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BANKING Batch 1 Finals

BANKING Batch 1 Finals

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BANKING Batch 1 Finals
BANKING Batch 1 Finals

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[G.R. No. 115849. January 24, 1996.

] FIRST PHILIPPINE INTERNATIONAL BANK (Formerly Producers Bank of the Philippines) and MERCURIO RIVERA, petitioners, vs. COURT OF APPEALS, CARLOS EJERCITO, in substitution of DEMETRIO DEMETRIA, and JOSE JANOLO, respondents.

Ongkiko, Dizon, Ongkiko & Panga Law Office and Domingo and Dizon for
petitioners.

Castillo, Laman, Tan, Pantalleon & San Jose for Carlos Ejercito.
SYLLABUS

cdta

1.CIVIL LAW; PRIVATE INTERNATIONAL LAW; ORIGIN OF FORUM-SHOPPING. — Forum-shopping originated as a concept in private international law, where non-resident litigants are given the option to choose the forum or place wherein to bring their suit for various reasons or excuses, including to secure procedural advantages, to annoy and harass the defendant, to avoid overcrowded dockets, or to select a more friendly venue. To combat these less than honorable excuses, the principle of forum non conveniens was developed whereby a court, in conflict of law cases, may refuse impositions on its jurisdiction where it is not the most "convenient" or available forum and the parties are not precluded from seeking remedies elsewhere. Hence, according to Words and Phrases, "a litigant is open to the charge of 'forum shopping' whenever he chooses a forum with the slight connection to factual circumstances surrounding his suit, and litigants should be encouraged to attempt to settle their differences without imposing undue expense and vexatious situations on the courts."
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2.REMEDIAL LAW; CIVIL PROCEDURE; FORUM-SHOPPING; AS A CHOICE OF VENUE AND AS A CHOICE OF REMEDY; CONSTRUED. — In the Philippines, forum shopping has acquired a connotation encompassing not only a choice of venues, as it was originally understood in conflicts of law, but also to a choice of remedies. As to the first (choice of venues), the Rules of Court, for example, allow a plaintiff to commence personal actions "where the defendant or any of the defendants resides or may be found, or where the plaintiff or any of the plaintiffs resides, at the election of the plaintiff" (Rule 4, Sec. 2 [b]). As to remedies, aggrieved parties, for example, are given a choice of pursuing civil liabilities independently of the criminal, arising from the same set of facts. A

passenger of a public utility vehicle involved in a vehicular accident may sue on culpa contractual, culpa aquiliana or culpa criminal — each remedy being available independently of the others — although he cannot recover more than once. "In either of these situations (choice of venue or choice of remedy), the litigant actually shops for a forum of his action. This was the original concept of the term forum-shopping. 3.ID.; ID.; ID.; AS AN UNETHICAL PRACTICE; WHEN PRESENT. — What originally started both in conflicts of laws and in our domestic law as a legitimate device for solving problems has been abused and mis-used to assure scheming litigants of dubious reliefs. To avoid or minimize this unethical practice of subverting justice, the Supreme Court, as already mentioned, promulgated Circular 28-91. And even before that, the Court had proscribed it in the Interim Rules and Guidelines issued on January 11, 1983 and had struck down in several cases the inveterate use of this insidious malpractice. Forum-shopping as "the filing of repetitious suits in different courts" has been condemned by Justice Andres R. Narvasa (now Chief Justice) in Minister of Natural Resources, et al., vs. Heirs of Orval Hughes, et al., "as a reprehensible manipulation of court processes and proceedings . . .." When does forum shopping take place? "There is forumshopping whenever, as a result of an adverse opinion in one forum, a party seeks a favorable opinion (other than by appeal or certiorari) in another. The principle applies not only with respect to suits filed in the courts but also in connection with litigations commenced in the courts while an administrative proceeding is pending, as in this case, in order to defeat administrative processes and in anticipation of an unfavorable administrative ruling and a favorable court ruling. This is specially so, as in this case, where the court in which the second suit was brought, has no jurisdiction."
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4.ID; ID.; ID.; AS A GROUND FOR SUMMARY DISMISSAL.— The test for determining whether a party violated the rule against forum shopping has been laid down in the 1986 case of Buan vs. Lopez, 145 SCRA 34 (October 13, 1986), also by Chief Justice Narvasa, and that is, forum shopping exists where the elements of litis pendentia are present or where a final judgment in one case will amount to res judicata in the other. Consequently, where a litigant (or one representing the same interest or person) sues the same party against whom another action or actions for the alleged violation of the same right and the enforcement of the same relief is/are still pending, the defense of litis pendencia in one case is a bar to the others; and, a final judgment in one would constitute res judicata and this would cause the dismissal of the rest. In either case, forum-shopping could be cited by the other party as a ground to ask for summary dismissal of the two (or more) complaints or petitions, and for the

imposition of the other sanctions, which are direct contempt of court, criminal prosecution, and disciplinary action against the erring lawyer. What is truly important to consider in determining whether forum-shopping exists or not is the vexation caused the courts and parties-litigant by a party who asks different courts and/or administrative agencies to rule on the same or related causes and/or to grant the same or substantially the same reliefs, in the process creating the possibility of conflicting decisions being rendered by the different fora upon the same issue. 5. D.; ID.; ID.; ID.; APPLICATION OF PRINCIPLE IN CASE AT BAR. — Applying the foregoing principles in the present case and comparing it with the Second Case, it is obvious that there exist identity of parties or interests represented, identity of rights or causes and identity of reliefs sought. Very simply stated, the original complaint in the court a quo which gave rise to the instant petition was filed by the buyer to enforce the alleged perfected sale of real estate. On the other hand, the complaint in the Second Case seeks to declare such purported sale involving the same real property "as unenforceable as against the Bank," which is the petitioner herein. In other words, in the Second Case, the majority stockholders, in representation of the Bank, are seeking to accomplish what the Bank itself failed to do in the original case in the trial court. In brief, the objective or the relief being sought, though worded differently, is the same, namely, to enable the petitioner Bank to escape from the obligation to sell the property to respondent. In this case, a decision recognizing the perfection and directing the enforcement of the contract of sale will directly conflict with a possible decision in the Second Case barring the parties from enforcing or implementing the said sale. Indeed, a final decision in one would constitute res judicata in the other. 6.COMMERCIAL LAW; CORPORATION CODE; DERIVATIVE SUIT, CONSTRUED. — "An individual stockholder is permitted to institute a derivative suit on behalf of the corporation wherein he holds stock in order to protect or vindicate corporate rights, whenever the officials of the corporation refuse to sue, or are the ones to be sued or hold the control of the corporation. In such actions, the suing stockholder is regarded as a nominal party, with the corporation as the real party in interest (Gamboa v. Victoriano, 90 SCRA 40, 47 [1979]).
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7.ID.; ID.; WHEN THE VEIL OF CORPORATE FICTION MAY BE LIFTED. — Petitioner also tried to seek refuge in the corporate fiction that the personality of the Bank is separate and distinct from its shareholders. But the rulings of this Court are consistent: "When the fiction is urged as a means of perpetrating a fraud or an illegal act or as a vehicle for the evasion of an existing obligation, the

REQUISITES.S. Accordingly. cannot be allowed to trifle with court processes. (2) Object certain which is the subject matter of the contract. the agent is secretly abusing his authority and attempting to perpetrate a fraud upon his principal or some other .CIVIL LAW. Intermediate Appellate Court. 223 SCRA 350 (June 14. even though no benefit may accrue to the bank therefrom (10 Am Jur 2d. where it was held that: "Conformably. 114). nor will it be permitted to shirk its responsibility for such frauds. 184 SCRA 166). DOCTRINE OF APPARENT AUTHORITY. in the particular case. 1993). we now add the instant case. particularly where. Court of Appeals." A bank is liable for wrongful acts of its officers done in the interests of the bank or in the course of dealing of the officers in their representative capacity but not for acts outside the scope of their authority (9 C. BANKS. A bank holding out its officers and agents as worthy of confidence will not be permitted to profit by the frauds they may thus be enabled to perpetrate in the apparent scope of their employment. the corporation itself has not been remiss in vigorously prosecuting or defending corporate causes and in using and applying remedies available to it. p. CONSTRUED. — The authority of a corporate officer in dealing with third persons may be actual or apparent. as in this case. The doctrine of "apparent authority. P. 417). 8." 9. Shareholders.circumvention of statutes. To rule otherwise would be to encourage corporate litigants to use their shareholders as fronts to circumvent the stringent rules against forum shopping. The agent's apparent representation yields to the principal's true representation and the contract is considered as entered into between the principal and the third person (citing National Food Authority vs. whether suing as the majority in direct action or as the minority in a derivative suit." with special reference to banks.. CONTRACT. CORPORATION CODE. the veil with which the law covers and isolates the corporation from the members or stockholders who compose it will be lifted to allow for its consideration merely as an aggregation of individuals. the achievement or perfection of a monopoly or generally the perpetration of knavery or crime. (3) Cause of the obligation which is established. a banking corporation is liable to innocent third persons where the representation is made in the course of its business by an agent acting within the general scope of his authority even though. — Article 1318 of the Civil Code enumerates the requisites of a valid and perfected contract as follows: "(1) Consent of the contracting parties. we have declared in countless decisions that the principal is liable for obligations contracted by the agent. was laid out in Prudential Bank vs. and declare herewith that the corporate veil cannot be used to shield an otherwise blatant violation of the prohibition against forum-shopping.COMMERCIAL LAW." In addition to the many cases where the corporate fiction has been disregarded.J.

— The statute of frauds will not apply by reason of the failure of petitioners to object to oral testimony proving petitioner Bank's counter-offer of P5. 204 NW 818. enormous and extensive as they are. — Basic is the doctrine that in petitions for review under Rule 45 of the Rules of Court. FINDINGS OF FACTS BY THE COURT OF APPEALS. pursuant to Article 1405 of the Civil Code. As private respondent pointed out in his Memorandum.REMEDIAL LAW.. oral testimony on the reaffirmation of the counter-offer of P5. — While admittedly. for his own ultimate benefit (McIntosh v.person. However. NOT REVIEWABLE BY THE SUPREME COURT.5 million. petitioners — by such utter failure to object — are deemed to have waived any defects of the contracts under the statute of frauds." Such powers. Section 28-A merely gives the conservator power to revoke . Indeed. "Application of these principles is especially necessary because banks have a fiduciary relationship with the public and their stability depends on the confidence of the people in their honesty and efficiency. 11. therefore.CIVIL LAW. because the trial court is in a better position to observe the demeanor of all the witnesses and their courtroom manner as well as to examine the real evidence presented . cannot extend to the post-facto repudiation of perfected transactions. it must be pointed out that such powers must be related to the "(preservation of) the assets of the bank (the reorganization of) the management thereof and (the restoration of) its viability. Dakota Trust Co. absent any serious abuse or evident lack of basis or capriciousness of any kind. 52 ND 752. 40 ALR 1021). Hence. conclusions of fact of a trial judge — as affirmed by the Court of Appeals — are conclusive upon this Court. findings of fact by the Court of Appeals are not reviewable by the Supreme Court. RULE AND EXCEPTION. otherwise they would infringe against the non-impairment clause of the Constitution." 10. PETITION FOR REVIEW. the Central Bank law gives vast and far-reaching powers to the conservator of a bank. there are settled exceptions where the Supreme Court may disregard findings of fact by the Court of Appeals.POWERS OF THE CONSERVATOR. WHEN DEFECTS THEREOF UNDER STATUTE OF FRAUD DEEMED WAIVED. 12. Such faith will be eroded where banks do not exercise strict care in the selection and supervision of its employees. resulting in prejudice to their depositors. CONTRACTS.5 million is aplenty — and the silence of petitioners all throughout the presentation makes the evidence binding on them. how can it delegate such non-existent powers to the conservator under Section 28-A of said law? Obviously. If the legislature itself cannot revoke an existing valid contract.

1994 of the respondent Court of Appeals 1 in CA-G. The dispositive portion of the said Decision reads: "WHEREFORE. A contrary understanding of the law would simply not be permitted by the Constitution. His authority would be only to bring court actions to assail such contracts — as he has already done so in the instant case. yielding nothing to perfected contractual rights nor vested interests of the third parties who had dealt with the Bank. may commitments given by bank officers in an exchange of letters and/or in a meeting with the buyers constitute a perfected and enforceable contract of sale over 101 hectares of land in Sta. deemed to be defective — i. may the Central Bank-appointed conservator of Producers Bank (now First Philippine International Bank) repudiate such "apparent authority" after said contract has been deemed perfected? During the pendency of a suit for specific performance. voidable. DECISION PANGANIBAN. unenforceable or rescissible. What the said board cannot do — such as repudiating a contract validly entered into under the doctrine of implied authority — the conservator cannot do either. his power is not unilateral and he cannot simply repudiate valid obligations of the Bank. Rosa. CV No. Neither by common sense. at the expense of third parties. does the filing of a "derivative suit" by the majority shareholders and directors of the distressed bank to prevent the enforcement or implementation of the sale violate the ban against forum-shopping? Simply stated. the conservator merely takes the place of a bank's board of directors. these are the major questions brought before this Court in the instant Petition for review on certiorari under Rule 45 of the Rules of Court.contracts that are. Hence. by simply getting the conservator to unilaterally revoke all previous dealings which had one way or another come to be considered unfavorable to the Bank. Ineluctably. under existing law. void. Laguna? Does the doctrine of "apparent authority" apply in this case? If so.. 4 and 6 of its .e. 35756 and the Resolution promulgated June 14. the decision of the lower court is MODIFIED by the elimination of the damages awarded under paragraphs 3.R. To rule otherwise would be to enable a failing bank to become solvent. J : p In the absence of a formal deed of sale. to set aside the Decision promulgated January 14. 1994 denying the motion for reconsideration.

Ordering the defendants to pay the plaintiffs. more or less. covered by and embraced in Transfer Certificates of Title Nos. between the plaintiffs as buyers and the defendant Producers Bank for an agreed price of Five and One Half Million (P5. of the Land Records of Laguna. to execute in favor of said plaintiffs a deed of absolute sale over the aforementioned six (6) parcels of land. cdta "2. "3. In all other aspects. upon finality of this decision and receipt from the plaintiffs the amount of P5. jointly and severally. jointly and severally.Ordering the defendants.Ordering the defendants.5 Million. Nos.00 as exemplary damages. to pay plaintiffs the sum of P100. herein and hereafter.00) Pesos. "Costs against appellant bank. is as follows: 2 decision dated July 10. "6.000. cdta "5. 1991. judgment is hereby rendered in favor of the plaintiffs and against the defendants as follows: "1.dispositive portion and the reduction of the award in paragraph 5 thereof to P75. Sta.00 each in moral damages. Laguna with an area of 101 hectares.Declaring the existence of a perfected contract to buy and sell over the six (6) parcels of land situated at Don Jose.C.000." The dispositive portion of the trial court's other hand. T-106932 to T-106937. actual and moderate damages in the amount of P20.000.500.T.000. to legally refer to the plaintiffappellee Carlos C. on the "WHEREFORE. Ejercito. inclusive. jointly and severally.00.Ordering defendant Producers Bank of the Philippines. cdta "All references to the original plaintiffs in the decision and its dispositive portion are deemed. and to immediately deliver to the plaintiffs the owner's copies of T. jointly and severally.000.00 for and by way of attorney's fees. to pay plaintiffs Jose A. inclusive. . said decision is hereby AFFIRMED.00. to pay the plaintiffs the amount of P400. Rosa. premises considered. to be assessed against defendant bank. for purposes of registration of the same deed and transfer of the six (6) titles in the names of the plaintiffs.Ordering the defendants. Janolo and Demetrio Demetria the sums of P200.000. "4. T-106932 to T-106937.

Thence. upon the suggestion of BYME Investment's legal counsel. Respondent Carlos Ejercito (respondent Ejercito. Petitioner Mercurio Rivera (petitioner Rivera. Head Manager of the Property Management Department of the petitioner Bank. Respondent Court of Appeals is the court which issued the Decision and Resolution sought to be set aside through this petition. rejoinder. T-106932 to T-106937. petitioner Bank. The property used to be owned by BYME Investment and Development Corporation which had them mortgaged with the bank as collateral for a loan. "(2)In the early part of August 1987 said plaintiffs. wanted to purchase the property and thus initiated negotiations for that purpose. the parties filed their respective memoranda and reply memoranda. Demetrio Demetria and Jose O. and covered by Transfer Certificates of Title Nos. After carefully deliberating on the aforesaid submissions. for brevity) is of legal age and was. cdta The Facts The facts of this case are summarized in the respondent Court's Decision follows: "(1)In the course of its banking operations. for brevity) is of legal age and is the assignee of original plaintiffs-appellees Demetrio Demetria and Jose Janolo. 1995. the Court assigned the case to the undersigned ponente for the writing of this Decision. as ." After the parties filed their comment. sur-rejoinder and reply to sur-rejoinder. Janolo. Manager of the Property Management Department of 3 . 1995. Jose Fajardo. met with defendant Mercurio Rivera. at all times material to this case. The original plaintiffs. Laguna."With costs against the defendants. cdta The Parties Petitioner First Philippine International Bank (formerly Producers Bank of the Philippines. The First Division transferred this case to the Third Division per resolution dated October 23. Rosa. the petition was given due course in a Resolution dated January 18. reply. Sta. the defendant Producer Bank of the Philippines acquired six parcels of land with a total area of 101 hectares located at Don Jose. for brevity) is a banking institution organized and existing under the laws of the Republic of the Philippines.

pp. Laguna.246 sq. T-10693370. T-106936187. My offer is for PESOS: THREE MILLION FIVE HUNDRED THOUSAND (P3. with a total area of 101 hectares.m.m.the defendant bank.m. . Mercurio Q. 1987 The Producers Bank of the Philippines Makati. Rosa. 1987 (Exh. 16. Metro Manila cdta Attn.768 sq.AREA T-106932113. as follows: August 30.481 sq. cdta Kindly contact me at Telephone Number 921-1344. The meeting was held pursuant to plaintiffs' plan to buy the property (TSN of Jan. Rivera Manager. Gentlemen: I have the honor to submit my formal offer to purchase your properties covered by titles listed hereunder located at Sta. following the advice of defendant Rivera. T-10693596. 7-10). After the meeting.000. 1990. Property Management Dept. plaintiff Janolo.500.899 sq.580 sq. T-106937481. TCT No. made a formal purchase offer to the bank through a letter dated August 30. "B"). more or less.114 sq.m. in cash.m.00) PESOS.m. T-10693452.Mr.

). 1987. plaintiff Janolo. Please be informed however that the bank's counter-offer is at P5. wrote (Exh. "C"): September 1. 1987 J-P M-P GUTIERREZ ENTERPRISES 142 Charisma St. Laguna (formerly owned by Byme Industrial Corp. JANOLO Dear Sir: cdta Thank you for your letter-offer to buy our six (6) parcels of acquired lots at Sta. 1987 Producers Bank Paseo de Roxas Makati. We shall be very glad to hear your position on the matter. "D"): September 17. Metro Manila cdta . defendant Rivera made on behalf of the bank a formal reply by letter which is hereunder quoted (Exh. Doña Andres II Rosario. responding to Rivera's aforequoted reply.."(3)On September 1. Pasig. 1987. Metro Manila Attention:JOSE O. Best regards. "(4)On September 17. Rosa.5 million for more than 101 hectares on lot basis.

Laguna Gentlemen: Pursuant to our discussion last 28 September 1987. "E"): cdta The Producers Bank of the Philippines Paseo de Roxas. I would like to amend my previous offer and I now propose to buy the said lot at P4. Rosa. Laguna.000. for a total price of PESOS: FIVE MILLION FIVE HUNDRED THOUSAND (P5. the following letter (Exh. Mercurio Rivera Gentlemen: In reply to your letter regarding my proposal to purchase your 101hectare lot located at Sta.250 million in CASH. 1987. Laguna. .00). 1987 between the plaintiffs and Luis Co. Rivera as well as Fajardo.500. Makati Metro Manila Attention:Mr. "(6)On October 12. Two days later. What took place was a meeting on September 28. plaintiff Janolo sent to the bank. Hoping that this proposal meets your satisfaction. formerly owned by Byme Investment. we are pleased to inform you that we are accepting your offer for us to purchase the property at Sta. 1987.Attention:Mr. Mercurio Rivera Re:101 Hectares of Land in Sta. through Rivera. or on September 30. Rosa. the conservator of the bank (which has been placed under conservatorship by the Central Bank since 1984) was replaced by an Acting Conservator in the person of defendant Leonida T. attended the meeting. Rosa. "(5)There was no reply to Janolo's foregoing letter of September 17. the Senior Vice-President of defendant bank. the BYME lawyer. Thank you. 1987.

plaintiffs through a letter to defendant Rivera (Exhibit "G") tendered payment of the amount of P5. As detailed by the trial court in its decision. located at Sta. Janolo. on November 17. Demetrio Demetria Dear Sir: Your proposal to buy the properties the bank foreclosed from Byme Investment Corp. the parcels of land involved in the transaction were advertised by the bank for sale to any interested buyer (Exhs. Producers Bank Paseo de Roxas." Defendants refused to receive both the payment and the letter. Laguna is under study yet as of this time by the newly created committee for submission to the newly designated Acting Conservator of the bank. Rosa. which demands were in one form or another refused by the bank. 1987. . For your information. T-106932 to 106937. and which are covered by TCT No. Makati Metro Manila Dear Mr. Jose O. On November 4." Thus: cdta Mr. Mercurio Rivera Manager. "H" and "H-1"). Laguna.5 million "pursuant to (our) perfected sale agreement. Rivera: This is in connection with the offer of our client.Encarnacion. "F"): cdta Attention:Atty. "(7)What thereafter transpired was a series of demands by the plaintiffs for compliance by the bank with what plaintiff considered as a perfected contract of sale. Instead. Plaintiffs demanded the execution by the bank of the documents on what was considered as a "perfected agreement. 1987. Mr. Rosa. to purchase your 101-hectare lot located in Sta. defendant Rivera wrote plaintiff Demetria the following letter (Exh.

1987 (Exh. "L" and "L-1"). Metro Manila Attn. Otherwise. defendant Encarnacion. this time through the Acting Conservator. that said letter has been "referred . to the office of our Conservator for proper disposition". you have advertised for sale the same lot to others. We were also informed that despite repeated follow-up to consummate the purchase. . acknowledged receipt of the foregoing letter and stated. On December 14. Instead. . "I"). NIDA ENCARNACION Central Bank Conservator . we shall be constrained to file the necessary court action to protect the interest of our client. 1987 of this same lot in the amount of P5. you now refuse to honor your commitment. therefore. 1987.5 million at your advice. we are making this formal demand upon you to consummate and execute the necessary actions/documentation within three (3) days from your receipt hereof.5 million was accepted by our client thru a letter dated September 30. no response came from the Acting Conservator.:Atty. the plaintiffs made a second tender of payment (Exh. it appears that your counter-offer dated September 1. 1987 and was received by you on October 5. "(8)Defendant bank. Makati. in its communication of December 2. We are ready to remit the agreed amount of P5. We trust that you will be guided accordingly. cdta In behalf of our client. through defendant Rivera.From the documents at hand. In view of the above circumstances. Plaintiffs' letter reads: cdta PRODUCERS BANK OF THE PHILIPPINES Paseo de Roxas. 1987. However. we believe that an agreement has been perfected.

Gentlemen: We are sending you herewith, in-behalf of our client, Mr. JOSE O. JANOLO, MBTC Check No. 258387 in the amount of P5.5 million as our agreed purchase price of the 101-hectare lot covered by TCT Nos. 106932, 106933, 106934, 106935 106936 and 106937 and registered under Producers Bank. This is in connection with the perfected agreement consequent from your offer of P5.5 Million as the purchase price of the said lots. Please inform us of the date of documentation of the sale immediately.
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Kindly acknowledge receipt of our payment. "(9)The foregoing letter drew no response for more than four months. Then, on May 3, 1988, plaintiff, through counsel, made a final demand for compliance by the bank with its obligations under the considered perfected contract of sale (Exhibit "N"). As recounted by the trial court (Original Record, p. 656), in a reply letter dated May 12, 1988 (Annex "4" of defendant's answer to amended complaint), the defendants through Acting Conservator Encarnacion repudiated the authority of defendant Rivera and claimed that his dealings with the plaintiffs, particularly his counter-offer of P5.5 Million are unauthorized or illegal. On that basis, the defendants justified the refusal of the tenders of payment and the non-compliance with the obligations under what the plaintiffs considered to be a perfected contract of sale. "(10)On May 16, 1988, plaintiffs filed a suit for specific performance with damages against the bank, its Manager Rivera and Acting Conservator Encarnacion. The basis of the suit was that the transaction had with the bank resulted in a perfected contract of sale. The defendants took the position that there was no such perfected sale because the defendant Rivera is not authorized to sell the property, and that there was no meeting of the minds as to the price."
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On March 14, 1991, Henry L. Co (the brother of Luis Co), through counsel Sycip Salazar Hernandez and Gatmaitan, filed a motion to intervene in the trial court, alleging that as owner of 80% of the Bank's outstanding shares of stock, he had a substantial interest in resisting the complaint. On July 8, 1991, the trial court issued an order denying the motion to intervene on the ground that it was filed after trial had already been concluded. It also denied a motion for reconsideration filed thereafter. From the trial court's decision, the Bank, petitioner Rivera and conservator Encarnacion appealed to the Court of Appeals

which subsequently affirmed with modification the said judgment. Henry Co did not appeal the denial of his motion for intervention. In the course of the proceedings in the respondent Court, Carlos Ejercito was substituted in place of Demetria and Janolo, in view of the assignment of the latters' rights in the matter in litigation to said private respondent. On July 11, 1992, during the pendency of the proceedings in the Court of Appeals, Henry Co and several other stockholders of the Bank, through counsel Angara Abello Concepcion Regala and Cruz, filed an action (hereafter, the "Second Case") — purportedly a "derivative suit" — with the Regional Trial Court of Makati, Branch 134, docketed as Civil Case No. 92-1606, against Encarnacion, Demetria and Janolo "to declare any perfected sale of the property as unenforceable and to stop Ejercito from enforcing or implementing the sale". 4 In his answer, Janolo argued that the Second Case was barred by litis pendentia by virtue of the case then pending in the Court of Appeals. During the pre-trial conference in the Second Case, plaintiffs filed a Motion for Leave of Court to Dismiss the Case Without Prejudice. "Private respondent opposed this motion on the ground, among others, that plaintiff's act of forum shopping justifies the dismissal of both cases, with prejudice." 5 Private respondent, in his memorandum, averred that this motion is still pending in the Makati RTC.
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In their Petition follows:

6

and Memorandum,

7

petitioners summarized their position as
I.

"The Court of Appeals erred in declaring that a contract of sale was perfected between Ejercito (in substitution of Demetria and Janolo) and the bank. II. "The Court of Appeals erred in declaring the existence of an enforceable contract of sale between the parties. III. "The Court of Appeals erred in declaring that the conservator does not have the power to overrule or revoke acts of previous management. IV.

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"The findings and conclusions of the Court of Appeals do not conform to the evidence on record."

On the other hand, private respondents prayed for dismissal of the instant suit on the ground 8 that:
I. "Petitioners have engaged in forum shopping. II. "The factual findings and conclusions of the Court of Appeals are supported by the evidence on record and may no longer be questioned in this case. III. "The Court of Appeals correctly held that there was a perfected contract between Demetria and Janolo (substituted by respondent Ejercito) and the bank.
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IV. "The Court of Appeals has correctly held that the conservator, apart from being estopped from repudiating the agency and the contract, has no authority to revoke the contract of sale."
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The Issues
From the foregoing positions of the parties, the issues in this case may be summed up as follows: 1)Was there forum-shopping on the part of petitioner Bank? 2)Was there a perfected contract of sale between the parties? 3)Assuming there was, was the said contract enforceable under the statute of frauds? 4)Did the bank conservator have the unilateral power to repudiate the authority of the bank officers and/or to revoke the said contract?
cdasia

2)"The derivative suit is not properly a suit for and in behalf of the corporation under the circumstances". rights asserted and reliefs sought (as that) currently pending before the Regional Trial Court. To be sure. or any other tribunal or agency. . 92-1606 before the Regional Trial Court of Makati. the Supreme Court promulgated Revised Circular No. In fact. the issues in the two cases are so intertwined that a judgment or resolution in either case will constitute res judicata in the other. (b) to the best of his knowledge. petitioners explain because: 11 that there is no forum-shopping 1)In the earlier or "First Case" from which this proceeding arose. A violation of the said circular entails sanctions that include the summary dismissal of the multiple petitions or complaints. involving a derivative suit filed by stockholders of petitioner Bank against the conservator and other defendants but which is the subject of a pending Motion to Dismiss Without Prejudice. 3)Although the CERTIFICATION/VERIFICATION (supra) signed by the Bank president and attached to the Petition identifies the action as a "derivative suit. 28-91 requiring that a party "must certify under oath . Branch 134." it "does not mean that it is one" and "(t)hat is a legal question for the courts to decide. Makati Branch 134 in the Second Case.) the pendency of Civil Case No." 10 cdasia On the other hand. cdasia ." 9 Private respondent Ejercito vigorously argues that in spite of this verification. . no such action or proceeding is pending" in said courts or agencies. it was the plaintiff. the Court of Appeals.5)Did the respondent Court commit any reversible error in its findings of facts? The First Issue: Was There Forum-Shopping? In order to prevent the vexations of multiple petitions and actions. the Bank was impleaded as a defendant. [that] (a) he has not (t)heretofore commenced any other action or proceeding involving the same issues in the Supreme Court. whereas in the "Second Case" (assuming the Bank is the real party in interest in a derivative suit). petitioners have included a VERIFICATION/CERTIFICATION in their Petition stating "for the record(. petitioners are guilty of actual forum shopping because the instant petition pending before this Court involves "identical parties or interests represented.

or where the plaintiff or any of the plaintiffs resides. We rule for private respondent. may refuse impositions on its jurisdiction where it is not the most "convenient" or available forum and the parties are not precluded from seeking remedies elsewhere. As to the first (choice of venues). To begin with. according to Words and Phrases 14 . the litigant actually shops for a forum of his action. As to remedies. In this light. A passenger of a public utility vehicle involved in a vehicular accident may sue on culpa contractual. culpa aquiliana or culpa criminal — each remedy being available independently of the others — although he cannot recover more than once. but also to a choice of remedies. or to select a more friendly venue. Black's Law Dictionary 13 says that forum shopping "occurs when a party attempts to have his action tried in a particular court or jurisdiction where he feels he will receive the most favorable judgment or verdict. are given a choice of pursuing civil liabilities independently of the criminal. Sec." Hence. for example. allow a plaintiff to commence personal actions "where the defendant or any of the defendants resides or may be found. as it was originally understood in conflicts of laws. . where non-resident litigants are given the option to choose the forum or place wherein to bring their suit for various reasons or excuses. in conflicts of law cases. cdasia In the Philippines. "a litigant is open to the charge of 'forum shopping' whenever he chooses a forum with slight connection to factual circumstances surrounding his suit. to annoy and harass the defendant. To combat these less than honorable excuses. at the election of the plaintiff" (Rule 4. 2 [b]). forum-shopping originated as a concept in private international law 12 . for example. "In either of these situations (choice of venue or choice of remedy). forum shopping has acquired a connotation encompassing not only a choice of venues. to avoid overcrowded dockets. and litigants should be encouraged to attempt to settle their differences without imposing undue expense and vexatious situations on the courts". including to secure procedural advantages.4)Petitioners did not hide the Second Case as they mentioned it in the said VERIFICATION/CERTIFICATION. the principle of forum non conveniens was developed whereby a court. aggrieved parties. the Rules of Court. arising from the same set of facts. This was the original concept of the term forum shopping.

