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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. DECISION PANGANIBAN, J.: In the absence of a formal deed of sale, may commitments given by bank officers in an exchange of letters and/or in a meeting with the buyers constitute a perfected and enforceable contract of sale over 101 hectares of land in Sta. Rosa, Laguna? Does the doctrine of "apparent authority" apply in this case? If so, may the Central Bank-appointed conservator of Producers Bank (now First Philippine International Bank) repudiate such "apparent authority" after said contract has been deemed perfected? During the pendency of a suit for specific performance, does the filing of a "derivative suit" by the majority shareholders and directors of the distressed bank to prevent the enforcement or implementation of the sale violate the ban against forum-shopping? Simply stated, these are the major questions brought before this Court in the instant Petition for review on certiorari under Rule 45 of the Rules of Court, to set aside the Decision promulgated January 14, 1994 of the respondent Court of Appeals 1 in CA-G.R CV No. 35756 and the Resolution promulgated June 14, 1994 denying the motion for reconsideration. The dispositive portion of the said Decision reads: WHEREFORE, the decision of the lower court is MODIFIED by the elimination of the damages awarded under paragraphs 3, 4 and 6 of its dispositive portion and the reduction of the award in paragraph 5 thereof to P75,000.00, to be assessed against defendant bank. In all other aspects, said decision is hereby AFFIRMED. All references to the original plaintiffs in the decision and its dispositive portion are deemed, herein and hereafter, to legally refer to the plaintiff-appellee Carlos C. Ejercito. Costs against appellant bank. The dispositive portion of the trial court's 2 decision dated July 10, 1991, on the other hand, is as follows: WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and against the defendants as follows: 1. Declaring the existence of a perfected contract to buy and sell over the six (6) parcels of land situated at Don Jose, Sta. Rosa, Laguna with an area of 101 hectares, more or less, covered by and embraced in Transfer Certificates of Title Nos. T-106932 to T-106937, inclusive, of the Land Records of Laguna, between the plaintiffs as buyers and the defendant Producers Bank for an agreed price of Five and One Half Million (P5,500,000.00) Pesos; 2. Ordering defendant Producers Bank of the Philippines, upon finality of this decision and receipt from the plaintiffs the amount of P5.5 Million, to execute in favor of said plaintiffs a deed of absolute sale over the aforementioned six (6) parcels of land, and to immediately deliver to the plaintiffs the owner's copies of T.C.T. Nos. T-106932 to T- 106937, inclusive, for purposes of registration of the same deed and transfer of the six (6) titles in the names of the plaintiffs; 3. Ordering the defendants, jointly and severally, to pay plaintiffs Jose A. Janolo and Demetrio Demetria the sums of P200,000.00 each in moral damages; 4. Ordering the defendants, jointly and severally, to pay plaintiffs the sum of P100,000.00 as exemplary damages ; 5. Ordering the defendants, jointly and severally, to pay the plaintiffs the amount of P400,000.00 for and by way of attorney's fees; 6. Ordering the defendants to pay the plaintiffs, jointly and severally, actual and moderate damages in the amount of P20,000.00; With costs against the defendants.

After the parties filed their comment, reply, rejoinder, sur-rejoinder and reply to sur-rejoinder, the petition was given due course in a Resolution dated January 18, 1995. Thence, the parties filed their respective memoranda and reply memoranda. The First Division transferred this case to the Third Division per resolution dated October 23, 1995. After carefully deliberating on the aforesaid submissions, the Court assigned the case to the undersigned ponente for the writing of this Decision. The Parties Petitioner First Philippine International Bank (formerly Producers Bank of the Philippines; petitioner Bank, for brevity) is a banking institution organized and existing under the laws of the Republic of the Philippines. Petitioner Mercurio Rivera (petitioner Rivera, for brevity) is of legal age and was, at all times material to this case, Head-Manager of the Property Management Department of the petitioner Bank. Respondent Carlos Ejercito (respondent Ejercito, for brevity) is of legal age and is the assignee of original plaintiffs-appellees Demetrio Demetria and Jose Janolo. Respondent Court of Appeals is the court which issued the Decision and Resolution sought to be set aside through this petition. The Facts The facts of this case are summarized in the respondent Court's Decision 3 as follows: (1) In the course of its banking operations, the defendant Producer Bank of the Philippines acquired six parcels of land with a total area of 101 hectares located at Don Jose, Sta. Rose, Laguna, and covered by Transfer Certificates of Title Nos. T-106932 to T-106937. The property used to be owned by BYME Investment and Development Corporation which had them mortgaged with the bank as collateral for a loan. The original plaintiffs, Demetrio Demetria and Jose O. Janolo, wanted to purchase the property and thus initiated negotiations for that purpose. (2) In the early part of August 1987 said plaintiffs, upon the suggestion of BYME investment's legal counsel, Jose Fajardo, met with defendant Mercurio Rivera, Manager of the Property Management Department of the defendant bank. The meeting was held pursuant to plaintiffs' plan to buy the property (TSN of Jan. 16, 1990, pp. 7-10). After the meeting, plaintiff Janolo, following the advice of defendant Rivera, made a formal purchase offer to the bank through a letter dated August 30, 1987 (Exh. "B"), as follows: August 30, 1987 The Producers Bank of the Philippines Makati, Metro Manila Attn. Mr. Mercurio Q. Rivera Manager, Property Management Dept. Gentleman: I have the honor to submit my formal offer to purchase your properties covered by titles listed hereunder located at Sta. Rosa, Laguna, with a total area of 101 hectares, more or less. TCT NO. AREA T-106932 T-106933 T-106934 T-106935 T-106936 T-106937 113,580 sq. m. 70,899 sq. m. 52,246 sq. m. 96,768 sq. m. 187,114 sq. m. 481,481 sq. m.

My offer is for PESOS: THREE MILLION FIVE HUNDRED THOUSAND (P3,500,000.00) PESOS, in cash. Kindly contact me at Telephone Number 921-1344. (3) On September 1, 1987, defendant Rivera made on behalf of the bank a formal reply by letter which is hereunder quoted (Exh. "C"): September 1, 1987 JP M-P GUTIERREZ ENTERPRISES 142 Charisma St., Doña Andres II Rosario, Pasig, Metro Manila Attention: JOSE O. JANOLO Dear Sir: Thank you for your letter-offer to buy our six (6) parcels of acquired lots at Sta. Rosa, Laguna (formerly owned by Byme Industrial Corp.). Please be informed however that the bank's counter-offer is at P5.5 million for more than 101 hectares on lot basis. We shall be very glad to hear your position on the on the matter. Best regards. (4) On September 17, 1987, plaintiff Janolo, responding to Rivera's aforequoted reply, wrote (Exh. "D"): September 17, 1987 Producers Bank Paseo de Roxas Makati, Metro Manila Attention: Mr. Mercurio Rivera Gentlemen: In reply to your letter regarding my proposal to purchase your 101-hectare lot located at Sta. Rosa, Laguna, I would like to amend my previous offer and I now propose to buy the said lot at P4.250 million in CASH.. Hoping that this proposal meets your satisfaction. (5) There was no reply to Janolo's foregoing letter of September 17, 1987. What took place was a meeting on September 28, 1987 between the plaintiffs and Luis Co, the Senior VicePresident of defendant bank. Rivera as well as Fajardo, the BYME lawyer, attended the meeting. Two days later, or on September 30, 1987, plaintiff Janolo sent to the bank, through Rivera, the following letter (Exh. "E"): The Producers Bank of the Philippines Paseo de Roxas, Makati Metro Manila Attention: Mr. Mercurio Rivera Re: 101 Hectares of Land in Sta. Rosa, Laguna Gentlemen: Pursuant to our discussion last 28 September 1987, we are pleased to inform you that we are accepting your offer for us to purchase the property at Sta. Rosa, Laguna, formerly owned by Byme Investment, for a total price of PESOS: FIVE MILLION FIVE HUNDRED THOUSAND (P5,500,000.00). Thank you. (6) On October 12, 1987, the conservator of the bank (which has been placed under conservatorship by the Central Bank since 1984) was replaced by an Acting Conservator in the person of defendant Leonida T. Encarnacion. On November 4, 1987, defendant Rivera wrote plaintiff Demetria the following letter (Exh. "F"): Attention: Atty. Demetrio Demetria Dear Sir:

5 million "pursuant to (our) perfected sale agreement. and which are covered by TCT No. In view of the above circumstances." Defendants refused to receive both the payment and the letter. Otherwise. Janolo. Laguna. 1987. T-106932 to 106937. (8) Defendant bank. 1987 and was received by you on October 5. defendant Encarnacion. 106934. 1987 of this same lot in the amount of P5." Thus: Mr. Plaintiffs' letter reads: PRODUCERS BANK OF THE PHILIPPINES Paseo de Roxas. to purchase your 101hectare lot located in Sta.5 million at your advice. We are ready to remit the agreed amount of P5. you now refuse to honor your commitment. 258387 in the amount of P5.5 million was accepted by our client thru a letter dated September 30. this time through the Acting Conservator. From the documents at hand. . 1987 (Exh. which demands were in one form or another refused by the bank. "L" and "L-1"). Mr.behalf of our client. 106936 and 106937 and registered under Producers Bank.5 million as our agreed purchase price of the 101-hectare lot covered by TCT Nos.5 Million as the purchase price of the said lots. in . we shall be constrained to file the necessary court action to protect the interest of our client. Jose O. Mercurio Rivera Manager. 1987. through defendant Rivera. This is in connection with the perfected agreement consequent from your offer of P5. We were also informed that despite repeated follow-up to consummate the purchase. Producers Bank Paseo de Roxas.: Atty. In behalf of our client. Plaintiffs demanded the execution by the bank of the documents on what was considered as a "perfected agreement. "H" and "H-1"). you have advertised for sale the same lot to others. on November 17. For your information. Makati Metro Manila Dear Mr. As detailed by the trial court in its decision. in its communication of December 2. plaintiffs through a letter to defendant Rivera (Exhibit "G") tendered payment of the amount of P5. Kindly acknowledge receipt of our payment. . we believe that an agreement has been perfected. Please inform us of the date of documentation of the sale immediately. 106933. Mr. acknowledged receipt of the foregoing letter and stated. JANOLO. "I"). Makati. NIDA ENCARNACION Central Bank Conservator We are sending you herewith. it appears that your counter-offer dated September 1. MBTC Check No. Rosa. On December 14. the plaintiffs made a second tender of payment (Exh. JOSE O. Instead. Rosa. therefore. located at Sta. we are making this formal demand upon you to consummate and execute the necessary actions/documentation within three (3) days from your receipt hereof. 106935. Instead. 106932. We trust that you will be guided accordingly. no response came from the Acting Conservator. (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. to the office of our Conservator for proper disposition" However. 1987. the parcels of land involved in the transaction were advertised by the bank for sale to any interested buyer (Exh. that said letter has been "referred . 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. Rivera: This is in connection with the offer of our client. Metro Manila Attn.Your proposal to buy the properties the bank foreclosed from Byme investment Corp. .

petitioner Rivera and conservator Encarnacion appealed to the Court of Appeals which subsequently affirmed with modification the said judgment. It also denied a motion for reconsideration filed thereafter. in his memorandum. The defendants took the position that there was no such perfected sale because the defendant Rivera is not authorized to sell the property. with prejudice. Co (the brother of Luis Co). through counsel Sycip Salazar Hernandez and Gatmaitan. in a reply letter dated May 12. and that there was no meeting of the minds as to the price. Henry Co and several other stockholders of the Bank. Branch 134. On that basis. During the pre-trial conference in the Second Case. in view of the assignment of the latters' rights in the matter in litigation to said private respondent. Then. petitioners summarized their position as follows: I. plaintiffs filed a suit for specific performance with damages against the bank. Janolo argued that the Second Case was barred by litis pendentia by virtue of the case then pending in the Court of Appeals. through counsel.5 Million are unauthorized or illegal. plaintiff. petitioners prayed for dismissal of the instant suit on the ground 8 that: I. Henry Co did not appeal the denial of his motion for intervention. II. 1988 (Annex "4" of defendant's answer to amended complaint). 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. docketed as Civil Case No. The findings and conclusions of the Court of Appeals do not conform to the evidence on record. the Bank. 1991. In the course of the proceedings in the respondent Court. Henry L." 5 Private respondent. against Encarnacion. The Court of Appeals erred in declaring the existence of an enforceable contract of sale between the parties. IV. 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. From the trial court's decision. "Private respondent opposed this motion on the ground. the defendants through Acting Conservator Encarnacion repudiated the authority of defendant Rivera and claimed that his dealings with the plaintiffs. Carlos Ejercito was substituted in place of Demetria and Janolo. 1988. III. 1991. The Court of Appeals erred in declaring that the conservator does not have the power to overrule or revoke acts of previous management. through counsel Angara Abello Concepcion Regala and Cruz. As recounted by the trial court (Original Record. 1988. filed an action (hereafter. . during the pendency of the proceedings in the Court of Appeals. On July 11. (10) On May 16. alleging that as owner of 80% of the Bank's outstanding shares of stock. 92-1606. On the other hand. 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. its Manager Rivers and Acting Conservator Encarnacion. plaintiffs filed a Motion for Leave of Court to Dismiss the Case Without Prejudice. 1992. among others. On March 14. made a final demand for compliance by the bank with its obligations under the considered perfected contract of sale (Exhibit "N"). that plaintiff's act of forum shopping justifies the dismissal of both cases. On July 8. filed a motion to intervene in the trial court. on May 3. p. particularly his counter-offer of P5.(9) The foregoing letter drew no response for more than four months. the trial court issued an order denying the motion to intervene on the ground that it was filed after trial had already been concluded. 656). In their Petition6 and Memorandum7. averred that this motion is still pending in the Makati RTC. The basis of the suit was that the transaction had with the bank resulted in a perfected contract of sale. he had a substantial interest in resisting the complaint. the "Second Case") — purportedly a "derivative suit" — with the Regional Trial Court of Makati.

the Court of Appeals. in . it was plaintiff. Branch 134. 28-91 requiring that a party "must certify under oath . . 4) Petitioners did not hide the Second Case at they mentioned it in the said VERIFICATION/CERTIFICATION.) the pendency of Civil Case No. II." 10 On the other hand. including to secure procedural advantages. respondent Ejercito) and the bank. 9 Private respondent Ejercito vigorously argues that in spite of this verification. or any other tribunal or agency. forum-shopping originated as a concept in private international law. Makati Branch 134 in the Second Case. to avoid overcrowded dockets.Petitioners have engaged in forum shopping. The Court of Appeals correctly held that there was a perfected contract between Demetria and Janolo (substituted by. To begin with. The Issues From the foregoing positions of the parties. the issues in the two cases are so interwined that a judgement or resolution in either case will constitute res judicata in the other. to annoy and harass the defendant. 12. has no authority to revoke the contract of sale. or to select a more friendly venue. To be sure. was the said contract enforceable under the statute of frauds? 4) Did the bank conservator have the unilateral power to repudiate the authority of the bank officers and/or to revoke the said contract? 5) Did the respondent Court commit any reversible error in its findings of facts? The First Issue: Was There Forum-Shopping? In order to prevent the vexations of multiple petitions and actions. To combat these less than honorable excuses. 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. We rule for private respondent. III. no such action or proceeding is pending" in said courts or agencies. 2) "The derivative suit is not properly a suit for and in behalf of the corporation under the circumstances". In fact." it "does not mean that it is one" and "(t)hat is a legal question for the courts to decide". 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. . rights asserted and reliefs sought (as that) currently pending before the Regional Trial Court. 92-1606 before the Regional Trial Court of Makati. A violation of the said circular entails sanctions that include the summary dismissal of the multiple petitions or complaints. petitioners are guilty of actual forum shopping because the instant petition pending before this Court involves "identical parties or interests represented. the Bank was impleaded as a defendant. whereas in the "Second Case" (assuming the Bank is the real party in interest in a derivative suit). the principle of forum non conveniens was developed whereby a court. the Supreme Court promulgated Revised Circular No. petitioners explain 11 that there is no forum-shopping because: 1) In the earlier or "First Case" from which this proceeding arose. (b) to the best of his knowledge. petitioners have included a VERIFICATION/CERTIFICATION in their Petition stating "for the record(. where nonresident litigants are given the option to choose the forum or place wherein to bring their suit for various reasons or excuses. [that] (a) he has not (t)heretofore commenced any other action or proceeding involving the same issues in the Supreme Court. apart from being estopped from repudiating the agency and the contract. The Court of Appeals has correctly held that the conservator. 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. IV. 3) Although the CERTIFICATION/VERIFICATION (supra) signed by the Bank president and attached to the Petition identifies the action as a "derivative suit.

according to Words and Phrases14. as a result of an adverse opinion in one forum. the Rules of Court. and litigants should be encouraged to attempt to settle their differences without imposing undue expenses and vexatious situations on the courts". for example. and that is. for example. A passenger of a public utility vehicle involved in a vehicular accident may sue on culpa contractual. has no jurisdiction.conflicts of law cases. . through the encouragement of their lawyers.. Heirs of Orval Hughes. In this light. Forum shopping as "the filing of repetitious suits in different courts" has been condemned by Justice Andres R. as already mentioned. 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 follows: There thus exists between the action before this Court and RTC Case No. Narvasa (now Chief Justice) in Minister of Natural Resources. as in this case.18 The test for determining whether a party violated the rule against forum shopping has been laid dawn in the 1986 case of Buan vs. as it was originally understood in conflicts of laws. arising from the same set of facts. forum shopping has acquired a connotation encompassing not only a choice of venues. but also to a choice of remedies. 86-36563 identity of parties. This was the original concept of the term forum shopping. 15 What therefore originally started both in conflicts of laws and in our domestic law as a legitimate device for solving problems has been abused and mis-used to assure scheming litigants of dubious reliefs. allow a plaintiff to commence personal actions "where the defendant or any of the defendants resides or may be found. As to remedies. also by Chief Justice Narvasa. In either of these situations (choice of venue or choice of remedy). 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. "as a reprehensible manipulation of court processes and proceedings . In the Philippines. Sec. the relief being founded on the same facts. the Court had prescribed it in the Interim Rules and Guidelines issued on January 11. litigants. the Supreme Court. Eventually. are given a choice of pursuing civil liabilities independently of the criminal. It had created extreme inconvenience to some of the parties to the action. the litigant actually shops for a forum of his action. et al. et al. . 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. "forum shopping" had acquired a different concept — which is unethical professional legal practice. As to the first (choice of venues). file their actions in all available courts. or at least such parties as represent the same interests in both actions. Thus. 1983 and had struck down in several cases 16 the inveterate use of this insidious malpractice. and . where the court in which the second suit was brought. a party seeks a favorable opinion (other than by appeal or certiorari) in another. "a litigant is open to the charge of "forum shopping" whenever he chooses a forum with slight connection to factual circumstances surrounding his suit. at the election of the plaintiff" (Rule 4. 2 [b]). however. vs. or where the plaintiff or any of the plaintiffs resides." Hence. in order to defeat administrative processes and in anticipation of an unfavorable administrative ruling and a favorable court ruling. And even before that. as in this case. as well as identity of rights asserted and relief prayed for. or invoke all relevant remedies simultaneously. aggrieved parties. Lopez 19. This is specially so. instead of actually making a choice of the forum of their actions. culpa aquiliana or culpa criminal — each remedy being available independently of the others — although he cannot recover more than once." 17 when does forum shopping take place? There is forum-shopping whenever. And this necessitated or had given rise to the formulation of rules and canons discouraging or altogether prohibiting the practice. promulgated Circular 28-91. To avoid or minimize this unethical practice of subverting justice. 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. This practice had not only resulted to ( sic) conflicting adjudications among different courts and consequent confusion enimical ( sic) to an orderly administration of justice.

