G.R. No. L-21146 September 20, 1965 ordering the Central Bank to pay P5,000.00 damages and costs.
ering the Central Bank to pay P5,000.00 damages and costs. The Central Bank
RURAL BANK OF LUCENA, INC., PETITIONER,
VS.
HON. FRANCISCO ARCA, AS JUDGE OF THE COURT OF FIRST
INSTANCE OF MANILA, BRANCH 1, AND CENTRAL BANK OF THE
PHILIPPINES, RESPONDENTS.
REYES, J.B.L., J.:
The Rural Bank of Lucena, Inc., a banking corporation organized under Republic
Act No. 720, instituted, on June 22, 1961, in the Court of First Instance of Manila
(Civil Case No. 47345) an action to collect damages and to enjoin the Central Bank
from enforcing Resolution No. 928 of its Monetary Board, finding that the Rural
Bank of Lucena (Lucena for short), through its officers, directors, and employees, had
committed acts substantially prejudicial to the Government, depositors, and creditors,
and directing Lucena to reorganize its board of directors; to refrain from granting or
renewing loans, or accept new deposits, and not to issue drafts or make disbursements
without the approval of the supervising Central Bank examiners, and threatening
Lucena that its management would be taken over if the latter should fail to comply
with the resolution. After issue joined and trial of the case, and while the litigation was
still undecided by the Court of First Instance, the Monetary Board, having been
informed that the Director of its Department of Rural Banks recommended the
liquidation of the Rural Bank of Lucena, adopted on February 2, 1962 its Resolution
No. 122 (Petition, Annex "C") —
To request the Solicitor General, pursuant to Section 29 of Republic Act No. 265, to
file a petition in the proper courts for the liquidation of the affairs of the Rural Bank
of Lucena, Inc.
Notice was given by Central Bank officials, on February 10, 1962 that the Lucena
bank was temporarily closed pending final decision of the Court, and that business be
transacted with Central Bank representatives only.
Two days later (February 12, 1962), the Lucena bank filed suit in the Court of First
Instance of Quezon (Tayabas) annual Resolution 122 of the Monetary Board (Case
No. 6471) and enjoin its enforcement; and on February 14 the court issued ex parte a
writ of preliminary injunction to such effect.
On the same day, the Court of First Instance of Manila, per Judge, now Court of
Appeals Justice, Magno Gatmaitan of Branch XIV, decided Case No. 47345,
enjoining enforcement of Resolution No. 928 of the Monetary Board, for having been
issued without the prior hearing prescribed by section 10 of the Rural Bank Act, and
appealed.
Upon the other hand, the Court of First Instance of Quezon Province, in its Case No.
6741, on February, 24, 1962, dissolved its preliminary injunction against the
enforcement of Resolution 122 of the Monetary Board. Other than filing a motion for
reconsideration (ultimately denied on January 9, 1963) the Lucena bank took no other
steps to prosecute the case it had filed.
On the 31st of March 1962, invoking section 29 of Republic Act 265, the Central
Bank, as liquidator, petitioned the Court of First Instance of Manila for assistance in
the liquidation of the Lucena bank (Civil Case No. 50019). Upon motion, and after
hearing the parties, Judge Arca issued on interlocutory order on March 28, 1963, the
dispositive portion of which is to the following effect (Petition, Annex "D"):
The Rural Bank of Lucena thru its duly authorized officers or representatives, is
hereby ordered to turn over to the Central Bank, thru its duly authorized
representative, within a period of five (5) days from receipt of copy of this order, the
physical possession of all of said Rural Bank of Lucena's assets, properties and papers.
Should the Rural Bank of Lucena or its officers fail to comply with the above order
within the period indicated herein, the Central Bank, thru its authorized
representatives, is hereby authorized to take actual and physical possession of all said
assets, properties and papers of the Rural Bank of Lucena, duly inventoried in the
presence of the Provincial Fiscal, the Provincial Commander, the Provincial Treasurer,
and the Provincial Auditor of Quezon province, or their duly authorized
representatives.
The Rural Bank of Lucena resorted to this Court on certiorari, claiming that Judge
Arca gravely abused his discretion in issuing the above order, in that —
(a) it interferes with the immediately executory judgment of Judge Gatmaitan in Case
No. 47345 of the Court of First Instance of Manila;
(b) Section 29 of the Central Bank Act (R.A. 265) does not apply;
(c) there was no prior valid take over of assets nor due hearing of the liquidated Bank;
(d) Judge Gatmaitan's decision constitutes a judicial review of the Monetary Board's
action that cannot be nullified by the challenged order of Judge Area; and
(e) the turn over should not be ordered before trial on the merits.1awphîl.nèt
This Court issued a temporary restraining order until April 25, 1963, but the same
was not renewed when it expired.
We see no irreconcilable conflict between section 10 (as amended) of Republic Act
No. 720 (Rural Banks Act) and section 29 of Republic Act No. 265 (Central Bank
Act). The former provides in substance as follows:
The director of the Department of the Central Bank designated by the Monetary
Board to supervise Rural Banks ... upon proof that the Rural Bank or its board of
directors or officers are conducting and managing the affairs of the bank in a manner
contrary to laws, orders, instructions, rules and regulations promulgated by the
Monetary Board or in any manner substantially prejudicial to the interests of the
government, depositors or creditors, to take over the management of such bank when
specifically authorized to do so by the Monetary Board after due hearing until a new
board of directors and officers are elected and qualified. ...
It is easily seen that what this section authorized is the take over of the management
by the Central Bank, until the governing body of the offending Rural Bank is
recognized with a view to assuring compliance by it with the laws and regulations.
Upon the other hand, section 29 6f the Central Bank Act (R. A. 265) has in view a
much more drastic step, the liquidation of a rural bank by taking over its assets and
converting them into money to pay off its creditors. Said section prescribes:
SEC. 29. Proceedings upon insolvency. — Whenever, upon examination by the
Superintendent 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 Superintendent forthwith, in writing, to inform the
Monetary Board of the facts, and the Board, upon finding the statement of the
Superintendent to be true, shall forthwith forbid the institution to do business in the
Philippines and shall take charge of its assets and proceeds according to law.
The Monetary Board shall thereupon determine within thirty 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 creditors and shall prescribe the
conditions under which such resumption of business shall take place. In such case the
expenses and fee in the administration 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.
At any time within ten days after the Monetary Board has taken charge of the assets
of any banking institution, such institution may apply to the Court of First Instance
for an order requiring the Monetary Board to show cause why it should not be
enjoined from continuing such charge of its assets, and the court may direct the Board
to refrain from further proceedings and to surrender charge of its assets.
If the Monetary Board shall determine that the banking institution cannot resume
business with safety to its creditors, it shall, by the Solicitor General, file a petition in
the Court of First Instance reciting the proceedings which have been taken and
praying the assistance and supervision of the court in the liquidation of the affairs of
the same. The Superintendent shall thereafter, upon order of the Monetary Board
and under the supervision of the court and with all convenient speed, convert the
assets of the banking institution to money.
Considering that section 27 of the Rural Banks law (R.A. No. 720) expressly declares
that —
The provisions of Republic Acts numbered 265 and 337, in so far as applicable and
not in conflict with any provision of this Act, are hereby made a part of this Act.
we find no room for questioning the applicability of section 29 of Republic Act No.