"Thus. as a result of an adverse opinion in one forum. a party seeks a favorable opinion (other than by appeal or certiorari) in another. Lopez 19 . The principle applies not only with respect to suits filed in the courts but also in connection with litigations commenced in the courts while an administrative proceeding is pending. 'forum shopping' had acquired a different concept — which is unethical professional legal practice. This practice had not only resulted to (sic) conflicting adjudications among different courts and consequent confusion enimical (sic) to an orderly administration of justice. . through the encouragement of their lawyers. however. as already mentioned. the Supreme Court." 17 When does forum shopping take place? "There is forum-shopping whenever. Narvasa (now Chief Justice) in Minister of Natural Resources. in order to defeat administrative processes and in anticipation of an unfavorable administrative ruling and a favorable court ruling. et al. as in this case. . et al. has no jurisdiction. as follows: cdasia . or invoke all relevant remedies simultaneously. file their actions in all available courts. "as a reprehensible manipulation of court processes and proceedings." 18 The test for determining whether a party violated the rule against forumshopping has been laid down in the 1986 case of Buan vs."Eventually. Heirs of Orval Hughes. instead of actually making a choice of the forum of their actions. . and that is. Forum shopping as "the filing of repetitious suits in different courts" has been condemned by Justice Andres R. forum-shopping exists where the elements of litis pendentia are present or where a final judgment in one case will amount to res judicata in the other. 1983 and had struck down in several cases 16 the inveterate use of this insidious malpractice. where the court in which the second suit was brought. And this necessitated or had given rise to the formulation of rules and canons discouraging or altogether prohibiting the practice. And even before that. as in this case.. It had created extreme inconvenience to some of the parties to the action." 15 cdasia What therefore originally started both in conflicts of laws and in our domestic law as a legitimate device for solving problems has been abused and misused to assure scheming litigants of dubious reliefs. vs. promulgated Circular 28-91. This is specially so. also by Chief Justice Narvasa. To avoid or minimize this unethical practice of subverting justice. the Court had proscribed it in the Interim Rules and Guidelines issued on January 11. litigants.

regardless of which party is successful. and for the imposition of the other sanctions. or interests represented. and the identity on the two preceding particulars is such that any judgment rendered in the other action. in fine. amount to res adjudicata in the action under consideration: all the requisites. cdasia Applying the foregoing principles in the case before us and comparing it with the Second Case. the complaint 21 in the . will. forum shopping could be cited by the other party as a ground to ask for summary dismissal of the two 20 (or more) complaints or petitions. a final judgment in one would constitute res judicata and thus would cause the dismissal of the rest. an identity as regards parties. 86-36563. there is between the action at bar and RTC Case No. where a litigant (or one representing the same interest or person) sues the same party against whom another action or actions for the alleged violation of the same right and the enforcement of the same relief is/are still pending. the relief being founded on the same facts. the original complaint in the court a quo which gave rise to the instant petition was filed by the buyer (herein private respondent and his predecessors-in-interest) against the seller (herein petitioners) to enforce the alleged perfected sale of real estate. it is obvious that there exist identity of parties or interests represented. criminal prosecution."There thus exists between the action before this Court and RTC Case No. as well as identity of rights asserted and relief prayed for. rights asserted and relief sought. and disciplinary action against the erring lawyer." Consequently. which dismissed the petition upon grounds which appear persuasive." xxx xxx xxx "As already observed. In either case. of auter action pendant. The application of this sanction will prevent any further delay in the settlement of the controversy which might ensue from attempts to seek reconsideration of or to appeal from the Order of the Regional Trial Court in Civil Case No. 1986. or at least such parties as represent the same interests in both actions. That same identity puts into operation the sanction of twin dismissals just mentioned. as well as basis thereof. to a degree sufficient to give rise to the ground for dismissal known as auter action pendant or lis pendens. which are direct contempt of court. identity of rights or causes and identity of reliefs sought. 86-36563 identity of parties. the defense of litis pendencia in one case is a bar to the others. and. On the other hand. Very simply stated. 86-36563 promulgated on July 15.

vs. Both actions unquestionably involve the same transactions. are seeking to accomplish what the Bank itself failed to do in the original case in the trial court. which is the petitioner herein. obtaining the release of the pledged shares. in the Second Case. 1988 disapproving the sale. and the suit did not involve certain acts which transpired after its commencement. the objective or the relief being sought. we held: cdasia "In other words. In brief. 1988 and to direct said body to approve the Memorandum of Agreement entered into by and between the PNOC and petitioner.e. but with the same objective. namely. In the RTC action. to enable the petitioner Bank to escape from the obligation to sell the property to respondent. that is. One can see that although the relief prayed for in the two (2) actions are ostensibly different. this Court ruled that the filing by a party of two apparently different actions. in representation of the Bank. the majority stockholders. etc. though worded differently. whether or not it had been efficaciously rescinded. 1986. the filing by the petitioners of the instant special civil action for certiorari and prohibition in this Court despite the pendency of their action in the Makati Regional Trial Court. In Danville Maritime. too.) were the basic issues. and the propriety of implementing the same (by paying the pledgee banks the amount of their loans. So. petitioner impleaded different respondents therein — PNOC in the case before the lower court and the COA in the case before this Court and sought what seems to be different reliefs. is specious. but with the same logic and vigor. the relief was the . the approval of the sale of vessel in favor of Petitioner. is the same. Petitioner asks this Court to set aside the questioned letter-directive of the COA dated October 10. Inc. and to overturn the letter-directive of the COA of October 10. The petitioners' claim of absence of identity simply because the PCGG had not been impleaded in the RTC suit. as in the action before this Court. the validity of the contract to purchase and sell of September 1.Second Case seeks to declare such purported sale involving the same real property "as unenforceable as against the Bank". the same essential facts and circumstances. i. In other words. the ultimate objective in both actions is the same. Commission on Audit 22 ." (Emphasis supplied) In an earlier case 23 .. while in the complaint before the lower court petitioner seeks to enjoin the PNOC from conducting a rebidding and from selling to other parties the vessel "T/T Andres Bonifacio". is a species of forumshopping. constituted forum shopping: "In the attempt to make the two actions appear to be different. and for an extension of time for it to comply with the paragraph 1 of the memorandum of agreement and damages.

the allegations of the complaint in the Second Case show that the stockholders are bringing a "derivative suit". In the face of the damaging admissions taken from the complaint in the Second Case. so as to include the PCGG as defendant and seek nullification of the acts sought to be enjoined but nonetheless done. In such actions. they are not suing in their personal capacities. Indeed.. They are not principally or even subsidiarily liable." In the instant case before us.whenever the officials of the corporation refuse to sue. this is the very essence of a derivative suit: cdasia "An individual stockholder is permitted to institute a derivative suit on behalf of the corporation wherein he holds stock in order to protect or vindicate corporate rights. or are the ones to be sued or hold the control of the corporation. quite strangely. because: Firstly. petitioner Bank. (Gamboa v. It remained an effective vehicle for obtention of relief. they represent the same interest and entity. petitioners claim to have brought suit "for and in behalf of the Producers Bank of the Philippines" 24 . When the acts sought to be restrained took place anyway despite the issuance by the Trial Court of a temporary restraining order. reasoning that it was brought. 47 [1979]. for they have no direct personal interest in the matter in controversy. petitioners.) are not name parties in the First Case. or at least. not by the minority shareholders. 90 SCRA 40. with the corporation as the real party in interest. The remedy was certainly not the institution of another action in another forum based on essentially the same facts. Emphasis supplied). The adoption of this latter recourse renders the petitioners amenable to disciplinary action and both their actions. and Secondly. then they really represent the Bank. much less are they direct parties in the assailed contract of sale. the RTC suit did not become functus oficio. Victoriano. Co. but by Henry Co et al. but also constitute the majority in the Board of Directors of petitioner Bank. namely. Although the plaintiffs in the Second Case (Henry L. in this Court as well as in the Court a quo. That being so. . there is also identity of parties. sought to deny that the Second Case was a derivative suit. hold or control over 80% of the outstanding capital stock. the suing stockholder is regarded as a nominal party. et al. and petitioners' remedy in the premises was plain and patent: the filing of an amended and supplemental pleading in the RTC suit. of interests represented. dismissible. In the caption itself. who not only own.same: the prevention of such implementation and/or the restoration of thestatus quo ante.

we now add the instant case. it could not have chosen the forum in said case.So. as in this case. whether they sued "derivatively" or directly. petitioner Bank argued that there cannot be any forum shopping. Velhagen's and King's motion to dismiss Civil Case No. cannot be allowed to trifle with court processes. Shareholders. the veil with which the law covers and isolates the corporation from the members or stockholders who compose it will be lifted to allow for its consideration merely as an aggregation of individuals." (Emphasis supplied) Petitioner pointed out that since it was merely the defendant in the original case. as causes of action. . the circumvention of statutes. specific denials. To rule otherwise would be to encourage corporate litigants to use their shareholders as fronts to circumvent the stringent rules against forum shopping. Makati. Thus. etc. cdasia Finally. there is undeniably an identity of interests/entity represented. citing as authority Victronics Computers. 27 where the Court held: "The rule has not been extended to a defendant who. and declare herewith that the corporate veil cannot be used to shield an otherwise blatant violation of the prohibition against forum-shopping. But the rulings of this Court are consistent: "When the fiction is urged as a means of perpetrating a fraud or an illegal act or as a vehicle for the evasion of an existing obligation. causes of action and reliefs sought. Regional Trial Court. et al. even assuming arguendo that there is identity of parties. Petitioner also tried to seek refuge in the corporate fiction that the personality of the Bank is separate and distinct from its shareholders." 25 In addition to the many cases 26 where the corporate fiction has been disregarded. Branch 63. the achievement or perfection of a monopoly or generally the perpetration of knavery or crime. for reasons known only to him. commences a new action against the plaintiff — instead of filing a responsive pleading in the other case — setting forth therein. the corporation itself has not been remiss in vigorously prosecuting or defending corporate causes and in using and applying remedies available to it. special and affirmative defenses or even counterclaims. 91-2069 by no means negates the charge of forum-shopping as such did not exist in the first place. vs. whether suing as the majority in direct actions or as the minority in a derivative suit. particularly where.. Inc. "because it (the Bank) was the defendant in the (first) case while it was the plaintiff in the other (Second Case)".

in the process creating the possibility of conflicting decisions being rendered by the different fora upon the same issue. the petitioners became plaintiffs themselves in the original case. Ultimately. cdasia Indeed. cdasia . as underscored in the above-quoted Court ruling. on the other hand. a final decision in one would constitute res judicata in the other. The lawyers who filed the Second Case are not before us. the issues were joined. However. the only sanction possible now is the dismissal of both cases with prejudice. Indeed. replied that there is a difference in factual setting between Victronics and the present suit. In other words. petitioners themselves (and particularly Henry Co. thus the rudiments of due process prevent us from motu propio imposing disciplinary measures against them in this Decision. giving unto themselves the very remedies they repeated in the Second Case. et al. what is truly important to consider in determining whether forumshopping exists or not is the vexation caused the courts and parties-litigant by a party who asks different courts and/or administrative agencies to rule on the same or related causes and/or to grant the same or substantially the same reliefs. petitioners filed a responsive pleading to the complaint — as a result of which. they did not make any denial or raise any defense or counter-claim therein. In the former. They are warned that a repetition of the same will be dealt with more severely. In the case before us however. this is exactly the problem: a decision recognizing the perfection and directing the enforcement of the contract of sale will directly conflict with a possible decision in the Second Case barring the parties from enforcing or implementing the said sale. by praying for affirmative reliefs and interposing counter-claims in their responsive pleadings. 28 The foregoing conclusion finding the existence of forum-shopping notwithstanding. and the Petition's VERIFICATION/CERTIFICATION contained sufficient allegations as to the pendency of the Second Case to show good faith in observing Circular 28-91.Respondent. the defendants did not file any responsive pleading in the first case. In this case. as the other sanctions cannot be imposed because petitioners' present counsel entered their appearance only during the proceedings in this Court.) as litigants are admonished to strictly follow the rules against forum-shopping and not to trifle with court proceedings and processes.

bid price during the foreclosure. sir. the bank was looking for buyers of the property. in early August 1987. 1990. a perfected contract of sale as the ultimate issue. therefore. The Second Issue: Was The Contract Perfected? The respondent Court correctly treated the question of whether or not there was. Thus (TSN of July 30. I provide the Committee with necessary information about the property such as original loan of the borrower. It is likewise beyond cavil that the bank intended to sell the property. 19-20): cdasia A:The procedure runs this way: Acquired assets was turned over to me and then I published it in the form of an inter-office memorandum distributed to all branches that these are acquired assets for sale. pp. which testimony was relied upon by both the bank and by Rivera in their appeal briefs. As testified to by the Bank's Deputy Conservator. Holding that a valid contract has been established. total claim of the bank. formal offer and upon having been offered. "The plaintiffs. we have to execute the deed of sale and it is the Conservator that sign the deed of sale. Manager of the Property Management Department of the defendant bank. as will be discussed shortly. dealt with and talked to the right . to accept offer. on the basis of the facts established. I was instructed to advertise acquired assets for sale so on that basis. the appraised value at the time the property is being offered for sale and then the information which are relative to the evaluation of the bank to buy which the Committee considers and it is the Committee that evaluate as against the exposure of the bank and it is also the Committee that submit to the Conservator for final approval and once approved. I present it to the Committee. Jose Entereso. at that meeting of August 1987 regarding their purpose of buying the property. The procedure in the sale of acquired assets as well as the nature and scope of the authority of Rivera on the matter is clearly delineated in the testimony of Rivera himself. respondent Court stated: "There is no dispute that the object of the transaction is that property owned by the defendant bank as acquired assets consisting of six (6) parcels of land specifically identified under Transfer Certificates of Title Nos. I have to entertain offer. T-106932 to T-106937. let it be emphasized that this petition should be dismissed not merely because of forum-shopping but also because of the substantive issues raised. It is definite that the plaintiffs wanted to purchase the property and it was precisely for this purpose that they met with defendant Rivera.Having said that.

the plaintiffs made a formal offer by a letter dated August 20. If I am not mistaken Wednesday and in about two week's (sic) time. Considering an aspect of the official duty of Rivera as some sort of intermediary between the plaintiffs-buyers with their proposed buying price on one hand. But he would refer it to the committee and he would relay the decision of the committee to me. can be had. "Parenthetically. sir. to accept offers and to present the offer to the Committee before which the said official is authorized to discuss information relative to price determination.) But he said he would refer the matter to the committee and he would relay the decision to me and he did just like that. (W)hen I asked him how long it would take because he was saying that the matter of pricing will be passed upon by the committee.person.5 Million in cash. it being inherent in his authority. with Jose Entereso as one of the members. Necessarily. too. "What transpired after the meeting of early August 1987 are consistent with the authority and the duties of Rivera and the bank's internal procedure in the matter of the sale of bank's assets. The testimony of plaintiff Demetria is clear on this point (TSN of May 31. Mercurio Rivera. And when I asked him how long it will take for the committee to decide and he said the committee meets every week. A:He did not say that he had the authority(. and the bank Committee. And Rivera confirmed his authority when he talked with the plaintiff in August 1987. and plaintiffs were dealing with the bank official authorized to entertain offers. Not point blank although it came from him. as determined by the Committee and approved by the Conservator. the Committee referred to was the Past Due Committee of which Luis Co was the Head. the Conservator and ultimately the bank itself with the set price on the other. The letter was for the attention of Mercurio Rivera who was tasked to convey and accept such offers. the agenda was the price of the property. 1990. Necessarily. 27-28): Q:When you went to the Producers Bank and talked with Mr. As advised by Rivera. Rivera is the officer from whom official information regarding the price. and considering further the discussion of price at the meeting of . cdasia Q:Please answer the question. in effect what he was saying he was not the one who was to decide. did you ask him pointblank his authority to sell any property? A:No. pp. 1987 stating that they would buy at the price of P3.

" such counter-offer price had been determined by the Past Due Committee and approved by the Conservator after Rivera had duly presented plaintiffs' offer for discussion by the Committee of such matters as original loan of borrower. In the same vein. Rivera.R. this is not credible. and market value. having been made to understand by Rivera. the doctrine of ostensible authority. as members of the Past Due Committee of the bank. or any other agent. The bank cannot turn around and later say. 1993). The testimonies of Luis Co and Jose Entereso on this point are at best equivocal and considering the gratuitous and self-serving character of these declarations. Prudential Bank v. Court of Appeals. total claim of the bank. G. 1987. 583-584. as clearly worded in Rivera's letter (Exh. on September 1. Tersely put. PNB v. as against any one who has in good faith dealt with the corporation through such agent. 103957. GSIS. 94 SCRA 357. From the facts. both Co and Entereso openly admit that they seldom attend the meetings of the Committee. the bank placed its official.5 Million was.August resulting in a formal offer of P3. that the price will be submitted for approval by the bank and that the bank's decision will be relayed to plaintiffs. bid price during foreclosure. claim that the offer of the plaintiff was never discussed by the Committee. Both Co and Entereso. "E"). the bank's submission on this point does not inspire belief. No. and thus holds him out to the public as possessing power to do those acts. as it now does. the price of P5. As correctly characterized by the trial court. that the P5. the corporation will. 369-370. It is important to note that negotiations on the price had started in early August and the plaintiffs had already offered an amount as purchase price. "There were averments by defendants below. At any rate.5 Million has a definite significance.5 Million price was not discussed by the Committee and that it was merely quoted to start negotiations regarding the price. the official in charge of the negotiation. that what Rivera states as the bank's action on the matter is not in fact so. as well as before this Court. Rivera informed plaintiffs by letter that "the bank's counter-offer is at P5. June 14. he estopped from denying his authority (Francisco v. It is the official bank price. 7 SCRA 577." 29 .5 Million in cash. Court of Appeals. that if a corporation knowingly permits one of its officers. the official and definitive price at which the bank was selling the property. there can be no other logical conclusion than that when. the amount of P5. It is a familiar doctrine. to do acts within the scope of an apparent authority. under the established facts.5 Million for more than 101 hectares on lot basis. in a position of authority to accept offers to buy and negotiate the sale by having the offer officially acted upon by the bank.

there are questions of law which could be drawn from the factual findings of the respondent Court. as a rule. and in addition to the foregoing disquisitions by the Court of Appeals. to which the Bank counter-offered P5. such findings merit serious consideration by this Court." There is no dispute on requisite no. we have declared in countless decisions that the principal is liable for obligations contracted by the agent.Article 1318 of the Civil Code enumerates the requisites of a valid and perfected contract as follows: "(1) Consent of the contracting parties. Be that as it may. where it was held that: "Conformably. This is basic. and any supposed counter-offer which Rivera (or Co) may have made is unauthorized. In fact. a dispute on the first and third requisites. We have perused the evidence but cannot find fault with the said Court's findings of fact. and covered by Transfer Certificates of Title Nos. as in this case. Rosa. more or less. Petitioners allege that "there is no counter-offer made by the Bank. Since there was no counter-offer by the Bank.5 million counter-offer was extinguished by the P4. not reviewable. errors of fact — if there be any — are.25 million revised offer of Janolo.5 million. was laid out in Prudential Bank vs. There is.5 million. Verily. T-106932 to T-106937. The object of the questioned contract consists of the six (6) parcels of land in Sta. (2) Object certain which is the subject matter of the contract. there was nothing for Ejercito (in substitution of Demetria and Janolo) to accept. The doctrine of "apparent authority". Laguna with an aggregate area of about 101 hectares. The agent's apparent representation yields to the principal's true representation and the . They also delve into the contractual elements of consent and cause. particularly where. The authority of a corporate officer in dealing with third persons may be actual or apparent. Here. let us review the question of Rivera's authority to act and petitioner's allegations that the P5. 2." 30 They disputed the factual basis of the respondent Court's findings that there was an offer made by Janolo for P3. Court of Appeals 31 . however. (3) Cause of the obligation which is established. said courts carefully and meticulously dismissed their findings. in a petition under Rule 45 such as this. with special reference to banks. The mere fact that respondent Court (and the trial court as well) chose to believe the evidence presented by respondent more than that presented by petitioners is not by itself a reversible error.

1990. Manager of the Property Management Department of the Bank. p. 8-9). II-1 (p. in the particular case. 52 ND 752. nor will it be permitted to shirk its responsibility for such frauds. . 30 July 1990.contract is considered as entered into between the principal and the third person (citing National Food Authority vs. Such faith will be eroded where banks do not exercise strict care in the selection and supervision of its employees. pp. the latter suggested that the buyers' offer should be no less than P3. 204 NW 818. resulting in prejudice to their depositors.." By his own admission. pp. "Application of these principles is especially necessary because banks have a fiduciary relationship with the public and their stability depends on the confidence of the people in their honesty and efficiency. "A bank is liable for wrongful acts of its officers done in the interest of the bank or in the course of dealings of the officers in their representative capacity but not for acts outside the scope of their authority (9 C.. it is obvious that petitioner Rivera has apparent or implied authority to act for the Bank in the matter of selling its acquired assets. for his own ultimate benefit (McIntosh v. 40 ALR 1021). This evidence includes the following: (a)The petition itself in par.3 million (TSN. " From the evidence found by respondent Court. 16-17). even though no benefit may accrue to the bank therefrom (10 Am Jur 2. the agent is secretly abusing his authority and attempting to perpetrate a fraud upon his principal or some other person. p. And during the initial meeting between the buyers and Rivera.5 million (TSN. the land was definitely being sold by the Bank. August 6. 1990. 184 SCRA 166). 1987 offering P3. (b)As observed by respondent Court. Dakota Trust Co. Intermediate Appellate Court. p. A bank holding out its officers and agents as worthy of confidence will not be permitted to profit by the frauds they may thus be enabled to perpetrate in the apparent scope of their employment. a banking corporation is liable to innocent third persons where the representation is made in the course of its business by an agent acting within the general scope of his authority even though.S. April 26. 114) Accordingly. (c)Rivera received the buyers' letter dated August 30.J. 11 ). 417). 3) states that Rivera was "at all times material to this case. Rivera was already the person in charge of the Bank's acquired assets (TSN.

a major shareholder and officer of the Bank. vs.5 million was confirmed by Rivera (TSN. (g)Rivera arranged the meeting between the buyers and Luis Co on September 28.5 million was the final price of the Bank (TSN. 12) had already made a factual finding that . the existence of which is borne out by the respondent Court's findings. p. the Court. (f)Rivera.5 million (TSN. 33 Petitioners also argued that since Demetria and Janolo were experienced lawyers and their "law firm" had once acted for the Bank in three criminal cases. the Bank referred to Rivera as the officer acting for the Bank in relation to parties interested in buying assets owned/acquired by the Bank. Melo. in a telephone conversation. the evidence of actual authority is immaterial insofar as the liability of a corporation is concerned. But the Court of Appeals in its Decision (p. Inc. 21.(d)Rivera signed the letter dated September 1. 1990. Exhs. 32 . confirmed that the P5. however. TSN. 35). of which private respondent cannot be charged with knowledge. (h)In its newspaper advertisements and announcements. 34-35). At said meeting. since the issue is apparent authority. p. April 26. 18). 1987. affirmed the doctrine of apparent authority as it held that the apparent authority of the officer of the Bank of P. January 16. These pieces of evidence. 1990. 11). p.I. July 30. (e)Rivera received the letter dated September 17. Court of Appeals. 1990. To be sure. Co. April 26. in charge of acquired assets is borne out by similar circumstances surrounding his dealings with buyers. et al. Rivera was the officer mentioned in the Bank's advertisements offering for sale the property in question (cf. 12). July 30. through Justice Jose A. they should be charged with actual knowledge of Rivera's limited authority. 1987 offering to sell the property for P5. January 16. In fact. p. In any event. p. petitioners attempted to repudiate Rivera's apparent authority through documents and testimony which seek to establish Rivera's actual authority. are inherently weak as they consist of Rivera's self-serving testimony and various inter-office memoranda that purport to show his limited actual authority. confirmed Rivera's statement as to the finality of the Bank's counter-offer of P5. In the very recent case of Limketkai Sons Milling. pp. 1990. R. 1990. 1987 containing the buyers' proposal to buy the property for P4. during which the Bank's offer of P5.5 million (TSN. "S" and "S-1").25 million (TSN.

we see no reason to disturb the lower courts' (both the RTC and the CA) common finding that private respondents' evidence is more in keeping with truth and logic — that during the meeting on September 28. 38 However.5 million as confirmed and reiterated to Demetria and Atty. 1319 of the Civil Code 36 and related Supreme Court rulings starting with Beaumont vs. 1987)". 1987.5 million price has been passed upon by the Committee and could no longer be lowered (TSN of April 27. Note that the said letter of September 30. And by virtue of the September 30.5 million. the above-cited authorities and precedents cannot apply in the instant case because. Jose Fajardo by Rivera and Co during their meeting on September 28. . 1987 meeting "was meant to have the offerors improve on their position of P5.5 million under Annex 'J' (letter dated September 17." Petitioners insist that the respondent Court should have believed the testimonies of Rivera and Co that the September 28.the buyers had no notice of Rivera's actual authority prior to the sale.5 million. .5 million". 1987. pp. assuming arguendo that the counter-offer of P4.25 million extinguished the offer of P5. the Bank has not shown that they acted as its counsel in respect to any acquired assets. there was a meeting of the minds. 1987 begins with "(p)ursuant to our discussion last 28 September 1987 . on the other hand. Petitioners also alleged that Demetria's and Janolo's P4. and we find no basis for changing this finding of fact. 37 However. Luis Co's reiteration of the said P5. 1987 was the Bank's offer of P5.25 million counter-offer in the letter dated September 17. Susana Parker) acted in said criminal cases. 34 They disputed the respondent Court's finding that "there was a meeting of minds when on 30 September 1987 Demetria and Janolo through Annex 'L' (letter dated September 30. Indeed. 1987) 'accepted' Rivera's counter offer of P5. one of whose members (Atty. 1990. 39 Hence. Prieto. . 1987 letter accepting this revived offer. citing the late Justice Paras 35 . 1987 extinguished the Bank's offer of P5. both the trial court and the Court of Appeals found petitioners' testimonial evidence "not credible". as the acceptance in said letter was absolute and unqualified. Luis Co and Rivera "confirmed that the P5. Art.5 million price during the September 28. what was "accepted" by Janolo in his letter dated September 30. 34-35)". respondent has proven that Demetria and Janolo merely associated with a loose aggrupation of lawyers (not a professional partnership). as found by the respondent Court which reviewed the testimonies on this point. In fact. 1987 meeting revived the said offer.

5 million. 147 SCRA 434 [1987]. G. 153 SCRA 713 [1987]. considered by a reviewing court.R. on the basis of the evidence already in the record and as appreciated by the lower courts. 1990). August 30. and the absence of any circumstance which might have justifiably prevented the Bank from acting earlier. through Conservator Encarnacion. of Rivera's authority and action. Dulos Realty & Development Corp. Gevero vs. "This Court in several decisions has repeatedly adhered to the principle that points of law. clearly characterizes the repudiation as nothing more than a last-minute attempt on the Bank's part to get out of a binding contractual obligation." 40 ".We note that the Bank's repudiation. Ramos vs. private respondent was not given an opportunity in the trial court to controvert the same through opposing evidence. 1986. and ordinarily will not be. The Third Issue: Is the Contract Enforceable? . particularly the latter's counter-offer of P5. 1987. truth and good faith.5 million was raised for the first time on appeal and should thus be disregarded. November 14. the inevitable conclusion is simply that there was a perfected contract of sale. as being "unauthorized and illegal" came only on May 12. this is a matter of due process. But we passed upon the issue anyway. Indeed. Such delay. as they cannot be raised for the first time on appeal (Santos vs. IAC. 77029. IAC. Taken together. justice and due process (Dihiansan vs. the factual findings of the respondent Court point to an implied admission on the part of the petitioners that the written offer made on September 1. 175 SCRA 70 [1989]. IAC. . CA. 1988 or more than seven (7) months after Janolo's acceptance. This is the conclusion consistent with human experience. 157 SCRA 425 [1988]. and we repeat that. 74243." 41 Since the issue was not raised in the pleadings as an affirmative defense. theories. if only to avoid deciding the case on purely procedural grounds. It also bears noting that this issue of extinguishment of the Bank's offer of P5. issues of fact and arguments not adequately brought to the attention of the trial court need not be. 1987 was carried through during the meeting of September 28. It is settled jurisprudence that an issue which was neither averred in the complaint nor raised during the trial in the court below cannot be raised for the first time on appeal as it would be offensive to the basic rules of fair play. vs. No. IAC. 145 SCRA 592). CA. . Anchuelo vs.

petitioners — by such utter failure to object — are deemed to have waived any defects of the contract under the statute of frauds. 1987. the price and a description of the property as the object of the contract. We agree that.5 million. the bank's letter of September 1. these letters constitute sufficient memoranda — since they include the names of the parties. referred to in No. the terms and conditions of the contract. the statute of frauds will not apply by reason of the failure of petitioners to object to oral testimony proving petitioner Bank's counter-offer of P5. Still. the bank's letter of September 1. 1987 on the official price and the plaintiffs' acceptance of the price on September 30. Of course. Hence. 1987 did constitute a "new" offer which was accepted by Janolo on September 30. 1987.The petition alleged: 42 "Even assuming that Luis Co or Rivera did relay a verbal offer to sell at P5. in themselves. the respondent Court in its Decision (p. 1987 letter. taken together." The respondent Court could have added that the written communications commenced not only from September 1. 2 of Article 1403. are not. constitute in law a sufficient memorandum of a perfected contract of sale. memorandum or writing subscribed by the Bank to evidence such contract. formal contracts of sale. But let it be assumed arguendo that the counter-offer during the meeting on September 28. 1987.Contracts infringing the Statute of Frauds.5 million during the meeting of 28 September 1987. Civil Code. . 1987.)" Upon the other hand. are ratified by the failure to object to the presentation of oral evidence to prove the same." . 1405. Stated simply. and it was this verbal offer that Demetria and Janolo accepted with their letter of 30 September 1987. 14) stated: ". 1987 but from Janolo's August 20. the contract produced thereby would be unenforceable by action — there being no note. pursuant to Article 1405 of the Civil Code: "Art. They are however clear embodiments of the fact that a contract of sale was perfected between the parties. (Please see Article 1403[2]. taken together with plaintiffs' letter dated September 30. or by the acceptance of benefits under them. such contract being binding in whatever form it may have been entered into (case citations omitted). .

[Direct testimony of Atty. Demetria told me to accompany him and we were able to meet Luis Co at the Bank. xxx xxx xxx QNow. Luis Co of the defendant Bank? .5 million is aplenty — and the silence of petitioners all throughout the presentation makes the evidence binding on them thus: AYes.5 million pesos and Mr. 1987 and I was again present because Atty. sir.] xxx xxx xxx QWhat transpired during that meeting between you and Mr.5 million was the defendant's bank (sic) final offer? AHe said in a day or two. Jose Fajardo. January 16. 18-21. QWhat is the response of Mr. sir. he will make final acceptance. sir. Mercurio Rivera is the final price and that is the price they intends (sic) to have. 1990. Luis Co? AHe said he will wait for the position of Atty.As private respondent pointed out in his Memorandum. QWhat do you mean? AThat is the amount they want. Demetria asked Mr. sir. Demetria. Luis Co whether the price could be reduced. TSN. QWhat price? AThe 5. Luis Co said that the amount cited by Mr. sir. I think it was September 28. what transpired during this meeting with Luis Co of the Producers Bank? AAtty. oral testimony on the reaffirmation of the counter-offer of P5. at pp. sir. QWhat is the reaction of the plaintiff Demetria to Luis Co's statment (sic) that the defendant Rivera's counter-offer of 5.

30 July 1990. the amount of P5.5 million was reached by the Committee and it is not within his power to reduce this amount. Pajardo (sic) in that September 28. we did. Co himself. Mercurio [Rivera] was with us at the time at his office. Demetrio Demetria. Luis Co. And he told me that is the final offer of the bank P5. 14-15. pp. the offer of the bank which is P5.] xxx xxx xxx QAccording to Atty. Co in his office in Producers Bank Building during this meeting? AMr. I told him if the amount of P5. 1987 meeting. TSN. Luis Co. 26 April 1990.AWe went straight to the point because he being a busy person. What can you say to that statement that the amount of P5. sir. Co you are referring to? AMr. What the bank expects which was contrary to what Mr. QAfter this meeting with Mr. Atty. TSN.5 million and we should indicate our position as soon as possible. at pp. 34-36. Demetrio Demetria and Atty. your Honor please.5 million.5 million could still be reduced and he said that was already passed upon by the committee. Rivera. QWhat was your response to the answer of Mr. Atty. Luis Co? AI said that we are going to give him our answer in a few days and he said that was it. Fajardo and I and Mr. did you and your partner accede on (sic) the counter offer by the bank? AYes.] ." [Direct testimony of Mercurio Rivera.5 million was reached by the Committee? AIt was not discussed by the Committee but it was discussed initially by Luis Co and the group of Atty. Demetria. Fajardo and I. QBy Mr. Mr. QFor the record. sir. Two days thereafter we sent our acceptance to the bank which offer we accepted. will you tell this Court who was with Mr." [Direct testimony of Atty. Rivera stated.

there is absolutely no evidence that the Conservator. on the basis of a report submitted by the appropriate supervising or examining department. at the time the contract was perfected. 1987 (Annex V. He shall have the power to overrule or revoke the actions of the previous management and board of directors of the bank or non-bank financial intermediary performing quasi-banking functions. justice and due process.The Fourth Issue: May the Conservator Revoke the Perfected and Enforceable Contract? It is not disputed that the petitioner Bank was under a conservator placed by the Central Bank of the Philippines during the time that the negotiation and perfection of the contract of sale took place. collect all monies and debts due said institution and exercise all powers necessary to preserve the assets of the institution. Rodolfo Romey. petition) which unilaterally repudiated — not the contract — but the authority of Rivera to make a binding offer — and which unarguably came months after the perfection of the contract. and such other powers as the Monetary Board shall deem necessary." 43 In the second place. As already stated earlier. let alone in the Court of Appeals. issues not raised and/or ventilated in the trial court. the Monetary Board finds that a bank or a non-bank financial intermediary performing quasi-banking functions is in a state of continuing inability or unwillingness to maintain a state of liquidity deemed adequate to protect the interest of depositors and creditors. never objected to the sale of the property to Demetria and Janolo. Said letter dated May 12. under Section 28-A of Republic Act No. liabilities. "cannot be raised for the first time on appeal as it would be offensive to the basic rules of fair play. What petitioners are really referring to is the letter of Conservator Encarnacion. this issue of the Conservator's alleged authority to revoke or repudiate the perfected contract of sale was raised for the first time in this Petition — as this was not litigated in the trial court or Court of Appeals. and the management of that institution. 265 (otherwise known as the Central Bank Act) as follows: "Whenever. 1988 is reproduced hereunder: . reorganize the management thereof. any provision of law to the contrary notwithstanding. and restore its viability. the Monetary Board may appoint a conservator to take charge of the assets." In the first place. The Bank's acting conservator at the time. who took over from Romey after the sale was perfected on September 30. actually repudiated or overruled said contract of sale. Petitioners energetically contended that the conservator has the power to revoke or overrule actions of the management or the board of directors of a bank.

Moreover. Andres I. Noe C. Producers Bank Senior Manager Perfecto M. Zarate: This pertains to your letter dated May 5. only the Board of Directors/Conservator may authorize the sale of any property of the corporation/bank. In short. 265. 23 and 36 of the Corporation Code of the Philippines (Batas Pambansa Blg. We deny that Producers Bank has ever made a legal counter-offer to any of your clients nor perfected a 'contract to sell and buy' with any of them for the following reasons. 1988 "Atty. what took place were just preliminary discussions/consultations between him and your clients. under Sec. you will immediately read that Manager Mr. Janolo and Demetria regarding the six (6) parcels of land located at Sta. Makati. Rivera was authorized by the old board or by any of the bank conservators (starting January. Suite 323 Rufino Building Ayala Avenue. Laguna. . 1984) to sell the aforesaid property to any of your clients. 1988 on behalf of Attys."May 12. as amended). which everyone knows cannot bind the Bank's Board or Conservator. 28-A of the Central Bank Act (Rep. Our records do not show that Mr. 1986 addressed to and approved by former Acting Conservator Mr. In the 'Inter-office Memorandum' dated April 25. Metro Manila Dear Atty. Mercurio Rivera or any of his subordinates has no authority. Zarate Zarate Carandang Perlas & Ass. Act No. power or right to make any alleged counter-offer. 68) and Sec. Rosa. Pascua detailed the functions of Property Management Department (PMD) staff and officers (Annex A). Rustia. Apparently. your lawyer-clients did not deal with the authorized officers of the bank.

We also have no personal interest in any of the properties of the Bank.We are. All our acts are official. We believe that this is more than sufficient legal justification for refusing said alleged tender. cannot extend to the postfacto repudiation of perfected transactions. deemed to be defective — i. To rule otherwise would be to enable a failing bank to become solvent. otherwise they would infringe against the non-impairment clause of the Constitution. void. therefore. Ineluctably. Neither by common sense. the Central Bank law gives vast and farreaching powers to the conservator of a bank. (the reorganization of) the management thereof and (the restoration of) its viability. (Sgd. enormous and extensive as they are. Section 28-A merely gives the conservator power to revoke contracts that are. constrained to refuse any tender of payment by your clients.e. while admittedly. the conservator merely takes the place of a bank's board of directors. Very truly yours. how can it delegate such non-existent powers to the conservator under Section 28-A of said law? Obviously. Please be advised accordingly. Encarnacion Acting Conservator" In the third place. 44 If the legislature itself cannot revoke an existing valid contract. What the said board cannot do — such as repudiating a contract validly entered into under the doctrine of implied authority — the conservator cannot do either. therefore. His authority would be only to bring court actions to assail such contracts — as he has already done so in the instant case.) Leonida T. as the same is patently violative of corporate and banking laws. Rest assured that we have nothing personal against your clients. voidable. unenforceable or rescissible." Such powers.. it must be pointed out that such powers must be related to the "(preservation of) the assets of the bank. Hence. at the expense of third parties. legal and in accordance with law. A contrary understanding of the law would simply not be permitted by the Constitution. by simply getting the conservator to unilaterally revoke all previous . under existing law. his power is not unilateral and he cannot simply repudiate valid obligations of the Bank.