One can see that although the relief prayed for in the two (2) actions are ostensibly different. Consequently.the identity on the two preceding particulars is such that any judgment rendered in the other action. xxx xxx xxx As already observed. Applying the foregoing principles in the case before us and comparing it with the Second Case. which is the petitioner herein. in fine. we held: In other words. this Court ruled that the filing by a party of two apparently different actions. to a degree sufficient to give rise to the ground for dismissal known as auter action pendant or lis pendens. 1986. in representation of the Bank. The petitioners' claim of absence of identity simply because the PCGG had not been impleaded in the RTC suit. identity of rights or causes and identity of reliefs sought. (emphasis supplied). the majority stockholders. there is between the action at bar and RTC Case No. which dismissed the petition upon grounds which appear persuasive. and the suit did not . in the Second Case. to enable the petitioner Bank to escape from the obligation to sell the property to respondent. the complaint 21 in the Second Case seeks to declare such purported sale involving the same real property "as unenforceable as against the Bank". though worded differently. 86-36563. In brief. the objective or the relief being sought. constituted forum shopping: In the attempt to make the two actions appear to be different. On the other hand. is a species of forum-shopping. That same identity puts into operation the sanction of twin dismissals just mentioned. amount to res adjudicata in the action under consideration: all the requisites. 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. but with the same objective. are seeking to accomplish what the Bank itself failed to do in the original case in the trial court. of auter action pendant. In either case. 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. namely. approval of the sale of vessel in favor of petitioner and to overturn the letter-directive of the COA of October 10. and disciplinary action against the erring lawyer. forum shopping could be cited by the other party as a ground to ask for summary dismissal of the two 20 (or more) complaints or petitions. and for an extension of time for it to comply with the paragraph 1 of the memorandum of agreement and damages. In an earlier case 23 but with the same logic and vigor. In other words. as well as basis thereof. is the same. which are direct contempt of court. rights asserted and relief sought. regardless of which party is successful. 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. 1988 disapproving the sale. it is obvious that there exist identity of parties or interests represented. criminal prosecution. 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. and for imposition of the other sanctions. 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. or interests represented. and. 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". 1988 and to direct said body to approve the Memorandum of Agreement entered into by and between the PNOC and petitioner. In Danville Maritime. the defense of litis pendencia in one case is bar to the others. a final judgment in one would constitute res judicata and thus would cause the dismissal of the rest. Inc. that is. the same essential facts and circumstances. vs. Both actions unquestionably involve the same transactions. the ultimate objective in both actions is the same. 86-36563 promulgated on July 15. an identity as regards parties. Petitioner asks this Court to set aside the questioned letter-directive of the COA dated October 10. will. Very simply stated. 22. Commission on Audit.

. of interests represented." 25 In addition to the many cases 26 where the corporate fiction has been disregarded. and the propriety of implementing the same (by paying the pledgee banks the amount of their loans. with the corporation as the real party in interest. but also constitute the majority in the Board of Directors of petitioner Bank.. It remained an effective vehicle for obtention of relief. namely. petitioners. In the face of the damaging admissions taken from the complaint in the Second Case. whenever the officials of the corporation refuse to sue. the validity of the contract to purchase and sell of September 1. not by the minority 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. or at least. quite strangely. much less are they direct parties in the assailed contract of sale. So. They are not principally or even subsidiarily liable.e. for they have no direct personal interest in the matter in controversy. In the instant case before us. the relief was the same: the prevention of such implementation and/or the restoration of the status quo ante.) are not name parties in the First Case. too. To rule otherwise would be to encourage corporate litigants to use their shareholders as fronts to circumvent the stringent rules against forum shopping. the corporation itself has not been remiss in vigorously prosecuting or defending corporate causes and in using and applying remedies available to it. who not only own. 1986. the circumvention of statutes. Although the plaintiffs in the Second Case (Henry L. whether they sued "derivatively" or directly. and declare herewith that the corporate veil cannot be used to shield an otherwise blatant violation of the prohibition against forum-shopping. When the acts sought to be restrained took place anyway despite the issuance by the Trial Court of a temporary restraining order. 47 [1979]. whether or not it had been efficaciously rescinded. this is the very essence of a derivative suit: An individual stockholder is permitted to institute a derivative suit on behalf of the corporation wherein he holdsstock in order to protect or vindicate corporate rights. there is undeniably an identity of interests/entity represented. whether suing as the majority in direct actions or as the minority in a derivative suit. Victoriano. Co. 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. cannot be allowed to trifle with court processes. they represent the same interest and entity. in this Court as well as in the Court a quo. reasoning that it was brought. we now add the instant case. Indeed. and petitioners' remedy in the premises was plain and patent: the filing of an amended and supplemental pleading in the RTC suit. The adoption of this latter recourse renders the petitioners amenable to disciplinary action and both their actions. sought to deny that the Second Case was a derivative suit. In such actions. the suing stockholder is regarded as a nominal party. the allegations of the complaint in the Second Case show that the stockholders are bringing a "derivative suit". as in this case.) were the basic issues. . hold or control over 80% of the outstanding capital stock. Petitioner also tried to seek refuge in the corporate fiction that the personality Of the Bank is separate and distinct from its shareholders. the achievement or perfection of a monopoly or generally the perpetration of knavery or crime. emphasis supplied). That being so. etc.involve certain acts which transpired after its commencement. i. Shareholders. 90 SCRA 40. as in the action before this Court. So. and Secondly. particularly where. the RTC suit did not become functus oficio. or are the ones to be sued or hold the control of the corporation. In the caption itself. (Gamboa v. dismissible. In the RTC action. The remedy was certainly not the institution of another action in another forum based on essentially the same facts. petitioner Bank. because: Firstly. then they really represent the Bank. petitioners claim to have brought suit "for and in behalf of the Producers Bank of the Philippines" 24. but by Henry Co et al. so as to include the PCGG as defendant and seek nullification of the acts sought to be enjoined but nonetheless done. there is also identity of parties. et al. is specious. they are not suing in their personal capacities. obtaining the release of the pledged shares.

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. even assuming arguendo that there is identity of parties. causes of action and reliefs sought.. vs. 27 where Court held: The rule has not been extended to a defendant who. As testified to by the Bank's Deputy Conservator. However. in the process creating the possibility of conflicting decisions being rendered by the different fora upon the same issue. the defendants did not file any responsive pleading in the first case. the issues were joined. as will be discussed shortly. Makati. let it be emphasized that this petition should be dismissed not merely because of forum-shopping but also because of the substantive issues raised. Respondent. Indeed.Finally. etc. 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. Regional Trial Court. et al. Having said that. (emphasis supplied) Petitioner pointed out that since it was merely the defendant in the original case. specific denials. giving unto themselves the very remedies they repeated in the Second Case. petitioners filed a responsive pleading to the complaint — as a result of which. Inc. Velhagen's and King's motion to dismiss Civil Case No. T-106932 to T-106937. a perfected contract of sale as the ultimate issue. this is exactly the problem: a decision recognizing the perfection and directing the enforcement of the contract of sale will directly conflict with a possible decision in the Second Case barring the parties front enforcing or implementing the said sale. as underscored in the above-quoted Court ruling. 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. for reasons known only to him. In other words. Thus. it could not have chosen the forum in said case. in . the only sanction possible now is the dismissal of both cases with prejudice..) as litigants are admonished to strictly follow the rules against forumshopping and not to trifle with court proceedings and processes They are warned that a repetition of the same will be dealt with more severely. Manager of the Property Management Department of the defendant bank. Jose Entereso. petitioners themselves (and particularly Henry Co. Branch 63. by praying for affirmative reliefs and interposing counter–claims in their responsive pleadings. as causes of action. commences a new action against the plaintiff — instead of filing a responsive pleading in the other case — setting forth therein. The Second Issue: Was The Contract Perfected? The respondent Court correctly treated the question of whether or not there was. The foregoing conclusion finding the existence of forum-shopping notwithstanding. 91-2069 by no means negates the charge of forum-shopping as such did not exist in the first place. petitioner Bank argued that there cannot be any forum shopping. It is definite that the plaintiffs wanted to purchase the property and it was precisely for this purpose that they met with defendant Rivera. on the basis of the facts established. Ultimately. In this case.citing as authority Victronics Computers. a final decision in one would constitute res judicata in the other 28. thus the rudiments of due process prevent us from motu propio imposing disciplinary measures against them in this Decision. they did not make any denial or raise any defense or counter-claim therein In the case before us however. Holding that a valid contract has been established. special and affirmative defenses or even counterclaims. as the other sanctions cannot be imposed because petitioners' present counsel entered their appearance only during the proceedings in this Court. et al. The Lawyers who filed the Second Case are not before us. on the other hand. replied that there is a difference in factual setting between Victronics and the present suit. the bank was looking for buyers of the property. It is likewise beyond cavil that the bank intended to sell the property. In the former. "because it (the Bank) was the defendant in the (first) case while it was the plaintiff in the other (Second Case)". Indeed. the petitioners became plaintiffs themselves in the original case.

Not point blank although it came from him. 1987 stating that they would buy at the price of P3. 27-28): Q: When you went to the Producers Bank and talked with Mr. I present it to the Committee. and plaintiffs were dealing with the bank official authorized to entertain offers. 19-20): A: The procedure runs this way: Acquired assets was turned over to me and then I published it in the form of an inter-office memorandum distributed to all branches that these are acquired assets for sale. can be had. pp. But he would refer it to the committee and he would relay the decision of the committee to me. and considering further the discussion of price at the meeting of August resulting in a formal offer of P3. the agenda was the price of the property. 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. on September 1. 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. 1987. in effect what he was saying he was not the one who was to decide. Rivera informed plaintiffs by letter that "the bank's counter-offer is at P5. 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. and the bank Committee. formal offer and upon having been offered. pp. Rivera is the officer from whom official information regarding the price.) 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. The plaintiffs. If I am not mistaken Wednesday and in about two week's (sic) time.5 Million for more than 101 hectares on lot basis. bid price during the foreclosure. As advised by Rivera. And Rivera confirmed his authority when he talked with the plaintiff in August 1987. at that meeting of August 1987 regarding their purpose of buying the property. 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. Q — Please answer the question. as determined by the Committee and approved by the Conservator. The letter was for the attention of Mercurio Rivera who was tasked to convey and accept such offers.5 Million in cash. did you ask him point-blank his authority to sell any property? A: No. dealt with and talked to the right person. too. I have to entertain offer. total claim of the bank. 1990. 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. the plaintiffs made a formal offer by a letter dated August 20. Thus (TSN of July 30. the Committee referred to was the Past Due Committee of which Luis Co was the Head.early August 1987. therefore. with Jose Entereso as one of the members. it being inherent in his authority. sir. (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. Mercurio Rivera.1990. "Parenthetically. Necessarily. we have to execute the deed of sale and it is the Conservator that sign the deed of sale. sir. which testimony was relied upon by both the bank and by Rivera in their appeal briefs.5 Million in cash. I provide the Committee with necessary information about the property such as original loan of the borrower. the Conservator and ultimately the bank itself with the set price on the other. there can be no other logical conclusion than that when. to accept offer. A — He did not say that he had the authority (. The testimony of plaintiff Demetria is clear on this point (TSN of May 31." 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 . And when I asked him how long it will take for the committee to decide and he said the committee meets every week. Necessarily.

the official and definitive price at which the bank was selling the property. there are questions of law which could be drawn from the factual findings of the respondent Court. the official in charge of the negotiation. Since there was no counter-offer by the Bank. let us review the question of Rivera's authority to act and petitioner's allegations that the P5. total claim of the bank. particularly where. 2. as against any one who has in good faith dealt with the corporation through such agent. the corporation will. Verily. We have perused the evidence but cannot find fault with the said Court's findings of fact. as it now does. the bank's submission on this point does not inspire belief. the bank placed its official.25 million revised offer of Janolo. was laid out in Prudential Bank vs. No. that what Rivera states as the bank's action on the matter is not in fact so. Laguna with an aggregate area of about 101 hectares. that the price will be submitted for approval by the bank and that the bank's decision will be relayed to plaintiffs. and covered by Transfer Certificates of Title Nos. Prudential Bank v. with special reference to banks. 7 SCRA 577. and thus holds him out to the public as possessing power to do those acts. errors of fact — if there be any . and any supposed counter-offer which Rivera (or Co) may have made is unauthorized. and in addition to the foregoing disquisitions by the Court of Appeals. as clearly worded in Rivera's letter (Exh. and market value. more or less. Both Co ad Entereso. The doctrine of "apparent authority". that the P5. PNB v. The bank cannot turn around and later say." 30 They disputed the factual basis of the respondent Court's findings that there was an offer made by Janolo for P3. to which the Bank counter-offered P5. There is. GSIS.Committee of such matters as original loan of borrower.5 million counter-offer was extinguished by the P4.are. 583-584. the doctrine of ostensible authority. Be that as it may. a dispute on the first and third requisites.5 million. claim that the offer of the plaintiff was never discussed by the Committee. From the facts. 103957. Petitioners allege that "there is no counter-offer made by the Bank. 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. that if a corporation knowingly permits one of its officers. bid price during foreclosure. Tersely put. both Co and Entereso openly admit that they seldom attend the meetings of the Committee. June 14. Court of Appeals. Court of Appeals31.R. The object of the questioned contract consists of the six (6) parcels of land in Sta. In fact. having been made to understand by Rivera. the price of P5. Rivera. There were averments by defendants below. 369-370. as a rule. he estopped from denying his authority (Francisco v. as members of the Past Due Committee of the bank. It is a familiar doctrine. said courts carefully and meticulously discussed their findings. Rosa. such findings merit serious consideration by this Court. not reviewable. T-106932 to T-106937. (3) Cause of the obligation which is established. Here. They also delve into the contractual elements of consent and cause. G. This is basic." There is no dispute on requisite no. where it was held that: . In the same vein. this is not credible. 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. "E"). under the established facts. Court of Appeals. in a petition under Rule 45 such as this. as well as before this Court.5 Million was. 94 SCRA 357. (2) Object certain which is the subject matter of the contract. as in this case. or any other agent. the official bank price. in a position of authority to accept offers to buy and negotiate the sale by having the offer officially acted upon by the bank. The authority of a corporate officer in dealing with third persons may be actual or apparent. As correctly characterized by the trial court. to do acts within the scope of an apparent authority. there was nothing for Ejercito (in substitution of Demetria and Janolo) to accept. 1993). however. 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.5 Million price was not discussed by the Committee and that price. At any rate.5 million. 29 Article 1318 of the Civil Code enumerates the requisites of a valid and perfected contract as follows: "(1) Consent of the contracting parties.

pp. 40 ALR 1021). 89). From the evidence found by respondent Court. the agent is secretly abusing his authority and attempting to perpetrate a fraud upon his principal or some other person. 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. 204 NW 818. R. (c) Rivera received the buyers' letter dated August 30.S. April 26. In the very recent case of Limketkai Sons Milling. p. confirmed Rivera's statement as to the finality of the Bank's counter-offer of P5. a major shareholder and officer of the Bank. 184 SCRA 166). al. Intermediate Appellate Court. 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. Melo. 1987 offering P3. 1990. 1990.J. By his own admission. August 6. 1990. (h) In its newspaper advertisements and announcements.5 million (TSN. during which the Bank's offer of P5. affirmed the doctrine of apparent authority as it held that the apparent authority of the officer of the Bank of P. pp. through Justice Jose A. Co. Inc. (g) Rivera arranged the meeting between the buyers and Luis Co on September 28. it is obvious that petitioner Rivera has apparent or implied authority to act for the Bank in the matter of selling its acquired assets. 1990. 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. Manager of the Property Management Department of the Bank". Accordingly.5 million (TSN.3 million (TSN. p. (d) Rivera signed the letter dated September 1. resulting in prejudice to their depositors. July 30. in a telephone conversation. 1990. Rivera was already the person in charge of the Bank's acquired assets (TSN. the land was definitely being sold by the Bank.Conformably. 18). And during the initial meeting between the buyers and Rivera. p.. April 26. pp. 52 ND 752. . for his own ultimate benefit (McIntosh v. 1990. 11). 1994. et. p. 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. (b) As observed by respondent Court. we have declared in countless decisions that the principal is liable for obligations contracted by the agent. 1990. Such faith will be eroded where banks do not exercise strict care in the selection and supervision of its employees.5 million was confirmed by Rivera (TSN. p. nor will it be permitted to shirk its responsibility for such frauds even though no benefit may accrue to the bank therefrom (10 Am Jur 2d.32. TSN. 3) states that Rivera was "at all times material to this case. in the particular case.I. 21. confirmed that the P5. At said meeting. January 16. 1987 offering to sell the property for P5. April 26. 114). "S" and "S-1").11). the Court. 35). Court of Appeals. 12). 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. the latter suggested that the buyers' offer should be no less than P3.5 million (TSN. p. 34-35). In fact. This evidence includes the following: (a) The petition itself in par. in charge of acquired assets is borne out by similar circumstances surrounding his dealings with buyers. vs. p. January 16. II-i (p. Dakota Trust Co. July 30. Rivera was the officer mentioned in the Bank's advertisements offering for sale the property in question (cf. 417).25 million (TSN. 30 July 1990. 16-17). p. (f) Rivera.. A bank is liable for wrongful acts of its officers done in the interests of the bank or in the course of dealings of the officers in their representative capacity but not for acts outside the scape of their authority (9 C. (e) Rivera received the letter dated September 17. 1987 containing the buyers' proposal to buy the property for P4.5 million was the final price of the Bank (TSN. Exhs.

5 million price during the September 28. one of whose members (Atty. It also bears noting that this issue of extinguishment of the Bank's offer of P5. .5 million. there was a meeting of the minds. Luis Co and Rivera "confirmed that the P5. petitioners attempted to repudiate Rivera's apparent authority through documents and testimony which seek to establish Rivera's actual authority. Petitioners insist that the respondent Court should have believed the testimonies of Rivera and Co that the September 28. both the trial court and the Court of Appeals found petitioners' testimonial evidence "not credible". This is the conclusion consistent with human experience. since the issue is apparent authority. Such delay. as the acceptance in said letter was absolute and unqualified. respondent has proven that Demetria and Janolo merely associated with a loose aggrupation of lawyers (not a professional partnership). . 1990. Luis Co's reiteration of the said P5. of Rivera's authority and action.25 million extinguished the offer of P5. the Bank has not shown that they acted as its counsel in respect to any acquired assets. 1987. and the absence of any circumstance which might have justifiably prevented the Bank from acting earlier. 1988 or more than seven (7) months after Janolo' acceptance. assuming arguendo that the counter-offer of P4. Taken together. they should be charged with actual knowledge of Rivera's limited authority. as being "unauthorized and illegal" came only on May 12. 1987 begins with"(p)ursuant to our discussion last 28 September 1987 . through Conservator Encarnacion. 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. Susana Parker) acted in said criminal cases. however. as found by the respondent Court which reviewed the testimonies on this point. But the Court of Appeals in its Decision (p. In fact. 1987) "accepted" Rivera's counter offer of P5. Note that the said letter of September 30. Hence. 1987 meeting revived the said offer.25 million counter-offer in the letter dated September 17. 1987 was carried through during the meeting of September 28. million.5 million 34 . citing the late Justice Paras35. And by virtue of the September 30. the evidence of actual authority is immaterial insofar as the liability of a corporation is concerned 33.To be sure. Art. 1987. on the other hand.5 million under Annex "J" (letter dated September 17. 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. pp.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.5 million was raised for the first time on appeal and should thus be disregarded. However. Petitioners also alleged that Demetria's and Janolo's P4. particularly the latter's counter-offer of P5. 1987 meeting "was meant to have the offerors improve on their position of P5. These pieces of evidence. truth and good faith. 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. of which private respondent cannot be charged with knowledge. 34-35)" 39. the existence of which is borne out by the respondent Court's findings. the above-cited authorities and precedents cannot apply in the instant case because. and we find no basis for changing this finding of fact. 1319 of the Civil Code 36 and related Supreme Court rulings starting with Beaumont vs. 1987 extinguished the Bank's offer of P5. 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 1.5 million. 12) had already made a factual finding that the buyers had no notice of Rivera's actual authority prior to the sale. 1987. Prieto 37. 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. what was "accepted" by Janolo in his letter dated September 30."38 However. 1987)". .5. Jose Fajardo by Rivera and Co during their meeting on September 28. In any event.5 million price has been passed upon by the Committee and could no longer be lowered (TSN of April 27.5 million as confirmed and reiterated to Demetria and Atty. 1987 was the Bank's offer of P5. 1987 letter accepting this revived offer. We note that the Bank's repudiation.