265 (Central Bank Act) to rural banks organized under Republic Act 720, whenever
the Monetary Board should find that the rural bank affected is insolvent, or that its
continuance in business would involve probable loss to its depositors or creditors, and
that it cannot resume business with safety.
It follows that on the assumption that under section 10 of the Rural Banks Act the
Monetary Board may not take over the management of a rural bank without giving
the latter a hearing, i.e., an opportunity to rebut the charge that it has contravened
applicable laws, rules and regulations to the substantial prejudice of the government,
its depositors and creditors, such a previous hearing is nowhere required by section 29
of the Central Bank Law. Manifestly, whether a rural bank's "continuance in business
would involve probable loss" to its clients or creditors and that it "cannot resume
business with safety," is a matter of appreciation and judgment that the law entrusts
primarily to the Monetary Board. Equally apparent is that if the rural bank affected is
in the condition previously adverted to, every minute of delay in securing its assets
from dissipation inevitably increases the danger to the creditors. For this reason, the
statute has provided for a subsequent judicial review of the Monetary Board, in lieu of
a previous hearing.
In point of fact, the petitioner Rural Bank of Lucena did file a petition (Annex "G")
for judicial review in the Court of First Instance of Quezon Province, dated February
12, 1962, and challenged the validity of Resolution No. 122 of the Monetary Board
(Case No. 6471) ; but the Court of First Instance of Quezon dissolved the preliminary
injunction issued in that case and allowed Resolution No. 122 to take effect, without
any steps being taken for a review of such action. This being the case, and in view of
the manifest reluctance the Lucena bank's officials to comply with the Monetary
Board's resolution, the Central Bank had cause to seek judicial assistance for the
discharge of its duties as liquidator.
The petitioner rural bank seems to take the view that the proceedings had before
Judge Gatmaitan in Case No. 47345, Branch XIV, of the Court of First Instance of
Manila constituted the judicial review required by section 29 of Republic Act No. 265,
the Central Bank Act. Such a stand is untenable, for the case tried and decided by
Judge Gatmaitan concerned an attempt by the Central Bank to take over management
under section 10 of the Rural Banks law (R.A. No. 720) in connection with the
Monetary Board's resolution No. 928 of June 16, 1961. Even more conclusive is the
consideration that said action (Case No. 47345) was filed on June 22, 1961, and could
not possibly be a judicial review of the Resolution No. 122 adopted eight months later,
on February 2, 1962. A review cannot precede the adoption of the resolution being
reviewed. This proposition requires no demonstration.
The narrated events also rebut the contention that the order of Judge Area, issued on
March 28, 1963, in Case No. 50019, constitutes unlawful interference with the
enforcement of Judge Gatmaitan's decision of February 14, 1962, the issues involved
being different in each case. As heretofore pointed out one involved a take over of
management under section 10 of the Rural Banks Act, and the other a seizure of
assets and liquidation under section 29 of the Central Bank law (R.A. 265).
Nor can the proceedings before Judge Area be deemed judicial review of the 1962
resolution No. 122 of the Monetary Board, if only because by law (section 29, R. A.
265) such review must be asked within 10 days from notice of the resolution of the
Board. Between the adoption of Resolution No. 122 and the challenged order of
Judge Arca, more than one year had elapsed. Hence, the validity of the Monetary
Board's resolution can no longer be litigated before Judge Arca, whose role under the
fourth paragraph of section 29 is confined to assisting and supervising the liquidation
of the Lucena bank.
Whether or not the Central Bank acted with arbitrariness or bad faith in decreeing
that circumstances called for the liquidation of the Lucena Rural Bank, and should be
answerable in damages, should be threshed out and determined, not by Judge Arca
but in Case No. 6471 of the Court of First Instance of Quezon Province, which was
filed within the 10-day period prescribed by the Central Bank law, and which appears
to be still pending, unless the Lucena bank had abandoned such litigation, a fact that
we need not decide at present. Suffice it to say that Judge Arca had no reason to
inquire into the merits of the case before issuing the disputed order requiring the
surrender of the assets and papers of the Lucena bank, because: (1) neither the statute
(sec. 29, R.A. 265) nor the constitutional requirement of due process demand that the
correctness of the Monetary Board's resolution to stop operation and proceed to the
liquidation of the Lucena Rural Bank should first be adjudged before making the
resolution effective, it being enough that a subsequent judicial review by provided
(section 29, R.A. 265; 12 Am. Jur. 305, sec. 611; Bourjois vs. Chapman, 301 U.S. 183,
81 Law Ed. 1027, 1032; American Surety Co. vs. Baldwin, 77 Law Ed. 231, 86 ALR
307; Wilson vs. Standefer, 46 Law Ed. 612); (2) the period for asking such judicial
review had elapsed with excess between the adoption of the Monetary Board
Resolution No. 122 and the filing of the case by the Central Bank in the Court of
First Instance of Manila; (3) the correctness of said resolution had already been put in
issue before the Court of Quezon Province; (4) because the latter court had refused to
stop implementation of the Resolution of the Monetary Board when it dissolved its
own preliminary injunction; and (5) because the Lucena Bank had apparently
acquiesced in the action taken by the Court of Quezon Province, since the rural bank
had not sought that the action of the Quezon court be set aside by a higher court.
IN VIEW OF THE FOREGOING, the writ applied for is denied with costs against
the petitioner Lucena Rural Bank, Inc.
Bengzon, C.J., Bautista Angelo, Concepcion, Dizon, Makalintal, Bengzon, J.P., and
Zaldivar, JJ., concur.
G.R. No. 161276. January 31, 2005]
BORLONGAN vs. REYES
THIRD DIVISION
Gentlemen:
Quoted hereunder, for your information, is a resolution of this Court dated
JAN 31 2005.
G.R. No. 161276 (Teodoro C. Borlongan vs. Alberto V. Reyes, Ma. Dolores B.
Yuviengco, Candon B. Guerrero and Tomas S. Aure, Jr.)
At bar is this petition for review on certiorari filed by petitioner Teodoro C.
Borlongan, assailing the decision dated 18 September 2003[1] of the Court of
Appeals in CA-G.R. SP No. 72234, reversing and setting aside the Orders
dated 2 July 2002 and 30 July 2002 of the Ombudsman in OMB-
ADM-0-00-0867 which respectively declared herein respondents guilty of
simple neglect of duty, and denied both parties' separate motions for
reconsideration.
In a complaint-affidavit filed with Office of the Ombudsman and thereat
docketed as OMB-ADM-0-00-0867, petitioner Teodoro C. Borlongan, former
president and chief executive officer of Union Bank, Inc. (UBI),
administratively charged herein respondent officials of the Bangko Sentral ng
Pilipinas (BSP), for allegedly falsifying statement of facts in the BSP
Supervision and Examination Sector (SES) reports and tendering incorrect
and inaccurate reports and opinions to conjure false grounds for the closure of
UBI and Urbancorp Development Bank and placing them under receivership,
to the detriment of their shareholders, officers and employees.
In an Order dated 2 July 2002,[2]cralaw the Ombudsman found respondents
guilty of simple neglect of duty and imposed upon them the penalty of one (1)
month and one (1) day suspension without pay. In a subsequent Order dated
30 July 2002,[3]cralawthe Ombudsman denied both parties' motions for
reconsideration.
Therefrom, both parties interposed separate appellate recourses to the Court
of Appeals.
