G.R. No.

177526 July 3, 2008 Meanwhile, petitioner caused the service

074602 P160,138.12 08 August 1989
of its summons on the cross-claim and
PHILIPPINE SAVINGS
third party complaints through publication.
BANK, petitioner, 074631 P159,634.13 08 August 1989
On its subsequent motion, Manzano was
vs.
declared in default for failure to file a
CHOWKING FOOD
017096 P 60,036.74 10 August 1989
responsive
2
pleading.11
CORPORATION, respondent.
Respondent filed a motion for summary
DECISION The total amount of the subject checks
judgment. Petitioner opposed the motion.
reached P556,981.86.
REYES, R.T., J.: On February 1, 1995, the trial court
On the respective due dates of each denied the motion via an order of even
IT is the peculiar quality of a fool to check, Chowking's acting accounting date.12
perceive the fault of others and to forget manager, Rino T. Manzano, endorsed and
his own. Ang isang kakatuwang katangian In its Answer, petitioner did not controvert
encashed said checks with the Bustos
ng isang hangal ay punahin ang kamalian the foregoing facts, but denied liability to
branch of respondent PSBank.3
ng iba at kalimutan naman ang sa kanya. respondent for the encashed
All the five checks were honored by checks.13 Petitioner bank maintained it
This is a petition for review on certiorari of defendant Santos, even with only the exercised due diligence in the supervision
the Decision1 of the Court of Appeals (CA) endorsement of Manzano approving them. of all its employees. It even dismissed
reinstating the Decision of the Regional The signatures of the other authorized defendant Santos after she was found
Trial Court (RTC), Manila, Branch 5. The officers of respondent corporation were guilty of negligence in the performance of
RTC ordered petitioner Philippine Savings absent in the five (5) checks, contrary to her duties.14
Bank (PSBank) and its Bustos Branch usual banking practice.4 Unexpectedly,
Head, Erlinda O. Santos, to reimburse Defendant Santos, on the other hand,
Manzano absconded with and
respondent Chowking Food Corporation denied that she had been negligent in her
misappropriated the check proceeds.5
(Chowking) the amount corresponding to job. She averred that she merely followed
five (5) illegally encashed checks. When Chowking found out Manzano's the bank's practice of honoring
scheme, it demanded reimbursement from respondent's checks even if accompanied
The Facts PSBank.6 When PSBank refused to pay, only by Manzano's endorsement.15
Chowking filed a complaint7 for a sum of
Between March 15, 1989 and August 10, Defendant Abacan likewise denied any
money with damages before the RTC.
1989, Joe Kuan Food Corporation issued liability to respondent. He alleged that, as
Likewise impleaded were PSBank's
in favor of Chowking five (5) PSBank president and officer of petitioner bank, he
president, Antonio S. Abacan, and Bustos
checks with the following numbers, dates played no role in the transactions
branch head, Santos.8
and denominations: complained of.16 Thus, respondent has no
Both PSBank and Santos filed cross claims cause of action against him.
Check No. Amount Date and third party complaints against
Petitioner, Santos and Abacan were
Manzano.9 Despite all diligent efforts,
unanimous in asserting that respondent is
017069 P 44,120.00 summonses were not served upon third
15 March 1989
estopped from claiming reimbursement
party defendant Manzano. Santos did not
and damages since it was negligent in
take any further action and her third party
053528 P135,052.87 09 May 1989 allowing Manzano to take hold, endorse,
complaint was archived.10
and encash its checks. Petitioner pointed
out that the proximate cause of SO ORDERED.18 In its appeal, respondent Chowking
respondent's loss was its own contended, inter alia, that the RTC erred
Aggrieved, petitioner filed a motion for
negligence.17 in ruling that the proximate cause of the
reconsideration. Through an Order dated
loss was its own negligence; and that its
RTC Disposition January 11, 1999, the RTC reversed its
claim was barred by estoppel.
earlier ruling and held that it was
On August 24, 1998, the RTC rendered
respondent's own negligence that was the On January 31, 2007, the CA granted the
judgment in favor of respondent, the
proximate cause of the loss. The fallo of appeal, disposing as follows:
dispositive portion of which reads:
the amended RTC decision now reads:
WHEREFORE, the instant appeal is
WHEREFORE, premises considered,
In light of the foregoing grounds and GRANTED. The order appealed from is
judgment is hereby rendered in favor of
observations, the Decision of August 24, hereby SET ASIDE and the 24 August
plaintiff and as against defendant
1998, by this Court is accordingly 1998 decision is consequently
Philippine Savings Bank and Erlinda O.
modified as follows: REINSTATED with modification that the
Santos ordering the said defendants to
awards of attorney's fees, exemplary
pay plaintiff, jointly and severally: 1. Ordering the dismissal of the complaint
damages, and alleged P1,000,000.00
by the plaintiff Chowking Food Corporation
1. The amount of P556,981.86 plus unrealized profits of the appellant are
against the defendants, Philippine Savings
interest at the rate of 12% per annum DELETED.
Bank (PSBank) and Erlinda Santos for lack
from August 15, 1989 until said amount
of basis in fact and law; IT IS SO ORDERED.20
shall have been paid;
2. Ordering the third party defendant, The CA held that both petitioner PSBank
2. 20% of the total amount due plaintiff
Regino or Rino T. Manzano to pay the and Santos should bear the loss. Said the
as attorney's fees;
plaintiff Chowking Food Corporation, the appellate court:
3. The sum of P100,000.00 as exemplary following:
It is admitted that PSB cashed, over the
damages;
a. To reimburse the plaintiff the amount counter, the checks of the appellant
4. The sum of P1,000,000.00 for plaintiff's of P556,981.86 plus interest at the rate of indorsed by Manzano alone. Since there is
unrealized profits. 12% per annum from August 15, 1989, no more dispute on the negligent act of
until said amount has been fully satisfied; Santos in honoring the appellant's checks,
The complaint with respect to defendant over the counter, despite the proper
Antonio Abacan, Jr. as well as his b. To pay an attorney's fee equivalent to
indorsements, the categorical finding of
counterclaim and cross claim are hereby 20% of the total amount due the plaintiff;
negligence against her, remaining
DISMISSED. unrebutted, is deemed established. This in
c. To pay an amount of P100,000.00 the
plaintiff for actual and compensatory effect warrants a finding that Santos is
With respect to the cross claim of
damages, plus the costs of this suit. liable for damages to the appellant. The
defendant PSBank against Erlinda Santos
lower court therefore erred in dismissing
and its third-party complaint against Rino
SO ORDERED.19 the complaint against her.21
T. Manzano, both Santos and Manzano are
hereby ordered to jointly and severally, Dissatisfied with the modified ruling of the Further, the CA held that:
reimburse defendant PSBank whatever RTC, respondent appealed to the CA.
amount the latter shall be constrained to Contrary to PSB's contention that it should
CA Disposition not be held liable because it neither
pay plaintiff in connection with this case.
consented to nor had knowledge of Santos because those were independent determine the validity of those
Santos' (sic) violations, such liability of acts x x x perpetrated without its indorsements but for one reason or
Santos is solidary with PSB pursuant to knowledge and consent is without basis in another she was neglectful of her duty x x
Article 2176 in relation to Article 2180 of fact and in law. Assuming that PSB did not x as admitted by PSB, such over the
the Civil Code which states: err in hiring Santos for her position, its counter encashments are not even
lack of supervision over her made it sanctioned by its policies but Santos
"Art. 2176. Whoever by act or omission
solidarily liable for the unauthorized simply ignored the same. It appears clear
causes damage to another, there being
encashment of the checks involved. In the that Santos let the opportunity slip by
fault or negligence, is obliged to pay for
supervision of employees, the employer when an exercise of ordinary prudence
the damage done....
must formulate standard operating expected of bank employees would have
Art. 2180. The obligation imposed by Art. procedures, monitor their implementation sufficed to prevent the loss.23
2176 is demandable not only for one's and impose disciplinary measures for the
Issues
own acts or omissions but also for those breach thereof. The appellee, in this case,
of persons for whom one is responsible. presented no evidence that it formulated Petitioner has resorted to the present
rules/guidelines for the proper recourse and assigns to the CA the
xxxx performance of functions of its following errors:
employees and that it strictly
Employers shall be liable for the damage
implemented and monitored compliance I
caused by their employees and household
therewith. x x x22
helpers acting within the scope of their THE HONORABLE COURT OF
assigned tasks even though the former The CA also disagreed with petitioner's APPEALS ERRED IN NOT RULING THAT
are not engaged in any business or contention that respondent's own RESPONDENT WAS ESTOPPED FROM
activity. negligence was the proximate cause of its ASSERTING ITS CLAIM AGAINST
loss. The CA opined that even assuming PETITIONER.
xxxx
that respondent was also negligent in
II
The responsibility treated of in this article allowing Manzano to encash its checks,
shall cease when the persons herein petitioner had the last clear chance to THE HONORABLE COURT OF
mentioned prove that they observed all avert injury and loss to respondent. This APPEALS ERRED WHEN IT DID NOT RULE
the diligence of a good father of a family could have been done if petitioner, THAT RESPONDENT'S NEGLIGENCE WAS
to prevent damage." through Santos, faithfully and carefully THE PROXIMATE CAUSE OF ITS OWN
observed its encashment rules and LOSS. (Underscoring supplied)
x x x However, with banks like PSB, the procedures.
degree of diligence required is more than Our Ruling
that of a good father of a family The CA ratiocinated:
The doctrine of equitable estoppel or
considering that the business of banking is
x x x Had Santos not been remiss in estoppel in pais finds no application in the
imbued with public interest due to the
verifying the indorsements of the checks present case. The equitable doctrine of
nature of its functions. Highest degree of
involved, she would not have cashed the estoppel was explained by this Court
diligence is needed which PSB, in this
same because Manzano, whose only in Caltex (Philippines), Inc. v. Court of
case, failed to observe.
signature appears therein, is apparently Appeals:24
x x x Its argument that it should no be not an authorized signatory of the
held responsible for the negligent acts of appellant x x x had every means to
Under the doctrine of estoppel, an We agree with the CA that Chowking did knowledge of the truth as the facts in
admission or representation is rendered not make any false representation or question; (2) reliance, in good faith, upon
conclusive upon the person making it, and concealment of material facts in relation the conduct and statements of the party
cannot be denied or disproved as against to the encashments of the previous to be estopped; (3) action or inaction
the person relying thereon. A party may checks. As adverted to earlier, respondent based thereon of such character as to
not go back on his own acts and may have allowed Manzano to previously change the position or status of the party
representations to the prejudice of the encash its checks, but it has always been claiming the estoppel, to his injury,
other party who relied upon them. In the accompanied with the endorsements of detriment or prejudice.31
law of evidence, whenever a party has, by the other authorized signatories.
Here, the first two elements are wanting.
his own declaration, act, or omission, Respondent did not allow petitioner to
Petitioner has knowledge of the truth and
intentionally and deliberately led another have its checks encashed without the
the means to it as to the proper
to believe a particular thing true, to act signature of all of its authorized
endorsements necessary in encashing
upon such belief, he cannot, in any signatories.
respondent's checks. Respondent has an
litigation arising out of such declaration,
The CA pointed out: account with petitioner bank and, as such,
act, or omission, be permitted to falsify
is privy to the proper signatories to
it.25 We find at the back of those checks,
endorse respondent's checks.
whereon indorsement usually appears, the
The principle received further elaboration
signature of Manzano together with other Neither can petitioner claim good faith.
in Maneclang v. Baun:26
signature/signatures though mostly are
It is elementary that estoppel cannot be
In estoppel by pais, as related to the party illegible. It appears then that, assuming
sustained in doubtful inference. Absent
sought to be estopped, it is necessary that the appellant impliedly tolerated the act of
the conclusive proof that its essential
there be a concurrence of the following Manzano in indorsing the checks, it did
elements are present, estoppel must fail.
requisites: (a) conduct amounting to false not allow Manzano "alone" to indorse its
Because estoppel, when misapplied,
representation or concealment of material checks as what actually happened in this
becomes a most effective weapon to
facts or at least calculated to convey the case because his previous indorsements
accomplish an injustice, inasmuch as it
impression that the facts are otherwise were coupled with other indorsements of
shuts a man's mouth from speaking the
than, and inconsistent with, those which the appellant's signatories. There is,
truth.32
the party subsequently attempts to therefore, no sufficient evidence to sustain
assert; (b) intent, or at least expectation PSB's submission. On this score alone, the Petitioner failed to prove that it has
that this conduct shall be acted upon, or defense of estoppel must observed the due diligence required of
at least influenced by the other party; and fail.29 (Underscoring and emphasis banks under the law. Contrary to
(c) knowledge, actual or constructive of supplied) petitioner's view, its negligence is the
the actual facts.27 proximate cause of respondent's loss.
Neither can estoppel be appreciated in
Estoppel may vary somewhat in definition, relation to petitioner itself. In Kalalo v. It cannot be over emphasized that the
but all authorities agree that a party Luz,30 the Court enumerated the elements banking business is impressed with public
invoking the doctrine must have been of estoppel in this wise: interest.1avvphi1 Of paramount
misled to one's prejudice. That is the final importance is the trust and confidence of
x x x As related to the party claiming the
and, in reality, most important of the the public in general in the banking
estoppel, the essential elements are (1)
elements of equitable estoppel.28 It is this industry. Consequently, the diligence
lack of knowledge and of the means of
element that is lacking here. required of banks is more than that of a
Roman pater familias or a good father of a Q: Did he ever tell you that one of your Measured by the foregoing yardstick, the
family.33 The highest degree of diligence is cashiers affixed the stamp mark of the proximate cause of the loss is not
expected.34 bank on the deposit slips and they respondent's alleged negligence in
validated the same with the machine, the allowing Manzano to take hold and encash
In its declaration of policy, the General
fact that those deposit slips were unfilled respondent's checks. The proximate cause
Banking Law of 200035 requires of banks
up, is there any report similar to that? is petitioner's own negligence in the
the highest standards of integrity and
supervision of its employees when it
performance. Needless to say, a bank is A: No, it was not the cashier but the
overlooked the irregular practice of
"under obligation to treat the accounts of teller.
encashing checks even without the
its depositors with meticulous care."36 The
Q: The teller validated the blank deposit requisite endorsements.
fiduciary nature of the relationship
slip?
between the bank and the depositors In Bank of the Philippine Islands v. Casa
must always be of paramount concern.37 A: No it was not reported. Montessori Internationale,41 this Court
similarly held:
Petitioner, through Santos, was clearly Q: You did not know that any one in the
negligent when it honored respondent's bank tellers or cashiers validated the For allowing payment on the checks to a
checks with the lone endorsement of blank deposit slip? wrongful and fictitious payee, BPI - the
Manzano. In the similar case of Philippine drawee bank - becomes liable to its
Bank of Commerce v. Court of A: I am not aware of that. depositor-drawer. Since the encashing
Appeals,38 an employee of Rommel's bank is one of its branches, BPI can easily
Q: It is only now that you are aware of
Marketing Corporation (RMC) was able to go after it and hold it liable for
that?
illegally deposit in a different account the reimbursement. x x x In both law and
checks of the corporation. This Court A: Yes, Sir. equity, when one of two innocent persons
found that it was the bank teller's failure "must suffer by the wrongful act of a third
to exercise extraordinary diligence to xxxx person, the loss must be borne by the one
validate the deposit slips that caused the It was this negligence x x x coupled by the whose negligence was the proximate
crime to be perpetrated. negligence of the petitioner bank in the cause of the loss or who put it into the
selection and supervision of its bank power of the third person to perpetrate
The Court held thus:
teller, which was the proximate cause of the wrong."42
Negligence here lies not only on the part the loss suffered by private respondent, Further, the Court ruled:
of Ms. Mabayad but also on the part of the and not the latter's act of entrusting cash
bank itself in its lackadaisical selection to a dishonest employee, as insisted by Pursuant to its prime duty to ascertain
and supervision of Ms. Mabayad. This was the petitioners.39 well the genuineness of the signatures of
exemplified in the testimony of Mr. Romeo its client-depositors on checks being
Bonifacio, then Manager of the Pasig Proximate cause is determined by the encashed, BPI is "expected to use
Branch of the petitioner bank and now its facts of the case. It is that cause which, in reasonable business prudence." In the
Vice-President, to the effect that, while he natural and continuous sequence, performance of that obligation, it is bound
ordered the investigation of the incident, unbroken by any efficient intervening by its internal banking rules and
he never came to know that blank deposit cause, produces the injury, and without regulations that form part of the contract
slips were validated in total disregard of which the result would not have it enters into with its depositors.
the bank's validation procedures, viz.: occurred.40
Unfortunately, it failed in that regard. x x
x Without exercising the required
prudence on its part, BPI accepted and
encashed the eight checks presented to
it. As a result, it proximately contributed
to the fraud and should be held primarily
liable for the "negligence of its officers or
agents when acting within the course and
scope of their employment." It must bear
the loss.43

WHEREFORE, the petition is DENIED for

lack of merit.

SO ORDERED.
[G.R. No. 161276. January 31, 2005] Development Bank and placing them out, the two (2) divisions of the Court of
under receivership, to the detriment of Appeals rendered conflicting decisions.
BORLONGAN vs. REYES
their shareholders, officers and
Thus, in a decision dated 13 August
THIRD DIVISION employees.
2003,[4] the 5th Division modified the
Gentlemen: In an Order dated 2 July questioned orders of the Ombudsman by
2002,[2]cralaw the Ombudsman found finding the herein respondents, including
Quoted hereunder, for your information, is respondents guilty of simple neglect of the BSP Governor, guilty of gross neglect
a resolution of this Court duty and imposed upon them the penalty of duty and imposing on each of them the
dated JAN 31 2005. of one (1) month and one (1) day penalty of one (1) year suspension
suspension without pay. In a without pay.
G.R. No. 161276 (Teodoro C. Borlongan
subsequent Order dated 30 July
vs. Alberto V. Reyes, Ma. Dolores B. On the other hand, the 17th Division, in
2002,[3]cralawthe Ombudsman denied
Yuviengco, Candon B. Guerrero and a decision dated 18 September
both parties' motions for reconsideration.
Tomas S. Aure, Jr.) 2003,[5]cralawreversed and set aside the
Therefrom, both parties interposed same assailed orders of the Ombudsman
At bar is this petition for review on
separate appellate recourses to the Court and dismissed the administrative
certiorari filed by petitioner Teodoro C.
of Appeals. complaints against the herein
Borlongan, assailing the decision dated 18
respondents.
September 2003[1] of the Court of Appeals Respondents were the first to appeal via a
in CA-G.R. SP No. 72234, reversing and petition for review, which was docketed in Petitioner filed a motion for
setting aside the Orders dated 2 July 2002 the Court of Appeals as CA-G.R. SP No. reconsideration, imploring
and 30 July 2002 of the Ombudsman in 72234 and raffled off to its 17th Division. the 17th Division to set aside
OMB-ADM-0-00-0867 which respectively its September 18,2003 decision for being
declared herein respondents guilty of For his part, petitioner, also thru a petition
inconsistent with the August 13,
simple neglect of duty, and denied both for review, questioned before the Court of
2003 decision of the 5th Division in CA-
parties' separate motions for Appeals the Ombudsman's absolution of
G.R. SP No. 72270.
reconsideration. the BSP Governor and its General Counsel
from his affidavit-complaint, and sought In a Resolution dated 17 December
In a complaint-affidavit filed with Office of the imposition of a graver penalty against 2003,[6]cralaw the 17th Division denied
the Ombudsman and thereat docketed as the herein respondents. Docketed as CA- petitioner's motion for reconsideration,
OMB-ADM-0-00-0867, petitioner Teodoro G.R. SP No. 72270, petitioner's appeal and, in the process, castigated petitioner
C. Borlongan, former president and chief landed to the 5th Division of the appellate for his refusal to have the two (2) cases
executive officer of Union Bank, Inc. court. consolidated:
(UBI), administratively charged herein
respondent officials of the Bangko Sentral Initially, petitioner filed a motion to Without a consolidation, there is no rule of
ng Pilipinas (BSP), for allegedly falsifying consolidate the two (2) cases. Later, law or jurisprudence that prevents us, the
statement of facts in the BSP Supervision however, he not only withdrew said 17th Division, from deciding SP 72234
and Examination Sector (SES) reports and motion but even vigorously opposed the according to our own independent
tendering incorrect and inaccurate reports consolidation. judgment, any more than the 5th Division
and opinions to conjure false grounds for can be prevented from ruling upon SP
Unconsolidated, the two (2) cases
the closure of UBI and Urbancorp 72270 according to their own independent
proceeded separately. And, as it turned
judgment.
The records show that respondent had, To repeat, the respondent refused to have Perusal of the present petition reveals that
indeed, filed with us a motion to his case in the 5th Division consolidated it raises substantially the same issues
consolidate SP 72270 with our SP 72234. before us. If he is to fault anyone now for already passed upon by the two (2)
But for reasons only known to him, he the consequence of this non-consolidation, Divisions of the Court of Appeals and by
withdrew the motion for consolidation. He he should point all his fingers to himself. this Court, no less, in G.R. No. 163765.
even said that the 5th Division had
Later, or on June 14, 2004, the former Chanting the same tone, the recourse is
eventually denied the consolidation of the
5th Division of the Court of Appeals, this unavailing.
case with us, again for reasons we do not
time acting as a Special Division of Five in
know. In Philippine Retirement Authority vs.
connection with the motions for
Rupa,[9]cralaw we laid down the standard
Under these circumstances, without a reconsideration therein pending, came out
definition of simple neglect of duty, as a
consolidation, both divisions will have to with an Amended
disregard of a duty resulting from
decide their own cases, and any resulting Decision,[7]cralawamending the earlier
carelessness or indifference.
conflict in the decisions on similar issues decision of 12 August 2003 in CA-G.R. SP
of fact and law will have to be resolved No. 72270 by dismissing the Here, we find that neither gross nor
ultimately by the Supreme Court as the administrative complaint against all the simple neglect of duty characterized the
supreme arbiter of all justiciable respondents therein. Petitioner elevated acts of the respondents. The subject SES
controversies in this jurisdiction. the same Amended Decision to this Court reports prepared by respondents and
via a petition for review on certiorari submitted to the Monetary Board were
But for the respondent to make it appear
in G.R. No. 163765. anything but haphazardly or negligently
as if we are to blame for the conflict
made. As it were, the reports were a
between the two divisions of the Court, In a Resolution promulgated on July 26,
compendium of long years of monitoring
after the respondent refused to 2004,[8]cralaw the Court, thru its Third
by the BSP of a problem bank, and
consolidate the cases before us, is absurd Division, denied the petition in G.R. No.
assembled over a period of 15 hours after
and comical. Absurd, because he is saying 163765 "for failure of the petitioner to
the respondents were instructed to do so.
in so many words that we should not show that a reversible error had been
The data contained therein had been
exercise an independent judgment in our committed by the appellate court". In a
patiently collected and analyzed.
case anymore after the 5th Division subsequent Resolution promulgated
happened to decide its case ahead of us on October 1, 2004, the Court denied Record reveals that UBI was being
and comical, because he has reduced the petitioner's motion for reconsideration monitored by BSP officials for years.
adjudicative process into a race between with finality "as no substantial arguments Respondent Dolores Yuvienco had
the cases. If we had only known that this were raised to warrant a reconsideration supervised the bank directly since 1999 as
was the kind of ballgame he wanted us to thereof". Director of DCB II
observe, we would have considered our
Meanwhile, on February 13, 2004, UBI had since given up its status as an
case submitted for decision a long time
petitioner filed the instant petition for expanded commercial bank and reverted
ago, immediately after he filed his
review on certiorari, this time assailing to an ordinary commercial bank because it
comment, and bar the parties from filling
the 18 September 2003 decision of the could not meet the P3.5 billion minimum
replies, memoranda and other pleadings
17th Decision of the Court of Appeals in capital requirement for a universal bank.
as a waste of our time. This is how things
CA-G.R. SP No. 72234. For two (2) months prior to its closure,
would turn out if we pursued his line of
thinking ad absurdum. Urban Bank had been besieged by liquidity
problems, and its declaration of a bank
holiday on April 25 only confirmed its Corporation as receiver of the Banking The subject reports are only between the
decreasing ability to meet obligations on institution. xxx. (Emphasis supplied) Monetary Board and the BSP officials who
time. prepared and endorsed them and may be
Pertinent, too, is Section 53 of Republic
rejected, modified or accepted by the
Section 30(a) of RA 7653, otherwise Act No. 8791,[10]cralaw since it
Monetary Board. As far as this case is
known as the New Central Bank Act, is underscores the summary character of the
concerned, the legal obligations of
relevant. Under that law, the Monetary MB's initiative of placing a bank under
diligence and good faith that BSP officials
Board may execute measures such those receivership. It provides that in case a
owe to the public under Section 16 of the
taken in this case, summarily and without bank or quasi-bank notifies the BSP or
New Central Act start with the official acts
need of prior hearing: publicly announces a bank holiday, or in
of the Monetary Board which, rightly or
any manner suspends the payment of its
Sec. 30. Proceedings in Receivership and wrong, are the cause of loss or injury to
deposit liabilities continuously for more
Liquidation. -Whenever, upon report of third parties, not any preparatory report
than 30 days, the MB may summarily and
the head of the supervising and examining or recommendation.
without need of prior hearing close such
department, the Monetary Board finds
banking institution and place it under As earlier noted, UBI's own top
that the Bank or quasi-bank:
receivership of the PDIC. management, specifically Bartolome III,
(a) is unable to pay its liabilities as its chairman of the Board, and the
This authority is beyond review by the
they become due in the ordinary course of petitioner himself, its president,
courts except on a petition for certiorari.
business: Provided, that this shall not continually provided the BSP the picture of
Here, it is worth to note even the
include inability to pay caused by the worsening situation of UBI in the four
Ombudsman found significant evidence to
extraordinary demands induced by (4) weeks from March 20, 2000 to April
rationalize the decision of the Monetary
financial panic in the banking community; 25, 2000, leading to UBI's unilateral
Board to place UBI under receivership.
declaration of a bank holiday on April 25,
(b) has insufficient realizable asset, as 2000.[12]cralaw Their constant reporting
Likewise, we agree with the appellate
determined by the Bangko Sentral to meet showed that UBI was "unable to pay its
court's 17th Division in its ratiocination
its liabilities; or liabilities as they become due in the
that it is illogical to hold the respondents
administratively liable for the preparation ordinary course of business; (or that it)
(c) cannot continue in business without
of reports that are, in their nature, merely has insufficient realizable assets, as
involving probable losses to its creditors;
recommendatory and have to be acted determined by the Bangko Sentral, to
or
upon by superior officials. The reports meet its liabilities."[13]cralaw While other
(d) has willfully violated a cease and were not the final action that creates right factors might have weighed in the analysis
desist order under Section 37 that has and duties and affects the interest and of UBI's financial liquidity and in the
become final, involving acts or fortunes of third parties. Courts do not preparation of the inevitable Supervisor
transactions which amount to fraud or a interfere with any administrative measure and Examination Sector (SES) reports, the
dissipation of the assets of the institution; prior to its completion or finality, and MB considered the constant reports of
in which cases, the Monetary Board may when they do, what is actionable is not UBI's own top management as the best
summarily and without need for prior the recommendation but the decision of proof of its dire liquidity status.
hearing forbid the institution from doing the official with the competence under the
Petitioner would have this Court review
business in the Philippines and designate law to issue it.[11]cralaw
and reverse factual findings of the Court
the Philippine Deposit Insurance
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.
 motion for reconsideration. The dispositive T-106932 to T- 106937, inclusive, for
portion of the said Decision reads: purposes of registration of the same deed
G.R. No. 115849 January 24, WHEREFORE, the decision of the lower and transfer of the six (6) titles in the
1996 court is MODIFIED by the elimination of names of the plaintiffs;
FIRST PHILIPPINE INTERNATIONAL the damages awarded under paragraphs 3. Ordering the defendants, jointly and
BANK (Formerly Producers Bank of 3, 4 and 6 of its dispositive portion and severally, to pay plaintiffs Jose A. Janolo
the Philippines) and MERCURIO the reduction of the award in paragraph 5 and Demetrio Demetria the sums of
RIVERA, petitioners, thereof to P75,000.00, to be assessed P200,000.00 each in moral damages;
vs. against defendant bank. In all other 4. Ordering the defendants, jointly and
COURT OF APPEALS, CARLOS aspects, said decision is hereby severally, to pay plaintiffs the sum of
EJERCITO, in substitution of AFFIRMED. P100,000.00 as exemplary damages ;
DEMETRIO DEMETRIA, and JOSE All references to the original plaintiffs in 5. Ordering the defendants, jointly and
JANOLO, respondents. the decision and its dispositive portion are severally, to pay the plaintiffs the amount
DECISION deemed, herein and hereafter, to legally of P400,000.00 for and by way of
PANGANIBAN, J.: refer to the plaintiff-appellee Carlos C. attorney's fees;
In the absence of a formal deed of sale, Ejercito. 6. Ordering the defendants to pay the
may commitments given by bank officers Costs against appellant bank. plaintiffs, jointly and severally, actual and
in an exchange of letters and/or in a The dispositive portion of the trial moderate damages in the amount of
meeting with the buyers constitute a court's2 decision dated July 10, 1991, on P20,000.00;
perfected and enforceable contract of sale the other hand, is as follows: With costs against the defendants.
over 101 hectares of land in Sta. Rosa, WHEREFORE, premises considered, After the parties filed their comment,
Laguna? Does the doctrine of "apparent judgment is hereby rendered in favor of reply, rejoinder, sur-rejoinder and reply to
authority" apply in this case? If so, may the plaintiffs and against the defendants sur-rejoinder, the petition was given due
the Central Bank-appointed conservator of as follows: course in a Resolution dated January 18,
Producers Bank (now First Philippine 1. Declaring the existence of a perfected 1995. Thence, the parties filed their
International Bank) repudiate such contract to buy and sell over the six (6) respective memoranda and reply
"apparent authority" after said contract parcels of land situated at Don Jose, Sta. memoranda. The First Division transferred
has been deemed perfected? During the Rosa, Laguna with an area of 101 this case to the Third Division per
pendency of a suit for specific hectares, more or less, covered by and resolution dated October 23, 1995. After
performance, does the filing of a embraced in Transfer Certificates of Title carefully deliberating on the aforesaid
"derivative suit" by the majority Nos. T-106932 to T-106937, inclusive, of submissions, the Court assigned the case
shareholders and directors of the the Land Records of Laguna, between the to the undersigned ponente for the writing
distressed bank to prevent the plaintiffs as buyers and the defendant of this Decision.
enforcement or implementation of the sale Producers Bank for an agreed price of Five The Parties
violate the ban against forum-shopping? and One Half Million (P5,500,000.00) Petitioner First Philippine International
Simply stated, these are the major Pesos; Bank (formerly Producers Bank of the
questions brought before this Court in the 2. Ordering defendant Producers Bank of Philippines; petitioner Bank, for brevity) is
instant Petition for review the Philippines, upon finality of this a banking institution organized and
on certiorari under Rule 45 of the Rules of decision and receipt from the plaintiffs the existing under the laws of the Republic of
Court, to set aside the Decision amount of P5.5 Million, to execute in favor the Philippines. Petitioner Mercurio Rivera
promulgated January 14, 1994 of the of said plaintiffs a deed of absolute sale (petitioner Rivera, for brevity) is of legal
respondent Court of Appeals1 in CA-G.R over the aforementioned six (6) parcels of age and was, at all times material to this
CV No. 35756 and the Resolution land, and to immediately deliver to the case, Head-Manager of the Property
promulgated June 14, 1994 denying the plaintiffs the owner's copies of T.C.T. Nos.
Management Department of the petitioner The Producers Bank of the Philippines at P5.5 million for more than 101 hectares
Bank. Makati, Metro Manila on lot basis.
Respondent Carlos Ejercito (respondent Attn. Mr. Mercurio Q. Rivera We shall be very glad to hear your
Ejercito, for brevity) is of legal age and is Manager, Property Management Dept. position on the on the matter.
the assignee of original plaintiffs-appellees Gentleman: Best regards.
Demetrio Demetria and Jose Janolo. I have the honor to submit my formal (4) On September 17, 1987, plaintiff
Respondent Court of Appeals is the court offer to purchase your properties covered Janolo, responding to Rivera's aforequoted
which issued the Decision and Resolution by titles listed hereunder located at Sta. reply, wrote (Exh. "D"):
sought to be set aside through this Rosa, Laguna, with a total area of 101 September 17, 1987
petition. hectares, more or less. Producers Bank
The Facts TCT NO. AREA Paseo de Roxas
The facts of this case are summarized in Makati, Metro Manila
T-106932 113,580 sq.
the respondent Court's Decision3 as Attention: Mr. Mercurio Rivera
m.
follows: Gentlemen:
(1) In the course of its banking T-106933 70,899 sq. m.
In reply to your letter regarding my
operations, the defendant Producer Bank T-106934 52,246 sq. m. proposal to purchase your 101-hectare lot
of the Philippines acquired six parcels of located at Sta. Rosa, Laguna, I would like
land with a total area of 101 hectares T-106935 96,768 sq. m.
to amend my previous offer and I now
located at Don Jose, Sta. Rose, Laguna, T-106936 187,114 sq. propose to buy the said lot at P4.250
and covered by Transfer Certificates of m. million in CASH..
Title Nos. T-106932 to T-106937. The T-106937 481,481 sq. Hoping that this proposal meets your
property used to be owned by BYME m. satisfaction.
Investment and Development Corporation (5) There was no reply to Janolo's
which had them mortgaged with the bank My offer is for PESOS: THREE MILLION
FIVE HUNDRED THOUSAND foregoing letter of September 17, 1987.
as collateral for a loan. The original What took place was a meeting on
plaintiffs, Demetrio Demetria and Jose O. (P3,500,000.00) PESOS, in cash.
Kindly contact me at Telephone Number September 28, 1987 between the
Janolo, wanted to purchase the property plaintiffs and Luis Co, the Senior Vice-
and thus initiated negotiations for that 921-1344.
(3) On September 1, 1987, defendant President of defendant bank. Rivera as
purpose. well as Fajardo, the BYME lawyer,
(2) In the early part of August 1987 said Rivera made on behalf of the bank a
formal reply by letter which is hereunder attended the meeting. Two days later, or
plaintiffs, upon the suggestion of BYME on September 30, 1987, plaintiff Janolo
quoted (Exh. "C"):
investment's legal counsel, Jose Fajardo, sent to the bank, through Rivera, the
met with defendant Mercurio Rivera, September 1, 1987
following letter (Exh. "E"):
Manager of the Property Management JP M-P GUTIERREZ ENTERPRISES
The Producers Bank of the Philippines
Department of the defendant bank. The 142 Charisma St., Doña Andres II Paseo de Roxas, Makati
meeting was held pursuant to plaintiffs' Rosario, Pasig, Metro Manila Metro Manila
plan to buy the property (TSN of Jan. 16, Attention: JOSE O. JANOLO Attention: Mr. Mercurio Rivera
1990, pp. 7-10). After the meeting, Dear Sir:
Re: 101 Hectares of Land
plaintiff Janolo, following the advice of Thank you for your letter-offer to buy our in Sta. Rosa, Laguna
defendant Rivera, made a formal purchase six (6) parcels of acquired lots at Sta. Gentlemen:
offer to the bank through a letter dated Rosa, Laguna (formerly owned by Byme
Pursuant to our discussion last 28
August 30, 1987 (Exh. "B"), as follows: Industrial Corp.). Please be informed September 1987, we are pleased to
August 30, 1987 however that the bank's counter-offer is inform you that we are accepting your
offer for us to purchase the property at
Sta. Rosa, Laguna, formerly owned by Mr. Mercurio Rivera 1987, the plaintiffs made a second tender
Byme Investment, for a total price of Manager, Producers Bank of payment (Exh. "L" and "L-1"), this time
PESOS: FIVE MILLION FIVE HUNDRED Paseo de Roxas, Makati through the Acting Conservator,
THOUSAND (P5,500,000.00). Metro Manila defendant Encarnacion. Plaintiffs' letter
Thank you. Dear Mr. Rivera: reads:
(6) On October 12, 1987, the conservator This is in connection with the offer of our PRODUCERS BANK OF
of the bank (which has been placed under client, Mr. Jose O. Janolo, to purchase THE PHILIPPINES
conservatorship by the Central Bank since your 101-hectare lot located in Sta. Rosa, Paseo de Roxas,
1984) was replaced by an Acting Laguna, and which are covered by TCT Makati, Metro Manila
Conservator in the person of defendant No. T-106932 to 106937. Attn.: Atty. NIDA ENCARNACION
Leonida T. Encarnacion. On November 4, From the documents at hand, it appears Central Bank Conservator
1987, defendant Rivera wrote plaintiff that your counter-offer dated September We are sending you herewith, in - behalf
Demetria the following letter (Exh. "F"): 1, 1987 of this same lot in the amount of of our client, Mr. JOSE O. JANOLO, MBTC
Attention: Atty. Demetrio Demetria P5.5 million was accepted by our client Check No. 258387 in the amount of P5.5
Dear Sir: thru a letter dated September 30, 1987 million as our agreed purchase price of the
Your proposal to buy the properties the and was received by you on October 5, 101-hectare lot covered by TCT Nos.
bank foreclosed from Byme investment 1987. 106932, 106933, 106934, 106935,
Corp. located at Sta. Rosa, Laguna is In view of the above circumstances, we 106936 and 106937 and registered under
under study yet as of this time by the believe that an agreement has been Producers Bank.
newly created committee for submission perfected. We were also informed that This is in connection with the perfected
to the newly designated Acting despite repeated follow-up to consummate agreement consequent from your offer of
Conservator of the bank. the purchase, you now refuse to honor P5.5 Million as the purchase price of the
For your information. your commitment. Instead, you have said lots. Please inform us of the date of
(7) What thereafter transpired was a advertised for sale the same lot to others. documentation of the sale immediately.
series of demands by the plaintiffs for In behalf of our client, therefore, we are Kindly acknowledge receipt of our
compliance by the bank with what plaintiff making this formal demand upon you to payment.
considered as a perfected contract of sale, consummate and execute the necessary (9) The foregoing letter drew no response
which demands were in one form or actions/documentation within three (3) for more than four months. Then, on May
another refused by the bank. As detailed days from your receipt hereof. We are 3, 1988, plaintiff, through counsel, made
by the trial court in its decision, on ready to remit the agreed amount of P5.5 a final demand for compliance by the bank
November 17, 1987, plaintiffs through a million at your advice. Otherwise, we shall with its obligations under the considered
letter to defendant Rivera (Exhibit "G") be constrained to file the necessary court perfected contract of sale (Exhibit "N"). As
tendered payment of the amount of P5.5 action to protect the interest of our client. recounted by the trial court (Original
million "pursuant to (our) perfected sale We trust that you will be guided Record, p. 656), in a reply letter dated
agreement." Defendants refused to accordingly. May 12, 1988 (Annex "4" of defendant's
receive both the payment and the letter. (8) Defendant bank, through defendant answer to amended complaint), the
Instead, the parcels of land involved in Rivera, acknowledged receipt of the defendants through Acting Conservator
the transaction were advertised by the foregoing letter and stated, in its Encarnacion repudiated the authority of
bank for sale to any interested buyer communication of December 2, 1987 defendant Rivera and claimed that his
(Exh, "H" and "H-1"). Plaintiffs demanded (Exh. "I"), that said letter has been dealings with the plaintiffs, particularly his
the execution by the bank of the "referred . . . to the office of our counter-offer of P5.5 Million are
documents on what was considered as a Conservator for proper disposition" unauthorized or illegal. On that basis, the
"perfected agreement." Thus: However, no response came from the defendants justified the refusal of the
Acting Conservator. On December 14, tenders of payment and the non-
compliance with the obligations under Abello Concepcion Regala and Cruz, filed On the other hand, petitioners prayed for
what the plaintiffs considered to be a an action (hereafter, the "Second Case") dismissal of the instant suit on the
perfected contract of sale. — purportedly a "derivative suit" — with ground8 that:
(10) On May 16, 1988, plaintiffs filed a the Regional Trial Court of Makati, Branch I.
suit for specific performance with 134, docketed as Civil Case No. 92-1606, Petitioners have engaged in forum
damages against the bank, its Manager against Encarnacion, Demetria and Janolo shopping.
Rivers and Acting Conservator "to declare any perfected sale of the II.
Encarnacion. The basis of the suit was property as unenforceable and to stop The factual findings and conclusions of the
that the transaction had with the bank Ejercito from enforcing or implementing Court of Appeals are supported by the
resulted in a perfected contract of sale, the sale"4 In his answer, Janolo argued evidence on record and may no longer be
The defendants took the position that that the Second Case was barred by litis questioned in this case.
there was no such perfected sale because pendentia by virtue of the case then III.
the defendant Rivera is not authorized to pending in the Court of Appeals. During The Court of Appeals correctly held that
sell the property, and that there was no the pre-trial conference in the Second there was a perfected contract between
meeting of the minds as to the price. Case, plaintiffs filed a Motion for Leave of Demetria and Janolo (substituted by;
On March 14, 1991, Henry L. Co (the Court to Dismiss the Case Without respondent Ejercito) and the bank.
brother of Luis Co), through counsel Sycip Prejudice. "Private respondent opposed IV.
Salazar Hernandez and Gatmaitan, filed a this motion on the ground, among others, The Court of Appeals has correctly held
motion to intervene in the trial court, that plaintiff's act of forum shopping that the conservator, apart from being
alleging that as owner of 80% of the justifies the dismissal of both cases, with estopped from repudiating the agency and
Bank's outstanding shares of stock, he prejudice."5 Private respondent, in his the contract, has no authority to revoke
had a substantial interest in resisting the memorandum, averred that this motion is the contract of sale.
complaint. On July 8, 1991, the trial court still pending in the Makati RTC. The Issues
issued an order denying the motion to In their Petition6 and Memorandum7 , From the foregoing positions of the
intervene on the ground that it was filed petitioners summarized their position as parties, the issues in this case may be
after trial had already been concluded. It follows: summed up as follows:
also denied a motion for reconsideration I. 1) Was there forum-shopping on the part
filed thereafter. From the trial court's The Court of Appeals erred in declaring of petitioner Bank?
decision, the Bank, petitioner Rivera and that a contract of sale was perfected 2) Was there a perfected contract of sale
conservator Encarnacion appealed to the between Ejercito (in substitution of between the parties?
Court of Appeals which subsequently Demetria and Janolo) and the bank. 3) Assuming there was, was the said
affirmed with modification the said II. contract enforceable under the statute of
judgment. Henry Co did not appeal the The Court of Appeals erred in declaring frauds?
denial of his motion for intervention. the existence of an enforceable contract of 4) Did the bank conservator have the
In the course of the proceedings in the sale between the parties. unilateral power to repudiate the authority
respondent Court, Carlos Ejercito was III. of the bank officers and/or to revoke the
substituted in place of Demetria and The Court of Appeals erred in declaring said contract?
Janolo, in view of the assignment of the that the conservator does not have the 5) Did the respondent Court commit any
latters' rights in the matter in litigation to power to overrule or revoke acts of reversible error in its findings of facts?
said private respondent. previous management. The First Issue: Was There Forum-
On July 11, 1992, during the pendency of IV. Shopping?
the proceedings in the Court of Appeals, The findings and conclusions of the Court In order to prevent the vexations of
Henry Co and several other stockholders of Appeals do not conform to the evidence multiple petitions and actions, the
of the Bank, through counsel Angara on record. Supreme Court promulgated Revised
Circular No. 28-91 requiring that a party 2) "The derivative suit is not properly a expenses and vexatious situations on the
"must certify under oath . . . [that] (a) he suit for and in behalf of the corporation courts".
has not (t)heretofore commenced any under the circumstances"; In the Philippines, forum shopping has
other action or proceeding involving the 3) Although the acquired a connotation encompassing not
same issues in the Supreme Court, the CERTIFICATION/VERIFICATION (supra) only a choice of venues, as it was
Court of Appeals, or any other tribunal or signed by the Bank president and originally understood in conflicts of laws,
agency; (b) to the best of his knowledge, attached to the Petition identifies the but also to a choice of remedies. As to the
no such action or proceeding is pending" action as a "derivative suit," it "does not first (choice of venues), the Rules of
in said courts or agencies. A violation of mean that it is one" and "(t)hat is a legal Court, for example, allow a plaintiff to
the said circular entails sanctions that question for the courts to decide"; commence personal actions "where the
include the summary dismissal of the 4) Petitioners did not hide the Second defendant or any of the defendants
multiple petitions or complaints. To be Case at they mentioned it in the said resides or may be found, or where the
sure, petitioners have included a VERIFICATION/CERTIFICATION. plaintiff or any of the plaintiffs resides, at
VERIFICATION/CERTIFICATION in their We rule for private respondent. the election of the plaintiff" (Rule 4, Sec, 2
Petition stating "for the record(,) the To begin with, forum-shopping originated [b]). As to remedies, aggrieved parties,
pendency of Civil Case No. 92-1606 before as a concept in private international for example, are given a choice of
the Regional Trial Court of Makati, Branch law.12 , where non-resident litigants are pursuing civil liabilities independently of
134, involving a derivative suit filed by given the option to choose the forum or the criminal, arising from the same set of
stockholders of petitioner Bank against place wherein to bring their suit for facts. A passenger of a public utility
the conservator and other defendants but various reasons or excuses, including to vehicle involved in a vehicular accident
which is the subject of a pending Motion secure procedural advantages, to annoy may sue on culpa contractual, culpa
to Dismiss Without Prejudice.9 and harass the defendant, to avoid aquiliana or culpa criminal — each remedy
Private respondent Ejercito vigorously overcrowded dockets, or to select a more being available independently of the
argues that in spite of this verification, friendly venue. To combat these less than others — although he cannot recover
petitioners are guilty of actual forum honorable excuses, the principle of forum more than once.
shopping because the instant petition non conveniens was developed whereby a In either of these situations (choice of
pending before this Court involves court, in conflicts of law cases, may refuse venue or choice of remedy), the litigant
"identical parties or interests represented, impositions on its jurisdiction where it is actually shops for a forum of his action,
rights asserted and reliefs sought (as not the most "convenient" or available This was the original concept of the term
that) currently pending before the forum and the parties are not precluded forum shopping.
Regional Trial Court, Makati Branch 134 in from seeking remedies elsewhere. Eventually, however, instead of actually
the Second Case. In fact, the issues in the In this light, Black's Law Dictionary 13 says making a choice of the forum of their
two cases are so interwined that a that forum shopping "occurs when a party actions, litigants, through the
judgement or resolution in either case will attempts to have his action tried in a encouragement of their lawyers, file their
constitute res judicata in the other." 10 particular court or jurisdiction where he actions in all available courts, or invoke all
On the other hand, petitioners feels he will receive the most favorable relevant remedies simultaneously. This
explain 11 that there is no forum-shopping judgment or verdict." Hence, according practice had not only resulted to (sic)
because: to Words and Phrases14 , "a litigant is open conflicting adjudications among different
1) In the earlier or "First Case" from which to the charge of "forum shopping" courts and consequent confusion enimical
this proceeding arose, the Bank was whenever he chooses a forum with slight (sic) to an orderly administration of
impleaded as a defendant, whereas in the connection to factual circumstances justice. It had created extreme
"Second Case" (assuming the Bank is the surrounding his suit, and litigants should inconvenience to some of the parties to
real party in interest in a derivative suit), be encouraged to attempt to settle their the action.
it was plaintiff; differences without imposing undue
Thus, "forum shopping" had acquired a where the court in which the second suit dismissed the petition upon grounds which
different concept — which is unethical was brought, has no jurisdiction.18 appear persuasive.
professional legal practice. And this The test for determining whether a party Consequently, where a litigant (or one
necessitated or had given rise to the violated the rule against forum shopping representing the same interest or person)
formulation of rules and canons has been laid dawn in the 1986 case of sues the same party against whom
discouraging or altogether prohibiting the Buan vs. Lopez 19 , also by Chief Justice another action or actions for the alleged
practice. 15 Narvasa, and that is, forum shopping violation of the same right and the
What therefore originally started both in exists where the elements of litis enforcement of the same relief is/are still
conflicts of laws and in our domestic law pendentia are present or where a final pending, the defense of litis pendencia in
as a legitimate device for solving problems judgment in one case will amount to res one case is bar to the others; and, a final
has been abused and mis-used to assure judicata in the other, as follows: judgment in one would constitute res
scheming litigants of dubious reliefs. There thus exists between the action judicata and thus would cause the
To avoid or minimize this unethical before this Court and RTC Case No. 86- dismissal of the rest. In either case, forum
practice of subverting justice, the 36563 identity of parties, or at least such shopping could be cited by the other party
Supreme Court, as already mentioned, parties as represent the same interests in as a ground to ask for summary dismissal
promulgated Circular 28-91. And even both actions, as well as identity of rights of the two 20 (or more) complaints or
before that, the Court had prescribed it in asserted and relief prayed for, the relief petitions, and for imposition of the other
the Interim Rules and Guidelines issued being founded on the same facts, and the sanctions, which are direct contempt of
on January 11, 1983 and had struck down identity on the two preceding particulars is court, criminal prosecution, and
in several cases 16 the inveterate use of such that any judgment rendered in the disciplinary action against the erring
this insidious malpractice. Forum shopping other action, will, regardless of which lawyer.
as "the filing of repetitious suits in party is successful, amount to res Applying the foregoing principles in the
different courts" has been condemned by adjudicata in the action under case before us and comparing it with the
Justice Andres R. Narvasa (now Chief consideration: all the requisites, in fine, Second Case, it is obvious that there exist
Justice) in Minister of Natural Resources, of auter action pendant. identity of parties or interests
et al., vs. Heirs of Orval Hughes, et xxx xxx xxx represented, identity of rights or causes
al., "as a reprehensible manipulation of As already observed, there is between the and identity of reliefs sought.
court processes and proceedings . . action at bar and RTC Case No. 86-36563, Very simply stated, the original complaint
." 17 when does forum shopping take an identity as regards parties, or interests in the court a quo which gave rise to the
place? represented, rights asserted and relief instant petition was filed by the buyer
There is forum-shopping whenever, as a sought, as well as basis thereof, to a (herein private respondent and his
result of an adverse opinion in one forum, degree sufficient to give rise to the ground predecessors-in-interest) against the
a party seeks a favorable opinion (other for dismissal known as auter action seller (herein petitioners) to enforce the
than by appeal or certiorari) in another. pendant or lis pendens. That same alleged perfected sale of real estate. On
The principle applies not only with respect identity puts into operation the sanction of the other hand, the complaint 21 in the
to suits filed in the courts but also in twin dismissals just mentioned. The Second Case seeks to declare such
connection with litigations commenced in application of this sanction will prevent purported sale involving the same real
the courts while an administrative any further delay in the settlement of the property "as unenforceable as against the
proceeding is pending, as in this case, in controversy which might ensue from Bank", which is the petitioner herein. In
order to defeat administrative processes attempts to seek reconsideration of or to other words, in the Second Case, the
and in anticipation of an unfavorable appeal from the Order of the Regional majority stockholders, in representation of
administrative ruling and a favorable court Trial Court in Civil Case No. 86-36563 the Bank, are seeking to accomplish what
ruling. This is specially so, as in this case, promulgated on July 15, 1986, which the Bank itself failed to do in the original
case in the trial court. In brief, the
objective or the relief being sought, in the Makati Regional Trial Court, is a represented. Although the plaintiffs in the
though worded differently, is the same, species of forum-shopping. Both actions Second Case (Henry L. Co. et al.) are not
namely, to enable the petitioner Bank to unquestionably involve the same name parties in the First Case, they
escape from the obligation to sell the transactions, the same essential facts and represent the same interest and entity,
property to respondent. In Danville circumstances. The petitioners' claim of namely, petitioner Bank, because:
Maritime, Inc. vs. Commission on absence of identity simply because the Firstly, they are not suing in their personal
Audit. 22 , this Court ruled that the filing PCGG had not been impleaded in the RTC capacities, for they have no direct
by a party of two apparently different suit, and the suit did not involve certain personal interest in the matter in
actions, but with the same acts which transpired after its controversy. They are not principally or
objective, constituted forum shopping: commencement, is specious. In the RTC even subsidiarily liable; much less are
In the attempt to make the two actions action, as in the action before this Court, they direct parties in the assailed contract
appear to be different, petitioner the validity of the contract to purchase of sale; and
impleaded different respondents therein — and sell of September 1, 1986, i.e., Secondly, the allegations of the complaint
PNOC in the case before the lower court whether or not it had been efficaciously in the Second Case show that the
and the COA in the case before this Court rescinded, and the propriety of stockholders are bringing a "derivative
and sought what seems to be different implementing the same (by paying the suit". In the caption itself, petitioners
reliefs. Petitioner asks this Court to set pledgee banks the amount of their loans, claim to have brought suit "for and in
aside the questioned letter-directive of the obtaining the release of the pledged behalf of the Producers Bank of the
COA dated October 10, 1988 and to direct shares, etc.) were the basic issues. So, Philippines" 24 . Indeed, this is the very
said body to approve the Memorandum of too, the relief was the same: the essence of a derivative suit:
Agreement entered into by and between prevention of such implementation and/or An individual stockholder is permitted to
the PNOC and petitioner, while in the the restoration of the status quo ante. institute a derivative suit on behalf of the
complaint before the lower court When the acts sought to be restrained corporation wherein he holdsstock in order
petitioner seeks to enjoin the PNOC from took place anyway despite the issuance by to protect or vindicate corporate
conducting a rebidding and from selling to the Trial Court of a temporary restraining rights, whenever the officials of the
other parties the vessel "T/T Andres order, the RTC suit did not corporation refuse to sue, or are the ones
Bonifacio", and for an extension of time become functus oficio. It remained an to be sued or hold the control of the
for it to comply with the paragraph 1 of effective vehicle for obtention of relief; corporation. In such actions, the suing
the memorandum of agreement and and petitioners' remedy in the premises stockholder is regarded as a nominal
damages. One can see that although the was plain and patent: the filing of an party, with the corporation as the real
relief prayed for in the two (2) actions are amended and supplemental pleading in party in interest. (Gamboa v. Victoriano,
ostensibly different, the ultimate objective the RTC suit, so as to include the PCGG as 90 SCRA 40, 47 [1979]; emphasis
in both actions is the same, that is, defendant and seek nullification of the supplied).
approval of the sale of vessel in favor of acts sought to be enjoined but In the face of the damaging admissions
petitioner and to overturn the letter- nonetheless done. The remedy was taken from the complaint in the Second
directive of the COA of October 10, 1988 certainly not the institution of another Case, petitioners, quite strangely, sought
disapproving the sale. (emphasis action in another forum based on to deny that the Second Case was a
supplied). essentially the same facts, The adoption derivative suit, reasoning that it was
In an earlier case 23 but with the same of this latter recourse renders the brought, not by the minority shareholders,
logic and vigor, we held: petitioners amenable to disciplinary action but by Henry Co et al., who not only own,
In other words, the filing by the and both their actions, in this Court as hold or control over 80% of the
petitioners of the instant special civil well as in the Court a quo, dismissible. outstanding capital stock, but also
action for certiorari and prohibition in this In the instant case before us, there is also constitute the majority in the Board of
Court despite the pendency of their action identity of parties, or at least, of interests Directors of petitioner Bank. That being
so, then they really represent the Bank. sought, "because it (the Bank) was the Ultimately, what is truly important to
So, whether they sued "derivatively" or defendant in the (first) case while it was consider in determining whether forum-
directly, there is undeniably an identity of the plaintiff in the other (Second shopping exists or not is the vexation
interests/entity represented. Case)",citing as authority Victronics caused the courts and parties-litigant by a
Petitioner also tried to seek refuge in the Computers, Inc., vs. Regional Trial Court, party who asks different courts and/or
corporate fiction that the personality Of Branch 63, Makati, etc. et al., 27 where administrative agencies to rule on the
the Bank is separate and distinct from its Court held: same or related causes and/or to grant
shareholders. But the rulings of this Court The rule has not been extended to a the same or substantially the same reliefs,
are consistent: "When the fiction is urged defendant who, for reasons known only to in the process creating the possibility of
as a means of perpetrating a fraud or an him, commences a new action against the conflicting decisions being rendered by the
illegal act or as a vehicle for the evasion plaintiff — instead of filing a responsive different fora upon the same issue. In this
of an existing obligation, the pleading in the other case — setting forth case, this is exactly the problem: a
circumvention of statutes, the therein, as causes of action, specific decision recognizing the perfection and
achievement or perfection of a monopoly denials, special and affirmative defenses directing the enforcement of the contract
or generally the perpetration of knavery or or even counterclaims, Thus, Velhagen's of sale will directly conflict with a possible
crime, the veil with which the law covers and King's motion to dismiss Civil Case decision in the Second Case barring the
and isolates the corporation from the No. 91-2069 by no means negates the parties front enforcing or implementing
members or stockholders who compose it charge of forum-shopping as such did not the said sale. Indeed, a final decision in
will be lifted to allow for its consideration exist in the first place. (emphasis one would constitute res judicata in the
merely as an aggregation of supplied) other 28 .
individuals." 25 Petitioner pointed out that since it was The foregoing conclusion finding the
In addition to the many cases 26 where the merely the defendant in the original case, existence of forum-shopping
corporate fiction has been disregarded, we it could not have chosen the forum in said notwithstanding, the only sanction
now add the instant case, and declare case. possible now is the dismissal of both cases
herewith that the corporate veil cannot be Respondent, on the other hand, replied with prejudice, as the other sanctions
used to shield an otherwise blatant that there is a difference in factual setting cannot be imposed because petitioners'
violation of the prohibition against forum- between Victronics and the present suit. present counsel entered their appearance
shopping. Shareholders, whether suing as In the former, as underscored in the only during the proceedings in this Court,
the majority in direct actions or as the above-quoted Court ruling, the defendants and the Petition's
minority in a derivative suit, cannot be did not file any responsive pleading in the VERIFICATION/CERTIFICATION contained
allowed to trifle with court processes, first case. In other words, they did not sufficient allegations as to the pendency of
particularly where, as in this case, the make any denial or raise any defense or the Second Case to show good faith in
corporation itself has not been remiss in counter-claim therein In the case before observing Circular 28-91. The Lawyers
vigorously prosecuting or defending us however, petitioners filed a responsive who filed the Second Case are not before
corporate causes and in using and pleading to the complaint — as a result of us; thus the rudiments of due process
applying remedies available to it. To rule which, the issues were joined. prevent us from motu propio imposing
otherwise would be to encourage Indeed, by praying for affirmative reliefs disciplinary measures against them in this
corporate litigants to use their and interposing counter–claims in their Decision. However, petitioners themselves
shareholders as fronts to circumvent the responsive pleadings, the petitioners (and particularly Henry Co, et al.) as
stringent rules against forum shopping. became plaintiffs themselves in the litigants are admonished to strictly follow
Finally, petitioner Bank argued that there original case, giving unto themselves the the rules against forum-shopping and not
cannot be any forum shopping, even very remedies they repeated in the to trifle with court proceedings and
assuming arguendo that there is identity Second Case. processes They are warned that a
of parties, causes of action and reliefs
repetition of the same will be dealt with memorandum distributed to all branches Q: When you went to the Producers Bank
more severely. that these are acquired assets for sale. I and talked with Mr. Mercurio Rivera, did
Having said that, let it be emphasized that was instructed to advertise acquired you ask him point-blank his authority to
this petition should be dismissed not assets for sale so on that basis, I have to sell any property?
merely because of forum-shopping but entertain offer; to accept offer, formal A: No, sir. Not point blank although it
also because of the substantive issues offer and upon having been offered, I came from him, (W)hen I asked him how
raised, as will be discussed shortly. present it to the Committee. I provide the long it would take because he was saying
The Second Issue: Was The Contract Committee with necessary information that the matter of pricing will be passed
Perfected? about the property such as original loan of upon by the committee. And when I asked
The respondent Court correctly treated the borrower, bid price during the him how long it will take for the
the question of whether or not there was, foreclosure, total claim of the bank, the committee to decide and he said the
on the basis of the facts established, a appraised value at the time the property committee meets every week. If I am not
perfected contract of sale as the ultimate is being offered for sale and then the mistaken Wednesday and in about two
issue. Holding that a valid contract has information which are relative to the week's (sic) time, in effect what he was
been established, respondent Court evaluation of the bank to buy which the saying he was not the one who was to
stated: Committee considers and it is the decide. But he would refer it to the
There is no dispute that the object of the Committee that evaluate as against the committee and he would relay the
transaction is that property owned by the exposure of the bank and it is also the decision of the committee to me.
defendant bank as acquired assets Committee that submit to the Conservator Q — Please answer the question.
consisting of six (6) parcels of land for final approval and once approved, we A — He did not say that he had the
specifically identified under Transfer have to execute the deed of sale and it is authority (.) But he said he would refer
Certificates of Title Nos. T-106932 to T- the Conservator that sign the deed of the matter to the committee and he would
106937. It is likewise beyond cavil that sale, sir. relay the decision to me and he did just
the bank intended to sell the property. As The plaintiffs, therefore, at that meeting like that.
testified to by the Bank's Deputy of August 1987 regarding their purpose of "Parenthetically, the Committee referred
Conservator, Jose Entereso, the bank was buying the property, dealt with and talked to was the Past Due Committee of which
looking for buyers of the property. It is to the right person. Necessarily, the Luis Co was the Head, with Jose Entereso
definite that the plaintiffs wanted to agenda was the price of the property, and as one of the members.
purchase the property and it was precisely plaintiffs were dealing with the bank What transpired after the meeting of early
for this purpose that they met with official authorized to entertain offers, to August 1987 are consistent with the
defendant Rivera, Manager of the Property accept offers and to present the offer to authority and the duties of Rivera and the
Management Department of the defendant the Committee before which the said bank's internal procedure in the matter of
bank, in early August 1987. The official is authorized to discuss information the sale of bank's assets. As advised by
procedure in the sale of acquired assets as relative to price determination. Rivera, the plaintiffs made a formal offer
well as the nature and scope of the Necessarily, too, it being inherent in his by a letter dated August 20, 1987 stating
authority of Rivera on the matter is clearly authority, Rivera is the officer from whom that they would buy at the price of P3.5
delineated in the testimony of Rivera official information regarding the price, as Million in cash. The letter was for the
himself, which testimony was relied upon determined by the Committee and attention of Mercurio Rivera who was
by both the bank and by Rivera in their approved by the Conservator, can be had. tasked to convey and accept such offers.
appeal briefs. Thus (TSN of July 30, 1990. And Rivera confirmed his authority when Considering an aspect of the official duty
pp. 19-20): he talked with the plaintiff in August 1987. of Rivera as some sort of intermediary
A: The procedure runs this way: Acquired The testimony of plaintiff Demetria is clear between the plaintiffs-buyers with their
assets was turned over to me and then I on this point (TSN of May 31,1990, pp. proposed buying price on one hand, and
published it in the form of an inter-office 27-28): the bank Committee, the Conservator and
ultimately the bank itself with the set having been made to understand by Petitioners allege that "there is no
price on the other, and considering further Rivera, the official in charge of the counter-offer made by the Bank, and any
the discussion of price at the meeting of negotiation, that the price will be supposed counter-offer which Rivera (or
August resulting in a formal offer of P3.5 submitted for approval by the bank and Co) may have made is unauthorized.
Million in cash, there can be no other that the bank's decision will be relayed to Since there was no counter-offer by the
logical conclusion than that when, on plaintiffs. From the facts, the official bank Bank, there was nothing for Ejercito (in
September 1, 1987, Rivera informed price. At any rate, the bank placed its substitution of Demetria and Janolo) to
plaintiffs by letter that "the bank's official, Rivera, in a position of authority to accept." 30 They disputed the factual basis
counter-offer is at P5.5 Million for more accept offers to buy and negotiate the of the respondent Court's findings that
than 101 hectares on lot basis," such sale by having the offer officially acted there was an offer made by Janolo for
counter-offer price had been determined upon by the bank. The bank cannot turn P3.5 million, to which the Bank counter-
by the Past Due Committee and approved around and later say, as it now does, that offered P5.5 million. We have perused the
by the Conservator after Rivera had duly what Rivera states as the bank's action on evidence but cannot find fault with the
presented plaintiffs' offer for discussion by the matter is not in fact so. It is a familiar said Court's findings of fact. Verily, in a
the Committee of such matters as original doctrine, the doctrine of ostensible petition under Rule 45 such as this, errors
loan of borrower, bid price during authority, that if a corporation knowingly of fact — if there be any - are, as a rule,
foreclosure, total claim of the bank, and permits one of its officers, or any other not reviewable. The mere fact that
market value. Tersely put, under the agent, to do acts within the scope of an respondent Court (and the trial court as
established facts, the price of P5.5 Million apparent authority, and thus holds him well) chose to believe the evidence
was, as clearly worded in Rivera's letter out to the public as possessing power to presented by respondent more than that
(Exh. "E"), the official and definitive price do those acts, the corporation will, as presented by petitioners is not by itself a
at which the bank was selling the against any one who has in good faith reversible error. In fact, such findings
property. dealt with the corporation through such merit serious consideration by this Court,
There were averments by defendants agent, he estopped from denying his particularly where, as in this case, said
below, as well as before this Court, that authority (Francisco v. GSIS, 7 SCRA 577, courts carefully and meticulously
the P5.5 Million price was not discussed by 583-584; PNB v. Court of Appeals, 94 discussed their findings. This is basic.
the Committee and that price. As correctly SCRA 357, 369-370; Prudential Bank v. Be that as it may, and in addition to the
characterized by the trial court, this is not Court of Appeals, G.R. No. 103957, June foregoing disquisitions by the Court of
credible. The testimonies of Luis Co and 14, 1993). 29 Appeals, let us review the question of
Jose Entereso on this point are at best Article 1318 of the Civil Code enumerates Rivera's authority to act and petitioner's
equivocal and considering the gratuitous the requisites of a valid and perfected allegations that the P5.5 million counter-
and self-serving character of these contract as follows: "(1) Consent of the offer was extinguished by the P4.25
declarations, the bank's submission on contracting parties; (2) Object certain million revised offer of Janolo. Here, there
this point does not inspire belief. Both Co which is the subject matter of the are questions of law which could be drawn
ad Entereso, as members of the Past Due contract; (3) Cause of the obligation from the factual findings of the
Committee of the bank, claim that the which is established." respondent Court. They also delve into the
offer of the plaintiff was never discussed There is no dispute on requisite no. 2. The contractual elements of consent and
by the Committee. In the same vein, both object of the questioned contract consists cause.
