with Prayer for Issuance of a
Temporary Restraining Order (TRO)/Writ of Preliminary Injunction, questioning the Decision
dated September 30, 20081 of the Court of Appeals (CA) in CA-G.R. SP No. 103935. The CA
Decision upheld the Order2 dated June 4, 2008 of the Regional Trial Court (RTC), Branch 28 in
Manila, issuing writs of preliminary injunction in Civil Case Nos. 08-119243, 08-119244, 08-
119245, 08-119246, 08-119247, 08-119248, 08-119249, 08-119250, 08-119251, and 08-
119273, and the Order dated May 21, 2008 that consolidated the civil cases.
The Facts
In September of 2007, the Supervision and Examination Department (SED) of the Bangko
Sentral ng Pilipinas (BSP) conducted examinations of the books of the following banks: Rural
Bank of Parañaque, Inc. (RBPI), Rural Bank of San Jose (Batangas), Inc., Rural Bank of Carmen
(Cebu), Inc., Pilipino Rural Bank, Inc., Philippine Countryside Rural Bank, Inc., Rural Bank of
Calatagan (Batangas), Inc. (now Dynamic Rural Bank), Rural Bank of Darbci, Inc., Rural Bank of
Kananga (Leyte), Inc. (now First Interstate Rural Bank), Rural Bank de Bisayas Minglanilla
(now Bank of East Asia), and San Pablo City Development Bank, Inc.
After the examinations, exit conferences were held with the officers or representatives of the
banks wherein the SED examiners provided them with copies of Lists of Findings/Exceptions
containing the deficiencies discovered during the examinations. These banks were then
required to comment and to undertake the remedial measures stated in these lists within 30
days from their receipt of the lists, which remedial measures included the infusion of
additional capital. Though the banks claimed that they made the additional capital infusions,
petitioner Chuchi Fonacier, officer-in-charge of the SED, sent separate letters to the Board of
Directors of each bank, informing them that the SED found that the banks failed to carry out
the required remedial measures. In response, the banks requested that they be given time to
obtain BSP approval to amend their Articles of Incorporation, that they have an opportunity
to seek investors. They requested as well that the basis for the capital infusion figures be
disclosed, and noted that none of them had received the Report of Examination (ROE) which
finalizes the audit findings. They also requested meetings with the BSP audit teams to
reconcile audit figures. In response, Fonacier reiterated the banks’ failure to comply with the
directive for additional capital infusions.
On May 12, 2008, the RBPI filed a complaint for nullification of the BSP ROE with application
for a TRO and writ of preliminary injunction before the RTC docketed as Civil Case No. 08-
119243 against Fonacier, the BSP, Amado M. Tetangco, Jr., Romulo L. Neri, Vicente B.
Valdepenas, Jr., Raul A. Boncan, Juanita D. Amatong, Alfredo C. Antonio, and Nelly F.
Villafuerte. RBPI prayed that Fonacier, her subordinates, agents, or any other person acting in
her behalf be enjoined from submitting the ROE or any similar report to the Monetary Board
(MB), or if the ROE had already been submitted, the MB be enjoined from acting on the basis
of said ROE, on the allegation that the failure to furnish the bank with a copy of the ROE
violated its right to due process.
The Rural Bank of San Jose (Batangas), Inc., Rural Bank of Carmen (Cebu), Inc., Pilipino Rural
Bank, Inc., Philippine Countryside Rural Bank, Inc., Rural Bank of Calatagan (Batangas), Inc.,
Rural Bank of Darbci, Inc., Rural Bank of Kananga (Leyte), Inc., and Rural Bank de Bisayas
Minglanilla followed suit, filing complaints with the RTC substantially similar to that of RBPI,
including the reliefs prayed for, which were raffled to different branches and docketed as
Civil Cases Nos. 08-119244, 08-119245, 08-119246, 08-119247, 08-119248, 08-119249, 08-
119250, and 08-119251, respectively.
On May 13, 2008, the RTC denied the prayer for a TRO of Pilipino Rural Bank, Inc. The bank
filed a motion for reconsideration the next day.
On May 14, 2008, Fonacier and the BSP filed their opposition to the application for a TRO and
writ of preliminary injunction in Civil Case No. 08-119243 with the RTC. Respondent Judge
Nina Antonio-Valenzuela of Branch 28 granted RBPI’s prayer for the issuance of a TRO.
The other banks separately filed motions for consolidation of their cases in Branch 28, which
motions were granted. Judge Valenzuela set the complaint of Rural Bank of San Jose
(Batangas), Inc. for hearing on May 15, 2008. Petitioners assailed the validity of the
consolidation of the nine cases before the RTC, alleging that the court had already prejudged
the case by the earlier issuance of a TRO in Civil Case No. 08-119243, and moved for the
inhibition of respondent judge. Petitioners filed a motion for reconsideration regarding the
consolidation of the subject cases.
On May 16, 2008, San Pablo City Development Bank, Inc. filed a similar complaint against the
same defendants with the RTC, and this was docketed as Civil Case No. 08-119273 that was
later on consolidated with Civil Case No. 08-119243. Petitioners filed an Urgent Motion to
Lift/Dissolve the TRO and an Opposition to the earlier motion for reconsideration of Pilipino
Rural Bank, Inc.
On May 19, 2008, Judge Valenzuela issued an Order granting the prayer for the issuance of
TROs for the other seven cases consolidated with Civil Case No. 08-119243. On May 21, 2008,
Judge Valenzuela issued an Order denying petitioners’ motion for reconsideration regarding
the consolidation of cases in Branch 28. On May 22, 2008, Judge Valenzuela granted the
urgent motion for reconsideration of Pilipino Rural Bank, Inc. and issued a TRO similar to the
ones earlier issued.
On May 26, 2008, petitioners filed a Motion to Dismiss against all the complaints (except that
of the San Pablo City Development Bank, Inc.), on the grounds that the complaints stated no
cause of action and that a condition precedent for filing the cases had not been complied
with. On May 29, 2008, a hearing was conducted on the application for a TRO and for a writ
of preliminary injunction of San Pablo City Development Bank, Inc.
The Ruling of the RTC
After the parties filed their respective memoranda, the RTC, on June 4, 2008, ruled that the
banks were entitled to the writs of preliminary injunction prayed for. It held that it had been
the practice of the SED to provide the ROEs to the banks before submission to the MB. It
further held that as the banks are the subjects of examinations, they are entitled to copies of
the ROEs. The denial by petitioners of the banks’ requests for copies of the ROEs was held to
be a denial of the banks’ right to due process.
The dispositive portion of the RTC’s order reads:
WHEREFORE, the Court rules as follows:
1) Re: Civil Case No. 08-119243. Pursuant to Rule 58, Section 4(b) of the Revised Rules of
Court, plaintiff Rural Bank of Paranaque Inc. is directed to post a bond executed to the
defendants, in the amount of P500,000.00 to the effect that the plaintiff will pay to the
defendants all damages which they may sustain by reason of the injunction if the Court
should finally decide that the plaintiff was not entitled thereto. After posting of the bond and
approval thereof, let a writ of preliminary injunction be issued to enjoin and restrain the
defendants from submitting the Report of Examination or any other similar report prepared
in connection with the examination conducted on the plaintiff, to the Monetary Board. In
case such a Report on Examination [sic] or any other similar report prepared in connection
with the examination conducted on the plaintiff has been submitted to the Monetary Board,
the latter and its members (i.e. defendants Tetangco, Neri, Valdepenas, Boncan, Amatong,
Antonio, and Villafuerte) are enjoined and restrained from acting on the basis of said report.
2) Re: Civil Case No. 08-119244. Pursuant to Rule 58, Section 4(b) of the Revised Rules of
Court, plaintiff Rural Bank of San Jose (Batangas), Inc. is directed to post a bond executed to
the defendants, in the amount of P500,000.00 to the effect that the plaintiff will pay to the
defendants all damages which they may sustain by reason of the injunction if the Court
should finally decide that the plaintiff was not entitled thereto. After posting of the bond and
approval thereof, let a writ of preliminary injunction be issued to enjoin and restrain the
defendants from submitting the Report of Examination or any other similar report prepared
in connection with the examination conducted on the plaintiff, to the Monetary Board. In
case such a Report on Examination [sic] or any other similar report prepared in connection
with the examination conducted on the plaintiff has been submitted to the Monetary Board,
the latter and its members (i.e. defendants Tetangco, Neri, Valdepenas, Boncan, Amatong,
Antonio, and Villafuerte) are enjoined and restrained from acting on the basis of said report.
3) Re: Civil Case No. 08-119245. Pursuant to Rule 58, Section 4(b) of the Revised Rules of
Court, plaintiff Rural Bank of Carmen (Cebu), Inc. is directed to post a bond executed to the
defendants, in the amount of P500,000.00 to the effect that the plaintiff will pay to the
defendants all damages which they may sustain by reason of the injunction if the Court
should finally decide that the plaintiff was not entitled thereto. After posting of the bond and
approval thereof, let a writ of preliminary injunction be issued to enjoin and restrain the
defendants from submitting the Report of Examination or any other similar report prepared
in connection with the examination conducted on the plaintiff, to the Monetary Board. In
case such a Report on Examination [sic] or any other similar report prepared in connection
with the examination conducted on the plaintiff has been submitted to the Monetary Board,
the latter and its members (i.e. defendants Tetangco, Neri, Valdepenas, Boncan, Amatong,
Antonio, and Villafuerte) are enjoined and restrained from acting on the basis of said report.
4) Re: Civil Case No. 08-119246. Pursuant to Rule 58, Section 4(b) of the Revised Rules of
Court, plaintiff Pilipino Rural Bank Inc. is directed to post a bond executed to the defendants,
in the amount of P500,000.00 to the effect that the plaintiff will pay to the defendants all
damages which they may sustain by reason of the injunction if the Court should finally decide
that the plaintiff was not entitled thereto. After posting of the bond and approval thereof, let
a writ of preliminary injunction be issued to enjoin and restrain the defendants from
submitting the Report of Examination or any other similar report prepared in connection with
the examination conducted on the plaintiff, to the Monetary Board. In case such a Report on
Examination [sic] or any other similar report prepared in connection with the examination
conducted on the plaintiff has been submitted to the Monetary Board, the latter and its
members (i.e. defendants Tetangco, Neri, Valdepenas, Boncan, Amatong, Antonio, and
Villafuerte) are enjoined and restrained from acting on the basis of said report.
5) Re: Civil Case No. 08-119247. Pursuant to Rule 58, Section 4(b) of the Revised Rules of
Court, plaintiff Philippine Countryside Rural Bank Inc. is directed to post a bond executed to
the defendants, in the amount of P500,000.00 to the effect that the plaintiff will pay to the
defendants all damages which they may sustain by reason of the injunction if the Court
should finally decide that the plaintiff was not entitled thereto. After posting of the bond and
approval thereof, let a writ of preliminary injunction be issued to enjoin and restrain the
defendants from submitting the Report of Examination or any other similar report prepared
in connection with the examination conducted on the plaintiff, to the Monetary Board. In
case such a Report on Examination [sic] or any other similar report prepared in connection
with the examination conducted on the plaintiff has been submitted to the Monetary Board,
the latter and its members (i.e. defendants Tetangco, Neri, Valdepenas, Boncan, Amatong,
Antonio, and Villafuerte) are enjoined and restrained from acting on the basis of said report.
6) Re: Civil Case No. 08-119248. Pursuant to Rule 58, Section 4(b) of the Revised Rules of
Court, plaintiff Dynamic Bank Inc. (Rural Bank of Calatagan) is directed to post a bond
executed to the defendants, in the amount of P500,000.00 to the effect that the plaintiff will
pay to the defendants all damages which they may sustain by reason of the injunction if the
Court should finally decide that the plaintiff was not entitled thereto. After posting of the
bond and approval thereof, let a writ of preliminary injunction be issued to enjoin and
restrain the defendants from submitting the Report of Examination or any other similar
report prepared in connection with the examination conducted on the plaintiff, to the
Monetary Board. In case such a Report on Examination [sic] or any other similar report
prepared in connection with the examination conducted on the plaintiff has been submitted
to the Monetary Board, the latter and its members (i.e. defendants Tetangco, Neri,
Valdepenas, Boncan, Amatong, Antonio, and Villafuerte) are enjoined and restrained from
acting on the basis of said report.
7) Re: Civil Case No. 08-119249. Pursuant to Rule 58, Section 4(b) of the Revised Rules of
Court, plaintiff Rural Bank of DARBCI, Inc. is directed to post a bond executed to the
defendants, in the amount of P500,000.00 to the effect that the plaintiff will pay to the
defendants all damages which they may sustain by reason of the injunction if the Court
should finally decide that the plaintiff was not entitled thereto. After posting of the bond and
approval thereof, let a writ of preliminary injunction be issued to enjoin and restrain the
defendants from submitting the Report of Examination or any other similar report prepared
in connection with the examination conducted on the plaintiff, to the Monetary Board. In
case such a Report on Examination [sic] or any other similar report prepared in connection
with the examination conducted on the plaintiff has been submitted to the Monetary Board,
the latter and its members (i.e. defendants Tetangco, Neri, Valdepenas, Boncan, Amatong,
Antonio, and Villafuerte) are enjoined and restrained from acting on the basis of said report.
8) Re: Civil Case No. 08-119250. Pursuant to Rule 58, Section 4(b) of the Revised Rules of
Court, plaintiff Rural Bank of Kananga Inc. (First Intestate Bank), is directed to post a bond
executed to the defendants, in the amount of P500,000.00 to the effect that the plaintiff will
pay to the defendants all damages which they may sustain by reason of the injunction if the
Court should finally decide that the plaintiff was not entitled thereto. After posting of the
bond and approval thereof, let a writ of preliminary injunction be issued to enjoin and
restrain the defendants from submitting the Report of Examination or any other similar
report prepared in connection with the examination conducted on the plaintiff, to the
Monetary Board. In case such a Report on Examination [sic] or any other similar report
prepared in connection with the examination conducted on the plaintiff has been submitted
to the Monetary Board, the latter and its members (i.e. defendants Tetangco, Neri,
Valdepenas, Boncan, Amatong, Antonio, and Villafuerte) are enjoined and restrained from
acting on the basis of said report.
9) Re: Civil Case No. 08-119251. Pursuant to Rule 58, Section 4(b) of the Revised Rules of
Court, plaintiff Banco Rural De Bisayas Minglanilla (Cebu) Inc. (Bank of East Asia) is directed
to post a bond executed to the defendants, in the amount of P500,000.00 to the effect that
the plaintiff will pay to the defendants all damages which they may sustain by reason of the
injunction if the Court should finally decide that the plaintiff was not entitled thereto. After
posting of the bond and approval thereof, let a writ of preliminary injunction be issued to
enjoin and restrain the defendants from submitting the Report of Examination or any other
similar report prepared in connection with the examination conducted on the plaintiff, to the
Monetary Board. In case such a Report on Examination [sic] or any other similar report
prepared in connection with the examination conducted on the plaintiff has been submitted
to the Monetary Board, the latter and its members (i.e. defendants Tetangco, Neri,
Valdepenas, Boncan, Amatong, Antonio, and Villafuerte) are enjoined and restrained from
acting on the basis of said report.
10) Re: Civil Case No. 08-119273. Pursuant to Rule 58, Section 4(b) of the Revised Rules of
Court, plaintiff San Pablo City Development Bank, Inc. is directed to post a bond executed to
the defendants, in the amount of P500,000.00 to the effect that the plaintiff will pay to the
defendants all damages which they may sustain by reason of the injunction if the Court
should finally decide that the plaintiff was not entitled thereto. After posting of the bond and
approval thereof, let a writ of preliminary injunction be issued to enjoin and restrain the
defendants from submitting the Report of Examination or any other similar report prepared
in connection with the examination conducted on the plaintiff, to the Monetary Board. In
case such a Report on Examination [sic] or any other similar report prepared in connection
with the examination conducted on the plaintiff has been submitted to the Monetary Board,
the latter and its members (i.e. defendants Tetangco, Neri, Valdepenas, Boncan, Amatong,
Antonio, and Villafuerte) are enjoined and restrained from acting on the basis of said report.3
The Ruling of the CA
Petitioners then brought the matter to the CA via a petition for certiorari under Rule 65
claiming grave abuse of discretion on the part of Judge Valenzuela when she issued the
orders dated May 21, 2008 and June 4, 2008.
The CA ruled that the RTC committed no grave abuse of discretion when it ordered the
issuance of a writ of preliminary injunction and when it ordered the consolidation of the 10
cases.
It held that petitioners should have first filed a motion for reconsideration of the assailed
orders, and failed to justify why they resorted to a special civil action of certiorari instead.
The CA also found that aside from the technical aspect, there was no grave abuse of
discretion on the part of the RTC, and if there was a mistake in the assessment of evidence by
the trial court, that should be characterized as an error of judgment, and should be
correctable via appeal.
The CA held that the principles of fairness and transparency dictate that the respondent
banks are entitled to copies of the ROE.
Regarding the consolidation of the 10 cases, the CA found that there was a similarity of facts,
reliefs sought, issues raised, defendants, and that plaintiffs and defendants were represented
by the same sets of counsels. It found that the joint trial of these cases would prejudice any
substantial right of petitioners.
Finding that no grave abuse of discretion attended the issuance of the orders by the RTC, the
CA denied the petition.
On November 24, 2008, a TRO was issued by this Court, restraining the CA, RTC, and
respondents from implementing and enforcing the CA Decision dated September 30, 2008 in
CA-G.R. SP No. 103935.4
By reason of the TRO issued by this Court, the SED was able to submit their ROEs to the MB.
The MB then prohibited the respondent banks from transacting business and placed them
under receivership under Section 53 of Republic Act No. (RA) 87915 and Sec. 30 of RA
76536 through MB Resolution No. 1616 dated December 9, 2008; Resolution Nos. 1637 and
1638 dated December 11, 2008; Resolution Nos. 1647, 1648, and 1649 dated December 12,
2008; Resolution Nos. 1652 and 1653 dated December 16, 2008; and Resolution Nos. 1692
and 1695 dated December 19, 2008, with the Philippine Deposit Insurance Corporation as the
appointed receiver.
Now we resolve the main petition.
Grounds in Support of Petition
I. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING THAT THE
INJUNCTION ISSUED BY THE REGIONAL TRIAL COURT VIOLATED SECTION 25 OF THE NEW
CENTRAL BANK ACT AND EFFECTIVELY HANDCUFFED THE BANGKO SENTRAL FROM
DISCHARGING ITS FUNCTIONS TO THE GREAT AND IRREPARABLE DAMAGE OF THE
COUNTRY’S BANKING SYSTEM;
II. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT RESPONDENTS
ARE ENTITLED TO BE FURNISHED COPIES OF THEIR RESPECTIVE ROEs BEFORE THE SAME IS
SUBMITTED TO THE MONETARY BOARD IN VIEW OF THE PRINCIPLES OF FAIRNESS AND
TRANSPARENCY DESPITE LACK OF EXPRESS PROVISION IN THE NEW CENTRAL BANK ACT
REQUIRING BSP TO DO THE SAME
III. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN DEPARTING FROM WELL-
ESTABLISHED PRECEPTS OF LAW AND JURISPRUDENCE
A. THE EXCEPTIONS CITED BY PETITIONER JUSTIFIED RESORT TO PETITION FOR CERTIORARI
UNDER RULE 65 INSTEAD OF FIRST FILING A MOTION FOR RECONSIDERATION
B. RESPONDENT BANKS’ ACT OF RESORTING IMMEDIATELY TO THE COURT WAS PREMATURE
SINCE IT WAS MADE IN UTTER DISREGARD OF THE PRINCIPLE OF PRIMARY JURISDICTION
AND EXHAUSTION OF ADMINISTRATIVE REMEDY
C. THE ISSUANCE OF A WRIT OF PRELIMINARY INJUNCTION BY THE REGIONAL TRIAL COURT
WAS NOT ONLY IMPROPER BUT AMOUNTED TO GRAVE ABUSE OF DISCRETION7
Our Ruling
The petition is meritorious.
In Lim v. Court of Appeals it was stated:
The requisites for preliminary injunctive relief are: (a) the invasion of right sought to be
protected is material and substantial; (b) the right of the complainant is clear and
unmistakable; and (c) there is an urgent and paramount necessity for the writ to prevent
serious damage.
As such, a writ of preliminary injunction may be issued only upon clear showing of an actual
existing right to be protected during the pendency of the principal action. The twin
requirements of a valid injunction are the existence of a right and its actual or threatened
violations. Thus, to be entitled to an injunctive writ, the right to be protected and the
violation against that right must be shown.8
These requirements are absent in the present case.
In granting the writs of preliminary injunction, the trial court held that the submission of the
ROEs to the MB before the respondent banks would violate the right to due process of said
banks.
This is erroneous.
The respondent banks have failed to show that they are entitled to copies of the ROEs. They
can point to no provision of law, no section in the procedures of the BSP that shows that the
BSP is required to give them copies of the ROEs. Sec. 28 of RA 7653, or the New Central Bank
Act, which governs examinations of banking institutions, provides that the ROE shall be
submitted to the MB; the bank examined is not mentioned as a recipient of the ROE.
The respondent banks cannot claim a violation of their right to due process if they are not
provided with copies of the ROEs. The same ROEs are based on the lists of
findings/exceptions containing the deficiencies found by the SED examiners when they
examined the books of the respondent banks. As found by the RTC, these lists of
findings/exceptions were furnished to the officers or representatives of the respondent
banks, and the respondent banks were required to comment and to undertake remedial
measures stated in said lists. Despite these instructions, respondent banks failed to comply
with the SED’s directive.
Respondent banks are already aware of what is required of them by the BSP, and cannot
claim violation of their right to due process simply because they are not furnished with
copies of the ROEs. Respondent banks were held by the CA to be entitled to copies of the
ROEs prior to or simultaneously with their submission to the MB, on the principles of fairness
and transparency. Further, the CA held that if the contents of the ROEs are essentially the
same as those of the lists of findings/exceptions provided to said banks, there is no reason
not to give copies of the ROEs to the banks. This is a flawed conclusion, since if the banks are
already aware of the contents of the ROEs, they cannot say that fairness and transparency
are not present. If sanctions are to be imposed upon the respondent banks, they are already
well aware of the reasons for the sanctions, having been informed via the lists of
findings/exceptions, demolishing that particular argument. The ROEs would then be
superfluities to the respondent banks, and should not be the basis for a writ of preliminary
injunction. Also, the reliance of the RTC on Banco Filipino v. Monetary Board9 is misplaced.
The petitioner in that case was held to be entitled to annexes of the Supervision and
Examination Sector’s reports, as it already had a copy of the reports themselves. It was not
the subject of the case whether or not the petitioner was entitled to a copy of the reports.
And the ruling was made after the petitioner bank was ordered closed, and it was allowed to
be supplied with annexes of the reports in order to better prepare its defense. In this
instance, at the time the respondent banks requested copies of the ROEs, no action had yet
been taken by the MB with regard to imposing sanctions upon said banks.
The issuance by the RTC of writs of preliminary injunction is an unwarranted interference
with the powers of the MB. Secs. 29 and 30 of RA 765310 refer to the appointment of a
conservator or a receiver for a bank, which is a power of the MB for which they need the
ROEs done by the supervising or examining department. The writs of preliminary injunction
issued by the trial court hinder the MB from fulfilling its function under the law. The actions
of the MB under Secs. 29 and 30 of RA 7653 "may not be restrained or set aside by the court
except on petition for certiorari on the ground that the action taken was in excess of
jurisdiction or with such grave abuse of discretion as to amount to lack or excess of
jurisdiction." The writs of preliminary injunction order are precisely what cannot be done
under the law by preventing the MB from taking action under either Sec. 29 or Sec. 30 of RA
7653.
As to the third requirement, the respondent banks have shown no necessity for the writ of
preliminary injunction to prevent serious damage. The serious damage contemplated by the
trial court was the possibility of the imposition of sanctions upon respondent banks, even the
sanction of closure. Under the law, the sanction of closure could be imposed upon a bank by
the BSP even without notice and hearing. The apparent lack of procedural due process would
not result in the invalidity of action by the MB. This was the ruling in Central Bank of the
Philippines v. Court of Appeals.11 This "close now, hear later" scheme is grounded on
practical and legal considerations to prevent 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. The writ of preliminary injunction cannot, thus, prevent the MB from
taking action, by preventing the submission of the ROEs and worse, by preventing the MB
from acting on such ROEs.
The trial court required the MB to respect the respondent banks’ right to due process by
allowing the respondent banks to view the ROEs and act upon them to forestall any sanctions
the MB might impose. Such procedure has no basis in law and does in fact violate the "close
now, hear later" doctrine. We held in Rural Bank of San Miguel, Inc. v. Monetary Board,
Bangko Sentral ng Pilipinas:
It is well-settled that the closure of a bank may be considered as an exercise of police power.
The action of the MB on this matter is final and executory. Such exercise may nonetheless be
subject to judicial inquiry and can be set aside if found to be in excess of jurisdiction or with
such grave abuse of discretion as to amount to lack or excess of jurisdiction.12
The respondent banks cannot—through seeking a writ of preliminary injunction by appealing
to lack of due process, in a roundabout manner— prevent their closure by the MB. Their
remedy, as stated, is a subsequent one, which will determine whether the closure of the
bank was attended by grave abuse of discretion. Judicial review enters the picture only after
the MB has taken action; it cannot prevent such action by the MB. The threat of the
imposition of sanctions, even that of closure, does not violate their right to due process, and
cannot be the basis for a writ of preliminary injunction.
The "close now, hear later" doctrine has already been justified as a measure for the
protection of the public interest. Swift action is called for on the part of the BSP when it finds
that a bank is in dire straits. Unless adequate and determined efforts are taken by the
government against distressed and mismanaged banks, public faith in the banking system is
certain to deteriorate to the prejudice of the national economy itself, not to mention the
losses suffered by the bank depositors, creditors, and stockholders, who all deserve the
protection of the government.13
The respondent banks have failed to show their entitlement to the writ of preliminary
injunction. It must be emphasized that an application for injunctive relief is construed strictly
against the pleader.14 The respondent banks cannot rely on a simple appeal to procedural
due process to prove entitlement. The requirements for the issuance of the writ have not
been proved. No invasion of the rights of respondent banks has been shown, nor is their right
to copies of the ROEs clear and unmistakable. There is also no necessity for the writ to
prevent serious damage. Indeed the issuance of the writ of preliminary injunction tramples
upon the powers of the MB and prevents it from fulfilling its functions. There is no right that
the writ of preliminary injunction would protect in this particular case. In the absence of a
clear legal right, the issuance of the injunctive writ constitutes grave abuse of discretion. 15 In
the absence of proof of a legal right and the injury sustained by the plaintiff, an order for the
issuance of a writ of preliminary injunction will be nullified.16
Courts are hereby reminded to take greater care in issuing injunctive relief to litigants, that it
would not violate any law. The grant of a preliminary injunction in a case rests on the sound
discretion of the court with the caveat that it should be made with great caution.17 Thus, the
issuance of the writ of preliminary injunction must have basis in and be in accordance with
law. All told, while the grant or denial of an injunction generally rests on the sound discretion
of the lower court, this Court may and should intervene in a clear case of abuse.18
WHEREFORE, the petition is hereby GRANTED. The assailed CA Decision dated September 30,
2008 in CA-G.R. SP No. 103935 is hereby REVERSED. The assailed order and writ of
preliminary injunction of respondent Judge Valenzuela in Civil Case Nos. 08-119243, 08-
119244, 08-119245, 08-119246, 08-119247, 08-119248, 08-119249, 08-119250, 08-119251,
and 08-119273 are hereby declared NULL and VOID.
SO ORDERED.
G.R. No. 115849 January 24, 1996
FIRST PHILIPPINE INTERNATIONAL BANK (Formerly Producers Bank of the Philippines) and
MERCURIO RIVERA, petitioners,
vs.
COURT OF APPEALS, CARLOS EJERCITO, in substitution of DEMETRIO DEMETRIA, and JOSE
JANOLO,respondents.
DECISION
PANGANIBAN, J.:
In the absence of a formal deed of sale, may commitments given by bank officers in an
exchange of letters and/or in a meeting with the buyers constitute a perfected and
enforceable contract of sale over 101 hectares of land in Sta. Rosa, Laguna? Does the
doctrine of "apparent authority" apply in this case? If so, may the Central Bank-appointed
conservator of Producers Bank (now First Philippine International Bank) repudiate such
"apparent authority" after said contract has been deemed perfected? During the pendency
of a suit for specific performance, does the filing of a "derivative suit" by the majority
shareholders and directors of the distressed bank to prevent the enforcement or
implementation of the sale violate the ban against forum-shopping?
Simply stated, these are the major questions brought before this Court in the instant Petition
for review on certiorariunder Rule 45 of the Rules of Court, to set aside the Decision
promulgated January 14, 1994 of the respondent Court of Appeals1 in CA-G.R CV No. 35756
and the Resolution promulgated June 14, 1994 denying the motion for reconsideration. The
dispositive portion of the said Decision reads:
WHEREFORE, the decision of the lower court is MODIFIED by the elimination of the damages
awarded under paragraphs 3, 4 and 6 of its dispositive portion and the reduction of the
award in paragraph 5 thereof to P75,000.00, to be assessed against defendant bank. In all
other aspects, said decision is hereby AFFIRMED.
All references to the original plaintiffs in the decision and its dispositive portion are deemed,
herein and hereafter, to legally refer to the plaintiff-appellee Carlos C. Ejercito.
Costs against appellant bank.
The dispositive portion of the trial court's2 decision dated July 10, 1991, on the other hand, is
as follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and
against the defendants as follows:
1. Declaring the existence of a perfected contract to buy and sell over the six (6) parcels of
land situated at Don Jose, Sta. Rosa, Laguna with an area of 101 hectares, more or less,
covered by and embraced in Transfer Certificates of Title Nos. T-106932 to T-106937,
inclusive, of the Land Records of Laguna, between the plaintiffs as buyers and the defendant
Producers Bank for an agreed price of Five and One Half Million (P5,500,000.00) Pesos;
2. Ordering defendant Producers Bank of the Philippines, upon finality of this decision and
receipt from the plaintiffs the amount of P5.5 Million, to execute in favor of said plaintiffs a
deed of absolute sale over the aforementioned six (6) parcels of land, and to immediately
deliver to the plaintiffs the owner's copies of T.C.T. Nos. T-106932 to T- 106937, inclusive, for
purposes of registration of the same deed and transfer of the six (6) titles in the names of the
plaintiffs;
3. Ordering the defendants, jointly and severally, to pay plaintiffs Jose A. Janolo and
Demetrio Demetria the sums of P200,000.00 each in moral damages;
4. Ordering the defendants, jointly and severally, to pay plaintiffs the sum of P100,000.00 as
exemplary damages ;
5. Ordering the defendants, jointly and severally, to pay the plaintiffs the amount of
P400,000.00 for and by way of attorney's fees;
6. Ordering the defendants to pay the plaintiffs, jointly and severally, actual and moderate
damages in the amount of P20,000.00;
With costs against the defendants.
After the parties filed their comment, reply, rejoinder, sur-rejoinder and reply to sur-
rejoinder, the petition was given due course in a Resolution dated January 18, 1995. Thence,
the parties filed their respective memoranda and reply memoranda. The First Division
transferred this case to the Third Division per resolution dated October 23, 1995. After
carefully deliberating on the aforesaid submissions, the Court assigned the case to the
undersigned ponentefor the writing of this Decision.
The Parties
Petitioner First Philippine International Bank (formerly Producers Bank of the Philippines;
petitioner Bank, for brevity) is a banking institution organized and existing under the laws of
the Republic of the Philippines. Petitioner Mercurio Rivera (petitioner Rivera, for brevity) is of
legal age and was, at all times material to this case, Head-Manager of the Property
Management Department of the petitioner Bank.
Respondent Carlos Ejercito (respondent Ejercito, for brevity) is of legal age and is the
assignee of original plaintiffs-appellees Demetrio Demetria and Jose Janolo.
Respondent Court of Appeals is the court which issued the Decision and Resolution sought to
be set aside through this petition.
The Facts
The facts of this case are summarized in the respondent Court's Decision3 as follows:
(1) In the course of its banking operations, the defendant Producer Bank of the Philippines
acquired six parcels of land with a total area of 101 hectares located at Don Jose, Sta. Rose,
Laguna, and covered by Transfer Certificates of Title Nos. T-106932 to T-106937. The
property used to be owned by BYME Investment and Development Corporation which had September 1, 1987
them mortgaged with the bank as collateral for a loan. The original plaintiffs, Demetrio
Demetria and Jose O. Janolo, wanted to purchase the property and thus initiated JP M-P GUTIERREZ ENTERPRISES
negotiations for that purpose. 142 Charisma St., Doña Andres II
Rosario, Pasig, Metro Manila
(2) In the early part of August 1987 said plaintiffs, upon the suggestion of BYME investment's
legal counsel, Jose Fajardo, met with defendant Mercurio Rivera, Manager of the Property Attention: JOSE O. JANOLO
Management Department of the defendant bank. The meeting was held pursuant to
plaintiffs' plan to buy the property (TSN of Jan. 16, 1990, pp. 7-10). After the meeting, Dear Sir:
plaintiff Janolo, following the advice of defendant Rivera, made a formal purchase offer to
Thank you for your letter-offer to buy our six (6) parcels of acquired lots at Sta. Rosa, Laguna
the bank through a letter dated August 30, 1987 (Exh. "B"), as follows:
(formerly owned by Byme Industrial Corp.). Please be informed however that the bank's
counter-offer is at P5.5 million for more than 101 hectares on lot basis.
August 30, 1987
We shall be very glad to hear your position on the on the matter.
The Producers Bank of the Philippines
Makati, Metro Manila Best regards.

Attn. Mr. Mercurio Q. Rivera (4) On September 17, 1987, plaintiff Janolo, responding to Rivera's aforequoted reply, wrote
Manager, Property Management Dept. (Exh. "D"):

Gentleman: September 17, 1987

I have the honor to submit my formal offer to purchase your properties covered by titles
Producers Bank
listed hereunder located at Sta. Rosa, Laguna, with a total area of 101 hectares, more or less.
Paseo de Roxas
Makati, Metro Manila
TCT NO. AREA
Attention: Mr. Mercurio Rivera
T-106932 113,580 sq. m.
Gentlemen:
T-106933 70,899 sq. m.
In reply to your letter regarding my proposal to purchase your 101-hectare lot located at Sta.
Rosa, Laguna, I would like to amend my previous offer and I now propose to buy the said lot
T-106934 52,246 sq. m.
at P4.250 million in CASH..

T-106935 96,768 sq. m. Hoping that this proposal meets your satisfaction.

