Citibank, N.A. v.

Sabeniano, 514 SCRA 441 (2007) FACTS Sabeniano was a client of Citibank, where she had several deposits and market placements, as well as outstanding loans with an aggregate amount of P1.92M. However, when she failed to repay these, Citibank used her deposits and money market placements to off-set and liquidate her outstanding loans, a large amount coming from Citibank-Geneva. Sabeniano denied having any outstanding loans with Citibank and demanded that she recover her deposits and money market placements. She instituted a complaint for "Accounting, Sum of Money and Damages" against Citibank with RTC of Makati, which declared the setoff illegal, null and void and that Sabeniano is still indebted to Citibank (P1.07M). ISSUE Whether it was proper for Citibank to offset Sabeniano's outstanding loan balance with her dollar deposits in Citibank-Geneva RULING NO. Without the Declaration of Pledge, petitioner Citibank had no authority to demand the remittance of respondents dollar accounts with CitibankGeneva and to apply them to her outstanding loans. It cannot effect legal compensation under Article 1278 of the Civil Code since, petitioner Citibank itself admitted that Citibank-Geneva is a distinct and separate entity. As for the dollar accounts, respondent was the creditor and Citibank-Geneva is the debtor; and as for the outstanding loans, petitioner Citibank was the creditor and respondent was the debtor. The parties in these transactions were evidently not the principal creditor of each other. It is true that the afore-quoted Section 20 of the General Banking Law of 2000 expressly states that the bank and its branches shall be treated as one unit. It should be pointed out, however, that the said provision applies to a universal9 or commercial bank, duly established and organized as a Philippine corporation in accordance with Section 8 of the same statute,11 and authorized to establish branches within or outside the Philippines. The General Banking Law of 2000, however, does not make the same categorical statement as regards to foreign banks and their branches in the Philippines. What Section 74 of the said law provides is that in case of a foreign bank with several branches in the country, all such branches shall be treated as one unit. As to the relations between the local branches of a foreign bank and its head office, Section 75 of the General Banking Law of 2000 and Section 5 of the Foreign Banks Liberalization Law provide for a "Home Office Guarantee," in which the head office of the foreign bank shall guarantee prompt payment of all liabilities of its Philippine branches. While the Home Office Guarantee is in accord with the principle that these local branches, together with its head office, constitute but one legal entity, it does not necessarily support the view that said principle is true and applicable in all circumstances. The Home Office Guarantee is included in Philippine statutes clearly for the protection of the interests of the depositors and other creditors of the local branches of a foreign bank. Since the head office of the bank is located in another country or state, such a guarantee is necessary so as to bring the head office within Philippine jurisdiction, and to hold the same answerable for the liabilities of its Philippine branches. Hence, the principle of the singular identity of that the local branches and the head office of a foreign bank are more often invoked by the clients in order to establish the accountability of the head office for the liabilities of its local branches. It is under such attendant circumstances in which the American authorities and jurisprudence presented by petitioners in their Motion for Partial Reconsideration were rendered.

Now the question that remains to be answered is whether the foreign bank can use the principle for a reverse purpose, in order to extend the liability of a client to the foreign banks Philippine branch to its head office, as well as to its branches in other countries. Thus, if a client obtains a loan from the foreign banks Philippine branch, does it absolutely and automatically make the client a debtor, not just of the Philippine branch, but also of the head office and all other branches of the foreign bank around the world? This Court rules in the negative. Section 25 of the United States Federal Reserve Act states that Every national banking association operating foreign branches shall conduct the accounts of each foreign branch independently of the accounts of other foreign branches established by it and of its home office, and shall at the end of each fiscal period transfer to its general ledger the profit or loss accrued at each branch as a separate item. v. Head Office Guarantee Sec. 75, GBL: In order to provide effective protection of the interests of the depositors and other creditors of Philippine branches of a foreign bank, the head office of such branches shall fully guarantee the prompt payment of all liabilities of its Philippine branch. (69) Residents and citizens of the Philippines who are creditors of a branch in the Philippines of a foreign bank shall have preferential rights to the assets of such branch in accordance with the existing laws. Sec. 5, Foreign Banks Liberalization Act The head office of foreign bank branches shall guarantee prompt payment of all liabilities of its Philippine branches. vi. License to Do Business Sec. 133, Corporation Code No foreign corporation transacting business in the Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines; but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine laws. Bangko Sentral ng Pilipinas Monetary Board v. Antonio-Valenzuela, 602 SCRA 698 (2009) FACTS The BSP conducted examinations of the books of a lot of rural banks. They required these banks to infuse fresh capital. Though the banks claimed that they did, the BSP informed them that they failed to comply with the remedial requirements imposed by the BSP. The banks asked for more time, and told BSP that they have not received the Report of Examination (ROE), which finalizes the audit findings. The Rural Bank of Paranaque filed a complaint for nullification of the BSP ROE, with application for TRO and preliminary Injunction, which was raffled with Judge Nina AntonioValenzuela. Other banks followed suit with their respective RTC branches. The TRO application of RBPI was granted, and the other banks filed for consolidation, where both the consolidation, and their TRO application were granted. BSP filed a petition for certiorari, annulling the grant of injunction against them. The CA dismissed the petition. ISSUE Whether or not the submission of the ROE with the MB for the closure of the banks may be prevented by an injunction

RULING NO. The issuance by the RTC of an injunction is an unwarranted interference with the powers of the MB. The actions of the MB under the New Central Bank Act may not be restrained or set aside by the court except on petition for certiorari on the ground that the action was taken with grave abuse of discretion as to amount to lack or excess of jurisdiction. This close now, hear later scheme is grounded on practical and legal considerations to prevent unwarranted dissipation of the banks assets and as a valid exercise of police power to protect the depositors, creditors, stockholders, and the general public. Such power of the MB to close banks may be considered as an exercise of police power. Central Bank of the Philippines v. Court of Appeals, 220 SCRA 536 (1993) FACTS Based on examination reports submitted by the Supervision and Examination Sector of the Central Bank "that the financial condition of TSB is one of insolvency and its continuance in business would involve probable loss to its depositors and creditors," the Monetary Board issued a RESOLUTION ordering the closure of Triumph Savings Bank, forbidding it from doing business in the Philippines, placing it under receivership, and appointing Ramon V. Tiaoqui as receiver. One week later, TSB filed a complaint against Central Bank and Ramon V. Tiaoqui challenging in the process the constitutionality of Sec. 29 of R.A. 269, otherwise known as "The Central Bank Act," as amended, insofar as it authorizes the Central Bank to take over a banking institution even if it is not charged with violation of any law or regulation, much less found guilty thereof. The RTC granted a TRO against the CB resolution. Central Bank filed a motion to dismiss the complaint before the RTC for failure to state a cause of action, i.e., it did not allege ultimate facts showing that the action was plainly arbitrary and made in bad faith, which are the only grounds for the annulment of Monetary Board resolutions placing a bank under conservatorship, and that TSB was without legal capacity to sue except through its receiver. These were denied. The denial was elevated to the CA, which upheld the orders of the RTC. Thus, this petition for (Rule 45) certiorari. Central BAnk claims that it is the essence of Sec. 29 of R.A. 265 that prior notice and hearing in cases involving bank closures should not be required since in all probability a hearing would not only cause unnecessary delay but also provide bank "insiders" and stockholders the opportunity to further dissipate the bank's resources, create liabilities for the bank and even destroy evidence of fraud or irregularity in the bank's operations to the prejudice of its depositors and creditors. ISSUES 1) Is absence of prior notice and hearing constitutive of acts of arbitrariness and bad faith, as to annul the MB resolution? 2) Is it only the receiver who has a right of action to question the resolution of the CB, and not the stockholders of the corporation? HELD NO. Contrary to the notion of private respondent, Sec. 29 does not contemplate prior notice and hearing before a bank may be directed to stop operations and placed under receivership. When par. 4 provides for the filing of a case within ten (10) days after the receiver takes charge of the assets of the bank, it is unmistakable that the assailed actions should

precede the filing of the case. Plainly, the legislature could not have intended to authorize "no prior notice and hearing" in the closure of the bank and at the same time allow a suit to annul it on the basis of absence thereof. A previous hearing is NOT required. It is enough that a subsequent judicial review be provided. This "close now and hear later" scheme is grounded on practical and legal considerations to prevent unwarranted dissipation of the bank's assets and as a valid exercise of police power to protect the depositors, creditors, stockholders and the general public. The mere filing of a case for receivership by the Central Bank can trigger a bank run and drain its assets in days or even hours leading to insolvency even if the bank be actually solvent. The procedure prescribed in Sec. 29 is truly designed to protect the interest of all concerned, i.e., the depositors, creditors and stockholders, the bank itself, and the general public. The absence of notice and hearing is not a valid ground to annul a Monetary Board resolution placing a bank under receivership. The absence of prior notice and hearing cannot be deemed acts of arbitrariness and bad faith. 2) As regards the second ground, to rule that only the receiver may bring suit in behalf of the bank is, to echo the respondent appellate court, "asking for the impossible, for it cannot be expected that the master, the CB, will allow the receiver it has appointed to question that very appointment." Consequently, only stockholders of a bank could file an action for annulment of a Monetary Board resolution placing the bank under receivership and prohibiting it from continuing operations. First Philippine International Bank v. Court of Appeals, 252 SCRA 259 (1996) FACTS Producer Bank (now FPIB) obtained six parcels of land with a size o totaling to 101 hectares. Demetrio Demeteria and Jose Janolo wanted to buy the property, for which they wrote a letter with Mercurio Rivera, Manager of the Property Management Department of the bank, offering P3.5M. Rivera wrote back, making a counter-offer worth P5.5M. Demetria and Janolo made another counter-offer worth P4.25M for which the bank did not reply to. Two weeks later, they met with the majority stockholder, Mr. Co and Rivera, and eventually accepted the P5.5M counter-offer. Two weeks had passed, the bank was put under conservatorship. Demetria and Janolo demanded the compliance for their agreement, which the bank ignored. After multiple demands, they filed a case for specific performance, tendering payment with the court. The bank lost with the RTC and CA level. ISSUES Whether there was a perfected contract of sale RULING 1. Yes. Although a counter-offer was made for P4.25M and was rejected by the bank, the previous offer of P5.5M was revived when the respondents met with Co and Rivera, to which they acceded two days after. This was evidenced by the letter and their meetings. Since there was meeting of the minds, when the bank offered a price, to which respondents accepted, object, the six parcels of land, and price, worth P5.5M, there was a perfected contract of sale. ***Petitioners contend that Rivera did not have the authority to negotiate as to the property involved in the litigation. There had been an apparent authority when Rivera was the Manager of the Property Management Department; he was the one who talks to potential buyers of such property; he referred the prices offered to him to the committee that decided the counter-offer worth P5.5M; he was present in all transactions involving the

property. The bank cannot feign ignorance to the acts of its Manager that handled the property. CENTRAL BANK v. MORFE, 63 SCRA 114 (1975) FACTS Monetary Board found the Fidelity Savings Bank to be insolvent. The Board directed the Superintendent of Banks to take charge of its assets, forbade it to do business and instructed the Central Bank Legal Counsel to take legal actions. Prior to the institution of the liquidation proceeding but after the declaration of insolvency, or, specifically, the spouses Job Elizes and Marcela P. Elizes filed a complaint in the Court of First Instance of Manila against the Fidelity Savings Bank for the recovery of the sum of P50, 584 as the balance of their time deposits. In the judgment rendered in that case on December 13, 1972 the Fidelity Savings Bank was ordered to pay the Elizes spouses the sum of P50,584 plus accumulated interest. In another case, assigned to Branch XXX of the Court of First Instance of Manila, the spouses Augusta A. Padilla and Adelaida Padilla secured on April 14, 1972 a judgment against the Fidelity Savings Bank for the sums of P80,000 as the balance of their time deposits, plus interests, P70,000 as moral and exemplary damages and P9,600 as attorney's fees (Civil Case No. 84200 where the action was filed on September 6, 1971). The Central Bank appealed to SC by certiorari. It contends that the final judgments secured by the Elizes and Padilla spouses do not enjoy any preference because (a) they were rendered after the Fidelity Savings Bank was declared insolvent and (b) under the charter of the Central Bank and the General Banking Law, no final judgment can be validly obtained against an insolvent bank. The lower court, in justifying the award for damages to the spouses, reasoned out that, because such actions are not suspended, judgments against insolvent banks could be considered as preferred credits under article 2244(14)(b) of the Civil Code. It further noted that, in contrast with the Central Act, section 18 of the Insolvency Law provides that upon the issuance by the court of an order declaring a person insolvent "all civil proceedings against the said insolvent shall be stayed." On the other hand, the Central Bank argues that after the Monetary Board has declared that a bank is insolvent and has ordered it to cease operations, the Board becomes the trustee of its assets "for the equal benefit of all the creditors, including the depositors". The Central Bank cites the ruling that "the assets of an insolvent banking institution are held in trust for the equal benefit of all creditors, and after its insolvency, one cannot obtain an advantage or a preference over another by an attachment, execution or otherwise" ISSUE 1) Whether deposits are deemed as preferred credits and if not, 2) may they be elevated to the level of preferred credits by acquiring a court judgment? RULING NO to both. It should be noted that fixed, savings, and current deposits of money in banks and similar institutions are not true deposits. They are considered simple loans and, as such, are not preferred credits. Evidently, one purpose in prohibiting the insolvent bank from doing business is to prevent some depositors from having an undue or fraudulent preference over other creditors and depositors. That purpose would be nullified if, as in this case, after the bank is declared insolvent, suits by some depositors could be maintained and judgments

would be rendered for the payment of their deposits and then such judgments would be considered preferred credits under article 2244 (14) (b) of the Civil Code. A contrary rule or practice would be productive of injustice, mischief and confusion. To recognize such judgments as entitled to priority would mean that depositors in insolvent banks, after learning that the bank is insolvent as shown by the fact that it can no longer pay withdrawals or that it has closed its doors or has been enjoined by the Monetary Board from doing business, would rush to the courts to secure judgments for the payment of their deposits. In such an eventuality, the courts would be swamped with suits of that character. Some of the judgments would be default judgments. Depositors armed with such judgments would pester the liquidation court with claims for preference on the basis of article 2244(14)(b). Less alert depositors would be prejudiced. That inequitable situation could not have been contemplated by the framers of section 29. The general principle of equity that the assets of an insolvent are to be distributed ratably among general creditors applies with full force to the distribution of the assets of a bank. A general depositor of a bank is merely a general creditor, and, as such, is not entitled to any preference or priority over other general creditors Considering that the deposits in question, in their inception, were not preferred credits, it does not seem logical and just that they should be raised to the category of preferred credits simply because the depositors, taking advantage of the long interval between the declaration of insolvency and the filing of the petition for judicial assistance and supervision, were able to secure judgments for the payment of their time deposits. The circumstance that the Fidelity Savings Bank, having stopped operations since February 19, 1969, was forbidden to do business (and that ban would include the payment of time deposits) implies that suits for the payment of such deposits were prohibited. What was directly prohibited should not be encompassed indirectly. Rural Bank of Buhi VS Ca Larrobis Vs. Phil. Veterans Bank

Provident Savings Bank v. Court of Appeals, 222 SCRA 125 (1993) FACTS On 16 February 1967, the spouses Lorenzo K. Guarin and Liwayway J. Guarin (Guarins) obtained a loan from provident bank in the amount of P62,500.00 payable on or before 20 June 1967. As security for the loan, they executed a real estate mortgage in favor of provident bank over a parcel of land. In September, 1972, provident bank was placed under receivership by the Central Bank of the Philippines until 27 July 1981 when the receivership was set aside by the Honorable Supreme Court. On 10 July 1986, the Guarins and respondent Wilson Chua executed a Deed of Absolute Sale With Assumption of Mortgaged whereby the Guarins sold the mortgaged property to Guarins sold the appellant for the sum of P250,000.00 and plaintiff-appellant undertook to assume the mortgaged obligation of the Guarins with defendant-appellant which as of 15 February 1985 amounted to P591,088.80

Wilson Chua wrote to Provident bank that the former had purchased the mortgaged property from the Guarin's and requesting that the owner's copy of TCT in the possession of defendant-appellant be released to him so that he can register the sale and have the title to the property transferred in his name. He likewise, informed defendant-appellant that it had lost whatever right or action had against the Guarins because of prescription. (Defendantappellant replied on 10 August 1987 stating the reasons why they could not comply with plaintiff-appellant's demands Provident bank argues that the prescriptive period was suspended due to the prohibition to do business issued by the Monetary Board. ISSUE Whether a foreclose proceeding falls within the purview of the phrase "doing business"? Whether the prescriptive period for the mortage was suspended? RULING YES to both. Doing business means a continuity of commercial dealings and arrangements, and contemplates to that extent, the exercise of some of the words or the normally incident to, and in progressive prosecution of, the purpose ands object of its organizations. With banks it also involves the collection of debts and foreclosure of mortgages. Generally, an appointment of a receiver does not dissolve the corporation nor does it interfere with the exercise of its corporate rights. But this principles is, of course, applicable to a situation where there is no restraint imposed on the corporation, unlike in the case at bar where petitioner Provident Savings Bank was specifically forbidden and immobilized from doing business in the Philippines on September 15, 1972 1981 when the decision in Central Bank vs. Court of Appeals was rendered. Having arrived at the conclusion that the foreclosure is part of bank's business activity which could not have been pursued by the receiver then because of the circumstances discussed in the Central Bank case, we are thus convinced that the prescriptive period was legally interrupted by fuerza mayor in 1972 on account on the prohibition imposed by the Monetary Board against petitioner from transacting business, until the directive of the board was nullified in 1981. Indeed, the period during which the obligee was prevented by a caso fortuito from enforcing his right is not reckoned against him (Article 1154, New Civil Code). When prescription is interrupted, all the benefits acquired so far from the possession cease and when prescription starts anew, it will be entirely a new one Also when respondent wrote to the Guarins requesting that the former be allowed to pay off the loan of the mortgage, he in turn acknowledged the existing debt thereby suspending the prescriptive period for the second time. Central Bank v. Court of Appeals, 106 SCRA 143 (1981) FACTS In 1985, the Monetary Board ordered the closure of Triumph Savings Bank (TSB) after it found that its financial condition is one of insolvency and its continuance in business would involve probable loss to its depositors and creditors. TSB filed a complaint against Central Bank to annul its closure and challenging the constitutionality of the Central Bank Act insofar as it authorizes the Central Bank to take over a banking institution even if it is not charged with violation of any law or regulation. It further alleged that the Central Bank violated the rule on administrative due process, which requires that prior notice and hearing be afforded to all

parties in administrative proceedings. Since MB Resolution No. 596 was adopted without TSB being previously notified and heard, according to respondents, the same is void for want of due process; consequently, the bank's management should be restored to its board of directors and officers. ISSUE May a Monetary Board resolution placing a private bank under receivership be annulled on the ground of lack of prior notice and hearing? RULING NO. Under Sec. 29 of R.A. 265, the Central Bank, through the Monetary Board, is vested with exclusive authority to assess, evaluate and determine the condition of any bank, and finding such condition to be one of insolvency, or that its continuance in business would involve probable loss to its depositors or creditors, forbid the bank or non-bank financial institution to do business in the Philippines; and shall designate an official of the CB or other competent person as receiver to immediately take charge of its assets and liabilities. The fourth paragraph, which was then in effect at the time the action was commenced, allows the filing of a case to set aside the actions of the Monetary Board, which are tainted with arbitrariness and bad faith. Sec. 29 does not contemplate prior notice and hearing before a bank may be directed to stop operations and placed under receivership. It may be emphasized that Sec. 29 does not altogether divest a bank or a non-bank financial institution placed under receivership of the opportunity to be heard and present evidence on arbitrariness and bad faith because within ten (10) days from the date the receiver takes charge of the assets of the bank, resort to judicial review may be had by filing an appropriate pleading with the court. Respondent TSB did in fact avail of this remedy by filing a complaint with the RTC of Quezon City on the 8th day following the takeover by the receiver of the bank's assets on 3 June 1985. This "close now and hear later" scheme is grounded on practical and legal considerations to prevent unwarranted dissipation of the bank's assets and as a valid exercise of police power to protect the depositors, creditors, stockholders and the general public. Admittedly, the mere filing of a case for receivership by the Central Bank can trigger a bank run and drain its assets in days or even hours leading to insolvency even if the bank be actually solvent. The procedure prescribed in Sec. 29 is truly designed to protect the interest of all concerned, i.e., the depositors, creditors and stockholders, the bank itself, and the general public, and the summary closure pales in comparison to the protection afforded public interest. At any rate, the bank is given full opportunity to prove arbitrariness and bad faith in placing the bank under receivership, in which event, the resolution may be properly nullified and the receivership lifted as the trial court may determine. The Court ruled in Banco Filipino (as relied upon by TSB) that the closure of the bank was arbitrary and attendant with grave abuse of discretion, not because of the absence of prior notice and hearing, but that the Monetary Board had no sufficient basis to arrive at a sound conclusion of insolvency to justify the closure. In other words, the arbitrariness, bad faith and abuse of discretion were determined only after the bank was placed under conservatorship and evidence thereon was received by the trial court. We rule that Sec. 29 of R.A. 265 is a sound legislation promulgated in accordance with the Constitution in the exercise of police power of the state. Consequently, the absence of notice and hearing is not a valid ground to annul a Monetary Board resolution placing a bank under receivership. The absence of prior notice and hearing cannot be deemed acts of arbitrariness and bad faith. Thus, an MB resolution placing a bank under receivership, or conservatorship for that matter, may only be annulled after a determination

has been made by the trial court that its issuance was tainted with arbitrariness and bad faith. Until such determination is made, the status quo shall be maintained, i.e., the bank shall continue to be under receivership.