18 SCRA 973] [at pp.R. its findings of the fact being conclusive' '[Chan vs. L-27488. The rule regarding questions of fact being raised with this Court in a petition for certiorari under Rule 45 of the Revised Rules of Court has been stated inRemalante vs. relating to the sufficiency of evidence and the credibility of witnesses presented. L-16394. Hernandez.' 'Barring.' 'The jurisdiction of the Supreme Court in cases brought to it from the Court of Appeals is limited to reviewing and revising the errors of law imputed to it. reiterating a long line of decisions]. such findings must stand. yielding nothing to perfected contractual rights nor vested interests of the third parties who had dealt with the Bank. L-24426. 1974. April 28. 45 we held: ". December 17. 1988. February 20. 1984. a showing that the findings complained of are totally devoid of support in the record. its jurisdiction being limited to reviewing errors of law that might have been committed by the lower court' (Tiongco v. 59514. vs. 1970.R. This Court has emphatically declared that' 'it is not the function of the Supreme Court to analyze or weigh such evidence all over again.dealings which had one way or another come to be considered unfavorable to the Bank.R. 1983.R. . No. De la Merced. In Andres vs. June 30. Court of Appeals. 58 SCRA 89. No. Court of Appeals. Court of Appeals. in Bernardo vs. or that they are so glaringly erroneous as to constitute serious abuse of discretion. 144-145.]' " Likewise. findings of fact by the Court of Appeals are not reviewable by the Supreme Court. 158 SCRA 138. Jr. 121 SCRA 865. July 25. G. 127 SCRA 596). 46 we held: "The resolution of this petition invites us to closely scrutinize the facts of the case. G. G. Manufacturers Hanover & Trust Corporation. G. . 33 SCRA 737. Corona vs. Tibe. This Court so held that it is not the function of the Supreme Court to analyze or weigh such evidence all over again. No. No. therefore. . for this Court is not expected or required to examine or contrast the oral and documentary evidence submitted by the parties' [Santa Ana. G. The Fifth Issue: Were There Reversible Errors of Fact? Basic is the doctrine that in petitions for review under Rule 45 of the Rules of Court. No.R. thus: 'The rule in this jurisdiction is that only questions of law may be raised in a petition for certiorari under Rule 45 of the Revised Rules of Court. The Supreme Court's jurisdiction is limited to reviewing errors of law that . L-47531. February 25. Baniqued vs. L-62482.R. Court of Appeals. G. No. 1966.

. et al. Inc. the ruling of this Court in the recent case of South Sea Surety and Insurance Company." In the same vein. however. Court of Appeals 49. petitioners are asking us to review and reverse such factual findings." (Emphasis supplied) Petitioners. . the findings of both the trial court and the appellate court on the matter coincide. 50 thus: .5 million." Hence. After a careful study of the case at bench. Hon. particularly where.5 million had been determined by the past due committee and approved by conservator Romey. adduced by the parties. when the findings went beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee. we find none of the above grounds present to justify the re-evaluation of the findings of fact made by the courts below. vs." As held in the recent case of Chua Tiong Tay vs. Among the exceptional circumstances where a reassessment of facts found by the lower courts is allowed are when the conclusion is a finding grounded entirely on speculation. . assailed the respondent Court's Decision as "fraught with findings and conclusions which were not only contrary to the evidence on record but have no bases at all. . as well as the Court of Appeals. after Rivera presented the same for discussion" and (2) "the meeting with Co was not to scale down the price and start negotiations anew. 48 is equally applicable to the present case: "We see no valid reason to discard the factual conclusions of the appellate court. are final and conclusive and may not be reviewed on appeal. The first point was clearly passed upon by the Court of Appeals. (I)t is not the function of this Court to assess and evaluate all over again the evidence. such as here. . when the judgment is premised on a misapprehension of facts." specifically the findings that (1) the "Bank's counteroffer price of P5. Court of Appeals. mistaken or impossible. . citing Philippine National Bank vs. but a meeting on the already determined price of P5. Court of Appeals and Goldrock Construction and Development Corp. The Supreme Court is not a trier of facts. testimonial and documentary. surmises or conjectures.: 47 "The Court has consistently held that the factual findings of the trial court. when there is grave abuse of discretion in the appreciation of facts.may have been committed by the lower court. when the inference made is manifestly absurd.

the official and definitive price at which the bank was selling the property. But the petitioners are now asking this Court to disturb these findings to fit the conclusion they are espousing. the bank official refused it and confirmed that the P5. characterizing it as "not credible" and "at best equivocal and considering the gratuitous and self-serving character of these declarations. To be sure. 52 We have studied both the records and . petitioners should have presented then Conservator Rodolfo Romey to testify on their behalf. 34-35)" (p." (p. 1987 between the plaintiffs. The respondent Court did not believe the evidence of the petitioners on this point. as he would have been in the best position to establish their thesis.' such counteroffer price had been determined by the Past Due Committee and approved by the Conservator after Rivera had duly presented plaintiffs' offer for discussion by the Committee. The second point was squarely raised in the Court of Appeals."There can be no other logical conclusion than that when. it was respondent's submissions that were believed and became bases of the conclusions arrived at. Rivera informed plaintiffs by letter that 'the bank's counter-offer is at P5. .5 Million price had been passed upon by the Committee and could no longer be lowered (TSN of April 27. during the meeting of September 28. As pointed out by plaintiff. 1990. under the established fact. 15. the senior vice-president of the bank. Rivera and Luis Co. The argument deserves scant consideration. Tersely put. as clearly worded in Rivera's letter (Exh. there are settled exceptions where the Supreme Court may disregard findings of fact by the Court of Appeals. 11. 'E'). Under the rules on evidence. the price of P5.5 Million was. . pp." To become credible and unequivocal. on September 1. where the topic was the possible lowering of the price.5 Million for more than 101 hectares on lot basis. if produced. and instead. This we cannot do. it is quite evident that the legal conclusions arrived at from the findings of fact by the lower courts are valid and correct. xxx xxx xxx " . the bank's submissions on this point do not inspire belief. CA Decision). In fine. . but petitioners' evidence was deemed insufficient by both the trial court and the respondent Court. . CA Decision). . 1987. 51 such suppression gives rise to the presumption that his testimony would have been adverse.

conclusions of fact of a trial judge — as affirmed by the Court of Appeals — are conclusive upon this Court. We did not limit ourselves thereto. the Bank's overdraft with the Central Bank had already reached P1.5 million and the conservator's powers to repudiate contracts entered into by the Bank's officers] — which per se could justify the dismissal of the present case. as in this case. magnitude and vigor by which the parties. The best that can be said in favor of petitioners on this point is that the factual findings of respondent Court did not correspond to petitioners' claims. if only to find out whether there is reason to disturb any of its factual findings. because the trial court is in a better position to observe the demeanor of the witnesses and their courtroom manner as well as to examine the real evidence presented. We are not unmindful of the tenacious plea that the petitioner Bank is operating abnormally under a government-appointed conservator and "there is need to rehabilitate the Bank in order to get it back on its feet . we did so just the same. which required the determination of questions of fact. the findings of the said Court are supported by a preponderance of competent and credible evidence. The inferences and conclusions are reasonably based on evidence duly identified in the Decision. there are two procedural issues involved — forum-shopping and the raising of issues for the first time on appeal [viz. . . lending credibility and dependability to its findings. as many people depend on (it) for investments. deposits and well as employment. but were closer to the evidence as presented in the trial court by private respondent. particularly where. the extinguishment of the Bank's offer of P5. While the Supreme Court is not a trier of facts and as a rule we are not required to look into the factual bases of respondent Court's decisions and resolutions. Indeed. Indeed. but delved as well into the substantive issues — the perfection of the contract of sale and its enforceability. for we are only too aware of the depth.023 . But this alone is no reason to reverse or ignore such factual findings. through their respective eloquent counsel. the appellate court patiently traversed and dissected the issues presented before it. On the contrary. argued their positions before this Court. As of June 1987.the CA Decision and we find no such exceptions in this case. Epilogue In summary. the trial court and the appellate court were in common agreement thereon. absent any serious abuse or evident lack of basis or capriciousness of any kind..

WHEREFORE. C. Moreover. Melo and Francisco. JJ. SO ORDERED. Narvasa. Certainly.5 million was reasonable.. . The assailed Decision is AFFIRMED.. the Court hereby DENIES the petition.billion . petitioner Bank is REPRIMANDED for engaging in forumshopping and WARNED that a repetition of the same or similar acts will be dealt with more severely. to enable it to escape its binding obligation and to reap the benefits of the increase in land values. considering that the Bank acquired these properties at a foreclosure sale for no more than P3.. it is equally true that at the time of the transaction in 1987. while the subject properties may currently command a much higher price. Jr. This Court cannot just gloss over private respondent's submission that. To rule in favor of the Bank simply because the property in question has algebraically accelerated in price during the long period of litigation is to reward lawlessness and delays in the fulfillment of binding contracts. concur. the Court cannot emotionally close its eyes to overriding considerations of substantive and procedural law. nonimpairment of obligations and sanctions against forum-shopping. which must be upheld under the rule of law and blind justice. . 54 That the Bank procrastinated and refused to honor its commitment to sell cannot now be used by it to promote its own advantage. and there were (other) offers to buy the subject properties for a substantial amount of money. like respect for perfected contracts. finding no reversible error in the questioned Decision and Resolution.J. Davide. Costs against petitioners.5 million. the price agreed upon of P5." 53 While we do not deny our sympathy for this distressed bank. at the same time. . the Court cannot stamp its imprimatur on such outrageous proposition.

DECISION GONZAGA-REYES.R. 1984 and the corresponding adjustment thereof." promulgated on 30 April 1991. 1 respondents. de Castro found private respondent's claims to be unmeritorious and dismissed its complaint. 6 for November 1. 2.Wage differentials under Wage Order No. 2001. In addition. SET ASIDE and another one issued ordering respondentappellee to pay complainant-appellant: 1. except for damages. Producers Bank of the Philippines. 02-00753-88.The unpaid bonus (mid-year and Christmas bonus) and 13th month pay. reversing the Labor Arbiter's dismissal of private respondent's complaint and (2) public respondent's resolution dated 18 June 1991 denying petitioner's motion for partial reconsideration. 100701. 6 and non-payment of holiday pay. vs. 3 In a complete reversal.] PRODUCERS BANK OF THE PHILIPPINES. J : p Before us is a special civil action for certiorari with prayer for preliminary injunction and/or restraining order seeking the nullification of (1) the decision of public respondent in NLRC-NCR Case No. petitioner. however. premises considered. as it is hereby. National Labor Relations Commission (NLRC).[G. 5 The dispositive portion of the NLRC's decision provides — WHEREFORE. entitled "Producers Bank Employees Association v. No. March 28. NATIONAL LABOR RELATIONS COMMISSION and PRODUCERS BANK EMPLOYEES ASSOCIATION. non-compliance with Wage Order No. and . The present petition originated from a complaint filed by private respondent on 11 February 1988 with the Arbitration Branch. 2 On 31 March 1989. National Capital Region. the NLRC 4 granted all of private respondent's claims. private respondent prayed for damages. the appealed Decision is. Labor Arbiter Nieves V. charging petitioner with diminution of benefits.

Annex "H").R. promulgated on August 30. Petitioner contends that the NLRC gravely abused its discretion in ruling as it did for the succeeding reasons stated in its Petition — 1. NLRC. (3) its ruling is contrary to the CBA. which was denied by the NLRC in a Resolution issued on 18 June 1991. 2. Furthermore. is exempted under Wage Order No. NLRC Decision). dispositive portion.On the alleged non-compliance with Wage Order No. Hence. but not to exceed three (3) years. Motion for Partial Reconsideration.Holiday pay under Article 94 of the Labor Code.3. under conservatorship and distressed. 2. (2) its ruling is not justified by law and Art. 6. 1990.On the alleged non-payment of legal holiday pay. the NLRC gravely abused its discretion when (1) it contravened the Supreme Court decision in Traders Royal Bank v. 2. et al. 88168. recourse to this Court. and (4) the so-called "company practice invoked by it has no legal and moral bases" (p. Annex "H"). The rest of the claims are dismissed for lack of merit. 1984 and the corresponding adjustment thereof" (par. No. 6. 3. 100 of the Labor Code. has prescribed (p.On the alleged diminution of benefits.. the "wage differentials under Wage Order No. 12. Motion for Partial Reconsideration. G. SO ORDERED. 6 for November 1. the petitioner. the NLRC again gravely abused its discretion when it patently and palpably erred in approving and adopting "the position of appellant (private respondent UNION)" without giving any reason or justification therefor which position does not squarely traverse or refute the Labor Arbiter's correct . Petition filed a Motion for Partial Reconsideration. the NLRC again gravely abused its discretion when it patently and palpably erred in holding that it is "more inclined to adopt the stance of appellant (private respondent UNION) in this issue since it is more in keeping with the law and its implementing provisions and the intendment of the parties as revealed in their CBA" without giving any reason or justification for such conclusions as the stance of appellant (private respondent UNION) does not traverse the clear and correct finding and conclusion of the Labor Arbiter. Finally.

4.From 1981 up to 1983. 2. the Court shall discuss the issues ad seriatim.D. the basic pay previously being given as part of the Christmas bonus was applied as compliance to it (P.D. has been providing several benefits to its employees since 1971 when it started its operation.When P. Motion for Partial Reconsideration. 3. 851).Producers Bank of the Philippines. Among the benefits it had been regularly giving is a mid-year bonus equivalent to an employee's one-month basic pay and a Christmas bonus equivalent to an employee's one whole month salary (basic pay plus allowance). the law granting a 13th month pay. 1566. 18. took effect. In a tabular form. the bank continued giving one month basic pay as mid-year bonus.By virtue of an alleged Monetary Board Resolution No. the bank only gave a one-half (1/2) month basic pay as compliance of the 13th month pay and none for the Christmas bonus. 7 Coming now to the merits of the petition. Annex "H"). the allowances remained as Christmas bonus. one month basic pay as 13th month pay but the Christmas bonus was no longer based on the allowance but on the basic pay of the employees which is higher. the Court granted petitioner's prayer for a temporary restraining order enjoining respondents from executing the 30 April 1991 Decision and 18 June 1991 Resolution of the NLRC. 6 On 29 July 1991. here are the bank's violations: YEARMID-YEAR BONUSCHRISTMAS13TH MO. 5. Bonuses As to the bonuses. the bank was placed under conservatorship but it still provided the traditional mid-year bonus.finding and ruling (p. PAY BONUS . 851. a banking institution.In the early part of 1984. private respondent declared in its position paper the NLRC that — 8 filed with 1.

previous yearsone mo. basicone mo. basicone mo. basic 1984[one mo. basic]noneone-half mo. basic 1985one-half mo. basicnone one-half mo. basic 1986one-half mo. basicone-half mo. basicone mo. basic 1987one-half mo. basicone-half mo. basicone mo. basic

Private respondent argues that the mid-year and Christmas bonuses, by reason of their having been given for thirteen consecutive years, have ripened into a vested right and, as such, can no longer be unilaterally withdrawn by petitioner without violating Article 100 of Presidential Decree No. 442 9 which prohibits the diminution or elimination of benefits already being enjoyed by the employees. Although private respondent concedes that the grant of a bonus is discretionary on the part of the employer, it argues that, by reason of its long and regular concession, it may become part of the employee's regular compensation. 10 On the other hand, petitioner asserts that it cannot be compelled to pay the alleged bonus differentials due to its depressed financial condition, as evidenced by the fact that in 1984 it was placed under conservatorship by the Monetary Board. According to petitioner, it sustained losses in the millions of pesos from 1984 to 1988, an assertion which was affirmed by the labor arbiter. Moreover, petitioner points out that the collective bargaining agreement of the parties does not provide for the payment of any mid-year or Christmas bonus. On the contrary, Section 4 of the collective bargaining agreement states that —
Acts of Grace.Any other benefits or privileges which are not expressly
provided in this Agreement, even if now accorded or hereafter accorded to the employees, shall be deemed purely acts of grace dependent upon the sole judgment and discretion of the BANK to grant, modify or withdraw. 11

A bonus is an amount granted and paid to an employee for his industry and loyalty which contributed to the success of the employer's business and made possible the realization of profits. It is an act of generosity granted by an enlightened employer to spur the employee to greater efforts for the success of the business and realization of bigger profits. 12 The granting of a bonus is a management prerogative, something given in addition to what is ordinarily received by or strictly due the recipient. 13 Thus, a bonus is not a demandable

and enforceable obligation, 14 except when it is made part of the wage, salary or compensation of the employee. 15 However, an employer cannot be forced to distribute bonuses which it can no longer afford to pay. To hold otherwise would be to penalize the employer for his past generosity. Thus, in Traders Royal Bank v. NLRC, 16 we held that —
It is clear . . . that the petitioner may not be obliged to pay bonuses to its employees. The matter of giving them bonuses over and above their lawful salaries and allowances is entirely dependent on the profits, if any, realized by the Bank from its operations during the past year. From 1979-1985, the bonuses were less because the income of the Bank had decreased. In 1986, the income of the Bank was only 20.2 million pesos, but the Bank still gave out the usual two (2) months basic midyear and two months gross year-end bonuses. The petitioner pointed out, however, that the Bank weakened considerably after 1986 on account of political developments in the country. Suspected to be a Marcos-owned or controlled bank, it was placed under sequestration by the present administration and is now managed by the Presidential Commission on Good Government (PCGG). In light of these submissions of the petitioner, the contention of the Union that the granting of bonuses to the employees had ripened into a company practice that may not be adjusted to the prevailing financial condition of the Bank has no legal and moral bases. Its fiscal condition having declined, the Bank may not be forced to distribute bonuses which it can no longer afford to pay and, in effect, be penalized for its past generosity to its employees. Private respondents' contention, that the decrease in the mid-year and year-end bonuses constituted a diminution of the employees' salaries, is not correct, for bonuses are not part of labor standards in the same class as salaries, cost of living allowances, holiday pay, and leave benefits, which are provided by the Labor Code.

This doctrine was reiterated in the more recent case of Manila Banking Corporation v. NLRC 17 wherein the Court made the following pronouncements —
By definition, a "bonus" is a gratuity or act of liberality of the giver which the recipient has no right to demand as a matter of right. It is something

given in addition to what is ordinarily received by or strictly due the recipient. The granting of a bonus is basically a management prerogative which cannot be forced upon the employer who may not be obliged to assume the onerous burden of granting bonuses or other benefits aside from the employee's basic salaries or wages, especially so if it is incapable of doing so. xxx xxx xxx Clearly then, a bonus is an amount given ex gratia to an employee by an employer on account of success in business or realization of profits. How then can an employer be made liable to pay additional benefits in the nature of bonuses to its employees when it has been operating on considerable net losses for a given period of time? Records bear out that petitioner Manilabank was already in dire financial straits in the mid-80's. As early as 1984, the Central Bank found that Manilabank had been suffering financial losses. Presumably, the problems commenced even before their discovery in 1984. As earlier chronicled, the Central Bank placed petitioner bank under comptrollership in 1984 because of liquidity problems and excessive interbank borrowings. In 1987, it was placed under receivership and ordered to close operation. In 1988, it was ordered liquidated. It is evident, therefore, that petitioner bank was operating on net losses from the years 1984, 1985 and 1986, thus, resulting to its eventual closure in 1987 and liquidation in 1988. Clearly, there was no success in business or realization of profits to speak of that would warrant the conferment of additional benefits sought by private respondents. No company should be compelled to act liberally and confer upon its employees additional benefits over and above those mandated by law when it is plagued by economic difficulties and financial losses. No act of enlightened generosity and self-interest can be exacted from near empty, if not empty coffers.

It was established by the labor arbiter 18 and the NLRC 19 and admitted by both parties 20 that petitioner was placed under conservatorship by the Monetary Board, pursuant to its authority under Section 28-A of Republic Act No. 265, 21 as amended by Presidential Decree No. 72, 22 which provides —
SECTION 28-A.Appointment of conservator. — Whenever, on the basis of a report submitted by the appropriate supervising and examining department, the Monetary Board finds that a bank is in a state of continuing inability or unwillingness to maintain a condition of solvency and liquidity deemed adequate to protect the interest of

depositors and creditors, the Monetary Board may appoint a conservator to take charge of the assets, liabilities, and the management of that banking institution, collect all monies and debts due said bank and exercise all powers necessary to preserve the assets of the bank, reorganize the management thereof and restore its viability. He shall have the power to overrule or revoke the actions of the previous management and board of directors of the bank, any provision of law to the contrary notwithstanding, and such other powers as the Monetary Board shall deem necessary. xxx xxx xxx

Under Section 28-A, the Monetary Board may place a bank under the control of a conservator when it finds that the bank is continuously unable or unwilling to maintain a condition of solvency or liquidity. In Central Bank of the Philippines v. Court of Appeals, 23 the Court declared that the order placing petitioner herein under conservatorship had long become final and its validity could no longer be litigated upon. Also, in the same case, the Court found that sometime in August, 1983, some news items triggered a bank-run in petitioner which resulted in continuous over-drawings on petitioner's demand deposit account with the Central Bank; the over-drawings reached P143.955 million by 17 January 1984; and as of 13 February 1990, petitioner had over-drawings of up to P1.233 billion, which evidences petitioner's continuing inability to maintain a condition of solvency and liquidity, thus justifying the conservatorship. Our findings in the Central Bank case coincide with petitioner's claims that it continuously suffered losses from 1984 to 1988 as follows —
YEARNET LOSSES IN MILLIONS OF PESOS

1984P144.418 1985P144.940 1986P132.940 1987P 84.182 January-February 1988P 9.271

These losses do not include the interest expenses on the overdraft loan of the petitioner to the Central Bank, which interest as of July 31, 1987, amounted to P610.065 Million, and penalties on reserve deficiencies

1988. in accordance with Section 7 of Presidential Decree No. 26 private respondent claimed that petitioner made the following payments to its members — YEARMID-YEAR BONUS13TH MONTH PAYCHRISTMAS BONUS 19841 month basic1/2 month basicNone 19851/2 month basic1/2 month basicNone 19861/2 month basic1 month basic1/2 month basic 19871/2 month basic1 month basic1/2 month basic However.029 Million. it is to the employees' advantage that the conservatorship achieve its purposes for the alternative would be petitioner's closure whereby employees would lose not only their benefits. as amended by Presidential Decree No. petitioner cannot be legally compelled to continue paying the same amount of bonuses to its employees. To hold otherwise would be to defeat the reason for the conservatorship which is to preserve the assets and restore the viability of the financially precarious bank. but that it did not do so. The principal balance of the overdraft amounted to P971. 13th Month Pay With regard to the 13th month pay.632 Million as of March 16. 25 The NLRC held that the actions of the conservator ran counter to the provisions of PD 851. 24 Petitioner was not only experiencing a decline in its profits.which amounted to P89. the NLRC adopted the position taken by private respondent and held that the conservator was not justified in diminishing or not paying the 13th month pay and that petitioner should have instead applied for an exemption. In its position paper. but their jobs as well. 1364. in its Memorandum 27 filed before this Court. In such a depressed financial condition. but was reeling from tremendous losses triggered by a bank-run which began in 1983. the conservator was justified in reducing the mid-year and Christmas bonuses of petitioner's employee. private respondent revised its claims as follows — YEARMID-YEAR BONUS13TH MONTH PAYCHRISTMAS BONUS . Ultimately. 851 (PD 851). Thus.

the total amount given by petitioner would still exceed. Hence. 28 PD 851. even assuming the truth of private respondent's claims as contained in its position paper or Memorandum regarding the payments received by its members in the form of 13th month pay. by whatever name called. for each and every year involved. his prior concessions might not be given due credit. requires all employers to pay their employees receiving a basic salary of not more than P1. or at least be equal to. 32 In the case at bar.000 a month. 29 regardless of the nature of the employment. employers already paying their employees a 13th month pay or its equivalent are not covered by the law. it is noted that. cash bonuses and other payments amounting to not less than 1/12 of the basic salary. one month basic salary and thus. not later than December 24 of every year.19841 month basicNone1/2 month basic 19851/2 month basicNone1/2 month basic 19861/2 month basic1/2 month basic1 month basic 19871/2 month basic1/2 month basic1 month basic 19881/2 month basic1/2 month basic1 month basic Petitioner argues that it is not covered by PD 851 since the mid-year and Christmas bonuses it has been giving its employees from 1984 to 1988 exceeds the basic salary for one month (except for 1985 where a total of one month basic salary was given). mid-year bonus. The intention of the law was to grant some relief — not to all workers — but only to those not actually paid a 13th month salary or what amounts to it. may be considered as an "equivalent" of the 13th month pay . 30 However. a 13th month pay. To impose upon an employer already giving his employees the equivalent of a 13th month pay would be to penalize him for his liberality and in all probability. the employer would react by withdrawing the bonuses or resist further voluntary grants for fear that if and when a law is passed giving the same benefits. It was not envisioned that a double burden would be imposed on the employer already paying his employees a 13th month pay or its equivalent — whether out of pure generosity or on the basis of a binding agreement. Under the Revised Guidelines on the Implementation of the 13th-Month Pay Law. this amount should be applied towards the satisfaction of the 13th month pay. which was issued by President Marcos on 16 December 1975. pursuant to Section 2 of PD 851. mid-year bonus and Christmas bonus. 31 the term "equivalent" shall be construed to include Christmas bonus.

(ii)Effective March 1. 1984 and the effectivity of this Order shall be credited as compliance with the minimum wage and allowance adjustments prescribed herein. the employer shall pay the difference. bonuses and other fringe benefits. Wage Order No. 6 Wage Order No. — Cognizant of the effects of. 1984. The bone of contention. which came into effect on 1 November 1984. with different increases being specified for agricultural plantation and non-agricultural workers. however. Such increases shall not include anniversary wage increases provided in collective bargaining agreements unless the agreement expressly provide otherwise. earnings. 6. among others. allowances. petitioner is justified in crediting the mid-year bonus and Christmas bonus as part of the 13th month pay.00 per month as increase in allowance to employees within the bargaining unit on March 1.00 per month as increase in allowance to employees within the bargaining unit on March 1. price increases of oil and other commodities on the employees' wages and earnings. . 1985 — P125. and the certainty of continued governmental or statutory actions adjusting employees' minimum wages. the parties have formulated and agreed on the following highly substantial packaged increases in salary and allowance which take into account and cover (a) any deflation in income of employees because of such price increases and inflation and (b) the expected governmental response thereto in the form of statutory adjustments in wages.00 per month as salary increase plus P100.mandated by PD 851. provided that where the increases are less than the applicable amount provided in this Order. the parties entered into a collective bargaining agreement providing for the following salary adjustments — Article VIII. involves Section 4 thereof which reads — All wage increase in wage and/or allowance granted by employers between June 17. 1985.00 per month as salary increase plus P100. allowances and benefits.Salary Adjustments. Section 1. increased the statutory minimum wage of workers. Thus. On 16 November 1984. 1984 — P225. during the next three (3) years of this Agreement: (i)Effective March 1.

According to private respondent. 16 November 1984 — the date when the collective bargaining agreement was signed by the parties and 1 March . private respondent contends that the first year salary and allowance increases under the collective bargaining agreement cannot be applied towards the satisfaction of the increases prescribed by Wage Order No. the collective bargaining agreement of the parties also included a provision on the chargeability of such salary or allowance increases against government-ordered or legislated income adjustments — SECTION 2. In addition. should be made chargeable against the increase prescribed by Wage Order No.00 per month as increase in allowance to employees within the bargaining unit on March 1. therefore. 6. all increases in wages or allowances granted by the employer between 17 June 1984 and 1 November 1984 shall be credited as compliance with the wage and allowance adjustments prescribed therein. Pursuant to the MOLE Decision dated October 2. Under Wage Order No. the balance remaining after applying the first year salary and allowance increase in the collective bargaining agreement to the increase mandated by Wage Order No. 5. 1984.00. Petitioner maintains that this period encompasses the period of creditability provided for under Wage Order No. and if not sufficient. in the amount of P125. 1986 — P125. 1984. 6. beginning from 1 March 1984 until 28 February 1985. 6 because the first year salary and allowance increase provided for under the collective bargaining agreement can be credited against the wage and allowance increase mandated by such wage order. 6 and that. Petitioner asserts that although the collective bargaining agreement was signed by the parties on 16 November 1984.00 per month as salary increase plus P100. petitioner is willing to pay the difference. 5 shall be determined on the basis of the provisions of such government orders or legislation. The chargeability of the foregoing salary increases against government-ordered or legislated income adjustments subsequent to Wage Order No. 1986. which took effect on June 16. 1984 and Order dated October 24.(iii)Effective March 1. 5. the first-year salary and allowance increases shall be chargeable against adjustments under Wage Order No. 6 because the former were not granted within the period of creditability provided for in such wage order. the first year salary and allowance increase was made to take effect retroactively. 33 On the other hand. the significant dates with regard to the granting of the first year increases are 9 November 1984 — the date of issuance of the MOLE Resolution. Petitioner argues that it complied with Wage Order No.

Thus. 6. The creditability provisions in the Wage Orders prevent the penalizing of employers who are industry leaders and who do not wait for statutorily prescribed increases in salary or allowances and pay their workers more than what the law or regulations require. we held in Apex Mining Company. Furthermore. NLRC 35 that — [t]o obliterate the creditability provisions in the Wage Orders through interpretation or otherwise. . Section 1 of Article VIII of the collective bargaining agreement of the parties states that ". Private respondent points out that none of these dates fall within the period of creditability under Wage Order No." The unequivocal wording of this provision manifests the clear intent of the parties to apply the wage and allowance increases stipulated in the collective bargaining agreement to any statutory wage and allowance adjustments issued during the effectivity of such agreement — from 1 March 1984 to 28 February 1987. Inc. . v. this would be counter-productive so far as securing the interest of labor is concerned. 34 The creditability provision in Wage Order No. 6 which is from 17 June 1984 to 1 November 1984. there is nothing in the wording of Section 2 of Article VIII of the collective bargaining agreement that would prevent petitioner from crediting the first year salary and allowance increases against the increases prescribed by Wage Order No. allowances and benefits. 6 is based on important public policy. and to compel employers simply to add on legislated increases in salaries or allowances without regard to what is already being paid. It would be inconsistent with the abovestated rationale underlying the creditability provision of Wage Order No. would be to penalize employers who grant their workers more than the statutorily prescribed minimum rates of increases. the encouragement of employers to grant wage and allowance increases to their employees higher than the minimum rates of increases prescribed by statute or administrative regulation. the balance was not made chargeable to the . 6. during the next three (3) years of this Agreement . 5. that is. contrary to private respondent's contentions. Thus. . Clearly. petitioner has not complied with Wage Order No. . the parties have formulated and agreed on the following highly substantial packaged increases in salary and allowance which take into account and cover (a) any deflation in income of employees because of such price increases and inflation and (b) the expected governmental response thereto in the form of statutory adjustments in wages.1984 — the retroactive date of effectivity of the first year increases. 6 if. after applying the first year increase to Wage Order No.

the Acting Conservator also approved the increase of meal allowance from P25. the petitioner bank used a divisor of 314 days in arriving at the . In its Memorandum.increases under Wage Order No. among others. are still considered paid rest days. prior to 18 August 1986. 6 for the fact remains that petitioner actually granted wage and allowance increases sufficient to cover the increases mandated by Wage Order No. Holiday Pay Article 94 of the Labor Code provides that every worker shall be paid his regular daily wage during regular holidays 36 and that the employer may require an employee to work on any holiday but such employee shall be paid a compensation equivalent to twice his regular rate. therefore.00 for a minimum of four (4) hours of work for Saturdays. 37 This finding was not disputed by the NLRC. 1986. 39 Private respondent admits that. 1986. Prior to August 18. Private respondent also concedes that the divisor was changed to 303 for purposes of computing overtime pay only. The present Policy of 314 days as divisor used in the computation for cash conversion and determination of daily rate. Saturdays. private respondent states that — 49. Proceeding from the unambiguous terms of the above quoted memorandum. In this case. 38 However. the Labor Arbiter observed that the reduction of the divisor to 303 was for the sole purpose of increasing the employees' overtime pay and was not meant to replace the use of 314 as the divisor in the computation of the daily rate for salaryrelated benefits. the acting Conservator approved the use of 303 days as divisor in the computation of Overtime pay. we are pleased to inform that effective August 18. 6. the divisor was reduced to 303 by virtue of an inter-office memorandum issued on 13 August 1986. Corollarily. 5 and part of the increases mandated by Wage Order No. still remain. The Memorandum Circular issued by the Acting Conservator is clear.00 to P30.The facts germane to this issue are not debatable. petitioner used a divisor of 314 in arriving at the daily wage rate of monthly-salaried employees. the Labor Arbiter found that the divisor used by petitioner in arriving at the employees' daily rate for the purpose of computing salary-related benefits is 314. to wit — To increase the rate of overtime pay for rank and filers.

However. The bank uses 303 days as its divisor. it is bound to pay the salary differential of its employees effective November 1.Since it is a question of fact.By utilizing this formula even up to the present. there is a disputable presumption that the employees are paid their holiday pay. Sundays and the ten . One strong argument in favor of the petitioner's stand is the fact that the Chartered Bank. it is not paying its employees their corresponding holiday pay. 42 as follows — It is argued that even without the presumption found in the rules and in the policy instruction. The clear import of this document is that from the 365 days in a year. 40 In Union of Filipino Employees v. in computing overtime compensation for its employees." This was also our ruling in Chartered Bank Employees Association v. we deduct 52 rest days which gives a total of 313 days. xxx xxx xxx 54. Jr. 1986 (Annex "E") provides for a divisor of 303 days in computing overtime pay. the Inter-office Memorandum dated August 13. The 251 working days divisor is the result of subtracting all Saturdays. It adopted the following formula: (Basic salary x 12 months) ——————————= Daily Wage Rate 303 days 50. if 313 days is the number of working days of the employees then. 1974 up to the present. 1986. this is not so in the case at bar. employs a "divisor" of 251 days.daily wage rate of the monthly-salaried employees. 41 the Court held that "[t]he divisor assumes an important role in determining whether or not holiday pay is already included in the monthly paid employee's salary and in the computation of his daily rate. Vivar. Hence. The petitioner contends otherwise. this was changed. Effective August 18. the company practice indicates that the monthly salaries of the employees are so computed as to include the holiday pay provided by law. Ople. Now. the conclusion is inescapable that the petitioner bank is not actually paying its employees the regular holiday pay mandated by law. Consequently.