Respondents were the first to appeal via a petition for review, which was
docketed in the Court of Appeals as CA-G.R. SP No. 72234 and raffled off to
its 17th Division.
For his part, petitioner, also thru a petition for review, questioned before the
Court of Appeals the Ombudsman's absolution of the BSP Governor and its
General Counsel from his affidavit-complaint, and sought the imposition of a
graver penalty against the herein respondents. Docketed as CA-G.R. SP No.
72270, petitioner's appeal landed to the 5th Division of the appellate court.
Initially, petitioner filed a motion to consolidate the two (2) cases. Later,
however, he not only withdrew said motion but even vigorously opposed the
consolidation.
Unconsolidated, the two (2) cases proceeded separately. And, as it turned out,
the two (2) divisions of the Court of Appeals rendered conflicting decisions.
Thus, in a decision dated 13 August 2003,[4] the 5th Division modified the
questioned orders of the Ombudsman by finding the herein respondents,
including the BSP Governor, guilty of gross neglect of duty and imposing on
each of them the penalty of one (1) year suspension without pay.
On the other hand, the 17th Division, in a decision dated 18 September 2003,
[5]cralawreversed and set aside the same assailed orders of the Ombudsman
and dismissed the administrative complaints against the herein respondents.
Petitioner filed a motion for reconsideration, imploring the 17th Division to set
aside its September 18,2003 decision for being inconsistent with the August
13, 2003 decision of the 5th Division in CA-G.R. SP No. 72270.
In a Resolution dated 17 December 2003,[6]cralaw the 17th Division denied
petitioner's motion for reconsideration, and, in the process, castigated
petitioner for his refusal to have the two (2) cases consolidated:
Without a consolidation, there is no rule of law or jurisprudence that prevents
us, the 17th Division, from deciding SP 72234 according to our own
independent judgment, any more than the 5th Division can be prevented from
ruling upon SP 72270 according to their own independent judgment.
The records show that respondent had, indeed, filed with us a motion to
consolidate SP 72270 with our SP 72234. But for reasons only known to him,
he withdrew the motion for consolidation. He even said that the 5th Division
had eventually denied the consolidation of the case with us, again for reasons
we do not know.
Under these circumstances, without a consolidation, both divisions will have to
decide their own cases, and any resulting conflict in the decisions on similar
issues of fact and law will have to be resolved ultimately by the Supreme Court
as the supreme arbiter of all justiciable controversies in this jurisdiction.
But for the respondent to make it appear as if we are to blame for the conflict
between the two divisions of the Court, after the respondent refused to
consolidate the cases before us, is absurd and comical. Absurd, because he is
saying in so many words that we should not exercise an independent judgment
in our case anymore after the 5th Division happened to decide its case ahead
of us and comical, because he has reduced the adjudicative process into a race
between the cases. If we had only known that this was the kind of ballgame he
wanted us to observe, we would have considered our case submitted for
decision a long time ago, immediately after he filed his comment, and bar the
parties from filling replies, memoranda and other pleadings as a waste of our
time. This is how things would turn out if we pursued his line of thinking ad
absurdum.
To repeat, the respondent refused to have his case in the 5th Division
consolidated before us. If he is to fault anyone now for the consequence of this
non-consolidation, he should point all his fingers to himself.
Later, or on June 14, 2004, the former 5th Division of the Court of Appeals,
this time acting as a Special Division of Five in connection with the motions
for reconsideration therein pending, came out with an Amended Decision,
[7]cralawamending the earlier decision of 12 August 2003 in CA-G.R. SP No.
72270 by dismissing the administrative complaint against all the respondents
therein. Petitioner elevated the same Amended Decision to this Court via a
petition for review on certiorari in G.R. No. 163765.
In a Resolution promulgated on July 26, 2004,[8]cralaw the Court, thru its
Third Division, denied the petition in G.R. No. 163765 "for failure of the
petitioner to show that a reversible error had been committed by the appellate
court". In a subsequent Resolution promulgated on October 1, 2004, the
Court denied petitioner's motion for reconsideration with finality "as no
substantial arguments were raised to warrant a reconsideration thereof".
Meanwhile, on February 13, 2004, petitioner filed the instant petition for
review on certiorari, this time assailing the 18 September 2003 decision of the
17th Decision of the Court of Appeals in CA-G.R. SP No. 72234.
Perusal of the present petition reveals that it raises substantially the same
issues already passed upon by the two (2) Divisions of the Court of Appeals
and by this Court, no less, in G.R. No. 163765.
Chanting the same tone, the recourse is unavailing.
In Philippine Retirement Authority vs. Rupa,[9]cralaw we laid down the
standard definition of simple neglect of duty, as a disregard of a duty resulting
from carelessness or indifference.
Here, we find that neither gross nor simple neglect of duty characterized the
acts of the respondents. The subject SES reports prepared by respondents and
submitted to the Monetary Board were anything but haphazardly or
negligently made. As it were, the reports were a compendium of long years of
monitoring by the BSP of a problem bank, and assembled over a period of 15
hours after the respondents were instructed to do so. The data contained
therein had been patiently collected and analyzed.
Record reveals that UBI was being monitored by BSP officials for years.
Respondent Dolores Yuvienco had supervised the bank directly since 1999 as
Director of DCB II
UBI had since given up its status as an expanded commercial bank and
reverted to an ordinary commercial bank because it could not meet the P3.5
billion minimum capital requirement for a universal bank. For two (2) months
prior to its closure, Urban Bank had been besieged by liquidity problems, and
its declaration of a bank holiday on April 25 only confirmed its decreasing
ability to meet obligations on time.
Section 30(a) of RA 7653, otherwise known as the New Central Bank Act, is
relevant. Under that law, the Monetary Board may execute measures such
those taken in this case, summarily and without need of prior hearing:
Sec. 30. Proceedings in Receivership and Liquidation. -Whenever, upon
report of the head of the supervising and examining department, the
Monetary Board finds that the 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 asset, as determined by the Bangko Sentral to
meet its liabilities; or
(c) cannot continue in business without involving probable losses to its
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. xxx. (Emphasis
supplied)
Pertinent, too, is Section 53 of Republic Act No. 8791,[10]cralaw since it
underscores the summary character of the MB's initiative of placing a bank
under receivership. It provides that in case a bank or quasi-bank notifies the
BSP or publicly announces a bank holiday, or in any manner suspends the
payment of its deposit liabilities continuously for more than 30 days, the MB
may summarily and without need of prior hearing close such banking
institution and place it under receivership of the PDIC.
This authority is beyond review by the courts except on a petition for
certiorari. Here, it is worth to note even the Ombudsman found significant
evidence to rationalize the decision of the Monetary Board to place UBI
under receivership.
Likewise, we agree with the appellate court's 17th Division in its ratiocination
that it is illogical to hold the respondents administratively liable for the
preparation of reports that are, in their nature, merely recommendatory and
have to be acted upon by superior officials. The reports were not the final
action that creates right and duties and affects the interest and fortunes of
third parties. Courts do not interfere with any administrative measure prior to
its completion or finality, and when they do, what is actionable is not the
recommendation but the decision of the official with the competence under
the law to issue it.[11]cralaw
The subject reports are only between the Monetary Board and the BSP
officials who prepared and endorsed them and may be rejected, modified or
accepted by the Monetary Board. As far as this case is concerned, the legal
obligations of diligence and good faith that BSP officials owe to the public
under Section 16 of the New Central Act start with the official acts of the
Monetary Board which, rightly or wrong, are the cause of loss or injury to
third parties, not any preparatory report or recommendation.