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. 1987.5 million. referred to in No. the price and a description of the property as the object of the contract. . Civil Code. what transpired during this meeting with Luis Co of the Producers Bank? . They are however clear embodiments of the fact that a contract of sale was perfected between the parties. I think it was September 28. 1987. Anchuelo vs. 1987. justice and due process (Dihiansan vs. 1990). Contracts infringing the Statute of Frauds. are not. formal contracts of sale. IAC. oral testimony on the reaffirmation of the counter-offer of P5. But let it be assumed arguendo that the counter-offer during the meeting on September 28. CA. CA. Indeed. 1987 on the official price and the plaintiffs' acceptance of the price on September 30. issues of fact and arguments not adequately brought to the attention of the trial court need not be. constitute in law a sufficient memorandum of a perfected contract of sale. But we passed upon the issue anyway. . the terms and conditions of the contract. A Yes. 147 SCRA 434 [1987]. August 30. G. As private respondent pointed out in his Memorandum. taken together. Stated simply. 74243. No. Hence. vs. . xxx xxx xxx Q Now. Demetria told me to accompany him we were able to meet Luis Co at the Bank. if only to avoid deciding the case on purely procedural grounds. 77029. and ordinarily will not be. on the basis of the evidence already in the record and as appreciated by the lower courts. 2 of article 1403. sir. as they cannot be raised for the first time on appeal (Santos vs. 175 SCRA 70 [1989]. (Please see article 1403[2]. 1405. are ratified by the failure to object to the presentation of oral evidence to prove the same. IAC. 1986. and we repeat that. and it was this verbal offer that Demetria and Janolo accepted with their letter of 30 September 1987.R. or by the acceptance of benefits under them. 1987 but from Janolo's August 20. Ramos vs. the contract produced thereby would be unenforceable by action — there being no note.This Court in several decisions has repeatedly adhered to the principle that points of law. 14) stated: . the inevitable conclusion is simply that there was a perfected contract of sale. The Third Issue: Is the Contract Enforceable? The petition alleged42: Even assuming that Luis Co or Rivera did relay a verbal offer to sell at P5. 145 SCRA 592). pursuant to Article 1405 of the Civil Code: Art. memorandum or writing subscribed by the Bank to evidence such contract. 1987 did constitute a "new" offer which was accepted by Janolo on September 30.) Upon the other hand.41 Since the issue was not raised in the pleadings as an affirmative defense. this is a matter of due process. The respondent Court could have added that the written communications commenced not only from September 1. in themselves. the banks' letter of September 1. IAC. Of course. theories. 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. November 14. 153 SCRA 713 [1987]. . IAC. 157 SCRA 425 [1988].5 million during the meeting of 28 September 1987. such contract being binding in whatever form it may have been entered into (case citations omitted). 1987. private respondent was not given an opportunity in the trial court to controvert the same through opposing evidence. taken together with plaintiffs' letter dated September 30. the bank's letter of September 1. We agree that.5 million is a plenty — and the silence of petitioners all throughout the presentation makes the evidence binding on them thus. 1987 letter. the respondent Court in its Decision (p. Still. petitioners — by such utter failure to object — are deemed to have waived any defects of the contract under the statute of frauds.40 . these letters constitute sufficient memoranda — since they include the names of the parties. 1987 and I was again present because Atty. Dulos Realty & Development Corp. Gevero vs. considered by a reviewing court.

on the basis of a report submitted by the appropriate supervising or examining department. 1987 meeting. the Monetary Board may appoint a conservator to take charge of the assets. Co in his Office in Producers Bank Building during this meeting? A Mr.? Two days thereafter we sent our acceptance to the bank which offer we accepted.5 million pesos and Mr. Luis Co. What the bank expects which was contrary to what Mr. Mercurio Rivera is the final price and that is the price they intends ( sic) to have. TSN.A Atty. 265 (otherwise known as the Central Bank Act) as follows: Whenever.5 million and we should indicate our position as soon as possible. And he told me that is the final offer of the bank P5. .5 million could still be reduced and he said that was already passed upon by the committee. at pp. [Direct testimony of Atty. Rivera stated. Co himself. will you tell this Court who was with Mr. 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. What can you say to that statement that the amount of P5. Luis Co. 26 April 1990.] Q What transpired during that meeting between you and Mr. TSN. the amount of P5.5 million was reached by the Committee and it is not within his power to reduce this amount. Demetrio Demetria. 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. Demetrio Demetria and Atty. Q By Mr. Demetria asked Mr. and the management of that institution. [Direct testimony of Mercurio Rivera. sir. 34-36. sir.5 million. Demetria. Mercurio [Rivera] was with us at the time at his office. Co you are referring to? A Mr.] The Fourth Issue: May the Conservator Revoke the Perfected and Enforceable Contract. 18-21. Luis Co of the defendant Bank? A We went straight to the point because he being a busy person. Q What was your response to the answer of Mr. I told him if the amount of P5.5 million was reached by the Committee? A It was not discussed by the Committee but it was discussed initially by Luis Co and the group of Atty. your Honor please. he will make final acceptance. Fajardo and I. Q What do you mean?. at pp. Luis Co?. Q For the record. 1990. TSN. sir. Fajardo and I and Mr. Mr. [Direct testimony of Atty. Luis Co said that the amount cited by Mr. Demetria. January 16. 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. 30 July 1990. sir. 14-15. A That is the amount they want. did you and your partner accede on ( sic) the counter offer by the bank? A Yes. Q What price? A The 5. sir. Atty. Atty. Luis Co whether the price could be reduced. pp. Pajardo ( sic) in that September 28. Q What is the response of Mr. Jose Fajardo.5 million was the defendant's bank ( sic) final offer? A He said in a day or two. Q What is the reaction of the plaintiff Demetria to Luis Co's statement ( sic) that the defendant Rivera's counter-offer of 5. A He said he will wait for the position of Atty. under Section 28-A of Republic Act No. Luis Co? A I said that we are going to give him our answer in a few days and he said that was it. the offer of the bank which is P5. sir. we did. Rivera. Q After this meeting with Mr. sir. liabilities.] Q According to Atty. collect all monies and debts due said institution and exercise all powers necessary to preserve the assets of the institution.

In the "Inter-Office Memorandum" dated April 25. Mercurio Rivera or any of his subordinates has no authority. Janolo and Demetria regarding the six (6) parcels of land located at Sta. 265. We also have no personal interest in any of the properties of the Bank. there is absolutely no evidence that the Conservator. 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. 1986 addressed to and approved by former Acting Conservator Mr. you will immediately read that Manager Mr. We believe that this is more than sufficient legal justification for refusing said alleged tender. legal and in accordance with law. Pascua detailed the functions of Property Management Department (PMD) staff and officers (Annex A. only the Board of Directors/Conservator may authorize the sale of any property of the corportion/bank. power or right to make any alleged counter-offer. 1984) to sell the aforesaid property to any of your clients. Our records do not show that Mr. as amended). Zarate: This pertains to your letter dated May 5. 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. Metro-Manila Dear Atty. Very truly yours. actually repudiated or overruled said contract of sale. 1988 is reproduced hereunder: May 12. never objected to the sale of the property to Demetria and Janolo. your lawyer-clients did not deal with the authorized officers of the bank. Producers Bank Senior Manager Perfecto M. 68. In short. Andres I. Rodolfo Romey. 1988 on behalf of Attys. any provision of law to the contrary notwithstanding. under Sec. Makati. . 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.. We are. which everyone knows cannot bind the Bank's Board or Conservator. issues not raised and/or ventilated in the trial court. 28-A of the Central Bank Act (Rep. Rivera was authorized by the old board or by any of the bank conservators (starting January. and restore its viability. Act No. 23 and 36 of the Corporation Code of the Philippines (Bates Pambansa Blg. Please be advised accordingly. let alone in the Court of Appeals. what took place were just preliminary discussions/consultations between him and your clients. All our acts are official. therefore. at the time the contract was perfected. and such other powers as the Monetary Board shall deem necessary.) and Sec." 43 In the second place. As already stated earlier. Zarate Zarate Carandang Perlas & Ass. Apparently. 1988 Atty.). Suite 323 Rufino Building Ayala Avenue. Rosa. Noe C. The Bank's acting conservator at the time. as the same is patently violative of corporate and banking laws. What petitioners are really referring to is the letter of Conservator Encarnacion. Moreover. Said letter dated May 12. justice and due process. 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. In the first place.reorganize the management thereof. "cannot be raised for the first time on appeal as it would be offensive to the basic rules of fair play. Rustia. Rest assured that we have nothing personal against your clients. Laguna. constrained to refuse any tender of payment by your clients. 1987 (Annex V. who took over from Romey after the sale was perfected on September 30.

at the expense of third parties. 1970. how can it delegate such non-existent powers to the conservator under Section 28-A of said law? Obviously. 58 SCRA 89. The Supreme Court is not a trier of facts. Neither by common sense. Hernandez. April 28. the conservator merely takes the place of a bank's board of directors. G. by simply getting the conservator to unilaterally revoke all previous dealings which had one way or another or come to be considered unfavorable to the Bank. 121 SCRA 865. reiterating a long line of decisions]. His authority would be only to bring court actions to assail such contracts — as he has already done so in the instant case. 45. Court of Appeals 46. This Court so held that it is not the function of the Supreme Court to analyze or weigh such evidence all over again. we held: The resolution of this petition invites us to closely scrutinize the facts of the case. June 30. No. L-16394. therefore. If the legislature itself cannot revoke an existing valid contract. vs. R. G. Jr. "Barring. L-47531. No. or that they are so glaringly erroneous as to constitute serious abuse of discretion. 127 SCRA 596). No. Baniqued vs. Manufacturers Hanover & Trust Corporation. relating to the sufficiency of evidence and the credibility of witnesses presented. As held in the recent case of Chua Tiong Tay vs. 1974. under existing law. findings of fact by the Court of Appeals are not reviewable by the Supreme Court. 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. his power is not unilateral and he cannot simply repudiate valid obligations of the Bank.R. 47: . unenforceable or rescissible. therefore. its findings of the fact being conclusive " [Chan vs. void. its jurisdiction being limited to reviewing errors of law that might have been committed by the lower court" (Tiongco v. Hence. July 25. such findings must stand. Court of Appeals. The Supreme Court's jurisdiction is limited to reviewing errors of law that may have been committed by the lower court. otherwise they would infringe against the non-impairment clause of the Constitution 44. 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. No. the Central Bank law gives vast and far-reaching powers to the conservator of a bank. G. The rule regarding questions of fact being raised with this Court in a petition for certiorari under Rule 45 of the Revised Rules of Court has been stated in Remalante vs.R. 1983. .) Leonida T. 18 SCRA 973] [at pp. Corona vs.e. while admittedly. a showing that the findings complained of are totally devoid of support in the record. (the reorganization of) the management thereof and (the restoration of) its viability. 33 SCRA 737. February 25. To rule otherwise would be to enable a failing bank to become solvent. 158 SCRA 138. R. R. L27488.R. we held: . No.(Sgd. A contrary understanding of the law would simply not be permitted by the Constitution. G. enormous and extensive as they are. Encarnacion LEONIDA T. Tibe. . in Bernardo vs. Section 28-A merely gives the conservator power to revoke contracts that are. Court of Appeals. voidable. L-62482." Such powers. Court of Appeals and Goldrock Construction and Development Corp. . for this Court is not expected or required to examine or contrast the oral and documentary evidence submitted by the parties" [Santa Ana.. EDCARNACION Acting Conservator In the third place. 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. L-24426. The Fifth Issue: Were There Reversible Errors of Facts? Basic is the doctrine that in petitions for review under Rule 45 of the Rules of Court. 144-145. "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. February 20. December 17. This Court has emphatically declared that "it is not the function of the Supreme Court to analyze or weigh such evidence all over again. Court of Appeals. 1966. In Andres vs. 59514. . deemed to be defective — i. No. G. Ineluctably.] Likewise. De la Merced. 1984. G. . 1988. yielding nothing to perfected contractual rights nor vested interests of the third parties who had dealt with the Bank.

however. The argument deserves scant consideration. 1987 between the plaintiffs. 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. . . (p. The first point was clearly passed upon by the Court of Appeals 50. when the findings went beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee. the price of P5. where the topic was the possible lowering of the price. petitioners should have presented then Conservator Rodolfo Romey to testify on their behalf. during the meeting of September 28. 34-35) (p. but a meeting on the already determined price of P5. under the established fact. but petitioners' evidence was deemed insufficient by both the trial court and the respondent Court.5 million" Hence. after Rivera presented the same for discussion" and (2) "the meeting with Co was not to scale down the price and start negotiations anew. We have studied both the records and the CA Decision and we find no such . Rivera and Luis Co. we find none of the above grounds present to justify the re-evaluation of the findings of fact made by the courts below. citing Philippine National Bank vs. vs. it is quite evident that the legal conclusions arrived at from the findings of fact by the lower courts are valid and correct. (I)t is not the function of this Court to assess and evaluate all over again the evidence. But the petitioners are now asking this Court to disturb these findings to fit the conclusion they are espousing. . 11." specifically the findings that (1) the "Bank's counter-offer price of P5. "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 . testimonial and documentary. adduced by the parties. characterizing it as "not credible" and "at best equivocal and considering the gratuitous and self-serving character of these declarations. To be sure. CA Decision). if produced.5 million had been determined by the past due committee and approved by conservator Romey. as he would have been in the best position to establish their thesis. "E"). Under the rules on evidence 51. on September 1. This we cannot do. 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. there are settled exceptions where the Supreme Court may disregard findings of fact by the Court of Appeals 52. 1987.The Court has consistently held that the factual findings of the trial court. thus: There can be no other logical conclusion than that when. when the judgment is premised on a misapprehension of facts. the findings of both the trial court and the appellate court on the matter coincide. . . The respondent Court did not believe the evidence of the petitioners on this point. the ruling of this Court in the recent case of South Sea Surety and Insurance Company Inc. . (emphasis supplied) Petitioners. et al. the official and definitive price at which the bank was selling the property. mistaken or impossible. 48 is equally applicable to the present case: We see no valid reason to discard the factual conclusions of the appellate court. Tersely put. are final and conclusive and may not be reviewed on appeal. as well as the Court of Appeals. when the inference made is manifestly absurd. petitioners are asking us to review and reverse such factual findings.5 Million was. it was respondent's submissions that were believed and became bases of the conclusions arrived at. 1990. the bank official refused it and confirmed that the P5. 15. As pointed out by plaintiff.5 Million for more than 101 hectares on lot basis. pp. In fine. when there is grave abuse of discretion in the appreciation of facts. The second point was squarely raised in the Court of Appeals." To become credible and unequivocal.5 Million price had been passed upon by the Committee and could no longer be lowered (TSN of April 27. and instead. After a careful study of the case at bench. as clearly worded in Rivera's letter (Exh. . such as here. such suppression gives rise to the presumption that his testimony would have been adverse. particularly where. the senior vice-president of the bank. CA Decision) xxx xxx xxx . Rivera informed plaintiffs by letter that "the bank's counter-offer is at P5. Court of Appeals 49. In the same vein. the bank's submissions on this point do not inspire belief. Court of Appeals. Hon. surmises or conjectures.

Davide Jr.. but were closer to the evidence as presented in the trial court by private respondent. non-impairment of obligations and sanctions against forum-shopping. . like respect for perfected contracts.5 million 54. it is equally true that at the time of the transaction in 1987. Certainly. the trial court and the appellate court were in common agreement thereon. considering that the Bank acquired these properties at a foreclosure sale for no more than P3.5 million was reasonable. C.023 billion . But this alone is no reason to reverse or ignore such factual findings. which required the determination of questions of fact. petitioner Bank is REPRIMANDED for engaging in forum-shopping and WARNED that a repetition of the same or similar acts will be dealt with more severely. Indeed. for we are only too aware of the depth. WHEREFORE. 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. The inferences and conclusions are seasonably based on evidence duly identified in the Decision.J. the Court hereby DENIES the petition. if only to find out whether there is reason to disturb any of its factual findings. the appellate court patiently traversed and dissected the issues presented before it. 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. SO ORDERED. the price agreed upon of P5.. . That the Bank procrastinated and refused to honor its commitment to sell cannot now be used by it to promote its own advantage. because the trial court is in a better position to observe the demeanor of the witnesses and their courtroom manner as well as to examine the real evidence presented. Epilogue. the Bank's overdraft with the Central Bank had already reached P1. 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. Narvasa. On the contrary. Indeed. but delved as well into the substantive issues — the perfection of the contract of sale and its enforceability. the findings of the said Court are supported by a preponderance of competent and credible evidence. 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 .. the extinguishment of the Bank's offer of P5. we did so just the same. We did not limit ourselves thereto. lending credibility and dependability to its findings. finding no reversible error in the questioned Decision and Resolution. at the same time. conclusions of fact of a trial judge — as affirmed by the Court of Appeals — are conclusive upon this Court. to enable it to escape its binding obligation and to reap the benefits of the increase in land values. the Court cannot emotionally close its eyes to overriding considerations of substantive and procedural law. deposits and well as employment. absent any serious abuse or evident lack of basis or capriciousness of any kind. . as many people depend on (it) for investments. particularly where. In summary. there are two procedural issues involved forum-shopping and the raising of issues for the first time on appeal [viz. Costs against petitioners. JJ.. Melo and Francisco. concur." 53 While we do not deny our sympathy for this distressed bank. This Court cannot just gloss over private respondent's submission that.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. magnitude and vigor by which the parties through their respective eloquent counsel. and there were (other) offers to buy the subject properties for a substantial amount of money. as in this case. As of June 1987. while the subject properties may currently command a much higher price.exceptions in this case. argued their positions before this Court. . the Court cannot stamp its imprimatur on such outrageous proposition. Moreover. The assailed Decision is AFFIRMED. . which must be upheld under the rule of law and blind justice.

Eslao in connection with their attempt to execute the Court's decision in this case before its finality.178. against Judge Regino T. vs. 112991. 1992. NAÑAGAS II. THE HONORABLE COURT OF APPEALS and VITALIANO N. the respondent reported the matter to the judge and prayed for the issuance of an order to the PNB to release the amount. In compliance with the demand. respondent sheriff on April 4. PAUG. respondent judge issued an order granting the sheriff's prayer. Cachero of the Regional Trial Court of Manila." 5 On the same day. HON. petitioner. 1995 PACIFIC BANKING CORPORATION EMPLOYEES ORGANIZATION. his Agents. LTD. Deputy Sheriff Carmelo V. J.R.: This relates to the Motion to Cite in Contempt. Eslao. 112991 October 13. the sheriff sent notices to the Land Bank of the Philippines (LBP) and the Philippine National Bank (PNB).R. filed by petitioner in G. its Agents. No. 109373 October 13. 1992 by respondent Judge Regino T. Branch 31.. 3 But as the PNB refused to comply with his demand. respondent judge issued an order with the following dispositive portion: 6 WHEREFORE. 1995 THE PRESIDENT OF THE PHILIPPINE DEPOSIT INSURANCE CORPORATION.R. As the PNB still refused to release the amount garnished. Veridiano II. Proc. Marino E. COURT OF APPEALS. his Agents. as Liquidator of the Pacific Banking Corporation. Representatives and Assigns. the LBP released on March 29. represented by their Attorney-in-fact. No. 1995. 075937. On April 3. 1995 the amount of P1. SO ORDERED.393. No. Acting on the request. G. ANG KEONG LAN and E. already sent a written request 1 to Deputy Sheriff Carmelo V. "for the immediate enforcement of the Writ of Execution" issued on October 28. No. GONZALO C. 86-35313 and "to further demand from the depository banks the immediate release of the garnished funds (of the Pacific Banking Corporation or PaBC) sufficient to satisfy the claims" of Atty. PAULA S. Veridiano II in Sp. Representatives and/or Assigns are hereby directed to appear before this Court immediately upon receipt of this Order to personally explain the delay of the release of the garnished amounts mentioned in its . vs. as Liquidator of Pacific Banking Corporation. are hereby directed to immediately release the garnished amounts to satisfy the Decision of this Court in SP. Proc. Marino E. SY.05. petitioners. 1995 asked the court (1) that a bench warrant be issued against the President of the PNB. 112991. for their refusal to comply with the order of the court. (2) that they be required to explain the delay and (3) that if their explanation was unmeritorious. counsel for private respondents in G. The dispositive portion of his order stated: 4 WHEREFORE. covered by Cashier's Check No . the Court declares that there is no more legal obstacle for the release of the garnished amounts and the Depository Bank PNB thru its President. No. demanding the immediate release and delivery of the amounts in question.G. No. President of PNB. JUDGE REGINO T. DEPUTY SHERIFF RAMON ENRIQUEZ and ANG ENG JOO. 86-35313 as per Writ of Execution issued as early as October 28. It appears that just four days after the promulgation of the decision on March 24. and its officers and members. RESOLUTION MENDOZA. 1995. Atty. they be confined at the Manila City Jail "until such time that they have released the garnished amounts. respondents. Cachero and Atty.R. respondents. Representatives and Assigns. 2 which was received by respondent sheriff on the same day. depositories of the garnished funds of the PaBC.J ANG INT'L. VERIDIANO II. Eslao's clients.