T-106936 187,114 sq. m. (5) There was no reply to Janolo's foregoing letter of September 17, 1987. What took place
was a meeting on September 28, 1987 between the plaintiffs and Luis Co, the Senior Vice-
President of defendant bank. Rivera as well as Fajardo, the BYME lawyer, attended the
T-106937 481,481 sq. m.
meeting. Two days later, or on September 30, 1987, plaintiff Janolo sent to the bank, through
My offer is for PESOS: THREE MILLION FIVE HUNDRED THOUSAND (P3,500,000.00) PESOS, in Rivera, the following letter (Exh. "E"):
cash.
The Producers Bank of the Philippines
Kindly contact me at Telephone Number 921-1344. Paseo de Roxas, Makati
Metro Manila
(3) On September 1, 1987, defendant Rivera made on behalf of the bank a formal reply by
letter which is hereunder quoted (Exh. "C"): Attention: Mr. Mercurio Rivera
Re: 101 Hectares of Land
in Sta. Rosa, Laguna
Gentlemen:
Pursuant to our discussion last 28 September 1987, we are pleased to inform you that we are
accepting your offer for us to purchase the property at Sta. Rosa, Laguna, formerly owned by
Byme Investment, for a total price of PESOS: FIVE MILLION FIVE HUNDRED THOUSAND
(P5,500,000.00).
Thank you.
(6) On October 12, 1987, the conservator of the bank (which has been placed under
conservatorship by the Central Bank since 1984) was replaced by an Acting Conservator in
the person of defendant Leonida T. Encarnacion. On November 4, 1987, defendant Rivera
wrote plaintiff Demetria the following letter (Exh. "F"):
Attention: Atty. Demetrio Demetria
Dear Sir:
Your proposal to buy the properties the bank foreclosed from Byme investment Corp. located
at Sta. Rosa, Laguna is under study yet as of this time by the newly created committee for
submission to the newly designated Acting Conservator of the bank.
For your information.
(7) What thereafter transpired was a series of demands by the plaintiffs for compliance by
the bank with what plaintiff considered as a perfected contract of sale, which demands were
in one form or another refused by the bank. As detailed by the trial court in its decision, on
November 17, 1987, plaintiffs through a letter to defendant Rivera (Exhibit "G") tendered
payment of the amount of P5.5 million "pursuant to (our) perfected sale agreement."
Defendants refused to receive both the payment and the letter. Instead, the parcels of land
involved in the transaction were advertised by the bank for sale to any interested buyer (Exh,
"H" and "H-1"). Plaintiffs demanded the execution by the bank of the documents on what
was considered as a "perfected agreement." Thus:
Mr. Mercurio Rivera
Manager, Producers Bank
Paseo de Roxas, Makati
Metro Manila
Dear Mr. Rivera:
This is in connection with the offer of our client, Mr. Jose O. Janolo, to purchase your 101-
hectare lot located in Sta. Rosa, Laguna, and which are covered by TCT No. T-106932 to
106937.
From the documents at hand, it appears that your counter-offer dated September 1, 1987 of
this same lot in the amount of P5.5 million was accepted by our client thru a letter dated
September 30, 1987 and was received by you on October 5, 1987.
In view of the above circumstances, we believe that an agreement has been perfected. We
were also informed that despite repeated follow-up to consummate the purchase, you now
refuse to honor your commitment. Instead, you have advertised for sale the same lot to
others.
In behalf of our client, therefore, we are making this formal demand upon you to
consummate and execute the necessary actions/documentation within three (3) days from
your receipt hereof. We are ready to remit the agreed amount of P5.5 million at your advice.
Otherwise, we shall be constrained to file the necessary court action to protect the interest
of our client.
We trust that you will be guided accordingly.
(8) Defendant bank, through defendant Rivera, acknowledged receipt of the foregoing letter
and stated, in its communication of December 2, 1987 (Exh. "I"), that said letter has been
"referred . . . to the office of our Conservator for proper disposition" However, no response
came from the Acting Conservator. On December 14, 1987, the plaintiffs made a second
tender of payment (Exh. "L" and "L-1"), this time through the Acting Conservator, defendant
Encarnacion. Plaintiffs' letter reads:
PRODUCERS BANK OF
THE PHILIPPINES
Paseo de Roxas,
Makati, Metro Manila
Attn.: Atty. NIDA ENCARNACION
Central Bank Conservator
We are sending you herewith, in - behalf of our client, Mr. JOSE O. JANOLO, MBTC Check No.
258387 in the amount of P5.5 million as our agreed purchase price of the 101-hectare lot
covered by TCT Nos. 106932, 106933, 106934, 106935, 106936 and 106937 and registered
under Producers Bank.
This is in connection with the perfected agreement consequent from your offer of P5.5
Million as the purchase price of the said lots. Please inform us of the date of documentation
of the sale immediately.
Kindly acknowledge receipt of our payment.
(9) The foregoing letter drew no response for more than four months. Then, on May 3, 1988,
plaintiff, through counsel, made a final demand for compliance by the bank with its
obligations under the considered perfected contract of sale (Exhibit "N"). As recounted by
the trial court (Original Record, p. 656), in a reply letter dated May 12, 1988 (Annex "4" of
defendant's answer to amended complaint), the defendants through Acting Conservator
Encarnacion repudiated the authority of defendant Rivera and claimed that his dealings with
the plaintiffs, particularly his counter-offer of P5.5 Million are unauthorized or illegal. On that
basis, the defendants justified the refusal of the tenders of payment and the non-compliance
with the obligations under what the plaintiffs considered to be a perfected contract of sale.
(10) On May 16, 1988, plaintiffs filed a suit for specific performance with damages against the
bank, its Manager Rivers and Acting Conservator Encarnacion. The basis of the suit was that
the transaction had with the bank resulted in a perfected contract of sale, The defendants
took the position that there was no such perfected sale because the defendant Rivera is not
authorized to sell the property, and that there was no meeting of the minds as to the price.
On March 14, 1991, Henry L. Co (the brother of Luis Co), through counsel Sycip Salazar
Hernandez and Gatmaitan, filed a motion to intervene in the trial court, alleging that as
owner of 80% of the Bank's outstanding shares of stock, he had a substantial interest in
resisting the complaint. On July 8, 1991, the trial court issued an order denying the motion to
intervene on the ground that it was filed after trial had already been concluded. It also
denied a motion for reconsideration filed thereafter. From the trial court's decision, the
Bank, petitioner Rivera and conservator Encarnacion appealed to the Court of Appeals which
subsequently affirmed with modification the said judgment. Henry Co did not appeal the
denial of his motion for intervention.
In the course of the proceedings in the respondent Court, Carlos Ejercito was substituted in
place of Demetria and Janolo, in view of the assignment of the latters' rights in the matter in
litigation to said private respondent.
On July 11, 1992, during the pendency of the proceedings in the Court of Appeals, Henry Co
and several other stockholders of the Bank, through counsel Angara Abello Concepcion
Regala and Cruz, filed an action (hereafter, the "Second Case") — purportedly a "derivative
suit" — with the Regional Trial Court of Makati, Branch 134, docketed as Civil Case No. 92-
1606, against Encarnacion, Demetria and Janolo "to declare any perfected sale of the
property as unenforceable and to stop Ejercito from enforcing or implementing the sale" 4 In
his answer, Janolo argued that the Second Case was barred by litis pendentia by virtue of the
case then pending in the Court of Appeals. During the pre-trial conference in the Second
Case, plaintiffs filed a Motion for Leave of Court to Dismiss the Case Without Prejudice.
"Private respondent opposed this motion on the ground, among others, that plaintiff's act of
forum shopping justifies the dismissal of both cases, with prejudice."5 Private respondent, in
his memorandum, averred that this motion is still pending in the Makati RTC.
In their Petition6 and Memorandum7 , petitioners summarized their position as follows:
I.
The Court of Appeals erred in declaring that a contract of sale was perfected between
Ejercito (in substitution of Demetria and Janolo) and the bank.
II.
The Court of Appeals erred in declaring the existence of an enforceable contract of sale
between the parties.
III.
The Court of Appeals erred in declaring that the conservator does not have the power to
overrule or revoke acts of previous management.
IV.
The findings and conclusions of the Court of Appeals do not conform to the evidence on
record.
On the other hand, petitioners prayed for dismissal of the instant suit on the ground8 that:
I.
Petitioners have engaged in forum shopping.
II.
The factual findings and conclusions of the Court of Appeals are supported by the evidence
on record and may no longer be questioned in this case.
III.
The Court of Appeals correctly held that there was a perfected contract between Demetria
and Janolo (substituted by; respondent Ejercito) and the bank.
IV.
The Court of Appeals has correctly held that the conservator, apart from being estopped
from repudiating the agency and the contract, has no authority to revoke the contract of
sale.
The Issues
From the foregoing positions of the parties, the issues in this case may be summed up as
follows:
1) Was there forum-shopping on the part of petitioner Bank?
2) Was there a perfected contract of sale between the parties?
3) Assuming there was, was the said contract enforceable under the statute of frauds?
4) Did the bank conservator have the unilateral power to repudiate the authority of the bank
officers and/or to revoke the said contract?
5) Did the respondent Court commit any reversible error in its findings of facts?
The First Issue: Was There Forum-Shopping?
In order to prevent the vexations of multiple petitions and actions, the Supreme Court
promulgated Revised Circular No. 28-91 requiring that a party "must certify under oath . . .
[that] (a) he has not (t)heretofore commenced any other action or proceeding involving the
same issues in the Supreme Court, the Court of Appeals, or any other tribunal or agency; (b)
to the best of his knowledge, no such action or proceeding is pending" in said courts or
agencies. A violation of the said circular entails sanctions that include the summary dismissal
of the multiple petitions or complaints. To be sure, petitioners have included a
VERIFICATION/CERTIFICATION in their Petition stating "for the record(,) the pendency of Civil
Case No. 92-1606 before the Regional Trial Court of Makati, Branch 134, involving
a derivative suit filed by stockholders of petitioner Bank against the conservator and other
defendants but which is the subject of a pending Motion to Dismiss Without Prejudice. 9
Private respondent Ejercito vigorously argues that in spite of this verification, petitioners are
guilty of actual forum shopping because the instant petition pending before this Court
involves "identical parties or interests represented, rights asserted and reliefs sought (as
that) currently pending before the Regional Trial Court, Makati Branch 134 in the Second
Case. In fact, the issues in the two cases are so interwined that a judgement or resolution in
either case will constitute res judicata in the other." 10
On the other hand, petitioners explain 11 that there is no forum-shopping because:
1) In the earlier or "First Case" from which this proceeding arose, the Bank was impleaded as
a defendant, whereas in the "Second Case" (assuming the Bank is the real party in interest in
a derivative suit), it wasplaintiff;
2) "The derivative suit is not properly a suit for and in behalf of the corporation under the
circumstances";
3) Although the CERTIFICATION/VERIFICATION (supra) signed by the Bank president and
attached to the Petition identifies the action as a "derivative suit," it "does not mean that it is
one" and "(t)hat is a legal question for the courts to decide";
4) Petitioners did not hide the Second Case at they mentioned it in the said
VERIFICATION/CERTIFICATION.
We rule for private respondent.
To begin with, forum-shopping originated as a concept in private international law.12 ,
where
non-resident litigants are given the option to choose the forum or place wherein to bring
their suit for various reasons or excuses, including to secure procedural advantages, to annoy
and harass the defendant, to avoid overcrowded dockets, or to select a more friendly venue.
To combat these less than honorable excuses, the principle of forum non conveniens was
developed whereby a court, in conflicts of law cases, may refuse impositions on its
jurisdiction where it is not the most "convenient" or available forum and the parties are not
precluded from seeking remedies elsewhere.
In this light, Black's Law Dictionary 13 says that forum shopping "occurs when a party
attempts to have his action tried in a particular court or jurisdiction where he feels he will
receive the most favorable judgment or verdict." Hence, according to Words and Phrases14 ,
"a litigant is open to the charge of "forum shopping" whenever he chooses a forum with
slight connection to factual circumstances surrounding his suit, and litigants should be
encouraged to attempt to settle their differences without imposing undue expenses and
vexatious situations on the courts".
In the Philippines, forum shopping has acquired a connotation encompassing not only a
choice of venues, as it was originally understood in conflicts of laws, but also to a choice of
remedies. As to the first (choice of venues), the Rules of Court, for example, allow a plaintiff
to commence personal actions "where the defendant or any of the defendants resides or
may be found, or where the plaintiff or any of the plaintiffs resides, at the election of the
plaintiff" (Rule 4, Sec, 2 [b]). As to remedies, aggrieved parties, for example, are given a
choice of pursuing civil liabilities independently of the criminal, arising from the same set of
facts. A passenger of a public utility vehicle involved in a vehicular accident may sue on culpa
contractual, culpa aquiliana or culpa criminal — each remedy being available independently
of the others — although he cannot recover more than once.
In either of these situations (choice of venue or choice of remedy), the litigant actually shops
for a forum of his action, This was the original concept of the term forum shopping.
Eventually, however, instead of actually making a choice of the forum of their actions,
litigants, through the encouragement of their lawyers, file their actions in all available courts,
or invoke all relevant remedies simultaneously. This practice had not only resulted to (sic)
conflicting adjudications among different courts and consequent confusion enimical (sic) to
an orderly administration of justice. It had created extreme inconvenience to some of the
parties to the action.
Thus, "forum shopping" had acquired a different concept — which is unethical professional
legal practice. And this necessitated or had given rise to the formulation of rules and canons
discouraging or altogether prohibiting the practice. 15
What therefore originally started both in conflicts of laws and in our domestic law as a
legitimate device for solving problems has been abused and mis-used to assure scheming
litigants of dubious reliefs.
To avoid or minimize this unethical practice of subverting justice, the Supreme Court, as
already mentioned, promulgated Circular 28-91. And even before that, the Court had
prescribed it in the Interim Rules and Guidelines issued on January 11, 1983 and had struck
down in several cases 16 the inveterate use of this insidious malpractice. Forum shopping as
"the filing of repetitious suits in different courts" has been condemned by Justice Andres R.
Narvasa (now Chief Justice) in Minister of Natural Resources, et al., vs. Heirs of Orval Hughes,
et al., "as a reprehensible manipulation of court processes and proceedings . . ." 17 when does
forum shopping take place?
There is forum-shopping whenever, as a result of an adverse opinion in one forum, a party
seeks a favorable opinion (other than by appeal or certiorari) in another. The principle applies
not only with respect to suits filed in the courts but also in connection with litigations
commenced in the courts while an administrative proceeding is pending, as in this case, in
order to defeat administrative processes and in anticipation of an unfavorable administrative
ruling and a favorable court ruling. This is specially so, as in this case, where the court in
which the second suit was brought, has no jurisdiction.18
The test for determining whether a party violated the rule against forum shopping has been
laid dawn in the 1986 case of Buan vs. Lopez 19 , also by Chief Justice Narvasa, and that is,
forum shopping exists where the elements of litis pendentia are present or where a final
judgment in one case will amount to res judicata in the other, as follows:
There thus exists between the action before this Court and RTC Case No. 86-36563 identity of
parties, or at least such parties as represent the same interests in both actions, as well as
identity of rights asserted and relief prayed for, the relief being founded on the same facts,
and the identity on the two preceding particulars is such that any judgment rendered in the
other action, will, regardless of which party is successful, amount to res adjudicata in the
action under consideration: all the requisites, in fine, of auter action pendant.
xxx xxx xxx
As already observed, there is between the action at bar and RTC Case No. 86-36563, an
identity as regards parties, or interests represented, rights asserted and relief sought, as well
as basis thereof, to a degree sufficient to give rise to the ground for dismissal known as auter
action pendant or lis pendens. That same identity puts into operation the sanction of twin
dismissals just mentioned. The application of this sanction will prevent any further delay in
the settlement of the controversy which might ensue from attempts to seek reconsideration
of or to appeal from the Order of the Regional Trial Court in Civil Case No. 86-36563
promulgated on July 15, 1986, which dismissed the petition upon grounds which appear
persuasive.
Consequently, where a litigant (or one representing the same interest or person) sues the
same party against whom another action or actions for the alleged violation of the same right
and the enforcement of the same relief is/are still pending, the defense of litis pendencia in
one case is bar to the others; and, a final judgment in one would constitute res judicata and
thus would cause the dismissal of the rest. In either case, forum shopping could be cited by
the other party as a ground to ask for summary dismissal of the two 20 (or more) complaints
or petitions, and for imposition of the other sanctions, which are direct contempt of court,
criminal prosecution, and disciplinary action against the erring lawyer.
Applying the foregoing principles in the case before us and comparing it with the Second
Case, it is obvious that there exist identity of parties or interests represented, identity of
rights or causes and identity of reliefs sought.
Very simply stated, the original complaint in the court a quo which gave rise to the instant
petition was filed by the buyer (herein private respondent and his predecessors-in-interest)
against the seller (herein petitioners) to enforce the alleged perfected sale of real estate. On
the other hand, the complaint 21 in the Second Case seeks to declare such purported sale
involving the same real property "as unenforceable as against the Bank", which is the
petitioner herein. In other words, in the Second Case, the majority stockholders, in
representation of the Bank, are seeking to accomplish what the Bank itself failed to do in the
original case in the trial court. In brief, the objective or the relief being sought, though
worded differently, is the same, namely, to enable the petitioner Bank to escape from the
obligation to sell the property to respondent. In Danville Maritime, Inc. vs. Commission on
Audit. 22 , this Court ruled that the filing by a party of two apparently different actions, but
with the same objective, constituted forum shopping:
In the attempt to make the two actions appear to be different, petitioner impleaded different
respondents therein — PNOC in the case before the lower court and the COA in the case
before this Court and sought what seems to be different reliefs. Petitioner asks this Court to
set aside the questioned letter-directive of the COA dated October 10, 1988 and to direct
said body to approve the Memorandum of Agreement entered into by and between the
PNOC and petitioner, while in the complaint before the lower court petitioner seeks to enjoin
the PNOC from conducting a rebidding and from selling to other parties the vessel "T/T
Andres Bonifacio", and for an extension of time for it to comply with the paragraph 1 of the
memorandum of agreement and damages. One can see that although the relief prayed for in
the two (2) actions are ostensibly different, the ultimate objective in both actions is the same,
that is, approval of the sale of vessel in favor of petitioner and to overturn the letter-directive
of the COA of October 10, 1988 disapproving the sale. (emphasis supplied).
In an earlier case 23 but with the same logic and vigor, we held:
In other words, the filing by the petitioners of the instant special civil action for certiorari and
prohibition in this Court despite the pendency of their action in the Makati Regional Trial
Court, is a species of forum-shopping. Both actions unquestionably involve the same
transactions, the same essential facts and circumstances. The petitioners' claim of absence of
identity simply because the PCGG had not been impleaded in the RTC suit, and the suit did
not involve certain acts which transpired after its commencement, is specious. In the RTC
action, as in the action before this Court, the validity of the contract to purchase and sell of
September 1, 1986, i.e., whether or not it had been efficaciously rescinded, and the propriety
of implementing the same (by paying the pledgee banks the amount of their loans, obtaining
the release of the pledged shares, etc.) were the basic issues. So, too, the relief was the
same: the prevention of such implementation and/or the restoration of the status quo ante.
When the acts sought to be restrained took place anyway despite the issuance by the Trial
Court of a temporary restraining order, the RTC suit did not become functus oficio. It
remained an effective vehicle for obtention of relief; and petitioners' remedy in the premises
was plain and patent: the filing of an amended and supplemental pleading in the RTC suit, so
as to include the PCGG as defendant and seek nullification of the acts sought to be enjoined
but nonetheless done. The remedy was certainly not the institution of another action in
another forum based on essentially the same facts, The adoption of this latter recourse
renders the petitioners amenable to disciplinary action and both their actions, in this Court as
well as in the Court a quo, dismissible.
In the instant case before us, there is also identity of parties, or at least, of interests
represented. Although the plaintiffs in the Second Case (Henry L. Co. et al.) are not name
parties in the First Case, they represent the same interest and entity, namely, petitioner
Bank, because:
Firstly, they are not suing in their personal capacities, for they have no direct personal
interest in the matter in controversy. They are not principally or even subsidiarily liable;
much less are they direct parties in the assailed contract of sale; and
Secondly, the allegations of the complaint in the Second Case show that the stockholders are
bringing a "derivative suit". In the caption itself, petitioners claim to have brought suit "for
and in behalf of the Producers Bank of the Philippines" 24 . Indeed, this is the very essence of
a derivative suit:
An individual stockholder is permitted to institute a derivative suit on behalf of the
corporation wherein he holdsstock in order to protect or vindicate corporate
rights, whenever the officials of the corporation refuse to sue, or are the ones to be sued or
hold the control of the corporation. In such actions, the suing stockholder is regarded as a
nominal party, with the corporation as the real party in interest. (Gamboa v. Victoriano, 90
SCRA 40, 47 [1979]; emphasis supplied).
In the face of the damaging admissions taken from the complaint in the Second Case,
petitioners, quite strangely, sought to deny that the Second Case was a derivative suit,
reasoning that it was brought, not by the minority shareholders, but by Henry Co et al., who
not only own, hold or control over 80% of the outstanding capital stock, but also constitute
the majority in the Board of Directors of petitioner Bank. That being so, then they really
represent the Bank. So, whether they sued "derivatively" or directly, there is undeniably an
identity of interests/entity represented.
Petitioner also tried to seek refuge in the corporate fiction that the personality Of the Bank is
separate and distinct from its shareholders. But the rulings of this Court are consistent:
"When the fiction is urged as a means of perpetrating a fraud or an illegal act or as a vehicle
for the evasion of an existing obligation, the circumvention of statutes, the achievement or
perfection of a monopoly or generally the perpetration of knavery or crime, the veil with
which the law covers and isolates the corporation from the members or stockholders who
compose it will be lifted to allow for its consideration merely as an aggregation of
individuals." 25
In addition to the many cases 26 where the corporate fiction has been disregarded, we now
add the instant case, and declare herewith that the corporate veil cannot be used to shield
an otherwise blatant violation of the prohibition against forum-shopping. Shareholders,
whether suing as the majority in direct actions or as the minority in a derivative suit, cannot
be allowed to trifle with court processes, particularly where, as in this case, the corporation
itself has not been remiss in vigorously prosecuting or defending corporate causes and in
using and applying remedies available to it. To rule otherwise would be to encourage
corporate litigants to use their shareholders as fronts to circumvent the stringent rules
against forum shopping.
Finally, petitioner Bank argued that there cannot be any forum shopping, even
assuming arguendo that there is identity of parties, causes of action and reliefs sought,
"because it (the Bank) was the defendant in the (first) case while it was the plaintiff in the
other (Second Case)",citing as authority Victronics Computers, Inc., vs. Regional Trial Court,
Branch 63, Makati, etc. et al., 27 where Court held:
The rule has not been extended to a defendant who, for reasons known only to him,
commences a new action against the plaintiff — instead of filing a responsive pleading in the
other case — setting forth therein, as causes of action, specific denials, special and
affirmative defenses or even counterclaims, Thus, Velhagen's and King's motion to dismiss
Civil Case No. 91-2069 by no means negates the charge of forum-shopping as such did not
exist in the first place. (emphasis supplied)
Petitioner pointed out that since it was merely the defendant in the original case, it could not
have chosen the forum in said case.
Respondent, on the other hand, replied that there is a difference in factual setting
between Victronics and the present suit. In the former, as underscored in the above-quoted
Court ruling, the defendants did not file any responsive pleading in the first case. In other
words, they did not make any denial or raise any defense or counter-claim therein In the case
before us however, petitioners filed a responsive pleading to the complaint — as a result of
which, the issues were joined.
Indeed, by praying for affirmative reliefs and interposing counter–claims in their responsive
pleadings, the petitioners became plaintiffs themselves in the original case, giving unto
themselves the very remedies they repeated in the Second Case.
Ultimately, what is truly important to consider in determining whether forum-shopping exists
or not is the vexation caused the courts and parties-litigant by a party who asks different
courts and/or administrative agencies to rule on the same or related causes and/or to grant
the same or substantially the same reliefs, in the process creating the possibility of conflicting
decisions being rendered by the different fora upon the same issue. In this case, this is
exactly the problem: a decision recognizing the perfection and directing the enforcement of
the contract of sale will directly conflict with a possible decision in the Second Case barring
the parties front enforcing or implementing the said sale. Indeed, a final decision in one
would constitute res judicata in the other 28 .
The foregoing conclusion finding the existence of forum-shopping notwithstanding, the only
sanction possible now is the dismissal of both cases with prejudice, as the other sanctions
cannot be imposed because petitioners' present counsel entered their appearance only
during the proceedings in this Court, and the Petition's VERIFICATION/CERTIFICATION
contained sufficient allegations as to the pendency of the Second Case to show good faith in
observing Circular 28-91. The Lawyers who filed the Second Case are not before us; thus the
rudiments of due process prevent us from motu propio imposing disciplinary measures
against them in this Decision. However, petitioners themselves (and particularly Henry Co, et
al.) as litigants are admonished to strictly follow the rules against forum-shopping and not to
trifle with court proceedings and processes They are warned that a repetition of the same
will be dealt with more severely.
Having said that, let it be emphasized that this petition should be dismissed not merely
because of forum-shopping but also because of the substantive issues raised, as will be
discussed shortly.
The Second Issue: Was The Contract Perfected?
The respondent Court correctly treated the question of whether or not there was, on the
basis of the facts established, a perfected contract of sale as the ultimate issue. Holding that
a valid contract has been established, respondent Court stated:
There is no dispute that the object of the transaction is that property owned by the
defendant bank as acquired assets consisting of six (6) parcels of land specifically identified
under Transfer Certificates of Title Nos. T-106932 to T-106937. It is likewise beyond cavil that
the bank intended to sell the property. As testified to by the Bank's Deputy Conservator, Jose
Entereso, the bank was looking for buyers of the property. It is definite that the plaintiffs
wanted to purchase the property and it was precisely for this purpose that they met with
defendant Rivera, Manager of the Property Management Department of the defendant bank,
in early August 1987. The procedure in the sale of acquired assets as well as the nature and
scope of the authority of Rivera on the matter is clearly delineated in the testimony of Rivera
himself, which testimony was relied upon by both the bank and by Rivera in their appeal
briefs. Thus (TSN of July 30, 1990. pp. 19-20):
A: The procedure runs this way: Acquired assets was turned over to me and then I published
it in the form of an inter-office memorandum distributed to all branches that these are
acquired assets for sale. I was instructed to advertise acquired assets for sale so on that basis,
I have to entertain offer; to accept offer, formal offer and upon having been offered, I
present it to the Committee. I provide the Committee with necessary information about the
property such as original loan of the borrower, bid price during the foreclosure, total claim of
the bank, the appraised value at the time the property is being offered for sale and then the
information which are relative to the evaluation of the bank to buy which the Committee
considers and it is the Committee that evaluate as against the exposure of the bank and it is
also the Committee that submit to the Conservator for final approval and once approved, we
have to execute the deed of sale and it is the Conservator that sign the deed of sale, sir.
The plaintiffs, therefore, at that meeting of August 1987 regarding their purpose of buying
the property, dealt with and talked to the right person. Necessarily, the agenda was the price
of the property, and plaintiffs were dealing with the bank official authorized to entertain
offers, to accept offers and to present the offer to the Committee before which the said
official is authorized to discuss information relative to price determination. Necessarily, too,
it being inherent in his authority, Rivera is the officer from whom official information
regarding the price, as determined by the Committee and approved by the Conservator, can
be had. And Rivera confirmed his authority when he talked with the plaintiff in August 1987.
The testimony of plaintiff Demetria is clear on this point (TSN of May 31,1990, pp. 27-28):
Q: When you went to the Producers Bank and talked with Mr. Mercurio Rivera, did you ask
him point-blank his authority to sell any property?
A: No, sir. Not point blank although it came from him, (W)hen I asked him how long it would
take because he was saying that the matter of pricing will be passed upon by the committee.
And when I asked him how long it will take for the committee to decide and he said the
committee meets every week. If I am not mistaken Wednesday and in about two week's (sic)
time, in effect what he was saying he was not the one who was to decide. But he would refer
it to the committee and he would relay the decision of the committee to me.
Q — Please answer the question.
A — He did not say that he had the authority (.) But he said he would refer the matter to the
committee and he would relay the decision to me and he did just like that.
"Parenthetically, the Committee referred to was the Past Due Committee of which Luis Co
was the Head, with Jose Entereso as one of the members.
What transpired after the meeting of early August 1987 are consistent with the authority and
the duties of Rivera and the bank's internal procedure in the matter of the sale of bank's
assets. As advised by Rivera, the plaintiffs made a formal offer by a letter dated August 20,
1987 stating that they would buy at the price of P3.5 Million in cash. The letter was for the
attention of Mercurio Rivera who was tasked to convey and accept such offers. Considering
an aspect of the official duty of Rivera as some sort of intermediary between the plaintiffs-
buyers with their proposed buying price on one hand, and the bank Committee, the
Conservator and ultimately the bank itself with the set price on the other, and considering
further the discussion of price at the meeting of August resulting in a formal offer of P3.5
Million in cash, there can be no other logical conclusion than that when, on September 1,
1987, Rivera informed plaintiffs by letter that "the bank's counter-offer is at P5.5 Million for
more than 101 hectares on lot basis," such counter-offer price had been determined by the
Past Due Committee and approved by the Conservator after Rivera had duly presented
plaintiffs' offer for discussion by the Committee of such matters as original loan of borrower,
bid price during foreclosure, total claim of the bank, and market value. Tersely put, under the
established facts, the price of P5.5 Million was, as clearly worded in Rivera's letter (Exh. "E"),
the official and definitive price at which the bank was selling the property.
There were averments by defendants below, as well as before this Court, that the P5.5
Million price was not discussed by the Committee and that price. As correctly characterized
by the trial court, this is not credible. The testimonies of Luis Co and Jose Entereso on this
point are at best equivocal and considering the gratuitous and self-serving character of these
declarations, the bank's submission on this point does not inspire belief. Both Co ad
Entereso, as members of the Past Due Committee of the bank, claim that the offer of the
plaintiff was never discussed by the Committee. In the same vein, both Co and Entereso
openly admit that they seldom attend the meetings of the Committee. It is important to note
that negotiations on the price had started in early August and the plaintiffs had already
offered an amount as purchase price, having been made to understand by Rivera, the official
in charge of the negotiation, that the price will be submitted for approval by the bank and
that the bank's decision will be relayed to plaintiffs. From the facts, the official bank price. At
any rate, the bank placed its official, Rivera, in a position of authority to accept offers to buy
and negotiate the sale by having the offer officially acted upon by the bank. The bank cannot
turn around and later say, as it now does, that what Rivera states as the bank's action on the
matter is not in fact so. It is a familiar doctrine, the doctrine of ostensible authority, that if a
corporation knowingly permits one of its officers, or any other agent, to do acts within the
scope of an apparent authority, and thus holds him out to the public as possessing power to
do those acts, the corporation will, as against any one who has in good faith dealt with the
corporation through such agent, he estopped from denying his authority (Francisco v. GSIS, 7
SCRA 577, 583-584; PNB v. Court of Appeals, 94 SCRA 357, 369-370; Prudential Bank v. Court
of Appeals, G.R. No. 103957, June 14, 1993). 29
Article 1318 of the Civil Code enumerates the requisites of a valid and perfected contract as
follows: "(1) Consent of the contracting parties; (2) Object certain which is the subject matter
of the contract; (3) Cause of the obligation which is established."
There is no dispute on requisite no. 2. The object of the questioned contract consists of the
six (6) parcels of land in Sta. Rosa, Laguna with an aggregate area of about 101 hectares,
more or less, and covered by Transfer Certificates of Title Nos. T-106932 to T-106937. There
is, however, a dispute on the first and third requisites.
Petitioners allege that "there is no counter-offer made by the Bank, and any supposed
counter-offer which Rivera (or Co) may have made is unauthorized. Since there was no
counter-offer by the Bank, there was nothing for Ejercito (in substitution of Demetria and
Janolo) to accept." 30 They disputed the factual basis of the respondent Court's findings that
there was an offer made by Janolo for P3.5 million, to which the Bank counter-offered P5.5
million. We have perused the evidence but cannot find fault with the said Court's findings of
fact. Verily, in a petition under Rule 45 such as this, errors of fact — if there be any - are, as a
rule, not reviewable. The mere fact that respondent Court (and the trial court as well) chose
to believe the evidence presented by respondent more than that presented by petitioners is
not by itself a reversible error. In fact, such findings merit serious consideration by this Court,
particularly where, as in this case, said courts carefully and meticulously discussed their
findings. This is basic.
Be that as it may, and in addition to the foregoing disquisitions by the Court of Appeals, let us
review the question of Rivera's authority to act and petitioner's allegations that the P5.5
million counter-offer was extinguished by the P4.25 million revised offer of Janolo. Here,
there are questions of law which could be drawn from the factual findings of the respondent
Court. They also delve into the contractual elements of consent and cause.
The authority of a corporate officer in dealing with third persons may be actual or apparent.
The doctrine of "apparent authority", with special reference to banks, was laid out
in Prudential Bank vs. Court of Appeals31 , where it was held that:
Conformably, we have declared in countless decisions that the principal is liable for
obligations contracted by the agent. The agent's apparent representation yields to the
principal's true representation and the contract is considered as entered into between the
principal and the third person (citing National Food Authority vs. Intermediate Appellate
Court, 184 SCRA 166).
A bank is liable for wrongful acts of its officers done in the interests of the bank or in the
course of dealings of the officers in their representative capacity but not for acts outside the
scape of their authority (9 C.J.S., p. 417). A bank holding out its officers and agents as worthy
of confidence will not be permitted to profit by the frauds they may thus be enabled to
perpetrate in the apparent scope of their employment; nor will it be permitted to shirk its
responsibility for such frauds even though no benefit may accrue to the bank therefrom (10
Am Jur 2d, p. 114). Accordingly, a banking corporation is liable to innocent third persons
where the representation is made in the course of its business by an agent acting within the
general scope of his authority even though, in the particular case, the agent is secretly
abusing his authority and attempting to perpetrate a fraud upon his principal or some other
person, for his own ultimate benefit (McIntosh v. Dakota Trust Co., 52 ND 752, 204 NW 818,
40 ALR 1021).
Application of these principles is especially necessary because banks have a fiduciary
relationship with the public and their stability depends on the confidence of the people in
their honesty and efficiency. Such faith will be eroded where banks do not exercise strict care
in the selection and supervision of its employees, resulting in prejudice to their depositors.
From the evidence found by respondent Court, it is obvious that petitioner Rivera has
apparent or implied authority to act for the Bank in the matter of selling its acquired assets.
This evidence includes the following:
(a) The petition itself in par. II-i (p. 3) states that Rivera was "at all times material to this case,
Manager of the Property Management Department of the Bank". By his own admission,
Rivera was already the person in charge of the Bank's acquired assets (TSN, August 6, 1990,
pp. 8-9);
(b) As observed by respondent Court, the land was definitely being sold by the Bank. And
during the initial meeting between the buyers and Rivera, the latter suggested that the
buyers' offer should be no less than P3.3 million (TSN, April 26, 1990, pp. 16-17);
(c) Rivera received the buyers' letter dated August 30, 1987 offering P3.5 million (TSN, 30 July
1990, p.11);
(d) Rivera signed the letter dated September 1, 1987 offering to sell the property for P5.5
million (TSN, July 30, p. 11);
(e) Rivera received the letter dated September 17, 1987 containing the buyers' proposal to
buy the property for P4.25 million (TSN, July 30, 1990, p. 12);
(f) Rivera, in a telephone conversation, confirmed that the P5.5 million was the final price of
the Bank (TSN, January 16, 1990, p. 18);
(g) Rivera arranged the meeting between the buyers and Luis Co on September 28, 1994,
during which the Bank's offer of P5.5 million was confirmed by Rivera (TSN, April 26, 1990,
pp. 34-35). At said meeting, Co, a major shareholder and officer of the Bank, confirmed
Rivera's statement as to the finality of the Bank's counter-offer of P5.5 million (TSN, January
16, 1990, p. 21; TSN, April 26, 1990, p. 35);
(h) In its newspaper advertisements and announcements, the Bank referred to Rivera as the
officer acting for the Bank in relation to parties interested in buying assets owned/acquired
by the Bank. In fact, Rivera was the officer mentioned in the Bank's advertisements offering
for sale the property in question (cf. Exhs. "S" and "S-1").
In the very recent case of Limketkai Sons Milling, Inc. vs. Court of Appeals, et. al.32 , the Court,
through Justice Jose A. R. Melo, affirmed the doctrine of apparent authority as it held that
the apparent authority of the officer of the Bank of P.I. in charge of acquired assets is borne
out by similar circumstances surrounding his dealings with buyers.
To be sure, petitioners attempted to repudiate Rivera's apparent authority through
documents and testimony which seek to establish Rivera's actual authority. These pieces of
evidence, however, are inherently weak as they consist of Rivera's self-serving testimony and
various inter-office memoranda that purport to show his limited actual authority, of which
private respondent cannot be charged with knowledge. In any event, since the issue is
apparent authority, the existence of which is borne out by the respondent Court's findings,
the evidence of actual authority is immaterial insofar as the liability of a corporation is
concerned 33 .
Petitioners also argued that since Demetria and Janolo were experienced lawyers and their
"law firm" had once acted for the Bank in three criminal cases, they should be charged with
actual knowledge of Rivera's limited authority. But the Court of Appeals in its Decision (p. 12)
had already made a factual finding that the buyers had no notice of Rivera's actual authority
prior to the sale. In fact, the Bank has not shown that they acted as its counsel in respect to
any acquired assets; on the other hand, respondent has proven that Demetria and Janolo
merely associated with a loose aggrupation of lawyers (not a professional partnership), one
of whose members (Atty. Susana Parker) acted in said criminal cases.
Petitioners also alleged that Demetria's and Janolo's P4.25 million counter-offer in the letter
dated September 17, 1987 extinguished the Bank's offer of P5.5 million 34 .They disputed the
respondent Court's finding that "there was a meeting of minds when on 30 September 1987
Demetria and Janolo through Annex "L" (letter dated September 30, 1987) "accepted"
Rivera's counter offer of P5.5 million under Annex "J" (letter dated September 17,
1987)", citingthe late Justice Paras35 , Art. 1319 of the Civil Code 36 and related Supreme Court
rulings starting with Beaumont vs. Prieto 37 .
However, the above-cited authorities and precedents cannot apply in the instant case
because, as found by the respondent Court which reviewed the testimonies on this point,
what was "accepted" by Janolo in his letter dated September 30, 1987 was the Bank's offer of
P5.5 million as confirmed and reiterated to Demetria and Atty. Jose Fajardo by Rivera and Co
during their meeting on September 28, 1987. Note that the said letter of September 30, 1987
begins with"(p)ursuant to our discussion last 28 September 1987 . . .
Petitioners insist that the respondent Court should have believed the testimonies of Rivera
and Co that the September 28, 1987 meeting "was meant to have the offerors improve on
their position of P5.5. million."38 However, both the trial court and the Court of Appeals
found petitioners' testimonial evidence "not credible", and we find no basis for changing this
finding of fact.
Indeed, we see no reason to disturb the lower courts' (both the RTC and the CA) common
finding that private respondents' evidence is more in keeping with truth and logic — that
during the meeting on September 28, 1987, Luis Co and Rivera "confirmed that the P5.5
million price has been passed upon by the Committee and could no longer be lowered (TSN
of April 27, 1990, pp. 34-35)"39 . Hence, assuming arguendo that the counter-offer of P4.25
million extinguished the offer of P5.5 million, Luis Co's reiteration of the said P5.5 million
price during the September 28, 1987 meeting revived the said offer. And by virtue of the
September 30, 1987 letter accepting this revived offer, there was a meeting of the minds, as
the acceptance in said letter was absolute and unqualified.
We note that the Bank's repudiation, through Conservator Encarnacion, of Rivera's authority
and action, particularly the latter's counter-offer of P5.5 million, as being "unauthorized and
illegal" came only on May 12, 1988 or more than seven (7) months after Janolo' acceptance.
Such delay, and the absence of any circumstance which might have justifiably prevented the
Bank from acting earlier, clearly characterizes the repudiation as nothing more than a last-
minute attempt on the Bank's part to get out of a binding contractual obligation.
Taken together, the factual findings of the respondent Court point to an implied admission
on the part of the petitioners that the written offer made on September 1, 1987 was carried
through during the meeting of September 28, 1987. This is the conclusion consistent with
human experience, truth and good faith.
It also bears noting that this issue of extinguishment of the Bank's offer of P5.5 million was
raised for the first time on appeal and should thus be disregarded.
This Court in several decisions has repeatedly adhered to the principle that points of law,
theories, issues of fact and arguments not adequately brought to the attention of the trial
court need not be, and ordinarily will not be, considered by a reviewing court, as they cannot
be raised for the first time on appeal (Santos vs. IAC, No. 74243, November 14, 1986, 145
SCRA 592).40
. . . It is settled jurisprudence that an issue which was neither averred in the complaint nor
raised during the trial in the court below cannot be raised for the first time on appeal as it
would be offensive to the basic rules of fair play, justice and due process (Dihiansan vs. CA,
153 SCRA 713 [1987]; Anchuelo vs. IAC, 147 SCRA 434 [1987]; Dulos Realty & Development
Corp. vs. CA, 157 SCRA 425 [1988]; Ramos vs. IAC, 175 SCRA 70 [1989]; Gevero vs. IAC, G.R.
77029, August 30, 1990).41
Since the issue was not raised in the pleadings as an affirmative defense, private respondent
was not given an opportunity in the trial court to controvert the same through opposing
evidence. Indeed, this is a matter of due process. But we passed upon the issue anyway, if
only to avoid deciding the case on purely procedural grounds, and we repeat that, on the
basis of the evidence already in the record and as appreciated by the lower courts, the
inevitable conclusion is simply that there was a perfected contract of sale.
The Third Issue: Is the Contract Enforceable?
The petition alleged42 :
Even assuming that Luis Co or Rivera did relay a verbal offer to sell at P5.5 million during the
meeting of 28 September 1987, and it was this verbal offer that Demetria and Janolo
accepted with their letter of 30 September 1987, the contract produced thereby would be
unenforceable by action — there being no note, memorandum or writing subscribed by the
Bank to evidence such contract. (Please see article 1403[2], Civil Code.)
Upon the other hand, the respondent Court in its Decision (p, 14) stated:
. . . Of course, the bank's letter of September 1, 1987 on the official price and the plaintiffs'
acceptance of the price on September 30, 1987, are not, in themselves, formal contracts of
sale. They are however clear embodiments of the fact that a contract of sale was perfected
between the parties, such contract being binding in whatever form it may have been entered
into (case citations omitted). Stated simply, the banks' letter of September 1, 1987, taken
together with plaintiffs' letter dated September 30, 1987, constitute in law a sufficient
memorandum of a perfected contract of sale.
The respondent Court could have added that the written communications commenced not
only from September 1, 1987 but from Janolo's August 20, 1987 letter. We agree that, taken
together, these letters constitute sufficient memoranda — since they include the names of
the parties, the terms and conditions of the contract, the price and a description of the
property as the object of the contract.
But let it be assumed arguendo that the counter-offer during the meeting on September 28,
1987 did constitute a "new" offer which was accepted by Janolo on September 30, 1987. Still,
the statute of frauds will not apply by reason of the failure of petitioners to object to oral
testimony proving petitioner Bank's counter-offer of P5.5 million. Hence, petitioners — by
such utter failure to object — are deemed to have waived any defects of the contract under
the statute of frauds, pursuant to Article 1405 of the Civil Code:
Art. 1405. Contracts infringing the Statute of Frauds, referred to in No. 2 of article 1403, are
ratified by the failure to object to the presentation of oral evidence to prove the same, or by
the acceptance of benefits under them.
As private respondent pointed out in his Memorandum, oral testimony on the reaffirmation
of the counter-offer of P5.5 million is a plenty — and the silence of petitioners all throughout
the presentation makes the evidence binding on them thus;
A Yes, sir, I think it was September 28, 1987 and I was again present because Atty. Demetria
told me to accompany him we were able to meet Luis Co at the Bank.
xxx xxx xxx
Q Now, what transpired during this meeting with Luis Co of the Producers Bank?
A Atty. Demetria asked Mr. Luis Co whether the price could be reduced, sir.
Q What price?
A The 5.5 million pesos and Mr. Luis Co said that the amount cited by Mr. Mercurio Rivera is
the final price and that is the price they intends (sic) to have, sir.
Q What do you mean?.
A That is the amount they want, sir.
Q What is the reaction of the plaintiff Demetria to Luis Co's statement (sic) that the
defendant Rivera's counter-offer of 5.5 million was the defendant's bank (sic) final offer?
A He said in a day or two, he will make final acceptance, sir.
Q What is the response of Mr. Luis Co?.
A He said he will wait for the position of Atty. Demetria, sir.
[Direct testimony of Atty. Jose Fajardo, TSN, January 16, 1990, at pp. 18-21.]
Q What transpired during that meeting between you and Mr. Luis Co of the defendant Bank?
A We went straight to the point because he being a busy person, I told him if the amount of
P5.5 million could still be reduced and he said that was already passed upon by the
committee. What the bank expects which was contrary to what Mr. Rivera stated. And he
told me that is the final offer of the bank P5.5 million and we should indicate our position as
soon as possible.
Q What was your response to the answer of Mr. Luis Co?
A I said that we are going to give him our answer in a few days and he said that was it. Atty.
Fajardo and I and Mr. Mercurio [Rivera] was with us at the time at his office.
Q For the record, your Honor please, will you tell this Court who was with Mr. Co in his Office
in Producers Bank Building during this meeting?
A Mr. Co himself, Mr. Rivera, Atty. Fajardo and I.
Q By Mr. Co you are referring to?
A Mr. Luis Co.
Q After this meeting with Mr. Luis Co, did you and your partner accede on (sic) the counter
offer by the bank?
A Yes, sir, we did.? Two days thereafter we sent our acceptance to the bank which offer we
accepted, the offer of the bank which is P5.5 million.
[Direct testimony of Atty. Demetria, TSN, 26 April 1990, at pp. 34-36.]
Q According to Atty. Demetrio Demetria, the amount of P5.5 million was reached by the
Committee and it is not within his power to reduce this amount. What can you say to that
statement that the amount of P5.5 million was reached by the Committee?
A It was not discussed by the Committee but it was discussed initially by Luis Co and the
group of Atty. Demetrio Demetria and Atty. Pajardo (sic) in that September 28, 1987
meeting, sir.
[Direct testimony of Mercurio Rivera, TSN, 30 July 1990, pp. 14-15.]
The Fourth Issue: May the Conservator Revoke
the Perfected and Enforceable Contract.
It is not disputed that the petitioner Bank was under a conservator placed by the Central
Bank of the Philippines during the time that the negotiation and perfection of the contract of
sale took place. Petitioners energetically contended that the conservator has the power to
revoke or overrule actions of the management or the board of directors of a bank, under
Section 28-A of Republic Act No. 265 (otherwise known as the Central Bank Act) as follows:
Whenever, on the basis of a report submitted by the appropriate supervising or examining
department, the Monetary Board finds that a bank or a non-bank financial intermediary
performing quasi-banking functions is in a state of continuing inability or unwillingness to
maintain a state of liquidity deemed adequate to protect the interest of depositors and
creditors, the Monetary Board may appoint a conservator to take charge of the assets,
liabilities, and the management of that institution, collect all monies and debts due said
institution and exercise all powers necessary to preserve the assets of the institution,
reorganize the management thereof, and restore its viability. He shall have the power to
overrule or revoke the actions of the previous management and board of directors of the
bank or non-bank financial intermediary performing quasi-banking functions, any provision of
law to the contrary notwithstanding, and such other powers as the Monetary Board shall
deem necessary.
In the first place, this issue of the Conservator's alleged authority to revoke or repudiate the
perfected contract of sale was raised for the first time in this Petition — as this was not
litigated in the trial court or Court of Appeals. As already stated earlier, issues not raised
and/or ventilated in the trial court, let alone in the Court of Appeals, "cannot be raised for
the first time on appeal as it would be offensive to the basic rules of fair play, justice and due
process."43
In the second place, there is absolutely no evidence that the Conservator, at the time the
contract was perfected, actually repudiated or overruled said contract of sale. The Bank's
acting conservator at the time, Rodolfo Romey, never objected to the sale of the property to
Demetria and Janolo. What petitioners are really referring to is the letter of Conservator
Encarnacion, who took over from Romey after the sale was perfected on September 30, 1987
(Annex V, petition) which unilaterally repudiated — not the contract — but the authority of
Rivera to make a binding offer — and which unarguably came months after the perfection of
the contract. Said letter dated May 12, 1988 is reproduced hereunder:
May 12, 1988
Atty. Noe C. Zarate
Zarate Carandang Perlas & Ass.
Suite 323 Rufino Building
Ayala Avenue, Makati, Metro-Manila
Dear Atty. Zarate:
This pertains to your letter dated May 5, 1988 on behalf of Attys. Janolo and Demetria
regarding the six (6) parcels of land located at Sta. Rosa, Laguna.
We deny that Producers Bank has ever made a legal counter-offer to any of your clients nor
perfected a "contract to sell and buy" with any of them for the following reasons.
In the "Inter-Office Memorandum" dated April 25, 1986 addressed to and approved by
former Acting Conservator Mr. Andres I. Rustia, Producers Bank Senior Manager Perfecto M.
Pascua detailed the functions of Property Management Department (PMD) staff and officers
(Annex A.), you will immediately read that Manager Mr. Mercurio Rivera or any of his
subordinates has no authority, power or right to make any alleged counter-offer. In short,
your lawyer-clients did not deal with the authorized officers of the bank.
Moreover, under Sec. 23 and 36 of the Corporation Code of the Philippines (Bates Pambansa
Blg. 68.) and Sec. 28-A of the Central Bank Act (Rep. Act No. 265, as amended), only the
Board of Directors/Conservator may authorize the sale of any property of the
corportion/bank..
Our records do not show that Mr. Rivera was authorized by the old board or by any of the
bank conservators (starting January, 1984) to sell the aforesaid property to any of your
clients. Apparently, what took place were just preliminary discussions/consultations between
him and your clients, which everyone knows cannot bind the Bank's Board or Conservator.
We are, therefore, constrained to refuse any tender of payment by your clients, as the same
is patently violative of corporate and banking laws. We believe that this is more than
sufficient legal justification for refusing said alleged tender.
Rest assured that we have nothing personal against your clients. All our acts are official, legal
and in accordance with law. We also have no personal interest in any of the properties of the
Bank.
Please be advised accordingly.
Very truly yours,
(Sgd.) Leonida T. Encarnacion
LEONIDA T. EDCARNACION
Acting Conservator
In the third place, while admittedly, the Central Bank law gives vast and far-reaching powers
to the conservator of a bank, it must be pointed out that such powers must be related to the
"(preservation of) the assets of the bank, (the reorganization of) the management thereof
and (the restoration of) its viability." Such powers, enormous and extensive as they are,
cannot extend to the post-facto repudiation of perfected transactions, otherwise they would
infringe against the non-impairment clause of the Constitution 44 . If the legislature itself
cannot revoke an existing valid contract, how can it delegate such non-existent powers to the
conservator under Section 28-A of said law?
Obviously, therefore, Section 28-A merely gives the conservator power to revoke contracts
that are, under existing law, deemed to be defective — i.e., void, voidable, unenforceable or
rescissible. Hence, the conservator merely takes the place of a bank's board of directors.
What the said board cannot do — such as repudiating a contract validly entered into under
the doctrine of implied authority — the conservator cannot do either. Ineluctably, his power
is not unilateral and he cannot simply repudiate valid obligations of the Bank. His authority
would be only to bring court actions to assail such contracts — as he has already done so in
the instant case. A contrary understanding of the law would simply not be permitted by the
Constitution. Neither by common sense. To rule otherwise would be to enable a failing bank
to become solvent, at the expense of third parties, by simply getting the conservator to
unilaterally revoke all previous dealings which had one way or another or come to be
considered unfavorable to the Bank, yielding nothing to perfected contractual rights nor
vested interests of the third parties who had dealt with the Bank.
The Fifth Issue: Were There Reversible Errors of Facts?
Basic is the doctrine that in petitions for review under Rule 45 of the Rules of Court, findings
of fact by the Court of Appeals are not reviewable by the Supreme Court. In Andres
vs. Manufacturers Hanover & Trust Corporation, 45 , we held:
. . . The rule regarding questions of fact being raised with this Court in a petition
for certiorari under Rule 45 of the Revised Rules of Court has been stated in Remalante vs.
Tibe, G.R. No. 59514, February 25, 1988, 158 SCRA 138, thus:
The rule in this jurisdiction is that only questions of law may be raised in a petition
for certiorari under Rule 45 of the Revised Rules of Court. "The jurisdiction of the Supreme
Court in cases brought to it from the Court of Appeals is limited to reviewing and revising the
errors of law imputed to it, its findings of the fact being conclusive " [Chan vs. Court of
Appeals, G.R. No. L-27488, June 30, 1970, 33 SCRA 737, reiterating a long line of decisions].
This Court has emphatically declared that "it is not the function of the Supreme Court to
analyze or weigh such evidence all over again, its jurisdiction being limited to reviewing
errors of law that might have been committed by the lower court" (Tiongco v. De la Merced,
G. R. No. L-24426, July 25, 1974, 58 SCRA 89; Corona vs. Court of Appeals, G.R. No. L-62482,
April 28, 1983, 121 SCRA 865; Baniqued vs. Court of Appeals, G. R. No. L-47531, February 20,
1984, 127 SCRA 596). "Barring, therefore, a showing that the findings complained of are
totally devoid of support in the record, or that they are so glaringly erroneous as to
constitute serious abuse of discretion, such findings must stand, for this Court is not expected
or required to examine or contrast the oral and documentary evidence submitted by the
parties" [Santa Ana, Jr. vs. Hernandez, G. R. No. L-16394, December 17, 1966, 18 SCRA 973]
[at pp. 144-145.]
Likewise, in Bernardo vs. Court of Appeals 46 , we held:
The resolution of this petition invites us to closely scrutinize the facts of the case, relating to
the sufficiency of evidence and the credibility of witnesses presented. This Court so held that
it is not the function of the Supreme Court to analyze or weigh such evidence all over again.
The Supreme Court's jurisdiction is limited to reviewing errors of law that may have been
committed by the lower court. The Supreme Court is not a trier of facts. . . .
As held in the recent case of Chua Tiong Tay vs. Court of Appeals and Goldrock Construction
and Development Corp. 47 :
The Court has consistently held that the factual findings of the trial court, as well as the Court
of Appeals, are final and conclusive and may not be reviewed on appeal. Among the
exceptional circumstances where a reassessment of facts found by the lower courts is
allowed are when the conclusion is a finding grounded entirely on speculation, surmises or
conjectures; when the inference made is manifestly absurd, mistaken or impossible; when
there is grave abuse of discretion in the appreciation of facts; when the judgment is premised
on a misapprehension of facts; when the findings went beyond the issues of the case and the
same are contrary to the admissions of both appellant and appellee. After a careful study of
the case at bench, we find none of the above grounds present to justify the re-evaluation of
the findings of fact made by the courts below.
In the same vein, the ruling of this Court in the recent case of South Sea Surety and Insurance
Company Inc. vs. Hon. Court of Appeals, et al. 48 is equally applicable to the present case:
We see no valid reason to discard the factual conclusions of the appellate court, . . . (I)t is not
the function of this Court to assess and evaluate all over again the evidence, testimonial and
documentary, adduced by the parties, particularly where, such as here, the findings of both
the trial court and the appellate court on the matter coincide. (emphasis supplied)
Petitioners, however, assailed the respondent Court's Decision as "fraught with findings and
conclusions which were not only contrary to the evidence on record but have no bases at
all," specifically the findings that (1) the "Bank's counter-offer price of P5.5 million had been
determined by the past due committee and approved by conservator Romey, after Rivera
presented the same for discussion" and (2) "the meeting with Co was not to scale down the
price and start negotiations anew, but a meeting on the already determined price of P5.5
million" Hence, citingPhilippine National Bank vs. Court of Appeals 49 , petitioners are asking
us to review and reverse such factual findings.
The first point was clearly passed upon by the Court of Appeals 50 , thus:
There can be no other logical conclusion than that when, on September 1, 1987, Rivera
informed plaintiffs by letter that "the bank's counter-offer is at P5.5 Million for more than
101 hectares on lot basis, "such counter-offer price had been determined by the Past Due
Committee and approved by the Conservator after Rivera had duly presented plaintiffs' offer
for discussion by the Committee . . . Tersely put, under the established fact, the price of P5.5
Million was, as clearly worded in Rivera's letter (Exh. "E"), the official and definitive price at
which the bank was selling the property. (p. 11, CA Decision)
xxx xxx xxx
. . . The argument deserves scant consideration. As pointed out by plaintiff, during the
meeting of September 28, 1987 between the plaintiffs, Rivera and Luis Co, the senior vice-
president of the bank, where the topic was the possible lowering of the price, the bank
official refused it and confirmed that the P5.5 Million price had been passed upon by the
Committee and could no longer be lowered (TSN of April 27, 1990, pp. 34-35) (p. 15, CA
Decision).
The respondent Court did not believe the evidence of the petitioners on this point,
characterizing it as "not credible" and "at best equivocal and considering the gratuitous and
self-serving character of these declarations, the bank's submissions on this point do not
inspire belief."
To become credible and unequivocal, petitioners should have presented then Conservator
Rodolfo Romey to testify on their behalf, as he would have been in the best position to
establish their thesis. Under the rules on evidence 51 , such suppression gives rise to the
presumption that his testimony would have been adverse, if produced.
The second point was squarely raised in the Court of Appeals, but petitioners' evidence was
deemed insufficient by both the trial court and the respondent Court, and instead, it was
respondent's submissions that were believed and became bases of the conclusions arrived at.
In fine, it is quite evident that the legal conclusions arrived at from the findings of fact by the
lower courts are valid and correct. But the petitioners are now asking this Court to disturb
these findings to fit the conclusion they are espousing, This we cannot do.
To be sure, there are settled exceptions where the Supreme Court may disregard findings of
fact by the Court of Appeals 52 . We have studied both the records and the CA Decision and
we find no such exceptions in this case. On the contrary, the findings of the said Court are
supported by a preponderance of competent and credible evidence. The inferences and
conclusions are seasonably based on evidence duly identified in the Decision. Indeed, the
appellate court patiently traversed and dissected the issues presented before it, lending
credibility and dependability to its findings. The best that can be said in favor of petitioners
on this point is that the factual findings of respondent Court did not correspond to
petitioners' claims, but were closer to the evidence as presented in the trial court by private
respondent. But this alone is no reason to reverse or ignore such factual findings, particularly
where, as in this case, the trial court and the appellate court were in common agreement
thereon. Indeed, conclusions of fact of a trial judge — as affirmed by the Court of Appeals —
are conclusive upon this Court, absent any serious abuse or evident lack of basis or
capriciousness of any kind, because the trial court is in a better position to observe the
demeanor of the witnesses and their courtroom manner as well as to examine the real
evidence presented.
Epilogue.
In summary, there are two procedural issues involved forum-shopping and the raising of
issues for the first time on appeal [viz., the extinguishment of the Bank's offer of P5.5 million
and the conservator's powers to repudiate contracts entered into by the Bank's officers] —
which per se could justify the dismissal of the present case. We did not limit ourselves
thereto, but delved as well into the substantive issues — the perfection of the contract of
sale and its enforceability, which required the determination of questions of fact. While the
Supreme Court is not a trier of facts and as a rule we are not required to look into the factual
bases of respondent Court's decisions and resolutions, we did so just the same, if only to find
out whether there is reason to disturb any of its factual findings, for we are only too aware of
the depth, magnitude and vigor by which the parties through their respective eloquent
counsel, argued their positions before this Court.
We are not unmindful of the tenacious plea that the petitioner Bank is operating abnormally
under a government-appointed conservator and "there is need to rehabilitate the Bank in
order to get it back on its feet . . . as many people depend on (it) for investments, deposits
and well as employment. As of June 1987, the Bank's overdraft with the Central Bank had
already reached P1.023 billion . . . and there were (other) offers to buy the subject properties
for a substantial amount of money." 53
While we do not deny our sympathy for this distressed bank, at the same time, the Court
cannot emotionally close its eyes to overriding considerations of substantive and procedural
law, like respect for perfected contracts, non-impairment of obligations and sanctions against
forum-shopping, which must be upheld under the rule of law and blind justice.
This Court cannot just gloss over private respondent's submission that, while the subject
properties may currently command a much higher price, it is equally true that at the time of
the transaction in 1987, the price agreed upon of P5.5 million was reasonable, considering
that the Bank acquired these properties at a foreclosure sale for no more than P3.5
million 54 . That the Bank procrastinated and refused to honor its commitment to sell cannot
now be used by it to promote its own advantage, to enable it to escape its binding obligation
and to reap the benefits of the increase in land values. To rule in favor of the Bank simply
because the property in question has algebraically accelerated in price during the long period
of litigation is to reward lawlessness and delays in the fulfillment of binding contracts.
Certainly, the Court cannot stamp its imprimatur on such outrageous proposition.
WHEREFORE, finding no reversible error in the questioned Decision and Resolution, the Court
hereby DENIES the petition. The assailed Decision is AFFIRMED. Moreover, petitioner Bank is
REPRIMANDED for engaging in forum-shopping and WARNED that a repetition of the same or
similar acts will be dealt with more severely. Costs against petitioners.
SUPREME COURT
Manila
EN BANC
G.R. No. 76118 March 30, 1993
THE CENTRAL BANK OF THE PHILIPPINES and RAMON V. TIAOQUI, petitioners,
vs.
COURT OF APPEALS and TRIUMPH SAVINGS BANK, respondents.
Sycip, Salazar, Hernandez & Gatmaitan for petitioners.
Quisumbing, Torres & Evangelista for Triumph Savings Bank.
BELLOSILLO, J.:
May a Monetary Board resolution placing a private bank under receivership be annulled on
the ground of lack of prior notice and hearing?
This petition seeks review of the decision of the Court of Appeals in CA G.R. S.P. No. 07867
entitled "The Central Bank of the Philippines and Ramon V. Tiaoqui vs. Hon. Jose C. de
Guzman and Triumph Savings Bank," promulgated 26 September 1986, which affirmed the
twin orders of the Regional Trial Court of Quezon City issued 11 November 19851 denying
herein petitioners' motion to dismiss Civil Case No. Q-45139, and directing petitioner Ramon
V. Tiaoqui to restore the private management of Triumph Savings Bank (TSB) to its elected
board of directors and officers, subject to Central Bank comptrollership.2
The antecedent facts: Based on examination reports submitted by the Supervision and
Examination Sector (SES), Department II, of the Central Bank (CB) "that the financial
condition of TSB is one of insolvency and its continuance in business would involve probable
loss to its depositors and creditors,"3 the Monetary Board (MB) issued on 31 May 1985
Resolution No. 596 ordering the closure of TSB, forbidding it from doing business in the
Philippines, placing it under receivership, and appointing Ramon V. Tiaoqui as receiver.
Tiaoqui assumed office on 3 June 1985.4
On 11 June 1985, TSB filed a complaint with the Regional Trial Court of Quezon City,
docketed as Civil Case No. Q-45139, against Central Bank and Ramon V. Tiaoqui to annul MB
Resolution No. 596, with prayer for injunction, challenging in the process the constitutionality
of Sec. 29 of R.A. 269, otherwise known as "The Central Bank Act," as amended, insofar as it
authorizes the Central Bank to take over a banking institution even if it is not charged with
violation of any law or regulation, much less found guilty thereof.5
On 1 July 1985, the trial court temporarily restrained petitioners from implementing MB
Resolution No. 596 "until further orders", thus prompting them to move for the quashal of
the restraining order (TRO) on the ground that it did not comply with said Sec. 29, i.e., that
TSB failed to show convincing proof of arbitrariness and bad faith on the part of petitioners;'
and, that TSB failed to post the requisite bond in favor of Central Bank.
On 19 July 1985, acting on the motion to quash the restraining order, the trial court granted
the relief sought and denied the application of TSB for injunction. Thereafter, Triumph
Savings Bank filed with Us a petition for certiorariunder Rule 65 of the Rules of Court6 dated
25 July 1985 seeking to enjoin the continued implementation of the questioned MB
resolution.
Meanwhile, on 9 August 1985; Central Bank and Ramon Tiaoqui filed a motion to dismiss the
complaint before the RTC for failure to state a cause of action, i.e., it did not allege ultimate
facts showing that the action was plainly arbitrary and made in bad faith, which are the only
grounds for the annulment of Monetary Board resolutions placing a bank under
conservatorship, and that TSB was without legal capacity to sue except through its receiver.7
On 9 September 1985, TSB filed an urgent motion in the RTC to direct receiver Ramon V.
Tiaoqui to restore TSB to its private management. On 11 November 1985, the RTC in
separate orders denied petitioners' motion to dismiss and ordered receiver Tiaoqui to
restore the management of TSB to its elected board of directors and officers, subject to CB
comptrollership.
Since the orders of the trial court rendered moot the petition for certiorari then pending
before this Court, Central Bank and Tiaoqui moved on 2 December 1985 for the dismissal of
G.R. No. 71465 which We granted on 18 December 1985.8
Instead of proceeding to trial, petitioners elevated the twin orders of the RTC to the Court of
Appeals on a petition for certiorari and prohibition under Rule 65.9 On 26 September 1986,
the appellate court, upheld the orders of the trial court thus —
Petitioners' motion to dismiss was premised on two grounds, namely, that the complaint
failed to state a cause of action and that the Triumph Savings Bank was without capacity to
sue except through its appointed receiver.
Concerning the first ground, petitioners themselves admit that the Monetary Board
resolution placing the Triumph Savings Bank under the receivership of the officials of the
Central Bank was done without prior hearing, that is, without first hearing the side of the
bank. They further admit that said resolution can be the subject of judicial review and may be
set aside should it be found that the same was issued with arbitrariness and in bad faith.
The charge of lack of due process in the complaint may be taken as constitutive of allegations
of arbitrariness and bad faith. This is not of course to be taken as meaning that there must be
previous hearing before the Monetary Board may exercise its powers under Section 29 of its
Charter. Rather, judicial review of such action not being foreclosed, it would be best should
private respondent be given the chance to show and prove arbitrariness and bad faith in the
issuance of the questioned resolution, especially so in the light of the statement of private
respondent that neither the bank itself nor its officials were even informed of any charge of
violating banking laws.
In regard to lack of capacity to sue on the part of Triumph Savings Bank, we view such
argument as being specious, for if we get the drift of petitioners' argument, they mean to
convey the impression that only the CB appointed receiver himself may question the CB
resolution appointing him as such. This may be asking for the impossible, for it cannot be
expected that the master, the CB, will allow the receiver it has appointed to question that
very appointment. Should the argument of petitioners be given circulation, then judicial
review of actions of the CB would be effectively checked and foreclosed to the very bank
officials who may feel, as in the case at bar, that the CB action ousting them from the bank
deserves to be set aside.
xxx xxx xxx
On the questioned restoration order, this Court must say that it finds nothing whimsical,
despotic, capricious, or arbitrary in its issuance, said action only being in line and congruent
to the action of the Supreme Court in the Banco Filipino Case (G.R. No. 70054) where
management of the bank was restored to its duly elected directors and officers, but subject
to the Central Bank comptrollership.10
On 15 October 1986, Central Bank and its appointed receiver, Ramon V. Tiaoqui, filed this
petition under Rule 45 of the Rules of Court praying that the decision of the Court of Appeals
in CA-G.R. SP No. 07867 be set aside, and that the civil case pending before the RTC of
Quezon City, Civil Case No.
Q-45139, be dismissed. Petitioners allege that the Court of Appeals erred —
(1) in affirming that an insolvent bank that had been summarily closed by the Monetary
Board should be restored to its private management supposedly because such summary
closure was "arbitrary and in bad faith" and a denial of "due process";
(2) in holding that the "charge of lack of due process" for "want of prior hearing" in a
complaint to annul a Monetary Board receivership resolution under Sec. 29 of R.A. 265 "may
be taken as . . allegations of arbitrariness and bad faith"; and
(3) in holding that the owners and former officers of an insolvent bank may still act or sue in
the name and corporate capacity of such bank, even after it had been ordered closed and
placed under receivership.11
The respondents, on the other hand, allege inter alia that in the Banco Filipino case,12 We
held that CB violated the rule on administrative due process laid down in Ang Tibay vs.
CIR (69 Phil. 635) and Eastern Telecom Corp. vs. Dans, Jr. (137 SCRA 628) which requires that
prior notice and hearing be afforded to all parties in administrative proceedings. Since MB
Resolution No. 596 was adopted without TSB being previously notified and heard, according
to respondents, the same is void for want of due process; consequently, the bank's
management should be restored to its board of directors and officers.13
Petitioners claim that it is the essence of Sec. 29 of R.A. 265 that prior notice and hearing in
cases involving bank closures should not be required since in all probability a hearing would
not only cause unnecessary delay but also provide bank "insiders" and stockholders the
opportunity to further dissipate the bank's resources, create liabilities for the bank up to the
insured amount of P40,000.00, and even destroy evidence of fraud or irregularity in the
bank's operations to the prejudice of its depositors and creditors. 14 Petitioners further argue
that the legislative intent of Sec. 29 is to repose in the Monetary Board exclusive power to
determine the existence of statutory grounds for the closure and liquidation of banks, having
the required expertise and specialized competence to do so.
The first issue raised before Us is whether absence of prior notice and hearing may be
considered acts of arbitrariness and bad faith sufficient to annul a Monetary Board resolution
enjoining a bank from doing business and placing it under receivership. Otherwise stated, is
absence of prior notice and hearing constitutive of acts of arbitrariness and bad faith?
Under Sec. 29 of R.A. 265,15 the Central Bank, through the Monetary Board, is vested with
exclusive authority to assess, evaluate and determine the condition of any bank, and finding
such condition to be one of insolvency, or that its continuance in business would involve
probable loss to its depositors or creditors, forbid the bank or non-bank financial institution
to do business in the Philippines; and shall designate an official of the CB or other competent
person as receiver to immediately take charge of its assets and liabilities. The fourth
paragraph,16 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, Sec. 29 does not contemplate prior notice and
hearing before a bank may be directed to stop operations and placed under receivership.
When par. 4 (now par. 5, as amended by E.O. 289) provides for the filing of a case within ten
(10) days after the receiver takes charge of the assets of the bank, it is unmistakable that the
assailed actions should precede the filing of the case. Plainly, the legislature could not have
intended to authorize "no prior notice and hearing" in the closure of the bank and at the
same time allow a suit to annul it on the basis of absence thereof.
In the early case of Rural Bank of Lucena, Inc. v. Arca [1965],17 We held that a previous
hearing is nowhere required in Sec. 29 nor does the constitutional requirement of due
process demand that the correctness of the Monetary Board's resolution to stop operation
and proceed to liquidation be first adjudged before making the resolution effective. It is
enough that a subsequent judicial review be provided.
Even in Banco Filipino, 18 We reiterated that Sec. 29 of R.A. 265 does not require a previous
hearing before the Monetary Board can implement its resolution closing a bank, since its
action is subject to judicial scrutiny as provided by law.
It may be emphasized that Sec. 29 does not altogether divest a bank or a non-bank financial
institution placed under receivership of the opportunity to be heard and present evidence on
arbitrariness and bad faith because within ten (10) days from the date the receiver takes
charge of the assets of the bank, resort to judicial review may be had by filing an appropriate
pleading with the court. Respondent TSB did in fact avail of this remedy by filing a complaint
with the RTC of Quezon City on the 8th day following the takeover by the receiver of the
bank's assets on 3 June 1985.
This "close now and hear later" scheme is grounded on practical and legal considerations to
prevent 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.
In Rural Bank of Buhi, Inc. v. Court of Appeals,19 We stated that —
. . . due process does not necessarily require a prior hearing; a hearing or an opportunity to
be heard may be subsequent to the closure. One can just imagine the dire consequences of a
prior hearing: bank runs would be the order of the day, resulting in panic and hysteria. In the
process, fortunes may be wiped out and disillusionment will run the gamut of the entire
banking community.
We stressed in Central Bank of the Philippines v. Court of Appeals20 that —
. . . the banking business is properly subject to reasonable regulation under the police power
of the state because of its nature and relation to the fiscal affairs of the people and the
revenues of the state (9 CJS 32). Banks are affected with public interest because they receive
funds from the general public in the form of deposits. Due to the nature of their transactions
and functions, a fiduciary relationship is created between the banking institutions and their
depositors. Therefore, banks are under the obligation to treat with meticulous care and
utmost fidelity the accounts of those who have reposed their trust and confidence in them
(Simex International [Manila], Inc., v. Court of Appeals, 183 SCRA 360 [1990]).
It is then the Government's responsibility to see to it that the financial interests of those who
deal with the banks and banking institutions, as depositors or otherwise, are protected. In
this country, that task is delegated to the Central Bank which, pursuant to its Charter (R.A.
265, as amended), is authorized to administer the monetary, banking and credit system of
the Philippines. Under both the 1973 and 1987 Constitutions, the Central Bank is tasked with
providing policy direction in the areas of money, banking and credit; corollarily, it shall have
supervision over the operations of banks (Sec. 14, Art. XV, 1973 Constitution, and Sec. 20,
Art. XII, 1987 Constitution). Under its charter, the CB is further authorized to take the
necessary steps against any banking institution if its continued operation would cause
prejudice to its depositors, creditors and the general public as well. This power has been
expressly recognized by this Court. In Philippine Veterans Bank Employees Union-NUBE v.
Philippine Veterans Banks (189 SCRA 14 [1990], this Court held that:
. . . [u]nless adequate and determined efforts are taken by the government against distressed
and mismanaged banks, public faith in the banking system is certain to deteriorate to the
prejudice of the national economy itself, not to mention the losses suffered by the bank
depositors, creditors, and stockholders, who all deserve the protection of the government.
The government cannot simply cross its arms while the assets of a bank are being depleted
through mismanagement or irregularities. It is the duty of the Central Bank in such an event
to step in and salvage the remaining resources of the bank so that they may not continue to
be dissipated or plundered by those entrusted with their management.
Section 29 of R.A. 265 should be viewed in this light; otherwise, We would be subscribing to a
situation where the procedural rights invoked by private respondent would take precedence
over the substantive interests of depositors, creditors and stockholders over the assets of the
bank.
Admittedly, the mere filing of a case for receivership by the Central Bank can trigger a bank
run and drain its assets in days or even hours leading to insolvency even if the bank be
actually solvent. The procedure prescribed in Sec. 29 is truly designed to protect the interest
of all concerned, i.e., the depositors, creditors and stockholders, the bank itself, and the
general public, and the summary closure pales in comparison to the protection afforded
public interest. At any rate, the bank is given full opportunity to prove arbitrariness and bad
faith in placing the bank under receivership, in which event, the resolution may be properly
nullified and the receivership lifted as the trial court may determine.
The heavy reliance of respondents on the Banco Filipino case is misplaced in view of factual
circumstances therein which are not attendant in the present case. We ruled in Banco
Filipino that the closure of the bank was arbitrary and attendant with grave abuse of
discretion, not because of the absence of prior notice and hearing, but that the Monetary
Board had no sufficient basis to arrive at a sound conclusion of insolvency to justify the
closure. In other words, the arbitrariness, bad faith and abuse of discretion were determined
only after the bank was placed under conservatorship and evidence thereon was received by
the trial court. As this Court found in that case, the Valenzuela, Aurellano and Tiaoqui
Reports contained unfounded assumptions and deductions which did not reflect the true
financial condition of the bank. For instance, the subtraction of an uncertain amount as
valuation reserve from the assets of the bank would merely result in its net worth or the
unimpaired capital and surplus; it did not reflect the total financial condition of Banco
Filipino.
Furthermore, the same reports showed that the total assets of Banco Filipino far exceeded its
total liabilities. Consequently, on the basis thereof, the Monetary Board had no valid reason
to liquidate the bank; perhaps it could have merely ordered its reorganization or
rehabilitation, if need be. Clearly, there was in that case a manifest arbitrariness, abuse of
discretion and bad faith in the closure of Banco Filipino by the Monetary Board. But, this is
not the case before Us. For here, what is being raised as arbitrary by private respondent is
the denial of prior notice and hearing by the Monetary Board, a matter long settled in this
jurisdiction, and not the arbitrariness which the conclusions of the Supervision and
Examination Sector (SES), Department II, of the Central Bank were reached.
Once again We refer to Rural Bank of Buhi, Inc. v. Court of Appeals,21 and reiterate Our
pronouncement therein that —
. . . the law is explicit as to the conditions prerequisite to the action of the Monetary Board to
forbid the institution to do business in the Philippines and to appoint a receiver to
immediately take charge of the bank's assets and liabilities. They are: (a) an examination
made by the examining department of the Central Bank; (b) report by said department to the
Monetary Board; and (c) prima facie showing that its continuance in business would involve
probable loss to its depositors or creditors.
In sum, appeal to procedural due process cannot just outweigh the evil sought to be Let this case be remanded to the Regional Trial Court of Quezon City for further proceedings
prevented; hence, We rule that Sec. 29 of R.A. 265 is a sound legislation promulgated in to determine whether the issuance of Resolution No. 596 of the Monetary Board was tainted
accordance with the Constitution in the exercise of police power of the state. Consequently, with arbitrariness and bad faith and to decide the case accordingly.
the absence of notice and hearing is not a valid ground to annul a Monetary Board resolution
placing a bank under receivership. The absence of prior notice and hearing cannot be SO ORDERED.
deemed acts of arbitrariness and bad faith. Thus, an MB resolution placing a bank under
receivership, or conservatorship for that matter, may only be annulled after a determination
has been made by the trial court that its issuance was tainted with arbitrariness and bad
faith. Until such determination is made, the status quo shall be maintained, i.e., the bank
shall continue to be under receivership.