As earlier noted, UBI's own top management, specifically Bartolome III, its
chairman of the Board, and the petitioner himself, its president, continually
provided the BSP the picture of the worsening situation of UBI in the four (4)
weeks from March 20, 2000 to April 25, 2000, leading to UBI's unilateral
declaration of a bank holiday on April 25, 2000.[12]cralaw Their constant
reporting showed that UBI was "unable to pay its liabilities as they become
due in the ordinary course of business; (or that it) has insufficient realizable
assets, as determined by the Bangko Sentral, to meet its liabilities."[13]cralaw
While other factors might have weighed in the analysis of UBI's financial
liquidity and in the preparation of the inevitable Supervisor and Examination
Sector (SES) reports, the MB considered the constant reports of UBI's own
top management as the best proof of its dire liquidity status.
Petitioner would have this Court review and reverse factual findings of the
Court of Appeals. This, of course, the Court cannot and will not do. Review
of factual findings of the appellate court is not a function ordinarily
undertaken by this Court, the rule admitting only a few exceptions recognized
in decisional law. The principle is consistent with Rule 45 of the Rules of
Court which categorically provides that a petition for review on certiorari must
raise "only questions of law which must be distinctly set forth" in the petition.
Even then, the review sought will be denied if the questions raised are "too
unsubstantial to require consideration" or if the Court is not convinced of the
existence of "special and important reasons" to warrant review, of which none
exists in this case.
All told, we find that no reversible error was committed by the 17th Division
of Court of Appeals when it reversed and set aside the July 2, 2002 and July
30, 2002 Orders of the Ombudsman in OMB-ADM-0-00-0867.
WHEREFORE, the instant petition is hereby DENIED DUE COURSE.
SO ORDERED.
THE CENTRAL BANK OF THE PHILIPPINES and RAMON V.
TIAOQUI, petitioners,
vs.
COURT OF APPEALS and TRIUMPH SAVINGS BANK, respondents.
III. PONENTE: Bellosillo
IV. TOPIC: NCBA
V. STATEMENT OF FACTS:
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,". The resolution was allegedly issued by reason of an examination submitted by
the Supervision and Examination Sector (SES), Department II, of the Central Bank
(CB) stating that: "that the financial condition of TSB is one of insolvency and its
continuance in business would involve probable loss to its depositors and creditors,"
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.
Subsequently, 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. 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. The CA upheld the findings of the trial
court.
VI. STATEMENT OF THE CASE:
TSB filed a complaint before the Regional Trial Court against Central Bank
and Tiaoqui to annul the MB resolution. TSB argued that the Central Bank has no
authority to take over a banking institution even if it is not charged with violation of
any law or regulation, much less found guilty thereof.
TSB thereafter filed for a Temporary Restraining Order (TRO), which was initially
issued by the RTC, until the trial court quashed the TRO upon motion by Central
Bank and Tiaoqui. Afterwards, Central Bank and Tiaoqui filed a motion to dismiss
the complaint. Meanwhile, TSB filed an urgent motion in the RTC to direct receiver
Tiaoqui to restore TSB to its elected board of directors and officers after failing to
secure an injunction. The RTC denied the motion to dismiss and granted TSB’s
urgent motion.
The RTC’s order prompted Central Bank and Tiaoqui to file a petition for certiorari
and prohibition under Rule 65 before the Court of Appeals, but the appellate court
ruled in favor of TSB. Central Bank and Tiaoqui filed a petition for review on
certiorari under Rule 45 to set aside the decision of the CA.
VII. ISSUES:
WON a Monetary Board resolution placing a private bank under receivership should
be annulled on the ground of lack of prior notice and hearing.
VIII. RULING:
No, the subject monetary board resolution in the case at bar cannot be
annulled merely on the ground of lack of prior notice and hearing.
Under Sec. 29 of R.A. 265, 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, 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], 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.


RURAL BANK OF SAN MIGUEL, INC. and HILARIO P. SORIANO, in his
capacity as majority stockholder in the Rural Bankof San Miguel, Inc.,
Petitioners,
vs.
MONETARY BOARD, BANGKO SENTRAL NG PILIPINAS and
PHILIPPINE DEPOSIT INSURANCE CORPORATION, Respondents. G.R.
No. 150886 February 16, 2007,
III: PONENTE: J. Corona
IV. TOPIC: The New Central Bank Act
V. STATEMENT OF FACTS:
Petitioner Rural Bank of San Miguel, Inc. (RBSM) was a domestic
corporation engaged in banking. On January 21, 2000, respondent Monetary Board
(MB), the governing board of respondent Bangko Sentral ng Pilipinas (BSP), issued
Resolution No. 105 prohibiting RBSM from doing business in the Philippines, placing
it under receivership and designating respondent Philippine Deposit Insurance
Corporation (PDIC) as receiver.
On the basis of the comptrollership/monitoring report as of October 31, 1999 as
reported by Mr. Wilfredo B. Domo-ong, Director, Department of Rural Banks, ,
which report showed that [RBSM] (a) is unable to pay its liabilities as they become
due in the ordinary course of business; (b) cannot continue in business without
involving probable losses to its depositors and creditors; that the management of the
bank had been accordingly informed of the need to infuse additional capital to place
the bank in a solvent financial condition and was given adequate time within which to
make the required infusion and that no infusion of adequate fresh capital was made.
RBSM filed a petition for certiorari and prohibition to nullify the resolution placing it
under receivership.
The Regional Trial Court and the Court of Appeals (CA) dismissed the
petition. The CA found that RBSM was granted with emergency loans as a last
trenche. The emergency loan was for the sole purpose of servicing and meeting
withdrawals but RBSM did not use it for that purpose.
Thereafter, RBSM declared a bank holiday which prompted BSP to ecamine its
books. The Comptroller report was submitted before the MB and based on that, a
closure and liquidation order was issued.
RBSM now argues that the resolution ordering the closure and liquidation of RBSM
is void because there was no prior complete examination but merely a report.
VI. STATEMENT OF THE CASE:
On January 31, 2000, petitioners filed a petition for certiorari and
prohibition in the Regional Trial Court (RTC) of Malolos, Branch 22 to nullify and set
aside Resolution No. 105. However, on February 7, 2000, petitioners filed a notice of
withdrawal in the RTC and, on the same day, filed a special civil action for certiorari
and prohibition in the CA. On February 8, 2000, the RTC dismissed the case
pursuant to Section 1, Rule 17 of the Rules of Court. In their petition before the CA,
petitioners claimed that respondents MB and BSP committed grave abuse of
discretion in issuing Resolution No. 105. The petition was dismissed by the CA on
March 28, 2000. It held, among others, that the decision of the MB to issue
Resolution No. 105 was based on the findings and recommendations of the
Department of Rural Banks Supervision and Examination Sector, the comptroller
reports as of October 31, 1999 and December 31, 1999 and the declaration of a bank
holiday. Such could be considered as substantial evidence.
Pertinently, on June 9, 2000, on the basis of reports prepared by PDIC stating that
RBSM could not resume business with sufficient assurance of protecting the interest
of its depositors, creditors and the general public, the MB passed Resolution No. 966
directing PDIC to proceed with the liquidation of RBSM under Section 30 of RA
7653.
Hence this petition.