Rosalina U. the Bank Liquidator. obstruct or degrade the administration of justice.order dated April 3. There was no malice or bad faith by the Presiding Judge in issuing the implementing Orders as it was done in good faith in the honest belief that it was in the regular performance of his official duty in view of the Honorable Supreme Court's decision that "because of the Liquidator's failure to perfect his appeal. Proc. 3. who was particularly required by this Court to comment on the motion for contempt. Eslao and respondent deputy sheriff defend the certification issued by the Branch Clerk of Court as a truthful statement of the facts and claim that respondent judge acted in the sincere belief that there was no further legal obstacle to the execution of the judgment. Eslao. of issuing a false certification that there was no record on appeal filed in Sp. SO ORDERED. Jr. No. To this motion private respondents (Stockholders/Investors) filed an Opposition. the Bank Liquidator filed this motion to cite in contempt of court respondent Judge Regino T. to impede. Casiguran. the undersigned had presumed that there was no further legal obstacle to the writ of execution which was issued three (3) years ago. No. Chief Legal Counsel of the respondent Philippine Deposit Insurance Corporation. 1995 of the decision in this case." Hence. Cachero. Respondent judge. Both Atty. 2. the Order granting the claims of the Stockholders/Investors became final. 1995. On April 7. 1995 to secure a restraining order from this Court. 1995 in the satisfaction of the Decision in Sp. Antonio B. petitioner in G. respondents say that they wish to express sincere apology for their acts and they beg that their acts be forgiven. this Court ordered respondents to cease and desist.M. Eslao engaged in improper conduct tending. from further implementing and enforcing the lower court's writ of execution. the Bank Liquidator filed with this Court an Urgent Motion for Status Quo Order to respondents not to continue enforcing the writ until such time that the motions for reconsideration were resolved.. disregard or obstruct or interfere with the administration of justice. by procuring the immediate execution of the writ of execution despite his knowledge that the decision of this Court had not yet become final and executory and by affirming in his verified comment that the Liquidator never filed a record on appeal. Valencia. 1995. The respondents filed an Opposition to the Liquidator's motion to cite them in contempt. alleging that they had acted in good faith and in the honest belief that the judgment of the RTC was already final and executory. Marino E. In the event this Court finds them to be disrespectful and discourteous. of April 7. 86-35313 in order to mislead this Court and make it dismiss petitioner's appeal. Proc. 1995. 112991. alleges: 1. Atty. Jr. that respondent had until 11:00 A. effective immediately and continuing until further orders. otherwise the PNB would release the garnished amount to the sheriff. No.R. the Bank Liquidator alleges that. and Atty. Eslao. Cachero. Eslao pleads that "he should not be punished for contempt in his eagerness to protect the lawful rights of his clients and to blunt the deplorable acts and tactics" of the Bank Liquidator. the Deputy Sheriff Carmelo V." The Bank Liquidator accuses the Branch Clerk of Court. 86-35313 and to show cause why they should not be cited for contempt of court. The petitioner PDIC despite these Sheriff's Reports and the implementing Orders of this Court for the immediate release and delivery of the garnished amounts failed to file . Meanwhile. Veridiano II. With respect to respondent Atty. 7 On April 5. and 4. directly and indirectly. the Branch Clerk of Court Antonio B. Valencia. There was no intent to disobey. filed a motion for reconsideration on April 11. The respondent Judge was merely impelled to act on the Reports submitted to him by Deputy Sheriff Carmelo V. On June 14. the Corporate Secretary and Chief Legal Counsel of the PNB wrote Ms. Because of respondent judge's orders. He accuses respondent judge and deputy sheriff of "acting with undue haste and unconscionable dispatch in enforcing and implementing the Writ of Execution. respondent Atty.

had been dismissed by this Court in its decision of March 20. 1995.-Asia Tobacco Corp. Eslao guilty of contempt. who tried to circumvent a restraining order of the Court of Appeals enjoining him from enforcing a writ of garnishment he had issued by issuing an order prohibiting a creditor corporation . When the PNB did not release the funds. Cachero to demand from the LBP and the PNB the release of the garnished funds.. Phil. when respondent Atty." which means that it was not automatically lifted upon the dismissal of the main case.any motion before this Court to stop the release of these amounts until the Urgent ExParte Motion was filed before this Court on April 7. Atty. 1995 when the deputy sheriff in turn asked respondent Judge Regino T. The Bank Liquidator was kept out of all the proceedings leading to the issuance of the orders to the LBP and the PNB and therefore could not have objected to the premature execution of the decision. Veridiano II for an order to the two banks to release the funds. Proc. No. 1995 granting the sheriff's request without furnishing the Bank Liquidator a copy. First. Second.R. which he in fact filed on April 11. therefore. 1992 issued by respondent judge in Sp. G. resolution. it could not have been final on March 24. 57 SCRA 370 (1974) a judge of the Court of First Instance. 1995 and which motion. again without notifying the Bank Liquidator. Promulgated on March 20. Writ large on the record of this case is conduct on their part that borders on lawlessness and certainly constitutes willfulness or bad faith and disrespect for the Court. he had no choice but to grant the motions. 1995 and. because the decision of this Court stated that the effect of the Bank Liquidator's failure to perfect his appeal was to render the lower court's decision final. He did not notify the Bank Liquidator of this request. The restraining order was expressly made "effective until further orders from this Court. Under these circumstances how could the respondent judge say straight faced that he granted the request for execution because there was no opposition from the Bank Liquidator? Even in executions pending appeal notice of any motion for this purpose is required to be served on the adverse party (Rule 39. 1995) No protestation of innocence can therefore excuse respondents' conduct. 1995. he could order the immediate execution of his decision. Respondent judge issued his order of April 3. the fact was that it was not yet final and executory and the temporary restraining order had not yet been lifted at the time respondents tried to enforce the lower court's writ of execution. In turn Cachero asked Judge Veridiano for an order to the PNB to release the garnished funds without notice to the Bank Liquidator. v. 1995. It is therefore plainly erroneous for respondent judge to suppose that. 86-35313. within which to file a motion for reconsideration. "ordering respondents to CEASE and DESIST from enforcing and/or implementing the writ of execution dated October 28. The Court finds the Bank Liquidator's motion to be meritorious and hereby adjudges respondent judge. (Tolentino v. As already stated. No. 1994 asking for the enforcement of the trial court's writ of execution. Sept. 1995. 1995 threatening the PNB with contempt if it did not release the amounts demanded by the sheriff. Finally when the respondent judge issued another order dated April 4. the judge again did not notify the Bank Liquidator. This Court's decision declaring the lower court's decision to have become final was not yet final. all the respondents in this motion for contempt cannot pretend ignorance of the fact that the decision of this Court was not yet final.R. 1994 by this Court. §2) as exception to the rule that motion for execution of final decisions may be made ex parte. Indeed. In Reliance Procoma. 112991. respondent sheriff complained to respondent judge. 115455. this Court immediately granted on the same date. All of the respondents knew that there was an existing temporary restraining order issued on January 6." While the petition in G. sheriff and Atty. or on April 3. 1995. It is just as plainly erroneous for respondent judge to say that because the Bank Liquidator failed to object to the motions for the release of the garnished funds. he had until April 13. Secretary of Finance. Their claim of good faith cannot be given credit. Inc. 23. the decision in this case was served on the Bank Liquidator only on March 29. 1992. As a matter of fact. Eslao asked respondent Deputy Sheriff Carmelo V. thereby belying the allegation that this Court had already acted in undue haste in implementing its questioned Orders issued on September 11 and October 28. just four days later. in which the restraining order was issued. Eslao wrote the letter to Deputy Sheriff Cachero on March 24. No .

Disrespect for the law is contagious. And upon no one else does this obligation of obedience rest with more binding force than a judicial officer such as respondent sheriff. They knowingly disregarded and negated partially the directive of the Appellate Court. Averia. was found guilty of contempt of court. With respect to respondent Deputy Sheriff Cachero. For the public looks up to them. Particularly deserving rebuke is the display of unusual interest on the part of respondent sheriff in enforcing the writ of execution by reporting to respondent judge the refusal of the PNB to comply with his demand and asking respondent judge to order the arrest of the PNB officials concerned and their confinement in the city jail until they complied. His conduct breeds contempt for the rule of law. as was the case here. together with the plaintiff's representative. Obsta principiies should be the rule. the judge of the court of first instance was bound by what it said. no evasion. The least that they could have done was to ask for the reconsideration of the restraining order or to secure leave and clearance from the Court of Appeals for the freezing of Phil-Asia's funds in the custody of the PVTA. (emphasis added) (At 379-380) There is need to reaffirm the ruling in that case because its teaching seems to have been lost on respondent judge in this case. to this Court. The appropriate procedure always is for the matter as thus decreed by any tribunal to be taken up on appeal. 124 Phil. 1541. what they do sets the example. is allowable. It would make a mockery of the legal order if one like the respondent Judge. For good or for ill. whenever appropriate. To say that he has been recreant to his trust is to put it mildly. This Court does not have to be the source. It may come from a municipal or city court. It is infinitely worse if the offender. the settled rule is that an order from the bench issued by a court acting within its jurisdiction is entitled to respect.00. the willfulness or bad faith of the respondents is manifest. Concerning the specific question involved. and fined P500. In the meanwhile. They appealed to this Court. What cannot be ignored is that it would be productive of confusion if parties could just disregard what has been so ordained. but where the observance of judicial decorum is concerned. a government of laws demands that public officials observe scrupulously orders emanating from tribunals vested with competence. a reconsideration can be sought. we held: Under the circumstances. artifice or contrivance of any kind. or the matter can be taken up. (At 376-377) Justice Fernando filed a separate concurring opinion in which he stated: This Court has ever been insistent on the rule of law being observed. nor would it countenance any disregard of its authority. even the slightest infraction is not to be tolerated. Respondent sheriff may have been requested by the counsel for the Stockholders/Investors to immediately enforce the writ but it was incumbent upon him . the Court of Appeals had spoken. It may ultimately lead to anarchy. precisely called upon to assure respect for legal processes.from transferring the garnished funds to the defendant owners. 1556 (1966) is particularly apropos: The Court cannot tolerate evasion of its commands by any omission. It may be so. In affirming the decision of the appellate court. For the contumacious conduct manifested by him has a much more corrosive effect in the public mind. would act otherwise. Where as did happen here. was a judge of the Court of First Instance . or one of the next higher rank as that of occupied by respondent Judge or the Court of Appeals. This may be to conjure too extreme an evil. negligence. as did happen here. he is to all intents and purposes just as much a law-breaker . It is bad enough if the parties would be minded to do so. For it is essential to the effective administration of justice that the processes of the courts be obeyed. If a judge does not observe judicial norms. If there is room for disagreement. much less defiance. more specifically the requirement of strict conformity to an order of an appellate tribunal. the following statement from Pacis v. To paraphrase Justice Brandeis.

petitioners.. Eslao GUILTY of indirect contempt and sentences each one to pay a FINE of One Thousand Pesos (P1. concur. 87-42550 2 and Sp. No. No. in connivance with one Andres Sebastian. Viudez.R. 1 the Court of Appeals held for Ong. acquired by the latter during her husband's sojourn in the United States since 1968. while the trial court. Cachero and Atty. 86-35313. respondents. containing an area of 529 and 300 square meters. Veridiano II. C. No. Marino E. 35890. Sometime in 1975. Antonio B. 210-D-1 and Lot No. VILLANUEVA. Miguela Villanueva sought the help of one Jose Viudez. 1995 MIGUELA R.. COURT OF APPEALS. And to further facilitate a bigger loan. On the other hand. VILLANUEVA. RICHARD R. Eslao it may be said that no amount of devotion to his client's cause could justify the overeagerness he showed in losing no time in running over to the sheriff's office to get the latter to enforce the writ of execution which theretofore had been enjoined from being enforced. WHEREFORE.J. CV No. G. SO ORDERED. swayed Miguela Villanueva to execute a deed of sale covering the two (2) disputed lots... and MERCEDITA VILLANUEVATIRADOS. Proc. in accordance with Rule 71. guilty of wrongdoing in certifying that the Bank Liquidator failed to file a record on appeal. As explained in our resolution denying the Bank Liquidator's Motion for Reconsideration. Jr. which she did but without the signature of her husband Celestino. not of any of the parties. Jose Viudez told Miguela Villanueva to surrender the titles of said lots as collaterals. 114870 May 26. 85-32311. in default thereof. until Miguela Villanueva thereafter found . Deputy Sheriff Carmelo V. ILDEFONSO C. Branch 39 of the Regional Trial Court (RTC) of Manila. of Atty. Puno and Francisco. or. and PHILIPPINE VETERANS BANK. J. Regalado.to wait for an order from the judge. Miguela Villanueva. JR.: Do petitioners have a better right than private respondent Ildefonso Ong to purchase from the Philippine Veterans Bank (PVB) the two parcels of land described as Lot No. It could not have escaped him that sheriffs are agents of the court. however. 3 The operative antecedent facts are set forth in the challenged decision as follows: The disputed lots were originally owned by the spouses Celestino Villanueva and Miguela Villanueva. and warns them that a repetition of the act herein dealt with will be punished more severely. never got the loan she was expecting. Narvasa. there is no proof to show that a record on appeal was in fact filed by the Bank Liquidator in Sp. the Court finds Judge Regino T. to suffer IMPRISONMENT of one (1) month. CENTRAL BANK OF THE PHILIPPINES. ONG. 210-D-2 situated at Muntinglupa. vs. Valencia. But we find no basis for holding the Branch Clerk of Court. Proc. §3 (b) (d) and §6 of the Rules of Court. Subsequent attempts to contact Jose Viudez proved futile. Metro Manila.000. JJ. respectively? This is the principal legal issue raised in this petition. the then Officer-in-Charge of the PVB branch in Makati if she could obtain a loan from said bank.R.00) within ten (10) days from notice. ruled for the petitioners in its joint decision of 31 October 1991 in Civil Case No. In its decision of 27 January 1994 in CA-G. DAVIDE.

the following additional or amplificatory facts are established: The efforts of Miguela Villanueva to reacquire the property began on 8 June 1983 when she offered to purchase the lots for P60.00 with a 20% downpayment and the balance payable in five years on a quarterly amortization basis. It appeared upon inquiry from the Registry of Deeds that the original titles of these lots were canceled and new ones were issued to Jose Viudez. plaintiff-appellant offered to purchase two pieces of Land that had been acquired by PVB through foreclosure. pp. Among the conditions imposed by PVB is that: "The purchase price shall be P110.000. sent a letter to CB demanding for the latter to execute the corresponding deed of conveyance in favor of appellant." In mid-April 1985. appellant returned to the country. Miguela Villanueva sought to repurchase the lots from the PVB after being informed that the lots were about to be sold at auction. On 17 September 1987.00) payable in cash within fifteen (15) days from receipt of approval of the offer. CB did not bother to answer the same. In 23 November 1984. On 26 May 1987. where he was informed that the same had already been approved.416. the instant case. Hence. appellant's payment for the balance of the subject properties were accepted by CB under Official Receipt #0816. 5 . until finally new titles were issued in the name of PNB [should be PVB] after the lots were foreclosed for failure to pay the loan granted in the name of Andres Sebastian. PVB approved his subject offer under Board Resolution No.00. While appellant's action for specific performance against CB was pending.000. 4 From the pleadings. (Appellant's Brief.000. The letter was not answered. To back-up plaintiffappellant's offer he deposited the sum of P10. Plaintiff-appellant sent follow-up Letters that went unheeded. The PVB told her that she can redeem the lots for the price of P110. He immediately verified the status of his offer with the PVB. the last of which was on 21 May 1987. which in turn were again canceled and new titles issued in favor of Andres Sebastian. Negotiations for the repurchase of the lots nevertheless were stalled by the filing of liquidation proceedings against the PVB on August of 1985. 3-4). now under the control of CB. while appellant was still abroad. plaintiff-appellant through his counsel.00 (Less deposit of P10. 10901-84.000.00.out that new titles over the two (2) lots were already issued in the name of the PVB. On 16 April 1985. appellant formally informed CB of his desire to pay the subject balance provided the bank should execute in his favor the corresponding deed of conveyance. Miguela Villanueva and her children filed their claims with the Liquidation court. Plaintiff-appellant [Ong] on the other hand expounds on his claim over the disputed lots in this manner: In October 1984.

On 26 May 1987. 12 It was raffled to Branch 47 thereof. the PVB should not be allowed to charge interest on the price of the lots.000. Upon learning that the PVB had been placed under liquidation.e. Camp Crame. the CIS officer recommended the filing of a complaint for estafa through falsification of public documents against Jose Viudez and Andres Sebastian. Ong tendered the sum of P100. 10 An employee of the PVB received the amount conditioned upon approval by the Central Bank liquidator. the presiding judge of Branch 47 ordered the transfer of the case to Branch 39. i. 9 The PVB was placed under receivership pursuant to Monetary Board (MB) Resolution No. 334 dated 3 April 1985 and later. then Presiding Judge Enrique B. and after investigation. She averred.000. and for reasons of equity. Miguela Villanueva filed her claim with the liquidation court. Inting issued an order allowing the purchase of the two lots at the price of P150. the purchase price should be the PVB's claim as of 29 August 1984 when it considered the sealed bids. 85-32311 and assigned to Branch 39 of the said court.Her offer not having been accepted. though only with respect to her undivided one-half (1/2) conjugal share in the disputed lots and her one-third (1/3) hereditary share in the estate of her husband. 7 After this and her subsequent offers were rejected. which should be borne by Miguela Villanueva alone. 13 On 15 June 1989. 16 Later.20. Nevertheless. that she is the lawful and registered owner of the subject lots which were mortgaged in favor of the PVB thru the falsification committed by Jose Viudez.. she offered to purchase the property from the bank. the court ruled that the principle of estoppel bars her from questioning the transaction with Viudez and the subsequent transactions because she was a co-participant thereto. the trial court rendered judgment 18 holding that while the board resolution approving Ong's offer may have created in his favor a vested right which may be enforced against the PVB at the time or against the liquidator after the bank was placed under liquidation proceedings. The dispositive portion of the decision of the trial court reads as follows: . the manager of the PVB Makati Branch. 11 Ong's demand for a deed of conveyance having gone unheeded. P110. that upon discovering this fraudulent transaction. under liquidation pursuant to MB Resolution No.417. a petition for liquidation was filed with the RTC of Manila.000. hence. the liquidation court. in view of the death of her husband. 6 Miguela Villanueva increased her bid to P70. 15 On 26 July 1989. he filed on 23 October 1987 with the RTC of Manila an action for specific performance against the Central Bank.00. 8 Miguela sent her sealed bid of P110. It was only at this time that she disclosed to the bank her private transactions with Jose Viudez. as he failed to exercise it within the prescribed 15-day period. As to Miguela's claim. Proc. 612 dated 7 June 1985. which was docketed as Sp.00. she amended her claim to include her children. It further held that by reason of estoppel.00 pursuant to the written advice of the vice president of the PVB. the said right was no longer enforceable. 17 On 31 October 1991. No. herein petitioners Mercedita Villanueva-Tirados and Richard Villanueva. the transactions having been perpetrated by a responsible officer of the PVB. Afterwards.416. 14 The Central Bank liquidator of the PVB moved for the reconsideration of the order asserting that it is contrary to law as the disposal of the lots should be made through public auction.00 representing the balance of the purchase price of the litigated lots. and that she reported the matter to the PC/INP Criminal Investigation Service Command. the trial court allowed her to purchase the lots if only to restore their status as conjugal properties. in collusion with Andres Sebastian. She then asked that the lots be excluded from the assets of the PVB and be conveyed back to her. among others.