G.R. No. 156132 October 12, 2006 CITIBANK, N.A. (Formerly First National City Bank) and INVESTORS' FINANCE CORPORATION, doing business under the name and style of FNCB Finance, petitioners, vs. MODESTA R. SABENIANO, respondent. DECISION CHICO-NAZARIO, J.: Before this Court is a Petition for Review on Certiorari,1 under Rule 45 of the Revised Rules of Court, of the Decision2 of the Court of Appeals in CA-G.R. CV No. 51930, dated 26 March 2002, and the Resolution,3 dated 20 November 2002, of the same court which, although modifying its earlier Decision, still denied for the most part the Motion for Reconsideration of herein petitioners. Petitioner Citibank, N.A. (formerly known as the First National City Bank) is a banking corporation duly authorized and existing under the laws of the United States of America and licensed to do commercial banking activities and perform trust functions in the Philippines. Petitioner Investor's Finance Corporation, which did business under the name and style of FNCB Finance, was an affiliate company of petitioner Citibank, specifically handling money market placements for its clients. It is now, by virtue of a merger, doing business as part of its successor-ininterest, BPI Card Finance Corporation. However, so as to consistently establish its identity in the Petition at bar, the said petitioner shall still be referred to herein as FNCB Finance.4 Respondent Modesta R. Sabeniano was a client of both petitioners Citibank and FNCB Finance. Regrettably, the business relations among the parties subsequently went awry. On 8 August 1985, respondent filed a Complaint5 against petitioners, docketed as Civil Case No. 11336, before the Regional Trial Court (RTC) of Makati City. Respondent claimed to have substantial deposits and money market placements with the petitioners, as well as money market placements with the Ayala Investment and Development Corporation (AIDC), the proceeds of which were supposedly deposited automatically and directly to respondent's accounts with petitioner Citibank. Respondent alleged that petitioners refused to return her deposits and the proceeds of her money market placements despite her repeated demands, thus, compelling respondent to file Civil Case No. 11336 against petitioners for "Accounting, Sum of Money and Damages." Respondent eventually filed an Amended Complaint6 on 9 October 1985 to include additional claims to deposits and money market placements inadvertently left out from her original Complaint. In their joint Answer7 and Answer to Amended Complaint,8 filed on 12 September 1985 and 6 November 1985, respectively, petitioners admitted that respondent had deposits and money market

placements with them, including dollar accounts in the Citibank branch in Geneva, Switzerland (Citibank-Geneva). Petitioners further alleged that the respondent later obtained several loans from petitioner Citibank, for which she executed Promissory Notes (PNs), and secured by (a) a Declaration of Pledge of her dollar accounts in Citibank-Geneva, and (b) Deeds of Assignment of her money market placements with petitioner FNCB Finance. When respondent failed to pay her loans despite repeated demands by petitioner Citibank, the latter exercised its right to off-set or compensate respondent's outstanding loans with her deposits and money market placements, pursuant to the Declaration of Pledge and the Deeds of Assignment executed by respondent in its favor. Petitioner Citibank supposedly informed respondent Sabeniano of the foregoing compensation through letters, dated 28 September 1979 and 31 October 1979. Petitioners were therefore surprised when six years later, in 1985, respondent and her counsel made repeated requests for the withdrawal of respondent's deposits and money market placements with petitioner Citibank, including her dollar accounts with Citibank-Geneva and her money market placements with petitioner FNCB Finance. Thus, petitioners prayed for the dismissal of the Complaint and for the award of actual, moral, and exemplary damages, and attorney's fees. When the parties failed to reach a compromise during the pre-trial hearing,9 trial proper ensued and the parties proceeded with the presentation of their respective evidence. Ten years after the filing of the Complaint on 8 August 1985, a Decision10 was finally rendered in Civil Case No. 11336 on 24 August 1995 by the fourth Judge11 who handled the said case, Judge Manuel D. Victorio, the dispositive portion of which reads WHEREFORE, in view of all the foregoing, decision is hereby rendered as follows: (1) Declaring as illegal, null and void the setoff effected by the defendant Bank [petitioner Citibank] of plaintiff's [respondent Sabeniano] dollar deposit with Citibank, Switzerland, in the amount of US$149,632.99, and ordering the said defendant [petitioner Citibank] to refund the said amount to the plaintiff with legal interest at the rate of twelve percent (12%) per annum, compounded yearly, from 31 October 1979 until fully paid, or its peso equivalent at the time of payment; (2) Declaring the plaintiff [respondent Sabeniano] indebted to the defendant Bank [petitioner Citibank] in the amount of P1,069,847.40 as of 5 September 1979 and ordering the plaintiff [respondent Sabeniano] to pay said amount, however, there shall be no interest and penalty charges from the time the illegal setoff was effected on 31 October 1979; (3) Dismissing all other claims and counterclaims interposed by the parties against each other. Costs against the defendant Bank. All the parties appealed the foregoing Decision of the RTC to the Court of Appeals, docketed as CAG.R. CV No. 51930. Respondent questioned the findings of the RTC that she was still indebted to petitioner Citibank, as well as the failure of the RTC to order petitioners to render an accounting of respondent's deposits and money market placements with them. On the other hand, petitioners argued that petitioner Citibank validly compensated respondent's outstanding loans with her dollar accounts with Citibank-Geneva, in accordance with the Declaration of Pledge she executed in its favor. Petitioners also alleged that the RTC erred in not declaring respondent liable for damages and interest. On 26 March 2002, the Court of Appeals rendered its Decision12 affirming with modification the RTC Decision in Civil Case No. 11336, dated 24 August 1995, and ruling entirely in favor of respondent in this wise

Wherefore, premises considered, the assailed 24 August 1995 Decision of the court a quo is hereby AFFIRMED with MODIFICATION, as follows: 1. Declaring as illegal, null and void the set-off effected by the defendant-appellant Bank of the plaintiff-appellant's dollar deposit with Citibank, Switzerland, in the amount of US$149,632.99, and ordering defendant-appellant Citibank to refund the said amount to the plaintiff-appellant with legal interest at the rate of twelve percent (12%) per annum, compounded yearly, from 31 October 1979 until fully paid, or its peso equivalent at the time of payment; 2. As defendant-appellant Citibank failed to establish by competent evidence the alleged indebtedness of plaintiff-appellant, the set-off of P1,069,847.40 in the account of Ms. Sabeniano is hereby declared as without legal and factual basis; 3. As defendants-appellants failed to account the following plaintiff-appellant's money market placements, savings account and current accounts, the former is hereby ordered to return the same, in accordance with the terms and conditions agreed upon by the contending parties as evidenced by the certificates of investments, to wit: (i) Citibank NNPN Serial No. 023356 (Cancels and Supersedes NNPN No. 22526) issued on 17 March 1977, P318,897.34 with 14.50% interest p.a.; (ii) Citibank NNPN Serial No. 23357 (Cancels and Supersedes NNPN No. 22528) issued on 17 March 1977, P203,150.00 with 14.50 interest p.a.; (iii) FNCB NNPN Serial No. 05757 (Cancels and Supersedes NNPN No. 04952), issued on 02 June 1977, P500,000.00 with 17% interest p.a.; (iv) FNCB NNPN Serial No. 05758 (Cancels and Supersedes NNPN No. 04962), issued on 02 June 1977, P500,000.00 with 17% interest per annum; (v) The Two Million (P2,000,000.00) money market placements of Ms. Sabeniano with the Ayala Investment & Development Corporation (AIDC) with legal interest at the rate of twelve percent (12%) per annum compounded yearly, from 30 September 1976 until fully paid; 4. Ordering defendants-appellants to jointly and severally pay the plaintiff-appellant the sum of FIVE HUNDRED THOUSAND PESOS (P500,000.00) by way of moral damages, FIVE HUNDRED THOUSAND PESOS (P500,000.00) as exemplary damages, and ONE HUNDRED THOUSAND PESOS (P100,000.00) as attorney's fees. Apparently, the parties to the case, namely, the respondent, on one hand, and the petitioners, on the other, made separate attempts to bring the aforementioned Decision of the Court of Appeals, dated 26 March 2002, before this Court for review. G.R. No. 152985 Respondent no longer sought a reconsideration of the Decision of the Court of Appeals in CA-G.R. CV No. 51930, dated 26 March 2002, and instead, filed immediately with this Court on 3 May 2002 a Motion for Extension of Time to File a Petition for Review,13 which, after payment of the docket and other lawful fees, was assigned the docket number G.R. No. 152985. In the said Motion, respondent alleged that she received a copy of the assailed Court of Appeals Decision on 18 April 2002 and, thus,

had 15 days therefrom or until 3 May 2002 within which to file her Petition for Review. Since she informed her counsel of her desire to pursue an appeal of the Court of Appeals Decision only on 29 April 2002, her counsel neither had enough time to file a motion for reconsideration of the said Decision with the Court of Appeals, nor a Petition for Certiorari with this Court. Yet, the Motion failed to state the exact extension period respondent was requesting for. Since this Court did not act upon respondent's Motion for Extension of Time to file her Petition for Review, then the period for appeal continued to run and still expired on 3 May 2002.14 Respondent failed to file any Petition for Review within the prescribed period for appeal and, hence, this Court issued a Resolution,15 dated 13 November 2002, in which it pronounced that G.R. No. 152985 (Modesta R. Sabeniano vs. Court of Appeals, et al.). It appearing that petitioner failed to file the intended petition for review on certiorari within the period which expired on May 3, 2002, the Court Resolves to DECLARE THIS CASE TERMINATED and DIRECT the Division Clerk of Court to INFORM the parties that the judgment sought to be reviewed has become final and executory. The said Resolution was duly recorded in the Book of Entries of Judgments on 3 January 2003. G.R. No. 156132 Meanwhile, petitioners filed with the Court of Appeals a Motion for Reconsideration of its Decision in CA-G.R. CV No. 51930, dated 26 March 2002. Acting upon the said Motion, the Court of Appeals issued the Resolution,16 dated 20 November 2002, modifying its Decision of 26 March 2002, as follows WHEREFORE, premises considered, the instant Motion for Reconsideration is PARTIALLY GRANTED as Sub-paragraph (V) paragraph 3 of the assailed Decision's dispositive portion is hereby ordered DELETED. The challenged 26 March 2002 Decision of the Court is AFFIRMED with MODIFICATION. Assailing the Decision and Resolution of the Court of Appeals in CA-G.R. CV No. 51930, dated 26 March 2002 and 20 November 2002, respectively, petitioners filed the present Petition, docketed as G.R. No. 156132. The Petition was initially denied17 by this Court for failure of the petitioners to attach thereto a Certification against Forum Shopping. However, upon petitioners' Motion and compliance with the requirements, this Court resolved18 to reinstate the Petition. The Petition presented fourteen (14) assignments of errors allegedly committed by the Court of Appeals in its Decision, dated 26 March 2002, involving both questions of fact and questions of law which this Court, for the sake of expediency, discusses jointly, whenever possible, in the succeeding paragraphs. I The Resolution of this Court, dated 13 November 2002, in G.R. No. 152985, declaring the Decision of the Court of Appeals, dated 26 March 2002, final and executory, pertains to respondent Sabeniano alone. Before proceeding to a discussion of the merits of the instant Petition, this Court wishes to address first the argument, persistently advanced by respondent in her pleadings on record, as well as her numerous personal and unofficial letters to this Court which were no longer made part of the record, that the Decision of the Court of Appeals in CA-G.R. CV No. 51930, dated 26 March 2002, had already become final and executory by virtue of the Resolution of this Court in G.R. No. 152985, dated 13 November 2002. G.R. No. 152985 was the docket number assigned by this Court to respondent's Motion for Extension

of Time to File a Petition for Review. Respondent, though, did not file her supposed Petition. Thus, after the lapse of the prescribed period for the filing of the Petition, this Court issued the Resolution, dated 13 November 2002, declaring the Decision of the Court of Appeals, dated 26 March 2002, final and executory. It should be pointed out, however, that the Resolution, dated 13 November 2002, referred only to G.R. No. 152985, respondent's appeal, which she failed to perfect through the filing of a Petition for Review within the prescribed period. The declaration of this Court in the same Resolution would bind respondent solely, and not petitioners which filed their own separate appeal before this Court, docketed as G.R. No. 156132, the Petition at bar. This would mean that respondent, on her part, should be bound by the findings of fact and law of the Court of Appeals, including the monetary amounts consequently awarded to her by the appellate court in its Decision, dated 26 March 2002; and she can no longer refute or assail any part thereof. 19 This Court already explained the matter to respondent when it issued a Resolution20 in G.R. No. 156132, dated 2 February 2004, which addressed her Urgent Motion for the Release of the Decision with the Implementation of the Entry of Judgment in the following manner [A]cting on Citibank's and FNCB Finance's Motion for Reconsideration, we resolved to grant the motion, reinstate the petition and require Sabeniano to file a comment thereto in our Resolution of June 23, 2003. Sabeniano filed a Comment dated July 17, 2003 to which Citibank and FNCB Finance filed a Reply dated August 20, 2003. From the foregoing, it is clear that Sabeniano had knowledge of, and in fact participated in, the proceedings in G.R. No. 156132. She cannot feign ignorance of the proceedings therein and claim that the Decision of the Court of Appeals has become final and executory. More precisely, the Decision became final and executory only with regard to Sabeniano in view of her failure to file a petition for review within the extended period granted by the Court, and not to Citibank and FNCB Finance whose Petition for Review was duly reinstated and is now submitted for decision. Accordingly, the instant Urgent Motion is hereby DENIED. (Emphasis supplied.) To sustain the argument of respondent would result in an unjust and incongruous situation wherein one party may frustrate the efforts of the opposing party to appeal the case by merely filing with this Court a Motion for Extension of Time to File a Petition for Review, ahead of the opposing party, then not actually filing the intended Petition.21 The party who fails to file its intended Petition within the reglementary or extended period should solely bear the consequences of such failure. Respondent Sabeniano did not commit forum shopping. Another issue that does not directly involve the merits of the present Petition, but raised by petitioners, is whether respondent should be held liable for forum shopping. Petitioners contend that respondent committed forum shopping on the basis of the following facts: While petitioners' Motion for Reconsideration of the Decision in CA-G.R. CV No. 51930, dated 26 March 2002, was still pending before the Court of Appeals, respondent already filed with this Court on 3 May 2002 her Motion for Extension of Time to File a Petition for Review of the same Court of Appeals Decision, docketed as G.R. No. 152985. Thereafter, respondent continued to participate in the proceedings before the Court of Appeals in CA-G.R. CV No. 51930 by filing her Comment, dated 17 July 2002, to petitioners' Motion for Reconsideration; and a Rejoinder, dated 23 September 2002, to petitioners' Reply. Thus, petitioners argue that by seeking relief concurrently from this Court and the Court of Appeals, respondent is undeniably guilty of forum shopping, if not indirect contempt. This Court, however, finds no sufficient basis to hold respondent liable for forum shopping.

Forum shopping has been defined as the filing of two or more suits involving the same parties for the same cause of action, either simultaneously or successively, for the purpose of obtaining a favorable judgment.22 The test for determining forum shopping is whether in the two (or more) cases pending, there is an identity of parties, rights or causes of action, and relief sought.23 To guard against this deplorable practice, Rule 7, Section 5 of the revised Rules of Court imposes the following requirement SEC. 5. Certification against forum shopping. The plaintiff or principal party shall certify under oath in the complaint or other initiatory pleading asserting a claim for relief, or in a sworn certification annexed thereto and simultaneously filed therewith: (a) that he has not theretofore commenced any action or filed any claim involving the same issues in any court, tribunal or quasijudicial agency and, to the best of his knowledge, no such other action or claim is pending therein; (b) if there is such other pending action or claim, a complete statement of the present status thereof; and (c) if he should thereafter learn that the same or similar action or claim has been filed or is pending, he shall report that fact within five (5) days therefrom to the court wherein his aforesaid complaint or initiatory pleading has been filed. Failure to comply with the foregoing requirements shall not be curable by mere amendment of the complaint or other initiatory pleading but shall be cause for the dismissal of the case without prejudice, unless otherwise provided, upon motion and after hearing. The submission of a false certification or non-compliance with any of the undertakings therein shall constitute indirect contempt of court, without prejudice to the corresponding administrative and criminal actions. If the acts of the party or his counsel clearly constitute willful and deliberate forum shopping, the same shall be ground for summary dismissal with prejudice and shall constitute direct contempt, as well as cause for administrative sanctions. Although it may seem at first glance that respondent was simultaneously seeking recourse from the Court of Appeals and this Court, a careful and closer scrutiny of the details of the case at bar would reveal otherwise. It should be recalled that respondent did nothing more in G.R. No. 152985 than to file with this Court a Motion for Extension of Time within which to file her Petition for Review. For unexplained reasons, respondent failed to submit to this Court her intended Petition within the reglementary period. Consequently, this Court was prompted to issue a Resolution, dated 13 November 2002, declaring G.R. No. 152985 terminated, and the therein assailed Court of Appeals Decision final and executory. G.R. No. 152985, therefore, did not progress and respondent's appeal was unperfected. The Petition for Review would constitute the initiatory pleading before this Court, upon the timely filing of which, the case before this Court commences; much in the same way a case is initiated by the filing of a Complaint before the trial court. The Petition for Review establishes the identity of parties, rights or causes of action, and relief sought from this Court, and without such a Petition, there is technically no case before this Court. The Motion filed by respondent seeking extension of time within which to file her Petition for Review does not serve the same purpose as the Petition for Review itself. Such a Motion merely presents the important dates and the justification for the additional time requested for, but it does not go into the details of the appealed case. Without any particular idea as to the assignments of error or the relief respondent intended to seek from this Court, in light of her failure to file her Petition for Review, there is actually no second case involving the same parties, rights or causes of action, and relief sought, as that in CA-G.R. CV No. 51930. It should also be noted that the Certification against Forum Shopping is required to be attached to the initiatory pleading, which, in G.R. No. 152985, should have been respondent's Petition for Review. It is

in that Certification wherein respondent certifies, under oath, that: (a) she has not commenced any action or filed any claim involving the same issues in any court, tribunal or quasi-judicial agency and, to the best of her knowledge, no such other action or claim is pending therein; (b) if there is such other pending action or claim, that she is presenting a complete statement of the present status thereof; and (c) if she should thereafter learn that the same or similar action or claim has been filed or is pending, she shall report that fact within five days therefrom to this Court. Without her Petition for Review, respondent had no obligation to execute and submit the foregoing Certification against Forum Shopping. Thus, respondent did not violate Rule 7, Section 5 of the Revised Rules of Court; neither did she mislead this Court as to the pendency of another similar case. Lastly, the fact alone that the Decision of the Court of Appeals, dated 26 March 2002, essentially ruled in favor of respondent, does not necessarily preclude her from appealing the same. Granted that such a move is ostensibly irrational, nonetheless, it does not amount to malice, bad faith or abuse of the court processes in the absence of further proof. Again, it should be noted that the respondent did not file her intended Petition for Review. The Petition for Review would have presented before this Court the grounds for respondent's appeal and her arguments in support thereof. Without said Petition, any reason attributed to the respondent for appealing the 26 March 2002 Decision would be grounded on mere speculations, to which this Court cannot give credence. II As an exception to the general rule, this Court takes cognizance of questions of fact raised in the Petition at bar. It is already a well-settled rule that the jurisdiction of this Court in cases brought before it from the Court of Appeals by virtue of Rule 45 of the Revised Rules of Court is limited to reviewing errors of law. Findings of fact of the Court of Appeals are conclusive upon this Court. There are, however, recognized exceptions to the foregoing rule, namely: (1) when the findings are grounded entirely on speculation, surmises, or conjectures; (2) when the interference made is manifestly mistaken, absurd, or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of fact are conflicting; (6) when in making its findings, the Court of Appeals went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to those of the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the respondent; and (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record.24 Several of the enumerated exceptions pertain to the Petition at bar. It is indubitable that the Court of Appeals made factual findings that are contrary to those of the RTC,25 thus, resulting in its substantial modification of the trial court's Decision, and a ruling entirely in favor of the respondent. In addition, petitioners invoked in the instant Petition for Review several exceptions that would justify this Court's review of the factual findings of the Court of Appeals, i.e., the Court of Appeals made conflicting findings of fact; findings of fact which went beyond the issues raised on appeal before it; as well as findings of fact premised on the supposed absence of evidence and contradicted by the evidence on record. On the basis of the foregoing, this Court shall proceed to reviewing and re-evaluating the evidence on record in order to settle questions of fact raised in the Petition at bar. The fact that the trial judge who rendered the RTC Decision in Civil Case No. 11336, dated 24 August 1995, was not the same judge who heard and tried the case, does not, by itself, render the