VII. ISSUE:
Whether or not Sec. 30 of RA 7653 and applicable jurisprudence require a current
and complete examination of the bank before it can be closed and placed under
receivership.
VIII. RULING:
No, a current and complete examination of the bank before it can be closed
and placed under receivership is not necessary.
The argument of RBSM was in accordance with the ruling in Banco Filipino vs.
Monetary Board. However, RBSM’s reliance on such ruling is misplaced because the
case was decided using Sec. 29 of the old law, RA 265. Thus in Banco Filipino, we
ruled that an "examination [conducted] by the head of the appropriate supervising or
examining department or his examiners or agents into the condition of the bank" is
necessary before the MB can order its closure. However, RA 265, including Section 29
thereof, was expressly repealed by RA 7653 which took effect in 1993. Resolution No.
105 was issued on January 21, 2000. Hence, petitioners’ reliance on Banco Filipino
which was decided under RA 265 was misplaced.
In RA 7653, only a "report of the head of the supervising or examining department"
is necessary. It is an established rule in statutory construction that where the words of
a statute are clear, plain and free from ambiguity, it must be given its literal meaning
and applied without attempted interpretation. The word "report" has a definite and
unambiguous meaning which is clearly different from "examination." A report, as a
noun, may be defined as "something that gives information" or "a usually detailed
account or statement."2 On the other hand, an examination is "a search, investigation
or scrutiny."
What is being raised here as grave abuse of discretion on the part of the
respondents was the lack of an examination and not the supposed arbitrariness with
which the conclusions of the director of the Department of Rural Banks Supervision
and Examination Sector had been reached in the report which became the basis of
Resolution No. 105.
The absence of an examination before the closure of RBSM did not mean
that there was no basis for the closure order. Needless to say, the decision of the MB
and BSP, like any other administrative body, must have something to support itself and
its findings of fact must be supported by substantial evidence. But it is clear under RA
7653 that the basis need not arise from an examination as required in the old law.
We thus rule that the MB had sufficient basis to arrive at a sound conclusion that there
were grounds that would justify RBSM’s closure. It relied on the report of Mr. Domo-
ong, the head of the supervising or examining department, with the findings that: (1)
RBSM was unable to pay its liabilities as they became due in the ordinary course of
business and (2) that it could not continue in business without incurring probable
losses to its depositors and creditors.The report was a 50- page memorandum
detailing the facts supporting those grounds, an extensive chronology of events
revealing the multitude of problems which faced RBSM and the recommendations
based on those findings
BANCO FILIPINO SAVINGS AND MORTGAGE BANK, petitioner,
vs.
THE MONETARY BOARD, CENTRAL BANK OF THE PHILIPPINES,
JOSE B. FERNANDEZ, CARLOTA P. VALENZUELA, ARNULFO B.
AURELLANO and RAMON V. TIAOQUI, respondents.
G.R. No. 68878 December 11, 1991
V. STATEMENT OF FACTS:
This case involves 9 consolidated cases. The first six cases involve the
common issue of whether or not the liquidator appointed by the respondent Central
Bank has the authority to prosecute as well as to defend suits, and to foreclose
mortgages for and in behalf of the bank while the issue on the validity of the
receivership and liquidation of the latter is pending resolution in G.R. No. 7004. On
the other hand, the other three (3) cases, namely, G.R. Nos. 70054, which is the main
case, 78767 and 78894 all seek to annul and set aside M.B. Resolution No. 75 issued
by respondents Monetary Board and Central Bank on January 25, 1985.
G.R. Nos. 70054
Banco Filipino Savings and Mortgage Bank commenced operations on July
9, 1964. It has 89 operating branches with more than 3 million depositors. It has an
approved emergency advance of P119.7 million. The Monetary Board placed Banco
Filipino Savings and Mortgage Bank under conservatorship of Basilio Estanislao. He
was later replaced by Gilberto Teodoro as conservator on August 10, 1984. Gilberto
Teodoro submitted a report dated January 8, 1985 to respondent The Monetary
Board on the conservatorship of the bank. Subsequently, another report dated
January 23, 1985 was submitted to the Monetary Board by Ramon Tiaoqui regarding
the major findings of examination on the financial condition of Banco Filipino
Savings and Mortgage Bank as of July 31, 1984, finding the bank one of insolvency
and illiquidity and provides sufficient justification for forbidding the bank from
engaging in banking. The Monetary Board ordered the closure of Banco Filipino and
designated Mrs. Carlota P. Valenzuela as Receiver.
Banco Filipino filed a complaint with the RTC to set aside the action of the
Monetary Board placing the bank under receivership and filed with the SC the
petition for certiorari and mandamus. Carlota Valenzuela, as Receiver and Arnulfo
Aurellano and Ramon Tiaoqui as Deputy Receivers of Banco Filipino submitted their
report on the receivership of the bank to the Monetary Board, finding that the
condition of the banking institution continues to be one of insolvency, i.e., its
realizable assets are insufficient to meet all its liabilities and that the bank cannot
resume business with safety to its depositors, other creditors and the general public,
and recommends the liquidation of the bank. Banco Filipino filed a motion before the
SC praying that a restraining order or a writ of preliminary injunction be issued to
enjoin respondents from causing the dismantling of Banco Filipino signs in its main
office and 89 branches. The SC ordered the issuance of the temporary restraining
order. The SC directed the Monetary Board and Central Bank hold hearings at which
the Banco Filipino should be heard.
VI. STATEMENT OF THE CASE:
This refers to nine (9) consolidated cases concerning the legality of the
closure and receivership of petitioner Banco Filipino Savings and Mortgage Bank
(Banco Filipino for brevity) pursuant to the order of respondent Monetary Board. Six
(6) of these cases, namely, G.R. Nos. 68878, 77255-68, 78766, 81303, 81304 and
90473 involve the common issue of whether or not the liquidator appointed by the
respondent Central Bank (CB for brevity) has the authority to prosecute as well as to
defend suits, and to foreclose mortgages for and in behalf of the bank while the issue
on the validity of the receivership and liquidation of the latter is pending resolution in
G.R. No. 7004. Corollary to this issue is whether the CB can be sued to fulfill financial
commitments of a closed bank pursuant to Section 29 of the Central Bank Act. On
the other hand, the other three (3) cases, namely, G.R. Nos. 70054, which is the main
case, 78767 and 78894 all seek to annul and set aside M.B. Resolution No. 75 issued
by respondents Monetary Board and Central Bank on January 25, 1985.
VII. ISSUES:
1. Whether or not the liquidator appointed by the respondent Central Bank has the
authority to prosecute as well as to defend suits, and to foreclose mortgages for and in
behalf of the bank while the issue on the validity of the receivership and liquidation
of the latter is pending resolution in G.R. No. 7004
2. Whether or not the Central Bank and the Monetary Board acted arbitrarily and in
bad faith in finding and thereafter concluding that petitioner bank is insolvent, and in
ordering its closure on January 25, 1985.