Co and Entereso openly admit that they of the six (6) parcels of land in Sta. Rosa, The authority of a corporate officer in
seldom attend the meetings of the Laguna with an aggregate area of about dealing with third persons may be actual
Committee. It is important to note that 101 hectares, more or less, and covered or apparent. The doctrine of "apparent
negotiations on the price had started in by Transfer Certificates of Title Nos. T- authority", with special reference to
early August and the plaintiffs had already 106932 to T-106937. There is, however, a banks, was laid out in Prudential Bank vs.
offered an amount as purchase price, dispute on the first and third requisites.
Court of Appeals31 , where it was held Such faith will be eroded where banks do (TSN, April 26, 1990, pp. 34-35). At said
that: not exercise strict care in the selection meeting, Co, a major shareholder and
Conformably, we have declared in and supervision of its employees, resulting officer of the Bank, confirmed Rivera's
countless decisions that the principal is in prejudice to their depositors. statement as to the finality of the Bank's
liable for obligations contracted by the From the evidence found by respondent counter-offer of P5.5 million (TSN,
agent. The agent's apparent Court, it is obvious that petitioner Rivera January 16, 1990, p. 21; TSN, April 26,
representation yields to the principal's has apparent or implied authority to act 1990, p. 35);
true representation and the contract is for the Bank in the matter of selling its (h) In its newspaper advertisements and
considered as entered into between the acquired assets. This evidence includes announcements, the Bank referred to
principal and the third person the following: Rivera as the officer acting for the Bank in
(citing National Food Authority vs. (a) The petition itself in par. II-i (p. 3) relation to parties interested in buying
Intermediate Appellate Court, 184 SCRA states that Rivera was "at all times assets owned/acquired by the Bank. In
166). material to this case, Manager of the fact, Rivera was the officer mentioned in
A bank is liable for wrongful acts of its Property Management Department of the the Bank's advertisements offering for
officers done in the interests of the bank Bank". By his own admission, Rivera was sale the property in question (cf. Exhs. "S"
or in the course of dealings of the officers already the person in charge of the Bank's and "S-1").
in their representative capacity but not for acquired assets (TSN, August 6, 1990, pp. In the very recent case of Limketkai Sons
acts outside the scape of their authority (9 8-9); Milling, Inc. vs. Court of Appeals, et. al.32 ,
C.J.S., p. 417). A bank holding out its (b) As observed by respondent Court, the the Court, through Justice Jose A. R. Melo,
officers and agents as worthy of land was definitely being sold by the affirmed the doctrine of apparent
confidence will not be permitted to profit Bank. And during the initial meeting authority as it held that the apparent
by the frauds they may thus be enabled to between the buyers and Rivera, the latter authority of the officer of the Bank of P.I.
perpetrate in the apparent scope of their suggested that the buyers' offer should be in charge of acquired assets is borne out
employment; nor will it be permitted to no less than P3.3 million (TSN, April 26, by similar circumstances surrounding his
shirk its responsibility for such frauds 1990, pp. 16-17); dealings with buyers.
even though no benefit may accrue to the (c) Rivera received the buyers' letter To be sure, petitioners attempted to
bank therefrom (10 Am Jur 2d, p. 114). dated August 30, 1987 offering P3.5 repudiate Rivera's apparent authority
Accordingly, a banking corporation is million (TSN, 30 July 1990, p.11); through documents and testimony which
liable to innocent third persons where the (d) Rivera signed the letter dated seek to establish Rivera's actual authority.
representation is made in the course of its September 1, 1987 offering to sell the These pieces of evidence, however, are
business by an agent acting within the property for P5.5 million (TSN, July 30, p. inherently weak as they consist of Rivera's
general scope of his authority even 11); self-serving testimony and various inter-
though, in the particular case, the agent is (e) Rivera received the letter dated office memoranda that purport to show
secretly abusing his authority and September 17, 1987 containing the his limited actual authority, of which
attempting to perpetrate a fraud upon his buyers' proposal to buy the property for private respondent cannot be charged
principal or some other person, for his P4.25 million (TSN, July 30, 1990, p. 12); with knowledge. In any event, since the
own ultimate benefit (McIntosh v. Dakota (f) Rivera, in a telephone conversation, issue is apparent authority, the existence
Trust Co., 52 ND 752, 204 NW 818, 40 confirmed that the P5.5 million was the of which is borne out by the respondent
ALR 1021). final price of the Bank (TSN, January 16, Court's findings, the evidence of actual
Application of these principles is especially 1990, p. 18); authority is immaterial insofar as the
necessary because banks have a fiduciary (g) Rivera arranged the meeting between liability of a corporation is concerned 33 .
relationship with the public and their the buyers and Luis Co on September 28, Petitioners also argued that since
stability depends on the confidence of the 1994, during which the Bank's offer of Demetria and Janolo were experienced
people in their honesty and efficiency. P5.5 million was confirmed by Rivera lawyers and their "law firm" had once
acted for the Bank in three criminal cases, Petitioners insist that the respondent Taken together, the factual findings of the
they should be charged with actual Court should have believed the respondent Court point to an implied
knowledge of Rivera's limited authority. testimonies of Rivera and Co that the admission on the part of the petitioners
But the Court of Appeals in its Decision (p. September 28, 1987 meeting "was meant that the written offer made on September
12) had already made a factual finding to have the offerors improve on their 1, 1987 was carried through during the
that the buyers had no notice of Rivera's position of P5.5. million."38 However, both meeting of September 28, 1987. This is
actual authority prior to the sale. In fact, the trial court and the Court of Appeals the conclusion consistent with human
the Bank has not shown that they acted found petitioners' testimonial evidence experience, truth and good faith.
as its counsel in respect to any acquired "not credible", and we find no basis for It also bears noting that this issue of
assets; on the other hand, respondent has changing this finding of fact. extinguishment of the Bank's offer of P5.5
proven that Demetria and Janolo merely Indeed, we see no reason to disturb the million was raised for the first time on
associated with a loose aggrupation of lower courts' (both the RTC and the CA) appeal and should thus be disregarded.
lawyers (not a professional partnership), common finding that private respondents' This Court in several decisions has
one of whose members (Atty. Susana evidence is more in keeping with truth and repeatedly adhered to the principle that
Parker) acted in said criminal cases. logic — that during the meeting on points of law, theories, issues of fact and
Petitioners also alleged that Demetria's September 28, 1987, Luis Co and Rivera arguments not adequately brought to the
and Janolo's P4.25 million counter-offer in "confirmed that the P5.5 million price has attention of the trial court need not be,
the letter dated September 17, been passed upon by the Committee and and ordinarily will not be, considered by a
1987 extinguished the Bank's offer of P5.5 could no longer be lowered (TSN of April reviewing court, as they cannot be raised
million 34 .They disputed the respondent 27, 1990, pp. 34-35)"39 . Hence, for the first time on appeal (Santos vs.
Court's finding that "there was a meeting assuming arguendo that the counter-offer IAC, No. 74243, November 14, 1986, 145
of minds when on 30 September 1987 of P4.25 million extinguished the offer of SCRA 592).40
Demetria and Janolo through Annex "L" P5.5 million, Luis Co's reiteration of the . . . It is settled jurisprudence that an
(letter dated September 30, 1987) said P5.5 million price during the issue which was neither averred in the
"accepted" Rivera's counter offer of P5.5 September 28, 1987 meeting revived the complaint nor raised during the trial in the
million under Annex "J" (letter dated said offer. And by virtue of the September court below cannot be raised for the first
September 17, 1987)", citing the late 30, 1987 letter accepting time on appeal as it would be offensive to
Justice Paras35 , Art. 1319 of the Civil this revived offer, there was a meeting of the basic rules of fair play, justice and due
Code 36 and related Supreme Court rulings the minds, as the acceptance in said letter process (Dihiansan vs. CA, 153 SCRA 713
starting with Beaumont vs. Prieto 37 . was absolute and unqualified. [1987]; Anchuelo vs. IAC, 147 SCRA 434
However, the above-cited authorities and We note that the Bank's repudiation, [1987]; Dulos Realty & Development
precedents cannot apply in the instant through Conservator Encarnacion, of Corp. vs. CA, 157 SCRA 425 [1988];
case because, as found by the respondent Rivera's authority and action, particularly Ramos vs. IAC, 175 SCRA 70 [1989];
Court which reviewed the testimonies on the latter's counter-offer of P5.5 million, Gevero vs. IAC, G.R. 77029, August 30,
this point, what was "accepted" by Janolo as being "unauthorized and illegal" came 1990).41
in his letter dated September 30, 1987 only on May 12, 1988 or more than seven Since the issue was not raised in the
was the Bank's offer of P5.5 million as (7) months after Janolo' acceptance. Such pleadings as an affirmative defense,
confirmed and reiterated to Demetria and delay, and the absence of any private respondent was not given an
Atty. Jose Fajardo by Rivera and Co circumstance which might have justifiably opportunity in the trial court to controvert
during their meeting on September 28, prevented the Bank from acting earlier, the same through opposing evidence.
1987. Note that the said letter of clearly characterizes the repudiation as Indeed, this is a matter of due process.
September 30, 1987 begins nothing more than a last-minute attempt But we passed upon the issue anyway, if
with"(p)ursuant to our discussion last 28 on the Bank's part to get out of a binding only to avoid deciding the case on purely
September 1987 . . . contractual obligation. procedural grounds, and we repeat that,
on the basis of the evidence already in the names of the parties, the terms and Rivera is the final price and that is the
record and as appreciated by the lower conditions of the contract, the price and a price they intends (sic) to have, sir.
courts, the inevitable conclusion is simply description of the property as the object Q What do you mean?.
that there was a perfected contract of of the contract. A That is the amount they want, sir.
sale. But let it be assumed arguendo that the Q What is the reaction of the plaintiff
The Third Issue: Is the Contract counter-offer during the meeting on Demetria to Luis Co's statement (sic) that
Enforceable? September 28, 1987 did constitute a the defendant Rivera's counter-offer of 5.5
The petition alleged42 : "new" offer which was accepted by Janolo million was the defendant's bank (sic)
Even assuming that Luis Co or Rivera did on September 30, 1987. Still, the statute final offer?
relay a verbal offer to sell at P5.5 million of frauds will not apply by reason of the A He said in a day or two, he will make
during the meeting of 28 September failure of petitioners to object to oral final acceptance, sir.
1987, and it was this verbal offer that testimony proving petitioner Bank's Q What is the response of Mr. Luis Co?.
Demetria and Janolo accepted with their counter-offer of P5.5 million. Hence, A He said he will wait for the position of
letter of 30 September 1987, the contract petitioners — by such utter failure to Atty. Demetria, sir.
produced thereby would be unenforceable object — are deemed to have waived any [Direct testimony of Atty. Jose Fajardo,
by action — there being no note, defects of the contract under the statute TSN, January 16, 1990, at pp. 18-21.]
memorandum or writing subscribed by the of frauds, pursuant to Article 1405 of the Q What transpired during that meeting
Bank to evidence such contract. (Please Civil Code: between you and Mr. Luis Co of the
see article 1403[2], Civil Code.) Art. 1405. Contracts infringing the Statute defendant Bank?
Upon the other hand, the respondent of Frauds, referred to in No. 2 of article A We went straight to the point because
Court in its Decision (p, 14) stated: 1403, are ratified by the failure to object he being a busy person, I told him if the
. . . Of course, the bank's letter of to the presentation of oral evidence to amount of P5.5 million could still be
September 1, 1987 on the official price prove the same, or by the acceptance of reduced and he said that was already
and the plaintiffs' acceptance of the price benefits under them. passed upon by the committee. What the
on September 30, 1987, are not, in As private respondent pointed out in his bank expects which was contrary to what
themselves, formal contracts of sale. They Memorandum, oral testimony on the Mr. Rivera stated. And he told me that is
are however clear embodiments of the reaffirmation of the counter-offer of P5.5 the final offer of the bank P5.5 million and
fact that a contract of sale was perfected million is a plenty — and the silence of we should indicate our position as soon as
between the parties, such contract being petitioners all throughout the presentation possible.
binding in whatever form it may have makes the evidence binding on them thus; Q What was your response to the answer
been entered into (case citations omitted). A Yes, sir, I think it was September 28, of Mr. Luis Co?
Stated simply, the banks' letter of 1987 and I was again present because A I said that we are going to give him our
September 1, 1987, taken together with Atty. Demetria told me to accompany him answer in a few days and he said that was
plaintiffs' letter dated September 30, we were able to meet Luis Co at the Bank. it. Atty. Fajardo and I and Mr. Mercurio
1987, constitute in law a sufficient xxx xxx xxx [Rivera] was with us at the time at his
memorandum of a perfected contract of Q Now, what transpired during this office.
sale. meeting with Luis Co of the Producers Q For the record, your Honor please, will
The respondent Court could have added Bank? you tell this Court who was with Mr. Co in
that the written communications A Atty. Demetria asked Mr. Luis Co his Office in Producers Bank Building
commenced not only from September 1, whether the price could be reduced, sir. during this meeting?
1987 but from Janolo's August 20, 1987 Q What price? A Mr. Co himself, Mr. Rivera, Atty. Fajardo
letter. We agree that, taken together, A The 5.5 million pesos and Mr. Luis Co and I.
these letters constitute sufficient said that the amount cited by Mr. Mercurio Q By Mr. Co you are referring to?
memoranda — since they include the A Mr. Luis Co.
Q After this meeting with Mr. Luis Co, did continuing inability or unwillingness to unilaterally repudiated — not the contract
you and your partner accede on (sic) the maintain a state of liquidity deemed — but the authority of Rivera to make a
counter offer by the bank? adequate to protect the interest of binding offer — and which unarguably
A Yes, sir, we did.? Two days thereafter depositors and creditors, the Monetary came months after the perfection of the
we sent our acceptance to the bank which Board may appoint a conservator to take contract. Said letter dated May 12, 1988
offer we accepted, the offer of the bank charge of the assets, liabilities, and the is reproduced hereunder:
which is P5.5 million. management of that institution, collect all May 12, 1988
[Direct testimony of Atty. Demetria, TSN, monies and debts due said institution and Atty. Noe C. Zarate
26 April 1990, at pp. 34-36.] exercise all powers necessary to preserve Zarate Carandang Perlas & Ass.
Q According to Atty. Demetrio Demetria, the assets of the institution, reorganize Suite 323 Rufino Building
the amount of P5.5 million was reached by the management thereof, and restore its Ayala Avenue, Makati, Metro-Manila
the Committee and it is not within his viability. He shall have the power to Dear Atty. Zarate:
power to reduce this amount. What can overrule or revoke the actions of the This pertains to your letter dated May 5,
you say to that statement that the previous management and board of 1988 on behalf of Attys. Janolo and
amount of P5.5 million was reached by the directors of the bank or non-bank financial Demetria regarding the six (6) parcels of
Committee? intermediary performing quasi-banking land located at Sta. Rosa, Laguna.
A It was not discussed by the Committee functions, any provision of law to the We deny that Producers Bank has ever
but it was discussed initially by Luis Co contrary notwithstanding, and such other made a legal counter-offer to any of your
and the group of Atty. Demetrio Demetria powers as the Monetary Board shall deem clients nor perfected a "contract to sell
and Atty. Pajardo (sic) in that September necessary. and buy" with any of them for the
28, 1987 meeting, sir. In the first place, this issue of the following reasons.
[Direct testimony of Mercurio Rivera, TSN, Conservator's alleged authority to revoke In the "Inter-Office Memorandum" dated
30 July 1990, pp. 14-15.] or repudiate the perfected contract of sale April 25, 1986 addressed to and approved
The Fourth Issue: May the Conservator was raised for the first time in this Petition by former Acting Conservator Mr. Andres
Revoke — as this was not litigated in the trial I. Rustia, Producers Bank Senior Manager
the Perfected and Enforceable Contract. court or Court of Appeals. As already Perfecto M. Pascua detailed the functions
It is not disputed that the petitioner Bank stated earlier, issues not raised and/or of Property Management Department
was under a conservator placed by the ventilated in the trial court, let alone in (PMD) staff and officers (Annex A.), you
Central Bank of the Philippines during the the Court of Appeals, "cannot be raised for will immediately read that Manager Mr.
time that the negotiation and perfection of the first time on appeal as it would be Mercurio Rivera or any of his subordinates
the contract of sale took place. Petitioners offensive to the basic rules of fair play, has no authority, power or right to make
energetically contended that the justice and due process."43 any alleged counter-offer. In short, your
conservator has the power to revoke or In the second place, there is absolutely no lawyer-clients did not deal with the
overrule actions of the management or evidence that the Conservator, at the time authorized officers of the bank.
the board of directors of a bank, under the contract was perfected, actually Moreover, under Sec. 23 and 36 of the
Section 28-A of Republic Act No. 265 repudiated or overruled said contract of Corporation Code of the Philippines (Bates
(otherwise known as the Central Bank sale. The Bank's acting conservator at the Pambansa Blg. 68.) and Sec. 28-A of the
Act) as follows: time, Rodolfo Romey, never objected to Central Bank Act (Rep. Act No. 265, as
Whenever, on the basis of a report the sale of the property to Demetria and amended), only the Board of
submitted by the appropriate supervising Janolo. What petitioners are really Directors/Conservator may authorize the
or examining department, the Monetary referring to is the letter of Conservator sale of any property of the
Board finds that a bank or a non-bank Encarnacion, who took over from Romey corportion/bank..
financial intermediary performing quasi- after the sale was perfected on September Our records do not show that Mr. Rivera
banking functions is in a state of 30, 1987 (Annex V, petition) which was authorized by the old board or by any
of the bank conservators (starting contracts that are, under existing law, petition for certiorari under Rule 45 of the
January, 1984) to sell the aforesaid deemed to be defective — i.e., void, Revised Rules of Court. "The jurisdiction of
property to any of your clients. voidable, unenforceable or rescissible. the Supreme Court in cases brought to it
Apparently, what took place were just Hence, the conservator merely takes the from the Court of Appeals is limited to
preliminary discussions/consultations place of a bank's board of directors. What reviewing and revising the errors of law
between him and your clients, which the said board cannot do — such as imputed to it, its findings of the fact being
everyone knows cannot bind the Bank's repudiating a contract validly entered into conclusive " [Chan vs. Court of Appeals,
Board or Conservator. under the doctrine of implied authority — G.R. No. L-27488, June 30, 1970, 33
We are, therefore, constrained to refuse the conservator cannot do either. SCRA 737, reiterating a long line of
any tender of payment by your clients, as Ineluctably, his power is not unilateral and decisions]. This Court has emphatically
the same is patently violative of corporate he cannot simply repudiate valid declared that "it is not the function of the
and banking laws. We believe that this is obligations of the Bank. His authority Supreme Court to analyze or weigh such
more than sufficient legal justification for would be only to bring court actions to evidence all over again, its jurisdiction
refusing said alleged tender. assail such contracts — as he has already being limited to reviewing errors of law
Rest assured that we have nothing done so in the instant case. A contrary that might have been committed by the
personal against your clients. All our acts understanding of the law would simply not lower court" (Tiongco v. De la Merced, G.
are official, legal and in accordance with be permitted by the Constitution. Neither R. No. L-24426, July 25, 1974, 58 SCRA
law. We also have no personal interest in by common sense. To rule otherwise 89; Corona vs. Court of Appeals, G.R. No.
any of the properties of the Bank. would be to enable a failing bank to L-62482, April 28, 1983, 121 SCRA 865;
Please be advised accordingly. become solvent, at the expense of third Baniqued vs. Court of Appeals, G. R. No.
Very truly yours, parties, by simply getting the conservator L-47531, February 20, 1984, 127 SCRA
(Sgd.) Leonida T. Encarnacion to unilaterally revoke all previous dealings 596). "Barring, therefore, a showing that
LEONIDA T. EDCARNACION which had one way or another or come to the findings complained of are totally
Acting Conservator be considered unfavorable to the Bank, devoid of support in the record, or that
In the third place, while admittedly, the yielding nothing to perfected contractual they are so glaringly erroneous as to
Central Bank law gives vast and far- rights nor vested interests of the third constitute serious abuse of discretion,
reaching powers to the conservator of a parties who had dealt with the Bank. such findings must stand, for this Court is
bank, it must be pointed out that such The Fifth Issue: Were There Reversible not expected or required to examine or
powers must be related to the Errors of Facts? contrast the oral and documentary
"(preservation of) the assets of the bank, Basic is the doctrine that in petitions for evidence submitted by the parties" [Santa
(the reorganization of) the management review under Rule 45 of the Rules of Ana, Jr. vs. Hernandez, G. R. No. L-
thereof and (the restoration of) its Court, findings of fact by the Court of 16394, December 17, 1966, 18 SCRA
viability." Such powers, enormous and Appeals are not reviewable by the 973] [at pp. 144-145.]
extensive as they are, cannot extend to Supreme Court. In Andres Likewise, in Bernardo vs. Court of
the post-facto repudiation of perfected vs. Manufacturers Hanover & Trust Appeals 46 , we held:
transactions, otherwise they would Corporation, 45 , we held: The resolution of this petition invites us to
infringe against the non-impairment . . . The rule regarding questions of fact closely scrutinize the facts of the case,
clause of the Constitution 44 . If the being raised with this Court in a petition relating to the sufficiency of evidence and
legislature itself cannot revoke an existing for certiorari under Rule 45 of the Revised the credibility of witnesses presented. This
valid contract, how can it delegate such Rules of Court has been stated in Court so held that it is not the function of
non-existent powers to the conservator Remalante vs. Tibe, G.R. No. 59514, the Supreme Court to analyze or weigh
under Section 28-A of said law? February 25, 1988, 158 SCRA 138, thus: such evidence all over again. The
Obviously, therefore, Section 28-A merely The rule in this jurisdiction is that only Supreme Court's jurisdiction is limited to
gives the conservator power to revoke questions of law may be raised in a reviewing errors of law that may have
been committed by the lower court. The with findings and conclusions which were Committee and could no longer be
Supreme Court is not a trier of facts. . . . not only contrary to the evidence on lowered (TSN of April 27, 1990, pp. 34-
As held in the recent case of Chua Tiong record but have no bases at all," 35) (p. 15, CA Decision).
Tay vs. Court of Appeals and Goldrock specifically the findings that (1) the The respondent Court did not believe the
Construction and Development Corp. 47 : "Bank's counter-offer price of P5.5 million evidence of the petitioners on this point,
The Court has consistently held that the had been determined by the past due characterizing it as "not credible" and "at
factual findings of the trial court, as well committee and approved by conservator best equivocal and considering the
as the Court of Appeals, are final and Romey, after Rivera presented the same gratuitous and self-serving character of
conclusive and may not be reviewed on for discussion" and (2) "the meeting with these declarations, the bank's submissions
appeal. Among the exceptional Co was not to scale down the price and on this point do not inspire belief."
circumstances where a reassessment of start negotiations anew, but a meeting on To become credible and unequivocal,
facts found by the lower courts is allowed the already determined price of P5.5 petitioners should have presented then
are when the conclusion is a finding million" Hence, citing Philippine National Conservator Rodolfo Romey to testify on
grounded entirely on speculation, Bank vs. Court of Appeals 49 , petitioners their behalf, as he would have been in the
surmises or conjectures; when the are asking us to review and reverse such best position to establish their thesis.
inference made is manifestly absurd, factual findings. Under the rules on evidence 51 , such
mistaken or impossible; when there is The first point was clearly passed upon by suppression gives rise to the presumption
grave abuse of discretion in the the Court of Appeals 50 , thus: that his testimony would have been
appreciation of facts; when the judgment There can be no other logical conclusion adverse, if produced.
is premised on a misapprehension of than that when, on September 1, 1987, The second point was squarely raised in
facts; when the findings went beyond the Rivera informed plaintiffs by letter that the Court of Appeals, but petitioners'
issues of the case and the same are "the bank's counter-offer is at P5.5 Million evidence was deemed insufficient by both
contrary to the admissions of both for more than 101 hectares on lot basis, the trial court and the respondent Court,
appellant and appellee. After a careful "such counter-offer price had been and instead, it was respondent's
study of the case at bench, we find none determined by the Past Due Committee submissions that were believed and
of the above grounds present to justify and approved by the Conservator after became bases of the conclusions arrived
the re-evaluation of the findings of fact Rivera had duly presented plaintiffs' offer at.
made by the courts below. for discussion by the Committee . . . In fine, it is quite evident that the legal
In the same vein, the ruling of this Court Tersely put, under the established fact, conclusions arrived at from the findings of
in the recent case of South Sea Surety the price of P5.5 Million was, as clearly fact by the lower courts are valid and
and Insurance Company worded in Rivera's letter (Exh. "E"), the correct. But the petitioners are now asking
Inc. vs. Hon. Court of Appeals, et al. 48 is official and definitive price at which the this Court to disturb these findings to fit
equally applicable to the present case: bank was selling the property. (p. 11, CA the conclusion they are espousing, This
We see no valid reason to discard the Decision) we cannot do.
factual conclusions of the appellate court, xxx xxx xxx To be sure, there are settled exceptions
. . . (I)t is not the function of this Court to . . . The argument deserves scant where the Supreme Court may disregard
assess and evaluate all over again the consideration. As pointed out by plaintiff, findings of fact by the Court of Appeals 52 .
evidence, testimonial and documentary, during the meeting of September 28, We have studied both the records and the
adduced by the parties, particularly 1987 between the plaintiffs, Rivera and CA Decision and we find no such
where, such as here, the findings of both Luis Co, the senior vice-president of the exceptions in this case. On the contrary,
the trial court and the appellate court on bank, where the topic was the possible the findings of the said Court are
the matter coincide. (emphasis supplied) lowering of the price, the bank official supported by a preponderance of
Petitioners, however, assailed the refused it and confirmed that the P5.5 competent and credible evidence. The
respondent Court's Decision as "fraught Million price had been passed upon by the inferences and conclusions are seasonably
based on evidence duly identified in the so just the same, if only to find out and to reap the benefits of the increase in
Decision. Indeed, the appellate court whether there is reason to disturb any of land values. To rule in favor of the Bank
patiently traversed and dissected the its factual findings, for we are only too simply because the property in question
issues presented before it, lending aware of the depth, magnitude and vigor has algebraically accelerated in price
credibility and dependability to its by which the parties through their during the long period of litigation is to
findings. The best that can be said in favor respective eloquent counsel, argued their reward lawlessness and delays in the
of petitioners on this point is that the positions before this Court. fulfillment of binding contracts. Certainly,
factual findings of respondent Court did We are not unmindful of the tenacious the Court cannot stamp its imprimatur on
not correspond to petitioners' claims, but plea that the petitioner Bank is operating such outrageous proposition.
were closer to the evidence as presented abnormally under a government- WHEREFORE, finding no reversible error in
in the trial court by private respondent. appointed conservator and "there is need the questioned Decision and Resolution,
But this alone is no reason to reverse or to rehabilitate the Bank in order to get it the Court hereby DENIES the petition. The
ignore such factual findings, particularly back on its feet . . . as many people assailed Decision is AFFIRMED. Moreover,
where, as in this case, the trial court and depend on (it) for investments, deposits petitioner Bank is REPRIMANDED for
the appellate court were in common and well as employment. As of June 1987, engaging in forum-shopping and WARNED
agreement thereon. Indeed, conclusions the Bank's overdraft with the Central Bank that a repetition of the same or similar
of fact of a trial judge — as affirmed by had already reached P1.023 billion . . . acts will be dealt with more severely.
the Court of Appeals — are conclusive and there were (other) offers to buy the Costs against petitioners.
upon this Court, absent any serious abuse subject properties for a substantial SO ORDERED.
or evident lack of basis or capriciousness amount of money." 53
of any kind, because the trial court is in a While we do not deny our sympathy for
better position to observe the demeanor this distressed bank, at the same time,
of the witnesses and their courtroom the Court cannot emotionally close its
manner as well as to examine the real eyes to overriding considerations of
evidence presented. substantive and procedural law, like
Epilogue. respect for perfected contracts, non-
In summary, there are two procedural impairment of obligations and sanctions
issues involved forum-shopping and the against forum-shopping, which must be
raising of issues for the first time on upheld under the rule of law and blind
appeal [viz., the extinguishment of the justice.
Bank's offer of P5.5 million and the This Court cannot just gloss over private
conservator's powers to repudiate respondent's submission that, while the
contracts entered into by the Bank's subject properties may currently
officers] — which per se could justify the command a much higher price, it is
dismissal of the present case. We did not equally true that at the time of the
limit ourselves thereto, but delved as well transaction in 1987, the price agreed upon
into the substantive issues — the of P5.5 million was reasonable,
perfection of the contract of sale and its considering that the Bank acquired these
enforceability, which required the properties at a foreclosure sale for no
determination of questions of fact. While more than P3.5 million 54 . That the Bank
the Supreme Court is not a trier of facts procrastinated and refused to honor its
and as a rule we are not required to look commitment to sell cannot now be used
into the factual bases of respondent by it to promote its own advantage, to
Court's decisions and resolutions, we did enable it to escape its binding obligation
G.R. No. L-21146 September 1962 its Resolution No. 122 (Petition, Bank, as liquidator, petitioned the Court of
20, 1965 Annex "C") — First Instance of Manila for assistance in
RURAL BANK OF LUCENA, To request the Solicitor General, pursuant the liquidation of the Lucena bank (Civil
INC., petitioner, to Section 29 of Republic Act No. 265, to Case No. 50019). Upon motion, and after
vs. file a petition in the proper courts for the hearing the parties, Judge Arca issued on
HON. FRANCISCO ARCA, as Judge of liquidation of the affairs of the Rural Bank interlocutory order on March 28, 1963, the
the Court of First Instance of Manila, of Lucena, Inc. dispositive portion of which is to the
Branch 1, and CENTRAL BANK OF THE Notice was given by Central Bank officials, following effect (Petition, Annex "D"):
PHILIPPINES, respondents. on February 10, 1962 that the Lucena The Rural Bank of Lucena thru its duly
Norberto J. Quisumbing for petitioner. bank was temporarily closed pending final authorized officers or representatives, is
Nat. M. Balboa, F. E. Evangelista and decision of the Court, and that business hereby ordered to turn over to the Central
Solicitor General for respondents. be transacted with Central Bank Bank, thru its duly authorized
representatives only. representative, within a period of five (5)
Two days later (February 12, 1962), the days from receipt of copy of this order,
REYES, J.B.L., J.: Lucena bank filed suit in the Court of First the physical possession of all of said Rural
The Rural Bank of Lucena, Inc., a banking Instance of Quezon (Tayabas) annual Bank of Lucena's assets, properties and
corporation organized under Republic Act Resolution 122 of the Monetary Board papers. Should the Rural Bank of Lucena
No. 720, instituted, on June 22, 1961, in (Case No. 6471) and enjoin its or its officers fail to comply with the above
the Court of First Instance of Manila (Civil enforcement; and on February 14 the order within the period indicated herein,
Case No. 47345) an action to collect court issued ex parte a writ of preliminary the Central Bank, thru its authorized
damages and to enjoin the Central Bank injunction to such effect. representatives, is hereby authorized to
from enforcing Resolution No. 928 of its On the same day, the Court of First take actual and physical possession of all
Monetary Board, finding that the Rural Instance of Manila, per Judge, now Court said assets, properties and papers of the
Bank of Lucena (Lucena for short), of Appeals Justice, Magno Gatmaitan of Rural Bank of Lucena, duly inventoried in
through its officers, directors, and Branch XIV, decided Case No. 47345, the presence of the Provincial Fiscal, the
employees, had committed acts enjoining enforcement of Resolution No. Provincial Commander, the Provincial
substantially prejudicial to the 928 of the Monetary Board, for having Treasurer, and the Provincial Auditor of
Government, depositors, and creditors, been issued without the prior hearing Quezon province, or their duly authorized
and directing Lucena to reorganize its prescribed by section 10 of the Rural Bank representatives.
board of directors; to refrain from Act, and ordering the Central Bank to pay The Rural Bank of Lucena resorted to this
granting or renewing loans, or accept new P5,000.00 damages and costs. The Court on certiorari, claiming that Judge
deposits, and not to issue drafts or make Central Bank appealed. Arca gravely abused his discretion in
disbursements without the approval of the Upon the other hand, the Court of First issuing the above order, in that —
supervising Central Bank examiners, and Instance of Quezon Province, in its Case (a) it interferes with the immediately
threatening Lucena that its management No. 6741, on February, 24, 1962, executory judgment of Judge Gatmaitan in
would be taken over if the latter should dissolved its preliminary injunction against Case No. 47345 of the Court of First
fail to comply with the resolution. After the enforcement of Resolution 122 of the Instance of Manila;
issue joined and trial of the case, and Monetary Board. Other than filing a (b) Section 29 of the Central Bank Act
while the litigation was still undecided by motion for reconsideration (ultimately (R.A. 265) does not apply;
the Court of First Instance, the Monetary denied on January 9, 1963) the Lucena (c) there was no prior valid take over of
Board, having been informed that the bank took no other steps to prosecute the assets nor due hearing of the liquidated
Director of its Department of Rural Banks case it had filed. Bank;
recommended the liquidation of the Rural On the 31st of March 1962, invoking (d) Judge Gatmaitan's decision constitutes
Bank of Lucena, adopted on February 2, section 29 of Republic Act 265, the Central a judicial review of the Monetary Board's
action that cannot be nullified by the Superintendent or his examiners or agents reciting the proceedings which have been
challenged order of Judge Area; and into the condition of any banking taken and praying the assistance and
(e) the turn over should not be ordered institution, it shall be disclosed that the supervision of the court in the liquidation
before trial on the merits.1awphîl.nèt condition of the same is one of insolvency, of the affairs of the same. The
This Court issued a temporary restraining or that its continuance in business would Superintendent shall thereafter, upon
order until April 25, 1963, but the same involve probable loss to its depositors or order of the Monetary Board and under
was not renewed when it expired. creditors, it shall be the duty of the the supervision of the court and with all
We see no irreconcilable conflict between Superintendent forthwith, in writing, to convenient speed, convert the assets of
section 10 (as amended) of Republic Act inform the Monetary Board of the facts, the banking institution to money.
No. 720 (Rural Banks Act) and section 29 and the Board, upon finding the statement Considering that section 27 of the Rural
of Republic Act No. 265 (Central Bank of the Superintendent to be true, shall Banks law (R.A. No. 720) expressly
Act). The former provides in substance as forthwith forbid the institution to do declares that —
follows: business in the Philippines and shall take The provisions of Republic Acts numbered
The director of the Department of the charge of its assets and proceeds 265 and 337, in so far as applicable and
Central Bank designated by the Monetary according to law. not in conflict with any provision of this
Board to supervise Rural Banks ... upon The Monetary Board shall thereupon Act, are hereby made a part of this Act.
proof that the Rural Bank or its board of determine within thirty days whether the we find no room for questioning the
directors or officers are conducting and institution may be reorganized or applicability of section 29 of Republic Act
managing the affairs of the bank in a otherwise placed in such a condition so No. 265 (Central Bank Act) to rural banks
manner contrary to laws, orders, that it may be permitted to resume organized under Republic Act 720,
instructions, rules and regulations business with safety to its creditors and whenever the Monetary Board should find
promulgated by the Monetary Board or in shall prescribe the conditions under which that the rural bank affected is insolvent,
any manner substantially prejudicial to the such resumption of business shall take or that its continuance in business would
interests of the government, depositors or place. In such case the expenses and fee involve probable loss to its depositors or
creditors, to take over the management of in the administration of the institution creditors, and that it cannot resume
such bank when specifically authorized to shall be determined by the Board and business with safety.
do so by the Monetary Board after due shall be paid to the Central Bank out of It follows that on the assumption that
hearing until a new board of directors and the assets of such banking institution. under section 10 of the Rural Banks Act
officers are elected and qualified. ... At any time within ten days after the the Monetary Board may not take over the
It is easily seen that what this section Monetary Board has taken charge of the management of a rural bank without
authorized is the take over of the assets of any banking institution, such giving the latter a hearing, i.e., an
management by the Central Bank, until institution may apply to the Court of First opportunity to rebut the charge that it has
the governing body of the offending Rural Instance for an order requiring the contravened applicable laws, rules and
Bank is recognized with a view to assuring Monetary Board to show cause why it regulations to the substantial prejudice of
compliance by it with the laws and should not be enjoined from continuing the government, its depositors and
regulations. such charge of its assets, and the court creditors, such a previous hearing is
Upon the other hand, section 29 6f the may direct the Board to refrain from nowhere required by section 29 of the
Central Bank Act (R. A. 265) has in view a further proceedings and to surrender Central Bank Law. Manifestly, whether a
much more drastic step, the liquidation of charge of its assets. rural bank's "continuance in business
a rural bank by taking over its assets and If the Monetary Board shall determine that would involve probable loss" to its clients
converting them into money to pay off its the banking institution cannot resume or creditors and that it "cannot resume
creditors. Said section prescribes: business with safety to its creditors, it business with safety," is a matter of
SEC. 29. Proceedings upon insolvency. — shall, by the Solicitor General, file a appreciation and judgment that the law
Whenever, upon examination by the petition in the Court of First Instance entrusts primarily to the Monetary Board.
Equally apparent is that if the rural bank a judicial review of the Resolution No. 122 day period prescribed by the Central Bank
affected is in the condition previously adopted eight months later, on February law, and which appears to be still pending,
adverted to, every minute of delay in 2, 1962. A review cannot precede the unless the Lucena bank had abandoned
securing its assets from dissipation adoption of the resolution being reviewed. such litigation, a fact that we need not
inevitably increases the danger to the This proposition requires no decide at present. Suffice it to say that
creditors. For this reason, the statute has demonstration. Judge Arca had no reason to inquire into
provided for a subsequent judicial review The narrated events also rebut the the merits of the case before issuing the
of the Monetary Board, in lieu of a contention that the order of Judge Area, disputed order requiring the surrender of
previous hearing. issued on March 28, 1963, in Case No. the assets and papers of the Lucena bank,
In point of fact, the petitioner Rural Bank 50019, constitutes unlawful interference because: (1) neither the statute (sec. 29,
of Lucena did file a petition (Annex "G") with the enforcement of Judge R.A. 265) nor the constitutional
for judicial review in the Court of First Gatmaitan's decision of February 14, requirement of due process demand that
Instance of Quezon Province, dated 1962, the issues involved being different the correctness of the Monetary Board's
February 12, 1962, and challenged the in each case. As heretofore pointed out resolution to stop operation and proceed
validity of Resolution No. 122 of the one involved a take over of management to the liquidation of the Lucena Rural Bank
Monetary Board (Case No. 6471) ; but the under section 10 of the Rural Banks Act, should first be adjudged before making
Court of First Instance of Quezon and the other a seizure of assets and the resolution effective, it being enough
dissolved the preliminary injunction issued liquidation under section 29 of the Central that a subsequent judicial review by
in that case and allowed Resolution No. Bank law (R.A. 265). provided (section 29, R.A. 265; 12 Am.
122 to take effect, without any steps Nor can the proceedings before Judge Jur. 305, sec. 611; Bourjois vs. Chapman,
being taken for a review of such action. Area be deemed judicial review of the 301 U.S. 183, 81 Law Ed. 1027, 1032;
This being the case, and in view of the 1962 resolution No. 122 of the Monetary American Surety Co. vs. Baldwin, 77 Law
manifest reluctance the Lucena bank's Board, if only because by law (section 29, Ed. 231, 86 ALR 307; Wilson vs.
officials to comply with the Monetary R. A. 265) such review must be asked Standefer, 46 Law Ed. 612); (2) the
Board's resolution, the Central Bank had within 10 days from notice of the period for asking such judicial review had
cause to seek judicial assistance for the resolution of the Board. Between the elapsed with excess between the adoption
discharge of its duties as liquidator. adoption of Resolution No. 122 and the of the Monetary Board Resolution No. 122
The petitioner rural bank seems to take challenged order of Judge Arca, more than and the filing of the case by the Central
the view that the proceedings had before one year had elapsed. Hence, the validity Bank in the Court of First Instance of
Judge Gatmaitan in Case No. 47345, of the Monetary Board's resolution can no Manila; (3) the correctness of said
Branch XIV, of the Court of First Instance longer be litigated before Judge Arca, resolution had already been put in issue
of Manila constituted the judicial review whose role under the fourth paragraph of before the Court of Quezon Province; (4)
required by section 29 of Republic Act No. section 29 is confined to assisting and because the latter court had refused to
265, the Central Bank Act. Such a stand is supervising the liquidation of the Lucena stop implementation of the Resolution of
untenable, for the case tried and decided bank. the Monetary Board when it dissolved its
by Judge Gatmaitan concerned an attempt Whether or not the Central Bank acted own preliminary injunction; and (5)
by the Central Bank to take over with arbitrariness or bad faith in decreeing because the Lucena Bank had apparently
management under section 10 of the that circumstances called for the acquiesced in the action taken by the
Rural Banks law (R.A. No. 720) in liquidation of the Lucena Rural Bank, and Court of Quezon Province, since the rural
connection with the Monetary Board's should be answerable in damages, should bank had not sought that the action of the
resolution No. 928 of June 16, 1961. Even be threshed out and determined, not by Quezon court be set aside by a higher
more conclusive is the consideration that Judge Arca but in Case No. 6471 of the court.
said action (Case No. 47345) was filed on Court of First Instance of Quezon
June 22, 1961, and could not possibly be Province, which was filed within the 10-
IN VIEW OF THE FOREGOING, the writ
applied for is denied with costs against the
petitioner Lucena Rural Bank, Inc
G.R. No. L-61689 June 20, 1988 The antecedent facts of the case are as Board, finding the report to be true,
RURAL BANK OF BUHI, INC., and follows: adopted Resolution No. 583
HONORABLE JUDGE CARLOS R. The petitioner Rural Bank of Buhi, Inc. placing Buhi, petitioner herein, under
BUENVIAJE, petitioners, (hereinafter referred to as Buhi) is a receivership and designated respondent,
vs. juridical entity existing under the laws of Consolacion V. Odra, as Receiver,
HONORABLE COURT OF APPEALS, the Philippines. Buhi is a rural bank that pursuant to the provisions of Section 29 of
CENTRAL BANK OF THE PHILIPPINES started its operations only on December Republic Act No. 265 as amended (Rollo,
and CONSOLACION 26,1975 (Rollo, p. 86). p. 111).
ODRA, respondents. In 1980, an examination of the books and In a letter dated April 8, 1980, respondent
Manuel B. Tomacruz and Rustico Pasilavan affairs of Buhi was ordered conducted by Consolacion V. Odra, as receiver,
for petitioners. the Rural Banks and Savings and Loan implemented and carried out said
I.B. Regalado, Jr. and Pacifica T. Torres Association (DRBSLA), Central Bank of the Monetary Board Resolution No. 583 by
for respondents. Philippines, which by law, has charge of authorizing deputies of the receiver to
the supervision and examination of rural take control, possession and charge
PARAS, J.: banks and savings and loan associations of Buhi, its assets and liabilities (Rollo, p.
This is a petition for review on certiorari in the Philippines. However, said petitioner 109).
with preliminary mandatory injunction refused to be examined and as a result Imelda del Rosario, Manager of herein
seeking the reversal of the orders of the thereof, financial assistance was petitioner Buhi, filed a petition for
Court of Appeals dated March 19, 1982 suspended. injunction with Restraining Order dated
and March 24, 1982 and its On January 10, 1980, a general April 23, 1980, docketed as Special
decision * (HATOL) promulgated on June examination of the bank's affairs and Proceedings IR-428 against respondent
17,1982 in CA-G.R. No. 13944 entitled operations was conducted and there were Consolacion V. Odra and DRBSLA deputies
"Banko Central ng Pilipinas at Consolacion found by DRBSLA represented by herein in the Court of First Instance of Camarines
Odra Laban Kina Rural Bank of Buhi respondent, Consolacion V. Odra, Director Sur, Branch VII, Iriga City, entitled Rural
(Camarines Sur), Inc." and praying for a of DRBSLA, among others, massive Bank of Buhi vs. Central Bank, which
restraining order or a preliminary irregularities in its operations consisting of assailed the action of herein respondent
mandatory injunction to restrain loans to unknown and fictitious borrowers, Odra in recommending the receivership
respondents from enforcing aforesaid where the sum of P 1,704,782.00 was over Buhi as a violation of the provisions
orders and decision of the respondent past due and another sum of Sections 28 and 29 of Republic Act No.
Court, and to give due course to the of P1,130,000.00 was also past due in 265 as amended, and Section 10 of
petitioners' complaint in IR-428, pending favor of the Central Bank (Rollo, p. 86). Republic Act No. 720 (The Rural Banks
before Hon. Judge Carlos R. Buenviaje of The promissory notes evidencing these Act) and as being ultra vires and done
Branch VII, CFI, Camarines Sur. loans were rediscounted with the Central with grave abuse of discretion and in
The decretal portion of the appealed Bank for cash. As a result thereof, the excess of jurisdiction (Rollo, p. 120).
decision reads: bank became insolvent and prejudiced its Respondents filed their motion to dismiss
DAHIL DITO, ang utos ng pinasasagot sa depositors and creditors. dated May 27, 1980 alleging that the
Hukom noong ika-9 ng Marso, 1982, ay Respondent, Consolacion V. Odra, petition did not allege a cause of action
isinasang-tabi. Kapalit nito, isang utos and submitted a report recommending to the and is not sufficient in form and substance
ipinalabas na nag-uutos sa pinasasagot sa Monetary Board of the Central Bank the and that it was filed in violation of Section
Hukom na itigil ang anumang placing of Buhi under receivership in 29, Republic Act No. 265 as amended by
pagpapatuloy o pagdidinig kaugnay sa accordance with Section 29 of Republic Presidential Decree No. 1007 (Rollo, p.
usaping IR-428 na pinawawalang saysay Act No. 265, as amended, the designation 36).
din ng Hukumang ito. of the Director, DRBSLA, as receiver Petitioners, through their counsel, filed an
SIYANG IPINAG-UUTOS. thereof. On March 28, 1980, the Monetary opposition to the motion to dismiss dated
June 17, 1980 averring that the petition No. 265 as amended, among others Consequently, on March 16, 1982, herein
alleged a valid cause of action and that (Rollo, p. 28). On the same day, petitioner petitioner Judge issued the writ of
respondents have violated the due herein filed a rejoinder to its opposition to execution directing the Acting Provincial
process clause of the Constitution (Rollo, the motion to dismiss (Rollo, p. 145). Sheriff of Camarines Sur to implement the
p. 49). On March 9,1982, herein petitioner Judge Court's order of March 9, 1982 (Rollo, p.
Later, respondents filed a reply to the Buenviaje, issued an order denying the 268). Complying with the said order of the
opposition dated July 1, 1980, claiming respondents' motion to dismiss, Court, the Deputy Provincial Sheriff went
that the petition is not proper; that Imelda supplemental motion to dismiss and to the Buhi premises to implement the
del Rosario is not the proper granting a temporary restraining order writ of execution but the vault of the
representative of the bank; that the enjoining respondents from further petitioner bank was locked and no
petition failed to state a cause of action; managing and administering the Rural inventory was made, as evidenced by the
and, that the provisions of Section 29 of Bank of Buhi and to deliver the possession Sheriffs Report (Rollo, pp. 83-84). Thus,
Republic Act No. 265 had been faithfully and control thereof to the petitioner Bank the petitioner herein filed with the Court
observed (Rollo, p. 57). under the same conditions and with the an "Urgent Ex-Parte Motion to Allow
On August 22, 1980, the Central Bank same financial status as when the same Sheriff Calope to Force Open Bank Vault"
Monetary Board issued a Resolution No. was taken over by herein respondents on the same day (Rollo, p. 268).
1514 ordering the liquidation of the Rural (defendants) on April 16, 1980 and Accordingly, on March 17, 1982, herein
Bank of Buhi (Rollo, p. 108). further enjoining petitioner to post a bond petitioner Judge granted the aforesaid Ex-
On September 1, 1981, the Office of the in the amount of three hundred thousand Parte Motion to Force Open the Bank Vault
Solicitor General, in accordance with pesos (P300,000.00) (Rollo, p. 72). (Rollo, p. 269).
Republic Act No. 265, Section 29, filed in The dispositive portion of said decision On March 18, 1982, counsel for petitioner
the same Court of First Instance of reads: filed another "Urgent Ex-Parte Motion to
Camarines Sur, Branch VII, a petition for WHEREFORE, premises considered, the Order Manager of City Trust to Allow
Assistance in the Liquidation of Buhi, motion to dismiss and supplemental Petitioner to Withdraw Rural Bank
which petition was docketed as SP-IR- motion to dismiss, in the light of Deposits" while a separate "Urgent Ex-
553, pursuant to the Monetary Board petitioners' opposition, for want of Parte Motion to Order Manager of
Resolution No. 1514 (Rollo, pp. 89; 264). sufficient merit is denied. Respondents are Metrobank to Release Deposits of
Meanwhile, respondent Central Bank filed hereby directed to file their answer within Petitioners" was filed on the same date.
on September 15, 1981, in Civil Case No. ten (10) days from receipt of a copy of The motion was granted by the Court in
IR-428 a Supplemental Motion To Dismiss this order. (Rollo, p. 4). an order directing the Manager of Metro
on the ground that the receivership On March 11, 1982, petitioner Buhi Bank-Naga City (Rollo, p. 269) to comply
of Buhi, in view of the issuance of the through counsel, conformably with the as prayed for.
Monetary Board Resolution No. 1514 had above-mentioned order, filed a Motion to In view thereof, herein respondents filed
completely become moot and academic Admit Bond in the amount of P300,220.00 in the Court of Appeals a petition for
(Rollo, p. 68) and the fact that Case SP- (Rollo, pp. 78-80). certiorari and prohibition with preliminary
IR-553 for the liquidation of Buhi was On March 15,1982, herein petitioner injunction docketed as CA-G.R. No. 13944
already pending with the same Court Judge issued the order admitting the bond against herein petitioners, seeking to set
(Rollo, p. 69). of P300,220.00 filed by the petitioner, and aside the restraining order and reiterating
On October 16, 1981, petitioners herein directing the respondents to surrender the therein that petitioner Buhi's complaint in
filed their amended complaint in Civil Case possession of the Rural Bank of Buhi, the lower court be dismissed (Rollo, p.
No. IR-428 alleging that the issuance of together with all its equipments, 270).
Monetary Board Resolution No. 583 was accessories, etc. to the petitioners (Rollo, On March 19, 1982, the Court of Appeals
plainly arbitrary and in bad faith under p. 6). issued a Resolution (KAPASIYAHAN) in
aforequoted Section 29 of Republic Act tagalog, restraining the Hon. Judge Carlos
R. Buenviaje, from enforcing his order of On June 9, 1982, petitioners filed their motion to cite the respondents in CA-G.R.
March 9,1982 and suspending further objection to respondents' motion for No. SP-13944 (herein petitioner) for
proceedings in Sp. Proc. No. IR-428 contempt dated June 5, 1982 claiming contempt (Rollo, p. 193).
pending before him while giving the that the properties, subject of the order, At said hearing, counsel for Rural Bank of
Central Bank counsel, Atty. Ricardo had already been returned to the herein Buhi agreed and promised in open court to
Quintos, authority to carry out personally petitioners who are the lawful owners restore and return to the Central Bank the
said orders and directing the "Punong thereof and that the returning could no possession and control of the Bank within
Kawani" of the Court of Appeals to send longer be undone (Rollo, p. 181). three (3) days from August 31, 1982.
telegrams to the Office of the President Later, petitioners filed another motion However on September 3,1982, Rosalia
and the Supreme Court (Rollo, p. 168). dated June 17, 1982 for the Guevara, Manager thereof, vigorously and
Herein petitioners did not comply with the reconsideration of the resolution of June adamantly refused to surrender the
Court of Appeals' order of March 19, 1982, 1, 1982 of the Court of Appeals alleging premises unless she received a written
but filed instead on March 21, 1982 a that the same contravened and departed order from the Court.
motion for reconsideration of said order of from the rulings of the Supreme Court In a subsequent hearing of the contempt
the Court of Appeals, claiming that the that consummated acts or acts already incident, the Court of Appeals issued its
lower court's order of March 9, 1982 done could no longer be the subject of Order dated October 13,1982, but Rosalia
referred only to the denial of therein mandatory injunction and that the Guevara still refused to obey, whereupon
respondents' motion to dismiss and respondent Court of Appeals had no she was placed under arrest and the Court
supplemental motion to dismiss and that jurisdiction to issue the order unless it of Appeals ordered her to be detained
the return of Buhi to the petitioners was was in aid of its appellate jurisdiction, until she decided to obey the Court's
already an accomplished fact. The motion claiming that the case (CA-G.R. No. Order (Rollo, pp. 273-274).
was denied by the respondent court in a 13944) did not come to it on appeal Earlier, on September 14, 1982
resolution dated June 1, 1982 (Rollo, p. (Rollo, p. 302). petitioners had filed this petition even
301). As aforestated, on June 17, 1982, while a motion for reconsideration of the
In view of petitioners' refusal to obey the respondent Court of Appeals rendered its decision of June 17,1982 was still pending
Court of Appeals' Order of March 19, decision (HATOL) setting aside the lower consideration in the Court of Appeals.
1982, herein respondents filed with the court's restraining order dated March In the resolution of October 20, 1982, the
Court of Appeals a Motion to Cite 9,1982 and ordering the dismissal of Second Division of this Court without
Petitioners in Contempt, dated April 22, herein petitioners' amended complaint in giving due course to the petition required
1982 (Rollo, p. 174). Civil Case No. IR-428 (Rollo, p. 186). respondents to COMMENT (Rollo, p. 225).
The Court of Appeals issued on May 24, On July 9, 1982, petitioners (respondents Counsel for respondents manifested
1982 an order requiring herein petitioner in CA-G.R. No. 13944) filed a Motion for (Rollo, p. 226) that they could not file the
Rural Bank of Buhi, Inc., through its then Reconsideration of the Decision dated required comment because they were not
Acting Manager, Imelda del Rosario and June 17, 1982 insofar as the complaint given a copy of the petition. Meanwhile,
herein petitioner Judge Carlos Buenviaje, with the lower court (Civil Case No. IR- they filed an urgent motion dated October
as well as Manuel Genova and Rodolfo 428 was ordered dismissed (Rollo, p. 28, 1982 with the Court of Appeals to
Sosa, to show cause within ten (10) days 305). place the bank through its representatives
from notice why they should not be held On August 23, 1982, the respondent Court in possession of the Rural Bank of Buhi
in contempt of court and further directing of Appeals issued its Resolution denying (Camarines Sur), Inc. (Rollo, p. 237).
the Ministry of National Defense or its for lack of merit, herein petitioners' On December 9, 1982, petitioners filed a
representative to cause the return of motion for reconsideration of the Supplemental Petition with urgent motion
possession and management of the Rural resolution issued by the respondent Court for the issuance of a restraining order
Bank to the respondents Central Bank and of Appeals on June 1, 1982 and set on dated December 2, 1982 praying that the
Consolacion Odra (Rollo, p. 180). August 31, 1982 the hearing of the
restraining order be issued against October 28, 1982 ordered on April 13, PLACED A RURAL BANK UNDER
respondent court (Rollo, p. 229). 1983 the return to the petitioners (herein RECEIVERSHIP, IS SUCH ACTION OF THE
In the resolution of December 15,1982, respondents) or their duly authorized MONETARY BOARD (MB) SUBJECT TO
the Court resolved to require petitioners representatives of the possession, JUDICIAL REVIEW? IF SO, WHICH COURT
to furnish the respondents with a copy of management and control of subject Rural MAY EXERCISE SUCH POWER AND WHEN
the petition and to require the Bank (Rollo, p. 319), together with its MAY IT EXERCISE THE SAME?
respondents to comment on both the properties. III. UNDER THE SAID SECTION OF THE
original and the supplemental petitions On April 28, 1983, petitioner filed an LAW, SUPPOSE A CIVIL CASE IS
(Rollo, p. 243). urgent motion: (1) to give due course to INSTITUTED SEEKING ANNULMENT OF
In a resolution of February 21, 1983, the the petition and (2) for immediate THE RECEIVERSHIP ON THE GROUND OF
Court NOTED Rosalia V. Guevara's letter issuance of a Restraining Order against ARBITRARINESS AND BAD FAITH ON THE
dated February 4, 1983 (Rollo, p. 252) the respondent court to prevent it from PART OF THE MONETARY BOARD (MB),
addressed to Hon. Chief Justice Enrique M. enforcing its aforesaid resolution dated MAY SUCH CASE BE DISMISSED BY THE
Fernando, requesting that she be allowed April 13, 1983 and from further IAC (THEN CA) ON THE GROUND OF
to file a petition for the issuance of a writ proceeding in AC-G.R. No. 13944-SP INSUFFICIENCY OF EVIDENCE EVEN IF
of habeas corpus (Rollo, p. 256). (Rollo, p. 315). THE TRIAL COURT HAS NOT HAD A
At the hearing of the said petition on On May 16, 1983, this Court resolved to CHANCE YET TO RECEIVE EVIDENCE AND
February 23, 1983 where the counsel of deny the petition for lack of merit (Rollo, THE PARTIES HAVE NOT YET PRESENTED
both parties appeared, this Court noted p. 321). On July 25, 1983, petitioners filed EVIDENCE EITHER IN THE TRIAL COURT
the Return of the Writ of Habeas Corpus their verified Motion for Reconsideration OR IN SAID APPELLATE COURT? (Rollo,
as well as the release of petitioner Rosalia (Rollo, p. 337) praying that the HATOL pp. 330-331).
V. Guevara from detention by the National dated June 17, 1982 of the Court of I. Petitioner Rural Bank's position is to the
Bureau of Investigation. After hearing Appeals be set aside as null and void and effect that due process was not observed
aforesaid counsel and petitioner herself, that Special Proceedings No. IR-428 of by the Monetary Board before said bank
and it appearing that the latter had CFI-Camarines Sur, Iriga City, Branch VII, was placed under receivership. Said Rural
resigned since January 18,1983 as be ordered remanded to the RTC of Bank claimed that it was not given the
Manager of the Rural Bank of Buhi, Inc. Camarines Sur, Iriga City, for further chance to deny and disprove such claim of
and that the Central Bank might avail of proceedings. insolvency and/or any other ground which
more than adequate legal measures to A Motion for Early Resolution was filed by the Monetary Board used in justification of
take over the management, possession herein petitioners on March 12,1984 its action.
and control of the said bank (and not (Rollo, p. 348). Relative thereto, the provision of Republic
through contempt proceedings and Petitioners raised the following legal Act No. 265 on the proceedings upon
detention and confinement of petitioner), issues in their motion for reconsideration: insolvency reads:
with Assistant Solicitor General Andin I. UNDER SEC. 29, R.A. 265, AS SEC. 29. Proceedings upon insolvency.—
manifesting that respondents were not AMENDED, MAY THE MONETARY BOARD Whenever, upon examination by the head
insisting on the continued detention of (MB) OF THE CENTRAL BANK (CB) PLACE of the appropriate supervising and
petitioner, the Court Resolved to SET the A RURAL BANK UNDER RECEIVERSHIP examining department or his examiners or
petitioner at liberty and to consider the WITHOUT PRIOR NOTICE TO SAID RURAL agents into the condition of any banking
contempt incident closed (Rollo, p. 339). BANK TO ENABLE IT TO BE HEARD ON institution, it shall be disclosed that the
On April 11, 1983, respondents filed their THE GROUND RELIED UPON FOR SUCH condition of the same is one of insolvency,
comment on the original and RECEIVERSHIP? or that its continuance in business would
supplemental petitions. II. UNDER THE SAME SECTION OF SAID involve probable loss to its depositors or
Meanwhile, the Court of Appeals, acting LAW, WHERE THE MONETARY BOARD creditors, it shall be the duty of the
on respondents' urgent motion filed on (MB) OF THE CENTRAL BANK (CB) HAS department head concerned forthwith, in
writing, to inform the Monetary Board of proceedings which have been taken and court in which the action is pending a
the facts, and the Board may, upon praying the assistance of the court in the bond executed in favor of the Central
finding the statements of the department liquidation of the banking institution. The Bank, in an amount to be fixed by the
head to be true, forbid the institution to Court shall have jurisdiction in the same court. The restraining order or injunction
do business in the Philippines and shall proceedings to adjudicate disputed claims shall be refused or, if granted, shall be
designate an official of the Central Bank, against the bank and enforce individual dissolved upon filing by the Central Bank
or a person of recognized competence in liabilities of the stockholders and do all of a bond, which shall be in the form of
banking, as receiver to immediately take that is necessary to preserve the assets of cash or Central Bank cashier's check, in
charge of its assets and liabilities, as the banking institution and to implement an amount twice the amount of the bond
expeditiously as possible collect and the liquidation plan approved by the of the petitioner, or plaintiff conditioned
gather all the assets and administer the Monetary Board. The Monetary Board shall that it will pay the damages which the
same for the benefit of its creditors, designate an official of the Central Bank or petitioner or plaintiff may suffer by the
exercising all the powers necessary for a person of recognized competence in refusal or the dissolution of the injunction.
these purposes including, but not limited banking, as liquidator who shall take over The provisions of Rule 58 of the New
to, bringing suits and foreclosing the functions of the receiver previously Rules of Court insofar as they are
mortgages in the name of the banking appointed by the Monetary Board under applicable and not inconsistent with the
institution. this Section. The liquidator shall, with all provisions of this Section shall govern the
The Monetary Board shall thereupon convenient speed, convert the assets of issuance and dissolution of the restraining
determine within sixty days whether the the banking institution to money or sell, order or injunction contemplated in this
institution may be recognized or otherwise assign or otherwise dispose of the same to Section.
placed in such a condition so that it may creditors and other parties for the purpose Insolvency, under this Act, shall be
be permitted to resume business with of paying the debts of such bank and he understood to mean the inability of a
safety to its depositors and creditors and may, in the name of the banking banking institution to pay its liabilities as
the general public and shall prescribe the institution, institute such actions as may they fall due in the usual and ordinary
conditions under which such redemption be necessary in the appropriate court to course of business: Provided, however,
of business shall take place as the time for collect and recover accounts and assets of that this shall not include the inability to
fulfillment of such conditions. In such the banking institution. pay of an otherwise non-insolvent bank
case, the expenses and fees in the The provisions of any law to the contrary caused by extraordinary demands induced
collection and administration of the assets notwithstanding the actions of the by financial panic commonly evidenced by
of the institution shall be determined by Monetary Board under this Section and a run on the banks in the banking
the Board and shall be paid to the Central the second paragraph of Section 34 of this community.
Bank out of the assets of such banking Act shall be final and executory, and can The appointment of a conservator under
institution. be set aside by the court only if there is Section 28-A of this Act or the
If the Monetary Board shall determine and convincing proof that the action is plainly appointment of receiver under this Section
confirm within the said period that the arbitrary and made in bad faith. No shall be vested exclusively with the
banking institution is insolvent or cannot restraining order or injunction shall be Monetary Board, the provision of any law,
resume business with safety to its issued by the court enjoining the Central general or special, to the contrary not
depositors, creditors and the general Bank from implementing its actions under withstanding.
public, it shall, if the public interest this Section and the second paragraph of It will be observed from the foregoing
requires, order its liquidation, indicate the Section 34 of this Act, unless there is provision of law, that there is no
manner of its liquidation and approve a convincing proof that the action of the requirement whether express or implied,
liquidation plan. The Central Bank shall, Monetary Board is plainly arbitrary and that a hearing be first conducted before a
by the Solicitor General, file a petition in made in bad faith and the petitioner or banking institution may be placed under
the Court of First Instance reciting the plaintiff files with the clerk or judge of the receivership. On the contrary, the law is
explicit as to the conditions prerequisite to liquidator appointed by the Monetary disillusionment will run the gamut of the
the action of the Monetary Board to forbid Board. The Central Bank shall thereafter entire banking community.
the institution to do business in the file a petition in the Regional Trial Court In Mendiola vs. Court of Appeals, (106
Philippines and to appoint a receiver to praying for the Court's assistance in the SCRA 130), the Supreme Court held:
immediately take charge of the bank's liquidation of the bank." ... (Salud vs. The pivotal issue raised by petitioner is
assets and liabilities. They are: (a) an Central Bank, 143 SCRA 590 [1986]). whether or not the appointment of a
examination made by the examining Petitioner further argues, that there is also receiver by the Court of First Instance on
department of the Central Bank; (b) that constitutional guarantee that no January 14, 1969 was in order.
report by said department to the Monetary property shall be taken without due Respondent Court correctly stated that the
Board; and (c) prima facie showing that process of law, so that Section 29, R.A. appointment of a receiver pendente lite is
the bank is in a condition of insolvency or 265, as amended, could not have intended a matter principally addressed to and
so situated that its continuance in to disregard and do away with such resting largely on the sound discretion of
business would involve probable loss to its constitutional requirement when it the court to which the application is made.
depositors or creditors. conferred upon the Monetary Board the This Tribunal has so held in a number of
Supportive of this theory is the ruling of power to place Rural Banks under cases. However, receivership being
this Court, which established the authority receivership (Rollo, p. 333). admittedly a harsh remedy, it should be
of the Central Bank under the foregoing The contention is without merit. It has granted with extreme caution. Sound
circumstances, which reads: long been established and recognized in reasons for receivership must appear of
As will be noted, whenever it shall appear this jurisdiction that the closure and record, and there should be a clear
prima facie that a banking institution is in liquidation of a bank may be considered showing of a necessity therefor. Before
"a condition of insolvency" or so situated as an exercise of police power. Such granting the remedy, the court is advised
"that its continuance in business would exercise may, however, be subject to to consider the consequence or effects
involved probable loss to its depositors or judicial inquiry and could be set aside if thereof in order to avoid irreparable
creditors," the Monetary Board has found to be capricious, discriminatory, injustice or injury to others who are
authority: whimsical, arbitrary, unjust or a denial of entitled to as much consideration as those
First, to forbid the institution to do the due process and equal protection seeking it.
business and appoint a receiver therefor; clauses of the Constitution (Central Bank xxx xxx xxx
and vs. Court of Appeals, 106 SCRA 155 This is not to say that a hearing is an
Second, to determine, within 60 days, [1981]). indispensable requirement for the
whether or not: The evident implication of the law, appointment of a receiver. As petitioner
1) the institution may be reorganized and therefore, is that the appointment of a correctly contends in his first assignment
rehabilitated to such an extent as to be receiver may be made by the Monetary of error, courts may appoint receivers
permitted to resume business with safety Board without notice and hearing but its without prior presentation of evidence and
to depositors, creditors and the general action is subject to judicial inquiry to solely on the basis of the averments of the
public; or insure the protection of the banking pleadings. Rule 59 of the Revised Rules of
2) it is indeed insolvent or cannot resume institution. Stated otherwise, due process Court allows the appointment of a receiver
business with safety to depositors, does not necessarily require a prior upon an ex parte application.
creditors and the general public, and hearing; a hearing or an opportunity to be There is no question that the action of the
public interest requires that it be heard may be subsequent to the closure. Monetary Board in this regard may be
liquidated. One can just imagine the dire subject to judicial review. Thus, it has
In this latter case (i.e., the bank can no consequences of a prior hearing: bank been held that the courts may interfere
longer resume business with safety to runs would be the order of the day, with the Central Bank's exercise of
depositors, creditors and the public, etc.) resulting in panic and hysteria. In the discretion in determining whether or not a
its liquidation will be ordered and a process, fortunes may be wiped out, and distressed bank shall be supported or
liquidated. Discretion has its limits and where the latter was filed ahead of the
has never been held to include petition for assistance in liquidation (ibid;
arbitrariness, discrimination or bad faith Central Bank vs. Court of Appeals, 106
(Ramos vs. Central Bank of the SCRA 143 [1981]).