said Decision erroneous. The Decision in Civil Case No. 11336 was rendered more than 10 years from the institution of the said case. In the course of its trial, the case was presided over by four (4) different RTC judges.26 It was Judge Victorio, the fourth judge assigned to the case, who wrote the RTC Decision, dated 24 August 1995. In his Decision,27 Judge Victorio made the following findings After carefully evaluating the mass of evidence adduced by the parties, this Court is not inclined to believe the plaintiff's assertion that the promissory notes as well as the deeds of assignments of her FNCB Finance money market placements were simulated. The evidence is overwhelming that the plaintiff received the proceeds of the loans evidenced by the various promissory notes she had signed. What is more, there was not an iota of proof save the plaintiff's bare testimony that she had indeed applied for loan with the Development Bank of the Philippines. More importantly, the two deeds of assignment were notarized, hence they partake the nature of a public document. It makes more than preponderant proof to overturn the effect of a notarial attestation. Copies of the deeds of assignments were actually filed with the Records Management and Archives Office. Finally, there were sufficient evidence wherein the plaintiff had admitted the existence of her loans with the defendant Bank in the total amount of P1,920,000.00 exclusive of interests and penalty charges (Exhibits "28", "31", "32", and "33"). In fine, this Court hereby finds that the defendants had established the genuineness and due execution of the various promissory notes heretofore identified as well as the two deeds of assignments of the plaintiff's money market placements with defendant FNCB Finance, on the strength of which the said money market placements were applied to partially pay the plaintiff's past due obligation with the defendant Bank. Thus, the total sum of P1,053,995.80 of the plaintiff's past due obligation was partially offset by the said money market placement leaving a balance of P1,069,847.40 as of 5 September 1979 (Exhibit "34"). Disagreeing in the foregoing findings, the Court of Appeals stressed, in its Decision in CA-G.R. CV No. 51930, dated 26 March 2002, "that the ponente of the herein assailed Decision is not the Presiding Judge who heard and tried the case."28 This brings us to the question of whether the fact alone that the RTC Decision was rendered by a judge other than the judge who actually heard and tried the case is sufficient justification for the appellate court to disregard or set aside the findings in the Decision of the court a quo? This Court rules in the negative. What deserves stressing is that, in this jurisdiction, there exists a disputable presumption that the RTC Decision was rendered by the judge in the regular performance of his official duties. While the said presumption is only disputable, it is satisfactory unless contradicted or overcame by other evidence.29 Encompassed in this presumption of regularity is the presumption that the RTC judge, in resolving the case and drafting his Decision, reviewed, evaluated, and weighed all the evidence on record. That the said RTC judge is not the same judge who heard the case and received the evidence is of little consequence when the records and transcripts of stenographic notes (TSNs) are complete and available for consideration by the former. In People v. Gazmen,30 this Court already elucidated its position on such an issue Accused-appellant makes an issue of the fact that the judge who penned the decision was not the judge who heard and tried the case and concludes therefrom that the findings of the former are erroneous. Accused-appellant's argument does not merit a lengthy discussion. It is well-

settled that the decision of a judge who did not try the case is not by that reason alone erroneous. It is true that the judge who ultimately decided the case had not heard the controversy at all, the trial having been conducted by then Judge Emilio L. Polig, who was indefinitely suspended by this Court. Nonetheless, the transcripts of stenographic notes taken during the trial were complete and were presumably examined and studied by Judge Baguilat before he rendered his decision. It is not unusual for a judge who did not try a case to decide it on the basis of the record. The fact that he did not have the opportunity to observe the demeanor of the witnesses during the trial but merely relied on the transcript of their testimonies does not for that reason alone render the judgment erroneous. (People vs. Jaymalin, 214 SCRA 685, 692 [1992]) Although it is true that the judge who heard the witnesses testify is in a better position to observe the witnesses on the stand and determine by their demeanor whether they are telling the truth or mouthing falsehood, it does not necessarily follow that a judge who was not present during the trial cannot render a valid decision since he can rely on the transcript of stenographic notes taken during the trial as basis of his decision. Accused-appellant's contention that the trial judge did not have the opportunity to observe the conduct and demeanor of the witnesses since he was not the same judge who conducted the hearing is also untenable. While it is true that the trial judge who conducted the hearing would be in a better position to ascertain the truth and falsity of the testimonies of the witnesses, it does not necessarily follow that a judge who was not present during the trial cannot render a valid and just decision since the latter can also rely on the transcribed stenographic notes taken during the trial as the basis of his decision. (People vs. De Paz, 212 SCRA 56, 63 [1992]) At any rate, the test to determine the value of the testimony of the witness is whether or not such is in conformity with knowledge and consistent with the experience of mankind ( People vs. Morre, 217 SCRA 219 [1993]). Further, the credibility of witnesses can also be assessed on the basis of the substance of their testimony and the surrounding circumstances (People v. Gonzales, 210 SCRA 44 [1992]). A critical evaluation of the testimony of the prosecution witnesses reveals that their testimony accords with the aforementioned tests, and carries with it the ring of truth end perforce, must be given full weight and credit. Irrefragably, by reason alone that the judge who penned the RTC Decision was not the same judge who heard the case and received the evidence therein would not render the findings in the said Decision erroneous and unreliable. While the conduct and demeanor of witnesses may sway a trial court judge in deciding a case, it is not, and should not be, his only consideration. Even more vital for the trial court judge's decision are the contents and substance of the witnesses' testimonies, as borne out by the TSNs, as well as the object and documentary evidence submitted and made part of the records of the case. This Court proceeds to making its own findings of fact. Since the Decision of the Court of Appeals in CA-G.R. CV No. 51930, dated 26 March 2002, has become final and executory as to the respondent, due to her failure to interpose an appeal therefrom within the reglementary period, she is already bound by the factual findings in the said Decision. Likewise, respondent's failure to file, within the reglementary period, a Motion for Reconsideration or an appeal of the Resolution of the Court of Appeals in the same case, dated 20 November 2002, which modified its earlier Decision by deleting paragraph 3(v) of its dispositive portion, ordering petitioners to return to respondent the proceeds of her money market placement with AIDC, shall already bar her

from questioning such modification before this Court. Thus, what is for review before this Court is the Decision of the Court of Appeals, dated 26 March 2002, as modified by the Resolution of the same court, dated 20 November 2002. Respondent alleged that she had several Amount deposits and money market placements with petitioners. These deposits and money market placements, as determined by the Court of Appeals in its Decision, dated 26 March 2002, and as modified by its Resolution, dated 20 November 2002, are as follows Deposit/Placement Dollar deposit with Citibank-Geneva $ 149,632.99 Money market placement with Citibank, P 318,897.34 evidenced by Promissory Note (PN) No. 23356 (which cancels and supersedes PN No. 22526), earning 14.5% interest per annum (p.a.) Money market placement with Citibank, P 203,150.00 evidenced by PN No. 23357 (which cancels and supersedes PN No. 22528), earning 14.5% interest p.a. Money market placement with FNCB P 500,000.00 Finance, evidenced by PN No. 5757 (which cancels and supersedes PN No. 4952), earning 17% interest p.a. Money market placement with FNCB P 500,000.00 Finance, evidenced by PN No. 5758 (which cancels and supersedes PN No. 2962), earning 17% interest p.a.

G.R. No. L-61689 June 20, 1988 RURAL BANK OF BUHI, INC., and HONORABLE JUDGE CARLOS R. BUENVIAJE, petitioners, vs. HONORABLE COURT OF APPEALS, CENTRAL BANK OF THE PHILIPPINES and CONSOLACION ODRA, respondents. Manuel B. Tomacruz and Rustico Pasilavan for petitioners. I.B. Regalado, Jr. and Pacifica T. Torres for respondents.

PARAS, J.: This is a petition for review on certiorari with preliminary mandatory injunction seeking the reversal of the orders of the Court of Appeals dated March 19, 1982 and March 24, 1982 and its decision * (HATOL) promulgated on June 17,1982 in CA-G.R. No. 13944 entitled "Banko Central ng Pilipinas at Consolacion Odra Laban Kina Rural Bank of Buhi (Camarines Sur), Inc." and praying for a restraining order or a preliminary mandatory injunction to restrain respondents from enforcing aforesaid orders and decision of the

respondent Court, and to give due course to the petitioners' complaint in IR-428, pending before Hon. Judge Carlos R. Buenviaje of Branch VII, CFI, Camarines Sur. The decretal portion of the appealed decision reads: DAHIL DITO, ang utos ng pinasasagot sa Hukom noong ika-9 ng Marso, 1982, ay isinasang-tabi. Kapalit nito, isang utos and ipinalabas na nag-uutos sa pinasasagot sa Hukom na itigil ang anumang pagpapatuloy o pagdidinig kaugnay sa usaping IR-428 na pinawawalang saysay din ng Hukumang ito. SIYANG IPINAG-UUTOS. The antecedent facts of the case are as follows: The petitioner Rural Bank of Buhi, Inc. (hereinafter referred to as Buhi) is a juridical entity existing under the laws of the Philippines. Buhi is a rural bank that started its operations only on December 26,1975 (Rollo, p. 86). In 1980, an examination of the books and affairs of Buhi was ordered conducted by the Rural Banks and Savings and Loan Association (DRBSLA), Central Bank of the Philippines, which by law, has charge of the supervision and examination of rural banks and savings and loan associations in the Philippines. However, said petitioner refused to be examined and as a result thereof, financial assistance was suspended. On January 10, 1980, a general examination of the bank's affairs and operations was conducted and there were found by DRBSLA represented by herein respondent, Consolacion V. Odra, Director of DRBSLA, among others, massive irregularities in its operations consisting of loans to unknown and fictitious borrowers, where the sum of P 1,704,782.00 was past due and another sum of P1,130,000.00 was also past due in favor of the Central Bank (Rollo, p. 86). The promissory notes evidencing these loans were rediscounted with the Central Bank for cash. As a result thereof, the bank became insolvent and prejudiced its depositors and creditors. Respondent, Consolacion V. Odra, submitted a report recommending to the Monetary Board of the Central Bank the placing of Buhi under receivership in accordance with Section 29 of Republic Act No. 265, as amended, the designation of the Director, DRBSLA, as receiver thereof. On March 28, 1980, the Monetary Board, finding the report to be true, adopted Resolution No. 583 placing Buhi, petitioner herein, under receivership and designated respondent, Consolacion V. Odra, as Receiver, pursuant to the provisions of Section 29 of Republic Act No. 265 as amended (Rollo, p. 111). In a letter dated April 8, 1980, respondent Consolacion V. Odra, as receiver, implemented and carried out said Monetary Board Resolution No. 583 by authorizing deputies of the receiver to take control, possession and charge of Buhi, its assets and liabilities (Rollo, p. 109). Imelda del Rosario, Manager of herein petitioner Buhi, filed a petition for injunction with Restraining Order dated April 23, 1980, docketed as Special Proceedings IR-428 against respondent Consolacion V. Odra and DRBSLA deputies in the Court of First Instance of Camarines Sur, Branch VII, Iriga City, entitled Rural Bank of Buhi vs. Central Bank, which assailed the action of herein respondent Odra in recommending the receivership over Buhi as a violation of the provisions of Sections 28 and 29 of Republic Act No. 265 as amended, and Section 10 of Republic Act No. 720 (The Rural Banks Act) and as being ultra vires and done with grave abuse of discretion and in excess of jurisdiction (Rollo, p. 120). Respondents filed their motion to dismiss dated May 27, 1980 alleging that the petition did not allege a cause of action and is not sufficient in form and substance and that it was filed in violation of Section 29, Republic Act No. 265 as amended by Presidential Decree No. 1007 (Rollo, p. 36). Petitioners, through their counsel, filed an opposition to the motion to dismiss dated June 17, 1980 averring that the petition alleged a valid cause of action and that respondents have violated the due process clause of the Constitution (Rollo, p. 49). Later, respondents filed a reply to the opposition dated July 1, 1980, claiming that the petition is not proper; that Imelda del Rosario is not the proper representative of the bank; that the petition failed to state a cause of action; and, that the provisions of Section 29 of Republic Act No. 265 had been faithfully observed (Rollo, p. 57). On August 22, 1980, the Central Bank Monetary Board issued a Resolution No. 1514 ordering the liquidation of the Rural Bank of Buhi (Rollo, p. 108). On September 1, 1981, the Office of the Solicitor General, in accordance with Republic Act No. 265, Section 29, filed in the same Court of First Instance of Camarines Sur, Branch VII, a petition for Assistance in the Liquidation of Buhi, which petition was docketed as SP-IR-553, pursuant to the Monetary Board Resolution No. 1514 (Rollo, pp. 89; 264).

Meanwhile, respondent Central Bank filed on September 15, 1981, in Civil Case No. IR-428 a Supplemental Motion To Dismiss on the ground that the receivership of Buhi, in view of the issuance of the Monetary Board Resolution No. 1514 had completely become moot and academic (Rollo, p. 68) and the fact that Case SP-IR-553 for the liquidation of Buhi was already pending with the same Court (Rollo, p. 69). On October 16, 1981, petitioners herein filed their amended complaint in Civil Case No. IR-428 alleging that the issuance of Monetary Board Resolution No. 583 was plainly arbitrary and in bad faith under aforequoted Section 29 of Republic Act No. 265 as amended, among others (Rollo, p. 28). On the same day, petitioner herein filed a rejoinder to its opposition to the motion to dismiss (Rollo, p. 145). On March 9,1982, herein petitioner Judge Buenviaje, issued an order denying the respondents' motion to dismiss, supplemental motion to dismiss and granting a temporary restraining order enjoining respondents from further managing and administering the Rural Bank of Buhi and to deliver the possession and control thereof to the petitioner Bank under the same conditions and with the same financial status as when the same was taken over by herein respondents (defendants) on April 16, 1980 and further enjoining petitioner to post a bond in the amount of three hundred thousand pesos (P300,000.00) (Rollo, p. 72). The dispositive portion of said decision reads: WHEREFORE, premises considered, the motion to dismiss and supplemental motion to dismiss, in the light of petitioners' opposition, for want of sufficient merit is denied. Respondents are hereby directed to file their answer within ten (10) days from receipt of a copy of this order. (Rollo, p. 4). On March 11, 1982, petitioner Buhi through counsel, conformably with the above-mentioned order, filed a Motion to Admit Bond in the amount of P300,220.00 (Rollo, pp. 78-80). On March 15,1982, herein petitioner Judge issued the order admitting the bond of P300,220.00 filed by the petitioner, and directing the respondents to surrender the possession of the Rural Bank of Buhi, together with all its equipments, accessories, etc. to the petitioners (Rollo, p. 6). Consequently, on March 16, 1982, herein petitioner Judge issued the writ of execution directing the Acting Provincial Sheriff of Camarines Sur to implement the Court's order of March 9, 1982 (Rollo, p. 268). Complying with the said order of the Court, the Deputy Provincial Sheriff went to the Buhi premises to implement the writ of execution but the vault of the petitioner bank was locked and no inventory was made, as evidenced by the Sheriffs Report (Rollo, pp. 83-84). Thus, the petitioner herein filed with the Court an "Urgent Ex-Parte Motion to Allow Sheriff Calope to Force Open Bank Vault" on the same day (Rollo, p. 268). Accordingly, on March 17, 1982, herein petitioner Judge granted the aforesaid Ex-Parte Motion to Force Open the Bank Vault (Rollo, p. 269). On March 18, 1982, counsel for petitioner filed another "Urgent Ex-Parte Motion to Order Manager of City Trust to Allow Petitioner to Withdraw Rural Bank Deposits" while a separate "Urgent Ex-Parte Motion to Order Manager of Metrobank to Release Deposits of Petitioners" was filed on the same date. The motion was granted by the Court in an order directing the Manager of Metro Bank-Naga City (Rollo, p. 269) to comply as prayed for. In view thereof, herein respondents filed in the Court of Appeals a petition for certiorari and prohibition with preliminary injunction docketed as CA-G.R. No. 13944 against herein petitioners, seeking to set aside the restraining order and reiterating therein that petitioner Buhi's complaint in the lower court be dismissed (Rollo, p. 270). On March 19, 1982, the Court of Appeals issued a Resolution (KAPASIYAHAN) in tagalog, restraining the Hon. Judge Carlos R. Buenviaje, from enforcing his order of March 9,1982 and suspending further proceedings in Sp. Proc. No. IR-428 pending before him while giving the Central Bank counsel, Atty. Ricardo Quintos, authority to carry out personally said orders and directing the "Punong Kawani" of the Court of Appeals to send telegrams to the Office of the President and the Supreme Court (Rollo, p. 168). Herein petitioners did not comply with the Court of Appeals' order of March 19, 1982, but filed instead on March 21, 1982 a motion for reconsideration of said order of the Court of Appeals, claiming that the lower court's order of March 9, 1982 referred only to the denial of therein respondents' motion to dismiss and supplemental motion to dismiss and that the return of Buhi to the petitioners was already an accomplished fact. The motion was denied by the respondent court in a resolution dated June 1, 1982 (Rollo, p. 301). In view of petitioners' refusal to obey the Court of Appeals' Order of March 19, 1982, herein respondents filed with the Court of Appeals a Motion to Cite Petitioners in Contempt, dated April 22, 1982 (Rollo, p. 174). The Court of Appeals issued on May 24, 1982 an order requiring herein petitioner Rural Bank of Buhi, Inc., through its then Acting Manager, Imelda del Rosario and herein petitioner Judge Carlos Buenviaje, as well as Manuel Genova and Rodolfo Sosa, to show cause within ten (10) days from notice why they should not be held in contempt of court and further directing the Ministry of National

Defense or its representative to cause the return of possession and management of the Rural Bank to the respondents Central Bank and Consolacion Odra (Rollo, p. 180). On June 9, 1982, petitioners filed their objection to respondents' motion for contempt dated June 5, 1982 claiming that the properties, subject of the order, had already been returned to the herein petitioners who are the lawful owners thereof and that the returning could no longer be undone (Rollo, p. 181). Later, petitioners filed another motion dated June 17, 1982 for the reconsideration of the resolution of June 1, 1982 of the Court of Appeals alleging that the same contravened and departed from the rulings of the Supreme Court that consummated acts or acts already done could no longer be the subject of mandatory injunction and that the respondent Court of Appeals had no jurisdiction to issue the order unless it was in aid of its appellate jurisdiction, claiming that the case (CA-G.R. No. 13944) did not come to it on appeal (Rollo, p. 302). As aforestated, on June 17, 1982, respondent Court of Appeals rendered its decision (HATOL) setting aside the lower court's restraining order dated March 9,1982 and ordering the dismissal of herein petitioners' amended complaint in Civil Case No. IR-428 (Rollo, p. 186). On July 9, 1982, petitioners (respondents in CA-G.R. No. 13944) filed a Motion for Reconsideration of the Decision dated June 17, 1982 insofar as the complaint with the lower court (Civil Case No. IR-428 was ordered dismissed (Rollo, p. 305). On August 23, 1982, the respondent Court of Appeals issued its Resolution denying for lack of merit, herein petitioners' motion for reconsideration of the resolution issued by the respondent Court of Appeals on June 1, 1982 and set on August 31, 1982 the hearing of the motion to cite the respondents in CA-G.R. No. SP-13944 (herein petitioner) for contempt (Rollo, p. 193). At said hearing, counsel for Rural Bank of Buhi agreed and promised in open court to restore and return to the Central Bank the possession and control of the Bank within three (3) days from August 31, 1982. However on September 3,1982, Rosalia Guevara, Manager thereof, vigorously and adamantly refused to surrender the premises unless she received a written order from the Court. In a subsequent hearing of the contempt incident, the Court of Appeals issued its Order dated October 13,1982, but Rosalia Guevara still refused to obey, whereupon she was placed under arrest and the Court of Appeals ordered her to be detained until she decided to obey the Court's Order (Rollo, pp. 273-274). Earlier, on September 14, 1982 petitioners had filed this petition even while a motion for reconsideration of the decision of June 17,1982 was still pending consideration in the Court of Appeals. In the resolution of October 20, 1982, the Second Division of this Court without giving due course to the petition required respondents to COMMENT (Rollo, p. 225). Counsel for respondents manifested (Rollo, p. 226) that they could not file the required comment because they were not given a copy of the petition. Meanwhile, they filed an urgent motion dated October 28, 1982 with the Court of Appeals to place the bank through its representatives in possession of the Rural Bank of Buhi (Camarines Sur), Inc. (Rollo, p. 237). On December 9, 1982, petitioners filed a Supplemental Petition with urgent motion for the issuance of a restraining order dated December 2, 1982 praying that the restraining order be issued against respondent court (Rollo, p. 229). In the resolution of December 15,1982, the Court resolved to require petitioners to furnish the respondents with a copy of the petition and to require the respondents to comment on both the original and the supplemental petitions (Rollo, p. 243). In a resolution of February 21, 1983, the Court NOTED Rosalia V. Guevara's letter dated February 4, 1983 (Rollo, p. 252) addressed to Hon. Chief Justice Enrique M. Fernando, requesting that she be allowed to file a petition for the issuance of a writ of habeas corpus (Rollo, p. 256). At the hearing of the said petition on February 23, 1983 where the counsel of both parties appeared, this Court noted the Return of the Writ of Habeas Corpus as well as the release of petitioner Rosalia V. Guevara from detention by the National Bureau of Investigation. After hearing aforesaid counsel and petitioner herself, and it appearing that the latter had resigned since January 18,1983 as Manager of the Rural Bank of Buhi, Inc. and that the Central Bank might avail of more than adequate legal measures to take over the management, possession and control of the said bank (and not through contempt proceedings and detention and confinement of petitioner), with Assistant Solicitor General Andin manifesting that respondents were not insisting on the continued detention of petitioner, the Court Resolved to SET the petitioner at liberty and to consider the contempt incident closed (Rollo, p. 339).