VIII. RULING:
1. Yes, the liquidator appointed by the respondent Central Bank has the authority to
prosecute as well as to defend suits, and to foreclose mortgages for and in behalf of
the bank while the issue on the validity of the receivership and liquidation of the latter
is pending resolution in G.R. No. 7004. When the issue on the validity of the closure
and receivership of Banco Filipino bank was raised in G.R. No. 70054, pendency of
the case did not diminish the powers and authority of the designated liquidator to
effectuate and carry on the administration of the bank. In fact when We adopted a
resolute on August 25, 1985 and issued a restraining order to respondents Monetary
Board and Central Bank, We enjoined further acts of liquidation. Such acts of
liquidation, as explained in Sec. 29 of the Central Bank Act are those which constitute
the conversion of the assets of the banking institution to money or the sale,
assignment or disposition of the s to creditors and other parties for the purpose of
paying debts of such institution. We did not prohibit however acts a as receiving
collectibles and receivables or paying off credits claims and other transactions
pertaining to normal operate of a bank.
There is no doubt that the prosecution of suits collection and the foreclosure of
mortgages against debtors the bank by the liquidator are among the usual and
ordinary transactions pertaining to the administration of a bank. their did Our order
in the same resolution dated August 25, 1985 for the designation by the Central Bank
of a comptroller Banco Filipino alter the powers and functions; of the liquid insofar as
the management of the assets of the bank is concerned. The mere duty of the
comptroller is to supervise counts and finances undertaken by the liquidator and to d
mine the propriety of the latter's expenditures incurred behalf of the bank.
Notwithstanding this, the liquidator is empowered under the law to continue the
functions of receiver is preserving and keeping intact the assets of the bank in
substitution of its former management, and to prevent the dissipation of its assets to
the detriment of the creditors of the bank. These powers and functions of the
liquidator in directing the operations of the bank in place of the former management
or former officials of the bank include the retaining of counsel of his choice in actions
and proceedings for purposes of administration. Clearly, in G.R. Nos. 68878,
77255-58, 78766 and 90473, the liquidator by himself or through counsel has the
authority to bring actions for foreclosure of mortgages executed by debtors in favor of
the bank. In G.R. No. 81303, the liquidator is likewise authorized to resist or defend
suits instituted against the bank by debtors and creditors of the bank and by other
private persons. Similarly, in G.R. No. 81304, due to the aforestated reasons, the
Central Bank cannot be compelled to fulfill financial transactions entered into by
Banco Filipino when the operations of the latter were suspended by reason of its
closure. The Central Bank possesses those powers and functions only as provided for
in Sec. 29 of the Central Bank Act.
2. Yes, the Monetary Board acted arbitrarily and in bad faith in finding and thereafter
concluding that petitioner bank is insolvent, and in ordering its closure on January 25,
1985. There is no question that under Section 29 of the Central Bank Act, the
following are the mandatory requirements to be complied with before a bank found to
be insolvent is ordered closed and forbidden to do business in the Philippines: Firstly,
an examination shall be conducted by the head of the appropriate supervising or
examining department or his examiners or agents into the condition of the bank;
secondly, it shall be disclosed in the examination that the condition of the bank is one
of insolvency, or that its continuance in business would involve probable loss to its
depositors or creditors; thirdly, the department head concerned shall inform the
Monetary Board in writing, of the facts; and lastly, the Monetary Board shall find the
statements of the department head to be true. Anent the first requirement, the
Tiaoqui report, submitted on January 23, 1985, revealed that the finding of insolvency
of petitioner was based on the partial list of exceptions and findings on the regular
examination of the bank as of July 31, 1984 conducted by the Supervision and
Examination Sector II of the Central Bank of the Philippines Central Bank. Clearly,
Tiaoqui based his report on an incomplete examination of petitioner bank and
outrightly concluded therein that the latter's financial status was one of insolvency or
illiquidity. It is evident from the foregoing circumstances that the examination
contemplated in Sec. 29 of the CB Act as a mandatory requirement was not
completely and fully complied with. Despite the existence of the partial list of findings
in the examination of the bank, there were still highly significant items to be weighed
and determined such as the matter of valuation reserves, before these can be
considered in the financial condition of the bank.
It would be a drastic move to conclude prematurely that a bank is insolvent if the basis
for such conclusion is lacking and insufficient, especially if doubt exists as to whether
such bases or findings faithfully represent the real financial status of the bank. The
actuation of the Monetary Board in closing petitioner bank on January 25, 1985
barely four days after a conference with the latter on the examiners' partial findings on
its financial position is also violative of what was provided in the CB Manual of
Examination Procedures. Said manual provides that only after the examination is
concluded, should a pre-closing conference led by the examiner-in-charge be held
with the officers/representatives of the institution on the findings/exception, and a
copy of the summary of the findings/violations should be furnished the institution
examined so that corrective action may be taken by them as soon as possible (Manual
of Examination Procedures, General Instruction, p. 14). It is hard to understand how
a period of four days after the conference could be a reasonable opportunity for a
bank to undertake a responsive and corrective action on the partial list of findings of
the examiner-in-charge. In the instant case, the basic standards of substantial due
process were not observed. Time and again, We have held in several cases, that the
procedure of administrative tribunals must satisfy the fundamentals of fair play and
that their judgment should express a well-supported conclusion.
In view of the foregoing premises, We believe that the closure of the petitioner bank
was arbitrary and committed with grave abuse of discretion. Granting in gratia
argumenti that the closure was based on justified grounds to protect the public, the
fact that petitioner bank was suffering from serious financial problems should not
automatically lead to its liquidation. Section 29 of the Central Bank provides that a
closed bank may be reorganized or otherwise placed in such a condition that it may be
permitted to resume business with safety to its depositors, creditors and the general
public.
G.R. No. 105364* June 28, 2001
PHILIPPINE VETERANS BANK EMPLOYEES UNION-N.U.B.E. and
PERFECTO V. FERNANDEZ, petitioners,
vs.
HONORABLE BENJAMIN VEGA, Presiding Judge of Branch 39 of the
REGIONAL TRIAL COURT of Manila, the CENTRAL BANK OF THE
PHILIPPINES and THE LIQUIDATOR OF THE PHILIPPINE VETERANS
BANK, respondents
KAPUNAN, J.:
May a liquidation court continue with liquidation proceedings of the Philippine
Veterans Bank (PVB) when Congress had mandated its rehabilitation and reopening?
This is the sole issue raised in the instant Petition for Prohibition with Petition for
Preliminary Injunction and application for Ex Parte Temporary Restraining Order.
The antecedent facts of the case are as follows:
Sometime in 1985, the Central Bank of the Philippines (Central Bank, for brevity)
filed with Branch 39 of the Regional Trial Court of Manila a Petition for Assistance in
the Liquidation of the Philippine Veterans Bank, the same docketed as Case No.
SP-32311. Thereafter, the Philipppine Veterans Bank Employees Union-N.U.B.E.,
herein petitioner, represented by petitioner Perfecto V. Fernandez, filed claims for
accrued and unpaid employee wages and benefits with said court in SP-32311.1
After lengthy proceedings, partial payment of the sums due to the employees were
made. However, due to the piecemeal hearings on the benefits, many remain unpaid.2
On March 8, 1991, petitioners moved to disqualify the respondent judge from hearing
the above case on grounds of bias and hostility towards petitioners.3
On January 2, 1992, the Congress enacted Republic Act No. 7169 providing for the
rehabilitation of the Philippine Veterans Bank.4
Thereafter, petitioners filed with the labor tribunals their residual claims for benefits
and for reinstatement upon reopening of the bank.5
Sometime in May 1992, the Central Bank issued a certificate of authority allowing the
PVB to reopen.6
Despite the legislative mandate for rehabilitation and reopening of PVB, respondent
judge continued with the liquidation proceedings of the bank. Moreover, petitioners
learned that respondents were set to order the payment and release of employee
benefits upon motion of another lawyer, while petitioners’ claims have been frozen to
their prejudice.