Philippines, 41 SCRA 567 [1971]). III. It will be noted that in the issuance of
It has likewise been held that resolutions the Order of the Court of First Instance of
of the Monetary Board under Section 29 of Camarines Sur, Branch VII, Iriga City,
the Central Bank Act, such as: forbidding dated March 9, 1982 (Rollo, pp. 72-77),
bank institutions to do business on there was no trial on the merits. Based on
account of a "condition of insolvency" or the pleadings filed, the Court merely acted
because its continuance in business would on the Central Bank's Motion to Dismiss
involve probable loss to depositors or and Supplemental Motion to Dismiss,
creditors; or appointing a receiver to take denying both for lack of sufficient merit.
charge of the bank's assets and liabilities, Evidently, the trial court merely acted on
or determining whether the bank may be an incident and has not as yet inquired, as
rehabilitated or should be liquidated and mandated by Section 29 of the Central
appointing a liquidator for that purpose, Bank Act, into the merits of the claim that
are under the law "final and executory" the Monetary Board's action is plainly
and may be set aside only on one ground, arbitrary and made in bad faith. It has not
that is "if there is convincing proof that appreciated certain facts which would
the action is plainly arbitrary and made in render the remedy of liquidation proper
bad faith" (Salud vs. Central Bank, supra). and rehabilitation improper, involving as it
There is no dispute that under the above- does an examination of the probative
quoted Section 29 of the Central Bank Act, value of the evidence presented by the
the Regional Trial Court has jurisdiction to parties properly belonging to the trial
adjudicate the question of whether or not court and not properly cognizable on
the action of the Monetary Board directing appeal (Central Bank vs. Court of
the dissolution of the subject Rural Bank is Appeals, supra, p. 156).
attended by arbitrariness and bad faith. Still further, without a hearing held for
Such position has been sustained by this both parties to substantiate their
Court in Salud vs. Central Bank of the allegations in their respective pleadings,
Philippines (supra). there is lacking that "convincing proof"
In the same case, the Court ruled further prerequisite to justify the temporary
that a banking institution's claim that a restraining order (mandatory injunction)
resolution of the Monetary Board under issued by the trial court in its Order of
Section 29 of the Central Bank Act should March 9, 1982.
be set aside as plainly arbitrary and made PREMISES CONSIDERED, the decision of
in bad faith, may be asserted as an the Court of Appeals is MODIFIED; We
affirmative defense (Sections 1 and 4[b], hereby order the remand of this case to
Rule 6, Rules of Court) or a counterclaim the Regional Trial Court for further
(Section 6, Rule 6; Section 2, Rule 72 of proceedings, but We LIFT the temporary
the Rules of Court) in the proceedings for restraining order issued by the trial court
assistance in liquidation or as a cause of in its Order dated March 9, 1982.
action in a separate and distinct action SO ORDERED.
G.R. No. 76118 March 30, 1993 the Philippines, placing it under that the action was plainly
THE CENTRAL BANK OF THE receivership, and appointing Ramon V. arbitrary and made in bad faith, which are
PHILIPPINES and RAMON V. Tiaoqui as receiver. Tiaoqui assumed the only grounds for the annulment of
TIAOQUI, petitioners, office on 3 June 1985.4 Monetary Board resolutions placing a bank
vs. On 11 June 1985, TSB filed a complaint under conservatorship, and that TSB was
COURT OF APPEALS and TRIUMPH with the Regional Trial Court of Quezon without legal capacity to sue except
SAVINGS BANK, respondents. City, docketed as Civil Case No. Q-45139, through its receiver.7
Sycip, Salazar, Hernandez & Gatmaitan against Central Bank and Ramon V. On 9 September 1985, TSB filed an urgent
for petitioners. Tiaoqui to annul MB Resolution No. 596, motion in the RTC to direct receiver
Quisumbing, Torres & Evangelista for with prayer for injunction, challenging in Ramon V. Tiaoqui to restore TSB to its
Triumph Savings Bank. the process the constitutionality of Sec. 29 private management. On 11 November
of R.A. 269, otherwise known as "The 1985, the RTC in separate orders denied
BELLOSILLO, J.: Central Bank Act," as amended, insofar as petitioners' motion to dismiss and ordered
May a Monetary Board resolution placing a it authorizes the Central Bank to take over receiver Tiaoqui to restore the
private bank under receivership be a banking institution even if it is not management of TSB to its elected board
annulled on the ground of lack of prior charged with violation of any law or of directors and officers, subject to CB
notice and hearing? regulation, much less found guilty comptrollership.
This petition seeks review of the decision thereof.5 Since the orders of the trial court
of the Court of Appeals in CA G.R. S.P. On 1 July 1985, the trial court temporarily rendered moot the petition
No. 07867 entitled "The Central Bank of restrained petitioners from implementing for certiorari then pending before this
the Philippines and Ramon V. Tiaoqui vs. MB Resolution No. 596 "until further Court, Central Bank and Tiaoqui moved on
Hon. Jose C. de Guzman and Triumph orders", thus prompting them to move for 2 December 1985 for the dismissal of G.R.
Savings Bank," promulgated 26 the quashal of the restraining order (TRO) No. 71465 which We granted on 18
September 1986, which affirmed the twin on the ground that it did not comply with December 1985.8
orders of the Regional Trial Court of said Sec. 29, i.e., that TSB failed to show Instead of proceeding to trial, petitioners
Quezon City issued 11 November convincing proof of arbitrariness and bad elevated the twin orders of the RTC to the
19851 denying herein petitioners' motion faith on the part of petitioners;' and, that Court of Appeals on a petition
to dismiss Civil Case No. Q-45139, and TSB failed to post the requisite bond in for certiorari and prohibition under Rule
directing petitioner Ramon V. Tiaoqui to favor of Central Bank. 65.9 On 26 September 1986, the appellate
restore the private management of On 19 July 1985, acting on the motion to court, upheld the orders of the trial court
Triumph Savings Bank (TSB) to its elected quash the restraining order, the trial court thus —
board of directors and officers, subject to granted the relief sought and denied the Petitioners' motion to dismiss was
Central Bank comptrollership.2 application of TSB for injunction. premised on two grounds, namely, that
The antecedent facts: Based on Thereafter, Triumph Savings Bank filed the complaint failed to state a cause of
examination reports submitted by the with Us a petition for certiorari under Rule action and that the Triumph Savings Bank
Supervision and Examination Sector 65 of the Rules of Court6 dated 25 July was without capacity to sue except
(SES), Department II, of the Central Bank 1985 seeking to enjoin the continued through its appointed receiver.
(CB) "that the financial condition of TSB is implementation of the questioned MB Concerning the first ground, petitioners
one of insolvency and its continuance in resolution. themselves admit that the Monetary Board
business would involve probable loss to its Meanwhile, on 9 August 1985; Central resolution placing the Triumph Savings
depositors and creditors,"3 the Monetary Bank and Ramon Tiaoqui filed a motion to Bank under the receivership of the officials
Board (MB) issued on 31 May 1985 dismiss the complaint before the RTC for of the Central Bank was done without
Resolution No. 596 ordering the closure of failure to state a cause of action, i.e., it prior hearing, that is, without first hearing
TSB, forbidding it from doing business in did not allege ultimate facts showing the side of the bank. They further admit
that said resolution can be the subject of arbitrary in its issuance, said action only notice and hearing be afforded to all
judicial review and may be set aside being in line and congruent to the action parties in administrative proceedings.
should it be found that the same was of the Supreme Court in the Banco Filipino Since MB Resolution No. 596 was adopted
issued with arbitrariness and in bad faith. Case (G.R. No. 70054) where without TSB being previously notified and
The charge of lack of due process in the management of the bank was restored to heard, according to respondents, the
complaint may be taken as constitutive of its duly elected directors and officers, but same is void for want of due process;
allegations of arbitrariness and bad faith. subject to the Central Bank consequently, the bank's management
This is not of course to be taken as comptrollership.10 should be restored to its board of directors
meaning that there must be previous On 15 October 1986, Central Bank and its and officers.13
hearing before the Monetary Board may appointed receiver, Ramon V. Tiaoqui, Petitioners claim that it is the essence of
exercise its powers under Section 29 of its filed this petition under Rule 45 of the Sec. 29 of R.A. 265 that prior notice and
Charter. Rather, judicial review of such Rules of Court praying that the decision of hearing in cases involving bank closures
action not being foreclosed, it would be the Court of Appeals in CA-G.R. SP No. should not be required since in all
best should private respondent be given 07867 be set aside, and that the civil case probability a hearing would not only cause
the chance to show and prove pending before the RTC of Quezon City, unnecessary delay but also provide bank
arbitrariness and bad faith in the issuance Civil Case No. "insiders" and stockholders the
of the questioned resolution, especially so Q-45139, be dismissed. Petitioners allege opportunity to further dissipate the bank's
in the light of the statement of private that the Court of Appeals erred — resources, create liabilities for the bank up
respondent that neither the bank itself nor (1) in affirming that an insolvent bank to the insured amount of P40,000.00, and
its officials were even informed of any that had been summarily closed by the even destroy evidence of fraud or
charge of violating banking laws. Monetary Board should be restored to its irregularity in the bank's operations to the
In regard to lack of capacity to sue on the private management supposedly because prejudice of its depositors and
part of Triumph Savings Bank, we view such summary closure was "arbitrary and creditors. 14 Petitioners further argue that
such argument as being specious, for if in bad faith" and a denial of "due the legislative intent of Sec. 29 is to
we get the drift of petitioners' argument, process"; repose in the Monetary Board exclusive
they mean to convey the impression that (2) in holding that the "charge of lack of power to determine the existence of
only the CB appointed receiver himself due process" for "want of prior hearing" in statutory grounds for the closure and
may question the CB resolution appointing a complaint to annul a Monetary Board liquidation of banks, having the required
him as such. This may be asking for the receivership resolution under Sec. 29 of expertise and specialized competence to
impossible, for it cannot be expected that R.A. 265 "may be taken as . . allegations do so.
the master, the CB, will allow the receiver of arbitrariness and bad faith"; and The first issue raised before Us is whether
it has appointed to question that very (3) in holding that the owners and former absence of prior notice and hearing may
appointment. Should the argument of officers of an insolvent bank may still act be considered acts of arbitrariness and
petitioners be given circulation, then or sue in the name and corporate capacity bad faith sufficient to annul a Monetary
judicial review of actions of the CB would of such bank, even after it had been Board resolution enjoining a bank from
be effectively checked and foreclosed to ordered closed and placed under doing business and placing it under
the very bank officials who may feel, as in receivership.11 receivership. Otherwise stated, is absence
the case at bar, that the CB action ousting The respondents, on the other hand, of prior notice and hearing constitutive of
them from the bank deserves to be set allege inter alia that in the Banco acts of arbitrariness and bad faith?
aside. Filipino case,12 We held that CB violated Under Sec. 29 of R.A. 265,15 the Central
xxx xxx xxx the rule on administrative due process laid Bank, through the Monetary Board, is
On the questioned restoration order, this down in Ang Tibay vs. CIR (69 Phil. 635) vested with exclusive authority to assess,
Court must say that it finds nothing and Eastern Telecom Corp. vs. Dans, Jr. evaluate and determine the condition of
whimsical, despotic, capricious, or (137 SCRA 628) which requires that prior any bank, and finding such condition to be
one of insolvency, or that its continuance Board can implement its resolution closing (9 CJS 32). Banks are affected with public
in business would involve probable loss to a bank, since its action is subject to interest because they receive funds from
its depositors or creditors, forbid the bank judicial scrutiny as provided by law. the general public in the form of deposits.
or non-bank financial institution to do It may be emphasized that Sec. 29 does Due to the nature of their transactions
business in the Philippines; and shall not altogether divest a bank or a non- and functions, a fiduciary relationship is
designate an official of the CB or other bank financial institution placed under created between the banking institutions
competent person as receiver to receivership of the opportunity to be and their depositors. Therefore, banks are
immediately take charge of its assets and heard and present evidence on under the obligation to treat with
liabilities. The fourth paragraph,16 which arbitrariness and bad faith because within meticulous care and utmost fidelity the
was then in effect at the time the action ten (10) days from the date the receiver accounts of those who have reposed their
was commenced, allows the filing of a takes charge of the assets of the bank, trust and confidence in them (Simex
case to set aside the actions of the resort to judicial review may be had by International [Manila], Inc., v. Court of
Monetary Board which are tainted with filing an appropriate pleading with the Appeals, 183 SCRA 360 [1990]).
arbitrariness and bad faith. court. Respondent TSB did in fact avail of It is then the Government's responsibility
Contrary to the notion of private this remedy by filing a complaint with the to see to it that the financial interests of
respondent, Sec. 29 does not contemplate RTC of Quezon City on the 8th day those who deal with the banks and
prior notice and hearing before a bank following the takeover by the receiver of banking institutions, as depositors or
may be directed to stop operations and the bank's assets on 3 June 1985. otherwise, are protected. In this country,
placed under receivership. When par. 4 This "close now and hear later" scheme is that task is delegated to the Central Bank
(now par. 5, as amended by E.O. 289) grounded on practical and legal which, pursuant to its Charter (R.A. 265,
provides for the filing of a case within ten considerations to prevent unwarranted as amended), is authorized to administer
(10) days after the receiver takes charge dissipation of the bank's assets and as a the monetary, banking and credit system
of the assets of the bank, it is valid exercise of police power to protect of the Philippines. Under both the 1973
unmistakable that the assailed actions the depositors, creditors, stockholders and and 1987 Constitutions, the Central Bank
should precede the filing of the case. the general public. is tasked with providing policy direction in
Plainly, the legislature could not have In Rural Bank of Buhi, Inc. v. Court of the areas of money, banking and credit;
intended to authorize "no prior notice and Appeals,19 We stated that — corollarily, it shall have supervision over
hearing" in the closure of the bank and at . . . due process does not necessarily the operations of banks (Sec. 14, Art. XV,
the same time allow a suit to annul it on require a prior hearing; a hearing or an 1973 Constitution, and Sec. 20, Art. XII,
the basis of absence thereof. opportunity to be heard may 1987 Constitution). Under its charter, the
In the early case of Rural Bank of Lucena, be subsequent to the closure. One can CB is further authorized to take the
Inc. v. Arca [1965],17 We held that a just imagine the dire consequences of a necessary steps against any banking
previous hearing is nowhere required in prior hearing: bank runs would be the institution if its continued operation would
Sec. 29 nor does the constitutional order of the day, resulting in panic and cause prejudice to its depositors, creditors
requirement of due process demand that hysteria. In the process, fortunes may be and the general public as well. This power
the correctness of the Monetary Board's wiped out and disillusionment will run the has been expressly recognized by this
resolution to stop operation and proceed gamut of the entire banking community. Court. In Philippine Veterans Bank
to liquidation be first adjudged before We stressed in Central Bank of the Employees Union-NUBE v. Philippine
making the resolution effective. It is Philippines v. Court of Appeals20 that — Veterans Banks (189 SCRA 14 [1990],
enough that a subsequent judicial review . . . the banking business is properly this Court held that:
be provided. subject to reasonable regulation under the . . . [u]nless adequate and determined
Even in Banco Filipino, 18 We reiterated police power of the state because of its efforts are taken by the government
that Sec. 29 of R.A. 265 does not require nature and relation to the fiscal affairs of against distressed and mismanaged
a previous hearing before the Monetary the people and the revenues of the state banks, public faith in the banking system
is certain to deteriorate to the prejudice of which are not attendant in the present Once again We refer to Rural Bank of
the national economy itself, not to case. We ruled in Banco Filipino that the Buhi, Inc. v. Court of Appeals,21 and
mention the losses suffered by the bank closure of the bank was arbitrary and reiterate Our pronouncement therein that
depositors, creditors, and stockholders, attendant with grave abuse of discretion, —
who all deserve the protection of the not because of the absence of prior notice . . . the law is explicit as to the conditions
government. The government cannot and hearing, but that the Monetary Board prerequisite to the action of the Monetary
simply cross its arms while the assets of a had no sufficient basis to arrive at a sound Board to forbid the institution to do
bank are being depleted through conclusion of insolvency to justify the business in the Philippines and to appoint
mismanagement or irregularities. It is the closure. In other words, the arbitrariness, a receiver to immediately take charge of
duty of the Central Bank in such an event bad faith and abuse of discretion were the bank's assets and liabilities. They are:
to step in and salvage the remaining determined only after the bank was placed (a) an examination made by the
resources of the bank so that they may under conservatorship and evidence examining department of the Central
not continue to be dissipated or plundered thereon was received by the trial court. As Bank; (b) report by said department to
by those entrusted with their this Court found in that case, the the Monetary Board; and (c) prima
management. Valenzuela, Aurellano and Tiaoqui Reports facie showing that its continuance in
Section 29 of R.A. 265 should be viewed contained unfounded assumptions and business would involve probable loss to its
in this light; otherwise, We would be deductions which did not reflect the true depositors or creditors.
subscribing to a situation where the financial condition of the bank. For In sum, appeal to procedural due process
procedural rights invoked by private instance, the subtraction of an uncertain cannot just outweigh the evil sought to be
respondent would take precedence over amount as valuation reserve from the prevented; hence, We rule that Sec. 29 of
the substantive interests of depositors, assets of the bank would merely result in R.A. 265 is a sound legislation
creditors and stockholders over the assets its net worth or the unimpaired capital promulgated in accordance with the
of the bank. and surplus; it did not reflect the total Constitution in the exercise of police
Admittedly, the mere filing of a case for financial condition of Banco Filipino. power of the state. Consequently, the
receivership by the Central Bank can Furthermore, the same reports showed absence of notice and hearing is not a
trigger a bank run and drain its assets in that the total assets of Banco Filipino far valid ground to annul a Monetary Board
days or even hours leading to insolvency exceeded its total liabilities. Consequently, resolution placing a bank under
even if the bank be actually solvent. The on the basis thereof, the Monetary Board receivership. The absence of prior notice
procedure prescribed in Sec. 29 is truly had no valid reason to liquidate the bank; and hearing cannot be deemed acts of
designed to protect the interest of all perhaps it could have merely ordered its arbitrariness and bad faith. Thus, an MB
concerned, i.e., the depositors, creditors reorganization or rehabilitation, if need resolution placing a bank under
and stockholders, the bank itself, and the be. Clearly, there was in that case a receivership, or conservatorship for that
general public, and the summary closure manifest arbitrariness, abuse of discretion matter, may only be annulled after a
pales in comparison to the protection and bad faith in the closure of Banco determination has been made by the trial
afforded public interest. At any rate, the Filipino by the Monetary Board. But, this is court that its issuance was tainted with
bank is given full opportunity to not the case before Us. For here, what is arbitrariness and bad faith. Until such
prove arbitrariness and bad faith in being raised as arbitrary by private determination is made, the
placing the bank under receivership, in respondent is the denial of prior notice status quo shall be maintained, i.e., the
which event, the resolution may be and hearing by the Monetary Board, a bank shall continue to be under
properly nullified and the receivership matter long settled in this jurisdiction, and receivership.
lifted as the trial court may determine. not the arbitrariness which the conclusions As regards the second ground, to rule that
The heavy reliance of respondents on of the Supervision and Examination Sector only the receiver may bring suit in behalf
the Banco Filipino case is misplaced in (SES), Department II, of the Central Bank of the bank is, to echo the respondent
view of factual circumstances therein were reached. appellate court, "asking for the
impossible, for it cannot be expected that . 289, any party in interest could institute
the master, the CB, will allow the receiver court proceedings to question a Monetary
it has appointed to question that very Board resolution placing a bank under
appointment." Consequently, only receivership. Consequently, since the
stockholders of a bank could file an action instant complaint was filed by parties
for annulment of a Monetary Board representing themselves to be officers of
resolution placing the bank under respondent Bank (Officer-in-Charge and
receivership and prohibiting it from Vice President), the case before the trial
continuing operations.22 In Central Bank v. court should now take its natural course.
Court of Appeals, 23 We explained the However, after the effectivity of E.O. 289,
purpose of the law — the procedure stated therein should be
. . . in requiring that only the stockholders followed and observed.
of record representing the majority of the PREMISES considered, the Decision of the
capital stock may bring the action to set Court of Appeals in CA-G.R. SP No. 07867
aside a resolution to place a bank under is AFFIRMED, except insofar as it upholds
conservatorship is to ensure that it be not the Order of the trial court of 11
frustrated or defeated by the incumbent November 1985 directing petitioner
Board of Directors or officers who may RAMON V. TIAOQUI to restore the
immediately resort to court action to management of TRIUMPH SAVINGS BANK
prevent its implementation or to its elected Board of Directors and
enforcement. It is presumed that such a Officers, which is hereby SET ASIDE.
resolution is directed principally against Let this case be remanded to the Regional
acts of said Directors and officers which Trial Court of Quezon City for further
place the bank in a state of continuing proceedings to determine whether the
inability to maintain a condition of liquidity issuance of Resolution No. 596 of the
adequate to protect the interest of Monetary Board was tainted with
depositors and creditors. Indirectly, it is arbitrariness and bad faith and to decide
likewise intended to protect and safeguard the case accordingly.
the rights and interests of the SO ORDERED.
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
G.R. No. 150886 February 16, due in the ordinary course of business; (b) clearing arrangement of RBSM to protect
2007 cannot continue in business without the interests of RBSM’s depositors and
RURAL BANK OF SAN MIGUEL, INC. involving probable losses to its depositors creditors.
and HILARIO P. SORIANO, in his and creditors; that the management of After a year, or on November 29, 1999,
capacity as majority stockholder in the bank had been accordingly informed the LBP informed the BSP of the
the Rural Bankof San Miguel, of the need to infuse additional capital to termination of the clearing facility of RBSM
Inc., Petitioners, place the bank in a solvent financial to take effect on December 29, 1999, in
vs. condition and was given adequate time view of the clearing problems of RBSM.
MONETARY BOARD, BANGKO within which to make the required infusion On December 28, 1999, the MB approved
SENTRAL NG PILIPINAS and and that no infusion of adequate fresh the release of ₱26.189 [million] which is
PHILIPPINE DEPOSIT INSURANCE capital was made, the Board decided as the last tranche of the ₱375 million
CORPORATION, Respondents. follows: emergency loan for the sole purpose of
DECISION 1. To prohibit the bank from doing servicing and meeting the withdrawals of
CORONA, J.: business in the Philippines and to place its its depositors. Of the ₱26.180 million, xxx
This is a petition for review on assets and affairs under receivership in ₱12.6 million xxx was not used to service
certiorari1 of a decision2 and resolution3 of accordance with Section 30 of [RA 7653]; withdrawals [and] remains unaccounted
the Court of Appeals (CA) dated March 28, 2. To designate the [PDIC] as receiver of for as admitted by [RBSM’s Treasury
2000 and November 13, 2001, the bank; Officer and Officer-in-Charge of Treasury].
respectively, in CA-G.R. SP No. 57112. xxx xxx xxx6 Instead of servicing withdrawals of
Petitioner Rural Bank of San Miguel, Inc. On January 31, 2000, petitioners filed a depositors, RBSM paid Forcecollect
(RBSM) was a domestic corporation petition for certiorari and prohibition in the Professional Solution, Inc. and Surecollect
engaged in banking. It started operations Regional Trial Court (RTC) of Malolos, Professional, Inc., entities which are
in 1962 and by year 2000 had 15 Branch 22 to nullify and set aside owned and controlled by Hilario P. Soriano
branches in Bulacan.4 Petitioner Hilario P. Resolution No. 105.7 However, on and other RBSM officers.
Soriano claims to be the majority February 7, 2000, petitioners filed a notice On January 4, 2000, RBSM declared a
stockholder of its outstanding shares of of withdrawal in the RTC and, on the same bank holiday. RBSM and all of its 15
stock.5 day, filed a special civil action for branches were closed from doing
On January 21, 2000, respondent certiorari and prohibition in the CA. On business.
Monetary Board (MB), the governing February 8, 2000, the RTC dismissed the Alarmed and disturbed by the unilateral
board of respondent Bangko Sentral ng case pursuant to Section 1, Rule 17 of the declaration of bank holiday, [BSP] wanted
Pilipinas (BSP), issued Resolution No. 105 Rules of Court.8 to examine the books and records of
prohibiting RBSM from doing business in The CA’s findings of facts were as follows. RBSM but encountered problems.
the Philippines, placing it under To assist its impaired liquidity and Meanwhile, on November 10, 1999,
receivership and designating respondent operations, the RBSM was granted RBSM’s designated comptroller, Ms.
Philippine Deposit Insurance Corporation emergency loans on different occasions in Zenaida Cabais of the BSP, submitted to
(PDIC) as receiver: the aggregate amount of ₱375 [million]. the Department of Rural Banks, BSP, a
On the basis of the As early as November 18, 1998, Land Comptrollership Report on her findings on
comptrollership/monitoring report as of Bank of the Philippines (LBP) advised the financial condition and operations of
October 31, 1999 as reported by Mr. RBSM that it will terminate the clearing of the bank as of October 31, 1999. Another
Wilfredo B. Domo-ong, Director, RBSM’s checks in view of the latter’s set of findings was submitted by said
Department of Rural Banks, in his frequent clearing losses and continuing comptroller [and] this second report
memorandum dated January 20, 2000, failure to replenish its Special Clearing reflected the financial status of RBSM as
which report showed that [RBSM] (a) is Demand Deposit with LBP. The BSP of December 31, 1999.
unable to pay its liabilities as they become interceded with LBP not to terminate the
The findings of the comptroller on the Rural Banks Supervision and Examination essentially boils down to one core issue:
financial state of RBSM as of October 31, Sector, issued Resolution No. 105 on whether Section 30 of RA 7653 (also
1999 in comparison with the financial January 21, 2000.11 Thereafter, PDIC known as the New Central Bank Act) and
condition as of December 31, 1999 is implemented the closure order and took applicable jurisprudence require a current
summed up pertinently as follows: over the management of RBSM’s assets and complete examination of the bank
FINANCIAL CONDITION OF RBSM and affairs. before it can be closed and placed under
In their petition12 before the CA, receivership.
As of Oct. As of Dec.
petitioners claimed that respondents MB Section 30 of RA 7653 provides:
31, 1999 31, 1999
and BSP committed grave abuse of SECTION 30. Proceedings in Receivership
Total ₱1,076,863 1,009,898, discretion in issuing Resolution No. 105. and Liquidation. — Whenever, upon
obligat ,000.00 000.00 The petition was dismissed by the CA on report of the head of the supervising
ions/ March 28, 2000. It held, among others, or examining department, the
Liabiliti that the decision of the MB to issue Monetary Board finds that a bank or
es Resolution No. 105 was based on the quasi-bank:
findings and recommendations of the (a) is unable to pay its liabilities as they
Realiza Department of Rural Banks Supervision become due in the ordinary course of
898,588,00 796,930,0
ble and Examination Sector, the comptroller business: Provided, That this shall not
0.00 00.00
Assets reports as of October 31, 1999 and include inability to pay caused by
December 31, 1999 and the declaration of extraordinary demands induced by
178,275,00 212,968,0 a bank holiday. Such could be considered financial panic in the banking community;
Deficit
0.00 00.00 as substantial evidence.13 (b) has insufficient realizable assets, as
Cash Pertinently, on June 9, 2000, on the basis determined by the [BSP] to meet its
101,441.54 8,266,450. of reports prepared by PDIC stating that liabilities; or
on
7.00 00 RBSM could not resume business with (c) cannot continue in business without
Hand
sufficient assurance of protecting the involving probable losses to its depositors
Required Capital Infusion interest of its depositors, creditors and the or creditors; or
₱252,120,000.00 general public, the MB passed Resolution (d) has willfully violated a cease and
Capital Infusion ₱5,000,000.00 No. 966 directing PDIC to proceed with desist order under Section 37 that has
(On Dec. 20, 1999) the liquidation of RBSM under Section 30 become final, involving acts or
Actual Breakdown of Total Obligations: of RA 7653.14 transactions which amount to fraud or a
1) Deposits of 20,000 depositors – Hence this petition. dissipation of the assets of the institution;
₱578,201,000.00 It is well-settled that the closure of a bank in which cases, the Monetary Board
2) Borrowings from BSP – may be considered as an exercise of police may summarily and without need for
₱320,907,000.00 power.15 The action of the MB on this prior hearing forbid the institution
3) Unremitted withholding and gross matter is final and executory.16 Such from doing business in the Philippines
receipt taxes – ₱57,403,000.00.9 exercise may nonetheless be subject to and designate the Philippine Deposit
Based on these comptrollership reports, judicial inquiry and can be set aside if Insurance Corporation as receiver of
the director of the Department of Rural found to be in excess of jurisdiction or the banking institution.
Banks Supervision and Examination with such grave abuse of discretion as to xxx xxx xxx
Sector, Wilfredo B. Domo-ong, made a amount to lack or excess of jurisdiction.17 The actions of the Monetary Board taken
report to the MB dated January 20, Petitioners argue that Resolution No. 105 under this section or under Section 29 of
2000.10 The MB, after evaluating and was bereft of any basis considering that this Act shall be final and executory, and
deliberating on the findings and no complete examination had been may not be restrained or set aside by the
recommendation of the Department of conducted before it was issued. This case court except on petition for certiorari on
the ground that the action taken was in report on the examination of the bank narration of facts for informative
excess of jurisdiction or with such grave which, under Section 28, must be made to purposes.21
abuse of discretion as to amount to lack or the MB after the supervising or examining Petitioners’ contention has no
excess of jurisdiction. The petition for head conducts an examination mandated merit. Banco Filipino and other cases
certiorari may only be filed by the by Sections 25 and 28.18 They cite Banco petitioners cited22 were decided using
stockholders of record representing the Filipino Savings & Mortgage Bank v. Section 29 of the old law (RA 265):
majority of the capital stock within ten Monetary Board, Central Bank of the SECTION 29. Proceedings upon
(10) days from receipt by the board of Philippines19 wherein the Court ruled: insolvency. — Whenever, upon
directors of the institution of the order There is no question that under Section 29 examination by the head of the
directing receivership, liquidation or of the Central Bank Act, the following are appropriate supervising or examining
conservatorship. (Emphasis supplied) the mandatory requirements to be department or his examiners or
xxx xxx xxx complied with before a bank found to be agents into the condition of any bank
Petitioners contend that there must be a insolvent is ordered closed and forbidden or non-bank financial intermediary
current, thorough and complete to do business in the Philippines: Firstly, performing quasi-banking functions, it
examination before a bank can be closed an examination shall be conducted by shall be disclosed that the condition of the
under Section 30 of RA 7653. They argue the head of the appropriate same is one of insolvency, or that its
that this section should be harmonized supervising or examining department continuance in business would involve
with Sections 25 and 28 of the same law: or his examiners or agents into the probable loss to its depositors or creditors,
SECTION 25. Supervision and condition of the bank; secondly, it shall it shall be the duty of the department
Examination. — The [BSP] shall have be disclosed in the examination that the head concerned forthwith, in writing, to
supervision over, and conduct periodic condition of the bank is one of insolvency, inform the Monetary Board of the facts.
or special examinations of, banking or that its continuance in business would The Board may, upon finding the
institutions and quasi-banks, including involve probable loss to its depositors or statements of the department head to be
their subsidiaries and affiliates engaged in creditors; thirdly, the department head true, forbid the institution to do business
allied activities. concerned shall inform the Monetary in the Philippines and designate an official
xxx xxx xxx Board in writing, of the facts; and lastly, of the Central Bank or a person of
SECTION 28. Examination and Fees. the Monetary Board shall find the recognized competence in banking or
— The supervising and examining statements of the department head to be finance, as receiver to immediately take
department head, personally or by true.20 (Emphasis supplied) charge of its assets and liabilities, as
deputy, shall examine the books of every Petitioners assert that an examination is expeditiously as possible collect and
banking institution once in every twelve necessary and not a mere report, gather all the assets and administer the
(12) months, and at such other time as otherwise the decision to close a bank same for the benefits of its creditors, and
the Monetary Board by an affirmative vote would be arbitrary. represent the bank personally or through
of five (5) members may deem Respondents counter that RA 7653 merely counsel as he may retain in all actions or
expedient and to make a report on the requires a report of the head of the proceedings for or against the institution,
same to the Monetary Board: Provided supervising or examining department. exercising all the powers necessary for
that there shall be an interval of at least They maintain that the term "report" these purposes including, but not limited
twelve (12) months between annual under Section 30 and the word to, bringing and foreclosing mortgages in
examinations. (Emphasis supplied) "examination" used in Section 29 of the the name of the bank or non-bank
xxx xxx xxx old law are not synonymous. financial intermediary performing quasi-
According to the petitioners, it is clear "Examination" connotes in-depth analysis, banking functions. (Emphasis supplied)
from these provisions that the "report of evaluation, inquiry or investigation while xxx xxx xxx
the supervising or examining department" "report" connotes a simple disclosure or Thus in Banco Filipino, we ruled that an
required under Section 30 refers to the "examination [conducted] by the head of
the appropriate supervising or examining This Court cannot look for or impose Banks Supervision and Examination Sector
department or his examiners or agents another meaning on the term "report" or had been reached in the report which
into the condition of the bank"23 is to construe it as synonymous with became the basis of Resolution No.
necessary before the MB can order its "examination." From the words used in [Link]
closure. Section 30, it is clear that RA 7653 no The absence of an examination before the
However, RA 265, including Section 29 longer requires that an examination be closure of RBSM did not mean that there
thereof, was expressly repealed by RA made before the MB can issue a closure was no basis for the closure order.
7653 which took effect in 1993. Resolution order. We cannot make it a requirement in Needless to say, the decision of the MB
No. 105 was issued on January 21, 2000. the absence of legal basis. and BSP, like any other administrative
Hence, petitioners’ reliance on Banco Indeed, the court may consider the spirit body, must have something to support
Filipino which was decided under RA 265 and reason of the statute, where a literal itself and its findings of fact must be
was misplaced. meaning would lead to absurdity, supported by substantial evidence. But it
In RA 7653, only a "report of the head of contradiction, injustice, or would defeat is clear under RA 7653 that the basis need
the supervising or examining department" the clear purpose of the not arise from an examination as required
is necessary. It is an established rule in lawmakers.28 However, these problems in the old law.
statutory construction that where the are not present here. Using the literal We thus rule that the MB had sufficient
words of a statute are clear, plain and free meaning of "report" does not lead to basis to arrive at a sound conclusion that
from ambiguity, it must be given its literal absurdity, contradiction or injustice. there were grounds that would justify
meaning and applied without attempted Neither does it defeat the intent of the RBSM’s closure. It relied on the report of
interpretation:24 legislators. The purpose of the law is to Mr. Domo-ong, the head of the
This plain meaning rule or verba make the closure of a bank summary and supervising or examining department,
legis derived from the maxim index animi expeditious in order to protect public with the findings that: (1) RBSM was
sermo est (speech is the index of interest. This is also why prior notice and unable to pay its liabilities as they became
intention) rests on the valid presumption hearing are no longer required before a due in the ordinary course of business and
that the words employed by the bank can be closed.29 (2) that it could not continue in business
legislature in a statute correctly express Laying down the requisites for the closure without incurring probable losses to its
its intention or will and preclude the court of a bank under the law is the prerogative depositors and creditors.30 The report was
from construing it differently. The of the legislature and what its wisdom a 50-page memorandum detailing the
legislature is presumed to know the dictates. The lawmakers could have easily facts supporting those grounds, an
meaning of the words, to have used words retained the word "examination" (and in extensive chronology of events revealing
advisedly, and to have expressed its the process also preserved the the multitude of problems which faced
intent by use of such words as are found jurisprudence attached to it) but they did RBSM and the recommendations based on
in the statute. Verba legis non est not and instead opted to use the word those findings.
recedendum, or from the words of a "report." The insistence on an examination In short, MB and BSP complied with all the
statute there should be no departure.25 is not sanctioned by RA 7653 and we requirements of RA 7653. By relying on a
The word "report" has a definite and would be guilty of judicial legislation were report before placing a bank under
unambiguous meaning which is clearly we to make it a requirement when such is receivership, the MB and BSP did not only
different from "examination." A report, as not supported by the language of the law. follow the letter of the law, they were also
a noun, may be defined as "something What is being raised here as grave abuse faithful to its spirit, which was to act
that gives information" or "a usually of discretion on the part of the expeditiously. Accordingly, the issuance of
detailed account or statement."26 On the respondents was the lack of an Resolution No. 105 was untainted with
other hand, an examination is "a search, examination and not the supposed arbitrariness.
investigation or scrutiny."27 arbitrariness with which the conclusions of
the director of the Department of Rural
Having dispensed with the issue decisive
of this case, it becomes unnecessary to
resolve the other minor issues raised.31
WHEREFORE, the petition is
hereby DENIED. The March 28, 2000
decision and November 13, 2001
resolution of the Court of Appeals in CA-
G.R. SP No. 57112 are AFFIRMED.
Costs against petitioners.
SO ORDERED.
G.R. No. 152551 June 15, 2006 2. A verification of the accounts showed Genbank, reported that the bank was
GENERAL BANK AND TRUST that the overdrawings of Genbank … were experiencing heavy withdrawals and its
COMPANY, Petitioner, due to the all-out financial support it liquidity position had continuously
vs. extended to Filcapital Development deteriorated and will inevitably be needing
CENTRAL BANK OF THE PHILIPPINES Corporation (a related interest of the immediate [CB] support. He urgently
and ARNULFO B. AURELLANO in his Yujuico Family Group and the directors requested that Genbank be allowed to
capacity as Liquidator of General and officers of Genbank) to meet maturing draw cash of P20 million to be spread out
Bank and Trust Company, Respondents. obligations. On December 14, 1976, to its branch offices. Since it was expected
DECISION Filcapital overdraft balance with Genbank that the drawdowns on deposits and
GARCIA, J.: totaled P55.8 million, in violation of deposit substitutes would continue which
Under consideration is this petition for existing CB regulations which was would necessitate further [CB] advances,
review under Rule 45 of the Rules of Court financed by overdrawings of P54.9 million and considering that the collateral
to nullify and set aside the following from CB [Id.]. submitted was insufficient, coupled with
issuances of the Court of Appeals (CA) in 3. The matter of overdraft the need to give a new image to the bank,
CA-G.R. CV No. 39939, to wit: accommodations to Filcapital had been the it was decided that as a condition to
1. Decision dated December 6, subject of several memoranda and letters further [CB] advances, the stockholders of
1999,1 reversing the Decision dated of the Department of Commercial and Genbank owning at least two-thirds (2/3)
December 2, 1992 of the Regional Trial Savings Bank [DCSB] to Genbank, the of the outstanding capital should execute
Court of Manila, Branch 37, in Special same being in violation of Section 23, R.A. irrevocable proxies in favor of Land Bank
Proceedings (SP Proc.) No. 107812 337 … (maximum loan limit); of Section [Id..].
entitled "Petition for Assistance in the 83, R.A. 337, as amended (requiring As a measure calculated to restore the
Liquidation of General Bank & Trust written Board approval); and of liquidity of and confidence in Genbank, Dr.
Company, Central Bank of the Philippines Memorandum To All Banks dated Yujuico … informed the [CB] Governor of
and Arnulfo B. Aurellano, in his capacity November 15, 1976 (prohibiting the agreement of the principal officers and
as Liquidator of General Bank & Trust Temporary Overdrawings) [Id.]. stockholders and the approval by the
Company, Petitioners"; and 4. On December 14, 1976, the [CB] Genbank Board of Directors with respect
2. Resolution dated March 12, required Genbank to stop its unsound to the guidelines under which Land Bank
2002,2 denying petitioner’s motion for banking practice of incurring daily … was invited to participate in the equity
reconsideration. overdrawings. On December 15, 1976, of the bank, some salient points of which
The material facts, as stated in the Genbank returned Filcapital checks were as follows: (a) Land Bank will
appealed CA decision are, as follows: aggregating P28.7 million and sold to the acquire two-thirds interest in the bank;
1. From December 3 to 14, 1976, General [CB] government securities xxx [Id.; tsn, Dec. 7, 1990, pp. 41-42].
Bank and Trust Company (Genbank) aggregating P49 million under a 6. On December 20, 1976, the Monetary
incurred overdrafts in its current account repurchase agreement, in order to cover Board in its Resolution No. 2553 [Exh. H-
with the Central Bank [CB], starting its overdraft with the [CB]. The return of 4] decided to grant Genbank an
from P478,000 on December 3, 1976 and the Filcapital checks to the different emergency loan under Section 90 of the
increasing daily to reach P54.9 million on collecting banks precipitated a run on the Central Bank Charter in an amount not
December 14, 1976. These daily bank starting on December 16, 1976 exceeding P150 million and to ratify the
overdrawings were covered up to the next which necessitated the release by the action taken by the Governor on
banking day by check deposits, thru [CB] Governor of an initial emergency December 20, 1976 in releasing an
"daycall" borrowings, obtained from advance of P16 million [Id.]. emergency advance of P165 million to
various commercial banks (7-page Aide 5. In his letter dated December 17, 1976 Genbank. It also designated Arnulfo B.
Memoire, Exh. H). [Exh. H-1], Dr. Clarencio Yujuico, Aurellano, Assistant to the Governor, to
Chairman of the Board and President of
act as Comptroller [Id., tsn, December 7, Board of Directors that the undertaking to by the Committee to submit formal
1960, pp. 23-24]. collateralize the loans concerned and the written offers to the sellers. Five (5)
7. On December 23, 1976, the President sureties are merely steps to be taken prior written offers were received from the
of Genbank executed a Deed of to the full collateralization of the accounts following:
Assignment [Exh. H-5] of the general concerned, the more important thing a. Philippine Bank of Communications
assets of the Bank in favor of the [CB]. As being the actual collateralization which b. Paramount Finance Corporation
of that date, [CB] emergency advances to must be done immediately [Id., Exh. H-9]. c. Willy Co/Lucio Tan, et al.
Genbank amounted to P116 million … 11. As of year-end 1976, emergency d. Gotianun Group/Family Savings Bank
which were not sufficiently collateralized advances totalled P154.521 million …. In e. Morris Carpo Group
by Genbank [Id.]. view of the continuous drawdowns, [CB] [Id.; p. 4, Exh. E]
8. On December 27, 1976, the [CB] advances reached P170.227 million on 14. At various dates from January 26 to
Governor invited the Board of Directors of January 5, 1977 exceeding the level February 7, 1977, the Committee
Genbank to a meeting … to discuss the of P150 million previously approved. The convoked meetings … with all the
affairs of the Bank with particular Monetary Board in its Resolution No. 90 [interested] groups … primarily to advise
reference to the loans to directors, dated January 7, 1977 [Exh. H-8] … them that the [CB] emergency advances
officers, stockholders and related interests authorized Management to extend must be amply protected and that the
(DOSRI). The Board was informed of the continued support to Genbank to meet sellers’ group must submit the final results
magnitude of DOSRI loans which as of further drawdowns on its deposits and of their negotiations on or before February
that date totalled P172.3 million … or deposit substitutes [Id.]. 10, 1977, the deadline set by the
59.4% thereof was classified as doubtful 12. On January 10, 1977, at a meeting of Governor and agreed to by Dr. Yujuico
and P0.505 million as the Board of Directors …, seven nominees and his colleagues in the old Board of
uncollectible. P158.1 million or 91.7% of of Land Bank were elected members of Genbank [Id.; Tsn., December 7, 1990,
DOSRI accounts was unsecured while only the Board, namely …. The four others … pp. 57-58].
8% was secured [Id.]. came from the old Board. This was done 15. By January 31, 1997, [CB] emergency
9. At the said meeting, the Governor to carry out the understanding that Land advances to Genbank had increased
indicated that Genbank should Bank shall participate in the management …to P272.465 million… [Id.].
immediately take the following of Genbank. xxx (Id., Exh. H-10]. In his report dated February 10, 1977, on
[indispensable] steps: (a) clean [DOSRI] At said meeting, Dr. Yujuico advised that the operations of Genbank for the month
loans … should be collected or the controlling stockholders were of January, 1977, the [CB] Comptroller
collateralized; (b) pending formal negotiating for the sale of their reported that the deposits and deposit
execution of the collateral instruments, stockholdings and requested that he be substitutes decreased by P22.328 million
the borrower must undertake to execute retained as President to give him and P125.128 million, respectively. xxx
the required mortgage and other security personality and leverage during the [Id.; Exh. H-15].
instruments; and (c) before full negotiations, … [Id., Exh. H-10; Exh. H- 16. On February 10, 1977, the deadline
collateralization, the affected director, 11]. set for completion of the negotiations for
officer or stockholder shall assume joint 13. In an office Order No. 12 dated the sale of Genbank shares, the
and several liability with the borrower January 14, 1977 [Exh. H-12], the [CB] representatives of the sellers’ group
(related interest) for the payment of the Governor created a Special Committee … reported (Exh. H-16) that the offer of the
loan or credit accommodation. xxx [Id, to act as observers and advisers in the … Lucio Tan group, Paramount Finance
Exh. H-7], xxx.. negotiations for the proposed purchase of Corporation and PB Communications were
10. Since the compliance with the the outstanding shares of Genbank or all to be presented to the shareholders with
directives in his letter dated December 27, its assets and assumption of all its their recommendations [Id.].
1976 had been incomplete, the [CB] liabilities [tsn, Dec. 7, 1990, pp. 34-36]. 17. The Special Committee submitted its
Governor stressed … to the Genbank All the prospective buyers were requested report on the evaluation of the offers to
buy Genbank shares indicating that the …decided to instruct the Yujuico In a letter dated March 20, 1977 [Exh. H-
Lucio Tan offer was the most negotiators to inform all prospective 28], Paramount advised that
advantageous insofar as the [CB] is sellers and buyers of the additional collateralizing the emergency advances
concerned because it offered the best valuation reserves required to be booked with standby letters credit would be too
collateral for the [CB] advances [Id.]. in view of the pertinence of such heavy a financial burden for the bank to
Acting on said report, the Monetary Board, information to the ongoing negotiations. bear, the hold-out on the concessional
in its Resolution No. 449 dated February The Chairman of the Genbank Board was loan of their foreign partner met with
25, 1977 [Exh. H-17], authorized the duly advised of the said Resolution of the resistance from the investor as being
sellers’ group to discuss further with the Monetary Board in a letter … dated March unusual and onerous on them, and the
Lucio Tan group the price of the shares, 7, 1977 [Exh. H-22]. proxies to be held by Land Bank was
and prescribed the minimum conditions 20. The Lucio Tan group and the sellers’ difficult to explain to prospective
for the approval of any sale of the representatives continued their investors.
controlling shares of Genbank. The negotiations on March 4 to 5, 1977 but The Governor replied on March 22,1977
representatives of the sellers’ group were could not reach an agreement, …. In view [Exh.H-29] advising that it is not the
duly advised of the resolution … [Exh. H- of the non-acceptance by the sellers’ interest of the [CB] to accept a proposal
18]. group of the offer of the Lucio Tan group, which offers a security inferior to that
18. By February 28, 1977, [CB] advances the Governor informed the representatives offered by another interested buyer, ….
to Genbank totaled P300.961 million … of the sellers’ group that they may 23. Central Bank advances as of March
which showed an increase of P28.496 consider the offer of Paramount Finance 22, 1977 totaled P305.918 million … [Id.].
million compared to January 31, 1977 Corporation and at the same time 24. On March 23, 1977, the Governor
[Id.]. conveyed the conditions for [CB] approval together with other [CB] officials and
In the report of the [CB] Comptroller of the sale [Id.]. Genbank directors, had a meeting with
dated March 11, 1977 [Exh. H-19] on the 21. On the matter of collateralization of Messrs. Clarencio Yujuico, [and seven
operations of the bank for February 1977, the [DOSRI] loans …, the Governor on others] …, stockholders of Genbank who
it was reported that the decrease in March 10, 1977 wrote individually nine (9) …represented stockholders owning at least
deposits and deposit substitutes for the members of the Yujuico family calling two-thirds (2/3) of the outstanding
month was P5.124 million and P35.694 attention to his … directive to collateralize shares. They were given copies of the
million, respectively. The loan portfolio of their loans and requested them to give the aide-memoire for the meeting [Exh. H-30]
which 57% was in past due status or in matter their immediate and serious which outlined developments regarding
litigation, was reduced by P19.822 million. attention [Id.; Exh. H-25]. Genbank particularly the [DOSRI] loans,
It was also reported that from December 22. The sellers’ representatives, in a letter the negotiations for the sale of Genbank
31, 1976 to February 28, 1977, the dated March 14, 1977 [Exh. H-26], shares, (the Lucio Tan Group was willing
reduction on [DOSRI] loans … amounted submitted an Agreement to Buy and Sell to comply with all the conditions of the
to P6.918 million only, from P172.354 Genbank shares between them and [CB] for the approval of the sale but could
million to P165.436 million. Of this Paramount Finance Corporation. … The meet the price of the selling group; the
amount P127.494 million or 77% Special Committee reported [Exh. H-27] Paramount Finance Group could not
belonged to the Yujuico group; …. Of the that since it is unlikely that Paramount will comply with all the conditions prescribed
loans of the Yujuico group, P126.608 be able to comply with the [CB] … to secure [CB] advances and the
million or 99.3% was unsecured or requirements and at the same time be in interest of Genbank creditors and
uncollateralized. Furthermore, of the a position to inject fresh funds to make depositors, but this group and the selling
Yujuico loans, 88.4% was in past due the bank viable, the Committee felt that group could agree on the price), and the
status [Id.]. the [CB] should explore alternative valuation reserves and resulting net worth
19. The Monetary Board, in its Resolution courses of action. of the bank after valuation reserve was
No. 502 dated March 4, 1977 [Exh. H-21], less than P20 per share. The stockholders
were advised by the Governor that public 26. On March 26, 1977, a Bid Committee liquidation plan whereby all the assets of
interest required that the [CB] should not met with representatives of the four Genbank should be purchased by the
continuously extend further credit interested groups …, and informed them Lucio Tan Group which should also
assistance to Genbank and that a that the [CB] would accept bids for the assume all the liabilities under certain
rehabilitation program instead be acquisition of all the assets and terms and conditions.
immediately implemented [tsn, Dec. 7, assumption of all the liabilities of 28. In his letters dated March 29, 1977 to
1990, pp. 58-59]. Genbank stockholders Genbank, subject to certain conditions. the Genbank stockholders and Dr. Yujuico
were told to submit before 10:00 a.m., The deadline for submission of sealed bids …, Governor Licaros informed them that
Friday, March 25, 1977, either of the was 7:00 p.m., March 28, 1977 [Exh. E- the Monetary Board had ordered the
following: 2]. liquidation of Genbank [Exhs. I-15 and I-
a) firm commitment to purchase the As of the said deadline, the only bid 15-a].
controlling shares of Genbank by a private received was that of the Lucio Tan group. 29. On May 9,1977, the Liquidator …;
group or to undertake a merger with It advised that it was prepared to acquire Allied Banking Corporation …; and the
another bank, which is willing and capable the assets and assumed all the liabilities individual members of the Lucio Tan –
to comply with all the conditions of the of Genbank subject to the terms and Willy Co group executed a Memorandum
[CB] conveyed previously to conditions enumerated in the letter [Exh. of Agreement [Exh. I-26] in
representatives of the controlling E-2; Exh. E-2-a]. implementation of Monetary Board
stockholders and whose price is 27. Pursuant to the Memorandum of the Resolution No. 677 dated March 27, 1977
acceptable to sellers. Director, [DCSB], dated March 28, 1977 … (sic) [Exh. I-2], whereby the Liquidator
b) a written decision of the stockholders stating that – sold and transferred to Allied Bank all the
owning at least two-thirds (2/3) of the "As of March 24, 1977, the Bank’s liquid assets of Genbank and Allied Bank
outstanding shares to reduce the par assets of P28 million, together with assumed all the liabilities of Genbank,
value and a commitment of the Land Bank collections from its loan portfolio, will not subject to certain terms and conditions,
or a private group to put up the additional be enough to meet expected further among which were:
equity and a commitment to comply with withdrawal of deposits and deposit (a) payment by Allied Bank to the
the conditions prescribed by the [CB]. substitutes of P235.4 million. The Bank’s Liquidator of an initial amount
25. As there was no compliance with operation may be expected to result into of P500,000.00;
either of said requirements, and finding losses of at least P2.9 million per month (b) xxx;
the report of Director [Antonio Castro], and these loans will dissipate the Bank’s (c) payment to the [CB] of its emergency
Department of Commercial and Savings remaining capital accounts of P10.9 advances to Genbank in the amount of
Banks [DCSB] that Genbank million. The Bank therefore may not be P310 million within a period of two (2)
was insolvent within the meaning of permitted to resume business with safety years from date of opening for business of
Section 29 of R.A. 265 (Central Bank Act), to its depositors, creditors, and the Allied Bank, with 12% interest per annum;
as amended, and that Genbank’s general public" (d) no deferment in the payment by Allied
continuance in business would involve and recommending certain actions, the Bank of deposits and deposit substitutes
losses to its depositors and creditors … - Monetary Board adopted Resolution No. in Genbank; and
to be true, the Monetary Board adopted 677 on March 29, 1977 [Exh. I-2] (e) xxx money market placements by the
Resolution No. 675 on March 25, 1977 determining and confirming that Genbank Lucio Tan – Willy Co group in an amount
[Exh. I-1] forbidding Genbank to do was insolvent and could not resume not less than P100 million which
business in the Philippines and designating business with safety to its depositors, placements shall remain with Allied Bank
Arnulfo B. Aurellano as receiver. creditors and general public, and ordering from the opening and commencement of
In a letter dated March 25, 1977, the liquidation of Genbank, the operations until normalization of
Governor Licaros informed the Genbank designation of Arnulfo B. Aurellano as operations as determined by the [CB], so
Board of Directors of such action…. Liquidator and the approval of a that during said period, Allied Bank shall
have fresh funds of at least P200 million payment of [CB] emergency advances on appellees-[intervenors]. However, upon
to meet any withdrawal contingencies. November 28, 1980 [Exh. L], causing the [CB’s] motion for reconsideration, the
30. Acting on the letter dated June 9, discharge and release of the mortgages on Court [CA] reconsidered said decision in
1977 of Lucio Tan, … to Governor Licaros the real and personal properties which its Resolution dated July 19, 1986, and
[Exh. I-4-a], the Monetary Board, in its served as security for the payment of said remanded the case to the court of origin
Resolution No. 1214 dated June 17, 1977 advances [Exhs. L-1, L-2, and L-3]. for the reception of appellants’ evidence.
[Exh. I-4], decided as follows: (Appellants’ Brief, pp. 11-34) (Underlining in the original; Words in
1. To authorize the Allied Banking On April 1, 1977, [CB and Arnulfo B. bracket and underscoring added.)
Corporation (ABC) to increase its paid-up Aurellano, as Genbank Liquadator] On November 5, 1992, the trial court
capital from P100 million to P200 million, initiated Sp. Proc. No. 107812 before the rendered a decision,3 the dispositive
…; then Court of First Instance (CFI) of portion of which reads:
2. To approve the deletion of Paragraph H, Manila, Branch IV, pursuant to Section 29, WHEREFORE, judgment is hereby
Page 5 of the [MOA] dated May 9, 1977 RA 265, as amended. rendered against the Petitioners [CB et
which requires the Lucio Tan and Willy Co On May 5, 1982, appellees Worldwide al.] and in favor of Intervenors as follows:
group to make money market placements Insurance & Surety Company …, Midland First: That the closure of Genbank under
in ABC …; and Insurance Corporation …, and Standard Monetary Board Resolution No. 675,
3. xxx. Insurance Co., Inc. … filed a motion for March 25, 1977 (Petitioners’ Exh. I-1) and
31. Pursuant to the recommendation of intervention in Sp. Proc. No. 107812. Said the adoption of the Lucio Tan Group as
Arnulfo B. Aurellano … the Monetary motion alleged that the closure and the liquidation plan of Genbank under
Board, in its Resolution No. 1245 dated liquidation of [Genbank] … were done Monetary Board Resolution No. 677,
July 1, 1977 [Exh. I-5], decided to amend arbitrarily and in bad faith. On May 7, March 29, 1977 (Intervenor’s Exh. 1-2)
par. F, page 5 of the [MOA]dated May 9, 1982, the court a quo issued an order are hereby annulled and set aside as
1977, so as: approving the intervention. being plainly arbitrary and made in bad
1. To dispense with the requirement that About a couple of years later, appellee faith as provided under Section 29, RA No.