On April 11, 1983, respondents filed their comment on the original and supplemental petitions. Meanwhile, the Court of Appeals, acting on respondents' urgent motion filed on October 28, 1982 ordered on April 13, 1983 the return to the petitioners (herein respondents) or their duly authorized representatives of the possession, management and control of subject Rural Bank (Rollo, p. 319), together with its properties. On April 28, 1983, petitioner filed an urgent motion: (1) to give due course to the petition and (2) for immediate issuance of a Restraining Order against the respondent court to prevent it from enforcing its aforesaid resolution dated April 13, 1983 and from further proceeding in AC-G.R. No. 13944-SP (Rollo, p. 315). On May 16, 1983, this Court resolved to deny the petition for lack of merit (Rollo, p. 321). On July 25, 1983, petitioners filed their verified Motion for Reconsideration (Rollo, p. 337) praying that the HATOL dated June 17, 1982 of the Court of Appeals be set aside as null and void and that Special Proceedings No. IR-428 of CFI-Camarines Sur, Iriga City, Branch VII, be ordered remanded to the RTC of Camarines Sur, Iriga City, for further proceedings. A Motion for Early Resolution was filed by herein petitioners on March 12,1984 (Rollo, p. 348). Petitioners raised the following legal issues in their motion for reconsideration: I. UNDER SEC. 29, R.A. 265, AS AMENDED, MAY THE MONETARY BOARD (MB) OF THE CENTRAL BANK (CB) PLACE A RURAL BANK UNDER RECEIVERSHIP WITHOUT PRIOR NOTICE TO SAID RURAL BANK TO ENABLE IT TO BE HEARD ON THE GROUND RELIED UPON FOR SUCH RECEIVERSHIP? II. UNDER THE SAME SECTION OF SAID LAW, WHERE THE MONETARY BOARD (MB) OF THE CENTRAL BANK (CB) HAS PLACED A RURAL BANK UNDER RECEIVERSHIP, IS SUCH ACTION OF THE MONETARY BOARD (MB) SUBJECT TO JUDICIAL REVIEW? IF SO, WHICH COURT MAY EXERCISE SUCH POWER AND WHEN MAY IT EXERCISE THE SAME? III. UNDER THE SAID SECTION OF THE LAW, SUPPOSE A CIVIL CASE IS INSTITUTED SEEKING ANNULMENT OF THE RECEIVERSHIP ON THE GROUND OF ARBITRARINESS AND BAD FAITH ON THE PART OF THE MONETARY BOARD (MB), MAY SUCH CASE BE DISMISSED BY THE IAC (THEN CA) ON THE GROUND OF INSUFFICIENCY OF EVIDENCE EVEN IF THE TRIAL COURT HAS NOT HAD A CHANCE YET TO RECEIVE EVIDENCE AND THE PARTIES HAVE NOT YET PRESENTED EVIDENCE EITHER IN THE TRIAL COURT OR IN SAID APPELLATE COURT? (Rollo, pp. 330-331). I. Petitioner Rural Bank's position is to the effect that due process was not observed by the Monetary Board before said bank was placed under receivership. Said Rural Bank claimed that it was not given the chance to deny and disprove such claim of insolvency and/or any other ground which the Monetary Board used in justification of its action. Relative thereto, the provision of Republic Act No. 265 on the proceedings upon insolvency reads: SEC. 29. Proceedings upon insolvency. Whenever, upon examination by the head of the appropriate supervising and examining department or his examiners or agents into the condition of any banking institution, it shall be disclosed that the condition of the same is one of insolvency, or that its continuance in business would involve probable loss to its depositors or creditors, it shall be the duty of the department head concerned forthwith, in writing, to inform the Monetary Board of the facts, and the Board may, upon finding the statements of the department head to be true, forbid the institution to do business in the Philippines and shall designate an official of the Central Bank, or a person of recognized competence in banking, as receiver to immediately take charge of its assets and liabilities, as expeditiously as possible collect and gather all the assets and administer the same for the benefit of its creditors, exercising all the powers necessary for these purposes including, but not limited to, bringing suits and foreclosing mortgages in the name of the banking institution. The Monetary Board shall thereupon determine within sixty days whether the institution may be recognized or otherwise placed in such a condition so that it may be permitted to resume business with safety to its depositors and creditors and the general public and shall prescribe the conditions under which such redemption of business shall take place as the time for fulfillment of such conditions. In such case, the expenses and fees in the collection and administration of the assets of the institution shall be determined by the Board and shall be paid to the Central Bank out of the assets of such banking institution. If the Monetary Board shall determine and confirm within the said period that the banking institution is insolvent or cannot resume business with safety to its depositors, creditors and the general public, it shall, if the public interest requires, order its liquidation, indicate the manner of its liquidation and approve a liquidation plan. The Central Bank shall, by the Solicitor General, file a petition in the Court of First Instance reciting the proceedings which have been taken and praying the assistance of the court in the liquidation of the banking institution. The Court shall have jurisdiction in the same proceedings to adjudicate disputed claims against the bank and

enforce individual liabilities of the stockholders and do all that is necessary to preserve the assets of the banking institution and to implement the liquidation plan approved by the Monetary Board. The Monetary Board shall designate an official of the Central Bank or a person of recognized competence in banking, as liquidator who shall take over the functions of the receiver previously appointed by the Monetary Board under this Section. The liquidator shall, with all convenient speed, convert the assets of the banking institution to money or sell, assign or otherwise dispose of the same to creditors and other parties for the purpose of paying the debts of such bank and he may, in the name of the banking institution, institute such actions as may be necessary in the appropriate court to collect and recover accounts and assets of the banking institution. The provisions of any law to the contrary notwithstanding the actions of the Monetary Board under this Section and the second paragraph of Section 34 of this Act shall be final and executory, and can be set aside by the court only if there is convincing proof that the action is plainly arbitrary and made in bad faith. No restraining order or injunction shall be issued by the court enjoining the Central Bank from implementing its actions under this Section and the second paragraph of Section 34 of this Act, unless there is convincing proof that the action of the Monetary Board is plainly arbitrary and made in bad faith and the petitioner or plaintiff files with the clerk or judge of the court in which the action is pending a bond executed in favor of the Central Bank, in an amount to be fixed by the court. The restraining order or injunction shall be refused or, if granted, shall be dissolved upon filing by the Central Bank of a bond, which shall be in the form of cash or Central Bank cashier's check, in an amount twice the amount of the bond of the petitioner, or plaintiff conditioned that it will pay the damages which the petitioner or plaintiff may suffer by the refusal or the dissolution of the injunction. The provisions of Rule 58 of the New Rules of Court insofar as they are applicable and not inconsistent with the provisions of this Section shall govern the issuance and dissolution of the restraining order or injunction contemplated in this Section. Insolvency, under this Act, shall be understood to mean the inability of a banking institution to pay its liabilities as they fall due in the usual and ordinary course of business: Provided, however, that this shall not include the inability to pay of an otherwise non-insolvent bank caused by extraordinary demands induced by financial panic commonly evidenced by a run on the banks in the banking community. The appointment of a conservator under Section 28-A of this Act or the appointment of receiver under this Section shall be vested exclusively with the Monetary Board, the provision of any law, general or special, to the contrary not withstanding. It will be observed from the foregoing provision of law, that there is no requirement whether express or implied, that a hearing be first conducted before a banking institution may be placed under receivership. On the contrary, the law is explicit as to the conditions prerequisite to the action of the Monetary Board to forbid the institution to do business in the Philippines and to appoint a receiver to immediately take charge of the bank's assets and liabilities. They are: (a) an examination made by the examining department of the Central Bank; (b) report by said department to the Monetary Board; and (c) prima facie showing that the bank is in a condition of insolvency or so situated that its continuance in business would involve probable loss to its depositors or creditors. Supportive of this theory is the ruling of this Court, which established the authority of the Central Bank under the foregoing circumstances, which reads: As will be noted, whenever it shall appear prima facie that a banking institution is in "a condition of insolvency" or so situated "that its continuance in business would involved probable loss to its depositors or creditors," the Monetary Board has authority: First, to forbid the institution to do business and appoint a receiver therefor; and Second, to determine, within 60 days, whether or not: 1) the institution may be reorganized and rehabilitated to such an extent as to be permitted to resume business with safety to depositors, creditors and the general public; or 2) it is indeed insolvent or cannot resume business with safety to depositors, creditors and the general public, and public interest requires that it be liquidated. In this latter case (i.e., the bank can no longer resume business with safety to depositors, creditors and the public, etc.) its liquidation will be ordered and a liquidator appointed by the Monetary Board. The Central Bank shall thereafter file a petition in the Regional Trial Court praying for the Court's assistance in the liquidation of the bank." ... (Salud vs. Central Bank, 143 SCRA 590 [1986]).

Petitioner further argues, that there is also that constitutional guarantee that no property shall be taken without due process of law, so that Section 29, R.A. 265, as amended, could not have intended to disregard and do away with such constitutional requirement when it conferred upon the Monetary Board the power to place Rural Banks under receivership (Rollo, p. 333). The contention is without merit. It has long been established and recognized in this jurisdiction that the closure and liquidation of a bank may be considered as an exercise of police power. Such exercise may, however, be subject to judicial inquiry and could be set aside if found to be capricious, discriminatory, whimsical, arbitrary, unjust or a denial of the due process and equal protection clauses of the Constitution (Central Bank vs. Court of Appeals, 106 SCRA 155 [1981]). The evident implication of the law, therefore, is that the appointment of a receiver may be made by the Monetary Board without notice and hearing but its action is subject to judicial inquiry to insure the protection of the banking institution. Stated otherwise, due process does not necessarily require a prior hearing; a hearing or an opportunity to be heard may be subsequent to the closure. One can just imagine the dire consequences of a prior hearing: bank runs would be the order of the day, resulting in panic and hysteria. In the process, fortunes may be wiped out, and disillusionment will run the gamut of the entire banking community. In Mendiola vs. Court of Appeals, (106 SCRA 130), the Supreme Court held: The pivotal issue raised by petitioner is whether or not the appointment of a receiver by the Court of First Instance on January 14, 1969 was in order. Respondent Court correctly stated that the appointment of a receiver pendente lite is a matter principally addressed to and resting largely on the sound discretion of the court to which the application is made. This Tribunal has so held in a number of cases. However, receivership being admittedly a harsh remedy, it should be granted with extreme caution. Sound reasons for receivership must appear of record, and there should be a clear showing of a necessity therefor. Before granting the remedy, the court is advised to consider the consequence or effects thereof in order to avoid irreparable injustice or injury to others who are entitled to as much consideration as those seeking it. xxx xxx xxx This is not to say that a hearing is an indispensable requirement for the appointment of a receiver. As petitioner correctly contends in his first assignment of error, courts may appoint receivers without prior presentation of evidence and solely on the basis of the averments of the pleadings. Rule 59 of the Revised Rules of Court allows the appointment of a receiver upon an ex parte application. There is no question that the action of the Monetary Board in this regard may be subject to judicial review. Thus, it has been held that the courts may interfere with the Central Bank's exercise of discretion in determining whether or not a distressed bank shall be supported or liquidated. Discretion has its limits and has never been held to include arbitrariness, discrimination or bad faith (Ramos vs. Central Bank of the Philippines, 41 SCRA 567 [1971]). It has likewise been held that resolutions of the Monetary Board under Section 29 of the Central Bank Act, such as: forbidding bank institutions to do business on account of a "condition of insolvency" or because its continuance in business would involve probable loss to depositors or creditors; or appointing a receiver to take charge of the bank's assets and liabilities, or determining whether the bank may be rehabilitated or should be liquidated and appointing a liquidator for that purpose, are under the law "final and executory" and may be set aside only on one ground, that is "if there is convincing proof that the action is plainly arbitrary and made in bad faith" (Salud vs. Central Bank, supra). There is no dispute that under the above-quoted Section 29 of the Central Bank Act, the Regional Trial Court has jurisdiction to adjudicate the question of whether or not the action of the Monetary Board directing the dissolution of the subject Rural Bank is attended by arbitrariness and bad faith. Such position has been sustained by this Court in Salud vs. Central Bank of the Philippines (supra). In the same case, the Court ruled further that a banking institution's claim that a resolution of the Monetary Board under Section 29 of the Central Bank Act should be set aside as plainly arbitrary and made in bad faith, may be asserted as an affirmative defense (Sections 1 and 4[b], Rule 6, Rules of Court) or a counterclaim (Section 6, Rule 6; Section 2, Rule 72 of the Rules of Court) in the proceedings for assistance in liquidation or as a cause of action in a separate and distinct action where the latter was filed ahead of the petition for assistance in liquidation (ibid; Central Bank vs. Court of Appeals, 106 SCRA 143 [1981]). III. It will be noted that in the issuance of the Order of the Court of First Instance of Camarines Sur, Branch VII, Iriga City, dated March 9, 1982 (Rollo, pp. 72-77), there was no trial on the merits. Based on the pleadings filed, the Court merely acted on the Central Bank's Motion to Dismiss and Supplemental Motion to Dismiss, denying both for lack of sufficient merit. Evidently, the trial court merely acted on an incident and has not as yet inquired, as mandated by Section 29 of the Central Bank Act, into the merits of the claim that the Monetary Board's action is plainly arbitrary and made in bad faith. It has not appreciated certain facts which would render the remedy of liquidation proper and rehabilitation improper, involving as it does an examination of the probative value of the

evidence presented by the parties properly belonging to the trial court and not properly cognizable on appeal (Central Bank vs. Court of Appeals, supra, p. 156). Still further, without a hearing held for both parties to substantiate their allegations in their respective pleadings, there is lacking that "convincing proof" prerequisite to justify the temporary restraining order (mandatory injunction) issued by the trial court in its Order of March 9, 1982. PREMISES CONSIDERED, the decision of the Court of Appeals is MODIFIED; We hereby order the remand of this case to the Regional Trial Court for further proceedings, but We LIFT the temporary restraining order issued by the trial court in its Order dated March 9, 1982. SO ORDERED.

[G.R. No. 135706. October 1, 2004]

SPS.

CESAR A. LARROBIS, JR. and LARROBIS, petitioners, vs. PHILIPPINE BANK, respondent.

VIRGINIA S. VETERANS

DECISION
AUSTRIA-MARTINEZ, J.:

Before us is a petition for review of the decision of the Regional Trial Court (RTC), Cebu City, Branch 24, dated April 17, 1998,[1] and the order denying petitioners motion for reconsideration dated August 25, 1998, raising pure questions of law.[2] The following facts are uncontroverted: On March 3, 1980, petitioner spouses contracted a monetary loan with respondent Philippine Veterans Bank in the amount of P135,000.00, evidenced by a promissory note, due and demandable on February 27, 1981, and secured by a Real Estate Mortgage executed on their lot together with the improvements thereon. On March 23, 1985, the respondent bank went bankrupt and was placed under receivership/liquidation by the Central Bank from April 25, 1985 until August 1992. [3] On August 23, 1985, the bank, through Francisco Go, sent the spouses a demand letter for accounts receivable in the total amount of P6,345.00 as of August 15, 1984,[4] which pertains to the insurance premiums advanced by respondent bank over the mortgaged property of petitioners.[5] On August 23, 1995, more than fourteen years from the time the loan became due and demandable, respondent bank filed a petition for extrajudicial foreclosure of mortgage of petitioners property.[6] On October 18, 1995, the property was sold in a public auction by Sheriff Arthur Cabigon with Philippine Veterans Bank as the lone bidder.

On April 26, 1996, petitioners filed a complaint with the RTC, Cebu City, to declare the extra-judicial foreclosure and the subsequent sale thereof to respondent bank null and void.[7] In the pre-trial conference, the parties agreed to limit the issue to whether or not the period within which the bank was placed under receivership and liquidation was a fortuitous event which suspended the running of the ten-year prescriptive period in bringing actions.[8] On April 17, 1998, the RTC rendered its decision, the fallo of which reads: WHEREFORE, premises considered judgment is hereby rendered dismissing the complaint for lack of merit. Likewise the compulsory counterclaim of defendant is dismissed for being unmeritorious.[9] It reasoned that: defendant bank was placed under receivership by the Central Bank from April 1985 until 1992. The defendant bank was given authority by the Central Bank to operate as a private commercial bank and became fully operational only on August 3, 1992. From April 1985 until July 1992, defendant bank was restrained from doing its business. Doing business as construed by Justice Laurel in 222 SCRA 131 refers to: .a continuity of commercial dealings and arrangements and contemplates to that extent, the performance of acts or words or the exercise of some of the functions normally incident to and in progressive prosecution of the purpose and object of its organization. The defendant banks right to foreclose the mortgaged property prescribes in ten (10) years but such period was interrupted when it was placed under receivership. Article 1154 of the New Civil Code to this effect provides: The period during which the obligee was prevented by a fortuitous event from enforcing his right is not reckoned against him. In the case of Provident Savings Bank vs. Court of Appeals, 222 SCRA 131, the Supreme Court said. Having arrived at the conclusion that a foreclosure is part of a banks activity which could not have been pursued by the receiver then because of the circumstances discussed in the Central Bank case, we are thus convinced that the prescriptive period was legally interrupted by fuerza mayor in 1972 on account of the prohibition imposed by the Monetary Board against petitioner from transacting business, until the directive of the Board was nullified in 1981. Indeed, the period during which the obligee was prevented by a caso fortuito from enforcing his right is not reckoned against him. (Art. 1154, NCC) When prescription is interrupted, all the benefits acquired so far from the possession cease and when prescription starts anew, it will be entirely a new one. This

concept should not be equated with suspension where the past period is included in the computation being added to the period after the prescription is presumed (4 Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines 1991 ed. pp. 1819), consequently, when the closure of the petitioner was set aside in 1981, the period of ten years within which to foreclose under Art. 1142 of the N.C.C. began to run and, therefore, the action filed on August 21, 1986 to compel petitioner to release the mortgage carried with it the mistaken notion that petitioners own suit for foreclosure has prescribed. Even assuming that the liquidation of defendant bank did not affect its right to foreclose the plaintiffs mortgaged property, the questioned extrajudicial foreclosure was well within the ten (10) year prescriptive period. It is noteworthy to mention at this point in time, that defendant bank through authorized Deputy Francisco Go made the first extrajudicial demand to the plaintiffs on August 1985. Then on March 24, 1995 defendant bank through its officer-in-charge Llanto made the second extrajudicial demand. And we all know that a written extrajudicial demand wipes out the period that has already elapsed and starts anew the prescriptive period. (Ledesma vs. C.A., 224 SCRA 175.)[10] Petitioners filed a motion for reconsideration which the RTC denied on August 25, 1998.[11] Thus, the present petition for review where petitioners claim that the RTC erred:
I

IN RULING THAT THE PERIOD WITHIN WHICH RESPONDENT BANK WAS PUT UNDER RECEIVERSHIP AND LIQUIDATION WAS A FORTUITOUS EVENT THAT INTERRUPTED THE RUNNING OF THE PRESCRIPTIVE PERIOD.
II

IN RULING THAT THE WRITTEN EXTRA-JUDICIAL DEMAND MADE BY RESPONDENT ON PETITIONERS WIPED OUT THE PERIOD THAT HAD ALREADY ELAPSED.
III

IN DENYING PETITIONERS MOTION FOR RECONSIDERATION OF ITS HEREIN ASSAILED DECISION.[12] Petitioners argue that: since the extra-judicial foreclosure of the real estate mortgage was effected by the bank on October 18, 1995, which was fourteen years from the date the obligation became due on February 27, 1981, said foreclosure and the subsequent sale at public auction should be set aside and declared null and void ab initio since they are already barred by prescription; the court a quo erred in sustaining the respondents theory that its having been placed under receivership by the Central Bank between April 1985 and August 1992 was a fortuitous event that interrupted the running of the prescriptive period;[13] the court a quos reliance on the case

of Provident Savings Bank vs. Court of Appeals[14] is misplaced since they have different sets of facts; in the present case, a liquidator was duly appointed for respondent bank and there was no judgment or court order that would legally or physically hinder or prohibit it from foreclosing petitioners property; despite the absence of such legal or physical hindrance, respondent banks receiver or liquidator failed to foreclose petitioners property and therefore such inaction should bind respondent bank;[15] foreclosure of mortgages is part of the receivers/liquidators duty of administering the banks assets for the benefit of its depositors and creditors, thus, the ten-year prescriptive period which started on February 27, 1981, was not interrupted by the time during which the respondent bank was placed under receivership; and the Monetary Boards prohibition from doing business should not be construed as barring any and all business dealings and transactions by the bank, otherwise, the specific mandate to foreclose mortgages under Sec. 29 of R.A. No. 265 as amended by Executive Order No. 65 would be rendered nugatory.[16] Said provision reads: Section 29. Proceedings upon Insolvency Whenever, upon examination by the head of the appropriate supervising or examining department or his examiners or agents into the condition of any bank or non-bank financial intermediary performing quasi-banking functions, it shall be disclosed that the condition of the same is one of insolvency, or that its continuance in business would involve probable loss to its depositors or creditors, it shall be the duty of the department head concerned forthwith, in writing, to inform the Monetary Board of the facts. The Board may, upon finding the statements of the department head to be true, forbid the institution to do business in the Philippines and designate the official of the Central Bank or a person of recognized competence in banking or finance, as receiver to immediately take charge its assets and liabilities, as expeditiously as possible, collect and gather all the assets and administer the same for the benefit of its creditors, and represent the bank personally or through counsel as he may retain in all actions or proceedings for or against the institution, exercising all the powers necessary for these purposes including, but not limited to, bringing and foreclosing mortgages in the name of the bank. Petitioners further contend that: the demand letter, dated March 24, 1995, was sent after the ten-year prescriptive period, thus it cannot be deemed to have revived a period that has already elapsed; it is also not one of the instances enumerated by Art. 1115 of the Civil Code when prescription is interrupted;[17] and the August 23, 1985 letter by Francisco Go demanding P6,345.00, refers to the insurance premium on the house of petitioners, advanced by respondent bank, thus such demand letter referred to another obligation and could not have the effect of interrupting the running of the prescriptive period in favor of herein petitioners insofar as foreclosure of the mortgage is concerned.[18] Petitioners then prayed that respondent bank be ordered to pay them P100,000.00 as moral damages, P50,000.00 as exemplary damages and P100,000.00 as attorneys fees.[19] Respondent for its part asserts that: the period within which it was placed under receivership and liquidation was a fortuitous event that interrupted the running of the