As regards the second ground, to rule that only the receiver may bring suit in behalf of the
bank is, to echo the respondent appellate court, "asking for the impossible, for it cannot be
expected that the master, the CB, will allow the receiver it has appointed to question that
very appointment." Consequently, only stockholders of a bank could file an action for
annulment of a Monetary Board resolution placing the bank under receivership and
prohibiting it from continuing operations.22 In Central Bank v. Court of Appeals, 23 We
explained the purpose of the law —

. . . in requiring that only the stockholders of record representing the majority of the capital
stock may bring the action to set aside a resolution to place a bank under conservatorship is
to ensure that it be not frustrated or defeated by the incumbent Board of Directors or
officers who may immediately resort to court action to prevent its implementation or
enforcement. It is presumed that such a resolution is directed principally against acts of said
Directors and officers which place the bank in a state of continuing inability to maintain a
condition of liquidity adequate to protect the interest of depositors and creditors. Indirectly,
it is likewise intended to protect and safeguard the rights and interests of the stockholders.
Common sense and public policy dictate then that the authority to decide on whether to
contest the resolution should be lodged with the stockholders owning a majority of the
shares for they are expected to be more objective in determining whether the resolution is
plainly arbitrary and issued in bad faith.

It is observed that the complaint in this case was filed on 11 June 1985 or two (2) years prior
to 25 July 1987 when E.O. 289 was issued, to be effective sixty (60) days after its approval
(Sec. 5). The implication is that before E.O

. 289, any party in interest could institute court proceedings to question a Monetary Board
resolution placing a bank under receivership. Consequently, since the instant complaint was
filed by parties representing themselves to be officers of respondent Bank (Officer-in-Charge
and Vice President), the case before the trial court should now take its natural course.
However, after the effectivity of E.O. 289, the procedure stated therein should be followed
and observed.

PREMISES considered, the Decision of the Court of Appeals in CA-G.R. SP No. 07867
is AFFIRMED, except insofar as it upholds the Order of the trial court of 11 November 1985
directing petitioner RAMON V. TIAOQUI to restore the management of TRIUMPH SAVINGS
BANK to its elected Board of Directors and Officers, which is hereby SET ASIDE.
FIRST DIVISION
G.R. No. 114870 May 26, 1995
MIGUELA R. VILLANUEVA, RICHARD R. VILLANUEVA, and MERCEDITA VILLANUEVA-
TIRADOS, petitioners,
vs.
COURT OF APPEALS, CENTRAL BANK OF THE PHILIPPINES, ILDEFONSO C. ONG, and
PHILIPPINE VETERANS BANK, respondents.
DAVIDE, JR., J.:
Do petitioners have a better right than private respondent Ildefonso Ong to purchase from
the Philippine Veterans Bank (PVB) the two parcels of land described as Lot No. 210-D-1 and
Lot No. 210-D-2 situated at Muntinglupa, Metro Manila, containing an area of 529 and 300
square meters, respectively? This is the principal legal issue raised in this petition.
In its decision of 27 January 1994 in CA-G.R. CV No. 35890,1 the Court of Appeals held for
Ong, while the trial court, Branch 39 of the Regional Trial Court (RTC) of Manila, ruled for the
petitioners in its joint decision of 31 October 1991 in Civil Case No. 87-425502 and Sp. Proc.
No. 85-32311.3
The operative antecedent facts are set forth in the challenged decision as follows:
The disputed lots were originally owned by the spouses Celestino Villanueva and Miguela
Villanueva, acquired by the latter during her husband's sojourn in the United States since
1968. Sometime in 1975, Miguela Villanueva sought the help of one Jose Viudez, the then
Officer-in-Charge of the PVB branch in Makati if she could obtain a loan from said bank. Jose
Viudez told Miguela Villanueva to surrender the titles of said lots as collaterals. And to
further facilitate a bigger loan, Viudez, in connivance with one Andres Sebastian, swayed
Miguela Villanueva to execute a deed of sale covering the two (2) disputed lots, which she
did but without the signature of her husband Celestino. Miguela Villanueva, however, never
got the loan she was expecting. Subsequent attempts to contact Jose Viudez proved futile,
until Miguela Villanueva thereafter found out that new titles over the two (2) lots were
already issued in the name of the PVB. It appeared upon inquiry from the Registry of Deeds
that the original titles of these lots were canceled and new ones were issued to Jose Viudez,
which in turn were again canceled and new titles issued in favor of Andres Sebastian, until
finally new titles were issued in the name of PNB [should be PVB] after the lots were
foreclosed for failure to pay the loan granted in the name of Andres Sebastian.
Miguela Villanueva sought to repurchase the lots from the PVB after being informed that the
lots were about to be sold at auction. The PVB told her that she can redeem the lots for the
price of P110,416.00. Negotiations for the repurchase of the lots nevertheless were stalled by
the filing of liquidation proceedings against the PVB on August of 1985.
Plaintiff-appellant [Ong] on the other hand expounds on his claim over the disputed lots in
this manner:
In October 1984, plaintiff-appellant offered to purchase two pieces of Land that had been
acquired by PVB through foreclosure. To back-up plaintiff-appellant's offer he deposited the
sum of P10,000.00.
In 23 November 1984, while appellant was still abroad, PVB approved his subject offer under
Board Resolution No. 10901-84. Among the conditions imposed by PVB is that: "The purchase
price shall be P110,000.00 (Less deposit of P10,000.00) payable in cash within fifteen (15)
days from receipt of approval of the offer."
In mid-April 1985, appellant returned to the country. He immediately verified the status of
his offer with the PVB, now under the control of CB, where he was informed that the same
had already been approved. On 16 April 1985, appellant formally informed CB of his desire to
pay the subject balance provided the bank should execute in his favor the corresponding
deed of conveyance. The letter was not answered.
Plaintiff-appellant sent follow-up Letters that went unheeded, the last of which was on 21
May 1987. On 26 May 1987, appellant's payment for the balance of the subject properties
were accepted by CB under Official Receipt #0816.
On 17 September 1987, plaintiff-appellant through his counsel, sent a letter to CB demanding
for the latter to execute the corresponding deed of conveyance in favor of appellant. CB did
not bother to answer the same. Hence, the instant case.
While appellant's action for specific performance against CB was pending, Miguela Villanueva
and her children filed their claims with the Liquidation court. (Appellant's Brief, pp. 3-4).4
From the pleadings, the following additional or amplificatory facts are established:
The efforts of Miguela Villanueva to reacquire the property began on 8 June 1983 when she
offered to purchase the lots for P60,000.00 with a 20%
downpayment and the balance payable in five years on a quarterly amortization basis.5
Her offer not having been accepted,6 Miguela Villanueva increased her bid to P70,000.00. It
was only at this time that she disclosed to the bank her private transactions with Jose
Viudez.7
After this and her subsequent offers were rejected,8 Miguela sent her sealed bid of
P110,417.00 pursuant to the written advice of the vice president of the PVB.9
The PVB was placed under receivership pursuant to Monetary Board (MB) Resolution No. 334
dated 3 April 1985 and later, under liquidation pursuant to MB Resolution No. 612 dated 7
June 1985. Afterwards, a petition for liquidation was filed with the RTC of Manila, which was
docketed as Sp. Proc. No. 85-32311 and assigned to Branch 39 of the said court.
On 26 May 1987, Ong tendered the sum of P100,000.00 representing the balance of the
purchase price of the litigated lots. 10 An employee of the PVB received the amount
conditioned upon approval by the Central Bank
liquidator. 11 Ong's demand for a deed of conveyance having gone unheeded, he filed on 23
October 1987 with the RTC of Manila an action for specific performance against the Central
Bank.12 It was raffled to Branch 47 thereof. Upon learning that the PVB had been placed
under liquidation, the presiding judge of Branch 47 ordered the transfer of the case to Branch
39, the liquidation court.13
On 15 June 1989, then Presiding Judge Enrique B. Inting issued an order allowing the
purchase of the two lots at the price of P150,000.00. 14 The Central Bank liquidator of the
PVB moved for the reconsideration of the order asserting that it is contrary to law as the
disposal of the lots should be made through public auction. 15
On 26 July 1989, Miguela Villanueva filed her claim with the liquidation court. She averred,
among others, that she is the lawful and registered owner of the subject lots which were
mortgaged in favor of the PVB thru the falsification committed by Jose Viudez, the manager
of the PVB Makati Branch, in collusion with Andres Sebastian; that upon discovering this
fraudulent transaction, she offered to purchase the property from the bank; and that she
reported the matter to the PC/INP Criminal Investigation Service Command, Camp Crame,
and after investigation, the CIS officer recommended the filing of a complaint for estafa
through falsification of public documents against Jose Viudez and Andres Sebastian. She then
asked that the lots be excluded from the assets of the PVB and be conveyed back to
her. 16 Later, in view of the death of her husband, she amended her claim to include her
children, herein petitioners Mercedita Villanueva-Tirados and Richard Villanueva. 17
On 31 October 1991, the trial court rendered judgment 18 holding that while the board
resolution approving Ong's offer may have created in his favor a vested right which may be
enforced against the PVB at the time or against the liquidator after the bank was placed
under liquidation proceedings, the said right was no longer enforceable, as he failed to
exercise it within the prescribed 15-day period. As to Miguela's claim, the court ruled that the
principle of estoppel bars her from questioning the transaction with Viudez and the
subsequent transactions because she was a co-participant thereto, though only with respect
to her undivided one-half (1/2) conjugal share in the disputed lots and her one-third (1/3)
hereditary share in the estate of her husband.
Nevertheless, the trial court allowed her to purchase the lots if only to restore their status as
conjugal properties. It further held that by reason of estoppel, the transactions having been
perpetrated by a responsible officer of the PVB, and for reasons of equity, the PVB should not
be allowed to charge interest on the price of the lots; hence, the purchase price should be
the PVB's claim as of 29 August 1984 when it considered the sealed bids, i.e., P110,416.20,
which should be borne by Miguela Villanueva alone.
The dispositive portion of the decision of the trial court reads as follows:
WHEREFORE, judgment is hereby rendered as follows:
1. Setting aside the order of this court issued on June 15, 1989 under the caption Civil Case
No. 87-42550 entitled "Ildefonso Ong vs. Central Bank of the Phils., et al.;
2. Dismissing the claim of Ildefonso Ong over the two parcels of land originally covered by
TCT No. 438073 and 366364 in the names of Miguela Villanueva and Celestino Villanueva,
respectively which are now covered by TCT No. 115631 and 115632 in the name of the PVB;
3. Declaring the Deed of Absolute Sale bearing the signature of Miguela Villanueva and the
falsified signature of Celestino [sic] Viudez under date May 6, 1975 and all transactions and
related documents executed thereafter referring to the two lots covered by the above stated
titles as null and void;
4. Ordering the Register of Deeds of Makati which has jurisdiction over the two parcels of
land in question to re-instate in his land records, TCT No. 438073 in the name of Miguela
Villanueva and TCT No. 366364 in the name of Celestino Villanueva who were the registered
owners thereof, and to cancel all subsequent titles emanating therefrom; and
5. Ordering the Liquidator to reconvey the two lots described in TCT No. 115631 and 115632
and executing the corresponding deed of conveyance of the said lots upon the payment of
One Hundred Ten Thousand Four Hundred Sixteen and 20/100 (P110,416.20) Pesos without
interest and less the amount deposited by the claimant, Miguela Villanueva in connection
with the bidding where she had participated and conducted by the PVB on August 29, 1984.
Cost against Ildefonso Ong and the PVB.
SO ORDERED. 19
Only Ong appealed the decision to the Court of Appeals. The appeal was docketed as CA-G.R.
CV No. 35890. In its decision of 27 January 1994, the Court of Appeals reversed the decision
of the trial court and ruled as follows:
WHEREFORE, premises considered, the assailed decision is hereby REVERSED and SET ASIDE,
and a new one entered ordering the disputed-lots be awarded in favor of plaintiff-appellant
Ildefonso Ong upon defendant-appellee Central Bank's execution of the corresponding deed
of sale in his favor. 20
In support thereof, the Court of Appeals declared that Ong's failure to pay the balance within
the prescribed period was excusable because the PVB neither notified him of the approval of
his bid nor answered his letters manifesting his readiness to pay the balance, for which
reason he could not have known when to reckon the 15-day period prescribed under its
resolution. It went further to suggest that the Central Bank was in estoppel because it
accepted Ong's late-payment of the balance. As to the petitioners' claim, the Court of
Appeals stated:
The conclusion reached by the lower court favorable to Miguela Villanueva is, as aptly
pointed out by plaintiff-appellant, indeed confusing. While the lower court's decision
declared Miguela Villanueva as estopped from recovering her proportionate share and
interest in the two (2) disputed lots for being a "co-participant" in the fraudulent scheme
perpetrated by Jose Viudez and Andres Sebastian — a factual finding which We conform to
and which Miguela Villanueva does not controvert in this appeal by not filing her appellee's
brief, yet it ordered the reconveyance of the disputed lots to Miguela Villanueva as the
victorious party upon her payment of P110,416.20. Would not estoppel defeat the claim of
the party estopped? If so, which in fact must be so, would it not then be absurd or even
defiant for the lower court to finally entitle Miguela Villanueva to the disputed lots after
having been precluded from assailing their subsequent conveyance in favor of Jose Viudez by
reason of her own negligence and/or complicity therein? The intended punitive effect of
estoppel would merely be a dud if this Court leaves the lower court's conclusion
unrectified. 21
Their motion for reconsideration 22 having been denied, 23 the petitioners filed this petition
for review on certiorari. 24
Subsequently, the respondent Central Bank apprised this Court that the PVB was no longer
under receivership or liquidation and that the PVB has been back in operation since 3 August
1992. It then prayed that it be dropped from this case or at least be substituted by the PVB,
which is the real party in interest. 25
In its Manifestation and Entry of Appearance, the PVB declared that it submits to the
jurisdiction of this Court and that it has no objection to its inclusion as a party respondent in
this case in lieu of the Central Bank. 26 The petitioners did not object to the substitution. 27
Later, in its Comment dated 10 October 1994, the PVB stated that it "submits to and shall
abide by whatever judgment this Honorable Supreme Tribunal may announce as to whom
said lands may be awarded without any touch of preference in favor of one or the other
party litigant in the instant
case." 28
In support of their contention that the Court of Appeals gravely erred in holding that Ong is
better entitled to purchase the disputed lots, the petitioners maintain that Ong is a
disqualified bidder, his bid of P110,000.00 being lower than the starting price of P110,417.00
and his deposit of P10,000.00 being less than the required 10% of the bid price; that Ong
failed to pay the balance of the price within the 15-day period from notice of the approval of
his bid; and that his offer of payment is ineffective since it was conditioned on PVB's
execution of the deed of absolute sale in his favor.
On the other hand, Ong submits that his offer, though lower than Miguela ViIlanueva's bid by
P417.00, is much better, as the same is payable in cash, while Villanueva's bid is payable in
installment; that his payment could not be said to have been made after the expiration of the
15-day period because this period has not even started to run, there being no notice yet of
the approval of his offer; and that he has a legal right to compel the PVB or its liquidator to
execute the corresponding deed of conveyance.
There is no doubt that the approval of Ong's offer constitutes an acceptance, the effect of
which is to perfect the contract of sale upon notice thereof to Ong. 29 The peculiar
circumstances in this case, however, pose a legal obstacle to his claim of a better right and
deny support to the conclusion of the Court of Appeals.
Ong did not receive any notice of the approval of his offer. It was only sometime in mid-April
1985 when he returned from the United States and inquired about the status of his bid that
he came to know of the approval.
It must be recalled that the PVB was placed under receivership pursuant to the MB
Resolution of 3 April 1985 after a finding that it was insolvent, illiquid, and could not operate
profitably, and that its continuance in business would involve probable loss to its depositors
and creditors. The PVB was then prohibited from doing business in the Philippines, and the
receiver appointed was directed to "immediately take charge of its assets and liabilities, as
expeditiously as possible collect and gather all the assets and administer the same for the
benefit of its creditors, exercising all the powers necessary for these purposes."
Under Article 1323 of the Civil Code, an offer becomes ineffective upon the death, civil
interdiction, insanity, or insolvency of either party before acceptance is conveyed. The reason
for this is that:
[T]he contract is not perfected except by the concurrence of two wills which exist and
continue until the moment that they occur. The contract is not yet perfected at any time
before acceptance is conveyed; hence, the disappearance of either party or his loss of
capacity before perfection prevents the contractual tie from being formed. 30
It has been said that where upon the insolvency of a bank a receiver therefor is appointed,
the assets of the bank pass beyond its control into the possession and control of the receiver
whose duty it is to administer the assets for the benefit of the creditors of the bank. 31 Thus,
the appointment of a receiver operates to suspend the authority of the bank and of its
directors and officers over its property and effects, such authority being reposed in the
receiver, and in this respect, the receivership is equivalent to an injunction to restrain the
bank officers from intermeddling with the property of the bank in any way. 32
Section 29 of the Central Bank Act, as amended, provides thus:
Sec. 29. Proceedings upon insolvency. — Whenever, upon examination by the head of the
appropriate supervising or examining department or his examiners or agents into the
condition of any bank or non-bank financial intermediary performing quasi-banking
functions, it shall be disclosed that the condition of the same is one of insolvency, or that its
continuance in business would involve probable loss to its depositors or creditors, shall be
the duty of the department head concerned forthwith, in writing, to inform the Monetary
Board of the facts. The Board may, upon finding the statements of the department head to
be true, forbid the institution to do business in the Philippines and designate an official of the
Central Bank or a person of recognized competence in banking or finance as receiver to
immediately take charge of its assets and liabilities, as expeditiously as possible collect and
gather all the assets and administer the same for the benefit of its creditors . . . exercising all
the powers necessary for these purposes. . . .
xxx xxx xxx
The assets of an institution under receivership or liquidation shall be deemed in custodia
legis in the hands of the receiver or liquidator and shall, from the moment of such
receivership or liquidation, be exemp from any order of garnishment, levy, attachment, or
execution.

In a nutshell, the insolvency of a bank and the consequent appointment of a receiver restrict
the bank's capacity to act, especially in relation to its property, Applying Article 1323 of the
Civil Code, Ong's offer to purchase the subject lots became ineffective because the PVB
became insolvent before the bank's acceptance of the offer came to his knowledge. Hence,
the purported contract of sale between them did not reach the stage of perfection.
Corollarily, he cannot invoke the resolution of the bank approving his bid as basis for his
alleged right to buy the disputed properties.

Nor may the acceptance by an employee of the PVB of Ong's payment of P100,000.00 benefit
him since the receipt of the payment was made subject to the approval by the Central Bank
liquidator of the PVB thus:

Payment for the purchase price of the former property of Andres Sebastian per approved BR
No. 10902-84 dated 11/13/84, subject to the approval of CB liquidator. 33

This payment was disapproved on the ground that the subject property was already
in custodia legis, and hence, disposable only by public auction and subject to the approval of
the liquidation court. 34

The Court of Appeals therefore erred when it held that Ong had a better right than the
petitioners to the purchase of the disputed lots.

Considering then that only Ong appealed the decision of the trial court, the PVB and the
Central Bank, as well as the petitioners, are deemed to have fully and unqualifiedly accepted
the judgment, which thus became final as to them for their failure to appeal.

WHEREFORE, the instant petition is GRANTED and the challenged decision of the Court of
Appeals of 27 January 1994 in CA-G.R. CV No. 35890 is hereby SET ASIDE. The decision of
Branch 39 of the Regional Trial Court of Manila of 31 October 1991 in Civil Case No. 87-42550
and Sp. Proc. No. 85-32311 is hereby REINSTATED.

Respondent Philippine Veterans Bank is further directed to return to private respondent

Ildefonso C. Ong the amount of P100,000.00.

No pronouncement as to costs.

SO ORDERED.
Republic of the Philippines
SUPREME COURT
THIRD DIVISION
G.R. No. 162270. April 06, 2005
ABACUS REAL ESTATE DEVELOPMENT CENTER, INC., Petitioners,
vs.
THE MANILA BANKING CORPORATION, Respondents.
DECISION
GARCIA, J.:
Thru this appeal by way of a petition for review on certiorari under Rule 45 of the Rules of
Court, petitioner Abacus Real Estate Development Center, Inc. seeks to set aside the
following issuances of the Court of Appeals in CA-G.R. CV No. 64877, to wit:
1. Decision dated May 26, 2003,1 reversing an earlier decision of the Regional Trial Court at
Makati City, Branch 59, in an action for specific performance and damages thereat
commenced by the petitioner against the herein respondent Manila Banking Corporation;
and
2. Resolution of February 17, 2004,2 denying petitioner’s motion for reconsideration.
The petition is casts against the following factual backdrop:
Respondent Manila Banking Corporation (Manila Bank, for brevity), owns a 1,435-square
meter parcel of land located along Gil Puyat Avenue Extension, Makati City and covered by
Transfer Certificate of Title (TCT) No. 132935 of the Registry of Deeds of Makati. Prior to
1984, the bank began constructing on said land a 14-storey building. Not long after, however,
the bank encountered financial difficulties that rendered it unable to finish construction of
the building.
On May 22, 1987, the Central Bank of the Philippines, now Bangko Sentral ng Pilipinas,
ordered the closure of Manila Bank and placed it under receivership, with Feliciano Miranda,
Jr. being initially appointed as Receiver. The legality of the closure was contested by the bank
before the proper court.
On November 11, 1988, the Central Bank, by virtue of Monetary Board (MB) Resolution No.
505, ordered the liquidation of Manila Bank and designated Atty. Renan V. Santos as
Liquidator. The liquidation, however, was held in abeyance pending the outcome of the
earlier suit filed by Manila Bank regarding the legality of its closure. Consequently, the
designation of Atty. Renan V. Santos as Liquidator was amended by the Central Bank on
December 22, 1988 to that of Statutory Receiver.
In the interim, Manila Bank’s then acting president, the late Vicente G. Puyat, in a bid to save
the bank’s investment, started scouting for possible investors who could finance the
completion of the building earlier mentioned. On August 18, 1989, a group of investors,
represented by Calixto Y. Laureano (hereafter referred to as Laureano group), wrote Vicente
G. Puyat offering to lease the building for ten (10) years and to advance the cost to complete
the same, with the advanced cost to be amortized and offset against rental payments during
the term of the lease. Likewise, the letter-offer stated that in consideration of advancing the
construction cost, the group wanted to be given the "exclusive option to purchase" the
building and the lot on which it was constructed.
Since no disposition of assets could be made due to the litigation concerning Manila Bank’s
closure, an arrangement was thought of whereby the property would first be leased
to Manila Equities Corporation (MEQCO, for brevity), a wholly-owned subsidiary of Manila
Bank, with MEQCO thereafter subleasing the property to the Laureano group.
In a letter dated August 30, 1989, Vicente G. Puyat accepted the Laureano group’s offer and
granted it an "exclusive option to purchase" the lot and building for One Hundred Fifty Million
Pesos (₱150,000,000.00). Later, or on October 31, 1989, the building was leased to MEQCO
for a period of ten (10) years pursuant to a contract of lease bearing that date. On March 1,
1990, MEQCO subleased the property to petitioner Abacus Real Estate Development Center,
Inc. (Abacus, for short), a corporation formed by the Laureano group for the purpose, under
identical provisions as that of the October 31, 1989 lease contract between Manila Bank and
MEQCO.
The Laureano group was, however, unable to finish the building due to the economic crisis
brought about by the failed December 1989 coup attempt. On account thereof, the Laureano
group offered its rights in Abacus and its "exclusive option to purchase" to Benjamin Bitanga
(Bitanga hereinafter), for Twenty Million Five Hundred Thousand Pesos (₱20,500,000.00).
Bitanga would later allege that because of the substantial amount involved, he first had to
talk with Atty. Renan Santos, the Receiver appointed by the Central Bank, to discuss Abacus’
offer. Bitanga further alleged that, over lunch, Atty. Santos then verbally approved his entry
into Abacus and his take-over of the sublease and option to purchase.
On March 30, 1990, the Laureano group transferred and assigned to Bitanga all of its rights in
Abacus and the "exclusive option to purchase" the subject land and building.
On September 16, 1994, Abacus sent a letter to Manila Bank informing the latter of its desire
to exercise its "exclusive option to purchase". However, Manila Bank refused to honor the
same.
Such was the state of things when, on November 10, 1995, in the Regional Trial Court (RTC)
at Makati, Abacus Real Estate Development Center, Inc. filed a complaint3 for specific
performance and damages against Manila Bank and/or the Estate of Vicente G. Puyat. In its
complaint, docketed as Civil Case No. 96-1638 and raffled to Branch 59 of the court, plaintiff
Abacus prayed for a judgment ordering Manila Bank, inter alia, to sell, transfer and convey
unto it for ₱150,000,000.00 the land and building in dispute "free from all liens and
encumbrances", plus payment of damages and attorney’s fees.
Subsequently, defendant Manila Bank, followed a month later by its co-defendant Estate of
Vicente G. Puyat, filed separate motions to dismiss the complaint.
In an Order dated April 15, 1996, the trial court granted the motion to dismiss filed by the
Estate of Vicente G. Puyat, but denied that of Manila Bank and directed the latter to file its
answer.
Before plaintiff Abacus could adduce evidence but after pre-trial, defendant Manila Bank
filed a Motion for Partial Summary Judgment, followed by a Supplement to Motion for Partial
Summary Judgment. While initially opposed, Abacus would later join Manila Bank in
submitting the case for summary judgment.
Eventually, in a decision dated May 27, 1999,4 the trial court rendered judgment for Abacus
in accordance with the latter’s prayer in its complaint, thus:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff as
follows:
1. Ordering the defendant [Manila Bank] to immediately sell to plaintiff the parcel of land
and building, with an area of 1,435 square meters and covered by TCT No. 132935 of the
Makati Registry of Deeds, situated along Sen. Gil J. Puyat Ave. in Makati City, at the price of
One Hundred Fifty Million (₱150,000.000.00) Pesos in accordance with the said exclusive
option to purchase, and to execute the appropriate deed of sale therefor in favor of plaintiff;
2. Ordering the defendant [Manila Bank] to pay plaintiff the amount of Two Million
(₱2,000,000.00) Pesos representing reasonable attorney’s fees;
3. Ordering the DISMISSAL of defendant’s counterclaim, for lack of merit; and
4. With costs against the defendant.
SO ORDERED.
Its motion for reconsideration of the aforementioned decision having been denied by the
trial court in its Order of August 17, 1999,5 Manila Bank then went on to the Court of Appeals
whereat its appellate recourse was docketed as CA-G.R. CV No. 64877.
As stated at the threshold hereof, the Court of Appeals, in a decision dated May 26,
2003,6 reversed and set aside the appealed decision of the trial court, thus:
WHEREFORE, finding serious reversible error, the appeal is GRANTED.
The Decision dated May 27, 1999 of the Regional Trial Court of Makati City, Branch 59
is REVERSED and SET ASIDE.
Cost of the appeal to be paid by the appellee.
SO ORDERED.
On June 25, 2003, Abacus filed a Motion for Reconsideration, followed, with leave of court,
by an Amended Motion for Reconsideration. Pending resolution of its motion for
reconsideration, as amended, Abacus filed a Motion to Dismiss Appeal,7 therein praying for
the dismissal of Manila Bank’s appeal from the RTC decision of May 27, 1999, contending
that said appeal was filed out of time.
In its Resolution of February 17, 2004,8 the appellate court denied Abacus’ aforementioned
motion for reconsideration.
Hence, this recourse by petitioner Abacus Real Estate Development Center, Inc.
As we see it, two (2) issues commend themselves for the resolution of the Court, namely:
WHETHER OR NOT RESPONDENT BANK’S APPEAL TO THE COURT OF APPEALS WAS FILED ON
TIME; and
WHETHER OR NOT PETITIONER ABACUS HAS ACQUIRED THE RIGHT TO PURCHASE THE LOT
AND BUILDING IN QUESTION.
We rule for respondent Manila Bank on both issues.
Addressing the first issue, petitioner submits that respondent bank’s appeal to the Court of
Appeals from the adverse decision of the trial court was belatedly filed. Elaborating thereon,
petitioner alleges that respondent bank received a copy of the May 27, 1999 RTC decision on
June 22, 1999, hence, petitioner had 15 days, or only up to July 7, 1999 within which to take
an appeal from the same decision or move for a reconsideration thereof. Petitioner alleges
that respondent furnished the trial court with a copy of its Motion for Reconsideration only
on July 7, 1999, the last day for filing an appeal. Under Section 3, Rule 41 of the 1997 Rules of
Civil Procedure, "the period of appeal shall be interrupted by a timely motion for new trial or
reconsideration". Since, according to petitioner, respondent filed its Motion for
Reconsideration on the last day of the period to appeal, it only had one (1) more day within
which to file an appeal, so much so that when it received on August 23, 1999 a copy of the
trial court’s order denying its Motion for Reconsideration, respondent bank had only up to
August 24, 1999 within which to file the corresponding appeal. As respondent bank appealed
the decision of the trial court only on August 25, 1999, petitioner thus argues that
respondent’s appeal was filed out of time.
As a counterpoint, respondent alleges that it sent the trial court a copy of its Motion for
Reconsideration on July 6, 1999, through registered mail. Having sent a copy of its Motion for
Reconsideration to the trial court with still two (2) days left to appeal, respondent then
claims that its filing of an appeal on August 25, 1999, two (2) days after receiving the Order of
the trial court denying its Motion for Reconsideration, was within the reglementary period.
Agreeing with respondent, the appellate court declared that respondent’s appeal was filed
on time. Explained that court in its Resolution of February 17, 2004, denying petitioner’s
motion for reconsideration:
Firstly, the file copy of the motion for reconsideration contains the written annotations
"Registry Receipt No. 1633 Makati P.O. 7-6-99" in its page 13. The presence of the
annotations proves that the motion for reconsideration was truly filed by registered mail on
July 6, 1999 through registry receipt no. 1633.
Secondly, the appellant’s manifestation filed in the RTC personally on July 7, 1999 contains
the following self-explanatory statements, to wit:
2. Defendant [Manila Bank] also filed with this Honorable Court a Motion for Reconsideration
of the Decision dated 27 May 1999 promulgated by this Honorable Court in this case, and
served a copy thereof to the plaintiff, by registered mail yesterday, 6 July 1999, due to lack of
material time and messenger to effect personal service and filing.
3. In order for this Honorable Court to be able to review defendant [Manila Bank’s] Motion
for Reconsideration without awaiting the mailed copy, defendant [Manila Bank] is now
furnishing this Honorable Court with a copy of said motion, as well as the entry of
appearance, by personal service.
The aforecited reference in the manifestation to the mailing of the motion for
reconsideration on July 6, 1999, in light of the handwritten annotations adverted to herein,
renders beyond doubt the appellant’s insistence of filing through registered mail on July 6,
1999.
Thirdly, the registry return cards attached to the envelopes separately addressed and mailed
to the RTC and the appellee’s counsel, found in pages 728 and 729 of the rollo, indicate that
the contents were the motion for reconsideration and the formal entry of appearance.
Although the appellee argues that the handwritten annotations of what were contained by
the envelopes at the time of mailing was easily self-serving, the fact remains that the
envelope addressed to the appellee’s counsel appears thereon to have been received on July
6, 1999 ("7/6/99"), which enhances the probability of the motion for reconsideration being
mailed, hence filed, on July 6, 1999, as claimed by the appellant.
Fourthly, the certification issued on October 2, 2003 by Atty. Jayme M. Luy, Branch Clerk of
Court, Branch 59, RTC in Makati City, has no consequence because Atty. Luy based his data
only on page 3 of the 1995 Civil Case Docket Book without reference to the original records
which were already with the Court of Appeals.
Fifthly, since the appellant received the denial of the motion for reconsideration on August
23, 1999, it had until August 25, 1999 within which to perfect its appeal from the decision of
the RTC because 2 days remained in its reglementary period to appeal. It is not disputed that
the appellant filed its notice of appeal and paid the appellate court docket fees on August 25,
1999.
These circumstances preponderantly demonstrate that the appellant’s appeal was not late by
one day. (Emphasis in the original)
Petitioner would, however, contest the above findings of the appellate court, stating, among
other things, that if it were true that respondent filed its Motion for Reconsideration by
registered mail and then furnished the trial court with a copy of said Motion the very next
day, then the rollo should have had two copies of the Motion for Reconsideration in
question. Respondent, on the other hand, insists that it indeed filed a Motion for
Reconsideration on July 6, 1999 through registered mail.
It is evident that the issue raised by petitioner relates to the correctness of the factual finding
of the Court of Appeals as to the precise date when respondent filed its motion for
reconsideration before the trial court. Such issue, however, is beyond the province of this
Court to review. It is not the function of the Court to analyze or weigh all over again the
evidence or premises supportive of such factual determination.9 The Court has consistently
held that the findings of the Court of Appeals and other lower courts are, as a rule, accorded
great weight, if not binding upon it,10save for the most compelling and cogent reasons.11 As
nothing in the record indicates any of such exceptions, the factual conclusion of the appellate
court that respondent filed its appeal on time, supported as it is by substantial evidence,
must be affirmed.
Going to the second issue, petitioner insists that the option to purchase the lot and building
in question granted to it by the late Vicente G. Puyat, then acting president of Manila Bank,
was binding upon the latter. On the other hand, respondent has consistently maintained that
the late Vicente G. Puyat had no authority to act for and represent Manila Bank, the latter
having been placed under receivership by the Central Bank at the time of the granting of the
"exclusive option to purchase."
There can be no quibbling that respondent Manila Bank was under receivership, pursuant to
Central Bank’s MB Resolution No. 505 dated May 22, 1987, at the time the late Vicente G.
Puyat granted the "exclusive option to purchase" to the Laureano group of investors. Owing
to this defining reality, the appellate court was correct in declaring that Vicente G. Puyat was
without authority to grant the exclusive option to purchase the lot and building in question.
The invocation by the appellate court of the following pronouncement in Villanueva vs. Court
of Appeals12was apropos, to say the least:
… the assets of the bank pass beyond its control into the possession and control of the
receiver whose duty it is to administer the assets for the benefit of the creditors of the bank.
Thus, the appointment of a receiver operates to suspend the authority of the bank and of its
directors and officers over its property and effects, such authority being reposed in the
receiver, and in this respect, the receivership is equivalent to an injunction to restrain the
bank officers from intermeddling with the property of the bank in any way.
With respondent bank having been already placed under receivership, its officers, inclusive of
its acting president, Vicente G. Puyat, were no longer authorized to transact business in
connection with the bank’s assets and property. Clearly then, the "exclusive option to
purchase" granted by Vicente G. Puyat was and still is unenforceable against Manila Bank.13
Petitioner, however, asseverates that the "exclusive option to purchase" was ratified by
Manila Bank’s receiver, Atty. Renan Santos, during a lunch meeting held with Benjamin
Bitanga in March 1990.
Petitioner’s argument is tenuous at best. Concededly, a contract unenforceable for lack of
authority by one of the parties may be ratified by the person in whose name the contract was
executed. However, even assuming, in gratiaargumenti, that Atty. Renan Santos, Manila
Bank’s receiver, approved the "exclusive option to purchase" granted by Vicente G. Puyat, the
same would still be of no force and effect.

Section 29 of the Central Bank Act, as amended,14 pertinently provides:

Sec. 29. Proceedings upon insolvency. – Whenever, upon examination by the head of the
appropriate supervising and examining department or his examiners or agents into the
condition of any banking institution, it shall be disclosed that the condition of the same is one
of insolvency, or that its continuance in business would involve probable loss to its depositors
or creditors, it shall be the duty of the department head concerned forthwith, in writing, to
inform the Monetary Board of the facts, and the Board may, upon finding the statements of
the department head to be true, forbid the institution to do business in the Philippines
and shall designate an official of the Central Bank as receiver to immediately take charge of
its assets and liabilities, as expeditiously as possible collect and gather all the assets and
administer the same for the benefit of its creditors, exercising all the powers necessary for
these purposes including, but not limited to, bringing suits and foreclosing mortgages in the
name of the banking institution. (Emphasis supplied)

Clearly, the receiver appointed by the Central Bank to take charge of the properties of Manila
Bank only had authority to administer the same for the benefit of its creditors. Granting or
approving an "exclusive option to purchase" is not an act of administration, but an act of
strict ownership, involving, as it does, the disposition of property of the bank. Not being an
act of administration, the so-called "approval" by Atty. Renan Santos amounts to no approval
at all, a bank receiver not being authorized to do so on his own.