Allied Bank and Lucio Tan group submit a Genbank joined the intervention …. Said 265, as amended.
standby irrevocable letter of credit to intervention was approved by the Court a Second: That Petitioner [CB] is hereby
secure the emergency advances assumed quo in its Order dated March 15, 1984. ordered and directed to restore the license
by Allied Bank, subject to the following Subsequently, [CB et al., as petitioners and authorization of Genbank to operate
conditions: before the CFI), instead of presenting and conduct business as a commercial
xxx xxx xxx evidence to support their petition in Sp. bank and trust corporation and to restore
2. To extend from two (2) years to five Proc. No. 107892, questioned the court a Genbank’s banking network of Head
years the period of payment of the quo’s jurisdiction to determine the validity Office, 23 branches and 1 extension office.
balance of the emergency advances of the liquidation of Genbank before this Third: That Petitioner [CB] is hereby
assumed by Allied Bank, to be paid in Court [CA], by way of a Petition for ordered and directed to pay Intervenor
twenty (20) equal quarterly installments Certiorari and Prohibition with Preliminary Genbank the amount of P103,984,477.55
beginning October 15, 1977, with interest Injunction and Restraining Order docketed representing Genbank’s capital account
at twelve percent (12%) per annum and as CA G.R. SP No. 03180. However, said which was the excess of Genbank’s assets
said balance to be secured by the petition became moot and academic when over this liabilities as shown in the
mortgages mentioned above. the court a quo rendered a Decision dated Consolidated Statement of Condition of
32. Allied Bank was able to comply with all April 24, 1984, a day before it was served Genbank as of March 25, 1977
the conditions laid down in Resolution No. a copy of the [TRO] dated April 24, 1984, (Petitioners’ Exh. I-26-A) plus damages by
1245. It paid to the [CB] P100 million of and when [CB et al.] appealed said way of unrealized earnings at 5% interest
the total emergency advances on July 15, decision to this Court [CA] [which] per annum of said amount
1977 [Exh. K; Exh. P], and effected full disposed of said appeal in favor of
of P103,984,477.55 starting from May 7, MB Resolution No. 677 dated March 29, their total liabilities. As respondent CB
1982 … until fully paid; and 1977, adopting the Lucio Tan Group’s bid argued, the closure of Banco Filipino and
Fourth: That Petitioner [CB] is likewise as liquidation plan of petitioner Genbank, Triumph Savings Bank on January 25,
ordered and directed to pay Intervenor or otherwise committed grave abuse of 1985 and May 31, 1985, respectively,
Genbank costs of the suit in accordance discretion which will justify reversal of the were effected under the aegis of Section
with the Rules of Court. assailed MB resolutions. 29 of RA 265, as amended by PD 1007,
SO ORDERED. At the outset, it bears to stress that the after it was further amended by PD 1937
Therefrom, herein respondents CB and the underlying governing law, Republic Act in June 1984. Under the latter
Liquidator-designate appealed to the CA (RA) 2655 , underwent several amendment, a banking institution is
where their recourse was docketed as CA amendments. Among the amendatory deemed insolvent when " [its] realizable
G.R. CV No. 39939. laws are Presidential Decree (PD) Nos. assets … as determined by the Central
On December 6, 1999, the appellate court 1007 and 1937 which took effect in Bank are insufficient to meet its
rendered judgment setting aside the September 1976 and June 1984, liabilities." Thus, this Court ruled that
decision of the trial court.4 With the denial respectively. there was no valid basis for the closure of
of its motion for reconsideration by the Petitioner Genbank claims that it was not both banks on the ground of insolvency,
same court in its resolution of March 12, insolvent when Resolution No. 675 was the total assets of either bank exceeding
2002, petitioner is now with us via the issued on March 25, 1977, its assets at as it were their respective liabilities.
present recourse, submitting that the CA that time standing at P599,743,639.00, Unlike the cases referred to above,
erred when - while its total liabilities only amounted however, Genbank was ordered closed by
1. It ruled that Petitioner Bank was to P586,640,450.00, thus having surplus the CB on March 25, 1977, when
insolvent thus paving the way for its assets over liabilities in the amount "insolvency" was defined under Section 29
closure and eventual liquidation. of P13,103,189.00. Plodding on, it insists of RA 265, as amended on September 22,
2. It ruled that the property rights of that the definition of insolvency in Section 1976 by PD 1007, where and when the
Petitioner Bank was not trampled upon 29 of RA 265, as amended by PD 1937, insolvency concept carried a slightly
despite the fact that respondent Central should have been made the tipping factor different but contextually significant
Bank maliciously and arbitrarily and in bad for determining on whether or not the connotation. As thus then defined,
faith ordered its closure on March 25, declaration made by respondent CB, insolvency was understood to mean as
1977 and its liquidation and bidding three acting through the Monetary Board, that "the inability of a banking institution to
(3) days later on March 28, 1977 which is petitioner Genbank is insolvent constitutes pay its liabilities as they fall due in the
tantamount to denial of due process and grave abuse of discretion. In support of its ordinary course of business." Respondent
equal protection clause of the contention of not being insolvent during CB found Genbank undoubtedly incapable
Constitution. the period material, petitioner Genbank to generate liquid funds by itself in order
3. It failed to apply Sec. 29 of R.A. 265 cites Central Bank of the Philippines vs. to meet drawdowns on its deposits and
which laid down the procedure to be Court of Appeals6 and Banco Filipino deposit substitutes and to pay for other
followed for insolvency cases of banking Savings & Mortgage Bank vs. The maturing obligations, as well as advances
institutions. Monetary Board7 . from the Central Bank. Respondent CB,
The petition has no merit. Respondent CB, however, retorted that therefore, concluded that Genbank was
The three (3) assigned errors ultimately the above-cited cases do not apply, albeit, insolvent under the obtaining definition of
boil down to the issue of whether or not there, the Court struck down as null and said term, with the CA eventually
respondent CB violated any existing void the closure of what CB then sustaining the posture of respondent CB.
procedural or substantive law when its considered as insolvent banks, referring to After a review of all the arguments of the
Monetary Board (MB) issued Resolution Banco Filipino Savings & Mortgage Bank parties in the light of the laws and
No. 675 dated March 25, 1977 ordering and Triumph Savings Bank, despite their jurisprudence applicable thereto, this
the closure of Genbank, and eventually respective total assets being more than Court finds no reversible error committed
by the Court of Appeals when it sustained convincing proof that the action of the business would involve losses to its
the validity of the MB resolutions resolving Monetary Board is plainly arbitrary and depositors and creditors.
the issue of insolvency against petitioner made in bad faith and the petitioner or Recommendation
Genbank. plaintiff files with the clerk of court or In view of the foregoing, it is
It cannot be overemphasized that judge of the court in which the action is recommended that in accordance with the
Resolution No. 675 prohibiting Genbank to pending a bond executed in favor of the provisions of Sec. 29, R.A. 265, as
do business in the Philippines and Central Bank, in an amount to be fixed by amended, the General Bank and Trust Co.
designating Arnulfo B. Aurellano as the court. xxx.. (Emphasis supplied.) be forbidden to do business in the
receiver was issued in March 1977, when The burden thus rests upon petitioner Philippines considering that it is insolvent
the definition of the term "insolvency" Genbank to prove the mala fides of the and its continued operation would involve
under the last paragraph of Section 29, of Monetary Board in issuing Resolution No. probable loss to its depositors and
RA 265, as amended by PD No. 1007, was 675. The present petition cites no creditors and that a receiver be
as follows: concrete proof to convincingly show that designated to take charge immediately of
Sec. 29. Proceedings upon insolvency. – x the pertinent findings and the Bank’s assets and liabilities.
x x. recommendation of Antonio Castro, then Instead of directly controverting the
xxxxxxxxx Director of CB’s DCSB whence Resolution factual basis of the MB resolutions,
Insolvency, under this Act, shall be No. 675 emanated were factually infirm. petitioner Genbank would simply insist on
understood to mean the inability of a The Castro report stated thus: owning more realizable assets than
banking institution to pay its liabilities as Summary Comments liabilities and ergo essentially solvent per
they fall due in the usual and ordinary 1. As of Feb. 28, 1977, the Bank’s liquid the definition of "insolvency" under the PD
course of business, provided, however, assets amounted to P33.5 million only. On 1937 amendment which, to stress, took
that this shall not include the inability to the other hand, total deposit and deposit effect only in 1984. To a redundant point,
pay of an otherwise non-insolvent bank substitutes which had to be paid the PD 1937 amendment defines
caused by extraordinary demands induced amounted to P269.563 million. Total "insolvency" as follows:
by financial panic commonly evidenced by advances from the CB amounted Insolvency, under this Act shall be
a run on the bank in the banking to P300.961 million, of which P252.365 understood to mean that the realizable
community. (Emphasis supplied.) million (unsecured overdrawing) is assets of a bank or a non-bank financial
And by the terms of the same Section 29 payable on demand. Considering the poor intermediary performing quasi-banking
of RA 265, as amended by PD No. 1007, quality of the Bank’s loan portfolio, the functions as determined by the Central
Resolution No. 675 is deemed final and bank cannot expect to generate enough Bank are insufficient to meet its liabilities.
executory, to wit: funds out of these loans to meet payment Petitioner’s recourse of insisting on the
The provisions of any law to the contrary of said obligations. In view hereof, the meaning of insolvency other than the
notwithstanding, the actions of the bank is insolvent within the meaning of current definition thereof is, at the
Monetary Board under this Section and Sec. 29, R.A. 265, as amended. minimum, a recognition, plain and simple,
the second paragraph of Section 34 of this 2. As of February 28, 1977, the Bank’s that under the applicable definition of the
Act shall be final and executory, and can capital accounts after adjustment for term "insolvency" under the last
be set aside by the court only if there is provision for bad debts and interest on OD paragraph of Section 29, of RA 265, as
convincing proof that the action is plainly and CB and penalties for reserve amended in 1976 by PD No. 1007, the
arbitrary and made in bad faith. No deficiencies amounted to P14.1 million Monetary Board could not have erred in
restraining order or injunction shall be only which amount would be eaten up ruling that petitioner Genbank was indeed
issued by the court enjoining the Central completely within a period of less than insolvent, justifying its closure under the
Bank from implementing its actions under five (5) months considering the average same Section 29, of RA 265, as amended.
this section and the second paragraph of monthly operating loss of P2.868 million. Petitioner Genbank cannot plausibly be
Section 34 of this Act, unless there is In view of this, the Bank’s continuance in allowed to adopt a statutory definition of
"insolvency" which was not set forth in the of its inability to pay its obligations. In to those of the trial court; (6) said
law when Resolution No. 675 was issued. other words, the existence of a bank run findings of fact are conclusions without
The Monetary Board’s action could not is not, without more, a saving grace for citation of specific evidence on which they
have run counter to a legal provision any bank, absolutely preventing the CB or are based; (7) the findings of fact of the
inexistent at the time when it issued the the Monetary Board from ordering its CA are premised on the supposed absence
resolution in question. closure due to insolvency. If the bank is of evidence and contradicted by the
Perhaps realizing the flaw in its argument, not "non-insolvent" in contemplation of evidence on record.8 The Court finds no
petitioner Genbank now cites the the definition under Section 29 of RA 265, cogent reason to take exception from the
definition of insolvency under PD No. 1007 as amended by PD No. 1007, because it general rule.
but this time faulting the CA for allegedly cannot pay its liabilities as they fall due in Even then, a review of the pleadings on
truncating the same by glossing over the the ordinary course of business, the record shows no signs that the CA erred in
proviso portion which contextually presence or absence of a bank run is of no not finding that the Monetary Board
excluded from the coverage of the term determinative moment on the issue of the violated any substantial or procedural law
"insolvency" "the inability to pay of an justifiability of an order of closure. The CB when it issued the two assailed
otherwise non-insolvent bank caused by had, as it were, ample basis other than resolutions. Moreover, the CA cannot also
extraordinary demands induced by the bank run to consider petitioner be faulted in sustaining the MB
financial panic commonly evidenced by a Genbank insolvent. Upon the issuance of resolutions, or, to be precise, in not
run on the bank in the banking an order of closure, which by express finding arbitrariness and capriciousness in
community." While conceding that it was provision of law is final and executory, the the closure of petitioner bank. For, as the
then not in a position to generate funds by burden of proving non-insolvency is upon CA aptly explained:
itself in order to meet drawdowns on its the bank which challenges the validity of 1. Even before the Genbank President
deposits and deposit substitutes and to such closure. requested for emergency advances, the
pay for other maturing obligations, as well For sure, this issue of whether or not [CB] gave P16 million on December 16,
as its advances from the Central Bank, petitioner Genbank’s inability to pay may 1976. After the request was made on
petitioner Genbank nonetheless argues be solely and exclusively attributable to December 17, 1976, additional emergency
that it did not fall within the concept of the bank run necessarily requires passing was extended to Genbank. In MB
insolvency contemplated in the upon and evaluating the evidence Resolution No. 90 dated January 7, 1977
amendatory PD No. 1007 since what it presented during the trial. It should be [Exh. H-8], the [CB] decided to "extend
was then experiencing was a liquidity made perfectly clear, however, that the continued support to Genbank to meet
problem attributed to a bank run. Court’s jurisdiction in appellate further drawdowns on its deposits and
The Court is still unconvinced. proceedings under Rule 45 of the Rules of deposit substitutes." These advances
The aforementioned proviso thus relied Court is, as a rule, limited to reviewing reached P272.467 million in January 31,
upon by petitioner Genbank excludes from only errors of law, it not being a trier of 1977 [Exh. H-15], …
the definition of insolvency, "the inability facts. And it is a settled doctrine that and P302.095,746.28 on March 25, 1977
to pay of an otherwise non-insolvent bank findings of fact of the CA are basically [Exh. I-26-a]. The graph [Exh. E-1] shows
caused by extraordinary demands induced binding and not be disturbed except for steep upward climb in the amount of
by financial panic commonly evidenced by very compelling reasons, such as when: advances from December 17, 1976 up to
a run on the bank in the banking (1) the conclusion is a finding grounded March 25, 1977.
community." As it were, the applicability entirely on speculation, surmise and 2. Aside from the emergency advances
of that proviso presupposes that the conjecture; (2) the inference made is given to Genbank, the [CB] encouraged
struggling bank, Genbank in this case, manifestly mistaken; (3) there is grave and assisted the controlling stockholders
should, in the first place be "an otherwise abuse of discretion; (4) the judgment is in negotiating with various groups that
non-insolvent bank" and the existence of based on a misapprehension of facts; (5) could put in new funds to help restore
a bank run is the sole and exclusive cause the findings of fact of the CA are contrary Genbank to full health. This indicates the
[CB] earnest desire to find a solution to the interest of Genbank creditors and true, the Monetary Board adopted
Genbank’s difficulties. depositors, but this group and the selling Resolution No. 675 on March 25,
3. Aside from the [CB] and Genbank, group could agree on the price), and the 1977 [Exh. I-1] forbidding Genbank to do
there is a third party involved here. This is valuation reserves and resulting net worth business in the Philippines and designating
one vital aspect that distinguishes this of the bank after valuation reserve was Arnulfo B. Aurellano as receiver.
case from all other liquidation cases less than P20 per share. The stockholders xxx xxx xxx.
handled by the [CB] [tsn., Feb. 15, 1991, were advised by the Governor that public 3. March 26, 1977:
p. 33]. What does this mean? Since a interest required that the [CB] should not On March 26, 1977, a Bid Committee met
third party has assumed all liabilities of continuously extend further credit with representatives of the four interested
Genbank, payment of deposits and other assistance to Genbank and that a groups … and informed them that the [CB]
obligations of the bank has been rehabilitation program instead be would accept bids for the acquisition of all
guaranteed. If this had been ordinary immediately implemented [tsn, Dec. 7, the assets and assumption of all the
bank liquidation where there is no 1990, pp. 58-59]. Genbank stockholders liabilities of Genbank, subject to certain
assumption of liabilities by a third party, were told to submit before 10:00 a.m., conditions. The deadline for submission of
the depositors and creditors could not Friday, March 25, 1977, either of the sealed bids was 7:00 p.m., March 28,
have retrieved the full face value of their following: 1977 [Exh. E-2].
deposits and credits. But here, all a) firm commitment to purchase the 5. March 29, 1977:
depositors and creditors have actually controlling shares of Genbank by a private As of the said deadline [March 28, 1977],
been paid in full by Allied Bank.9 (Words in group or to undertake a merger with the only bid received was that of the Lucio
bracket added.) another bank, which is willing and capable Tan group. It advised that it was prepared
Now, as regards the supposed denial of its to comply with all the conditions of the to acquire the assets and assumed all the
right to due process, petitioner Genbank [CB] conveyed previously to liabilities of Genbank subject to the terms
relies on the following chain of events: representatives of the controlling and conditions enumerated in the letter
1. March 23, 1977: stockholders and whose price is [Exh. E-2; Exh. E-2-a].
x x x the Governor together with other acceptable to sellers Pursuant to the Memorandum of the
Central Bank officials and Genbank b) a written decision of the stockholders Director, Department of Commercial and
directors, had a meeting with Messrs. owning at least two-thirds (2/3) of the Savings Banks, dated March 28, 1977
Clarencio Yujuico, [et al.], stockholders of outstanding shares to reduce the par [Exh. E] stating that –
Genbank who, according to the Corporate value and a commitment of the Land Bank "As of March 24, 1977, the Bank’s liquid
Secretary, represented stockholders or a private group to put up the additional assets of P28 million, together with
owning at least two-thirds (2/3) of the equity and a commitment to comply with collections from its loan portfolio, will not
outstanding shares. They were given the conditions prescribed by the [CB]. be enough to meet expected further
copies of the aide-memoire for the 2. March 25, 1977: withdrawal of deposits and deposit
meeting (Exh. H-30) which outlined As there was no compliance with either of substitute of P235.4 million. The Bank’s
developments regarding Genbank said requirements, and finding the report operation may be expected to result into
particularly the [DOSRI]loans …, the of the Director, Department of losses of at least P2.9 million per month
negotiations for the sale of Genbank Commercial and Savings Banks that and these loans will dissipate the Bank’s
shares, (the Lucio Tan Group was willing Genbank was insolvent within the remaining capital accounts of P10.9
to comply with all the conditions of the meaning of Section 29 of R.A. 265 million. The Bank therefore may not be
[CB] for the approval of the sale but could (Central Bank Act), as amended, and that permitted to resume business with safety
not meet the price of the selling group; Genbank’s continuance in business would to its depositors, creditors, and the
the Paramount Finance Group could not involve losses to its depositors and general public"
comply with all the [CB] conditions creditors (as recited in his Memorandum and recommending certain actions, the
prescribed … to secure [CB] advances and dated March 24, 1977, Exh. D), - to be Monetary Board adopted Resolution No.
677 on March 29, 1977 [Exh. I-2] related interest of the Yujuico Family Indeed, that the Genbank, Now Allied
determining and confirming that Genbank Group and directors and officers of Bank, was able to resume normal banking
was insolvent and could not resume Genbank) and the standing practice of operations immediately on June 2, 1977,
business with safety to its depositors, extending DOSRI loans which, at one thereafter meeting all the demands for
creditors and general public, and ordering point, reached a peak of P172.3 million or deposit withdrawals and paying off all CB
the liquidation of Genbank, the 26% of the total loan portfolio of P666.78 emergency advances to Genbank (Exh. K,
designation of Arnulfo B. Aurellano as million. Of the final figure, 59.4% thereof L, and P), is a strong indication that the
Liquidator and the approval of a was classified as doubtful and P0.505 Central Bank performed its duty to
liquidation plan whereby all the assets of million as uncollectible. And 91.7% of maintain public confidence in the banking
Genbank should be purchased by the such DOSRI accounts were unsecured system, x x x.
Lucio Tan Group which should also leaving only 8% thereof secured. All these Absent, in sum, of compelling proof to
assume all the liabilities under certain unsound practices occurred way before becloud the bona fides of the decision of
terms and conditions. their resulting crippling effects became the Central Bank to close and order the
In his letters dated March 29, 1977 to the manifest sometime in December 1976, liquidation of Genbank pursuant to
Genbank stockholders and Dr. Yujuico further leading the bank to resort to other Monetary Board Resolution Nos. 675 and
(received by the addressees on April 1, unsound banking practices, like incurring 677, the Court, as the CA before it,
1977), Governor Licaros informed them daily overdrafts. These problems, as loathes to interfere with what basically is
that the Monetary Board had ordered the earlier narrated in the assailed CA the exercise by the Central Bank of its
liquidation of Genbank [Exhs. I-15 and I- decision, were taken up by the then CB mandate as administrator of the banking
15-a]. Governor with the Board of Directors of system.
In short, petitioner Genbank would claim Genbank in a meeting held on December WHEREFORE, the petition is hereby
that in a span of just two (2) days from 27, 1976. Thus, when the crucial March DISMISSED for lack of merit, with costs
the time it called a meeting with the board 23, 1977 meeting was held, there can be against petitioner.
of directors of Genbank on March 23, no doubt that petitioner Genbank was SO ORDERED.
1977, or on March 25, 1977, the Monetary totally aware of the predicament it has
Board issued the resolution finding gotten itself into and the conditions which
petitioner Genbank insolvent and the CB had imposed to address the
prohibiting it from further conducting situation for the protection of the
business; and only another four (4) days depositors and the banking public. It is
thereafter, or on March 29, 1977, it not as if CB sprang a surprise on
ordered its liquidation, thereby denying petitioner Genbank when Resolution 675
sufficient time for petitioner Genbank to was issued on March 25, 1977 declaring
comply with its directives. Genbank insolvent. Petitioner Genbank’s
We are not persuaded. posture that it was given only two (2)
It must be stressed that petitioner days to remedy the situation is specious
Genbank’s financial predicament did not at best.
crop up overnight, nor is it a product of a Finally, as to petitioner Genbank’s lament
single financial indiscretion, so to speak. about the Monetary Board acting, under
The root of its problem and eventual the premises, in bad faith or committing
downfall is traceable to unsound banking grave abuse of discretion in approving the
practices employed by management. liquidation plan of the Lucio Tan Group,
Mentioned in this regard may be made of suffice it to restate what the CA wrote in
the all-out financial support given to this regard:
Filcapital Development Corporation (a
G.R. No. 70054 December 11, 1991 G.R. No. 78767 December 11, 1991 VICTA, BANCO FILIPINO SAVINGS
BANCO FILIPINO SAVINGS AND METROPOLIS DEVELOPMENT AND MORTGAGE BANK, CARLOTA P.
MORTGAGE BANK, petitioner, CORPORATION, petitioner, VALENZUELA AND SYCIP, SALAZAR,
vs. vs. HERNANDEZ AND
THE MONETARY BOARD, CENTRAL COURT OF APPEALS, CENTRAL BANK GATMAITAN, respondents.
BANK OF THE PHILIPPINES, JOSE B. OF THE PHILIPPINES, JOSE B. Panganiban, Benitez, Barinaga & Bautista
FERNANDEZ, CARLOTA P. FERNANDEZ, JR., CARLOTA P. Law Offices collaborating counsel for
VALENZUELA, ARNULFO B. VALENZUELA, ARNULFO AURELLANO petitioner.
AURELLANO and RAMON V. AND RAMON TIAOQUI, respondents. Florencio T. Domingo, Jr. and Crisanto S.
TIAOQUI, respondents. G.R. No. 78894 December 11, 1991 Cornejo for intervenors.
G.R. No. 68878 December 11, 1991 BANCO FILIPINO SAVINGS AND
BANCO FILIPINO SAVINGS AND MORTGAGE BANK, petitioner
MORTGAGE BANK, petitioner, vs. MEDIALDEA, J.:
vs. COURT OF APPEALS, THE CENTRAL This refers to nine (9) consolidated cases
HON. INTERMEDIATE APPELLATE BANK OF THE PHILIPPINES, JOSE B. concerning the legality of the closure and
COURT and CELESTINA S. FERNANDEZ, JR., CARLOTA P. receivership of petitioner Banco Filipino
PAHIMUNTUNG, assisted by her VALENZUELA, ARNULFO B. Savings and Mortgage Bank (Banco
husband, respondents. AURELLANO AND RAMON Filipino for brevity) pursuant to the order
G.R. No. 77255-58 December 11, TIAOQUI, respondents. of respondent Monetary Board. Six (6) of
1991 G.R. No. 81303 December 11, 1991 these cases, namely, G.R. Nos. 68878,
TOP MANAGEMENT PROGRAMS PILAR DEVELOPMENT 77255-68, 78766, 81303, 81304 and
CORPORATION AND PILAR CORPORATION, petitioner 90473 involve the common issue of
DEVELOPMENT vs. whether or not the liquidator appointed by
CORPORATION, petitioners, COURT OF APPEALS, HON. MANUEL M. the respondent Central Bank (CB for
vs. COSICO, in his capacity as Presiding brevity) has the authority to prosecute as
THE COURT OF APPEALS, The Judge of Branch 136 of the Regional well as to defend suits, and to foreclose
Executive Judge of the Regional Trial Trial Court of Makati, CENTRAL BANK mortgages for and in behalf of the bank
Court of Cavite, Ex-Officio Sheriff OF THE PHILIPPINES AND CARLOTA while the issue on the validity of the
REGALADO E. EUSEBIO, BANCO P. VALENZUELA, respondents. receivership and liquidation of the latter is
FILIPINO SAVINGS AND MORTGAGE G.R. No. 81304 December 11, 1991 pending resolution in G.R. No. 7004.
BANK, CARLOTA P. VALENZUELA AND BF HOMES DEVELOPMENT Corollary to this issue is whether the CB
SYCIP, SALAZAR, HERNANDEZ AND CORPORATION, petitioner, can be sued to fulfill financial
GATMAITAN, respondents. vs. commitments of a closed bank pursuant to
G.R. No. 78766 December 11, 1991 THE COURT OF APPEALS, CENTRAL Section 29 of the Central Bank Act. On the
EL GRANDE CORPORATION, petitioner, BANK AND CARLOTA P. other hand, the other three (3) cases,
vs. VALENZUELA, respondents. namely, G.R. Nos. 70054, which is the
THE COURT OF APPEALS, THE G.R. No. 90473 December 11, 1991 main case, 78767 and 78894 all seek to
EXECUTIVE JUDGE of The Regional EL GRANDE DEVELOPMENT annul and set aside M.B. Resolution No.
Trial Court and Ex-Officio Sheriff CORPORATION, petitioner, 75 issued by respondents Monetary Board
REGALADO E. EUSEBIO, BANCO vs. and Central Bank on January 25, 1985.
FILIPINO SAVINGS AND MORTGAGE THE COURT OF APPEALS, THE
BANK, CARLOTA P. VALENZUELA AND EXECUTIVE JUDGE of the Regional The antecedent facts of each of the nine
SYCIP, SALAZAR, FELICIANO AND Trial Court of Cavite, CLERK OF COURT (9) cases are as follows:
HERNANDEZ, respondents. and Ex-Officio Sheriff ADORACION G.R No. 68878
This is a motion for reconsideration, filed receivership of Carlota Valenzuela, Deputy seeking to enjoin the Regional Trial Court
by respondent Celestina Pahimuntung, of Governor of the Central Bank. of Cavite, the ex-officio sheriff of said
the decision promulgated by thisCourt on On March 22, 1985, the Monetary Board court and Sycip, Salazar, et al. from
April 8, 1986, granting the petition for issued another resolution placing the bank proceeding with foreclosure sale.
review on certiorari and reversing the under liquidation and designating Similarly, Pilar Development defaulted in
questioned decision of respondent Valenzuela as liquidator. By virtue of her the payment of its loans. The law firm of
appellate court, which annulled the writ of authority as liquidator, Valenzuela Sycip, Salazar, et al. filed separate
possession issued by the trial court in appointed the law firm of Sycip, Salazar, applications with the ex-officio sheriff of
favor of petitioner. et al. to represent Banco Filipino in all the Regional Trial Court of Cavite for the
The respondent-movant contends that the litigations. extra-judicial foreclosure of mortgage over
petitioner has no more personality to On March 26, 1985, Banco Filipino filed its properties.
continue prosecuting the instant case the petition for certiorari in G.R. No. Hence, Pilar Development filed with the
considering that petitioner bank was 70054 questioning the validity of the respondent appellate court a petition for
placed under receivership since January resolutions issued by the Monetary Board prohibition with prayer for the issuance of
25, 1985 by the Central Bank pursuant to authorizing the receivership and a writ of preliminary injunction docketed
the resolution of the Monetary Board. liquidation of Banco Filipino. as CA-G.R SP Nos. 08962-64 seeking to
G.R. Nos. 77255-58 In a resolution dated August 29, 1985, enjoin the same respondents from
Petitioners Top Management Programs this Court in G.R. No. 70054 resolved to enforcing the foreclosure sale of its
Corporation (Top Management for brevity) issue a temporary restraining order, properties. CA-G.R. SP Nos. 07892 and
and Pilar Development Corporation (Pilar effective during the same period of 30 08962-64 were consolidated and jointly
Development for brevity) are corporations days, enjoining the respondents from decided.
engaged in the business of developing executing further acts of liquidation of the On October 30, 1986, the respondent
residential subdivisions. bank; that acts such as receiving appellate court rendered a decision
Top Management obtained a loan of collectibles and receivables or paying off dismissing the aforementioned petitions.
P4,836,000 from Banco Filipino as creditors' claims and other transactions Hence, this petition was filed by the
evidenced by a promissory note dated pertaining to normal operations of a bank petitioners Top Management and Pilar
January 7, 1982 payable in three years are not enjoined. The Central Bank is Development alleging that Carlota
from date. The loan was secured by real ordered to designate a comptroller for Valenzuela, who was appointed by the
estate mortgage in its various properties Banco Filipino. Monetary Board as liquidator of Banco
in Cavite. Likewise, Pilar Development Subsequently, Top Management failed to Filipino, has no authority to proceed with
obtained loans from Banco Filipino pay its loan on the due date. Hence, the the foreclosure sale of petitioners'
between 1982 and 1983 in the principal law firm of Sycip, Salazar, et al. acting as properties on the ground that the
amounts of P6,000,000, P7,370,000 and counsel for Banco Filipino under authority resolution of the issue on the validity of
P5,300,000 with maturity dates on of Valenzuela as liquidator, applied for the closure and liquidation of Banco
December 28, 1984, January 5, 1985 and extra-judicial foreclosure of the mortgage Filipino is still pending with this Court in
February 16, 1984, respectively. To over Top Management's properties. Thus, G.R. 70054.
secure the loan, Pilar Development the Ex-Officio Sheriff of the Regional Trial G.R. No. 78766
mortgaged to Banco Filipino various Court of Cavite issued a notice of extra- Petitioner El Grande Development
properties in Dasmariñas, Cavite. judicial foreclosure sale of the properties Corporation (El Grande for brevity) is
On January 25, 1985, the Monetary Board on December 16, 1985. engaged in the business of developing
issued a resolution finding Banco Filipino On December 9, 1985, Top Management residential subdivisions. It was extended
insolvent and unable to do business filed a petition for injunction and by respondent Banco Filipino a credit
without loss to its creditors and prohibition with the respondent appellate accommodation to finance its housing
depositors. It placed Banco Filipino under court docketed as CA-G.R. SP No. 07892 program. Hence, petitioner was granted a
loan in the amount of P8,034,130.00 Mortgage Bank, she was not legally March 22, 1988. Hence, this instant
secured by real estate mortgages on its precluded from foreclosing the mortgage motion for reconsideration.
various estates located in Cavite. over the properties of the petitioner G.R. No. 81304
On January 15, 1985, the Monetary Board through counsel retained by her for the On July 9, 1985, petitioner BF Homes
forbade Banco Filipino to do business, purpose. Incorporated (BF Homes for brevity) filed
placed it under receivership and G.R. No. 81303 an action with the trial court to compel the
designated Deputy Governor Carlota On November 8, 1985, petitioner Pilar Central Bank to restore petitioner's;
Valenzuela as receiver. On March 22, Development Corporation (Pilar financing facility with Banco Filipino.
1985, the Monetary Board confirmed Development for brevity) filed an action The Central Bank filed a motion to dismiss
Banco Filipino's insolvency and designated against Banco Filipino, the Central Bank the action. Petitioner BF Homes in a
the receiver Carlota Valenzuela as and Carlota Valenzuela for specific supplemental complaint impleaded as
liquidator. performance, docketed as Civil Case No. defendant Carlota Valenzuela as receiver
When petitioner El Grande failed to pay its 12191. It appears that the former of Banco Filipino Savings and Mortgage
indebtedness to Banco Filipino, the latter management of Banco Filipino appointed Bank.
thru its liquidator, Carlota Valenzuela, Quisumbing & Associates as counsel for On April 8, 1985, petitioner filed a second
initiated the foreclosure with the Clerk of Banco Filipino. On June 12, 1986 the said supplemental complaint to which
Court and Ex-officio sheriff of RTC Cavite. law firm filed an answer for Banco Filipino respondents filed a motion to dismiss.
Subsequently, on March 31, 1986, the ex- which confessed judgment against Banco On July 9, 1985, the trial court granted
officio sheriff issued the notice of extra- Filipino. the motion to dismiss the supplemental
judicial sale of the mortgaged properties On June 17, 1986, petitioner filed a complaint on the grounds (1) that plaintiff
of El Grande scheduled on April 30, 1986. second amended complaint. The Central has no contractual relation with the
In order to stop the public auction sale, Bank and Carlota Valenzuela, thru the law defendants, and (2) that the Intermediate
petitioner El Grande filed a petition for firm Sycip, Salazar, Hernandez and Appellate Court in a previous decision in
prohibition with the Court of Appeals Gatmaitan filed an answer to the AC-G.R. SP. No. 04609 had stated that
alleging that respondent Carlota complaint. Banco Filipino has been ordered closed
Valenzuela could not proceed with the On June 23, 1986, Sycip, et al., acting for and placed under receivership pending
foreclosure of its mortgaged properties on all the defendants including Banco Filipino liquidation, and thus, the continuation of
the ground that this Court in G.R. No. moved that the answer filed by the facility sued for by the plaintiff has
70054 issued a resolution dated August Quisumbing & Associates for defendant become legally impossible and the suit
29, 1985, which restrained Carlota Banco Filipino be expunged from the has become moot.
Valenzuela from acting as liquidator and records. Despite opposition from The order of dismissal was appealed by
allowed Banco Filipino to resume banking Quisumbing & Associates, the trial court the petitioner to the Court of Appeals. On
operations only under a Central Bank granted the motion to expunge in an order November 4, 1987, the respondent
comptroller. dated March 17, 1987. Petitioner Pilar appellate court dismissed the appeal and
On March 2, 1987, the Court of Appeals Development moved to reconsider the affirmed the order of the trial court.
rendered a decision dismissing the order but the motion was denied. Hence, this petition for review
petition. Petitioner Pilar Development filed with the on certiorari was filed, alleging that the
Hence this petition for review respondent appellate court a petition respondent court erred when it found that
on certiorari was filed alleging that the for certiorari and mandamus to annul the the private respondents should not be the
respondent court erred when it held in its order of the trial court. The Court of ones to respond to the cause of action
decision that although Carlota P. Appeals rendered a decision dismissing asserted by the petitioner and the
Valenzuela was restrained by this the petition. A petition was filed with this petitioner did not have any cause of action
Honorable Court from exercising acts in Court but was denied in a resolution dated against the respondents Central Bank and
liquidation of Banco Filipino Savings & Carlota Valenzuela.
G.R. No. 90473 stockholders to be: Metropolis 1. Forbid the Banco Filipino Savings &
Petitioner El Grande Development Development Corporation, Apex Mortgage Mortgage Bank to do business in the
Corporation (El Grande for brevity) and Loans Corporation, Filipino Business Philippines effective the beginning of office
obtained a loan from Banco Filipino in the Consultants, Tiu Family Group, LBH Inc. January 1985, pursuant to Sec. 29 of R.A
amount of P8,034,130.00, secured by a and Anthony Aguirre. No. 265, as amended;
mortgage over its five parcels of land Petitioner Bank had an approved 2. Designate the Head of the Conservator
located in Cavite which were covered by emergency advance of P119.7 million Team at the bank, as Receiver of Banco
Transfer Certificate of Title Nos. T-82187, under M.B. Resolution No. 839 dated June Filipino Savings & Mortgage Bank, to
T-109027, T-132897, T-148377, and T- 29, 1984. This was augmented with a P3 immediately take charge of the assets and
79371 of the Registry of Deeds of Cavite. billion credit line under M.B. Resolution liabilities, as expeditiously as possible
When Banco Filipino was ordered closed No. 934 dated July 27, 1984. collect and gather all the assets and
and placed under receivership in 1985, On the same date, respondent Board administer the same for the benefit of all
the appointed liquidator of BF, thru its issued M.B. Resolution No. 955 placing the creditors, and exercise all the powers
counsel Sycip, Salazar, et al. applied with petitioner bank under conservatorship of necessary for these purposes including but
the ex-officio sheriff of the Regional Trial Basilio Estanislao. He was later replaced not limited to bringing suits and
Court of Cavite for the extrajudicial by Gilberto Teodoro as conservator on foreclosing mortgages in the name of the
foreclosure of the mortgage constituted August 10, 1984. The latter submitted a bank.
over petitioner's properties. On March 24, report dated January 8, 1985 to 3. The Board of Directors and the principal
1986, the ex-officio sheriff issued a notice respondent Board on the conservatorship officers from Senior Vice Presidents, as
of extrajudicial foreclosure sale of the of petitioner bank, which report shall listed in the attached Annex "A" be
properties of petitioner. hereinafter be referred to as the Teodoro included in the watchlist of the
Thus, petitioner filed with the Court of report. Supervision and Examination Sector until
Appeals a petition for prohibition with Subsequently, another report dated such time that they shall have cleared
prayer for writ of preliminary injunction to January 23, 1985 was submitted to the themselves.
enjoin the respondents from foreclosing Monetary Board by Ramon Tiaoqui, 4. Refer to the Central Bank's Legal
the mortgage and to nullify the notice of Special Assistant to the Governor and Department and Office of Special
foreclosure. Head, SES Department II of the Central Investigation the report on the findings on
On June 16, 1989, respondent Court of Bank, regarding the major findings of Banco Filipino for investigation and
Appeals rendered a decision dismissing examination on the financial condition of possible prosecution of directors, officers,
the petition. petitioner BF as of July 31, 1984. The and employees for activities which led to
Not satisfied with the decision, petitioner report, which shall be referred to herein its insolvent position. (pp- 61-62, Rollo)
filed the instant petition for review as the Tiaoqui Report contained the On January 25, 1985, the Monetary Board
on certiorari. following conclusion and recommendation: issued the assailed MB Resolution No. 75
G.R. No. 70054 The examination findings as of July 31, which ordered the closure of BF and which
Banco Filipino Savings and Mortgage Bank 1984, as shown earlier, indicate one of further provides:
was authorized to operate as such under insolvency and illiquidity and further After considering the report dated January
M.B. Resolution No. 223 dated February confirms the above conclusion of the 8, 1985 of the Conservator for Banco
14, 1963. It commenced operations on Conservator. Filipino Savings and Mortgage Bank that
July 9, 1964. It has eighty-nine (89) All the foregoing provides sufficient the continuance in business of the bank
operating branches, forty-six (46) of justification for forbidding the bank from would involve probable loss to its
which are in Manila, with more than three engaging in banking. depositors and creditors, and after
(3) million depositors. Foregoing considered, the following are discussing and finding to be true the
As of July 31, 1984, the list of recommended: statements of the Special Assistant to the
stockholders showed the major Governor and Head, Supervision and
Examination Sector (SES) Department II 5. In consequence of the foregoing, to 1. Banco Filipino Savings & Mortgage Bank
as recited in his memorandum dated terminate the conservatorship over Banco be liquidated pursuant to paragraph 3,
January 23, 1985, that the Banco Filipino Filipino Savings and Mortgage Bank. (pp. Sec. 29 of RA No. 265, as amended;
Savings & Mortgage Bank is insolvent and 10-11, Rollo, Vol. I) 2. The Legal Department, through the
that its continuance in business would On February 2, 1985, petitioner BF filed a Solicitor General, be authorized to file in
involve probable loss to its depositors and complaint docketed as Civil Case No. 9675 the proper court a petition for assistance
creditors, and in pursuance of Sec. 29 of with the Regional Trial Court of Makati to in th liquidation of the Bank;
RA 265, as amended, the Board decided: set aside the action of the Monetary Board 3. The Statutory Receiver be designated
1. To forbid Banco Filipino Savings and placing BF under receivership. as the Liquidator of said bank; and
Mortgage Bank and all its branches to do On February 28, 1985, petitioner filed 4. Management be instructed to inform
business in the Philippines; with this Court the instant petition the stockholders of Banco Filipino Savings
2. To designate Mrs. Carlota P. for certiorari and mandamus under Rule & Mortgage Bank of the Monetary Board's
Valenzuela, Deputy Governor as Receiver 65 of the Rules of Court seeking to annul decision liquidate the Bank. (p. 167, Rollo,
who is hereby directly vested with the resolution of January 25, 1985 as Vol. I)
jurisdiction and authority to immediately made without or in excess of jurisdiction On July 23, 1985, petitioner filed a motion
take charge of the bank's assets and or with grave abuse of discretion, to order before this Court praying that a
liabilities, and as expeditiously as possible respondents to furnish petitioner with the restraining order or a writ of preliminary
collect and gather all the assets and reports of examination which led to its injunction be issued to enjoin respondents
administer the same for the benefit of its closure and to afford petitioner BF a from causing the dismantling of BF signs
creditors, exercising all the powers hearing prior to any resolution that may in its main office and 89 branches. This
necessary for these purposes including but be issued under Section 29 of R.A. 265, Court issued a resolution on August 8,
not limited to, bringing suits and also known as Central Bank Act. 1985 ordering the issuance of the
foreclosing mortgages in the name of the On March 19, 1985, Carlota Valenzuela, as aforesaid temporary restraining order.
bank; Receiver and Arnulfo Aurellano and On August 20, 1985, the case was
3. To designate Mr. Arnulfo B. Aurellano, Ramon Tiaoqui as Deputy Receivers of submitted for resolution.
Special Assistant to the Governor, and Mr. Banco Filipino submitted their report on In a resolution dated August 29, 1985,
Ramon V. Tiaoqui, Special Assistant to the the receivership of BF to the Monetary this Court Resolved direct the respondents
Governor and Head, Supervision and Board, in compliance with the mandate of Monetary Board and Central Bank hold
Examination Sector Department II, as Sec. 29 of R.A. 265 which provides that hearings at which the petitioner should be
Deputy Receivers who are likewise hereby the Monetary Board shall determine within heard, and terminate such hearings and
directly vested with jurisdiction and sixty (60) days from date of receivership submit its resolution within thirty (30)
authority to do all things necessary or of a bank whether such bank may be days. This Court further resolved to issue
proper to carry out the functions reorganized/permitted to resume business a temporary restraining order enjoining
entrusted to them by the Receiver and or ordered to be liquidated. The report the respondents from executing further
otherwise to assist the Receiver in contained the following recommendation: acts of liquidation of a bank. Acts such as
carrying out the functions vested in the In view of the foregoing and considering receiving collectibles and receivables or
Receiver by law or Monetary Board that the condition of the banking paying off creditors' claims and other
Resolutions; institution continues to be one of transactions pertaining to normal
4. To direct and authorize Management to insolvency, i.e., its realizable assets are operations of a bank were no enjoined.
do all other things and carry out all other insufficient to meet all its liabilities and The Central Bank was also ordered to
measures necessary or proper to that the bank cannot resume business designate comptroller for the petitioner
implement this Resolution and to with safety to its depositors, other BF. This Court also ordered th
safeguard the interests of depositors, creditors and the general public, it is consolidation of Civil Cases Nos. 8108,
creditors and the general public; and recommended that:
9676 and 10183 in Branch 136 of the in its resolution dated August 3, 1989 respondents to adduce additional
Regional Trial Court of Makati. declared that its intention as expressed in evidence, if so minded, and for both
However, on September 12, 1985, this its resolution of August 29, 1985 had not parties to conduct the required cross-
Court in the meantime suspended the been faithfully adhered to by the herein examination of witnesses/deponents, to
hearing it ordered in its resolution of petitioner and respondents. The be done within a period of three months.
August 29, 1985. aforementioned resolution had ordered a To obviate all doubts on Judge Cosico's
On October 8, 1985, this Court submitted healing on the reports that led impartiality, this Court designated a new
a resolution order ing Branch 136 of the respondents to order petitioner's closure hearing commissioner in the person of
Regional Trial Court of Makati the presided and its alleged pre-planned liquidation. former Judge Consuelo Santiago of the
over by Judge Ricardo Francisco to This Court noted that during the referral Regional Trial Court, Makati, Branch 149
conduct the hear ing contemplated in the hearing however, a different scheme was (now Associate Justice of the Court of
resolution of August 29, 1985 in the most followed. Respondents merely submitted Appeals).
expeditious manner and to submit its to the commissioner their findings on the Three motions for intervention were filed
resolution to this Court. examinations conducted on petitioner, in this case as follows: First, in G.R. No.
In the Court's resolution of February 19, affidavits of the private respondents 70054 filed by Eduardo Rodriguez and
1987, the Court stated that the hearing relative to the findings, their reports to Fortunate M. Dizon, stockholders of
contemplated in the resolution of August the Monetary Board and several other petitioner bank for and on behalf of other
29, 1985, which is to ascertain whether documents in support of their position stockholders of petitioner; second, in G.R.
substantial administrative due process had while petitioner had merely submitted No. 78894, filed by the same
been observed by the respondent objections to the findings of respondents, stockholders, and, third, again in G.R. No.
Monetary Board, may be expedited by counter-affidavits of its officers and also 70054 by BF Depositors' Association and
Judge Manuel Cosico who now presides documents to prove its claims. Although others similarly situated. This Court, on
the court vacated by Judge Ricardo the records disclose that both parties had March 1, 1990, denied the aforesaid
Francisco, who was elevated to the Court not waived cross-examination of their motions for intervention.
of Appeals, there being no legal deponents, no such cross-examination has On January 28, 1991, the hearing
impediment or justifiable reason to bar been conducted. The reception of commissioner, Justice Consuelo Santiago
the former from conducting such hearing. evidence in the form of affidavits was of the Court of Appeals submitted her
Hence, this Court directed Judge Manuel followed throughout, until the report and recommendation (to be
Cosico to expedite the hearing and submit commissioner submitted his report and hereinafter called, "Santiago Report") on
his report to this Court. recommendations to the Court. This Court the following issues stated therein as
On February 20, 1988, Judge Manuel also held that the documents pertinent to follows:
Cosico submitted his report to this Court the resolution of the instant petition are l) Had the Monetary Board observed the
with the recommendation that the the Teodoro Report, Tiaoqui Report, procedural requirements laid down in Sec.
resolutions of respondents Monetary Valenzuela, Aurellano and Tiaoqui Report 29 of R.A. 265, as amended to justify th
Board and Central Bank authorizing the and the supporting documents which were closure of the Banco Filipino Savings and
closure and liquidation of petitioner BP be made as the bases by the reporters of Mortgage Bank?
upheld. their conclusions contained in their 2) On the date of BF's closure (January
On October 21, 1988, petitioner BF filed respective reports. This Court also 25, 1985) was its condition one of
an urgent motion to reopen hearing to Resolved in its resolution to re-open the insolvency or would its continuance in
which respondents filed their comment on referral hearing that was terminated after business involve probable loss to its
December 16, 1988. Petitioner filed their Judge Cosico had submitted his report and depositors or creditors?
reply to respondent's comment of January recommendation with the end in view of The commissioner after evaluation of the
11, 1989. After having deliberated on the allowing petitioner to complete its evidence presented found and
grounds raised in the pleadings, this Court presentation of evidence and also for recommended the following:
1. That the TEODORO and TIAOQUI On March 12, 1991 petitioner filed its later filed by Central Bank. On June 5,
reports did not establish in accordance opposition to the motion for oral 1985, the trial court allowed the motion
with See. 29 of the R.A. 265, as amended, argument. On March 20, 1991, it filed its for intervention.
BF's insolvency as of July 31, 1984 or that reply to respondents' objections to the Hence, the Central Bank and the receivers
its continuance in business thereafter Santiago Report. of Banco Filipino filed a petition
would involve probable loss to its On June 18, 1991, a hearing was held for certiorari with the respondent
depositors or creditors. On the contrary, where both parties were heard on oral appellate court alleging that the trial court
the evidence indicates that BF was solvent argument before this Court. The parties, committed grave abuse of discretion in
on July 31, 1984 and that on January 25, having submitted their respective not dismissing Civil Case No. 9675.
1985, the day it was closed, its insolvency memoranda, the case is now submitted On March 17, 1986, the respondent
was not clearly established; for decision. appellate court rendered a decision
2. That consequently, BF's closure on G.R. No. 78767 annulling and setting aside the questioned
January 25, 1985, not having satisfied the On February 2, 1985, Banco Filipino filed a orders of the trial court, and ordering the
requirements prescribed under Sec. 29 of complaint with the trial court docketed as dismissal of the complaint filed by Banco
RA 265, as amended, was null and void. Civil Case No. 9675 to annul the Filipino with the trial court as well as the
3. That accordingly, by way of correction, resolution of the Monetary Board dated complaint in intervention of petitioner
BF should be allowed to re-open subject to January 25, 1985, which ordered the Metropolis Development Corporation.
such laws, rules and regulations that closure of the bank and placed it under Hence this petition was filed by Metropolis
apply to its situation. receivership. Development Corporation questioning the
Respondents thereafter filed a motion for On February 14, 1985, the Central Bank decision of the respondent appellate court.
leave to file objections to the Santiago and the receivers filed a motion to dismiss G.R. No. 78894
Report. In the same motion, respondents the complaint on the ground that the On February 2, 1985, a complaint was
requested that the report and receivers had not authorized anyone to filed with the trial court in the name of
recommendation be set for oral argument file the action. In a supplemental motion Banco Filipino to annul the resolution o
before the Court. On February 7, 1991, to dismiss, the Central Bank cited the the Monetary Board dated January 25,
this Court denied the request for oral resolution of this Court dated October 15, 1985 which ordered the closure of Banco
argument of the parties. 1985 in G.R. No. 65723 entitled, "Central Filipino and placed it under receivership.
On February 25, 1991, respondents filed Bank et al. v. Intermediate Appellate The receivers appointed by the Monetary
their objections to the Santiago Report. Court" whereby We held that a complaint Board were Carlota Valenzuela, Arnulfo
On March 5, 1991, respondents submitted questioning the validity of the receivership Aurellano and Ramon Tiaoqui.
a motion for oral argument alleging that established by the Central Bank becomes On February 14, 1985, the Central Bank
this Court is confronted with two moot and academic upon the initiation of and the receiver filed a motion to dismiss
conflicting reports on the same subject, liquidation proceedings. the complaint on the ground that the
one upholding on all points the Monetary While the motion to dismiss was pending receiver had not authorized anyone to file
Board's closure of petitioner, (Cosico resolution, petitioner herein Metropolis the action.
Report dated February 19, 1988) and the Development Corporation (Metropolis for On March 22, 1985, the Monetary Board
other (Santiago Report dated January 25, brevity) filed a motion to intervene in the placed the bank under liquidation and
1991) holding that petitioner's closure was aforestated civil case on the ground that designated Valenzuela as liquidator and
null and void because petitioner's as a stockholder and creditor of Banco Aurellano and Tiaoqui as deputy
insolvency was not clearly established Filipino, it has an interest in the subject of liquidators.
before its closure; and that such a hearing the action. The Central Bank filed a supplemental
on oral argrument will therefore allow the On July 19, 1985, the trial court denied motion to dismiss which was denied.
parties to directly confront the issues the motion to dismiss and also denied the Hence, the latter filed a petition
before this Court. motion for reconsideration of the order for certiorari with the respondent
appellate court to set aside the order of creditors, and represent the bank credits claims and other transactions
the trial court denying the motion to personally or through counsel as he may pertaining to normal operate of a bank.
dismiss. On March 17, 1986, the retain in all actions or proceedings for or There is no doubt that the prosecution of
respondent appellate court granted the against the institution, exercising all the suits collection and the foreclosure of
petition and dismissed the complaint of powers necessary for these purposes mortgages against debtors the bank by
Banco Filipino with the trial court. including, but not limited to, bringing and the liquidator are among the usual and
Thus, this petition for certiorari was filed foreclosing mortgages in the name of the ordinary transactions pertaining to the
with the petitioner contending that a bank bank. If the Monetary Board shall later administration of a bank. their did Our
which has been closed and placed under determine and confirm that banking order in the same resolution dated August
receivership by the Central Bank under institution is insolvent or cannot resume 25, 1985 for the designation by the
Section 29 of RA 265 could file suit in business safety to depositors, creditors Central Bank of a comptroller Banco
court in its name to contest such acts of and the general public, it shall, public Filipino alter the powers and functions; of
the Central Bank, without the interest requires, order its liquidation and the liquid insofar as the management of
authorization of the CB-appointed appoint a liquidator who shall take over the assets of the bank is concerned. The
receiver. and continue the functions of receiver mere duty of the comptroller is to
After deliberating on the pleadings in the previously appointed by Monetary supervise counts and finances undertaken
following cases: Board. The liquid for may, in the name of by the liquidator and to d mine the
1. In G.R. No. 68878, the respondent's the bank and with the assistance counsel propriety of the latter's expenditures
motion for reconsideration; as he may retain, institute such actions as incurred behalf of the bank.
2. In G.R. Nos. 77255-58, the petition, may necessary in the appropriate court to Notwithstanding this, the liquidator is
comment, reply, rejoinder and sur- collect and recover a counts and assets of empowered under the law to continue the
rejoinder; such institution or defend any action ft functions of receiver is preserving and
2. In G.R. No. 78766, the petition, against the institution. keeping intact the assets of the bank in
comment, reply and rejoinder; When the issue on the validity of the substitution of its former management,
3. In G.R. No. 81303, the petitioner's closure and receivership of Banco Filipino and to prevent the dissipation of its assets
motion for reconsideration; bank was raised in G.R. No. 70054, to the detriment of the creditors of the
4. In [Link]. 81304, the petition, pendency of the case did not diminish the bank. These powers and functions of the
comment and reply; powers and authority of the designated liquidator in directing the operations of the
5. Finally, in G.R. No. 90473, the petition liquidator to effectuate and carry on the a bank in place of the former management
comment and reply. ministration of the bank. In fact when We or former officials of the bank include the
We find the motions for reconsideration in adopted a resolute on August 25, 1985 retaining of counsel of his choice in
G.R. Nos. 68878 and 81303 and the and issued a restraining order to actions and proceedings for purposes of
petitions in G.R. Nos. 77255-58, 78766, respondents Monetary Board and Central administration.
81304 and 90473 devoid of merit. Bank, We enjoined me further acts of Clearly, in G.R. Nos. 68878, 77255-58,
Section 29 of the Republic Act No. 265, as liquidation. Such acts of liquidation, as 78766 and 90473, the liquidator by
amended known as the Central Bank explained in Sec. 29 of the Central Bank himself or through counsel has the
Act, provides that when a bank is Act are those which constitute the authority to bring actions for foreclosure
forbidden to do business in the Philippines conversion of the assets of the banking of mortgages executed by debtors in favor
and placed under receivership, the person institution to money or the sale, of the bank. In G.R. No. 81303, the
designated as receiver shall immediately assignment or disposition of the s to liquidator is likewise authorized to resist
take charge of the bank's assets and creditors and other parties for the purpose or defend suits instituted against the bank
liabilities, as expeditiously as possible, of paying debts of such institution. We did by debtors and creditors of the bank and
collect and gather all the assets and not prohibit however acts a as receiving by other private persons. Similarly, in
administer the same for the benefit of its collectibles and receivables or paying off G.R. No. 81304, due to the aforestated
reasons, the Central Bank cannot be grave abuse of discretion or has acted exercising all the powers necessary for
compelled to fulfill financial transactions without or in excess of jurisdiction in these purposes including, but not limited
entered into by Banco Filipino when the issuing the assailed order. Coupled with to, bringing and foreclosing mortgages in
operations of the latter were suspended this task is the duty of this Court not only the name of the bank or non-bank
by reason of its closure. The Central Bank to strike down acts which violate financial intermediary performing quasi-
possesses those powers and functions constitutional protections or to nullify banking functions.
only as provided for in Sec. 29 of the administrative decisions contrary to legal The Monetary Board shall thereupon
Central Bank Act. mandates but also to prevent acts in determine within sixty days whether the
While We recognize the actual closure of excess of authority or jurisdiction, as well institution may be reorganized or
Banco Filipino and the consequent legal as to correct manifest abuses of discretion otherwise placed in such a condition so
effects thereof on its operations, We committed by the officer or tribunal that it may be permitted to resume
cannot uphold the legality of its closure involved. business with safety to its depositors and
and thus, find the petitions in G.R. Nos. The law applicable in the determination of creditors and the general public and shall
70054, 78767 and 78894 impressed with these issues is Section 29 of Republic Act prescribe the conditions under which such
merit. We hold that the closure and No. 265, as amended, also known as the resumption of business shall take place as
receivership of petitioner bank, which was Central Bank Act, which provides: well as the time for fulfillment of such
ordered by respondent Monetary Board on SEC. 29. Proceedings upon insolvency. — conditions. In such case, the expenses
January 25, 1985, is null and void. Whenever, upon examination by the head and fees in the collection and
It is a well-recognized principle that of the appropriate supervising or administration of the assets of the
administrative and discretionary functions examining department or his examiners or institution shall be determined by the
may not be interfered with by the courts. agents into the condition of any bank or Board and shall be paid to the Central
In general, courts have no supervising non-bank financial intermediary Bank out of the assets of such institution.
power over the proceedings and actions of performing quasi-banking functions, it If the Monetary Board shall determine and
the administrative departments of the shall be disclosed that the condition of the confirm within the said period that the
government. This is generally true with same is one of insolvency, or that its bank or non-bank financial intermediary
respect to acts involving the exercise of continuance in business would involve performing quasi-banking functions is
judgment or discretion, and findings of probable loss to its depositors or creditors, insolvent or cannot resume business with
fact. But when there is a grave abuse of it shall be the duty of the department safety to its depositors, creditors, and the
discretion which is equivalent to a head concerned forthwith, in writing, to general public, it shall, if the public
capricious and whimsical exercise of inform the Monetary Board of the facts. interest requires, order its liquidation,
judgment or where the power is exercised The Board may, upon finding the indicate the manner of its liquidation and
in an arbitrary or despotic manner, then statements of the department head to be approve a liquidation plan which may,
there is a justification for the courts to set true, forbid the institution to do business when warranted, involve disposition of
aside the administrative determination in the Philippines and designate an official any or all assets in consideration for the
reached (Lim, Sr. v. Secretary of of the Central Bank or a person of assumption of equivalent liabilities. The
Agriculture and Natural Resources, L- recognized competence in banking or liquidator designated as hereunder
26990, August 31, 1970, 34 SCRA 751) finance, as receiver to immediately take provided shall, by the Solicitor General,
The jurisdiction of this Court is called charge of its assets and liabilities, as file a petition in the regional trial court
upon, once again, through these petitions, expeditiously as possible collect and reciting the proceedings which have been
to undertake the delicate task of gather all the assets and administer the taken and praying the assistance of the
ascertaining whether or not an same for the benefit's of its creditors, and court in the liquidation of such
administrative agency of the government, represent the bank personally or through institutions. The court shall have
like the Central Bank of the Philippines counsel as he may retain in all actions or jurisdiction in the same proceedings to
and the Monetary Board, has committed proceedings for or against the institution, assist in the adjudication of the disputed
claims against the bank or non-bank garnishment, levy, attachment, by the refusal or the dissolution of the
financial intermediary performing quasi- orexecution. injunction. The provisions of Rule 58 of
banking functions and in the enforcement The provisions of any law to the contrary the New Rules of Court insofar as they are
of individual liabilities of the stockholders notwithstanding, the actions of the applicable and not inconsistent with the
and do all that is necessary to preserve Monetary Board under this Section, provision of this Section shall govern the
the assets of such institutions and to Section 28-A, an the second paragraph of issuance and dissolution of the re
implement the liquidation plan approved Section 34 of this Act shall be final an straining order or injunction contemplated
by the Monetary Board. The Monetary executory, and can be set aside by a court in this Section.
Board shall designate an official of the only if there is convince proof, after xxx xxx xxx
Central bank or a person of recognized hearing, that the action is plainly arbitrary Based on the aforequoted provision, the
competence in banking or finance, as and made in bad faith: Provided, That the Monetary Board may order the cessation
liquidator who shall take over and same is raised in an appropriate pleading of operations of a bank in the Philippine
continue the functions of the receiver filed by the stockholders of record and place it under receivership upon a
previously appointed by the Monetary representing the majority of th capital finding of insolvency or when its
Board under this Section. The liquidator stock within ten (10) days from the date continuance in business would involve
shall, with all convenient speed, convert the receiver take charge of the assets and probable loss its depositors or creditors. If
the assets of the banking institutions or liabilities of the bank or non-bank financial the Monetary Board shall determine and
non-bank financial intermediary intermediary performing quasi-banking confirm within sixty (60) days that the
performing quasi-banking function to functions or, in case of conservatorship or bank is insolvent or can no longer resume
money or sell, assign or otherwise dispose liquidation, within ten (10) days from business with safety to its depositors,
of the same to creditors and other parties receipt of notice by the said majority creditors and the general public, it shall, if
for the purpose of paying the debts of stockholders of said bank or non-bank public interest will be served, order its
such institution and he may, in the name financial intermediary of the order of its liquidation.
of the bank or non-bank financial placement under conservatorship o Specifically, the basic question to be
intermediary performing quasi-banking liquidation. No restraining order or resolved in G.R. Nos. 70054, 78767 and
functions and with the assistance of injunction shall be issued by an court 78894 is whether or not the Central Bank
counsel as he may retain, institute such enjoining the Central Bank from and the Monetary Board acted arbitrarily
actions as may be necessary in the implementing its actions under this and in bad faith in finding and thereafter
appropriate court to collect and recover Section and the second paragraph of concluding that petitioner bank is
accounts and assets of such institution or Section 34 of this Act in th absence of any insolvent, and in ordering its closure on
defend any action filed against the convincing proof that the action of the January 25, 1985.
institution: Provided, However, That after Monetary Board is plainly arbitrary and As We have stated in Our resolution dated
having reasonably established all claims made in bad faith and the petitioner or August 3, 1989, the documents pertinent
against the institution, the liquidator may, plaintiff files a bond, executed in favor of to the resolution of these petitions are the
with the approval of the court, effect the Central Bank, in an amount be fixed Teodoro Report, Tiaoqui Report, and the
partial payments of such claims for assets by the court. The restraining order or Valenzuela, Aurellano and Tiaoqui Report
of the institution in accordance with their injunction shall be refused or, if granted, and the supporting documents made as
legal priority. shall be dissolved upon filing by the bases by the supporters of their
The assets of an institution under Central Bank of a bond, which shall be in conclusions contained in their respective
receivership or liquidation shall be the form of cash or Central Bank cashier's reports. We will focus Our study and
deemed in custodia legis in the hands of check, in an amount twice the amount of discussion however on the Tiaoqui Report
the receiver or liquidator and shall from the bond of th petitioner or plaintiff and the Valenzuela, Aurellano and Tiaoqui
the moment of such receivership or conditioned that it will pay the damages Report. The former recommended the
liquidation, be exempt from any order of which the petitioner or plaintiff may suffer closure and receivership of petitioner bank
while the latter report made the On December 17, 1984, this list of indirectly available to several entities
recommendation to eventually place the exceptions and finding was submitted to within the group; and the unhealth
petitioner bank under liquidation. This the petitioner bank (p. 6, Tiaoqui Report) financial status of these firms in which the
Court shall likewise take into consideration This was attached to the letter dated bank was additionally exposed through
the findings contained in the reports of December 17, 1984, of examiner-in- new funds or refinancing accommodation
the two commissioners who were charge Dionisio Domingo of SES including accrued interest.
appointed by this Court to hold the Department II of the Central Bank to Queried in the impact of these clean
referral hearings, namely the report by Teodoro Arcenas, president of petitione loans, on the bank solvency Mr. Dizon (BF
Judge Manuel Cosico submitted February bank, which disclosed that the Executive Vice President) intimated that,
20, 1988 and the report submitted by examination of the petitioner bank as to collectively these corporations have large
Justice Consuelo Santiago on January 28, its financial condition as of July 31, 1984 undeveloped real estate properties in the
1991. was not yet completed or finished on suburbs which can be made answerable
There is no question that under Section 29 December 17, 1984 when the Central for the unsecured loans a well as the
of the Central Bank Act, the following are Bank submitted the partial list of findings Central Bank's credit accommodations. A
the mandatory requirements to be of examination to th petitioner bank. The formal reply of the bank would still be
complied with before a bank found to be letter reads: forthcoming. (pp. 58-59, Rollo, Vol. I;
insolvent is ordered closed and forbidden In connection with the regular emphasis ours)
to do business in the Philippines: Firstly, examination of your institution a of July Clearly, Tiaoqui based his report on an
an examination shall be conducted by the 31, 1984, we are submitting herewith a incomplete examination of petitioner bank
head of the appropriate supervising or partial list of our exceptions/findings for and outrightly concluded therein that the
examining department or his examiners or your comments. latter's financial status was one of
agents into the condition of the bank; Please be informed that we have not yet insolvency or illiquidity. He arrived at the
secondly, it shall be disclosed in the officially terminated our examination said conclusion from the following facts:
examination that the condition of the bank (tentatively scheduled last December 7, that as of July 31, 1984, total capital
is one of insolvency, or that its 1984) and that we are still awaiting for accounts consisting of paid-in capital and
continuance in business would involve the unsubmitted replies to our previous other capital accounts such as surplus,
probable loss to its depositors or letters requests. Moreover, other findings/ surplus reserves and undivided profits
creditors; thirdly, the department head observations are still being summarized aggregated P351.8 million; that capital
concerned shall inform the Monetary including the classification of loans and adjustments, however, wiped out the
Board in writing, of the facts; and lastly, other risk assets. These shall be capital accounts and placed the bank with
the Monetary Board shall find the submitted to you in due time (p. 810, a capital deficiency amounting to
statements of the department head to be Rollo, Vol. III; emphasis ours). P334.956 million; that the biggest
true. It is worthy to note that a conference was adjustment which contributed to the
Anent the first requirement, the Tiaoqui held on January 21, 1985 at the Central deficit is the provision for estimated losses
report, submitted on January 23, 1985, Bank between the officials of the latter an on accounts classified as doubtful and loss
revealed that the finding of insolvency of of petitioner bank. What transpired and which was computed at P600.4 million
petitioner was based on the partial list of what was agreed upon during the pursuant to the examination. This
exceptions and findings on the regular conference was explained in the Tiaoqui provision is also known as valuation
examination of the bank as of July 31, report. reserves which was set up or deducted
1984 conducted by the Supervision and ... The discussion centered on the against the capital accounts of the bank in
Examination Sector II of the Central Bank substantial exposure of the bank to the arriving at the latter's financial condition.
of the PhilippinesCentral Bank (p. 1, various entities which would have a Tiaoqui however admits the insufficiency
Tiaoqui Report). relationship with the bank; the manner by and unreliability of the findings of the
which some bank funds were made examiner as to the setting up of
recommended valuation reserves from the It is evident from the foregoing We recognize the fact that it is the
assets of petitioner bank. He stated: circumstances that the examination responsibility of the Central Bank of the
The recommended valuation reserves as contemplated in Sec. 29 of the CB Act as Philippines to administer the monetary,
bases for determining the financial status a mandatory requirement was not banking and credit system of the country
of the bank would need to be discussed completely and fully complied with. and that its powers and functions shall be
with the bank, consistent with standard Despite the existence of the partial list of exercised by the Monetary Board pursuant
examination procedure, for which the findings in the examination of the bank, to Rep. Act No. 265, known as the Central
bank would in turn reply. Also, the there were still highly significant items to Bank Act. Consequently, the power and
examination has not been officially be weighed and determined such as the authority of the Monetary Board to close
terminated. (p. 7. Tiaoqui report; p. matter of valuation reserves, before these banks and liquidate them thereafter when
59, Rollo, Vol. I) can be considered in the financial public interest so requires is an exercise of
In his testimony in the second referral condition of the bank. It would be a the police power of the state. Police
hearing before Justice Santiago, Tiaoqui drastic move to conclude prematurely that power, however, may not be done
testified that on January 21, 1985, he met a bank is insolvent if the basis for such arbitratrily or unreasonably and could be
with officers of petitioner bank to discuss conclusion is lacking and insufficient, set aside if it is either capricious,
the advanced findings and exceptions especially if doubt exists as to whether discriminatory, whimsical, arbitrary,
made by Mr. Dionisio Domingo which such bases or findings faithfully represent unjust or is tantamount to a denial of due
covered 70%-80% of the bank's loan the real financial status of the bank. process and equal protection clauses of
portfolio; that at that meeting, Fortunato The actuation of the Monetary Board in the Constitution (Central Bank v. Court of
Dizon (BF's Executive Vice President) said closing petitioner bank on January 25, Appeals, Nos. L-50031-32, July 27, 1981,
that as regards the unsecured loans 1985 barely four days after a conference 106 SCRA 143).
granted to various corporations, said with the latter on the examiners' partial In the instant case, the basic standards of
corporations had large undeveloped real findings on its financial position is also substantial due process were not
estate properties which could be violative of what was provided in the CB observed. Time and again, We have held
answerable for the said unsecured loans Manual of Examination Procedures. Said in several cases, that the procedure of
and that a reply from BF was forthcoming, manual provides that only after the administrative tribunals must satisfy the
that he (Tiaoqui) however prepared his examination is concluded, should a pre- fundamentals of fair play and that their
report despite the absence of such reply; closing conference led by the examiner-in- judgment should express a well-supported
that he believed, as in fact it is stated in charge be held with the conclusion.
his report, that despite the meeting on officers/representatives of the institution In the celebrated case of Ang Tibay v.
January 21, 1985, there was still a need on the findings/exception, and a copy of Court of Industrial Relations, 69 Phil. 635,
to discuss the recommended valuation the summary of the findings/violations this Court laid down several cardinal
reserves of petitioner bank and; that he should be furnished the institution primary rights which must be respected in
however, did not wait anymore for a examined so that corrective action may be a proceeding before an administrative
discussion of the recommended valuation taken by them as soon as possible body.
reserves and instead prepared his report (Manual of Examination Procedures, However, as to the requirement of notice
two days after January 21, 1985 (pp. General Instruction, p. 14). It is hard to and hearing, Sec. 29 of RA 265 does not
3313-3314, Rollo). understand how a period of four days require a previous hearing before the
Records further show that the after the conference could be a reasonable Monetary Board implements the closure of
examination of petitioner bank was opportunity for a bank to undertake a a bank, since its action is subject to
officially terminated only when Central responsive and corrective action on the judicial scrutiny as provided for under the
Bank Examination-charge Dionisio partial list of findings of the examiner-in- same law (Rural Bank of Bato v. IAC, G.R.