Hence, the instant petition.
Petitioners argue that with the passage of R.A. 7169, the liquidation court became
functus officio, and no longer had the authority to continue with liquidation
proceedings.
In a Resolution, dated June 8, 1992, the Supreme Court resolved to issue a Temporary
Restraining Order enjoining the trial court from further proceeding with the case.
On June 22, 1992, VOP Security & Detective Agency (VOPSDA) and its 162 security
guards filed a Motion for Intervention with prayer that they be excluded from the
operation of the Temporary Restraining Order issued by the Court. They alleged that
they had filed a motion before Branch 39 of the RTC of Manila, in SP-No. 32311,
praying that said court order PVB to pay their backwages and salary differentials by
authority of R.A. No 6727, Wage Orders No. NCR-01 and NCR-01-Ad and Wage
Orders No. NCR-02 and NCR-02-A; and, that said court, in an Order dated June 5,
1992, approved therein movants’ case and directed the bank liquidator or PVB itself
to pay the backwages and differentials in accordance with the computation
incorporated in the order. Said intervenors likewise manifested that there was an error
in the computation of the monetary benefits due them.
On August 18, 1992, petitioners, pursuant to the Resolution of this Court, dated July
6, 1992, filed their Comment opposing the Motion for Leave to File Intervention and
for exclusion from the operation of the T.R.O. on the grounds that the movants have
no legal interest in the subject matter of the pending action; that allowing intervention
would only cause delay in the proceedings; and that the motion to exclude the
movants from the T.R.O. is without legal basis and would render moot the relief
sought in the petition.
On September 3, 1992, the PVB filed a Petition-In-Intervention praying for the
issuance of the writs of certiorari and prohibition under Rule 65 of the Rules of
Court in connection with the issuance by respondent judge of several orders involving
acts of liquidation of PVB even after the effectivity of R.A. No. 7169. PVB further
alleges that respondent judge clearly acted in excess of or without jurisdiction when he
issued the questioned orders.
We find for the petitioners.
Republic Act No. 7169 entitled "An Act To Rehabilitate The Philippine Veterans
Bank Created Under Republic Act No. 3518, Providing The Mechanisms Therefor,
And For Other Purposes", which was signed into law by President Corazon C. Aquino
on January 2, 1992 and which was published in the Official Gazette on February 24,
1992, provides in part for the reopening of the Philippine Veterans Bank together with
all its branches within the period of three (3) years from the date of the reopening of
the head office.7 The law likewise provides for the creation of a rehabilitation
committee in order to facilitate the implementation of the provisions of the same.8
Pursuant to said R.A. No. 7169, the Rehabilitation Committee submitted the
proposed Rehabilitation Plan of the PVB to the Monetary Board for its approval.
Meanwhile, PVB filed a Motion to Terminate Liquidation of Philippine Veterans
Bank dated March 13, 1992 with the respondent judge praying that the liquidation
proceedings be immediately terminated in view of the passage of R.A. No. 7169.
On April 10, 1992, the Monetary Board issued Monetary Board Resolution No. 348
which approved the Rehabilitation Plan submitted by the Rehabilitaion Committee.
Thereafter, the Monetary Board issued a Certificate of Authority allowing PVB to
reopen.
On June 3, 1992, the liquidator filed A Motion for the Termination of the Liquidation
Proceedings of the Philippine Veterans Bank with the respondent judge.
As stated above, the Court, in a Resolution dated June 8, 1992, issued a temporary
restraining order in the instant case restraining respondent judge from further
proceeding with the liquidation of PVB.
On August 3, 1992, the Philippine Veterans Bank opened its doors to the public and
started regular banking operations.
Clearly, the enactment of Republic Act No. 7169, as well as the subsequent
developments has rendered the liquidation court functus officio. Consequently,
respondent judge has been stripped of the authority to issue orders involving acts of
liquidation.
Liquidation, in corporation law, connotes a winding up or settling with creditors and
debtors.9 It is the winding up of a corporation so that assets are distributed to those
entitled to receive them. It is the process of reducing assets to cash, discharging
liabilities and dividing surplus or loss.
On the opposite end of the spectrum is rehabilitation which connotes a reopening or
reorganization. Rehabilitation contemplates a continuance of corporate life and
activities in an effort to restore and reinstate the corporation to its former position of
successful operation and solvency.10

It is crystal clear that the concept of liquidation is diametrically opposed or contrary
to the concept of rehabilitation, such that both cannot be undertaken at the same
time. To allow the liquidation proceedings to continue would seriously hinder the
rehabilitation of the subject bank.
Anent the claim of respondents Central Bank and Liquidator of PVB that R.A. No.
7169 became effective only on March 10, 1992 or fifteen (15) days after its publication
in the Official Gazette; and, the contention of intervenors VOP Security, et. al. that
the effectivity of said law is conditioned on the approval of a rehabilitation plan by the
Monetary Board, among others, the Court is of the view that both contentions are
bereft of merit.
While as a rule, laws take effect after fifteen (15) days following the completion of their
publication in the Official Gazette or in a newspaper of general circulation in the
Philippines, the legislature has the authority to provide for exceptions, as indicated in
the clause "unless otherwise provided."
In the case at bar, Section 10 of R.A. No. 7169 provides:
Sec. 10. Effectivity. - This Act shall take effect upon its approval.
Hence, it is clear that the legislature intended to make the law effective immediately
upon its approval. It is undisputed that R.A. No. 7169 was signed into law by
President Corazon C. Aquino on January 2, 1992. Therefore, said law became
effective on said date.
Assuming for the sake of argument that publication is necessary for the effectivity of
R.A. No. 7169, then it became legally effective on February 24, 1992, the date when
the same was published in the Official Gazette, and not on March 10, 1992, as
erroneously claimed by respondents Central Bank and Liquidator.
WHEREFORE, in view of the foregoing, the instant petition is hereby GIVEN DUE
COURSE and GRANTED. Respondent Judge is hereby PERMANENTLY
ENJOINED from further proceeding with Civil Case No. SP- 32311.
SO ORDERED.
DOMINGO R. MANALO, petitioner, vs. COURT OF APPEALS (Special
Twelfth Division) and PAIC SAVINGS AND MORTGAGE BANK,
respondents. G.R. No. 141297. October 8, 2001
STATEMENT OF FACTS:
S. Villanueva Enterprise thru its president, Therese Vargas, obtained a loan
of 3M and 1M from the respondent PAIC Savings and Mortgage Bank and the
Philippine American Investments Corporation (PAIC) respectively. As a security,
Vargas executed a Joint First Mortgage over her two parcels of land in favor of the
respondent and PAIC. S. Villanueva Enterprise failed to settle its loan obligation
which prompted the respondent to institute an extrajudicial foreclosure proceeding
over the mortgage lots. A public sale was held and the property was sold to the
respondent. A certificate of sale was issued and it’s duly annotated in the title of the
land. Vargas failed to redeem the property, thus, the title was consolidated in
respondent’s name. Meanwhile, the respondent bank was put under liquidation a
petition for assistance was granted by the RTC. Vargas tried to negotiate with the
liquidator of the bank to repurchase the property but she cannot afford the same.