the assailed decision is hereby REVERSED and SET ASIDE.WHEREFORE. Ordering the Register of Deeds of Makati which has jurisdiction over the two parcels of land in question to reinstate in his land records. judgment is hereby rendered as follows: 1.. 19 Only Ong appealed the decision to the Court of Appeals. 115631 and 115632 and executing the corresponding deed of conveyance of the said lots upon the payment of One Hundred Ten Thousand Four Hundred Sixteen and 20/100 (P110. 20 In support thereof. Cost against Ildefonso Ong and the PVB. It went further to suggest . 115631 and 115632 in the name of the PVB. the Court of Appeals reversed the decision of the trial court and ruled as follows: WHEREFORE. 1989 under the caption Civil Case No. for which reason he could not have known when to reckon the 15-day period prescribed under its resolution. The appeal was docketed as CA-G. 438073 and 366364 in the names of Miguela Villanueva and Celestino Villanueva. Central Bank of the Phils. 1984. and to cancel all subsequent titles emanating therefrom. 87-42550 entitled "Ildefonso Ong vs. Ordering the Liquidator to reconvey the two lots described in TCT No. the Court of Appeals declared that Ong's failure to pay the balance within the prescribed period was excusable because the PVB neither notified him of the approval of his bid nor answered his letters manifesting his readiness to pay the balance. and a new one entered ordering the disputed-lots be awarded in favor of plaintiff-appellant Ildefonso Ong upon defendant-appellee Central Bank's execution of the corresponding deed of sale in his favor.. 2. 1975 and all transactions and related documents executed thereafter referring to the two lots covered by the above stated titles as null and void. TCT No. Declaring the Deed of Absolute Sale bearing the signature of Miguela Villanueva and the falsified signature of Celestino [sic] Viudez under date May 6. 366364 in the name of Celestino Villanueva who were the registered owners thereof. premises considered. 35890. 4. and 5.R. In its decision of 27 January 1994. Setting aside the order of this court issued on June 15. Dismissing the claim of Ildefonso Ong over the two parcels of land originally covered by TCT No.416. Miguela Villanueva in connection with the bidding where she had participated and conducted by the PVB on August 29. respectively which are now covered by TCT No. 3. CV No. et al. SO ORDERED. 438073 in the name of Miguela Villanueva and TCT No.20) Pesos without interest and less the amount deposited by the claimant.

which is the real party in interest. While the lower court's decision declared Miguela Villanueva as estopped from recovering her proportionate share and interest in the two (2) disputed lots for being a "co-participant" in the fraudulent scheme perpetrated by Jose Viudez and Andres Sebastian — a factual finding which We conform to and which Miguela Villanueva does not controvert in this appeal by not filing her appellee's brief. the Court of Appeals stated: The conclusion reached by the lower court favorable to Miguela Villanueva is.that the Central Bank was in estoppel because it accepted Ong's late-payment of the balance. the PVB stated that it "submits to and shall abide by whatever judgment this Honorable Supreme Tribunal may announce as to whom said lands may be awarded without any touch of preference in favor of one or the other party litigant in the instant case. in its Comment dated 10 October 1994. . the petitioners maintain that Ong is a disqualified bidder.24 Subsequently.416." 28 In support of their contention that the Court of Appeals gravely erred in holding that Ong is better entitled to purchase the disputed lots. and that his offer of payment is ineffective since it was conditioned on PVB's execution of the deed of absolute sale in his favor. the effect of which is to perfect the contract of sale upon notice thereof to Ong. the PVB declared that it submits to the jurisdiction of this Court and that it has no objection to its inclusion as a party respondent in this case in lieu of the Central Bank. that his payment could not be said to have been made after the expiration of the 15-day period because this period has not even started to run.00 and his deposit of P10. the respondent Central Bank apprised this Court that the PVB was no longer under receivership or liquidation and that the PVB has been back in operation since 3 August 1992. which in fact must be so. indeed confusing.20. as aptly pointed out by plaintiff-appellant. 29 The peculiar circumstances in this case. It then prayed that it be dropped from this case or at least be substituted by the PVB. yet it ordered the reconveyance of the disputed lots to Miguela Villanueva as the victorious party upon her payment of P110.000. though lower than Miguela ViIlanueva's bid by P417. and that he has a legal right to compel the PVB or its liquidator to execute the corresponding deed of conveyance.417. would it not then be absurd or even defiant for the lower court to finally entitle Miguela Villanueva to the disputed lots after having been precluded from assailing their subsequent conveyance in favor of Jose Viudez by reason of her own negligence and/or complicity therein? The intended punitive effect of estoppel would merely be a dud if this Court leaves the lower court's conclusion unrectified. is much better. while Villanueva's bid is payable in installment. 23 the petitioners filed this petition for review on certiorari. that Ong failed to pay the balance of the price within the 15-day period from notice of the approval of his bid.00 being less than the required 10% of the bid price. 21 Their motion for reconsideration 22 having been denied. Ong submits that his offer. his bid of P110. On the other hand. Would not estoppel defeat the claim of the party estopped? If so. there being no notice yet of the approval of his offer. as the same is payable in cash. There is no doubt that the approval of Ong's offer constitutes an acceptance.00. 25 In its Manifestation and Entry of Appearance. 26 The petitioners did not object to the substitution.00 being lower than the starting price of P110. As to the petitioners' claim. 27 Later.000.

civil interdiction. and in this respect. The Board may. Ong did not receive any notice of the approval of his offer. . It must be recalled that the PVB was placed under receivership pursuant to the MB Resolution of 3 April 1985 after a finding that it was insolvent. the receivership is equivalent to an injunction to restrain the bank officers from intermeddling with the property of the bank in any way. the disappearance of either party or his loss of capacity before perfection prevents the contractual tie from being formed. 32 Section 29 of the Central Bank Act." Under Article 1323 of the Civil Code. an offer becomes ineffective upon the death. and the receiver appointed was directed to "immediately take charge of its assets and liabilities. 30 It has been said that where upon the insolvency of a bank a receiver therefor is appointed. such authority being reposed in the receiver. shall be the duty of the department head concerned forthwith. and that its continuance in business would involve probable loss to its depositors and creditors. from the moment of . it shall be disclosed that the condition of the same is one of insolvency. . as amended. forbid the institution to do business in the Philippines and designate an official of the Central Bank or a person of recognized competence in banking or finance as receiver to immediately take charge of its assets and liabilities. xxx xxx xxx The assets of an institution under receivership or liquidation shall be deemed in custodia legis in the hands of the receiver or liquidator and shall. It was only sometime in mid-April 1985 when he returned from the United States and inquired about the status of his bid that he came to know of the approval. . or that its continuance in business would involve probable loss to its depositors or creditors. the appointment of a receiver operates to suspend the authority of the bank and of its directors and officers over its property and effects. insanity. to inform the Monetary Board of the facts. upon finding the statements of the department head to be true. 29. . or insolvency of either party before acceptance is conveyed. provides thus: Sec. — Whenever. exercising all the powers necessary for these purposes. The PVB was then prohibited from doing business in the Philippines. 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. the assets of the bank pass beyond its control into the possession and control of the receiver whose duty it is to administer the assets for the benefit of the creditors of the bank. The contract is not yet perfected at any time before acceptance is conveyed. in writing. Proceedings upon insolvency. and could not operate profitably. 31 Thus. as expeditiously as possible collect and gather all the assets and administer the same for the benefit of its creditors . as expeditiously as possible collect and gather all the assets and administer the same for the benefit of its creditors.however. The reason for this is that: [T]he contract is not perfected except by the concurrence of two wills which exist and continue until the moment that they occur. illiquid. pose a legal obstacle to his claim of a better right and deny support to the conclusion of the Court of Appeals. hence. exercising all the powers necessary for these purposes. .

as well as the petitioners. Proc. be exemp from any order of garnishment. 33 This payment was disapproved on the ground that the subject property was already in custodia legis. Respondent Philippine Veterans Bank is further directed to return to private respondent Ildefonso C. Ong the amount of P100. 35890 is hereby SET ASIDE. 34 The Court of Appeals therefore erred when it held that Ong had a better right than the petitioners to the purchase of the disputed lots. Nor may the acceptance by an employee of the PVB of Ong's payment of P100. the insolvency of a bank and the consequent appointment of a receiver restrict the bank's capacity to act. WHEREFORE. disposable only by public auction and subject to the approval of the liquidation court. attachment. Corollarily. SO ORDERED. Ong's offer to purchase the subject lots became ineffective because the PVB became insolvent before the bank's acceptance of the offer came to his knowledge.000. CV No. are deemed to have fully and unqualifiedly accepted the judgment. which thus became final as to them for their failure to appeal. No.such receivership or liquidation. 87-42550 and Sp. especially in relation to its property. he cannot invoke the resolution of the bank approving his bid as basis for his alleged right to buy the disputed properties. JJ. is on leave.R. the purported contract of sale between them did not reach the stage of perfection. The decision of Branch 39 of the Regional Trial Court of Manila of 31 October 1991 in Civil Case No.000. J. the PVB and the Central Bank. 85-32311 is hereby REINSTATED. concur. No pronouncement as to costs. subject to the approval of CB liquidator. Applying Article 1323 of the Civil Code. Considering then that only Ong appealed the decision of the trial court. levy... 10902-84 dated 11/13/84.00. . Bellosillo and Kapunan. or execution. Hence. Padilla. Quiason. and hence. In a nutshell. the instant petition is GRANTED and the challenged decision of the Court of Appeals of 27 January 1994 in CA-G.00 benefit him since the receipt of the payment was made subject to the approval by the Central Bank liquidator of the PVB thus: Payment for the purchase price of the former property of Andres Sebastian per approved BR No.

To require the board of directors of PESALA to file civil and criminal cases against Messrs. Inc. the Monetary Board adopted and issued MB Resolution No. On September 9. 1988. 95326. Conflict of interest in the conduct of business 3. To note the report on the examination of the PAL Employees' Savings and Loan Association. Commission of unsound and unsafe business practices. (PESALA) as of December 31. but petitioners did not attend such conference. As culled from the records. 1987. LIM. xxx 5. 1988 by a team of CB examiners headed by Belinda Rodriguez. Questionable investment In a multi-million peso real estate project (Pesalaville) 2. No. Romeo Busuego and Renato Lim for all the misfeasance and malfeasance committed by them. 7. CV No. 6. were uncovered. To include the names of Mr. 1988. CATALINO F. ("PESALA") was conducted from March 14 to April 16. 23656. of the Court of Appeals in CA-G."iii[3] xxx xxx xxx On January 23. vs. dated August 19. To require the board of directors of PESALA to improve the operations of the Association. F. Unwarranted declaration and payment of dividends 4. THE HONORABLE COURT OF APPEALS and THE MONETARY BOARD OF THE CENTRAL BANK OF THE PHILIPPINES. Central Bank ("CB") Supervision and Examination Section ("SES") Department IV Director Ricardo.R. PESALA's directors and officers. petitioners. as submitted in a memorandum of the Director. 805 the pertinent provisions of which are as follows: "1. Supervision and Examination Section (SES) Department IV. BANEZ and RENATO F. Renato Lim in the Sector's watchlist to prevent them from holding responsible positions in any institution under Central Bank supervision. and adopt internal control measures to prevent the recurrence of similar incidents as shown in Annex E of the subject memorandum of the Director. On July 19. correct all violations noted. BUSUEGO. several anomalies and irregularities committed by the herein petitioners. To require PESALA to enforce collection of the overpayment to the Vista Grande Management and Development Corporation and to require the accounting of P12. respondents.28 million unaccounted and unremitted bank loan proceeds and P3. SES Department IV. Catalino Banez. 1989. J. 1999] ROMEO P.. 1988. On July 28. 2. which was fortwith made by the Board. PESALA's Board of Directors sent to Director Lirio a letter concerning the 16th regular examination of PESALA's records.: This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking a reversal of the Decisioni[1]. Inc. Q-89-1617 before Branch 104 of the Regional Trial Court of Quezon City. Romeo Busuego and Mr. Lirio sent a letter to the Board of Directors of PESALA inviting them to a conference on July 21. 1988. Catalino Banez. . 1988 to discuss subject findings noted in the said 16th regular examination. 1988. 8. petitioners filed a Petition for Injunction with Prayer for the Immediate Issuance of a Temporary Restraining Orderiv[4] docketed as Civil Case No. 1990. dated September 14. To require the board of directors of PESALA to immediately inform the members of PESALA of the results of the Central Bank examination and their effects on the financial condition of the Association. March 11. among which are: 1. petitioner Renato Lim wrote the PESALA's Board of Directors explaining his side on the said examination of PESALA's records and requesting that a copy of his letter be furnished the CB. DECISION PURISIMA. as warranted by the evidence. Mr. if necessary.[G. the facts of the case are as follows: The 16th regular examination of the books and records of the PAL Employees Savings and Loan Association.ii[2] On July 29. Following the said examination. or to properly charge these against their respective accounts.9 million other unsupported cash disbursements from the responsible directors and officers.R.

that the said complaints were dismissed by the City Prosecutor and the dismissals were appealed to the Secretary of Justice for review. The writ of preliminary prohibitory injunctions issued on February 10. Petitioners were invited by Director Lirio to a conference scheduled for July 21. petitioners have come to this Court via the present petition for review on certiorari. . Petitioners were duly afforded their right to due process by the Monetary Board. 90-1835. I WHETHER OR NOT THE PETITIONERS WERE DEPRIVED OF THEIR RIGHT TO A NOTICE AND THE OPPORTUNITY TO BE HEARD BY THE MONETARY BOARD PRIOR TO ITS ISSUANCE OF MONETARY BOARD RESOLUTION NO. Petitioners did not attend. said conference." The Monetary Board appealed the aforesaid Decision to the Court of Appeals which came out with a Decisionix[9] of reversal on September 14. the court denied the said motion. xxx”xii[12] The foregoing disquisition by the trial court is untenable under the facts and circumstances of the case. 1989. 805. Nos. some of which have been reversed already. much so. The petition poses as issues for resolution. 1990.S. the same trial court issued a writ of preliminary injunctionvi[6]. Petitioners prayed that a Temporary Restraining Order and/or Writ of Preliminary Injunction issue "restraining and enjoining the Secretary of Justice and the City Prosecutor of Pasay City from proceeding and taking further actions. 1992. petitioners filed an "Urgent Motion for the Immediate Issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction against the Secretary of Justice and the City Prosecutor of Pasay"x[10] stating that several complaints were lodged against the petitioners before the Office of the City Prosecutor of Pasay City pursuant to Monetary Board Resolution No. 90-1837.On January 26 1989. On February 10. 1988 to discuss the findings made in the 16th regular examination of PESALA's records. in the Resolutionxi[11] dated September 9. 1989 is deemed permanent. the Monetary Board of the Central Bank. the trial court handed down its Decision. but the same was denied. 90-1249.-901836. judgment is hereby rendered declaring Monetary Board Resolution No. With respect to the first issue. 90-1248. 90-1831. and more specially from filing Informations in I. 90-3032. 90-1834. 805. 90-1832. 805 IS NULL AND VOID FOR BEING VIOLATIVE OF PETITIONERS' RIGHTS TO DUE PROCESS. the decretal portion of which is to the following effect: "WHEREFORE. On June 5. pending the final resolution of the case at bar xxx." Dissatisfied with the said Decision of the Court of Appeals.viii[8] disposing thus: "WHEREFORE. they were not informed of any charges against them and were not afforded the opportunity to adduce countervailing evidence so as to deserve the punitive measures promulgated in Resolution No. 90-3031. it appearing that: 1. (now Banko Sentral ng Pilipinas) from including the names of petitioners in the watchlist. Costs against respondent. III WHETHER OR NOT MONETARY BOARD RESOLUTION NO. the decision appealed from is hereby reversed and another one entered dismissing the petition for injunction." However. The Monetary Board presented a Motion for Reconsiderationvii[7] of the said Order. NOTICE AND OPPORTUNITY TO BE HEARD INSOFAR AS THE PETITIONERS' SUBJECT CASE IS CONCERNED. conditioned upon the filing by petitioners of a bond in the amount of Ten Thousand (P10. 805 as void and inexistent. 805 of the Monetary Board. 1992. On September 11. the said court issued a temporary restraining orderv[5] enjoining the defendant. II WHETHER OR NOT THE RESPONDENT BOARD IS LEGALLY BOUND TO OBSERVE THE ESSENTIAL REQUIREMENTS OF DUE PROCESS OF A VALID CHARGE.00) Pesos each.000. The deprivation of petitioners' rights in the Resolution undermines the constitutional guarantee of due process. the trial court said: "The evidence submitted preponderates in favor of petitioners. 1989. Petitioners were never notified that they were being investigated.

which is to prevent further irregularities from being committed and to prosecute the officials responsible therefor.xvii[17]) Secondly. any inspection. The right to a hearing.2. explaining the Board's side of the controversy. they were not denied due processxv[15]. business affairs. fourthly and fifthly. 3779 ("RA 3779") delineating the powers of the Monetary Board over savings and loan associations. there is no denial of due process where records show that hearings were held with prior notice to adverse parties. Firstly. as an administrative agency. 805 was adopted on the basis of said findings unearthed during the 16th regular examination of PESALA's records and derived from the letter-comments submitted by the parties. was forwarded to the Monetary Board which the latter considered in adopting Monetary Board Resolution No. which includes the right to present one's case and submit evidence in support thereof. The decision must have something to support itself. With respect to the second issue. Hence. is legally bound to observe due process. and the reason for the decision rendered. 805 is readily apparent. 4. 7. process as long as the parties are given the opportunity to be heard. Petitioner Renato Lim's letter of July 28. PESALA's Board of Director's letter. the petitioners were invited to a conference to discuss the findings gathered during the 16th regular examination of PESALA's records. in all controversial questions. CIRxvi[16] and assert that the following requisites of procedural due process were not observed by the Monetary Board: 1. there is no denial of procedural due. However. 2. was properly considered in the adoption of Monetary Board Resolution No. explaining his side of the controversy. examination or investigation of the books. 805. as they were given ample opportunity by the Monetary Board to air their Submission and defenses as to the findings of irregularity during the said 16th regular examination. 1988 to PESALA's Board of Directors. Contrary to petitioners' allegation. The essence of due process is to be afforded a reasonable opportunity to be heard and to submit any evidence one may have in support of his defense. and 3. Thirdly. and records. or at least contained in the record and disclosed to the parties affected. Monetary Board Resolution No. 6. the reason for the issuance of Monetary Board Resolution No. 3. administration. As held in Adamson and Adamson. The tribunal or body or any of its judges must act or its or his own independent consideration of the law and facts of the controversy and not simply accept the view of a subordinate in arriving at a decision. Sixthly. v. of Republic Act No. 1988. and not necessarily that an actual hearing was conducted. (c) and (d)." Even Section 28. Amoresxviii[18]: "While administrative tribunals exercising quasi-judicial functions are free from the rigidity of certain procedural requirements they are bound by law and practice to observe the fundamental and essential requirements of due process in justiciable cases presented before them. placing reliance on the said findings made during the 16th regular examination.xiii[13] What is offensive to due process is the denial of the opportunity to be heard. Lastly. dated July 29. require observance of due process in the exercise of its powers: “x x x (c) To conduct at least once every year. render its decision in such a manner that the parties to the proceedings can know the various issues involved. the standard of due process that must be met in administrative tribunals allows a certain latitude as long as the element of fairness is not ignored. and financial condition of any savings . to the Monetary Board. 5. Petitioners therefore cannot complain of deprivation of their right to due process. The board or body should. there is tenability in petitioners' contention that the Monetary Board. 805. although they are free from the rigidity of certain procedural requirements. The tribunal must consider the evidence presented. The evidence must be substantial. But even in the absence of previous notice. The decision must be rendered on the evidence presented at the hearing. the members of the Monetary Board acted independently on their own in issuing subject Resolution. 805. Inc. (The requirement of a hearing is complied with as long as there was an opportunity to be heard.xiv[14] Petitioners having availed of their opportunity to present their position to the Monetary Board by their letters-explanation. and whenever necessary. the Monetary Board considered the evidence presented. Petitioners cite Ang Tibay v. it appears that the requisites of procedural due process were complied with by the Monetary Board before it issued the questioned Monetary Board Resolution No.