prescriptive period for the foreclosure of petitioners mortgaged property; within such period, it was specifically restrained and immobilized from doing business which includes foreclosure proceedings; the extra-judicial demand it made on March 24, 1995 wiped out the period that has already lapsed and started anew the prescriptive period; respondent through its authorized deputy Francisco Go made the first extra-judicial demand on the petitioners on August 23, 1985; while it is true that the first demand letter of August 1985 pertained to the insurance premium advanced by it over the mortgaged property of petitioners, the same however formed part of the latters total loan obligation with respondent under the mortgage instrument and therefore constitutes a valid extra-judicial demand made within the prescriptive period.[20] In their Reply, petitioners reiterate their earlier arguments and add that it was respondent that insured the mortgaged property thus it should not pass the obligation to petitioners through the letter dated August 1985.[21] To resolve this petition, two questions need to be answered: (1) Whether or not the period within which the respondent bank was placed under receivership and liquidation proceedings may be considered a fortuitous event which interrupted the running of the prescriptive period in bringing actions; and (2) Whether or not the demand letter sent by respondent banks representative on August 23, 1985 is sufficient to interrupt the running of the prescriptive period. Anent the first issue, we answer in the negative. One characteristic of a fortuitous event, in a legal sense and consequently in relations to contract, is that its occurrence must be such as to render it impossible for a party to fulfill his obligation in a normal manner.[22] Respondents claims that because of a fortuitous event, it was not able to exercise its right to foreclose the mortgage on petitioners property; and that since it was banned from pursuing its business and was placed under receivership from April 25, 1985 until August 1992, it could not foreclose the mortgage on petition ers property within such period since foreclosure is embraced in the phrase doing business, are without merit. While it is true that foreclosure falls within the broad definition of doing business, that is: a continuity of commercial dealings and arrangements and contemplates to that extent, the performance of acts or words or the exercise of some of the functions normally incident to and in progressive prosecution of the purpose and object of its organization.[23] it should not be considered included, however, in the acts prohibited whenever banks are prohibited from doing business during receivership and liquidation proceedings. This we made clear in Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank of the Philippines[24] where we explained that: Section 29 of the Republic Act No. 265, as amended known as the Central Bank Act, provides that when a bank is forbidden to do business in the Philippines and placed

under receivership, the person designated as receiver shall immediately take charge of the banks assets and liabilities, as expeditiously as possible, collect and gather all the assets and administer the same for the benefit of its creditors, and represent the bank personally or through counsel as he may retain in all actions or proceedings for or against the institution, exercising all the powers necessary for these purposes including, but not limited to, bringing and foreclosing mortgages in the name of the bank. [25] This is consistent with the purpose of receivership proceedings, i.e., to receive collectibles and preserve the assets of the bank in substitution of its former management, and prevent the dissipation of its assets to the detriment of the creditors of the bank.[26] When a bank is declared insolvent and placed under receivership, the Central Bank, through the Monetary Board, determines whether to proceed with the liquidation or reorganization of the financially distressed bank. A receiver, who concurrently represents the bank, then takes control and possession of its assets for the benefit of the banks creditors. A liquidator meanwhile assumes the role of the receiver upon the determination by the Monetary Board that the bank can no longer resume business. His task is to dispose of all the assets of the bank and effect partial payments of the banks obligations in accordance with legal priority. In both receivership and liquidation proceedings, the bank retains its juridical personality notwithstanding the closure of its business and may even be sued as its corporate existence is assumed by the receiver or liquidator. The receiver or liquidator meanwhile acts not only for the benefit of the bank, but for its creditors as well.[27] In Provident Savings Bank vs. Court of Appeals,[28] we further stated that: When a bank is prohibited from continuing to do business by the Central Bank and a receiver is appointed for such bank, that bank would not be able to do new business, i.e., to grant new loans or to accept new deposits. However, the receiver of the bank is in fact obliged to collect debts owing to the bank, which debts form part of the assets of the bank. The receiver must assemble the assets and pay the obligation of the bank under receivership, and take steps to prevent dissipation of such assets. Accordingly, the receiver of the bank is obliged to collect pre-existing debts due to the bank, and in connection therewith, to foreclose mortgages securing such debts.[29] (Emphasis supplied.) It is true that we also held in said case that the period during which the bank was placed under receivership was deemed fuerza mayor which validly interrupted the prescriptive period.[30] This is being invoked by the respondent and was used as basis by the trial court in its decision. Contrary to the position of the respondent and court a quo however, such ruling does not find application in the case at bar. A close scrutiny of the Provident case, shows that the Court arrived at said conclusion, which is an exception to the general rule, due to the peculiar circumstances of Provident Savings Bank at the time. In said case, we stated that:

Having arrived at the conclusion that a foreclosure is part of a banks business activity which could not have been pursued by the receiver then because of the circumstances discussed in the Central Bank case, we are thus convinced that the prescriptive period was legally interrupted by fuerza mayor in 1972 on account of the prohibition imposed by the Monetary Board against petitioner from transacting business, until the directive of the Board was nullified in 1981.[31] (Emphasis supplied.) Further examination of the Central Bank case reveals that the circumstances of Provident Savings Bank at the time were peculiar because after the Monetary Board issued MB Resolution No. 1766 on September 15, 1972, prohibiting it from doing business in the Philippines, the banks majority stockholders immediately went to the Court of First Instance of Manila, which prompted the trial court to issue its judgment dated February 20, 1974, declaring null and void the resolution and ordering the Central Bank to desist from liquidating Provident. The decision was appealed to and affirmed by this Court in 1981. Thus, the Superintendent of Banks, which was instructed to take charge of the assets of the bank in the name of the Monetary Board, had no power to act as a receiver of the bank and carry out the obligations specified in Sec. 29 of the Central Bank Act.[32] In this case, it is not disputed that Philippine Veterans Bank was placed under receivership by the Monetary Board of the Central Bank by virtue of Resolution No. 364 on April 25, 1985, pursuant to Section 29 of the Central Bank Act on insolvency of banks. [33] Unlike Provident Savings Bank, there was no legal prohibition imposed upon herein respondent to deter its receiver and liquidator from performing their obligations under the law. Thus, the ruling laid down in the Provident case cannot apply in the case at bar. There is also no truth to respondents claim that it could not continue doing business from the period of April 1985 to August 1992, the time it was under receivership. As correctly pointed out by petitioner, respondent was even able to send petitioners a demand letter, through Francisco Go, on August 23, 1985 for accounts receivable in the total amount of P6,345.00 as of August 15, 1984 for the insurance premiums advanced by respondent bank over the mortgaged property of petitioners. How it could send a demand letter on unpaid insurance premiums and not foreclose the mortgage during the time it was prohibited from doing business was not adequately explained by respondent. Settled is the principle that a bank is bound by the acts, or failure to act of its receiver.[34] As we held in Philippine Veterans Bank vs. NLRC,[35] a labor case which also involved respondent bank, all the acts of the receiver and liquidator pertain to petitioner, both having assumed petitioners corporate existence. Petitioner cannot disclaim liability by arguing that the non-payment of MOLINAs just wages was committed by the liquidators during the liquidation period.[36]

However, the bank may go after the receiver who is liable to it for any culpable or negligent failure to collect the assets of such bank and to safeguard its assets.[37] Having reached the conclusion that the period within which respondent bank was placed under receivership and liquidation proceedings does not constitute a fortuitous event which interrupted the prescriptive period in bringing actions, we now turn to the second issue on whether or not the extra-judicial demand made by respondent bank, through Francisco Go, on August 23, 1985 for the amount of P6,345.00, which pertained to the insurance premiums advanced by the bank over the mortgaged property, constitutes a valid extra-judicial demand which interrupted the running of the prescriptive period. Again, we answer this question in the negative. Prescription of actions is interrupted when they are filed before the court, when there is a written extra-judicial demand by the creditors, and when there is any written acknowledgment of the debt by the debtor.[38] Respondents claim that while its first demand letter dated August 23, 1985 pertained to the insurance premium it advanced over the mortgaged property of petitioners, the same formed part of the latters total loan obligation with respondent under the mortgage instrument, and therefore, constitutes a valid extra-judicial demand which interrupted the running of the prescriptive period, is not plausible. The real estate mortgage signed by the petitioners expressly states that: This mortgage is constituted by the Mortgagor to secure the payment of the loan and/or credit accommodation granted to the spouses Cesar A. Larrobis, Jr. and Virginia S. Larrobis in the amount of ONE HUNDRED THIRTY FIVE THOUSAND (P135,000.00) PESOS ONLY Philippine Currency in favor of the herein Mortgagee.[39] The promissory note, executed by the petitioners, also states that: FOR VALUE RECEIVED, I/WE, JOINTLY AND SEVERALLY, PROMISE TO PAY THE PHILIPPINE VETERANS BANK, OR ORDER, AT ITS OFFICE AT CEBU CITY THE SUM OF ONE HUNDRED THIRTY FIVE THOUSAND PESOS (P135,000.00), PHILIPPINE CURRENCY WITH INTEREST AT THE RATE OF FOURTEEN PER CENT (14%) PER ANNUM FROM THIS DATE UNTIL FULLY PAID.[40] Considering that the mortgage contract and the promissory note refer only to the loan of petitioners in the amount of P135,000.00, we have no reason to hold that the insurance premiums, in the amount of P6,345.00, which was the subject of the August 1985 demand letter, should be considered as pertaining to the entire obligation of petitioners. In Quirino Gonzales Logging Concessionaire vs. Court of Appeals,[41] we held that the notices of foreclosure sent by the mortgagee to the mortgagor cannot be considered tantamount to written extrajudicial demands, which may validly interrupt the running of the prescriptive period, where it does not appear from the records that the notes are covered by the mortgage contract.[42]

In this case, it is clear that the advanced payment of the insurance premiums is not part of the mortgage contract and the promissory note signed by petitioners. They pertain only to the amount of P135,000.00 which is the principal loan of petitioners plus interest. The arguments of respondent bank on this point must therefore fail. As to petitioners claim for damages, however, we find no sufficient basis to award the same. For moral damages to be awarded, the claimant must satisfactorily prove the existence of the factual basis of the damage and its causal relation to defendants acts.[43] Exemplary damages meanwhile, which are imposed as a deterrent against or as a negative incentive to curb socially deleterious actions, may be awarded only after the claimant has proven that he is entitled to moral, temperate or compensatory damages.[44] Finally, as to attorneys fees, it is demanded that there be factual, lega l and equitable justification for its award.[45] Since the bases for these claims were not adequately proven by the petitioners, we find no reason to grant the same. WHEREFORE, the decision of the Regional Trial Court, Cebu City, Branch 24, dated April 17, 1998, and the order denying petitioners motion for reconsideration dated August 25, 1998 are hereby REVERSED and SET ASIDE. The extra-judicial foreclosure of the real estate mortgage on October 18, 1995, is hereby declared null and void and respondent is ordered to return to petitioners their owners duplicate certificate of title. Costs against respondent. SO ORDERED. Puno, (Chairman), Callejo, Sr., and Tinga, JJ., concur. Chico-Nazario, J., on leave.
PHILIPPINE DEPOSIT INSURANCE CORPORATION (PDIC), petitioner, vs. PHILIPPINE COUNTRYSIDE RURAL BANK, INC., RURAL BANK OF CARMEN (CEBU), INC., BANK OF EAST ASIA (MINGLANILLA, CEBU), INC., and PILIPINO RURAL BANK (CEBU), INC., respondents. Remedial Law; Actions; Forum Shopping; Definition of Forum Shopping; There is forum shopping where the elements of litis pendentia are present.In the recent case of Sameer Oversees Placement Agency, Inc. v. Mildred R. Santos, 595 SCRA 67 (2009), the Court discussed the matter of forum shopping: Forum shopping is defined as an act of a party, against whom an adverse judgment or order has been rendered in one forum, of seeking and possibly getting a favorable opinion in another forum, other than by appeal or special civil action for certiorari. It may also be the institution of two or more actions or proceedings grounded on the same cause on the supposition that one or the other court would make a favorable disposition. There is forum shopping where the elements of litis pendentia are present, namely: (a) there is identity of parties, or at least such parties as represent the same interest in both actions; (b) there is identity of rights asserted and relief prayed for, the relief being founded on the same set of facts; and (c) the identity of the two preceding particulars is such that any judgment rendered in the pending case, regardless of which party is successful, would amount to res judicata in the other. It is expressly prohibited by this Court because it trifles with and abuses court processes, degrades the _______________

* SECOND DIVISION. 323

VOL. 640, JANUARY 24, 2011 323 Philippine Deposit Insurance Corporation (PDIC) vs. Philippine Countryside Rural Bank, Inc. administration of justice, and congests court dockets. A willful and deliberate violation of the rule against forum shopping is a ground for summary dismissal of the case, and may also constitute direct contempt. Same; Same; Same; There is a marked difference between the reliefs sought under an action for declaratory relief and an action for injunction.There is a marked difference between the reliefs sought under an action for declaratory relief and an action for injunction. While an action for declaratory relief seeks a declaration of rights or duties, or the determination of any question or validity arising under a statute, executive order or regulation, ordinance, or any other governmental regulation, or under a deed, will, contract or other written instrument, under which his rights are affected, and before breach or violation, an action for injunction ultimately seeks to enjoin or to compel a party to perform certain acts. Constitutional Law; Due Process; The essence of procedural due process is found in the reasonable opportunity to be heard and submit ones evidence in support of his defense.The essence of procedural due process is found in the reasonable opportunity to be heard and submit ones evidence in support of his defense. The Court finds that procedural due process was observed by the CA-Cebu. The parties were afforded equal opportunity to present their arguments. In the absence of any indication to the contrary, the CA-Cebu must be accorded the presumption of regularity in the performance of their functions. However, as discussed herein, the matter of whether it erred in its conclusion and issuance of the TRO, preliminary injunction and final injunction is another matter altogether. Banks and Banking; Bangko Sentral ng Pilipinas (BSP); Monetary Board; Court is of the view that the Monetary Board approval is not required for Philippine Deposit Insurance Corporation (PDIC) to conduct an investigation on the Banks. After an evaluation of the respective positions of the parties, the Court is of the view that the Monetary Board approval is not required for PDIC to conduct an investigation on the Banks. Same; Same; Same; Philippine Deposit Insurance Corporation (PDIC); The primary purpose is to act as deposit insurer, as a coregulator of banks, and as receiver and liquidator of closed banks.The PDIC was created by R.A. No. 3591 on June 22, 1963 as an 324

324 SUPREME COURT REPORTS ANNOTATED Philippine Deposit Insurance Corporation (PDIC) vs. Philippine Countryside Rural Bank, Inc. insurer of deposits in all banks entitled to the benefits of insurance under the PDIC Charter to promote and safeguard the interests of the depositing public by way of providing permanent and continuing insurance coverage of all insured deposits. It is a government instrumentality that operates under the Department of Finance. Its primary purpose is to act as deposit insurer, as a co-regulator of banks, and as receiver and liquidator of closed banks. Same; Same; Same; Same; Process of Examination and Investigation; The process of examination covers a wider scope than that of investigation; Investigation does not involve a general evaluation of the status of a bank; An examination entails a review of essentially all the functions and facets of a bank and its operation. From the above-cited provisions, it is clear that the process of examination covers a wider scope than that of investigation. Examination involves an evaluation of the current status of a bank and determines its compliance with the set standards regarding solvency, liquidity, asset valuation, operations, systems, management, and compliance with banking laws, rules and regulation4es. Investigation, on the other hand, is conducted based on specific findings of certain acts or omissions which are subject of a complaint or a Final Report of Examination. Clearly, investigation does not involve a general evaluation of the status of a bank. An investigation zeroes in on specific acts and omissions uncovered via an examination, or which are cited in a complaint. An examination entails a review of essentially all the functions and facets of a bank and its operation. It necessitates poring through voluminous documents, and requires a detailed evaluation thereof. Such a process then involves an intrusion into a banks records. Same; Same; Same; Same; Same; An examination of banks requires the prior consent of the Monetary Board, whereas an investigation based on an examination report, does not. While in a literary sense, the two terms may be used interchangeably,

under the PDIC Charter, examination and investigation refer to two different processes. To reiterate, an examination of banks requires the prior consent of the Monetary Board, whereas an investigation based on an examination report, does not. PETITION for review on certiorari of the decision and resolution of the Court of Appeals-Cebu. 325

VOL. 640, JANUARY 24, 2011 325 Philippine Deposit Insurance Corporation (PDIC) vs. Philippine Countryside Rural Bank, Inc. The facts are stated in the opinion of the Court. Office of the Government Corporate Counsel for petitioner. Pizarras & Associates Law Offices for respondents. MENDOZA, J.: This is a petition for review on certiorari under Rule 45 of the Rules of Court filed by the Philippine Deposit Insurance Corporation (PDIC) assailing the September 18, 2006 Decision of the Court of Appeals-Cebu (CA-Cebu), which granted the petition for injunction filed by respondents Philippine Countryside Rural Bank, Inc. (PCRBI), Rural Bank of Carmen (Cebu), Inc. (RBCI), Bank of East Asia (Minglanilla, Cebu), Inc. (BEAI), and Pilipino Rural Bank (Cebu), Inc. (PRBI), all collectively referred to as Banks. The dispositive portion of the CA-Cebu decision reads: WHEREFORE, in view of all the foregoing premises, the petition for injuncti on is hereby GRANTED. The respondent PDIC is restrained from further conducting investigations or examination on petitioners-banks without the requisite approval from the Monetary Board. SO ORDERED.1 In a resolution dated January 25, 2007, the CA-Cebu denied petitioners motion for reconsideration for lack of merit.2 The Facts

On March 9, 2005, the Board of Directors of the PDIC (PDIC Board) adopted Resolution No. 2005-03-0323 approving _______________

1 Rollo, p. 107. Penned by Justice Pampio A. Abarintos with Justice Agustin S. Dizon and Justice Priscilla Baltazar-Padilla, concurring. 2 Id., at p. 111. 3 Id., at p. 113. 326

326 SUPREME COURT REPORTS ANNOTATED Philippine Deposit Insurance Corporation (PDIC) vs. Philippine Countryside Rural Bank, Inc. the conduct of an investigation, in accordance with Section 9(b-1) of Republic Act (R.A.) No. 3591, as amended, on the basis of the Reports of Examination of the Bangko Sentral ng Pilipinas (BSP) on ten (10) banks, four (4) of which are respondents in this petition for review. The said resolution also created a Special Investigation Team to conduct the said investigation, with the authority to administer oaths, to examine, take and preserve testimony of any person relating to the subject of the investigation, and to examine pertinent bank records. On May 25, 2005, the PDIC Board adopted another resolution, Resolution No. 2005-05-056,4 approving the conduct of an investigation on PCRBI based on a Complaint-Affidavit filed by a corporate depositor, the Philippine School of Entrepreneurship and Management (PSEMI) through its president, Jacinto L. Jamero. On June 3, 2005, in accordance with the two PDIC Board resolutions, then PDIC President and Chief Executive Officer Ricardo M. Tan issued the Notice of Investigation5 to the President or The Highest Ranking Officer of PCRBI. On June 7, 2005, the PDIC Investigation Team personally served the Notice of Investigation on PCRBI at its Head Office in Pajo, Lapu-Lapu City.6According to PDIC, in the course of its investigation, PCRBI was found to have granted loans to certain individuals, which were settled by way of dacion of properties. These properties, however, had already been previously foreclosed and consolidated under the names of PRBI, BEAI and RBCI.7 _______________

4 Id., at p. 115. 5 Id., at p. 116. 6 Id. 7 Id., at p. 25. 327

VOL. 640, JANUARY 24, 2011 327 Philippine Deposit Insurance Corporation (PDIC) vs. Philippine Countryside Rural Bank, Inc. On June 15, 2005, PDIC issued similar notices of investigation to PRBI8 and BEAI.9 The notices stated that the investigation was to be conducted pursuant to Section 9 (b-1) of the PDIC Charter and upon authority of PDIC Board Resolution No. 2005-03-032 authorizing the twelve (12) named representatives of PDIC to conduct the investigation.10 The investigation was sought because the Banks were found to be among the ten (10) banks collectively known as Legacy Banks. The Reports of General and Special Examinations of the BSP as of June 30, 2004, disclosed, among others, that the Legacy Banks were commonly owned and/or controlled by Legacy Plans Inc. (now Legacy Consolidated Plans, Inc.), and Celso Gancayco delos Angles, Jr. and his family.11 The notice of investigation was served on PRBI the next day, June 16, 2005.12

On June 25, 2005, a separate notice of investigation13 was served on RBCI. The latter provided the PDIC Investigation Team with certified copies of the loan documents they had requested, until its president received an order directing him not to allow the investigation.14 Subsequently, PRBI and BEAI refused entry to their bank premises and access to their records and documents by the PDIC Investigation Team, upon advice of their respective counsels.15 _______________

8 Id., at p. 120. 9 Id., at p. 126. 10 Id., at pp. 120-121, 126-127, 132-133. 11 Id., at p. 20. 12 Id., at p. 27. 13 Id., at p. 132. 14 Id., at p. 29. 15 Id., at pp. 29-30. 328

328 SUPREME COURT REPORTS ANNOTATED Philippine Deposit Insurance Corporation (PDIC) vs. Philippine Countryside Rural Bank, Inc. On June 16 and 17, 2005, Atty. Victoria G. Noel (Atty. Noel) of the Tiongson & Antenor Cruz Law Office sent letters to the PDIC16 informing it of her legal advice to PCRBI and BEAI not to submit to PDIC investigation on the ground that its investigatory power pursuant to Section 9(b-1) of R.A. No. 3591, as amended (An Act Establishing The Philippine Deposit Insurance Corporation, Defining Its Powers And Duties And For Other Purposes), cannot be differentiated from the examination powers accorded to PDIC under Section 8, paragraph 8 of the same law, under which, prior approval from the Monetary Board is required. On June 17, 2005, PDIC General Counsel Romeo M. Mendoza sent a reply to Atty. Noel stating that PDICs investigation power, as distinguished from the examination power of the PDIC under Section 8 of the same law, does not need prior approval of the Monetary Board.17 PDIC then urged PRBI and BEAI not to impede the conduct of PDICs investigation as the same constitutes a violation of the PDIC Charter for which PRBI and BEAI may be held criminally and/or administratively liable.18 On June 27 and 28, 2005, the Banks, through counsel, sought further clarification from PDIC on its source of authority to conduct the impending investigations and requested that PDIC refrain from proceeding with the investigations.19 Simultaneously, the Banks wrote to the Monetary Board requesting a clarification on the parameters of PDICs power of investigation/examination over the Banks and for an issuance of a directive to PDIC not to pursue the investigations pending the requested clarification.20 _______________