Domingo submitted his final report of charge. No. 65642, October 15, 1984, Rural Bank
examination on March 4,1985.
v. Court of Appeals, G.R. 61689, June 20, questioned valuation reserves refer, the will be construed as conferring those
1988,162 SCRA 288). manual provides that: powers which are expressly imposed or
Notwithstanding the foregoing, 1. For doubtful loans, or loans the necessarily implied (Floyd Mechem,
administrative due process does not mean ultimate collection of which is doubtful and Treatise on the Law of Public Offices and
that the other important principles may be in which a substantial loss is probable but Officers, p. 335).
dispensed with, namely: the decision of not yet definitely ascertainable as to In this case, there can be no clearer
the administrative body must have extent, valuation reserves of fifty per cent explanation of the concept of insolvency
something to support itself and the (50%) of the accounts should be than what the law itself states. Sec. 29 of
evidence must be substantial. Substantial recommended to be set up. the Central Bank Act provides that
evidence is more than a mere scintilla. It 2. For loans classified as loss, or loans insolvency under the Act, shall be
means such relevant evidence as a regarded by the examiner as absolutely understood to mean that "the realizable
reasonable mind might accept as uncollectible or worthless, valuation assets of a bank or a non-bank financial
adequate to support a conclusion (Ang reserves of one hundred percent (100%) intermediary performing quasi-banking
Tibay vs. CIR, supra). Hence, where the of the accounts should be recommended functions as determined by the Central
decision is merely based upon pieces of to be set up (p. 8, Objections to Santiago Bank are insufficient to meet its
documentary evidence that are not report). liabilities."
sufficiently substantial and probative for The foregoing criteria used by Hence, the contention of the Central Bank
the purpose and conclusion they are respondents in determining the financial that a bank's true financial condition is
presented, the standard of fairness condition of the bank is based on Section synonymous with the terms "unimpaired
mandated in the due process clause is not 5 of RA 337, known as the General capital and surplus," "combined capital
met. In the case at bar, the conclusion Banking Act which states: accounts" and net worth after deducting
arrived at by the respondent Board that Sec. 5. The following terms shall be held valuation reserves from the capital,
the petitioner bank is in an illiquid to be synonymous and interchangeable: surplus and unretained earnings, citing
financial position on January 23, 1985, as ... f. Unimpaired Capital and Surplus, Sec. 5 of RA 337 is misplaced.
to justify its closure on January 25, 1985 "Combined capital accounts," and "Net Firstly, it is clear from the law that a
cannot be given weight and finality as the worth," which terms shall mean for the solvent bank is one in which its assets
report itself admits the inadequacy of its purposes of this Act, the total of the exceed its liabilities. It is a basic
basis to support its conclusion. "unimpaired paid-in capital, surplus, and accounting principle that assets are
The second requirement provided in undivided profits net of such valuation composed of liabilities and capital. The
Section 29, R.A. 265 before a bank may reserves as may be required by the term "assets" includes capital and surplus"
be closed is that the examination should Central Bank." (Exley v. Harris, 267 p. 970, 973, 126
disclose that the condition of the bank is There is no doubt that the Central Bank Kan., 302). On the other hand, the term
one of insolvency. Act vests authority upon the Central Bank "capital" includes common and preferred
As to the concept of whether the bank is and Monetary Board to take charge and stock, surplus reserves, surplus and
solvent or not, the respondents contend administer the monetary and banking undivided profits. (Manual of Examination
that under the Central Bank Manual of system of the country and this authority Procedures, Report of Examination on
Examination Procedures, Central Bank includes the power to examine and Department of Commercial and Savings
examiners must recommend valuation determine the financial condition of banks Banks, p. 3-C). If valuation reserves
reserves, when warranted, to be set up or for purposes provided for by law, such as would be deducted from these items, the
deducted against the corresponding asset for the purpose of closure on the ground result would merely be the networth or
account to determine the bank's true of insolvency stated in Section 29 of the the unimpaired capital and surplus of the
condition or net worth. In the case of loan Central Bank Act. But express grants of bank applying Sec. 5 of RA 337 but not
accounts, to which practically all the power to public officers should be the total financial condition of the bank.
subjected to a strict interpretation, and
Secondly, the statement of assets and losses arising from non-collection of loans insufficient to pay its liabilities, not
liabilities is used in balance sheets. Banks and advances, and this account is also considering capital stock and surplus
use statements of condition to reflect the referred to as valuation reserve (p. 9, which are not liabilities for such purpose
amounts, nature and changes in the Objections to Santiago report). Clearly, (Exley v. Harris, 267 p. 970, 973,126 Kan.
assets and liabilities. The Central Bank the statement of condition which contains 302; Alexander v. Llewellyn, Mo. App., 70
Manual of Examination Procedures a provision for recommended valuation S.W. 2n 115,117).
provides a format or checklist of a reserves should not be used as the In arriving at the computation of
statement of condition to be used by ultimate basis to determine the solvency realizable assets of petitioner bank,
examiners as guide in the examination of of an institution for the purpose of respondents used its books which
banks. The format enumerates the items termination of its operations. undoubtedly are not reflective of the
which will compose the assets and Respondents acknowledge that under the actual cash or fair market value of its
liabilities of a bank. Assets include cash said CB manual, CB examiners must assets. This is not the proper procedure
and those due from banks, loans, recommend valuation reserves, when contemplated in Sec. 29 of the Central
discounts and advances, fixed assets and warranted, to be set up against the Bank Act. Even the CB Manual of
other property owned or acquired and corresponding asset account (p. 8, Examination Procedures does not confine
other miscellaneous assets. The amount of Objections to Santiago report). Tiaoqui examination of a bank solely with the
loans, discounts and advances to be himself, as author of the report determination of the books of the bank.
stated in the statement of condition as recommending the closure of petitioner The latter is part of auditing which should
provided for in the manual is computed bank admits that the valuation reserves not be confused with examination.
after deducting valuation reserves when should still be discussed with the Examination appraises the soundness of
deemed necessary. On the other hand, petitioner bank in compliance with the institution's assets, the quality and
liabilities are composed of demand standard examination procedure. Hence, character of management and determines
deposits, time and savings deposits, for the Monetary Board to unilaterally the institution's compliance with laws,
cashier's, manager's and certified checks, deduct an uncertain amount as valuation rules and regulations. Audit is a detailed
borrowings, due to head office, branches; reserves from the assets of a bank and to inspection of the institution's books,
and agencies, other liabilities and deferred conclude therefrom without sufficient accounts, vouchers, ledgers, etc. to
credits (Manual of Examination Procedure, basis that the bank is insolvent, would be determine the recording of all assets and
p. 9). The amounts stated in the balance totally unjust and unfair. liabilities. Hence, examination concerns
sheets or statements of condition The test of insolvency laid down in Section itself with review and appraisal, while
including the computation of valuation 29 of the Central Bank Act is measured by audit concerns itself with verification (CB
reserves when justified, are based determining whether the realizable assets Manual of Examination Procedures,
however, on the assumption that the bank of a bank are leas than its liabilities. General Instructions, p. 5). This Court
or company will continue in business Hence, a bank is solvent if the fair cash however, is not in the position to
indefinitely, and therefore, the networth value of all its assets, realizable within a determine how much cash or market
shown in the statement is in no sense an reasonable time by a reasonable prudent value shall be assigned to each of the
indication of the amount that might be person, would equal or exceed its total assets and liabilities of the bank to
realized if the bank or company were to liabilities exclusive of stock liability; but if determine their total realizable value. The
be liquidated immediately (Prentice Hall such fair cash value so realizable is not proper determination of these matters by
Encyclopedic Dictionary of Business sufficient to pay such liabilities within a using the actual cash value criteria
Finance, p. 48). Further, based on reasonable time, the bank is insolvent. belongs to the field of fact-finding
respondents' submissions, the allowance (Gillian v. State, 194 N.E. 360, 363, 207 expertise of the Central Bank and the
for probable losses on loans and discounts Ind. 661). Stated in other words, the Monetary Board. Notwithstanding the fact
represents the amount set up against insolvency of a bank occurs when the that the figures arrived at by the
current operations to provide for possible actual cash market value of its assets is respondent Board as to assets and
liabilities do not truly indicate their million. Likewise, the consolidated petitioner bank's closure was not
realizable value as they were merely statement of condition of petitioner bank unsound, unsafe and fraudulent banking
based on book value, We will however, as of January 25, 1985 prepared by the practices but the alleged insolvency
take a look at the figures presented by the Central Bank Authorized Deputy Receiver position of the bank (TSN, August 3,
Tiaoqui Report in concluding insolvency as Artemio Cruz shows that total assets 1990, p. 3316, Rollo, Vol. VIII).
of July 31, 1984 and at the figures amounting to P4,981,522,996.22 even Finally, another circumstance which point
presented by the CB authorized deputy exceeds total liabilities amounting to to the solvency of petitioner bank is the
receiver and by the Valenzuela, Aurellano P4,540,836,834.15. Based on the granting by the Monetary Board in favor of
and Tiaoqui Report which recommended foregoing, there was no valid reason for the former a credit line in the amount of
the liquidation of the bank by reason of the Valenzuela, Aurellano and Tiaoqui P3 billion along with the placing of
insolvency as o January 25,1985. report to finally recommend the petitioner bank under conservatorship by
The Tiaoqui report dated January 23, liquidation of petitioner bank instead of its virtue of M.B. Resolution No. 955 dated
1985, which was based on partial rehabilitation. July 27, 1984. This paved the way for the
examination findings on the bank's We take note of the exhaustive study and reopening of the bank on August 1, 1984
condition as of July 31, 1984, states that findings of the Cosico report on the after a self-imposed bank holiday on July
total liabilities of P5,282.1 million exceeds petitioner bank's having engaged in 23, 1984.
total assets of P4,947.2 million after unsafe, unsound and fraudulent banking On emergency loans and advances,
deducting from the assets valuation practices by the granting of huge Section 90 of RA 265 provides two types
reserves of P612.2 million. Since, as We unsecured loans to several subsidiaries of emergency loans that can be granted
have explained in our previous discussion and related companies. We do not see, by the Central Bank to a financially
that valuation reserves can not be legally however, that this has any material distressed bank:
deducted as there was no truthful and bearing on the validity of the closure. Sec. 90. ... In periods of emergency or of
complete evaluation thereof as admitted Section 34 of the RA 265, Central Bank imminent financial panic which directly
by the Tiaoqui report itself, then an Act empowers the Monetary Board to take threaten monetary and banking stability,
adjustment of the figures win show that action under Section 29 of the Central the Central Bank may grant banking
the liabilities of P5,282.1 million will not Bank Act when a bank "persists in institutions extraordinary advances
exceed the total assets which will amount carrying on its business in an unlawful or secured by any assets which are defined
to P5,559.4 if the 612.2 million allotted to unsafe manner." There was no showing as acceptable by by a concurrent vote of
valuation reserves will not be deducted whatsoever that the bank had persisted in at least five members of the Monetary
from the assets. There can be no basis committing unlawful banking practices Board. While such advances are
therefore for both the conclusion of and that the respondent Board had outstanding, the debtor institution may
insolvency and for the decision of the attempted to take effective action on the not expand the total volume of its loans or
respondent Board to close petitioner bank bank's alleged activities. During the period investments without the prior
and place it under receivership. from July 27, 1984 up to January 25, authorization of the Monetary Board.
Concerning the financial position of the 1985, when petitioner bank was under The Central Bank may, at its discretion,
bank as of January 25, 1985, the date of conservatorship no official of the bank was likewise grant advances to banking
the closure of the bank, the consolidated ever prosecuted, suspended or removed institutions, even during normal periods,
statement of condition thereof as of the for any participation in unsafe and for the purpose of assisting a bank in a
aforesaid date shown in the Valenzuela, unsound banking practices, and neither precarious financial condition or under
Aurellano and Tiaoqui report on the was the entire management of the bank serious financial pressures brought about
receivership of petitioner bank, dated replaced or substituted. In fact, in her by unforeseen events, or events which,
March 19, 1985, indicates that total testimony during the second referral though foreseeable, could not be
liabilities of 4,540.84 million does not hearing, Carlota Valenzuela, CB Deputy prevented by the bank concerned.
exceed the total assets of 4,981.53 Governor, testified that the reason for Provided, however, That the Monetary
Board has ascertained that the bank is not WHEREAS, it is the desire of the Central In view of the foregoing premises, We
insolvent and has clearly realizable assets Bank to rapidly diffuse the uncertainty believe that the closure of the petitioner
to secure the advances. Provided, further, that presently exists; bank was arbitrary and committed with
That a concurrent vote of at least five ... (M.B. Min. No. 35 dated July 27, 1984 grave abuse of discretion. Granting
members of the Monetary Board is cited in Respondents' Objections to in gratia argumenti that the closure was
obtained. (Emphasis ours) Santiago Report, p. 26; p. 3387, Rollo, based on justified grounds to protect the
The first paragraph of the aforequoted Vol. IX; Emphasis ours). public, the fact that petitioner bank was
provision contemplates a situation where A perusal of the foregoing "Whereas" suffering from serious financial problems
the whole banking community is clauses unmistakably show that the clear should not automatically lead to its
confronted with financial and economic reason for the decision to grant the liquidation. Section 29 of the Central Bank
crisis giving rise to serious and emergency loan to petitioner bank was provides that a closed bank may be
widespread confusion among the public, that the latter was suffering from financial reorganized or otherwise placed in such a
which may eventually threaten and distress and severe bank "run" as a result condition that it may be permitted to
gravely prejudice the stability of the of which it closed on July 23, 1984 and resume business with safety to its
banking system. Here, the emergency or that the release of the said amount is in depositors, creditors and the general
financial confusion involves the whole accordance with the Central Bank's full public.
banking community and not one bank or support to meet Banco Filipino's We are aware of the Central Bank's
institution only. The second situation on depositors' withdrawal requirements concern for the safety of Banco Filipino's
the other hand, provides for a situation (Excerpts of minutes of meeting on MB depositors as well as its creditors including
where the Central Bank grants a loan to a Min. No. 35, p. 25, Rollo, Vol. IX). Nothing itself which had granted substantial
bank with uncertain financial condition but therein shows that an extraordinary financial assistance up to the time of the
not insolvent. emergency situation exists affecting most latter's closure. But there are alternatives
As alleged by the respondents, the banks, not only as regards petitioner to permanent closure and liquidation to
following are the reasons of the Central bank. This Court thereby finds that the safeguard those interests as well as those
Bank in approving the resolution granting grant of the said emergency loan was of the general public for the failure of
the P3 billion loan to petitioner bank and intended from the beginning to fall under Banco Filipino or any bank for that matter
the latter's reopening after a brief self- the second paragraph of Section 90 of the may be viewed as an irreversible decline
imposed banking holiday: Central Bank Act, which could not have of the country's entire banking system
WHEREAS, the closure by Banco Filipino occurred if the petitioner bank was not and ultimately, it may reflect on the
Savings and Mortgage Bank of its Banking solvent. Where notwithstanding Central Bank's own viability. For one
offices on its own initiative has worked knowledge of the irregularities and unsafe thing, the Central Bank and the Monetary
serious hardships on its depositors and banking practices allegedly committed by Board should exercise strict supervision
has affected confidence levels in the the petitioner bank, the Central Bank even over Banco Filipino. They should take all
banking system resulting in a feeling of granted financial support to the latter and the necessary steps not violative of the
apprehension among depositors and placed it under conservatorship, such laws that will fully secure the repayment
unnecessary deposit withdrawals; actuation means that petitioner bank of the total financial assistance that the
WHEREAS, the Central Bank is charged could still be saved from its financial Central Bank had already granted or
with the function of administering the distress by adequate aid and management would grant in the future.
banking system; reform, which was required by Central ACCORDINGLY, decision is hereby
WHEREAS, the reopening of Banco Filipino Bank's duty to maintain the stability of the rendered as follows:
would require additional credit resources banking system and the preservation of 1. The motion for reconsideration in G.R.
from the Central Bank as well as an public confidence in it (Ramos v. Central Nos. 68878 and 81303, and the petitions
independent management acceptable to Bank, No. L-29352, October 4, 1971, 41 in G.R. Nos. 77255-58, 78766, 81304 and
the Central Bank; SCRA 565). 90473 are DENIED;
2. The petitions in G.R. No. 70054, 78767
and 78894 are GRANTED and the assailed
order of the Central Bank and the
Monetary Board dated January 25, 1985 is
hereby ANNULLED AND SET ASIDE. The
Central Bank and the Monetary Board are
ordered to reorganize petitioner Banco
Filipino Savings and Mortgage Bank and
allow the latter to resume business in the
Philippines under the comptrollership of
both the Central Bank and the Monetary
Board and under such conditions as may
be prescribed by the latter in connection
with its reorganization until such time that
petitioner bank can continue in business
with safety to its creditors, depositors and
the general public.
SO ORDERED.
G.R. No. 162270. April 06, 2005 with Feliciano Miranda, Jr. being initially with MEQCO thereafter subleasing the
ABACUS REAL ESTATE DEVELOPMENT appointed as Receiver. The legality of the property to the Laureano group.
CENTER, INC., Petitioners, closure was contested by the bank before In a letter dated August 30, 1989, Vicente
vs. the proper court. G. Puyat accepted the Laureano group’s
THE MANILA BANKING On November 11, 1988, the Central Bank, offer and granted it an "exclusive option
CORPORATION, Respondents. by virtue of Monetary Board (MB) to purchase" the lot and building for One
DECISION Resolution No. 505, ordered the Hundred Fifty Million Pesos
GARCIA, J.: liquidation of Manila Bank and designated (₱150,000,000.00). Later, or on October
Thru this appeal by way of a petition for Atty. Renan V. Santos as Liquidator. The 31, 1989, the building was leased to
review on certiorari under Rule 45 of the liquidation, however, was held in MEQCO for a period of ten (10) years
Rules of Court, petitioner Abacus Real abeyance pending the outcome of the pursuant to a contract of lease bearing
Estate Development Center, Inc. seeks earlier suit filed by Manila Bank regarding that date. On March 1, 1990, MEQCO
to set aside the following issuances of the the legality of its closure. Consequently, subleased the property to
Court of Appeals in CA-G.R. CV No. the designation of Atty. Renan V. Santos petitioner Abacus Real Estate
64877, to wit: as Liquidator was amended by the Central Development Center, Inc. (Abacus, for
1. Decision dated May 26, Bank on December 22, 1988 to that of short), a corporation formed by the
2003,1 reversing an earlier decision of the Statutory Receiver. Laureano group for the purpose, under
Regional Trial Court at Makati City, Branch In the interim, Manila Bank’s then acting identical provisions as that of the October
59, in an action for specific performance president, the late Vicente G. Puyat, in a 31, 1989 lease contract between Manila
and damages thereat commenced by the bid to save the bank’s investment, started Bank and MEQCO.
petitioner against the herein scouting for possible investors who could The Laureano group was, however, unable
respondent Manila Banking finance the completion of the building to finish the building due to the economic
Corporation; and earlier mentioned. On August 18, 1989, a crisis brought about by the failed
2. Resolution of February 17, group of investors, represented by Calixto December 1989 coup attempt. On account
2004,2 denying petitioner’s motion for Y. Laureano (hereafter referred to thereof, the Laureano group offered its
reconsideration. as Laureano group), wrote Vicente G. rights in Abacus and its "exclusive option
The petition is casts against the following Puyat offering to lease the building for ten to purchase" to Benjamin Bitanga
factual backdrop: (10) years and to advance the cost to (Bitanga hereinafter), for Twenty Million
Respondent Manila Banking Corporation complete the same, with the advanced Five Hundred Thousand Pesos
(Manila Bank, for brevity), owns a cost to be amortized and offset against (₱20,500,000.00). Bitanga would later
1,435-square meter parcel of land located rental payments during the term of the allege that because of the substantial
along Gil Puyat Avenue Extension, Makati lease. Likewise, the letter-offer stated that amount involved, he first had to talk with
City and covered by Transfer Certificate of in consideration of advancing the Atty. Renan Santos, the Receiver
Title (TCT) No. 132935 of the Registry of construction cost, the group wanted to be appointed by the Central Bank, to discuss
Deeds of Makati. Prior to 1984, the bank given the "exclusive option to purchase" Abacus’ offer. Bitanga further alleged that,
began constructing on said land a 14- the building and the lot on which it was over lunch, Atty. Santos then verbally
storey building. Not long after, however, constructed. approved his entry into Abacus and his
the bank encountered financial difficulties Since no disposition of assets could be take-over of the sublease and option to
that rendered it unable to finish made due to the litigation concerning purchase.
construction of the building. Manila Bank’s closure, an arrangement On March 30, 1990, the Laureano group
On May 22, 1987, the Central Bank of the was thought of whereby the property transferred and assigned to Bitanga all of
Philippines, now Bangko Sentral ng would first be leased to Manila Equities its rights in Abacus and the "exclusive
Pilipinas, ordered the closure of Manila Corporation (MEQCO, for brevity), a option to purchase" the subject land and
Bank and placed it under receivership, wholly-owned subsidiary of Manila Bank, building.
On September 16, 1994, Abacus sent a WHEREFORE, premises considered, On June 25, 2003, Abacus filed a Motion
letter to Manila Bank informing the latter judgment is hereby rendered in favor of for Reconsideration, followed, with leave
of its desire to exercise its "exclusive the plaintiff as follows: of court, by an Amended Motion for
option to purchase". However, Manila 1. Ordering the defendant [Manila Bank] Reconsideration. Pending resolution of its
Bank refused to honor the same. to immediately sell to plaintiff the parcel motion for reconsideration, as amended,
Such was the state of things when, on of land and building, with an area of 1,435 Abacus filed a Motion to Dismiss
November 10, 1995, in the Regional Trial square meters and covered by TCT No. Appeal,7 therein praying for the dismissal
Court (RTC) at Makati, Abacus Real Estate 132935 of the Makati Registry of Deeds, of Manila Bank’s appeal from the RTC
Development Center, Inc. filed a situated along Sen. Gil J. Puyat Ave. in decision of May 27, 1999, contending that
complaint3 for specific performance and Makati City, at the price of One Hundred said appeal was filed out of time.
damages against Manila Bank and/or the Fifty Million (₱150,000.000.00) Pesos in In its Resolution of February 17,
Estate of Vicente G. Puyat. In its accordance with the said exclusive option 2004,8 the appellate court denied Abacus’
complaint, docketed as Civil Case No. 96- to purchase, and to execute the aforementioned motion for
1638 and raffled to Branch 59 of the appropriate deed of sale therefor in favor reconsideration.
court, plaintiff Abacus prayed for a of plaintiff; Hence, this recourse by petitioner Abacus
judgment ordering Manila Bank, inter alia, 2. Ordering the defendant [Manila Bank] Real Estate Development Center, Inc.
to sell, transfer and convey unto it for to pay plaintiff the amount of Two Million As we see it, two (2) issues commend
₱150,000,000.00 the land and building in (₱2,000,000.00) Pesos representing themselves for the resolution of the Court,
dispute "free from all liens and reasonable attorney’s fees; namely:
encumbrances", plus payment of damages 3. Ordering the DISMISSAL of defendant’s WHETHER OR NOT RESPONDENT BANK’S
and attorney’s fees. counterclaim, for lack of merit; and APPEAL TO THE COURT OF APPEALS WAS
Subsequently, defendant Manila Bank, 4. With costs against the defendant. FILED ON TIME; and
followed a month later by its co-defendant SO ORDERED. WHETHER OR NOT PETITIONER ABACUS
Estate of Vicente G. Puyat, filed separate Its motion for reconsideration of the HAS ACQUIRED THE RIGHT TO PURCHASE
motions to dismiss the complaint. aforementioned decision having been THE LOT AND BUILDING IN QUESTION.
In an Order dated April 15, 1996, the trial denied by the trial court in its Order of We rule for respondent Manila Bank on
court granted the motion to dismiss filed August 17, 1999,5 Manila Bank then went both issues.
by the Estate of Vicente G. Puyat, but on to the Court of Appeals whereat its Addressing the first issue, petitioner
denied that of Manila Bank and directed appellate recourse was docketed as CA- submits that respondent bank’s appeal to
the latter to file its answer. G.R. CV No. 64877. the Court of Appeals from the adverse
Before plaintiff Abacus could adduce As stated at the threshold hereof, the decision of the trial court was belatedly
evidence but after pre-trial, defendant Court of Appeals, in a decision dated filed. Elaborating thereon, petitioner
Manila Bank filed a Motion for Partial May 26, 2003,6 reversed and set aside alleges that respondent bank received a
Summary Judgment, followed by the appealed decision of the trial court, copy of the May 27, 1999 RTC decision on
a Supplement to Motion for Partial thus: June 22, 1999, hence, petitioner had 15
Summary Judgment. While initially WHEREFORE, finding serious reversible days, or only up to July 7, 1999 within
opposed, Abacus would later join Manila error, the appeal is GRANTED. which to take an appeal from the same
Bank in submitting the case for summary The Decision dated May 27, 1999 of the decision or move for a reconsideration
judgment. Regional Trial Court of Makati City, Branch thereof. Petitioner alleges that respondent
Eventually, in a decision dated May 27, 59 is REVERSED and SET ASIDE. furnished the trial court with a copy of its
1999,4 the trial court rendered judgment Cost of the appeal to be paid by the Motion for Reconsideration only on July 7,
for Abacus in accordance with the latter’s appellee. 1999, the last day for filing an appeal.
prayer in its complaint, thus: SO ORDERED. Under Section 3, Rule 41 of the 1997
Rules of Civil Procedure, "the period of
appeal shall be interrupted by a timely personally on July 7, 1999 contains the on July 6, 1999, as claimed by the
motion for new trial or reconsideration". following self-explanatory statements, to appellant.
Since, according to petitioner, respondent wit: Fourthly, the certification issued on
filed its Motion for Reconsideration on the 2. Defendant [Manila Bank] also filed with October 2, 2003 by Atty. Jayme M. Luy,
last day of the period to appeal, it only this Honorable Court a Motion for Branch Clerk of Court, Branch 59, RTC in
had one (1) more day within which to file Reconsideration of the Decision dated 27 Makati City, has no consequence because
an appeal, so much so that when it May 1999 promulgated by this Honorable Atty. Luy based his data only on page 3 of
received on August 23, 1999 a copy of the Court in this case, and served a copy the 1995 Civil Case Docket Book without
trial court’s order denying its Motion for thereof to the plaintiff, by registered mail reference to the original records which
Reconsideration, respondent bank had yesterday, 6 July 1999, due to lack of were already with the Court of Appeals.
only up to August 24, 1999 within which material time and messenger to effect Fifthly, since the appellant received the
to file the corresponding appeal. As personal service and filing. denial of the motion for reconsideration on
respondent bank appealed the decision of 3. In order for this Honorable Court to be August 23, 1999, it had until August 25,
the trial court only on August 25, 1999, able to review defendant [Manila Bank’s] 1999 within which to perfect its appeal
petitioner thus argues that respondent’s Motion for Reconsideration without from the decision of the RTC because 2
appeal was filed out of time. awaiting the mailed copy, defendant days remained in its reglementary period
As a counterpoint, respondent alleges that [Manila Bank] is now furnishing this to appeal. It is not disputed that the
it sent the trial court a copy of its Motion Honorable Court with a copy of said appellant filed its notice of appeal and
for Reconsideration on July 6, 1999, motion, as well as the entry of paid the appellate court docket fees on
through registered mail. Having sent a appearance, by personal service. August 25, 1999.
copy of its Motion for Reconsideration to The aforecited reference in These circumstances preponderantly
the trial court with still two (2) days left to the manifestation to the mailing of demonstrate that the appellant’s appeal
appeal, respondent then claims that its the motion for reconsideration on July 6, was not late by one day. (Emphasis in the
filing of an appeal on August 25, 1999, 1999, in light of the handwritten original)
two (2) days after receiving the Order of annotations adverted to herein, renders Petitioner would, however, contest the
the trial court denying its Motion for beyond doubt the appellant’s insistence of above findings of the appellate court,
Reconsideration, was within the filing through registered mail on July 6, stating, among other things, that if it were
reglementary period. 1999. true that respondent filed its Motion for
Agreeing with respondent, the appellate Thirdly, the registry return cards attached Reconsideration by registered mail and
court declared that respondent’s appeal to the envelopes separately addressed then furnished the trial court with a copy
was filed on time. Explained that court in and mailed to the RTC and the appellee’s of said Motion the very next day, then
its Resolution of February 17, 2004, counsel, found in pages 728 and 729 of the rollo should have had two copies of
denying petitioner’s motion for the rollo, indicate that the contents were the Motion for Reconsideration in
reconsideration: the motion for reconsideration and question. Respondent, on the other hand,
Firstly, the file copy of the motion for the formal entry of appearance. Although insists that it indeed filed a Motion for
reconsideration contains the written the appellee argues that the handwritten Reconsideration on July 6, 1999 through
annotations "Registry Receipt No. 1633 annotations of what were contained by the registered mail.
Makati P.O. 7-6-99" in its page 13. The envelopes at the time of mailing was It is evident that the issue raised by
presence of the annotations proves that easily self-serving, the fact remains that petitioner relates to the correctness of the
the motion for reconsideration was truly the envelope addressed to the appellee’s factual finding of the Court of Appeals as
filed by registered mail on July 6, 1999 counsel appears thereon to have been to the precise date when respondent filed
through registry receipt no. 1633. received on July 6, 1999 ("7/6/99"), which its motion for reconsideration before the
Secondly, the enhances the probability of the motion for trial court. Such issue, however, is beyond
appellant’s manifestation filed in the RTC reconsideration being mailed, hence filed, the province of this Court to review. It is
not the function of the Court to analyze or the receiver whose duty it is to administer institution, it shall be disclosed that the
weigh all over again the evidence or the assets for the benefit of the creditors condition of the same is one of insolvency,
premises supportive of such factual of the bank. Thus, the appointment of a or that its continuance in business would
determination.9 The Court has consistently receiver operates to suspend the authority involve probable loss to its depositors or
held that the findings of the Court of of the bank and of its directors and creditors, it shall be the duty of the
Appeals and other lower courts are, as a officers over its property and effects, such department head concerned forthwith, in
rule, accorded great weight, if not binding authority being reposed in the receiver, writing, to inform the Monetary Board of
upon it,10 save for the most compelling and in this respect, the receivership is the facts, and the Board may, upon
and cogent reasons.11 As nothing in the equivalent to an injunction to restrain the finding the statements of the department
record indicates any of such exceptions, bank officers from intermeddling with the head to be true, forbid the institution to
the factual conclusion of the appellate property of the bank in any way. do business in the Philippines and shall
court that respondent filed its appeal on With respondent bank having been designate an official of the Central Bank
time, supported as it is by substantial already placed under receivership, its as receiver to immediately take charge of
evidence, must be affirmed. officers, inclusive of its acting president, its assets and liabilities, as expeditiously
Going to the second issue, petitioner Vicente G. Puyat, were no longer as possible collect and gather all the
insists that the option to purchase the lot authorized to transact business in assets and administer the same for the
and building in question granted to it by connection with the bank’s assets and benefit of its creditors, exercising all the
the late Vicente G. Puyat, then acting property. Clearly then, the "exclusive powers necessary for these
president of Manila Bank, was binding option to purchase" granted by Vicente G. purposes including, but not limited to,
upon the latter. On the other hand, Puyat was and still is unenforceable bringing suits and foreclosing mortgages
respondent has consistently maintained against Manila Bank.13 in the name of the banking institution.
that the late Vicente G. Puyat had no Petitioner, however, asseverates that the (Emphasis supplied)
authority to act for and represent Manila "exclusive option to purchase" was ratified Clearly, the receiver appointed by the
Bank, the latter having been placed under by Manila Bank’s receiver, Atty. Renan Central Bank to take charge of the
receivership by the Central Bank at the Santos, during a lunch meeting held with properties of Manila Bank only had
time of the granting of the "exclusive Benjamin Bitanga in March 1990. authority to administer the same for
option to purchase." Petitioner’s argument is tenuous at best. the benefit of its creditors. Granting or
There can be no quibbling that respondent Concededly, a contract unenforceable for approving an "exclusive option to
Manila Bank was under receivership, lack of authority by one of the parties may purchase" is not an act of administration,
pursuant to Central Bank’s MB Resolution be ratified by the person in whose name but an act of strict ownership, involving,
No. 505 dated May 22, 1987, at the time the contract was executed. However, even as it does, the disposition of property of
the late Vicente G. Puyat granted the assuming, in gratia argumenti, that Atty. the bank. Not being an act of
"exclusive option to purchase" to the Renan Santos, Manila Bank’s receiver, administration, the so-called "approval" by
Laureano group of investors. Owing to this approved the "exclusive option to Atty. Renan Santos amounts to no
defining reality, the appellate court was purchase" granted by Vicente G. Puyat, approval at all, a bank receiver not being
correct in declaring that Vicente G. Puyat the same would still be of no force and authorized to do so on his own.
was without authority to grant the effect. For sure, Congress itself has recognized
exclusive option to purchase the lot and Section 29 of the Central Bank Act, as that a bank receiver only has powers of
building in question. The invocation by the amended,14 pertinently provides: administration. Section 30 of the New
appellate court of the following Sec. 29. Proceedings upon insolvency. – Central Bank Act15 expressly provides that
pronouncement in Villanueva vs. Court of Whenever, upon examination by the head "[t]he receiver shall immediately gather
Appeals12 was apropos, to say the least: of the appropriate supervising and and take charge of all the assets and
… the assets of the bank pass beyond its examining department or his examiners or liabilities of the institution, administer the
control into the possession and control of agents into the condition of any banking 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.
G.R. No. 114870 May 26, 1995 deed of sale covering the two (2) disputed payable in cash within fifteen (15) days
MIGUELA R. VILLANUEVA, RICHARD lots, which she did but without the from receipt of approval of the offer."
R. VILLANUEVA, and MERCEDITA signature of her husband Celestino. In mid-April 1985, appellant returned to
VILLANUEVA-TIRADOS, petitioners, Miguela Villanueva, however, never got the country. He immediately verified the
vs. the loan she was expecting. Subsequent status of his offer with the PVB, now
COURT OF APPEALS, CENTRAL BANK attempts to contact Jose Viudez proved under the control of CB, where he was
OF THE PHILIPPINES, ILDEFONSO C. futile, until Miguela Villanueva thereafter informed that the same had already been
ONG, and PHILIPPINE VETERANS found out that new titles over the two (2) approved. On 16 April 1985, appellant
BANK, respondents. lots were already issued in the name of formally informed CB of his desire to pay
the PVB. It appeared upon inquiry from the subject balance provided the bank
DAVIDE, JR., J.: the Registry of Deeds that the original should execute in his favor the
Do petitioners have a better right than titles of these lots were canceled and new corresponding deed of conveyance. The
private respondent Ildefonso Ong to ones were issued to Jose Viudez, which in letter was not answered.
purchase from the Philippine Veterans turn were again canceled and new titles Plaintiff-appellant sent follow-up Letters
Bank (PVB) the two parcels of land issued in favor of Andres Sebastian, until that went unheeded, the last of which was
described as Lot No. 210-D-1 and Lot No. finally new titles were issued in the name on 21 May 1987. On 26 May 1987,
210-D-2 situated at Muntinglupa, Metro of PNB [should be PVB] after the lots were appellant's payment for the balance of the
Manila, containing an area of 529 and 300 foreclosed for failure to pay the loan subject properties were accepted by CB
square meters, respectively? This is the granted in the name of Andres Sebastian. under Official Receipt #0816.
principal legal issue raised in this petition. Miguela Villanueva sought to repurchase On 17 September 1987, plaintiff-appellant
In its decision of 27 January 1994 in CA- the lots from the PVB after being informed through his counsel, sent a letter to CB
G.R. CV No. 35890,1 the Court of Appeals that the lots were about to be sold at demanding for the latter to execute the
held for Ong, while the trial court, Branch auction. The PVB told her that she can corresponding deed of conveyance in
39 of the Regional Trial Court (RTC) of redeem the lots for the price of favor of appellant. CB did not bother to
Manila, ruled for the petitioners in its joint P110,416.00. Negotiations for the answer the same. Hence, the instant case.
decision of 31 October 1991 in Civil Case repurchase of the lots nevertheless were While appellant's action for specific
No. 87-425502 and Sp. Proc. No. 85- stalled by the filing of liquidation performance against CB was pending,
32311.3 proceedings against the PVB on August of Miguela Villanueva and her children filed
The operative antecedent facts are set 1985. their claims with the Liquidation court.
forth in the challenged decision as follows: Plaintiff-appellant [Ong] on the other hand (Appellant's Brief, pp. 3-4).4
The disputed lots were originally owned by expounds on his claim over the disputed From the pleadings, the following
the spouses Celestino Villanueva and lots in this manner: additional or amplificatory facts are
Miguela Villanueva, acquired by the latter In October 1984, plaintiff-appellant established:
during her husband's sojourn in the United offered to purchase two pieces of Land The efforts of Miguela Villanueva to
States since 1968. Sometime in 1975, that had been acquired by PVB through reacquire the property began on 8 June
Miguela Villanueva sought the help of one foreclosure. To back-up plaintiff- 1983 when she offered to purchase the
Jose Viudez, the then Officer-in-Charge of appellant's offer he deposited the sum of lots for P60,000.00 with a 20%
the PVB branch in Makati if she could P10,000.00. downpayment and the balance payable in
obtain a loan from said bank. Jose Viudez In 23 November 1984, while appellant five years on a quarterly amortization
told Miguela Villanueva to surrender the was still abroad, PVB approved his subject basis.5
titles of said lots as collaterals. And to offer under Board Resolution No. 10901- Her offer not having been
further facilitate a bigger loan, Viudez, in 84. Among the conditions imposed by PVB accepted,6 Miguela Villanueva increased
connivance with one Andres Sebastian, is that: "The purchase price shall be her bid to P70,000.00. It was only at this
swayed Miguela Villanueva to execute a P110,000.00 (Less deposit of P10,000.00)
time that she disclosed to the bank her lots which were mortgaged in favor of the status as conjugal properties. It further
private transactions with Jose Viudez.7 PVB thru the falsification committed by held that by reason of estoppel, the
After this and her subsequent offers were Jose Viudez, the manager of the PVB transactions having been perpetrated by a
rejected,8 Miguela sent her sealed bid of Makati Branch, in collusion with Andres responsible officer of the PVB, and for
P110,417.00 pursuant to the written Sebastian; that upon discovering this reasons of equity, the PVB should not be
advice of the vice president of the PVB.9 fraudulent transaction, she offered to allowed to charge interest on the price of
The PVB was placed under receivership purchase the property from the bank; and the lots; hence, the purchase price should
pursuant to Monetary Board (MB) that she reported the matter to the be the PVB's claim as of 29 August 1984
Resolution No. 334 dated 3 April 1985 and PC/INP Criminal Investigation Service when it considered the sealed bids, i.e.,
later, under liquidation pursuant to MB Command, Camp Crame, and after P110,416.20, which should be borne by
Resolution No. 612 dated 7 June 1985. investigation, the CIS officer Miguela Villanueva alone.
Afterwards, a petition for liquidation was recommended the filing of a complaint for The dispositive portion of the decision of
filed with the RTC of Manila, which was estafa through falsification of public the trial court reads as follows:
docketed as Sp. Proc. No. 85-32311 and documents against Jose Viudez and WHEREFORE, judgment is hereby
assigned to Branch 39 of the said court. Andres Sebastian. She then asked that rendered as follows:
On 26 May 1987, Ong tendered the sum the lots be excluded from the assets of 1. Setting aside the order of this court
of P100,000.00 representing the balance the PVB and be conveyed back to issued on June 15, 1989 under the caption
of the purchase price of the litigated her. 16 Later, in view of the death of her Civil Case No. 87-42550 entitled
lots. 10 An employee of the PVB received husband, she amended her claim to "Ildefonso Ong vs. Central Bank of the
the amount conditioned upon approval by include her children, herein petitioners Phils., et al.;
the Central Bank Mercedita Villanueva-Tirados and Richard 2. Dismissing the claim of Ildefonso Ong
liquidator. 11 Ong's demand for a deed of Villanueva. 17 over the two parcels of land originally
conveyance having gone unheeded, he On 31 October 1991, the trial court covered by TCT No. 438073 and 366364
filed on 23 October 1987 with the RTC of rendered judgment 18 holding that while in the names of Miguela Villanueva and
Manila an action for specific performance the board resolution approving Ong's offer Celestino Villanueva, respectively which
against the Central Bank.12 It was raffled may have created in his favor a vested are now covered by TCT No. 115631 and
to Branch 47 thereof. Upon learning that right which may be enforced against the 115632 in the name of the PVB;
the PVB had been placed under PVB at the time or against the liquidator 3. Declaring the Deed of Absolute Sale
liquidation, the presiding judge of Branch after the bank was placed under bearing the signature of Miguela
47 ordered the transfer of the case to liquidation proceedings, the said right was Villanueva and the falsified signature of
Branch 39, the liquidation court.13 no longer enforceable, as he failed to Celestino [sic] Viudez under date May 6,
On 15 June 1989, then Presiding Judge exercise it within the prescribed 15-day 1975 and all transactions and related
Enrique B. Inting issued an order allowing period. As to Miguela's claim, the court documents executed thereafter referring
the purchase of the two lots at the price of ruled that the principle of estoppel bars to the two lots covered by the above
P150,000.00. 14 The Central Bank her from questioning the transaction with stated titles as null and void;
liquidator of the PVB moved for the Viudez and the subsequent transactions 4. Ordering the Register of Deeds of
reconsideration of the order asserting that because she was a co-participant thereto, Makati which has jurisdiction over the two
it is contrary to law as the disposal of the though only with respect to her undivided parcels of land in question to re-instate in
lots should be made through public one-half (1/2) conjugal share in the his land records, TCT No. 438073 in the
auction. 15 disputed lots and her one-third (1/3) name of Miguela Villanueva and TCT No.
On 26 July 1989, Miguela Villanueva filed hereditary share in the estate of her 366364 in the name of Celestino
her claim with the liquidation court. She husband. Villanueva who were the registered
averred, among others, that she is the Nevertheless, the trial court allowed her to owners thereof, and to cancel all
lawful and registered owner of the subject purchase the lots if only to restore their
subsequent titles emanating therefrom; The conclusion reached by the lower court as a party respondent in this case
and favorable to Miguela Villanueva is, as aptly in lieu of the Central Bank. 26 The
5. Ordering the Liquidator to reconvey the pointed out by plaintiff-appellant, indeed petitioners did not object to the
two lots described in TCT No. 115631 and confusing. While the lower court's decision substitution. 27
115632 and executing the corresponding declared Miguela Villanueva as estopped Later, in its Comment dated 10 October
deed of conveyance of the said lots upon from recovering her proportionate share 1994, the PVB stated that it "submits to
the payment of One Hundred Ten and interest in the two (2) disputed lots and shall abide by whatever judgment this
Thousand Four Hundred Sixteen and for being a "co-participant" in the Honorable Supreme Tribunal may
20/100 (P110,416.20) Pesos without fraudulent scheme perpetrated by Jose announce as to whom said lands may be
interest and less the amount deposited by Viudez and Andres Sebastian — a factual awarded without any touch of preference
the claimant, Miguela Villanueva in finding which We conform to and which in favor of one or the other party litigant
connection with the bidding where she Miguela Villanueva does not controvert in in the instant
had participated and conducted by the this appeal by not filing her appellee's case." 28
PVB on August 29, 1984. brief, yet it ordered the reconveyance of In support of their contention that the
Cost against Ildefonso Ong and the PVB. the disputed lots to Miguela Villanueva as Court of Appeals gravely erred in holding
SO ORDERED. 19 the victorious party upon her payment of that Ong is better entitled to purchase the
Only Ong appealed the decision to the P110,416.20. Would not estoppel defeat disputed lots, the petitioners maintain that
Court of Appeals. The appeal was the claim of the party estopped? If so, Ong is a disqualified bidder, his bid of
docketed as CA-G.R. CV No. 35890. In its which in fact must be so, would it not then P110,000.00 being lower than the starting
decision of 27 January 1994, the Court of be absurd or even defiant for the lower price of P110,417.00 and his deposit of
Appeals reversed the decision of the trial court to finally entitle Miguela Villanueva P10,000.00 being less than the required
court and ruled as follows: to the disputed lots after having been 10% of the bid price; that Ong failed to
WHEREFORE, premises considered, the precluded from assailing their subsequent pay the balance of the price within the 15-
assailed decision is hereby REVERSED and conveyance in favor of Jose Viudez by day period from notice of the approval of
SET ASIDE, and a new one entered reason of her own negligence and/or his bid; and that his offer of payment is
ordering the disputed-lots be awarded in complicity therein? The intended punitive ineffective since it was conditioned on
favor of plaintiff-appellant Ildefonso Ong effect of estoppel would merely be a dud if PVB's execution of the deed of absolute
upon defendant-appellee Central Bank's this Court leaves the lower court's sale in his favor.
execution of the corresponding deed of conclusion unrectified. 21 On the other hand, Ong submits that his
sale in his favor. 20 Their motion for reconsideration 22 having offer, though lower than Miguela
In support thereof, the Court of Appeals been denied, 23 the petitioners filed this ViIlanueva's bid by P417.00, is much
declared that Ong's failure to pay the petition for review on certiorari. 24 better, as the same is payable in cash,
balance within the prescribed period was Subsequently, the respondent Central while Villanueva's bid is payable in
excusable because the PVB neither Bank apprised this Court that the PVB was installment; that his payment could not be
notified him of the approval of his bid nor no longer under receivership or liquidation said to have been made after the
answered his letters manifesting his and that the PVB has been back in expiration of the 15-day period because
readiness to pay the balance, for which operation since 3 August 1992. It then this period has not even started to run,
reason he could not have known when to prayed that it be dropped from this case there being no notice yet of the approval
reckon the 15-day period prescribed under or at least be substituted by the PVB, of his offer; and that he has a legal right
its resolution. It went further to suggest which is the real party in interest. 25 to compel the PVB or its liquidator to
that the Central Bank was in estoppel In its Manifestation and Entry of execute the corresponding deed of
because it accepted Ong's late-payment of Appearance, the PVB declared that it conveyance.
the balance. As to the petitioners' claim, submits to the jurisdiction of this Court There is no doubt that the approval of
the Court of Appeals stated: and that it has no objection to its inclusion Ong's offer constitutes an acceptance, the
effect of which is to perfect the contract of appointed, the assets of the bank pass The assets of an institution under
sale upon notice thereof to Ong. 29 The beyond its control into the possession and receivership or liquidation shall be
peculiar circumstances in this case, control of the receiver whose duty it is to deemed in custodia legis in the hands of
however, pose a legal obstacle to his administer the assets for the benefit of the receiver or liquidator and shall, from
claim of a better right and deny support to the creditors of the bank.31 Thus, the the moment of such receivership or
the conclusion of the Court of Appeals. appointment of a receiver operates to liquidation, be exemp from any order of
Ong did not receive any notice of the suspend the authority of the bank and of garnishment, levy, attachment, or
approval of his offer. It was only its directors and officers over its property execution.
sometime in mid-April 1985 when he and effects, such authority being reposed In a nutshell, the insolvency of a bank and
returned from the United States and in the receiver, and in this respect, the the consequent appointment of a receiver
inquired about the status of his bid that he receivership is equivalent to an injunction restrict the bank's capacity to act,
came to know of the approval. to restrain the bank officers from especially in relation to its property,
It must be recalled that the PVB was intermeddling with the property of the Applying Article 1323 of the Civil Code,
placed under receivership pursuant to the bank in any way. 32 Ong's offer to purchase the subject lots
MB Resolution of 3 April 1985 after a Section 29 of the Central Bank Act, as became ineffective because the PVB
finding that it was insolvent, illiquid, and amended, provides thus: became insolvent before the bank's
could not operate profitably, and that its Sec. 29. Proceedings upon insolvency. — acceptance of the offer came to his
continuance in business would involve Whenever, upon examination by the head knowledge. Hence, the purported contract
probable loss to its depositors and of the appropriate supervising or of sale between them did not reach the
creditors. The PVB was then prohibited examining department or his examiners or stage of perfection. Corollarily, he cannot
from doing business in the Philippines, agents into the condition of any bank or invoke the resolution of the bank
and the receiver appointed was directed to non-bank financial intermediary approving his bid as basis for his alleged
"immediately take charge of its assets and performing quasi-banking functions, it right to buy the disputed properties.
liabilities, as expeditiously as possible shall be disclosed that the condition of the Nor may the acceptance by an employee
collect and gather all the assets and same is one of insolvency, or that its of the PVB of Ong's payment of
administer the same for the benefit of its continuance in business would involve P100,000.00 benefit him since the receipt
creditors, exercising all the powers probable loss to its depositors or creditors, of the payment was made subject to the
necessary for these purposes." shall be the duty of the department head approval by the Central Bank liquidator of
Under Article 1323 of the Civil Code, an concerned forthwith, in writing, to inform the PVB thus:
offer becomes ineffective upon the death, the Monetary Board of the facts. The Payment for the purchase price of the
civil interdiction, insanity, or insolvency of Board may, upon finding the statements former property of Andres Sebastian per
either party before acceptance is of the department head to be true, forbid approved BR No. 10902-84 dated
conveyed. The reason for this is that: the institution to do business in the 11/13/84, subject to the approval of CB
[T]he contract is not perfected except by Philippines and designate an official of the liquidator. 33
the concurrence of two wills which exist Central Bank or a person of recognized This payment was disapproved on the
and continue until the moment that they competence in banking or finance as ground that the subject property was
occur. The contract is not yet perfected at receiver to immediately take charge of its already in custodia legis, and hence,
any time before acceptance is conveyed; assets and liabilities, as expeditiously as disposable only by public auction and
hence, the disappearance of either party possible collect and gather all the assets subject to the approval of the liquidation
or his loss of capacity before perfection and administer the same for the benefit of court. 34
prevents the contractual tie from being its creditors . . . exercising all the powers The Court of Appeals therefore erred when
formed. 30 necessary for these purposes. . . . it held that Ong had a better right than
It has been said that where upon the xxx xxx xxx the petitioners to the purchase of the
insolvency of a bank a receiver therefor is 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.
G.R. No. 141297 October 8, extrajudicial foreclosure proceedings over Certiorari for having been filed beyond the
2001 the mortgaged lots. On August 22, 1984, reglementary period.8
DOMINGO R. MANALO, petitioner, the Pasay City property was sold at a In the meantime, on June 22, 1992,
vs. public auction to the respondent itself, respondent petitioned the Regional Trial
COURT OF APPEALS (Special Twelfth after tendering the highest bid. The Court, Branch 112, of Pasay City, herein
Division) and PAIC SAVINGS AND respondent then caused the annotation of court a quo, for the issuance of a writ of
MORTGAGE BANK, respondents. the corresponding Sheriff's Certificate of possession for the subject property in Civil
PUNO, J.: Sale3 on the title of the land on December Case No. 9011. This is in view of the
This petition for certiorari seeks the 4, 1984. After the lapse of one year, or consolidation of its ownership over the
review of the Decision of the Court of the statutory period extended by law to a same as mentioned earlier. Vargas and S.
Appeals in C.A.-G.R. SP. No. 50341 mortgagor to exercise his/her right of Villanueva Enterprises, Inc. filed their
promulgated December 23, 1999, which redemption, title was consolidated in opposition thereto. After which, trial
affirmed an Order issued by the Regional respondent's name for failure of Vargas to ensued.
Trial Court, Branch 112, Pasay City, in redeem. During the pendency of Civil Case No.
Civil Case No. 9011 dated December 9, On October 29, 1986, the Central Bank of 9011 (for the issuance of a writ of
1998. the Philippines filed a Petition4 for possession), Vargas, on December 23,
On July 19, 1983, S. Villanueva assistance in the liquidation of the 1992, executed a Deed of Absolute
Enterprises, represented by its president, respondent with the Regional Trial Court. Sale9 selling, transferring, and conveying
Therese Villanueva Vargas, obtained a The petition was given due course in an ownership of the disputed lot in favor of a
loan of three million pesos Order5 dated May 19, 1987. certain Armando Angsico. Notwithstanding
(P3,000,000.00) and one million pesos It appears that from the years 1986 to this sale, Vargas, still representing herself
(P1,000,000.00) from the respondent 1991, Vargas negotiated with the to be the lawful owner of the property,
PAIC Savings and Mortgage Bank and the respondent (through its then liquidator, leased the same to petitioner Domingo R.
Philippine American Investments the Central Bank) for the repurchase of Manalo on August 25, 1994. Pertinent
Corporation (PAIC), respectively. To the foreclosed property. The negotiations, provisions of the lease agreement 10 state:
secure payment of both debts, Vargas however, fizzled out as Vargas cannot "3. (a) The lease is for a period of ten
executed in favor of the respondent and afford the repurchase price fixed by the year lease (sic), involving 450 square
PAIC a Joint First Mortgage1 over two respondent based on the appraised value meters, a portion of the above 919 square
parcels of land registered under her name. of the land at that time. On October 4, meter property.
One of the lots, located in Pasay City with 1991, Vargas filed a case for annulment of x x x (d) The LESSEE has to introduce into
an area of nine hundred nineteen square mortgage and extrajudicial foreclosure the said 450 square meter premises
meters (919 sq. m.) and covered by TCT sale before Branch 116 of the Pasay City improvements thereon (sic) consisting of
No. 6076, is the subject of the present Regional Trial Court. On July 22, 1993, one story building to house a Karaoke
case. Section 2 of the mortgage contract the court rendered a decision6 dismissing Music Restaurant Business, which
states that "the properties mortgaged the complaint and upholding the validity improvements constructed thereof (sic),
therein shall include all buildings and of the mortgage and foreclosure sale. On upon the termination of the lease
improvements existing on the mortgaged appeal, the appellate court upheld the contract, by said LESSEE be surrendered
property at the time of the execution of assailed judgment and declared the said in favor of the LESSOR (sic).''11
the mortgage contract and thereafter."2 mortgage and foreclosure proceedings to Later, on June 29, 1997, Armando
S. Villanueva Enterprises defaulted in be in accord with law.7 This decision of the Angsico, as buyer of the property,
paying the amortizations due. Despite Court of Appeals subsequently became assigned his rights therein to petitioner. 12
repeated demands from the respondent, it final and executory when we summarily On April 21, 1998, the court a quo
failed to settle its loan obligation. dismissed Vargas' Petition for Review on granted the petition for the issuance of
Accordingly, respondent instituted the Writ of Possession.13 The writ was
subsequently issued on April 24, 1998, agreement,19 this time with the is exclusively vested with jurisdiction to
the pertinent portion of which reads:14 respondent, represented by its liquidator, hear all matters and incidents on
"NOW THEREFORE you are hereby over the same 450 sq. m. portion of the liquidation pursuant to Section 29,
commanded that you cause oppositors lot. The contract fixed a period of one Republic Act No. 265, otherwise known as
THERESE VILLANUEVA VARGAS and S. month beginning January 28, 1999, The Central Bank Act, as amended.
VILLANUEVA ENTERPRISES, INC. and any renewable for another month at the III. Whether or not the public respondent
and all persons claiming rights or title exclusive option of the lessor, respondent committed grave abuse of discretion
under them, to forthwith vacate and PAIC Bank. and/or was patently in error in affirming
surrender the possession of subject On December 23, 1999, the appellate the ruling of the trial court, totally
premises in question known as that parcel court rendered the impugned Decision, disregarding the arguments raised in
of land and improvements covered by TCT dismissing the petition, thus: petitioner's supplemental motion for
No. 6076 of the Registry of Deeds of "All told, WE find the Order, subject of the reconsideration only through a minute
Pasay City; you are hereby further instant Petition for Certiorari and order and without taking into
ordered to take possession and deliver to Prohibition, to be not without rational consideration the fact that there is a
the petitioner PAIC SAVINGS AND bases and we observe that the court a pending action in another court (RTC,
MORTGAGE BANK the subject parcel of quo, in issuing its questioned Order, Pasay City, Branch 231 ) which presents a
land and improvements." committed no grave abuse of discretion prejudicial question to the case at bar.
Shortly, on May 8, 1998, S. Villanueva amounting to lack of jurisdiction. IV. Whether or not the petitioner is
Enterprises and Vargas moved for its WHEREFORE, the Petition for Certiorari estopped from questioning private
quashal.15 Thereafter on June 25, 1998, and Prohibition is hereby DISMISSED and respondent's ownership when it entered
petitioner, on the strength of the lease the assailed December 9, 1998 Order is into a contract of lease involving the
contract and Deed of Assignment made in AFFIRMED in all respects. property in question."21
his favor, submitted a Permission to File SO ORDERED."20 We will first resolve the jurisdictional and
an Ex-parte Motion to Intervene.16 It Hence, this appeal, where petitioner raises procedural questions raised by the
bears mentioning, however, that before and argues the following legal issues: petitioner.
petitioner sought intervention in the "I. Whether or not public respondent I.
present case, he had separately instituted acted without or in excess of its Petitioner postulates that the lower court
a Complaint for Mandamus, docketed as jurisdiction and/or was patently in error should have dismissed respondent's "Ex-
Civil Case No. 98-0868 before another when it affirmed the denial of petitioner's Parte Petition for Issuance of Writ of
branch17 of the Pasay City RTC to compel motion for intervention, despite the fact Possession" in Civil Case No. P-9011 for
PAIC Bank to allow him to repurchase the that he has a legal interest, being a lessee want of jurisdiction over the subject
subject property. and an assignee of the property subject matter of the claim. The power to hear the
On October 7, 1998, the court a matter of this case. same, he insists, exclusively vests with
quo denied the Motion to Quash and II. Whether or not the public respondent the Liquidation Court pursuant to Section
Motion to Intervene filed respectively by committed grave abuse of discretion when 29 of Republic Act No. 265, otherwise
Vargas and petitioner.18 A Motion for it held that what are required to be known as The Central Bank Act.22 He then
Reconsideration and a Supplemental instituted before the liquidation court are cites our decision in Valenzuela v. Court of
Motion for Reconsideration were filed by those claims against the insolvent banks Appeals,23 where we held that "if there is
the petitioner which, however, were only considering that the private a judicial liquidation of an insolvent bank,
similarly denied on December 9, 1998. respondent bank is legally dead due to all claims against the bank should be filed
Petitioner then sought relief with the Court insolvency and considering further that in the liquidation proceeding." For going to
of Appeals, filing therein a Petition for there is already a liquidation court another court, the respondent, he
Certiorari. While this was awaiting (Regional Trial Court of Makati, Branch 57, accuses, is guilty of forum shopping.
resolution, he entered into another lease docketed as Spec. Pro. No. M-1280) which
These contentions can not pass judicial convenience, only one court, if possible, requirements of this Act x x
muster. The pertinent portion of Section should pass upon the claims against the x"28 (emphasis supplied)
29 states: insolvent bank and that the liquidation Since the land subject of this controversy
"x x x The liquidator designated as court should assist the Superintendents of is located in Pasay City, then the city's
hereunder provided shall, by the Solicitor Banks and regulate his operations.26 RTC should rightly take cognizance of the
General, file a petition in the Regional It then ought to follow that petitioner's case, to the exclusion of other courts.
Trial Court reciting the proceedings which reliance on Section 29 and Anent petitioner's auxiliary contention that
have been taken and praying the the Valenzuela case is misplaced. The respondent should be held guilty of forum
assistance of the court in the liquidation of Petition for the Issuance of a Writ of shopping for not filing the case in the
such institution. The court shall have Possession in Civil Case No. 9011 is not in liquidation court, suffice it to state here
jurisdiction in the same proceedings to the nature of a disputed claim against the that the doctrine only ponders situations
assist in the adjudication of disputed bank. On the contrary, it is an action where two (or more) cases are pending
claims against the bank or non-bank instituted by the respondent bank itself for before different tribunals.29 Well to point,
financial intermediary performing quasi- the preservation of its asset and we have laid down the yardstick to
banking functions and the enforcement of protection of its property. It was filed determine whether a party violated the
individual liabilities of the stockholders upon the instance of the respondent's rule against forum shopping as where the
and do all that is necessary to preserve liquidator in order to take possession of a elements of litis pendentia are present or
the assets of such institution and to tract of land over which it has ownership where a final judgment in one case will
implement the liquidation plan approved claims. amount to res judicata in the
by the Monetary Board, x x x"24 (emphasis To be sure, the liquidator took the proper other.30 Inasmuch as the case at bar is
supplied.) course of action when it applied for a writ the only one filed by the respondent for
Petitioner apparently failed to appreciate in the Pasay City RTC. Act 3135,27 entitled the issuance of a writ of possession over
the correct meaning and import of the An Act to Regulate the Sale of Property the subject property, there is no occasion
above-quoted law. The legal provision Under Special Powers Inserted In or for the doctrine to apply.
only finds operation in cases where there Annexed To Real Estate Mortgages, Petitioner next casts doubt on the capacity
are claims against an insolvent bank. In mandates that jurisdiction over a Petition of the respondent to continue litigating
fine, the exclusive jurisdiction of the for Writ of Possession lies with the court of the petition for the issuance of the writ.
liquidation court pertains only to the the province, city, or municipality where He asserts that, being under liquidation,
adjudication of claims against the bank. It the property subject thereof is situated. respondent bank is already a "dead"
does not cover the reverse situation This is sanctioned by Section 7 of the said corporation that cannot maintain the suit
where it is the bank which files a claim Act, thus: in the RTC. Hence, no writ may be issued
against another person or legal entity. "SECTION 7. In any sale made under the in its favor.
This interpretation of Section 29 becomes provisions of this Act, the purchaser may The argument is devoid of merit. A bank
more obvious in the light of its intent. The petition the Court of First Instance of the which had been ordered closed by the
requirement that all claims against the province or place where the property or monetary board retains its juridical
bank be pursued in the liquidation any part thereof is situated, to give him personality which can sue and be sued
proceedings filed by the Central Bank is possession thereof during the redemption through its liquidator. The only limitation
intended to prevent multiplicity of actions period, furnishing bond in an amount being that the prosecution or defense of
against the insolvent bank and designed equivalent to the use of the property for a the action must be done through the
to establish due process and orderliness in period of twelve months, to indemnify the liquidator.31 Otherwise, no suit for or
the liquidation of the bank, to obviate the debtor in case it be shown that the sale against an insolvent entity would prosper.
proliferation of litigations and to avoid was made without violating the mortgage In such situation, banks in liquidation
injustice and arbitrariness.25 The or without complying with the would lose what justly belongs to them
lawmaking body contemplated that for through a mere technicality.32
That the law allows a bank under criminal action are both pending and there redemption has expired. The two cases,
liquidation to participate in an action can exists in the former an issue which must assuming both are pending, can proceed
be clearly inferred from the third be preemptively resolved before the separately and take their own direction
paragraph of the same Section 29 of The criminal action may proceed, because independent of each other.
Central Bank Act earlier quoted, which howsoever the issue raised in the civil III.
authorizes or empowers a liquidator to action is resolved would be Having disposed of the jurisdictional and
institute actions, thus: "x x x and he determinative juris et de jure of the guilt procedural issues, we now come to the
(liquidator) may in the name of the bank or innocence of the accused in the merits of the case. Petitioner seeks
or non-bank financial intermediary criminal case. The rationale behind the intervention in this case by virtue of the
performing quasi-banking functions and principle of prejudicial question is to avoid lease agreement and the deed of
with the assistance of counsel as he may two conflicting decisions.35 assignment executed in his favor by the
retain, institute such actions as may be Here, aside from the fact that Civil Case mortgagor (Vargas) and an alleged buyer
necessary in the appropriate court to No. 98-0868 and the present one are both (Angsico) of the land, respectively. He
collect and recover accounts and assets of civil in nature and therefore no prejudicial posits that as a lessee and assignee in
such institution or defend any action filed question can arise from the existence of possession of the foreclosed real estate,
against the institution."33 (emphasis the two actions,36 it is apparent that the he automatically acquires interest over the
supplied.) former action was instituted merely to subject matter of the litigation. This
It is therefore beyond dispute that frustrate the Court's ruling in the case at interest is coupled with the fact that he
respondent was legally capacitated to bar granting the respondent the right to introduced improvements thereon,
petition the court a quo for the issuance of possess the subject property. It is but a consisting of a one-storey building which
the writ. canny and preemptive maneuver on the houses a karaoke-music restaurant,
II. part of the petitioner to delay, if not allegedly to the tune of fifteen million
Petitioner likewise proffers one other prevent, the execution of a judgment pesos (P15,000,000.00). Enforcing the
procedural obstacle, which is the adverse to his interests. It bears stressing writ, he adds, without hearing his side
pendency of Civil Case No. 98-0868 in that the complaint for mandamus was would be an injustice to him.
Branch 231 of Pasay City RTC. The said filed only on May 7, 1998, sixteen days Intervention is a remedy by which a third
action is the complaint he filed against the after the lower court granted respondent's party, not originally impleaded in the
respondent for the latter to receive and petition and thirteen days after it issued proceeding, becomes a litigant therein to
accept the redemption price of eighteen the writ. It cannot then possibly prejudice enable him to protect or preserve a right
million pesos for the subject property. He a decided case. or interest which may be affected by such
argues that the primary issue therein At any rate, it taxes our imagination why proceeding.37 The pertinent provision is
constitutes a prejudicial question in the questions raised in Case No. 98-0868 stated in Section 1, Rule 19 of the 1997
relation to the present case in that if the must be considered determinative of Case Rules of Civil Procedure, thus:
Court therein will grant petitioner's No. 9011. The basic issue in the former is "SECTION 1. Who may intervene. — A
prayer, then this will necessarily negate whether the respondent, as the purchaser person who has a legal interest in the
the possessory writ issued by the court a in the extra-judicial foreclosure matter in litigation, or in the success of
quo. proceedings, may be compelled to have either of the parties, or an interest against
Again, we are not persuaded. A prejudicial the property repurchased or resold to a both, or is so situated as to be adversely
question is one which arises in a case the mortgagor's successor-in-interest affected by a distribution or other
resolution of which is a logical antecedent (petitioner): while that in the latter is disposition of property in the custody of
of the issue involved therein, and the merely whether the respondent, as the the court or of an officer thereof may,
cognizance of which pertains to another purchaser in the extrajudicial foreclosure with leave of court, be allowed to
tribunal.34 It generally comes into play in proceedings, is entitled to a writ of intervene in the action. The court shall
a situation where a civil action and a possession after the statutory period for consider whether or not the intervention
will unduly delay or prejudice the Taking into account these fundamental by a pending action for annulment of
adjudication of the rights of the original precepts, we rule that the petitioner may mortgage or the foreclosure itself.48
parties, and whether or not the not properly intervene in the case at bar. Even if he anchors his intervention on the
intervenor's rights may be fully protected His insistence to participate in the purported interest he has over the land
in a separate proceeding."38 proceeding is an unfortunate case of too and the improvements thereon, petitioner,
Intervention is not a matter of right but little, too late. still, should not be allowed to do so. He
may be permitted by the courts only when In the first place, petitioner's Ex- admits that he is a mere lessee and
the statutory conditions for the right to parte Permission to File a Motion to assignee. Whatever possessory rights he
intervene is shown.39 Thus, the allowance Intervene was submitted to the RTC only holds only emanate from that of Vargas,
or disallowance of a motion to intervene is on June 25, 1998. At that stage, the lower from whom he leased the lot, and from
addressed to the sound discretion of the court had already granted respondent's whom his assignor/predecessor-in-interest
court.40 In determining the propriety of petition for the writ in an Order dated bought it. Therein lies the precariousness
letting a party intervene in a case, the April 21, 1998. It had issued the Writ of of his title. Petitioner cannot validly
tribunal should not limit itself to inquiring Possession on April 24, 1998. Petitioner's predicate his supposed interest over the
whether "a person (1) has a legal interest motion then was clearly out of time, property in litigation on that of Vargas, for
in the matter in litigation; (2) or in the having been filed only at the execution the simple reason that as early as
success of either of the parties; (3) or an stage. For that reason alone, it must meet December 4, 1985, the latter has already
interest against both; (4) or when is so the consequence of denial. While it is true been stripped of all her rights over the
situated as to be adversely affected by a that on May 8, 1998, Vargas and S. land when she, as mortgagor, failed to
distribution or other disposition of Villanueva Enterprises moved to quash the redeem it. A mortgagor has only one year
property in the custody of the court or of writ, that did not in any way affect the within which to redeem her foreclosed real
an officer thereof."41 Just as important, as nature of the RTC's Order as an estate.49 After that period, she loses all
we have stated in Big Country Ranch adjudication on the merits. The issuance her interests over it. This is in consonance
Corporation v. Court of Appeals,42 is the of the Order is in essence a rendition of with Section 78 of the General Banking
function to consider whether or not the judgment within the purview of Section 2, Act, 50 viz.:
intervention will unduly delay or prejudice Rule 19. "x x x In the event of foreclosure, whether
the adjudication of the rights of the Allowing petitioner to intervene, judicially or extrajudicially, of any
original parties, and whether or not the furthermore, will serve no other purpose mortgage on real estate which is security
intervenor's rights may be fully protected but to unduly delay the execution of the for any loan granted before the passage of
in a separate proceeding. writ, to the prejudice of the respondent. this Act or the provisions of this Act, the
The period within which a person may This cannot be countenanced considering mortgagor or debtor whose real property
intervene is also restricted. Section 2, that after the consolidation of title in the has been sold at public auction, judicially
Rule 19 of the 1997 Rules of Civil buyer's name, for failure of the mortgagor or extrajudicially, for the full or partial
Procedure requires: to redeem, the writ of possession payment of an obligation to any bank,
"SECTION 2. Time to intervene. — The becomes a matter of right.44 Its issuance banking or credit institution, within the
motion to intervene may be filed at any to a purchaser in an extrajudicial purview of this Act shall have the right,
time before the rendition of judgment by foreclosure is merely a ministerial within one year after the sale of the real
the trial court, x x x" function.45 As such, the court neither estate mortgage as a result of the
After the lapse of this period, it will not be exercises its official discretion nor foreclosure of the respective mortgage, to
warranted anymore. This is because, judgment.46 If only to stress the writ's redeem the property by paying the
basically, intervention is not an ministerial character, we have, in previous amount fixed by the court in the order or
independent action but is ancillary and cases, disallowed injunction to prohibit its execution x x x"51 (emphasis supplied.)
supplemental to an existing litigation.43 issuance,47 just as we have held that Being herself bereft of valid title and
issuance of the same may not be stayed rights, Vargas can not legitimately convey
any to some other person. She could not IN VIEW WHEREOF, finding no cogent
have lawfully sold the land to Angsico nor reason to disturb the assailed Decision,
leased it to petitioner for her own account. the instant petition is hereby DENIED.
It is axiomatic that one can not transmit SO ORDERED
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.
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. Whether by
acknowledging the legality of the
respondent's claim and title over the land
at 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. Hence, there is
presently no need for us to squarely rule
on this ultimate point.
G.R. No. 158261 December 18, insolvent condition of RBBI, the members xxxx
2006 of the RBBI Board of Directors were called [T]he Board decided as follows:
IN RE: PETITION FOR ASSISTANCE IN for a conference at the BSP on 4 August a. To forbid the bank to do business in the
THE LIQUIDATION OF THE RURAL 1986. Only one RBBI Director, a certain Philippines and place its assets and affairs
BANK OF BOKOD (BENGUET), INC., Mr. Wakit, attended the conference, and under receivership in accordance with
PHILIPPINE DEPOSIT INSURANCE the examination findings and related Section 29 of R.A. No. 265, as amended.