such as PESALA. It must be remembered that the Central Bank of the. through the Monetary Board. 805 discloses that it imposes administrative sanctions against petitioners. declared. Inc. to suspend. and financial condition of any savings and loan association with or without prior notice but always with fairness and reasonable opportunity for the association or any of its officials to give their side of the case. and. as void and inexistent because among other things. petitioners theorize that Monetary Board Resolution No. for unsafe and unsound practices or for reason of insolvency. Supervisory powers over savings and loan associations." Petitioners opine that with the issuance of Monetary Board Resolution No. 28. It must therefore be." Said law authorizes the Monetary Board to conduct regular yearly examinations of the books and records of savings and loan associations. among others. Philippines (now Bangko Sentral ng Pilipinas). they cite the trial court's ruling. 3779. reads: "SEC. form part ofxx[20]. as warranted by the evidence. business affairs. x x x (d) After proper notice and hearing. as amended. The special law governing savings and loan association is Republic Act No." According to them. administration. and are likewise prevented from future engagements or employments in all institutions under the supervision of the Central Bank thereby virtually depriving them of the opportunity to seek employments in the field which they can excel and are best fitted. 3779. Act No. it openly derogates the fundamental rights of petitioners. 805? x x x Although the Monetary Board is free from the rigidity of certain procedural requirements. 805 Violates basic and essential requirements. examination or investigation is conducted under this grant of power. it failed 'to observe the essential requirement of due process' (Adamson and Adamson. Whenever an inspection. and to take remedial measures. examination or investigation of the books and records. the Monetary Board shall have the power to exercise the following: xxx (c) To conduct at least once every year. the person authorized to do so may seize books and records and keep them . liberty and property. after appropriate notice and hearings any controversy as to the rights or obligations of the savings and loan association.' Monetary Board Resolution No. In fact. 805 virtually deprives petitioners their respective gainful employment. 805 is null and void for being violative of petitioners' right to due process. . x x x" (italics supplied) Anent the third issue." Petitioners' contentions are untenable. the Monetary Board is not vested with "the authority to disqualify persons from occupying positions in institutions under the supervision of the Central Bank without proper notice and hearing" nor is it vested with authority "to file civil and criminal cases against its officers/directors for suspected fraudulent acts. to suspend a savings and loan association for violation of law. Section 28 of Rep. stockholders and members under its charter. to enforce the same. (f) To decide. v. its directors. officers. banking and credit system of the countryxix[19] and is granted the power of supervision and examination over banks and non-bank financial institutions performing quasi-banking functions. and whenever. "they are now barred from being elected or designated as officers again of PESALA. any inspection.' Monetary Board Resolution No. it does not only penalize petitioners by including them in the watchlist to prevent them from holding responsible positions in any institution under Central Bank supervision. of which savings and loan associations. To support their stance. a savings and loan association for violation of law. 805. In short. there is a clear showing of arbitrariness resulting in an irreparable injury against petitioners as the Resolution certainly affects their 'life.and loan association with or without prior notice but always with fairness and reasonable opportunity for the association or any of its officials to give their side of the case. as it is hereby. to decide any controversy over the obligations and duties of directors and officers. Amores.necessary. to wit: "A reading of Monetary Board Resolution No. 152 SCRA 237) specifically its failure to afford petitioners the opportunity to be heard. The crucial question here is that were petitioners afforded due process in the investigations conducted which prompted the issuance of Monetary Board Resolution No.' it mandates the PESALA Board of Directors as well to file Civil and Criminal charges against them 'for all the misfeasance and malfeasance committed by them. and at the same time marks them for judicial prosecution. is the government agency charged with the responsibility of administering the monetary. x x x x x x. otherwise known as the "Savings and Loan Association Act.In addition to whatever powers have been conferred by the foregoing provisions. by order.

the said requirement was properly complied with by the respondent Monetary Board. 805 and affirms the decision of the respondent court. rules and regulations promulgated by the Monetary Board or in a manner substantially prejudicial to the interest of the government. Petitioners can still practise their profession or engage in business as long as these are not within the ambit of Monetary Board Resolution No. All things studiedly considered. to enforce the same.. they may be preventively suspended from holding office so as not to influence the conduct of investigation. after appropriate notice and hearings any controversy as to the rights or obligations of the savings and loan association. The requirement of prior notice is also relaxed under Section 28 (c) of RA 3779 as investigations or examinations may be conducted with or without prior notice "but always with fairness and reasonable opportunity for the association or any of its officials to give their side. stockholders and members under its charter. no notice or. If any irregularity is discovered in the process. receptacles or similar containers and prohibit the opening thereof without first securing authority therefor. safes. xxx (l) To conduct such investigations. Neither were petitioners deprived of their lawful calling as they are free to look for another employment so long as the agency or company involved is not subject to Central Bank control and supervision. by order. may make any marking or notation on any paper. We sustain the ruling of the Court of Appeals that petitioners' suspension was only preventive in nature and therefore. as amended. 1990 of the Court of Appeals AFFIRMED. except such as is actually necessary for its operation. . hearing was necessary. Until such time that the petitioners have proved their innocence. document or book to show that it has been examined and verified and may padlock or seal shelves. instructions. vaults." From the foregoing. and to prevent the commission of further irregularities. for unsafe and unsound practices or for reason of insolvency. whether stock or noti-stock their directors and/or officers administrative sanctions under Sections 34-A or 34-B of Republic Act Two Hundred sixty-five. upon the proof that a savings and loan association or its board or directors or officers are conducting and managing its affairs in a manner contrary to laws. is empowered to conduct investigations and examine the records of savings and loan associations. 805. WHEREFORE. the court upholds the validity of Monetary Board Resolution No. No pronouncement as to costs. orders. the petition is DENIED. Romero. The management by the Monetary Board shall be without expense to the savings and loan association. JJ. (Chairman). The official of the Central Bank in charge of savings and loan associations and his deputies are hereby authorized to administer oaths to any director. Vitug. its directors. SO ORDERED. take over the management of the savings and loan association after due hearing." As may be gathered from the records. it is gleanable that the Central Bank. The Monetary Board may likewise. take such remedial measures. for as long as may be necessary in connection with the investigation or examination being conducted. to suspend a savings and loan association for violation of law. officer or employee of any association under the supervision of the Monetary Board. the Monetary Board may impose appropriate sanctions. and impose upon associations. depositors or creditors.under his custody after giving proper receipts therefor. xxx (d) After proper notice and hearing. officers. until a new board of directors and officers are elected and qualified without prejudice to the prosecution of the persons responsible for such violations. or placing the names of the offenders in a watchlist. and. pending the election and qualification of a new board of directors and officers to take the place of those responsible for the violation or acts contrary to the interest of the government. Panganiban. and Gonzaga-Reyes. xxx (f) To decide. such as suspending the offender from holding office or from being employed with the Central Bank. and the assailed Decision dated September 14. record. depositors or creditor. through the Monetary Board. exercise all powers which are now or may hereafter be conferred upon it by Republic Act Numbered Two Hundred sixty-five in the enforcement of this legislation. concur.

). Jr. 967 which prohibited Island Savings Bank from doing business in the Philippines and instructed the Acting Superintendent of Banks to take charge of the assets of Island Savings Bank (pp.00 at 12% annual interest. rec).000. and Sulpicio M. Lombos and Marino E. decided as follows: 1) To prohibit the bank from making new loans and investments [except investments in government securities] excluding extensions or renewals of already approved loans. 1985 CENTRAL BANK OF THE PHILIPPINES and ACTING DIRECTOR ANTONIO T.00 partial release of the P80. Island Savings Bank. No. upon favorable recommendation of its legal department.00 of Sulpicio M. and damages with preliminary injunction. Tolentino on July 23. 1049. as a security for the loan. the Board. Tupaz for private respondent. petitioners. On August 13. 64. Tolentino shall use the loan proceeds solely as an additional capital to develop his other property into a subdivision. thru its vicepresident and treasurer.000.). repayable in semi-annual installments for a period of 3 years. 48-49. rec. in his capacity as statutory receiver of Island Savings Bank. Antonio R. On May 22. . executed on the same day a real estate mortgage over his 100-hectare land located in Cubo. Tolentino. 1965. and which mortgage was annotated on the said title the next day.00 loan was made by the Bank.00 was deducted from the partial release of P17. But this pre-deducted interest was refunded to Sulpicio M.000.00 loan covering a 6-month period amounting to P4. THE HONORABLE COURT OF APPEALS and SULPICIO M. It was required that Sulpicio M. and covered by TCT No.R. xxx xxx xxx (p.00 balance (p.00. provided that such extensions or renewals shall be subject to review by the Superintendent of Banks. Agusan. 1977. 1965. promised repeatedly the release of the P63. 47. On June 14. by unanimous vote. after being informed by the Bank that there was no fund yet available for the release of the P63. 1965. T-305. Fabian S.-G. rec. CASTRO. Eslao for petitioners. 1965. issued Resolution No.00 (p. in C. after finding Island Savings Bank was suffering liquidity problems.00 loan.). rec. The approved loan application called for a lump sum P80. approved the loan application for P80. a mere P17.A.000. An advance interest for the P80. 1968. The Bank.).: This is a petition for review on certiorari to set aside as null and void the decision of the Court of Appeals. specific performance or rescission. Regalado.000. vs. 52253-R dated February 11. modifying the decision dated February 15. 46. the Monetary Board. 1972 of the Court of First Instance of Agusan. who.R.000. who may impose such limitations as may be necessary to insure correction of the bank's deficiency as soon as possible.000.B. CJ. TOLENTINO. the Monetary Board of the Central Bank. Tolentino and his wife Edita Tolentino signed a promissory note for P17. On April 28..800. L-45710 October 3. Las Nieves.000.000. rec. issued Resolution No. payable within 3 years from the date of execution of the contract at semi-annual installments of P3. respondents. No. MAKASIAR. Tolentino for injunction.459. JR. 113. OF THE DEPARTMENT OF COMMERCIAL AND SAVINGS BANK. after finding thatIsland Savings Bank failed to put up the required capital to restore its solvency.iG. which dismissed the petition of respondent Sulpicio M. with 12% annual interest.00 balance (p. I. which provides: In view of the chronic reserve deficiencies of the Island Savings Bank against its deposit liabilities.

1948. 1969. Tolentino's petition for specific performance. finding unmeritorious the petition of Sulpicio M. 65-76. the validity of which is not in question.00 balance of the P80.00 plus legal interest and legal charges due thereon. The issues are: 1. de Quirino vs. after trial on the merits rendered its decision.). Such prohibition made it legally impossible for Island Savings Bank to furnish the P63. the obligation or promise of each party is the consideration for that of the other (Penaco vs. filed an application for the extra-judicial foreclosure of the real estate mortgage covering the 100-hectare land of Sulpicio M. specific performance or rescission and damages with preliminary injunction. From such date. the trial court. Tolentino. ordering him to pay Island Savings Bank the amount of PI 7 000.00 with interest of 12% per annum from April 28. 1965. Thus. Pelarca 29 SCRA 1 [1969]). but it ruled that Island Savings Bank can neither foreclose the real estate mortgage nor collect the P17. Tolentino liable to pay the P17.000.). he is entitled to specific performance by ordering Island Savings Bank to deliver the P63.00 surety bond.000. to rescind the real estate mortgage (pp. alleging that since Island Savings Bank failed to deliver the P63.00 loan. 1965. 1965. Can the action of Sulpicio M. this instant petition by the central Bank. 1965. which prohibited Island Savings Bank from doing further business. Tolentino for specific performance prosper? 2. 1968. they undertook reciprocal obligations. On January 29. 135-136.00 loan. Tolentino executed a real estate mortgage on April 28. 30-:31.00 subsists. the trial court. and when one party has performed or is ready and willing to perform his part of the contract. In reciprocal obligations. 32-43. 110 SCRA 46 [1981].000.000.00 loan.00 loan pp. Tolentino filed a petition with the Court of First Instance of Agusan for injunction. . rec.000. 1969.). Ruaya. the obligation of Island Savings Bank to furnish the P80. Tolentino entered into an P80.00 loan.000. Tolentino and the setting aside of the restraining order. and the sheriff scheduled the auction for January 22. No.A. Hence. 967 on June 14. If Sulpicio M. On February 11.000.000. he signified his willingness to pay the P80. upon the filing of a P5. 1977.00 covered by the promissory note. 86-87. can his real estate mortgage be foreclosed to satisfy said amount? When Island Savings Bank and Sulpicio M. 1968. the trial court admitted the answer in intervention praying for the dismissal of the petition of Sulpicio M.00 loan accrued. Tolentino's liability to pay the P17.On August 1. rec. On February 15. When Sulpicio M. and lifting the restraining order so that the sheriff may proceed with the foreclosure (pp.000. which took effect on June 15. Tolentino. rec.00 balance of the P80. the other party who has not performed or is not ready and willing to perform incurs in delay (Art. On January 21. the Bank's delay in furnishing the entire loan started on April 28. issued a temporary restraining order enjoining the Island Savings Bank from continuing with the foreclosure of the mortgage (pp.00 loan agreement on April 28. Island Savings Bank.00 debt covered by the promissory note? 3. 1969. filed by the Central Bank and by the Acting Superintendent of Banks (pp. Tolentino. modified the Court of First Instance decision by affirming the dismissal of Sulpicio M.000. 265. the Court of Appeals.000.000. The promise of Sulpicio M. in view of non-payment of the P17.). 1969. 1972. Sulpicio M. Vda. The power of the Monetary Board to take over insolvent banks for the protection of the public is recognized by Section 29 of R. Tolentino to pay was the consideration for the obligation of Island Savings Bank to furnish the P80. Is Sulpicio M. rec. 1169 of the Civil Code).000. and if said balance cannot be delivered. on appeal by Sulpicio M.000. rec. On January 20. and lasted for a period of 3 years or when the Monetary Board of the Central Bank issued Resolution No.

000. 15. If ever bank officials and employees totally reIy on the representation of their customers as to the valuation of the loan collateral. 967. Besides.00 loan was released. 198-199.The Board Resolution No. the lower court. cannot raise the same issue before the Supreme Court. And. The mere reliance by bank officials and employees on their customer's representation regarding the loan collateral being offered as loan security is a patent non-performance of this responsibility. the bank shall bear the risk in case the collateral turn out to be over-valued.000. the bank was deemed to have complied with its .00 loan. WE rule. as there is no doubt that the bank failed to give the P63.00 loan covering a 6-month period cannot be taken as a waiver of his right to collect the P63. the mere pecuniary inability to fulfill an engagement does not discharge the obligation of the contract. on objections of' Sulpicio M. had enjoined petitioners from presenting proof on the alleged over-valuation because of their failure to raise the same in their pleadings (pp.00 for the supposed P80.00 loan. Since Island Savings Bank was in default in fulfilling its reciprocal obligation under their loan agreement. The act of Island Savings Bank.A." Petitioners. Rescission is the only alternative remedy left. may choose between specific performance or rescission with damages in either case.000. WE cannot grant specific performance in favor of Sulpicio M.00 loan. much less neutralize. was improper considering that only P17. Tolentino accepted and executed a promissory note to cover it. thus. 'This Court previously ruled that bank officials and employees are expected to exercise caution and prudence in the discharge of their functions (Rural Bank of Caloocan. 1971). in asking the advance interest for 6 months on the supposed P80. 1049 issued on August 13.. the exercise of the other. Inc.00.000. and nowhere did it prohibit island Savings Bank from releasing the balance of loan agreements previously contracted. But since Island Savings Bank is now prohibited from doing further business by Monetary Board Resolution No. Section 2.000. nor does it constitute any defense to a decree of specific performance (Gutierrez Repide vs.00. 39 Phil. Rule 9. Sulpicio M. C.00 balance because said resolution merely prohibited the Bank from making new loans and investments. which Sulpicio M. 104 SCRA 151 [1981]). As far as the partial release of P17.00 out of the P80. Tolentino demanded and accepted the refund of the pre-deducted interest amounting to P4.00 balance of the P80. The lower court's action is sanctioned by the Rules of Court. Sept. which states that "defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived. Furthermore. because the bank is in default only insofar as such amount is concerned. Tolentino.000. Afzelius and Afzelius. 650) The fact that Sulpicio M. however.000. A person cannot be legally charged interest for a non-existing debt.000. Tolentino.000. 1974 ed. vs. 190 [1918]). t. that rescission is only for the P63. the receipt by Sulpicio M.s.000. Thus. 17A. The alleged discovery by Island Savings Bank of the over-valuation of the loan collateral cannot exempt it from complying with its reciprocal obligation to furnish the entire P80.000. The exercise of one right does not affect. The recent rush of events where collaterals for bank loans turn out to be non-existent or grossly over-valued underscore the importance of this responsibility. CJS p. Tolentino. they must investigate the existence and evaluation of the properties being offered as a loan security.800.00 loan. which right exist independently of his right to demand the completion of the P80. It is the obligation of the bank's officials and employees that before they approve the loan application of their customers. the mere fact of insolvency of a debtor is never an excuse for the nonfulfillment of an obligation but 'instead it is taken as a breach of the contract by him (vol. The representation made by the customer is immaterial to the bank's responsibility to conduct its own investigation.000.1965 cannot interrupt the default of Island Savings Bank in complying with its obligation of releasing the P63. 'Tolentino of the pre-deducted interest was an exercise of his right to it. under Article 1191 of the Civil Code.n.00 balance..

Vol.000. Vol. that the real estate mortgage of Sulpicio M. p.00 loan.00. 59.000.000. Since Sulpicio M.00 debt.000. 'Tolentino executed his real estate mortgage.00. Sherman. Tolentino cannot be entirely foreclosed to satisfy his P 17. p. 82. 21.25 hectares is more than sufficient to secure a P17. 2052. Tolentino for damages. Bayuga. . or unenforceable debt (Art. CJS. 93 SCRA 443 [1979]). 1974 ed.00 is 78. lt may either be a prior or subsequent matter. the consideration of his obligation to pay is the existence of a debt. in relation to Art.000. The mortgage covering the remainder of 21.000. 88. for not paying his overdue P17. in the accessory contract of real estate mortgage. Tolentino derived some benefit for his use of the P17. et al. 19. in the form of penalties and surcharges.00 within 3 years. His failure to pay the overdue amortizations under the promissory note made him a party in default. 125 SCRA 122 [1983]). the mortgage can take effect only when the debt secured by it is created as a binding contract to pay (Parks vs.25 hectares subsists as a security for the P17.W. Where the indebtedness actually owing to the holder of the mortgage is less than the sum named in the mortgage. pp. Peterson. WE rule that the liability of Island Savings Bank for damages in not furnishing the entire loan is offset by the liability of Sulpicio M. vs. Since both parties were in default in the performance of their respective reciprocal obligations. Island Savings Bank. Tolentino's reciprocal obligation to pay the P17. of the Civil Code). Island Savings Bank failed to comply with its obligation to furnish the entire loan and Sulpicio M.000.000. It is not necessary that any consideration should pass at the time of the execution of the contract of real mortgage (Bonnevie vs. 2086.000.00 balance of the P8O.00 debt. 2.. For the debtor. The fact that when Sulpicio M. The promissory note gave rise to Sulpicio M. the mortgage cannot be enforced for more than the actual sum due (Metropolitan Life Ins. the mortgage becomes unenforceable to the extent of such failure (Dow.75 hectares. Jones on Mortgage. when there is partial failure of consideration.00 debt. Wiltsie on Mortgage. F(2d) p.00 loan. Thus.E. The consideration of the accessory contract of real estate mortgage is the same as that of the principal contract (Banco de Oro vs. hence the real estate mortgage covering 100 hectares is unenforceable to the extent of 78. Poore. 176 N. they are both liable for damages. The liability of Sulpicio M. 1. that is. hence not entitled to rescission (Article 1191 of the Civil Code). the real estate mortgage of Sulpicio M. WE hold. he would be entitled to ask for rescission of the entire loan because he cannot possibly be in default as there was no date for him to perform his reciprocal obligation to pay. 172 N. Tolentino for interest on his PI 7.. that is. as there was no debt yet because Island Savings Bank had not made any release on the loan. C. 583. If Tolentino had not signed a promissory note setting the date for payment of P17.reciprocal obligation to furnish a P17. it is just that he should account for the interest thereon. But when the consideration is subsequent to the mortgage. Vol. cited in 5th ed. no consideration was then in existence.00 debt. the consideration of the debtor in furnishing the mortgage is the existence of a valid. P. And. cited in Vol. does not make the real estate mortgage void for lack of consideration. Since Island Savings Bank failed to furnish the P63. Article 1192 of the Civil Code provides that in case both parties have committed a breach of their reciprocal obligations.000.A. cited in the 8th ed. P63.000. it shall belong to the aggrieved party. vs. Vol. 180).000. Vol. If there is a right to rescind the promissory note.000.00 loan when it falls due. 138). Co. however..00 debt shall not be included in offsetting the liabilities of both parties.75% of P80. 5-6). Tolentino became unenforceable to such extent. voidable. the liability of the first infractor shall be equitably tempered by the courts.00 debt within 3 years as stipulated. Tolentino failed to comply with his obligation to pay his P17.000. p.