(10) legal holidays from the total number of calendar days in a year. the divisor of 314 is arrived at by subtracting all Sundays from the total number of calendar days in a year. and was not meant to exclude holiday pay from the monthly salary of petitioner's employees. the NLRC was correct in ruling that there is no basis to support the same. concur. Thus. Panganiban and Sandoval-Gutierrez. SO ORDERED. Vitug. . with the exception of public respondent's ruling on damages. Apparently." and its 18 June 1991 Resolution issued in the same case are hereby SET ASIDE. WHEREFORE. the 30 April 1991 Decision of public respondent in NLRC-NCR Case No. the divisor should be 365 and not 251. 02-00753-88. Thus. since Saturdays are considered paid rest days. In fact. for the reasons above stated.. based on the records of this case and the parties' own admissions. We agree with the labor arbiter that the reduction of the divisor to 303 was done for the sole purpose of increasing the employees' overtime pay. the use of 314 as a divisor leads to the inevitable conclusion that the ten legal holidays are already included therein. as stated in the inter-office memorandum. it was expressly stated in the inter-office memorandum — also referred to by private respondent in its pleadings — that the divisor of 314 will still be used in the computation for cash conversion and in the determination of the daily rate. entitled "Producers Bank Employees Association v. Melo. Producers Bank of the Philippines. the Court holds that petitioner has complied with the requirements of Article 94 of the Labor Code. Damages As to private respondent's claim for damages. If the employees are already paid for all non-working days. JJ.

. in CA-G. 105 prohibiting RBSM from doing business in the Philippines. petitioners. MONETARY BOARD. respondents. J : p This is a petition for review on certiorari 1 of a decision 2 and resolution 3 of the Court of Appeals (CA) dated March 28. 150886. No. and HILARIO P. 2000. Petitioner Rural Bank of San Miguel. 5 On January 21. Inc. Department of Rural Banks. February 16. Domo-ong. INC. in his memorandum dated January 20. 2007. issued Resolution No.[G. 2000 and November 13. Director. that the management of the bank had been accordingly informed of the need to infuse additional capital to place the bank in a solvent financial condition and was given adequate time within which to make the required infusion and that no infusion of adequate fresh capital was made. SORIANO. the Board decided as follows: . placing it under receivership and designating respondent Philippine Deposit Insurance Corporation (PDIC) as receiver: On the basis of the comptrollership/monitoring report as of October 31. respectively. 2000.R. the governing board of respondent Bangko Sentral ng Pilipinas (BSP). vs. in his capacity as majority stockholder in the Rural Bank of San Miguel. (RBSM) was a domestic corporation engaged in banking. (b) cannot continue in business without involving probable losses to its depositors and creditors. BANGKO SENTRAL NG PILIPINAS and PHILIPPINE DEPOSIT INSURANCE CORPORATION. SP No.] RURAL BANK OF SAN MIGUEL. 4 Petitioner Hilario P. Wilfredo B. Inc. respondent Monetary Board (MB). 2001.R. DECISION CORONA. Soriano claims to be the majority stockholder of its outstanding shares of stock. 57112. which report showed that [RBSM] (a) is unable to pay its liabilities as they become due in the ordinary course of business. It started operations in 1962 and by year 2000 had 15 branches in Bulacan. 1999 as reported by Mr.

Branch 22 to nullify and set aside Resolution No. the RBSM was granted emergency loans on different occasions in the aggregate amount of P375 [million]. Instead of servicing withdrawals of depositors. RBSM paid Forcecollect Professional Solution. 2000. . 7 However.. was not used to service withdrawals [and] remains unaccounted for as admitted by [RBSM's Treasury Officer and Officer-in-Charge of Treasury].180 million. petitioners filed a notice of withdrawal in the RTC and. 2. . Of the P26. On February 8. Rule 17 of the Rules of Court. On January 4.6 million . entities which are owned and controlled by Hilario P. Inc. xxx xxx xxx 6 On January 31. P12. RBSM declared a bank holiday.189 [million] which is the last tranche of the P375 million emergency loan for the sole purpose of servicing and meeting the withdrawals of its depositors. 1999. filed a special civil action forcertiorari and prohibition in the CA. . 8 The CA's findings of facts were as follows. 2000. The BSP interceded with LBP not to terminate the clearing arrangement of RBSM to protect the interests of RBSM's depositors and creditors. 2000. On December 28. on February 7. . As early as November 18. After a year. . Soriano and other RBSM officers. 1999. TcCSIa To assist its impaired liquidity and operations. the MB approved the release of P26. Land Bank of the Philippines (LBP) advised RBSM that it will terminate the clearing of RBSM's checks in view of the latter's frequent clearing losses and continuing failure to replenish its Special Clearing Demand Deposit with LBP. 105. . petitioners filed a petition for certiorari and prohibition in the Regional Trial Court (RTC) of Malolos. the RTC dismissed the case pursuant to Section 1. the LBP informed the BSP of the termination of the clearing facility of RBSM to take effect on December 29. RBSM and all of its 15 branches were closed from doing business. or on November 29.1. Inc. and Surecollect Professional. 2000. in view of the clearing problems of RBSM. on the same day.To designate the [PDIC] as receiver of the bank. 1999.To prohibit the bank from doing business in the Philippines and to place its assets and affairs under receivership in accordance with Section 30 of [RA 7653]. 1998.

1999 Total obligations/ LiabilitiesP1.547.000. Zenaida Cabais of the BSP.000.00 2)Borrowings from BSP — P320.450.201.898. 1999As of Dec. 1999) Actual Breakdown of Total Obligations: 1)Deposits of 20.00 Realizable Assets898. 1999. the director of the Department of Rural Banks Supervision and Examination Sector.000. RBSM's designated comptroller. 10 The MB.000. submitted to the Department of Rural Banks. BSP.00 Cash on Hand101. Ms.000.00 Required Capital InfusionP252.000. [BSP] wanted to examine the books and records of RBSM but encountered problems. after evaluating and . Domo-ong. 20.588. on November 10.000.266.930.000. 1999.008.Alarmed and disturbed by the unilateral declaration of bank holiday. HISAET The findings of the comptroller on the financial state of RBSM as of October 31. 1999 is summed up pertinently as follows: FINANCIAL CONDITION OF RBSM As of Oct.00.000. a Comptrollership Report on her findings on the financial condition and operations of the bank as of October 31. Wilfredo B.00796. 2000.000. 1999.009.001. 31.120. 9 Based on these comptrollership reports. 31.00212.863.441. Another set of findings was submitted by said comptroller [and] this second report reflected the financial status of RBSM as of December 31. made a report to the MB dated January 20.968.000 depositors — P578.00 (On Dec.403.275.00 3)Unremitted withholding and gross receipt taxes — P57.907. 1999 in comparison with the financial condition as of December 31.00 Capital InfusionP5.00 Deficit178. Meanwhile.076.000.000.

This case essentially boils down to one core issue: whether Section 30 of RA 7653 (also known as the New Central Bank Act) and applicable jurisprudence require a current and complete examination of the bank before it can be closed and placed under receivership. 1999 and the declaration of a bank holiday. 966 directing PDIC to proceed with the liquidation of RBSM under Section 30 of RA 7653. Such could be considered as substantial evidence.deliberating on the findings and recommendation of the Department of Rural Banks Supervision and Examination Sector. 14 Hence this petition. on June 9. 2000. 1999 and December 31. PDIC implemented the closure order and took over the management of RBSM's assets and affairs. upon report of the head of the supervising or examining department. The petition was dismissed by the CA on March 28. 105 was bereft of any basis considering that no complete examination had been conducted before it was issued. that the decision of the MB to issue Resolution No. 15 The action of the MB on this matter is final and executory. 2000. 13 Pertinently.Proceedings in Receivership and Liquidation. petitioners claimed that respondents MB and BSP committed grave abuse of discretion in issuing Resolution No. 105 was based on the findings and recommendations of the Department of Rural Banks Supervision and Examination Sector. the Monetary Board finds that a bank or quasi-bank: . 11 Thereafter. 105 on January 21. 105. — Whenever. among others. on the basis of reports prepared by PDIC stating that RBSM could not resume business with sufficient assurance of protecting the interest of its depositors. the MB passed Resolution No. creditors and the general public. 17 Petitioners argue that Resolution No. caTESD Section 30 of RA 7653 provides: SECTION 30. issued Resolution No. 2000. the comptroller reports as of October 31. It held. It is well-settled that the closure of a bank may be considered as an exercise of police power. 16Such exercise may nonetheless be subject to judicial inquiry and can be set aside if found to be in excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of jurisdiction. In their petition 12 before the CA.

thorough and complete examination before a bank can be closed under Section 30 of RA 7653. That this shall not include inability to pay caused by extraordinary demands induced by financial panic in the banking community. including their subsidiaries and affiliates engaged in allied activities. or (d)has willfully violated a cease and desist order under Section 37 that has become final. TIaDHE . xxx xxx xxx The actions of the Monetary Board taken under this section or under Section 29 of this Act shall be final and executory. liquidation or conservatorship. and may not be restrained or set aside by the court except on petition for certiorari on the ground that the action taken was in excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of jurisdiction. as determined by the [BSP] to meet its liabilities. or (c)cannot continue in business without involving probable losses to its depositors or creditors. (Emphasis supplied) xxx xxx xxx Petitioners contend that there must be a current. banking institutions and quasi-banks. The petition for certiorari may only be filed by the stockholders of record representing the majority of the capital stock within ten (10) days from receipt by the board of directors of the institution of the order directing receivership. in which cases. and conduct periodic or special examinations of. — The [BSP] shall have supervision over. involving acts or transactions which amount to fraud or a dissipation of the assets of the institution. the Monetary Board may summarily and without need for prior hearing forbid the institution from doing business in the Philippines and designate the Philippine Deposit Insurance Corporation as receiver of the banking institution.Supervision and Examination. They argue that this section should be harmonized with Sections 25 and 28 of the same law: SECTION 25. (b)has insufficient realizable assets.(a)is unable to pay its liabilities as they become due in the ordinary course of business: Provided.

must be made to the MB after the supervising or examining head conducts an examination mandated by Sections 25 and 28. "Examination" connotes in-depth analysis. They maintain that the term "report" under Section 30 and the word "examination" used in Section 29 of the old law are not synonymous. otherwise the decision to close a bank would be arbitrary.xxx xxx xxx SECTION 28. and at such other time as the Monetary Board by an affirmative vote of five (5) members may deem expedientand to make a report on the same to the Monetary Board: Provided that there shall be an interval of at least twelve (12) months between annual examinations. evaluation. — The supervising and examining department head. (Emphasis supplied) xxx xxx xxx According to the petitioners. . of the facts. the following are the mandatory requirements to be complied with before a bank found to be insolvent is ordered closed and forbidden to do business in the Philippines: Firstly.20 (Emphasis supplied) Petitioners assert that an examination is necessary and not a mere report. or that its continuance in business would involve probable loss to its depositors or creditors. Central Bank of the Philippines 19wherein the Court ruled: There is no question that under Section 29 of the Central Bank Act. Respondents counter that RA 7653 merely requires a report of the head of the supervising or examining department. under Section 28.Examination and Fees. shall examine the books of every banking institution once in every twelve (12) months. the department head concerned shall inform the Monetary Board in writing. an examination shall be conducted by the head of the appropriate supervising or examining department or his examiners or agents into the condition of the bank. secondly. 18 They cite Banco Filipino Savings & Mortgage Bank v. the Monetary Board shall find the statements of the department head to be true. Monetary Board. personally or by deputy. and lastly. it is clear from these provisions that the "report of the supervising or examining department" required under Section 30 refers to the report on the examination of the bank which. it shall be disclosed in the examination that the condition of the bank is one of insolvency. thirdly.

21 Petitioners' contention has no merit. 2000. and represent the bank personally or through counsel as he may retain in all actions or proceedings for or against the institution. only a "report of the head of the supervising or examining department" is necessary. we ruled that an "examination [conducted] by the head of the appropriate supervising or examining department or his examiners or agents into the condition of the bank" 23 is necessary before the MB can order its closure. It is an established rule in statutory construction that . to inform the Monetary Board of the facts. RA 265. in writing.Proceedings upon insolvency. 105 was issued on January 21. Hence. exercising all the powers necessary for these purposes including. but not limited to. However. or that its continuance in business would involve probable loss to its depositors or creditors.inquiry or investigation while "report" connotes a simple disclosure or narration of facts for informative purposes. including Section 29 thereof. forbid the institution to do business in the Philippines and designate an official of the Central Bank or a person of recognized competence in banking or finance. it shall be the duty of the department head concerned forthwith. The Board may. was expressly repealed by RA 7653 which took effect in 1993. it shall be disclosed that the condition of the same is one of insolvency. as receiver to immediately take charge of its assets and liabilities. — Whenever. bringing and foreclosing mortgages in the name of the bank or non-bank financial intermediary performing quasi-banking functions. as expeditiously as possible collect and gather all the assets and administer the same for the benefits of its creditors. upon finding the statements of the department head to be true. petitioners' reliance on Banco Filipino which was decided under RA 265 was misplaced. Banco Filipino and other cases petitioners cited 22 were decided using Section 29 of the old law (RA 265): SECTION 29. (Emphasis supplied) HAICET xxx xxx xxx Thus in Banco Filipino. 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. Resolution No. In RA 7653.

Using the literal meaning of "report" does not lead to absurdity. The lawmakers could have easily retained the word "examination" (and in the process also preserved the jurisprudence attached to it) but they did not and instead opted to use the word "report. 25 The word "report" has a definite and unambiguous meaning which is clearly different from "examination." A report. Indeed. Neither does it defeat the intent of the legislators. these problems are not present here. 28 However. 29 Laying down the requisites for the closure of a bank under the law is the prerogative of the legislature and what its wisdom dictates. or would defeat the clear purpose of the lawmakers. injustice. investigation or scrutiny." 27 This Court cannot look for or impose another meaning on the term "report" or to construe it as synonymous with "examination." 26 On the other hand. it must be given its literal meaning and applied without attempted interpretation: 24 This plain meaning rule or verba legis derived from the maxim index animi sermo est (speech is the index of intention) rests on the valid presumption that the words employed by the legislature in a statute correctly express its intention or will and preclude the court from construing it differently. the court may consider the spirit and reason of the statute. an examination is "a search. . contradiction. it is clear that RA 7653 no longer requires that an examination be made before the MB can issue a closure order. or from the words of a statute there should be no departure. This is also why prior notice and hearing are no longer required before a bank can be closed. The legislature is presumed to know the meaning of the words. plain and free from ambiguity. may be defined as "something that gives information" or "a usually detailed account or statement. contradiction or injustice. Verba legis non est recedendum. The purpose of the law is to make the closure of a bank summary and expeditious in order to protect public interest. and to have expressed its intent by use of such words as are found in the statute. to have used words advisedly.where the words of a statute are clear. as a noun." From the words used in Section 30. We cannot make it a requirement in the absence of legal basis." The insistence on an examination is not sanctioned by RA 7653 and we would be guilty of judicial legislation were we to make it a requirement when such is not supported by the language of the law. where a literal meaning would lead to absurdity.

What is being raised here as grave abuse of discretion on the part of the respondents was the lack of an examination and not the supposed arbitrariness with which the conclusions of the director of the Department of Rural Banks Supervision and Examination Sector had been reached in the report which became the basis of Resolution No. 105.
EIASDT

The absence of an examination before the closure of RBSM did not mean that there was no basis for the closure order. Needless to say, the decision of the MB and BSP, like any other administrative body, must have something to support itself and its findings of fact must be supported by substantial evidence. But it is clear under RA 7653 that the basis need not arise from an examination as required in the old law. We thus rule that the MB had sufficient basis to arrive at a sound conclusion that there were grounds that would justify RBSM's closure. It relied on the report of Mr. Domo-ong, the head of the supervising or examining department, with the findings that: (1) RBSM was unable to pay its liabilities as they became due in the ordinary course of business and (2) that it could not continue in business without incurring probable losses to its depositors and creditors. 30 The report was a 50-page memorandum detailing the facts supporting those grounds, an extensive chronology of events revealing the multitude of problems which faced RBSM and the recommendations based on those findings. In short, MB and BSP complied with all the requirements of RA 7653. By relying on a report before placing a bank under receivership, the MB and BSP did not only follow the letter of the law, they were also faithful to its spirit, which was to act expeditiously. Accordingly, the issuance of Resolution No. 105 was untainted with arbitrariness. Having dispensed with the issue decisive of this case, it becomes unnecessary to resolve the other minor issues raised. 31 WHEREFORE, the petition is hereby DENIED. The March 28, 2000 decision and November 13, 2001 resolution of the Court of Appeals in CA-G.R. SP No. 57112 are AFFIRMED. Costs against petitioners. SO ORDERED.

[G.R. No. 70054. December 11, 1991.] BANCO FILIPINO SAVINGS AND MORTGAGE BANK, petitioner, vs. THE MONETARY BOARD, CENTRAL BANK OF THE PHILIPPINES, JOSE B. FERNANDEZ, CARLOTA P. VALENZUELA, ARNULFO B. AURELLANO AND RAMON V. TIAOQUI, respondents. [G.R. No. 68878. December 11, 1991.] BANCO FILIPINO SAVINGS AND MORTGAGE BANK, petitioner, vs. HON. INTERMEDIATE APPELLATE COURT AND CELESTINA S. PAHIMUNTUNG, assisted by her husband, respondents. [G.R. Nos. 77255-58. December 11, 1991.] TOP MANAGEMENT PROGRAMS CORPORATION AND PILAR DEVELOPMENT CORPORATION, petitioners, vs. THE COURT OF APPEALS, The Executive Judge of the Regional Trial Court of Cavite, Ex-Officio Sheriff REGALADO E. EUSEBIO, BANCO FILIPINO SAVINGS AND MORTGAGE BANK, CARLOTA P. VALENZUELA AND SYCIP, SALAZAR, HERNANDEZ AND GATMAITAN, respondents. [G.R. No. 78766. December 11, 1991.] EL GRANDE CORPORATION, petitioner, vs. THE COURT OF APPEALS, THE EXECUTIVE JUDGE OF The Regional Trial Court and Ex-Officio Sheriff REGALADO E. EUSEBIO, BANCO FILIPINO SAVINGS AND MORTGAGE BANK, CARLOTA P. VALENZUELA AND SYCIP, SALAZAR, FELICIANO AND HERNANDEZ, respondents. [G.R. No. 78767. December 11, 1991.]

METROPOLIS DEVELOPMENT CORPORATION, petitioner, vs. COURT OF APPEALS, CENTRAL BANK OF THE PHILIPPINES, JOSE B. FERNANDEZ, JR., CARLOTA P. VALENZUELA, ARNULFO AURELLANO AND RAMON TIAOQUI, respondents. [G.R. No. 78894. December 11, 1991.] BANCO FILIPINO SAVINGS AND MORTGAGE BANK, petitioner, vs. COURT OF APPEALS, THE CENTRAL BANK OF THE PHILIPPINES, JOSE B. FERNANDEZ, JR., CARLOTA P. VALENZUELA, ARNULFO B. AURELLANO AND RAMON TIAOQUI, respondents. [G.R. No. 81303. December 11, 1991.] PILAR DEVELOPMENT CORPORATION, petitioner, vs. COURT OF APPEALS, HON. MANUEL M. COSICO, in his capacity as Presiding Judge of Branch 136 of the Regional Trial Court of Makati, CENTRAL BANK OF THE PHILIPPINES AND CARLOTA P. VALENZUELA,respondents. [G.R. No. 81304. December 11, 1991.] BF HOMES DEVELOPMENT CORPORATION, petitioner, vs. THE COURT OF APPEALS, CENTRAL BANK AND CARLOTA P. VALENZUELA,respondents. [G.R. No. 90473. December 11, 1991.] EL GRANDE DEVELOPMENT CORPORATION, petitioner, vs. THE COURT OF APPEALS, THE EXECUTIVE JUDGE of the Regional Trial Court of Cavite, CLERK OF COURT and Ex-Officio Sheriff ADORACION VICTA, BANCO FILIPINO SAVINGS AND MORTGAGE BANK, CARLOTA P. VALENZUELA AND SYCIP, SALAZAR, HERNANDEZ AND GATMAITAN, respondents.

68878. DECISION MEDIALDEA. 78767 and 78894 all seek to annul and set aside M. Cornejo for intervenors.B. 78766. Corollary to this issue is whether the CB can be sued to fulfill financial commitments of a closed bank pursuant to Section 29 of the Central Bank Act. G. 81304 and 90473 involve the common issue of whether or not the liquidator appointed by the respondent Central Bank (CB for brevity) has the authority to prosecute as well as to defend suits. Nos. namely.Panganiban. and Crisanto S. Nos. No. Barinaga & Bautista Law Offices collaborating counsel for petitioner. G. The respondent-movant contends that the petitioner has no more personality to continue prosecuting the instant case considering that petitioner bank was placed under receivership since January 25. On the other hand. filed by respondent Celestina Pahimuntung. The antecedent facts of each of the nine (9) cases are as follows: G. which annulled the writ of possession issued by the trial court in favor of petitioner. Resolution No. granting the petition for review on certiorari and reversing the questioned decision of respondent appellate court. 75 issued by respondents Monetary Board and Central Bank on January 25. 1985 by the Central Bank pursuant to the resolution of the Monetary Board. 70054.R. and to foreclose mortgages for and in behalf of the bank while the issue on the validity of the receivership and liquidation of the latter is pending resolution in G. 1985. Benitez. namely. which is the main case.R. 81303. the other three (3) cases. Domingo. Six (6) of these cases. No.R. 1986. 77255-58. of the decision promulgated by this Court on April 8.R. Jr. Florencio T. . J : p This refers to nine (9) consolidated cases concerning the legality of the closure and receivership of petitioner Banco Filipino Savings and Mortgage Bank (BancoFilipino for brevity) pursuant to the order of respondent Monetary Board. 70054. 68878 This is a motion for reconsideration.

The Central Bank is ordered to designate a comptroller forBanco Filipino. 1982 payable in three years from date. the Monetary Board issued another resolution placing the bank under liquidation and designating Valenzuela as liquidator. respectively. that acts such as receiving collectibles and receivables or paying off creditors' claims and other transactions pertaining to normal operations of a bank are not enjoined. this Court in G. applied for extra-judicial foreclosure of the mortgage over Top Management's properties.000 and P5. The loan was secured by real estate mortgage in its various properties in Cavite. 1985. acting as counsel for Banco Filipino under authority of Valenzuela as liquidator.836. January 5. Banco Filipino filed the petition for certiorari in G. Thus. 1984. to represent Banco Filipino in all litigations. Hence. Nos. 1985.000.R. Top Management failed to pay its loan on the due date. On March 22. No. effective during the same period of 30 days. Salazar. et al.000. LLpr On January 25. Deputy Governor of the Central Bank.000 with maturity dates on December 28. In a resolution dated August 29. 70054 resolved to issue a temporary restraining order. It placed Banco Filipino under receivership of Carlota Valenzuela. 1985. 1985 and February 16. the Ex-Officio Sheriff of the . By virtue of her authority as liquidator.000 from Banco Filipino as evidenced by a promissory note dated January 7.370. Salazar. Valenzuela appointed the law firm of Sycip. 77255-58 Petitioners Top Management Programs Corporation (Top Management for brevity) and Pilar Development Corporation (Pilar Development for brevity) are corporations engaged in the business of developing residential subdivisions.300. 1984. Pilar Development obtained loans from Banco Filipino between 1982 and 1983 in the principal amounts of P6. On March 26. No. Cavite. Subsequently. Pilar Development mortgaged to Banco Filipino various properties in Dasmariñas. To secure the loan. enjoining the respondents from executing further acts of liquidation of the bank. P7.R. Likewise.R. 1985. the Monetary Board issued a resolution finding Banco Filipino insolvent and unable to do business without loss to its creditors and depositors. Top Management obtained a loan of P4. et al. 70054 questioning the validity of the resolutions issued by the Monetary Boardauthorizing the receivership and liquidation of Banco Filipino.G. the law firm of Sycip.

SP Nos. Hence.R. Pilar Development filed with the respondent appellate court a petition for prohibition with prayer for the issuance of a writ of preliminary injunction docketed as CA-G. . 07892 and 08962-64 were consolidated and jointly decided. Hence. 1985. this petition was filed by the petitioners Top Management and Pilar Development alleging that Carlota Valenzuela. the respondent appellate court rendered a decision dismissing the aforementioned petitions. 08962-64 seeking to enjoin the same respondents from enforcing the foreclosure sale of its properties.R. 70054.R. 19869 the Monetary Board confirmed Banco Filipino's insolvency and designated the receiver Carlota Valenzuela as liquidator. the Monetary Board forbade Banco Filipino to do business. from proceeding with foreclosure sale. It was extended by respondent Banco Filipino a credit accommodation to finance its housing program. 1985. The law firm of Sycip. On December 9. 78766 Petitioner El Grande Development Corporation (El Grande for brevity) is engaged in the business of developing residential subdivisions. On March 22. Salazar. et al. G. the ex-officio sheriff of said court and Sycip.034.R. On October 30. who was appointed by the MonetaryBoard as liquidator of Banco Filipino. Hence. Top Management filed a petition for injunction and prohibition with the respondent appellate court docketed as CA-G. CA-G. placed it under receivership and designated Deputy Governor Carlota Valenzuela as receiver. cdphil On January 15. petitioner was granted a loan in the amount of P8. SP Nos.R.130. No.Regional Trial Court of Cavite issued a notice of extra-judicial foreclosure sale of the properties on December 16. SP No. Salazar. has no authority to proceed with the foreclosure sale of petitioners' properties or the ground that the resolution of the issue on the validity of the closure and liquidation of Banco Filipino is still pending with this Court in G.00 secured by real estate mortgages on its various estates located in Cavite. et al. Pilar Development defaulted in the payment of its loans. Similarly. 1986. 07892 seeking to enjoin the Regional Trial Court of Cavite. filed separate applications with the ex-officio sheriff of the Regional Trial Court of Cavite for the extra-judicial foreclosure of mortgage over its properties. 1985.

1986. Subsequently. on March 31. the Central Bank and Carlota Valenzuela for specific performance. initiated the foreclosure with the Clerk of Court and Ex-officio sheriff of RTC Cavite. On June 17.. docketed as Civil Case No. Salazar.R. On June 23. petitioner filed a second amended complaint. In order to stop the public auction sale.R. 1985. Valenzuela was restrained by this Honorable Court from exercising acts in liquidation of Banco Filipino Savings & Mortgage Bank. the Court of Appeals rendered a decision dismissing the petition. 81303 On November 8. G. 1986. Hence this petition for review on certiorari was filed alleging that the respondent court erred when it held in its decision that although Carlota P. she was not legally precluded from foreclosing the mortgage over the properties of the petitioner through counsel retained by her for the purpose. On March 2.When petitioner El Grande failed to pay its indebtedness to Banco Filipino. It appears that the former management of Banco Filipino appointed Quisumbing & Associates as counsel for Banco Filipino. 12191. the latter thru its liquidator. 1986 the said law firm filed an answer for Banco Filipino which confessed judgment against BancoFilipino. The Central Bank and Carlota Valenzuela. the ex-officio sheriff issued the notice of extra-judicial sale of the mortgaged properties of El Grande scheduled or April 30. thru the law firm Sycip. which restrained Carlota Valenzuela from acting as liquidator and allowed Banco Filipino to resume banking operations only under a Central Bank comptroller. et al. acting for all the defendants including Banco Filipino moved that the answer filed by Quisumbing & Associates . Hernandez and Gatmaitan filed an answer to the complaint. petitioner El Grande filed a petition for prohibition with the Court of Appeals alleging that respondent Carlota Valenzuela could not proceed with the foreclosure of its mortgaged properties on the ground that this Court in G. No. 1985. Carlota Valenzuela. petitioner Pilar Development Corporation (Pilar Development for brevity) filed an action against Banco Filipino. 1986. 1987. On June 12. No. 70054 issued a resolution dated August 29. 1986. Sycip.

On April 8. 1985. 1987. No. 1985. and thus. 1985. the continuation of the facility sued for by the plaintiff has become legally impossible and the suit has become moot. the respondent appellate court dismissed the appeal and affirmed the order of the trial court.R. Petitioner Pilar Development moved to reconsider the order but the motion was denied. A petition was filed with this Court but was denied in a resolution dated March 22. Hence. Petitioner Pilar Development filed with the respondent appellate court a petition for certiorari and mandamus to annul the order of the trial court. On November 4. 1988. Hence. this petition for review on certiorari was filed. No. and (2) that the Intermediate Appellate Court in a previous decision in AC-G. The Central Bank filed a motion to dismiss the action. Petitioner BF Homes in a supplemental complaint impleaded as defendant Carlota Valenzuela as receiver of Banco Filipino Savings and Mortgage Bank. SP. 04609 had stated that Banco Filipino has been ordered closed and placed under receivership pending liquidation. petitioner filed a second supplemental complaint to which respondents filed a motion to dismiss. The Court of Appeals rendered a decision dismissing the petition. On July 9. alleging that the respondent court erred when it found that the private respondents should not be the ones to respond to the cause of action asserted by the petitioner and the petitioner did not have any cause of action against the respondents Central Bank and Carlota Valenzuela. 1987. 81304 On July 9. the trial court granted the motion to dismiss the supplemental complaint on the grounds (1) that plaintiff has no contractual relation with the defendants. LLjur The order of dismissal was appealed by the petitioner to the Court of Appeals. petitioner BF Homes Incorporated (BF Homes for brevity) filed an action with the trial court to compel the Central Bank to restore petitioner's financing facility with Banco Filipino. . the trial court granted the motion to expunge in an order dated March 17. this instant motion for reconsideration. Despite opposition from Quisumbing & Associates.R. G.for defendantBanco Filipino be expunged from the records.

T-82187. T-132897. on March 24.00. It commenced operations on July 9. 1984. the ex-officio sheriff issued a notice of extrajudicial foreclosure sale of the properties of petitioner. Salazar. 90473 Petitioner El Grande Development Corporation (El Grande for brevity) obtained a loan from Banco Filipino in the amount of P8. applied with the ex-officio sheriff of the Regional Trial Court of Cavite for the extrajudicial foreclosure of the mortgage constituted over petitioner's properties. 1986. T-148377. with more than three (3) million depositors.B. Petitioner Bank had an approved emergency advance of P119. On June 16. and Anthony Aguirre. It has eighty-nine (89) operating branches. and T-79371 of the Registry of Deeds of Cavite. Resolution No. This was augmented with a P3 billion credit line under M. Tiu Family Group. 223 dated February 14. Not satisfied with the decision.B. Apex Mortgage and Loans Corporation. the list of stockholders showed the major stockholders to be Metropolis Development Corporation. G. 1984.7 million under M. No. secured by a mortgage over its five parcels of land located in Cavite which were covered by Transfer Certificate of Title Nos. respondent Court of Appeals rendered a decision dismissing the petition. As of July 31. petitioner filed with the Court of Appeals a petition for prohibition with prayer for writ of preliminary injunction to enjoin the respondents from foreclosing the mortgage and to nullify the notice of foreclosure.130. T-109027. et al.R. petitioner filed the instant petition for review on certiorari.034. Resolution No. . 839 dated June 29. When Banco Filipino was ordered closed and placed under receivership in 1985. thru its counsel Sycip. LBH Inc.R. 1984. 70054 Banco Filipino Savings and Mortgage Bank was authorized to operate as such under M.G. Thus.B. 1963. the appointed liquidator of BF. 1989.Filipino Business Consultants. forty-six (46) of which are in Manila. 1964. No. Resolution No. 934 dated July 27.