CORPORATION, petitioner, recommendations were discussed with b. To designate the Special Assistant to
vs. him. In a letter, dated 4 August 1986, the Governor and Head, SES Department
BUREAU OF INTERNAL receipt of which was acknowledged by Mr. III, as Receiver of the bank;
REVENUE, respondent. Wakit, the SES Department III warned the c. To refer the cases of
RBBI Board of Directors that, unless irregularities/frauds to the Office of
substantial remedial measures are taken Special Investigation for further
DECISION to rehabilitate the bank, it will recommend investigation and possible filing of
that the bank be placed under appropriate charges against the following
receivership. In a subsequent letter, dated present/former officers and employees of
CHICO-NAZARIO, J.: 17 November 1986, a copy of which was the bank:
This is a Petition for Review sent to every member of the RBBI Board xxxx
on Certiorari1 under Rule 45 of the revised of Directors via registered mail, the SES d. To include the names of the above-
Rules of Court, praying that this Court set Department III reiterated its warning that mentioned present and former officers
aside the Orders, dated 17 January it would recommend the closure of the and employees of the bank in the list of
20032 and 13 May 2003,3 of the Regional bank, unless the needed fresh capital was persons barred from employment in any
Trial Court (RTC) of La Trinidad, Benguet, immediately infused. Despite these financial institution under the supervision
sitting as the Liquidation Court of the notices, the SES Department III received of the Central Bank without prior
closed Rural Bank of Bokod (Benguet), no word from RBBI or from any of its clearance from the Central Bank.6
Inc. (RBBI), in Spec. Proc. No. 91-SP- Directors as of 28 November 1986.5 A memorandum and report, dated 28
0060. In a meeting held on 9 January 1987, the August 1990, were submitted by the
There is no dispute as to the antecedent Monetary Board of the BSP decided to Director of the SES Department III
facts of the case, recounted as follows: take the following action – concluding that the RBBI remained in
In 1986, a special examination of RBBI Rural Bank of Bokod (Benguet), Inc. – insolvent financial condition and it can no
was conducted by the Supervision and Report on its examination as of June 16, longer safely resume business with the
Examination Sector (SES) Department III 1986, its placement under receivership depositors, creditors, and the general
of what is now the Bangko Sentral ng ACTION TAKEN public. On 7 September 1990, the
Pilipinas (BSP),4 wherein various loan Finding to be true the statements of the Monetary Board, after determining and
irregularities were uncovered. In a letter, Special Assistant to the Governor and confirming the said memorandum and
dated 20 May 1986, the SES Department Head, Supervision and Examination Sector report, ordered the liquidation of the bank
III required the RBBI management to (SES) Department III, in her and designated the Director of the SES
infuse fresh capital into the bank, within memorandum dated 28 November 1986 Department III as liquidator.7
30 days from date of the advice, and to submitting a report on the general On 10 April 1991, the designated BSP
correct all the exceptions noted. However, examination of the Rural Bank of Bokod liquidator of RBBI caused the filing with
up to the termination of the subsequent (Benguet), Inc. as of 16 June 1986, that the RTC of a Petition for Assistance in the
general examination conducted by the the financial condition of the rural bank is Liquidation of RBBI, docketed as Spec.
SES Department III, no concrete action one of insolvency and its continuance in Proc. No. 91-SP-0060.8 Subsequently, on
was taken by the RBBI management. In business would involve further losses to 2 June 1992, the Monetary Board
view of the irregularities noted and the its depositors and creditors, x x x transferred to herein petitioner Philippine
Deposit Insurance Corporation (PDIC) the otherwise known as the new Central Bank BOARD PURSUANT TO SECTION 30 OF
receivership/liquidation of RBBI.9 Law. REPUBLIC ACT NO. 7653.14
PDIC then filed, on 11 September 2002, a Commenting on the motion for PDIC argues that the closure of banks
Motion for Approval of Project of reconsideration the Bureau of Internal under Section 30 of the New Central Bank
Distribution10 of the assets of RBBI, in Revenue states that the only logic why the Act is summary in nature and
accordance with Section 31, in relation to Bureau is requesting for a tax clearance is procurement of tax clearance as required
Section 30, of Republic Act No. 7653, to determine how much taxes, if there be under Section 52(C) of the Tax Code of
otherwise known as the New Central Bank any, is due the government. 1997 is not a condition precedent thereto;
Act. During the hearing held on 17 The court believes and so holds that that under Section 30, in relation to
January 2003, the respondent Bureau of petitioner should still secure the necessary Section 31, of the New Central Bank Act,
Internal Revenue (BIR), through Atty. tax clearance in order for it to be cleared asset distribution of a closed bank
Justo Reginaldo, manifested that PDIC of all its tax liabilities as regardless of requires only the approval of the
should secure a tax clearance certificate what law covers the liquidation of closed liquidation court; and that the BIR is not
from the appropriate BIR Regional Office, banks, still these banks are subject to without recourse since, subject to the
pursuant to Section 52(C) of Republic Act payment of taxes mandated by law. Also applicable provisions of the Tax Code of
No. 8424, or the Tax Code of 1997, before in its motion for approval of the project of 1997, it may therefore assess the closed
it could proceed with the dissolution of distribution, paragraph 2, item 2.2 states RBBI for tax liabilities, if any.
RBBI. On even date, the RTC issued one that there are unremitted withholding In its Comment, the BIR countered with
of the assailed Orders,11 directing PDIC to taxes in the amount of P8,767.32. the following arguments: that the present
comply with Section 52(C) of the Tax This shows that indeed there are still Petition for Review on Certiorari under
Code of 1997 within 30 days from receipt taxes to be paid. In order therefore that Rule 45 of the revised Rules of Court is
of a copy of the said order. Pending all taxes due the government should be not the proper remedy to question the
compliance therewith, the RTC held in paid, petitioner should secure a tax Order, dated 17 January 2003, of the RTC
abeyance the Motion for Approval of clearance from the Bureau of Internal because said order is interlocutory and
Project of Distribution. On 13 May 2003, Revenue. cannot be the subject of an appeal; that
the second assailed Order12 was issued, in Wherefore, based on the foregoing Section 52(C) of the Tax Code of 1997
which the RTC, in resolving the Motion for premises, the motion for reconsideration applies to all corporations, including banks
Reconsideration filed by PDIC, ruled as filed by petitioner is hereby DENIED for ordered closed by the Monetary Board
follows – lack of merit.13 pursuant to Section 30 of the New Central
ORDER Hence, PDIC filed the present Petition for Bank Act; that the RTC may order the
Submitted for resolution is petitioner’s Review on Certiorari, under Rule 45 of the PDIC to obtain a tax clearance before
motion for reconsideration of the order of revised Rules of Court, raising pure proceeding to rule on the Motion for
this court dated January 17, 2003 holding questions of law. It made a lone Approval of Project of Distribution of the
in abeyance the motion for approval of the assignment of error, alleging that – assets of RBBI; and that the present
project of distribution pending their THE COURT A QUO ERRED IN APPLYING controversy should not have been
compliance with a tax clearance from the THE PROVISION OF SECTION 52-C OF elevated to this Court since the parties are
Bureau of Internal Revenue. REPUBLIC ACT NO. 8424 DIRECTING THE both government agencies who should
Petitioner in their motion state that SUBMISSION OF TAX CLEARANCE FOR have administratively settled the dispute.
Section 52-C of Republic Act 8424 does CORPORATIONS CONTEMPLATING This Court finds that there are only two
not cover closed banking institutions like DISSOLUTION ON A BANK ORDERED primary issues for the resolution of the
the Rural Bank of Bokod as the law that CLOSED AND PLACED UNDER Petition at bar, one being procedural, and
covers liquidation of closed banks is RECEIVERSHIP AND, THEREAFTER, the other substantive. The procedural
Section 30 of Republic Act No. 7653 UNDER LIQUIDATION, BY THE MONETARY issue involves the question of whether the
Petition for Review on Certiorari under
Rule 45 of the revised Rules of Court is notice of the judgment, order or resolution appealed only when it is final, meaning
the proper remedy from the assailed sought to be assailed. that it completely disposes of the case and
Orders of the RTC. The substantive issue d. Appeal by certiorari stays the definitively adjudicates the respective
deals with the determination of whether a judgment, award or order appealed from. rights of the parties, leaving thereafter no
bank ordered closed and placed under An original action for certiorari, unless a substantial proceeding to be had in
receivership by the Monetary Board of the writ of preliminary injunction or a connection with the case except the
BSP still needs to secure a tax clearance temporary restraining order shall have proper execution of the judgment or
certificate from the BIR before the been issued, does not stay the challenged order. Conversely, an interlocutory order
liquidation court approves the project of proceeding. or judgment is not appealable for it does
distribution of the assets of the bank. e. In appeal by certiorari, the petitioner not decide the action with finality and
I and respondent are the original parties to leaves substantial proceedings still to be
This Court shall first proceed with the the action, and the lower court or quasi- had.18
procedural issue on the appropriateness of judicial agency is not to be impleaded. The RTC Orders presently questioned
the remedy taken by PDIC from the In certiorari as an original action, the before this Court has not disposed of the
assailed RTC Orders. parties are the aggrieved party against case nor has it adjudicated definitively the
The differences between an appeal the lower court or quasi-judicial agency rights of the parties in Spec. Proc. No. 91-
by certiorari under Rule 4515 of the and the prevailing parties, who thereby SP-0060. They only held in abeyance the
revised Rules of Court and an original respectively become the petitioner and approval of the Project of Distribution of
action for certiorari under Rule 6516 of the respondents. the assets of RBBI until PDIC, as
same Rules have been laid down by this f. In certiorari for purposes of appeal, the liquidator, acquires a tax clearance from
Court in the case of Atty. Paa v. Court of prior filing of a motion for reconsideration the BIR. Indubitably, there are still
Appeals,17 to wit – is not required (Sec. 1, Rule 45); while substantial proceedings to be had after
a. In appeal by certiorari, the petition is in certiorari as an original action, a motion PDIC presents the required tax clearance
based on questions of law which the for reconsideration is a condition to the trial court, since the Project of
appellant desires the appellate court to precedent (Villa-Rey Transit vs. Bello, L- Distribution of assets still has to be
resolve. In certiorari as an original action, 18957, April 23, 1963), subject to certain finalized and approved.
the petition raises the issue as to whether exceptions. PDIC avers that the RTC Orders of 17
the lower court acted without or in excess g. In appeal by certiorari, the appellate January 2003 and 13 May 2003 are final
of jurisdiction or with grave abuse of court is in the exercise of its appellate because, as this Court pronounced in the
discretion. jurisdiction and power of review, while case of Pacific Banking Corporation
b. Certiorari, as a mode of appeal, in certiorari as an original action, the Employees’ Organization (PaBCEO) v.
involves the review of the judgment, higher court exercises original jurisdiction Court of Appeals,19 an order of the
award or final order on the merits. The under its power of control and supervision liquidation court allowing or disallowing a
original action for certiorari may be over the proccedings of lower courts. claim is a final order and may be the
directed against an interlocutory order of Guided by the foregoing distinctions, this subject of an appeal. It further asserts
the court prior to appeal from the Court, in perusing the assailed RTC that the legal issue of whether RBBI
judgment or where there is no appeal or Orders, dated 17 January 2003 and 13 should secure a tax clearance is a
any other plain, speedy or adequate May 2003, reaches the conclusion that "disputed claim," which was already
remedy. these are merely interlocutory in nature allowed by the RTC in its assailed Orders,
c. Appeal by certiorari must be made and are not the proper subjects of an thus, making the latter final.
within the reglementary period for appeal. appeal by certiorari under Rule 45 of the This Court is unconvinced. The foregoing
An original action for certiorari may be revised Rules of Court. arguments of PDIC result from a strained
filed not later than sixty (60) days from This Court has repeatedly and uniformly interpretation of law and jurisprudence,
held that a judgment or order may be and are raised in an apparent attempt to
justify a very obvious faux pas on its part. burden the courts. This Court, however, which has been notified of possible
While it is true that in liquidation has also held that an original action involuntary dissolution by the Securities
proceedings, the settlement of disputed or for certiorari under Rule 65 of the revised and Exchange Commission, or for its
contentious claims may require a full- Rules of Court is an appropriate remedy to reorganization, render a correct return to
dress hearing and the resolution of legal assail an interlocutory order when (1) the the Commissioner, verified under oath,
issues,20 it does not follow that all legal tribunal issued such order without or in setting forth the terms of such resolution
issues resolved in the course of the excess of jurisdiction or with grave abuse or plan and such other information as the
liquidation proceedings would of discretion, and (2) the assailed Secretary of Finance, upon
automatically be tantamount to an interlocutory order is patently erroneous recommendation of the Commissioner,
allowance or disallowance of a disputed or and the remedy of appeal would not afford shall, by rules and regulations, prescribe.
contentious claim. In Spec. Proc. No. 91- adequate and expeditious relief.21 Thus, The dissolving or reorganizing corporation
SP-0060 pending before the RTC, there despite this Court’s finding that PDIC, as shall, prior to the issuance by the
can be no doubt that the claim of the BIR the liquidator of RBBI, availed itself of the Securities and Exchange Commission of
against RBBI consists of the unpaid tax wrong remedy by filing an appeal the Certificate of Dissolution or
liabilities of the latter. The BIR contends by certiorari under Rule 45 of the revised Reorganization, as may be defined by
that it could only determine the existence Rules of Court, We shall adopt a positive rules and regulations prescribed by the
and correct amount of the tax liabilities of and pragmatic approach, and, instead of Secretary of Finance, upon
RBBI if PDIC, as liquidator of the bank, dismissing the instant Petition outright, it recommendation of the Commissioner,
secures a tax clearance from the shall treat the same as an original action secure a certificate of tax clearance from
appropriate BIR Regional Office. The for certiorari under Rule 65 of the same the Bureau of Internal Revenue which
acquirement of a tax clearance is not the Rules, in consideration of the crucial certificate shall be submitted to the
claim of the BIR against RBBI, it is only issues and substantial arguments already Securities and Exchange Commission.
the means by which to ascertain such presented by the concerned parties before To implement the foregoing provision, the
claim. Whatever tax liabilities the BIR may this Court.22 BIR still relies on the regulations it jointly
claim against RBBI can still be disputed II issued with the Securities and Exchange
before the RTC by the PDIC, as liquidator Having disposed of the procedural issue, Commission (SEC) in 1985, when the Tax
of the bank, whether as to the existence this Court now addresses the substantive Code of 1977 was still in effect and a
or computation of the said tax liabilities, issue of whether RBBI, as represented by similar provision could be found in Section
and it is the ruling of the RTC on such its liquidator, PDIC, still needs to secure a 46(C) thereof. The full text of the
matters that may constitute a final order tax clearance from the BIR before the RTC regulations is reproduced below –
which definitively settles the claim of the could approve the Project of Distribution BIR-SEC REGULATIONS NO. 1
BIR. The mere grant by the RTC of the of the assets of RBBI. SUBJECT: Regulations to Implement the
motion requiring PDIC, as liquidator of The BIR anchors its position that a tax Provisions of Executive Order No. 1026,
RBBI, to secure a tax clearance, does not clearance is necessary on Section 52(C) of Amending Section 46(c) of the National
yet constitute an adjudication of the claim the Tax Code of 1997, which provides – Internal Revenue Code of 1977, as
of the BIR. Hence, the assailed RTC SEC. 52. Corporation Returns. – amended, Requiring Dissolving
Orders, dated 17 January 2003 and 13 xxxx Corporations to File Information Returns
May 2003, are clearly interlocutory in (C) Return of Corporation Contemplating and Secure Tax Clearance from the
nature. Dissolution or Reorganization. – Every Commissioner of Internal Revenue, and
As a general rule, an interlocutory order is corporation shall, within thirty days (30) Providing Adequate Penalties for Violations
not appealable until after the rendition of after the adoption by the corporation of a Thereof.
the judgment on the merits, given that a resolution or plan for its dissolution, or for TO: All Internal Revenue Officers and
contrary rule would delay the the liquidation of the whole or any part of Others Concerned.
administration of justice and unduly its capital stock, including a corporation
Pursuant to the provisions of Section 277, registration of a corporation, shall at the and/or liquidation of a corporation through
in relation to Section 4 of the National same time furnish the Commissioner of its adoption of a resolution or plan to that
Revenue Code of 1977, as amended, the Internal Revenue a copy of such order. effect, or an involuntary dissolution of a
following regulations are hereby Section 3. Tax clearance certificate. – a) corporation by order of the SEC. They
promulgated. Within thirty (30) days from receipt of the make no reference at all to a situation
Section 1. Scope. – These regulations documents mentioned in the preceding similar to the one at bar in which a
shall govern the procedure for the Section, the Commissioner of Internal banking corporation is ordered closed and
issuance of tax clearance certificates to Revenue, or his duly authorized placed under receivership by the BSP and
dissolving corporations. This shall include representative, shall issue the its assets judicially liquidated. Now, the
corporations intending to dissolve or corresponding tax clearance certificate determining question is, whether Section
liquidate the whole or any part of its (BIR Form No. 17.61) for the corporation 52(C) of the Tax Code of 1997 and BIR-
capital stocks, as well as, corporations which will be dissolved. SEC Regulations No. 1 could be made to
which have been notified of possible b) The Securities and Exchange apply to the present case.
involuntary dissolution by the Securities Commission shall issue the final order of This Court rules in the negative.
and Exchange Commission. dissolution only after a certificate of tax First, Section 52(C) of the Tax Code of
Section 2. Requirements in case of clearance has been submitted by the 1997 and the BIR-SEC Regulations No. 1
dissolution. – a) Every Corporation shall, dissolving corporation: Provided, that in regulate the relations only as between the
within thirty (30) days after case of involuntary dissolution, the SEC and the BIR, making a certificate of
- the adoption by the corporation of a Securities and Exchange Commission may tax clearance a prior requirement before
resolution or plan for the dissolution of the nevertheless proceed with the dissolution the SEC could approve the dissolution of a
corporation, or for the liquidation of the if thirty (30) days after receipt of the corporation. In Spec. Proc. No. 91-SP-
whole or any part of its capital stock, or suspension order no tax clearance has yet 0060 pending before the RTC, RBBI was
- the receipt of an order of suspension by been issued. placed under receivership and ordered
the Securities and Exchange Commission Section 4. Penalty. – Failure to render the liquidated by the BSP, not the SEC; and
in case of involuntary dissolution, return and secure the certificate of tax the SEC is not even a party in the said
file their income tax returns covering the clearance as above-mentioned shall case, although the BIR is. This Court
income earned by them from the subject the officer(s) of the corporation cannot find any basis to extend the SEC
beginning of the taxable year up to date required by law to file the return under requirements for dissolution of a
of such dissolution. Section 46(a) of the National Internal corporation to the liquidation proceedings
In addition thereto, they shall submit Revenue Code of 1977, as amended, to a of RBBI before the RTC when the SEC is
within the same period and verified under fine of not less than P5,000.00 or not even involved therein.
oath, the following documents: imprisonment of not less than two (2) It is conceded that the SEC has the
1. a copy of the articles of incorporation years, and shall make them liable for all authority to order the dissolution of a
and by-laws; outstanding or unpaid tax liabilities of the corporation pursuant to Section 121 of
2. a copy of the resolution authorizing dissolving corporation. Batas Pambansa Blg. 68, otherwise known
dissolution; and Section 5. Effectivity. – These regulations as the Corporation Code of the Philippines,
3. balance sheet as of the date of shall apply to all corporate dissolution which reads –
dissolution and a profit and loss statement taking place on or after May 14, 1985. Sec. 121. Involuntary dissolution. – A
covering the period from the beginning of Section 6. Repealing Clause. – All revenue corporation may be dissolved by the
the taxable year to the date of dissolution. regulations, orders and circulars which are Securities and Exchange Commission upon
b) The Securities and Exchange inconsistent herewith are hereby modified filing of a verified complaint and after
Commission whenever it issues an order accordingly. proper notice and hearing on the grounds
of involuntary dissolution or suspension of The afore-quoted Tax Code provision and provided by existing laws, rules and
the primary franchise or certificate of regulations refer to a voluntary dissolution regulations.
The Corporation Code, however, is a The receiver shall immediately gather and notice, adjudicate disputed claims against
general law applying to all types of take charge of all the assets and liabilities the institution, assist the enforcement of
corporations, while the New Central Bank of the institution, administer the same for individual liabilities of the stockholders,
Act regulates specifically banks and other the benefit of its creditors, and exercise directors and officers, and decide on other
financial institutions, including the the general powers of a receiver under the issues as may be material to implement
dissolution and liquidation thereof. As Revised Rules of Court but shall not, with the liquidation plan adopted. The receiver
between a general and special law, the the exception of administrative shall pay the cost of the proceedings from
latter shall prevail – generalia specialibus expenditures, pay or commit any act that the assets of the institution.
non derogant.23 will involve the transfer or disposition of (2) convert the assets of the institution to
The liquidation of RBBI is undertaken any asset of the institution: Provided, That money, dispose of the same to creditors
according to Sections 30 of the New the receiver may deposit or place the and other parties, for the purpose of
Central Bank Act, viz – funds of the institution in non-speculative paying the debts of such institution in
Sec. 30. Proceedings in Receivership and investments. The receiver shall determine accordance with the rules on concurrence
Liquidation. - Whenever, upon report of as soon as possible, but not later than and preference of credit under the Civil
the head of the supervising or examining ninety (90) days from take over, whether Code of the Philippines and he may, in the
department, the Monetary Board finds the institution may be rehabilitated or name of the institution, and with the
that a bank or quasi-bank: otherwise placed in such a condition that assistance of counsel as he may retain,
(a) is unable to pay its liabilities as they it may be permitted to resume business institute such actions as may be necessary
become due in the ordinary course of with safety to its depositors and creditors to collect and recover accounts and assets
business: Provided, That this shall not and the general public: Provided, That any of, or defend any action against, the
include inability to pay caused by determination for the resumption of institution. The assets of an institution
extraordinary demands induced by business of the institution shall be subject under receivership or liquidation shall be
financial panic in the banking community; to prior approval of the Monetary Board. deemed in custodia legis in the hands of
(b) has insufficient realizable assets, as If the receiver determines that the the receiver and shall, from the moment
determined by the Bangko Sentral, to institution cannot be rehabilitated or the institution was placed under such
meet its liabilities; or permitted to resume business in receivership or liquidation, be exempt
(c) cannot continue in business without accordance with the next preceding from any order of garnishment, levy,
involving probable losses to its depositors paragraph, the Monetary Board shall attachment, or execution.
or creditors; or notify in writing the board of directors of The actions of the Monetary Board taken
(d) has wilfully violated a cease and desist its findings and direct the receiver to under this section or under Section 29 of
order under Section 37 that has become proceed with the liquidation of the this Act shall be final and executory, and
final, involving acts or transactions which institution. The receiver shall: may not be restrained or set aside by the
amount to fraud or a dissipation of the (1) file ex parte with the proper regional court except on petition for certiorari on
assets of the institution; in which cases, trial court, and without requirement of the ground that the action taken was in
the Monetary Board may summarily and prior notice or any other action, a petition excess of jurisdiction or with such grave
without need for prior hearing forbid the for assistance in the liquidation of the abuse of discretion as to amount to lack or
institution from doing business in the institution pursuant to a liquidation plan excess of jurisdiction. The petition for
Philippines and designate the Philippine adopted by the Philippine Deposit certiorari may only be filed by the
Deposit Insurance Corporation as receiver Insurance Corporation for general stockholders of record representing the
of the banking institution. application to all closed banks. In case of majority of the capital stock within ten
For a quasi-bank, any person of quasi-banks, the liquidation plan shall be (10) days from receipt by the board of
recognized competence in banking or adopted by the Monetary Board. Upon directors of the institution of the order
finance may be designated as receiver. acquiring jurisdiction, the court shall, directing receivership, liquidation or
upon motion by the receiver after due conservatorship.
The designation of a conservator under suspension from the SEC, it is required to Bank Act, which explicitly states that the
Section 29 of this Act or the appointment notify and submit a copy of the said order, actions of the Monetary Board under the
of a receiver under this section shall be together with its final tax return, to the said Section or Section 29 shall be final
vested exclusively with the Monetary BIR. The SEC is also required to furnish and executory, and may not be restrained
Board. Furthermore, the designation of a the BIR a copy of its order of suspension. or set aside by the court except on a
conservator is not a precondition to the The BIR is supposed to issue a tax Petition for Certiorari filed by the
designation of a receiver. clearance to the corporation within 30 stockholders of record of the bank
Section 30 of the New Central Bank Act days from receipt of the foregoing representing a majority of the capital
lays down the proceedings for receivership documentary requirements. The SEC shall stock. PDIC, as the appointed receiver,
and liquidation of a bank. The said issue the final order of dissolution only shall file ex parte with the proper RTC,
provision is silent as regards the securing after the corporation has submitted its tax and without requirement of prior notice or
of a tax clearance from the BIR. The clearance; or in case of involuntary any other action, a petition for assistance
omission, nonetheless, cannot compel this dissolution, the SEC may proceed with the in the liquidation of the bank. The bank is
Court to apply by analogy the tax dissolution after 30 days from receipt by not given the option to undertake its own
clearance requirement of the SEC, as the BIR of the documentary requirements liquidation.
stated in Section 52(C) of the Tax Code of without a tax clearance having been Second, the alleged purpose of the BIR in
1997 and BIR-SEC Regulations No. 1, issued.25 The corporation is allowed to requiring the liquidator PDIC to secure a
since, again, the dissolution of a continue as a body corporate for three tax clearance is to enable it to determine
corporation by the SEC is a totally years after its dissolution, for the purpose the tax liabilities of the closed bank. It
different proceeding from the receivership of prosecuting and defending suits by or raised the point that since the PDIC, as
and liquidation of a bank by the BSP. This against it, to settle and close its affairs, receiver and liquidator, failed to file the
Court cannot simply replace any reference and to dispose of and convey its property final return of RBBI for the year its
by Section 52(C) of the Tax Code of 1997 and distribute its assets, but not for the operations were stopped, the BIR had no
and the provisions of the BIR-SEC purpose of continuing its business. The way of determining whether the bank still
Regulations No. 1 to the "SEC" with the corporation may undertake its own had outstanding tax liabilities.
"BSP." To do so would be to read into the liquidation, or at any time during the said To our mind, what the BIR should have
law and the regulations something that is three years, it may convey all of its requested from the RTC, and what was
simply not there, and would be property to trustees for the benefit of its within the discretion of the RTC to grant,
tantamount to judicial legislation. stockholders, members, creditors, and is not an order for PDIC, as liquidator of
It should be noted that there are other persons in interest.26 RBBI, to secure a tax clearance; but,
substantial differences in the procedure In contrast, the Monetary Board rather, for it to submit the final return of
for involuntary dissolution and liquidation may summarily and without need for prior RBBI. The first paragraph of Section 30(C)
of a corporation under the Corporation hearing, forbid the banking corporation of the Tax Code of 1997, read in
Code, and that of a banking corporation from doing business in the Philippines, for conjunction with Section 54 of the same
under the New Central Bank Act, so that causes enumerated in Section 30 of the Code, clearly imposes upon PDIC, as the
the requirements in one cannot simply be New Central Bank Act; and appoint the receiver and liquidator of RBBI, the duty
imposed in the other. PDIC as receiver of the bank. PDIC to file such a return. The pertinent
Under the Corporation Code, the SEC may shall immediately gather and take charge provisions are reproduced below for
dissolve a corporation, upon the filing of of all the assets and liabilities of the reference –
a verified complaint and after closed bank and administer the same for SEC. 52. Corporation Returns. –
proper notice and hearing, on grounds the benefit of its creditors. The summary xxxx
provided by existing laws, rules, and nature of the procedure for the (C) Return of Corporation Contemplating
regulations.24 Upon receipt by the involuntary closure of a bank is especially Dissolution or Reorganization. – Every
corporation of the order of stressed in Section 30 of the New Central corporation shall, within thirty days (30)
after the adoption by the corporation of a already enable the latter to determine if Thus, the recourse of the BIR, after
resolution or plan for its dissolution, or for RBBI still had outstanding tax liabilities. assessing the final return and examining
the liquidation of the whole or any part of The unreasonableness and impossibility of all other pertinent documents of RBBI,
its capital stock, including a corporation requiring a tax clearance before the and making a determination of the latter’s
which has been notified of possible approval by the RTC of the Project of outstanding tax liabilities, is to present its
involuntary dissolution by the Securities Distribution of the assets of the RBBI claim, on behalf of the National
and Exchange Commission, or for its becomes apparent when the timeline of Government, before the RTC during the
reorganization, render a correct return to the proceedings is considered. liquidation proceedings. The BIR is
the Commissioner, verified under oath, The BIR can only issue a certificate of tax expected to prove and substantiate its
setting forth the terms of such resolution clearance when the taxpayer had claim, in the same manner as the other
or plan and such other information as the completely paid off his tax liabilities. The creditors. It is only after the RTC allows
Secretary of Finance, upon certificate of tax clearance attests that the the claim of the BIR, together with the
recommendation of the Commissioner, taxpayer no longer has any outstanding claims of the other creditors, can a Project
shall, by rules and regulations, prescribe. tax obligations to the Government. for Distribution of the assets of RBBI be
xxxx Should the BIR find that RBBI still had finalized and approved. PDIC, then, as
SEC. 54. Returns of receivers, Trustees in outstanding tax liabilities, PDIC will not be liquidator, may proceed with the
Bankruptcy or Assignees. – In cases able to pay the same because the Project disposition of the assets of RBBI and pay
wherein receivers, trustees in bankruptcy of Distribution of the assets of RBBI the latter’s financial obligations, including
or assignees are operating the property or remains unapproved by the RTC; and, if its outstanding tax liabilities. And, finally,
business of a corporation, subject to the RBBI still had outstanding tax liabilities, only after such payment, can the BIR
tax imposed by this Title, such receivers, the BIR will not issue a tax clearance; but, issue a certificate of tax clearance in the
trustees or assignees shall make returns without the tax clearance, the Project of name of RBBI.
of net income as and for such corporation, Distribution of assets, which allocates the Third, the evident void in current statutes
in the same manner and form as such an payment for the tax liabilities, will not be and regulations as to the relations among
organization is hereinbefore required to approved by the RTC. It will be a chicken- the BIR, as tax collector of the National
make returns, and any tax due on the and-egg dilemma. Government; the BSP, as regulator of the
income as returned by receivers, trustees The Government, in this case, cannot banks; and the PDIC, as the receiver and
or assignees shall be assessed and generally claim preference of credit, and liquidator of banks ordered closed by the
collected in the same manner as if receive payment ahead of the other BSP, is not for this Court to fill in. It is up
assessed directly against the organizations creditors of RBBI. Duties, taxes, and fees to the legislature to address the matter
of whose businesses or properties they due the Government enjoy priority only through appropriate legislation, and to the
have custody or control. when they are with reference to a specific executive to provide the regulations for its
Section 54 of the Tax Code of 1997 movable property, under Article 2241(1) implementation.
imposes a general duty on all receivers, of the Civil Code, or immovable property, It is for these reasons that the RTC
trustees in bankruptcy, and assignees, under Article 2242(1) of the same Code. committed grave abuse of discretion, and
who operate and preserve the assets of a However, with reference to the other real committed patent error, in ordering the
corporation, regardless of the and personal property of the debtor, PDIC, as the liquidator of RBBI, to first
circumstances or the law by which they sometimes referred to as "free property," secure a tax clearance from the
came to hold their positions, to file the the taxes and assessments due the appropriate BIR Regional Office, and
necessary returns on behalf of the National Government, other than those in holding in abeyance the approval of the
corporation under their care. Articles 2241(1) and 2242(1) of the Civil Project of Distribution of the assets of the
The filing by PDIC of a final tax return, on Code, will come only in ninth place in the RBBI by virtue thereof.
behalf of RBBI, should already address the order of preference.27 Although this Court rules in favor of PDIC,
supposed concern of the BIR and would in the sense that a tax clearance is not a
prerequisite to the approval of the Project of creditors and their rights and the for Assistance in the Liquidation of e.g.,
of Distribution of the assets of RBBI, it determination of their order of Pacific Banking Corporation." All
cannot uphold its argument that the Spec. payment claims against the insolvent are required
Proc. No. 91-SP-0060 is summary in xxxx to be filed with the liquidation court.
nature. A liquidation proceeding is a single Although the claims are litigated in the
Section 30(d) of the New Central Bank Act proceeding which consists of a number of same proceeding, the treatment is
gives the Monetary Board of the BSP the cases properly classified as "claims." It is individual. Each claim is heard separately.
power to, summarily and without need for basically a two-phased proceeding. And the Order issued relative to a
prior hearing, forbid a bank or quasi-bank The first phase is concerned with the particular claim applies only to said claim,
from doing business in the Philippines and approval and disapproval of claims. Upon leaving the other claims unaffected, as
designating the PDIC as receiver of the the approval of the petition seeking the each claim is considered separate and
banking institution. It bears to emphasize assistance of the proper court in the distinct from the others. x x x [Emphases
that: (1) the power is granted to the liquidation of a closed entity, all money supplied.]
Monetary Board of the BSP; and (2) what claims against the bank are required to be Irrefragably, liquidation proceedings
is summary in nature is the power of the filed with the liquidation court. This phase cannot be summary in nature. It requires
Monetary Board of the BSP to forbid or may end with the declaration by the the holding of hearings and presentation
stop a bank or quasi-bank from doing liquidation court that the claim is not of evidence of the parties
further business. proper or without basis. On the other concerned, i.e., creditors who must prove
Once liquidation proceedings are instituted hand, it may also end with the liquidation and substantiate their claims, and the
before the appropriate trial court, and the court allowing the claim. In the latter liquidator disputing the same. It also
trial court assumes jurisdiction over the case, the claim shall be classified whether allows for multiple appeals, so that each
Petition, then the proceedings take a it is ordinary or preferred, and thereafter creditor may appeal a final order rendered
different character. Spec. Proc. No. 91-SP- included Liquidator. In either case, the against its claim. Hence, liquidation
0600 is the liquidation proceedings order allowing or disallowing a particular proceedings may very well be highly-
initiated by the PDIC before the RTC. claim is final order, and may be appealed contested and drawn-out, because, at the
Liquidation proceedings have been by the party aggrieved thereby. end of it all, all claims against the
described in detail in the case of Pacific The second phase involves the approval corporation undergoing litigation must be
Banking Corporation Employees’ by the Court of the distribution plan settled definitively and its assets properly
Organization (PaBCEO) v. Court of prepared by the duly appointed liquidator. disposed off.
Appeals,28 to wit – The distribution plan specifies in detail the WHEREFORE, in view of the foregoing,
[A] liquidation proceeding resembles the total amount available for distribution to this Court rules as follows –
proceeding for the settlement of estate of creditors whose claim were earlier (a) The instant Petition is GRANTED and
deceased persons under Rules 73 to 91 of allowed. The Order finally disposes of the the Orders, dated 17 January 2003 and 13
the Rules of Court. The two have a issue of how much property is available May 2003, of the RTC, sitting as the
common purpose: the determination of all for disposal. Moreover, it ushers in the Liquidation Court of the closed RBBI, in
the assets and the payment of all the final phase of the liquidation proceeding - Spec. Proc. No. 91-SP-0060,
debts and liabilities of the insolvent payment of all allowed claims in are NULLIFIED and SET ASIDE for
corporation or the estate. The Liquidator accordance with the order of legal priority having been rendered with grave abuse of
and the administrator or executor are and the approved distribution plan. discretion;
both charged with the assets for the xxxx (b) The PDIC, as liquidator,
benefit of the claimants. In both A liquidation proceeding is commenced by is ORDERED to submit to the BIR the
instances, the liability of the corporation the filing of a single petition by the final tax return of RBBI, in accordance
and the estate is not disputed. The Solicitor General with a court of with the first paragraph of Section 52(C),
court's concern is with the declaration competent jurisdiction entitled, "Petition
in connection with Section 54, of the Tax
Code of 1997; and
(c) The RTC is ORDERED to resume the
liquidation proceedings in Spec. Proc. No.
91-SP-0060 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 RBBI.
SO ORDERED.
 dated May 21, 2008 that consolidated the requested as well that the basis for the
G.R. No. 184778 October 2, civil cases. capital infusion figures be disclosed, and
2009 The Facts noted that none of them had received the
BANGKO SENTRAL NG PILIPINAS In September of 2007, the Supervision Report of Examination (ROE) which
MONETARY BOARD and CHUCHI and Examination Department (SED) of the finalizes the audit findings. They also
FONACIER, Petitioners, Bangko Sentral ng Pilipinas (BSP) requested meetings with the BSP audit
vs. conducted examinations of the books of teams to reconcile audit figures. In
HON. NINA G. ANTONIO- the following banks: Rural Bank of response, Fonacier reiterated the banks’
VALENZUELA, in her capacity as Parañaque, Inc. (RBPI), Rural Bank of San failure to comply with the directive for
Regional Trial Court Judge of Manila, Jose (Batangas), Inc., Rural Bank of additional capital infusions.
Branch 28; RURAL BANK OF Carmen (Cebu), Inc., Pilipino Rural Bank, On May 12, 2008, the RBPI filed a
PARAÑAQUE, INC.; RURAL BANK OF Inc., Philippine Countryside Rural Bank, complaint for nullification of the BSP ROE
SAN JOSE (BATANGAS), INC.; RURAL Inc., Rural Bank of Calatagan (Batangas), with application for a TRO and writ of
BANK OF CARMEN (CEBU), INC.; Inc. (now Dynamic Rural Bank), Rural preliminary injunction before the RTC
PILIPINO RURAL BANK, INC.; Bank of Darbci, Inc., Rural Bank of docketed as Civil Case No. 08-119243
PHILIPPINE COUNTRYSIDE RURAL Kananga (Leyte), Inc. (now First against Fonacier, the BSP, Amado M.
BANK, INC.; RURAL BANK OF Interstate Rural Bank), Rural Bank de Tetangco, Jr., Romulo L. Neri, Vicente B.
CALATAGAN (BATANGAS), INC. (now Bisayas Minglanilla (now Bank of East Valdepenas, Jr., Raul A. Boncan, Juanita
DYNAMIC RURAL BANK); RURAL Asia), and San Pablo City Development D. Amatong, Alfredo C. Antonio, and Nelly
BANK OF DARBCI, INC.; RURAL BANK Bank, Inc. F. Villafuerte. RBPI prayed that Fonacier,
OF KANANGA (LEYTE), INC. (now After the examinations, exit conferences her subordinates, agents, or any other
FIRST INTERSTATE RURAL BANK); were held with the officers or person acting in her behalf be enjoined
RURAL BANK OF BISAYAS representatives of the banks wherein the from submitting the ROE or any similar
MINGLANILLA (now BANK OF EAST SED examiners provided them with copies report to the Monetary Board (MB), or if
ASIA); and SAN PABLO CITY of Lists of Findings/Exceptions containing the ROE had already been submitted, the
DEVELOPMENT BANK, the deficiencies discovered during the MB be enjoined from acting on the basis
INC., Respondents. examinations. These banks were then of said ROE, on the allegation that the
DECISION required to comment and to undertake the failure to furnish the bank with a copy of
VELASCO, JR., J.: remedial measures stated in these lists the ROE violated its right to due process.
The Case within 30 days from their receipt of the The Rural Bank of San Jose (Batangas),
This is a Petition for Review on Certiorari lists, which remedial measures included Inc., Rural Bank of Carmen (Cebu), Inc.,
under Rule 45 with Prayer for Issuance of the infusion of additional capital. Though Pilipino Rural Bank, Inc., Philippine
a Temporary Restraining Order (TRO)/Writ the banks claimed that they made the Countryside Rural Bank, Inc., Rural Bank
of Preliminary Injunction, questioning the additional capital infusions, petitioner of Calatagan (Batangas), Inc., Rural Bank
Decision dated September 30, 20081 of Chuchi Fonacier, officer-in-charge of the of Darbci, Inc., Rural Bank of Kananga
the Court of Appeals (CA) in CA-G.R. SP SED, sent separate letters to the Board of (Leyte), Inc., and Rural Bank de Bisayas
No. 103935. The CA Decision upheld the Directors of each bank, informing them Minglanilla followed suit, filing complaints
Order2 dated June 4, 2008 of the Regional that the SED found that the banks failed with the RTC substantially similar to that
Trial Court (RTC), Branch 28 in Manila, to carry out the required remedial of RBPI, including the reliefs prayed for,
issuing writs of preliminary injunction in measures. In response, the banks which were raffled to different branches
Civil Case Nos. 08-119243, 08-119244, requested that they be given time to and docketed as Civil Cases Nos. 08-
08-119245, 08-119246, 08-119247, 08- obtain BSP approval to amend their 119244, 08-119245, 08-119246, 08-
119248, 08-119249, 08-119250, 08- Articles of Incorporation, that they have 119247, 08-119248, 08-119249, 08-
119251, and 08-119273, and the Order an opportunity to seek investors. They 119250, and 08-119251, respectively.
On May 13, 2008, the RTC denied the Branch 28. On May 22, 2008, Judge not entitled thereto. After posting of the
prayer for a TRO of Pilipino Rural Bank, Valenzuela granted the urgent motion for bond and approval thereof, let a writ of
Inc. The bank filed a motion for reconsideration of Pilipino Rural Bank, Inc. preliminary injunction be issued to enjoin
reconsideration the next day. and issued a TRO similar to the ones and restrain the defendants from
On May 14, 2008, Fonacier and the BSP earlier issued. submitting the Report of Examination or
filed their opposition to the application for On May 26, 2008, petitioners filed a any other similar report prepared in
a TRO and writ of preliminary injunction in Motion to Dismiss against all the connection with the examination
Civil Case No. 08-119243 with the RTC. complaints (except that of the San Pablo conducted on the plaintiff, to the Monetary
Respondent Judge Nina Antonio- City Development Bank, Inc.), on the Board. In case such a Report on
Valenzuela of Branch 28 granted RBPI’s grounds that the complaints stated no Examination [sic] or any other similar
prayer for the issuance of a TRO. cause of action and that a condition report prepared in connection with the
The other banks separately filed motions precedent for filing the cases had not examination conducted on the plaintiff has
for consolidation of their cases in Branch been complied with. On May 29, 2008, a been submitted to the Monetary Board,
28, which motions were granted. Judge hearing was conducted on the application the latter and its members (i.e.
Valenzuela set the complaint of Rural for a TRO and for a writ of preliminary defendants Tetangco, Neri, Valdepenas,
Bank of San Jose (Batangas), Inc. for injunction of San Pablo City Development Boncan, Amatong, Antonio, and
hearing on May 15, 2008. Petitioners Bank, Inc. Villafuerte) are enjoined and restrained
assailed the validity of the consolidation of The Ruling of the RTC from acting on the basis of said report.
the nine cases before the RTC, alleging After the parties filed their respective 2) Re: Civil Case No. 08-119244. Pursuant
that the court had already prejudged the memoranda, the RTC, on June 4, 2008, to Rule 58, Section 4(b) of the Revised
case by the earlier issuance of a TRO in ruled that the banks were entitled to the Rules of Court, plaintiff Rural Bank of San
Civil Case No. 08-119243, and moved for writs of preliminary injunction prayed for. Jose (Batangas), Inc. is directed to post a
the inhibition of respondent judge. It held that it had been the practice of the bond executed to the defendants, in the
Petitioners filed a motion for SED to provide the ROEs to the banks amount of P500,000.00 to the effect that
reconsideration regarding the before submission to the MB. It further the plaintiff will pay to the defendants all
consolidation of the subject cases. held that as the banks are the subjects of damages which they may sustain by
On May 16, 2008, San Pablo City examinations, they are entitled to copies reason of the injunction if the Court
Development Bank, Inc. filed a similar of the ROEs. The denial by petitioners of should finally decide that the plaintiff was
complaint against the same defendants the banks’ requests for copies of the ROEs not entitled thereto. After posting of the
with the RTC, and this was docketed as was held to be a denial of the banks’ right bond and approval thereof, let a writ of
Civil Case No. 08-119273 that was later to due process. preliminary injunction be issued to enjoin
on consolidated with Civil Case No. 08- The dispositive portion of the RTC’s order and restrain the defendants from
119243. Petitioners filed an Urgent Motion reads: submitting the Report of Examination or
to Lift/Dissolve the TRO and an Opposition WHEREFORE, the Court rules as follows: any other similar report prepared in
to the earlier motion for reconsideration of 1) Re: Civil Case No. 08-119243. Pursuant connection with the examination
Pilipino Rural Bank, Inc. to Rule 58, Section 4(b) of the Revised conducted on the plaintiff, to the Monetary
On May 19, 2008, Judge Valenzuela Rules of Court, plaintiff Rural Bank of Board. In case such a Report on
issued an Order granting the prayer for Paranaque Inc. is directed to post a bond Examination [sic] or any other similar
the issuance of TROs for the other seven executed to the defendants, in the amount report prepared in connection with the
cases consolidated with Civil Case No. 08- of P500,000.00 to the effect that the examination conducted on the plaintiff has
119243. On May 21, 2008, Judge plaintiff will pay to the defendants all been submitted to the Monetary Board,
Valenzuela issued an Order denying damages which they may sustain by the latter and its members (i.e.
petitioners’ motion for reconsideration reason of the injunction if the Court defendants Tetangco, Neri, Valdepenas,
regarding the consolidation of cases in should finally decide that the plaintiff was Boncan, Amatong, Antonio, and
Villafuerte) are enjoined and restrained Examination or any other similar report (Rural Bank of Calatagan) is directed to
from acting on the basis of said report. prepared in connection with the post a bond executed to the defendants,
3) Re: Civil Case No. 08-119245. Pursuant examination conducted on the plaintiff, to in the amount of P500,000.00 to the
to Rule 58, Section 4(b) of the Revised the Monetary Board. In case such a effect that the plaintiff will pay to the
Rules of Court, plaintiff Rural Bank of Report on Examination [sic] or any other defendants all damages which they may
Carmen (Cebu), Inc. is directed to post a similar report prepared in connection with sustain by reason of the injunction if the
bond executed to the defendants, in the the examination conducted on the plaintiff Court should finally decide that the
amount of P500,000.00 to the effect that has been submitted to the Monetary plaintiff was not entitled thereto. After
the plaintiff will pay to the defendants all Board, the latter and its members (i.e. posting of the bond and approval thereof,
damages which they may sustain by defendants Tetangco, Neri, Valdepenas, let a writ of preliminary injunction be
reason of the injunction if the Court Boncan, Amatong, Antonio, and issued to enjoin and restrain the
should finally decide that the plaintiff was Villafuerte) are enjoined and restrained defendants from submitting the Report of
not entitled thereto. After posting of the from acting on the basis of said report. Examination or any other similar report
bond and approval thereof, let a writ of 5) Re: Civil Case No. 08-119247. Pursuant prepared in connection with the
preliminary injunction be issued to enjoin to Rule 58, Section 4(b) of the Revised examination conducted on the plaintiff, to
and restrain the defendants from Rules of Court, plaintiff Philippine the Monetary Board. In case such a
submitting the Report of Examination or Countryside Rural Bank Inc. is directed to Report on Examination [sic] or any other
any other similar report prepared in post a bond executed to the defendants, similar report prepared in connection with
connection with the examination in the amount of P500,000.00 to the the examination conducted on the plaintiff
conducted on the plaintiff, to the Monetary effect that the plaintiff will pay to the has been submitted to the Monetary
Board. In case such a Report on defendants all damages which they may Board, the latter and its members (i.e.
Examination [sic] or any other similar sustain by reason of the injunction if the defendants Tetangco, Neri, Valdepenas,
report prepared in connection with the Court should finally decide that the Boncan, Amatong, Antonio, and
examination conducted on the plaintiff has plaintiff was not entitled thereto. After Villafuerte) are enjoined and restrained
been submitted to the Monetary Board, posting of the bond and approval thereof, from acting on the basis of said report.
the latter and its members (i.e. let a writ of preliminary injunction be 7) Re: Civil Case No. 08-119249. Pursuant
defendants Tetangco, Neri, Valdepenas, issued to enjoin and restrain the to Rule 58, Section 4(b) of the Revised
Boncan, Amatong, Antonio, and defendants from submitting the Report of Rules of Court, plaintiff Rural Bank of
Villafuerte) are enjoined and restrained Examination or any other similar report DARBCI, Inc. is directed to post a bond
from acting on the basis of said report. prepared in connection with the executed to the defendants, in the amount
4) Re: Civil Case No. 08-119246. Pursuant examination conducted on the plaintiff, to of P500,000.00 to the effect that the
to Rule 58, Section 4(b) of the Revised the Monetary Board. In case such a plaintiff will pay to the defendants all
Rules of Court, plaintiff Pilipino Rural Bank Report on Examination [sic] or any other damages which they may sustain by
Inc. is directed to post a bond executed to similar report prepared in connection with reason of the injunction if the Court
the defendants, in the amount of the examination conducted on the plaintiff should finally decide that the plaintiff was
P500,000.00 to the effect that the plaintiff has been submitted to the Monetary not entitled thereto. After posting of the
will pay to the defendants all damages Board, the latter and its members (i.e. bond and approval thereof, let a writ of
which they may sustain by reason of the defendants Tetangco, Neri, Valdepenas, preliminary injunction be issued to enjoin
injunction if the Court should finally decide Boncan, Amatong, Antonio, and and restrain the defendants from
that the plaintiff was not entitled thereto. Villafuerte) are enjoined and restrained submitting the Report of Examination or
After posting of the bond and approval from acting on the basis of said report. any other similar report prepared in
thereof, let a writ of preliminary injunction 6) Re: Civil Case No. 08-119248. Pursuant connection with the examination
be issued to enjoin and restrain the to Rule 58, Section 4(b) of the Revised conducted on the plaintiff, to the Monetary
defendants from submitting the Report of Rules of Court, plaintiff Dynamic Bank Inc. Board. In case such a Report on
Examination [sic] or any other similar plaintiff will pay to the defendants all has been submitted to the Monetary
report prepared in connection with the damages which they may sustain by Board, the latter and its members (i.e.
examination conducted on the plaintiff has reason of the injunction if the Court defendants Tetangco, Neri, Valdepenas,
been submitted to the Monetary Board, should finally decide that the plaintiff was Boncan, Amatong, Antonio, and
the latter and its members (i.e. not entitled thereto. After posting of the Villafuerte) are enjoined and restrained
defendants Tetangco, Neri, Valdepenas, bond and approval thereof, let a writ of from acting on the basis of said report.3
Boncan, Amatong, Antonio, and preliminary injunction be issued to enjoin The Ruling of the CA
Villafuerte) are enjoined and restrained and restrain the defendants from Petitioners then brought the matter to the
from acting on the basis of said report. submitting the Report of Examination or CA via a petition for certiorari under Rule
8) Re: Civil Case No. 08-119250. Pursuant any other similar report prepared in 65 claiming grave abuse of discretion on
to Rule 58, Section 4(b) of the Revised connection with the examination the part of Judge Valenzuela when she
Rules of Court, plaintiff Rural Bank of conducted on the plaintiff, to the Monetary issued the orders dated May 21, 2008 and
Kananga Inc. (First Intestate Bank), is Board. In case such a Report on June 4, 2008.
directed to post a bond executed to the Examination [sic] or any other similar The CA ruled that the RTC committed no
defendants, in the amount of P500,000.00 report prepared in connection with the grave abuse of discretion when it ordered
to the effect that the plaintiff will pay to examination conducted on the plaintiff has the issuance of a writ of preliminary
the defendants all damages which they been submitted to the Monetary Board, injunction and when it ordered the
may sustain by reason of the injunction if the latter and its members (i.e. consolidation of the 10 cases.
the Court should finally decide that the defendants Tetangco, Neri, Valdepenas, It held that petitioners should have first
plaintiff was not entitled thereto. After Boncan, Amatong, Antonio, and filed a motion for reconsideration of the
posting of the bond and approval thereof, Villafuerte) are enjoined and restrained assailed orders, and failed to justify why
let a writ of preliminary injunction be from acting on the basis of said report. they resorted to a special civil action of
issued to enjoin and restrain the 10) Re: Civil Case No. 08-119273. certiorari instead.
defendants from submitting the Report of Pursuant to Rule 58, Section 4(b) of the The CA also found that aside from the
Examination or any other similar report Revised Rules of Court, plaintiff San Pablo technical aspect, there was no grave
prepared in connection with the City Development Bank, Inc. is directed to abuse of discretion on the part of the RTC,
examination conducted on the plaintiff, to post a bond executed to the defendants, and if there was a mistake in the
the Monetary Board. In case such a in the amount of P500,000.00 to the assessment of evidence by the trial court,
Report on Examination [sic] or any other effect that the plaintiff will pay to the that should be characterized as an error of
similar report prepared in connection with defendants all damages which they may judgment, and should be correctable via
the examination conducted on the plaintiff sustain by reason of the injunction if the appeal.
has been submitted to the Monetary Court should finally decide that the The CA held that the principles of fairness
Board, the latter and its members (i.e. plaintiff was not entitled thereto. After and transparency dictate that the
defendants Tetangco, Neri, Valdepenas, posting of the bond and approval thereof, respondent banks are entitled to copies of
Boncan, Amatong, Antonio, and let a writ of preliminary injunction be the ROE.
Villafuerte) are enjoined and restrained issued to enjoin and restrain the Regarding the consolidation of the 10
from acting on the basis of said report. defendants from submitting the Report of cases, the CA found that there was a
9) Re: Civil Case No. 08-119251. Pursuant Examination or any other similar report similarity of facts, reliefs sought, issues
to Rule 58, Section 4(b) of the Revised prepared in connection with the raised, defendants, and that plaintiffs and
Rules of Court, plaintiff Banco Rural De examination conducted on the plaintiff, to defendants were represented by the same
Bisayas Minglanilla (Cebu) Inc. (Bank of the Monetary Board. In case such a sets of counsels. It found that the joint
East Asia) is directed to post a bond Report on Examination [sic] or any other trial of these cases would prejudice any
executed to the defendants, in the amount similar report prepared in connection with substantial right of petitioners.
of P500,000.00 to the effect that the the examination conducted on the plaintiff
Finding that no grave abuse of discretion VIEW OF THE PRINCIPLES OF FAIRNESS to be entitled to an injunctive writ, the
attended the issuance of the orders by the AND TRANSPARENCY DESPITE LACK OF right to be protected and the violation
RTC, the CA denied the petition. EXPRESS PROVISION IN THE NEW against that right must be shown.8
On November 24, 2008, a TRO was issued CENTRAL BANK ACT REQUIRING BSP TO These requirements are absent in the
by this Court, restraining the CA, RTC, DO THE SAME present case.
and respondents from implementing and III. THE HONORABLE COURT OF APPEALS In granting the writs of preliminary
enforcing the CA Decision dated GRAVELY ERRED IN DEPARTING FROM injunction, the trial court held that the
September 30, 2008 in CA-G.R. SP No. WELL-ESTABLISHED PRECEPTS OF LAW submission of the ROEs to the MB before
103935.4 AND JURISPRUDENCE the respondent banks would violate the
By reason of the TRO issued by this Court, A. THE EXCEPTIONS CITED BY right to due process of said banks.
the SED was able to submit their ROEs to PETITIONER JUSTIFIED RESORT TO This is erroneous.
the MB. The MB then prohibited the PETITION FOR CERTIORARI UNDER RULE The respondent banks have failed to show
respondent banks from transacting 65 INSTEAD OF FIRST FILING A MOTION that they are entitled to copies of the
business and placed them under FOR RECONSIDERATION ROEs. They can point to no provision of
receivership under Section 53 of Republic B. RESPONDENT BANKS’ ACT OF law, no section in the procedures of the
Act No. (RA) 87915 and Sec. 30 of RA RESORTING IMMEDIATELY TO THE COURT BSP that shows that the BSP is required to
76536 through MB Resolution No. 1616 WAS PREMATURE SINCE IT WAS MADE IN give them copies of the ROEs. Sec. 28 of
dated December 9, 2008; Resolution Nos. UTTER DISREGARD OF THE PRINCIPLE OF RA 7653, or the New Central Bank Act,
1637 and 1638 dated December 11, PRIMARY JURISDICTION AND which governs examinations of banking
2008; Resolution Nos. 1647, 1648, and EXHAUSTION OF ADMINISTRATIVE institutions, provides that the ROE shall be
1649 dated December 12, 2008; REMEDY submitted to the MB; the bank examined
Resolution Nos. 1652 and 1653 dated C. THE ISSUANCE OF A WRIT OF is not mentioned as a recipient of the
December 16, 2008; and Resolution Nos. PRELIMINARY INJUNCTION BY THE ROE.
1692 and 1695 dated December 19, 2008, REGIONAL TRIAL COURT WAS NOT ONLY The respondent banks cannot claim a
with the Philippine Deposit Insurance IMPROPER BUT AMOUNTED TO GRAVE violation of their right to due process if
Corporation as the appointed receiver. ABUSE OF DISCRETION7 they are not provided with copies of the
Now we resolve the main petition. Our Ruling ROEs. The same ROEs are based on the
Grounds in Support of Petition The petition is meritorious. lists of findings/exceptions containing the
I. THE HONORABLE COURT OF APPEALS In Lim v. Court of Appeals it was stated: deficiencies found by the SED examiners
GRAVELY ERRED IN NOT FINDING THAT The requisites for preliminary injunctive when they examined the books of the
THE INJUNCTION ISSUED BY THE relief are: (a) the invasion of right sought respondent banks. As found by the RTC,
REGIONAL TRIAL COURT VIOLATED to be protected is material and these lists of findings/exceptions were
SECTION 25 OF THE NEW CENTRAL BANK substantial; (b) the right of the furnished to the officers or representatives
ACT AND EFFECTIVELY HANDCUFFED THE complainant is clear and unmistakable; of the respondent banks, and the
BANGKO SENTRAL FROM DISCHARGING and (c) there is an urgent and paramount respondent banks were required to
ITS FUNCTIONS TO THE GREAT AND necessity for the writ to prevent serious comment and to undertake remedial
IRREPARABLE DAMAGE OF THE damage. measures stated in said lists. Despite
COUNTRY’S BANKING SYSTEM; As such, a writ of preliminary injunction these instructions, respondent banks
II. THE HONORABLE COURT OF APPEALS may be issued only upon clear showing of failed to comply with the SED’s directive.
GRAVELY ERRED IN FINDING THAT an actual existing right to be protected Respondent banks are already aware of
RESPONDENTS ARE ENTITLED TO BE during the pendency of the principal what is required of them by the BSP, and
FURNISHED COPIES OF THEIR action. The twin requirements of a valid cannot claim violation of their right to due
RESPECTIVE ROEs BEFORE THE SAME IS injunction are the existence of a right and process simply because they are not
SUBMITTED TO THE MONETARY BOARD IN its actual or threatened violations. Thus, furnished with copies of the ROEs.
Respondent banks were held by the CA to appointment of a conservator or a and worse, by preventing the MB from
be entitled to copies of the ROEs prior to receiver for a bank, which is a power of acting on such ROEs.
or simultaneously with their submission to the MB for which they need the ROEs The trial court required the MB to respect
the MB, on the principles of fairness and done by the supervising or examining the respondent banks’ right to due
transparency. Further, the CA held that if department. The writs of preliminary process by allowing the respondent banks
the contents of the ROEs are essentially injunction issued by the trial court hinder to view the ROEs and act upon them to
the same as those of the lists of the MB from fulfilling its function under forestall any sanctions the MB might
findings/exceptions provided to said the law. The actions of the MB under Secs. impose. Such procedure has no basis in
banks, there is no reason not to give 29 and 30 of RA 7653 "may not be law and does in fact violate the "close
copies of the ROEs to the banks. This is a restrained or set aside by the court except now, hear later" doctrine. We held in Rural
flawed conclusion, since if the banks are on petition for certiorari on the ground Bank of San Miguel, Inc. v. Monetary
already aware of the contents of the that the action taken was in excess of Board, Bangko Sentral ng Pilipinas:
ROEs, they cannot say that fairness and jurisdiction or with such grave abuse of It is well-settled that the closure of a bank
transparency are not present. If sanctions discretion as to amount to lack or excess may be considered as an exercise of police
are to be imposed upon the respondent of jurisdiction." The writs of preliminary power. The action of the MB on this
banks, they are already well aware of the injunction order are precisely what cannot matter is final and executory. Such
reasons for the sanctions, having been be done under the law by preventing the exercise may nonetheless be subject to
informed via the lists of MB from taking action under either Sec. judicial inquiry and can be set aside if
findings/exceptions, demolishing that 29 or Sec. 30 of RA 7653. found to be in excess of jurisdiction or
particular argument. The ROEs would then As to the third requirement, the with such grave abuse of discretion as to
be superfluities to the respondent banks, respondent banks have shown no amount to lack or excess of jurisdiction.12
and should not be the basis for a writ of necessity for the writ of preliminary The respondent banks cannot—through
preliminary injunction. Also, the reliance injunction to prevent serious damage. The seeking a writ of preliminary injunction by
of the RTC on Banco Filipino v. Monetary serious damage contemplated by the trial appealing to lack of due process, in a
Board9 is misplaced. The petitioner in that court was the possibility of the imposition roundabout manner— prevent their
case was held to be entitled to annexes of of sanctions upon respondent banks, even closure by the MB. Their remedy, as
the Supervision and Examination Sector’s the sanction of closure. Under the law, the stated, is a subsequent one, which will
reports, as it already had a copy of the sanction of closure could be imposed upon determine whether the closure of the bank
reports themselves. It was not the subject a bank by the BSP even without notice was attended by grave abuse of
of the case whether or not the petitioner and hearing. The apparent lack of discretion. Judicial review enters the
was entitled to a copy of the reports. And procedural due process would not result in picture only after the MB has taken
the ruling was made after the petitioner the invalidity of action by the MB. This action; it cannot prevent such action by
bank was ordered closed, and it was was the ruling in Central Bank of the the MB. The threat of the imposition of
allowed to be supplied with annexes of the Philippines v. Court of Appeals.11 This sanctions, even that of closure, does not
reports in order to better prepare its "close now, hear later" scheme is violate their right to due process, and
defense. In this instance, at the time the grounded on practical and legal cannot be the basis for a writ of
respondent banks requested copies of the considerations to prevent unwarranted preliminary injunction.
ROEs, no action had yet been taken by dissipation of the bank’s assets and as a The "close now, hear later" doctrine has
the MB with regard to imposing sanctions valid exercise of police power to protect already been justified as a measure for
upon said banks. the depositors, creditors, stockholders, the protection of the public interest. Swift
The issuance by the RTC of writs of and the general public. The writ of action is called for on the part of the BSP
preliminary injunction is an unwarranted preliminary injunction cannot, thus, when it finds that a bank is in dire straits.
interference with the powers of the MB. prevent the MB from taking action, by Unless adequate and determined efforts
Secs. 29 and 30 of RA 765310 refer to the preventing the submission of the ROEs are taken by the government against
distressed and mismanaged banks, public grant or denial of an injunction generally
faith in the banking system is certain to rests on the sound discretion of the lower
deteriorate to the prejudice of the national court, this Court may and should
economy itself, not to mention the losses intervene in a clear case of abuse.18
suffered by the bank depositors, creditors, WHEREFORE, the petition is hereby
and stockholders, who all deserve the GRANTED. The assailed CA Decision dated
protection of the government.13 September 30, 2008 in CA-G.R. SP No.
The respondent banks have failed to show 103935 is hereby REVERSED. The assailed
their entitlement to the writ of preliminary order and writ of preliminary injunction of
injunction. It must be emphasized that an respondent Judge Valenzuela in Civil Case
application for injunctive relief is Nos. 08-119243, 08-119244, 08-119245,
construed strictly against the 08-119246, 08-119247, 08-119248, 08-
pleader.14 The respondent banks cannot 119249, 08-119250, 08-119251, and 08-
rely on a simple appeal to procedural due 119273 are hereby declared NULL and
process to prove entitlement. The VOID.
requirements for the issuance of the writ SO ORDERED.
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
[G.R. No. 59957. November 12, REMEDIES; PRELIMINARY INJUNCTION;
1990.] 2. ID.; ID.; ID.; RULE WHEN A FUNCTION THEREOF. — Respondent
RESOLUTION THEREOF IS CLAIMED TO BE Judge acted with grave abuse of discretion
CENTRAL BANK OF THE PHILIPPINES, ARBITRARY AND DONE IN BAD FAITH. — in issuing the contested order dated
MEMBERS OF THE MONETARY BOARD, Respondent Judge erred in denying the January 15, 1982 enjoining the CB
CONSOLACION V. ODRA, MARIO Central Bank’s motion to dismiss the liquidator from closing the rural bank and
VICENTE, DRBSLA, RAMIL PARAISO, complaint for prohibition and mandamus requiring it to restore the management
DANTE L. REYES, DISIMULACION (Civil Case No. 1309) filed by Libmanan and control of the bank to its board of
KING and NORA G. Bank (Annex C, p. 71, Rollo). This Court in directors. It is a basic procedural postulate
SARMIENTO, Petitioners, v. THE the case of Rural Bank of Buhi, Inc. v. that a preliminary injunction should never
HONORABLE RAFAEL DE LA CRUZ and Court of Appeals (162 SCRA 288) and be used to transfer the possession or
the RURAL BANK OF LIBMANAN, Salud v. Central Bank of the Phils. 143 control of a thing to a party who did not
INC., Respondents. SCRA 590), ruled that a bank’s claim that have such possession or control at the
the resolution of the Monetary Board inception of the case (Lasala v.
Carpio & Carpio Law Office for Private under Section 29 is plainly arbitrary and Fernandez, 5 SCRA 79; Emilia v. Bado, 28
Respondents. done in bad faith should be asserted as an SCRA 183). Its proper function is simply
affirmative defense or counter-claim in the to maintain the status quo at the
SYLLABUS proceedings for assistance in liquidation. commencement of the action. The status
It may be filed as a separate action if no quo at the time of filing Civil Case No.