SO ORDERED. 1965 TO AUGUST 22. Concepcion. PLUS P41. Jr.00 REPRESENTING 12% INTEREST PER ANNUM COVERING THE PERIOD FROM MAY 22. 2. took no part. AND 12% INTEREST ON THE TOTAL AMOUNT COUNTED FROM AUGUST 22. . JJ.75 HECTARES IS HEREBY DECLARED UNEN FORCEABLE AND IS HEREBY ORDERED RELEASED IN FAVOR OF SULPICIO M. Article 2089 provides: A pledge or mortgage is indivisible even though the debt may be divided among the successors in interest of the debtor or creditor. THE DECISION OF THE COURT OF APPEALS DATED FEBRUARY 11.210. IN CASE SULPICIO M..25 HECTARES SHALL BE FORECLOSED TO SATISFY HIS TOTAL INDEBTEDNESS. petitioner.00. 1985 UNTIL PAID. No. SULPICIO M. TOLENTINO. AND 1. to the prejudice of other heirs who have not been paid.. concur. 1991 BANCO FILIPINO SAVINGS AND MORTGAGE BANK.The rule of indivisibility of a real estate mortgage provided for by Article 2089 of the Civil Code is inapplicable to the facts of this case. TOLENTINO IS HEREBY ORDERED TO PAY IN FAVOR OF HEREIN PETITIONERS THE SUM OF P17.. 1985. 70054 December 11. TOLENTINO FAILS TO PAY. Cuevas and Alampay. Therefore. G. HIS REAL ESTATE MORTGAGE COVERING 21. The rule of indivisibility of the mortgage as outlined by Article 2089 above-quoted presupposes several heirs of the debtor or creditor which does not obtain in this case. 1977 IS HEREBY MODIFIED. Hence. JJ. Neither can the creditor's heir who have received his share of the debt return the pledge or cancel the mortgage.000. Escolin. THE REAL ESTATE MORTGAGE COVERING 78. Aquino (Chairman) and Abad Santos.R. NO COSTS. AND 3. vs. the debtor's heirs who has paid a part of the debt can not ask for the proportionate extinguishment of the pledge or mortgage as long as the debt is not completely satisfied. the rule of indivisibility of a mortgage cannot apply WHEREFORE.

COURT OF APPEALS. Ex-Officio Sheriff REGALADO E. BANCO FILIPINO SAVINGS AND MORTGAGE BANK. vs. .R. respondents.R. FERNANDEZ. COURT OF APPEALS. No. VALENZUELA AND SYCIP. 1991 BF HOMES DEVELOPMENT CORPORATION. AURELLANO and RAMON V. COURT OF APPEALS. assisted by her husband. 1991 PILAR DEVELOPMENT CORPORATION. vs. No. CARLOTA P. FERNANDEZ. VALENZUELA. 77255-58 December 11. No. JOSE B. G.. CENTRAL BANK OF THE PHILIPPINES. FERNANDEZ. petitioner.R. petitioner. No. HON. 1991 BANCO FILIPINO SAVINGS AND MORTGAGE BANK. CENTRAL BANK OF THE PHILIPPINES AND CARLOTA P. petitioners. MANUEL M. SALAZAR.R.R. G. 78894 December 11. VALENZUELA AND SYCIP. 81303 December 11. vs. No. ARNULFO B. ARNULFO B. THE EXECUTIVE JUDGE of The Regional Trial Court and Ex-Officio Sheriff REGALADO E. G. 68878 December 11.R. FELICIANO AND HERNANDEZ. 1991 TOP MANAGEMENT PROGRAMS CORPORATION AND PILAR DEVELOPMENT CORPORATION. in his capacity as Presiding Judge of Branch 136 of the Regional Trial Court of Makati. respondents. No. THE COURT OF APPEALS. CARLOTA P. respondents. No.R. HERNANDEZ AND GATMAITAN. COSICO. G. petitioner vs. JOSE B. AURELLANO AND RAMON TIAOQUI.THE MONETARY BOARD. respondents. respondents. CENTRAL BANK AND CARLOTA P. VALENZUELA. vs. G. JR. VALENZUELA. BANCO FILIPINO SAVINGS AND MORTGAGE BANK. 90473 December 11. petitioner. respondents. JR.R. 1991 EL GRANDE DEVELOPMENT CORPORATION. petitioner vs. respondents. G. No.. ARNULFO AURELLANO AND RAMON TIAOQUI. petitioner. VALENZUELA. THE COURT OF APPEALS. 78767 December 11. JOSE B. 1991 BANCO FILIPINO SAVINGS AND MORTGAGE BANK. SALAZAR. THE COURT OF APPEALS. 78766 December 11. vs. VALENZUELA. 1991 METROPOLIS DEVELOPMENT CORPORATION. CENTRAL BANK OF THE PHILIPPINES. CARLOTA P. EUSEBIO. HON. vs. The Executive Judge of the Regional Trial Court of Cavite. G. respondents. CARLOTA P. THE CENTRAL BANK OF THE PHILIPPINES. petitioner. 81304 December 11. EUSEBIO. INTERMEDIATE APPELLATE COURT and CELESTINA S. 1991 EL GRANDE CORPORATION. G. PAHIMUNTUNG. CARLOTA P. TIAOQUI.

1985. Six (6) of these cases. The loan was secured by real estate mortgage in its various properties in Cavite. 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. 1982 payable in three years from date. G. 81303. 1984. Cornejo for intervenors. and Crisanto S. Benitez. 7004. CLERK OF COURT and Ex-Officio Sheriff ADORACION VICTA.R.:p This refers to nine (9) consolidated cases concerning the legality of the closure and receivership of petitioner Banco Filipino Savings and Mortgage Bank (Banco Filipino for brevity) pursuant to the order of respondent Monetary Board.000 and P5. 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. 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 25.000 with maturity dates on December 28. Nos. 1985.R. P7. Nos. No. 70054. Resolution No. 77255-68. 75 issued by respondents Monetary Board and Central Bank on January 25. 1985 and February 16. 78766. J. Top Management obtained a loan of P4. 68878 This is a motion for reconsideration. respectively. CARLOTA P. BANCO FILIPINO SAVINGS AND MORTGAGE BANK. Jr. On the other hand. granting the petition for review on certiorari and reversing the questioned decision of respondent appellate court. 78767 and 78894 all seek to annul and set aside M. It placed Banco Filipino under receivership of Carlota Valenzuela. Pilar Development mortgaged to Banco Filipino various properties in Dasmariñas. SALAZAR. Panganiban.370. The antecedent facts of each of the nine (9) cases are as follows: G.000. 1984. namely. Pilar Development obtained loans from Banco Filipino between 1982 and 1983 in the principal amounts of P6.B. On March 22. HERNANDEZ AND GATMAITAN. filed by respondent Celestina Pahimuntung. Florencio T. Barinaga & Bautista Law Offices collaborating counsel for petitioner. On January 25.R No. the Monetary Board issued a resolution finding Banco Filipino insolvent and unable to do business without loss to its creditors and depositors.000. 1985.R. 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. Salazar.836.000 from Banco Filipino as evidenced by a promissory note dated January 7. January 5. 1986. THE EXECUTIVE JUDGE of the Regional Trial Court of Cavite. Nos. .300. Domingo. MEDIALDEA. To secure the loan. which annulled the writ of possession issued by the trial court in favor of petitioner. respondents. namely. Valenzuela appointed the law firm of Sycip.THE COURT OF APPEALS. 1985 by the Central Bank pursuant to the resolution of the Monetary Board. VALENZUELA AND SYCIP. which is the main case. Likewise. to represent Banco Filipino in all litigations. Deputy Governor of the Central Bank. Cavite. et al. 68878. 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. G. By virtue of her authority as liquidator. of the decision promulgated by thisCourt on April 8.R. G. the other three (3) cases. the Monetary Board issued another resolution placing the bank under liquidation and designating Valenzuela as liquidator.

No.R. the law firm of Sycip. et al. 1985. Hence. initiated the foreclosure with the Clerk of Court and Ex-officio sheriff of RTC Cavite. petitioner was granted a loan in the amount of P8. Subsequently. this Court in G. In a resolution dated August 29. petitioner El Grande filed a petition for prohibition with the Court of Appeals alleging that respondent Carlota Valenzuela could not proceed with the . effective during the same period of 30 days. Salazar. 1985. In order to stop the public auction sale. Carlota Valenzuela. 70054. the Ex-Officio Sheriff of the Regional Trial Court of Cavite issued a notice of extra-judicial foreclosure sale of the properties on December 16. the latter thru its liquidator.00 secured by real estate mortgages on its various estates located in Cavite. the respondent appellate court rendered a decision dismissing the aforementioned petitions.R. the Monetary Board confirmed Banco Filipino's insolvency and designated the receiver Carlota Valenzuela as liquidator. the ex-officio sheriff issued the notice of extra-judicial sale of the mortgaged properties of El Grande scheduled on April 30. Salazar.R. No. 08962-64 seeking to enjoin the same respondents from enforcing the foreclosure sale of its properties. on March 31. 70054 questioning the validity of the resolutions issued by the Monetary Board authorizing the receivership and liquidation of Banco Filipino. Hence.R. 1986. 1986. G. 1985. No. On January 15. Hence. the Monetary Board forbade Banco Filipino to do business. Thus. 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. acting as counsel for Banco Filipino under authority of Valenzuela as liquidator. the ex-officio sheriff of said court and Sycip. Top Management filed a petition for injunction and prohibition with the respondent appellate court docketed as CA-G. placed it under receivership and designated Deputy Governor Carlota Valenzuela as receiver.R. 1985. SP Nos. 70054 resolved to issue a temporary restraining order. Salazar. SP No. On October 30. 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.034. 07892 seeking to enjoin the Regional Trial Court of Cavite. Banco Filipino filed the petition for certiorari in G. On March 22. CA-G. applied for extra-judicial foreclosure of the mortgage over Top Management's properties. 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. Subsequently.130. from proceeding with foreclosure sale. enjoining the respondents from executing further acts of liquidation of the bank. et al. The Central Bank is ordered to designate a comptroller for Banco Filipino. who was appointed by the Monetary Board as liquidator of Banco Filipino. this petition was filed by the petitioners Top Management and Pilar Development alleging that Carlota Valenzuela. Similarly.On March 26. Top Management failed to pay its loan on the due date.R SP Nos. 1985. It was extended by respondent Banco Filipino a credit accommodation to finance its housing program. has no authority to proceed with the foreclosure sale of petitioners' properties on 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. et al. 1985. On December 9.R. 07892 and 08962-64 were consolidated and jointly decided. The law firm of Sycip. Hence. 1986. Pilar Development defaulted in the payment of its loans. When petitioner El Grande failed to pay its indebtedness to Banco Filipino. 78766 Petitioner El Grande Development Corporation (El Grande for brevity) is engaged in the business of developing residential subdivisions.

1987. G. On July 9. No. 1986. The Central Bank filed a motion to dismiss the action. Hence. On November 4. 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. this petition for review on certiorari was filed. the respondent appellate court dismissed the appeal and affirmed the order of the trial court. No. the trial court granted the motion to expunge in an order dated March 17. The Court of Appeals rendered a decision dismissing the petition. the Central Bank and Carlota Valenzuela for specific performance. A petition was filed with this Court but was denied in a resolution dated March 22. 81303 On November 8. 1988. financing facility with Banco Filipino. 1985. acting for all the defendants including Banco Filipino moved that the answer filed by Quisumbing & Associates for defendant Banco Filipino be expunged from the records. No. SP.R. On June 12. Sycip. G. petitioner filed a second supplemental complaint to which respondents filed a motion to dismiss. 81304 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 . Petitioner Pilar Development moved to reconsider the order but the motion was denied.R. docketed as Civil Case No. 70054 issued a resolution dated August 29. and thus.. 04609 had stated that Banco Filipino has been ordered closed and placed under receivership pending liquidation. 1985. Hernandez and Gatmaitan filed an answer to the complaint. Petitioner BF Homes in a supplemental complaint impleaded as defendant Carlota Valenzuela as receiver of Banco Filipino Savings and Mortgage Bank. 1985. which restrained Carlota Valenzuela from acting as liquidator and allowed Banco Filipino to resume banking operations only under a Central Bank comptroller. thru the law firm Sycip. Despite opposition from Quisumbing & Associates. petitioner BF Homes Incorporated (BF Homes for brevity) filed an action with the trial court to compel the Central Bank to restore petitioner's. 1986.R. On March 2. On April 8. Salazar.foreclosure of its mortgaged properties on the ground that this Court in G. 1987. 1986 the said law firm filed an answer for Banco Filipino which confessed judgment against Banco Filipino.R. the trial court granted the motion to dismiss the supplemental complaint on the grounds (1) that plaintiff has no contractual relation with the defendants. The order of dismissal was appealed by the petitioner to the Court of Appeals. The Central Bank and Carlota Valenzuela. petitioner Pilar Development Corporation (Pilar Development for brevity) filed an action against Banco Filipino. petitioner filed a second amended complaint. On June 23. 1987. et al. On June 17. she was not legally precluded from foreclosing the mortgage over the properties of the petitioner through counsel retained by her for the purpose. Valenzuela was restrained by this Honorable Court from exercising acts in liquidation of Banco Filipino Savings & Mortgage Bank. Petitioner Pilar Development filed with the respondent appellate court a petition for certiorari and mandamus to annul the order of the trial court. 1985. No. and (2) that the Intermediate Appellate Court in a previous decision in AC-G. 1985. the continuation of the facility sued for by the plaintiff has become legally impossible and the suit has become moot. It appears that the former management of Banco Filipino appointed Quisumbing & Associates as counsel for Banco Filipino. this instant motion for reconsideration. Hence. 12191. the Court of Appeals rendered a decision dismissing the petition.

Thus. 29 of R. On June 16. G. 2. with more than three (3) million depositors. 1984.B. the following are recommended: 1. as Receiver of Banco Filipino Savings & Mortgage Bank.B. Special Assistant to the Governor and Head. Resolution No. pursuant to Sec. G. It has eighty-nine (89) operating branches. This was augmented with a P3 billion credit line under M. 1989. 839 dated June 29. 934 dated July 27. Resolution No. respondent Court of Appeals rendered a decision dismissing the petition. Designate the Head of the Conservator Team at the bank. 1986. et al. 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. Foregoing considered. indicate one of insolvency and illiquidity and further confirms the above conclusion of the Conservator. 1985 was submitted to the Monetary Board by Ramon Tiaoqui. As of July 31. 90473 Petitioner El Grande Development Corporation (El Grande for brevity) obtained a loan from Banco Filipino in the amount of P8. No. and T-79371 of the Registry of Deeds of Cavite. 265. T109027. Petitioner Bank had an approved emergency advance of P119. T-148377. 1964. Subsequently. 1984.7 million under M. which report shall hereinafter be referred to as the Teodoro report. Salazar. Resolution No. the ex-officio sheriff issued a notice of extrajudicial foreclosure sale of the properties of petitioner. 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. Tiu Family Group. the appointed liquidator of BF. as shown earlier. All the foregoing provides sufficient justification for forbidding the bank from engaging in banking. 1984. the list of stockholders showed the major stockholders to be: Metropolis Development Corporation. 223 dated February 14. On March 24. 1984. It commenced operations on July 9. another report dated January 23. He was later replaced by Gilberto Teodoro as conservator on August 10.R. LBH Inc.B. Resolution No. T-132897. and Anthony Aguirre. as amended.action asserted by the petitioner and the petitioner did not have any cause of action against the respondents Central Bank and Carlota Valenzuela.B. Not satisfied with the decision. 1985 to respondent Board on the conservatorship of petitioner bank.R. Filipino Business Consultants. No. respondent Board issued M. Forbid the Banco Filipino Savings & Mortgage Bank to do business in the Philippines effective the beginning of office January 1985. to . thru its counsel Sycip. secured by a mortgage over its five parcels of land located in Cavite which were covered by Transfer Certificate of Title Nos. On the same date. 1984. which shall be referred to herein as the Tiaoqui Report contained the following conclusion and recommendation: The examination findings as of July 31.00. SES Department II of the Central Bank. When Banco Filipino was ordered closed and placed under receivership in 1985. 1963.034. 70054 Banco Filipino Savings and Mortgage Bank was authorized to operate as such under M. 955 placing petitioner bank under conservatorship of Basilio Estanislao. 1984.A No. The latter submitted a report dated January 8. regarding the major findings of examination on the financial condition of petitioner BF as of July 31. forty-six (46) of which are in Manila. petitioner filed the instant petition for review on certiorari. Apex Mortgage and Loans Corporation. The report. T-82187.130.

Rollo) On January 25. 2. bringing suits and foreclosing mortgages in the name of the bank. To designate Mrs. To designate Mr. 1985. 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. Ramon V. as listed in the attached Annex "A" be included in the watchlist of the Supervision and Examination Sector until such time that they shall have cleared themselves. To forbid Banco Filipino Savings and Mortgage Bank and all its branches to do business in the Philippines. and . exercising all the powers necessary for these purposes including but not limited to. 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. officers. 1985. The Board of Directors and the principal officers from Senior Vice Presidents. 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. (pp61-62. Supervision and Examination Sector Department II. that the Banco Filipino Savings & Mortgage Bank is insolvent and that its continuance in business would involve probable loss to its depositors and creditors. the Monetary Board issued the assailed MB Resolution No. Arnulfo B. 29 of RA 265. 3. Carlota P. 75 which ordered the closure of BF and which further provides: After considering the report dated January 8. and in pursuance of Sec. and after discussing and finding to be true the statements of the Special Assistant to the Governor and Head. Supervision and Examination Sector (SES) Department II as recited in his memorandum dated January 23. Tiaoqui. 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 directors. as expeditiously as possible collect and gather all the assets and administer the same for the benefit of all the creditors. Valenzuela.immediately take charge of the assets and liabilities. Special Assistant to the Governor. creditors and the general public. 4. and Mr. 3. the Board decided: 1. Aurellano. Special Assistant to the Governor and Head. as amended. Deputy Governor as Receiver who is hereby directly vested with jurisdiction and authority to immediately take charge of the bank's assets and liabilities. and as expeditiously as possible collect and gather all the assets and administer the same for the benefit of its creditors. 4. and employees for activities which led to its insolvent position. 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 or Monetary Board Resolutions.

A. also known as Central Bank Act. 1985.. Rollo. The Central Bank was also ordered to designate comptroller for the petitioner BF. On February 28. Acts such as receiving collectibles and receivables or paying off creditors' claims and other transactions pertaining to normal operations of a bank were no enjoined. this Court Resolved direct the respondents Monetary Board and Central Bank hold hearings at which the petitioner should be heard. In consequence of the foregoing. 1985. 9676 and 10183 in Branch 136 of the Regional Trial Court of Makati. to terminate the conservatorship over Banco Filipino Savings and Mortgage Bank.5. 1985 ordering the issuance of the aforesaid temporary restraining order. 3. The Statutory Receiver be designated as the Liquidator of said bank. (p. 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. The Legal Department. 265.e. 1985. and 4. 167.A. 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. and terminate such hearings and submit its resolution within thirty (30) days. 265. In a resolution dated August 29. 10-11. (pp. 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. 29 of R. I) On February 2. 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. This Court also ordered th consolidation of Civil Cases Nos. Carlota Valenzuela. on September 12. Sec. other creditors and the general public. 1985 as made without or in excess of jurisdiction or with grave abuse of discretion. it is recommended that: 1. through the Solicitor General. On August 20. 1985 in the most expeditious manner and to . 1985. Vol. as amended. 1985. On March 19. the case was submitted for resolution. 1985. this Court submitted a resolution order ing Branch 136 of the Regional Trial Court of Makati the presided over by Judge Ricardo Francisco to conduct the hear ing contemplated in the resolution of August 29. Management be instructed to inform the stockholders of Banco Filipino Savings & Mortgage Bank of the Monetary Board's decision liquidate the Bank. On October 8. petitioner BF filed a complaint docketed as Civil Case No. be authorized to file in the proper court a petition for assistance in th liquidation of the Bank. 1985. Vol. 1985. in compliance with the mandate of Sec. Banco Filipino Savings & Mortgage Bank be liquidated pursuant to paragraph 3. This Court issued a resolution on August 8. However. 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. 29 of RA No. Rollo. 9675 with the Regional Trial Court of Makati to set aside the action of the Monetary Board placing BF under receivership. i. its realizable assets are insufficient to meet all its liabilities and that the bank cannot resume business with safety to its depositors. this Court in the meantime suspended the hearing it ordered in its resolution of August 29. 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. This Court further resolved to issue a temporary restraining order enjoining the respondents from executing further acts of liquidation of a bank. 8108. I) On July 23. 1985. 2.