1985 to respondent Board on the conservatorship of petitioner bank. as expeditiously as possible collect and gather all the assets and administer the same for the benefit of all the creditors. 29 of RA. The latter submitted a report dated January 8. as shown earlier. No. as amended. the following are recommended: 1. which report shall hereinafter be referred to as the Teodoro report. Special Assistant to the Governor and Head. 265. He was later replaced by Gilberto Teodoro as conservator on August 10.On the same date. as listed in the attached Annex 'A' be included in the watch list of the Supervision and Examination Sector until such time that they shall have cleared themselves. Resolution No. to immediately take charge of the assets and liabilities. 1984. 4. pursuant to Sec. and exercise all the powers necessary for these purposes including but not limited to bringing suits and foreclosing mortgages in the name of the bank. Subsequently. which shall be referred to herein as the Tiaoqui Report contained the following conclusion and recommendation: "The examination findings as of July 31. another report dated January 23. 1984. The report. indicate one of insolvency and illiquidity and further confirms the above conclusion of the Conservator. "Foregoing considered.Refer to the Central Bank's Legal Department and Office of Special Investigation the report on the findings on Banco Filipino for investigation and possible prosecution of .The Board of Directors and the principal officers from Senior Vice Presidents. 3. respondent Board issued M. "All the foregoing provides sufficient justification for forbidding the bank from engaging in banking.Designate the Head of the Conservator Team at the bank. regarding the major findings of examination on the financial condition of petitioner BF as of July 31.B. 1985 was submitted to the Monetary Board by Ramon Tiaoqui. 1984.Forbid the Banco Filipino Savings & Mortgage Bank to do business in the Philippines effective the beginning of office January 1985. as Receiver of Banco Filipino Savings & Mortgage Bank. SES Department II of the Central Bank. 2. 955 placing petitioner bank under conservatorship of Basilio Estanislao.

officers. Deputy Governor as Receiver who is hereby directly vested with jurisdiction and authority to immediately take charge of the bank's assets and liabilities. as amended. Rollo). Supervision and Examination Sector Department II. the Monetary Board issued the assailed MB Resolution No. Aurellano.To designate Mr. Special Assistant to the Governor. and Mr.directors. and employees for activities which led to its insolvent position. the Board decided: 1. 29 of R. 75 which ordered the closure of BF and which further provides: "After considering the report dated January 8. Supervision and Examination Sector (SES) Department II as recited in his memorandum dated January 23. bringing suits and foreclosing mortgages in the name of the bank. 1985 of the Conservator for Banco Filipino Savings and Mortgage Bank that the continuance in business of the bank would involve probable loss to its depositors and creditors.A.To forbid Banco Filipino Savings and Mortgage Bank and all its branches to do business in the Philippines. and as expeditiously as possible collect and gather all the assets and administer the same for the benefit of its creditors. 1985. Special Assistant to the Governor and Head. 265. Valenzuela." (pp. and . and after discussing and finding to be true the statements of the Special Assistant to the Governor and Head. 3. LLpr On January 25.To designate Mrs. creditors and the general public. that the Banco Filipino Savings & Mortgage Bank is insolvent and that its continuance in business would involve probable loss to its depositors and creditors. 2.To direct and authorize Management to do all other things and carry out all other measures necessary or proper to implement this Resolution and to safeguard the interests of depositors. 4. Tiaoqui. Ramon V. 61-62. 1985. Arnulfo B. as Deputy Receivers who are likewise hereby directly vested with jurisdiction and authority to do all things necessary or proper to carry out the functions entrusted to them by the Receiver and otherwise to assist the Receiver in carrying out the functions vested in the Receiver by law orMonetary Board Resolutions. and in pursuance of Sec. Carlota P. exercising all the powers necessary for these purposes including but not limited to.

in compliance with the mandate of Sec. its realizable assets are insufficient to meet all its liabilities and that the bank cannot resume business with safety to its depositors. 9675 with the Regional Trial Court of Makati to set aside the action of theMonetary Board placing BF under receivership. 265.A. and . 2." (pp. it is recommended that: 1.Banco Filipino Savings & Mortgage Bank be liquidated pursuant to paragraph 3. other creditors and the general public. to order respondents to furnish petitioner with the reports of examination which led to its closure and to afford petitioner BF a hearing prior to any resolution that may be issued under Section 29 of R. petitioner filed with this Court the instant petition for certiorari and mandamus under Rule 65 of the Rules of Court seeking to annul the resolution of January 25.In consequence of the foregoing. 29 of R. I). Sec. Vol. also known as Central Bank Act. through the Solicitor General. The report contained the following recommendation: "In view of the foregoing and considering that the condition of the banking institution continues to be one of insolvency.A. to terminate the conservatorship over Banco Filipino Savings and Mortgage Bank. 1985. i. 1985 as made without or in excess of jurisdiction or with grave abuse of discretion.The Statutory Receiver be designated as the Liquidator of said bank.e. 3. as Receiver and Arnulfo Aurellano and Ramon Tiaoqui as Deputy Receivers of Banco Filipino submitted their report on the receivership of BF to the Monetary Board.. 265. 29 of RA No. Carlota Valenzuela. On February 2. 1985.The Legal Department. On February 28. be authorized to file in the proper court a petition for assistance in the liquidation of the Bank.5. petitioner BF filed a complaint docketed as Civil Case No. 10-11. On March 19. as amended. 265 which provides that the Monetary Board shall determine within sixty (60) days from date of receivership of a bank whether such bank may be reorganized/permitted to resume business or ordered to be liquidated. 1985. Rollo.

on September 12. 1985. and to terminate such hearings and submit its resolution within thirty (30) days. 1985. This Court also ordered the consolidation of Civil Cases Nos. 1985 in the most expeditious manner and to submit its resolution to this Court. In the Court's resolution of February 19. this Court Resolved to direct the respondents Monetary Board and Central Bank to hold hearings at which the petitioner should be heard. I) On July 23. Acts such as receiving collectibles and receivables or paying off creditors' claims and other transactions pertaining to normal operations of a bank were not enjoined.4. this Court in the meantime suspended the hearing it ordered in its resolution of August 29. This Court issued a resolution on August 8. Vol. there being no legal impediment or justifiable reason to bar the former from conducting such hearing. 1985. llcd However. The Central Bank was also ordered to designate a comptroller for the petitioner BF.Management be instructed to inform the stockholders of Banco Filipino Savings & Mortgage Bark of the Monetary Board's decision to liquidate the Bank. this Court directed Judge Manuel Cosico to expedite the hearing and submit his report to this Court. This Court further resolved to issue a temporary restraining order enjoining the respondents from executing further acts of liquidation of a bank. 167. 1985. 8108. who was elevated to the Court of Appeals. 1985 ordering the issuance of the aforesaid temporary restraining order. (p. On October 8. 1985. 1985. 9676 and 10183 in Branch 136 of the Regional Trial Court of Makati. which is to ascertain whether substantial administrative due process had been observed by the respondent Monetary Board. .Rollo. On August 20. the Court stated that the hearing contemplated in the resolution of August 29. may be expedited by Judge Manuel Cosico who now presides the court vacated by Judge Ricardo Francisco. 1985. 1987. petitioner filed a motion before this Court praying that a restraining order or a writ of preliminary injunction be issued to enjoin respondents from causing the dismantling of BF signs in its main office and 89 branches. In a resolution dated August 29. Hence. the case was submitted for resolution. this Court submitted a resolution ordering Branch 136 of the Regional Trial Court of Makati then presided over by Judge Ricardo Francisco to conduct the hearing contemplated in the resolution of August 29.

a different scheme was followed. 1989 declared that its intention as expressed in its resolution of August 29. 1989. Branch 149 (now Associate Justice of the Court of Appeals). their reports to theMonetary Board and several other documents in support of their position while petitioner had merely submitted objections to the findings of respondents. petitioner BF filed an urgent motion to reopen hearing to which respondents filed their comment on December 16. affidavits of the private respondents relative to the findings. 70054 filed by Eduardo Rodriguez and Fortunato M. 1988. On October 21. 1988.On February 20. in G. To obviate all doubts on Judge Cosico's impartiality. Three motions for intervention were filed in this case as follows: First. this Court in its resolution dated August 3. Valenzuela. Aurellano and Tiaoqui Report and the supporting documents which were made as the bases by the reporters of their conclusions contained in their respective reports. Although the records disclose that both parties had not waived cross-examination of their deponents. This Court also Resolved in its resolution to re-open the referral hearing that was terminated after Judge Cosico had submitted his report and recommendation with the end in view of allowing petitioner to complete its presentation of evidence and also for respondents to adduce additional evidence. 1988. this Court designated a new hearing commissioner in the person of former Judge Consuelo Santiago of the Regional Trial Court. Dizon. no such cross-examination has been conducted. 1985 had not been faithfully adhered to by the herein petitioner and respondents. until the commissioner submitted his report and recommendations to the Court. The aforementioned resolution had ordered a hearing on the reports that led respondents to order petitioner's closure and its alleged preplanned liquidation. The reception of evidence in the form of affidavits was followed throughout. This Court noted that during the referral hearing however. After having deliberated on the grounds raised in the pleadings. counter-affidavits of its officers and also documents to prove its claims. Makati. Respondents merely submitted to the commissioner their findings on the examinations conducted on petitioner. stockholders of petitioner bank for and on behalf of other stockholders of petitioner. Tiaoqui Report. Petitioner filed their reply to respondent's comment of January 11. in . and for both parties to conduct the required cross-examination of witnesses/deponents. to be done within a period of three months. No.R. This Court also held that the documents pertinent to the resolution of the instant petition are the Teodoro Report. second. Judge Manuel Cosico submitted his report to this Court with the recommendation that the resolutions of respondents Monetary Boardand Central Bank authorizing the closure and liquidation of petitioner BF be upheld. if so minded.

respondents filed their objections to the Santiago Report. 1985) was its condition one of insolvency or would its continuance in business involve probable loss to its depositors or creditors?" The commissioner after evaluation of the evidence presented. as amended. not having satisfied the requirements prescribed under Sec.R. 1990.G. On March 5. as amended to justify the closure of the Banco Filipino Savings and Mortgage Bank? "2)On the date of BF's closure (January 25. 1985. and. 29 of RA 265. 265. 265. the day it was closed. This Court. 29 of the R. 1991. filed by the same stockholders. 1991.That the TEODORO and TIAOQUI reports did not establish. BF should be allowed to reopen subject to such laws. respondents submitted a motion for oral argument alleging .".That accordingly. 1991. On January 28. In the same motion. "2. in accordance with Sec. on March 1. Respondents thereafter filed a motion for leave to file objections to the Santiago Report. this Court denied the request for oral argument of the parties.R. 1984 and that on January 25. found and recommended the following: "1. 1984 or that its continuance in business thereafter would involve probable loss to its depositors or creditors. 1991. by way of correction. the evidence indicates that BF was solvent on July 31. third. 1985. 78894. its insolvency was not clearly established. the hearing commissioner. On the contrary. On February 25. prcd "3. BF's insolvency as of July 31. On February 7. was null and void. rules and regulations that apply to its situation. again in G. BF's closure on January 25. No. as amended.A.That consequently. No. "Santiago Report") on the following issues stated therein as follows: "1)Had the Monetary Board observed the procedural requirements laid down in Sec. 70054 by BF Depositors' Association and others similarly situated. 29 of R. Justice Consuelo Santiago of the Court of Appeals submitted her report and recommendation (to be hereinafter called. denied the aforesaid motions for intervention. respondents requested that the report and recommendation be set for oral argument before the Court.A.

it has an interest in the subject of the action. 1991 petitioner filed its opposition to the motion for oral argument. the trial court allowed the motion for intervention. (Cosico Report dated February 19. On February 14. 1985. No. the case is now submitted for decision. Banco Filipino filed a complaint with the trial court docketed as Civil Case No.R. one upholding on all points the Monetary Board's closure of petitioner. 1985. which ordered the closure of the bank and placed it under receivership. petitioner herein Metropolis Development Corporation (Metropolis for brevity) filed a motion to intervene in the aforestated civil case on the ground that as a stockholder and creditor of Banco Filipino. 1991) holding that petitioner's closure was null and void because petitioner's insolvency was not clearly established before its closure. Intermediate Appellate Court" whereby We held that a complaint questioning the validity of the receivership established by the Central Bank becomes moot and academic upon the initiation of liquidation proceedings. having submitted their respective memoranda. "Central Bank et al. On June 5. 1985. and that such a hearing on oral argument will therefore allow the parties to directly confront the issues before this Court. 78767 On February 2. While the motion to dismiss was pending resolution. On March 20. 65723 entitled. On March 12. the Central Bank and the receivers filed a motion to dismiss the complaint on the ground that the receivers had not authorized anyone to file the action. The parties. 1988) and the other (Santiago Report dated January 25. G. the trial court denied the motion to dismiss and also denied the motion for reconsideration of the order later filed by Central Bank. a hearing was held where both parties were heard on oral argument before this Court. In a supplemental motion to dismiss. 1991. 1985 in G. 1985. v. 1991. On June 18. On July 19. 1985.that this Court is confronted with two conflicting reports on the same subject. the Central Bank cited the resolution of this Court dated October 15. . 9675 to annul the resolution of the Monetary Board dated January 25. it filed its reply to respondents' objections to the Santiago Report.R No.

Hence. Thus. 68878. 1986. 1985. the respondent's motion for reconsideration. 9675. 78894 On February 2. 1985. a complaint was filed with the trial court in the name of Banco Filipino to annul the resolution of the Monetary Board dated January 25.R. the latter filed a petition for certiorari with the respondent appellate court to set aside the order of the trial court denying the motion to dismiss. On March 17. cdphil The Central Bank filed a supplemental motion to dismiss which was denied. After deliberating on the pleadings in the following cases: 1. Hence. the Central Bank and the receivers of Banco Filipino filed a petition for certiorari with the respondent appellate court alleging that the trial court committed grave abuse of discretion in not dismissing Civil Case No. without the authorization of the CB-appointed receiver. The receivers appointed by the Monetary Board were Carlota Valenzuela. G. the Monetary Board placed the bank under liquidation and designated Valenzuela as liquidator and Aurellano and Tiaoqui as deputy liquidators. 1986. the Central Bank and the receivers filed a motion to dismiss the complaint on the ground that the receiver had not authorized anyone to file the action. this petition for certiorari was filed with the petitioner contending that a bank which has been closed and placed under receivership by the Central Bank under Section 29 of RA 265 could file suit in court in its name to contest such acts of the Central Bank. Hence this petition was filed by Metropolis Development Corporation questioning the decision of the respondent appellate court. 1985. and ordering the dismissal of the complaint filed by Banco Filipino with the trial court as well as the complaint in intervention of petitioner Metropolis Development Corporation. No. the respondent appellate court rendered a decision annulling and setting aside the questioned orders of the trial court.In G. No.R. 1985 which ordered the closure of Banco Filipino and placed it under receivership. On March 17. On March 22. On February 14. the respondent appellate court granted the petition and dismissed the complaint of Banco Filipino with the trial court. Arnulfo Aurellano and Ramon Tiaoqui. .

R. Such acts of liquidation. 81303.R. the pendency of the case did not diminish the powers and authority of the designated liquidator to effectuate and carry on the administration of the bank. and represent the bank personally or through counsel as he may retain in all actions or proceedings for or against the institution. No.R. comment. institute such actions as may be necessary in the appropriate court to collect and recover accounts and assets of such institution or defend any action filed against the institution. In fact when We adopted a resolution on August 25. 77255-58. comment. in the name of the bank and with the assistance of counsel as he may retain. the petitioner's motion for reconsideration. the petition. rejoinder and sur-rejoinder. 78766. bringing and foreclosing mortgages in the name of the bank. Section 29 of the Republic Act No. 5. it shall. collect and gather all the assets and administer the same for the benefit of its creditors. as amended known as the Central Bank Act. as expeditiously as possible. comment and reply. 81304.R. the petition. reply and rejoinder. We find the motions for reconsideration in G.In G. exercising all the powers necessary for these purposes including. provides that when a bank is forbidden to do business in the Philippines and placed under receivership. 78766. If the Monetary Board shall later determine and confirm that the banking institution is insolvent or cannot resume business with safety to depositors. comment and reply. 70054. but not limited to. if public interest requires. 81304 and 90473 devoid of merit.In G. 68878 and 81303 and the petitions in G. 265. 29 of the Central Bank Act are those which constitute the conversion of the assets of the banking institution to money or the sale.R. in G. as explained in Sec. The liquidator may. When the issue on the validity of the closure and receivership of Banco Filipino bank was raised in G..2. the petition.In G. Nos. reply. No. Nos. 4. 3.Finally. creditors and the general public. the petition. We enjoined merely further acts of liquidation.In G. assignment or disposition of the same to creditors and other parties for the purpose of paying the debts of such . 6. No.R. order its liquidation and appoint a liquidator who shall take over and continue the functions of the receiver previously appointed by Monetary Board.R. 1985 and issued a restraining order to respondents Monetary Board and Central Bank. No. No. 77255-58.R. the person designated as receiver shall immediately take charge of the bank's assets and liabilities. Nos. 90473.

29 of the Central Bank Act.R. This is generally true with respect to acts involving the exercise of . 77255-58. No. These powers and functions of the liquidator in directing the operations of the bank in place of the former management or former officials of the bank include the retaining of counsel of his choice in actions and proceedings for purposes of administration. the liquidator by himself or through counsel has the authority to bring actions for foreclosure of mortgages executed by debtors in favor of the bank. It is a well-recognized principle that administrative and discretionary functions may not be interfered with by the courts. the liquidator is still empowered under the law to continue the functions of the receiver in preserving and keeping intact the assets of the bank in substitution of its former management. the Central Bank cannot be compelled to fulfill financial transactions entered into by Banco Filipino when the operations of the latter were suspended by reason of its closure.R. 81304. 70054. 78767 and 78894 impressed with merit. 78766 and 90473. which was ordered by respondent Monetary Board on January 25. 1985 for the designation by the Central Bank of a comptroller for Banco Filipino alter the powers and functions of the liquidator insofar as the management of the assets of the bank is concerned. Notwithstanding this. courts have no supervising power over the proceedings and actions of the administrative departments of the government. prLL Clearly. In G.institution. Nos. in G. 1985. 81303. and to prevent the dissipation of its assets to the detriment of the creditors of the bank. In general. No. We hold that the closure and receivership of petitioner bank. Nos. Neither did Our order in the same resolution dated August 25. While We recognize the actual closure of Banco Filipino and the consequent legal effects thereof on its operations. Similarly. There is no doubt that the prosecution of suits for collection and the foreclosure of mortgages against debtors of the bank by the liquidator are among the usual and ordinary transactions pertaining to the administration of a bank. in G. We cannot uphold the legality of its closure and thus. find the petitions in G. The mere duty of the comptroller is to supervise accounts and finances undertaken by the liquidator and to determine the propriety of the latter's expenditures incurred in behalf of the bank. The Central Bank possesses those powers and functions only as provided for in Sec.R. is null and void. We did not prohibit however acts such as receiving collectibles and receivables or paying off creditors' claims and other transactions pertaining to normal operations of a bank.R. due to the aforestated reasons. 68878. the liquidator is likewise authorized to resist or defend suits instituted against the bank by debtors and creditors of the bank and by other private persons.

L-26990. and findings of fact. as receiver to immediately take charge of its assets and liabilities. has committed grave abuse of discretion or has acted without or in excess of jurisdiction in issuing the assailed order. exercising all the powers necessary for these purposes including. 1970. The law applicable in the determination of these issues is Section 29 of Republic Act No. in writing. Sr. which provides: "SECTION 29. 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. forbid the institution to do business in the Philippines and designate an official of the Central Bank or a person of recognized competence in banking or finance. August 31. or that its continuance in business would involve probable loss to its depositors or creditors. The Board may. Coupled with this task is the duty of this Court not only to strike down acts which violate constitutional protections or to nullify administrative decisions contrary to legal mandates but also to prevent acts in excess of authority or jurisdiction. it shall be disclosed that the condition of the same is one of insolvency. it shall be the duty of the department head concerned forthwith. . but not limited to. 265. to inform the Monetary Board of the facts. as well as to correct manifest abuses of discretion committed by the officer or tribunal involved. The jurisdiction of this Court is called upon. v. like the Central Bank of the Philippines and the Monetary Board. — Whenever. as expeditiously as possible collect and gather all the assets and administer the same for the benefits of its creditors.Proceedings upon insolvency. bringing and foreclosing mortgages in the name of the bank or non-bank financial intermediary performing quasi-banking functions. Secretary of Agriculture and Natural Resources. to undertake the delicate task of ascertaining whether or not an administrative agency of the government. once again. also known as the Central Bank Act. through these petitions. as amended. But when there is a grave abuse of discretion which is equivalent to a capricious and whimsical exercise of judgment or where the power is exercised in an arbitrary or despotic manner. 34 SCRA 751). then there is a justification for the courts to set aside the administrative determination reached (Lim. upon finding the statements of the department head to be true.judgment or discretion. and represent the bank personally or through counsel as he may retain in all actions or proceedings for or against the institution.

when warranted. by the Solicitor General. The liquidator shall. convert the assets of the banking institutions or non-bank financial intermediary performing quasi-banking functions to money or sell. 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 institution. institute such actions as may be necessary in the appropriate court to collect and recover accounts and assets of such institution or defend any action filed against the institution: Provided. creditors. and the general public. in the name of the bank or non-bank financial intermediary performing quasi-banking functions and with the assistance of counsel as he may retain. indicate the manner of its liquidation and approve a liquidation plan which may. if the public interest requires. assign or otherwise dispose of the same to creditors and other parties for the purpose of paying the debts of such institution and he may. involve disposition of any or all assets in consideration for the assumption of equivalent liabilities. the liquidator may. . "If the Monetary Board shall determine and confirm within the said period that the bank or non-bank financial intermediary performing quasi-banking functions is insolvent or cannot resume business with safety to its depositors. order its liquidation. However. The Monetary Board shall designate an official of the Central bank or a person of recognized competence in banking or finance as liquidator who shall take over and continue the functions of the receiver previously appointed by the Monetary Board under this Section. file a petition in the regional trial court reciting the proceedings which have been taken and praying the assistance of the court in the liquidation of such institutions. In such case. with the approval of the court. That after having reasonably established all claims against the institution. with all convenient speed. The court shall have jurisdiction in the same proceedings to assist in the adjudication of the disputed claims against the bank or non-bank financial intermediary performing quasi-banking functions and in the enforcement of individual liabilities of the stockholders and do all that is necessary to preserve the assets of such institutions and to implement the liquidation plan approved by the MonetaryBoard."The Monetary Board shall thereupon determine within sixty days whether the institution may be reorganized or otherwise placed in such a condition so that it may be permitted to resume business with safety to its depositors and creditors and the general public and shall prescribe the conditions under which such resumption of business shall take place as well as the time for fulfillment of such conditions. effect partial payments of such claims for assets of the institution in accordance with their legal priority. The liquidator designated as hereunder provided shall. it shall.

No restraining order or injunction shall be issued by any court enjoining the Central Bank from implementing its actions under this Section and the second paragraph of Section 34 of this Act in the absence of any convincing proof that the action of the MonetaryBoard is plainly arbitrary and made in bad faith and the petitioner or plaintiff files a bond. order its liquidation. in case of conservator ship or liquidation. if public interest will be served."The assets of an institution under receivership or liquidation shall be deemed in custodia legis in the hands of the receiver or liquidator and shall from the moment of such receivership or liquidation. Section 28-A. shall be dissolved upon filing by the Central Bank of a bond. creditors and the general public. 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 actions of the Monetary Board under this Section. or execution. after hearing. That the same is raised in an appropriate pleading filed by the stockholders of record representing the majority of the capital stock within ten (10) days from the date the receiver taxes charge of the assets and liabilities of the bank or non-bank financial intermediary performing quasi-banking functions or. the Monetary Board may order the cessation of operations of a bank in the Philippines and place it under receivership upon a finding of insolvency or when its continuance in business would involve probable loss to its depositors or creditors. and can be set abide by a court only if there is convincing proof. . if granted. be exempt from any order of garnishment. which shall be in the form of cash or Central Bank cashier's check. LLpr "The provisions of any law to the contrary notwithstanding. and the second paragraph of Section 34 of this Act shall be final and executory. attachment. in an amount to be fixed by the court. it shall." Based on the aforequoted provision. levy. The restraining order or injunction shall be refused or. executed in favor of the Central Bank. If the Monetary Board shall determine and confirm within sixty (60) days that the bank is insolvent or can no longer resume business with safety to its depositors. that the action is plainly arbitrary and made in bad faith: Provided. within ten (10) days from receipt of notice by the said majority stockholders of said bark or non-bank financial intermediary of the order of its placement under conservator ship or liquidation. "xxx xxx xxx. 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.

1984. As We have stated in Our resolution dated August 3. The former recommended the closure and receivership of petitioner bank while the latter report made the recommendation to eventually place the petitioner bank under liquidation. 1. the basic question to be resolved in G. president of petitioner bank. Aurellano and Tiaoqui Report and the supporting documents made as bases by the supporters of their conclusions contained in their respective reports. thirdly. secondly. 1984. and lastly. Anent the first requirement. or that its continuance in business would involve probable loss to its depositors or creditors. Nos. 6. 1984 conducted by the Supervision and Examination Sector II of the Central Bank (p. this list of exceptions and findings was submitted to the petitioner bank (p. Tiaoqui Report. 78767 and 78894 is whether or not the Central Bank and the Monetary Board acted arbitrarily and in bad faith in finding and thereafter concluding that petitioner bank is insolvent. There is no question that under Section 29 of the Central Bank Act. 1985.Specifically. which . and the Valenzuela. This Court shall likewise take into consideration the findings contained in the reports of the two commissioners who were appointed by this Court to hold the referral hearings. Tiaoqui Report). the Tiaoqui report. the department head concerned shall inform the Monetary Board in writing. This was attached to the letter dated December 17. revealed that the finding of insolvency of petitioner was based on the partial list of exceptions and findings on the regular examination of the bank as of July 31. of examiner-in-charge Dionisio Domingo of SES Department II of the Central Bank to Teodoro Arcenas. 70054. submitted on January 23. it shall be disclosed in the examination that the condition of the bank is one of insolvency. On December 17. the following are the mandatory requirements to be complied with before a bank found to be insolvent is ordered closed and forbidden to do business in the Philippines: Firstly. We will focus Our study and discussion however on the Tiaoqui Report and the Valenzuela. Tiaoqui Report). and in ordering its closure on January 25. 1985. 1989. Aurellano and Tiaoqui Report. the Monetary Board shall find the statements of the department head to be true. namely the report by Judge Manuel Cosico submitted February 20. of the facts. 1988 and the report submitted by Justice Consuelo Santiago on January 28. the documents pertinent to the resolution of these petitions are the Teodoro Report. an examination shall be conducted by the head of the appropriate supervising or examining department or his examiners or agents into the condition of the bank.R. 1991.

"Please be informed that we have not yet officially terminated our examination (tentatively scheduled last December 7. 1984." (pp. The discussion centered on the substantial exposure of the bank to the various entities which would have a relationship with the bank. 810. Moreover. III. emphasis ours) Clearly. the manner by which some bank funds were made indirectly available to several entities within the group.disclosed that the examination of the petitioner bank as to its financial condition as of July 31. collectively. . What transpired and what was agreed upon during the conference was explained in the Tiaoqui report. I. total capital accounts consisting of paid-in capital and other capital accounts such as surplus. Tiaoqui based his report on an incomplete examination of petitioner bank and outrightly concluded therein that the latter's financial status was one of insolvency or illiquidity. A formal reply of the bank would still be forthcoming. on the bank solvency. Rollo. These shall be submitted to you in due time" (p. emphasis ours) It is worthy to note that a conference was held on January 21. 1984) and that we are still awaiting for the unsubmitted replies to our previous letters/requests. He arrived at the said conclusion from the following facts: that as of July 31. LexLib ". Mr. these corporations have large undeveloped real estate properties in the suburbs which can be made answerable for the unsecured loans as well as the Central Bank's credit accommodations. Vol. Rollo. 1984 was not yet completed or finished on December 17. . 58-59. 1985 at the Central Bank between the officials of the latter and of petitioner bank. we are submitting herewith a partial list of our exceptions/findings for your comments. Dizon (BF Executive Vice President) intimated that. surplus reserves and undivided . and the unhealthy financial status of these firms in which the bank was additionally exposed through new funds or refinancing accommodation including accrued interest. 1984 when the Central Bank submitted the partial list of findings of examination to the petitioner bank. The letter reads: "In connection with the regular examination of your institution as of July 31. 1984. other findings/observations are still being summarized including the classification of loans and other risk assets. "Queried in the impact of these clean loans. Vol.

1985. that the biggest adjustment which contributed to the deficit is the provision for estimated losses on accounts classified as doubtful and loss which was computed at P600. wiped out the capital accounts and placed the bank with a capital deficiency amounting to P334. Dionisio Domingo which covered 70%-80% of the bank's loan portfolio. that he believed. 29 of the CB Act as a mandatory requirement was not completely and fully complied with. that despite the meeting on January 21. Rollo). that he however. Tiaoqui report.8 million. he met with officers of petitioner bank to discuss the advanced findings and exceptions made by Mr. He stated: "The recommended valuation reserves as bases for determining the financial status of the bank would need to be discussed with the bank. that capital adjustments. Vol. Tiaoqui testified that on January 21. Also. for which the bank would in turn reply.956 million. consistent with standard examination procedure. In his testimony in the second referral hearing before Justice Santiago. 1985. 1985.4 million pursuant to the examination. that he (Tiaoqui) however prepared his report despite the absence of such reply. It is evident from the foregoing circumstances that the examination contemplated in Sec. however. as in fact it is stated in his report. the examination has not been officially terminated. there were still highly significant items . Fortunato Dizon (BF's Executive Vice President) said that as regards the unsecured loans granted to various corporations. This provision is also known as valuation reserves which was set up or deducted against the capital accounts of the bank in arriving at the latter's financial condition. 1985 (pp. 59. that at that meeting. p.profits aggregated P351. there was still a need to discuss the recommended valuation reserves of petitioner bank and. I). 3313-3314. Rollo. 7. Despite the existence of the partial list of findings in the examination of the bank. Tiaoqui however admits the insufficiency and unreliability of the findings of the examiner as to the setting up of recommended valuation reserves from the assets of petitioner bank. did not wait anymore for a discussion of the recommended valuation reserves and instead prepared his report two days after January 21. (p. Records further show that the examination of petitioner bank was officially terminated only when Central Bank Examiner-in-charge Dionisio Domingo submitted his final report of examination on March 4. said corporations had large undeveloped real estate properties which could be answerable for the said unsecured loans and that a reply from BF was forthcoming.

the power and authority of the Monetary Board to close banks and liquidate them thereafter when public interest so requires is an exercise of the police power of the state. prLL . unjust or is tantamount to a denial of due process and equal protection clauses of the Constitution (Central Bank v. We have held in several cases. Act No. Police power. may not be done arbitrarily or unreasonably and could be set aside if it is either capricious. and a copy of the summary of the findings/violations should be furnished the institution examined so that corrective action may be taken by them as soon as possible (Manual of Examination Procedures. We recognize the fact that it is the responsibility of the Central Bank of the Philippines to administer the monetary. General Instruction. Court of Appeals. 106 SCRA 143). The actuation of the Monetary Board in closing petitioner bank on January 25. It is hard to understand how a period of four days after the conference could be a reasonable opportunity for a bank to undertake a responsive and corrective action on the partial list of findings of the examiner-incharge. Nos. this Court laid down several cardinal primary rights which must be respected in a proceeding before an administrative body. 14). 1985 barely four days after a conference with the latter on the examiners' partial findings on its financial position is also violative of what was provided in the CB Manual of Examination Procedures. Said manual provides that only after the examination is concluded. whimsical. the basic standards of substantial due process were not observed.to be weighed and determined such as the matter of valuation reserves. 635. especially if doubt exists as to whether such bases or findings faithfully represent the real financial status of the bank. Court of Industrial Relations. should a pre-closing conference led by the examinerin-charge be held with the officers/representatives of the institution on the findings/exception. July 27. In the instant case. however. banking and credit system of the country and that its powers and functions shall be exercised by the Monetary Board pursuant to Rep. before these can be considered in the financial condition of the bank. arbitrary. 69 Phil. p. Consequently. that the procedure of administrative tribunals must satisfy the fundamentals of fair play and that their judgment should express a well-supported conclusion. In the celebrated case of Ang Tibay v. 265. L-50031-32. discriminatory. Time and again. known as the Central Bank Act. It would be a drastic move to conclude prematurely that a bank is insolvent if the basis for such conclusion is lacking and insufficient. 1981.

R. as to the requirement of notice and hearing. valuation reserves of fifty per cent (50%) of the accounts should be recommended to be set up. 1988. to be set up or deducted against the corresponding asset account to determine the bank's true condition or net worth.R. As to the concept of whether the bank is solvent or not. to which practically all the questioned valuation reserves refer. or loans regarded by the examiner as absolutely uncollectible or worthless. as to justify its closure on January 25. G. 29 of RA 265 does not require a previous hearing before the Monetary Board implements the closure of a bank. or loans the ultimate collection of which is doubtful and in which a substantial loss is probable but not yet definitely ascertainable as to extent. Rural Bank v.However. . the conclusion arrived at by the respondent Board that the petitioner bank is in an illiquid financial position on January 23. 1984. where the decision is merely based upon pieces of documentary evidence that are not sufficiently substantial and probative for the purpose and conclusion they are presented. namely: the decision of the administrative body must have something to support itself and the evidence must be substantial. 65642. 265 before a bank may be closed is that the examination should disclose that the condition of the bank is one of insolvency. R. 61689. 2. Notwithstanding the foregoing. when warranted. Central Bank examiners must recommend valuation reserves. Court of Appeals. October 15.For loans classified as loss.A. 8. the standard of fairness mandated in the due process clause is not met. administrative due process does not mean that the other important principles may be dispensed with. June 20. In the case at bar. The second requirement provided in Section 29. No. 1985. the manual provides that: 1. the respondents contend that under the Central Bank Manual of Examination Procedures. IAC. Substantial evidence is more than a mere scintilla. 162 SCRA 288). since its action is subject to judicial scrutiny as provided for under the same law (Rural Bank of Bato v. Hence. In the case of loan accounts. G. supra). It means such relevant evidence as a reasonable mind might except as adequate to support a conclusion (Ang Tibay vs. Sec. valuation reserves of one hundred percent (100%) of the accounts should be recommended to be set up (p. 1985 cannot be given weight and finality as the report itself admits the inadequacy of its basis to support its conclusion. CIR. Objections to Santiago report).For doubtful loans.

and will be construed as conferring those powers which are expressly imposed or necessarily implied (Floyd Mechem. it is clear from the law that a solvent bank is one in which its assets exceed its liabilities. 302). But express grants of power to public officers should be subjected to a strict interpretation. 5 of RA 337 is misplaced." "combined capital accounts" and net worth after deducting valuation reserves from the capital. p. Treatise on the Law of Public Offices and Officers.'Unimpaired Capital and Surplus. 970. On the other hand.The following terms shall be held to be synonymous and interchangeable: xxx xxx xxx f. the term "capital" . the total of the 'unimpaired paid-in capital. The term "assets" includes capital and surplus (Exley v. known as the General Banking Act which states: "SECTION 5. 973. and undivided profits net of such valuation reserves as may be required by the Central Bank. In this case. there can be no clearer explanation of the concept of insolvency than what the law itself states. surplus. Firstly. 126 Kan. citing Sec.The foregoing criteria used by respondents in determining the financial condition of the bank is based on Section 5 of RA 337. the contention of the Central Bank that a bank's true financial condition is synonymous with the terms "unimpaired capital and surplus." There is no doubt that the Central Bank Act vests authority upon the Central Bank and Monetary Board to take charge and administer the monetary and banking system of the country and this authority includes the power to examine and determine the financial condition of banks for purposes provided for by law.' which terms shall mean for the purposes of this Act.' and 'Net worth. 267 p. such as for the purpose of closure on the ground of insolvency stated in Section 29 of the Central Bank Act. It is a basic accounting principle that assets are composed of liabilities and capital. shall be understood to mean that "the realizable assets of a bank or a non-bank financial intermediary performing quasi-banking functions as determined by the Central Bank are insufficient to meet its liabilities. 335). surplus and unretained earnings. Sec. Harris. 29 of the Central Bank Act provides that insolvency under the Act.." Hence.' 'Combined capital accounts.

The Central Bank Manual of Examination Procedures provides a format or checklist of a statement of condition to be used by examiners as guide in the examination of banks. liabilities are composed of demand deposits. The amount of loans. due to head office. as author of the report recommending the closure of petitioner bank admits that the valuation reserves should still be discussed with the petitioner . the net worth shown in the statement is in no sense an indication of the amount that might be realized if the bank or company were to be liquidated immediately (Prentice Hall Encyclopedic Dictionary of Business Finance. 48). Report of Examination on Department of Commercial and Savings Banks. on the assumption that the bank or company will continue in business indefinitely. fixed assets and other property owned or acquired and other miscellaneous assets. are based however. p. cashier's. the statement of condition which contains a provision for recommended valuation reserves should not be used as the ultimate basis to determine the solvency of an institution for the purpose of termination of its operations. discounts and advances. Objections to Santiago report). Secondly. 8. and therefore. p. cdrep Respondents acknowledge that under the said CB manual. Banks use statements of condition to reflect the amounts. surplus reserves. and this account is also referred to as valuation reserve (p. when warranted. On the other hand. borrowings. 3-C). nature and changes in the assets and liabilities. Objections to Santiago report). discounts and advances to be stated in the statement of condition as provided for in the manual is computed after deducting valuation reserves when deemed necessary. the allowance for probable losses on loans and discounts represents the amount set up against current operations to provide for possible losses arising from non-collection of loans and advances. based on respondents' submissions. p. other liabilities and deferred credits (Manual of Examination Procedure. 9. the statement of assets and liabilities is used in balance sheets. 9).includes common and preferred stock. to be set up against the corresponding asset account (p. CB examiners must recommend valuation reserves. 5 of RA 337 but not the total financial condition of the bank. Further. Clearly. surplus and undivided profits. The amounts stated in the balance sheets or statements of condition including the computation of valuation reserves when justified. the result would merely be the net worth or the unimpaired capital and surplus of the bank applying Sec. The format enumerates the items which will compose the assets and liabilities of a bank. branches and agencies. loans. time and savings deposits. If valuation reserves would be deducted from these items. Assets include cash and those due from banks. (Manual of Examination Procedures. Tiaoqui himself. manager's and certified checks.

the quality and character of management and determines the institution's compliance with laws. Hence. 5). Notwithstanding the fact that the figures arrived at by the respondent Board as to assets and liabilities do not truly indicate their realizable value as they were merely based on book value. the bank is insolvent. (Gillian v. 267 p. would equal or exceed its total liabilities exclusive of stock liability. General Instructions. rules and regulations. realizable within a reasonable time by a reasonable prudent person. would be totally unjust and unfair. 207 Ind.W.bank in compliance with standard examination procedure. examination concerns itself with review and appraisal. etc. Llewellyn. while audit concerns itself with verification (CB Manual of Examination Procedures. 29 of the Central Bank Act. the insolvency of a bank occurs when the actual cash market value of its assets is insufficient to pay its liabilities. 973. Hence. Harris. 1984 and at the figures presented by the CB authorized deputy receiver and by the Valenzuela. vouchers. take a look at the figures presented by the Tiaoqui Report in concluding insolvency as of July 31. is not in the position to determine how much cash or market value shall be assigned to each of the assets and liabilities of the bank to determine their total realizable value. Alexander v. not considering capital stock and surplus which are not liabilities for such purpose (Exley v. accounts. 117). 363. Hence. but if such fair cash value so realizable is not sufficient to pay such liabilities within a reasonable time. Examination appraises the soundness of the institution's assets. This is not the proper procedure contemplated in Sec. Audit is a detailed inspection of the institution's books. We will however. The latter is part of auditing which should not be confused with examination. 194 N.E. for theMonetary Board to unilaterally deduct an uncertain amount as valuation reserves from the assets of a bank and to conclude therefrom without sufficient basis that the bank is insolvent. 2n 115. App. to determine the recording of all assets and liabilities. respondents used its books which undoubtedly are not reflective of the actual cash or fair market value of its assets. Stated in other words. The proper determination of these matters by using the actual cash value criteria belongs to the field of fact-finding expertise of the Central Bank and the Monetary Board. This Court however. p. Aurellano and Tiaoqui Report . The test of insolvency laid down in Section 29 of the Central Bank Act is measured by determining whether the realizable assets of a bank are less than its liabilities.. 360. Even the CB Manual of Examination Procedures does not confine examination of a bank solely with the determination of the books of the bank. Mo. ledgers. In arriving at the computation of realizable assets of petitioner bank. a bank is solvent if the fair cash value of all its assets. State. 302. 126 Kan. 661). 970. 70 S.