16 Id., at pp. 134-135. 17 Id., at pp. 31, 136-141. 18 Id., at pp. 136-141. 19 Id., at pp. 142-159. 20 Id., at pp. 160-161. 329

VOL. 640, JANUARY 24, 2011 329 Philippine Deposit Insurance Corporation (PDIC) vs. Philippine Countryside Rural Bank, Inc. On June 28, 2005, PRBI and BEAI again received letters from PDIC, dated June 24, 2005, which appeared to be final demands on them to allow its investigation.21 PRBI and BEAI replied that letters of clarification had been sent to PDIC and the Monetary Board.22 Pending action on such requests, PDIC was requested to refrain from proceeding with the investigation.23 Notwithstanding, on July 11, 2005, the Banks received a letter, dated July 8, 2005, from the PDIC General Counsel reiterating its position that prior Monetary Board approval was not a pre-requisite to PDICs exercise of its investigative power.24 Not in conformity, on July 28, 2005, the Banks filed a Petition for Declaratory Relief with a Prayer for the Issuance of a TRO and/or Writ of Preliminary Injunction (RTC Petition) before the Regional Trial Court of Makati (RTC-Makati) which was docketed as Civil Case No. 05-697.25 In the RTC Petition, the Banks prayed for a judgment interpreting Section 9(b-1) of the PDIC Charter, as amended, to require prior Monetary Board approval before PDIC could exercise its investigation/examination power over the Banks.26 PDIC filed a motion to dismiss alleging that the RTC had no jurisdiction over the said petition since a breach had already been committed by the Banks when they received the notices of investigation, and because PDIC need not secure prior Monetary Board approval since examination and investigation are two different terms.27 _______________

21 Id., at p. 579. 22 Id. 23 Id. 24 Id. 25 Id., at p. 572. 26 Id., at p. 579. 27 Id., at pp. 579-580. 330

330 SUPREME COURT REPORTS ANNOTATED Philippine Deposit Insurance Corporation (PDIC) vs. Philippine Countryside Rural Bank, Inc. Later, the Banks withdrew their application for a temporary restraining order (TRO) reasoning that lower courts cannot issue injunctions against PDIC. Thus, the Banks instituted a petition for injunction with application for TRO and/or Preliminary Injunction (CA-Manila petition) before the Court of Appeals-Manila (CA-Manila). The case was docketed as CA-G.R. SP No. 91038.28 Even before the CA-Manila could rule on the application for a TRO and/or writ of preliminary injunction, the RTC-Makati dismissed the petition on the ground that there already existed a breach of law that isolated the case from the jurisdiction of the trial court.29 The Banks filed a motion for reconsideration but it was denied by the RTC for lack of merit.30 On February 10, 2006, the Banks filed a notice of appeal31 which they later withdrew on February 28, 2006.32 In view of the dismissal of the RTC-Makati petition, the CA-Manila dismissed the petition for injunction for being moot and academic. In its Decision, dated February 1, 2006,33 the CA-Manila wrote: What remained for the petitioners to do was to litigate over the breach or violation by ordinary action, as the circumstance s ensuing from the breach or violation warrant. The ordinary action may either be in the same case, if the RTC permitted the conversion, in which event the RTC may allow the parties to file such pleadings as may be necessary or proper, pursuant to Sec. 5, Rule 63; or the petitioners may file another action in the proper court (e.g. including the Court of Appeals, should injunction be among the reliefs to be _______________

28 Id., at p. 219. 29 Id., at p. 260. 30 Id., at p. 337. 31 Id., at p. 338. 32 Id., at p. 340. 33 Id., at p. 433. 331

VOL. 640, JANUARY 24, 2011 331 Philippine Deposit Insurance Corporation (PDIC) vs. Philippine Countryside Rural Bank, Inc. sought) upon some cause of action that has arisen from the breach or violation.34 Thereafter, on March 14, 2006, the Banks filed their Petition for Injunction with Prayer for Preliminary Injunction35 (CA-Cebu Petition) with the CA-Cebu (CA-Cebu).

On March 15, 2006, the CA-Cebu issued a resolution granting the Banks application for a TRO. This enjoined the PDIC, its representatives or agents or any other persons or agency assisting them or acting for and in their behalf from conducting examinations/investigations on the Banks head and branch offices without securing the requisite approval from the Monetary B oard of BSP.36 During the pendency of the CA-Cebu petition, PDIC filed with this Court a Petition for Certiorari, Prohibition and Mandamus with Prayer for Issuance of Temporary Restraining Order and/or Writ of Preliminary Injunction under Rule 65 docketed as G.R. No. 173370.37 It alleged that the CA-Cebu committed grave abuse of discretion amounting to lack or excess of jurisdiction in taking cognizance of the Banks petition, and in issuing a TRO and a writ of preliminary injunction.38 On July 31, 2006, this Court issued a resolution dismissing the petition for certiorari in G.R. No. 173370. The Resolution reads: Considering the allegations, issues and arguments adduced in the petition for certiorari, prohibition and mandamus with pray er for preliminary injunction and/or restraining order dated 19 July 2006, the Court resolves to DISMISS the petition for failure to sufficiently show that the questioned resolution of the Court of Appeals is _______________

34 Id., at pp. 430-431. 35 Id., at p. 442. 36 Id., at p. 448. 37 Id. 38 Id., at p. 583. 332

332 SUPREME COURT REPORTS ANNOTATED Philippine Deposit Insurance Corporation (PDIC) vs. Philippine Countryside Rural Bank, Inc. tainted with grave abuse of discretion. Moreover, the petition failed to conform with Rule 65 and other related provisions of the 1997 Rules of Civil Procedure, as amended, governing petitions for certiorari, prohibition and mandamus filed with the Supreme Court, since petitioner failed to submit a verified statement of material date of receipt of the assailed resolution dated 16 May 2006 in accordance with Section 4, Rule 65 in relation to the second paragraph of Section 3, Rule 46. In any event, the petition is premature since no motion for reconsideration of the questioned resolution of the Court of Appeals was filed prior to the availment of this special civil action and there are no sufficient allegations to bring the case within the recognized exceptions to this rule.39 On September 18, 2006, after both parties had submitted their respective memoranda, the CA-Cebu rendered a decision granting the writ of preliminary injuction,40 pertinent portions of which read: [A]fter undergoing a series of amendments, the controlling law with respect to PDICs power to conduct examination of banks is prior approval of the Monetary Board is a condition sine qua non for PDIC to exercise its power of examination. To rule otherwise would disregard the amendatory law of the PDICs charter. The Court is not also swayed by the contention of respondent that what it seeks to conduct is an investigation and not an examination of petitioners transactions, hence prior approval of the Monetary Board is a mere surplusage. The ordinary definition of the words examination and investigation would lead one to conclude that both pertain to the sa me thing and there seems to be no fine line differentiating one from the other. Blacks Law Dictionary defines the word investigate as to examine and inquire into with care and accuracy; to find out by careful inquisition; examination and the word examination a s an

investigation. In Collins Dictionary of Banking and Finance, the word investigation is defined as an examination to find out what is wrong. _______________

39 Id., at p. 152. 40 Id., at p. 94. 33

VOL. 640, JANUARY 24, 2011 33 Philippine Deposit Insurance Corporation (PDIC) vs. Philippine Countryside Rural Bank, Inc. In the case of Anti-Graft League of the Philippines, Inc. vs. Hon. Ortega, et al.,41 the Supreme Court using Ballentines Law Dictionary defines an investigation as an inquiry, judicial or otherwise, for the discovery or collection of facts concerni ng the matter or matters involved. Such common definitions would show that there is really nothing to distinguish between these two (2) terms as to support the PDIC view differentiating Section 9 (b-1) from paragraph 8, Section 8 of the PDIC Charter. In the realm of the PDIC rules, specifically under Section 3 of PDIC Regulatory Issuance No. 2205-0242 investigation is defined as: Investigation shall refer to fact-finding examination, study, inquiry, for determining whether the allegations in a complaint or findings in a final report of examination may properly be the subject of an administrative, criminal or civil action. From the foregoing definition alone, it can be easily deduced that investigation and examination are synonymous terms. Simply stated, investigation encompasses a fact-finding examination. Thus, it is inconsistent with the rules if respondent PDIC be (sic) allowed to conduct an investigation without the approval of the Monetary Board. Moreover, the Court sees that the rationale of the law in requiring a (sic) prior approval from the Monetary Board whenever an examination or in this case an investigation needs to be conducted by the PDIC is obviously to ensure that there is no overlapping of efforts, duplication of functions and more importantly to provide a check and balance to the otherwise unrestricted power of respondent PDIC to conduct investigations on banks insured by it. With the foregoing premises, this Court rules that a prior approval from the Monetary Board is necessary before respondent PDIC can proceed with its investigations on petitioners-banks.43 PDIC moved for reconsideration but it was denied in a resolution dated January 25, 2007.44 Hence, this petition. _______________

41 188 Phil. 55, 58; 99 SCRA 644, 648 (1980). 42 This should read Regulatory Issuance No. 2005-02. 43 Rollo, pp. 102-104. 44 Id., at p. 110. 334

334 SUPREME COURT REPORTS ANNOTATED Philippine Deposit Insurance Corporation (PDIC) vs. Philippine Countryside Rural Bank, Inc. The Issues I. WHETHER RESPONDENT BANKS VIOLATED THE RULE AGAINST FORUM SHOPPING WHEN THEY FILED THE PETITION FOR INJUNCTION BEFORE THE COURT OF APPEALS-CEBU. II. WHETHER THE PRONOUNCEMENT OF THE REGIONAL TRIAL COURT OF MAKATI IN THE PETITION FOR DECLARATORY RELIEF CONSTITUTES RES JUDICATA TO THE PETITION FOR INJUNCTION IN THE COURT OF APPEALS-CEBU. III. WHETHER PETITIONER WAS DEPRIVED OF ITS OPPORTUNITY TO BE HEARD WHEN THE COURT OF APPEALS-CEBU ISSUED THE WRIT OF INJUNCTION. IV. WHETHER THE ISSUES RAISED BY PETITIONERS ARE THE SAME ISSUES RAISED IN G.R. NO. 173370 WHICH WAS EARLIER DISMISSED BY THIS COURT. V. WHETHER THE COURT OF APPEALS ERRED IN FINDING THAT PRIOR APPROVAL OF THE MONETARY BOARD OF THE BANGKO SENTRAL NG PILIPINAS IS NECESSARY BEFORE THE PDIC MAY CONDUCT AN INVESTIGATION OF RESPONDENT BANKS. The Courts Ruling

I Whether respondent banks violated the rule against forum shopping when they filed the petition for injunction before the Court of Appeals-Cebu. 335

VOL. 640, JANUARY 24, 2011 335

Philippine Deposit Insurance Corporation (PDIC) vs. Philippine Countryside Rural Bank, Inc. II Whether the pronouncement of the Regional Trial Court of Makati in the petition for declaratory relief constitutes res judicata to the petition for injunction in the Court of Appeals-Cebu. In the recent case of Sameer Oversees Placement Agency, Inc. v. Mildred R. Santos,45 the Court discussed the matter of forum shopping: Forum shopping is defined as an act of a party, against whom an adverse judgment or order has been rendered in one forum, of seeking and possibly getting a favorable opinion in another forum, other than by appeal or special civil action for certiorari. It may also be the institution of two or more actions or proceedings grounded on the same cause on the supposition that one or the other court would make a favorable disposition. There is forum shopping where the elements of litis pendentia are present, namely: (a) there is identity of parties, or at least such parties as represent the same interest in both actions; (b) there is identity of rights asserted and relief prayed for, the relief being founded on the same set of facts; and (c) the identity of the two preceding particulars is such that any judgment rendered in the pending case, regardless of which party is successful, would amount to res judicata in the other. It is expressly prohibited by this Court because it trifles with and abuses court processes, degrades the administration of justice, and congests court dockets. A willful and deliberate violation of the rule against forum shopping is a ground for summary dismissal of the case, and may also constitute direct contempt.46 _______________

45 G.R. No. 152579, August 4, 2009, 595 SCRA 67, 76-77. 46 Id., citing Philippine Islands Corporation for Tourism Development, Inc. v. Victorias Milling Company, Inc., G.R. No. 167674, June 17, 2008, 554 SCRA 561, 569; Tegimenta Chemical Phils. v. Buensalida, G.R. No. 176466, June 17, 2008, 554 SCRA 670, 679; and Tapuz v. Del Rosario, G.R. No. 182484, June 17, 2008, 554 SCRA 768, 782. 336

336 SUPREME COURT REPORTS ANNOTATED Philippine Deposit Insurance Corporation (PDIC) vs. Philippine Countryside Rural Bank, Inc. Juxtaposing the RTC-Makati, CA-Manila and CA-Cebu petitions, what must be determined here, is whether the elements of litis pendentia are present between and among these petitions, i.e. whether (a) there is identity of parties, or at least such parties as represent the same interest in both actions; (b) there is identity of rights asserted and relief prayed for, the relief being founded on the same set of facts; and (c) the identity of the two preceding particulars is such that any judgment rendered in the pending case, regardless of which party is successful, would amount to res judicata in the other. The first element is clearly present as between the RTC-Makati petition and the CA-Cebu petition. Both involved the Banks on one hand, and the PDIC on the other. The second and third elements of litis pendentia, however, are patently wanting. The rights asserted and reliefs prayed for were different, though founded on the same set of facts. The RTC-Makati Petition was one for declaratory relief while the CA-Manila Petition was one for injunction with a prayer for preliminary injunction.

A petition for declaratory relief is filed by any person interested under a deed, will, contract or other written instrument, or whose rights are affected by a statute, executive order or regulation, ordinance, or any other governmental regulation, before breach or violation, thereof, to determine any question of construction or validity arising, and for a declaration of his rights or duties thereunder.47 Injunction, on the other hand, is a judicial writ, process or proceeding whereby a party is directed either to do a particul ar act, in which case it is called a mandatory injunction, or to refrain from doing a particular act, in which case it is called a prohibitory injunction. As a main action, injunction seeks to _______________

47 Rule 63, Section 1 Revised Rules of Civil Procedure. 337

VOL. 640, JANUARY 24, 2011 337 Philippine Deposit Insurance Corporation (PDIC) vs. Philippine Countryside Rural Bank, Inc. permanently enjoin the defendant through a final injunction issued by the court and contained in the judgment.48 Clearly, there is a marked difference between the reliefs sought under an action for declaratory relief and an action for injunction. While an action for declaratory relief seeks a declaration of rights or duties, or the determination of any question or validity arising under a statute, executive order or regulation, ordinance, or any other governmental regulation, or under a deed, will, contract or other written instrument, under which his rights are affected, and before breach or violation, an action for injunction ultimately seeks to enjoin or to compel a party to perform certain acts. Moreover, as stated in the RTC-Makati Decision, because the Banks had already breached the provisions of law on which declaratory judgment was being sought, it was without jurisdiction to take cognizance of the same. Any judgment rendered in the RTC-Makati petition would not amount to res judicata in the CA-Manila Petition. Thus, the RTC was correct in dismissing the case, having been bereft of jurisdiction to take cognizance of the action for declaratory judgment. As between the CA-Manila and the CA-Cebu petitions, the second and third elements of litis pendentia are absent. The rights asserted and reliefs prayed for were different, although founded on the same set of facts. The CA-Manila Petition is a petition for injunction wherein the Banks prayed that: 1) Immediately upon filing of this Petition, a Writ of Preliminary Injunction and/or Temporary Restraining Order be issued commanding the respondent and all its officers, employees and agents to cease and desist from proceeding with the investigations sought to be conducted on the petitioners head and branch offices _______________

48 PEZA v. Carantes, G.R. No. 181274, 23 June 2010, 621 SCRA 569. 338

338

SUPREME COURT REPORTS ANNOTATED Philippine Deposit Insurance Corporation (PDIC) vs. Philippine Countryside Rural Bank, Inc. while the Petition for Declaratory Relief before Branch 58 of the Makati Regional Trial Court is pending. 2) After due proceedings, judgment be rendered declaring as permanent the Writ of Preliminary Injunction and/or Temporary Restraining Order prayed for above. Other equitable reliefs are likewise prayed for.49 [Underscoring supplied] The CA-Cebu Petition, on the other hand, is denominated as a Petition for Injunction With Prayer for Writ of Preliminary Injunction and/or Restraining Order. The Banks prayed therein that: 1) Upon filing of this Petition, a Writ of Preliminary Injunction and/or Temporary Restraining Order be issued forthwith, enjoining Respondent PDIC and all its officers, employees and agents to cease and desist from conducting examinations/investigations on Petitioner Banks head and branch offices without securing the requisite approval from the Monetary Board of the Bangko Sentr al ng Pilipinas, as required by Sec. 8, Paragraph 8 of the PDIC Charter, as amended; 2) After due proceedings, judgment be rendered declaring as permanent the Writ of Preliminary Injunction and/or Temporary Restraining Order prayed for above. Other equitable reliefs are likewise prayed for.50 As can be gleaned from the above-cited portions of the CA-Manila and CA-Cebu petitions, the petitions seek different reliefs. Therefore, as between and among the RTC Makati, and the CA-Manila and CA-Cebu petitions, there is no forum shopping. _______________

49 Rollo, p. 452. 50 Id., at p. 390. 339

VOL. 640, JANUARY 24, 2011 339 Philippine Deposit Insurance Corporation (PDIC) vs. Philippine Countryside Rural Bank, Inc. III Whether petitioner was deprived of its opportunity to be heard when the Court of Appeals-Cebu issued the writ of injunction.

PDIC alleges that the CA-Cebu, in issuing the TRO in its March 15, 2006 Resolution, and subsequently, the preliminary injunction in its May 16, 2006 Resolution, violated the fundamental rule that courts should avoid issuing injunctive relief which would in effect dispose of the main case without trial.51 PDIC argues that a TRO is intended only as a restraint until the propriety of granting a temporary injunction can be determined, and it goes no further than to preserve the status until that determination.52 Moreover, its purpose is merely to suspend proceedings until such time when there may be an opportunity to inquire whether any injunction should be granted, and it is not intended to operate as an injunction pendente lite, and should not, in effect, determine the issues involved before the parties can have their day in court, or give an advantage to either party by proceeding in the acquisition or alteration of the property the right to which is disputed while the hands of the other party are tied.53 On the other hand, the Banks claim that PDIC was given every opportunity to present its arguments against the issuance of the injunction.54 Its active participation in the proceedings negates its assertion that it was denied procedural due process in the issuance of the writ of injunction.55 Citing Salonga v. Court of Appeals,56 the Banks state that the essence _______________

51 Id., at p. 669. 52 Id., at p. 671, citing Francisco, The Revised Rules of Court in the Philippines, Vol. IV-A, 1971, p. 185. 53 Id., citing Government Service Insurance System v. Florendo, G.R. No. 48603, September 29, 1989, 178 SCRA 76, 87. 54 Id., at p. 605. 55 Id., at p. 607. 56 336 Phil. 514, 528; 269 SCRA 534, 547 (1997). 340

340 SUPREME COURT REPORTS ANNOTATED Philippine Deposit Insurance Corporation (PDIC) vs. Philippine Countryside Rural Bank, Inc. of due process is the reasonable opportunity to be heard and to submit evidence one may have in support of ones defense,57 and PDIC was able to do so. On March 15, 2006, the CA-Cebu issued a resolution granting their prayer for a 60-day TRO, and requiring PDIC to file its comment.58 The latter thereafter filed its Comment ad Cautelam dated March 30, 2006.59 [Underscoring ours] On May 16, 2006, the CA-Cebu issued another resolution, this time granting the prayer for a preliminary injunction and requiring the parties to file their respective memoranda. PDIC thereafter filed its memorandum dated July 31, 2006.60 On September 18, 2006, the CA-Cebu promulgated its Decision granting the Petition for Injunction.61 PDIC filed a motion for reconsideration dated October 10, 2006,62 which was subsequently denied. The essence of procedural due process is found in the reasonable opportunity to be heard and submit ones evidence in support of his defense.63 The Court finds that procedural due process was observed by the CA-Cebu. The parties were afforded equal opportunity to present their arguments. In the absence of any indication to the contrary, the CA-Cebu must be accorded the presumption of regularity in the performance of their functions. However, as discussed herein, the matter of whether it erred in its conclusion and issuance of the TRO, preliminary injunction and final injunction is another matter altogether. _______________

57 Rollo, p. 605. 58 Id., at p. 606. 59 Id. 60 Id. 61 Id., at p. 94. 62 Id., at p. 606. 63 Republic of the Philippines v. Sandiganbayan, et al., 461 Phil. 598, 614; 416 SCRA 133, 145 (2003), citing Mutuc v. Court of Appeals, G.R. No. 48108, September 26, 1990, 190 SCRA 43. 341