For sure, Congress itself has recognized that a bank receiver only has powers of
administration. Section 30 of the New Central Bank Act15 expressly provides that "[t]he
receiver shall immediately gather and take charge of all the assets and liabilities of the
institution, administer the same for the benefit of its creditors, and exercise the general
powers of a receiver under the Revised Rules of Court but shall not, with the exception of
administrative expenditures, pay or commit any act that will involve the transfer or
disposition of any asset of the institution…"

In all, respondent bank’s receiver was without any power to approve or ratify the "exclusive
option to purchase" granted by the late Vicente G. Puyat, who, in the first place, was himself
bereft of any authority, to bind the bank under such exclusive option. Respondent Manila
Bank may not thus be compelled to sell the land and building in question to petitioner
Abacus under the terms of the latter’s "exclusive option to purchase".

WHEREFORE, the instant petition is DENIED and the challenged issuances of the Court of
Appeals AFFIRMED.

Costs against petitioner.

SO ORDERED.
FIRST DIVISION
[G.R. No. 112830. February 1, 1996.]
JERRY ONG, Petitioner, v. COURT OF APPEALS and RURAL BANK OF OLONGAPO, INC.,
represented by its Liquidator, GUILLERMO G. REYES, JR. and Deputy Liquidator ABEL
ALLANIGUE, Respondents.
SYLLABUS
1. COMMERCIAL LAW; INSOLVENCY; CENTRAL BANK ACT (R.A. 265 AS AMENDED BY P.D.
1827); JUDICIAL LIQUIDATION; PURPOSE THEREOF. — Judicial liquidation is intended to
prevent multiplicity of actions against the insolvent bank. It is a pragmatic arrangement
designed to establish due process and orderliness in the liquidation of the bank, to obviate
the proliferation of litigations and to avoid injustice and arbitrariness. The lawmaking body
contemplated that for convenience only one court. if possible, should pass upon the claims
against the insolvent bank and that the liquidation court should assist the Superintendent of
Banks and regulate his operations.
2. ID.; ID.; ID.; LIQUIDATION COURT; HAS JURISDICTION OVER ALL CLAIMS AGAINST
INSOLVENT BANK; CASE AT BENCH. — The phrase" (T)he court shall have jurisdiction in the
same proceedings to adjudicate disputed claims against the bank" appears to have misled
petitioner. He argues that to the best of his personal knowledge there is no pending action
filed before any court or agency which contests his right over subject properties. Thus his
petition before the Regional Trial Court of Quezon City cannot be considered a "disputed
claim" as contemplated by law. It is not necessary that a claim be initially disputed in a court
or agency before it is filed with the liquidation court. Petitioner must have overlooked the
fact that since respondent RBO is insolvent other claimants not privy to their transaction may
be involved. As far as those claimants are concerned, in the absence of certificates of title in
the name of petitioner, subject lots still form part of the assets of the insolvent bank. On the
basis of the Hernandez case as well as Sec. 29, par. 3, of R.A. 265 as amended by P.D. 1827,
respondent Court of Appeals was correct in holding that the Regional Trial Court of Quezon
City, Br. 79, did not have jurisdiction over the petition, much less in ordering the dismissal of
Civil Case No. Q-91-8019, without prejudice to petitioner’s right to file his claim in Sp. Proc.
No. 170-0-85 before the Regional Trial Court of Olongapo City, Br. 73.
DECISION
BELLOSILLO, J.:
The jurisdiction of a regular court over a bank undergoing liquidation is the issue in this
petition for review of the decision of the Court of Appeals. 1
On 5 February 1991 Jerry Ong filed with the Regional Trial Court of Quezon City a petition for
the surrender of TCT Nos. 13769 and 13770 pursuant to the provisions of Secs. 63(b) and 107
of P.D. 1529 2 against Rural Bank of Olongapo, Inc. (RBO), represented by its liquidator
Guillermo G. Reyes, Jr., and deputy liquidator Abel Allanigue. 3 The petition averred inter alia
that —
2. The RBO was the owner in fee simple of two parcels of land including the improvements
thereon situated in Tagaytay City . . . particularly described in TCT Nos. 13769 and 13770 . . .
.
3. Said parcels of land were duly mortgaged by RBO in favor of petitioner on December 29,
1983 to guarantee the payment of Omnibus Finance, Inc., which is likewise now undergoing
liquidation proceedings of its money market obligations to petitioner in the principal amount
of P863,517.02 . . . .
4. Omnibus Finance, Inc., not having seasonably settled its obligations to petitioner, the latter
proceeded to effect the extrajudicial foreclosure of said mortgages, such that on March 23,
1984, the City Sheriff of Tagaytay City issued a Certificate of Sale in favor of petitioner . . . .
5. Said Certificate of Sale . . . was duly registered with the Registry of Deeds of Tagaytay City
on July 16, 1985, as shown in the certified true copies of the aforementioned titles . . . .
6. Respondents failed to seasonably redeem said parcels of land, for which reason, petitioner
has executed an Affidavit of Consolidation of Ownership which, to date, has not been
submitted to the Registry of Deeds of Tagaytay City, in view of the fact that possession of the
aforesaid titles or owner’s duplicate certificates of title remains with the RBO.
7. To date, petitioner has not been able to effect the registration of said parcels of land in his
name in view of the persistent refusal of respondents, despite demand, to surrender RBO’s
copies of its owner’s certificates of title for the parcels of land covered by TCT Nos. 13769
and 13770. 4
Respondent RBO filed a motion to dismiss on the ground of res judicata alleging that
petitioner had earlier sought a similar relief from Br. 18 of the Regional Trial Court of
Tagaytay City, which case was dismissed with finality on appeal before the Court of Appeals.

In a supplemental motion to dismiss, respondent RBO contended that it was undergoing
liquidation and, pursuant to prevailing jurisprudence, it is the liquidation court which has
exclusive jurisdiction to take cognizance of petitioner’s claim.
On 7 May 1991 the trial court denied the motion to dismiss because it found that the causes
of action in the previous and present cases were different although it was silent on the
jurisdictional issue. Accordingly, respondent RBO filed a motion for reconsideration but the
same was similarly rejected in the order of June 11, 1991 holding that: (a) subject parcels of
land were sold to petitioner through public bidding on 23 March 1984 and, consequently,
said pieces of realty were no longer part of the assets of respondent RBO; and, (b) in the
same token, subject lots were no longer considered assets of respondent RBO when its
liquidation was commenced by the Central Bank on 9 November 1984 and when the petition
for assistance in its liquidation was approved by the Regional Trial Court of Olongapo City on
30 May 1985.
On 5 July 1991 respondent RBO filed a manifestation and urgent motion for reconsideration
arguing that the validity of the certificate of sale issued to petitioner was still at issue in
another case between them and therefore the properties covered by said certificate were
still part and parcel of its assets.
Still unpersuaded by respondent RBO’s arguments, the trial court denied reconsideration in
its order of 18 September 1991 prompting the bank to elevate the case to respondent Court
of Appeals by way of a petition for certiorari and prohibition. On 12 February 1992
respondent court rendered a decision annulling the challenged order of the court a quo
dated 19 June 1991 which sustained the jurisdiction of the trial court as well as the order of
18 September 1991 denying reconsideration thereof. Moreover, the trial judge was ordered
to dismiss Civil Case No. Q-91-8019 without prejudice to the right of petitioner to file his
claim in the liquidation proceedings (Sp. Proc. No. 170-0-85) pending before Br. 73 of the
Regional Trial Court of Olongapo City. 5
In reversing the trial court the appellate court noted that Sec. 29, par. 3, of R.A. 265 as
amended by P.D. 1827 6 does not limit the jurisdiction of the liquidation court to claims
against the assets of the insolvent bank. The provision is general in that it clearly and
unqualifiedly states that the liquidation court shall have jurisdiction to adjudicate disputed
claims against the bank. "Disputed claims" refer to all claims, whether they be against the
assets of the insolvent bank, for specific performance, breach of contract, damages, or
whatever. To limit the jurisdiction of the liquidation court to those claims against the assets
of the bank is to remove significantly and without basis the cases that may be brought
against a bank in case of insolvency.
Respondent court also noted that the certificates of title are still in the name of respondent
RBO. As far as third persons are concerned (and these include claimants in the liquidation
court), registration is the operative act which would convey title to the property.
Petitioner submits that Civil Case No. Q-91-8019 may proceed independently of Sp. Proc. No.
170-0-85. He argues that the disputed parcels of land have been extrajudicially foreclosed
and the corresponding certificate of sale issued in his favor; that considering that respondent
RBO failed to redeem said properties he should now be allowed to consolidate his title
thereto; that respondent RBO’s mortgage of TCT Nos. 13769 and 13770 in favor of petitioner
and its subsequent foreclosure are presumed valid and regular; and, that the liquidation
court has no jurisdiction over subject parcels of land since they are no longer assets of
respondent RBO.
We find no merit in the petition. Section 29, par. 3, of R.A. 265 as amended by P.D. 1827
provides —
If the Monetary Board shall determine and confirm within (sixty days) that the bank . . . is
insolvent or cannot resume business with safety to its depositors, creditors and the general
public, it shall, if the public interest requires, order its liquidation, indicate the manner of its
liquidation and approve a liquidation plan. The Central Bank shall, by the Solicitor General,
file a petition in the Court of First Instance 7 reciting the proceedings which have been taken
and praying the assistance of the court in the liquidation of such institution. The court shall
have jurisdiction in the same proceedings to adjudicate disputed claims against the bank . . .
and enforce individual liabilities of the stockholders and do all that is necessary to preserve
the assets of such institution and to implement the liquidation plan approved by the
Monetary Board (Emphasis supplied).
Applying the aforequoted provision in Hernandez v. Rural Bank of Lucena, Inc., 8 this Court
ruled —
The fact that the insolvent bank is forbidden to do business, that its assets are turned over to
the Superintendent of Banks, as a receiver, for conversion into cash, and that its liquidation is
undertaken with judicial intervention means that, as far as lawful and practicable, all claims
against the insolvent bank should be filed in the liquidation proceeding (Emphasis supplied).
We explained therein the rationale behind the provision, i.e., the judicial liquidation is
intended to prevent multiplicity of actions against the insolvent bank. It is a pragmatic
arrangement designed to establish due process and orderliness in the liquidation of the bank,
to obviate the proliferation of litigations and to avoid injustice and arbitrariness. The
lawmaking body contemplated that for convenience only one court, if possible, should pass
upon the claims against the insolvent bank and that the liquidation court should assist the
Superintendent of Banks and regulate his operations.
The phrase" (T)he court shall have jurisdiction in the same proceedings to adjudicate
disputed claims against the bank" appears to have misled petitioner. He argues that to the
best of his personal knowledge there is no pending action filed before any court or agency
which contests his right over subject properties. Thus his petition before the Regional Trial
Court of Quezon City cannot be considered a "disputed claim" as contemplated by law.
It is not necessary that a claim be initially disputed in a court or agency before it is filed with
the liquidation court. As may be gleaned in the Hernandez case, the term "disputed claim" in
the provision simply connotes that —

[i]n the course of the liquidation, contentious cases might arise wherein a full-dress hearing
would be required and legal issues would have to be resolved. Hence, it would be necessary
in justice to all concerned that a Court of First Instance (now Regional Trial Court) . . . assist
and supervise the liquidation and . . . act as umpire or arbitrator in the allowance and
disallowance of claims.

Petitioner must have overlooked the fact that since respondent RBO is insolvent other
claimants not privy to their transaction may be involved. As far as those claimants are
concerned, in the absence of certificates of title in the name of petitioner, subject lots still
form part of the assets of the insolvent bank.

On the basis of the Hernandez case as well as Sec. 29, par. 3, of R.A. 265 as amended by P.D.
1827, respondent Court of Appeals was correct in holding that the Regional Trial Court of
Quezon City, Br. 79, did not have jurisdiction over the petition, much less in ordering the
dismissal of Civil Case No. Q-91-8019, without prejudice to petitioner’s right to file his claim
in Sp. Proc. No. 170-0-85 before the Regional Trial Court of Olongapo City, Br. 73.

WHEREFORE, the petition is DENIED. The decision of respondent Court of Appeals dated 12
February 1992 is AFFIRMED. Costs against petitioner.

SO ORDERED.
FIRST DIVISION
[G.R. No. 141297. October 8, 2001.]
DOMINGO R. MANALO, Petitioner, v. COURT OF APPEALS (Special Twelfth Division) and
PAIC SAVINGS AND MORTGAGE BANK, Respondents.
DECISION
PUNO, J.:
This petition for certiorari seeks the review of the Decision of the Court of Appeals in C.A.-
G.R. SP. No. 50341 promulgated December 23, 1999, which affirmed an Order issued by the
Regional Trial Court, Branch 112, Pasay City, in Civil Case No. 9011 dated December 9,
1998.chanrob1es virtua1 1aw 1ibrary
On July 19, 1983, S. Villanueva Enterprises, represented by its president, Therese Villanueva
Vargas, obtained a loan of three million pesos (P3,000,000.00) and one million pesos
(P1,000,000.00) from the respondent PAIC Savings and Mortgage Bank and the Philippine
American Investments Corporation (PAIC), respectively. To secure payment of both debts,
Vargas executed in favor of the respondent and PAIC a Joint First Mortgage 1 over two
parcels of land registered under her name. One of the lots, located in Pasay City with an area
of nine hundred nineteen square meters (919 sq. m.) and covered by TCT No. 6076, is the
subject of the present case. Section 2 of the mortgage contract states that "the properties
mortgaged therein shall include all buildings and improvements existing on the mortgaged
property at the time of the execution of the mortgage contract and thereafter." 2
S. Villanueva Enterprises defaulted in paying the amortizations due. Despite repeated
demands from the respondent, it failed to settle its loan obligation. Accordingly, respondent
instituted extrajudicial foreclosure proceedings over the mortgaged lots. On August 22, 1984,
the Pasay City property was sold at a public auction to the respondent itself, after tendering
the highest bid. The respondent then caused the annotation of the corresponding Sheriff’s
Certificate of Sale 3 on the title of the land on December 4, 1984. After the lapse of one year,
or the statutory period extended by law to a mortgagor to exercise his/her right of
redemption, title was consolidated in respondent’s name for failure of Vargas to redeem.
On October 29, 1986, the Central Bank of the Philippines filed a Petition 4 for assistance in
the liquidation of the respondent with the Regional Trial Court. The petition was given due
course in an Order 5 dated May 19, 1987.chanrob1es virtua1 1aw 1ibrary
It appears that from the years 1986 to 1991, Vargas negotiated with the respondent (through
its then liquidator, the Central Bank) for the repurchase of the foreclosed property. The
negotiations, however, fizzled out as Vargas cannot afford the repurchase price fixed by the
respondent based on the appraised value of the land at that time. On October 4, 1991,
Vargas filed a case for annulment of mortgage and extrajudicial foreclosure sale before
Branch 116 of the Pasay City Regional Trial Court. On July 22, 1993, the court rendered a
decision 6 dismissing the complaint and upholding the validity of the mortgage and
foreclosure sale. On appeal, the appellate court upheld the assailed judgment and declared
the said mortgage and foreclosure proceedings to be in accord with law. 7 This decision of
the Court of Appeals subsequently became final and executory when we summarily
dismissed Vargas’ Petition for Review on Certiorari for having been filed beyond the
reglementary period. 8
In the meantime, on June 22, 1992, respondent petitioned the Regional Trial Court, Branch
112, of Pasay City, herein court a quo, for the issuance of a writ of possession for the subject
property in Civil Case No. 9011. This is in view of the consolidation of its ownership over the
same as mentioned earlier. Vargas and S. Villanueva Enterprises, Inc. filed their opposition
thereto. After which, trial ensued.
During the pendency of Civil Case No. 9011 (for the issuance of a writ of possession), Vargas,
on December 23, 1992, executed a Deed of Absolute Sale 9 selling, transferring, and
conveying ownership of the disputed lot in favor of a certain Armando Angsico.
Notwithstanding this sale, Vargas, still representing herself to be the lawful owner of the
property, leased the same to petitioner Domingo R. Manalo on August 25, 1994. Pertinent
provisions of the lease agreement 10 state:jgc:chanrobles.com.ph
"3. (a) The lease is for a period of ten year lease (sic), involving 450 square meters, a portion
of the above 919 square meter property.
. . . .(d) The LESSEE has to introduce into the said 450 square meter premises improvements
thereon (sic) consisting of one story building to house a Karaoke Music Restaurant Business,
which improvements constructed thereof (sic), upon the termination of the lease contract,
by said LESSEE be surrendered in favor of the LESSOR (sic).’’ 11
Later, on June 29, 1997, Armando Angsico, as buyer of the property, assigned his rights
therein to petitioner. 12
On April 21, 1998, the court a quo granted the petition for the issuance of the Writ of
Possession. 13 The writ was subsequently issued on April 24, 1998, the pertinent portion of
which reads: 14
"NOW THEREFORE you are hereby commanded that you cause oppositors THERESE
VILLANUEVA VARGAS and S. VILLANUEVA ENTERPRISES, INC. and any and all persons claiming
rights or title under them, to forthwith vacate and surrender the possession of subject
premises in question known as that parcel of land and improvements covered by TCT No.
6076 of the Registry of Deeds of Pasay City; you are hereby further ordered to take
possession and deliver to the petitioner PAIC SAVINGS AND MORTGAGE BANK the subject
parcel of land and improvements."cralaw virtua1aw library
Shortly, on May 8, 1998, S. Villanueva Enterprises and Vargas moved for its quashal. 15
Thereafter on June 25, 1998, Petitioner, on the strength of the lease contract and Deed of
Assignment made in his favor, submitted a Permission to File an Ex-parte Motion to
Intervene. 16 It bears mentioning, however, that before petitioner sought intervention in the
present case, he had separately instituted a Complaint for Mandamus, docketed as Civil Case
No. 98-0868 before another branch 17 of the Pasay City RTC to compel PAIC Bank to allow
him to repurchase the subject property.
On October 7, 1998, the court a quo denied the Motion to Quash and Motion to Intervene
filed respectively by Vargas and petitioner. 18 A Motion for Reconsideration and a
Supplemental Motion for Reconsideration were filed by the petitioner which, however, were
similarly denied on December 9, 1998.chanrob1es virtua1 1aw 1ibrary
Petitioner then sought relief with the Court of Appeals, filing therein a Petition for Certiorari.
While this was awaiting resolution, he entered into another lease agreement, 19 this time
with the respondent, represented by its liquidator, over the same 450 sq. m. portion of the
lot. The contract fixed a period of one month beginning January 28, 1999, renewable for
another month at the exclusive option of the lessor, respondent PAIC Bank.
On December 23, 1999, the appellate court rendered the impugned Decision, dismissing the
petition, thus:jgc:chanrobles.com.ph
"All told, WE find the Order, subject of the instant Petition for Certiorari and Prohibition, to
be not without rational bases and we observe that the court a quo, in issuing its questioned
Order, committed no grave abuse of discretion amounting to lack of jurisdiction.
WHEREFORE, the Petition for Certiorari and Prohibition is hereby DISMISSED and the assailed
December 9, 1998 Order is AFFIRMED in all respects.
SO ORDERED." 20
Hence, this appeal, where petitioner raises and argues the following legal
issues:jgc:chanrobles.com.ph
"I. Whether or not public respondent acted without or in excess of its jurisdiction and/or was
patently in error when it affirmed the denial of petitioner’s motion for intervention, despite
the fact that he has a legal interest, being a lessee and an assignee of the property subject
matter of this case.
II. Whether or not the public respondent committed grave abuse of discretion when it held
that what are required to be instituted before the liquidation court are those claims against
the insolvent banks only considering that the private respondent bank is legally dead due to
insolvency and considering further that there is already a liquidation court (Regional Trial
Court of Makati, Branch 57, docketed as Spec. Pro. No. M-1280) which is exclusively vested
with jurisdiction to hear all matters and incidents on liquidation pursuant to Section 29,
Republic Act No. 265, otherwise known as The Central Bank Act, as amended.
III. Whether or not the public respondent committed grave abuse of discretion and/or was
patently in error in affirming the ruling of the trial court, totally disregarding the arguments
raised in petitioner’s supplemental motion for reconsideration only through a minute order
and without taking into consideration the fact that there is a pending action in another court
(RTC, Pasay City, Branch 231) which presents a prejudicial question to the case at bar.
IV. Whether or not the petitioner is estopped from questioning private respondent’s
ownership when it entered into a contract of lease involving the property in question." 21
We will first resolve the jurisdictional and procedural questions raised by the
petitioner.chanrob1es virtua1 1aw 1ibrary
I.
Petitioner postulates that the lower court should have dismissed respondent’s "Ex-Parte
Petition for Issuance of Writ of Possession" in Civil Case No. P-9011 for want of jurisdiction
over the subject matter of the claim. The power to hear the same, he insists, exclusively vests
with the Liquidation Court pursuant to Section 29 of Republic Act No. 265, otherwise known
as The Central Bank Act. 22 He then cites our decision in Valenzuela v. Court of Appeals, 23
where we held that "if there is a judicial liquidation of an insolvent bank, all claims against
the bank should be filed in the liquidation proceeding." For going to another court, the
respondent, he accuses, is guilty of forum shopping.
These contentions can not pass judicial muster. The pertinent portion of Section 29
states:jgc:chanrobles.com.ph
". . . The liquidator designated as hereunder provided shall, by the Solicitor General, file a
petition in the Regional Trial Court reciting the proceedings which have been taken and
praying the assistance of the court in the liquidation of such institution. The court shall have
jurisdiction in the same proceedings to assist in the adjudication of disputed claims against
the bank or non-bank financial intermediary performing quasi-banking functions and the
enforcement of individual liabilities of the stockholders and do all that is necessary to
preserve the assets of such institution and to implement the liquidation plan approved by the
Monetary Board. . . ." 24 (Emphasis supplied.)
Petitioner apparently failed to appreciate the correct meaning and import of the above-
quoted law. The legal provision only finds operation in cases where there are claims against
an insolvent bank. In fine, the exclusive jurisdiction of the liquidation court pertains only to
the adjudication of claims against the bank. It does not cover the reverse situation where it is
the bank which files a claim against another person or legal entity.
This interpretation of Section 29 becomes more obvious in the light of its intent. The
requirement that all claims against the bank be pursued in the liquidation proceedings filed
by the Central Bank is intended to prevent multiplicity of actions against the insolvent bank
and designed to establish due process and orderliness in the liquidation of the bank, to
obviate the proliferation of litigations and to avoid injustice and arbitrariness. 25 The
lawmaking body contemplated that for convenience, only one court, if possible, should pass
upon the claims against the insolvent bank and that the liquidation court should assist the
Superintendents of Banks and regulate his operations. 26
It then ought to follow that petitioner’s reliance on Section 29 and the Valenzuela case is
misplaced. The Petition for the Issuance of a Writ of Possession in Civil Case No. 9011 is not in
the nature of a disputed claim against the bank. On the contrary, it is an action instituted by
the respondent bank itself for the preservation of its asset and protection of its property. It
was filed upon the instance of the respondent’s liquidator in order to take possession of a
tract of land over which it has ownership claims.chanrob1es virtua1 1aw 1ibrary
To be sure, the liquidator took the proper course of action when it applied for a writ in the
Pasay City RTC. Act 3135, 27 entitled An Act to Regulate the Sale of Property Under Special
Powers Inserted In or Annexed To Real Estate Mortgages, mandates that jurisdiction over a
Petition for Writ of Possession lies with the court of the province, city, or municipality where
the property subject thereof is situated. This is sanctioned by Section 7 of the said Act,
thus:jgc:chanrobles.com.ph
"SECTION 7. In any sale made under the provisions of this Act, the purchaser may petition the
Court of First Instance of the province or place where the property or any part thereof is
situated, to give him possession thereof during the redemption period, furnishing bond in an
amount equivalent to the use of the property for a period of twelve months, to indemnify the
debtor in case it be shown that the sale was made without violating the mortgage or without
complying with the requirements of this Act.. . . ." 28 (Emphasis supplied)
Since the land subject of this controversy is located in Pasay City, then the city’s RTC should
rightly take cognizance of the case, to the exclusion of other courts.
Anent petitioner’s auxiliary contention that respondent should be held guilty of forum
shopping for not filing the case in the liquidation court, suffice it to state here that the
doctrine only ponders situations where two (or more) cases are pending before different
tribunals. 29 Well to point, we have laid down the yardstick to determine whether a party
violated the rule against forum shopping as where the elements of litis pendentia are present
or where a final judgment in one case will amount to res judicata in the other. 30 Inasmuch
as the case at bar is the only one filed by the respondent for the issuance of a writ of
possession over the subject property, there is no occasion for the doctrine to apply.
Petitioner next casts doubt on the capacity of the respondent to continue litigating the
petition for the issuance of the writ. He asserts that, being under liquidation, respondent
bank is already a "dead" corporation that cannot maintain the suit in 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. 31 Otherwise, no suit for or against an insolvent entity would prosper. In such
situation, banks in liquidation would lose what justly belongs to them through a mere
technicality. 32
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:jgc:chanrobles.com.ph
". . . .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." 33
(Emphasis supplied.)
It is therefore beyond dispute that respondent was legally capacitated to petition the court a
quo for the issuance of the writ.chanrob1es virtua1 1aw 1ibrary
II.
Petitioner likewise proffers one other procedural obstacle, which is the pendency of Civil
Case No. 98-0868 in Branch 231 of Pasay City RTC. The said action is the complaint he filed
against the respondent for the latter to receive and accept the redemption price of eighteen
million pesos for the subject property. He argues that the primary issue therein constitutes a
prejudicial question in relation to the present case in that if the Court therein will grant
petitioner’s prayer, then this will necessarily negate the possessory writ issued by the court a
quo.
Again, we are not persuaded. A prejudicial question is one which arises in a case the
resolution of which is a logical antecedent of the issue involved therein, and the cognizance
of which pertains to another tribunal. 34 It generally comes into play in a situation where a
civil action and a criminal action are both pending and there exists in the former an issue
which must be preemptively resolved before the criminal action may proceed, because
howsoever the issue raised in the civil action is resolved would be determinative juris et de
jure of the guilt or innocence of the accused in the criminal case. The rationale behind the
principle of prejudicial question is to avoid two conflicting decisions. 35
Here, aside from the fact that Civil Case No. 98-0868 and the present one are both civil in
nature and therefore no prejudicial question can arise from the existence of the two actions,
36 it is apparent that the former action was instituted merely to frustrate the Court’s ruling in
the case at bar granting the respondent the right to possess the subject property. It is but a
canny and preemptive maneuver on the part of the petitioner to delay, if not prevent, the
execution of a judgment adverse to his interests. It bears stressing that the complaint for
mandamus was filed only on May 7, 1998, sixteen days after the lower court granted
respondent’s petition and thirteen days after it issued the writ. It cannot then possibly
prejudice a decided case.
At any rate, it taxes our imagination why the questions raised in Case No. 98-0868 must be
considered determinative of Case No. 9011. The basic issue in the former is whether the
respondent, as the purchaser in the extra-judicial foreclosure proceedings, may be compelled
to have the property repurchased or resold to a mortgagor’s successor-in-interest
(petitioner): while that in the latter is merely whether the respondent, as the purchaser in
the extrajudicial foreclosure proceedings, is entitled to a writ of possession after the
statutory period for redemption has expired. The two cases, assuming both are pending, can
proceed separately and take their own direction independent of each other.
III.
Having disposed of the jurisdictional and procedural issues, we now come to the merits of
the case. Petitioner seeks intervention in this case by virtue of the lease agreement and the
deed of assignment executed in his favor by the mortgagor (Vargas) and an alleged buyer
(Angsico) of the land, respectively. He posits that as a lessee and assignee in possession of
the foreclosed real estate, he automatically acquires interest over the subject matter of the
litigation. This interest is coupled with the fact that he introduced improvements thereon,
consisting of a one-storey building which houses a karaoke-music restaurant, allegedly to the
tune of fifteen million pesos (P15,000,000.00). Enforcing the writ, he adds, without hearing
his side would be an injustice to him.chanrob1es virtua1 1aw 1ibrary
Intervention is a remedy by which a third party, not originally impleaded in the proceeding,
becomes a litigant therein to enable him to protect or preserve a right or interest which may
be affected by such proceeding. 37 The pertinent provision is stated in Section 1, Rule 19 of
the 1997 Rules of Civil Procedure, thus:jgc:chanrobles.com.ph
"SECTION 1. Who may intervene. — A person who has a legal interest in the matter in
litigation, or in the success of either of the parties, or an interest against both, or is so
situated as to be adversely affected by a distribution or other disposition of property in the
custody of the court or of an officer thereof may, with leave of court, be allowed to intervene
in the action. The court shall consider whether or not the intervention will unduly delay or
prejudice the adjudication of the rights of the original parties, and whether or not the
intervenor’s rights may be fully protected in a separate proceeding." 38
Intervention is not a matter of right but may be permitted by the courts only when the
statutory conditions for the right to intervene is shown. 39 Thus, the allowance or
disallowance of a motion to intervene is addressed to the sound discretion of the court. 40 In
determining the propriety of letting a party intervene in a case, the tribunal should not limit
itself to inquiring whether "a person (1) has a legal interest in the matter in litigation; (2) or in
the success of either of the parties; (3) or an interest against both; (4) or when is so situated
as to be adversely affected by a distribution or other disposition of property in the custody of
the court or of an officer thereof. "41 Just as important, as we have stated in Big Country
Ranch Corporation v. Court of Appeals, 42 is the function to consider whether or not the
intervention will unduly delay or prejudice the adjudication of the rights of the original
parties, and whether or not the intervenor’s rights may be fully protected in a separate
proceeding.
The period within which a person may intervene is also restricted. Section 2, Rule 19 of the
1997 Rules of Civil Procedure requires:jgc:chanrobles.com.ph
"SECTION 2. Time to intervene. — The motion to intervene may be filed at any time before
the rendition of judgment by the trial court.. . . ."cralaw virtua1aw library
After the lapse of this period, it will not be warranted anymore. This is because, basically,
intervention is not an independent action but is ancillary and supplemental to an existing
litigation. 43
Taking into account these fundamental precepts, we rule that the petitioner may not
properly intervene in the case at bar. His insistence to participate in the proceeding is an
unfortunate case of too little, too late.
In the first place, petitioner’s Ex-parte Permission to File a Motion to Intervene was
submitted to the RTC only on June 25, 1998. At that stage, the lower court had already
granted respondent’s petition for the writ in an Order dated April 21, 1998. It had issued the
Writ of Possession on April 24, 1998. Petitioner’s motion then was clearly out of time, having
been filed only at the execution stage. For that reason alone, it must meet the consequence
of denial. While it is true that on May 8, 1998, Vargas and S. Villanueva Enterprises moved to
quash the writ, that did not in any way affect the nature of the RTC’s Order as an
adjudication on the merits. The issuance of the Order is in essence a rendition of judgment
within the purview of Section 2, Rule 19.chanrob1es virtua1 1aw 1ibrary
Allowing petitioner to intervene, furthermore, will serve no other purpose but to unduly
delay the execution of the writ, to the prejudice of the Respondent. This cannot be
countenanced considering that after the consolidation of title in the buyer’s name, for failure
of the mortgagor to redeem, the writ of possession becomes a matter of right. 44 Its issuance
to a purchaser in an extrajudicial foreclosure is merely a ministerial function. 45 As such, the
court neither exercises its official discretion nor judgment. 46 If only to stress the writ’s
ministerial character, we have, in previous cases, disallowed injunction to prohibit its
issuance, 47 just as we have held that issuance of the same may not be stayed by a pending Whether by acknowledging the legality of the respondent’s claim and title over the land at
action for annulment of mortgage or the foreclosure itself. 48 the time of the execution of the contract, he likewise perpetually barred himself from
redeeming the same is a matter which can be addressed most aptly in that pending action.
Even if he anchors his intervention on the purported interest he has over the land and the Hence, there is presently no need for us to squarely rule on this ultimate point.
improvements thereon, Petitioner, still, should not be allowed to do so. He admits that he is
a mere lessee and assignee. Whatever possessory rights he holds only emanate from that of IN VIEW WHEREOF, finding no cogent reason to disturb the assailed Decision, the instant
Vargas, from whom he leased the lot, and from whom his assignor/predecessor-in-interest petition is hereby DENIED.chanrob1es virtua1 1aw 1ibrary
bought it. Therein lies the precariousness of his title. Petitioner cannot validly predicate his
supposed interest over the property in litigation on that of Vargas, for the simple reason that SO ORDERED.
as early as December 4, 1985, the latter has already been stripped of all her rights over the
land when she, as mortgagor, failed to redeem it. A mortgagor has only one year within
which to redeem her foreclosed real estate. 49 After that period, she loses all her interests
over it. This is in consonance with Section 78 of the General Banking Act, 50
viz.:jgc:chanrobles.com.ph

". . . .In the event of foreclosure, whether judicially or extrajudicially, of any mortgage on real
estate which is security for any loan granted before the passage of this Act or the provisions
of this Act, the mortgagor or debtor whose real property has been sold at public auction,
judicially or extrajudicially, for the full or partial payment of an obligation to any bank,
banking or credit institution, within the purview of this Act shall have the right, within one
year after the sale of the real estate mortgage as a result of the foreclosure of the respective
mortgage, to redeem the property by paying the amount fixed by the court in the order or
execution.. . . ." 51 (Emphasis supplied.)

Being herself bereft of valid title and rights, Vargas can not legitimately convey any to some
other person. She could not have lawfully sold the land to Angsico nor leased it to petitioner
for her own account. It is axiomatic that one can not transmit what one does not have. 52 It
ought to follow that petitioner could not have acquired any right or interest from Vargas.

Withal, all is not lost for the petitioner. He can still fully protect his rights in Civil Case No. 98-
0868 or the complaint for mandamus he filed before Branch 231 of the Pasay City RTC. There,
he can ventilate his side to a fuller extent as that would be the more appropriate venue for
elucidating whatever legal basis he alleges in compelling the respondent to sell to him the
currently disputed land.chanrob1es virtua1 1aw 1ibrary

IV.

This brings us to petitioner’s final point. He briefly asserts that his act of entering into a lease
contract with the respondent should not affect his right to redeem the subject property.

The possible legal implication of the lease on the petitioner’s act of trying to redeem the
disputed lot is a question which, in our opinion, can best be resolved in the mandamus
complaint. Whether the agreement must be construed as a waiver on his part of exercising
his purported right of redemption is an issue best left for the court therein to decide.
SECOND DIVISION
G.R. No. 135706 October 1, 2004
SPS. CESAR A. LARROBIS, JR. and VIRGINIA S. LARROBIS, petitioners,
vs.
PHILIPPINE VETERANS BANK, respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before us is a petition for review of the decision of the Regional Trial Court (RTC), Cebu City,
Branch 24, dated April 17, 1998,1 and the order denying petitioner’s motion for
reconsideration dated August 25, 1998, raising pure questions of law.2
The following facts are uncontroverted:
On March 3, 1980, petitioner spouses contracted a monetary loan with respondent Philippine
Veterans Bank in the amount of ₱135,000.00, evidenced by a promissory note, due and
demandable on February 27, 1981, and secured by a Real Estate Mortgage executed on their
lot together with the improvements thereon.
On March 23, 1985, the respondent bank went bankrupt and was placed under
receivership/liquidation by the Central Bank from April 25, 1985 until August 1992.3
On August 23, 1985, the bank, through Francisco Go, sent the spouses a demand letter for
"accounts receivable in the total amount of ₱6,345.00 as of August 15, 1984,"4 which
pertains to the insurance premiums advanced by respondent bank over the mortgaged
property of petitioners.5
On August 23, 1995, more than fourteen years from the time the loan became due and
demandable, respondent bank filed a petition for extrajudicial foreclosure of mortgage of
petitioners’ property.6 On October 18, 1995, the property was sold in a public auction by
Sheriff Arthur Cabigon with Philippine Veterans Bank as the lone bidder.
On April 26, 1996, petitioners filed a complaint with the RTC, Cebu City, to declare the extra-
judicial foreclosure and the subsequent sale thereof to respondent bank null and void.7
In the pre-trial conference, the parties agreed to limit the issue to whether or not the period
within which the bank was placed under receivership and liquidation was a fortuitous event
which suspended the running of the ten-year prescriptive period in bringing actions.8
On April 17, 1998, the RTC rendered its decision, the fallo of which reads:
WHEREFORE, premises considered judgment is hereby rendered dismissing the complaint for
lack of merit. Likewise the compulsory counterclaim of defendant is dismissed for being
unmeritorious.9
It reasoned that:
…defendant bank was placed under receivership by the Central Bank from April 1985 until
1992. The defendant bank was given authority by the Central Bank to operate as a private
commercial bank and became fully operational only on August 3, 1992. From April 1985 until
July 1992, defendant bank was restrained from doing its business. Doing business as
construed by Justice Laurel in 222 SCRA 131 refers to:
"….a continuity of commercial dealings and arrangements and contemplates to that extent,
the performance of acts or words or the exercise of some of the functions normally incident
to and in progressive prosecution of the purpose and object of its organization."
The defendant bank’s right to foreclose the mortgaged property prescribes in ten (10) years
but such period was interrupted when it was placed under receivership. Article 1154 of the
New Civil Code to this effect provides:
"The period during which the obligee was prevented by a fortuitous event from enforcing his
right is not reckoned against him."
In the case of Provident Savings Bank vs. Court of Appeals, 222 SCRA 131, the Supreme Court
said.
"Having arrived at the conclusion that a foreclosure is part of a bank’s activity which could
not have been pursued by the receiver then because of the circumstances discussed in the
Central Bank case, we are thus convinced that the prescriptive period was legally interrupted
by fuerza mayor in 1972 on account of the prohibition imposed by the Monetary Board
against petitioner from transacting business, until the directive of the Board was nullified in
1981. Indeed, the period during which the obligee was prevented by a caso fortuito from
enforcing his right is not reckoned against him. (Art. 1154, NCC) When prescription is
interrupted, all the benefits acquired so far from the possession cease and when prescription
starts anew, it will be entirely a new one. This concept should not be equated with
suspension where the past period is included in the computation being added to the period
after the prescription is presumed (4 Tolentino, Commentaries and Jurisprudence on the Civil
Code of the Philippines 1991 ed. pp. 18-19), consequently, when the closure of the petitioner
was set aside in 1981, the period of ten years within which to foreclose under Art. 1142 of
the N.C.C. began to run and, therefore, the action filed on August 21, 1986 to compel
petitioner to release the mortgage carried with it the mistaken notion that petitioner’s own
suit for foreclosure has prescribed."
Even assuming that the liquidation of defendant bank did not affect its right to foreclose the
plaintiffs’ mortgaged property, the questioned extrajudicial foreclosure was well within the
ten (10) year prescriptive period. It is noteworthy to mention at this point in time, that
defendant bank through authorized Deputy Francisco Go made the first extrajudicial demand
to the plaintiffs on August 1985. Then on March 24, 1995 defendant bank through its officer-
in-charge Llanto made the second extrajudicial demand. And we all know that a written
extrajudicial demand wipes out the period that has already elapsed and starts anew the
prescriptive period. (Ledesma vs. C.A., 224 SCRA 175.)10
Petitioners filed a motion for reconsideration which the RTC denied on August 25,
1998.11 Thus, the present petition for review where petitioners claim that the RTC erred:
I gather all the assets and administer the same for the benefit of its creditors, and represent
…IN RULING THAT THE PERIOD WITHIN WHICH RESPONDENT BANK WAS PUT UNDER
RECEIVERSHIP AND LIQUIDATION WAS A FORTUITOUS EVENT THAT INTERRUPTED THE
RUNNING OF THE PRESCRIPTIVE PERIOD.
II
…IN RULING THAT THE WRITTEN EXTRA-JUDICIAL DEMAND MADE BY RESPONDENT ON
PETITIONERS WIPED OUT THE PERIOD THAT HAD ALREADY ELAPSED.
III
…IN DENYING PETITIONERS’ MOTION FOR RECONSIDERATION OF ITS HEREIN ASSAILED
DECISION.12
Petitioners argue that: since the extra-judicial foreclosure of the real estate mortgage was
effected by the bank on October 18, 1995, which was fourteen years from the date the
obligation became due on February 27, 1981, said foreclosure and the subsequent sale at
public auction should be set aside and declared null and void ab initio since they are already
barred by prescription; the court a quo erred in sustaining the respondent’s theory that its
having been placed under receivership by the Central Bank between April 1985 and August
1992 was a fortuitous event that interrupted the running of the prescriptive period;13 the
court a quo’s reliance on the case of Provident Savings Bank vs. Court of Appeals14 is
misplaced since they have different sets of facts; in the present case, a liquidator was duly
appointed for respondent bank and there was no judgment or court order that would legally
or physically hinder or prohibit it from foreclosing petitioners’ property; despite the absence
of such legal or physical hindrance, respondent bank’s receiver or liquidator failed to
foreclose petitioners’ property and therefore such inaction should bind respondent
bank;15 foreclosure of mortgages is part of the receiver’s/liquidator’s duty of administering
the bank’s assets for the benefit of its depositors and creditors, thus, the ten-year
prescriptive period which started on February 27, 1981, was not interrupted by the time
during which the respondent bank was placed under receivership; and the Monetary Board’s
prohibition from doing business should not be construed as barring any and all business
dealings and transactions by the bank, otherwise, the specific mandate to foreclose
mortgages under Sec. 29 of R.A. No. 265 as amended by Executive Order No. 65 would be
rendered nugatory.16 Said provision reads:
Section 29. Proceedings upon Insolvency – Whenever, upon examination by the head of the
appropriate supervising or examining department or his examiners or agents into the
condition of any bank or non-bank financial intermediary performing quasi-banking
functions, it shall be disclosed that the condition of the same is one of insolvency, or that its
continuance in business would involve probable loss to its depositors or creditors, it shall be
the duty of the department head concerned forthwith, in writing, to inform the Monetary
Board of the facts. The Board may, upon finding the statements of the department head to
be true, forbid the institution to do business in the Philippines and designate the official of
the Central Bank or a person of recognized competence in banking or finance, as receiver to
immediately take charge its assets and liabilities, as expeditiously as possible, collect and
the bank personally or through counsel as he may retain in all actions or proceedings for or
against the institution, exercising all the powers necessary for these purposes including, but
not limited to, bringing and foreclosing mortgages in the name of the bank.
Petitioners further contend that: the demand letter, dated March 24, 1995, was sent after
the ten-year prescriptive period, thus it cannot be deemed to have revived a period that has
already elapsed; it is also not one of the instances enumerated by Art. 1115 of the Civil Code
when prescription is interrupted;17 and the August 23, 1985 letter by Francisco Go
demanding ₱6,345.00, refers to the insurance premium on the house of petitioners,
advanced by respondent bank, thus such demand letter referred to another obligation and
could not have the effect of interrupting the running of the prescriptive period in favor of
herein petitioners insofar as foreclosure of the mortgage is concerned.18
Petitioners then prayed that respondent bank be ordered to pay them ₱100,000.00 as moral
damages, ₱50,000.00 as exemplary damages and ₱100,000.00 as attorney’s fees.19
Respondent for its part asserts that: the period within which it was placed under receivership
and liquidation was a fortuitous event that interrupted the running of the prescriptive period
for the foreclosure of petitioners’ mortgaged property; within such period, it was specifically
restrained and immobilized from doing business which includes foreclosure proceedings; the
extra-judicial demand it made on March 24, 1995 wiped out the period that has already
lapsed and started anew the prescriptive period; respondent through its authorized deputy
Francisco Go made the first extra-judicial demand on the petitioners on August 23, 1985;
while it is true that the first demand letter of August 1985 pertained to the insurance
premium advanced by it over the mortgaged property of petitioners, the same however
formed part of the latter’s total loan obligation with respondent under the mortgage
instrument and therefore constitutes a valid extra-judicial demand made within the
prescriptive period.20
In their Reply, petitioners reiterate their earlier arguments and add that it was respondent
that insured the mortgaged property thus it should not pass the obligation to petitioners
through the letter dated August 1985.21
To resolve this petition, two questions need to be answered: (1) Whether or not the period
within which the respondent bank was placed under receivership and liquidation proceedings
may be considered a fortuitous event which interrupted the running of the prescriptive
period in bringing actions; and (2) Whether or not the demand letter sent by respondent
bank’s representative on August 23, 1985 is sufficient to interrupt the running of the
prescriptive period.
Anent the first issue, we answer in the negative.
One characteristic of a fortuitous event, in a legal sense and consequently in relations to
contract, is that its occurrence must be such as to render it impossible for a party to fulfill his
obligation in a normal manner.22
Respondent’s claims that because of a fortuitous event, it was not able to exercise its right to
foreclose the mortgage on petitioners’ property; and that since it was banned from pursuing
its business and was placed under receivership from April 25, 1985 until August 1992, it could
not foreclose the mortgage on petitioners’ property within such period since foreclosure is
embraced in the phrase "doing business," are without merit.
While it is true that foreclosure falls within the broad definition of "doing business," that is:
…a continuity of commercial dealings and arrangements and contemplates to that extent, the
performance of acts or words or the exercise of some of the functions normally incident to
and in progressive prosecution of the purpose and object of its organization.23
it should not be considered included, however, in the acts prohibited whenever banks are
"prohibited from doing business" during receivership and liquidation proceedings.
This we made clear in Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central
Bank of the Philippines24 where we explained that:
Section 29 of the Republic Act No. 265, as amended known as the Central Bank Act, provides
that when a bank is forbidden to do business in the Philippines and placed under
receivership, the person designated as receiver shall immediately take charge of the bank’s
assets and liabilities, as expeditiously as possible, collect and gather all the assets and
administer the same for the benefit of its creditors, and represent the bank personally or
through counsel as he may retain in all actions or proceedings for or against the
institution,exercising all the powers necessary for these purposes including, but not limited
to, bringing and foreclosing mortgages in the name of the bank.25
This is consistent with the purpose of receivership proceedings, i.e., to receive collectibles
and preserve the assets of the bank in substitution of its former management, and prevent
the dissipation of its assets to the detriment of the creditors of the bank.26
When a bank is declared insolvent and placed under receivership, the Central Bank, through
the Monetary Board, determines whether to proceed with the liquidation or reorganization
of the financially distressed bank. A receiver, who concurrently represents the bank, then
takes control and possession of its assets for the benefit of the bank’s creditors. A liquidator
meanwhile assumes the role of the receiver upon the determination by the Monetary Board
that the bank can no longer resume business. His task is to dispose of all the assets of the
bank and effect partial payments of the bank’s obligations in accordance with legal priority.
In both receivership and liquidation proceedings, the bank retains its juridical personality
notwithstanding the closure of its business and may even be sued as its corporate existence
is assumed by the receiver or liquidator. The receiver or liquidator meanwhile acts not only
for the benefit of the bank, but for its creditors as well.27
In Provident Savings Bank vs. Court of Appeals,28 we further stated that:
When a bank is prohibited from continuing to do business by the Central Bank and a receiver
is appointed for such bank, that bank would not be able to do new business, i.e., to
grant new loans or to accept new deposits. However, the receiver of the bank is in fact
obliged to collect debts owing to the bank, which debts form part of the assets of the bank.
The receiver must assemble the assets and pay the obligation of the bank under
receivership, and take steps to prevent dissipation of such assets. Accordingly, the receiver
of the bank is obliged to collect pre-existing debts due to the bank, and in connection
therewith, to foreclose mortgages securing such debts.29 (Emphasis supplied.)
It is true that we also held in said case that the period during which the bank was placed
under receivership was deemed fuerza mayor which validly interrupted the prescriptive
period.30 This is being invoked by the respondent and was used as basis by the trial court in
its decision. Contrary to the position of the respondent and court a quohowever, such ruling
does not find application in the case at bar.
A close scrutiny of the Provident case, shows that the Court arrived at said conclusion, which
is an exception to the general rule, due to the peculiar circumstances of Provident Savings
Bank at the time. In said case, we stated that:
Having arrived at the conclusion that a foreclosure is part of a bank’s business activity which
could not have been pursued by the receiver then because of the circumstances discussed
in the Central Bank case, we are thus convinced that the prescriptive period was legally
interrupted by fuerza mayor in 1972 on account of the prohibition imposed by the Monetary
Board against petitioner from transacting business, until the directive of the Board was
nullified in 1981.31 (Emphasis supplied.)
Further examination of the Central Bank case reveals that the circumstances of Provident
Savings Bank at the time were peculiar because after the Monetary Board issued MB
Resolution No. 1766 on September 15, 1972, prohibiting it from doing business in the
Philippines, the bank’s majority stockholders immediately went to the Court of First Instance
of Manila, which prompted the trial court to issue its judgment dated February 20, 1974,
declaring null and void the resolution and ordering the Central Bank to desist from liquidating
Provident. The decision was appealed to and affirmed by this Court in 1981. Thus, the
Superintendent of Banks, which was instructed to take charge of the assets of the bank in the
name of the Monetary Board, had no power to act as a receiver of the bank and carry out the
obligations specified in Sec. 29 of the Central Bank Act.32
In this case, it is not disputed that Philippine Veterans Bank was placed under receivership by
the Monetary Board of the Central Bank by virtue of Resolution No. 364 on April 25, 1985,
pursuant to Section 29 of the Central Bank Act on insolvency of banks.33
Unlike Provident Savings Bank, there was no legal prohibition imposed upon herein
respondent to deter its receiver and liquidator from performing their obligations under the
law. Thus, the ruling laid down in the Provident case cannot apply in the case at bar.
There is also no truth to respondent’s claim that it could not continue doing business from
the period of April 1985 to August 1992, the time it was under receivership. As correctly
pointed out by petitioner, respondent was even able to send petitioners a demand letter,
through Francisco Go, on August 23, 1985 for "accounts receivable in the total amount of
₱6,345.00 as of August 15, 1984" for the insurance premiums advanced by respondent bank
over the mortgaged property of petitioners. How it could send a demand letter on unpaid
insurance premiums and not foreclose the mortgage during the time it was "prohibited from
doing business" was not adequately explained by respondent.
Settled is the principle that a bank is bound by the acts, or failure to act of its receiver.34 As
we held in Philippine Veterans Bank vs. NLRC,35 a labor case which also involved respondent
bank,
… all the acts of the receiver and liquidator pertain to petitioner, both having assumed
petitioner’s corporate existence. Petitioner cannot disclaim liability by arguing that the non-
payment of MOLINA’s just wages was committed by the liquidators during the liquidation
period.36
However, the bank may go after the receiver who is liable to it for any culpable or negligent
failure to collect the assets of such bank and to safeguard its assets.37
Having reached the conclusion that the period within which respondent bank was placed
under receivership and liquidation proceedings does not constitute a fortuitous event which
interrupted the prescriptive period in bringing actions, we now turn to the second issue on
whether or not the extra-judicial demand made by respondent bank, through Francisco Go,
on August 23, 1985 for the amount of ₱6,345.00, which pertained to the insurance premiums
advanced by the bank over the mortgaged property, constitutes a valid extra-judicial demand
which interrupted the running of the prescriptive period. Again, we answer this question in
the negative.
Prescription of actions is interrupted when they are filed before the court, when there is a
written extra-judicial demand by the creditors, and when there is any written
acknowledgment of the debt by the debtor.38
Respondent’s claim that while its first demand letter dated August 23, 1985 pertained to the
insurance premium it advanced over the mortgaged property of petitioners, the same
formed part of the latter’s total loan obligation with respondent under the mortgage
instrument, and therefore, constitutes a valid extra-judicial demand which interrupted the
running of the prescriptive period, is not plausible.
The real estate mortgage signed by the petitioners expressly states that:
This mortgage is constituted by the Mortgagor to secure the payment of the loan and/or
credit accommodation granted to the spouses Cesar A. Larrobis, Jr. and Virginia S. Larrobis in
the amount of ONE HUNDRED THIRTY FIVE THOUSAND (₱135,000.00) PESOS ONLY Philippine
Currency in favor of the herein Mortgagee.39
The promissory note, executed by the petitioners, also states that:
…FOR VALUE RECEIVED, I/WE, JOINTLY AND SEVERALLY, PROMISE TO PAY THE PHILIPPINE
VETERANS BANK, OR ORDER, AT ITS OFFICE AT CEBU CITY THE SUM OF ONE HUNDRED
THIRTY FIVE THOUSAND PESOS (P135,000.00), PHILIPPINE CURRENCY WITH INTEREST AT THE
RATE OF FOURTEEN PER CENT (14%) PER ANNUM FROM THIS DATE UNTIL FULLY PAID. 40
Considering that the mortgage contract and the promissory note refer only to the loan of
petitioners in the amount of ₱135,000.00, we have no reason to hold that the insurance
premiums, in the amount of ₱6,345.00, which was the subject of the August 1985 demand
letter, should be considered as pertaining to the entire obligation of petitioners.
In Quirino Gonzales Logging Concessionaire vs. Court of Appeals,41 we held that the notices of
foreclosure sent by the mortgagee to the mortgagor cannot be considered tantamount to
written extrajudicial demands, which may validly interrupt the running of the prescriptive
period, where it does not appear from the records that the notes are covered by the
mortgage contract.42
In this case, it is clear that the advanced payment of the insurance premiums is not part of
the mortgage contract and the promissory note signed by petitioners. They pertain only to
the amount of ₱135,000.00 which is the principal loan of petitioners plus interest. The
arguments of respondent bank on this point must therefore fail.
As to petitioners’ claim for damages, however, we find no sufficient basis to award the same.
For moral damages to be awarded, the claimant must satisfactorily prove the existence of the
factual basis of the damage and its causal relation to defendant’s acts.43 Exemplary damages
meanwhile, which are imposed as a deterrent against or as a negative incentive to curb
socially deleterious actions, may be awarded only after the claimant has proven that he is
entitled to moral, temperate or compensatory damages.44 Finally, as to attorney’s fees, it is
demanded that there be factual, legal and equitable justification for its award.45 Since the
bases for these claims were not adequately proven by the petitioners, we find no reason to
grant the same.
WHEREFORE, the decision of the Regional Trial Court, Cebu City, Branch 24, dated April 17,
1998, and the order denying petitioners’ motion for reconsideration dated August 25, 1998
are hereby REVERSED and SET ASIDE. The extra-judicial foreclosure of the real estate
mortgage on October 18, 1995, is hereby declared null and void and respondent is ordered to
return to petitioners their owner’s duplicate certificate of title.
Costs against respondent.
SO ORDERED.
FIRST DIVISION
G.R. No. 182403 March 9, 2010
ATTY. RESTITUTO G. CUDIAMAT, ERLINDA P. CUDIAMAT1 and CORAZON D.
CUDIAMAT, Petitioners,
vs.
BATANGAS SAVINGS AND LOAN BANK, INC., and THE REGISTER OF DEEDS, NASUGBU,
BATANGAS,Respondents.
DECISION
CARPIO MORALES, J.:
Petitioner Atty. Restituto Cudiamat and his brother Perfecto were the registered co-owners
of a 320 square meter parcel of land (the property) in Balayan, Batangas, covered by TCT No.
T-37889 of the Register of Deeds of Nasugbu, Batangas. Restituto, who resided in Ozamiz City
with his wife, entrusted the custody of the title to who was residing in Balayan.
In 1979, Perfecto, without the knowledge and consent of Restituto, obtained a loan from
respondent Batangas Savings and Loan Bank, Inc. (the bank). To secure the payment of the
loan, Perfecto mortgaged the property for the purpose of which he presented a Special
Power of Attorney (SPA) purportedly executed by Restituto, with the marital consent of his
wife-herein co-petitioner Erlinda Cudiamat.
On June 19, 1991, Restituto was informed, via letter2 dated June 7, 1991 from the bank, that
the property was foreclosed. He thus, by letter3 dated June 25, 1991, informed the bank that
he had no participation in the execution of the mortgage and that he never authorized
Perfecto for the purpose.
In the meantime, Perfecto died in 1990. In 1998, as Perfecto’s widow petitioner Corazon was
being evicted from the property, she and her co-petitioner-spouses Restituto and Erlinda
filed on August 9, 1999 before the Regional Trial Court (RTC) of Balayan a complaint4 "for
quieting of title with damages" against the bank and the Register of Deeds of Nasugbu,
docketed as Civil Case No. 3618, assailing the mortgage as being null and void as they did not
authorize the encumbrance of the property.
In its Answer to the complaint, the bank, maintaining the validity of the mortgage, alleged
that it had in fact secured a title in its name, TCT No. T-48405, after Perfecto failed to redeem
the mortgage; that the Balayan RTC had no jurisdiction over the case as the bank had been
placed under receivership and under liquidation by the Philippine Deposit Insurance
Corporation (PDIC); that PDIC filed before the RTC of Nasugbu a petition for assistance in the
liquidation of the bank which was docketed as SP No. 576; and that jurisdiction to adjudicate
disputed claims against it is lodged with the liquidation court-RTC Nasugbu.
By Decision of January 17, 2006,5 Branch 9 of the Balayan RTC rendered judgment, in the
complaint for quieting of title, in favor of the plaintiffs-herein petitioners. It ordered
respondent Register of Deeds of Nasugbu to cancel the encumbrance annotated on TCT No.
T-37889, and to cancel TCT No. T-48405 issued in the name of the bank and reinstate the
former title. It also directed the bank to return the property to petitioner spouses Restituto
and Erlinda and to pay ₱20,000 to all the petitioners to defray the costs of suit.
The bank appealed to the Court of Appeals, contending, inter alia, that the Balayan RTC had
no jurisdiction over petitioners’ complaint for quieting of title.
By the assailed Decision of December 21, 2007,6 the appellate court, ruling in favor of the
bank, dismissed petitioners’ complaint for quieting of title, without prejudice to the right of
petitioners to take up their claims with the Nasugbu RTC sitting as a liquidation court.
To the appellate court, the Balayan RTC, as a court of general jurisdiction, should have
deferred to the Nasugbu RTC which sits as a liquidation court, given that the bank was
already under receivership when petitioners filed the complaint for quieting of title.
Petitioners’ Motion for Reconsideration having been denied by the appellate court by
Resolution of March 27, 2008, they filed the present petition for review on
certiorari.1avvphi1
Assailing the appellate court’s ruling that the Balayan RTC had no jurisdiction over their
complaint, petitioners argue that their complaint was filed earlier than PDIC’s petition for
assistance in the liquidation; and that the bank is now estopped from questioning the
jurisdiction of the Balayan RTC because it actively participated in the proceedings thereat.
The petition is impressed with merit.
Estoppel bars the bank from raising the issue of lack of jurisdiction of the Balayan RTC.
In Lozon v. NLRC,7 the Court came up with a clear rule on when jurisdiction by estoppel
applies and when it does not:
The operation of estoppel on the question of jurisdiction seemingly depends on whether the
lower court actually had jurisdiction or not. If it had no jurisdiction, but the case was tried
and decided upon the theory that it had jurisdiction, the parties are not barred, on appeal,
from assailing such jurisdiction, for the same "must exist as a matter of law, and may not be
conferred by the consent of the parties or by estoppel." However, if the lower court had
jurisdiction, and the case was heard and decided upon a given theory, such, for instance, as
that the court had no jurisdiction, the party who induced it to adopt such theory will not be
permitted, on appeal, to assume an inconsistent position – that the lower court had
jurisdiction… (underscoring supplied)
The ruling was echoed in Metromedia Times Corporation v. Pastorin.8
In the present case, the Balayan RTC, sitting as a court of general jurisdiction, had jurisdiction
over the complaint for quieting of title filed by petitioners on August 9, 1999. The Nasugbu
RTC, as a liquidation court, assumed jurisdiction over the claims against the bank only on May
25, 2000, when PDIC’s petition for assistance in the liquidation was raffled thereat and given
due course.
While it is well-settled that lack of jurisdiction on the subject matter can be raised at any time
and is not lost by estoppel by laches, the present case is an exception. To compel petitioners
to re-file and relitigate their claims before the Nasugbu RTC when the parties had already
been given the opportunity to present their respective evidence in a full-blown trial before
the Balayan RTC which had, in fact, decided petitioners’ complaint (about two years before
the appellate court rendered the assailed decision) would be an exercise in futility and would
unjustly burden petitioners.