522. Aurellano and Tiaoqui report on the receivership of petitioner bank. then an adjustment of the figures will show that the liabilities of P5. 1985. During the period from July 27. which was based on partial examination findings on the bank's condition as of July 31. There can be no basis therefore for both the conclusion of insolvency and for the decision of the respondent Board to close petitioner bank and place it under receivership.53 million. We do not see.996.2 million allotted to valuation reserves will not.836. the date of the closure of the bank.282.22 even exceeds total liabilities amounting to P4. Likewise. Concerning the financial position of the bank as of January 25." There was no showing whatsoever that the bank had persisted in committing unlawful banking practices and that the respondent Board had attempted to take effective action on the bank's alleged activities. states that total liabilities of P5. 1985.540. unsound and fraudulent banking practices by the granting of huge unsecured loans to several subsidiaries and related companies. suspended or removed for any participation in unsafe and unsound banking practices. that this has any material bearing on the validity of the closure. 1985 prepared by the Central Bank Authorized Deputy Receiver Artemio Cruz shows that total assets amounting to P4. Central Bank Act empowers the Monetary Board to take action under Section 29 of the Central Bank Act when a bank "persists in carrying on its business in an unlawful or unsafe manner. the consolidated statement of condition thereof as of the aforesaid date shown in the Valenzuela.2 million. 1984 up to January 25. 1985. Since.947. We take note of the exhaustive study and findings of the Cosico report on the petitioner bank's having engaged in unsafe. 1984. however.15. 1985.4 if the 612. 1985.981. as We have explained in our previous discussion that valuation reserves can not be legally deducted as there was no truthful and complete evaluation thereof as admitted by the Tiaoqui report itself.282. Section 34 of the RA 265. be deducted from the assets.which recommended the liquidation of the bank by reason of insolvency as of January 25. indicates that total liabilities of 4.1 million exceeds total assets of P4.1 million will not exceed the total assets which will amount to P5.84 million does not exceed the total assets of 4. Based on the foregoing. when petitioner bank was under conservator ship no official of the bank was ever prosecuted.981. The Tiaoqui report dated January 23.834. dated March 19.2 million after deducting from the assets valuation reserves of P612. and .559.540. the consolidated statement of condition of petitioner bank as of January 25. Aurellano and Tiaoqui report to finally recommend the liquidation of petitioner bank instead of its rehabilitation. there was no valid reason for the Valenzuela.

Provided. unsafe and fraudulent banking practices but the alleged insolvency position of the bank (TSN. That a concurrent vote of at least five members of the Monetary Board is obtained. That the Monetary Board has ascertained that the bank is not insolvent and has clearly realizable assets to secure the advances. Section 90 of RA 265 provides two types of emergency loans that can be granted by the Central Bank to a financially distressed bank: "SECTION 90. 1984. another circumstance which point to the solvency of petitioner bank is the granting by the Monetary Board in favor of the former a credit line in the amount of P3 billion along with the placing of petitioner bank under conservator ship by virtue of M. Here. While such advances are outstanding. even during normal periods. 1984 after a self-imposed bank holiday on July 23. August 3. VIII). Provided. could not be prevented by the bank concerned. likewise grant advances to banking institutions. for the purpose of assisting a bank in a precarious financial condition or under serious financial pressures brought about by unforeseen events. testified that the reason for petitioner bank's closure was not unsound. In fact.. Rollo." "The Central Bank may." (Emphasis ours) The first paragraph of the aforequoted provision contemplates a situation where the whole banking community is confronted with financial and economic crisis giving rise to serious and widespread confusion among the public. Vol.B. 1984. however. further. though foreseeable. CB Deputy Governor. at its discretion. 1990. or events which.neither was the entire management of the bank replaced or substituted. in her testimony during the second referral hearing. In periods of emergency or of imminent financial panic which directly threaten monetary and banking stability. . . 3315. Resolution No. the emergency or financial confusion involves the whole banking . 955 dated July 27. Finally. Carlota Valenzuela. the debtor institution may not expand the total volume of its loans or investments without the prior authorization of the Monetary Board. This paved the way for the reopening of the bank on August 1. which may eventually threaten and gravely prejudice the stability of the banking system. p. cdll On emergency loans and advances. the Central Bank may grant banking institutions extraordinary advances secured by any assets which are defined as acceptable security by a concurrent vote of at least five members of theMonetary Board.

." (M. not only as regards petitioner bank. Vol. Rollo.community and not one bank or institution only. This Court thereby finds that the grant of the said emergency loan was intended from the beginning to fall under the second paragraph of Section 90 of the Central Bank Act. The second situation on the other hand. No. Vol. No. "WHEREAS. As alleged by the respondents. such actuation means that petitioner bank could still be . which could not have occurred if the petitioner bank was not solvent. it is the desire of the Central Bank to rapidly diffuse the uncertainty that presently exists. Nothing therein shows that an extraordinary emergency situation exists affecting most banks.B. 1984 cited in Respondents' Objections to Santiago Report. IX. 35. the closure by Banco Filipino Savings and Mortgage Bank of its Banking offices on its own initiative has worked serious hardships on its depositors and has affected confidence levels in the banking system resulting in a feeling of apprehension among depositors and unnecessary deposit withdrawals. p. p. Emphasis ours). Rollo. the Central Bank is charged with the function of administering the banking system. "WHEREAS. Min. 35 dated July 27. Where notwithstanding knowledge of the irregularities and unsafe banking practices allegedly committed by the petitioner bank. ". the following are the reasons of the Central Bank in approving the resolution granting the P3 billion loan to petitioner bank and the latter's reopening after a brief self-imposed banking holiday: "WHEREAS. 25. the Central Bank even granted financial support to the latter and placed it under conservator ship. A perusal of the foregoing "Whereas" clauses unmistakably show that the clear reason for the decision to grant the emergency loan to petitioner bank was that the latter was suffering from financial distress and severe bank "run" as a result of which it closed on July 23. provides for a situation where the Central Bank grants a loan to a bank with uncertain financial condition but not insolvent. "WHEREAS. 1984 and that the release of the said amount is in accordance with the Central Bank's full support to meet Banco Filipino's depositors' withdrawal requirements (Excerpts of minutes of meeting on MB Min. the reopening of Banco Filipino would require additional credit resources from the Central Bank as well as an independent management acceptable to the Central Bank. p. . IX). 26. 3387.

. No. creditors and the general public. 68878 and 81303. No. They should take all the necessary steps not violative of the laws that will fully secure the repayment of the total financial assistance that the Central Bank had already granted or would grant in the future. In view of the foregoing premises. We are aware of the Central Bank's concern for the safety of Banco Filipino's depositors as well as its creditors including itself which had granted substantial financial assistance up to the time of the latter's closure.saved from its financial distress by adequate aid and management reform. 2. the fact that petitioner bank was suffering from serious financial problems should not automatically lead to its liquidation. October 4. For one thing. Section 29 of the Central Bank provides that a closed bank may be reorganized or otherwise placed in such a condition that it may be permitted to resume business with safety to its depositors. 78767 and 78894 are GRANTED and the assailed order of the Central Bank and the Monetary Board dated January 25. L-29352. 81304 and 90473 are DENIED. depositors and the general public. Central Bank. decision is hereby rendered as follows: 1.The petitions in G.The motion for reconsideration in G. the Central Bank and the Monetary Board should exercise strict supervision over Banco Filipino. Granting in gratia argumenti that the closure was based on justified grounds to protect the public. ACCORDINGLY. 77255-58.R. We believe that the closure of the petitioner bank was arbitrary and committed with grave abuse of discretion. The Central Bank and the Monetary Board are ordered to reorganize petitioner Banco Filipino Savings and Mortgage Bank and allow the latter to resume business in the Philippines under the comptroller ship of both the Central Bank and the Monetary Board and under such conditions as may be prescribed by the latter in connection with its reorganization until such time that petitioner bank can continue in business with safety to its creditors. Nos. 41 SCRA 565). 1971. which was required by Central Bank's duty to maintain the stability of the banking system and the preservation of public confidence in it (Ramos v. 1985 is hereby ANNULLED AND SET ASIDE. it may reflect on the Central Bank's own viability. Nos.R.R. 78766. 70054. and the petitions in G. But there are alternatives to permanent closure and liquidation to safeguard those interests as well as those of the general public for the failure of Banco Filipino or any bank for that matter may be viewed as an irreversible decline of the country's entire banking system and ultimately.

. C..SO ORDERED.. took no part. Davide.J. Jr. Narvasa. JJ. Paras. and Nocon.. Jr. Gutierrez. Cruz. concur. JJ. Feliciano. Padilla. Bidin and Regalado. .

R. J : p 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. 1988. Tomacruz and Rustico Pasilavan for petitioners.R. 1982. I. SIYANG IPINAG-UUTOS. Regalado. vs. and to give due course to the petitioners' complaint in IR-428. 1982 and its decision) * (HATOL) promulgated on June 17. petitioners. CENTRAL BANK OF THE PHILIPPINES and CONSOLACION ODRA. INC. and Pacifico T." 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 HONORABLE JUDGE CARLOS R.[G.. 1982 and March 24. Inc. Buenviaje of Branch VII. No. Manuel B. CFI. DECISION PARAS.B. respondents. June 20. Camarines Sur. BUENVIAJE." The antecedent facts of the case are as follows: . Kapalit nito. Jr. Torres for respondents.] RURAL BANK OF BUHI. Judge Carlos R. 61689. HONORABLE COURT OF APPEALS. 13944 entitled "Banko Central ng Pilipinas at Consolacion Odra Laban Kina Rural Bank of Buhi (Camarines Sur). pending before Hon. 1982 in CA-G. ay isinasang-tabi. ang utos ng pinasasagot sa Hukom noong ika-9 ng Marso. isang utos and ipinalabas na naguutos sa pinasasagot sa Hukom na itigil ang anumang pagpapatuloy o pagdidinig kaugnay sa usaping IR-428 na pinawawalang saysay din ng Hukumang ito. No. The decretal portion of the appealed decision reads: "DAHIL DITO.

said petitioner refused to be examined and as a result thereof. 1980. respondent Consolacion V. its assets and liabilities (Rollo. On January 10. docketed as Special Proceedings IR-428 against respondent Consolacion V.00 was past due and another sum of P1. 1980. financial assistance was suspended. 583 placing Buhi. Central Bankof the Philippines. Odra. has charge of the supervision and examination of rural banks and savings and loan associations in the Philippines. 109). As a result thereof. under receivership and designated respondent. p. Central Bank. Respondent. Branch VII. 86). On March 28. which by law. Buhi is a rural bank that started its operations only on December 26. The promissory notes evidencing these loans were rediscounted with the Central Bank for cash. finding the report to be true. Manager of herein petitioner Buhi. an examination of the books and affairs of Buhi was ordered conducted by the Rural Banks and Savings and Loan Association (DRBSLA). p. Odra. adopted Resolution No. filed a petition for injunction with Restraining Order dated April 23. 1980. where the sum of P1. Consolacion V. However.000. 265 as amended (Rollo.00 was also past due in favor of the Central Bank (Rollo. 1975 (Rollo. 86) In 1980. In a letter dated April 8. as receiver.704. 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. p. 1980. as amended. a general examination of the bank's affairs and operations was conducted and there were found by DRBSLA represented by herein respondent Consolacion V. 111). (hereinafter referred to as Buhi) is a juridical entity existing under the laws of the Philippines. p. Imelda del Rosario. the bank became insolvent and prejudiced its depositors and creditors. the Monetary Board. DRBSLA.The petitioner Rural Bank of Buhi. which assailed the action of herein respondent Odra in recommending the receivership over Buhi as a violation of . entitled Rural Bank of Buhi vs. Inc. pursuant to the provisions of Section 29 of Republic Act No. implemented and carried out said Monetary Board Resolution No. 583 by authorizing deputies of the receiver to take control. as receiver thereof. among others. massive irregularities in its operations consisting of loans to unknown and fictitious borrowers. Odra and DRBSLA deputies in the Court of First Instance of Camarines Sur. Director of DRBSLA. Odra. 265. possession and charge of Buhi. Iriga City.130. the designation of the Director. Odra. as Receiver.782. petitioner herein. Consolacion V.

1980. p. 265 as amended by Presidential Decree No. 1980 averring that the petition alleged a valid cause of action and that respondents have violated the due process clause of the Constitution (Rollo. that the provisions of Section 29 of Republic Act No. 1514 had completely become moot and academic (Rollo. p. IR-428 alleging that the issuance of Monetary Board Resolution No. p. 36). 1981. the Office of the Solicitor General. p. 720 (The Rural Banks Act) and as being ultra vires and done with grave abuse of discretion and in excess of jurisdiction (Rollo. 265 as amended. On the same day. Respondents filed their motion to dismiss dated May 27.the provisions of Sections 28 and 29 of Republic Act No. 265. pp. Petitioners. petitioners herein filed their amended complaint in Civil Case No. through their counsel. 583 was plainly arbitrary and in bad faith under aforequoted Section 29 of Republic Act No. 108). p. p. in accordance with Republic Act No. 89. On August 22. the Central Bank Monetary Board issued a Resolution No. Republic Act No. filed an opposition to the motion to dismiss dated June 17. respondents filed a reply to the opposition dated July 1. Branch VII. 1514 (Rollo. 69). 1981. 1981. pursuant to the Monetary Board Resolution No. p. 264). 57). 68) and the fact that Case SP-IR-553 for the liquidation of Buhi was already pending with the same Court (Rollo. On October 16. 1980. in view of the issuance of the Monetary Board Resolution No. 28). in Civil Case No. IR-428 a Supplemental Motion To Dismiss on the ground that the receivership of Buhi. filed in the same Court of First Instance of Camarines Sur. . and Section 10 of Republic Act No. 265 had been faithfully observed (Rollo. p. 49). Section 29. that the petition failed to state a cause of action. 1007 (Rollo. which petition was docketed as SP-IR-553. respondent Central Bank filed on September 15. claiming that the petition is not proper. On September 1. 1514 ordering the liquidation of the Rural Bank of Buhi (Rollo. and. 120). a petition for Assistance in the Liquidation of Buhi. 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. 265 as amended. among others (Rollo. that Imelda del Rosario is not the proper representative of the bank. Later. Meanwhile.

and directing the respondents to surrender the possession of the Rural Bank of Buhi. 269). counsel for petitioner filed another "Urgent Ex-Parte Motion to Order Manager of City Trust to Allow Petitioner to . filed a Motion to Admit Bond in the amount of P300. on March 17. 4). p. to the petitioners (Rollo. for want of sufficient merit is denied. herein petitioner Judge Buenviaje.220. pp. 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. 145). On March 9. 1982.00 filed by the petitioner. 1982. herein petitioner Judge issued the order admitting the bond of P300. conformably with the above-mentioned order. premises considered. p. p. 6). 72). accessories. issued an order denying the respondents' motion to dismiss. Respondents are hereby directed to file their answer within ten (10) days from receipt of a copy of this order. 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. 268). p.00 (Rollo. p. 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." (Rollo. Accordingly. The dispositive portion of said decision reads: "WHEREFORE. p. 78-80). 268). pp.220. in the light of petitioners' opposition. herein petitioner Judge granted the aforesaid Ex-Parte Motion to Force Open the Bank Vault (Rollo. Complying with the said order of the Court. On March 15. 1982 (Rollo.000. On March 18. petitioner Buhi through counsel. 1982. p. Consequently. together with all its equipments. 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. 1982. the motion to dismiss and supplemental motion to dismiss. 1982. as evidenced by the Sheriffs Report (Rollo. On March 11.00) (Rollo. 1980 and further enjoining petitioner to post a bond in the amount of three hundred thousand pesos (P300.petitioner herein filed a rejoinder to its opposition to the motion to dismiss (Rollo. 1982. 8384). etc. on March 16.

p. The motion was denied by the respondent court in a resolution dated June 1. Atty. 174). 269) to comply as prayed for. 180). 1982.Withdraw Rural BankDeposits" while a separate "Urgent Ex-Parte Motion to Order Manager of Metrobank to Release Deposits of Petitioners" was filed on the same date. p. 1982. Herein petitioners did not comply with the Court of Appeals' order of March 19. p. but filed instead on March 21. 1982 and suspending further proceedings in Sp. 1982 a motion for reconsideration of said order of the Court of Appeals.. 1982 (Rollo. restraining the Hon. Proc. 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. through its then Acting Manager. as well as Manuel Genova and Rodolfo Sosa. p. 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. The motion was granted by the Court in an order directing the Manager of Metro Bank-Naga City (Rollo. p. 13944 against herein petitioners. from enforcing his order of March 9. In view of petitioners' refusal to obey the Court of Appeals' Order of March 19. 1982. dated April 22. Ricardo Quintos. claiming that the lower court's order of March 9. 1982 [Rollo. No. The Court of Appeals issued on May 24. 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. 168). 270). 1982 an order requiring herein petitioner Rural Bank of Buhi. No. . Buenviaje. herein respondents filed with the Court of Appeals a Motion to Cite Petitioners in Contempt. seeking to set aside the restraining order and reiterating therein that petitioner Buhi's complaint in the lower court be dismissed (Rollo. Inc. Judge Carlos R.R. In view thereof. On March 19. Imelda del Rosario and herein petitioner Judge Carlos Buenviaje. the Court of Appeals issued a Resolution (KAPASIYAHAN) in tagalog. to show cause within ten (10) days from notice why they should not be held in contempt of court. IR-428 pending before him while giving the Central Bank counsel. 301). herein respondents filed in the Court of Appeals a petition for certiorari and prohibition with preliminary injunction docketed as CA-G.

1982 and ordering the dismissal of herein petitioners' amended complaint in Civil Case No. 13944) filed a Motion for Reconsideration of the Decision dated June 17. At said hearing. subject of the order. p. Manager thereof. No. 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. IR-428 was ordered dismissed (Rollo. 186).R. petitioners (respondents in CA-G. No. petitioners filed their objection to respondents' motion for contempt dated June 5. . p. 13944) did not come to it on appeal (Rollo. 1982. In a subsequent hearing of the contempt incident. 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. the Court of Appeals issued its Order dated October 13. p. Rosalia Guevara. respondent Court of Appeals rendered its decision (HATOL) setting aside the lower court's restraining order dated March 9. 1982. 305). However on September 3.R. 1982 the hearing of the motion to cite the respondents in CA-G. As aforestated. claiming that the case (CA-G. 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 theBank within three (3) days from August 31. SP-13944 (herein petitioner) for contempt (Rollo. 1982 insofar as the complaint with the lower court (Civil Case No. 1982. p. but Rosalia Guevara still refused to obey. on June 17. 1982. 1982. Later. No. 1982 claiming that the properties. 1982. 273-274).R. 1982. had already been returned to the herein petitioners who are the lawful owners thereof and that the returning could no longer be undone (Rollo.On June 9. the respondent Court of Appeals issued its Resolution denying for lack of merit. pp. 193). 1982 for the reconsideration of the resolution of June 1. On August 23. IR-428 (Rollo. On July 9. 302). vigorously and adamantly refused to surrender the premises unless she received a written order from the Court. petitioners filed another motion dated June 17. 181). 1982 and set on August 31. p. herein petitioners' motion for reconsideration of the resolution issued by the respondent Court of Appeals on June 1.

p. Inc. 1982 was still pending consideration in the Court of Appeals. 1983 as Manager of the Rural Bank of Buhi. 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. 1982. petitioners filed a Supplemental Petition with urgent motion for the issuance of a restraining order dated December 2. 1982 with the Court of Appeals to place the bank through its representatives in possession of theRural Bank of Buhi (Camarines Sur). In a resolution of February 21. with Assistant Solicitor General Andin manifesting that respondents were not insisting on the continued detention of petitioner. 225). they filed an urgent motion dated October 28. p. 243). Guevara from detention by the National Bureau of Investigation. possession and control of the said bank (and not through contempt proceedings and detention and confinement of petitioner). and it appearing that the latter had resigned since January 18. p. On December 9. p.Earlier. In the resolution of December 15. 339). p. Inc. 226) that they could not file the required comment because they were not given a copy of the petition. 1983 (Rollo. 1982. requesting that she be allowed to file a petition for the issuance of a writ of habeas corpus (Rollo. 256). p. and that the Central Bankmight avail of more than adequate legal measures to take over the management. 1983 where the counsel of both parties appeared. Counsel for respondents manifested (Rollo. . (Rollo. Meanwhile. the Court NOTED Rosalia V. 1982 praying that the restraining order be issued against respondent court (Rollo. 229). Chief Justice Enrique M. 252) addressed to Hon. the Court Resolved to SET the petitioner at liberty and to consider the contempt incident closed (Rollo. on September 14. In the resolution of October 20. 1982 petitioners had filed this petition even while a motion for reconsideration of the decision of June 17. 1982. p. After hearing aforesaid counsel and petitioner herself. this Court noted the Return of the Writ of Habeas Corpus as well as the release of petitioner Rosalia V. 1983. the Second Division of this Court without giving due course to the petition required respondents to COMMENT (Rollo. Fernando. At the hearing of the said petition on February 23. Guevara's letter dated February 4. p. 237).

p. for further proceedings. 1983 the return to the petitioners (herein respondents) or their duly authorized representatives of the possession.R. 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). IR-428 of CFI-Camarines Sur. 265. 1983. be ordered remanded to the RTC of Camarines Sur. 29. On July 25.A. Meanwhile. 13944-SP (Rollo. No. LLpr A Motion for Early Resolution was filed by herein petitioners on March 12. 1982 of the Court of Appeals be set aside as nulland void and that Special Proceedings No. p. 1983. R. WHICH COURT MAY EXERCISE SUCH POWER AND WHEN MAY IT EXERCISE THE SAME? III. On May 16. respondents filed their comment on the original and supplemental petitions. 1983 and from further proceeding in AC-G. management and control of subject Rural Bank (Rollo.UNDER SEC. On April 28. p. 1983. 1983.UNDER THE SAID SECTION OF THE LAW. 348). the Court of Appeals. 321).On April 11. WHERE THE MONETARY BOARD (MB) OF THE CENTRAL BANK (CB) HAS PLACED A RURAL BANK UNDER RECEIVERSHIP.UNDER THE SAME SECTION OF SAID LAW. Petitioners raised the following legal issues in their motion for reconsideration: I. Branch VII. MAY SUCH CASE BE . together with its properties. petitioners filed their verified Motion for Reconsideration (Rollo. IS SUCH ACTION OF THE MONETARY BOARD (MB) SUBJECT TO JUDICIAL REVIEW? IF SO. p. acting on respondents' urgent motion filed on October 28. this Court resolved to deny the petition for lack of merit (Rollo. AS AMENDED. 337) praying that the HATOL dated June 17. p. 315). 1984 (Rollo. 319). Iriga City. 1982 ordered on April 13. 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. Iriga City. 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.

. pp. in writing. but not limited to. as expeditiously as possible collect and gather all the assets and administer the same for the benefit of its creditors. 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.Proceedings upon insolvency.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. or that its continuance in business would involve probable loss to its depositors or creditors. it shall be disclosed that the condition of the same is one of insolvency. exercising all the powers necessary for these purposes including. as receiver to immediately take charge of its assets and liabilities. Relative thereto. 330331). forbid the institution to do business in the Philippines and shall designate an official of the Central Bank. — Whenever. the provision of Republic Act No. upon examination by the head of the appropriate supervising and examining department or his examiners or agents into the condition of any banking institution. 265 on the proceedings upon insolvency reads: "SEC. upon finding the statements of the department head to be true. or a person of recognized competence in banking. to inform the Monetary Board of the facts. and the Board may. I. it shall be the duty of the department head concerned forthwith.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. "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. bringing suits and foreclosing mortgages in the name of the banking institution. 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. 29.

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 restraining order or injunction shall be refused or. in an amount twice the amount of the bond of the petitioner. 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. it shall. shall be dissolved upon filing by the Central Bank of a bond. "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. institute such actions as may be necessary in the appropriate court to collect and recover accounts and assets of the banking institution. if the public interest requires. indicate the manner of its liquidation and approve a liquidation plan. which shall be in the form of cash or Central Bank cashier's check."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. 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. The Central Bank shall. if granted. in an amount to be fixed by the court. creditors and the general public. with all convenient speed. order its liquidation. 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. 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. 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. as liquidator who shall take over the functions of the receiver previously appointed by the Monetary Board under this Section. The liquidator shall. by the Solicitor General. 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. The Monetary Board shall designate an official of the Central Bank or a person of recognized competence in banking. convert the assets of the banking institution to money or sell. . The Court shall have jurisdiction in the same proceedings to adjudicate disputed claims against thebank 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. in the name of the banking institution.

within 60 days. They are: (a) an examination made by the examining department of the Central Bank. 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. 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. On the contrary. that a hearing be first conducted before a banking institution may be placed under receivership. that there is no requirement whether express or implied."Insolvency. to determine. to the contrary notwithstanding. the provision of any law. creditors and the general public. Supportive of this theory is the ruling of this Court." It will be observed from the foregoing provision of law. "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. 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. 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. or 2)it is indeed insolvent or cannot resume business with safety to depositors. and public interest requires that it be liquidated. creditors and the general public. 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. general or special. and Second. which established the authority of the Central Bank under the foregoing circumstances. however. 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. (b) report by said department to the Monetary Board. under this Act. prLL .' the Monetary Board has authority: First. to forbid the institution to do business and appoint a receiver therefor. which reads: "As will be noted.

Petitioner further argues. In the process. Such exercise may. whimsical.. as amended. 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. Central Bank. (Salud vs. Stated otherwise. be subject to judicial inquiry and could be set aside if found to be capricious. and disillusionment will run the gamut of the entire banking community. therefore. 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. however. 143 SCRA 590 [1986]). . fortunes may be wiped out. receivership being admittedly a harsh remedy. a hearing or an opportunity to be heard may be subsequent to the closure. Sound reasons for receivership must appear of record. and there should cdphil . etc. it should be granted with extreme caution. discriminatory. 333). Court of Appeals. 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. . arbitrary. 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. R. 1969 was in order. the bank can no longer resume business with safety to depositors. 106 SCRA 155 [1981]). so that Section 29.A." .e. 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. One can just imagine the dire consequences of a prior hearing: bank runs would be the order of the day. due process does not necessarily require a prior hearing. Court of Appeals. unjust or a denial of the due process and equal protection clauses of the Constitution (Central Bank vs. 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.) its liquidation will be ordered and a liquidator appointed by the Monetary Board. The evident implication of the law. creditors and the public. 265. (106 SCRA 130). However. The contention is without merit. resulting in panic and hysteria. In Mendiola vs. This Tribunal has so held in a number of cases. that there is also that constitutional guarantee that no property shall be taken without due process of law. p.In this latter case (i.

In the same case. are under the law "final and executory" and may be set aside only on one ground. 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. or determining whether the bank may be rehabilitated or should be liquidated and appointing a liquidator for that purpose. 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 . It has likewise been held that resolutions of the Monetary Board under Section 29 of the Central Bank Act. Central Bank of the Philippines (supra). or appointing a receiver to take charge of the bank's assets and liabilities. Discretion has its limits and has never been held to include arbitrariness. Before granting the remedy. Central Bank. As petitioner correctly contends in his first assignment of error. There is no dispute that under the above-quoted Section 29 of the Central Bank Act. 41 SCRA 567 [1971]).be a clear showing of a necessity therefor. 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. that is "if there is convincing proof that the action is plainly arbitrary and made in bad faith" (Salud vs. supra). discrimination or bad faith (Ramos vs. Central Bank of the Philippines. courts may appoint receivers without prior presentation of evidence and solely on the basis of the averments of the pleadings." There is no question that the action of the Monetary Board in this regard may be subject to judicial review. 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. Rule 59 of the Revised Rules of Court allows the appointment of a receiver upon an ex parte application. xxx xxx xxx This is not to say that a hearing is an indispensable requirement for the appointment of a receiver. Thus. 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.

We hereby order the remand of this case to the Regional Trial Court for further proceedings. Rule 6. Central Bank vs. 1982 (Rollo. may be asserted as an affirmative defense (Sections 1 and 4[b]. Evidently. Section 2. 156). as mandated by Section 29 of the Central Bank Act. Rule 6. dated March 9. LexLib III. Iriga City. into the merits of the claim that the Monetary Board's action is plainly arbitrary and made in bad faith.supra. 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. the Court merely acted on the Central Bank's Motion to Dismiss and Supplemental Motion to Dismiss. Court of Appeals. Court of Appeals. p. 72-77). denying both for lack of sufficient merit. It has not appreciated certain facts which would render the remedy of liquidation proper and rehabilitation improper. the decision of the Court of Appeals is MODIFIED. PREMISES CONSIDERED. Rules of Court) or a counterclaim (Section 6. 1982.It will be noted that in the issuance of the Order of the Court of First Instance of Camarines Sur. . pp. 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. SO ORDERED. Based on the pleadings filed. without a hearing held for both parties to substantiate their allegations in their respective pleadings. 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. there was no trial on the merits. 1982. 106 SCRA 143 [1981]). Still further.should be set aside as plainly arbitrary and made in bad faith. but We LIFT the temporary restraining order issued by the trial court in its Order dated March 9. Branch VII. the trial court merely acted on an incident and has not as yet inquired.

29 is truly designed to protect the interest of all concerned. In Rural Bank of Buhi. 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. EXCLUSIVE AUTHORITY UNDER SEC. the Central Bank. 29 of R. and the summary closure pales in comparison to the protection afforded public interest. — Sec. the mere filing of a case for receivership by the Central Bank cab trigger a bank run and drain its assets in days or even hours leading to insolvency even if the bank be actually solvent. COURT OF APPEALS and TRIUMPH SAVINGS BANKrespondents. the bank is given full opportunity to prove arbitrariness and bad faith in placing the bank under receivership. in which ." Admittedly. (G. CENTRAL BANK. v. The procedure prescribed in Sec. resulting in panic and hysteria. or that its continuance in business would involve probable loss to its depositors or creditors. Court of Appeals. a hearing or an opportunity to be heard may be subsequent to the closure.R. RATIONALE.[G. March 30. the bank itself. 289) provides for the filing of a case within ten (10) days alter the receiver takes charge of the assets of the bank. evaluate and determine the condition of any bank. due process does not necessarily require a prior hearing. 1993. ID. One can just imagine the dire consequences of a prior hearing. ID. 5.. creditors and stockholders. NOT REQUIRED. through the Monetary Board. .. — Under Sec.. TIAOQUI. forbid the bank or non-bank financial institution to do business in the Philippines.e. the depositors. 4 (now par. No.R. Inc. Plainly. i. vs.] THE CENTRAL BANK OF THE PHILIPPINES and RAMON V. 29 does not contemplate prior notice and hearing before a bank may be directed to stop operations and placed under receivership. 265. bank runs would be the order of the day. No. SYLLABUS 1. 20 June 1988. 2.O. and the general public. 29.ID.BANKS & BANKING. 61689. petitioners. 76118. 302) We stated that — ". fortunes may be wiped out and disillusionment will run the gamut of the entire banking community. and finding such condition to be one of insolvency. as amended by E. At any rate. PRIOR NOTICE AND HEARING BEFORE PLACING A BANK UNDER RECEIVERSHIP.A. 162 SCRA 288. RA 265. In the process. and shall designate an official of the CB or other competent person as receiver to immediately take charge of its assets and liabilities. is vested with exclusive authority to assess. . When par.. it is unmistakable that the assailed actions should precede the filing of the case.