VOL. 640, JANUARY 24, 2011 341 Philippine Deposit Insurance Corporation (PDIC) vs. Philippine Countryside Rural Bank, Inc. IV Whether the issues raised by petitioner are the same issues raised in G.R. No. 173370 which was earlier dismissed by this Court. In G.R. 173370, a petition for certiorari under Rule 65 of the Rules of Court, PDIC alleged that the CA-Cebu committed grave abuse of discretion amounting to lack or excess of jurisdiction in taking cognizance of the Banks petition, and in issuing a TRO a nd a writ of preliminary injunction.64 In the case at bench, a petition for review under Rule 45, PDICs core contention is that the CA -Cebu erred in finding that prior approval of the Monetary Board of the BSP is necessary before it may conduct an investigation of the Banks. Clearly then, the two petitions were of different nature raising different issues. G.R. 173370 challenged the CA-Cebus having taken cognizance of the Banks petition and interlocutory orders on the issuance of a TRO and a writ of preliminary injunction. This case, however, strikes at the core of the final decision on the merits of the CA-Cebu, and not merely the interlocutory orders. While both G.R. 173370 and the present case may have been anchored on the same set of facts, that is, the refusal of the Banks to allow PDIC to conduct an investigation without the prior consent of the Monetary Board, the issues raised in the two petitions are not identical. Moreover, the disposal of the first case does not amount to res judicata in this case. V Whether the Court of AppealsCebu erred in finding that prior approval of the Monetary Board of the

Bangko Sentral ng Pilipinas is necessary before the PDIC may conduct an investigation of respondent banks. _______________

64 Rollo, p. 583. 342

342 SUPREME COURT REPORTS ANNOTATED Philippine Deposit Insurance Corporation (PDIC) vs. Philippine Countryside Rural Bank, Inc. PDIC is of the position that in order for it to exercise its power of investigation, the law requires that: (a) The investigation is based on a complaint of a depositor or any other government agency, or on the report of examination of [the] Bangko Sentral ng Pilipinas (BSP) and/or PDIC; and, (b) The complaint alleges, or the BSP and/or PDIC Report of Examination contains adverse findings of, fraud, irregularities or anomalies committed by the Bank and/or its directors, officers, employees or agents; and, (c) The investigation is upon the authority of the PDIC Board of Directors.65 It argues that when it commenced its investigation on the Banks, all of the aforementioned requirements were met. PDIC stresses that its power of examination is different from its power of investigation, in such that the former requires prior approval of the Monetary Board while the latter requires merely the approval of the PDIC Board.66 It further claims that the power of examination cannot be exercised within twelve (12) months from the last examination conducted, whereas the power of investigation is without limitation as to the frequency of its conduct. It states that the purpose of the PDICs power of examination is merely to look into the condition of the bank, whereas the power of investigation aims to address fraud, irregularities and anomalies based on complaints from depositors and other government agencies or upon reports of examinations conducted by the PDIC itself or by the BSP.67 The Banks, on the other hand, are of the opinion that a holistic reading of the PDIC charter shows that petitioners power of examination is synonymous with its power of inves_______________

65 Id., at p. 673. 66 Id., at p. 82. 67 Id. 343

VOL. 640, JANUARY 24, 2011 343 Philippine Deposit Insurance Corporation (PDIC) vs. Philippine Countryside Rural Bank, Inc. tigation.68 They cite, as bases, the law dictionary definitions, Section 8, Eighth paragraph69 and Section 9(b-1)70 of the PDIC _______________

68 Id., at pp. 474-479. 69 Section 8 of R.A. 3591 provides: POWERS AS A CORPORATE BODY SECTION 8. The Corporation as a corporate body shall have the power. xxx Eighth To conduct examination of banks with prior approval of the Monetary Board: Provided, That no examination can be conducted within twelve (12) months from the last examination date: Provided, however, That the Corporation may, in coordination with the Bangko Sentral, conduct a special examination as the Board of Directors, by an affirmative vote of a majority of all its members, if there is a threatened or impending closure of a bank; Provided, further, That, notwithstanding the provisions of Republic Act No. 1405, as amended, Republic Act No. 6426, as amended, Republic Act No. 8791, and other laws, the Corporation and/or the Bangko Sentral, may inquire into or examine deposit accounts and all information related thereto in case there is a finding of unsafe or unsound banking practice; Provided, That to avoid overlapping of efforts, the examination shall maximize the efficient use of the relevant reports, information, and findings of the Bangko Sentral, which it shall make available to the Corporation; (As amended by R.A. 9302, 12 August 2004, R.A. 9576, 1 June 2009) xxx 70 Section 9(b-1) of the PDIC Charter further provides that the Board of Directors of the PDIC shall have the power to: POWERS AND RESPONSIBILITIES AND PROHIBITIONS SECTION 9. xxx

(b) The Board of Directors shall appoint examiners who shall have power, on behalf of the Corporation to examine any insured bank. Each such examiner shall have the power to make a thorough examination of all the affairs of the bank and in doing so, he shall have the power to administer oaths, to examine and take and preserve the testimony of any of the officers and agents thereof, and, to compel the presentation of books, documents, papers, or records necessary in his judgment to ascertain the facts relative to the condi 344

344 SUPREME COURT REPORTS ANNOTATED Philippine Deposit Insurance Corporation (PDIC) vs. Philippine Countryside Rural Bank, Inc. Charter, and Rule 1, Section 3(1) of PDIC Regulatory Issuance No. 2005-02, which defines investigation as follows:

(l) Investigation shall refer to fact-finding examination, study or inquiry for determining whether the allegations in a complaint or findings in a final report of examination may properly be the subject of an administrative, criminal or civil action. The Banks further cite Section X658 of the Manual of Regulations for Banks, which states: Sec. X658 Examination by the BSP. The term examination shall, henceforth, refer to an investigation of an institution under the supervisory authority of the BSP to determine compliance with laws and regulations. It shall include determination that the institution is conducting its business on a safe and sound basis. Examination requires full and comprehensive looking into the operations and books of institutions, and shall include, but need not be limited to the following: a. Determination of the banks solvency and liquidity position;

_______________

tion of the bank; and shall make a full and detailed report of the condition of the bank to the Corporation. The Board of Directors in like manner shall appoint claim agents who shall have the power to investigate and examine all claims for insured deposits and transferred deposits. Each claim agent shall have the power to administer oaths and to examine under oath and take and preserve testimony of any person relating to such claim. (As amended by E.O. 890, 08 April 1983; R.A. 7400, 13 April 1992) (b-1) The investigators appointed by the Board of Directors shall have the power on behalf of the Corporation to conduct investigations on frauds, irregularities and anomalies committed in banks, based on reports of examination conducted by the Corporation and Bangko Sentral ng Pilipinas or complaints from depositors or from other government agency. Each such investigator shall have the power to administer oaths, and to examine and take and preserve the testimony of any person relating to the subject of investigation. (As added by R.A. 9302, 12 August 2004) xxx 345

VOL. 640, JANUARY 24, 2011 345 Philippine Deposit Insurance Corporation (PDIC) vs. Philippine Countryside Rural Bank, Inc. b. c. Evaluation of asset quality as well as determination of sufficiency of valuation reserves on loans and other risk assets; Review of all aspects of bank operations;

d. Assessment of risk management system, including the evaluation of the effectiveness of the bank managements oversight functions, policies, procedures, internal control and audit; e. f. Appraisal of overall management of the bank; Review of compliance and applicable laws, rules and regulations; and any other activities relevant to the above.

After an evaluation of the respective positions of the parties, the Court is of the view that the Monetary Board approval is not required for PDIC to conduct an investigation on the Banks. The disagreement stems from the interpretation of these two key provisions of the PDIC Charter. The confusion can be attributed to the fact that although investigation and examination are two separate and distinct procedures under the charter of the PD IC and the BSP, the words seem to be used loosely and interchangeably.

It does not help that indeed these terms are very c losely related in a generic sense. However, while examination connotes a mere generic perusal or inspection, investigation refers to a more intensive scrutiny for a more specific fact -finding purpose. The latter term is also usually associated with proceedings conducted prior to criminal prosecution. The PDIC was created by R.A. No. 3591 on June 22, 1963 as an insurer of deposits in all banks entitled to the benefits of insurance under the PDIC Charter to promote and safeguard the interests of the depositing public by way of providing permanent and continuing insurance coverage of all insured deposits. It is a government instrumentality that operates under the Department of Finance. Its primary purpose is 346

346 SUPREME COURT REPORTS ANNOTATED Philippine Deposit Insurance Corporation (PDIC) vs. Philippine Countryside Rural Bank, Inc. to act as deposit insurer, as a co-regulator of banks, and as receiver and liquidator of closed banks.71 Section 1 of the PDIC Charter states: SECTION 1. There is hereby created a Philippine Deposit Insurance Corporation hereinafter referred to as the Corporation which shall insure, as herein provided, the deposits of all banks which are entitled to the benefits of insurance under this Act, and which shall have the powers hereinafter granted. The Corporation shall, as a basic policy, promote and safeguard the interests of the depositing public by way of providing permanent and continuing insurance coverage on all insured deposits. Section 1 of R.A. No. 9576 further provides: An Act Increasing the Maximum Deposit Insurance Coverage, and in connection therewith, to Strengthen the Regulatory and Administrative Authority, and Financial Capability of the Philippine Deposit Insurance Corporation (PDIC), amending for this purpose R.A. No. 3591, as Amended, otherwise known as the PDIC Charter. SECTION 1. Statement of State Policy and Objectives.It is hereby declared to be the policy of the State to strengthen the mandatory deposit insurance coverage system to generate, pr eserve, maintain faith and confidence in the countrys banking system, and protect it from illegal schemes and machinations. Towards this end, the government must extend all means and mechanisms necessary for the Philippine Deposit Insurance Corporation to effectively fulfill its vital task of promoting and safeguarding the interests of the depositing public by way of providing permanent and continuing insurance coverage on all insured deposits, and in helping develop a sound and stable banking system at all times. _______________

71 Republic Act No. 3591, as amended, Section 1.

347

VOL. 640, JANUARY 24, 2011 347

Philippine Deposit Insurance Corporation (PDIC) vs. Philippine Countryside Rural Bank, Inc. Under its charter, the PDIC is empowered to conduct examination of banks with prior approval of the Monetary Board: Eighth To conduct examination of banks with prior approval of the Monetary Board: Provided, That no examination can be conducted within twelve (12) months from the last examination date: Provided, however, That the Corporation may, in coordination with the Bangko Sentral, conduct a special examination as the Board of Directors, by an affirmative vote of a majority of all its members, if there is a threatened or impending closure of a bank; Provided, further, That, notwithstanding the provisions of Republic Act No. 1405, as amended, Republic Act No. 6426, as amended, Republic Act No. 8791, and other laws, the Corporation and/or the Bangko Sentral, may inquire into or examine deposit accounts and all information related thereto in case there is a finding of unsafe or unsound banking practice; Provided, That to avoid overlapping of efforts, the examination shall maximize the efficient use of the relevant reports, information, and findings of the Bangko Sentral, which it shall make available to the Corporation; (As amended by R.A. 9302, 12 August 2004, R.A. 9576, 1 June 2009) xxx. [Underlining supplied] Section 9(b-1) of the PDIC Charter further provides that the PDIC Board shall have the power to: POWERS AND RESPONSIBILITIES AND PROHIBITIONS SECTION 9. xxx

(b) The Board of Directors shall appoint examiners who shall have power, on behalf of the Corporation to examine any insured bank. Each such examiner shall have the power to make a thorough examination of all the affairs of the bank and in doing so, he shall have the power to administer oaths, to examine and take and preserve the testimony of any of the officers and agents thereof, and, to compel the presentation of books, documents, papers, or records necessary in his judgment to ascertain the facts relative to the condition of the bank; and shall make a full and detailed report of the condition of the bank to the Corporation. The Board of Directors in like manner shall appoint claim agents who shall have the power to 348

348 SUPREME COURT REPORTS ANNOTATED Philippine Deposit Insurance Corporation (PDIC) vs. Philippine Countryside Rural Bank, Inc. investigate and examine all claims for insured deposits and transferred deposits. Each claim agent shall have the power to administer oaths and to examine under oath and take and preserve testimony of any person relating to such claim. (As amended by E.O. 890, 08 April 1983; R.A. 7400, 13 April 1992) (b-1) The investigators appointed by the Board of Directors shall have the power on behalf of the Corporation to conduct investigations on frauds, irregularities and anomalies committed in banks, based on reports of examination conducted by the Corporation and Bangko Sentral ng Pilipinas or complaints from depositors or from other government agency. Each such investigator shall have the power to administer oaths, and to examine and take and preserve the testimony of any person relating to the subject of investigation. (As added by R.A. 9302, 12 August 2004) xxx. [Underscoring supplied] As stated above, the charter empowers the PDIC to conduct an investigation of a bank and to appoint examiners who shall have the power to examine any insured bank. Such investigators are authorized to conduct investigations on frauds, irregularities and anomalies committed in banks, based on an examination conducted by the PDIC and the BSP or on complaints from depositors or from other government agencies. The distinction between the power to investigate and the power to examine is emphasized by the existence of two separate sets of rules governing the procedure in the conduct of investigation and examination. Regulatory Issuance (RI) No. 2005-02 or the PDIC Rules on Fact-Finding Investigation of Fraud, Irregularities and Anomalies Committed in Banks covers the procedural requirements of the exercise of the PDICs power of investigation. On the other hand, RI No. 2009 -05 sets forth the guidelines for the conduct of the power of examination.

The definitions provided under the two aforementioned regulatory issuances elucidate on the distinction between the power of examination and the power of investigation. 349

VOL. 640, JANUARY 24, 2011 349 Philippine Deposit Insurance Corporation (PDIC) vs. Philippine Countryside Rural Bank, Inc. Section 2 of RI No. 2005-02 states that its coverage shall be applicable to all fact-finding investigations on fraud, irregularities and/or anomalies committed in banks that are conducted by PDIC based on: [a] complaints from depositors or other government agencies; and/or [b] final reports of examinations of banks conducted by the Bangko Sentral ng Pilipinas and/or PDIC. The same issuance states that the Final Report of Examination72 is one of the three pre-requisites to the conduct of an investigation, in addition to the authorization of the PDIC Board73 _______________

72 The Final Report of Examination is defined under Section 2, Rule 3 of RI No. 2005-02 as follows: SECTION 2. Final Report of Examination.

A Final Report of Examination shall refer to the document approved by the PDIC Board or the Monetary Board containing a written statement/narration of the findings and/or recommendations resulting from an examination of a bank. A Final Report of Examination of examiners of PDIC and/or BSP shall contain the following: If possible, full name(s) and address(es) of the bank and/or its directors, officers, employees or agents or such description as would identify who appear to be responsible for the commission of fraud, irregularities and/or anomalies; and A narration of the relevant and material facts which shows the fraudulent, irregular or anomalous acts or omissions allegedly committed in a bank. In addition to the foregoing, copies of relevant documents, if available, should accompany the Final Report of Examination. 73 Section 1, Rule 3 of RI No. 2005-02 states: SECTION 1. Authorization by the PDIC Board. In all cases, a fact-finding investigation shall be conducted only upon authorization by the PDIC Board acting on the recommendation contained in a Final Report of Examination or based on any adverse finding stated therein, and/or a complaint from a depositor or government agency. The Board shall likewise authorize the filing of criminal, civil, and/or administrative charges, if warranted. For this purpose, said 350

350

SUPREME COURT REPORTS ANNOTATED Philippine Deposit Insurance Corporation (PDIC) vs. Philippine Countryside Rural Bank, Inc. and a complaint.74 Juxtaposing this provision with Section _______________

authority is delegated to the President and Chief Executive Officer or the General Counsel in accordance with existing PDIC policies.

74 Section 3, Rule 3 of RI No. 2005-02 provides for the definition of a complaint as follows: SECTION 3. Complaint.

A complaint is a verified statement from a depositor alleging the commission or omission of certain acts which constitute fraud, irregularity or anomaly in a bank. The complaint shall follow the form attached hereto as Annex A and/or contain the following: Full name and address of the complainant; Full name and address of the bank and/or the names or sufficient description that will identify the directors, officers, employees and/or agents thereof who appear to be responsible for the commission of fraud, irregularities and/or anomalies; A narration of the relevant and material facts which shows the fraudulent, irregular or anomalous act or acts allegedly committed in a bank; A statement that the complainant has not commenced any action or filed any claim involving the same issues with BSP or any court, tribunal or quasi-judicial agency and, to the best of his/her knowledge, no such other action or claim is pending therein; or a full disclosure of the status of an action or claim involving the same issues filed with BSP or any court, tribunal or quasi-judicial agency; An undertaking that if the complainant should thereafter learn that a similar action or claim has been filed or is pending, he/she shall report the fact within five (5) days therefrom to PDIC; If the incident complained of involves the deposit account of the complainant with the subject bank, a statement authorizing PDIC to look into the desposit account of the complainant for purposes of the investigation; and Documents and/or affidavits, if any, supporting the allegations in the complaint. In the absence of any one of the aforementioned requirements other than paragraph [g], the complaint may be dismissed. A report from a government agency of fraud/irregularity/anomaly allegedly committed in a bank that is furnished PDIC, 351

VOL. 640, JANUARY 24, 2011 351 Philippine Deposit Insurance Corporation (PDIC) vs. Philippine Countryside Rural Bank, Inc.

9(b-1) of the PDIC Charter, since an examination is explicitly made the basis of a fact-finding examination, then clearly examination and investigation are two different proceedings. It would obviously defy logic to make the result of an investigation the basis of the same proceeding. Thus, RI No. 2005-02 defines an investigation as a fact-finding examination, study or inquiry for determining whether the allegations in a complaint or findings in a final report of examination may properly be the subject of an administrative, criminal or civil action.75 The Banks cite the dictionary definitions of examination and investigation to justify their conclusion that these terms r efer to one and the same proceeding. It is tempting to use these two terms interchangeably, which practice may be perfectly justified in a purely literary sense. Indeed, a reading of the PDIC Charter shows that the two terms have been used interchangeably at some point. However, based on the provisions aforecited, the intention of the laws is clearly to differentiate between the process of investigation and that of examination. In 2009, to clarify procedural matters, PDIC released RI No. 2009-05 or the Rules and Regulations on Examination of Banks. Section 2 thereof differentiated between the two types of examination as follows: Section 2. Types of Examination

a. Regular ExaminationAn examination conducted independently or jointly with the BSP. It requires the prior approval of the PDIC Board of Directors and the Monetary Board (MB). It may be conducted only after an interval of at least twelve (12) months from the closing date of the last Regular Examination. b. Special ExaminationAn examination conducted at any time in coordination with the BSP, by an affirmative vote of a major-

_______________

accompanied by a written request for the conduct of an investigation, is considered a valid complaint under these Rules. 75 Sec. 3(I), PDIC Regulatory Issuance No. 2005-02. 352

352 SUPREME COURT REPORTS ANNOTATED Philippine Deposit Insurance Corporation (PDIC) vs. Philippine Countryside Rural Bank, Inc. ity of all the members of the PDIC Board of Directors, without need of prior MB approval, if there is a threatened or impending bank closure as determined by the PDIC Board of Directors. [Underscoring supplied] Section 3 of RI No. 2009-05 provides for the general scope of the PDIC examination: Section 3. Scope of Examination The examination shall include, but need not be limited to, the following: a. b. c. Determination of the banks solvency and liquidity position; Evaluation of asset quality as well as determination of sufficiency of valuation reserves on loans and other risk assets; Review of all aspects of bank operations;

d. Assessment of risk management system, including the evaluation of the effectiveness of the bank managements oversight functions, policies, procedures, internal control and audit;

e. f. g. h.

Appraisal of overall management of the bank; Review of compliance with applicable banking laws, and rules and regulations, including PDIC issuances; Follow-through of specific exceptions/ violations noted during a previous examination; and Any other activity relevant to the above.