The Court, in Valenzuela v. Court of Appeals,9 held that as a general rule, if there is a judicial
liquidation of an insolvent bank, all claims against the bank should be filed in the liquidation
proceeding. The Court in Valenzuela, however, after considering the circumstances attendant
to the case, held that the general rule should not be applied if to order the aggrieved party to
refile or relitigate its case before the litigation court would be "an exercise in futility." Among
the circumstances the Court considered in that case is the fact that the claimants were poor
and the disputed parcel of land was their only property, and the parties’ claims and defenses
were properly ventilated in and considered by the judicial court.

In the present case, the Court finds that analogous considerations exist to warrant the
application of Valenzuela. Petitioner Restituto was 78 years old at the time the petition was
filed in this Court, and his co-petitioner-wife Erlinda died10 during the pendency of the case.
And, except for co-petitioner Corazon, Restituto is a resident of Ozamis City. To compel him
to appear and relitigate the case in the liquidation court-Nasugbu RTC when the issues to be
raised before it are the same as those already exhaustively passed upon and decided by the
Balayan RTC would be superfluous.

WHEREFORE, the petition is GRANTED. The Decision of December 21, 2007 and Resolution
dated March 27, 2008 of the Court of Appeals are SET ASIDE. The Decision dated January 17,
2006 of the Regional Trial Court of Balayan, Batangas, Branch 9 is REINSTATED.

SO ORDERED.
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 172892 June 13, 2013
PHILIPPINE DEPOSIT INSURANCE CORPORATION, Petitioner,
vs.
BUREAU OF INTERNAL REVENUE, Respondent.
DECISION
LEONARDO-DE CASTRO, J.:
This is a petition for review on Certiorari1 of the Decision2 and Resolution3 dated December
29, 2005 and May 5, 2006, respectively, of the Court of Appeals in CA-G.R. SP No. 80816.
In Resolution No. 1056 dated October 26, 1994, the Monetary Board of the Bangko Sentral
ng Pilipinas (BSP) prohibited the Rural Bank of Tuba (Benguet), Inc. (RBTI) from doing
business in the Philippines, placed it under receivership in accordance with Section 30 of
Republic Act No. 7653, otherwise known as the "New Central Bank Act," and designated the
Philippine Deposit Insurance Corporation (PDIC) as receiver.4
Subsequently, PDIC conducted an evaluation of RBTI’s financial condition and determined
that RBTI remained insolvent. Thus, the Monetary Board issued Resolution No. 675 dated
June 6, 1997 directing PDIC to proceed with the liquidation of RBTI. Accordingly and pursuant
to Section 30 of the New Central Bank Act, PDIC filed in the Regional Trial Court (RTC) of La
Trinidad, Benguet a petition for assistance in the liquidation of RBTI. The petition was
docketed as Special Proceeding Case No. 97-SP-0100 and raffled to Branch 8.5
In an Order6 dated September 4, 1997, the trial court gave the petition due course and
approved it.
As an incident of the proceedings, the Bureau of Internal Revenue (BIR) intervened as one of
the creditors of RBTI. The BIR prayed that the proceedings be suspended until PDIC has
secured a tax clearance required under Section 52(C) of Republic Act No. 8424, otherwise
known as the "Tax Reform Act of 1997" or the "Tax Code of 1997," which provides:
SEC. 52. Corporation Returns. –
xxxx
(C) Return of Corporation Contemplating Dissolution or Reorganization. – Every corporation
shall, within thirty (30) days after the adoption by the corporation of a resolution or plan for
its dissolution, or for the liquidation of the whole or any part of its capital stock, including a
corporation which has been notified of possible involuntary dissolution by the Securities and
Exchange Commission, or for its reorganization, render a correct return to the Commissioner,
verified under oath, setting forth the terms of such resolution or plan and such other
information as the Secretary of Finance, upon recommendation of the commissioner, shall,
by rules and regulations, prescribe.
The dissolving or reorganizing corporation shall, prior to the issuance by the Securities and
Exchange Commission of the Certificate of Dissolution or Reorganization, as may be defined
by rules and regulations prescribed by the Secretary of Finance, upon recommendation of
the Commissioner, secure a certificate of tax clearance from the Bureau of Internal Revenue
which certificate shall be submitted to the Securities and Exchange Commission.
In an Order7 dated February 14, 2003, the trial court found merit in the BIR’s motion and
granted it:
WHEREFORE, petitioner PDIC is directed to secure the necessary tax clearance provided for
under Section 45(C) of the 1993 National Internal Revenue Code and now Section 52(C) of
the 1997 National Internal Revenue Code and to secure the same from the BIR District Office
No. 9, La Trinidad, Benguet.
Further, petitioner PDIC is directed to submit a comprehensive liquidation report addressed
to creditor Bangko Sentral and to remit the accounts already collected from the pledged
assets to said Bangko Sentral.
Claimant Bangko Sentral may now initiate collection suits directly against the individual
borrowers.
In the event that the collection efforts of Bangko Sentral against individual borrowers may
fail, Bangko Sentral shall proceed against the general assets of the Rural Bank of Tuba
Benguet.
Finally, Annex "A" attached to the manifestation and motion dated November 29, 2002 [of
PDIC] is considered as partial satisfaction of the obligation of the Rural Bank of Tuba
(Benguet) Inc., to Bangko Sentral.8
PDIC moved for partial reconsideration of the Order dated February 14, 2003 with respect to
the directive for it to secure a tax clearance. It argued that Section 52(C) of the Tax Code of
1997 does not cover closed banking institutions as the liquidation of closed banks is governed
by Section 30 of the New Central Bank Act. The motion was, however, denied in an
Order9 dated September 16, 2003.
PDIC thereafter brought the matter to the Court of Appeals by way of a petition for Certiorari
under Rule 65 of the Rules of Court. In its petition, docketed as CA-G.R. SP No. 80816, PDIC
asserted that the trial court acted with grave abuse of discretion amounting to lack or excess
of jurisdiction in applying Section 52(C) of the Tax Code of 1997 to a bank ordered closed,
placed under receivership and, subsequently, under liquidation by the Monetary Board.10
In its Decision dated December 29, 2005, the appellate court agreed with the trial court that
banks under liquidation by PDIC are covered by Section 52(C) of the Tax Code of 1997. Thus,
the Court of Appeals affirmed the Orders dated February 14, 2003 and September 16, 2003
and dismissed PDIC’s petition.11
PDIC sought reconsideration but it was denied.12
Hence, this petition.
PDIC insists that Section 52(C) of the Tax Code of 1997 is not applicable to banks ordered
placed under liquidation by the Monetary Board of the BSP. It argues that closed banks
placed under liquidation pursuant to Section 30 of the New Central Bank Act are not
"corporations contemplating liquidation" within the purview of Section 52(C) of the Tax Code
of 1997. As opposed to the liquidation of all other corporations, the Monetary Board, not the
Securities and Exchange Commission (SEC), has the power to order or approve the closure
and liquidation of banks. Section 52(C) of the Tax Code of 1997 applies only to corporations
under the supervision of the SEC.13
For its part, the BIR counters that the requirement of a tax clearance under Section 52(C) of
the Tax Code of 1997 is applicable to rural banks undergoing liquidation proceedings under
Section 30 of the New Central Bank Act. For the BIR, the authority given to the BSP to
supervise banks does not mean that all matters regarding banks are exclusively under the
power of the BSP. Thus, banking corporations are still subject to reasonable regulations
imposed by the SEC on corporations. The purpose of a tax clearance requirement under
Section 52(C) of the Tax Code of 1997 is to ensure the collection of income taxes due to the
government by imposing upon a corporation undergoing liquidation the obligation of
reporting the income it earned, if any, for the purpose of determining the amount of
imposable tax.14
The petition succeeds.
This Court has already resolved the issue of whether Section 52(C) of the Tax Code of 1997
applies to banks ordered placed under liquidation by the Monetary Board, that is, whether a
bank placed under liquidation has to secure a tax clearance from the BIR before the project
of distribution of the assets of the bank can be approved by the liquidation court.
In Re: Petition for Assistance in the Liquidation of the Rural Bank of Bokod (Benguet), Inc.,
Philippine Deposit Insurance Corporation v. Bureau of Internal Revenue 15 ruled that Section
52(C) of the Tax Code of 1997 is not applicable to banks ordered placed under liquidation by
the Monetary Board,16 and a tax clearance is not a prerequisite to the approval of the project
of distribution of the assets of a bank under liquidation by the PDIC.17
Thus, this Court has held that the RTC, acting as liquidation court under Section 30 of the
New Central Bank Act, commits grave abuse of discretion in ordering the PDIC, as liquidator
of a bank ordered closed by the Monetary Board, to first secure a tax clearance from the
appropriate BIR Regional Office, and holding in abeyance the approval of the project of
distribution of the assets of the closed bank by virtue thereof.18 Three reasons have been
given.
First, Section 52(C) of the Tax Code of 1997 pertains only to a regulation of the relationship
between the SEC and the BIR with respect to corporations contemplating dissolution or
reorganization. On the other hand, banks under liquidation by the PDIC as ordered by the
Monetary Board constitute a special case governed by the special rules and procedures
provided under Section 30 of the New Central Bank Act, which does not require that a tax
clearance be secured from the BIR.19 As explained in In Re: Petition for Assistance for
Assistance in the Liquidation of the Rural Bank of Bokod (Benguet), Inc.:
Section 52(C) of the Tax Code of 1997 and the BIR-SEC Regulations No. 120 regulate the
relations only as between the SEC and the BIR, making a certificate of tax clearance a prior
requirement before the SEC could approve the dissolution of a corporation. x x x.
xxxx
Section 30 of the New Central Bank Act lays down the proceedings for receivership and
liquidation of a bank. The said provision is silent as regards the securing of a tax clearance
from the BIR. The omission, nonetheless, cannot compel this Court to apply by analogy the
tax clearance requirement of the SEC, as stated in Section 52(C) of the Tax Code of 1997 and
BIR-SEC Regulations No. 1, since, again, the dissolution of a corporation by the SEC is a totally
different proceeding from the receivership and liquidation of a bank by the BSP. This Court
cannot simply replace any reference by Section 52(C) of the Tax Code of 1997 and the
provisions of the BIR-SEC Regulations No. 1 to the "SEC" with the "BSP." To do so would be to
read into the law and the regulations something that is simply not there, and would be
tantamount to judicial legislation.21
Second, only a final tax return is required to satisfy the interest of the BIR in the liquidation of
a closed bank, which is the determination of the tax liabilities of a bank under liquidation by
the PDIC. In view of the timeline of the liquidation proceedings under Section 30 of the New
Central Bank Act, it is unreasonable for the liquidation court to require that a tax clearance
be first secured as a condition for the approval of project of distribution of a bank under
liquidation.22 This point has been elucidated thus:
[T]he alleged purpose of the BIR in requiring the liquidator PDIC to secure a tax clearance is
to enable it to determine the tax liabilities of the closed bank. It raised the point that since
the PDIC, as receiver and liquidator, failed to file the final return of RBBI for the year its
operations were stopped, the BIR had no way of determining whether the bank still had
outstanding tax liabilities.
To our mind, what the BIR should have requested from the RTC, and what was within the
discretion of the RTC to grant, is not an order for PDIC, as liquidator of RBBI, to secure a tax
clearance; but, rather, for it to submit the final return of RBBI. The first paragraph of Section
30(C) of the Tax Code of 1997, read in conjunction with Section 54 of the same Code, clearly
imposes upon PDIC, as the receiver and liquidator of RBBI, the duty to file such a return. x x x.
xxxx
Section 54 of the Tax Code of 1997 imposes a general duty on all receivers, trustees in
bankruptcy, and assignees, who operate and preserve the assets of a corporation, regardless
of the circumstances or the law by which they came to hold their positions, to file the
necessary returns on behalf of the corporation under their care.
The filing by PDIC of a final tax return, on behalf of RBBI, should already address the
supposed concern of the BIR and would already enable the latter to determine if RBBI still
had outstanding tax liabilities.
The unreasonableness and impossibility of requiring a tax clearance before the approval by
the RTC of the Project of Distribution of the assets of the RBBI becomes apparent when the
timeline of the proceedings is considered.
The BIR can only issue a certificate of tax clearance when the taxpayer had completely paid
off his tax liabilities.1âwphi1The certificate of tax clearance attests that the taxpayer no
longer has any outstanding tax obligations to the Government.
Should the BIR find that RBBI still had outstanding tax liabilities, PDIC will not be able to pay
the same because the Project of Distribution of the assets of RBBI remains unapproved by
the RTC; and, if RBBI still had outstanding tax liabilities, the BIR will not issue a tax clearance;
but, without the tax clearance, the Project of Distribution of assets, which allocates the
payment for the tax liabilities, will not be approved by the RTC.1âwphi1 It will be a chicken-
and-egg dilemma.23
Third, it is not for this Court to fill in any gap, whether perceived or evident, in current
statutes and regulations as to the relations among the BIR, as tax collector of the National
Government; the BSP, as regulator of the banks; and the PDIC, as the receiver and liquidator
of banks ordered closed by the BSP. It is up to the legislature to address the matter through
appropriate legislation, and to the executive to provide the regulations for its
implementation.24
There is another reason. The position of the BIR, insisting on prior compliance with the tax
clearance requirement as a condition for the approval of the project of distribution of the
assets of a bank under liquidation, is contrary to both the letter and intent of the law on
liquidation of banks by the PDIC. In this connection, the relevant portion of Section 30 of the
New Central Bank Act provides:
Section 30. Proceedings in Receivership and Liquidation. – x x x.
xxxx
If the receiver determines that the institution cannot be rehabilitated or permitted to resume
business in accordance with the next preceding paragraph, the Monetary Board shall notify
in writing the board of directors of its findings and direct the receiver to proceed with the
liquidation of the institution. The receiver shall:
(1) file ex parte with the proper regional trial court, and without requirement of prior notice
or any other action, a petition for assistance in the liquidation of the institution pursuant to a
liquidation plan adopted by the Philippine Deposit Insurance Corporation for general
application to all closed banks. In case of quasi-banks, the liquidation plan shall be adopted
by the Monetary Board. Upon acquiring jurisdiction, the court shall, upon motion by the
receiver after due notice, adjudicate disputed claims against the institution, assist the
enforcement of individual liabilities of the stockholders, directors and officers, and decide on
other issues as may be material to implement the liquidation plan adopted. The receiver shall
pay the cost of the proceedings from the assets of the institution.
(2) convert the assets of the institution to money, dispose of the same to creditors and other
parties, for the purpose of paying the debts of such institution in accordance with the rules
on concurrence and preference of credit under the Civil Code of the Philippines and he may,
in the name of the institution, and with the assistance of counsel as he may retain, institute
such actions as may be necessary to collect and recover accounts and assets of, or defend
any action against, the institution. The assets of an institution under receivership or
liquidation shall be deemed in custodia legis in the hands of the receiver and shall, from the
moment the institution was placed under such receivership or liquidation, be exempt from
any order of garnishment, levy, attachment, or execution.25 (Emphasis supplied.)
The law expressly provides that debts and liabilities of the bank under liquidation are to be
paid in accordance with the rules on concurrence and preference of credit under the Civil
Code. Duties, taxes, and fees due the Government enjoy priority only when they are with
reference to a specific movable property, under Article 2241(1) of the Civil Code, or
immovable property, under Article 2242(1) of the same Code. However, with reference to
the other real and personal property of the debtor, sometimes referred to as "free property,"
the taxes and assessments due the National Government, other than those in Articles
2241(1) and 2242(1) of the Civil Code, such as the corporate income tax, will come only in
ninth place in the order of preference.26 On the other hand, if the BIR’s contention that a tax
clearance be secured first before the project of distribution of the assets of a bank under
liquidation may be approved, then the tax liabilities will be given absolute preference in all
instances, including those that do not fall under Articles 2241(1) and 2242(1) of the Civil
Code. In order to secure a tax clearance which will serve as proof that the taxpayer had
completely paid off his tax liabilities, PDIC will be compelled to settle and pay first all tax
liabilities and deficiencies of the bank, regardless of the order of preference under the
pertinent provisions of the Civil Code. Following the BIR’s stance, therefore, only then may
the project of distribution of the bank’s assets be approved and the other debts and claims
thereafter settled, even though under Article 2244 of the Civil Code such debts and claims
enjoy preference over taxes and assessments due the National Government. The BIR
effectively wants this Court to ignore Section 30 of the New Central Bank Act and disregard
Article 2244 of the Civil Code. However, as a court of law, this Court has the solemn duty to
apply the law. It cannot and will not give its imprimatur to a violation of the laws.
WHEREFORE, the petition is hereby GRANTED. The Court further rules as follows:
(a) the Decision dated December 29, 2005 and Resolution dated May 5, 2006 of the Court of
Appeals in CA-G.R. SP No. 80816 are REVERSED and SET ASIDE;
(b) the Orders dated February 14, 2003 and September 16, 2003 of the Regional Trial Court
of La Trinidad, Benguet sitting as liquidation court of the closed RBTI, in Special Proceeding
Case No. 97-SP-0100 are NULLIFIED and SET ASIDE, insofar as they direct the Philippine
Deposit Insurance Corporation to secure a tax clearance, for having been rendered with
grave abuse of discretion;
(c) the PDIC, as liquidator, is ORDERED to submit to the BIR the final tax return of RBTI, in
accordance with the first paragraph of Section 52(C), in connection with Section 54, of the
Tax Code of 1997; and

(d) the Regional Trial Court of La Trinidad, Benguet is ORDERED to resume the liquidation
proceedings in Special Proceeding Case No. 97-SP-0100 in order to determine all the claims
of the creditors, including that of the National Government, as determined and presented by
the BIR; and, pursuant to such determination, and guided accordingly by the provisions of the
Civil Code on preference of credit, to review and approve the project of distribution of the
assets of RBTI.

SO ORDERED.
FIRST DIVISION
[G.R. No. 59957. November 12, 1990.]
CENTRAL BANK OF THE PHILIPPINES, MEMBERS OF THE MONETARY BOARD, CONSOLACION
V. ODRA, MARIO VICENTE, DRBSLA, RAMIL PARAISO, DANTE L. REYES, DISIMULACION KING
and NORA G. SARMIENTO, Petitioners, v. THE HONORABLE RAFAEL DE LA CRUZ and the
RURAL BANK OF LIBMANAN, INC., Respondents.
Carpio & Carpio Law Office for Private Respondents.
SYLLABUS
1. COMMERCIAL LAW; BANKING; MONETARY BOARD; ACTIONS THEREOF IN PROCEEDINGS
ON INSOLVENCY, FINAL AND EXECUTORY. — It is noteworthy that the actions of the
Monetary Board in proceedings on insolvency are explicitly declared by law to be "final and
executory." They may not be set aside, or restrained, or enjoined by the courts, except upon
"convincing proof that the action is plainly arbitrary and made in bad faith" (Salud v. Central
Bank of the Philippines, 143 SCRA 590). Respondent Judge acted in plain disregard of the
fourth paragraph of Section 29 of the Central Bank Act, when he restrained the petitioners
from closing and liquidating the Rural Bank of Libmanan, prevented them from performing
their functions, and ordered them to return the management and control of the rural bank to
its board of directors (p. 51, Rollo) without receiving convincing proof that the action of the
CB was plainly arbitrary and made in bad faith.
2. ID.; ID.; ID.; RULE WHEN A RESOLUTION THEREOF IS CLAIMED TO BE ARBITRARY AND
DONE IN BAD FAITH. — Respondent Judge erred in denying the Central Bank’s motion to
dismiss the complaint for prohibition and mandamus (Civil Case No. 1309) filed by Libmanan
Bank (Annex C, p. 71, Rollo). This Court in the case of Rural Bank of Buhi, Inc. v. Court of
Appeals (162 SCRA 288) and Salud v. Central Bank of the Phils. 143 SCRA 590), ruled that a
bank’s claim that the resolution of the Monetary Board under Section 29 is plainly arbitrary
and done in bad faith should be asserted as an affirmative defense or counter-claim in the
proceedings for assistance in liquidation. It may be filed as a separate action if no petition for
assistance in liquidation has been instituted yet.
3. ID.; ID.; REMAINING ASSETS OF INSOLVENT BANK, SHOULD BE CONSERVED TO PAY ITS
CREDITORS. — Respondent Judge abused his discretion in authorizing the Libmanan Bank to
withdraw funds from its deposits in other banks (Annex E, p. 26, Rollo). The Rural Bank had
become insolvent as a result of mismanagement, frauds, irregularities and violations of
banking laws, rules, and regulations by its officers (p. 62, Rollo). Its remaining assets should
therefore be conserved to pay its creditors. Allowing the Rural Bank to withdraw its deposits
in other banks would result in the further diminution and dissipation of its assets to the
prejudice of its depositors and creditors, and to the unlawful advantage of the very officers
who brought about the bank’s insolvency.
4. REMEDIAL LAW; PROVISIONAL REMEDIES; PRELIMINARY INJUNCTION; FUNCTION
THEREOF. — Respondent Judge acted with grave abuse of discretion in issuing the contested
order dated January 15, 1982 enjoining the CB liquidator from closing the rural bank and
requiring it to restore the management and control of the bank to its board of directors. It is
a basic procedural postulate that a preliminary injunction should never be used to transfer
the possession or control of a thing to a party who did not have such possession or control at
the inception of the case (Lasala v. Fernandez, 5 SCRA 79; Emilia v. Bado, 28 SCRA 183). Its
proper function is simply to maintain the status quo at the commencement of the action. The
status quo at the time of filing Civil Case No. 1309 was that Libmanan Bank was under the
control of the DRBSLA Director, with Consolacion V. Odra, as liquidator appointed by the
Central Bank.
5. ID.; PLEADINGS; RULE OF "WAIVER OF DEFENSE" OR "OMNIBUS MOTION RULE",
APPLICABLE IN THE CASE AT BAR. — Since the Central Bank’s petition for assistance in
liquidation had been filed on August 3, 1981 (Civil Case No. SP-111, Court of First Instance of
Camarines Sur, Branch III), the Libmanan Bank’s filing on September 23, 1981 of a complaint
for prohibition and mandamus attacking the Central Bank’s resolution appointing a receiver
and liquidator for the bank should have been asserted as a counterclaim in SP-111 (p. 39-40,
Rollo), instead of as a separate special civil action for prohibition against the Central Bank.
The separate action should have been either dismissed or consolidated with SP-111 for the
law abhors multiplicity of suits. Failure of Libmanan Bank to assert in SP-111 the defense that
the Monetary Board’s receivership and liquidation resolution was "arbitrary and made in bad
faith," constitutes a waiver of that defense conformably with the rule of "Waiver of Defense,"
i.e., that "defenses and objections not pleaded either in a motion to dismiss or in the answer
are (generally) deemed waived," or the "Omnibus Motion Rule," providing that "a motion
attacking a pleading or a proceeding shall include all objections then available, and all
objections not so included shall be deemed waived" (Salud v. Central Bank of the Phils., 143
SCRA 590).
DECISION
GRIÑO-AQUINO, J.:
This petition for certiorari, prohibition and mandamus was filed by the Central Bank of the
Philippines, the members of the Monetary Board, Consolacion V. Odra, Mario Vicente, Ramil
Paraiso, Dante L. Reyes, Disimulacion King and Nora G. Sarmiento, through the Solicitor
General, praying this Court:chanrobles.com : virtual law library
1. to annul the orders dated January 15, 1982, January 29, 1982, March 1, 1982, March 31,
1982 and April 20, 1982 (Annexes A, B, C, D and E) of the then Court of First Instance of
Camarines Sur, Branch III;
2. to restrain respondent Judge Rafael De la Cruz, his agents, and representatives, from
enforcing the aforesaid orders and from continuing to assume jurisdiction over Civil Case No.
1309, a proceeding for prohibition, mandamus, and injunction filed by herein private
respondent Rural Bank of Libmanan, Inc., to stop its liquidation by the petitioners
(defendants in the lower court) and to compel respondent Judge to dismiss Civil Case No.
1309 (pp. 24-26, Rollo); andchanrobles virtual lawlibrary
3. to restore to petitioner Consolacion V. Odra, as the duly appointed liquidator of the
Central Bank, the control of the respondent Rural Bank of Libmanan (p. 27, Rollo).
The Rural Bank of Libmanan (hereinafter referred to as Libmanan Bank) started operations in
1965 under and by virtue of Republic Act No. 720, otherwise known as the Rural Banks’ Act
(p. 331, Rollo). Originally owned and managed by the Albas’ family, Libmanan Bank was later
sold to Manuel M. Villar and respondent Alex G. Durante, who commenced banking
operations in January 1979 (p. 331, Rollo).
In 1979, the Department of Rural Banks and Savings and Loan Associations (DRBSLA) of the
Central Bank of the Philippines (or CB) conducted examinations of the books and affairs of
Libmanan Bank (pp. 28-32, Rollo) DRBSLA director, Consolacion V. Odra, found serious
irregularities in its lending and deposit operations, including false entries and false
statements in the bank’s records to give it the appearance of solidity and soundness which it
did not possess (p 28, Rollo). As a result of its questionable transactions, the bank became
insolvent.
In her Memorandum dated May 2, 1980 to the Monetary Board, Director Odra
recommended, among other things, that: (1) Libmanan Bank be prohibited from doing
business; (2) that it be placed under receivership in accordance with Section 29 of Republic
Act No. 265, as amended; and (3) that the Director of DRBSLA be designated as receiver (p.
36, Rollo).
Finding the report to be true, the Monetary Board, on May 23, 1980, adopted Resolution No.
929 placing Libmanan Bank under statutory receivership and designating Director
Consolacion V. Odra, as Receiver, pursuant to Section 29, of Republic Act No. 265, as
amended (p. 39, Rollo).
Libmanan Bank was informed of the Monetary Board Resolution No. 929, and advised to
submit to the Monetary Board an acceptable reorganization and rehabilitation program (p.
39, Rollo). Meanwhile, Director Odra, as receiver, took possession and control of the assets
and records of the rural bank (p. 39, Rollo).
As Libmanan Bank failed to submit the required acceptable reorganization and rehabilitation
plan, the Monetary Board issued on October 3, 1980 Resolution No. 1852 ordering its
liquidation (p. 39, Rollo).
On August 3, 1981, the Solicitor General, in accordance with Republic Act No. 265, Section
29, filed in the then Court of First Instance of Camarines Sur, Branch III, presided over by
respondent Judge Rafael De la Cruz, a petition for Assistance in the Liquidation of Libmanan
Bank. The petition was docketed as SP-111 (pp. 39-40, Rollo). Libmanan Bank, through its
resident-Manager and the members of its Board of Directors opposed the Central Bank’s
petition.
On September 23, 1981, Libmanan Bank filed in the same Court of First Instance of
Camarines Sur, Branch III, a separate complaint for prohibition, mandamus and injunction
(Civil Case No. 1309), against the Central Bank, Et. Al. (herein petitioners), praying the Court
to enjoin and dismiss the liquidation proceeding (Sp. Proc. No. 111) on the ground that the
Central Bank gravely abused its discretion in ordering the liquidation of said rural
Bank.chanroblesvirtualawlibrary
On December 24, 1981, the Central Bank, through its house counsel, filed a motion for
extension of time to file its responsive pleading in Civil Case No. 1309 (Annex G, p. 42, Rollo).
On January 12, 1982, the Solicitor General entered his appearance in the case as counsel for
the Central Bank, and asked for a second extension of time to file a responsive pleading
(Annex I, p. 42,-Rollo).
On January 15, 1982, respondent Judge issued the questioned order in Civil Case No. 1309,
restraining the respondent Central Bank from "closing the petitioner (rural) bank and from
performing its customary banking business; to restore the control and management of the
bank to its Board of Directors; and to desist from liquidating its assets until ordered
otherwise by this Court" (p. 42, Rollo). On January 29, 1982, respondent Judge modified this
order by requiring the parties in Civil Case No. 1309 to "refrain from any act or acts which will
tend to disturb the state in which the parties were found before the complaint was filed" (p.
25, Rollo).
On January 25, 1982, Libmanan Bank filed an ex parte motion to declare the CB in default
(Annex J, p. 42, Rollo).
On February 11, 1982, the Solicitor General filed a third motion for extension (up to March 1,
1982) of the period to file a responsive pleading in Civil Case No. 1309 (Annex K, p. 43, Rollo).
On February 15, 1982, he filed a Motion to Dismiss Civil Case No. 1309 on the ground that
respondent Judge had no jurisdiction over a special civil action for prohibition, mandamus
and injunction against the Central Bank and that the petition was defective in form because it
was not properly verified (Annex L, p. 43, Rollo). On March 1, 1982, Judge De la Cruz denied
the motion to dismiss and gave the Central Bank ten (10) days to file its answer (Annex C, p.
44, Rollo).
On March 19, 1982, the Central Bank filed in the Supreme Court a Motion for Extension to
file a petition for certiorari, prohibition and mandamus, and a separate manifestation in the
lower court notifying Judge De la Cruz of the CB’s intention to elevate the case to this Court
and requesting Judge De la Cruz to desist from taking any further action in Civil Case No.
1309.
On March 31, 1982, Judge De la Cruz declared the CB, Et Al., in default for failure to file a
responsive pleading to the petition in Civil Case No. 1309. He pointed out that "the projected
move to bring the court’s denial of the motion to dismiss to the Supreme Court
on certiorari did not stop the period given to the respondents to answer" (Annex D, p. 72,
Rollo).
On April 20, 1982, respondent Judge granted Libmanan Bank’s ex parte motion dated March
29, 1982 for authority to withdraw money from its bank deposits (Annex E, p. 45,
Rollo).chanrobles.com : virtual law library
Hence, the present recourse.
The main issue raised by the petition is whether or not respondent Judge acted with grave
abuse of discretion or without or in excess of his jurisdiction in issuing the questioned orders,
namely:chanrob1es virtual 1aw library
Annex A — order of January 15, 1982 restraining the Central Bank from closing the rural bank
and ordering return of management and control to the Board of Directors.
Annex B — order of January 29, 1982 restraining the Central Bank from disturbing status quo
before the complaint was filed.
Annex C — order of March 1, 1982 denying Central Bank’s motion to dismiss.
Annex D — order of March 31, 1982 declaring Central Bank in default.
Annex E — order of April 20, 1982 authorizing Libmanan Bank to withdraw money from its
bank deposits.
The answer is yes.
The authority for the receivership of Libmanan Bank is found in Section 29 of the Central
Bank Act (P.D. 1827), which provides:jgc:chanrobles.com.ph
"SECTION 29. — Proceedings upon insolvency — Whenever, upon examination by the head
of the appropriate supervising or examining department or his examiners or agents into the
condition of any bank or non-bank financial intermediary performing quasi-banking
functions, it shall be disclosed that the condition of the same is one of insolvency, or that its
continuance in business would involve probable loss to its depositors or creditors, it shall be
the duty of the department head concerned forthwith, in writing, to inform the Monetary
Board of the facts, and the Board may, upon finding the statements of the department head
to be true forbid the institution to do business in the Philippines and shall designate an
official of the Central Bank or a person of recognized competence in banking or finance as
receiver to immediately take charge of its assets and liabilities, as expeditiously as possible
collect and gather all the assets and administer the same for the benefit of its creditors,
exercising all the powers necessary for these purposes including, but not limited to, bringing
suits and foreclosing mortgages in the name of the bank or non-bank financial intermediary
performing quasi-banking functions.
‘The Monetary Board shall thereupon determine within sixty days whether the institution
may be reorganized or otherwise placed in such a condition so that it may be permitted to
resume business with safety to its depositors and creditors and the general public and shall
prescribe the conditions under which such resumption of business shall take place as well as
the time for fulfillment of such conditions. In such case, the expenses and fees in the
collection and administration of the assets of the institution shall be determined by the
board and shall be paid to the Central Bank out of the assets of such banking institution.
"If the Monetary Board shall determine and confirm within the said period that the bank or
non-bank financial intermediary performing quasi-banking functions is insolvent or cannot
resume business with safety to its depositors, creditors and the general public, it shall, if the
public interest requires, order its liquidation, indicate the manner of its liquidation and
approve a liquidation plan. The Central Bank shall, by the Solicitor General, file a petition in
the Court of First Instance reciting the proceeding which have been taken and praying the
assistance of the court in the liquidation of such institution. The court shall have jurisdiction
in the same proceedings to adjudicate disputed claims against the bank or non-bank financial
intermediary performing quasi-banking functions and enforce individual liabilities of the
stockholders and do all that is necessary to preserve the assets of such institution and to
implement the liquidation plan approved by the Monetary Board. The Monetary Board shall
designate an official of the Central Bank, or a person of recognized competence in banking or
finance, as liquidator who shall take over the functions of the receiver previously appointed
by the Monetary Board under this Section. The liquidator shall, with all convenient speed,
convert the assets of the bank or non-bank financial intermediary performing quasi-banking
functions to money or sell, assign or otherwise dispose of the same to creditors and other
parties for the purpose of paying the debts of such institution and he may, in the name of the
bank or non-bank financial intermediary performing quasi-banking functions, institute such
actions as may be necessary in the appropriate court to collect and recover accounts and
assets of such institution."cralaw virtua1aw library
"The provisions of any law to the contrary notwithstanding the actions of the Monetary
Board under this Section and the second paragraph of Section 34 of this Act shall be final and
executory, and can be set aside by the court only if there is convincing proof that the action is
plainly arbitrary and made in bad faith. No restraining order or injunction shall be issued by
the court enjoining the Central Bank from implementing its actions under this Section and
the second paragraph of Section 34 of this Act, unless there is convincing proof that the
action of the Monetary Board is plainly arbitrary and made in bad faith and the petitioner or
plaintiff files with the clerk or judge of the court in which the action is pending a bond
executed in favor of the Central Bank, in an amount to be fixed by the Court. The restraining
order or injunctions shall be refused or, if granted, shall be dissolved upon filing by the
Central Bank of a bond, which shall be in the form of cash or Central Bank cashier’s check, in
an amount twice the amount of the bond of the petitioner or plaintiff conditioned that it will
pay the damages which the petitioner or plaintiff may suffer by the refusal or the dissolution
of the injunction. The provisions of Rule 58 of the New Rules of Court insofar as they are
applicable and not inconsistent with the provisions of this Section shall govern the issuance
and dissolution of the restraining order or injunction contemplated in this Section.
"Insolvency under this Act, shall be understood to mean the inability of a bank or non-bank
financial intermediary performing quasi-banking functions to pay its liabilities as they fall due
in the usual and ordinary course of business: Provided, however, That this shall not include
the inability to pay of an otherwise non-insolvent bank or non-bank financial intermediary
performing quasi-banking functions caused by extraordinary demands induced by financial
panic commonly evidenced by a run on the bank or non-bank financial intermediary
performing quasi-banking functions in the banking community.
"The appointment of a conservator under Section 28-A of this Act or the appointment of a
receiver under this Section shall be vested exclusively with the Monetary Board, the
provision of any law, general or special, to the contrary notwithstanding." (Emphasis
supplied.)
It is noteworthy that the actions of the Monetary Board in proceedings on insolvency are
explicitly declared by law to be "final and executory." They may not be set aside, or
restrained, or enjoined by the courts, except upon "convincing proof that the action is plainly
arbitrary and made in bad faith" (Salud v. Central Bank of the Philippines, 143 SCRA 590).
Respondent Judge acted in plain disregard of the fourth paragraph of Section 29 of the
Central Bank Act, when he restrained the petitioners from closing and liquidating the Rural
Bank of Libmanan, prevented them from performing their functions, and ordered them to
return the management and control of the rural bank to its board of directors (p. 51, Rollo)
without receiving convincing proof that the action of the CB was plainly arbitrary and made in
bad faith. As stated therein, the basis of the questioned order dated January 15, 1982,
were:chanrob1es virtual 1aw library
1. that he did not receive any of petitioners’ formal motions for extension of time to file their
responsive pleading;
2. that he had read the petition filed in Civil Case No. 1309; and
3. that there were good reasons shown in said petition (p. 52, Rollo).
By using his own standards, instead of the standards set forth in Section 29 of the law, as
basis for issuing a restraining order against the CB, respondent Judge committed a grave
abuse of discretion tantamount to excess, or lack of jurisdiction. We held in Rural Bank of
Buhi, Inc. v. Court of Appeals (162 SCRA 288, 291):jgc:chanrobles.com.ph
"Evidently, the trial court acted merely on an incident and has acted merely on an incident
and has not as yet inquired, as mandated by Section 29 of the Central Bank Act, into the
merits of the claim that the Monetary Board’s action is plainly arbitrary and made in bad
faith. It has not appreciated certain facts which would render the remedy of liquidation
proper and rehabilitation improper, involving as it does an examination of the probative
value of the evidence presented by the parties properly belonging to the trial court and not
properly cognizable on appeal."cralaw virtua1aw library
Respondent Judge acted with grave abuse of discretion in issuing the contested order dated
January 15, 1982 enjoining the CB liquidator from closing the rural bank and requiring it to
restore the management and control of the bank to its board of directors. It is a basic
procedural postulate that a preliminary injunction should never be used to transfer the
possession or control of a thing to a party who did not have such possession or control at the
inception of the case (Lasala v. Fernandez, 5 SCRA 79; Emilia v. Bado, 28 SCRA 183). Its proper
function is simply to maintain the status quo at the commencement of the action. The status
quo at the time of filing Civil Case No. 1309 was that Libmanan Bank was under the control of
the DRBSLA Director, with Consolacion V. Odra, as liquidator appointed by the Central
Bank.chanrobles.com:cralaw:red
Respondent Judge erred in denying the Central Bank’s motion to dismiss the complaint for
prohibition and mandamus (Civil Case No. 1309) filed by Libmanan Bank (Annex C, p. 71,
Rollo). This Court in the case of Rural Bank of Buhi, Inc. v. Court of Appeals (162 SCRA 288)
and Salud v. Central Bank of the Phils. 143 SCRA 590), ruled that a bank’s claim that the
resolution of the Monetary Board under Section 29 is plainly arbitrary and done in bad faith
should be asserted as an affirmative defense or counter-claim in the proceedings for
assistance in liquidation. It may be filed as a separate action if no petition for assistance in
liquidation has been instituted yet.
". . . a banking institution’s claim that a resolution of the Monetary Board under Section 29 of
the Central Bank Act should be set aside as plainly arbitrary and made in bad faith, may be
asserted as an affirmative defense (Sections 1 and 4[b], Rule 6, Rules of Court) or a
counterclaim (Section 6, Rule 6; Section 2, Rule 72 of the Rules of Court) in the proceedings
for assistance in liquidation or as a cause of action in a separate and distinct action where the
latter was filed ahead of the petition for assistance in liquidation (Central Bank v. Court of
Appeals, 106 SCRA 143).
Since the Central Bank’s petition for assistance in liquidation had been filed on August 3,
1981 (Civil Case No. SP-111, Court of First Instance of Camarines Sur, Branch III), the
Libmanan Bank’s filing on September 23, 1981 of a complaint for prohibition and mandamus
attacking the Central Bank’s resolution appointing a receiver and liquidator for the bank
should have been asserted as a counterclaim in SP-111 (p. 39-40, Rollo), instead of as a
separate special civil action for prohibition against the Central Bank. The separate action
should have been either dismissed or consolidated with SP-111 for the law abhors
multiplicity of suits. Failure of Libmanan Bank to assert in SP-111 the defense that the
Monetary Board’s receivership and liquidation resolution was "arbitrary and made in bad
faith," constitutes a waiver of that defense conformably with the rule of "Waiver of Defense,"
i.e., that "defenses and objections not pleaded either in a motion to dismiss or in the answer
are (generally) deemed waived," or the "Omnibus Motion Rule," providing that "a motion
attacking a pleading or a proceeding shall include all objections then available, and all
objections not so included shall be deemed waived" (Salud v. Central Bank of the Phils., 143
SCRA 590).chanrobles virtual lawlibrary

Respondent Judge abused his discretion in authorizing the Libmanan Bank to withdraw funds
from its deposits in other banks (Annex E, p. 26, Rollo). The Rural Bank had become insolvent
as a result of mismanagement, frauds, irregularities and violations of banking laws, rules, and
regulations by its officers (p. 62, Rollo). Its remaining assets should therefore be conserved to
pay its creditors. Allowing the Rural Bank to withdraw its deposits in other banks would result
in the further diminution and dissipation of its assets to the prejudice of its depositors and
creditors, and to the unlawful advantage of the very officers who brought about the bank’s
insolvency.