183. Chapman.A. 81 Law Ed. 265. But. 72 and 74. but the Monetary Board had no sufficient basis to arrive at a sound conclusion of insolvency to justify the closure. Wilson vs. 3. 231. EVIDENCE. Baldwin. RELIANCE ON THE BANCO FILIPINO CASE. For here. of the General Bank were reached. 12 Am. this is not the case before Us. 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. v. It may be emphasized that Sec. resort to judicial review may be had by filing an appropriate pleading with the court. (G. a matter long settled in this jurisdiction. Standefer. MISPLACED. No. Area [1965]. 15 SCRA 67. and not the arbitrariness which the conclusions of the Supervision and Examination Sector (SES).R. 611. Sec.event. citing Sec. It is enough that a subsequent judicial review be provided. CASE AT BAR. In other words. 29 does not altogether divest a bank or a nonbank 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. L-21146. the resolution may properly nullified and the receivership lifted as the trial court may determine. Bourjois vs. — In the early case of Rural Bank of Lucena. 77 Law Ed.. 1027. 1032.REMEDIAL LAW. . what is being raised as arbitrary by private respondent is the denial of prior notice and hearing by the Monetary Board. the arbitrariness. Jur. We ruled in Banco Filipino that the closure of the bank was arbitrary and attendant with grave abuse of discretion. Inc. 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. 29 September 1965. 305. COURT ACTION TO DETERMINE WHETHER ISSUANCE OF MONETARY BOARD RESOLUTION WAS TAINTED WITH ARBITRARINESS MAY BE FILED WITHIN 10 DAYS FROM DATE THE RECEIVER TOOK OVER THE BANK'S ASSETS. 29. 29 nor does the constitutional requirement of due process demand that the correctness of the Monetary Board's resolution to stop operation and proceed to liquidation of first adjudged before making the resolution effective. bad faith and abuse of discretion were determined only after the bank was placed under the conservatorship and evidence thereon was received by the trial court. We held that a previous hearing is nowhere required in Sec.ID. not because of the absence of prior notice and hearing. stockholders and the general public. R. 612). American Surety Co vs.S. 301 U. 4. — The heavy reliance of respondents of the Banco Filipino case is misplaced in view of factual circumstances therein which are not attendant in the present case. 86 ALR 307. 46 Law Ed. creditors. Department II.

of the Central Bank . which affirmed the twin orders of the Regional Trial Court of Quezon City issued 11 November 1985 1 denying herein petitioners' motion to dismiss Civil Case No. Court of Appeals. Hon. ONLY STOCKHOLDERS COULD FILE ACTION FOR ANNULMENT OF A MONETARY BOARD RESOLUTION PLACING A BANK UNDER RECEIVERSHIP. de Guzman and Triumph Savings Bank. SP No. Indirectly. Tiaoqui to restore the private management of Triumph Savings Bank (TSB) to its elected board of directors and officers. We explained the purpose of the law — ".. Department II. Jose C. Common sense and public policy dictate then the authority to decide on whether to contest the resolution should be lodged with the stockholders owning a majority of the shares for they are expected to be more objective in determining whether the resolution is plainly arbitrary and issued in bad faith. In Central Bank v. it is likewise intended to protect and safeguard the rights and interests of the stockholders. 07867 entitled "The Central Bank of the Philippines and Ramon V.ID. J : p May a Monetary Board resolution placing a private bank under receivership be annulled on the ground of lack of prior notice and hearing? This petition seeks review of the decision of the Court of Appeals in CA G. in requiring that only the stockholders of record representing the majority of the capital stock may bring the action to set aside a resolution to a place a bank under conservatorship is to ensure that it be not frustrated or defeated by the incumbent Board of Directors or officers who may immediately resort to court action to prevent its implementation or enforcement.R." promulgated 26 September 1986. and directing petitioner Ramon V. . 2 The antecedent facts: Based on examination reports submitted by the Supervision and Examination Sector (SES). RECEIVERSHIP. subject to Central Bank comptrollership. — 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. Tiaoqui vs.5." DECISION BELLOSILLO. It is presumed that such a resolution is directed principally against acts of said Directors and officers which is directed principally against acts of said Directors and officers which place the bank in a state of continuing inability to maintain a condition of liquidity adequate to protect the interest of depositors and creditors. Q-45139. .

Tiaoqui to restore TSB to its private management. placing it under receivership. On 11 November 1985.(CB) "that the financial condition of TSB is one of insolvency and its continuance in business would involve probable loss to its depositors and creditors. with prayer for injunction. i. Q-45139. On 19 July 1985. Triumph Savings Bank filed with Us a petition for certiorari under Rule 65 of the Rules of Court 6 dated 25 July 1985 seeking to enjoin the continued implementation of the questioned MB resolution. 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. 596 "until further orders". and that TSB was without legal capacity to sue except through its receiver. which are the only grounds for the annulment of Monetary Board resolutions placing a bank under conservatorship. and appointing Ramon V..e. that TSB failed to show convincing proof of arbitrariness and had faith on the part of petitioners." 3 the Monetary Board (MB) issued on 31 May 1985 Resolution No. Thereafter. i. 596..A. much less found guilty thereof. Central Bank and Ramon Tiaoqui filed a motion to dismiss the complaint before the RTC for failure to state a cause of action. otherwise known as "The Central Bank Act. the trial court temporarily restrained petitioners from implementing MB Resolution No. 269. it did not allege ultimate facts showing that the action was plainly arbitrary and made in bad faith. TSB filed an urgent motion in the RTC to direct receiver Ramon V. 29 of R. thus prompting them to move for the quashal of the restraining order (TRO) on the ground that it did not comply with said Sec. 29. docketed as Civil Case No. Meanwhile. Tiaoqui to annul MB Resolution No. 4 On 11 June 1985. TSB filed a complaint with the Regional Trial Court of Quezon City. 7 On 9 September 1985. that TSB failed to post the requisite bond in favor of Central Bank. forbidding it from doing business in the Philippines. Tiaoqui as receiver. challenging in the process the constitutionality of Sec. on 9 August 1985. against Central Bank and Ramon V. the RTC in separate orders denied petitioners' motion to dismiss and .e." as amended. 596 ordering the closure of TSB. 5 On 1 July 1985. Tiaoqui assumed office on 3 June 1985. acting on the motion to quash the restraining order. the trial court granted the relief sought and denied the application of TSB for injunction.' and.

"The charge of lack of due process in the complaint may be taken as constitutive of allegations of arbitrariness and bad faith. judicial review of such action not being foreclosed. Rather. without first hearing the side of the bank. They further admit that said resolution can be the subject of judicial review and may be set aside should it be found that the same was issued with arbitrariness and in bad faith. No. 9 On 26 September 1986. subject to CB comptrollership. the appellate court.R. will allow the receiver it has appointed to question that very appointment. upheld the orders of the trial court thus — "Petitioners' motion to dismiss was premised on two grounds. namely. Should the argument of petitioners be given circulation. then judicial review of actions of the CB would be . for it cannot be expected that the master. the CB. especially so in the light of the statement of private respondent that neither the bank itself nor its officials were even informed of any charge of violating banking laws. This is not of course to be taken as meaning that there must be previous hearing before the Monetary Board may exercise its powers under Section 29 of its Charter. petitioners themselves admit that the Monetary Board resolution placing the Triumph Savings Bank under the receivership of the officials of the Central Bank was done without prior hearing. that the complaint failed to state a cause of action and that the Triumph Savings Bank was without capacity to sue except through its appointed receiver. In regard to lack of capacity to sue on the part of Triumph Savings Bank we view such argument as being specious. they mean to convey the impression that only the CB appointed receiver himself may question the CB resolution appointing him as such. for if we get the drift of petitioners' argument. Central Bank and Tiaoqui moved on 2 December 1985 for the dismissal of G. that is. petitioners elevated the twin orders of the RTC to the Court of Appeals on a petition for certiorari and prohibition under Rule 65. This may be asking for the impossible.ordered receiver Tiaoqui to restore the management of TSB to its elected board of directors and officers. it would be best should private respondent be given the chance to show and prove arbitrariness and bad faith in the issuance of the questioned resolution. Since the orders of the trial court rendered moot the petition for certiorari then pending before this Court. 71465 which We granted on 18 December 1985. "Concerning the first ground. 8 Instead of proceeding to trial.

this Court must say that it finds nothing whimsical. Q-45139.R." 10 On 15 October 1986. said action only being in line and congruent to the action of the Supreme Court in the Banco Filipino Case (G.effectively checked and foreclosed to the very bank officials who may feel. 635) and Eastern Telecom Corp. the bank's management should be restored to its board of directors and officers. Civil Case No. and that the civil case pending before the RTC of Quezon City. capricious. filed this petition under Rule 45 of the Rules of Court praying that the decision of the Court of Appeals in CA-G. allegations of arbitrariness and bad faith". 07867 be set aside. SP No. cdphil xxx xxx xxx "On the questioned restoration order.. or arbitrary in its issuance. consequently. and (3)in holding that the owners and former officers of an insolvent bank may still act or sue in the name and corporate capacity of such bank. 29 of RA 265 "may be taken as . (2)in holding that the "charge of lack of due process" for "want of prior hearing" in a complaint to annul a Monetary Board receivership resolution under Sec. 13 . Dans. according to respondents. 70054) where management of the bank was restored to its duly elected directors and officers. 596 was adopted without TSB being previously notified and heard. as in the case at bar.E. on the other hand. 11 The respondents. 12 We held that CB violated the rule on administrative due process laid down in Ang Tibay vs. even after it had been ordered closed and placed under receivership. Petitioners allege that the Court of Appeals erred — (1)in affirming that an insolvent bank that had been summarily closed by the Monetary Board should be restored to its private management supposedly because such summary closure was "arbitrary and in bad faith" and a denial of "due process". Ramon V. Since MB Resolution No. the same is void for want of due process. that the CB action ousting them from the bank deserves to be set aside. Jr. CIR (69 Phil. despotic. allege inter alia that in the Banco Filipino case. vs. but subject to the Central Bank comptrollership. Central Bank and its appointed receiver. No.. be dismissed. (137 SCRA 628) which requires that prior notice and hearing be afforded to all parties in administrative proceedings. Tiaoqui.

having the required expertise and specialized competence to do so. evaluate and determine the condition of any bank. Area [1965]. 17 We held that a previous hearing is nowhere required in Sec. 16 which was then in effect at the time the action was commenced. In the early case of Rural Bank of Lucena. 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. 29 is to repose in the Monetary Board exclusive power to determine the existence of statutory grounds for the closure and liquidation of banks. Otherwise stated. The fourth paragraph. create liabilities for the bank up to the insured amount of P40. Plainly. 15 the Central Bank. and finding such condition to be one of insolvency.00.000. 289) provides for the filing of a case within ten (10) days alter the receiver takes charge of the assets of the bank. 29 does not contemplate prior notice and hearing before a bank may be directed to stop operations and placed under receivership. through the Monetary Board. When par. 29 of R.O.A. 29 nor does the constitutional requirement of due process demand that the correctness of the Monetary Board's resolution to stop operation and proceed to liquidation of first adjudged . as amended by E. or that its continuance in business would involve probable loss to its depositors or creditors. and even destroy evidence of fraud or irregularity in the bank's operations to the prejudice of its depositors and creditors. Sec. allows the filing of a case to set aside the actions of the Monetary Board which are tainted with arbitrariness and bad faith. Inc. Contrary to the notion of private respondent. 29 of R. is absence of prior notice and hearing constitutive of acts of arbitrariness and bad faith? LexLib Under Sec.Petitioners claim that it is the essence of Sec. 5. 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. The first issue raised before Us is whether absence of prior notice and hearing may be considered acts of arbitrariness and bad faith sufficient to annul a Monetary Board resolution enjoining a bank from doing business and placing it under receivership. is vested with exclusive authority to assess. it is unmistakable that the assailed actions should precede the filing of the case. forbid the bank or non-bank financial institution to do business in the Philippines. 14 Petitioners further argue that the legislative intent of Sec. 265. 4 (now par.A. v. and shall designate an official of the CB or other competent person as receiver to immediately take charge of its assets and liabilities.

banks are under the obligation to treat with meticulous care and outmost fidelity the accounts of those who have reposed their trust and confidence in them (Simex International [Manila]. due process does not necessarily require a prior hearing. 29 does not altogether divest a bank or a nonbank 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. One can just imagine the dire consequences of a prior hearing. 19 We stated that — ". fortunes may be wiped out and disillusionment will run the gamut of the entire banking community. 265 does nor require a previous hearing before the Monetary Board can implement its resolution closing a bank. a fiduciary relationship is created between the banking institutions and their depositors. 183 SCRA 360 [1990]). since its actions is subject to judicial scrutiny as provided by law. 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. the banking business is properly subject to reasonable regulation under the police power of the state because of its nature and relation to the fiscal affairs of the people and the revenues of the state (9 CJS 32). Banks are affected with public interest because they receive funds from the general public in the form of deposits.before making the resolution effective. . 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." We stressed in Central Bank of the Philippines v. Court of Appeals 20 that — ". In the process. In Rural Bank of Buhi. . It may be emphasized that Sec.. It is enough that a subsequent judicial review be provided. . 29 of R. bank runs would be the order of the day. Court of Appeals. v. Therefore. creditors. . Even in Banco Filipino. Inc. stockholders and the general public. Inc. resulting in panic and hysteria. Court of Appeals. 18 We reiterated that Sec. resort to judicial review may be had by filing an appropriate pleading with the court.A. Due to the nature of their transactions and functions. a hearing or an opportunity to be heard may be subsequent to the closure. .

"It is then the Government's responsibility to see to it that the financial interests of those who deal with the banks and banking institutions. .. XII. XV. Art. The procedure prescribed in Sec. Under its charter. The government cannot simply cross its arms while the assets of a bank are being depleted through mismanagement or irregularities. It is the duty of the Central Bank in such an event to step in and salvage the remaining resources of the bank so that they may continue to be dissipated or plundered by those entrusted with their management. public faith in the banking system is certain to deteriorate to the prejudice of the national economy itself. pursuant to its Charter (R. 265 should viewed in this light.A. Under both the 1973 and 1987 Constitutions. as amended). Art. it shall have supervision over the operations of banks (Sec. who all deserve the protection of the government. are protected. 1987 Constitution). this Court held that: '. 29 is truly designed to protect the interest of all concerned.' " Section 29 of R. the CB is further authorized to take the necessary steps against any banking institutions if its continued operation would cause prejudice to its depositors. creditors and stockholders. Admittedly. 14. the depositors. We would be subscribing to a situation where the procedural rights invoked by private respondent would take precedence over the substantive interests of depositors. banking and credit. creditors and stockholders over the assets of the bank. In Philippine Veterans Bank Employees Union-NUBE v. and Sec. otherwise. the mere filing of a case for receivership by the Central Bank cab trigger a bank run and drain its assets in days or even hours leading to insolvency even if the bank be actually solvent. the Central Bank is tasked with providing policy direction in the areas of money. creditors and stockholders. that task is delegated to the Central Bank which. . 1973 Constitution. corollary. and the general public.e.A. Philippine Veterans Banks (189 SCRA 14 [1990]). and the summary closure pales in comparison to the protection afforded public interest. . 20. as depositors or otherwise. is authorized to administer the monetary. not to mention the losses suffered by the bank depositors. i. banking and credit system of the Philippines. creditors and the general public as well. 265. the bank itself. This power has been expressly recognized by this Court. It this country. [u]nless adequate and determined efforts are taken by the government against the distressed and mismanaged banks.

a matter long settled in this jurisdiction. the same reports showed that the total assets of Banco Filipino far exceeded its total liabilities. We refer to Rural Bank of Buhi. Consequently. . Inc. the subtraction of an uncertain amount as valuation reserve from the assets of the bank would merely result in its net worth or the unimpared capital and surplus. (b) report by said department to the Monetary Board. v. We ruled in Banco Filipino that the closure of the bank was arbitrary and attendant with grave abuse of discretion." . reiterate Our pronouncement therein that — 21 and ". what is being raised as arbitrary by private respondent is the denial of prior notice and hearing by the Monetary Board. and not the arbitrariness which the conclusions of the Supervision and Examination Sector (SES). the Valenzuela. In other words.At any rate. it did not reflect the total financial conditions of Banco Filipino. But. Clearly. Furthermore. abuse of discretion and bad faith in the closure of Banco Filipino by the Monetary Board. bad faith and abuse of discretion were determined only after the bank was placed under the conservatorship and evidence thereon was received by the trial court. but the Monetary Board had no sufficient basis to arrive at a sound conclusion of insolvency to justify the closure. Once again. 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. if need be. the bank is given full opportunity to prove arbitrariness and bad faith in placing the bank under receivership. Court of Appeals. on the basis thereof. and (c) prima facie showing that its continuance in the business would involve probable loss to its depositors or creditors. the Monetary Board had no valid reason to liquidate the bank. They are: (a) an examination made by the examining department of the Central Bank. perhaps it could have merely ordered its reorganization or rehabilitation . Department II. For here. The heavy reliance of respondents of the Banco Filipino case is misplaced in view of factual circumstances therein which are not attendant in the present case. Aurellano and Tiaoqui Reports contained unfounded assumptions and deductions which did not reflect the true financial condition of the bank. . For instance. there was in that case a manifest arbitrariness. the arbitrariness. of the General Bank were reached. in which event. not because of the absence of prior notice and hearing. this is not the case before Us. the resolution may properly nullified and the receivership lifted as the trial court may determine. As this Court found in that case.

to echo the respondent appellate court. We rule that Sec. hence. to rule that only the receiver may bring suit in behalf of the bank is. 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. 265 is a sound legislation promulgated in accordance with the Constitution in the exercise of police power of the state. Consequently. Indirectly. will allow the receiver it has appointed to question that very appointment.A. for it cannot be expected that the master. It is presumed that such a resolution is directed principally against acts of said Directors and officers which is directed principally against acts of said Directors and officers which place the bank in a state of continuing inability to maintain a condition of liquidity adequate to protect the interest of depositors and creditors. Until such determination is made. Common sense and public policy dictate then the authority to decide on whether to contest the resolution should be lodged with the stockholders owning a majority of the shares for they are expected to be more objective in determining whether the resolution is plainly arbitrary and issued in bad faith. the absence of notice and hearing is not valid ground to annul a Monetary Board resolution placing a bank under receivership. 289 was issued. Consequently. the CB. The implication is that before E.In sum. it is likewise intended to protect and safeguard the rights and interests of the stockholders. . 23 We explained the purpose of the law — ". Court of Appeals. to be effective sixty (60) days after its approval (Sec. "asking for impossible.e. since the instant complaint was filed by parties representing themselves to be officers of . appeal to procedural due process cannot just outweigh the evil sought to be prevented. 289. 5). may only be annulled after a determination has been made by the trial court that its issuance was tainted with arbitrariness and bad faith.O." It is observed that the complaint in this case was filed on 11 June 1985 or two (2) years prior to 25 July 1987 when E. or conservatorship for that matter. 22 In Central Bank v. in requiring that only the stockholders of record representing the majority of the capital stock may bring the action to set aside a resolution to a place a bank under conservatorship is to ensure that it be not frustrated or defeated by the incumbent Board of Directors or officers who may immediately resort to court action to prevent its implementation or enforcement. the bank shall continue to be under receivership. any party in interest could institute court proceedings to question a Monetary Board resolution placing a bank under receivership. 29 of R.O. ." Consequently. As regards the second ground. the status quo shall be maintained.. i.

TIAOQUI to restore the management of TRIUMPH SAVINGS BANK to its elected Board of Directors and officers.R. 289. However. PREMISES considered. except insofar as it upholds the Order of the trial court of 11 November 1985 directing petitioner RAMON V.respondent Bank (Officer-in-Charge and Vice President). the Decision of the Court of Appeals in CA-G. SP No.O. after the effectivity of E. 07867 is AFFIRMED. the case before the trial court should now take its natural course. 596 of the Monetary Board was tainted with arbitrariness and bad faith and to decide the case accordingly. SO ORDERED . Let this case be remanded to the Regional Trial Court of Quezon City for further proceedings to determine whether the issuance of Resolution No. the procedure stated therein should be followed and observed. which is hereby SET ASIDE.

It is not necessary that a claim be initially disputed in a court or agency before it is filed with the liquidation court. SYLLABUS 1. subject lots still form part of the assets of the insolvent bank. respondents. CASE AT BENCH. did not have jurisdiction over the petition.R. 265 AS AMENDED BY P.] JERRY ONG. COURT OF APPEALS and RURAL BANK OF OLONGAPO. and Deputy Liquidator ABEL ALLANIGUE. much less in ordering the dismissal of Civil Case No. 3. petitioner. On the basis of the Hernandez case as well as Sec. without prejudice to . if possible. INSOLVENCY. in the absence of certificates of title in the name of petitioner. JR. 112830. February 1.. GUILLERMO G.D. 1827. of R.ID. The lawmaking body contemplated that for convenience only one court. 265 as amended by P.[G. Cruz Cruz & Navarro III for petitioner. 1996. ID. to obviate the proliferation of litigations and to avoid injustice and arbitrariness. Q-91-8019. Petitioner must have overlooked the fact that since respondent RBO is insolvent other claimants not privy to their transaction may be involved.D.A. It is a pragmatic arrangement designed to establish due process and orderliness in the liquidation of the bank. REYES. CENTRAL BANK ACT (R. 79. JUDICIAL LIQUIDATION. ID. 1827). vs. 29. Br.. PURPOSE THEREOF. — Judicial liquidation is intended to prevent multiplicity of actions against the insolvent bank. Alberto Reyes and Abel Allanigue for Rural Bank of Olongapo.A. LIQUIDATION COURT. HAS JURISDICTION OVER ALL CLAIMS AGAINST INSOLVENT BANK. Thus his petition before the Regional Trial Court of Quezon City cannot be considered a "disputed claim" as contemplated by law. As far as those claimants are concerned. — The phrase "(T)he court shall have jurisdiction in the same proceedings to adjudicate disputed claims against the bank" appears to have misled petitioner. represented by its Liquidator. should pass upon the claims against the insolvent bank and that the liquidation court should assist the Superintendent of Banks and regulate his operations.. respondent Court of Appeals was correct in holding that the Regional Trial Court of Quezon City. INC. par.COMMERCIAL LAW. ELC 2.. He argues that to the best of his personal knowledge there is no pending action filed before any court or agency which contests his right over subject properties. No. Inc.

1985. Jr.. Proc. 13769 and 13770 . J : p The jurisdiction of a regular court over a bank undergoing liquidation is the issue in this petition for review of the decision of the Court of Appeals. the City Sheriff of Tagaytay City issued a Certificate of Sale in favor of petitioner . . . which is likewise now undergoing liquidation proceedings of its money market obligations to petitioner in the principal amount of P863. 1 On 5 February 1991 Jerry Ong filed with the Regional Trial Court of Quezon City a petition for the surrender of TCT Nos. not having seasonably settled its obligations to petitioner. Inc. 3. such that on March 23. 63(b) and 107 of P. represented by its liquidator Guillermo G. as shown in the certified true copies of the aforementioned titles . in view of the fact that possession of the aforesaid titles or owner's duplicate certificates of title remains with the RBO. petitioner has executed an Affidavit of Consolidation of Ownership which.Said parcels of land were duly mortgaged by RBO in favor of petitioner on December 29. for which reason. 170-0-85 before the Regional Trial Court of Olongapo City. 13769 and 13770 pursuant to the provisions of Secs. the latter proceeded to effect the extrajudicial foreclosure of said mortgages.. Inc. 5.Respondents failed to seasonably redeem said parcels of land. . 1529 2 against Rural Bank of Olongapo. has not been submitted to the Registry of Deeds of Tagaytay City. (RBO).Omnibus Finance. 6. 4.517. . . . DECISION BELLOSILLO. particularly described in TCT Nos. No. 1984. . Reyes. . and deputy liquidator Abel Allanigue.Said Certificate of Sale . .02 . Inc.petitioner's right to file his claim in Sp. . RBR . to date. 3 The petition averred inter alia that — 2. . Br..The RBO was the owner in fee simple of two parcels of land including the improvements thereon situated in Tagaytay City . was duly registered with the Registry of Deeds of Tagaytay City on July 16. 73. 1983 to guarantee the payment of Omnibus Finance. .D.

respondent RBO contended that it was undergoing liquidation and. and. 1991 holding that: (a) subject parcels of land were sold to petitioner through public bidding on 23 March 1984 and.7. despite demand. 18 of the Regional Trial Court of Tagaytay City. said pieces of realty were no longer part of the assets of respondent RBO. 13769 and 13770. the trial judge was ordered to dismiss Civil Case No. respondent RBO filed a motion for reconsideration but the same was similarly rejected in the order of June 11. subject lots were no longer considered assets of respondent RBO when its liquidation was commenced by the Central Bank on 9 November 1984 and when the petition for assistance in its liquidation was approved by the Regional Trial Court of Olongapo City on 30 May 1985.To date. (b) in the same token. consequently. Q-91-8019 without prejudice to the right of petitioner to file his claim in . Still unpersuaded by respondent RBO's arguments. 4 Respondent RBO filed a motion to dismiss on the ground of res judicata alleging that petitioner had earlier sought a similar relief from Br. which case was dismissed with finality on appeal before the Court of Appeals. pursuant to prevailing jurisprudence. Moreover. petitioner has not been able to effect the registration of said parcels of land in his name in view of the persistent refusal of respondents. the trial court denied reconsideration in its order of 18 September 1991 prompting the bank to elevate the case to respondent Court of Appeals by way of a petition for certiorari and prohibition. to surrender RBO's copies of its owner's certificates of title for the parcels of land covered by TCT Nos. Accordingly. On 7 May 1991 the trial court denied the motion to dismiss because it found that the causes of action in the previous and present cases were different although it was silent on the jurisdictional issue. it is the liquidation court which has exclusive jurisdiction to take cognizance of petitioner's claim. On 12 February 1992 respondent court rendered a decision annulling the challenged order of the court a quo dated 19 June 1991 which sustained the jurisdiction of the trial court as well as the order of 18 September 1991 denying reconsideration thereof. In a supplemental motion to dismiss. On 5 July 1991 respondent RBO filed a manifestation and urgent motion for reconsideration arguing that the validity of the certificate of sale issued to petitioner was still at issue in another case between them and therefore the properties covered by said certificate were still part and parcel of its assets.

breach of contract. 170-0-85. if the public interest requires.the liquidation proceedings (Sp. We find no merit in the petition. indicate the manner of its liquidation and approve a liquidation plan. registration is the operative act which would convey title to the property. Proc. 3. par. and.D. No. LGM Respondent court also noted that the certificates of title are still in the name of respondent RBO. file a petition in the Court of First Instance 7 reciting the proceedings which have been taken and praying the assistance of the court in the liquidation of such institution. 73 of the Regional Trial Court of Olongapo City. par.D. Q-91-8019 may proceed independently of Sp. 1827 6 does not limit the jurisdiction of the liquidation court to claims against the assets of the insolvent bank. that the liquidation court has no jurisdiction over subject parcels of land since they are no longer assets of respondent RBO. He argues that the disputed parcels of land have been extrajudicially foreclosed and the corresponding certificate of sale issued in his favor. that considering that respondent RBO failed to redeem said properties he should now be allowed to consolidate his title thereto. is insolvent or cannot resume business with safety to its depositors. The court shall have jurisdiction in the same proceedings to adjudicate disputed claims against the bank . of R. . . creditors and the general public. whether they be against the assets of the insolvent bank. 170-0-85) pending before Br. No. 13769 and 13770 in favor of petitioner and its subsequent foreclosure are presumed valid and regular. "Disputed claims" refer to all claims. it shall. damages. Proc. 265 as amended by P. or whatever. by the Solicitor General. 5 In reversing the trial court the appellate court noted that Sec. Section 29. 3. As far as third persons are concerned (and these include claimants in the liquidation court). order its liquidation. The Central Bank shall. of R. . To limit the jurisdiction of the liquidation court to those claims against the assets of the bank is to remove significantly and without basis the cases that may be brought against a bank in case of insolvency.A. 1827 provides — If the Monetary Board shall determine and confirm within (sixty days) that the bank . Petitioner submits that Civil Case No. for specific performance. that respondent RBO's mortgage of TCT Nos. and enforce individual liabilities of the stockholders . 265 as amended by P. The provision is general in that it clearly and unqualifiedly states that the liquidation court shall have jurisdiction to adjudicate disputed claims against the bank. . 29.A.

.e. . and that its liquidation is undertaken with judicial intervention means that. 8 this Court ruled — The fact that the insolvent bank is forbidden to do business. It is a pragmatic arrangement designed to establish due process and orderliness in the liquidation of the bank. to obviate the proliferation of litigations and to avoid injustice and arbitrariness. all claims against the insolvent bank should be filed in the liquidation proceeding (italics supplied).and do all that is necessary to preserve the assets of such institution and to implement the liquidation plan approved by the Monetary Board (italics supplied).. It is not necessary that a claim be initially disputed in a court or agency before it is filed with the liquidation court. if possible. . Rural Bank of Lucena. the judicial liquidation is intended to prevent multiplicity of actions against the insolvent bank. Thus his petition before the Regional Trial Court of Quezon City cannot be considered a "disputed claim" as contemplated by law. i. Applying the aforequoted provision in Hernandez v. The phrase "(T)he court shall have jurisdiction in the same proceedings to adjudicate disputed claims against the bank" appears to have misled petitioner. We explained therein the rationale behind the provision. should pass upon the claims against the insolvent bank and that the liquidation court should assist the Superintendent of Banks and regulate his operations. act as umpire or arbitrator in the allowance and disallowance of claims. that its assets are turned over to the Superintendent of Banks. contentious cases might arise wherein a full-dress hearing would be required and legal issues would have to be resolved. . . for conversion into cash. the term "disputed claim" in the provision simply connotes that — [i]n the course of the liquidation. assist and supervise the liquidation and . He argues that to the best of his personal knowledge there is no pending action filed before any court or agency which contests his right over subject properties. as a receiver. As may be gleaned in the Hernandez case. The lawmaking body contemplated that for convenience only one court. . it would be necessary in justice to all concerned that a Court of First Instance (now Regional Trial Court) . Hence. Inc. as far as lawful and practicable.

Vitug. much less in ordering the dismissal of Civil Case No. 265 as amended by P. Q-91-8019. Proc. in the absence of certificates of title in the name of petitioner.. Kapunan. Jr. of R. respondent Court of Appeals was correct in holding that the Regional Trial Court of Quezon City. 170-0-85 before the Regional Trial Court of Olongapo City. 29. Br. SO ORDERED. 3. As far as those claimants are concerned. without prejudice to petitioner's right to file his claim in Sp. . par. subject lots still form part of the assets of the insolvent bank. JJ. On the basis of the Hernandez case as well as Sec. did not have jurisdiction over the petition. WHEREFORE. 79.D. 73. The decision of respondent Court of Appeals dated 12 February 1992 is AFFIRMED. 1827..Petitioner must have overlooked the fact that since respondent RBO is insolvent other claimants not privy to their transaction may be involved. the petition is DENIED. Br. and Hermosisima. Padilla.A. Costs against petitioner. No. concur.

No.A. 1 Notwithstanding. petitioner Alfeo D. Incorporated.) No. August 7. THE MONETARYBOARD OF THE BANGKO SENTRAL NG PILIPINAS and the PHILIPPINE DEPOSIT INSURANCE CORPORATION. 2006. Record shows that the corporate life of RBFI expired on May 3l. 3 SaIACT Pursuant to Section 28 of Republic Act (R.] ALFEO D.R. petitioner. on his behalf and on behalf of the Shareholders of EUROCREDIT COMMUNITY BANK. The Facts The Rural Bank of Faire. At the initiative of Vivas and the new management team. VIVAS. Cagayan. J : p This is a petition for prohibition with prayer for the issuance of a status quo ante order or writ of preliminary injunction ordering the respondents to desist from closing EuroCredit Community Bank. 2005. the Integrated Supervision Department II (ISD II) of the . respondents. 2 On December 8. Sto. Niño. Vivas (Vivas) and his principals acquired the controlling interest in RBFI sometime in January 2006. Incorporated (RBFI) was a duly registered rural banking institution with principal office in Centro Sur. Incorporated (ECBI) and from pursuing the receivership thereof. as well as the increase in the number of the members of its BOD.THIRD DIVISION [G. 2013. The petition likewise prays that the management and operation of ECBI be restored to its Board of Directors (BOD) and its officers. DECISION MENDOZA. from five (5) to eleven (11). In view of those findings. The BSP also approved the change of its corporate name to EuroCredit Community Bank. 191424. otherwise known as The New Central Bank Act. certain measures calculated to revitalize the bank were allegedly introduced. the Bangko Sentral ng Pilipinas (BSP) issued the Certificate of Authority extending the corporate life of RBFI for another fifty (50) years. 7653. vs. an internal audit was conducted on RBFI and results thereof highlighted the dismal operation of the rural bank.

The ISD II. Vivas appealed the cancellation to BSP. however. 2008 at the BSP during which the BSP officials and examiners apprised Vivas. the Chairman and President of ECBI. 2007. and 3] serious supervisory concerns particularly on activities deemed unsafe or unsound. as well as the other bank officers and members of its BOD. In addition. 2008. 8 cAEaSC Vivas moved for a reconsideration of Resolution No. The proposed meeting.563 million representing unbooked valuation reserves on classified loans and other risks assets on or before October 31. on several instances.674 million and capital adequacy ratio of negative 18. an exit conference was held on March 27. 4 Sometime in April 2008. placing ECBI under Prompt Corrective Action (PCA) framework because of the following serious findings and supervisory concerns noted during the general examination: 1] negative capital of P14. and 3] take appropriate action necessary to address the violations/exceptions noted in the examination. dated September 30. 2008. had invited the BOD of ECBI to discuss matters pertaining to the placement of the bank under PCA framework and other supervisory concerns before making the appropriate recommendations to the MB. 5 Thereafter. 1255.42%. 2] CAMEL (Capital Asset Management Earnings Liquidity) composite rating of "2" with a Management component rating of "1".643 million. 1255 on the grounds of nonobservance of due process and arbitrariness. The ECBI submitted its comments on BSP's consolidated findings and risk asset classification through a letter. dated September 25. Shortly after the completion of the general examination. 6 Vivas claimed that the BSP took the above courses of action due to the joint influence exerted by a certain hostile shareholder and a former BSP examiner. 9 In its letter. 2008. the BSP furnished ECBI with a copy of the Report of Examination (ROE) as of December 31. of the advance findings noted during the said examination. the BSP directed ECBI to explain why it transferred the majority shares of RBFI without securing the prior approval of the MB in apparent violation of Subsection X126. 2008. 7 Through its letter. did not materialize due to postponements sought by Vivas. dated February 20. the Monetary Board (MB) issued Resolution No. 2] book the amount of P28. 2009.2 of the Manual of Regulation for . 2007. the examiners from the Department of Loans and Credit of the BSP arrived at the ECBI and cancelled the rediscounting line of the bank. the BSP directed the bank's BOD and senior management to: 1] infuse fresh capital of P22.BSP conducted a general examination on ECBI with the cut-off date of December 31. dated April 8.