1. COMMERCIAL LAW; BANKING; petition for assistance in liquidation has 1309 was that Libmanan Bank was under
MONETARY BOARD; ACTIONS THEREOF IN been instituted yet. the control of the DRBSLA Director, with
PROCEEDINGS ON INSOLVENCY, FINAL Consolacion V. Odra, as liquidator
AND EXECUTORY. — It is noteworthy that 3. ID.; ID.; REMAINING ASSETS OF appointed by the Central Bank.
the actions of the Monetary Board in INSOLVENT BANK, SHOULD BE
proceedings on insolvency are explicitly CONSERVED TO PAY ITS CREDITORS. — 5. ID.; PLEADINGS; RULE OF "WAIVER OF
declared by law to be "final and Respondent Judge abused his discretion in DEFENSE" OR "OMNIBUS MOTION RULE",
executory." They may not be set aside, or authorizing the Libmanan Bank to APPLICABLE IN THE CASE AT BAR. —
restrained, or enjoined by the courts, withdraw funds from its deposits in other Since the Central Bank’s petition for
except upon "convincing proof that the banks (Annex E, p. 26, Rollo). The Rural assistance in liquidation had been filed on
action is plainly arbitrary and made in bad Bank had become insolvent as a result of August 3, 1981 (Civil Case No. SP-111,
faith" (Salud v. Central Bank of the mismanagement, frauds, irregularities and Court of First Instance of Camarines Sur,
Philippines, 143 SCRA 590). Respondent violations of banking laws, rules, and Branch III), the Libmanan Bank’s filing on
Judge acted in plain disregard of the regulations by its officers (p. 62, Rollo). September 23, 1981 of a complaint for
fourth paragraph of Section 29 of the Its remaining assets should therefore be prohibition and mandamus attacking the
Central Bank Act, when he restrained the conserved to pay its creditors. Allowing Central Bank’s resolution appointing a
petitioners from closing and liquidating the Rural Bank to withdraw its deposits in receiver and liquidator for the bank should
the Rural Bank of Libmanan, prevented other banks would result in the further have been asserted as a counterclaim in
them from performing their functions, and diminution and dissipation of its assets to SP-111 (p. 39-40, Rollo), instead of as a
ordered them to return the management the prejudice of its depositors and separate special civil action for prohibition
and control of the rural bank to its board creditors, and to the unlawful advantage against the Central Bank. The separate
of directors (p. 51, Rollo) without of the very officers who brought about the action should have been either dismissed
receiving convincing proof that the action bank’s insolvency. or consolidated with SP-111 for the law
of the CB was plainly arbitrary and made abhors multiplicity of suits. Failure of
in bad faith. 4. REMEDIAL LAW; PROVISIONAL Libmanan Bank to assert in SP-111 the
defense that the Monetary Board’s over Civil Case No. 1309, a proceeding for the Monetary Board, Director Odra
receivership and liquidation resolution was prohibition, mandamus, and injunction recommended, among other things, that:
"arbitrary and made in bad faith," filed by herein private respondent Rural (1) Libmanan Bank be prohibited from
constitutes a waiver of that defense Bank of Libmanan, Inc., to stop its doing business; (2) that it be placed under
conformably with the rule of "Waiver of liquidation by the petitioners (defendants receivership in accordance with Section 29
Defense," i.e., that "defenses and in the lower court) and to compel of Republic Act No. 265, as amended; and
objections not pleaded either in a motion respondent Judge to dismiss Civil Case (3) that the Director of DRBSLA be
to dismiss or in the answer are (generally) No. 1309 (pp. 24-26, Rollo); designated as receiver (p. 36, Rollo).
deemed waived," or the "Omnibus Motion andchanrobles virtual lawlibrary
Rule," providing that "a motion attacking Finding the report to be true, the
a pleading or a proceeding shall include all 3. to restore to petitioner Consolacion V. Monetary Board, on May 23, 1980,
objections then available, and all Odra, as the duly appointed liquidator of adopted Resolution No. 929 placing
objections not so included shall be the Central Bank, the control of the Libmanan Bank under statutory
deemed waived" (Salud v. Central Bank of respondent Rural Bank of Libmanan (p. receivership and designating Director
the Phils., 143 SCRA 590). 27, Rollo). Consolacion V. Odra, as Receiver,
pursuant to Section 29, of Republic Act
The Rural Bank of Libmanan (hereinafter No. 265, as amended (p. 39, Rollo).
DECISION referred to as Libmanan Bank) started
operations in 1965 under and by virtue of Libmanan Bank was informed of the
Republic Act No. 720, otherwise known as Monetary Board Resolution No. 929, and
GRIÑO-AQUINO, J.: the Rural Banks’ Act (p. 331, Rollo). advised to submit to the Monetary Board
Originally owned and managed by the an acceptable reorganization and
Albas’ family, Libmanan Bank was later rehabilitation program (p. 39, Rollo).
This petition for certiorari, prohibition and sold to Manuel M. Villar and respondent Meanwhile, Director Odra, as receiver,
mandamus was filed by the Central Bank Alex G. Durante, who commenced banking took possession and control of the assets
of the Philippines, the members of the operations in January 1979 (p. 331, and records of the rural bank (p. 39,
Monetary Board, Consolacion V. Odra, Rollo). Rollo).
Mario Vicente, Ramil Paraiso, Dante L.
Reyes, Disimulacion King and Nora G. In 1979, the Department of Rural Banks As Libmanan Bank failed to submit the
Sarmiento, through the Solicitor General, and Savings and Loan Associations required acceptable reorganization and
praying this Court:[Link] : (DRBSLA) of the Central Bank of the rehabilitation plan, the Monetary Board
virtual law library Philippines (or CB) conducted issued on October 3, 1980 Resolution No.
examinations of the books and affairs of 1852 ordering its liquidation (p. 39,
1. to annul the orders dated January 15, Libmanan Bank (pp. 28-32, Rollo) DRBSLA Rollo).
1982, January 29, 1982, March 1, 1982, director, Consolacion V. Odra, found
March 31, 1982 and April 20, 1982 serious irregularities in its lending and On August 3, 1981, the Solicitor General,
(Annexes A, B, C, D and E) of the then deposit operations, including false entries in accordance with Republic Act No. 265,
Court of First Instance of Camarines Sur, and false statements in the bank’s records Section 29, filed in the then Court of First
Branch III; to give it the appearance of solidity and Instance of Camarines Sur, Branch III,
soundness which it did not possess (p 28, presided over by respondent Judge Rafael
2. to restrain respondent Judge Rafael De Rollo). As a result of its questionable De la Cruz, a petition for Assistance in the
la Cruz, his agents, and representatives, transactions, the bank became insolvent. Liquidation of Libmanan Bank. The
from enforcing the aforesaid orders and petition was docketed as SP-111 (pp. 39-
from continuing to assume jurisdiction In her Memorandum dated May 2, 1980 to 40, Rollo). Libmanan Bank, through its
resident-Manager and the members of its 25, Rollo). to answer" (Annex D, p. 72, Rollo).
Board of Directors opposed the Central
Bank’s petition. On January 25, 1982, Libmanan Bank filed On April 20, 1982, respondent Judge
an ex parte motion to declare the CB in granted Libmanan Bank’s ex parte motion
On September 23, 1981, Libmanan Bank default (Annex J, p. 42, Rollo). dated March 29, 1982 for authority to
filed in the same Court of First Instance of withdraw money from its bank deposits
Camarines Sur, Branch III, a separate On February 11, 1982, the Solicitor (Annex E, p. 45, Rollo).[Link] :
complaint for prohibition, mandamus and General filed a third motion for extension virtual law library
injunction (Civil Case No. 1309), against (up to March 1, 1982) of the period to file
the Central Bank, Et. Al. (herein a responsive pleading in Civil Case No. Hence, the present recourse.
petitioners), praying the Court to enjoin 1309 (Annex K, p. 43, Rollo).
and dismiss the liquidation proceeding The main issue raised by the petition is
(Sp. Proc. No. 111) on the ground that the On February 15, 1982, he filed a Motion to whether or not respondent Judge acted
Central Bank gravely abused its discretion Dismiss Civil Case No. 1309 on the ground with grave abuse of discretion or without
in ordering the liquidation of said rural that respondent Judge had no jurisdiction or in excess of his jurisdiction in issuing
[Link] over a special civil action for prohibition, the questioned orders,
mandamus and injunction against the namely:chanrob1es virtual 1aw library
On December 24, 1981, the Central Bank, Central Bank and that the petition was
through its house counsel, filed a motion defective in form because it was not Annex A — order of January 15, 1982
for extension of time to file its responsive properly verified (Annex L, p. 43, Rollo). restraining the Central Bank from closing
pleading in Civil Case No. 1309 (Annex G, On March 1, 1982, Judge De la Cruz the rural bank and ordering return of
p. 42, Rollo). On January 12, 1982, the denied the motion to dismiss and gave the management and control to the Board of
Solicitor General entered his appearance Central Bank ten (10) days to file its Directors.
in the case as counsel for the Central answer (Annex C, p. 44, Rollo).
Bank, and asked for a second extension of Annex B — order of January 29, 1982
time to file a responsive pleading (Annex On March 19, 1982, the Central Bank filed restraining the Central Bank from
I, p. 42,-Rollo). in the Supreme Court a Motion for disturbing status quo before the complaint
Extension to file a petition for certiorari, was filed.
On January 15, 1982, respondent Judge prohibition and mandamus, and a
issued the questioned order in Civil Case separate manifestation in the lower court Annex C — order of March 1, 1982
No. 1309, restraining the respondent notifying Judge De la Cruz of the CB’s denying Central Bank’s motion to dismiss.
Central Bank from "closing the petitioner intention to elevate the case to this Court
(rural) bank and from performing its and requesting Judge De la Cruz to desist Annex D — order of March 31, 1982
customary banking business; to restore from taking any further action in Civil declaring Central Bank in default.
the control and management of the bank Case No. 1309.
to its Board of Directors; and to desist Annex E — order of April 20, 1982
from liquidating its assets until ordered On March 31, 1982, Judge De la Cruz authorizing Libmanan Bank to withdraw
otherwise by this Court" (p. 42, Rollo). On declared the CB, Et Al., in default for money from its bank deposits.
January 29, 1982, respondent Judge failure to file a responsive pleading to the
modified this order by requiring the petition in Civil Case No. 1309. He pointed The answer is yes.
parties in Civil Case No. 1309 to "refrain out that "the projected move to bring the
from any act or acts which will tend to court’s denial of the motion to dismiss to The authority for the receivership of
disturb the state in which the parties were the Supreme Court on certiorari did not Libmanan Bank is found in Section 29 of
found before the complaint was filed" (p. stop the period given to the respondents the Central Bank Act (P.D. 1827), which
provides:jgc:[Link] well as the time for fulfillment of such or otherwise dispose of the same to
conditions. In such case, the expenses creditors and other parties for the purpose
"SECTION 29. — Proceedings upon and fees in the collection and of paying the debts of such institution and
insolvency — Whenever, upon administration of the assets of the he may, in the name of the bank or non-
examination by the head of the institution shall be determined by the bank financial intermediary performing
appropriate supervising or examining board and shall be paid to the Central quasi-banking functions, institute such
department or his examiners or agents Bank out of the assets of such banking actions as may be necessary in the
into the condition of any bank or non-bank institution. appropriate court to collect and recover
financial intermediary performing quasi- accounts and assets of such
banking functions, it shall be disclosed "If the Monetary Board shall determine institution."cralaw virtua1aw library
that the condition of the same is one of and confirm within the said period that the
insolvency, or that its continuance in bank or non-bank financial intermediary "The provisions of any law to the contrary
business would involve probable loss to its performing quasi-banking functions is notwithstanding the actions of the
depositors or creditors, it shall be the duty insolvent or cannot resume business with Monetary Board under this Section and
of the department head concerned safety to its depositors, creditors and the the second paragraph of Section 34 of this
forthwith, in writing, to inform the general public, it shall, if the public Act shall be final and executory, and can
Monetary Board of the facts, and the interest requires, order its liquidation, be set aside by the court only if there is
Board may, upon finding the statements indicate the manner of its liquidation and convincing proof that the action is plainly
of the department head to be true forbid approve a liquidation plan. The Central arbitrary and made in bad faith. No
the institution to do business in the Bank shall, by the Solicitor General, file a restraining order or injunction shall be
Philippines and shall designate an official petition in the Court of First Instance issued by the court enjoining the Central
of the Central Bank or a person of reciting the proceeding which have been Bank from implementing its actions under
recognized competence in banking or taken and praying the assistance of the this Section and the second paragraph of
finance as receiver to immediately take court in the liquidation of such institution. Section 34 of this Act, unless there is
charge of its assets and liabilities, as The court shall have jurisdiction in the convincing proof that the action of the
expeditiously as possible collect and same proceedings to adjudicate disputed Monetary Board is plainly arbitrary and
gather all the assets and administer the claims against the bank or non-bank made in bad faith and the petitioner or
same for the benefit of its creditors, financial intermediary performing quasi- plaintiff files with the clerk or judge of the
exercising all the powers necessary for banking functions and enforce individual court in which the action is pending a
these purposes including, but not limited liabilities of the stockholders and do all bond executed in favor of the Central
to, bringing suits and foreclosing that is necessary to preserve the assets of Bank, in an amount to be fixed by the
mortgages in the name of the bank or such institution and to implement the Court. The restraining order or injunctions
non-bank financial intermediary liquidation plan approved by the Monetary shall be refused or, if granted, shall be
performing quasi-banking functions. Board. The Monetary Board shall dissolved upon filing by the Central Bank
designate an official of the Central Bank, of a bond, which shall be in the form of
‘The Monetary Board shall thereupon or a person of recognized competence in cash or Central Bank cashier’s check, in
determine within sixty days whether the banking or finance, as liquidator who shall an amount twice the amount of the bond
institution may be reorganized or take over the functions of the receiver of the petitioner or plaintiff conditioned
otherwise placed in such a condition so previously appointed by the Monetary that it will pay the damages which the
that it may be permitted to resume Board under this Section. The liquidator petitioner or plaintiff may suffer by the
business with safety to its depositors and shall, with all convenient speed, convert refusal or the dissolution of the injunction.
creditors and the general public and shall the assets of the bank or non-bank The provisions of Rule 58 of the New
prescribe the conditions under which such financial intermediary performing quasi- Rules of Court insofar as they are
resumption of business shall take place as banking functions to money or sell, assign applicable and not inconsistent with the
provisions of this Section shall govern the liquidating the Rural Bank of Libmanan, parties properly belonging to the trial
issuance and dissolution of the restraining prevented them from performing their court and not properly cognizable on
order or injunction contemplated in this functions, and ordered them to return the appeal."cralaw virtua1aw library
Section. management and control of the rural bank
to its board of directors (p. 51, Rollo) Respondent Judge acted with grave abuse
"Insolvency under this Act, shall be without receiving convincing proof that of discretion in issuing the contested order
understood to mean the inability of a bank the action of the CB was plainly arbitrary dated January 15, 1982 enjoining the CB
or non-bank financial intermediary and made in bad faith. As stated therein, liquidator from closing the rural bank and
performing quasi-banking functions to pay the basis of the questioned order dated requiring it to restore the management
its liabilities as they fall due in the usual January 15, 1982, were:chanrob1es and control of the bank to its board of
and ordinary course of business: Provided, virtual 1aw library directors. It is a basic procedural postulate
however, That this shall not include the that a preliminary injunction should never
inability to pay of an otherwise non- 1. that he did not receive any of be used to transfer the possession or
insolvent bank or non-bank financial petitioners’ formal motions for extension control of a thing to a party who did not
intermediary performing quasi-banking of time to file their responsive pleading; have such possession or control at the
functions caused by extraordinary inception of the case (Lasala v.
demands induced by financial panic 2. that he had read the petition filed in Fernandez, 5 SCRA 79; Emilia v. Bado, 28
commonly evidenced by a run on the bank Civil Case No. 1309; and SCRA 183). Its proper function is simply
or non-bank financial intermediary to maintain the status quo at the
performing quasi-banking functions in the 3. that there were good reasons shown in commencement of the action. The status
banking community. said petition (p. 52, Rollo). quo at the time of filing Civil Case No.
1309 was that Libmanan Bank was under
"The appointment of a conservator under By using his own standards, instead of the the control of the DRBSLA Director, with
Section 28-A of this Act or the standards set forth in Section 29 of the Consolacion V. Odra, as liquidator
appointment of a receiver under this law, as basis for issuing a restraining appointed by the Central
Section shall be vested exclusively with order against the CB, respondent Judge [Link]:cralaw:red
the Monetary Board, the provision of any committed a grave abuse of discretion
law, general or special, to the contrary tantamount to excess, or lack of Respondent Judge erred in denying the
notwithstanding." (Emphasis supplied.) jurisdiction. We held in Rural Bank of Central Bank’s motion to dismiss the
Buhi, Inc. v. Court of Appeals (162 SCRA complaint for prohibition and mandamus
It is noteworthy that the actions of the 288, 291):jgc:[Link] (Civil Case No. 1309) filed by Libmanan
Monetary Board in proceedings on Bank (Annex C, p. 71, Rollo). This Court in
insolvency are explicitly declared by law to "Evidently, the trial court acted merely on the case of Rural Bank of Buhi, Inc. v.
be "final and executory." They may not be an incident and has acted merely on an Court of Appeals (162 SCRA 288) and
set aside, or restrained, or enjoined by incident and has not as yet inquired, as Salud v. Central Bank of the Phils. 143
the courts, except upon "convincing proof mandated by Section 29 of the Central SCRA 590), ruled that a bank’s claim that
that the action is plainly arbitrary and Bank Act, into the merits of the claim that the resolution of the Monetary Board
made in bad faith" (Salud v. Central Bank the Monetary Board’s action is plainly under Section 29 is plainly arbitrary and
of the Philippines, 143 SCRA 590). arbitrary and made in bad faith. It has not done in bad faith should be asserted as an
appreciated certain facts which would affirmative defense or counter-claim in the
Respondent Judge acted in plain disregard render the remedy of liquidation proper proceedings for assistance in liquidation.
of the fourth paragraph of Section 29 of and rehabilitation improper, involving as it It may be filed as a separate action if no
the Central Bank Act, when he restrained does an examination of the probative petition for assistance in liquidation has
the petitioners from closing and value of the evidence presented by the been instituted yet.
 a pleading or a proceeding shall include all
". . . a banking institution’s claim that a objections then available, and all
resolution of the Monetary Board under objections not so included shall be
Section 29 of the Central Bank Act should deemed waived" (Salud v. Central Bank of
be set aside as plainly arbitrary and made the Phils., 143 SCRA 590).chanrobles
in bad faith, may be asserted as an virtual lawlibrary
affirmative defense (Sections 1 and 4[b],
Rule 6, Rules of Court) or a counterclaim Respondent Judge abused his discretion in
(Section 6, Rule 6; Section 2, Rule 72 of authorizing the Libmanan Bank to
the Rules of Court) in the proceedings for withdraw funds from its deposits in other
assistance in liquidation or as a cause of banks (Annex E, p. 26, Rollo). The Rural
action in a separate and distinct action Bank had become insolvent as a result of
where the latter was filed ahead of the mismanagement, frauds, irregularities and
petition for assistance in liquidation violations of banking laws, rules, and
(Central Bank v. Court of Appeals, 106 regulations by its officers (p. 62, Rollo).
SCRA 143). Its remaining assets should therefore be
conserved to pay its creditors. Allowing
Since the Central Bank’s petition for the Rural Bank to withdraw its deposits in
assistance in liquidation had been filed on other banks would result in the further
August 3, 1981 (Civil Case No. SP-111, diminution and dissipation of its assets to
Court of First Instance of Camarines Sur, the prejudice of its depositors and
Branch III), the Libmanan Bank’s filing on creditors, and to the unlawful advantage
September 23, 1981 of a complaint for of the very officers who brought about the
prohibition and mandamus attacking the bank’s insolvency.
Central Bank’s resolution appointing a
receiver and liquidator for the bank should WHEREFORE, the petition for certiorari is
have been asserted as a counterclaim in GRANTED. The questioned orders dated
SP-111 (p. 39-40, Rollo), instead of as a January 15, 1982, January 29, 1982,
separate special civil action for prohibition March 1, 1982, March 31, 1982 and April
against the Central Bank. The separate 20, 1982 (Annexes A, B, C, D & E,
action should have been either dismissed respectively) of respondent Judge Rafael
or consolidated with SP-111 for the law De la Cruz of the then Court of First
abhors multiplicity of suits. Failure of Instance of Camarines Sur, Branch III, in
Libmanan Bank to assert in SP-111 the Civil Case No. 1309 are REVERSED AND
defense that the Monetary Board’s SET ASIDE. The temporary restraining
receivership and liquidation resolution was order issued by this Court on July 19,
"arbitrary and made in bad faith," 1982 is hereby made permanent.
constitutes a waiver of that defense Respondent Court is ordered to dismiss
conformably with the rule of "Waiver of Civil Case No. 1309. This order is
Defense," i.e., that "defenses and immediately executory. Costs against
objections not pleaded either in a motion respondent Rural Bank of Libmanan.
to dismiss or in the answer are (generally)
deemed waived," or the "Omnibus Motion SO ORDERED.
Rule," providing that "a motion attacking
G.R. No. 95326 March 11, 1999 findings noted in the said 16th regular million other unsupported cash
ROMEO P. BUSUEGO, CATALINO F. examination, but petitioners did not disbursements from the responsible
BANEZ and RENATO F. LIM, petitioners, attend such conference. directors and officers; or to properly
vs. On July 28, 1988, petitioner Renato Lim charge these against their respective
THE HONORABLE COURT OF APPEALS wrote the PESALA's Board of Directors accounts, if necessary;
and THE MONETARY BOARD OF THE explaining his side on the said 7. To require the board of directors of
CENTRAL BANK OF THE examination of PESALA's records and PESALA to file civil and criminal cases
PHILIPPINES, respondents. requesting that a copy .of his letter be against Messrs. Catalino Banez, Romeo
furnished the CB, which was forthwith Busuego and Renato Lim for all the
PURISIMA, J.: made by the Board. 2 misfeasance and malfeasance committed
This is a petition for review On July 29, 1988, PESALA's Board of by them, as warranted by the evidence;
on certiorari under Rule 45 of the Rules of Directors sent to Director Lirio a letter 8. To require the board of directors of
Court seeking a reversal of the concerning the 16th regular examination PESALA to improve the operations of the
Decision, 1 dated September 14, 1990, of of PESALA's records. Association; correct all violations noted,
the Court of Appeals in CA-G.R. CV No. On September 9, 1988, the Monetary and adopt internal control measures to
23656. Board adopted and issued MB Resolution prevent the recurrence of similar incidents
As culled from the records; the facts of No. 805 the pertinent provisions of which as shown in Annex E of the subject
the case are as follows: are as follows: memorandum of the Director, SES
The 16th regular examination of the books 1. To note the report on the examination Department IV; 3
and records of the PAL Employees Savings of the PAL Employees' Savings and Loan xxx xxx xxx
and Loan Association, Inc. ("PESALA") was Association, Inc. (PESALA) as of On January 23, 1989, petitioners filed a
conducted from March 14 to April 16, December 31, 1987, as submitted in a Petition for Injunction with Prayer for the
1988 by a team of CB examiners headed memorandum of the Director, Supervision Immediate Issuance of a Temporary
by Belinda Rodriguez. Following the said and Examination Section (SES) Restraining Order 4 docketed as Civil Case
examination, several anomalies and Department IV, dated August 19, 1988; No. Q-89-1617 before Branch 104 of the
irregularities committed by the herein 2. To require the board of directors of Regional Trial Court of Quezon City.
petitioners; PESALA's directors and PESALA to immediately inform the On January 26, 1989, the said court
officers, were uncovered, among which members of PESALA of the results of the issued. a temporary restraining
are: "Central Bank examination. and their order 5 enjoining the defendant, the
1. Questionable investment in a multi- effects on the financial condition of the Monetary Board of the Central Bank, (now
million peso real estate project Association; Banko Sentral ng Pilipinas) from including
(Pesalaville). xxx xxx xxx the names of petitioners in the watchlist.
2. Conflict of interest in the conduct of 5. To include the names of Mr. Catalino On February 10, 1989, the same trial
business. Banez, Mr. Romeo Busuego and Mr. Court issued a writ of preliminary
3. Unwarranted declaration and payment Renato Lim in the Sector's watchlist to injunction, 6 conditioned upon the filing by
of dividends. prevent them from holding responsible petitioners of a bond in the amount of Ten
4. Commission of unsound and unsafe positions in any institution under Central Thousand (P10,000.00) Pesos each. The
business practices. Bank supervision; Monetary Board presented a Motion for
On July 19, 1988, Central Bank ("CB") 6. To require PESALA to enforce collection Reconsideration 7 of the said Order, but
Supervision and Examination Section of the overpayment to the Vista Grande the same was denied.
("SES") Department IV Director Ricardo F. Management and Development On September 11, 1999, the trial court
Lirio sent a letter to the Board of Directors Corporation and to require the accounting handed down its Decision, 8 disposing
of PESALA inviting them to a conference of P12.28 million unaccounted and thus:
on July 21, 1988 to discuss subject unremitted bank loan proceeds and P3.9
WHEREFORE, judgment is hereby 90-1832; 90-1248; 90-1249; 90-3031; The foregoing disquisition by the trial
rendered declaring Monetary Board 90-3032; 90- 1837; 90-1834, pending the court is untenable under the facts and
Resolution No. 805 as void and in final resolution of the case at bar . . ." circumstances of the case. Petitioners
existent. The writ of preliminary However, in the Resolution 11 dated were duly afforded their right to due
prohibitory injunctions issued on February September 9, 1992, the court denied the process by the Monetary Board, it
10, 1989 is deemed permanent. Costs said motion. appearing that:
against respondent. The petition poses as issues for 1. Petitioners were invited by Director
The Monetary Board appealed the resolution: Lirio to a conference scheduled for July
aforesaid Decision to the Court of Appeals I 21, 1988 to discuss the findings made in
which came out with a Decision 9 of WHETHER OR NOT THE PETITIONERS the 16th regular examination of PESALA's
reversal on September 14, 1990, the WERE DEPRIVED OF THEIR RIGHT TO A records. Petitioners did not attend said
decretal portion of which is to the NOTICE AND THE OPPORTUNITY TO BE conference;
following effect: HEARD BY THE MONETARY BOARD PRIOR 2. Petitioner Renato Lim's letter of July
WHEREFORE, the decision appealed from TO ITS ISSUANCE OF MONETARY BOARD 28, 1988 to PESALA.'s Board of Directors,
is hereby reversed and another one RESOLUTION NO. 805. explaining his side of the controversy, was
entered dismissing the petition for II forwarded to the Monetary Board which
injunction. WHETHER OR NOT THE RESPONDENT the latter considered in adopting Monetary
Dissatisfied with the said Decision of the BOARD IS LEGALLY BOUND TO OBSERVE Board Resolution No. 805; and
Court of Appeals, petitioners have come to THE ESSENTIAL REQUIREMENTS OF DUE 3. PESALA's Board of Director's letter,
this Court via the present petition for PROCESS OF A VALID CHARGE, NOTICE dated July 29, 1988, to Monetary Board,
review on certiorari. AND OPPORTUNITY TO BE HEARD explaining the Board's side of the
On June 5, 1992, petitioners filed an INSOFAR AS THE PETITIONERS SUBJECT controversy was properly considered in
"Urgent Motion for the Immediate CASE IS CONCERNED. the adoption of Monetary Board Resolution
Issuance of a Temporary Restraining III No. 805.
Order and/or Writ of Preliminary WHETHER OR NOT MONETARY BOARD Petitioners therefore cannot complain of
Injunction against the Secretary of Justice RESOLUTION NO. 805 IS NULL AND VOID deprivation of their right to due process,
and the City Prosecutor of FOR BEING VIOLATIVE OF PETITIONERS' as they were given ample opportunity by
Pasay" 10 stating that several complaints RIGHTS TO DUE PROCESS. the Monetary Board to air their submission
were lodged against the petitioners before With respect to the first issue, the trial and defenses as to the findings of
the Office of the City Prosecutor of Pasay court said: irregularity during the said 16th regular
City pursuant to Monetary Board The evidence submitted Preponderates in examination. The essence of due process
Resolution No. 805; that the said favor of petitioners. The deprivation of is to be afforded a reasonable opportunity
complaints were dismissed, by the City petitioners' rights in the Resolution to be heard and to submit any evidence
Prosecutor and the dismissals were undermines the constitutional guarantee one may have in support of his
appealed to the Secretary of Justice for of due process. Petitioners were never defense 13 What is offensive to due
review, some of which have been reversed notified that they were being investigated, process is the denial of the opportunity to
already. Petitioners prayed that much so, they were not informed of any be heard. 14 Petitioner having availed of
Temporary Restraining Order and/or Writ charges against them and were not their opportunity to present their position
of Preliminary Injunction issue "restraining afforded the opportunity to adduce to the Monetary Board by their letters-
and enjoining the Secretary of Justice and countervailing evidence so as to deserve explanation, they were not denied due
the City Prosecutor of Pasay City from the punitive measures promulgated in process. 15
proceeding and taking further actions, and Resolution No. 805 of the Monetary Board Petitioners cite Ang Tibay v. CIR 16 and
more specially from filing Information's in . . . 12 assert that the following requisites of
I.S. Nos. 90-1836; 90- 1831; 90-1835;
procedural due process were not observed examination of PESALA's records and observance of due process in the exercise
by the Monetary Board: derived from the letter-comments of its powers:
1. The right to a hearing, which includes submitted by the parties. Sixthly, the xxx xxx xxx
the right to present one's case and submit members of the Monetary Board acted (c) To conduct at least once every year,
evidence in support thereof; independently on their own in issuing and whenever necessary, any inspection,
2. The tribunal must consider the evidence subject Resolution, placing reliance on the examination or investigation of the books
presented; said findings made during the 16th regular and records, business affairs,
3. The decision must have something to examination. Lastly, the reason for the administration, and financial condition of
support itself; issuance of Monetary Board Resolution any savings and loan association with or
4. The evidence must be substantial; No. 805 is readily apparent, which is to without prior notice but always with
5. The decision must be rendered on the prevent further irregularities from being fairness and reasonable opportunity for
evidence presented at the hearing, or at committed and to prosecute the officials the association or any of its officials to
least contained in the record and disclosed responsible therefor. give their side of the case. . .
to the parties affected; With respect to the second issue, there is (d) After proper notice and hearing, to
6. The tribunal or body or any of its tenability in petitioners' contention that suspend a savings and loan association for
judges must act on its or his own the Monetary Board, as an administrative violation of law, for unsafe and unsound
independent consideration of the law and agency, is legally bound to observe due practices or for reason of insolvency. . .
facts of the controversy and not simply process, although they are free from the xxx xxx xxx
accept the view of a subordinate in rigidity of certain procedural (f) To decide, after appropriate notice and
arriving at a decision; requirements. As held in Adamson and hearings any controversy as to the rights
7. The board or body should, in all Adamson, Inc. v. Amores. 18 or obligations of the savings and loan
controversial question, renders its decision While administrative tribunals exercising association, its directors, officers,
in such manner that the parties to the quasi-judicial functions are free from the stockholders and members under its
proceedings can know the various issues rigidity of certain procedural requirements charter, and, by order, to enforce the
involved and the reason for the decision they are bound by law and practice to same;
rendered. observe the fundamental and essential xxx xxx xxx (emphasis supplied)
Contrary to petitioners' allegation, it requirements of due process in justiciable Anent the third issue, petitioners theorize
appears that the requisites of procedural cases presented before them. However, that Monetary Board Resolution No. 805 is
due process were complied with by the the standard of due process that must be null and void for being violative of
Monetary Board before it issued the met in administrative tribunals allows a petitioners' right to due process. To
questioned Monetary Board Resolution No. certain latitude as long as the element of support their stance, they cite the trial
805. Firstly, the petitioner were invited to fairness is not ignored. Hence, there is no court's ruling, to wit:
a conference to discuss the findings denial of due process where records show A reading of Monetary Board Resolution
gathered during the 16th regular that hearings were held with prior notice No. 805 discloses that it imposes
examination of PESALA's records. (The to adverse parties. But even in the administrative sanctions against
requirement of a hearing is complied with absence of previous notice, there is no petitioners. In fact, it does not only
as long as there was an opportunity to be denial of procedural due process as long penalize petitioners by including them in
heard, and not necessarily that an actual as the parties are given the opportunity to the "watchlist to prevent them from
hearing was conducted. 17) Secondly, the be heard. holding responsible positions in any
Monetary Board considered the evidence Even Section 28, (c) and (d), of Republic institution under Central Bank
presented. Thirdly, fourthly, and fifthly, Act No. 3779 ("RA 1779") delineating the supervision," it mandates the PESALA
Monetary Board Resolution No. 805 was powers of the Monetary Board over Board of Directors as well to file Civil and
adopted on the basis of said findings savings and loan associations, require Criminal charges against them 'for all the
unearthed during the 16th regular misfeasance and malfeasance committed
by them, as warranted by the evidence.' it vested with authority "to file civil and without prior notice but always with
Monetary Board Resolution No. 805 criminal cases against its officers directors fairness and reasonable opportunity for
virtually deprives petitioners their for suspected fraudulent acts." the association or any of its official to give
respective gainful employment, and at the Petitioners' contentions are untenable. It their side of the case. Whenever an
same time marks them for judicial must be remembered that the Central inspection, examination or investigation is
prosecution. The crucial question here is Bank of the Philippines (now Bangko conducted under this grant power, the
that were petitioners afforded due process Sentral ng Pilipinas), through the person authorized to do so may seize
in the investigations conducted which Monetary Board, is the government books and records and keep them under
prompted the issuance of Monetary Board agency charged with the responsibility of his custody after giving proper receipts
Resolution No. 805? administering the monetary, banking and therefor; may make any marking or
. . . Although the Monetary Board is free credit system of the country 19 and is notation on any paper, record, document
from the rigidity of certain procedural granted the power of supervision and or book to show that it has been
requirements, it failed "to observe the examination over banks and non-bank examined and verified; and may padlock
essential requirement of due process" financial institutions performing quasi- or seal shelves, vaults, safes, receptacles
(Adamson and Adamson, Inc. v. Amores, banking functions of which savings and or similar container and prohibit the
152 SCRA 237) specifically its failure to loan associations, such as PESALA, from opening thereof without first securing
afford petitioners the opportunity to be part of.20 authority therefor, for as long as may be
heard. In short, there is a clear showing of The special law governing savings and necessary in connection with the
arbitrariness resulting in an irreparable loan associations is Republic Act No. 3779, investigation or examination being
injury against petitioners as the as amended, otherwise known as the conducted. The official of the Central Bank
Resolution certainly affects their "life, "Savings and Loan Association Act." Said in charge of savings and loan associations
liberty and property. law authorizes the Monetary Board to and his deputies are hereby authorized to
Monetary Board Resolution No. 805 conduct regular yearly examinations of administer oaths to any directors, officer
violates basic and essential requirements. the books and records of savings and or employee of any association under the
It must therefore be, as it is hereby, loans associations, to suspend a savings supervision of the Monetary Board;
declared, as void and inexistent because and loan association for violation of law, xxx xxx xxx
among other things, it openly derogates to decide any controversy over the (d) After proper notice and hearing, to
the fundamental rights of petitioners. obligations and duties of directors and suspend a savings and loan association for
Petitioners opine that with the issuance of officers, and to take remedial measures, violation of law, for unsafe and unsound
Monetary Board Resolution No. 805, "they among others. Section 28 of Rep. Act No. practices or for reason of insolvency. The
are now barred from being elected or 3779, reads; Monetary Board may likewise, upon the
designated as officers again of PESALA, Sec. 28. Supervisory powers over savings proof that a savings and loan association
and are likewise prevented from future and loan associations. — In addition to or its board or directors or officers are
engagements or employments in all whatever powers have been conferred by conducting and managing its affairs in a
institutions under the supervision of the the foregoing provisions, the Monetary manner contrary to laws, orders,
Central Bank thereby virtually depriving Board shall have the power to exercise the instruction, rules and regulations
them of the opportunity to seek following. promulgated by the Monetary Board or in
employments in the field which they can xxx xxx xxx a manner substantially prejudicial to the
excel and are best fitted." According to (c) To conduct atleast once every year, interest of the government, depositors or
them, the Monetary Board is not vested and whenever necessary, any inspection, creditors, take over the management of
with "the authority to disqualify persons examination or investigation of the books the savings and loan association after due
from occupying positions in institutions and records, business affairs, hearing, until a new board of directors and
under the supervision of the Central Bank administration, and financial condition of officers are elected and qualified without
without proper notice and hearing" nor is any savings and loan association with or prejudice to the prosecution of the
persons responsible for such violations. as investigations or examinations may be
The management by the Monetary Board conducted with or without prior notice
shall be without expense to the savings "but always with fairness and reasonable
and loan association, except such as is opportunity for the association or any of
actually necessary for its operation, its officials to give their side." As may be
pending the election and qualification of a gathered from the records, the said
new board of directors and officers to take requirement was properly complied with
the place of those responsible for the by the respondent Monetary Board.
violation or acts contrary to the interest of We sustain the ruling of the Court of
the government, depositors or creditors; Appeals that petitioners' suspension was
xxx xxx xxx only preventive in nature and therefore,
(f) To decide, after appropriate notice and no notice or hearing was necessary. Until
hearings any controversy as to the rights such time that the petitioners have proved
or obligations of the savings and loan their innocence, they may be preventively
association, its directors, officers, suspended from holding office so as not to
stockholders and members under its influence the conduct of investigation, and
charter, and, by order, to enforce the to prevent the commission of further
same; irregularities.
xxx xxx xxx Neither were petitioners deprived of their
(I) To conduct such investigations, take lawful calling as they are free to look for
such remedial measures, exercise all another employment so long as the
powers which are now or may hereafter agency or company involved is not subject
be conferred upon it by Republic Act to Central Bank control and supervision.
Numbered Two Hundred sixty-five in the Petitioners can still practise their
enforcement of this legislation, and profession or engage in business as long
impose upon associations, whether stock as these are not within the ambit of
or non-stock their directors and/or officers Monetary Board Resolution No. 805.
administrative sanctions under Sections All thing studiedly considered, the court
34-A or 34-B of Republic Act Two Hundred upholds the validity of Monetary Board
sixty-five, as amended. Resolution No. 805 and affirms the
From the foregoing, it is gleanable that decision of the respondent court.
the Central Bank, through the Monetary WHEREFORE, the petition is DENIED, and
Board, is empowered to conduct the assailed Decision dated September 14,
investigations and examine the records of 1996 of the AFFIRMED. No
savings and loan associations. If any pronouncement as to costs.
irregularity is discovered in the process, SO ORDERED.
the Monetary Board may impose
appropriate sanctions, such as suspending
the offender from holding office or from
being employed with the Central Bank, or
placing the names of the offenders in a
watchlist.
The requirement of prior notice is also
relaxed under Section 28 (c) of RA 3779
G.R. No. 214866 However, EIB still failed to overcome its bank, capital strengthening, liquidity,
APEX BANCRIGHTS HOLDINGS, INC., financial problems, thereby causing PDIC sustainability and viability of operations,
LEAD BANCFUND HOLDINGS, INC., to release in May 2005 additional financial and strengthening of bank governance;
ASIA WIDE REFRESHMENTS assistance to it, conditioned upon the and (b) all parties (including creditors and
CORPORATION, MEDCO ASIA infusion by EIB stockholders of additional stockholders) agree to the rehabilitation
INVESTMENT CORPORATION, ZEST-O capital whenever EIB' s adjusted Risk and the revised payment terms and
CORPORATION, HARMONY Based Capital Adequacy Ratio falls below conditions of outstanding
BANCSHARES HOLDINGS, INC., 12.5%. Despite this, EIB failed to comply liabilities.11 Accordingly, the Monetary
EXCALIBUR HOLDINGS, INC., and with the BSP's capital requirements, Board issued Resolution No. 1317 on
ALFREDO M. YAO, Petitioners causing EIB's stockholders to commence August 9, 2012 noting PDIC's initial
vs. the process of selling the bank.5 report, and its request to extend the
BANGKO SENTRAL NG PILIPINAS Initially, Banco de Oro (BDO) expressed period within which to submit the final
DEPOSIT CORPORATION, and interest in acquiring EIB. However, certain determination of whether or not EIB can
PHILIPPINE INSURANCE, Respondents issues derailed the acquisition, including be rehabilitated. Pursuant to the
DECISION BDO's unwillingness to assume certain rehabilitation efforts, a public bidding was
PERLAS-BERNABE, J.: liabilities of EIB, particularly the claim of scheduled by PDIC on October 18, 2012,
Before the Court is a petition for review the Pacific Rehouse Group against it. In but the same failed as no bid was
on certiorari 1 filed by petitioners Apex the end, BDO's acquisition of EIB did not submitted. A re-bidding was then set on
Bancrights Holdings, Inc., Lead Bancfund proceed and the latter's financial condition March 20, 2013 which also did not
Holdings, Inc, Asia Wide Refreshments worsened. Thus, in a letter6 dated April materialize as no bids were submitted.12
Corporation, Medco Asia Investment 26, 2012, EIB 's president and chairman On April 1, 2013, PDIC informed BSP that
Corporation, Zest-O Corporation, Harmony voluntarily turned-over the full control of EIB can hardly be rehabilitated.13 Based
Bancshares Holdings, Inc., Excalibur EIB to BSP, and informed the latter that on PDIC's report that EIB was insolvent,
Holdings, Inc., and Alfredo M. Yao the former will declare a bank holiday on the Monetary Board passed Resolution No.
(petitioners) assailing the Decision2 dated April 27, 2012.7 571 on April 4, 2013 directing PDIC to
January 21, 2014 and the On April 26, 2012, the BSP, through the proceed with the liquidation of EIB.14
Resolution3 dated October 10, 2014 of Monetary Board, issued Resolution No. On April 29, 2013, petitioners, who are
the Court of Appeals in CA-G.R. SP No. 6868 prohibiting EIB from doing business stockholders representing the majority
129674, which affirmed Resolution No. in the Philippines and placing it under the stock of EIB,15 filed a petition
571 dated April 4, 2013 of the Monetary receivership of PDIC, in accordance with for certiorari 16 before the CA challenging
Board of respondent Bangko Sentral ng Section 30 of Republic Act No. (RA) 7653, Resolution No. 571. In essence,
Pilipinas (BSP) ordering the liquidation of otherwise known as "The New Central petitioners blame PDIC for the failure to
the Export and Industry Bank (EIB). Bank Act."9 Accordingly, PDIC took over rehabilitate EIB, contending that
The Facts EIB.10 PDIC: (a) imposed unreasonable and
Sometime in July 2001, EIB entered into a In due course, PDIC submitted its initial oppressive conditions which delayed or
three-way merger with Urban Bank, Inc. receivership report to the Monetary Board frustrated the transaction between BDO
(UBI) and Urbancorp Investments, Inc. which contained its finding that EIB can be and EIB; (b) frustrated EIB's efforts to
(UII) in an attempt to rehabilitate UBI rehabilitated or permitted to resume increase its liquidity when PDIC
which was then under receivership.4 In business; provided, that a bidding for its disapproved EIB's proposal to sell its MRT
September 2001, following the said rehabilitation would be conducted, and bonds to a private third party and,
merger, EIB itself encountered financial that the following conditions would be instead, required EIB to sell the same to
difficulties which prompted respondent the met: (a) there are qualified interested government entities; (c) imposed
Philippine Deposit Insurance Corporation banks that will comply with the impossible and unnecessary bidding
(PDIC) to extend financial assistance to it. parameters for rehabilitation of a closed requirements; and (d) delayed the public
bidding which dampened investors' the receivership and liquidation of banks notify in writing the board of directors of
interest.17 and quasi-banks, the pertinent portions of its findings and direct the receiver to
In defense, PDIC countered18 that which read: proceed with the liquidation of the
petitioners were already estopped from Section 30. Proceedings in Receivership institution. The receiver shall:
assailing the placement of EIB under and Liquidation. - Whenever, upon report xxxx
receivership and its eventual liquidation of the head of the supervising or The actions of the Monetary Board taken
since they had already surrendered full examining department, the Monetary under this section or under Section 29 of
control of the bank to the BSP as early as Board finds that a bank or quasi-bank: this Act shall be final and executory, and
April 26, 2012.19 For its part, BSP (a) is unable to pay its liabilities as they may not be restrained or set aside by the
maintained20 that it had ample factual and become due in the ordinary course of court except on petition for certiorari on
legal bases to order EIB's liquidation.21 business: Provided, That this shall not the ground that the action taken was in
The CA Ruling include inability to pay caused by excess of jurisdiction or with such grave
In a Decision22 dated January 21, 2014, extraordinary demands induced by abuse of discretion as to amount to lack or
the CA dismissed the petition for lack of financial panic in the banking community; excess of jurisdiction. The petition
merit. It ruled that the Monetary Board (b) has insufficient realizable assets, as for certiorari may only be filed by the
did not gravely abuse its discretion in determined by the Bangko Sentral, to stockholders of record representing the
ordering the liquidation of EIB pursuant to meet its liabilities; or majority of the capital stock within ten
the PDIC's findings that the rehabilitation (c) cannot continue in business without (10) days from receipt by the board of
of the bank is no longer feasible. In this involving probable losses to its depositors directors of the institution of the order
regard, the CA held that there is nothing or creditors; or directing receivership, liquidation or
in Section 30 of RA 7653 that requires the (d) has willfully violated a cease and conservatorship.
Monetary Board to make its own desist order under Section 37 that has The designation of a conservator under
independent factual determination on the become final, involving acts or Section 29 of this Act or the appointment
bank's viability before ordering its transactions which amount to fraud or a of a receiver under this section shall be
liquidation. According to the CA, the law dissipation of the assets of the institution; vested exclusively with the Monetary
only provides that the Monetary Board in which cases, the Monetary Board may Board.1âwphi1 Furthermore, the
"shall notify in writing the board of summarily and without need for prior designation of a conservator is not a
directors of its findings and direct the hearing forbid the institution from doing precondition to the designation of a
receiver to proceed with the liquidation of business in the Philippines and designate receiver. (Emphases and underscoring
the institution,"23 which it did in this case. the Philippine Deposit Insurance supplied)
Undaunted, petitioners moved for Corporation as receiver of the banking It is settled that "[t]he power and
reconsideration24 which was, however, institution. authority of the Monetary Board to close
denied by the CA in its Resolution25 dated xxxx banks and liquidate them thereafter when
October 10, 2014; hence, this petition. The receiver shall immediately gather and public interest so requires is an exercise of
The Issue Before the Court take charge of all the assets and liabilities the police power of the State. Police
The sole issue before the Court is whether of the institution, administer the same for power, however, is subject to judicial
or not the CA correctly ruled that the the benefit of its creditors, and exercise inquiry. It may not be exercised arbitrarily
Monetary Board did not gravely abuse its the general powers of a receiver under the or unreasonably and could be set aside if
discretion in issuing Resolution No. 571 Revised Rules of Court x x x[.] it is either capricious, discriminatory,
which directed the PDIC to proceed with If the receiver determines that the whimsical, arbitrary, unjust, or is
the liquidation of EIB. institution cannot be rehabilitated or tantamount to a denial of due process and
The Court's Ruling permitted to resume business in equal protection clauses of the
The petition is without merit. Section 30 accordance with the next preceding Constitution."26 Otherwise stated and as
of RA 7653 provides for the proceedings in paragraph, the Monetary Board shall culled from the above provision, the
actions of the Monetary Board shall be Strategic Third Party Investors (STPI) concluded that the Monetary Board is not
final and executory and may not be submitted a letter of interest to participate so required when the PDIC has already
restrained or set aside by the court except in the bidding,"29 thereby resulting in the made such determination. It must be
on petition for certiorari on the ground PDIC's finding that EIB is already insolvent stressed that the BSP (the umbrella
that the action taken was in excess of and must already be liquidated - a finding agency of the Monetary Board), in its
jurisdiction or with such grave abuse of which eventually resulted in the Monetary capacity as government regulator of
discretion as to amount to lack or excess Board's issuance of Resolution No. 571. banks, and the PDIC, as statutory receiver
of jurisdiction. "There is grave abuse of In an attempt to forestall EIB's liquidation, of banks under RA 7653, are the principal
discretion when there is an evasion of a petitioners insist that the Monetary Board agencies mandated by law to determine
positive duty or a virtual refusal to must first make its own independent the financial viability of banks and quasi-
perform a duty enjoined by law or to act finding that the bank could no longer be banks, and facilitate the receivership and
in contemplation of law as when the rehabilitated - instead of merely relying on liquidation of closed financial institutions,
judgment rendered is not based on law the findings of the PDIC - before ordering upon a factual determination of the
and evidence but on caprice, whim and the liquidation of a bank.30 latter's insolvency.32 Thus, following the
despotism."27 Such position is untenable. maxim verba legis non est recedendum -
In line with the foregoing considerations, As correctly held by the CA, nothing in which means "from the words of a statute
the Court agrees with the CA that the Section 30 of RA 7653 requires the BSP, there should be no departure" - a statute
Monetary Board did not gravely abuse its through the Monetary Board, to make an· that is clear, plain, and free from
discretion in ordering the liquidation of independent determination of whether a ambiguity must be given its literal
EIB through its Resolution No. 571. bank may still be rehabilitated or not. As meaning and applied without any
To recount, after the Monetary Board expressly stated in the afore-cited attempted interpretation,33 as in this case.
issued Resolution No. 686 which placed provision, once the receiver determines In sum, the Monetary Board's issuance of
EIB under the receivership of PDIC, the that rehabilitation is no longer feasible, Resolution No. 571 ordering the
latter submitted its initial findings to the the Monetary Board is simply obligated liquidation of EIB cannot be considered to
Monetary Board, stating that EIB can be to: (a) notify in writing the bank's board be tainted with grave abuse of discretion
rehabilitated or permitted to resume of directors of the same; and (b) direct as it was amply supported by the factual
business; provided, that a bidding for its the PDIC to proceed with liquidation, viz.: circumstances at hand and made in
rehabilitation would be conducted, and If the receiver determines that the accordance with prevailing law and
that the following conditions would be institution cannot be rehabilitated or jurisprudence. To note, the "actions of the
met: (a) there are qualified interested permitted to resume business in Monetary Board in proceedings on
banks that will comply with the accordance with the next preceding insolvency are explicitly declared by law to
parameters for rehabilitation of a closed paragraph, the Monetary Board shall be 'final and executory.' They may not be
bank, capital strengthening, liquidity, notify in writing the board of directors of set aside, or restrained, or enjoined by
sustainability and viability of operations, its findings and direct the receiver to the courts, except upon 'convincing proof
and strengthening of bank governance; proceed with the liquidation of the that the action is plainly arbitrary and
and (b) all parties (including creditors and institution. x x x. made in bad faith,"[['34]] which is absent
stockholders) agree to the rehabilitation x x x x31 in this case.
and the revised payment terms and Suffice it to say that if the law had indeed WHEREFORE, the petition is
conditions of outstanding intended that the Monetary Board make a hereby DENIED. The Decision dated
liabilities.28 However, the foregoing separate and distinct factual January 21, 2014 and the Resolution
conditions for EIB 's rehabilitation "were determination before it can order the dated October 10, 2014 of the Court of
not met because the bidding and re- liquidation of a bank or quasi-bank, then Appeals in CA-G.R. SP No. 129674 are
bidding for the bank's rehabilitation were there should have been a provision to that hereby AFFIRMED.
aborted since none of the pre-qualified effect. There being none, it can safely be SO ORDERED.
G.R. No. L-49188 January 30, After trial, the Court of First Instance of P5,000.00 as attorney's fee, judgment is
1990 Manila, Branch 13, then presided over by affirmed, with costs. (CA Rollo, p. 29)
PHILIPPINE AIRLINES, the late Judge Jesus P. Morfe rendered Notice of judgment was sent by the Court
INC., petitioner, judgment on June 29, 1972, in favor of of Appeals to the trial court and on dates
vs. private respondent Amelia Tan and subsequent thereto, a motion for
HON. COURT OF APPEALS, HON. against petitioner Philippine Airlines, Inc. reconsideration was filed by respondent
JUDGE RICARDO D. GALANO, Court of (PAL) as follows: Amelia Tan, duly opposed by petitioner
First Instance of Manila, Branch XIII, WHEREFORE, judgment is hereby PAL.
JAIME K. DEL ROSARIO, Deputy rendered, ordering the defendant On May 23,1977, the Court of Appeals
Sheriff, Court of First Instance, Philippine Air Lines: rendered its resolution denying the
Manila, and AMELIA TAN, respondents. 1. On the first cause of action, to pay to respondent's motion for reconsideration
the plaintiff the amount of P75,000.00 as for lack of merit.
actual damages, with legal interest No further appeal having been taken by
GUTIERREZ, JR., J.: thereon from plaintiffs extra-judicial the parties, the judgment became final
Behind the simple issue of validity of an demand made by the letter of July 20, and executory and on May 31, 1977,
alias writ of execution in this case is a 1967; judgment was correspondingly entered in
more fundamental question. Should the 2. On the third cause of action, to pay to the case.
Court allow a too literal interpretation of the plaintiff the amount of P18,200.00, The case was remanded to the trial court
the Rules with an open invitation to representing the unrealized profit of 10% for execution and on September 2,1977,
knavery to prevail over a more discerning included in the contract price of respondent Amelia Tan filed a motion
and just approach? Should we not apply P200,000.00 plus legal interest thereon praying for the issuance of a writ of
the ancient rule of statutory construction from July 20,1967; execution of the judgment rendered by
that laws are to be interpreted by the 3. On the fourth cause of action, to pay to the Court of Appeals. On October 11,
spirit which vivifies and not by the letter the plaintiff the amount of P20,000.00 as 1977, the trial court, presided over by
which killeth? and for moral damages, with legal interest Judge Galano, issued its order of
This is a petition to review thereon from July 20, 1 967; execution with the corresponding writ in
on certiorari the decision of the Court of 4. On the sixth cause of action, to pay to favor of the respondent. The writ was duly
Appeals in CA-G.R. No. 07695 entitled the plaintiff the amount of P5,000.00 referred to Deputy Sheriff Emilio Z. Reyes
"Philippine Airlines, Inc. v. Hon. Judge damages as and for attorney's fee. of Branch 13 of the Court of First Instance
Ricardo D. Galano, et al.", dismissing the Plaintiffs second and fifth causes of action, of Manila for enforcement.
petition for certiorari against the order of and defendant's counterclaim, are Four months later, on February 11, 1978,
the Court of First Instance of Manila which dismissed. respondent Amelia Tan moved for the
issued an alias writ of execution against With costs against the defendant. (CA issuance of an alias writ of execution
the petitioner. Rollo, p. 18) stating that the judgment rendered by the
The petition involving the alias writ of On July 28, 1972, the petitioner filed its lower court, and affirmed with
execution had its beginnings on November appeal with the Court of Appeals. The modification by the Court of Appeals,
8, 1967, when respondent Amelia Tan, case was docketed as CA-G.R. No. 51079- remained unsatisfied.
under the name and style of Able Printing R. On March 1, 1978, the petitioner filed an
Press commenced a complaint for On February 3, 1977, the appellate court opposition to the motion for the issuance
damages before the Court of First rendered its decision, the dispositive of an alias writ of execution stating that it
Instance of Manila. The case was docketed portion of which reads: had already fully paid its obligation to
as Civil Case No. 71307, entitled Amelia IN VIEW WHEREOF, with the modification plaintiff through the deputy sheriff of the
Tan, et al. v. Philippine Airlines, Inc. that PAL is condemned to pay plaintiff the respondent court, Emilio Z. Reyes, as
sum of P25,000.00 as damages and evidenced by cash vouchers properly
signed and receipted by said Emilio Z. On May 23, 1978, the petitioner filed an We rule in the affirmative and we quote
Reyes. urgent motion to quash the alias writ of the respondent court's decision with
On March 3,1978, the Court of Appeals execution stating that no return of the approval:
denied the issuance of the alias writ for writ had as yet been made by Deputy The issuance of the questioned alias writ
being premature, ordering the executing Sheriff Emilio Z. Reyes and that the of execution under the circumstances here
sheriff Emilio Z. Reyes to appear with his judgment debt had already been fully obtaining is justified because even with
return and explain the reason for his satisfied by the petitioner as evidenced by the absence of a Sheriffs return on the
failure to surrender the amounts paid to the cash vouchers signed and receipted by original writ, the unalterable fact remains
him by petitioner PAL. However, the order the server of the writ of execution, Deputy that such a return is incapable of being
could not be served upon Deputy Sheriff Sheriff Emilio Z. Reyes. obtained (sic) because the officer who is
Reyes who had absconded or disappeared. On May 26,1978, the respondent Jaime K. to make the said return has absconded
On March 28, 1978, motion for the del Rosario served a notice of garnishment and cannot be brought to the Court
issuance of a partial alias writ of execution on the depository bank of petitioner, Far despite the earlier order of the court for
was filed by respondent Amelia Tan. East Bank and Trust Company, Rosario him to appear for this purpose. (Order of
On April 19, 1978, respondent Amelia Tan Branch, Binondo, Manila, through its Feb. 21, 1978, Annex C, Petition).
filed a motion to withdraw "Motion for manager and garnished the petitioner's Obviously, taking cognizance of this
Partial Alias Writ of Execution" with deposit in the said bank in the total circumstance, the order of May 11, 1978
Substitute Motion for Alias Writ of amount of P64,408.00 as of May 16, directing the issuance of an alias writ was
Execution. On May 1, 1978, the 1978. Hence, this petition for certiorari therefore issued. (Annex D. Petition). The
respondent Judge issued an order which filed by the Philippine Airlines, Inc., on the need for such a return as a condition
reads: grounds that: precedent for the issuance of an alias writ
As prayed for by counsel for the plaintiff, I was justifiably dispensed with by the court
the Motion to Withdraw 'Motion for Partial AN ALIAS WRIT OF EXECUTION CANNOT below and its action in this regard meets
Alias Writ of Execution with Substitute BE ISSUED WITHOUT PRIOR RETURN OF with our concurrence. A contrary view will
Motion for Alias Writ of Execution is THE ORIGINAL WRIT BY THE produce an abhorent situation whereby
hereby granted, and the motion for partial IMPLEMENTING OFFICER. the mischief of an erring officer of the
alias writ of execution is considered II court could be utilized to impede
withdrawn. PAYMENT OF JUDGMENT TO THE indefinitely the undisputed and awarded
Let an Alias Writ of Execution issue IMPLEMENTING OFFICER AS DIRECTED IN rights which a prevailing party rightfully
against the defendant for the fall THE WRIT OF EXECUTION CONSTITUTES deserves to obtain and with dispatch. The
satisfaction of the judgment rendered. SATISFACTION OF JUDGMENT. final judgment in this case should not
Deputy Sheriff Jaime K. del Rosario is III indeed be permitted to become illusory or
hereby appointed Special Sheriff for the INTEREST IS NOT PAYABLE WHEN THE incapable of execution for an indefinite
enforcement thereof. (CA Rollo, p. 34) DECISION IS SILENT AS TO THE PAYMENT and over extended period, as had already
On May 18, 1978, the petitioner received THEREOF. transpired. (Rollo, pp. 35-36)
a copy of the first alias writ of execution IV Judicium non debet esse illusorium; suum
issued on the same day directing Special SECTION 5, RULE 39, PARTICULARLY effectum habere debet (A judgment ought
Sheriff Jaime K. del Rosario to levy on REFERS TO LEVY OF PROPERTY OF not to be illusory it ought to have its
execution in the sum of P25,000.00 with JUDGMENT DEBTOR AND DISPOSAL OR proper effect).
legal interest thereon from July 20,1967 SALE THEREOF TO SATISFY JUDGMENT. Indeed, technicality cannot be
when respondent Amelia Tan made an Can an alias writ of execution be issued countenanced to defeat the execution of a
extra-judicial demand through a letter. without a prior return of the original writ judgment for execution is the fruit and
Levy was also ordered for the further sum by the implementing officer? end of the suit and is very aptly called the
of P5,000.00 awarded as attorney's fees. life of the law (Ipekdjian Merchandising
Co. v. Court of Tax Appeals, 8 SCRA 59 It should be emphasized that under the work a discharge (Hendry v. Benlisa 37
[1963]; Commissioner of Internal initial judgment, Amelia Tan was found to Fla. 609, 20 SO 800,34 LRA 283). The
Revenue v. Visayan Electric Co., 19 SCRA have been wronged by PAL. receipt of money due on ajudgment by an
697, 698 [1967]). A judgment cannot be She filed her complaint in 1967. officer authorized by law to accept it will,
rendered nugatory by the unreasonable After ten (10) years of protracted therefore, satisfy the debt (See 40 Am Jm
application of a strict rule of procedure. litigation in the Court of First Instance and 729, 25; Hendry v. Benlisa supra; Seattle
Vested rights were never intended to rest the Court of Appeals, Ms. Tan won her v. Stirrat 55 Wash. 104 p. 834,24 LRA
on the requirement of a return, the office case. [NS] 1275).
of which is merely to inform the court and It is now 1990. The theory is where payment is made to a
the parties, of any and all actions taken Almost twenty-two (22) years later, Ms. person authorized and recognized by the
under the writ of execution. Where such Tan has not seen a centavo of what the creditor, the payment to such a person so
information can be established in some courts have solemnly declared as authorized is deemed payment to the
other manner, the absence of an rightfully hers. Through absolutely no fault creditor. Under ordinary circumstances,
executing officer's return will not preclude of her own, Ms. Tan has been deprived of payment by the judgment debtor in the
a judgment from being treated as what, technically, she should have been case at bar, to the sheriff should be valid
discharged or being executed through an paid from the start, before 1967, without payment to extinguish the judgment debt.
alias writ of execution as the case may be. need of her going to court to enforce her There are circumstances in this case,
More so, as in the case at bar. Where the rights. And all because PAL did not issue however, which compel a different
return cannot be expected to be the checks intended for her, in her name. conclusion.
forthcoming, to require the same would be Under the peculiar circumstances of this The payment made by the petitioner to
to compel the enforcement of rights under case, the payment to the absconding the absconding sheriff was not in cash or
a judgment to rest on an impossibility, sheriff by check in his name did not legal tender but in checks. The checks
thereby allowing the total avoidance of operate as a satisfaction of the judgment were not payable to Amelia Tan or Able
judgment debts. So long as a judgment is debt. Printing Press but to the absconding
not satisfied, a plaintiff is entitled to other In general, a payment, in order to be sheriff.
writs of execution (Government of the effective to discharge an obligation, must Did such payments extinguish the
Philippines v. Echaus and Gonzales, 71 be made to the proper person. Article judgment debt?
Phil. 318). It is a well known legal maxim 1240 of the Civil Code provides: Article 1249 of the Civil Code provides:
that he who cannot prosecute his Payment shall be made to the person in The payment of debts in money shall be
judgment with effect, sues his case vainly. whose favor the obligation has been made in the currency stipulated, and if it
More important in the determination of constituted, or his successor in interest, or is not possible to deliver such currency,
the propriety of the trial court's issuance any person authorized to receive then in the currency which is legal tender
of an alias writ of execution is the issue of it. (Emphasis supplied) in the Philippines.
satisfaction of judgment. Thus, payment must be made to the The delivery of promissory notes payable
Under the peculiar circumstances obligee himself or to an agent having to order, or bills of exchange or other
surrounding this case, did the payment authority, express or implied, to receive mercantile documents shall produce the
made to the absconding sheriff by check the particular payment (Ulen v. Knecttle effect of payment only when they have
in his name operate to satisfy the 50 Wyo 94, 58 [2d] 446, 111 ALR 65). been cashed, or when through the fault of
judgment debt? The Court rules that the Payment made to one having apparent the creditor they have been impaired.
plaintiff who has won her case should not authority to receive the money will, as a In the meantime, the action derived from
be adjudged as having sued in vain. To rule, be treated as though actual authority the original obligation shall be held in
decide otherwise would not only give her had been given for its receipt. Likewise, if abeyance.
an empty but a pyrrhic victory. payment is made to one who by law is In the absence of an agreement, either
authorized to act for the creditor, it will express or implied, payment means the
discharge of a debt or obligation in money Because the checks were drawn in the by cheek provided adequate controls are
(US v. Robertson, 5 Pet. [US] 641, 8 L. name of Emilio Z. Reyes, neither has she instituted to prevent wrongful payment
ed. 257) and unless the parties so agree, received anything. The same rule should and illegal withdrawal or disbursement of
a debtor has no rights, except at his own apply. funds. If particularly big amounts are
peril, to substitute something in lieu of It is argued that if PAL had paid in cash to involved, escrow arrangements with a
cash as medium of payment of his debt Sheriff Reyes, there would have been bank and carefully supervised by the court
(Anderson v. Gill, 79 Md.. 312, 29 A 527, payment in full legal contemplation. The would be the safer procedure. Actual
25 LRA 200,47 Am. St. Rep. 402). reasoning is logical but is it valid and transfer of funds takes place within the
Consequently, unless authorized to do so proper? Logic has its limits in decision safety of bank premises. These practices
by law or by consent of the obligee a making. We should not follow rulings to are perfectly legal. The object is always
public officer has no authority to accept their logical extremes if in doing so we the safe and incorrupt execution of the
anything other than money in payment of arrive at unjust or absurd results. judgment.
an obligation under a judgment being In the first place, PAL did not pay in cash. It is, indeed, out of the ordinary that
executed. Strictly speaking, the It paid in cheeks. checks intended for a particular payee are
acceptance by the sheriff of the And second, payment in cash always made out in the name of another. Making
petitioner's checks, in the case at bar, carries with it certain cautions. Nobody the checks payable to the judgment
does not, per se, operate as a discharge hands over big amounts of cash in a creditor would have prevented the
of the judgment debt. careless and inane manner. Mature encashment or the taking of undue
Since a negotiable instrument is only a thought is given to the possibility of the advantage by the sheriff, or any person
substitute for money and not money, the cash being lost, of the bearer being into whose hands the checks may have
delivery of such an instrument does not, waylaid or running off with what he is fallen, whether wrongfully or in behalf of
by itself, operate as payment (See. 189, carrying for another. Payment in checks is the creditor. The issuance of the checks in
Act 2031 on Negs. Insts.; Art. 1249, Civil precisely intended to avoid the possibility the name of the sheriff clearly made
Code; Bryan Landon Co. v. American of the money going to the wrong party. possible the misappropriation of the funds
Bank, 7 Phil. 255; Tan Sunco v. Santos, 9 The situation is entirely different where a that were withdrawn.