WHEREFORE, the petition for certiorari is GRANTED. The questioned orders dated January 15,
1982, January 29, 1982, March 1, 1982, March 31, 1982 and April 20, 1982 (Annexes A, B, C,
D & E, respectively) of respondent Judge Rafael De la Cruz of the then Court of First Instance
of Camarines Sur, Branch III, in Civil Case No. 1309 are REVERSED AND SET ASIDE. The
temporary restraining order issued by this Court on July 19, 1982 is hereby made permanent.
Respondent Court is ordered to dismiss Civil Case No. 1309. This order is immediately
executory. Costs against respondent Rural Bank of Libmanan.

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 168859 June 30, 2009
UNITED COCONUT PLANTERS BANK, JERONIMO U. KILAYKO, LORENZO V. TAN, ENRIQUE L.
GANA, JAIME W. JACINTO and EMILY R. LAZARO, petitioners,
vs.
E. GANZON, INC., Respondent.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 168897 June 30, 2009
E. GANZON, INC., petitioner,
vs.
UNITED COCONUT PLANTERS BANK, JAIME W. JACINTO and EMILY R.
LAZARO, Respondents.
DECISION
CHICO-NAZARIO, J.:
These are two consolidated1 Petitions for Review on Certiorari under Rule 45 of the 1997
Revised Rules of Civil Procedure.
United Coconut Planters Bank (UCPB) is a universal bank duly organized and existing under
Philippine Laws. In G.R. No. 168859, UCPB and its corporate officers, i.e., Jeronimo U. Kilayko,
Lorenzo V. Tan, Enrique L. Gana, Jaime W. Jacinto and Emily R. Lazaro (UCPB, et al.) seek the
reversal and setting aside of the Decision2 dated 14 October 2004 and Resolution3 dated 7
July 2005 of the Court of Appeals in CA-G.R. SP No. 81385 and the affirmation, instead, of the
letter-decision4 dated 16 September 2003 of the Monetary Board of the Bangko Sentral ng
Pilipinas (BSP). The Court of Appeals, in its assailed Decision, set aside the aforesaid letter-
decision of the BSP Monetary Board and remanded the case to the latter for further
proceedings; and in its questioned Resolution, denied for lack of merit the Motion for
Reconsideration of UCPB, et al., as well as the Partial Motion for Reconsideration of E.
Ganzon, Inc. (EGI).
On the other hand, EGI is a corporation duly organized and existing under Philippine laws and
engaged in real estate construction and development business. In G.R. No. 168897, EGI prays
for this Court to review the same Decision dated 14 October 2004 and Resolution dated 7
July 2005 of the Court of Appeals in CA-G.R. SP No. 81385, and to order the appellate court to
(1) act on its findings in the case instead of remanding the same to the BSP Monetary Board
for further proceedings; (2) direct the BSP Monetary Board to impose the applicable
administrative sanctions upon UCPB, et al.; and (3) to amend its assailed Decision and
Resolution by deleting therefrom the statements requiring the BSP Monetary Board to
scrutinize and dig deeper into the acts of UCPB, et al., and to determine if, indeed, there
were irregular and unsound practices in its business dealings with EGI.
The factual antecedents of these consolidated petitions are as follows:
Beginning 1995 to 1998, EGI availed itself of credit facilities from UCPB to finance its business
expansion. To secure said credit facilities, EGI mortgaged to UCPB its condominium unit
inventories in EGI Rufino Plaza, located at the intersection of Buendia and Taft Avenues,
Manila.
Initially, EGI was able to make periodic amortization payments of its loans to UCPB. When the
negative effects of the Asian economic crisis on the property development sector finally
caught up with the corporation in the middle of 1998, EGI started defaulting in its payment of
amortizations, thus, making all of its obligations due and demandable. Subsequently, EGI was
declared in default by UCPB in its letters dated 2 October 19985 and 16 February
1999.6Thereafter, UCPB stopped sending EGI monthly statements of its accounts.
In 1999, EGI and UCPB explored the possibility of using the mortgaged condominium unit
inventories of EGI in EGI Rufino Plaza as payment for the loans of EGI to UCPB. Upon agreeing
on the valuation of said mortgaged properties, EGI and UCPB entered into a Memorandum of
Agreement (MOA)7 on 28 December 1998 in settlement of the loans of EGI from UCPB. Based
on this MOA, the outstanding loan obligations of EGI with UCPB amounted to
₱915,838,822.50, inclusive of all interest, charges and fees. UCPB, through its corporate
officers, assured EGI that the said amount already represented the total loan obligations of
EGI to UCPB.
On 18 January 2000, EGI and UCPB executed an Amendment of Agreement8 to reflect the
true and correct valuation of the properties of EGI listed in the MOA that would be
transferred to UCPB in settlement of the total loan obligations of the former with the latter.
The properties of EGI to be used in paying for its debt with UCPB were valued at
₱904,491,052.00.
According to the MOA and its amendments, titles to the properties of EGI shall be transferred
to UCPB by the following modes: (1) foreclosure of mortgage; (2) dacion en pago; (3) creation
of a holding company; and (4) use of other alternatives as may be deemed appropriate by
UCPB.
UCPB proceeded to foreclose some of the properties of EGI listed in the MOA. Per the
Certificate of Sale9 dated 13 April 2000, the foreclosure proceeds of said properties
amounted only to ₱723,592,000.00, less than the value of the properties of EGI stipulated in
its amended MOA with UCPB.
UCPB applied the entire foreclosure proceeds of ₱723,592,000.00 to the principal amount of
the loan obligations of EGI, pursuant to BSP Circular No. 239,10 which provided that partial
property payments shall first be applied to the principal. After deducting the said amount
from the total loan obligations of EGI, there was still an unpaid balance of ₱192,246,822.50.
On 8 May 2001, some of the other properties of EGI at EGI Rufino Plaza, valued at
₱166,127,369.50, were transferred by way of dacion en pago to UCPB. However, during the
signing of the transaction papers for the dacion en pago, EGI Senior Vice-President, Architect
Grace S. Layug (Layug), noticed that said papers stated that the remaining loan balance of EGI
in the amount of ₱192,246,822.50 had increased to ₱226,963,905.50. The increase was
allegedly due to the addition of the transaction costs amounting to ₱34,717,083.00. EGI
complained to UCPB about the increase, yet UCPB did not take any action on the matter.
This prompted EGI President Engineer Eulalio Ganzon (Ganzon) and Senior Vice-President
Layug to review their files to verify the figures on the loan obligations of EGI as computed by
UCPB. In the process, they discovered the UCPB Internal Memorandum dated 22 February
2001,11 signed by UCPB corporate officers. The said Internal Memorandum presented two
columns, one with the heading "ACTUAL" and the other "DISCLOSED TO EGI." The figures in
the two columns were conflicting. The figures in the "DISCLOSED TO EGI" column computed
the unpaid balance of the loan obligations of EGI to be ₱226,967,194.80, the amount which
UCPB actually made known to and demanded from EGI. The figures in the "ACTUAL" column
calculated the remaining loan obligations of EGI to be only ₱146,849,412.58.
Consequently, EGI wrote UCPB a letter dated 21 May 2001,12 which included, among other
demands, the refund by UCPB to EGI of the over-payment of ₱83,000,000.00;13 return to EGI
of all the remaining Transfer Certificates of Title (TCTs)/Condominium Certificates of Title
(CCTs) in the possession of UCPB; and cost of damage to EGI for the delay in the release of its
certificates of title.
In response, UCPB explained14 that the "ACTUAL" column in its Internal Memorandum dated
22 February 2001 contained the same amounts reflected or recorded in its financial
statements, in accordance with the Manual of Accounts for Banks, Manual of Regulations for
Banks15 and BSP Circular No. 202,16 Series of 1999. In contrast, the "DISCLOSED TO EGI"
column showed the total amount still due from EGI, including the total principal, interests,
transaction and other costs after the foreclosure, whether reflected in the financial books of
UCPB or not. Further, UCPB maintained that the difference in the figures in the two columns
was because BSP Circular No. 202 and Section X305.4 of the Manual of Regulations for Bank
disallowed banks from accruing in its books interest on loans which had become non-
performing.
Despite the explanation of UCPB, EGI insisted that the figures appearing in the "ACTUAL"
column of the former’s Internal Memorandum dated 22 February 2001 revealed the true and
actual amount of its loan obligations to UCPB, ₱146,849,412.58.
EGI Senior Vice-President Layug met with UCPB Vice-President, Jaime W. Jacinto (Jacinto) to
discuss the demand of EGI for the return of its overpayment. UCPB Vice-President Jacinto,
however, refused to concede that UCPB had any obligation to make a refund to EGI and,
instead, insisted that EGI Senior Vice-President Layug disclose who gave her a copy of the
UCPB Internal Memorandum dated 22 February 2001.
Based on the possession by EGI of the UCPB Internal Memorandum dated 22 February 2001,
UCPB filed a criminal case for theft and/or discovery of secrets against EGI President Ganzon
and Senior Vice-President Layug, but the said case was dismissed.17
On 5 November 2002, EGI, also on the basis of the UCPB Internal Memorandum dated 22
February 2001, EGI filed with the BSP an administrative complaint18 against UCPB, et al., for
violation of Sections 3619 and 37,20 Article IV of Republic Act No. 7653,21 in relation to Section
55.1(a)22 of Republic Act No. 8791;23 and for the commission of irregularities and conducting
business in an unsafe or unsound manner.
In a letter-decision24 dated 16 September 2003, the BSP Monetary Board dismissed the
administrative complaint of EGI, holding as follows:
Please be informed that the Monetary Board decided to dismiss the complaint based on the
evaluation conducted by the Supervision and Examination Department I and the Office of the
General Counsel and Legal Services to the effect that:
1. UCPB computed interest on the loans based on BSP rules and regulations which prohibit
banks from accruing interest on loans that have become non-performing (BSP Circular No.
202). This is different from interest which may have run and accrued based on the
promissory notes/loan documents from the date of default up to settlement date.
2. Fair market value of assets to be foreclosed is different from the bid price submitted
during foreclosure and there is no statutory obligation for the latter to be equivalent to the
former.
3. Regarding the alleged ₱145,163,000.00 fabricated loan, the documents showed that there
were the EGI Board Resolution to borrow, promissory note signed by Mr. Eulalio Ganzon, and
Loan Agreement stating that the proceeds shall be used to pay outstanding availments and
interest servicing.
4. There is no finding by Supervision and Examination Department I on the alleged double
charging and/or padding of transaction costs.25
EGI filed a Motion for Reconsideration and a Supplemental Motion for Reconsideration of the
aforequoted letter-decision of the BSP Monetary Board. The BSP Monetary Board denied
both motions in its letter26 dated 8 December 2003 as there was no sufficient basis to grant
the same.
EGI then filed a Petition for Review under Rule 43 of the 1997 Revised Rules of Civil
Procedure with the Court of Appeals raising the sole issue of "whether the Bangko Sentral ng
Pilipinas erred in dismissing the administrative complaint filed by EGI against UCPB, et al."
The case was docketed as CA-G.R. SP No. 81385.
On 14 October 2004, the Court of Appeals rendered its assailed Decision granting the Petition
for Review of EGI, thus, setting aside the BSP letter-decision dated 16 September 2003 and
remanding the case to the BSP Monetary Board for further proceedings.
UCPB, et al., moved for the reconsideration of the 14 October 2004 Decision of the appellate
court, praying for a new judgment dismissing the appeal of EGI for lack of jurisdiction and/or
lack of merit. EGI also filed a Partial Motion for Reconsideration of the same Court of Appeals
Decision, with the prayer that the appellate court, instead of still remanding the case to the
BSP Monetary Board for further proceedings, already direct the latter to impose the
applicable administrative sanctions upon UCPB, et al.,.
In a Resolution dated 7 July 2005, the Court of Appeals denied for lack of merit both the
Motion for Reconsideration of UCPB, et al. and the Motion for Partial Reconsideration of EGI.
G.R. No. 168859
Aggrieved by the 14 October 2004 Decision and 7 July 2005 Resolution of the Court of
Appeals, UCPB, et al. comes before this Court, via a Petition for Review on Certiorari under
Rule 45 of the 1997 Revised Rules of Civil Procedure, based on the following assignment of
errors:
I. THE HONORABLE COURT OF APPEALS ACTED WITHOUT JURISDICTION AND GRAVELY ERRED
IN HOLDING THAT IT HAS APPELLATE JURISDICTION OVER DECISIONS OF THE BSP/MONETARY
BOARD.
II. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE BANGKO
SENTRAL SUMMARILY DISMISSED THE COMPLAINT OF [EGI].
III. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN DISREGARDING THE FINDINGS
OF FACT OF THE BANGKO SENTRAL AND IN HOLDING THAT [UCPB, et al.] COMMITTED
IRREGULAR AND UNSOUND BANKING PRACTICES IN THE SUBJECT TRANSACTIONS.27
The Petition is docketed as G.R. No. 168859.
UCPB, et al., aver that the Court of Appeals has no appellate jurisdiction over decisions,
orders and/or resolutions of the BSP Monetary Board on administrative matters. The BSP
Monetary Board is not among the quasi-judicial agencies enumerated under Rule 43 of the
1997 Revised Rules of Civil Procedure, over which the Court of Appeals has appellate
jurisdiction. Further, there is nothing in Republic Act No. 7653 or in Republic Act No. 8791
which explicitly allows an appeal of the decisions or orders of the BSP Monetary Board to the
Court of Appeals. Resultantly, the Court of Appeals has no power to review, much less set
aside, the findings of fact of the BSP Monetary Board as contained in its letter-decision dated
16 September 2003.
UCPB, et al. also claim that, contrary to the ruling of the Court of Appeals, the letter-decision
dated 16 September 2003 of the BSP Monetary Board plainly reveals that the administrative
complaint of EGI against UCPB, et al. was not summarily dismissed. The charges of EGI
against UCPB, et al. was resolved only after the BSP Monetary Board thoroughly reviewed
pertinent bank records and studied the arguments raised by EGI in its complaint and Motion
for Partial Reconsideration. In its letter-decision dated 16 September 2003, the BSP
Monetary Board stated in no uncertain terms that the dismissal of the complaint of EGI was
based on the evaluation conducted by its Supervision and Examination Department I and the
Office of the General Counsel and Legal Services. Also, in its letter dated 8 December 2003,
the BSP Monetary Board denied the Motion for Reconsideration and Supplemental Motion
for Reconsideration of EGI because the latter did not present any new evidence in support of
its motions. Hence, there is no basis for the claim of EGI that the BSP Monetary Board
overlooked and completely ignored its accusations of irregular and unsound banking practice
against UCPB, et al.
Finally, UCPB, et al., maintain that the findings of fact of administrative bodies like the BSP
Monetary Board are accorded great respect, if not finality, especially if supported by
substantial evidence. Such findings are to be respected by the courts, especially in the
absence of grave abuse of discretion or grave errors by the BSP Monetary Board. No other
office, much less an appellate tribunal, can substitute its own findings of fact over that of the
concerned administrative agency in view of the expertise and specialized knowledge acquired
by it on matters falling within its areas of concern. UCPB, et al. insist that it is the BSP which
has the necessary expertise to draft guidelines for the evaluation of the performance and
conduct of banks. Thus, the Court of Appeals committed grave error in disregarding the
findings of fact of the BSP Monetary Board which justified the latter’s dismissal of the
administrative complaint of EGI against UCPB, et al.
The issue of jurisdiction of the Court of Appeals over appeals of decisions, orders and/or
resolutions of the BSP Monetary Board on administrative matters must first be resolved,
before the other issues raised herein by UCPB, et al.
Truly, there is nothing in Republic Act No. 7653 or in Republic Act No. 8791 which explicitly
allows an appeal of the decisions of the BSP Monetary Board to the Court of Appeals.
However, this shall not mean that said decisions are beyond judicial review.
Section 9(3) of Batas Pambansa Blg. 129, otherwise known as The Judiciary Reorganization
Act of 1980, as amended, reads:
SEC. 9. Jurisdiction. – The Court of Appeals shall exercise:
xxxx
(3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or
awards of Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards or
commissions, including the Securities and Exchange Commission, the Social Security
Commission, the Employees Compensation Commission and the Civil Service Commission,
except those falling within the appellate jurisdiction of the Supreme Court in accordance with
the Constitution, the Labor Code of the Philippines under Presidential Decree No. 442, as
amended, the provisions of this Act, and of subparagraph (1) of the third paragraph and
subparagraph 4 of the fourth paragraph of Section 17 of the Judiciary Act of 1948. (Emphasis
ours.)
In accordance with the afore-quoted provision, Rule 43 of the 1997 Revised Rules of Civil
Procedure, on Appeals from the Court of Tax Appeals and Quasi-Judicial Agencies to the
Court of Appeals, defines its scope as follows:
SECTION 1. Scope. - This Rule shall apply to appeals from judgments or final orders of the
Court of Tax Appeals and from awards, judgments, final orders or resolutions of or
authorized by any quasi-judicial agency in the exercise of its quasi-judicial functions.
Among these agencies are the Civil Service Commission, Central Board of Assessment
Appeals, Securities and Exchange Commission, Office of the President, Land Registration
Authority, Social Security Commission, Civil Aeronautics Board, Bureau of Patents,
Trademarks and Technology Transfer, National Electrification Administration, Energy
Regulatory Board, National Telecommunications Commission, Department of Agrarian
Reform under Republic Act No. 6657, Government Service Insurance System, Employees
Compensation Commission, Agricultural Inventions Board, Insurance Commission, Philippine
Atomic Energy Commission, Board of Investments, Construction Industry Arbitration
Commission, and voluntary arbitrators authorized by law. (Emphasis ours.)
A perusal of Section 9(3) of Batas Pambansa Blg. 129, as amended, and Section 1, Rule 43 of
the 1997 Revised Rules of Civil Procedure reveals that the BSP Monetary Board is not
included among the quasi-judicial agencies explicitly named therein, whose final judgments,
orders, resolutions or awards are appealable to the Court of Appeals. Such omission,
however, does not necessarily mean that the Court of Appeals has no appellate jurisdiction
over the judgments, orders, resolutions or awards of the BSP Monetary Board.
It bears stressing that Section 9(3) of Batas Pambansa Blg. 129, as amended, on the appellate
jurisdiction of the Court of Appeals, generally refers to quasi-judicial agencies,
instrumentalities, boards, or commissions. The use of the word "including" in the said
provision, prior to the naming of several quasi-judicial agencies, necessarily conveys the very
idea of non-exclusivity of the enumeration. The principle of expressio unius est exclusio
alterius does not apply where other circumstances indicate that the enumeration was not
intended to be exclusive, or where the enumeration is by way of example only. 28
Similarly, Section 1, Rule 43 of the 1997 Revised Rules of Civil Procedure merely mentions
several quasi-judicial agencies without exclusivity in its phraseology.29 The enumeration of
the agencies therein mentioned is not exclusive.30 The introductory phrase "[a]mong these
agencies are" preceding the enumeration of specific quasi-judicial agencies only highlights
the fact that the list is not meant to be exclusive or conclusive. Further, the overture stresses
and acknowledges the existence of other quasi-judicial agencies not included in the
enumeration but should be deemed included.31
A quasi-judicial agency or body is an organ of government other than a court and other than
a legislature, which affects the rights of private parties through either adjudication or rule-
making.32 The very definition of an administrative agency includes its being vested with
quasi-judicial powers. The ever increasing variety of powers and functions given to
administrative agencies recognizes the need for the active intervention of administrative
agencies in matters calling for technical knowledge and speed in countless controversies
which cannot possibly be handled by regular courts.33 A "quasi-judicial function" is a term
which applies to the action, discretion, etc., of public administrative officers or bodies, who
are required to investigate facts, or ascertain the existence of facts, hold hearings, and draw
conclusions from them, as a basis for their official action and to exercise discretion of a
judicial nature.34
Undoubtedly, the BSP Monetary Board is a quasi-judicial agency exercising quasi-judicial
powers or functions. As aptly observed by the Court of Appeals, the BSP Monetary Board is
an independent central monetary authority and a body corporate with fiscal and
administrative autonomy, mandated to provide policy directions in the areas of money,
banking and credit.35 It has power to issue subpoena, to sue for contempt those refusing to
obey the subpoena without justifiable reason,36 to administer oaths and compel presentation
of books, records and others, needed in its examination,37 to impose fines and other
sanctions and to issue cease and desist order.38 Section 37 of Republic Act No. 7653,39 in
particular, explicitly provides that the BSP Monetary Board shall exercise its discretion in
determining whether administrative sanctions should be imposed on banks and quasi-banks,
which necessarily implies that the BSP Monetary Board must conduct some form of
investigation or hearing regarding the same.
Having established that the BSP Monetary Board is indeed a quasi-judicial body exercising
quasi-judicial functions; then as such, it is one of those quasi-judicial agencies, though not
specifically mentioned in Section 9(3) of Batas Pambansa Blg. 129, as amended, and Section
1, Rule 43 of the 1997 Revised Rules of Civil Procedure, are deemed included therein.
Therefore, the Court of Appeals has appellate jurisdiction over final judgments, orders,
resolutions or awards of the BSP Monetary Board on administrative complaints against banks
and quasi-banks, which the former acquires through the filing by the aggrieved party of a
Petition for Review under Rule 43 of the 1997 Revised Rules of Civil Procedure.
As a futile effort of UCPB, et al. to convince this Court that the Court of Appeals has no
appellate jurisdiction over the final judgments, orders, resolutions or awards of the BSP
Monetary Board, it cited Salud v. Central Bank of the Philippines.40
The invocation of UCPB, et al. of Salud is evidently misplaced.
The present case involves a decision of the BSP Monetary Board as regards an administrative
complaint against a bank and its corporate officers for the alleged violation of Sections 36
and 37, Article IV of Republic Act No. 7653, in relation to Section 55.1(a) of Republic Act No.
8791, and for the commission of irregularity and unsafe or unsound banking practice. There
is nothing in the aforesaid laws which state that the final judgments, orders, resolutions or
awards of the BSP Monetary Board on administrative complaints against banks or quasi-
banks shall be final and executory and beyond the subject of judicial review. Without being
explicitly excepted or exempted, the final judgments, orders, resolutions or awards of the
BSP Monetary Board are among those appealable to the Court of Appeals by way of Petition
for Review, as provided in Section 9(3) of Batas Pambansa Blg. 129, as amended, and Section
1, Rule 43 of the 1997 Revised Rules of Civil Procedure.
Although in Salud, this Court declared that the Intermediate Appellate Court (now Court of
Appeals) has no appellate jurisdiction over resolutions or orders of the Monetary Board of
the Central Bank of the Philippines (CBP, now BSP), because no law prescribes any mode of
appeal therefrom, the factual settings of the said case are totally different from the one
presently before us. Salud involved a resolution issued by the Monetary Board, pursuant to
Section 29 of Republic Act No. 265, otherwise known as the old Central Bank Act, forbidding
banking institutions to do business on account of a "condition of insolvency" or because "its
continuance in business would involve probable loss to depositors or creditors;" or
appointing a receiver to take charge of the assets and liabilities of the bank; or determining
whether the banking institutions should be rehabilitated or liquidated, and if in the latter
case, appointing a liquidator towards this end. The said Section 29 of the old Central Bank Act
was explicit that the determination by the Monetary Board of whether a banking institution
is insolvent, or should be rehabilitated or liquidated, is final and executory. However, said
determination could be set aside by the trial court if there was convincing proof that the
Monetary Board acted arbitrarily or in bad faith. Under the circumstances obtaining in
Salud, it is apparent that our ruling therein is limited to cases of insolvency, and not to all
cases cognizable by the Monetary Board.
At any rate, under the new law, i.e., Section 30 of Republic Act No. 7653, otherwise known as
The New Central Bank Act, which took effect on 3 July 1993, the order of the BSP Monetary
Board, even regarding the liquidation of a bank, can be questioned via a Petition for
Certiorari before a court when the same was issued in excess of jurisdiction or with such
grave abuse of discretion as to amount to lack or excess of jurisdiction. The court referred to
therein can be construed to mean the Court of Appeals because it is in the said court where a
Petition for Certiorari can be filed following the hierarchy of courts.
Moreover, the appellate jurisdiction of the Court of Appeals over the final judgments, orders,
resolutions or awards of the BSP Monetary Board in administrative cases involving directors
and officers of banks, quasi-banks, and trust entities, is affirmed in BSP Circular No. 477,
Series of 2005. The said BSP Circular expressly provides that the resolution rendered by the
BSP Monetary Board in administrative cases may be appealed to the Court of Appeals within
the period and the manner provided under Rule 43 of the 1997 Revised Rules of Civil
Procedure.
With all the foregoing, it cannot now be questioned that the Court of Appeals has appellate
jurisdiction over the final judgments, orders, resolutions or awards rendered by the BSP
Monetary Board in administrative cases against banks and their directors and officers, such
as UCPB, et al.
The Court then proceeds to resolve the issue of whether the Court of Appeals erred in
holding that the BSP Monetary Board summarily dismissed the administrative complaint of
EGI against UCPB, et al.
After a meticulous scrutiny of the 16 September 2003 letter-decision of the BSP Monetary
Board, this Court rules in the negative and affirms the finding of the Court of Appeals that the
BSP Monetary Board did, indeed, summarily dismiss administrative complaint of EGI against
UCPB, et al., for violation of Sections 36 and 37, Article IV of Republic Act No. 7653, in
relation to Section 55.1(a) of Republic Act No. 8791, and for the commission of irregularity
and unsafe or unsound banking practice.
Given the gravity and seriousness of the charges of EGI against UCPB, et al., the sweeping
statement of the BSP Monetary Board that it was inclined to dismiss the complaint of EGI
based on the evaluation made by its Supervision and Examination Department I and Office of
the General Counsel and Legal Services, is simply insufficient and unsatisfactory. Worse, the
BSP Monetary Board merely presented the following conclusions without bothering to
explain its bases for the same: (1) UCPB computed interest on loans based on BSP rules and
regulations which prohibit banks from accruing interest on loans that have become non-
performing (BSP Circular No. 202); (2) fair market value of assets to be foreclosed is different
from the bid price submitted during foreclosure and there is no statutory obligation for the
latter to be equivalent to the former; (3) regarding the alleged ₱145,163,000.00 fabricated
loan, the documents showed that there were the EGI Board resolution to borrow, promissory
note signed by Mr. Eulalio Ganzon, and Loan Agreement stating the proceeds shall be used to
pay outstanding availments and interest servicing; and (4) there is no finding by Supervision
and Examination Department I on the alleged double charging and/or padding of transaction
costs.
Further, in resolving the matter before it, the BSP Monetary Board never considered the
UCPB Internal Memorandum dated 22 February 2001, which was the heart of the
administrative complaint of EGI against UCPB, et al. The BSP Monetary Board did not even
attempt to establish whether it was regular or sound practice for a bank to keep a record of
its borrower’s loan obligations with two different sets of figures, one higher than the other;
and to disclose to the borrower only the higher figures. The explanation of UCPB, et al.,
adopted by the BSP Monetary Board – that the figures in the "ACTUAL" column were lower
than those in the "DISCLOSED TO EGI" column because the former was computed in
accordance with BSP rules and regulations prohibiting the accrual of interest on loans that
have become non-performing – gives rise to more questions than answers. Examples of some
of these questions would be whether the loan obligations of EGI have become non-
performing; whether the differences between the figures in the "ACTUAL" and "DISCLOSED
TO EGI" columns indeed corresponded to the interest that should be excluded from the
figures in the first column per BSP rules and regulations; and whether the computations of
the figures in both columns should have been freely disclosed and sufficiently explained to
EGI in the name of transparency.
The BSP Monetary Board similarly failed to clarify whether UCPB can foreclose the
mortgaged properties of EGI in amounts that were less than the values of the said properties
as determined and stipulated by EGI and UCPB in their amended MOA. The Court once more
agrees in the ruling of the Court of Appeals that the MOA entered into by EGI and UCPB
serves as a contract between them, and it is the law that should govern their relationship,
which neither of the parties can simply abrogate, violate, or disregard. Unfortunately, the
BSP Monetary Board never even referred to the MOA executed by the parties in its letter-
decision dated 16 September 2003.
Moreover, the BSP Monetary Board found that the ₱145,163,000.00 loan of EGI from UCPB
was not fabricated based on several documents. However, there is absolute lack of
explanation by the BSP Monetary Board as to why said documents deserved more weight vis-
à-vis evidence of EGI of suspicious circumstances surrounding the said loan, such as UCPB
granting EGI said loan even when the latter was already in default on its prior loan
obligations, and without requiring additional security, detailed business plan, and financial
projections from EGI.
The disregard by BSP Monetary Board of all the foregoing facts and issues in its letter-
decision dated 16 September 2003 leads this Court to declare that it summarily dismissed the
administrative complaint of EGI against UCPB, et al. There can be no complete resolution of
the administrative complaint of EGI without consideration of these facts and judgment on
said issues.
Finally, there is no merit in the assertion of UCPB, et al. that the Court of Appeals erred in
disregarding the findings of fact of the BSP Monetary Board in the absence of grave abuse of
discretion or lack of basis for the same.
Although, as a general rule, findings of facts of an administrative agency, which has acquired
expertise in the particular field of its endeavor, are accorded great weight on appeal, such
rule cannot be applied with respect to the assailed findings of the BSP Monetary Board in this
case. Rather, what applies is the recognized exception that if such findings are not supported
by substantial evidence, the Court can make its own independent evaluation of the facts.41
The standard of substantial evidence required in administrative proceedings is more than a
mere scintilla. It means such relevant evidence as a reasonable mind might accept as
adequate to support a conclusion. While rules of evidence prevailing in courts of law and
equity shall not be controlling, the obvious purpose being to free administrative boards from
the compulsion of technical rules so that the mere admission of matter which would be
deemed incompetent in judicial proceedings would not invalidate the administrative order,
this assurance of a desirable flexibility in administrative procedure does not go so far as to
justify orders without basis in evidence having rational probative force.42
It cannot be convincingly said herein that the factual findings of the BSP Monetary Board in
its letter-decision dated 16 September 2003 was supported by substantial evidence since (1)
most of the findings were not supported by references to specific evidence; and (2) the
findings were made without consideration of the primary evidence presented by EGI (i.e., the
MOA and its amendments and the UCPB Internal Memorandum dated 22 February 2001).
Even then, the Court of Appeals stopped short of categorically ruling that UCPB, et al.
committed irregularities, or unsound or unsafe banking practice in its transactions with EGI.
What the Court of Appeals positively pronounced was that the BSP Monetary Board failed to
give the necessary consideration to the administrative complaint of EGI, summarily
dismissing the same in its 16 September 2003 letter-decision. The 14 October 2004 Decision
of the Court of Appeals clearly remanded the case to the BSP for further proceedings since
the BSP, with its specialized knowledge and expertise on banking matters, is more up to task
to receive evidence, hold hearings, and thereafter resolve the issues based on its findings of
fact and law.
G.R. No. 168897
Also unsatisfied with the Decision dated 14 October 2004 and Resolution dated 7 July 2005 of
the Court of Appeals, EGI filed with this Court its own Petition for Review on Certiorari under
Rule 45 of the 1997 Revised Rules of Civil Procedure, raising the following issues:
I. The Honorable Court of Appeals does have appellate jurisdiction over decisions, orders, and
resolutions of the BSP/Monetary Board.
II. The Honorable Court of Appeals was correct in FINDING that the [BSP] summarily
dismissed the complaint of EGI.
III. Whether or not the Honorable Court of Appeals committed patent, grave, and reversible
error when it remanded the case to the [BSP] for further proceedings instead of acting upon
its findings as narrated in its Decision.
IV. Whether or not the Honorable Court of Appeals committed patent, grave, and reversible
error in not directing the [BSP] to impose the appropriate penalties against [UCPB, et al.].43
The Petition is docketed as G.R. No. 168897.
Since the first two "issues" have already been addressed by this Court in its previous
discussion herein on G.R. No. 168859, we now proceed to resolve the next two issues raised
by EGI in its Petition in G.R. No. 168897.
EGI avers that the Court of Appeals committed reversible error when it remanded the case to
the BSP for further proceedings instead of directing the BSP to impose the applicable
sanctions on UCPB, et al. EGI reasons that the appellate court, in its Decision dated 14
October 2004, already found that UCPB had committed several acts of serious irregularity
and conducted business in an unsafe and unsound manner. By reason thereof, there was no
more need for the Court of Appeals to remand this case to the BSP for a further
determination of whether there were irregular and unsound practices by UCPB, et al. in its
dealings with EGI. Should this case be remanded to the BSP, there would be nothing to
prevent the BSP from ruling again that UCPB, et al., did not commit any irregularity and
unsafe or unsound business practice. To require that this case be reviewed by the BSP would
only lead to multiplicity of suits, promote unnecessary delay and negate the constitutional
rights of all persons to a speedy disposition of their cases before all judicial, quasi-judicial or
administrative bodies.
The Court reiterates that the Court of Appeals did not yet make conclusive findings in its
Decision dated 14 October 2004, that UCPB, et al., committed irregularities and unsound or
unsafe banking practices in their business dealings with EGI. The appellate court only
adjudged that the BSP Monetary Board summarily dismissed the administrative complaint of
EGI, without fully appreciating the facts and evidence presented by the latter. Given the
seriousness of the charges of EGI against UCPB, et al., the BSP Monetary Board should have
conducted a more intensive inquiry and rendered a more comprehensive
decision.1avvphi1.zw+
By remanding the case to the BSP Monetary Board, the Court of Appeals only acted in
accordance with Republic Act No. 7653 and Republic Act No. 8791, which tasked the BSP,
through the Monetary Board, to determine whether a particular act or omission, which is not
otherwise prohibited by any law, rule or regulation affecting banks, quasi-banks or trust
entities, may be deemed as conducting business in an unsafe or unsound manner. Also, the
BSP Monetary Board is the proper body to impose the necessary administrative sanctions for
the erring bank and its directors or officers.

The Court of Appeals did not deem it appropriate, on appeal, to outright reverse the
judgment of the BSP Monetary Board. The Court of Appeals held that the BSP Monetary
Board did not have sufficient basis for dismissing the administrative complaint of EGI in its 16
September 2003 letter-decision; yet, the appellate court likewise did not find enough
evidence on record to already resolve the administrative complaint in favor of EGI and
against UCPB, et al., precisely the reason why it still remanded the case to the BSP Monetary
Board for further proceedings. The Court of Appeals never meant to give EGI an assurance of
a favorable judgment; it only ensured that the BSP Monetary Board shall accord all parties
concerned to equal opportunity for presentation and consideration of their allegations,
arguments, and evidence. While the speedy disposition of cases is a constitutionally
mandated right, the paramount duty of the courts, as well as quasi-judicial bodies, is to
render justice by following the basic rules and principles of due process and fair play.

WHEREFORE, premises considered, the Petition for Review on Certiorari of United Coconut
Planters Bank, Jeronimo U. Kilayko, Lorenzo V. Tan, Enrique L. Gana, Jaime W. Jacinto and
Emily R. Lazaro, in G.R. No. 168859; as well as the Petition for Review on Certiorari of E.
Ganzon, Inc. in G.R. No. 168897, are hereby DENIED. The Decision dated 14 October 2004
and Resolution dated 7 July 2005 of the Court of Appeals in CA-G.R. SP No. 81385 are hereby
AFFIRMED in toto. No costs.