16 In its June 2. the ISD II reiterated its demand upon the ECBI BOD to allow the BSP examiners to conduct a general examination on June 3.A. and because Vivas was then out of the country. TCHcAE . No. on the other hand. 10 Still in another letter. 2009. 19 dated June 4. 2009. imposing monetary penalty/fine on ECBI. 17 ECBI asked for another deferment of the examination due to the pendency of certain unresolved issues subject of its appeal before the MB. 2009. which enjoined it from pursuing certain acts and transactions that were considered unsafe or unsound banking practices. 11 dated March 31. in violation of Sections 25 and 34 of R. 2009. No. 7653. 2009 Letter-Reply. 7653. 2009. 14 dated May 14. Also. the BSP informed ECBI that it was already due for another annual examination and that the pendency of its appeal before the MB would not prevent the BSP from conducting another one as mandated by Section 28 of R. The ISD II denied ECBI's request and ordered the general examination to proceed as previously scheduled. 18 Thereafter. 823. the MB issued Resolution No. approving the issuance of a cease and desist order against ECBI.Banks (MORB). did not push through. the ISD II required ECBI to explain why it did not obtain the prior approval of the BSP anent the establishment and operation of the bank's sub-offices. 771. 2009 general examination of the books. and from doing such other acts or transactions constituting fraud or might result in the dissipation of its assets. posited that ECBI unjustly refused to allow the BSP examiners from examining and inspecting its books and records. 2009. ECBI asked for the deferment of the examination pending resolution of its appeal before the MB. Vivas believed that he was being treated unfairly because the letter of authority to examine allegedly contained a clause which pertained to the Anti-Money Laundering Law and the Bank Secrecy Act. DTEScI In view of ECBI's refusal to comply with the required examination. According to Vivas. the scheduled March 31. 15dated May 26. On May 28. records and general condition of ECBI with the cut-off date of December 31. advising ECBI to comply with MB Resolution No. 2008. 13 dated May 8. 12 The MB. 2009. The BSP also wrote a letter. and referred the matter to the Office of the Special Investigation (OSI) for the filing of appropriate legal action.A. 726. the MB issued Resolution No. which essentially required the bank to follow its directives. In its letter.

in its memorandum dated 17 February 2010. 2009. the general examination of the books and records of ECBI with the cut-off date of September 30. Inc. and 2. the MB issued Resolution No. (b) has insufficient realizable assets to meet liabilities. 2009. and discussed their findings. the MB issued Resolution No. 21 On December 7. the ISD II informed ECBI of MB Resolution No. which findings showed that the Eurocredit Community Bank. 2010. On March 4. and (d) has willfully violated a cease and desist order of the Monetary Board for acts or transactions which are considered unsafe and unsound banking practices and other acts or transactions constituting fraud or dissipation of the assets of the institution. the OSI filed with the Department of Justice (DOJ) a complaint for Estafa Through Falsification of Commercial Documents against certain officials and employees of ECBI.To designate the Philippine Deposit Insurance Corporation as Receiver of the bank. Later. 20 dated August 13. 2009. approved the recommendation of ISD II as follows: cSDHEC 1. dated February 1. was commenced and ended in December 2009. and considering the failure of the Board of Directors/management of Eurocredit Bank to restore the bank's financial health and viability despite considerable time given to address the bank's financial problems. 2009. 7653 (The New Central Bank Act).To prohibit the Eurocredit Bank from doing business in the Philippines and to place its assets and affairs under receivership. On November 18.22 In a letter. and that the bank had been accorded due process. the Board. 2009. (c) cannot continue in business without involving probable losses to its depositors and creditors. 1548 which denied its request for reconsideration of Resolution No. 1255 which placed it under PCA framework. denying the appeal of ECBI from Resolution No. 2010. the ISD II reminded ECBI of the non-submission of its financial audit reports for the years 2007 and 2008 with a warning that failure to submit those reports and the written explanation for such omission shall result in the imposition of a monetary penalty. Meanwhile. — a Rural Bank (Eurocredit Bank) (a) is unable to pay its liabilities as they become due in the ordinary course of business.On June 10. 276 23 placing ECBI under receivership in accordance with the recommendation of the ISD II which reads: On the basis of the examination findings as of 30 September 2009 as reported by the Integrated Supervision Department (ISD) II. includingVivas. 726. the BSP officials and examiners met with the representatives of ECBI. in accordance with Section 30 of Republic Act No. 1164. .

7653.A. He contends that the implementation of the questioned resolution was tainted with arbitrariness and bad faith.A. its placement under receivership was unwarranted and improper. hence. stressing that ECBI was placed under . the BSP should have taken over the management of ECBI and extended loans to the financially distrained bank pursuant to Sections 11 and 14 of R. The petitioner presents the following ARGUMENTS: (a)It is grave abuse of discretion amounting to loss of jurisdiction to apply the general law embodied in Section 30 of the New Central Bank Act as opposed to the specific law embodied in Sections 11 and 14 of the Rural Banks Act of 1992. instead of Sections 11 and 14 of the Rural Bank Act of 1992 or R. 24 Vivas submits that the respondents committed grave abuse of discretion when they erroneously applied Section 30 of R. ascribing grave abuse of discretion to the MB for prohibiting ECBI from continuing its banking business and for placing it under receivership. No. He argues that despite the deficiencies. violation of constitutional rights and to further execute a mandate well in excess of its parameters. it is still the gravest abuse of discretion amounting to lack or excess of jurisdiction to execute the law with manifest arbitrariness. No. 7353. IcTEAD (c)The power delegated in favor of the Bangko Sentral ng Pilipinas to place rural banks under receiverships is unconstitutional for being a diminution or invasion of the powers of the Supreme Court. 7353 because the BSP's power is limited only to supervision and management takeover of banks. instead. it has not committed any financial fraud and. 276. He posits that. No.Assailing MB Resolution No.A. Article VIII of the Philippine Constitution. and bad faith. in violation of Section 2. inadequacies and oversights in the conduct of the affairs of ECBI. Vivas filed this petition for prohibition before this Court. (b)Even if it assumed that Section 30 of the New Central Bank Act is applicable. abuse of discretion.

— xxx xxx xxx." 25 ISCHET The Court's Ruling The petition must fail.A. The MB issued Resolution No.A. The petition for certiorari may only be filed by the stockholders of record representing the majority of the capital stock within ten (10) days from receipt by the board of directors of the institution of the order directing receivership. 2010. any act of the MB placing a bank under conservatorship. liquidation or conservatorship. Vivas assails the constitutionality of Section 30 of R. He adds that respondent PDIC actually closed ECBI even in the absence of any directive to this effect.receivership without due and prior hearing in violation of his and the bank's right to due process. Vivas Availed of the Wrong Remedy To begin with. receivership or liquidation may not be restrained or set aside except on a petition for certiorari. in the exercise of its power under R. 7653 read: Section 30.A. No. 276. Lastly. [Emphases supplied] Prohibition is already unavailing . Pertinent portions of R. Under Section 30 thereof. Vivas availed of the wrong remedy. 7653 claiming that said provision vested upon the BSP the unbridled power to close and place under receivership a hapless rural bank instead of aiding its financial needs. and may not be restrained or set aside by the court except on petition for certiorari on the ground that the action taken was in excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of jurisdiction. The actions of the Monetary Board taken under this section or under Section 29 of this Act shall be final and executory. He is of the view that such power goes way beyond its constitutional limitation and has transformed the BSP to a sovereign in its own "kingdom of banks. No. dated March 4. 7653. xxx xxx xxx.

xxx xxx xxx. It is not intended to provide a remedy for acts already accomplished. officers. or with grave abuse of discretion amounting to lack or excess of jurisdiction. the remedy of prohibition is no longer appropriate. tribunals. a person aggrieved thereby may file a verified petition in the proper court. quasi-judicial or ministerial functions. had already been issued by the MB and the closure of ECBI and its placement under receivership by the PDIC were already accomplished. this petition for prohibition apparently seeks to prevent the acts of closing of ECBI and placing it under receivership. Apparently. however. 276. alleging the facts with certainty and praying that the judgment be rendered commanding the respondent to desist from further proceedings in the action or matter specified therein. and there is no appeal or any other plain. Indeed. are without or in excess of its or his jurisdiction. it is already an ineffective remedy under the circumstances obtaining. officer or person. the proper function of a writ of prohibition is to prevent the doing of an act which is about to be done. corporation.Granting that a petition for prohibition is allowed. Settled is the rule that prohibition does not lie to restrain an act that is already afait accompli. prohibition is a preventive remedy seeking that a judgment be rendered which would direct the defendant to desist from continuing with the commission of an act perceived to be illegal. tribunals or persons from exercising jurisdiction over matters not within its cognizance or exceeding its jurisdiction in matters of which it has cognizance. and adequate remedy in the ordinary course of law. speedy. Prohibition or a "writ of prohibition" is that process by which a superior court prevents inferior courts. the rule on prohibition is enshrined in Section 2. board. 29 caADIC The Petition Should Have Been Filed in the CA . to wit: TIAEac Sec. whether exercising judicial. 28 Though couched in imprecise terms. Its office is to restrain subordinate courts. Rule 65 of the Rules on Civil Procedure. and confines them to the exercise of those powers legally conferred. or persons from usurping or exercising a jurisdiction with which they have not been vested by law. 27 As a rule. 26 In our jurisdiction.Petition for prohibition. — When the proceedings of any tribunal. or otherwise granting such incidental reliefs as the law and justice require. Resolution No. 2.

order or resolution. the Court. — The petition shall be filed not later than sixty (60) days from notice of the judgment. if it relates to the acts or omissions of a lower court or of a corporation. [Emphases supplied] That the MB is a quasi-judicial agency was already settled and reiterated in the case of Bank of Commerce v. the petition shall be filed in and cognizable only by the Court of Appeals. there are certainly factual issues as Vivas is questioning the findings of the investigating team.When and where petition filed. whether such motion is required or not. The concurrence of jurisdiction. officer or person. 31 In the case at bench. the petition is also dismissible because it simply ignored the doctrine of hierarchy of courts. however. 30 SIcEHC Doctrine of Hierarchy of Courts Even in the absence of such provision. Planters Development Bank and Bangko Sentral Ng Pilipinas. in the Regional Trial Court exercising jurisdiction over the territorial area as defined by the Supreme Court. It may also be filed in the Court of Appeals whether or not the same is in aid of its appellate jurisdiction. In case a motion for reconsideration or new trial is timely filed. prohibition and mandamus. the Court will not entertain direct resort to it unless the redress desired cannot be obtained in the appropriate lower courts. Under the Rules of Court. unless otherwise provided by law or these Rules. If it involves the acts or omissions of a quasi-judicial agency. the sixty (60) day period shall be counted from notice of the denial of said motion. or in the Sandiganbayan if it is in aid of its appellate jurisdiction. The petition shall be filed in the Supreme Court or. the special action for the obtainment of such writ must be presented to either court. a party may directly appeal to this Court only on pure questions of law. the CA and the RTC have original concurrent jurisdiction to issue writs of certiorari. As a rule. Section 4 of Rule 65 reads: Section 4. or where exceptional and compelling circumstances.Even if treated as a petition for certiorari. the petition should have been filed with the CA. such as cases of national interest and . True. does not grant the party seeking any of the extraordinary writs the absolute freedom to file a petition in any court of his choice. Strict observance of the policy of judicial hierarchy demands that where the issuance of the extraordinary writs is also within the competence of the CA or the RTC. board. The petitioner has not advanced any special or important reason which would allow a direct resort to this Court.

in instituting periodic surveys of loan and lending procedures. applicable to rural banks. 11. 265. their directors. No. instructions. orders. test-check of cash and other transactions of the rural banks. and. instructions. in determining the loan period and loan procedures. and. 33 and 34 of Republic Act No. upon proof that the rural bank or its Board of Directors. to require rural banks. The MB Committed No Grave Abuse of Discretion In any event. in supervising the business operations of the rural banks.The power to supervise the operation of any rural bank by the Monetary Board as herein indicated shall consist in placing limits to the maximum credit allowed to any individual borrower. aEDCAH xxx xxx xxx. officers and agents to conduct and manage the affairs of the rural banks in a lawful and orderly manner. in imposing a uniform accounting system and manner of keeping the accounts and records of rural banks. 276.with serious implications. 7353. 32 The judicial policy must be observed to prevent an imposition on the precious time and attention of the Court. justify the availment of the extraordinary remedy of writ of certiorari. in indicating the manner in which technical assistance shall be extended to rural banks. or officers are conducting and managing the affairs of the bank in a manner contrary to laws. .A. prohibition. no grave abuse of discretion can be attributed to the MB for the issuance of the assailed Resolution No. in general. in conducting training courses for personnel of rural banks. or mandamus calling for the exercise of its primary jurisdiction. depositors or creditors. as amended. audits. to take over the management of such bank when specifically authorized to do so by the Monetary Board after due hearing process until a new board of directors and officers are elected and qualified without prejudice to the prosecution of the persons responsible for such violations under the provisions of Sections 32. DcAEIS Vivas insists that the circumstances of the case warrant the application of Section 11 of R. orders. rules and regulations promulgated by the Monetary Board or in a manner substantially prejudicial to the interest of the Government. The Central Bank shall have the power to enforce the laws. which provides: Sec. in prescribing the interest rate. rules and regulations promulgated by the Monetary Board.

The records disclose that BSP officials and examiners met with the representatives of ECBI.: Sec.A. but it appears from all over the records that ECBI was given every opportunity to be heard and improve on its financial standing. He asserts that. ECBI cannot claim that it was deprived of its right under the Rural Bank Act. ETAICc . No. hence. the MB came out with Resolution No. No. including Vivas. 1548 denying its request for reconsideration of Resolution No. Section 30 of R.A.A. if circumstances warrant it.Proceedings in Receivership and Liquidation. 7653 which is a general law. and discussed their findings. Hear Later At any rate. instead. stressing that ECBI was placed under receivership without due and prior hearing. For failure of ECBI to comply. The Court has taken this into account. ECBI was heard on its motion for reconsideration. the BSP should have taken over the management of ECBI and extended loans to the financially distrained bank pursuant to Sections 11 and 14 of R. No. upon report of the head of the supervising or examining department. No. acIHDA Vivas argues that implementation of the questioned resolution was tainted with arbitrariness and bad faith. and not receivership. invoking Section 11 of R.A. its placement under receivership was unwarranted and improper. 30. Close Now.The thrust of Vivas' argument is that ECBI did not commit any financial fraud and. 7653 provides. 33 He adds that because R. 34 There were also reminders that ECBI submit its financial audit reports for the years 2007 and 2008 with a warning that failure to submit them and a written explanation of such omission shall result in the imposition of a monetary penalty. That this shall not include inability to pay caused by extraordinary demands induced by financial panic in the banking community. the MB may forbid a bank from doing business and place it under receivership without prior notice and hearing. 7353 is a special law. Having been heard on its motion for reconsideration. 726.A. — Whenever. viz. the same should prevail over R. 35 More importantly. the Monetary Board finds that a bank or quasi-bank: (a)is unable to pay its liabilities as they become due in the ordinary course of business: Provided. 7353 which states that the BSP may take over the management of a rural bank after due hearing. 7353 because the BSP's power is limited only to supervision and management take-over of banks. No.

It must be emphasized that R. has been invested with more power of closure and placement of a bank under receivership for insolvency or illiquidity. upheld the power of the MB to take over banks without need for prior hearing." stating that it was justified as a measure for the protection of the public interest. Accordingly. was increased and expanded. Thus: DAcSIC The "close now. Antonio-Valenzuela. the power of the MB over banks. Unless adequate and determined efforts are taken by the government against distressed and mismanaged banks.A. Swift action is called for on the part of the BSP when it finds that a bank is in dire straits. hear later. The Court. involving acts or transactions which amount to fraud or a dissipation of the assets of the institution. The MB. in which cases. who all deserve the protection of the government. Hon. No. 7653. and stockholders. creditors. 37 [Emphasis supplied] . [Emphases supplied. as determined by the Bangko Sentral. to meet its liabilities. or (c)cannot continue in business without involving probable losses to its depositors or creditors.(b)has insufficient realizable assets. the Monetary Board may summarily and without need for prior hearingforbid the institution from doing business in the Philippines and designate the Philippine Deposit Insurance Corporation as receiver of the banking institution. hear later" doctrine has already been justified as a measure for the protection of the public interest. there is no conflict which would call for the application of the doctrine that a special law should prevail over a general law. in several cases. or (d)has wilfully violated a cease and desist order under Section 37 that has become final. public faith in the banking system is certain to deteriorate to the prejudice of the national economy itself. In the case of Bangko Sentral Ng Pilipinas Monetary Board v. not to mention the losses suffered by the bank depositors. 36 the Court reiterated the doctrine of "close now. 7653 is a later law and under said act.A No. It is not necessary inasmuch as the law entrusts to the MB the appreciation and determination of whether any or all of the statutory grounds for the closure and receivership of the erring bank are present. or because the bank's continuance in business would probably result in the loss to depositors or creditors.] xxx xxx xxx. including rural banks. under R.

In Rural Bank of Buhi. the MB stressed that it accorded ECBI ample time and opportunity to address its monetary problem and to restore and improve its financial health and viability but it failed to do so. fortunes may be wiped out and disillusionment will run the gamut of the entire banking community. dated February 17. v. 40 Swift. Such action of the MB shall be final and executory. the MB can immediately implement its resolution prohibiting a banking institution to do business in the Philippines and. . this procedure is designed to protect the interest of all concerned. In the case at bench. due process does not necessarily require a prior hearing. containing the findings noted during the general examination conducted on ECBI with the cut-off date of September 30. 2009. The memorandum underscored the inability of ECBI to pay its liabilities as they would fall due in the usual course of its business. adequate and determined actions must be taken against financially distressed and mismanaged banks by government agencies lest the public faith in the banking system deteriorate to the prejudice of the national economy. 38 the Court also wrote that . thereafter. Inc. the ISD II submitted its memorandum. The procedure for the involuntary closure of a bank is summary and expeditious in nature. Also. that is. 39 The doctrine is founded on practical and legal considerations to obviate unwarranted dissipation of the bank's assets and as a valid exercise of police power to protect the depositors. One can just imagine the dire consequences of a prior hearing: bank runs would be the order of the day. AEcTaS . it was found that ECBI had willfully violated the cease-and-desist order of the MB issued in its June 24. In the process. creditors and stockholders. it was noted that ECBI's continued banking operation would most probably result in the incurrence of additional losses to the prejudice of its depositors and creditors. On top of these. the MB was forced to issue the assailed Resolution No. the bank itself and the general public. The protection afforded public interest warrants the exercise of a summary closure. 2010. and had disregarded the BSP rules and directives. and the general public. In addition. CcAITa Accordingly. stockholders. its liabilities being in excess of the assets held. For said reasons. creditors. Court of Appeals. a hearing or an opportunity to be heard may be subsequent to the closure. Obviously. appoint the PDIC as receiver. but may be later subjected to a judicial scrutiny via a petition for certiorari to be filed by the stockholders of record of the bank representing a majority of the capital stock. the depositors. resulting in panic and hysteria. . 276 placing ECBI under receivership. 2009 Resolution.

7353 was no longer feasible considering the financial quagmire that engulfed ECBI showing serious conditions of insolvency and illiquidity. The ascertainment of the latter subject is a prerogative of the legislature. there is no violation of the non-delegation of legislative power. Management take-over under Section 11 of R. No Undue Delegation of Legislative Power Lastly. the completeness test and the sufficient standard test. Both tests are intended to prevent a total transference of legislative . Under the sufficient standard test.A. the law must be complete in all its terms and conditions when it leaves the legislature such that when it reaches the delegate the only thing he will have to do is enforce it. 42 Be that as it may. Unless a law or rule is annulled in a direct proceeding. He claims that the said provision was an undue delegation of legislative power. Besides.A. No. 7653 constitutes collateral attack on the said provision of law.A. The contention deserves scant consideration. The rationale for the constitutional proscription is that "legislative discretion as to the substantive contents of the law cannot be delegated." 43 "There are two accepted tests to determine whether or not there is a valid delegation of legislative power. This prerogative cannot be abdicated or surrendered by the legislature to the delegate. Under the first test. Vivas' attempt to assail the constitutionality of Section 30 of R. placing ECBI under receivership would effectively put a stop to the further draining of its assets. DITEAc Preliminarily. the legal presumption of its validity stands.A.In light of the circumstances obtaining in this case. No. there must be adequate guidelines or stations in the law to map out the boundaries of the delegate's authority and prevent the delegation from running riot. 7653. No. viz. the petitioner challenges the constitutionality of Section 30 of R. Nothing is more settled than the rule that the constitutionality of a statute cannot be collaterally attacked as constitutionality issues must be pleaded directly and not collaterally.. the application of the corrective measures enunciated in Section 30 of R. as the legislature granted the MB a broad and unrestrained power to close and place a financially troubled bank under receivership. 7653 was proper and justified. 41 A collateral attack on a presumably valid law is not permissible. No. What can be delegated is the discretion to determine how the law may be enforced. notwhat the law shall be.

under the two tests. Velasco. to take over their management or to place them under receivership. No. WHEREFORE. In other words.A. SO ORDERED. Jr. the legislature has sufficiently empowered the MB to effectively monitor and supervise banks and financial institutions and. . the MB was given a wide discretion and latitude only as to how the law should be implemented in order to attain its objective of protecting the interest of the public." 44 CcAHEI In this case. Peralta. there was no undue delegation of legislative authority in the issuance of R. if circumstances warrant. the banking industry and the economy. concur. the petition for prohibition is DENIED..authority to the delegate. Abad and Leonen. The legislature has clearly spelled out the reasonable parameters of the power entrusted to the MB and assigned to it only the manner of enforcing said power. JJ.. who is not allowed to step into the shoes of the legislature and exercise a power essentially legislative. 7653. To address the growing concerns in the banking industry. to forbid them to do business.

including all the improvements erected thereon and eject therefrom all adverse occupants. 1998. Sta. and TCT No. it foreclosed the real estate mortgage extrajudicially. more particularly Sps. vs.000. Inc. J : p On April 12. The respondent bank prayed that: WHEREFORE. When the petitioner spouses failed to redeem the property within the prescribed period. MERCHANTS RURAL BANK OF TA LAVERA. NT-187791 with an area of 345 square meters. more or less.SPOUSES RUBEN SANTIAGO and INOCENCIA SANTIAGO. respectively. (NOTE: di ko alam kung ito ba yung kaso di masearch eh) DECISION CALLEJO. NT-196197 with an area of 337 square meters. of the Registry of Deeds for the Province of Nueva Ecija.. filed an Ex Parte Petition with the Regional Trial Court (RTC) of Cabanatuan City. respectively. Nueva Ecija. SR. respondent." in its favor. petitioners.00. NT-196197 and NT-187791 located in San Mariano. the respondent was the highest bidder. inter alia. premises considered. the Registry of Deeds for the Province of Nueva Ecija. Rosa. INC. It averred that when the petitioner spouses failed to pay their loan. The sheriff executed separate certificates of sale over the properties in the name of the respondent. over the said properties and all the improvements thereon. that petitioner spouses Ruben and Inocencia Santiago executed a "Deed of Real Estate Mortgage.000. The respondent alleged therein. Ruben & Inocencia Santiago and their privies and/or other persons claiming under . 1998. commanding the Ex-OfficioSheriff of this Court and/or of his deputies to place the petitioner and/or its authorized representative in possession of that parcels of land covered by TCT No. At the sale at public auction of the property on February 16. respondent Merchants Rural Bank of Talavera. the titles over the property were then consolidated in its favor. These certificates were registered with the Register of Deeds on March 6. as security for the payment of the separate loans of P500. 1998 and October 28. that a writ of possession be issued. 2000. it is respectfully prayed of this Honorable Court..00 and P120. more or less. for the issuance of a writ of possession over the two parcels of land covered by Transfer Certificate of Title (TCT) Nos.

2001. the sheriff requested the petitioner spouses to vacate the property within three (3) days from notice thereof. [T]he court a quo committed grave abuse of discretion when it issued the Order dated 01 September 2000 granting respondent Rural Bank'spetition for the issuance of writ of possession "without any evidence being marked and formally offered in support of the petition. the petitioner spouses.him/her upon the filing of [the] prescribed fees or such other amounts that array be deemed reasonable by this Court. Petitioner prays for such other remedies just and equitable under the premises. Instead. with prayer for injunctive relief. the CA rendered judgment 5 dismissing the petition for lack of merit. . Hence. 2 However. The petitioners' counsel agreed to this proposition." 4 On February 5. the petitioners filed their petition for review on certiorari in this Court. denied the petitioners' motion for reconsideration of the decision on April 6. The RTC forthwith declared that the petition was submitted for its resolution. 2000. the petitioner spouses failed to repurchase the property. During the hearing of the petition on July 18. the trial court issued an Order 3 granting the petition and ordered the clerk of court to issue a writ of possession in favor of the respondent. On September 1. but insisted that the petition be submitted for the court's resolution since a considerable amount of time had already lapsed from the time the petition was filed. 2000. they requested the respondent to give them more time to repurchase their properties. 2000. through counsel. but the latter refused to do so. The clerk of court complied and issued a Writ of Possession on September 4. claiming that: . Hence. The petitioner spouses alleged therein that: . . they filed a petition for a writ of certiorari with the Court of Appeals (CA) to nullify the Order of the RTC and the Writ of Possession issued by the clerk of court. appeared and prayed for more time to raise the money for the repurchase of the property. likewise. 1 Although aware of the said petition. the petitioner spouses failed to file their comment thereon. The respondent's counsel manifested that it was open to negotiation. Instead. 2001. It.

The appellate court erred in acting on the petition. In its comment on the petition.NOTWITHSTANDING ITS FINDING THAT THERE WAS INDEED NO EVIDENCE (WHETHER TESTIMONIAL OR DOCUMENTARY) SUBMITTED. As correctly pointed out by the Court of Appeals in its assailed Decision. The ex parte nature of the petition makes said practice unnecessary. instead. it is an action wherein the Court intervenes primarily to aid in effecting the delivery of a property to its rightful owner. AND OFFERED BY PRIVATE RESPONDENT TO SUPPORT ITS PETITION IN THE COURT A QUO. the assailed Order of the RTC does not conform to Section 1. Therefore. there is no law or procedure making the practice of making and formally offering documentary evidence in a petition for issuance of writ mandatory. a petition for issuance of writ of possession is not an action to deprive a person of his property. unless documentary and testimonial evidence are offered in evidence and admitted by the trial court. The petitioners assert that. Rule 36 of the Revised Rules of Court which requires that a final order must state clearly and distinctly the facts and the law on which it is based. Contrary to the claim of petitioners. it had been repeatedly held by the Honorable Supreme Court that issuance of writ of possession to a purchaser in an extrajudicial foreclosure is merely a ministerial function of the Court which lead us to the inference that issuance of writ of possession in such cases does not constitute exercise of discretion. 6 The petitioners aver that the respondent failed to formally offer any documentary and testimonial evidence to support its petition for a writ of possession. the respondent averred that: Furthermore. Besides. We note that the CA took cognizance of the petition for certiorari with a plea for injunctive relief filed by the petitioners assailing the Order of the RTC dated September 1. there can be no grave abuse of discretion to speak of. In fact. [THE] COURT OF APPEALS UPHELD THE VALIDITY OF THE ASSAILED ORDERS. 3135. hence. 2000. the same not being subject to court's discretion. 7 The petition is denied for lack of merit. it is for the petitioners to offer evidence to dispute that presumption to nullify the right created by the said foreclosure proceedings. This is so because under Section 8 of Act No. the same should not be considered by it in resolving the petition. MARKED. the RTC committed grave abuse of its discretion amounting to excess or lack of jurisdiction in granting the same. foreclosure proceedings has in its favor the presumption of regularity. the remedy of the petitioners from the .

— The debtor may. In the present case. The petitioners' recourse to Rule 65 of the Revised Rules of Court in the CA was inappropriate even though the Sheriff had demanded that they vacate the property.assailed order of the RTC was to file a petition to set aside the sale and the cancellation of the writ of possession. Appeal and certiorari are mutually exclusive. but not later than thirty days after the purchaser was given possession.. petition that the sale be set aside and the writ of possession cancelled. such order shall continue to be in effect during the pendency of an appeal. it shall dispose in his favor of all or part of the bond furnished by the person who obtained possession. and if it finds the complaint of the debtor justified. they were barred from filing a petition for certiorari from the assailed order of the trial court and the writ of possession issued by it. adequate and speedy remedy in the ordinary course of law. the petitioners had the right to file a petition to set aside the sale and writ of possession issued by the court and to appeal from an adverse ruling.Setting aside of sale and writ of possession. Section 8 of Act No. The petitioners failed to file the said petition and opted to file their petition for certiorari in the CA. 8. We reject the petitioners' contention that they were deprived of their right to due process when the trial court granted the respondent's petition for a writ of . and the court shall take cognizance of this petition in accordance with the summary procedure provided for in section one hundred and twelve of Act numbered Four hundred and ninety-six. Either of the parties may appeal from the order of the judge in accordance with section fourteen of Act Numbered Four hundred and ninety-six. 9 The general rule is that for a writ of certiorari to issue. Hence. because the mortgage was not violated or the sale was not made in accordance with the provisions hereof. but the order of possession shall continue in effect during the pendency of the appeal. they nevertheless failed to establish their claim. The aggrieved party may thereafter appeal from any disposition by the court on the matter. 3135 mandates that even if an appeal is interposed from an order granting a petition for a writ of possession. the petitioners must establish that they had no remedy of appeal or any plain. Sec. 8 Although the petitioners alleged in their petition that the RTC acted with grave abuse of discretion amounting to excess or lack of jurisdiction in issuing the assailed order. specifying the damages suffered by him. in the proceedings in which possession was requested.

furnishing bond in an amount equivalent to the use of the property for a period of twelve months." The petitioners' reliance on the said statement. is misplaced. In support of this. 7. 10 It is a proceeding wherein relief is granted without an opportunity for the person against whom the relief is sought to be heard. to indemnify the debtor in case it be shown that the sale was made without violating the mortgage or without complying with the requirements of this Act. v. 12 that "[u]pon proper application and proof of title. 3135 merely requires that a petition for the issuance of a writ of possession shall be in the form of an ex parte motion. Such petition shall be made under oath and filed in [the] form of an ex parte motion in the registration or cadastral proceedings if the property is registered. The petitioners have not cited any law or rule requiring that documentary and testimonial evidence be first adduced in support of a petition for a writ of possession before the trial court may act upon and grant the same. 11 Hence. to give him possession thereof during the redemption period. the payment of the requisite fees therefor. It is a judicial proceeding brought for the benefit of one party only and without notice by the court to any person adverse of interest. the RTC may grant the petition in the absence of the mortgagor. however. Insular Bank of Asia and America. Sec. the court shall order that a writ of possession be issued. and the approval of the trial court if such petition is filed during the period for the redemption of the property. David Enterprises. or in special proceedings in the case of property registered under the Mortgage Law or under section one hundred and ninety-four of the . — In any sale made under the provisions of this Act. the issuance of a writ of possession becomes a ministerial duty of the court.possession despite the latter's failure to adduce documentary and testimonial evidence in support thereof. in this case. the petitioners. Upon the filing of the said petition. the purchaser may petition the Court of First Instance of the province or place where the property or any part thereof is situated. Inc. Section 7 of Act No.Possession during redemption period. The petitioners contend that a petition for a writ of possession may be granted only if the respondent offers in evidence a new TCT in its name. The proceeding in a petition for a writ of possession is ex parte and summary in nature. the petitioners rely on the statement of the Court in F.

Your Honor. The petitioners as mortgagors. the petitioners herein did not even offer any objection. collect the fees specified in paragraph eleven of section one hundred and fourteen of Act Numbered Four hundred and ninety-six. order that a writ of possession issue. the court shall issue the writ prayed for. we are ready. When the respondent's counsel insisted on the resolution of the petition. or of any other real property encumbered with a mortgage duly registered in the office of any register of deeds in accordance with any existing law. who shall execute said order immediately. 13 The petitioners need not offer any documentary and testimonial evidence for the court to grant the petition. They failed to assail the petition in form and substance. the record shows that the petitioners were present during the hearing of the petition on July 18. 1999. Moreover. upon approval of the bond. the Register of Deeds had issued TCT Nos. Indeed. and in each case the clerk of court shall. failed to redeem the properties within the period therefor. as amended by Act Numbered Twentyeight hundred and sixty-six. hence. in the name of the respondent. respectively. the petitioners already knew that titles had been issued to the respondent over the property. ATTY.Administrative Code. they pleaded for time to raise the money to repurchase the properties. or even to question the respondent's title over the property. In fact. The law does not require that a petition for a writ of possession may be granted only after documentary and testimonial evidence shall have been offered to and admitted by the court. ORTALEZA: For the Petitioner. the respondent consolidated its ownership over the properties in its favor. addressed to the sheriff of the province in which the property is situated. they informed the court that they were submitting the petition for the resolution of the court. Indeed. and the court shall. Thereafter. on December 29. Indeed. As long as the verified petition states the facts sufficient to entitle the petitioner to the relief requested. 2000. NT-272739 and NT-27240. upon the filing of such petition. the Sheriff executed Certificates of Sale over the properties which were registered with the Register of Deeds on March 28 and October 28. . the respondent averred in its petition that it purchased the properties subject of the real estate mortgage at public auction following the extrajudicial foreclosure of said mortgage. 1998. ACETIa In the present case.

Thus. PUNZALAN: Your Honor. 2000. COURT: Alright. May we be given a period of two months. ORTALEZA: Your Honor. 14 The petitioners reneged on their promise and failed to repurchase the properties despite the lapse of two months. on September 1. we request that the ex parte petition be submitted for resolution considering that it is almost three months since the filing of this petition. Your Honor. The bank is open for negotiation.. we will submit to the Court's ruling. the bank['s] terms. the trial court resolved the petition and granted the same. Inc. ATTY. 15 the Court did not rule that a petition for a writ of possession shall be granted only after the trial court admits in evidence a . The ex parte petition for the issuance of the writ of possession is submitted for the resolution of this Court. we are requesting the Honorable Court that the Spouses Santiago be given ample time to raise the money for the repurchase of the property. this petition had been set for several times. PUNZALAN: For the Spouses Ruben and Inocencia Santiago.ATTY. and nothing was done since then. PUNZALAN: With that. ATTY. The Spouses could talk with the bank so that the said property [may] be redeemed by them with. Your Honor. ATTY. Your Honor. In F. ATTY. and we are praying that said petition being an ex parte be given due course by the Honorable Court since it was filed several months ago. Your Honor. David Enterprises. ORTALEZA: Your Honor. of course.

1982.Torrens title over the property subject of the petition in the name of the respondent. the purchaser becomes the absolute owner of the property. in effect. the petition was granted and the writ prayed for was issued. After such delivery. The petitioners' insistence that the September 1. the deed of conveyance entitled the purchaser to have and to hold the purchased property. it was only in this Court that the petitioners raised the issue for the first time. It is founded on its right of ownership. 17 we held that: The right of the petitioner to the possession of the property is clearly unassailable. This. As We said in Tan Soo Huat vs. CHcETA Case law has it that after the consolidation of title in the name of the respondent as the buyer of the property. 1985. 16 Indeed. Section 1 of the Rules of Court. 18 IN LIGHT OF ALL THE FOREGOING. This means. Costs against the petitioners. amounted to substantial compliance with Rule 36. and to which the respective titles thereto have already been issued. in an avuncular case. As the purchaser of the properties in the foreclosure sale. SO ORDERED. Ongwico. Evidently. upon failure of the mortgagor to redeem the property. the court neither exercises its discretion nor judgment. the petition is DENIED for lack of merit. The Court merely held that the respondent therein was issued a new certificate of title in its name on August 23. The matter was not raised in the court a quo and in the CA. As such. the writ of possession becomes a matter of right. 2000 Order of the lower court is null and void for its failure to state therein the facts and the law on which it is based is a mere afterthought. . and on January 31. the court thereby incorporated by reference the material allegations of the petition as part of said Order. and that it is the Sheriff's inescapable duty to place him in such possession. Besides granting the respondent's petition for a writ of possession on its finding that it was sufficient in form and substance. Its issuance to the purchaser is merely a ministerial function. vesting upon him the right of possession over an enjoyment of the property which the Court must aid in effecting its delivery. that the purchaser is entitled to go immediately upon the real property. petitioner's right over the property has become absolute. the lower court granted the petition for a writ of possession because it was of record that a new certificate of title had already been issued to the respondent.

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