Phil. 44; 21 R.C.L. 60, 61). A check, Sheriff seizes a car, a tractor, or a piece of As explained and held by the respondent
whether a manager's check or ordinary land. Logic often has to give way to court:
cheek, is not legal tender, and an offer of experience and to reality. Having paid ... [K]nowing as it does that the intended
a check in payment of a debt is not a valid with checks, PAL should have done so payment was for the private party
tender of payment and may be refused properly. respondent Amelia Tan, the petitioner
receipt by the obligee or creditor. Mere Payment in money or cash to the corporation, utilizing the services of its
delivery of checks does not discharge the implementing officer may be deemed personnel who are or should be
obligation under a judgment. The absolute payment of the judgment debt knowledgeable about the accepted
obligation is not extinguished and remains but the Court has never, in the least bit, procedures and resulting consequences of
suspended until the payment by suggested that judgment debtors should the checks drawn, nevertheless, in this
commercial document is actually realized settle their obligations by turning over instance, without prudence, departed from
(Art. 1249, Civil Code, par. 3). huge amounts of cash or legal tender to what is generally observed and done, and
If bouncing checks had been issued in the sheriffs and other executing officers. placed as payee in the checks the name of
name of Amelia Tan and not the Sheriff's, Payment in cash would result in damage the errant Sheriff and not the name of the
there would have been no payment. After or interminable litigations each time a rightful payee. Petitioner thereby created
dishonor of the checks, Ms. Tan could sheriff with huge amounts of cash in his a situation which permitted the said
have run after other properties of PAL. hands decides to abscond. Sheriff to personally encash said checks
The theory is that she has received no As a protective measure, therefore, the and misappropriate the proceeds thereof
value for what had been awarded her. courts encourage the practice of payments to his exclusive personal benefit. For the
prejudice that resulted, the petitioner at the expense of litigants and the proper xxx xxx xxx
himself must bear the fault. The judicial administration of justice. The temptation It is clear and manifest that after levy or
guideline which we take note of states as could be far greater, as proved to be in garnishment, for a judgment to be
follows: this case of the absconding sheriff. The executed there is the requisite of payment
As between two innocent persons, one of correct and prudent thing for the by the officer to the judgment creditor, or
whom must suffer the consequence of a petitioner was to have issued the checks his attorney, so much of the proceeds as
breach of trust, the one who made it in the intended payee's name. will satisfy the judgment and none such
possible by his act of confidence must The pernicious effects of issuing checks in payment had been concededly made yet
bear the loss. (Blondeau, et al. v. Nano, et the name of a person other than the by the absconding Sheriff to the private
al., L-41377, July 26, 1935, 61 Phil. 625) intended payee, without the latter's respondent Amelia Tan. The ultimate and
Having failed to employ the proper agreement or consent, are as many as the essential step to complete the execution
safeguards to protect itself, the judgment ways that an artful mind could concoct to of the judgment not having been
debtor whose act made possible the loss get around the safeguards provided by the performed by the City Sheriff, the
had but itself to blame. law on negotiable instruments. An angry judgment debt legally and factually
The attention of this Court has been called litigant who loses a case, as a rule, would remains unsatisfied.
to the bad practice of a number of not want the winning party to get what he Strictly speaking execution cannot be
executing officers, of requiring checks in won in the judgment. He would think of equated with satisfaction of a judgment.
satisfaction of judgment debts to be made ways to delay the winning party's getting Under unusual circumstances as those
out in their own names. If a sheriff directs what has been adjudged in his favor. We obtaining in this petition, the distinction
a judgment debtor to issue the checks in cannot condone that practice especially in comes out clearly.
the sheriff's name, claiming he must get cases where the courts and their officers Execution is the process which carries into
his commission or fees, the debtor must are involved.1âwphi1 We rule against the effect a decree or judgment (Painter v.
report the sheriff immediately to the court petitioner. Berglund, 31 Cal. App. 2d. 63, 87 P 2d
which ordered the execution or to the Anent the applicability of Section 15, Rule 360, 363; Miller v. London, 294 Mass 300,
Supreme Court for appropriate disciplinary 39, as follows: 1 NE 2d 198, 200; Black's Law
action. Fees, commissions, and salaries Section 15. Execution of money Dictionary), whereas the satisfaction of a
are paid through regular channels. This judgments. — The officer must enforce an judgment is the payment of the amount of
improper procedure also allows such execution of a money judgment by levying the writ, or a lawful tender thereof, or the
officers, who have sixty (60) days within on all the property, real and personal of conversion by sale of the debtor's
which to make a return, to treat the every name and nature whatsoever, and property into an amount equal to that
moneys as their personal finds and to which may be disposed of for value, of the due, and, it may be done otherwise than
deposit the same in their private accounts judgment debtor not exempt from upon an execution (Section 47, Rule 39).
to earn sixty (60) days interest, before execution, or on a sufficient amount of Levy and delivery by an execution officer
said finds are turned over to the court or such property, if they be sufficient, and are not prerequisites to the satisfaction of
judgment creditor (See Balgos v. Velasco, selling the same, and paying to the a judgment when the same has already
108 SCRA 525 [1981]). Quite as easily, judgment creditor, or his attorney, so been realized in fact (Section 47, Rule
such officers could put up the defense that much of the proceeds as will satisfy the 39). Execution is for the sheriff to
said checks had been issued to them in judgment. ... accomplish while satisfaction of the
their private or personal capacity. Without the respondent court held: judgment is for the creditor to achieve.
a receipt evidencing payment of the We are obliged to rule that the judgment Section 15, Rule 39 merely provides the
judgment debt, the misappropriation of debt cannot be considered satisfied and sheriff with his duties as executing officer
finds by such officers becomes clean and therefore the orders of the respondent including delivery of the proceeds of his
complete. The practice is ingenious but judge granting the alias writ of execution levy on the debtor's property to satisfy
evil as it unjustly enriches court personnel may not be pronounced as a nullity. the judgment debt. It is but to stress that
the implementing officer's duty should not acknowledgment of the many dimensions United States, a sheriff has continued his
stop at his receipt of payments but must of this authority, defined by statute and status as an adjunct of the court .. . As it
continue until payment is delivered to the chiselled by practice, which compels me to was there, so it has been in the
obligor or creditor. disagree with the decision reached by the Philippines from the time of the
Finally, we find no error in the respondent majority. organization of the judiciary .. . (J.
court's pronouncement on the inclusion of A consideration of the wide latitude of Fernando's concurring opinion in
interests to be recovered under the alias discretion allowed the sheriff as the officer Bagatsing v. Herrera, 65 SCRA 434)
writ of execution. This logically follows of the court most directly involved with One of a sheriff s principal functions is to
from our ruling that PAL is liable for both the implementation and execution of final execute final judgments and orders. The
the lost checks and interest. The judgments and orders persuades me that Rules of Court require the writs of
respondent court's decision in CA-G.R. No. PAL's payment to the sheriff of its execution to issue to him, directing him to
51079-R does not totally supersede the judgment debt to Amelia Tan, though enforce such judgments and orders in the
trial court's judgment in Civil Case No. made by check issued in said officer's manner therein provided (Rule 39). The
71307. It merely modified the same as to name, lawfully satisfied said obligation mode of enforcement varies according to
the principal amount awarded as actual and foreclosed further recourse therefor the nature of the judgment to be carried
damages. against PAL, notwithstanding the sheriffs out: whether it be against property of the
WHEREFORE, IN VIEW OF THE failure to deliver to Tan the proceeds of judgment debtor in his hands or in the
FOREGOING, the petition is hereby the check. hands of a third person i e. money
DISMISSED. The judgment of the It is a matter of history that the judiciary judgment), or for the sale of property,
respondent Court of Appeals is AFFIRMED .. is an inherit or of the Anglo-American real or personal (i.e. foreclosure of
and the trial court's issuance of the alias tradition. While the common law as such mortgage) or the delivery thereof, etc.
writ of execution against the petitioner is .. "is not in force" in this jurisdiction, "to (sec. 8, Rule 39).
upheld without prejudice to any action it breathe the breath of life into many of the Under sec. 15 of the same Rule, the
should take against the errant sheriff institutions, introduced [here] under sheriff is empowered to levy on so much
Emilio Z. Reyes. The Court Administrator American sovereignty, recourse must be of the judgment debtor's property as may
is ordered to follow up the actions taken had to the rules, principles and doctrines be sufficient to enforce the money
against Emilio Z. Reyes. of the common law under whose judgment and sell these properties at
SO ORDERED. protecting aegis the prototypes of these public auction after due notice to satisfy
Fernan, C.J., Cruz, Paras, Bidin, Griño- institutions had their birth" A sheriff is "an the adjudged amount. It is the sheriff
Aquino, Medialdea and Regalado, JJ., officer of great antiquity," and was also who, after the auction sale, conveys to the
concur. called the shire reeve. A shire in English purchaser the property thus sold (secs.
law is a Saxon word signifying a division 25, 26, 27, Rule 39), and pays the
later called a county. A reeve is an ancient judgment creditor so much of the
Separate Opinions English officer of justice inferior in rank to proceeds as will satisfy the judgment.
an alderman .. appointed to process, keep When the property sold by him on
the King's peace, and put the laws in execution is an immovable which
NARVASA, J., dissenting: execution. From a very remote period in consequently gives rise to a light of
The execution of final judgments and English constitutional history .. the shire redemption on the part of the judgment
orders is a function of the sheriff, an had another officer, namely the shire debtor and others (secs. 29, 30, Rule 39),
officer of the court whose authority is by reeve or as we say, the sheriff. .. The it is to him (or to the purchaser or
and large statutorily determined to meet Sheriff was the special representative of redemptioner that the payments may be
the particular exigencies arising from or the legal or central authority, and as such made by those declared by law as entitled
connected with the performance of the usually nominated by the King. .. Since to redeem (sec. 31, Rule 39); and in this
multifarious duties of the office. It is the the earliest times, both in England and the situation, it becomes his duty to accept
payment and execute the certificate of less. Such extinction is not in any way The sheriff is an adjunct of the court; a
redemption (Enage v. Vda. y Hijos de dependent upon the judgment creditor's court functionary whose competence
Escano, 38 Phil. 657, cited in Moran, receiving the amount realized, so that the involves both discretion and personal
Comments on the Rules of Court, 1979 conversion or embezzlement of the liability (concurring opinion of J. Fernando,
ed., vol. 2, pp. 326-327). It is also to the proceeds of the sale by the sheriff does citing Uy Piaoco v. Osmena, 9 Phil. 299, in
sheriff that "written notice of any not revive the judgment debt or render Bagatsing v. Herrera, 65 SCRA 434).
redemption must be given and a duplicate the judgment creditor liable anew Being an officer of the court and acting
filed with the registrar of deeds of the therefor. within the scope of his authorized
province, and if any assessments or taxes So, also, the taking by the sheriff of, say, functions, the sheriff s receipt of the
are paid by the redemptioner or if he has personal property from the judgment checks in payment of the judgment
or acquires any lien other than that upon debtor for delivery to the judgment execution, may be deemed, in legal
which the redemption was made, notice creditor, in fulfillment of the verdict contemplation, as received by the court
thereof must in like manner be given to against him, extinguishes the debtor's itself (Lara v. Bayona, 10 May 1955, No.
the officer and filed with the registrar of liability; and the conversion of said L- 10919).
deeds," the effect of failure to file such property by the sheriff, does not make That the sheriff functions as a conduit of
notice being that redemption may be said debtor responsible for replacing the the court is further underscored by the
made without paying such assessments, property or paying the value thereof. fact that one of the requisites for
taxes, or liens (sec. 30, Rule 39). In the instances where the Rules allow or appointment to the office is the execution
The sheriff may likewise be appointed a direct payments to be made to the sheriff, of a bond, "conditioned (upon) the faithful
receiver of the property of the judgment the payments may be made by check, but performance of his (the appointee's)
debtor where the appointment of the it goes without saying that if the sheriff so duties .. for the delivery or payment to
receiver is deemed necessary for the desires, he may require payment to be Government, or the person entitled
execution of the judgment (sec. 32, Rule made in lawful money. If he accepts the thereto, of all properties or sums of
39). check, he places himself in a position money that shall officially come into his
At any time before the sale of property on where he would be liable to the judgment hands" (sec. 330, Revised Administrative
execution, the judgment debtor may creditor if any damages are suffered by Code).
prevent the sale by paying the sheriff the the latter as a result of the medium in There is no question that the checks came
amount required by the execution and the which payment was made (Javellana v. into the sheriffs possession in his official
costs that have been incurred therein Mirasol, et al., 40 Phil. 761). The validity capacity. The court may require of the
(sec. 20, Rule 39). of the payment made by the judgment judgment debtor, in complying with the
The sheriff is also authorized to receive debtor, however, is in no wise affected judgment, no further burden than his
payments on account of the judgment and the latter is discharged from his vigilance in ensuring that the person he is
debt tendered by "a person indebted to obligation to the judgment creditor as of paying money or delivering property to is
the judgment debtor," and his "receipt the moment the check issued to the a person authorized by the court to
shall be a sufficient discharge for the sheriff is encashed and the proceeds are receive it. Beyond this, further
amount so paid or directed to be credited received by Id. office. The issuance of the expectations become unreasonable. To my
by the judgment creditor on the check to a person authorized to receive it mind, a proposal that would make the
execution" (sec. 41, Rule 39). (Art. 1240, Civil Code; See. 46 of the judgment debtor unqualifiedly the insurer
Now, obviously, the sheriff s sale Code of Civil Procedure; Enage v. Vda y of the judgment creditor's entitlement to
extinguishes the liability of the judgment Hijos de Escano, 38 Phil. 657, cited in the judgment amount which is really what
debtor either in fun, if the price paid by Javellana v. Mirasol, 40 Phil. 761) this case is all about begs the question.
the highest bidder is equal to, or more operates to release the judgment debtor That the checks were made out in the
than the amount of the judgment or pro from any further obligations on the sheriffs name (a practice, by the way, of
tanto if the price fetched at the sale be judgment. long and common acceptance) is of little
consequence if juxtaposed with the extent wish to add a few footnotes to their lucid no control, is not only deeply unfair to the
of the authority explicitly granted him by opinions. former. It is also a confession of
law as the officer entrusted with the 1. Narvasa, J. has demonstrated in detail comprehensive failure and comes too
power to execute and implement court that a sheriff is authorized by the Rules of close to an abdication of duty on the part
judgments. The sheriffs requirement that Court and our case law to receive either of the Court itself. This Court should have
the checks in payment of the judgment legal tender or checks from the judgment no part in that.
debt be issued in his name was simply an debtor in satisfaction of the judgment 2. I also feel compelled to comment on
assertion of that authority; and PAL's debt. In addition, Padilla, J. has the majority opinion written by Gutierrez,
compliance cannot in the premises be underscored the obligation of the sheriff, J. with all his customary and special way
faulted merely because of the sheriffs imposed upon him by the nature of his with words. My learned and eloquent
subsequent malfeasance in absconding office and the law, to turn over such legal brother in the Court apparently accepts
with the payment instead of turning it tender, checks and proceeds of execution the proposition that payment by a
over to the judgment creditor. sales to the judgment creditor. The failure judgment debtor of cash to a sheriff
If payment had been in cash, no question of a sheriff to effect such turnover and his produces the legal effects of payment, the
about its validity or of the authority and conversion of the funds (or goods) held by sheriff being authorized to accept such
duty of the sheriff to accept it in him to his own uses, do not have the payment. Thus, in page 10 of
settlement of PAL's judgment obligation effect of frustrating payment by and his ponencia, Gutierrez, J. writes:
would even have arisen. Simply because it consequent discharge of the judgment The receipt of money due on a judgment
was made by checks issued in the sheriff s debtor. by an officer authorized by law to accept it
name does not warrant reaching any To hold otherwise would be to throw the will satisfy the debt. (Citations omitted)
different conclusion. risk of the sheriff faithfully performing his The theory is where payment is made to a
As payment to the court discharges the duty as a public officer upon those person authorized and recognized by the
judgment debtor from his responsibility on members of the general public who are creditor, the payment to such a person so
the judgment, so too must payment to the compelled to deal with him. It seems to authorized is deemed payment to the
person designated by such court and me that a judgment debtor who turns creditor. Under ordinary circumstances,
authorized to act in its behalf, operate to over funds or property to the sheriff can payment by the judgment debtor in the
produce the same effect. not reasonably be made an insurer of the case at bar, to the sheriff would be valid
It is unfortunate and deserving of honesty and integrity of the sheriff and payment to extinguish the judgment debt.
commiseration that Amelia Tan was that the risk of the sheriff carrying out his Shortly thereafter, however, Gutierrez, J.
deprived of what was adjudged to her duties honestly and faithfully is properly backs off from the above position and
when the sheriff misappropriated the lodged in the State itself The sheriff, like strongly implies that payment in cash to
payment made to him by PAL in all other officers of the court, is appointed the sheriff is sheer imprudence on the
dereliction of his sworn duties. But I and paid and controlled and disciplined by part of the judgment debtor and that
submit that her remedy lies, not here and the Government, more specifically by this therefore, should the sheriff abscond with
in reviving liability under a judgment Court. The public surely has a duty to the cash, the judgment debtor has not
already lawfully satisfied, but elsewhere. report possible wrongdoing by a sheriff or validly discharged the judgment debt:
ACCORDINGLY, I vote to grant the similar officer to the proper authorities It is argued that if PAL had paid in cash to
petition. and, if necessary, to testify in the Sheriff Reyes, there would have been
Melencio-Herrera, Gancayco, J., concurs. appropriate judicial and administrative payment in full legal contemplation. The
disciplinary proceedings. But to make the reasoning is logical but is it valid and
individual members of the general proper?
FELICIANO, J., dissenting: community insurers of the honest In the first place, PAL did not pay in cash.
I concur in the able dissenting opinions of performance of duty of a sheriff, or other It paid in checks.
Narvasa and Padilla, JJ. and would merely officer of the court, over whom they have
And second, payment in cash always but rather a check made out in his name, and not in his personal capacity. Stated
carries with it certain cautions. Nobody does not change the legal situation. PAL differently, PAL had every right to assume
hands over big amounts of cash in a did not thereby become negligent; it that, as an officer of the law, Sheriff
careless and inane manner. Mature did not make the loss anymore possible or Reyes would perform his duties as
thought is given to the possibility of the probable than if it had instead delivered enjoined by law. It would be grossly unfair
cash being lost, of the bearer being plain cash to the sheriffs. to now charge PAL with advanced or
waylaid or running off with what he is It seems to me that the majority opinion's constructive notice that Mr. Reyes would
carrying for another. Payment in checks is real premise is the unspoken one that the abscond and not deliver to the judgment
precisely intended to avoid the possibility judgment debtor should bear the risk of creditor the proceeds of the writ of
of the money going to the wrong party.... the fragility of the sheriff s virtue until the execution. If a judgment debtor cannot
Payment in money or cash to the money or property parted with by the rely on and trust an officer of the law, as
implementing officer may be deemed judgment debtor actually reaches the the Sheriff, whom else can he trust?
absolute payment of the judgment debt hands of the judgment creditor. This Pursued to its logical extreme, if PAL had
but the court has never, in the least bit, brings me back to my earlier point that delivered to Sheriff Reyes the amount of
suggested that judgment debtors should risk is most appropriately borne not by the the judgment in CASH, i.e. Philippine
settle their obligations by turning over judgment debtor, nor indeed by the currency, with the corresponding receipt
huge amounts of cash or legal tender to judgment creditor, but by the State itself. signed by Sheriff Reyes, this would have
sheriffs and other executing officers. ... The Court requires all sheriffs to post good been payment by PAL in full legal
(Emphasis in the original) (Majority and adequate fidelity bonds before contemplation, because under Article
opinion, pp. 12-13) entering upon the performance of their 1240 of the Civil Code, "payment shall be
There is no dispute with the suggestion duties and, presumably, to maintain such made to the person in whose favor the
apparently made that maximum safety is bonds in force and effect throughout their obligation has been constituted or his
secured where the judgment debtor stay in office.2 The judgment creditor, in successor in interest or any person
delivers to the sheriff not cash but circumstances like those of the instant authorized to receive it." And said
a check made out, not in the name of the case, could be allowed to execute upon payment if made by PAL in cash, i.e.,
sheriff, but in the judgment creditor's the absconding sheriff s bond.3 Philippine currency, to Sheriff Reyes would
name. The fundamental point that must I believe the Petition should be granted have satisfied PAL's judgment obligation,
be made, however, is that under our law and I vote accordingly. as payment is a legally recognized mode
only cash is legal tender and that the for extinguishing one's obligation. (Article
sheriff can be compelled to accept only 1231, Civil Code).
cash and not checks, even if made out to PADILLA, J., Dissenting Opinion Under Sec. 15, Rule 39, Rules of Court
the name of the judgment creditor. 1 The From the facts that appear to be which provides that-
sheriff could have quite lawfully required undisputed, I reach a conclusion different Sec. 15. Execution of money judgments.
PAL to deliver to him only cash, i.e., from that of the majority. Sheriff Emilio Z. — The officer must enforce an execution
Philippine currency. If the sheriff had done Reyes, the trial court's authorized sheriff, of a money judgment by levying on all the
so, and if PAL had complied with such a armed with a writ of execution to enforce property, real and personal of every name
requirement, as it would have had to, one a final money judgment against the and nature whatsoever, and which may be
would have to agree that legal payment petitioner Philippine Airlines (PAL) in favor disposed of for value, of the judgment
must be deemed to have been effected. It of private respondent Amelia Tan, debtor not exempt from execution, or on a
requires no particularly acute mind to note proceeded to petitioner PAL's office to sufficient amount of such property, if
that a dishonest sheriff could easily implement the writ. there be sufficient, and selling the same,
convert the money and abscond. The fact There is no question that Sheriff Reyes, in and paying to the judgment creditor, or
that the sheriff in the instant case enforcing the writ of execution, was acting his attorney, so much of the proceeds as
required, not cash to be delivered to him, with full authority as an officer of the law
will satisfy the judgment. ... .(emphasis of action against Sheriff Reyes for his
supplied) failure to deliver to her the proceeds of
it would be the duty of Sheriff Reyes to the encashment. As held:
pay to the judgment creditor the proceeds Payment of a judgment, to operate as a
of the execution i.e., the cash received release or satisfaction, even pro
from PAL (under the above assumption). tanto must be made to the plaintiff or to
But, the duty of the sheriff to pay the cash some person authorized by him, or by
to the judgment creditor would be a law, to receive it. The payment of money
matter separate the distinct from the fact to the sheriff having an execution satisfies
that PAL would have satisfied its judgment it, and, if the plaintiff fails to receive it, his
obligation to Amelia Tan, the judgment only remedy is against the officer
creditor, by delivering the cash amount (Henderson v. Planters' and Merchants
due under the judgment to Sheriff Reyes. Bank, 59 SO 493, 178 Ala. 420).
Did the situation change by PAL's delivery Payment of an execution satisfies it
of its two (2) checks totalling P30,000.00 without regard to whether the officer pays
drawn against its bank account, payable it over to the creditor or misapplies it
to Sheriff Reyes, for account of the (340, 33 C.J.S. 644, citing Elliot v.
judgment rendered against PAL? I do not Higgins, 83 N.C. 459). If defendant
think so, because when Sheriff Reyes consents to the Sheriff s misapplication of
encashed the checks, the encashment was the money, however, defendant is
in fact a payment by PAL to Amelia Tan estopped to claim that the debt is satisfied
through Sheriff Reyes, an officer of the (340, 33 C.J.S. 644, citing Heptinstall v.
law authorized to receive payment, and Medlin 83 N.C. 16).
such payment discharged PAL'S obligation The above rulings find even more cogent
under the executed judgment. application in the case at bar because, as
If the PAL cheeks in question had not contended by petitioner PAL (not denied
been encashed by Sheriff Reyes, there by private respondent), when Sheriff
would be no payment by PAL and, Reyes served the writ of execution on
consequently no discharge or satisfaction PAL, he (Reyes) was accompanied by
of its judgment obligation. But the checks private respondent's counsel. Prudence
had been encashed by Sheriff Reyes dictated that when PAL delivered to Sheriff
giving rise to a situation as if PAL had paid Reyes the two (2) questioned checks
Sheriff Reyes in cash, i.e., Philippine (payable to Sheriff Reyes), private
currency. This, we repeat, is payment, in respondent's counsel should have insisted
legal contemplation, on the part of PAL on their immediate encashment by the
and this payment legally discharged PAL Sheriff with the drawee bank in order to
from its judgment obligation to the promptly get hold of the amount
judgment creditor. To be sure, the same belonging to his client, the judgment
encashment by Sheriff Reyes of PAL's creditor.
checks delivered to him in his official ACCORDINGLY, I vote to grant the
capacity as Sheriff, imposed an obligation petition and to quash the court a quo's
on Sheriff Reyes to pay and deliver the alias writ of execution
proceeds of the encashment to Amelia Tan
who is deemed to have acquired a cause
G.R. No. 138588 August 23, pesos as and for attorney's fees plus the then housed FEBTC and was told that the
2001 costs of litigation. latter had acquired PaBC; that Cashier
FAR EAST BANK & TRUST "All other claims of the parties against Ramon Lim told him that as of such date,
COMPANY, petitioner, each other are DENIED."4 his loan was P1,447,142.03; that he
vs. Likewise assailed is the May 4, 1999 CA (Diaz) asked the defendant to make an
DIAZ REALTY INC., respondents. Resolution,5 which denied petitioner's accounting of the monthly rental
PANGANIBAN, J.: Motion for Reconsideration. payments made by Allied Bank; that on
For a valid tender of payment, it is The Facts December 14, 1988,6 Diaz tendered to
necessary that there be a fusion of intent, The court a quo summarized the FEBTC the amount of P1,450,000.00
ability and capability to make good such antecedents of the case as follows: through an Interbank check, in order to
offer, which must be absolute and must "Sometime in August 1973, Diaz and prevent the imposition of additional
cover the amount due. Though a check is Company got a loan from the former PaBC interests, penalties and surcharges on its
not legal tender, and a creditor may [Pacific Banking Corporation] in the loan; that FEBTC did not accept it as
validly refuse to accept it if tendered as amount of P720,000.00, with interest at payment; that instead, Diaz was asked to
payment, one who in fact accepted a fully' 12% per annum, later increased to 14%, deposit the amount with the defendant's
funded check after the debtor's 16%, 18% and 20%. The loan was Davao City Branch Office, allegedly
manifestation that it had been given to secured by a real estate mortgage over pending the approval of Central Bank
settle an obligation is estopped from later two parcels of land owned by the plaintiff Liquidator Renan Santos; that in the
on denouncing the efficacy of such tender Diaz Realty, both located in Davao City. In meantime, Diaz wrote the defendant,
of payment. 1981, Allied Banking Corporation rented asking that the interest rate be reduced
The Case an office space in the building constructed from 20% to 12% per annum, but no
The foregoing principle is used by this on the properties covered by the reply was ever made; that subsequently,
Court in resolving the Petition for mortgage contract, with the conformity of the defendant told him to change the
Review1 on Certiorari before us, mortgagee PaBC, whereby the parties P1,450,000.00 deposit into a money
challenging the January 26, 1999 agreed that the monthly rentals shall be market placement, which he did; that the
Decision2 of the Court of Appeals3 (CA) in paid directly to the mortgagee for the money market placement expired on April
CA-GR CV No. 45349. The dispositive lessor's account, either to partly or fully 14, 1989; that when there was still no
portion of the assailed Decision reads as pay off the aforesaid mortgage news from the defendant whether or not it
follows: indebtedness. Pursuant to such contract, [would] accept his tender of payment, he
"WHEREFORE, the judgment appealed Allied Bank paid the monthly rentals to filed this case at the Regional Trial Court
from is hereby MODIFIED, to read as PaBC instead of to the plaintiffs. On July of Davao City.
follows: 5, 1985, the Central Bank closed PaBC, "In its responsive pleading, the defendant
'WHEREFORE, JUDGMENT IS HEREBY placed it under receivership, and set up the following special/affirmative
RENDERED, ORDERING: appointed Renan Santos as its liquidator. defenses: that sometime in December
'1. The plaintiffs to pay Far East Bank & Sometime in December 1986, appellant 1986, FEBTC purchased from the PaBC the
Trust Company the principal sum of FEBTC purchased the credit of Diaz & account of the plaintiffs for a total
P1,067,000.00 plus interests thereon Company in favor of PaBC, but it was not consideration of P1,828,875.00; that
computed at 12% per annum from July 9, until March 23, 1988 that Diaz was despite such purchase, PaBC Davao
1988 until fully paid; . informed about it. Branch continued to collect interests and
'2. The parties to negotiate for a new "According to the plaintiff as alleged in the penalty charges on the loan from January
lease over the subject premises; and complaint and testified to by Antonio Diaz 6, 1987 to July 8, 1988; that it was
'3. The defendant to pay the plaintiff the (President of Diaz & Company and Vice- therefore not FEBTC which collected the
sum of fifteen thousand (P15,000.00) President of Diaz Realty), on March 23, interest rates mentioned in the complaint,
1988, he went to office of PaBC which by but PaBC; that it is not true that FEBTC
was trying to impose [exorbitant] rates of return the difference or the excess to the '4. The defendant shall cancel the
interest; that as a matter of fact, after the plaintiffs. mortgage.
transfer of plaintiff's account, it sought to '4. The defendant shall cancel the '5. Paragraph eight of the lease contract
negotiate with the plaintiffs, and in fact, mortgage. between Allied Bank and the plaintiff in
negotiations were made for a settlement '5. Paragraph eight of the Lease Contract which the defendant['s predecessor],
and possible reduction of charges; that between Allied Bank and the plaintiffs in Pacific Banking gave its conformity (Exh.
FEBTC has no knowledge of the rates of which the defendant's predecessor, Pacific 'H') is hereby cancelled and deleted, so
interest imposed and collected by PaBC Banking gave its conformity (Exh. 'H') is that the rental should now be paid to the
prior to the purchase of the account from hereby cancelled, so that the rental should plaintiff.
the latter, hence it could not be held now be paid to the plaintiffs. '6. The defendant shall pay the plaintiff
responsible for those transactions which '6. The defendant shall pay the plaintiffs the sums:
transpired prior to the purchase; and that the sums: '6. A Fifteen [t]housand [p]esos as
the defendant acted at the opportune time '6-A. Fifteen thousand pesos as attorney's attorney's fees;
for the settlement of the account, albeit fees. '6. B Cost of suit."7
exercising prudence in the handling of '6-B. Three [h]undred [t]housand [p]esos The CA Ruling
such account. The rest of the 'affirmative (P300,000.00) as exemplary damages. The CA sustained the trial court's finding
defenses' are bare denials. '6-C. The cost of suit. that there was a valid tender of payment
"After trial, the court a quo rendered 'SO ORDERED." in the sum of P1,450,000, made by Diaz
judgment on August 6, 1993, the "Upon a motion for reconsideration filed Realty Inc. in favor of Far East Bank and
dispositive portion of which reads as by defendant FEBTC and after due notice Trust Company. The appellate court
follows: and hearing, the court a quo issued an reasoned that petitioner failed to
'WHEREFORE, judgment is hereby order on October 12, 1993, modifying the effectively rebut respondent's evidence
rendered as follows: aforequoted decision, such that its that it so tendered the check to liquidate
'1. The plaintiff and defendant shall jointly dispositive portion as amended would now its indebtedness, and that petitioner had
compute the interest due on the read as follows: unilaterally treated the same as a deposit
P1,057,000.00 loan from April 18, 1985 'IN VIEW WHEREOF, the decision rendered instead.
until November 14, 1988 at 12% per last August 6, is modified, accordingly, to The CA further ruled that in the
annum (IBAA Salazar Case Supra). wit: computation of interest charges, the legal
'2. That the parties shall then add the '1. The plaintiff and defendant shall jointly rate of 12 percent per annum should
result of the joint computation mentioned compute the interest due on the apply, reckoned from July 9, 1988, until
in paragraph one of the dispositive portion P1,167,000.00 loan from April 18, 1985 full and final payment of the whole
to the P1,057,000.00 principal. until November 14, 1988 at 12% per indebtedness. It explained that while
'3. The result of the addition of the annum. petitioner's purchase of respondent's
P1,057,000.00 principal and the interests '2. That the parties shall then add the account from Pacific Banking Corporation
arrived at shall then be compared with the result of the joint computation mentioned (PaBC) was valid, the 20 percent interest
P1,450,000.00 deposit and if in paragraph one above to the stipulated in the Promissory Note should
P1,450,000.00 is not enough, then the P1,067,000.00 principal. not apply, because the account transfer
plaintiff shall pay the difference/deficiency '3. The result of the addition of the was without the knowledge and the'
between the P1,450,000.00 deposit and P1,067,000.00 principal and the interests consent of respondent -obligor.
what the parties jointly computed[;] arrived at shall then be compared with the The appellate colin, however, sustained
conversely, if the P1,450,000.00 is more P1,450,000.00 money market placement petitioner's assertion that the trial court
than what the parties have arrived [at] put up by the plaintiff with the defendant should not have cancelled the real estate
after the computation, the defendant shall bank if the same is still existing or has not mortgage,' inasmuch as the principal
yet matured. obligation upon which it was anchored was
yet to be extinguished. Further, the CA same time that the mortgage contract True, jurisprudence holds that, in general,
held that the lease contract was subject to containing the lease was valid. a check does not constitute legal tender,
renegotiation by the parties. "F. and that a creditor may validly refuse
Lastly, the court a quo upheld the trial "Whether or not the petition, as argued by it.12 It must be emphasized, however, that
court's award of attorney's fees, pointing private respondent, raises questions of this dictum does not prevent a creditor
to petitioner's negligence in not fact not reviewable by certiorari."8 from accepting a check as payment. In
immediately informing respondent of the In the main, the Court will determine (1) other words, the creditor has
purchase and transfer of its credit, and in the efficacy of the alleged tender of the option and the discretion of refusing
failing to negotiate in order to avoid payment made by respondent, (2) the or accepting it.
litigation. effect of the transfer to petitioner of "In the present case, petitioner bank did
Issues respondent's account with PaBC, (3) the not refuse respondent's check. On the
Petitioner submits for our resolution the interest rate applicable, and (4) the status contrary, it accepted the check which, it
following issues: of the Real Estate Mortgage. insisted, was a deposit. As earlier stated,
"A. The Court's Ruling the check proved to be fully funded and
"'Whether or not the Court of Appeals The Petition9 is not meritorious. was in fact honored by the drawee bank.
correctly ruled that the validity of the First Issue: Moreover, petitioner was in possession of
tender of payment was not properly raised Tender of Payment the money for several months.
in the trial court and could not thus be Petitioner resolutely argues that the CA In further contending that there was no
raised in the appeal. erred in upholding the validity of the valid tender of payment, petitioner
"B. tender of payment made by respondent. emphasizes our pronouncement in Roman
"'Whether or not the Court of Appeals What the latter had tendered to settle its Catholic Bishop of Malolos, Inc. v.
erred in failing to apply settled outstanding obligation, it points out, was a Intermediate Appellate Court,13 as follows:
jurisprudential principles militating against check which could not be considered legal "Tender of payment involves a positive
the private respondent's contention that a tender. and unconditional act by the obligor of
valid tender of payment had been made We disagree. The records show that offering legal tender currency as payment
by it. petitioner bank purchased respondent's to the obligee for the former's obligation
"C. account from PaBC in December 1986, and demanding that the latter accept the
"Whether or not the Court of Appeals and that the latter was notified of the same.
correctly found that the transaction transaction only on March 23, 1988. xxx xxx xxx
between petitioner and PaBC was an Thereafter, Antonio Diaz, president of "Thus, tender of payment cannot be
'ineffective novation' and that the consent respondent corporation, inquired from presumed by a mere inference from
of private respondent was necessary petitioner on the status and the amount of surrounding circumstances. At most,
therefor. its obligation. He was informed that the sufficiency of available funds is only
"D. obligation summed up to P1,447,142.03. affirmative of the capacity or ability of the
"Whether or not the Court of Appeals On November 14, 1988, petitioner; obligor to fulfill his part of the bargain. But
erred in refusing to apply the rate of received from respondent Interbank Check whether or not the obligor avails himself
interest freely stipulated upon by the No. 81399841 dated November 13, 1988, of such funds to settle his outstanding
parties to the respondent's obligation. bearing the amount of P1,450,000, with account remains to be proven by
"E. the notation "Re: Full Payment of Pacific independent and credible evidence.
"Whether or not the Court of Appeals Bank Account now turn[ed] over to Far Tender of payment presupposes not only
committed an irreconcilable error in East Bank."10 The check was subsequently that the obligor is able, ready, and willing,
ordering the parties to re-negotiate the cleared and honored by Interbank, as but more so, in the act of performing his
terms of the contract while finding at the shown by the Certification it issued on obligation. Ab posse ad actu non vale
January 20, 1992.11 illatio. 'A proof that an act could have
been done is no proof that it was actually and the money kept in petitioner's (known as the assignor), by a legal cause
done."' possession for several months. -- such as sale, dation in payment,
In other words, tender of pament is the Finally, petitioner points out that, in any exchange or donation - and without the
definitive act of offering the creditor what case, tender of payment extinguishes the need of the debtor's consent, transfers
is due him or her, together with the obligation only after proper consignation, that credit and its accessory rights to
demand that the creditor accept the which respondent did not do. another (known as the assignee), who
same. More important, there must be a The argument does not persuade. For a acquires the power to enforce it, to the
fusion of intent, ability and capability to consignation to be necessary, the creditor same extent as the assignor could have
make good such offer, which must be must have refused, without just cause, to enforced it against the debtor.16
absolute and must cover the amount accept the debtor's payment.15 However, In the present case, it is undisputed that
due.14 as pointed out earlier, petitioner purchased respondent's loan
That respondent intended to settle its petitioner accepted respondent's check. from PaBC. In doing so, the former
obligation with petitioner is evident from T o iterate, the tender was made by acquired all of the latter's rights against
the records of the case. After learning that respondent for the purpose of settling its respondent. Thus, petitioner had the right
its loan balance was P1,447,142.03, it obligation. It was incumbent upon to collect the full value of the credit from
presented to petitioner a check in the petitioner to refuse, or accept it as respondent, subject to the terms as
amount of P1,450,000, with the specific payment. The latter did not have the right originally agreed upon in the Promissory
notation that it was for full payment of its or the option to accept and treat it as a Note.
Pacific Bank account that had been deposit. Thus, by accepting the tendered Third Issue:
purchased by petitioner. The latter check and converting it into money, Applicable Interest Rate
accepted the check, even if it now insists petitioner is presumed to have accepted it Petitioner bank, as assignee of
that it considered the same as a mere as payment. To hold otherwise would be respondent's credit, is entitled to the
deposit. The check was sufficiently inequitable and unfair to the obligor. interest rate of 20 percent in the
funded, as in fact it was honored by the Second Issue: computation of the debt of private
drawee bank. When petitioner refused to Nature of the Transfer of respondent, as stipulated in the August
release the mortgage, respondent Respondent's Account 26, 1983 Promissory Note executed by the
instituted the present case to compel the Petitioner bewails the CA's latter in favor of PaBC.17
bank to acknowledge the tender of characterization of the transfer of However, because there was a valid
payment, accept payment and cancel the respondent's account from Pacific Banking tender of payment made on November 14,
mortgage. These acts demonstrate Corporation to petitioner as an "ineffective 1988, the accrual of interest based on the
respondent's intent, ability and capability novation." Petitioner contends that the stipulated rate should stop on that date.
to fully settle and extinguish its obligation transfer was an assignment of credit. Thus, respondent should pay petitioner-
to petitioner. Indeed, the transfer of respondent's credit bank its principal obligation in the amount
That respondent subsequently withdrew from PaBC to petitioner was an of P1,067,000 plus accrued interest
the money from petitioner-bank is of no assignment of credit. Petitioner's thereon at 20 percent per annum until
moment, because such withdrawal would acquisition of respondent's credit did not November 14, 1988, less interest
not affect the efficacy or the legal involve any changes in the original payments given to PaBC from December
ramifications of the tender of payment agreement between PaBC and 1986 to July 8, 1988.18
made on November 14, 1988. As already respondent; neither did it vary the rights Thereafter, the interest shall be computed
discussed, the tender of payment to settle and the obligations of the parties. Thus, at 12 percent per annum until full
respondent's obligation as computed by no novation by conventional subrogation payment.
petitioner was accepted, the check given could have taken place. Fourth Issue:
in payment thereof converted into money, An assignment of credit is an agreement Status of Mortgage Contract
by virtue of which the owner of a credit
The Real Estate Mortgage executed
between respondent and PaBC to secure
the former's principal obligation, as well
as the provision in the Contract of Lease
between respondent and Allied Bank with
regard to the application of rent payment
to the former's indebtedness, should
subsist until full and final settlement of
such obligation pursuant to the guidelines
set forth in this Decision. Thereafter, the
parties are free to negotiate a renewal of
either or both contracts, or to end any and
all of their contractual relations.
WHEREFORE, the Petition is
hereby DENIED. The assailed Decision of
the Court of Appeals is AFFIRMED with
the following modifications: Respondent
Diaz Realty Inc. is ORDERED to pay Far
East Bank and Trust Co. its principal loan
obligation in the amount of P1,067,000,
with interest thereon computed at 20
percent per annum until November 14,
1988, less any interest payments made to
PaBC, petitioner's assignor. Thereafter,
interest shall be computed at 12 percent
per annum until fully paid.1âwphi1.nêt
SO ORDERED.
G.R. No. L-12610 October 25, dispose of such foreign exchange in whole prevailing rate of exchange set up by the
1963 or in part, not receive less than its full Central Bank(Exhibits "E", "F", "G" and
BACOLOD-MURCIA, MILLING CO., value, nor delay taking ownership thereof "H") creating a reserve supply of dollars
INC., petitioner-appellant, except as such delay is which the Cenral Bank thereafter disposed
vs. customary; Provided, further, That within to parties in need thereof, but at the rate
CENTRAL BANK OF THE one day upon taking ownership, or also of 2 to 1. Plaintiff apparently felt, that
PHILIPPINES, respondent-appellee. receiving payment, of foreign exchange it had suffered enough; thereof, on
Vicente Hilado for petitioner-appellant. the aforementioned persons and entities December 29, 1956, it wrote to the
Nat. M. Balboa, Enrique M. Fernando and shall sell such foreign exchange to defendant Central Bank that "we seriously
F. E. Evangelista for respondent-appellee. designated agents of the Central Bank. doubt the legality and validity of your
LABRADOR, J.: Section 8 also provides: rules and regulations on this particular
This is an appeal from a decision of the Strict observance of the Provisions of this point, and cannot therefore agree and
Court of First Instance of Manila, Hon. Circular is enjoined, and any person, firm cannot give our consent to the sale of the
Magno Gatmaitan, presiding, dismissing a or corporation, foreign or domestic: who, dollar proceeds of our said drafts to the
petition for prohibition filed by petitioner- being bound to the observance thereof, or Central Bank of the Philippines, unless the
appellant, praying that the Court declare of such other rules, regulations or Central Bank should agree to pay us, as
Circular No. 20 of the Central Bank, directives as may hereafter be issued in fair consideration and just compensation,
particularly section 4(a) thereof, null and implementation of this Circular, shall fail the real international worth and prevailing
void, and that the Central Bank be or refuse to comply with, or abide by, or market value of the said dollar proceeds
perpetually enjoined from enforcing the shall violate the same, shall be subject to of our sugar," . . .
same. The complaint contains a petition the penal sanctions provided in the It was because of this that on 28 January
for the issuance of a writ of preliminary Central Bank Act. 1957, plaintiff brought this special civil
injunction. The facts and circumstances giving rise to action for prohibition in order to stop the
Circular No. 20 of the Central Bank was the petition are, as found by the court defendant Central Bank from taking
promulgated on December 9, 1949 and below, as follows: further action to enforce Circular No. 20.
Section 4(a) thereof provides: On or about December 17, 1956, plaintiff Plaintiff says that the forced sale of
4. (a) All receipts of foreign exchange sold and exported to Olavarria & Co., Inc. foreign to the Central Bank required in
shall be sold daily to the Central Bank by of New York, United States of America Circular No. 20 is "ultra vires"; and that
those authorized to deal in foreign 48,192 piculs (equivalent to 3,000 tons) the practice of the central Bank in paying
exchange. All receipts of foreign exchange of sugar for the total price of $416,640.00 for such exchange only at a the legal
by any person, firm, partnership, U.S. currency, and as a consequence drew party rate with the purpose of reselling
association, branch office, agency, against said Olavarria & Co., Inc. two (2) the same to other private parties at the
company or other unincorporated body or drafts for the total sum of $336,995.40 same rate is a confiscation of private
corporation shall be sold to the authorized U.S. currency, to cover an initial payment property not for public use nor for just
agents of the Central Bank by the of 95% of said purchase price (Exhs. "E" compensation. Respondent contends the
recipients within one business day and "F"); said drafts were then entrusted contrary.
following the receipt of such foreign and delivered for collection to the The defenses presented by the
exchange. Any person firm, partnership, Philippine Bank of Commerce, which duly respondent-appellee in its answer are: (1)
association, branch office, agency, accepted the undertaking to collect the that Circular No. 20 is presumed to be
company or other unincorporated body or amount thereof for the account of plaintiff, valid; (2) that the Philippines is a
corporation, residing or located within the but called the attention of plaintiff that signatory member of the International
Philippines who acquired on and after the under existing rules and regulations all Monetary Fund Agreement and as such is
date of this Circular foreign exchange shall exchange proceeds of the drafts must be bound to respect or to maintain the par
not, unless, licensed by the Central Bank, sold to the Central Bank authorities at the value of the Philippine currency; (3) that
Circular No. 20 was approved in an banking institutions and other entities The provisions of Republic Act 265 are so
exchange crisis in accordance with Section specified; broad and encompassing with respect to
74 of the Central Bank Act and said 2. That the circular establishes a the Bank's powers that it is difficult to
circular was approved by the President of monopoly by allowing commandeering of believe that exchange control was not
the Philippines and by the International foreign exchange, when its charter allows authorized within the scope of the
Monetary Fund; (4) that the powers of the commandeering only of gold (Sec. 72); Charter. The fact that the Charter does
Central Bank to curtail, regulate and 3. That compelling private persons to sell not expressly grant the Bank the power to
license the use of foreign exchange foreign exchange to the Central Bank can require the forcible sale of foreign
include the right to require that all foreign not be included in the power "to subject to exchange is no reason, per se, for holding
exchange be surrendered and that the license all transactions in gold and foreign that the Bank may not do so; the inquiry
plaintiff has not exhausted all the exchange during an exchange crisis" as should be whether the Act
administrative remedies available in the defined in Section 74 of the Charter. contains sufficient standards on which the
ordinary course of law, etc. The first three objections may be exercise of a power could be premised. On
The court below found, as plaintiffs explained away by the observation that this score Republic Act No. 265 is not
evidence itself shows, that there is a the powers granted in Sections 72, 73, wanting.
monetary crisis. It also found that the and 80 of the Central Bank Charter, which In Section 2, the Central Bank is charged
export of sugar by plaintiff was a plaintiff-appellant claims to have been with the duty "to administer the monetary
transaction on foreign exchange; it violated, are the powers of the Bank in and banking system of the Republic; to
declared that plaintiff would stand to lose normal times, and not during an exchange maintain monetary stability in the
by the operation of the exchange control crisis, when the Bank may adopt the Philippines; to preserve the international
circular, but that the enactment of a law remedies indicated in Section 74 of its value of the peso; and to promote in
on currency and even the issuance of Charter, entitled "Emergency Restrictions rising level of production, employment
paper money as legal tender are on Exchange Operations." and real income in the Philippines." In
attributes of the sovereign power (citing Issue Section 64, it is given the duty to "control
Juillard vs. Greennan, 110 U.S. 421); that The most important issue now before the any expansion or contraction in the money
the devaluation of the dollar by authority Court is whether the exchange control supply, or any rise or fall in prices, which,
of the Congress of the United States and provision, contained in Section 4 (a) of in the opinion of the Board is prejudicial to
the provision legalizing payment of Central Bank Circular No. 20, may be the attainment or maintenance of a high
contractual obligations and other considered is sufficiently authorized by the level of production, employment and real
restrictions may not be considered as a provisions of the Charter. Petitioner income." Under this section, the Monetary
capricious or arbitrary exercise of its sustains the negative of the issue, i.e., Board shall have due regard "for their
powers; and the damage done to plaintiff that the establishment of exchange effects (measures) on the availability and
in this case may be considered damnum control can not be considered authorized cost of money to particular sectors of the
absque injuria. by the provisions of Section 72 of the economy as well as to the economy as a
The foregoing decision is the subject of Bank Charter and is, therefore, null and whole, and their effects on the
the present appeal. void. Respondent supports the affirmative, relationship of domestic prices and costs
In its brief appellant argues that the court arguing that such establishment (of to world prices and costs."
below failed to pass upon the specific exchange control) may be considered Dealing on the international reserve,
objections of appellant to the circular and authorized by implication from the general Section 68 enjoins the Central Bank to
its provisions, namely: duty imposed upon the Bank of preserving maintain an international reserve
1. That the compulsory sale regulation and maintaining the international value of "adequate to meet any foreseeable net
expressly violates Section 73 of the the peso. demands on the Bank for foreign
Central Bank Charter, that it may engage Reasons Adduced To Justify Exchange currencies." In gauging the adequacy of
in exchange transactions only with Control the international reserve, the guide is the
"prospective receipts and payments of Even the Legislature was perhaps aware as those necessary for the effective
foreign exchange by the Philippines." that by the nature of the vast subject discharge of its responsibilities.
Further, the Monetary Board is required to matter which R.A. No. 265 covers, it could Implied powers flow from a grant of
consider the it volume and maturity of the not foresee every conceivable means or expressed powers and are those powers
Central Bank's own liabilities in foreign power by which the objectives of the law necessary or incidental to the exercise of
currencies, the volume and maturity of could be achieved. That is why under the expressed powers. (Shelby Oil Co. vs.
the foreign exchange assets and liabilities Section 14, the Monetary Board is given Pruitt & McCrory, 221 P. 709, 710, 94 Okl.
of other banks operating in the the authority to "prepare and issue such 232). Implied powers are such as are
Philippines, and in so far as they are rules and regulations as it considers necessary to carry into effect those which
known or can be estimated, the volume necessary for the effective discharge of are expressly granted, and which must
and maturity of the foreign exchange the responsibilities and exercise the therefore be presumed to have been
assets and liabilities of all other persons powers assigned to the Monetary Board within the intention of the legislative
and entities in the Philippines." and to the Central Bank." This is grant." (City of Madison vs. Daley, 58 F.
In Section 70, the Central Bank shall take reiterated under Section 70 aforecited, 751, 755); ... incidental powers are such
remedial measures as are appropriate and under which when the international as are necessary in order to enable a
within the powers granted whenever the stability of the peso is threatened, the corporation to carry into execution that
international reserve falls "to an amount Central Bank may "take such remedial specific powers conferred upon it by its
which the Monetary Board considers measures as are appropriate and within Charter. (First M. E. Church vs. Dixon,
inadequate to meet the prospective net the powers granted to the Monetary Board 152 N.E. 887, 890, 178 III. 260.)
demands on the Central Bank for foreign and the Central Bank under the provisions Criticism Of The Theory Supporting
currencies, or whenever the international of this Act." (R.A. No. 265) Control
reserve appears to be in imminent danger Against appellant's contention that the The gist of the argument for exchange
of falling to such a level, or whenever the rules and regulations which the Central control, therefore, is the rule of
international reserve is falling as a result Bank or the Monetary Board may necessity, i.e., its establishment would
of payments or remittances abroad, Promulgate are only such as are within affect the international stability of the
which, in the opinion of the Monetary the powers granted by the Charter, and peso and it is necessary to establish it to
Board, are contrary to the national that the latter does not grant the Central maintain international reserve, etc. The
welfare." Bank the power to impose the forcible sale writer does not understand how
It would seem, from a study of the of foreign exchange, it is pointed out, that commandeering of the foreign exchange
provisions cited, that the Act contains the test of whether a power has been by the Central Bank itself is necessary to
sufficient standards as the term is granted to a body created by law is not carry out the purpose of establishing the
understood in Philippine jurisprudence. It necessarily whether the stability of the peso or maintaining the
is recognized that a body created by, law Charter expressly grants such power, but international reserve. Commandeering
has the power to promulgate rules and whether the law contains sufficient does not increase foreign exchange,
regulations to implement a given standards on which its exercise may be neither does it decrease demand therefor.
legislation and effectuate its policies.(See based. (People vs. Jollite, G.R. No. L- With the licensing of exports and imports
People vs. Pedro R. Exconde, G.R. No. L- 9553, May 13, 1959.) possession of foreign exchange becomes
9820, Aug. 80, 1957; Calalang vs. The forcible sale of foreign exchange to known, and the stability can be
Williams, 70 Phil. 727; Pangasinan the Central Bank, in relation to the powers maintained by the limitation of licenses for
Transportation vs. Public Service and responsibilities given to it in Sees. 2, the importation of goods to such foreign
Commission, 70 Phil. 22; People vs. 14, 64, 68, 70, 74 and other sections of exchange as may have been secured
Rosenthal, 68 Phil 328; People vs. Vera, R.A. No. 265 can be regarded as falling through exports. It is not necessary that
38 Phil. 660; Rubi vs. The Provincial Board within the category of "implied powers", the central Bank get the foreign exchange
of Mindoro, 39 Phil. 660.) itself for it to distribute among persons
whom it chooses, it is sufficient that the provisions of Section 74 of the Bank's All these restrictions are fairly simple both
foreign exchange obtained be apportioned Charter. to operate and to understand. The serious
among legitimate importers in accordance Let us examine the merits of appellant's complications arise when restrictions are
with the relative necessity of such arguments. placed on the actual use of certain funds
imports. If the demand for exchange Evitt1 states that "exchange control" is in the home country. Since the object of
exceeds the foreign exchange earned by one form of exchange restriction; the the government when imposing any trade
exports, the demand, if deemed necessary most drastic form thereof and the last or exchange restrictions is to reduce the
preserve the economy of the country, can step in a series of exchange restrictions. demand for and increase the supply of
be met by international reserves or by He considers exchange control separately foreign currencies against the home
international loans, etc. limiting the sale from exchange restriction. currency so that a larger balance of
of foreign exchange to be used for imports Forms of Exchange Restrictions. foreign exchange shall be available for
to the amounts earned through exports xxx xxx xxx government purposes, it follows that this
and obtain by loans, the stability of the The expression "exchange restrictions" is object would be defeated if foreign owners
currency could be secure even without the applied not only to official regulation of of capital were able to withdraw that
Bank commandeering the foreign dealings in foreign exchange, but also to capital from the country at will or if
exchange earned by exporters in the any disabilities attaching to the ownership foreign exporters were allowed to take
course of their business operations. of certain forms of the home currency. payment from home currency and then
By way of remark it may be added that xxx xxx xxx offer that currency for sale in the
exchange control is unwise in that the Each of the main methods is capable of exchange market, or if existing home
profits that are derived from the producer refinements. An exchange quota system debtors to foreign creditors could have
of export products and which could may be introduced, allowing the purchase any pressure brought to bear on them by
stimulate further production of export at the official selling rate of a monthly the latter to discharge such debts
products is removed from the hands of the allowance of exchange based on the immediately in full either by payment in
producer and transferred to the importer average over a previous period; arbitrary home currency (no foreign exchange
trader to the ultimate detriment of the "rationing" of exchange to buyers may be being available) or in goods, service, or
over-all economy, reducing production resorted to; exporters may be required to securities. To prevent such possibilities,
and increasing importation. And by placing hand over only a proportion of the the restrictions on trade and exchange are
the allocation of foreign exchange in the proceeds in foreign currency of their frequently reinforced by restrictions on the
hands of the Government opportunities for exports, leaving them free to dispose of working of foreign-owned accounts, either
graft and corruption are multiplied any balance in whatever manner they banking or trading, by restrictions as to
resulting not in the demoralization of choose, etc. Again, import and export the uses which may be made of the
industry only but in that of the whole restrictions and official control of proceeds of specified operations in trade
Government. The Previous administration exchange dealings are usually combined, and finance, and, more drastic still, the
is witness to the deleterious effects of and may be reinforced by regulations declaration of moratoria on certain forms
exchange control. against the granting of "clean" credits or of foreign debts. (H.E. Evitt, Manual of
Theory Sustained By Appellant overdrafts to foreigners (to prevent Foreign Exchange, pp. 289-291.)
The theory sustained by appellant is that outside speculation against the currency), xxx xxx xxx
exchange control can not be embraced or by the enforced surrender of the part of Methods of Exchange Control.
intended within the meaning of the clause home owners of any assets which they xxx xxx xxx
"may temporarily suspend or restrict sales may hold abroad, usually at an arbitrarily The most drastic form of official action is
of exchange by the Central Bank and may fixed price, and by the prohibition of the that by which all exporters are compelled
subject all transactions in gold and foreign export of capital in any form. by law to sell only in terms of the
exchange to license", embodied in the xxx xxx xxx currencies of buying countries and to hand
over to the home Central Bank or State
Bureau the entire proceeds of such sale Henius in his Dictionary of Foreign Trade control. The exchange control thus
Such foreign currency will be purchased explains that "exchange restrictions apply becomes a monopolistic buyer of foreign
from the exporter by the central authority to official regulation (such as licensing) exchange to which all residents must sell
only it an arbitrarily fixed "official" rate of and also to disabilities attaching to as soon as they acquire exchange and a
exchange in terms of the home currency. ownership of foreign exchange but control monopolistic seller, the only source from
At the same time importers wishing to buy or commandeering of all exchange is which residents may acquire foreign
goods from abroad must first apply for a a last step in regulation." exchange for payment abroad. The heart
license to import and must also apply to The term exchange restrictions is applied of all exchange control is compulsion.
the central authority for the allocation of not only to official regulation of dealings in (International Trade & Commercial Policy,
the necessarily foreign exchange. This foreign exchange, but also to any 2nd Ed., Lawrence W. Towle, p. 93.)
latter will only be sold to them at another disabilities attaching to the ownership of From the above it would appear that the
arbitrarily fixed "official" rate (which may certain forms of home currency. . . . In grant of the power to adopt "exchange
bear little relation to current market their early form, exchange restrictions restrictions" and to license exchange
quotation), and which even then may only usually consist of regulations requiring should, if a reasonable construction is to
be obtainable in series of small amounts. importers to open market the foreign be adopted, not be extended to include
It is under such conditions that exchange needed to pay for their imports. the most drastic step of control, namely,
clandestine dealings in exchange take ... The next stage is for the State to the commandeering of the exchange
place and which lead to the creation of a require all exporters of home produce to earned by private individuals and the
"Black Bourse" or illegal exchange market. sell only in terms of foreign currencies, power to pay therefor at prices which the
Such markets have persisted under these and to hand over the eventual proceeds in controller or commandeerer itself fixes.
conditions in spite of rigorous attempts to such foreign currencies to the government It is true that under Section 70 of the
suppress them, as the prospects of large banking agent, which will pay out the Central Bank Charter the Bank may adopt
profits for the operators appear to equivalent in home currency to the such remedial measures as are
outweigh the fears of fines and exporter at the official rate of exchange. appropriate to maintain, the international
imprisonment. A slight relaxation of this Laws or regulations for exchange control reserve to a desired level, as directed in
form of control is to be found when the generally commandeer all foreign Section 70 of the Charter which provides:
central authority is permitted to offer exchange arising from the country's SEC. 70. Action when the international
specified sums of foreign exchange for export and release that exchange as a stability of peso is threatened. —
sale by tender to prospective buyers who means of paying for imports in accordance Whenever the international reserve of
already hold the necessary licenses, with certain conditions. (Henius, Central Bank falls to an amount which the
instead of "rationed" sales at the "official" Dictionary of Foreign Trade, 2nd Ed., pp. Monetary Board considers inadequate to
rate. 292-293.) meet the prospective net demands the
In a still more relaxed form, the duty of Another author explains the monopolistic Central Bank for foreign currencies, or
acquiring all foreign exchange from and compulsory nature of exchange whenever the international reserve
exporters and alloting it to importers may control, thus: appears to be imminent, danger of falling
be handed over to approved home banks Where there is an effective exchange to such level or whenever the
instead of being carried out by the State control, residents are required to sell to international reserve is falling as a result
Bank or a State Bureau. Even so, it is the control at a rate set by the control, all of payments or remittance abroad which,
usually stipulated that official buying and foreign exchange that comes into their in the opinion of the Monetary Board, are
selling rates shall be fixed and that a possession from any source whatsoever. contrary to the national welfare, the
stated percentage of all foreign exchange Residents are unable to buy foreign Monetary Board shall:
acquired by the banks shall be sold to the exchange from any source except the (a) Take such remedial measures as are
State at the fixed price. (Ibid., pp. 300- exchange control, for purposes, in appropriate and within the powers granted
301.) amounts, and at rates fixed by the to the Monetary Board, and Central Bank
under the provisions of this Act: exchange earned by exporters and pay for estoppel. As petitioner obtained the
(Emphasis ours) it the price it fixes, later selling it to license to export under the provisions of
As indicated in the underlined portions of importers at the same rate of purchase. Circular No. 20, it may not question the
the provisions cited, the remedial The writer further holds the belief that the right or power of the Bank to enforce the
measures must be within the powers power to commandeer amounts to a provisions of said circular requiring
granted under the provisions of the Act. confiscatory power that may not be surrender of proceeds of the shipment
We venture the suggestion that the exercised by the Central Bank under its obtained through the use of license. When
commandeering of an exporter's dollars Charter; that such confiscatory measures the petitioner secured the license it aware
for a price less by 50% than its value and if justified by a monetary crisis can be of the fact that the license was being
the selling of said dollars to an importer to adopted by the Legislature alone under its issued under general Circular No. 20,
the exclusion of the exporter police power. In the opinion of the writer, subject to the right of the Bank to
himself 1 can not be said to be authorized therefore, the disputed Section 4(a) of commandeer the proceeds of the
even under the pretext of an exchange Circular No. 20 of the Central Bank is exportation. Although aware of said
crisis, by the provisions of Section 74 of beyond the power of the Central Bank to provisions petitioner nevertheless secured
the Central Bank Act because the Bank's adopt under the provisions of its Charter, license; it may not now after the use of
acts taken to remedy an exchange crisis particularly Section 74 thereof. license to secure exportation, refuse to
must be within the powers granted and That exchange control helped to ward off comply with the obligation it assumed
exchange control is not mere licensing of the exchange crisis is true; but it was by under the license to surrender the foreign
foreign exchange or the restriction no means the only way to do so. It was change earned. Under general principles
thereof. not necessary for the Bank to of law such action on the part of the
If, as contended, there is need for the commandeer all foreign exchange to petitioner cannot be sustained cause he is
Government to adopt such a radical maintain the international monetary estoppel from questioning the right of
compulsory and confiscatory measure as reserve. This could be done by mere Bank to commandeer the dollars earned
the exchange control, the matter should licensing of the sale of foreign exchange, through the license.
be reported to the President and the directing those that earn the dollars, for The defense of estoppel, however, can be
Legislature for the formulation of a law example, to sell to those that are licensed set up on with respect to the demand for
authorizing such confiscation, because to import the foreign commodities needed the payment of the foreign exchange
such confiscation can be exercised by the country's population and economy. earned at the rate of P3 to $1. The
only under a clear and express provision As the exports are to be licensed also, the defense estoppel is no bar to the
of law authorizing or directing such Bank could merely restrict the freedom of Petitioner's present petition prohibit the
confiscation. In other words, it is only the the exporter holding the foreign exchange, enforcement of Circular No. 20. The
Legislature that has the power to requiring him to sell the foreign exchange defense to this position of the Petitioner
determine when the police power should to the licensed importer. must be found in the other provisions or
be exercised and when the circumstances Lastly, it may not be amiss to state here principles of law.
for the exercise thereof exist. The Central that the alleged necessity and wisdom of Suit Barred By Republic's Exchange
Bank can not be said to have been given the exchange control has been refuted by Commitments And By Republic Act No.
the authority to pass or enact by law the the success of the decontrol measure 265
exchange control provision that it had adopted by this administration upon its One last defense raised by the Bank
established. inception. against the action is that under present
In short, the writer holds the view that the Estoppel Bars Action To Compel Payment laws and because of international
Central Bank Act merely authorizes the At P3.00 To The Dollar agreements which the country has
Monetary Board to license or restrict or The majority of the members of the Court, entered into, the Bank may not
regulate foreign exchange; said Act does however, of the belief that petitioner's unilaterally change the present rate of
not authorize it to commandeer foreign present suit is subject the defense of exchange of P2 to the dollar. The
members of the Court agreed that this change the par value of the peso in
defense is valid and bars the present suit. relation to the dollar without previous
Sections 3 and 4 of Article IV of the consultation or approval by the other
International Monetary Fund Agreement of signatories to the agreement. Circular No.
which the Philippines is signatory, 20 must have been communicated to the
provides as follows: other members of the agreement — and it
SEC. 3. Foreign exchange dealings based is assumed that no contemplated change
on parity. — The maximum and the therein had been communicated to the
minimum rates for exchange transactions other signatories at the time of the filing
between the currencies of members taking of this case.
place within their territories shall not differ The Central Bank, therefore, may not be
from parity: compelled to ignore Circular No. 20, which
(i) in the case of spot exchange was adopted with the advice and
transactions, by more than one per cent; acquiescence of the other members of the
and International Monetary Fund, and it may
(ii) in the case of other exchange not be compelled by mandamus to
transactions, by a margin which exceeds prohibit its enforcement.
the margin for spot exchange transactions Furthermore, under Article 49 of Republic
by more than the Fund considers Act No. 265, the Central Bank does not
reasonable. have the power to change the par value of
SEC. 4. Obligations regarding exchange the peso, a change which the present suit
stability — would require. This can be done only by
(a) Each member undertakes to the President upon proposal of the
collaborate with the Fund to promote Monetary Board and with the approval of
exchange stability, to maintain orderly Congress. Were the petition of the
exchange arrangements with other petitioner for the payment of his dollar
members, and to avoid competitive earnings at the rate of P3 to the dollar
exchange alterations. granted, the Central Bank would be
(b) Each member undertakes, through violating the above provision of Republic
appropriate measures consistent with this Act No. 265 because it would be
Agreement, to permit within its territories consenting to an actual change in the par
exchange transactions between its value of the peso in relation to the dollar
currency and the currencies of other without previous approval or authority of
members only within the limits prescribed those empowered to make the change.
under section 3 of this article. WHEREFORE, the petition should be, as it
The main purpose of the agreement is to is hereby dismissed, without costs. So
promote exchange stability, to maintain ordered.
orderly exchange arrangements among
members, and to avoid competitive
exchange depreciation. (Art. 1, par. iii,
International Monetary Fund Agreement.)
To comply with its obligations under the
agreement, especially as regards
exchange stability, the Bank may not