Vargas then filed a case for annulment of the mortgage and the extrajudicial
foreclosure which was later on dismissed by the RTC. Vargas appealed before the CA
but the decision of the RTC was affirmed and later on, this decision became final and
executory.
VI. STATEMENT OF THE CASE
In the meantime, the respondent bank filed a petition before the RTC for the
issuance of a writ of possession for the subject property. Vargas and the Villanueva
Enterprise filed an opposition. While the case was still pending, Vargas sold the
disputed property to a certain Armando Angsico. After this sale, Vargas, representing
herself as the lawful owner of the same property, leased it to Doming R. Manalo for a
period of 10 years. Later on, Angsico assigned his rights over the property to Manalo.
Then, the RTC granted the petition and issued the writ of possession and ordered
Vargas and any and all persons claiming rights under her title to vacate the property.
Villanueva Enterprise and Vargas moved for the quashal of the said writ. Manalo filed
a motion to intervene. The RTC denied both the said motions. Manalo filed a Motion
for Reconsideration which was also denied. Manalo filed a Petition for Certiorari
before the CA. Petitioner contended that the lower court should have dismissed
respondents Ex-Parte Petition for Issuance of Writ of Possession 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. He then cites the decision in
Valenzuela v. Court of Appeals, where it was 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. While this case was pending, Manalo entered into a lease agreement with
the respondent over the same property. The CA dismissed the petition of Manalo.
Hence, this appeal before the SC.
VII. ISSUE/S:
1. Whether or not the Liquidation Court has the exclusive jurisdiction over the
petition for the issuance of writ of possession filed by the respondent bank in another
court?
2. Whether or not the respondent bank can still file and maintain a suit despite the
fact that it is already under liquidation?
VIII. Ruling:
1. NO. The pertinent provision of the law which states the liquidation court “shall
have jurisdiction in the same proceedings to assist in the adjudication of disputed
claims against the bank...xxx” 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. 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 regulates his
operations. 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. To be sure, the liquidator took the proper course of action when it
applied for a writ in the Pasay City RTC because under Act 3135, it is mandated 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.
2. YES. 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. 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.
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.
III. PONENTE: Justice Velasco Jr.
IV. TOPIC: The New Central Bank Act
V. STATEMENT OF FACTS:
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 of the
banks wherein SED provided copies of Lists of Findings containing the deficiencies
discovered during the examinations. Banks were then required to comment and to
undertake the remedial measures which 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. In response, Fonacier
reiterated the banks’ failure to comply with the directive for additional capital
infusions.
RBPI filed a complaint for nullification of the BSP ROE with application for
a TRO and writ of preliminary injunction before the RTC. Praying 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 rest of the banks followed suit filing complaints with the RTC
substantially similar to that of RBPI.
RTC denied the prayer for a TRO of Pilipino Rural Bank, Inc. The bank filed a
motion for reconsideration the next day.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. 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 and moved for the inhibition of respondent judge.
Petitioners filed a motion for reconsideration regarding the consolidation of the
subject cases.
VI. STATEMENT OF THE CASE:
The Ruling of the RTC 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 Ruling of the CA
Petitioners claims grave abuse of discretion on the part of Judge Valenzuela. 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.
On November 24, 2008, a TRO was issued by this Court, restraining the CA, RTC,
and respondents from implementing and enforcing the CA Decision. 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
VII. ISSUES/S:
a. Whether or not the TRO issued by the RTC violated section 25 of the New Central
Bank Act that prevented the MB to discharge functions.
b. Whether or not the respondents are required to be given copies of the ROEs before
submission of such to the Monetary Board.
VIII. RULING:
(A.)YES, 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.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. These requirements are absent in the present case.
The issuance by the RTC of writs of preliminary injunction is an unwarranted
interference with the powers of the MB 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 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. 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.
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.
(B) NO,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, 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.
CENTRAL BANK OF PHILIPPINES petitioners, vs. RAFAEL DE LA
CRUZ, respondent. GR No. 59957, Nov 12, 1990,
IV. TOPIC: The New Central Bank Act
V. STATEMENT OF FACTS:
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 Rural Bank of Libmanan. DRBSLA director, 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. As a result of its questionable transactions, the bank became
insolvent.
In her Memorandum 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 and (3) that the Director of
DRBSLA be designated as receiver. Finding the report to be true, the Monetary
Board placed Libmanan Bank under statutory receivership and designating Director
Consolacion V. Odra, as Receiver. Libmanan Bank was informed of the Monetary
Board Resolution, and advised to submit to the Monetary Board an acceptable
reorganization and rehabilitation program. Meanwhile, Director Odra, as receiver,
took possession and control of the assets and records of the rural bank
As Libmanan Bank failed to submit the required acceptable reorganization
and rehabilitation plan, the Monetary Board issued a resolution ordering its
liquidation. On August 3, 1981, the Solicitor General, filed in the then Court of First
Instance of Camarines Sur, presided over by respondent Judge Rafael De la Cruz, a
petition for Assistance in the Liquidation of Libmanan Bank. Libmanan Bank,
opposed the Central Bank’s petition. On September 23, 1981, Libmanan Bank filed, a
separate complaint for prohibition, mandamus and injunction praying the Court to
enjoin and dismiss the liquidation proceeding on the ground that the Central Bank
gravely abused its discretion in ordering the liquidation of said rural bank.
VI. STATEMENT OF THE CASE:
On August 3, 1981, the Solicitor General, filed in the then Court of First
Instance of Camarines Sur, presided over by respondent Judge Rafael De la Cruz, a
petition for Assistance in the Liquidation of Libmanan Bank. Libmanan Bank,
opposed the Central Bank’s petition. On September 23, 1981, Libmanan Bank filed, a
separate complaint for prohibition, mandamus and injunction praying the Court to
enjoin and dismiss the liquidation proceeding on the ground that the Central Bank
gravely abused its discretion in ordering the liquidation of said rural Bank. Thereafter,
Judge De la Cruz declared the CB, Et Al., in default for failure to file a responsive
pleading. 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. “Respondent Judge then granted Libmanan Bank’s ex
parte motion dated March 29, 1982 for authority to withdraw money from its bank
deposits. Hence, the present recourse.
VII. ISSUES:
Whether or not respondent Judge acted with grave abuse of discretion or without or
in excess of his jurisdiction in issuing the following:
1. restraining order;
2. denying the CB’s Motion to Dismiss; and
3. authorizing Libmanan bank to withdraw money from its bank depositss
VIII. RULING
1. YES, the judge acted with grave abuse of discretion in issuing a restraining order.
The authority for the receivership of Libmanan Bank is found in Section 29 of the
Central Bank Act (P.D. 1827). 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 without receiving
convincing proof that the action of the CB was plainly arbitrary and made in bad
faith. 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. 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. 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.

2. Yes, respondent judge erred in denying the Central Bank’s motion to dismiss the
complaint for prohibition and mandamus filed by Libmanan. This Court ruled in
previous cases 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. Since the Central Bank’s petition for assistance in liquidation had been
filed on August 3, 1981, 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 instead of as a separate special civil action for prohibition against the
Central Bank. The separate action should have been either dismissed or consolidated.

3. Yes, Respondent Judge abused his discretion in authorizing the Libmanan Bank to
withdraw funds from its deposits in other banks. The Rural Bank had become
insolvent as a result of mismanagement, frauds, irregularities and violations of
banking laws, rules, and regulations by its officers. 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.