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 168644 February 16, 2010
BSB GROUP, INC., represented by its President, Mr. RICARDO BANGAYAN, Petitioner,
vs.
SALLY GO a.k.a. SALLY GO-BANGAYAN, Respondent.
DECISION
PERALTA, J.:
This is a Petition for Review under Rule 45 of the Rules of Court assailing the Decision of the
Court of Appeals in CA-G.R. SP No. 876001 dated April 20, 2005, which reversed and set aside
the September 13, 20042 and November 5, 20043 Orders issued by the Regional Trial Court of
Manila, Branch 364 in Criminal Case No. 02-202158 for qualified theft. The said orders, in
turn, respectively denied the motion filed by herein respondent Sally Go for the suppression
of the testimonial and documentary evidence relative to a Security Bank account, and denied
reconsideration.
The basic antecedents are no longer disputed.
Petitioner, the BSB Group, Inc., is a duly organized domestic corporation presided by its
herein representative, Ricardo Bangayan (Bangayan). Respondent Sally Go, alternatively
referred to as Sally Sia Go and Sally Go-Bangayan, is Bangayan’s wife, who was employed in
the company as a cashier, and was engaged, among others, to receive and account for the
payments made by the various customers of the company.
In 2002, Bangayan filed with the Manila Prosecutor’s Office a complaint for estafa and/or
qualified theft5 against respondent, alleging that several checks6 representing the aggregate
amount of ₱1,534,135.50 issued by the company’s customers in payment of their obligation
were, instead of being turned over to the company’s coffers, indorsed by respondent who
deposited the same to her personal banking account maintained at Security Bank and Trust
Company (Security Bank) in Divisoria, Manila Branch.7 Upon a finding that the evidence
adduced was uncontroverted, the assistant city prosecutor recommended the filing of the
Information for qualified theft against respondent.8
Accordingly, respondent was charged before the Regional Trial Court of Manila, Branch 36, in
an Information, the inculpatory portion of which reads:
That in or about or sometime during the period comprised (sic) between January 1988 [and]
October 1989, inclusive, in the City of Manila, Philippines, the said accused did then and
there willfully, unlawfully and feloniously with intent [to] gain and without the knowledge
and consent of the owner thereof, take, steal and carry away cash money in the total amount
of ₱1,534,135.50 belonging to BSB GROUP OF COMPANIES represented by RICARDO
BANGAYAN, to the damage and prejudice of said owner in the aforesaid amount of
₱1,534,135.50, Philippine currency.
That in the commission of the said offense, said accused acted with grave abuse of
confidence, being then employed as cashier by said complainant at the time of the
commission of the said offense and as such she was entrusted with the said amount of
money.
Contrary to law.9
Respondent entered a negative plea when arraigned.10 The trial ensued. On the premise that
respondent had allegedly encashed the subject checks and deposited the corresponding
amounts thereof to her personal banking account, the prosecution moved for the issuance of
subpoena duces tecum /ad testificandum against the respective managers or records
custodians of Security Bank’s Divisoria Branch, as well as of the Asian Savings Bank (now
Metropolitan Bank & Trust Co. [Metrobank]), in Jose Abad Santos, Tondo, Manila
Branch.11 The trial court granted the motion and issued the corresponding subpoena. 12
Respondent filed a motion to quash the subpoena dated November 4, 2003, addressed to
Metrobank, noting to the court that in the complaint-affidavit filed with the prosecutor,
there was no mention made of the said bank account, to which respondent, in addition to
the Security Bank account identified as Account No. 01-14-006, allegedly deposited the
proceeds of the supposed checks. Interestingly, while respondent characterized the
Metrobank account as irrelevant to the case, she, in the same motion, nevertheless waived
her objection to the irrelevancy of the Security Bank account mentioned in the same
complaint-affidavit, inasmuch as she was admittedly willing to address the allegations with
respect thereto.13
Petitioner, opposing respondent’s move, argued for the relevancy of the Metrobank account
on the ground that the complaint-affidavit showed that there were two checks which
respondent allegedly deposited in an account with the said bank.14 To this, respondent filed a
supplemental motion to quash, invoking the absolutely confidential nature of the Metrobank
account under the provisions of Republic Act (R.A.) No. 1405.15 The trial court did not sustain
respondent; hence, it denied the motion to quash for lack of merit.16
Meanwhile, the prosecution was able to present in court the testimony of Elenita Marasigan
(Marasigan), the representative of Security Bank. In a nutshell, Marasigan’s testimony sought
to prove that between 1988 and 1989, respondent, while engaged as cashier at the BSB
Group, Inc., was able to run away with the checks issued to the company by its customers,
endorse the same, and credit the corresponding amounts to her personal deposit account
with Security Bank. In the course of the testimony, the subject checks were presented to
Marasigan for identification and marking as the same checks received by respondent,
endorsed, and then deposited in her personal account with Security Bank.17 But before the
testimony could be completed, respondent filed a Motion to Suppress,18 seeking the
exclusion of Marasigan’s testimony and accompanying documents thus far received, bearing
on the subject Security Bank account. This time respondent invokes, in addition to
irrelevancy, the privilege of confidentiality under R.A. No. 1405.
The trial court, nevertheless, denied the motion in its September 13, 2004 Order.19 A motion
for reconsideration was subsequently filed, but it was also denied in the Order dated
November 5, 2004.20 These two orders are the subject of the instant case.
Aggrieved, and believing that the trial court gravely abused its discretion in acting the way it
did, respondent elevated the matter to the Court of Appeals via a petition for certiorari
under Rule 65. Finding merit in the petition, the Court of Appeals reversed and set aside the
assailed orders of the trial court in its April 20, 2005 Decision.21The decision reads:
WHEREFORE, the petition is hereby GRANTED. The assailed orders dated September 13, 2004
and November 5, 2004 are REVERSED and SET ASIDE. The testimony of the SBTC
representative is ordered stricken from the records.
SO ORDERED.22
With the denial of its motion for reconsideration,23 petitioner is now before the Court
pleading the same issues as those raised before the lower courts.
In this Petition24 under Rule 45, petitioner averred in the main that the Court of Appeals had
seriously erred in reversing the assailed orders of the trial court, and in effect striking out
Marasigan’s testimony dealing with respondent’s deposit account with Security Bank.25 It
asserted that apart from the fact that the said evidence had a direct relation to the subject
matter of the case for qualified theft and, hence, brings the case under one of the exceptions
to the coverage of confidentiality under R.A. 1405.26 Petitioner believed that what
constituted the subject matter in litigation was to be determined by the allegations in the
information and, in this respect, it alluded to the assailed November 5, 2004 Order of the trial
court, which declared to be erroneous the limitation of the present inquiry merely to what
was contained in the information.27
For her part, respondent claimed that the money represented by the Security Bank account
was neither relevant nor material to the case, because nothing in the criminal information
suggested that the money therein deposited was the subject matter of the case. She invited
particular attention to that portion of the criminal Information which averred that she has
stolen and carried away cash money in the total amount of ₱1,534,135.50. She advanced the
notion that the term "cash money" stated in the Information was not synonymous with the
checks she was purported to have stolen from petitioner and deposited in her personal
banking account. Thus, the checks which the prosecution had Marasigan identify, as well as
the testimony itself of Marasigan, should be suppressed by the trial court at least for
violating respondent’s right to due process.28 More in point, respondent opined that
admitting the testimony of Marasigan, as well as the evidence pertaining to the Security Bank
account, would violate the secrecy rule under R.A. No. 1405.29
In its reply, petitioner asserted the sufficiency of the allegations in the criminal Information
for qualified theft, as the same has sufficiently alleged the elements of the offense charged. It
posits that through Marasigan’s testimony, the Court would be able to establish that the
checks involved, copies of which were attached to the complaint-affidavit filed with the
prosecutor, had indeed been received by respondent as cashier, but were, thereafter,
deposited by the latter to her personal account with Security Bank. Petitioner held that the
checks represented the cash money stolen by respondent and, hence, the subject matter in
this case is not only the cash amount represented by the checks supposedly stolen by
respondent, but also the checks themselves.30
We derive from the conflicting advocacies of the parties that the issue for resolution is
whether the testimony of Marasigan and the accompanying documents are irrelevant to the
case, and whether they are also violative of the absolutely confidential nature of bank
deposits and, hence, excluded by operation of R.A. No. 1405. The question of admissibility of
the evidence thus comes to the fore. And the Court, after deliberative estimation, finds the
subject evidence to be indeed inadmissible.
Prefatorily, fundamental is the precept in all criminal prosecutions, that the constitutive acts
of the offense must be established with unwavering exactitude and moral certainty because
this is the critical and only requisite to a finding of guilt. 31 Theft is present when a person,
with intent to gain but without violence against or intimidation of persons or force upon
things, takes the personal property of another without the latter’s consent. It is qualified
when, among others, and as alleged in the instant case, it is committed with abuse of
confidence.32 The prosecution of this offense necessarily focuses on the existence of the
following elements: (a) there was taking of personal property belonging to another; (b) the
taking was done with intent to gain; (c) the taking was done without the consent of the
owner; (d) the taking was done without violence against or intimidation of persons or force
upon things; and (e) it was done with abuse of confidence.33 In turn, whether these elements
concur in a way that overcomes the presumption of guiltlessness, is a question that must
pass the test of relevancy and competency in accordance with Section 334 Rule 128 of the
Rules of Court.
Thus, whether these pieces of evidence sought to be suppressed in this case the testimony
of Marasigan, as well as the checks purported to have been stolen and deposited in
respondent’s Security Bank account are relevant, is to be addressed by considering
whether they have such direct relation to the fact in issue as to induce belief in its existence
or non-existence; or whether they relate collaterally to a fact from which, by process of logic,
an inference may be made as to the existence or non-existence of the fact in issue.35
The fact in issue appears to be that respondent has taken away cash in the amount of
₱1,534,135.50 from the coffers of petitioner. In support of this allegation, petitioner seeks to
establish the existence of the elemental act of taking by adducing evidence that respondent,
at several times between 1988 and 1989, deposited some of its checks to her personal
account with Security Bank. Petitioner addresses the incongruence between the allegation of
theft of cash in the Information, on the one hand, and the evidence that respondent had first
stolen the checks and deposited the same in her banking account, on the other hand, by
impressing upon the Court that there obtains no difference between cash and check for
purposes of prosecuting respondent for theft of cash. Petitioner is mistaken.
In theft, the act of unlawful taking connotes deprivation of personal property of one by
another with intent to gain, and it is immaterial that the offender is able or unable to freely
dispose of the property stolen because the deprivation relative to the offended party has
already ensued from such act of execution.36 The allegation of theft of money, hence,
necessitates that evidence presented must have a tendency to prove that the offender has
unlawfully taken money belonging to another. Interestingly, petitioner has taken pains in
attempting to draw a connection between the evidence subject of the instant review, and
the allegation of theft in the Information by claiming that respondent had fraudulently
deposited the checks in her own name. But this line of argument works more prejudice than
favor, because it in effect, seeks to establish the commission, not of theft, but rather of some
other crime probably estafa.
Moreover, that there is no difference between cash and check is true in other instances. In
estafa by conversion, for instance, whether the thing converted is cash or check, is
immaterial in relation to the formal allegation in an information for that offense; a check,
after all, while not regarded as legal tender, is normally accepted under commercial usage as
a substitute for cash, and the credit it represents in stated monetary value is properly
capable of appropriation. And it is in this respect that what the offender does with the check
subsequent to the act of unlawfully taking it becomes material inasmuch as this offense is a
continuing one.37 In other words, in pursuing a case for this offense, the prosecution may
establish its cause by the presentation of the checks involved. These checks would then
constitute the best evidence to establish their contents and to prove the elemental act of
conversion in support of the proposition that the offender has indeed indorsed the same in
his own name.38
Theft, however, is not of such character. Thus, for our purposes, as the Information in this
case accuses respondent of having stolen cash, proof tending to establish that respondent
has actualized her criminal intent by indorsing the checks and depositing the proceeds
thereof in her personal account, becomes not only irrelevant but also immaterial and, on that
score, inadmissible in evidence.
We now address the issue of whether the admission of Marasigan’s testimony on the
particulars of respondent’s account with Security Bank, as well as of the corresponding
evidence of the checks allegedly deposited in said account, constitutes an unallowable
inquiry under R.A. 1405.
It is conceded that while the fundamental law has not bothered with the triviality of
specifically addressing privacy rights relative to banking accounts, there, nevertheless, exists
in our jurisdiction a legitimate expectation of privacy governing such accounts. The source of
this right of expectation is statutory, and it is found in R.A. No. 1405,39otherwise known as
the Bank Secrecy Act of 1955. 40
R.A. No. 1405 has two allied purposes. It hopes to discourage private hoarding and at the
same time encourage the people to deposit their money in banking institutions, so that it
may be utilized by way of authorized loans and thereby assist in economic
development.41 Owing to this piece of legislation, the confidentiality of bank deposits
remains to be a basic state policy in the Philippines.42 Section 2 of the law institutionalized
this policy by characterizing as absolutely confidential in general all deposits of whatever
nature with banks and other financial institutions in the country. It declares:
Section 2. All deposits of whatever nature with banks or banking institutions in the
Philippines including investments in bonds issued by the Government of the Philippines, its
political subdivisions and its instrumentalities, are hereby considered as of an absolutely
confidential nature and may not be examined, inquired or looked into by any person,
government official, bureau or office, except upon written permission of the depositor, or in
cases of impeachment, or upon order of a competent court in cases of bribery or dereliction
of duty of public officials, or in cases where the money deposited or invested is the subject
matter of the litigation.1avvphi1
Subsequent statutory enactments43 have expanded the list of exceptions to this policy yet
the secrecy of bank deposits still lies as the general rule, falling as it does within the legally
recognized zones of privacy.44 There is, in fact, much disfavor to construing these primary
and supplemental exceptions in a manner that would authorize unbridled discretion,
whether governmental or otherwise, in utilizing these exceptions as authority for
unwarranted inquiry into bank accounts. It is then perceivable that the present legal order is
obliged to conserve the absolutely confidential nature of bank deposits.45
The measure of protection afforded by the law has been explained in China Banking
Corporation v. Ortega.46 That case principally addressed the issue of whether the prohibition
against an examination of bank deposits precludes garnishment in satisfaction of a judgment.
Ruling on that issue in the negative, the Court found guidance in the relevant portions of the
legislative deliberations on Senate Bill No. 351 and House Bill No. 3977, which later became
the Bank Secrecy Act, and it held that the absolute confidentiality rule in R.A. No. 1405
actually aims at protection from unwarranted inquiry or investigation if the purpose of such
inquiry or investigation is merely to determine the existence and nature, as well as the
amount of the deposit in any given bank account. Thus,
x x x The lower court did not order an examination of or inquiry into the deposit of B&B
Forest Development Corporation, as contemplated in the law. It merely required Tan Kim
Liong to inform the court whether or not the defendant B&B Forest Development
Corporation had a deposit in the China Banking Corporation only for purposes of the
garnishment issued by it, so that the bank would hold the same intact and not allow any
withdrawal until further order. It will be noted from the discussion of the conference
committee report on Senate Bill No. 351 and House Bill No. 3977which later became Republic
Act No. 1405, that it was not the intention of the lawmakers to place banks deposits beyond
the reach of execution to satisfy a final judgmentThus:
x x x Mr. Marcos: Now, for purposes of the record, I should like the Chairman of the
Committee on Ways and Means to clarify this further. Suppose an individual has a tax case.
He is being held liable by the Bureau of Internal Revenue [(BIR)] or, say, ₱1,000.00 worth of
tax liability, and because of this the deposit of this individual [has been] attached by the
[BIR].
Mr. Ramos: The attachment will only apply after the court has pronounced sentence
declaring the liability of such person. But where the primary aim is to determine whether he
has a bank deposit in order to bring about a proper assessment by the [BIR], such inquiry is
not allowed by this proposed law.
Mr. Marcos: But under our rules of procedure and under the Civil Code, the attachment or
garnishment of money deposited is allowed. Let us assume for instance that there is a
preliminary attachment which is for garnishment or for holding liable all moneys deposited
belonging to a certain individual, but such attachment or garnishment will bring out into the
open the value of such deposit. Is that prohibited by... the law?
Mr. Ramos: It is only prohibited to the extent that the inquiry... is made only for the purpose
of satisfying a tax liability already declared for the protection of the right in favor of the
government; but when the object is merely to inquire whether he has a deposit or not for
purposes of taxation, then this is fully covered by the law. x x x
Mr. Marcos: The law prohibits a mere investigation into the existence and the amount of the
deposit.
Mr. Ramos: Into the very nature of such deposit. x x x47
In taking exclusion from the coverage of the confidentiality rule, petitioner in the instant case
posits that the account maintained by respondent with Security Bank contains the proceeds
of the checks that she has fraudulently appropriated to herself and, thus, falls under one of
the exceptions in Section 2 of R.A. No. 1405 that the money kept in said account is the
subject matter in litigation. To highlight this thesis, petitioner avers, citing Mathay v.
Consolidated Bank and Trust Co.,48 that the subject matter of the action refers to the physical
facts; the things real or personal; the money, lands, chattels and the like, in relation to which
the suit is prosecuted, which in the instant case should refer to the money deposited in the
Security Bank account.49 On the surface, however, it seems that petitioner’s theory is valid to
a point, yet a deeper treatment tends to show that it has argued quite off-tangentially. This,
because, while Mathay did explain what the subject matter of an action is, it nevertheless did
so only to determine whether the class suit in that case was properly brought to the court.
What indeed constitutes the subject matter in litigation in relation to Section 2 of R.A. No.
1405 has been pointedly and amply addressed in Union Bank of the Philippines v. Court of
Appeals,50 in which the Court noted that the inquiry into bank deposits allowable under R.A.
No. 1405 must be premised on the fact that the money deposited in the account is itself the
subject of the action.51 Given this perspective, we deduce that the subject matter of the
action in the case at bar is to be determined from the indictment that charges respondent
with the offense, and not from the evidence sought by the prosecution to be admitted into
the records. In the criminal Information filed with the trial court, respondent, unqualifiedly
and in plain language, is charged with qualified theft by abusing petitioner’s trust and
confidence and stealing cash in the amount of ₱1,534,135.50. The said Information makes no
factual allegation that in some material way involves the checks subject of the testimonial
and documentary evidence sought to be suppressed. Neither do the allegations in said
Information make mention of the supposed bank account in which the funds represented by
the checks have allegedly been kept.
In other words, it can hardly be inferred from the indictment itself that the Security Bank
account is the ostensible subject of the prosecution’s inquiry. Without needlessly expanding
the scope of what is plainly alleged in the Information, the subject matter of the action in this
case is the money amounting to ₱1,534,135.50 alleged to have been stolen by respondent,
and not the money equivalent of the checks which are sought to be admitted in evidence.
Thus, it is that, which the prosecution is bound to prove with its evidence, and no other.
It comes clear that the admission of testimonial and documentary evidence relative to
respondent’s Security Bank account serves no other purpose than to establish the existence
of such account, its nature and the amount kept in it. It constitutes an attempt by the
prosecution at an impermissible inquiry into a bank deposit account the privacy and
confidentiality of which is protected by law. On this score alone, the objection posed by
respondent in her motion to suppress should have indeed put an end to the controversy at
the very first instance it was raised before the trial court.
In sum, we hold that the testimony of Marasigan on the particulars of respondent’s supposed
bank account with Security Bank and the documentary evidence represented by the checks
adduced in support thereof, are not only incompetent for being excluded by operation of
R.A. No. 1405. They are likewise irrelevant to the case, inasmuch as they do not appear to
have any logical and reasonable connection to the prosecution of respondent for qualified
theft. We find full merit in and affirm respondent’s objection to the evidence of the
prosecution. The Court of Appeals was, therefore, correct in reversing the assailed orders of
the trial court.
A final note. In any given jurisdiction where the right of privacy extends its scope to include
an individual’s financial privacy rights and personal financial matters, there is an intermediate
or heightened scrutiny given by courts and legislators to laws infringing such rights.52 Should
there be doubts in upholding the absolutely confidential nature of bank deposits against
affirming the authority to inquire into such accounts, then such doubts must be resolved in
favor of the former. This attitude persists unless congress lifts its finger to reverse the
general state policy respecting the absolutely confidential nature of bank deposits.53
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No.
87600 dated April 20, 2005, reversing the September 13, 2004 and November 5, 2004 Orders
of the Regional Trial Court of Manila, Branch 36 in Criminal Case No. 02-202158, is
AFFIRMED.
SO ORDERED.
G.R. No. L-34964 January 31, 1973
CHINA BANKING CORPORATION and TAN KIM LIONG, petitioners-appellants,
vs.
HON. WENCESLAO ORTEGA, as Presiding Judge of the Court of First Instance of Manila,
Branch VIII, and VICENTE G. ACABAN, respondents-appellees.
Sy Santos, Del Rosario and Associates for petitioners-appellants.
Tagalo, Gozar and Associates for respondents-appellees.
MAKALINTAL, J.:
The only issue in this petition for certiorari to review the orders dated March 4, 1972 and
March 27, 1972, respectively, of the Court of First Instance of Manila in its Civil Case No.
75138, is whether or not a banking institution may validly refuse to comply with a court
process garnishing the bank deposit of a judgment debtor, by invoking the provisions of
Republic Act No. 1405. *
On December 17, 1968 Vicente Acaban filed a complaint in the court a quo against Bautista
Logging Co., Inc., B & B Forest Development Corporation and Marino Bautista for the
collection of a sum of money. Upon motion of the plaintiff the trial court declared the
defendants in default for failure to answer within the reglementary period, and authorized
the Branch Clerk of Court and/or Deputy Clerk to receive the plaintiff's evidence. On January
20, 1970 judgment by default was rendered against the defendants.
To satisfy the judgment, the plaintiff sought the garnishment of the bank deposit of the
defendant B & B Forest Development Corporation with the China Banking Corporation.
Accordingly, a notice of garnishment was issued by the Deputy Sheriff of the trial court and
served on said bank through its cashier, Tan Kim Liong. In reply, the bank' cashier invited the
attention of the Deputy Sheriff to the provisions of Republic Act No. 1405 which, it was
alleged, prohibit the disclosure of any information relative to bank deposits. Thereupon the
plaintiff filed a motion to cite Tan Kim Liong for contempt of court.
In an order dated March 4, 1972 the trial court denied the plaintiff's motion. However, Tan
Kim Liong was ordered "to inform the Court within five days from receipt of this order
whether or not there is a deposit in the China Banking Corporation of defendant B & B Forest
Development Corporation, and if there is any deposit, to hold the same intact and not allow
any withdrawal until further order from this Court." Tan Kim Liong moved to reconsider but
was turned down by order of March 27, 1972. In the same order he was directed "to comply
with the order of this Court dated March 4, 1972 within ten (10) days from the receipt of
copy of this order, otherwise his arrest and confinement will be ordered by the Court."
Resisting the two orders, the China Banking Corporation and Tan Kim Liong instituted the
instant petition.
The pertinent provisions of Republic Act No. 1405 relied upon by the petitioners reads:
Sec. 2. All deposits of whatever nature with banks or banking institutions in the Philippines
including investments in bonds issued by the Government of the Philippines, its political
subdivisions and its instrumentalities, are hereby considered as of absolutely confidential
nature and may not be examined, inquired or looked into by any person, government official,
bureau or office, except upon written permission of the depositor, or in cases of
impeachment, or upon order of a competent court in cases of bribery or dereliction of duty
of public officials, or in cases where the money deposited or invested is the subject matter of
the litigation.
Sec 3. It shall be unlawful for any official or employee of a banking institution to disclose to
any person other than those mentioned in Section two hereof any information concerning
said deposits.
Sec. 5. Any violation of this law will subject offender upon conviction, to an imprisonment of
not more than five years or a fine of not more than twenty thousand pesos or both, in the
discretion of the court.
The petitioners argue that the disclosure of the information required by the court does not
fall within any of the four (4) exceptions enumerated in Section 2, and that if the questioned
orders are complied with Tan Kim Liong may be criminally liable under Section 5 and the
bank exposed to a possible damage suit by B & B Forest Development Corporation.
Specifically referring to this case, the position of the petitioners is that the bank deposit of
judgment debtor B & B Forest Development Corporation cannot be subject to garnishment to
satisfy a final judgment against it in view of the aforequoted provisions of law.
We do not view the situation in that light. The lower court did not order an examination of or
inquiry into the deposit of B & B Forest Development Corporation, as contemplated in the
law. It merely required Tan Kim Liong to inform the court whether or not the defendant B &
B Forest Development Corporation had a deposit in the China Banking Corporation only for
purposes of the garnishment issued by it, so that the bank would hold the same intact and
not allow any withdrawal until further order. It will be noted from the discussion of the
conference committee report on Senate Bill No. 351 and House Bill No. 3977, which later
became Republic Act 1405, that it was not the intention of the lawmakers to place bank
deposits beyond the reach of execution to satisfy a final judgment. Thus:
Mr. MARCOS. Now, for purposes of the record, I should like the Chairman of the Committee
on Ways and Means to clarify this further. Suppose an individual has a tax case. He is being
held liable by the Bureau of Internal Revenue for, say, P1,000.00 worth of tax liability, and
because of this the deposit of this individual is attached by the Bureau of Internal Revenue.
Mr. RAMOS. The attachment will only apply after the court has pronounced sentence
declaring the liability of such person. But where the primary aim is to determine whether he
has a bank deposit in order to bring about a proper assessment by the Bureau of Internal
Revenue, such inquiry is not authorized by this proposed law.
Mr. MARCOS. But under our rules of procedure and under the Civil Code, the attachment or
garnishment of money deposited is allowed. Let us assume, for instance, that there is a
preliminary attachment which is for garnishment or for holding liable all moneys deposited
belonging to a certain individual, but such attachment or garnishment will bring out into the
open the value of such deposit. Is that prohibited by this amendment or by this law?
Mr. RAMOS. It is only prohibited to the extent that the inquiry is limited, or rather, the
inquiry is made only for the purpose of satisfying a tax liability already declared for the
protection of the right in favor of the government; but when the object is merely to inquire
whether he has a deposit or not for purposes of taxation, then this is fully covered by the
law.
Mr. MARCOS. And it protects the depositor, does it not?
Mr. RAMOS. Yes, it protects the depositor.
Mr. MARCOS. The law prohibits a mere investigation into the existence and the amount of
the deposit.
Mr. RAMOS. Into the very nature of such deposit.
Mr. MARCOS. So I come to my original question. Therefore, preliminary garnishment or
attachment of the deposit is not allowed?
Mr. RAMOS. No, without judicial authorization.
Mr. RAMOS. That was the question raised by the gentleman from Pangasinan to which I
replied that outside the very purpose of this law it could be reached by attachment.
Mr. MACAPAGAL. Therefore, in such ordinary civil cases it can be attached?
Mr. RAMOS. That is so.
(Vol. II, Congressional Record, House of Representatives, No. 12, pp. 3839-3840, July 27,
1955).
It is sufficiently clear from the foregoing discussion of the conference committee report of
the two houses of Congress that the prohibition against examination of or inquiry into a bank
deposit under Republic Act 1405 does not preclude its being garnished to insure satisfaction
of a judgment. Indeed there is no real inquiry in such a case, and if the existence of the
deposit is disclosed the disclosure is purely incidental to the execution process. It is hard to
conceive that it was ever within the intention of Congress to enable debtors to evade
payment of their just debts, even if ordered by the Court, through the expedient of
converting their assets into cash and depositing the same in a bank.
WHEREFORE, the orders of the lower court dated March 4 and 27, 1972, respectively, are
hereby affirmed, with costs against the petitioners-appellants.

Mr. MARCOS. I am glad that is clarified. So that the established rule of procedure as well as
the substantive law on the matter is amended?

Mr. RAMOS. Yes. That is the effect.

Mr. MARCOS. I see. Suppose there has been a decision, definitely establishing the liability of
an individual for taxation purposes and this judgment is sought to be executed ... in the
execution of that judgment, does this bill, or this proposed law, if approved, allow the
investigation or scrutiny of the bank deposit in order to execute the judgment?

Mr. RAMOS. To satisfy a judgment which has become executory.

Mr. MARCOS. Yes, but, as I said before, suppose the tax liability is P1,000,000 and the deposit
is half a million, will this bill allow scrutiny into the deposit in order that the judgment may be
executed?

Mr. RAMOS. Merely to determine the amount of such money to satisfy that obligation to the
Government, but not to determine whether a deposit has been made in evasion of taxes.

xxx xxx xxx

Mr. MACAPAGAL. But let us suppose that in an ordinary civil action for the recovery of a sum
of money the plaintiff wishes to attach the properties of the defendant to insure the
satisfaction of the judgment. Once the judgment is rendered, does the gentleman mean that
the plaintiff cannot attach the bank deposit of the defendant?
G.R. No. 107303 February 21, 1994
EMMANUEL C. OÑATE and ECON HOLDINGS CORPORATION, petitioners,
vs.
HON. ZUES C. ABROGAR, as Presiding Judge of Branch 150 of the Regional Trial Court of
Makati, and SUN LIFE ASSURANCE COMPANY OF CANADA, respondents.
G.R. No. 107491 February 21, 1994
BRUNNER DEVELOPMENT CORPORATION, petitioner,
vs.
HON. ZUES C. ABROGAR, as Presiding Judge of Branch 150 of the Regional Trial Court of
Makati, and SUN LIFE ASSURANCE COMPANY OF CANADA, respondents.
Florante A. Bautista for petitioner in G.R. No. 107303.
Andin & Andin Law Offices for Brunner Development Corporation.
Quasha, Asperilla, Ancheta, Pena & Nolasco for Sun Life Assurance Company of Canada.
NOCON, J.:
These are separate petitions for certiorari with a prayer for temporary restraining order filed
by Emmanuel C. Oñate and Econ Holdings Corporation (in G.R. No. 107303), and Brunner
Development Corporation (in G.R. No. 107491), both of which assail several orders issued by
respondent Judge Zues C. Abrogar in Civil Case No. 91-3506.
The pertinent facts are as follows: On December 23, 1991, respondent Sun Life Assurance
Company of Canada (Sun Life, for brevity) filed a complaint for a sum of money with a prayer
for the immediate issuance of a writ of attachment against petitioners, and Noel L. Diño,
which was docketed as Civil Case No. 91-3506 and raffled to Branch 150 of the RTC Makati,
presided over by respondent Judge. The following day, December 24, 1991, respondent
Judge issued an order granting the issuance of a writ of attachment, and the writ was actually
issued on December 27, 1991.
On January 3, 1992, upon Sun Life's ex-parte motion, the trial court amended the writ of
attachment to reflect the alleged amount of the indebtedness. That same day, Deputy Sheriff
Arturo C. Flores, accompanied by a representative of Sun Life, attempted to serve summons
and a copy of the amended writ of attachment upon petitioners at their known office
address at 108 Aguirre St., Makati but was not able to do so since there was no responsible
officer to receive the same.1 Nonetheless, Sheriff Flores proceeded, over a period of several
days, to serve notices of garnishment upon several commercial banks and financial
institutions, and levied on attachment a condominium unit and a real property belonging to
petitioner Oñate.
Summons was eventually served upon petitioners on January 9, 1992, while defendant Diño
was served with summons on January 16, 1992.
On January 21, 1992, petitioners filed an "Urgent Motion to Discharge/Dissolve Writ of
Attachment." That same day, Sun Life filed an ex-parte motion to examine the books of
accounts and ledgers of petitioner Brunner Development Corporation (Brunner, for brevity)
at the Urban Bank, Legaspi Village Branch, and to obtain copies thereof, which motion was
granted by respondent Judge. The examination of said account took place on January 23,
1992. Petitioners filed a motion to nullify the proceedings taken thereat since they were not
present.
On January 30, 1992, petitioners and their co-defendants filed a memorandum in support of
the motion to discharge attachment. Also on that same day, Sun Life filed another motion for
examination of bank accounts, this time seeking the examination of Account No. 0041-0277-
03 with the Bank of Philippine Islands (BPI) — which, incidentally, petitioners claim not to be
owned by them — and the records of Philippine National Bank (PNB) with regard to checks
payable to Brunner. Sun Life asked the court to order both banks to comply with the notice
of garnishment.
On February 6, 1992, respondent Judge issued an order (1) denying petitioners' and the co-
defendants' motion to discharge the amended writ of attachment, (2) approving Sun Life's
additional attachment, (3) granting Sun Life's motion to examine the BPI account, and (4)
denying petitioners' motion to nullify the proceedings of January 23, 1992.
On March 12, 1992, petitioners filed a motion for reconsideration of the February 6, 1992
order. On September 6, 1992, respondent Judge denied the motion for reconsideration.
Hence, the instant petitions. Petitioners' basic argument is that respondent Judge had acted
with grave abuse of discretion amounting to lack or in excess of jurisdiction in (1) issuing ex
parte the original and amended writs of preliminary attachment and the corresponding
notices of garnishment and levy on attachment since the trial court had not yet acquired
jurisdiction over them; and (2) allowing the examination of the bank records though no
notice was given to them.
We find both petitions unmeritorious.
Petitioners initially argue that respondent Judge erred in granting Sun Life's prayer for a writ
of preliminary attachment on the ground that the trial court had not acquired jurisdiction
over them. This argument is clearly unavailing since it is well-settled that a writ of preliminary
attachment may be validly applied for and granted even before the defendant is summoned
or is heard from.2 The rationale behind this rule was stated by the Court in this wise:
A preliminary attachment may be defined, paraphrasing the Rules of Court, as the provisional
remedy in virtue of which a plaintiff or other proper party may, at the commencement of the
action or any time thereafter, have the property of the adverse party taken into the custody
of the court as security for the satisfaction of any judgment that may be recovered. It is a
remedy which is purely statutory in respect of which the law requires a strict construction of
the provisions granting it. Withal no principle, statutory or jurisprudential, prohibits its
issuance by any court before acquisition of jurisdiction over the person of the defendant.
Rule 57 in fact speaks of the grant of the remedy "at the commencement of the action or at
any time thereafter." The phrase "at the commencement of the action," obviously refers to
the date of the filing of the complaint — which, as abovepointed out, its the date that marks
"the commencement of the action;" and the reference plainly is to a time before summons is
served on the defendant or even before summons issues. What the rule is saying quite
clearly is that after an action is properly
commenced — by the filing of the complaint and the payment of all requisite docket and
other fees — the plaintiff may apply for and obtain a writ of preliminary attachment upon
fulfillment of the pertinent requisites laid down by law, and that he may do so at any time,
either before or after service of summons on the defendant. And this indeed, has been the
immemorial practice sanctioned by the courts: for the plaintiff or other proper party to
incorporate the application for attachment in the complaint or other appropriate pleading
(counterclaim, cross-claim, third-party claim) and for the Trial Court to issue the writ ex-
parte at the commencement of the action if it finds the application otherwise sufficient in
form and substance.3
Petitioners then contended that the writ should have been discharged since the ground on
which it was issued — fraud in contracting the obligation — was not present. This cannot be
considered a ground for lifting the writ since this delves into the very complaint of the Sun
Life. As this Court stated in Cuatro v. Court of Appeals:4
Moreover, an attachment may not be dissolved by a showing of its irregular or improper
issuance if it is upon a ground which is at the same time the applicant's cause of action in the
main case since an anomalous situation would result if the issues of the main case would be
ventilated and resolved in a mere hearing of the motion (Davao Light and Power Co., Inc. vs.
Court of Appeals, supra, The Consolidated Bank and Trust Corp. (Solidbank) vs. Court of
Appeals, 197 SCRA 663 [1991]).
In the present case, one of the allegation in petitioner's complaint below is that the
defendant spouses induced the plaintiff to grant the loan by issuing postdated checks to
cover the installment payments and a separate set of postdated checks for payment of the
stipulated interest (Annex "B"). The issue of fraud, then, is clearly within the competence of
the lower court in the main action.5
The fact that a criminal complaint for estafa filed by Sun Life against the petitioners was
dismissed by the Provincial Prosecutor of Rizal for Makati on April 21, 1992 and was upheld
by the Provincial Prosecutor on July 13, 1992 is of no moment since the same can be
indicative only of the absence of criminal liability, but not of civil liability. Besides, Sun Life
had elevated the case for review to the Department of Justice, where the case is presently
pending.
Finally, petitioners argue that the enforcement of the writ was invalid since it undisputedly
preceded the actual service of summons by six days at most. Petitioners cite the decisions
in Sievert vs. Court of Appeals, et al.6 and BAC Manufacturing and Sales Corp. vs. Court of
Appeals, et al.,7 wherein this Court held that enforcement of the writ of attachment can not
bind the defendant in view of the failure of the trial court to acquire jurisdiction over the
defendant through either summons or his voluntary appearance.
We do not agree entirely with petitioners. True, this Court had held in a recent decision that
the enforcement of writ of attachment may not validly be effected until and unless
proceeded or contemporaneously accompanied by service of summons.8
But we must distinguish the case at bar from the Sievert and BAC Manufacturing cases. In
those two cases, summons was never served upon the defendants. The plaintiffs therein did
not even attempt to cause service of summons upon the defendants, right up to the time the
cases went up to this Court. This is not true in the case at bar. The records reveal that Sheriff
Flores and Sun Life did attempt a contemporaneous service of both summons and the writ of
attachment on January 3, 1992, but we stymied by the absence of a responsible officer in
petitioners' offices. Note is taken of the fact that petitioners Oñate and Econ Holdings
admitted in their answer9 that the offices of both Brunner Development Corporation and
Econ Holdings were located at the same address and that petitioner Oñate is the President of
Econ Holdings while petitioner Diño is the President of Brunner Development Corporation as
well as a stockholder and director of Econ Holdings.
Thus, an exception to the established rule on the enforcement of the writ of attachment can
be made where a previous attempt to serve the summons and the writ of attachment failed
due to factors beyond the control of either the plaintiff or the process server, provided that
such service is effected within a reasonable period thereafter.
Several reasons can be given for the exception. First, there is a possibility that a defendant,
having been alerted of plaintiffs action by the attempted service of summons and the writ of
attachment, would put his properties beyond the reach of the plaintiff while the latter is
trying to serve the summons and the writ anew. By the time the plaintiff may have caused
the service of summons and the writ, there might not be any property of the defendant left
to attach.
Second, the court eventually acquired jurisdiction over the petitioners six days later. To
nullify the notices of garnishment issued prior thereto would again open the possibility that
petitioners would transfer the garnished monies while Sun Life applied for new notices of
garnishment.
Third, the ease by which a writ of attachment can be obtained is counter-balanced by the
ease by which the same can be discharged: the defendant can either make a cash deposit or
post a counter-bond equivalent to the value of the property attached. 10 The petitioners
herein tried to have the writ of attachment discharged by posting a counter-bond, the same
was denied by respondent Judge on the ground that the amount of the counter-bond was
less than that of Sun Life's bond.
II.
Petitioners' second ground assail the acts of respondent Judge in allowing the examination of
Urban Banks' records and in ordering that the examination of the bank records of BPI and
PNB as invalid since no notice of said examinations were ever given them. Sun Life grounded
its requests for the examination of the bank accounts on Section 10, Rule 57 of the Rules of
Court, which provided, to wit:
Sec. 10. Examination of party whose property is attached and persons indebted to him or
controlling his property; delivery of property to officer. — Any person owing debts to the
party whose property is attached or having in his possession or under his control any credit
or other personal property belonging to such party, may be required to attend before the
court in which the action is pending, or before a commissioner appointed by the court and be
examined on oath respecting the same. The party whose property is attached may also be
required to attend for the purpose of giving information respecting his property, and may be
examined on oath. The court may, after such examination, order personal property capable
of manual delivery belonging to him, in the possession of the person so required to attend
before the court, to be delivered to the clerk or court, sheriff, or other proper officer on such
terms as may be just, having reference to any lien thereon or claim against the same, to
await the judgment in the action.

It is clear from the foregoing provision that notice need only be given to the garnishee, but
the person who is holding property or credits belonging to the defendant. The provision does
not require that notice be furnished the defendant himself, except when there is a need to
examine said defendant "for the purpose of giving information respecting his property.

Furthermore, Section 10 Rule 57 is not incompatible with Republic Act No. 1405, as
amended, "An Act Prohibiting Disclosure or Inquiry Into, Deposits With Any Banking
Institution and Providing Penalty Therefore," for Section 2 therefore provides an exception
"in cases where the money deposited or invested is the subject matter of the litigation."

The examination of the bank records is not a fishing expedition, but rather a method by
which Sun Life could trace the proceeds of the check it paid to petitioners.

WHEREFORE, the instant petitions are hereby DISMISSED. The temporary restraining order
issued on June 28, 1993 is hereby lifted.

SO ORDERED.
SECOND DIVISION
G.R. No. 128996 February 15, 2002
CARMEN LL. INTENGAN, ROSARIO LL. NERI, and RITA P. BRAWNER, petitioners,
vs.
COURT OF APPEALS, DEPARTMENT OF JUSTICE, AZIZ RAJKOTWALA, WILLIAM FERGUSON,
JOVEN REYES, and VIC LIM, respondents.
DECISION
DE LEON, JR., J.:
Before us is a petition for review on certiorari, seeking the reversal of the Decision1 dated July
8, 1996 of the former Fifteenth Division2 of the Court of Appeals in CA-G.R. SP No. 37577 as
well as its Resolution3 dated April 16, 1997 denying petitioners’ motion for reconsideration.
The appellate court, in its Decision, sustained a resolution of the Department of Justice
ordering the withdrawal of informations for violation of Republic Act No. 1405 against private
respondents.
The facts are:
On September 21, 1993, Citibank filed a complaint for violation of section 31,4 in relation to
section 1445 of the Corporation Code against two (2) of its officers, Dante L. Santos and
Marilou Genuino. Attached to the complaint was an affidavit6 executed by private
respondent Vic Lim, a vice-president of Citibank. Pertinent portions of his affidavit are quoted
hereunder:
2.1 Sometime this year, the higher management of Citibank, N.A. assigned me to assist in the
investigation of certain anomalous/highly irregular activities of the Treasurer of the Global
Consumer Group of the bank, namely, Dante L. Santos and the Asst. Vice President in the
office of Mr. Dante L. Santos, namely Ms. Marilou (also called Malou) Genuino. Ms. Marilou
Genuino apart from being an Assistant Vice President in the office of Mr. Dante L. Santos also
performed the duties of an Account Officer. An Account Officer in the office of Mr. Dante L.
Santos personally attends to clients of the bank in the effort to persuade clients to place and
keep their monies in the products of Citibank, NA., such as peso and dollar deposits,
mortgage backed securities and money placements, among others.
xxx xxx xxx
4.1 The investigation in which I was asked to participate was undertaken because the bank
had found records/evidence showing that Mr. Dante L. Santos and Ms. Malou Genuino,
contrary to their disclosures and the aforementioned bank policy, appeared to have been
actively engaged in business endeavors that were in conflict with the business of the bank. It
was found that with the use of two (2) companies in which they have personal financial
interest, namely Torrance Development Corporation and Global Pacific Corporation, they
managed or caused existing bank clients/depositors to divert their money from Citibank,
N.A., such as those placed in peso and dollar deposits and money placements, to products
offered by other companies that were commanding higher rate of yields. This was done by
first transferring bank clients’ monies to Torrance and Global which in turn placed the monies
of the bank clients in securities, shares of stock and other certificates of third parties. It also
appeared that out of these transactions, Mr. Dante L. Santos and Ms. Marilou Genuino
derived substantial financial gains.
5.1 In the course of the investigation, I was able to determine that the bank clients which Mr.
Santos and Ms. Genuino helped/caused to divert their deposits/money placements with
Citibank, NA. to Torrance and Global (their family corporations) for subsequent investment in
securities, shares of stocks and debt papers in other companies were as follows:
xxx
b) Carmen Intengan
xxx
d) Rosario Neri
xxx
i) Rita Brawner
All the above persons/parties have long standing accounts with Citibank, N.A. in
savings/dollar deposits and/or in trust accounts and/or money placements.
As evidence, Lim annexed bank records purporting to establish the deception practiced by
Santos and Genuino. Some of the documents pertained to the dollar deposits of petitioners
Carmen Ll. Intengan, Rosario Ll. Neri, and Rita P. Brawner, as follows:
a) Annex "A-6"7 - an "Application for Money Transfer" in the amount of US $140,000.00,
executed by Intengan in favor of Citibank $ S/A No. 24367796, to be debited from her
Account No. 22543341;
b) Annex "A-7"8 - a "Money Transfer Slip" in the amount of US $45,996.30, executed by
Brawner in favor of Citibank $ S/A No. 24367796, to be debited from her Account No.
22543236; and
c) Annex "A-9"9 - an "Application for Money Transfer" in the amount of US $100,000.00,
executed by Neri in favor of Citibank $ S/A No. 24367796, to be debited from her Account
No. 24501018.
In turn, private respondent Joven Reyes, vice-president/business manager of the Global
Consumer Banking Group of Citibank, admits to having authorized Lim to state the names of
the clients involved and to attach the pertinent bank records, including those of
petitioners’.10 He states that private respondents Aziz Rajkotwala and William Ferguson,
Citibank, N.A. Global Consumer Banking Country Business Manager and Country Corporate
Officer, respectively, had no hand in the disclosure, and that he did so upon the advice of
counsel.
In his memorandum, the Solicitor General described the scheme as having been conducted in
this manner:
First step: Santos and/or Genuino would tell the bank client that they knew of financial
products of other companies that were yielding higher rates of interests in which the bank
client can place his money. Acting on this information, the bank client would then authorize
the transfer of his funds from his Citibank account to the Citibank account of either Torrance
or Global.
The transfer of the Citibank client’s deposits was done through the accomplishment of either
an Application For Manager’s Checks or a Term Investment Application in favor of Global or
Torrance that was prepared/filed by Genuino herself.
Upon approval of the Application for Manager’s Checks or Term Investment Application, the
funds of the bank client covered thereof were then deposited in the Citibank accounts of
Torrance and/or Global.
Second step: Once the said fund transfers had been effected, Global and/or Torrance would
then issue its/ their checks drawn against its/their Citibank accounts in favor of the other
companies whose financial products, such as securities, shares of stocks and other
certificates, were offering higher yields.
Third step: On maturity date(s) of the placements made by Torrance and/or Global in the
other companies, using the monies of the Citibank client, the other companies would then.
return the placements to Global and/or Torrance with the corresponding interests earned.
Fourth step: Upon receipt by Global and/or Torrance of the remittances from the other
companies, Global and/or Torrance would then issue its/their own checks drawn against
their Citibank accounts in favor of Santos and Genuino.
The amounts covered by the checks represent the shares of Santos and Genuino in the
margins Global and/or Torrance had realized out of the placements [using the diverted
monies of the Citibank clients] made with the other companies.
Fifth step: At the same time, Global and/or Torrance would also issue its/their check(s) drawn
against its/their Citibank accounts in favor of the bank client.
The check(s) cover the principal amount (or parts thereof) which the Citibank client had
previously transferred, with the help of Santos and/or Genuino, from his Citibank account to
the Citibank account(s) of Global and/or Torrance for placement in the other companies, plus
the interests or earnings his placements in other companies had made less the spreads made
by Global, Torrance, Santos and Genuino.
The complaints which were docketed as I.S. Nos. 93-9969, 93-10058 and 94-1215 were
subsequently amended to include a charge of estafa under Article 315, paragraph 1(b)11 of
the Revised Penal Code.
As an incident to the foregoing, petitioners filed respective motions for the exclusion and
physical withdrawal of their bank records that were attached to Lim’s affidavit.
In due time, Lim and Reyes filed their respective counter-affidavits.12 In separate Memoranda
dated March 8, 1994 and March 15, 1994 2nd Assistant Provincial Prosecutor Hermino T.
Ubana, Sr. recommended the dismissal of petitioners’ complaints. The recommendation was
overruled by Provincial Prosecutor Mauro M. Castro who, in a Resolution dated August 18,
1994,13 directed the filing of informations against private respondents for alleged violation of
Republic Act No. 1405, otherwise known as the Bank Secrecy Law.
Private respondents’ counsel then filed an appeal before the Department of Justice (DOJ). On
November 17, 1994, then DOJ Secretary Franklin M. Drilon issued a
Resolution14 ordering, inter alia, the withdrawal of the aforesaid informations against private
respondents. Petitioners’ motion for reconsideration15 was denied by DOJ Acting Secretary
Demetrio G. Demetria in a Resolution dated March 6, 1995.16
Initially, petitioners sought the reversal of the DOJ resolutions via a petition
for certiorari and mandamus filed with this Court, docketed as G.R. No. 119999-120001.
However, the former First Division of this Court, in a Resolution dated June 5,
1995,17 referred the matter to the Court of the Appeals, on the basis of the latter tribunal’s
concurrent jurisdiction to issue the extraordinary writs therein prayed for. The petition was
docketed as CA-G.R. SP No. 37577 in the Court of Appeals.
On July 8, 1996, the Court of Appeals rendered judgment dismissing the petition in CA-G.R.
SP No. 37577 and declared therein, as follows:
Clearly, the disclosure of petitioners’ deposits was necessary to establish the allegation that
Santos and Genuino had violated Section 31 of the Corporation Code in acquiring "any
interest adverse to the corporation in respect of any matter which has been reposed in him
in confidence." To substantiate the alleged scheme of Santos and Genuino, private
respondents had to present the records of the monies which were manipulated by the two
officers which included the bank records of herein petitioners.
Although petitioners were not the parties involved in IS. No. 93-8469, their accounts were
relevant to the complete prosecution of the case against Santos and Genuino and the
respondent DOJ properly ruled that the disclosure of the same falls under the last exception
of R.A. No. 1405. That ruling is consistent with the principle laid down in the case of Mellon
Bank, N.A. vs. Magsino (190 SCRA 633) where the Supreme Court allowed the testimonies on
the bank deposits of someone not a party to the case as it found that said bank deposits
were material or relevant to the allegations in the complaint. Significantly, therefore, as long
as the bank deposits are material to the case, although not necessarily the direct subject
matter thereof, a disclosure of the same is proper and falls within the scope of the
exceptions provided for by R.A. No. 1405.
xxx xxx xxx
Moreover, the language of the law itself is clear and cannot be subject to different
interpretations. A reading of the provision itself would readily reveal that the exception "or in
cases where the money deposited or invested is the subject matter of the litigation" is not
qualified by the phrase "upon order of competent Court" which refers only to cases of
bribery or dereliction of duty of public officials.
Petitioners’ motion for reconsideration was similarly denied in a Resolution dated April 16,
1997. Appeal was made in due time to this Court.
The instant petition was actually denied by the former Third Division of this Court in a
Resolution18 dated July 16, 1997, on the ground that petitioners had failed to show that a
reversible error had been committed. On motion, however, the petition was reinstated19 and
eventually given due course.20
In assailing the appellate court’s findings, petitioners assert that the disclosure of their bank
records was unwarranted and illegal for the following reasons:
I.
IN BLATANT VIOLATION OF R.A. NO. 1405, PRIVATE RESPONDENTS ILLEGALLY MADE
DISCLOSURES OF PETITIONERS’ CONFIDENTIAL BANK DEPOSITS FOR THEIR SELFISH ENDS IN
PROSECUTING THEIR COMPLAINT IN IS. NO. 93-8469 THAT DID NOT INVOLVE PETITIONERS.
II.
PRIVATE RESPONDENTS’ DISCLOSURES DO NOT FALL UNDER THE FOURTH EXCEPTION OF R.A.
NO. 1405 (i.e., "in cases where the money deposited or invested is the subject matter of the
litigation"), NOR UNDER ANY OTHER EXCEPTION:
(1)
PETITIONERS’ DEPOSITS ARE NOT INVOLVED IN ANY LITIGATION BETWEEN PETITIONERS AND
RESPONDENTS. THERE IS NO LITIGATION BETWEEN THE PARTIES, MUCH LESS ONE
INVOLVING PETITIONERS’ DEPOSITS AS THE SUBJECT MATTER THEREOF.
(2)
EVEN ASSUMING ARGUENDO THAT THERE IS A LITIGATION INVOLVING PETITIONERS’
DEPOSITS AS THE SUBJECT MATTER THEREOF, PRIVATE RESPONDENTS’ DISCLOSURES OF
PETITIONERS’ DEPOSITS ARE NEVERTHELESS ILLEGAL FOR WANT OF THE REQUISITE COURT
ORDER, IN VIOLATION OF R.A. NO. 1405.
III.
THEREFORE, PETITIONERS ARE ENTITLED TO PROSECUTE PRIVATE RESPONDENTS FOR
VIOLATIONS OF R.A. NO. 1405 FOR HAVING ILLEGALLY DISCLOSED PETITIONERS’
CONFIDENTIAL BANK DEPOSITS AND RECORDS IN IS. NO. 93-8469.
Apart from the reversal of the decision and resolution of the appellate court as well as the
resolutions of the Department of Justice, petitioners pray that the latter agency be directed
to issue a resolution ordering the Provincial Prosecutor of Rizal to file the corresponding
informations for violation of Republic Act No. 1405 against private respondents.
The petition is not meritorious.
Actually, this case should have been studied more carefully by all concerned. The finest legal
minds in the country - from the parties’ respective counsel, the Provincial Prosecutor, the
Department of Justice, the Solicitor General, and the Court of Appeals - all appear to have
overlooked a single fact which dictates the outcome of the entire controversy. A circumspect
review of the record shows us the reason. The accounts in question are U.S. dollar deposits;
consequently, the applicable law is not Republic Act No. 1405 but Republic Act (RA) No.
6426, known as the "Foreign Currency Deposit Act of the Philippines," section 8 of which
provides:
Sec. 8. Secrecy of Foreign Currency Deposits.- All foreign currency deposits authorized under
this Act, as amended by Presidential Decree No. 1035, as well as foreign currency deposits
authorized under Presidential Decree No. 1034, are hereby declared as and considered of an
absolutely confidential nature and, except upon the written permission of the depositor, in no
instance shall such foreign currency deposits be examined, inquired or looked into by any
person, government official bureau or office whether judicial or administrative or legislative
or any other entity whether public or private: Provided, however, that said foreign currency
deposits shall be exempt from attachment, garnishment, or any other order or process of any
court, legislative body, government agency or any administrative body whatsoever.21 (italics
supplied)
Thus, under R.A. No. 6426 there is only a single exception to the secrecy of foreign currency
deposits, that is, disclosure is allowed only upon the written permission of the depositor.
Incidentally, the acts of private respondents complained of happened before the enactment
on September 29, 2001 of R.A. No. 9160 otherwise known as the Anti-Money Laundering Act
of 2001.
A case for violation of Republic Act No. 6426 should have been the proper case brought
against private respondents. Private respondents Lim and Reyes admitted that they had
disclosed details of petitioners’ dollar deposits without the latter’s written permission. It does
not matter if that such disclosure was necessary to establish Citibank’s case against Dante L.
Santos and Marilou Genuino. Lim’s act of disclosing details of petitioners’ bank records
regarding their foreign currency deposits, with the authority of Reyes, would appear to
belong to that species of criminal acts punishable by special laws, called malum
prohibitum. In this regard, it has been held that:
While it is true that, as a rule and on principles of abstract justice, men are not and should
not be held criminally responsible for acts committed by them without guilty knowledge and
criminal or at least evil intent xxx, the courts have always recognized the power of the
legislature, on grounds of public policy and compelled by necessity, "the great master of
things," to forbid in a limited class of cases the doing of certain acts, and to make their
commission criminal without regard to the intent of the doer. xxx In such cases no judicial
authority has the power to require, in the enforcement of the law, such knowledge or motive
to be shown. As was said in the case of State vs. McBrayer xxx:
‘It is a mistaken notion that positive, willful intent, as distinguished from a mere intent, to
violate the criminal law, is an essential ingredient in every criminal offense, and that where
there is the absence of such intent there is no offense; this is especially so as to statutory
offenses. When the statute plainly forbids an act to be done, and it is done by some person,
the law implies conclusively the guilty intent, although the offender was honestly mistaken as
to the meaning of the law he violates. When the language is plain and positive, and the
offense is not made to depend upon the positive, willful intent and purpose, nothing is left to
interpretation.’22
Ordinarily, the dismissal of the instant petition would have been without prejudice to the
filing of the proper charges against private respondents. The matter would have ended here
were it not for the intervention of time, specifically the lapse thereof. So as not to unduly
prolong the settlement of the case, we are constrained to rule on a material issue even
though it was not raised by the parties. We refer to the issue of prescription.
Republic Act No. 6426 being a special law, the provisions of Act No. 3326,23 as amended by
Act No. 3763, are applicable:
foreign currency bank account on October 14, 1993. On the other hand, Neri asserts that she
discovered the disclosure on October 24, 1993.28 As to Brawner, the material date is January
5, 1994.29 Based on any of these dates, prescription has set in.30
The filing of the complaint or information in the case at bar for alleged violation of Republic
Act No. 1405 did not have the effect of tolling the prescriptive period. For it is the filing of the
complaint or information corresponding to the correct offense which produces that effect. 31
It may well be argued that the foregoing disquisition would leave petitioners with no remedy
in law. We point out, however, that the confidentiality of foreign currency deposits
mandated by Republic Act No. 6426, as amended by Presidential Decree No. 1246, came into
effect as far back as 1977. Hence, ignorance thereof cannot be pretended. On one hand, the
existence of laws is a matter of mandatory judicial notice;32 on the other, ignorantia legis non
excusat.33 Even during the pendency of this appeal, nothing prevented the petitioners from
filing a complaint charging the correct offense against private respondents. This was not
done, as everyone involved was content to submit the case on the basis of an alleged
violation of Republic Act No. 1405 (Bank Secrecy Law), however, incorrectly invoked.34

SECTION 1. Violations penalized by special acts shall, unless otherwise provided in such acts, WHEREFORE, the petition is hereby DENIED. No pronouncement as to costs.
prescribe in accordance with the following rules: (a) after a year for offences punished only
by a fine or by imprisonment for not more than one month, or both: (b) after four years for SO ORDERED.
those punished by imprisonment for more than one month, but less than two years; (c) after
eight years for those punished by imprisonment for two years or more, but less than six
years; and (d) after twelve years for any other offence punished by imprisonment for six
years or more, except the crime of treason, which shall prescribe after twenty
years: Provided, however, That all offences against any law or part of law administered by the
Bureau of Internal Revenue shall prescribe after five years. Violations penalized by municipal
ordinances shall prescribe after two months.

Violations of the regulations or conditions of certificates of public convenience issued by the

Public Service Commission shall prescribe after two months.

SEC. 2. Prescription shall begin to run from the day of the commission of the violation of the
law, and if the same be not known at the time, from the discovery thereof and the institution
of judicial proceedings for its investigation and punishment.