Rule 2, Section 1 of PDIC RI No. 2005-02 or the PDIC Rules on Fact-Finding Investigation of Fraud, Irregularities and Anomalies Committed in Banks provides for the scope of fact-finding investigations as follows: SECTION 1. Scope of the Investigation. 353

VOL. 640, JANUARY 24, 2011 353 Philippine Deposit Insurance Corporation (PDIC) vs. Philippine Countryside Rural Bank, Inc. Fact-finding Investigations shall be limited to the particular acts or omissions subject of a complaint or a Final Report of Examination. From the above-cited provisions, it is clear that the process of examination covers a wider scope than that of investigation. Examination involves an evaluation of the current status of a bank and determines its compliance with the set standards regarding solvency, liquidity, asset valuation, operations, systems, management, and compliance with banking laws, rules and regulations. Investigation, on the other hand, is conducted based on specific findings of certain acts or omissions which are subject of a complaint or a Final Report of Examination. Clearly, investigation does not involve a general evaluation of the status of a bank. An investigation zeroes in on specific acts and omissions uncovered via an examination, or which are cited in a complaint. An examination entails a review of essentially all the functions and facets of a bank and its operation. It necessitates poring through voluminous documents, and requires a detailed evaluation thereof. Such a process then involves an intrusion into a banks rec ords. In contrast, although it also involves a detailed evaluation, an investigation centers on specific acts of omissions and, thus, requires a less invasive assessment. The practical justification for not requiring the Monetary Board approval to conduct an investigation of banks is the administrative hurdles and paperwork it entails, and the correspondent time to complete those additional steps or requirements. As in other types of investigation, time is always of essence, and it is prudent to expedite the proceedings if an accurate conclusion is to be arrived at, as an investigation is only as precise as the evidence on which it is based. The promptness with which such evidence is gathered is always of utmost importance because evidence, documentary evidence 354

354 SUPREME COURT REPORTS ANNOTATED Philippine Deposit Insurance Corporation (PDIC) vs. Philippine Countryside Rural Bank, Inc.

in particular, is remarkably fungible. A PDIC investigation is conducted to determine[e] whether the allegations in a compla int or findings in a final report of examination may properly be the subject of an administrative, criminal or civil action.76 In o ther words, an investigation is based on reports of examination and an examination is conducted with prior Monetary Board approval. Therefore, it would be unnecessary to secure a separate approval for the conduct of an investigation. Such would merely prolong the process and provide unscrupulous individuals the opportunity to cover their tracks. Indeed, while in a literary sense, the two terms may be used interchangeably, under the PDIC Charter, examination and investigation refer to two different processes. To reiterate, an examination of banks requires the prior consent of the Monetary Board, whereas an investigation based on an examination report, does not. WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Appeals in CA-G.R. CEB SP. No. 01550, dated September 18, 2006 and January 25, 2007 are REVERSED and SET ASIDE. SO ORDERED. Carpio (Chairperson), Nachura, Peralta and Abad, JJ., concur. Petition granted, judgment and resolution reversed and set aside. Note.The banking system is an indispensable institution in the modern world. It plays a vital role in the economic life of every civilized nation. (Philippine National Bank vs. Velasco, 564 SCRA 512 [2008]) o0o [Philippine Deposit Insurance Corporation (PDIC) vs. Philippine Countryside Rural Bank, Inc., 640 SCRA 322(2011)]

G.R. No. 130439. October 26, 1999.* PHILIPPINE VETERANS BANK, petitioner, vs. HONORABLE NATIONAL LABOR RELATIONS COMMISSION, HON. POTENCIANO CAIZARES, JR., and DR. TEODORICO V. MOLINA, respondents. Labor Law; Appeals; Well-settled is the rule that the findings of fact of quasi-judicial bodies are generally accorded respect and finality where they are supported by substantial evidence.We see no reason to disturb the factual finding of the labor arbiter, and affirmed by the NLRC, that MOLINAs salary was within the coverage of the cited wage orders. Well-settled is the rule that the findings of fact of quasijudicial bodies are generally accorded respect and finality where they are supported by substantial evidence. Indeed, MOLINAs monthly salary of P3,754.60 was never at issue. What was in dispute was the computation of his daily wage. Same; Same; Damages; The complaint being pro forma, MOLINAs omission to specify a claim for damages does not bar recovery thereof especially when such a claim was prayed for in his position paper.We agree with the NLRC that MOLINA is entitled to moral damages and attorneys fees. He may have omitted such claims in his complaint, but he certainly included them in his position paper. We hold that such allegation is sufficient to enable the complainant to seek an award thereof. The complaint being pro forma, MOLINAs omission to specify a claim for damages does not bar recovery thereof especially when, as in this case, such a claim was prayed for in his position paper. Same; Same; Same; Awards for moral damages and attorneys fees cannot be consolidated for they are different in nature and each must be separately determined.The NLRC, however, did not distinguish between attorneys fees and moral damages in affirming the award of P100,000 to MOLINA. We hold that awards for moral damages and attorneys fees cannot be consolidated for they are different in

nature and each must be separately determined. Since the Labor Code limits attorneys fees to ten percent of the wages awarded, and the total wage differential due MOLINA was com_______________

* FIRST DIVISION. 511

VOL. 317, OCTOBER 26, 1999 511 Philippine Veterans Bank vs. NLRC puted at P12,501.20, only P1,250.12 should have been awarded as attorneys fees. Same; Same; Same; It is basic that for moral damages to be awarded, the claimant must satisfactorily prove its factual basis and causal connection with the respondents acts.Moving on to the issue of moral damages, the records show that MOLINA based his claim on the alleged failure of the liquidation team to implement the benefits of the wage orders, without submitting any proof in support thereof. It is basic, however, that for moral damages to be awarded, the claimant must satisfactorily prove its factual basis and causal connection with the respondents acts. In this, MOLINA failed, for which reason the award of moral damages must be deleted. SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.

The facts are stated in the opinion of the Court. Jose C. Guico, Jr. Law Office for petitioner. DAVIDE, JR., C.J.:

In this petition for certiorari under Rule 65 of the Rules of Court, petitioner seeks to set aside the resolution1 of the National Labor Relations Commission (NLRC) in NLRC Case No. 05-02940-91 and its order2 denying the motion for reconsideration thereof. In 1983, petitioner Philippine Veterans Bank was placed under receivership by the Central Bank (now Bangko Sentral)3 by virtue of Resolution No. 334 issued by the Monetary Board. Petitioner was

subsequently placed under liquidation on 15 June 1985. Consequently, its employees, including private respondent Dr. Jose Teodorico V. Molina (MOLINA), _______________

1 Original Record (OR), 301-307; Rollo, 92-102. Per Veloso, V., Comm., Carale, B. and Quimpo, A., Comms., concurring. 2 OR, 336-337; Rollo, 112-113. 3 Republic Act No. 7653 (The New Central Bank Act), which became effective on 24 August 1993, established the Bangko Sentral ng Pilipinas in lieu of the Central Bank. 512

512 SUPREME COURT REPORTS ANNOTATED Philippine Veterans Bank vs. NLRC were terminated from work and given their respective separation pay and other benefits. To assist in the liquidation, some of petitioners former employees were rehired, among them MOLINA, whose re employment commenced on 15 June 1985. On 11 May 1991, MOLINA filed a complaint4 against Renan V. Santos,5 Pacifico U. Cervantes and Alfredo L. Dizon, members of the liquidation team.6 Docketed as NLRC-NCR Case No. 05-02940-91, the complaint demanded the implementation of Wage Orders Nos. NCR-01 and NCR-02 (hereafter W.O. 1 and W.O. 2) as well as moral damages and attorneys fees in the amount of P300,000. In his position paper, MOLINA alleged that he started working for petitioner as a legal assistant on 17 March 1974. When petitioner was placed under liquidation in 1985, he was retained as Manager II in the Legal Department, where he continued to receive a monthly salary of P3,754.60. Meanwhile, W.O. 1 took effect on 10 November 1990, prescribing a P17-increase in the daily wage of employees whose monthly salary did not exceed P3,802.08. On the other hand, W.O. 2, which became effective on 8 January 1991, mandated a P12-increase in the daily wage of employees whose monthly salary did not exceed P4,319.16. MOLINA claimed that his salary should have been adjusted in compliance with said wage orders. In their position paper, the liquidation team countered that MOLINA was not entitled to any salary increase because he was already receiving a monthly salary of P6,654.60 broken down as follows:

P3,754.60 as basic compensation, P2,000 as representation and transportation allowance (RATA), and a special allowance of P900. _______________

4 Rollo, 37. 5 Later substituted by Ricardo P. Lirio per NLRC resolution dated 25 May 1993; OR, 219-221; Rollo, 6769. 6 Petitioner was subsequently substituted as party respondent upon motion of the liquidators after the Central Bank authorized its rehabilitation. 513

VOL. 317, OCTOBER 26, 1999 513 Philippine Veterans Bank vs. NLRC In his decision,7 Labor Arbiter Potenciano S. Caizares, Jr. rejected the 26.16 factor used by the liquidators in computing the daily wage of MOLINA, adopting instead the factor of 365 days. Consequently, they were ordered to pay MOLINA P4,136.64 and P2,190 representing the wage differentials due him under W.O. 1 and W.O. 2. They were also required to pay him P100,000 in moral damages and attorneys fees. On appeal, the NLRC sustained the labor arbiters ruling after concluding that MOLINA was a regular employee of petitioner with a basic monthly salary of P3,754.60 at the time of his dismissal on 31 January 1992. He was, therefore, entitled to the wage increases mandated by the aforesaid wage orders. In its assailed resolution of 7 April 1997, the NLRC decreed thus: WHEREFORE, the respondents [members of herein petitioners liquidation team] are hereby directed to pay the complainant [MOLINA] the total sum [sic] of P112,501.20 broken down as follows: WO# NCR-01 & 01-A P17.00/day Nov. 1990 - Jan. 7, 1991 WO# NCR-02 & 02-A

P12.00/day Jan. 8, 1991 - Jan. 31, 1992

(Date of termination) Wage Differential:

WO# NCR-01 (Nov. 1990 Jan. 31, 1992 - 15 mos.) P17.00 x 365 12 = P517.08 x 15 mos. - P7,756.20 WO# NCR-02 (Jan. 8, 1991 Jan. 31, 1992 - 13 mos.) P12.00 x 365 12 = P365.00 x 13 mos. - P4,745.00 Total Wage Differential P 12,501.20 Moral Damages & Attorneys Fees P100,000.00 TOTAL AWARD P112,501.20 SO ORDERED.8 _______________

7 OR, 38-45; Rollo, 47-54. 8 Rollo, 101-102. 514

514

SUPREME COURT REPORTS ANNOTATED Philippine Veterans Bank vs. NLRC As MOLINA moved for the execution of the NLRC resolution, petitioner, in turn, moved for its reconsideration. In its order of 27 June 1997, the NLRC denied petitioners motion, prompting the latter to file the instant petition with a prayer for the issuance of a temporary restraining order and writ of preliminary injunction. In this action, petitioner questions the propriety of its substitution as a party-respondent below on the pretext that it was thereby deprived of its right to due process. Second, MOLINA was alluding to acts committed by the representatives of the then Central Bank. Petitioner emphasizes that he was rehired only to assist in the liquidation process.9 In fact, all its employees were dismissed and given their corresponding separation pay and benefits. At that moment, the employer-employee relationship between petitioner and MOLINA ceased to exist. Third, petitioner maintains that MOLINA is estopped from claiming that it continued to be his employer during the rehabilitation period since the admissions in his pleadings, one of which is that the liquidators were his employers, are binding and conclusive. Nonetheless, petitioner reiterates the arguments raised by the original respondents, particularly that the factor of 26.16 should have been applied in determining MOLINAs daily wage. Doing so would show that MOLINAs daily pay exceeded the minimum wage and, therefore, was beyond the scope of the wage orders. Petitioner also avers that the award of P100,000 in moral damages and attorneys fees was inappropriate since the complaint did not specify the same, and it was clearly excessive, considering that the case was decided based on the pleadings and without the benefit of trial. In fact, MOLINA failed to prove his claim for both moral damages and attorneys fees. Even if due, the amount far surpassed any actual damage that MOLINA may have suffered. In any event, moral dam_______________

9 The banks closure was upheld by this Court in Philippine Veterans Bank Employees Union-NUBE v. Philippine Veterans Bank, 189 SCRA 14 [1994]. 515

VOL. 317, OCTOBER 26, 1999 515 Philippine Veterans Bank vs. NLRC

ages may only be recovered in labor cases when the dismissal is attended by bad faith or fraud, or when it constitutes an act oppressive to labor or committed in a manner contrary to good morals, good customs or public policy. MOLINAs dismissal was made in the ordinary course of business. On the other hand, MOLINA primarily asserts that upon petitioners rehabilitation it assumed all the rights and obligations of the liquidator, including the NLRCs monetary award arising from the labor complaint he filed against the liquidation team. The Office of the Solicitor General supports the NLRCs finding that MOLINA was entitled to the wage increases because it was never disputed that his salary of P3,754.60 was clearly covered by the wage orders. The liquidators, however, used the 26.16 instead of the 365 factor in computing his daily wage. The OSG cites the ruling of the National Wages Council in its letter10 to the Philippine Veterans Bank Retained Employees, where the Council opined that the retained employees were entitled to the wage increase computed on the basis of 365 days. It also agrees with the NLRCs conclusion that MOLINA is entitled to moral damages and attorneys fees, although they must be separately specified. Finally, the OSG opines that upon the rehabilitation of petitioner, it assumed all the assets, liabilities, rights and obligations of the liquidation team. This would include the salaries of the employees hired for liquidation purposes, such as MOLINA. In its reply, petitioner insists that when it was placed under liquidation, it lost its juridical personality, such that it could no longer enter into contracts or transact business. All its assets and liabilities were turned over to the Central Bank. MOLINAs complaint pertained to acts committed during liquidation and so was correctly filed against the liquidation team. Its substitution as party-respondent was clearly erroneous. _______________

10 OR, 26-27. 516

516 SUPREME COURT REPORTS ANNOTATED Philippine Veterans Bank vs. NLRC Hence, the issues to be resolved are: (1) Are W.O. 1 and W.O. 2 applicable to MOLINA? (2) Is MOLINA entitled to moral damages and attorneys fees? (3) If so, who is liable to pay MOLINAs claims? We see no reason to disturb the factual finding of the labor arbiter, and affirmed by the NLRC, that MOLINAs salary was within the coverage of the cited wage orders. Well-settled is the rule that the

findings of fact of quasi-judicial bodies are generally accorded respect and finality where they are supported by substantial evidence.11 Indeed, MOLINAs monthly salary of P3,754.60 was neve r at issue. What was in dispute was the computation of his daily wage. W.O. 1 expressly states that employees having a monthly salary of not more than P3,802.08 are entitled to receive the mandated wage increase. Undeniably, MOLINA was receiving a monthly salary of P3,754.60. This fact alone leaves no doubt that he should benefit from said wage order. On the other hand, W.O. 2 raised the ceiling for entitlement to the wage increase. If MOLINA was covered by the earlier wage order, with more reason should the later wage order apply to him. Worth mentioning is the opinion12 rendered by the National Wages Council on the query of the Philippine Veterans Bank Retained Employees, on whether they were entitled to a wage increase under Republic Act No. 6640,13 viz.: The documents attached to your query show that the Bank has been consistently using the factor of 365 days in computing your equivalent monthly salary prior to its being placed under receivership by the Central Bank. This is evident in the wage and allowance _______________

11 Metro Transit Organization, Inc. v. NLRC, 263 SCRA 313, 319 [1996]; Sebuguero v. NLRC, 248 SCRA 532, 544 [1995]; Philippine National Construction Corporation v. NLRC, 245 SCRA 668, 675 [1995]. 12 Supra note 10. 13 The New Minimum Wage Law, which took effect on 14 December 1987. 517

VOL. 317, OCTOBER 26, 1999 517 Philippine Veterans Bank vs. NLRC increases granted under previous Presidential Decrees and Wage Orders, which were given by the Bank on monthly basis, i.e., where the rest days are unworked [sic] but paid. This is also indicated in the appointment and service records of bank personnel who started out as daily paid employees and were eventually promoted as permanent employees with fixed monthly salaries. However, when R.A. 6640 went into force, the Bank unilaterally reduced the factor to 262 instead of maintaining factor 365 as was the practice/policy long before the effectivity of the Act. And when R.A. 6727 took effect, the Bank

reverted to the old practice/policy of using factor 365 days in computing your equivalent monthly rate salary. x x x May we add that the old practice of the bank in using factor 365 days in a year in determining your equivalent monthly salary cannot unilaterally be changed by your employer without the consent of the employees, such practice being now a part of the terms and conditions of your employment. An employment agreement, whether written or unwritten, is a bilateral contract and as such either party thereto cannot change or amend the terms thereof without the consent of the other party thereto. From the foregoing, it is clear that you are entitled to the wage increase under R.A. 6440 computed on the basis of 365 paid days and to the corresponding salary differentials as a result of the application of this factor. [Emphasis supplied] Evidently, the use of the 365 factor is binding and conclusive, forming as it did part of the employment contract. Petitioner can no longer invoke the 26.16 factor after it voluntarily adopted the 365 factor as a policy even prior to its receivership. To abandon such policy and revert to its old practice of using the 26.16 factor would be a diminution of a labor benefit, which is prohibited by the Labor Code.14 It cannot be doubted that the 365 factor favors petitioners employees, including MOLINA, because it results in a higher determination of their monthly salary. _______________

14 Art. 100 of the Labor Code provides: Prohibition against elimination or diminution of benefits. Nothing in this Book shall be construed to eliminate or in any way diminish supplements, or other employee benefits being enjoyed at the time of promulgation of this Code. 518

518 SUPREME COURT REPORTS ANNOTATED Philippine Veterans Bank vs. NLRC As to the second issue, we agree with the NLRC that MOLINA is entitled to moral damages and attorneys fees. He may have omitted such claims in his complaint, but he certainly included them in his position paper. We hold that such allegation is sufficient to enable the complainant to seek an award thereof. The complaint being pro forma, MOLINAs omission to specify a claim for damages does not bar recovery thereof especially when, as in this case, such a claim was prayed for in his position paper.15 The NLRC, however, did not distinguish between attorneys fees and moral damages in affirming the award of P100,000 to MOLINA. We hold that awards for moral damages and attorneys fees cannot be

consolidated for they are different in nature and each must be separately determined.16 Since the Labor Code limits attorneys fees to ten percent of the wages awarded,17 and the total wage differential due MOLINA was computed at P12,501.20, only P1,250.12 should have been awarded as attorneys fees. Moving on to the issue of moral damages, the records show that MOLINA based his claim on the alleged failure of the liquidation team to implement the benefits of the wage orders, without submitting any proof in support thereof. It is basic, however, that for moral damages to be awarded, the claimant must satisfactorily prove its factual basis and causal connection with the respondents acts.18 In this, MOLINA failed, for which reason the award of moral damages must be deleted. _______________

15 See Special Police and Watchmen Association (PLUM) Federation v. NLRC, 278 SCRA 828, 835 [1997]. 16 People v. Aringue, 283 SCRA 291, 305 [1997]; Solid Homes, Inc. v. Court of Appeals, 275 SCRA 267, 289 [1997]; Del Mundo v. Court of Appeals, 240 SCRA 348, 356 [1995]. 17 Article 111 thereof provides: Attorneys fees. (a) In cases of unlawful withholding of wages the culpable party may be assessed attorneys fees equivalent to ten percent of the amount of wages recovered. x x x; Sebuguero v. NLRC, supra note 11, 548. 18 See People v. Adora, 275 SCRA 441, 470 [1997]; Philippine Airlines, Inc. v. NLRC, 259 SCRA 459, 473 [1996]; People v. Sequio, 254 SCRA 79, 102-103 [1996]. 519

VOL. 317, OCTOBER 26, 1999 519 Philippine Veterans Bank vs. NLRC Finally, we rule that the payment of MOLINAs claims devolves upon petitioner, not the liquidation team. When a bank is declared insolvent and placed under receivership, the Monetary Board of the Central Bank determines whether to proceed with the liquidation or reorganization of the financially distressed bank.19 A receiver takes control and possession of the assets of the bank for the benefit of its creditors20 and concurrently represents the bank.21 On the other hand, a liquidator assumes the role of the receiver upon the determination by the Monetary Board that the bank can no longer resume business. His task is to dispose of all the assets of the bank and effect partial payments of its obligations in accordance with their legal priority.22 In both receivership and liquidation proceedings, the bank retains its juridical personality notwithstanding the closure of its business; in fact, the bank may even be

sued.23 Its corporate existence is assumed by the receiver or liquidator. The latter, however, acts not only for the benefit of the bank, but for the banks creditors as well.24 _______________

19 Rural Bank of Buhi, Inc. v. Court of Appeals, 162 SCRA 288, 302 [1988]. 20 Villanueva v. Court of Appeals, 244 SCRA 395, 404 [1995]; 10 Am Jur 2d Banks 764 [1963]. 21 Section 29, Central Bank Act. 22 Ibid.; Central Bank of the Philippines v. Court of Appeals, 220 SCRA 536, 547 [1993]; Banco Filipino Savings & Mortgage Bank v. Monetary Board, Central Bank of the Philippines, 204 SCRA 768, 789-790 [1991]; See Rural Bank of Lucena, Inc. v. Arca, 15 SCRA 66, 71 [1965]. 23 See Central Bank of the Philippines v. Court of Appeals, 208 SCRA 652, 679 [1992]; Central Bank of the Philippines v. Morfe, 63 SCRA 114 [1975], citing Rohr v. Stanton Trust & Savings Bank, 76 Mont. 248, 245 Pac. 947. 24 Villanueva v. Court of Appeals, supra note 20; Central Bank of the Philippines v. Court of Appeals, 220 SCRA 536, 547 [1993]; Banco Filipino Savings & Mortgage Bank v. Monetary Board, Central Bank of the Philippines, supra note 22, 788. 520

520 SUPREME COURT REPORTS ANNOTATED Philippine Veterans Bank vs. NLRC In the instant case, petitioner was initially closed and put under receivership and liquidation. Subsequently, its rehabilitation was effected by virtue of Republic Act No. 716925 and Monetary Board Resolution No. 348 dated 10 April 1992. Rehabilitation contemplates a continuance of corporate life and activities in an effort to restore and reinstate the corporation to its former position of successful operation and solvency.26 Upon its rehabilitation, petitioner assumed the rights and obligations of the receiver and liquidator. This includes MOLINAs claim for unpaid wages. It must be borne in mind that all the acts of the receiver and liquidator pertain to petitioner, both having assumed petitioners corporate existence. Petitioner cannot disclaim liability by arguing that the nonpayment of MOLINAs just wages was committed by the liquidators during the liquidation period. WHEREFORE, this case is DISMISSED. The assailed Resolution of 7 April 1997 and Order of 27 June 1997 of the National Labor Relations in NLRC Case No. 05-02940-91 are AFFIRMED with the MODIFICATION

that the award of moral damages is deleted and the award of attorneys fees is reduced to ONE THOUSAND TWO HUNDRED FIFTY & 12/100 PESOS (P1,250.12). No pronouncement as to costs. SO ORDERED. Kapunan, Pardo and Ynares-Santiago, JJ., concur. Puno, J., On official leave. Case dismissed; Assailed resolution and order affirmed with modification. _______________

25 An Act to Rehabilitate the Philippine Veterans Bank Created under Republic Act No. 3518, Providing the Mechanisms Therefor, and for Other Purposes. 26 Ruby Industrial Corporation v. Court of Appeals, 284 SCRA 445, 460 [1998], citing New York Title and Mortgage Co. v. Friedman, 276 N.Y.S. 72, 153, Misc. 697. 521

VOL. 317, OCTOBER 26, 1999 521 Tai Lim vs. Court of Appeals Note.Moral damages must be understood to be in concept of grants not punitive or corrective in nature calculated to compensate the claimant for the injury suffered. (Morales vs. Court of Appeals, 274 SCRA 282 [1997]) o0o [Philippine Veterans Bank vs. NLRC, 317 SCRA 510(1999)]