The prescription shall be interrupted when proceedings are instituted against the guilty
person, and shall begin to run again if the proceedings are dismissed for reasons not
constituting jeopardy.1âwphi1

A violation of Republic Act No. 6426 shall subject the offender to imprisonment of not less
than one year nor more than five years, or by a fine of not less than five thousand pesos nor
more than twenty-five thousand pesos, or both.24 Applying Act No. 3326, the offense
prescribes in eight years.25 Per available records, private respondents may no longer be haled
before the courts for violation of Republic Act No. 6426. Private respondent Vic Lim made the
disclosure in September of 1993 in his affidavit submitted before the Provincial Fiscal.26 In her
complaint-affidavit,27 Intengan stated that she learned of the revelation of the details of her
GOVERNMENT SERVICE INSURANCE SYSTEM, Petitioner, The controversy originated fromG.R.
a surety agreement by which Domsat obtained a surety
No. 189206
bond from GSIS to secure the payment of the loan from the Banks. We quote the terms of
the Surety Bond in its entirety.4

Republic of the Philippines

Present:
GOVERNMENT SERVICE INSURANCE SYSTEM

GENERAL INSURANCE FUND

–versus– CORONA, C.J.,
GSIS Headquarters, Financial Center

Roxas Boulevard, Pasay City Chairperson

G(16) GIF Bond 027461 VELASCO, JR.,

SURETY BOND LEONARDO-DE CASTRO,

DEL CASTILLO, and

THE HONORABLE 15TH DIVISION OF THE COURT OF APPEALS and INDUSTRIAL BANK OF KOREA, TONGThat
YANG MERCHANT
we,
DOMSAT HOLDINGS, PEREZ, JJ.
HANAREUM BANKING CORP., LAND BANK OF THE PHILIPPINES, WESTMONT BANK and DOMSAT HOLDINGS, INC., SERVICE INSURANCE SYSTEM, as Administrator of the GENERAL INSURANCE
GOVERNMENT
Respondents.
x —————————————————————————————-x
DECISION
PEREZ, J.:
The subject of this petition for certiorari is the Decision1 of the Court of Appeals in CA-G.R. SP
No. 82647 allowing the quashal by the Regional Trial Court (RTC) of Makati of a subpoena for
the production of bank ledger. This case is incident to Civil Case No. 99-1853, which is the
main case for collection of sum of money with damages filed by Industrial Bank of Korea,
Tong Yang Merchant Bank, First Merchant Banking Corporation, Land Bank of the Philippines,
and Westmont Bank (now United Overseas Bank), collectively known as “the Banks” against
Domsat Holdings, Inc. (Domsat) and the Government Service Insurance System (GSIS). Said
case stemmed from a Loan Agreement,2whereby the Banks agreed to lend United States
(U.S.) $11 Million to Domsat for the purpose of financing the lease and/or purchase of a
Gorizon Satellite from the International Organization of Space Communications
(Intersputnik).3
KNOW ALL MEN BY THESE PRESENTS:
BANK,
INC., represented by its President as PRINCIPAL, and the
FUND, a corporation duly organized and existing under and by virtue of the laws of the
Philippines, with principal office in the City of Pasay, Metro Manila, Philippines as SURETY,
are held and firmly bound unto the OBLIGEES: LAND BANK OF THE PHILIPPINES, 7th Floor,
Land Bank Bldg. IV. 313 Sen. Gil J. Puyat Avenue, Makati City; WESTMONT BANK, 411 Quintin
Paredes St., Binondo, Manila: TONG YANG MERCHANT BANK, 185, 2-Ka, Ulchi-ro, Chungk-ku,
Seoul, Korea; INDUSTRIAL BANK OF KOREA, 50, 2-Ga, Ulchi-ro, Chung-gu, Seoul, Korea; and
FIRST MERCHANT BANKING CORPORATION,
Promulgated: 199-40, 2-Ga, Euliji-ro, Jung-gu, Seoul, Korea, in
the sum, of US $ ELEVEN MILLION DOLLARS ($11,000,000.00) for the payment of which sum,
well and truly to be made, we June
bind 8, 2011 our heirs, executors, administrators, successors
ourselves,
and assigns, jointly and severally, firmly by these presents.
THE CONDITIONS OF THE OBLIGATION ARE AS FOLLOWS:
WHEREAS, the above bounden PRINCIPAL, on the 12th day of December, 1996 entered into a
contract agreement with the aforementioned OBLIGEES to fully and faithfully
Guarantee the repayment of the principal and interest on the loan granted the PRINCIPAL to
be used for the financing of the two (2) year lease of a Russian Satellite from INTERSPUTNIK,
in accordance with the terms and conditions of the credit package entered into by the
parties.
This bond shall remain valid and effective until the loan including interest has been fully paid
and liquidated,
a copy of which contract/agreement is hereto attached and made part hereof;
WHEREAS, the aforementioned OBLIGEES require said PRINCIPAL to give a good and
sufficient bond in the above stated sum to secure the full and faithful performance on his
part of said contract/agreement.
NOW, THEREFORE, if the PRINCIPAL shall well and truly perform and fulfill all the
undertakings, covenants, terms, conditions, and agreements stipulated in said
contract/agreements, then this obligation shall be null and void; otherwise, it shall remain in
full force and effect.
WITNESS OUR HANDS AND SEALS this 13th day of December 1996 at Pasay City,
Philippines.
DOMSAT HOLDINGS, INC GOVERNMENT SERVICE INSURANCE
Principal SYSTEM
General Insurance Fund
By: By:
CAPT. RODRIGO A. SILVERIO AMALIO A. MALLARI
President Senior Vice-President
General Insurance Group
When Domsat failed to pay the loan, GSIS refused to comply with its obligation reasoning
that Domsat did not use the loan proceeds for the payment of rental for the satellite. GSIS
alleged that Domsat, with Westmont Bank as the conduit, transferred the U.S. $11 Million
loan proceeds from the Industrial Bank of Korea to Citibank New York account of Westmont
Bank and from there to the Binondo Branch of Westmont Bank.5 The Banks filed a complaint
before the RTC of Makati against Domsat and GSIS.
In the course of the hearing, GSIS requested for the issuance of a subpoena duces tecum to
the custodian of records of Westmont Bank to produce the following documents:
1. Ledger covering the account of DOMSAT Holdings, Inc. with Westmont Bank
(now United Overseas Bank), any and all documents, records, files, books, deeds, papers,
notes and other data and materials relating to the account or transactions of DOMSAT
Holdings, Inc. with or through the Westmont Bank (now United Overseas Bank) for the period
January 1997 to December 2002, in his/her direct or indirect possession, custody or control
(whether actual or constructive), whether in his/her capacity as Custodian of Records or
otherwise;
2. All applications for cashier’s/ manager’s checks and bank transfers funded by the
account of DOMSAT Holdings, Inc. with or through the Westmont Bank (now United
Overseas Bank) for the period January 1997 to December 2002, and all other data and
materials covering said applications, in his/her direct or indirect possession, custody or
control (whether actual or constructive), whether in his/her capacity as Custodian of Records
or otherwise;
3. Ledger covering the account of Philippine Agila Satellite, Inc. with Westmont
Bank (now United Overseas Bank), any and all documents, records, files, books, deeds,
papers, notes and other data and materials relating to the account or transactions of
Philippine Agila Satellite, Inc. with or through the Westmont bank (now United Overseas
Bank) for the period January 1997 to December 2002, in his/her direct or indirect possession,
custody or control (whether actual or constructive), whether in his/her capacity as Custodian
of Records or otherwise;
4. All applications for cashier’s/manager’s checks funded by the account of
Philippine Agila Satellite, Inc. with or through the Westmont Bank (now United Overseas
Bank) for the period January 1997 to December 2002, and all other data and materials
covering said applications, in his/her direct or indirect possession, custody or control
(whether actual or constructive), whether in his/her capacity as Custodian of Records or
otherwise.6
The RTC issued a subpoena decus tecum on 21 November 2002.7 A motion to quash was filed
by the banks on three grounds: 1) the subpoena is unreasonable, oppressive and does not
establish the relevance of the documents sought; 2) request for the documents will violate
the Law on Secrecy of Bank Deposits; and 3) GSIS failed to advance the reasonable cost of
production of the documents.8 Domsat also joined the banks’ motion to quash through its
Manifestation/Comment.9 On 9 April 2003, the RTC issued an Order denying the motion to
quash for lack of merit. We quote the pertinent portion of the Order, thus:
After a careful consideration of the arguments of the parties, the Court did not find merit in
the motion.
The serious objection appears to be that the subpoena is violative of the Law on Secrecy of
Bank Deposit, as amended. The law declares bank deposits to be “absolutely confidential”
except: x x x (6) In cases where the money deposited or invested is the subject matter of the
litigation.
The case at bench is for the collection of a sum of money from defendants that obtained a
loan from the plaintiff. The loan was secured by defendant GSIS which was the surety. It is
the contention of defendant GSIS that the proceeds of the loan was deviated to purposes
other than to what the loan was extended. The quashal of the subpoena would deny
defendant GSIS its right to prove its defenses.
WHEREFORE, for lack of merit the motion is DENIED.10
On 26 June 2003, another Order was issued by the RTC denying the motion for
reconsideration filed by the banks.11 On 1 September 2003 however, the trial court granted
the second motion for reconsideration filed by the banks. The previous subpoenas issued
were consequently quashed.12 The trial court invoked the ruling in Intengan v. Court of
Appeals,13 where it was ruled that foreign currency deposits are absolutely confidential and
may be examined only when there is a written permission from the depositor. The motion for
reconsideration filed by GSIS was denied on 30 December 2003.
Hence, these assailed orders are the subject of the petition for certiorari before the Court of
Appeals. GSIS raised the following arguments in support of its petition:
I.
Respondent Judge acted with grave abuse of discretion when it favorably considered
respondent banks’ (second) Motion for Reconsideration dated July 9, 2003 despite the fact
that it did not contain a notice of hearing and was therefore a mere scrap of paper.
II.
Respondent judge capriciously and arbitrarily ignored Section 2 of the Foreign Currency
Deposit Act (RA 6426) in ruling in his Orders dated September 1 and December 30, 2003 that
the US$11,000,000.00 deposit in the account of respondent Domsat in Westmont Bank is
covered by the secrecy of bank deposit.
III.
Since both respondent banks and respondent Domsat have disclosed during the trial the
US$11,000,000.00 deposit, it is no longer secret and confidential, and petitioner GSIS’ right to
inquire into what happened to such deposit can not be suppressed.14
The Court of Appeals addressed these issues in seriatim.
The Court of Appeals resorted to a liberal interpretation of the rules to avoid miscarriage of
justice when it allowed the filing and acceptance of the second motion for reconsideration.
The appellate court also underscored the fact that GSIS did not raise the defect of lack of
notice in its opposition to the second motion for reconsideration. The appellate court held
that failure to timely object to the admission of a defective motion is considered a waiver of
its right to do so.
The Court of Appeals declared that Domsat’s deposit in Westmont Bank is covered by
Republic Act No. 6426 or the Bank Secrecy Law. We quote the pertinent portion of the
Decision:
It is our considered opinion that Domsat’s deposit of $11,000,000.00 in Westmont
Bank is covered by the Bank Secrecy Law, as such it cannot be examined, inquired or looked
into without the written consent of its owner. The ruling in Van Twest vs. Court of
Appeals was rendered during the effectivity of CB Circular No. 960, Series of 1983, under Sec.
102 thereof, transfer to foreign currency deposit account or receipt from another foreign
currency deposit account, whether for payment of legitimate obligation or otherwise, are not
eligible for deposit under the System.
CB Circular No. 960 has since been superseded by CB Circular 1318 and later by CB
Circular 1389. Section 102 of Circular 960 has not been re-enacted in the later Circulars. What
is applicable now is the decision in Intengan vs. Court of Appeals where the Supreme Court
has ruled that the under R.A. 6426 there is only a single exception to the secrecy of foreign
currency deposits, that is, disclosure is allowed only upon the written permission of the
depositor. Petitioner, therefore, had inappropriately invoked the provisions of Central Bank
(CB) Circular Nos. 343 which has already been superseded by more recently issued CB
Circulars. CB Circular 343 requires the surrender to the banking system of foreign exchange,
including proceeds of foreign borrowings. This requirement, however, can no longer be
found in later circulars.
In its Reply to respondent banks’ comment, petitioner appears to have conceded that
what is applicable in this case is CB Circular 1389. Obviously, under CB 1389, proceeds of
foreign borrowings are no longer required to be surrendered to the banking system.
Undaunted, petitioner now argues that paragraph 2, Section 27 of CB Circular 1389 is
applicable because Domsat’s $11,000,000.00 loan from respondent banks was intended to be
paid to a foreign supplier Intersputnik and, therefore, should have been paid directly to
Intersputnik and not deposited into Westmont Bank. The fact that it was deposited to the
local bank Westmont Bank, petitioner claims violates the circular and makes the deposit lose
its confidentiality status under R.A. 6426. However, a reading of the entire Section 27 of CB
Circular 1389 reveals that the portion quoted by the petitioner refers only to the
procedure/conditions of drawdown for service of debts using foreign exchange. The above-
said provision relied upon by the petitioner does not in any manner prescribe the conditions
before any foreign currency deposit can be entitled to the confidentiality provisions of R.A.
6426.15
Anent the third issue, the Court of Appeals ruled that the testimony of the incumbent
president of Westmont Bank is not the written consent contemplated by Republic Act No.
6426.
The Court of Appeals however upheld the issuance of subpoena praying for the production of
applications for cashier’s or manager’s checks by Domsat through Westmont Bank, as well as
a copy of an Agreement and/or Contract and/or Memorandum between Domsat and/or
Philippine Agila Satellite and Intersputnik for the acquisition and/or lease of a Gorizon
Satellite. The appellate court believed that the production of these documents does not
involve the examination of Domsat’s account since it will never be known how much money
was deposited into it or withdrawn therefrom and how much remains therein.
On 29 February 2008, the Court of Appeals rendered the assailed Decision, the decretal
portion of which reads:
WHEREFORE, the petition is partially GRANTED. Accordingly, the assailed Order dated
December 30, 2003 is hereby modified in that the quashal of the subpoena for the
production of Domsat’s bank ledger in Westmont Bank is upheld while respondent court is
hereby ordered to issue subpoena duces tecum ad testificandum directing the records
custodian of Westmont Bank to bring to court the following documents:
a) applications for cashier’s or manager’s checks by respondent Domsat through
Westmont Bank from January 1997 to December 2002;
b) bank transfers by respondent Domsat through Westmont Bank from January 1997 to
December 2002; and
c) copy of an agreement and/or contract and/or memorandum between respondent
Domsat and/or Philippine Agila Satellite and Intersputnik for the acquisition and/or lease of a
Gorizon satellite.
No pronouncement as to costs.16
GSIS filed a motion for reconsideration which the Court of Appeals denied on 19 June 2009.
Thus, the instant petition ascribing grave abuse of discretion on the part of the Court of
Appeals in ruling that Domsat’s deposit with Westmont Bank cannot be examined and in
finding that the banks’ second motion for reconsideration in Civil Case No. 99-1853 is
procedurally acceptable.17
This Court notes that GSIS filed a petition for certiorari under Rule 65 of the Rules of Court to
assail the Decision and Resolution of the Court of Appeals. Petitioner availed of the improper
remedy as the appeal from a final disposition of the Court of Appeals is a petition for review
under Rule 45 and not a special civil action under Rule 65.18 Certiorariunder Rule 65 lies only
when there is no appeal, nor plain, speedy and adequate remedy in the ordinary course of
law. That action is not a substitute for a lost appeal in general; it is not allowed when a party
to a case fails to appeal a judgment to the proper forum.19 Where an appeal is
available, certiorari will not prosper even if the ground therefor is grave abuse of discretion.
Accordingly, when a party adopts an improper remedy, his petition may be dismissed
outright.20
Yet, even if this procedural infirmity is discarded for the broader interest of justice, the
petition sorely lacks merit.
GSIS insists that Domsat’s deposit with Westmont Bank can be examined and inquired into. It
anchored its argument on Republic Act No. 1405 or the “Law on Secrecy of Bank Deposits,”
which allows the disclosure of bank deposits in cases where the money deposited is the
subject matter of the litigation. GSIS asserts that the subject matter of the litigation is the
U.S. $11 Million obtained by Domsat from the Banks to supposedly finance the lease of a
Russian satellite from Intersputnik. Whether or not it should be held liable as a surety for the
principal amount of U.S. $11 Million, GSIS contends, is contingent upon whether Domsat
indeed utilized the amount to lease a Russian satellite as agreed in the Surety Bond
Agreement. Hence, GSIS argues that the whereabouts of the U.S. $11 Million is the subject
matter of the case and the disclosure of bank deposits relating to the U.S. $11 Million should
be allowed.
GSIS also contends that the concerted refusal of Domsat and the banks to divulge the
whereabouts of the U.S. $11 Million will greatly prejudice and burden the GSIS pension fund
considering that a substantial portion of this fund is earmarked every year to cover the surety
bond issued.
Lastly, GSIS defends the acceptance by the trial court of the second motion for
reconsideration filed by the banks on the grounds that it is pro forma and did not conform to
the notice requirements of Section 4, Rule 15 of the Rules of Civil Procedure.21
Domsat denies the allegations of GSIS and reiterates that it did not give a categorical or
affirmative written consent or permission to GSIS to examine its bank statements with
Westmont Bank.
The Banks maintain that Republic Act No. 1405 is not the applicable law in the instant case
because the Domsat deposit is a foreign currency deposit, thus covered by Republic Act No.
6426. Under said law, only the consent of the depositor shall serve as the exception for the
disclosure of his/her deposit.
The Banks counter the arguments of GSIS as a mere rehash of its previous arguments before
the Court of Appeals. They justify the issuance of the subpoena as an interlocutory matter
which may be reconsidered anytime and that the pro forma rule has no application to
interlocutory orders.
It appears that only GSIS appealed the ruling of the Court of Appeals pertaining to
the quashal of the subpoena for the production of Domsat’s bank ledger with Westmont
Bank. Since neither Domsat nor the Banks interposed an appeal from the other portions of
the decision, particularly for the production of applications for cashier’s or manager’s checks
by Domsat through Westmont Bank, as well as a copy of an agreement and/or contract
and/or memorandum between Domsat and/or Philippine Agila Satellite and Intersputnik for
the acquisition and/or lease of a Gorizon satellite, the latter became final and executory.
GSIS invokes Republic Act No. 1405 to justify the issuance of the subpoena while the banks
cite Republic Act No. 6426 to oppose it. The core issue is which of the two laws should apply
in the instant case.
Republic Act No. 1405 was enacted in 1955. Section 2 thereof was first amended by
Presidential Decree No. 1792 in 1981 and further amended by Republic Act No. 7653 in 1993.
It now reads:
Section 2. All deposits of whatever nature with banks or banking institutions in the
Philippines including investments in bonds issued by the Government of the Philippines, its
political subdivisions and its instrumentalities, are hereby considered as of an absolutely
confidential nature and may not be examined, inquired or looked into by any person,
government official, bureau or office, except upon written permission of the depositor, or in
cases of impeachment, or upon order of a competent court in cases of bribery or dereliction
of duty of public officials, or in cases where the money deposited or invested is the subject
matter of the litigation.
Section 8 of Republic Act No. 6426, which was enacted in 1974, and amended by Presidential
Decree No. 1035 and later by Presidential Decree No. 1246, provides:
Section 8. Secrecy of Foreign Currency Deposits. – All foreign currency deposits authorized
under this Act, as amended by Presidential Decree No. 1035, as well as foreign currency
deposits authorized under Presidential Decree No. 1034, are hereby declared as and
considered of an absolutely confidential nature and, except upon the written permission of
the depositor, in no instance shall foreign currency deposits be examined, inquired or looked
into by any person, government official, bureau or office whether judicial or administrative or
legislative or any other entity whether public or private; Provided, however, That said foreign
currency deposits shall be exempt from attachment, garnishment, or any other order or
process of any court, legislative body, government agency or any administrative body
whatsoever. (As amended by PD No. 1035, and further amended by PD No. 1246, prom. Nov.
21, 1977.)
On the one hand, Republic Act No. 1405 provides for four (4) exceptions when records of
deposits may be disclosed. These are under any of the following instances: a) upon written
permission of the depositor, (b) in cases of impeachment, (c) upon order of a competent
court in the case of bribery or dereliction of duty of public officials or, (d) when the money
deposited or invested is the subject matter of the litigation, and e) in cases of violation of the
Anti-Money Laundering Act (AMLA), the Anti-Money Laundering Council (AMLC) may inquire
into a bank account upon order of any competent court.22 On the other hand, the lone
exception to the non-disclosure of foreign currency deposits, under Republic Act No. 6426, is
disclosure upon the written permission of the depositor.
These two laws both support the confidentiality of bank deposits. There is no conflict
between them. Republic Act No. 1405 was enacted for the purpose of giving encouragement
to the people to deposit their money in banking institutions and to discourage private
hoarding so that the same may be properly utilized by banks in authorized loans to assist in
the economic development of the country.23 It covers all bank deposits in the Philippines and
no distinction was made between domestic and foreign deposits. Thus, Republic Act No.
1405 is considered a law of general application. On the other hand, Republic Act No. 6426
was intended to encourage deposits from foreign lenders and investors.24 It is a special law
designed especially for foreign currency deposits in the Philippines. A general law does not
nullify a specific or special law. Generalia specialibus non derogant.25 Therefore, it is beyond
cavil that Republic Act No. 6426 applies in this case.
issued to employees of China Bank to testify on these checks. China Bank argued that the
Citibank dollar checks with both respondent and/or her daughter as payees, deposited with
China Bank, may not be looked into under the law on secrecy of foreign currency deposits.
This Court highlighted the exception to the non-disclosure of foreign currency deposits, i.e.,
in the case of a written permission of the depositor, and ruled that respondent, as owner of
the funds unlawfully taken and which are undisputably now deposited with China Bank, he
has the right to inquire into the said deposits.
Applying Section 8 of Republic Act No. 6426, absent the written permission from Domsat,
Westmont Bank cannot be legally compelled to disclose the bank deposits of Domsat,
otherwise, it might expose itself to criminal liability under the same act.27
The basis for the application of subpoena is to prove that the loan intended for Domsat by
the Banks and guaranteed by GSIS, was diverted to a purpose other than that stated in the
surety bond. The Banks, however, argue that GSIS is in fact liable to them for the proper
applications of the loan proceeds and not vice-versa. We are however not prepared to rule
on the merits of this case lest we pre-empt the findings of the lower courts on the matter.
The third issue raised by GSIS was properly addressed by the appellate court. The appellate
court maintained that the judge may, in the exercise of his sound discretion, grant the
second motion for reconsideration despite its being pro forma. The appellate court correctly
relied on precedents where this Court set aside technicality in favor of substantive justice.
Furthermore, the appellate court accurately pointed out that petitioner did not assail the
defect of lack of notice in its opposition to the second motion of reconsideration, thus it can
be considered a waiver of the defect.
WHEREFORE, the petition for certiorari is DISMISSED. The Decision dated 29 February 2008
and 19 June 2009 Resolution of the Court of Appeals are hereby AFFIRMED.
SO ORDERED.

Intengan v. Court of Appeals affirmed the above-cited principle and categorically declared
that for foreign currency deposits, such as U.S. dollar deposits, the applicable law is
Republic Act No. 6426.

In said case, Citibank filed an action against its officers for persuading their clients to transfer
their dollar deposits to competitor banks. Bank records, including dollar deposits of
petitioners, purporting to establish the deception practiced by the officers, were annexed to
the complaint. Petitioners now complained that Citibank violated Republic Act No. 1405. This
Court ruled that since the accounts in question are U.S. dollar deposits, the applicable law
therefore is not Republic Act No. 1405 but Republic Act No. 6426.

The above pronouncement was reiterated in China Banking Corporation v. Court of

Appeals,26 where respondent accused his daughter of stealing his dollar deposits with
Citibank. The latter allegedly received the checks from Citibank and deposited them to her
account in China Bank. The subject checks were presented in evidence. A subpoenawas
EN BANC
G.R. No. L-18343 September 30, 1965
PHILIPPINE NATIONAL BANK and EDUARDO Z. ROMUALDEZ, in his capacity as President of
the Philippine National Bank, plaintiffs-appellants,
vs.
EMILIO A. GANCAYCO and FLORENTINO FLOR, Special Prosecutors of the Dept. of
Justice, defendants-appellees.
Ramon B. de los Reyes and Zoilo P. Perlas for plaintiffs-appellants.
Villamor & Gancayco for defendants-appellees.
REGALA, J.:
The principal question presented in this case is whether a bank can be compelled to disclose
the records of accounts of a depositor who is under investigation for unexplained wealth.
This question arose when defendants Emilio A. Gancayco and Florentino Flor, as special
prosecutors of the Department of Justice, required the plaintiff Philippine National Bank to
produce at a hearing to be held at 10 a.m. on February 20, 1961 the records of the bank
deposits of Ernesto T. Jimenez, former administrator of the Agricultural Credit and
Cooperative Administration, who was then under investigation for unexplained wealth. In
declining to reveal its records, the plaintiff bank invoked Republic Act No. 1405 which
provides:
SEC. 2. All deposits of whatever nature with banks or banking institutions in the Philippines
including investments in bonds issued by the Government of the Philippines, its political
subdivisions and its instrumentalities, are hereby considered as of an absolutely confidential
nature and may not be examined, inquired or looked into by any person, government official,
bureau or office, except upon written permission of the depositor, or in cases of
impeachment, or upon order of a competent court in cases of bribery or dereliction of duty
of public officials, or in cases where the money deposited or invested is the subject matter of
the litigation.
The plaintiff bank also called attention to the penal provision of the law which reads:
SEC. 5. Any violation of this law will subject the offender upon conviction, to an
imprisonment of not more than five years or a fine of not more than twenty thousand pesos
or both, in the discretion of the court.
On the other hand, the defendants cited the Anti-Graft and Corrupt Practices Act (Republic
Act No. 3019) in support of their claim of authority and demanded anew that plaintiff
Eduardo Z. Romualdez, as bank president, produce the records or he would be prosecuted
for contempt. The law invoked by the defendant states:
SEC. 8. Dismissal due to unexplained wealth. — If in accordance with the provisions of
Republic Act Numbered One thousand three hundred seventy-nine, a public official has been
found to have acquired during his incumbency, whether in his name or in the name of other
persons, an amount of property and/or money manifestly out of proportion to his salary and
to his other lawful income, that fact shall be a ground for dismissal or removal. Properties in
the name of the spouse and unmarried children of such public official may be taken into
consideration, when their acquisition through legitimate means cannot be satisfactorily
shown. Bank deposits shall be taken into consideration in the enforcement of this section,
notwithstanding any provision of law to the contrary.
Because of the threat of prosecution, plaintiffs filed an action for declaratory judgment in the
Manila Court of First Instance. After trial, during which Senator Arturo M. Tolentino, author
of the Anti-Graft and Corrupt Practices Act testified, the court rendered judgment, sustaining
the power of the defendants to compel the disclosure of bank accounts of ACCFA
Administrator Jimenez. The court said that, by enacting section 8 of, the Anti-Graft and
Corrupt Practices Act, Congress clearly intended to provide an additional ground for the
examination of bank deposits. Without such provision, the court added prosecutors would be
hampered if not altogether frustrated in the prosecution of those charged with having
acquired unexplained wealth while in public office.1awphîl.nèt
From that judgment, plaintiffs appealed to this Court. In brief, plaintiffs' position is that
section 8 of the Anti-Graft Law "simply means that such bank deposits may be included or
added to the assets of the Government official or employee for the purpose of computing his
unexplained wealth if and when the same are discovered or revealed in the manner
authorized by Section 2 of Republic Act 1405, which are (1) Upon written permission of the
depositor; (2) In cases of impeachment; (3) Upon order of a competent court in cases of
bribery or dereliction of duty of public officials; and (4) In cases where the money deposited
or invested is the subject matter of the litigation."
In support of their position, plaintiffs contend, first, that the Anti-Graft Law (which took
effect on August 17, 1960) is a general law which cannot be deemed to have impliedly
repealed section 2 of Republic Act No. 1405 (which took effect on Sept. 9, 1955), because of
the rule that repeals by implication are not favored. Second, they argue that to construe
section 8 of the Anti-Graft Law as allowing inquiry into bank deposits would be to negate the
policy expressed in section 1 of Republic Act No. 1405 which is "to give encouragement to
the people to deposit their money in banking institutions and to discourage private hoarding
so that the same may be utilized by banks in authorized loans to assist in the economic
development of the country."
Contrary to their claim that their position effects a reconciliation of the provisions of the two
laws, plaintiffs are actually making the provisions of Republic Act No. 1405 prevail over those
of the Anti-Graft Law, because even without the latter law the balance standing to the
depositor's credit can be considered provided its disclosure is made in any of the cases
provided in Republic Act No. 1405.
The truth is that these laws are so repugnant to each other than no reconciliation is possible.
Thus, while Republic Act No. 1405 provides that bank deposits are "absolutely confidential ...
and [therefore] may not be examined, inquired or looked into," except in those cases
enumerated therein, the Anti-Graft Law directs in mandatory terms that bank deposits "shall
be taken into consideration in the enforcement of this section, notwithstanding any provision
of law to the contrary." The only conclusion possible is that section 8 of the Anti-Graft Law is
intended to amend section 2 of Republic Act No. 1405 by providing additional exception to
the rule against the disclosure of bank deposits.

Indeed, it is said that if the new law is inconsistent with or repugnant to the old law, the
presumption against the intent to repeal by implication is overthrown because the
inconsistency or repugnancy reveals an intent to repeal the existing law. And whether a
statute, either in its entirety or in part, has been repealed by implication is ultimately a
matter of legislative intent. (Crawford, The Construction of Statutes, Secs. 309-310. Cf. Iloilo
Palay and Corn Planters Ass'n v. Feliciano, G.R. No. L-24022, March 3, 1965).

The recent case of People v. De Venecia, G.R. No. L-20808, July 31, 1965 invites comparison
with this case. There it was held:

The result is that although sec. 54 [Rev. Election Code] prohibits a classified civil service
employee from aiding any candidate, sec. 29 [Civil Service Act of 1959] allows such classified
employee to express his views on current political problems or issues, or to mention the
name of his candidate for public office, even if such expression of views or mention of names
may result in aiding one particular candidate. In other words, the last paragraph of sec. 29 is
an exception to sec. 54; at most, an amendment to sec. 54.

With regard to the claim that disclosure would be contrary to the policy making bank
deposits confidential, it is enough to point out that while section 2 of Republic Act 1405
declares bank deposits to be "absolutely confidential," it nevertheless allows such disclosure
in the following instances: (1) Upon written permission of the depositor; (2) In cases of
impeachment; (3) Upon order of a competent court in cases of bribery or dereliction of duty
of public officials; (4) In cases where the money deposited is the subject matter of the
litigation. Cases of unexplained wealth are similar to cases of bribery or dereliction of duty
and no reason is seen why these two classes of cases cannot be excepted from the rule
making bank deposits confidential. The policy as to one cannot be different from the policy as
to the other. This policy express the motion that a public office is a public trust and any
person who enters upon its discharge does so with the full knowledge that his life, so far as
relevant to his duty, is open to public scrutiny.

WHEREFORE, the decision appealed from is affirmed, without pronouncement as to costs.

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-56429 May 28, 1988
BANCO FILIPINO SAVINGS AND MORTGAGE BANK, petitioner,
vs.
HON. FIDEL PURISIMA, etc., and HON. VICENTE ERICTA and JOSE DEL FIERO,
etc., respondents.
NARVASA, J.:
The verdict in this special civil action of certiorari turns upon the question of whether or not
the "Law on Secrecy of Bank Deposits" 1 precludes production by subpoena duces tecum of
bank records of transactions by or in the names of the wife, children and friends of a special
agent of the Bureau of Customs, accused before the Tanodbayan of having allegedly acquired
property manifestly out of proportion to his salary and other lawful income, in violation of
the "Anti-Graft and Corrupt Practices Act." 2
The Customs special agent involved is Manuel Caturla, and the accusation against him was
filed by the Bureau of Internal Revenue. 3 In the course of the preliminary investigation
thereof, the Tanodbayan issued a subpoena duces tecum to the Banco Filipino Savings &
Mortgage Bank, commanding its representative to appear at a specified time at the Office of
the Tanodbayan and furnish the latter with duly certified copies of the records in all its
branches and extension offices, of the loans, savings and time deposits and other banking
transactions, dating back to 1969, appearing in the names of Caturla, his wife, Purita Caturla,
their children — Manuel, Jr., Marilyn and Michael — and/or Pedro Escuyos. 4
Caturla moved to quash the subpoena duces tecum 5 arguing that compliance therewith
would result in a violation of Sections 2 and 3 of the Law on Secrecy of Bank Deposits.
Then Tanodbayan Vicente Ericta not only denied the motion for lack of merit, and directed
compliance with the subpoena, 6 but also expanded its scope through a second subpoena
duces tecum,7 this time requiring production by Banco Filipino of the bank records in all its
branches and extension offices, of Siargao Agro-Industrial Corporation, Pedro Escuyos or his
wife, Emeterio Escuyos, Purita Caturla, Lucia Escuyos or her husband, Romeo Escuyos,
Emerson Escuyos, Fraterno Caturla, Amparo Montilla, Cesar Caturla, Manuel Caturla or his
children, Manuel Jr., Marilyn and Michael, LTD Pub/Restaurant, and Jose Buo or his wife,
Evelyn. Two other subpoena of substantially the same tenor as the second were released by
the Tanodbayan's Office. 8 The last required obedience under sanction of contempt.
The Banco Filipino Savings & Mortgage Bank, hereafter referred to simply as BF Bank, took
over from Caturla in the effort to nullify the subpoenae. It filed a complaint for declaratory
relief with the Court of First Instance of Manila, 9which was assigned by raffle to the sala of
respondent Judge Fidel Purisima. BF Bank prayed for a judicial declaration as to whether its
compliance with the subpoenae duces tecum would constitute an infringement of the
provisions of Sections 2 and 3 of R.A. No. 1405 in relation to Section 8 of R.A. No. 3019. It also
asked that pending final resolution of the question, the Tanodbayan be provisionally
restrained from exacting compliance with the subpoenae.
Respondent Judge Purisima issued an Order denying for lack of merit the application by BF
Bank for a preliminary injunction and/or restraining order. 10
This Order is now impugned in the instant certiorari action instituted by BF Bank before this
Court, as having been issued with grave abuse of discretion, amounting to lack of jurisdiction.
It is the bank's theory that the order declining to grant that remedy operated as a premature
adjudication of the very issue raised in the declaratory suit, and as judicial sufferance of a
transgression of the bank deposits statute, and so constituted grievous error correctible
by certiorari. It further argues that subpoenae in question are in the nature of "fishing
expeditions" or "general warrants" since they authorize indiscriminate inquiry into bank
records; that, assuming that such an inquiry is allowed as regards public officials under
investigation for a violation of the Anti-Graft & Corrupt Practices Act, it is constitutionally
impermissible with respect to private individuals or public officials not under investigation on
a charge of violating said Act; and that while prosecution of offenses should not, as a rule, be
enjoined, there are recognized exceptions to the principle one of which is here present, i.e.
to avoid multiplicity of suits, similar subpoenae having been directed to other banks as well.
It is difficult to see how the refusal by the Court a quo to issue the temporary restraining
order applied for by the petitioner — in other words, its disagreement with the petitioner's
advocated theory — could be deemed so whimsical, capricious, despotic or oppressive an act
as to constitute grave abuse of discretion. Obviously, the writ of certiorari cannot issue
simply on a showing of disagreement between a party and the court upon some material
factual or legal issue. There must be a reasonable demonstration that a party's contentions
are so clearly correct, or the court's ruling thereon so clearly wrong, to justify the issuance of
a writ of certiorari. No such demonstration exists in this case. Indeed, for aught that the
record shows, the Court's refusal to grant the application for a restraining order was, in the
premises, licit and proper, or its validity, fairly debatable, at the very least. Be this as it may,
on the merits the petitioner cannot succeed. Its declared theory is untenable.
The provisions of R.A. No. 1405 subject of BF's declaratory action, read as follows:
Sec. 2. All deposits of whatever nature with banks or banking institutions in the Philippines
including investments in bonds issued by the Government of the Philippines, its political
subdivisions and its instrumentalities, are hereby considered as of an absolutely confidential
nature and may not be examined, inquired or looked into by any person, government official,
bureau or office, except upon written permission of the depositor, or in cases of
impeachment, or upon order of a competent court in cases of bribery or dereliction of duty
of public officials, or in cases where the money deposited or invested is the subject matter of
litigation.
Sec. 3. It shall be unlawful for any official or employee of a banking institution to disclose to include .. property unlawfully acquired by the respondent, but its ownership is concealed by
any person other than those mentioned in Section two hereof any information concerning its being recorded in the name of, or held by, respondent's spouse, ascendants, descendants,
said deposits relatives or any other persons." 16

The other provision involved in the declaratory action is Section 8 of R.A. No. 3019. It reads:
Sec. 8. Dismissal due to unexplained wealth. — If in accordance with the provisions of
Republic Act Numbered One thousand three hundred seventy-nine, a public official has been
found to have acquired during his incumbency, whether in his name or in the name of other
persons, an amount of property and/or money manifestly out of proportion to this salary and
to his other lawful income, that fact shall be a ground for dismissal or removal. Properties in
the name of the spouse and unmarried children of such public official may be taken into
consideration, when their acquisition through legitimate means cannot be satisfactorily
shown. Bank deposits shall be taken into consideration in the enforcement of this section,
notwithstanding any prohibition of law to the contrary.
To sustain the petitioner's theory, and restrict the inquiry only to property held by or in the
name of the government official or employee, or his spouse and unmarried children is
unwarranted in the light of the provisions of the statutes in question, and would make
available to persons in government who illegally acquire property an easy and fool-proof
means of evading investigation and prosecution; all they would have to do would be to
simply place the property in the possession or name of persons other than their spouse and
unmarried children. This is an absurdity that we will not ascribe to the lawmakers.
The power of the Tanodbayan to issue subpoenae ad testificandcum and subpoenae duces
tecum at the time in question is not disputed, and at any rate does not admit of doubt. 17 The
subpoenae issued by him, will be sustained against the petitioner's impugnation.

In our decision in Philippine National Bank v. Gancayco, rendered on September 30, WHEREFORE, the petition for certiorari is DISMISSED, with costs against petitioner.
1966, 11 we upheld the judgment of the Trial Court "sustaining the power of the defendants
(special prosecutors of the Department of Justice) to compel the disclosure (by PNB) of bank
accounts of ACCFA Administrator Jimenez (then under investigation for unexplained wealth),
.. (it being ruled) that, by enacting section 8 of the Anti-Graft and Corrupt Practices Act,
Congress clearly intended to provide an additional ground for the examination of bank
deposits .. (for) without such provision, the .. prosecutors would be hampered if not
altogether frustrated in the prosection of those charged with having acquired unexplained
wealth while in public office. 12 We ourselves declared in said case that 13—

.. while Republic Act No. 1405 provides that bank deposits are "absolutely confidential .. and
[therefore] may not be examined, inquired or looked into," except in those cases
enumerated therein, the Anti-Graft Law directs in mandatory terms that bank deposits "shall
be taken into consideration in the enforcement of this section, notwithstanding any provision
of law to the contrary." The only conclusion possible is that section 8 of the Anti-Graft Law is
intended to amend section 2 of Republic Act No. 1405 by providing an additional exception
to the rule against the disclosure of bank desposits.

xxx xxx xxx

... Cases of unexplained wealth 14 are similar to cases of bribery or dereliction of duty 15 and
no reason is seen why these two classes of cases cannot be excepted from the rule making
bank deposits confidential. The policy as to one cannot be different from the policy as to the
other. This policy expresses the notion that a public office is a public trust and any person
who enters upon its discharge does so with the full knowledge that his life, so far as relevant
to his duty, is open to public scrutiny.

The inquiry into illegally acquired property — or property NOT "legitimately acquired" —
extends to cases where such property is concealed by being held by or recorded in the name
of other persons. This proposition is made clear by R.A. No. 3019 which quite categorically
states that the term, "legitimately acquired property of a public officer or employee shall not
G.R. No. 135882 June 27, 2001
LOURDES T. MARQUEZ, in her capacity as Branch Manager, UNION BANK OF THE
PHILIPPINES, petitioner,
vs.
HONORABLE ANIANO A. DESIERTO, in his capacity as OMBUDSMAN, ANGEL C. MAYOR-
ALGO, JR., MARY ANN CORPUZ-MANALAC AND JOSE T. DE JESUS, JR., in their capacity as
Chairman and Members of the Panel, respectively, respondents.
PARDO, J.:
In the petition at bar, petitioner seeks to --
a. Annul and set aside, for having been issued without or in excess of jurisdiction or with
grave abuse of discretion amounting to lack of jurisdiction, respondents' order dated
September 7, 1998 in OMB-0-97-0411, In Re: Motion to Cite Lourdes T. Marquez for indirect
contempt, received by counsel of September 9,1998, and their order dated October 14,1998,
denying Marquez's motion for reconsideration dated September 10, 1998, received by
counsel on October 20, 1998.
b. Prohibit respondents from implementing their order dated October 14, 1998, in
proceeding with the hearing of the motion to cite Marquez for indirect contempt, through
the issuance by this Court of a temporary restraining order and/or preliminary injunction.1
The antecedent facts are as follows:
Sometime in May 1998, petitioner Marquez received an Order from the Ombudsman Aniano
A. Desierto dated April 29, 1998, to produce several bank documents for purposes of
inspection in camera relative to various accounts maintained at Union Bank of the
Philippines, Julia Vargas Branch, where petitioner is the branch manager. The accounts to be
inspected are Account Nos. 011-37270, 240-020718, 245-30317-3 and 245-30318-1, involved
in a case pending with the Ombudsman entitled, Fact-Finding and Intelligence Bureau (FFIB)
v. Amado Lagdameo, et al. The order further states:
"It is worth mentioning that the power of the Ombudsman to investigate and to require the
production and inspection of records and documents is sanctioned by the 1987 Philippine
Constitution, Republic Act No. 6770, otherwise known as Ombudsman Act of 1989 and under
existing jurisprudence on the matter. It must be noted that R.A. 6770 especially Section 15
thereof provides, among others, the following powers, functions and duties of the
Ombudsman, to wit:
xxx
(8) Administer oaths, issue subpoena duces tecum and take testimony in any investigation or
inquiry, including the power to examine and have access to banks accounts and records;
(9) Punish for contempt in accordance with the Rules of Court and under the same procedure
and with the same penalties provided therein.
Clearly, the specific provision of R.A. 6770, a later legislation, modifies the law on the Secrecy
of Bank Deposits (R.A.1405) and places the office of the Ombudsman in the same footing as
the courts of law in this regard."2
The basis of the Ombudsman in ordering an in camera inspection of the accounts is a trail
managers checks purchased by one George Trivinio, a respondent in OMB-097-0411, pending
with the office of the Ombudsman.
It would appear that Mr. George Trivinio, purchased fifty one (51) Managers Checks (MCs) for
a total amount of P272.1 Million at Traders Royal Bank, United Nations Avenue branch, on
May 2 and 3, 1995. Out of the 51 MCs, eleven (11) MCs in the amount of P70.6 million, were
deposited and credited to an account maintained at the Union Bank, Julia Vargas Branch.3
On May 26, 1998, the FFIB panel met in conference with petitioner Lourdes T. Marquez and
Atty. Fe B. Macalino at the bank's main office, Ayala Avenue, Makati City. The meeting was
for the purpose of allowing petitioner and Atty. Macalino to view the checks furnished by
Traders Royal Bank. After convincing themselves of the veracity of the checks, Atty. Macalino
advised Ms. Marquez to comply with the order of the Ombudsman. Petitioner agreed to an in
camera inspection set on June 3, 1998.4
However, on June 4,1998, petitioner wrote the Ombudsman explaining to him that the
accounts in question cannot readily be identified and asked for time to respond to the order.
The reason forwarded by the petitioner was that "despite diligent efforts and from the
accounts numbers presented, we can not identify these accounts since the checks are issued
in cash or bearer. We surmised that these accounts have long been dormant, hence are not
covered by the new account number generated by the Union Bank system. We therefore
have to verify from the Interbank records archives for the whereabouts of these accounts.5
The Ombudsman, responding to the request of the petitioner for time to comply with the
order, stated: "firstly, it must be emphasized that Union Bank, Julia Vargas Branch was
depositary bank of the subject Traders Royal Bank Manager's Check (MCs), as shown at its
dorsal portion and as cleared by the Philippines Clearing House, not the International
Corporate Bank.
Notwithstanding the facts that the checks were payable to cash or bearer, nonetheless, the
name of the depositor(s) could easily be identified since the account numbers x x x where
said checks were deposited are identified in the order.
Even assuming that the accounts xxx were already classified as "dormant accounts," the bank
is still required to preserve the records pertaining to the accounts within a certain period of
time as required by existing banking rules and regulations.
And finally, the in camera inspection was already extended twice from May 13, 1998 to June
3,1998 thereby giving the bank enough time within which to sufficiently comply with the
order."6
Thus, on June 16, 1998, the Ombudsman issued an order directing petitioner to produce the
bank documents relative to accounts in issue. The order states:
Viewed from the foregoing, your persistent refusal to comply with Ombudsman's order in
unjustified, and is merely intended to delay the investigation of the case. Your act constitutes
disobedience of or resistance to a lawful order issued by this office and is punishable as
Indirect Contempt under Section 3(b) of R.A. 6770. The same may also constitute obstruction
in the lawful exercise of the functions of the Ombudsman which is punishable under Section
36 of R.A. 6770.7
On July 10,1998, petitioner together with Union Bank of the Philippines, filed a petition for
declaratory relief, prohibition and injunctions8 with the Regional Trial Court, Makati City,
against the Ombudsman.
The petition was intended to clear the rights and duties of petitioner. Thus, petitioner sought
a declaration of her rights from the court due to the clear conflict between RA No.6770,
Section 15 and R.A. No. 1405, Sections 2 and 3.
Petitioner prayed for a temporary restraining order (TRO) because the Ombudsman and the
other persons acting under his authority were continuously harassing her to produce the
bank documents relatives to the accounts in question. Moreover, on June 16, 1998, the
Ombudsman issued another order stating that unless petitioner appeared before the FFIB
with the documents requested, petitioner manager would be charged with indirect contempt
and obstruction of justice.
In the meantime,9 on July 14, 1998, the lower court denied petitioner's prayer for a
temporary restraining order and stated us:
"After hearing the arguments of the parties, the court finds the application for a Temporary
Restraining Order to be without merit.
"Since the application prays for restraint of the respondent, in the exercise of his contempt
powers under Section 15(9) in relation to paragraph (8) of RA. 6770, known as " The
Ombudsman Act of 1989", there is no great or irreparable injury from which petitioners may
suffer, if respondent is not so restrained. Respondent should he decide to exercise his
contempt powers would still have to apply with the court. x x x Anyone who, without lawful
excuse x x x refuses to produce documents for inspection, when thereunto lawfully required
shall be subject to discipline as in case of contempt of Court and upon application of the
individual or body exercising the power in question shall be dealt with by the Judge of the
First Instance (now RTC) having jurisdiction of the case in a manner provided by the law
(section 580 of the Revised Administrative Code). Under the present Constitution only judges
may issue warrants, hence, respondent should apply with the Court for the issuance of the
warrant needed for the enforcement of his contempt orders. It is in these proceedings where
petitioner may question the propriety of respondent's exercise of his contempt powers.
Petitioners are not therefore left without any adequate remedy.
"The questioned orders were issued with the investigation of the case of Fact-Finding and
Intelligence Bureau vs. Amado Lagdameo, et. al., OMB-0-97-0411, for violation of RA. 3019.
Since petitioner failed to show prima facie evidence that the subject matter of the
investigation is outside the jurisdiction of the Office of the Ombudsman, no writ of injunction
may be issued by this Court to delay this investigation pursuant to section 14 of Ombudsman
Act of 1989."10
On July 20,1998, petitioner filed a motion for reconsideration based on the following
grounds:
a. Petitioners' application for filed Temporary Restraining Order is not only to restrain the
Ombudsman from exercising his contempt powers, but to stop him from implementing his
Orders dated April 29, 1998 and June 16, 1998: and
b. The subject matter of the investigation being conducted by the Ombudsman at petitioners'
premises is outside his jurisdiction.11
On July 23, 1998, the Ombudsman filed a motion to dismiss the petition for declaratory
relief12 on the ground that the Regional Trial Court has no jurisdiction to hear a petition for
relief from the findings and orders of the Ombudsman, citing R.A. No. 6770, Sections 14 and
27. On August 7, 1998, the Ombudsman filed an opposition to petitioner's motion for
reconsideration dated July 20, 1998.13
On August 19,1998, the lower court denied petitioner's motion for reconsideration,14 and
also the Ombudsman's motion to dismiss. 15
On August 21, 1998, petitioner received a copy of the motion to cite her for contempt, filed
with the Office of the Ombudsman by Agapito B. Rosales, Director, Fact Finding and
Intelligence Bureau (FFIB).16
On August 31, 1998, petitioner filed with the Ombudsman an opposition to the motion to
cite her in contempt on the ground that the filing thereof was premature due to the petition
pending in the lower court.17 Petitioner likewise reiterated that she had no intention to
disobey the orders of the Ombudsman. However, she wanted to be clarified as to how she
would comply with the orders without her breaking any law, particularly RA. No. 1405.18
Respondent Ombudsman panel set the incident for hearing on September 7, 1998.19 After
hearing, the panel issued an order dated September 7, 1998, ordering petitioner and counsel
to appear for a continuation of the hearing of the contempt charges against her. 20
On September 10, 1998, petitioner filed with the Ombudsman a motion for reconsideration
of the above order.21 Her motion was premised on the fact that there was a pending case
with the Regional Trial Court, Makati City,22 which would determine whether obeying the
orders of the Ombudsman to produce bank documents would not violate any law.
The FFIB opposed the motion,23 and on October 14, 1998, the Ombudsman denied the
motion by order the dispositive portion of which reads:
"Wherefore, respondent Lourdes T. Marquez's motion for reconsideration is hereby DENIED,
for lack of merit. Let the hearing of the motion of the Fact Finding Intelligence Bureau (FFIB)
to cite her for indirect contempt to be intransferrably set to 29 October 1998 at 2:00 o'clock
p.m. at which date and time she should appear personally to submit her additional evidence.
Failure to do so shall be deemed a waiver thereof."24
Hence, the present petition.25
The issue is whether petitioner may be cited for indirect contempt for her failure to produce
the documents requested by the Ombudsman. And whether the order of the Ombudsman to
have an in camera inspection of the questioned account is allowed as an exception to the law
on secrecy of bank deposits (R.A. No.1405).
An examination of the secrecy of bank deposits law (R.A. No.1405) would reveal the
following exceptions:
1. Where the depositor consents in writing;
2. Impeachment case;
3. By court order in bribery or dereliction of duty cases against public officials;
4. Deposit is subject of litigation;
5. Sec. 8, R.A. No.3019, in cases of unexplained wealth as held in the case of PNB vs.
Gancayco.26
The order of the Ombudsman to produce for in camera inspection the subject accounts with
the Union Bank of the Philippines, Julia Vargas Branch, is based on a pending investigation at
the Office of the Ombudsman against Amado Lagdameo, et. al. for violation of R.A. No. 3019,
Sec. 3 (e) and (g) relative to the Joint Venture Agreement between the Public Estates
Authority and AMARI.
We rule that before an in camera inspection may be allowed, there must be a pending case
before a court of competent jurisdiction. Further, the account must be clearly identified, the
inspection limited to the subject matter of the pending case before the court of competent
jurisdiction. The bank personnel and the account holder must be notified to be present
during the inspection, and such inspection may cover only the account identified in the
pending case.
(5) Upon order of a competent court in cases of bribery or dereliction of duty of public
officials, or
(6) In cases where the money deposited or invested is the subject matter of the litigation".27
In the case at bar, there is yet no pending litigation before any court of competent authority.
What is existing is an investigation by the Office of the Ombudsman. In short, what the office
of the ombudsman would wish to do is to fish for additional evidence to formally charge
Amado Lagdameo, et. al., with the Sandiganbayan. Clearly, there was no pending case in
court which would warrant the opening of the bank account for inspection.
Zone of privacy are recognized and protected in our laws. The Civil Code provides that"
[e]very person shall respect the dignity, personality, privacy and peace of mind of his
neighbors and other persons" and punishes as actionable torts several acts for meddling and
prying into the privacy of another. It also holds public officer or employee or any private
individual liable for damages for any violation of the rights and liberties of another person,
and recognizes the privacy of letters and other private communications. The Revised Penal
Code makes a crime of the violation of secrets by an officer, revelation of trade and industrial
secrets, and trespass to dwelling. Invasion of privacy is an offense in special laws like the
Anti-Wiretapping Law, the Secrecy of Bank Deposits Act, and the Intellectual Property
Code.28
IN VIEW WHEREOF, we GRANT the petition. We order the Ombudsman to cease and desist
from requiring Union Bank Manager Lourdes T. Marquez, or anyone in her place to comply
with the order dated October 14,1998, and similar orders. No costs.
SO ORDERED . 1âwphi1.nêt

In Union Bank of the Philippines v. Court of Appeals, we held that "Section 2 of the Law on
Secrecy of Bank Deposits, as amended, declares bank deposits to be "absolutely confidential"
except:

(1) In an examination made in the course of a special or general examination of a bank that is
specifically authorized by the Monetary Board after being satisfied that there is reasonable
ground to believe that a bank fraud or serious irregularity has been or is being committed
and that it is necessary to look into the deposit to establish such fraud or irregularity,

(2) In an examination made by an independent auditor hired by the bank to conduct its
regular audit provided that the examination is for audit purposes only and the results thereof
shall be for the exclusive use of the bank,

(3) Upon written permission of the depositor,

(4) In cases of impeachment,