a different scheme was followed. and for both parties to conduct the required cross-examination of witnesses/deponents. Hence. 265. On October 21. the Court stated that the hearing contemplated in the resolution of August 29. if so minded. filed by the same stockholders. Although the records disclose that both parties had not waived cross-examination of their deponents. second. Justice Consuelo Santiago of the Court of Appeals submitted her report and recommendation (to be hereinafter called. there being no legal impediment or justifiable reason to bar the former from conducting such hearing. 29 of R. 1990. 1988. 1989 declared that its intention as expressed in its resolution of August 29. until the commissioner submitted his report and recommendations to the Court. 1985 had not been faithfully adhered to by the herein petitioner and respondents. 70054 filed by Eduardo Rodriguez and Fortunate M. The aforementioned resolution had ordered a healing on the reports that led respondents to order petitioner's closure and its alleged pre-planned liquidation. on March 1. who was elevated to the Court of Appeals. 1987. Three motions for intervention were filed in this case as follows: First. This Court noted that during the referral hearing however. this Court designated a new hearing commissioner in the person of former Judge Consuelo Santiago of the Regional Trial Court. To obviate all doubts on Judge Cosico's impartiality. No. 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. counter-affidavits of its officers and also documents to prove its claims. On January 28. which is to ascertain whether substantial administrative due process had been observed by the respondent Monetary Board. third. Judge Manuel Cosico submitted his report to this Court with the recommendation that the resolutions of respondents Monetary Board and Central Bank authorizing the closure and liquidation of petitioner BP be upheld.R. In the Court's resolution of February 19. Tiaoqui Report. No. The reception of evidence in the form of affidavits was followed throughout. Makati. 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.R. Petitioner filed their reply to respondent's comment of January 11.A. 1988. Respondents merely submitted to the commissioner their findings on the examinations conducted on petitioner. and. Valenzuela. no such cross-examination has been conducted. denied the aforesaid motions for intervention. 1991. again in G. After having deliberated on the grounds raised in the pleadings. the hearing commissioner. to be done within a period of three months.submit its resolution to this Court. stockholders of petitioner bank for and on behalf of other stockholders of petitioner. 1985. This Court. in G. affidavits of the private respondents relative to the findings. Branch 149 (now Associate Justice of the Court of Appeals). 70054 by BF Depositors' Association and others similarly situated. Dizon. On February 20. petitioner BF filed an urgent motion to reopen hearing to which respondents filed their comment on December 16. 1988. No. this Court directed Judge Manuel Cosico to expedite the hearing and submit his report to this Court. may be expedited by Judge Manuel Cosico who now presides the court vacated by Judge Ricardo Francisco. 78894. this Court in its resolution dated August 3. This Court also held that the documents pertinent to the resolution of the instant petition are the Teodoro Report.R. as amended to justify th closure of the Banco Filipino Savings and Mortgage Bank? . "Santiago Report") on the following issues stated therein as follows: l) Had the Monetary Board observed the procedural requirements laid down in Sec. in G. 1989. their reports to the Monetary Board and several other documents in support of their position while petitioner had merely submitted objections to the findings of respondents.

rules and regulations that apply to its situation. No. 1984 and that on January 25. the evidence indicates that BF was solvent on July 31. 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 found and recommended the following: 1. On February 25. BF's closure on January 25.2) On the date of BF's closure (January 25.R. On February 14. G. 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. 1991. BF should be allowed to re-open subject to such laws. the Central Bank cited the resolution of this Court dated October 15. 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. the day it was closed. 78767 On February 2. The parties. While the motion to dismiss was pending resolution. and that such a hearing on oral argrument will therefore allow the parties to directly confront the issues before this Court. 1991. On the contrary. 1991. as amended. not having satisfied the requirements prescribed under Sec. it has an interest in the . 29 of RA 265. 1984 or that its continuance in business thereafter would involve probable loss to its depositors or creditors. (Cosico Report dated February 19. No. by way of correction. Respondents thereafter filed a motion for leave to file objections to the Santiago Report. its insolvency was not clearly established. 1985. In a supplemental motion to dismiss. 65723 entitled. 1991. 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. On March 5. On March 12. In the same motion. 29 of the R. 3. 1985. On March 20. 1991 petitioner filed its opposition to the motion for oral argument. 9675 to annul the resolution of the Monetary Board dated January 25. That consequently.R. this Court denied the request for oral argument of the parties. That the TEODORO and TIAOQUI reports did not establish in accordance with See. Banco Filipino filed a complaint with the trial court docketed as Civil Case No. which ordered the closure of the bank and placed it under receivership. v. as amended. On February 7. 1991. respondents filed their objections to the Santiago Report. 1985. "Central Bank et al. it filed its reply to respondents' objections to the Santiago Report. a hearing was held where both parties were heard on oral argument before this Court.A. 1988) and the other (Santiago Report dated January 25. 1985. respondents submitted a motion for oral argument alleging that this Court is confronted with two conflicting reports on the same subject. On June 18. BF's insolvency as of July 31. 1985 in G. having submitted their respective memoranda. That accordingly. respondents requested that the report and recommendation be set for oral argument before the Court. one upholding on all points the Monetary Board's closure of petitioner. was null and void. 1985. 2. 265. the case is now submitted for decision.

the petition. as expeditiously as possible. 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. No.No. 1985. the respondent's motion for reconsideration. the trial court allowed the motion for intervention.R.R. The Central Bank filed a supplemental motion to dismiss which was denied. 1986. reply and rejoinder. provides that when a bank is forbidden to do business in the Philippines and placed under receivership. 1985. In G. No. as amended known as the Central Bank Act. 81304. On March 17. the trial court denied the motion to dismiss and also denied the motion for reconsideration of the order later filed by Central Bank. Nos. the person designated as receiver shall immediately take charge of the bank's assets and liabilities. 77255-58. After deliberating on the pleadings in the following cases: 1. On March 22. in G. the petition. 81304 and 90473 devoid of merit. In G. 1985 which ordered the closure of Banco Filipino and placed it under receivership. Hence this petition was filed by Metropolis Development Corporation questioning the decision of the respondent appellate court.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. 90473. 78894 On February 2. Hence. 1985. Nos.R. Section 29 of the Republic Act No. 4. bringing and foreclosing mortgages in the name of the bank . reply. Arnulfo Aurellano and Ramon Tiaoqui. the Central Bank and the receiver filed a motion to dismiss the complaint on the ground that the receiver had not authorized anyone to file the action. comment.R. and represent the bank personally or through counsel as he may retain in all actions or proceedings for or against the institution. We find the motions for reconsideration in G. 265. No. In G. Finally. On February 14. a complaint was filed with the trial court in the name of Banco Filipino to annul the resolution o the Monetary Board dated January 25.R.R. exercising all the powers necessary for these purposes including. 78766. 68878. No. G. 5. comment. 78766. the petition. but not limited to. collect and gather all the assets and administer the same for the benefit of its creditors. 3. 2. No.R. the respondent appellate court granted the petition and dismissed the complaint of Banco Filipino with the trial court. In G. 81303. without the authorization of the CB-appointed receiver. comment and reply. Thus. the Monetary Board placed the bank under liquidation and designated Valenzuela as liquidator and Aurellano and Tiaoqui as deputy liquidators. 77255-58.subject of the action. the respondent appellate court rendered a decision annulling and setting aside the questioned orders of the trial court. 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. On June 5. 68878 and 81303 and the petitions in G. Hence. On March 17. 9675. The receivers appointed by the Monetary Board were Carlota Valenzuela. the petitioner's motion for reconsideration. rejoinder and sur-rejoinder. In G. On July 19. 1985.R. 1985. 1986. Nos. 2. If the Monetary Board shall later determine and confirm that banking institution is insolvent or cannot resume business safety . the petition comment and reply. 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.

due to the aforestated reasons. Nos. Such acts of liquidation. 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. their did Our order in the same resolution dated August 25. 29 of the Central Bank Act are those which constitute the conversion of the assets of the banking institution to money or the sale. We hold that the closure and receivership of petitioner bank. pendency of the case did not diminish the powers and authority of the designated liquidator to effectuate and carry on the a ministration of the bank. in the name of the bank and with the assistance counsel as he may retain. When the issue on the validity of the closure and receivership of Banco Filipino bank was raised in G. is null and void. It is a well-recognized principle that administrative and discretionary functions may not be interfered with by the courts. The mere duty of the comptroller is to supervise counts and finances undertaken by the liquidator and to d mine the propriety of the latter's expenditures incurred behalf of the bank. 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 . The liquid for may. it shall. 78767 and 78894 impressed with merit. 77255-58. We did not prohibit however acts a as receiving collectibles and receivables or paying off credits claims and other transactions pertaining to normal operate of a bank. No.R. 29 of the Central Bank Act. Similarly. Clearly. 70054. 1985. Notwithstanding this. There is no doubt that the prosecution of suits collection and the foreclosure of mortgages against debtors the bank by the liquidator are among the usual and ordinary transactions pertaining to the administration of a bank. assignment or disposition of the s to creditors and other parties for the purpose of paying debts of such institution. While We recognize the actual closure of Banco Filipino and the consequent legal effects thereof on its operations.R. find the petitions in G.to depositors. 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. which was ordered by respondent Monetary Board on January 25. 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. No. of the liquid insofar as the management of the assets of the bank is concerned. In fact when We adopted a resolute on August 25. 81304. and findings of fact. in G. 70054. as explained in Sec. 68878. 81303. This is generally true with respect to acts involving the exercise of judgment or discretion. institute such actions as may necessary in the appropriate court to collect and recover a counts and assets of such institution or defend any action ft against the institution. We enjoined me further acts of liquidation. No. 1985 for the designation by the Central Bank of a comptroller Banco Filipino alter the powers and functions. In G. order its liquidation and appoint a liquidator who shall take over and continue the functions of receiver previously appointed by Monetary Board. We cannot uphold the legality of its closure and thus. 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. Nos. The Central Bank possesses those powers and functions only as provided for in Sec.R. creditors and the general public. and to prevent the dissipation of its assets to the detriment of the creditors of the bank. 78766 and 90473. In general. courts have no supervising power over the proceedings and actions of the administrative departments of the government.R. public interest requires. in G. 1985 and issued a restraining order to respondents Monetary Board and Central Bank.R. the liquidator is empowered under the law to continue the functions of receiver is preserving and keeping intact the assets of the bank in substitution of its former management.

once again. it shall be the duty of the department head concerned forthwith. 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. bringing and foreclosing mortgages in the name of the bank or non-bank financial intermediary performing quasi-banking functions. indicate the manner of its liquidation and approve a liquidation plan which may. 29. The court shall have jurisdiction in the same proceedings to assist in the adjudication of the disputed claims . 34 SCRA 751) The jurisdiction of this Court is called upon. by the Solicitor General. 265. and represent the bank personally or through counsel as he may retain in all actions or proceedings for or against the institution. has committed grave abuse of discretion or has acted without or in excess of jurisdiction in issuing the assailed order. like the Central Bank of the Philippines and the Monetary Board.or despotic manner. as receiver to immediately take charge of its assets and liabilities. Sr. 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. as well as to correct manifest abuses of discretion committed by the officer or tribunal involved. v. The Board may. when warranted. exercising all the powers necessary for these purposes including. as expeditiously as possible collect and gather all the assets and administer the same for the benefit's of its creditors. involve disposition of any or all assets in consideration for the assumption of equivalent liabilities. Secretary of Agriculture and Natural Resources. then there is a justification for the courts to set aside the administrative determination reached (Lim. 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. 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. upon finding the statements of the department head to be true. if the public interest requires. it shall. 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. or that its continuance in business would involve probable loss to its depositors or creditors. The liquidator designated as hereunder provided shall. which provides: SEC. but not limited to. 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. as amended. — Whenever. 1970. to undertake the delicate task of ascertaining whether or not an administrative agency of the government. Proceedings upon insolvency. through these petitions. L-26990. order its liquidation. creditors. In such case. in writing. and the general public. August 31. 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. also known as the Central Bank Act. The law applicable in the determination of these issues is Section 29 of Republic Act No. to inform the Monetary Board of the facts. it shall be disclosed that the condition of the same is one of insolvency.

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. The liquidator shall. as liquidator who shall take over and continue the functions of the receiver previously appointed by the Monetary Board under this Section. However. 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. the liquidator may. in the name of the bank or non-bank financial intermediary performing quasi-banking functions and with the assistance of counsel as he may retain. within ten (10) days from receipt of notice by the said majority stockholders of said bank or non-bank financial intermediary of the order of its placement under conservatorship o liquidation. . be exempt from any order of garnishment. shall be dissolved upon filing by the Central Bank of a bond. convert the assets of the banking institutions or non-bank financial intermediary performing quasi-banking function to money or sell.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 Monetary Board. an the second paragraph of Section 34 of this Act shall be final an executory. That the same is raised in an appropriate pleading filed by the stockholders of record representing the majority of th capital stock within ten (10) days from the date the receiver take charge of the assets and liabilities of the bank or non-bank financial intermediary performing quasi-banking functions or. executed in favor of the Central Bank. The Monetary Board shall designate an official of the Central bank or a person of recognized competence in banking or finance. in an amount be fixed by the court. in case of conservatorship or liquidation. levy. The restraining order or injunction shall be refused or. No restraining order or injunction shall be issued by an court enjoining the Central Bank from implementing its actions under this Section and the second paragraph of Section 34 of this Act in th absence of any convincing proof that the action of the Monetary Board is plainly arbitrary and made in bad faith and the petitioner or plaintiff files a bond. Section 28-A. the actions of the Monetary Board under this Section. attachment. with the approval of the court. That after having reasonably established all claims against the institution. The provisions of Rule 58 of the New Rules of Court insofar as they are applicable and not inconsistent with the provision of this Section shall govern the issuance and dissolution of the re straining order or injunction contemplated in this Section. 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. and can be set aside by a court only if there is convince proof. effect partial payments of such claims for assets of the institution in accordance with their legal priority. in an amount twice the amount of the bond of th petitioner or plaintiff conditioned that it will pay the damages which the petitioner or plaintiff may suffer by the refusal or the dissolution of the injunction. The provisions of any law to the contrary notwithstanding. after hearing. with all convenient speed. which shall be in the form of cash or Central Bank cashier's check. orexecution. that the action is plainly arbitrary and made in bad faith: Provided. if granted.

secondly. As We have stated in Our resolution dated August 3. and in ordering its closure on January 25. 1985. order its liquidation. Specifically. There is no question that under Section 29 of the Central Bank Act. the Tiaoqui report. Moreover. 1984. the department head concerned shall inform the Monetary Board in writing. submitted on January 23. this list of exceptions and finding was submitted to the petitioner bank (p. or that its continuance in business would involve probable loss to its depositors or creditors. 1984 when the Central Bank submitted the partial list of findings of examination to th petitioner bank. 1988 and the report submitted by Justice Consuelo Santiago on January 28. other . 1985. 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. Aurellano and Tiaoqui Report. namely the report by Judge Manuel Cosico submitted February 20. 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. The letter reads: In connection with the regular examination of your institution a of July 31. 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. the Monetary Board may order the cessation of operations of a bank in the Philippine and place it under receivership upon a finding of insolvency or when its continuance in business would involve probable loss its depositors or creditors. it shall. 6. of examiner-in-charge Dionisio Domingo of SES Department II of the Central Bank to Teodoro Arcenas. Tiaoqui Report) This was attached to the letter dated December 17. and the Valenzuela. thirdly. 1984.xxx xxx xxx Based on the aforequoted provision. Aurellano and Tiaoqui Report and the supporting documents made as bases by the supporters of their conclusions contained in their respective reports. creditors and the general public. Tiaoqui Report. 70054. Nos. which disclosed that the examination of the petitioner bank as to its financial condition as of July 31. Anent the first requirement. 1984) and that we are still awaiting for the unsubmitted replies to our previous letters requests. 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.R. We will focus Our study and discussion however on the Tiaoqui Report and the Valenzuela. the Monetary Board shall find the statements of the department head to be true. 1991. 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. if public interest will be served. Please be informed that we have not yet officially terminated our examination (tentatively scheduled last December 7. 1984. the basic question to be resolved in G. 1984 conducted by the Supervision and Examination Sector II of the Central Bank of the PhilippinesCentral Bank (p. 1989. 1984 was not yet completed or finished on December 17. Tiaoqui Report). and lastly. 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. 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. On December 17. it shall be disclosed in the examination that the condition of the bank is one of insolvency. president of petitione bank. we are submitting herewith a partial list of our exceptions/findings for your comments. the documents pertinent to the resolution of these petitions are the Teodoro Report. 1. of the facts.

Vol. emphasis ours) Clearly. that capital adjustments. . 3313-3314. surplus reserves and undivided profits aggregated P351.4 million pursuant to the examination. 1985 (pp. 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. and the unhealth financial status of these firms in which the bank was additionally exposed through new funds or refinancing accommodation including accrued interest. 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. 7. Fortunato Dizon (BF's Executive Vice President) said that as regards the unsecured loans granted to various corporations. that at that meeting. total capital accounts consisting of paid-in capital and other capital accounts such as surplus. the examination has not been officially terminated. p.findings/ observations are still being summarized including the classification of loans and other risk assets. Vol. Rollo. Tiaoqui testified that on January 21. on the bank solvency Mr. Dizon (BF Executive Vice President) intimated that. A formal reply of the bank would still be forthcoming. 1985. collectively these corporations have large undeveloped real estate properties in the suburbs which can be made answerable for the unsecured loans a well as the Central Bank's credit accommodations. 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. III. the manner by which some bank funds were made indirectly available to several entities within the group. consistent with standard examination procedure. 1984. . 59. (pp. He arrived at the said conclusion from the following facts: that as of July 31. that he believed. The discussion centered on the substantial exposure of the bank to the various entities which would have a relationship with the bank. did not wait anymore for a discussion of the recommended valuation reserves and instead prepared his report two days after January 21. Also..8 million. that he however. wiped out the capital accounts and placed the bank with a capital deficiency amounting to P334. Vol. 1985 at the Central Bank between the officials of the latter an of petitioner bank. Rollo). Dionisio Domingo which covered 70%-80% of the bank's loan portfolio. emphasis ours). Rollo. there was still a need to discuss the recommended valuation reserves of petitioner bank and. he met with officers of petitioner bank to discuss the advanced findings and exceptions made by Mr. however. that despite the meeting on January 21. I) In his testimony in the second referral hearing before Justice Santiago.. Rollo.956 million. 5859. He stated: The recommended valuation reserves as bases for determining the financial status of the bank would need to be discussed with the bank. (p. Queried in the impact of these clean loans. These shall be submitted to you in due time (p. that he (Tiaoqui) however prepared his report despite the absence of such reply. Tiaoqui report. 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. It is worthy to note that a conference was held on January 21. 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. What transpired and what was agreed upon during the conference was explained in the Tiaoqui report. 810. I. as in fact it is stated in his report. for which the bank would in turn reply. 1985.

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. G. Time and again. The actuation of the Monetary Board in closing petitioner bank on January 25. should a pre-closing conference led by the examiner-in-charge be held with the officers/representatives of the institution on the findings/exception. However. where . Hence. 106 SCRA 143). October 15. It is evident from the foregoing circumstances that the examination contemplated in Sec. 69 Phil. this Court laid down several cardinal primary rights which must be respected in a proceeding before an administrative body. before these can be considered in the financial condition of the bank.R. G. 14). 29 of the CB Act as a mandatory requirement was not completely and fully complied with. 635. We have held in several cases. Court of Appeals. 1984. General Instruction. supra). that the procedure of administrative tribunals must satisfy the fundamentals of fair play and that their judgment should express a well-supported conclusion.R. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion (Ang Tibay vs. Court of Industrial Relations. arbitrary. Consequently. Act No. No.Records further show that the examination of petitioner bank was officially terminated only when Central Bank Examination-charge Dionisio Domingo submitted his final report of examination on March 4. In the celebrated case of Ang Tibay v. 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. since its action is subject to judicial scrutiny as provided for under the same law (Rural Bank of Bato v. Sec. may not be done arbitratrily or unreasonably and could be set aside if it is either capricious. It would be a drastic move to conclude prematurely that a bank is insolvent if the basis for such conclusion is lacking and insufficient. Despite the existence of the partial list of findings in the examination of the bank. Court of Appeals. Said manual provides that only after the examination is concluded. known as the Central Bank Act. however. June 20. Substantial evidence is more than a mere scintilla. 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. CIR. We recognize the fact that it is the responsibility of the Central Bank of the Philippines to administer the monetary. In the instant case. July 27. as to the requirement of notice and hearing. 1981. Police power. banking and credit system of the country and that its powers and functions shall be exercised by the Monetary Board pursuant to Rep. Notwithstanding the foregoing. namely: the decision of the administrative body must have something to support itself and the evidence must be substantial. p. the basic standards of substantial due process were not observed. 1988.1985. Rural Bank v. especially if doubt exists as to whether such bases or findings faithfully represent the real financial status of the bank. 61689. 65642. IAC. Nos. 29 of RA 265 does not require a previous hearing before the Monetary Board implements the closure of a bank. It is hard to understand how a period of four days after the conference could be a reasonable opportunity for a bank to undertake a responsive and corrective action on the partial list of findings of the examiner-in-charge. there were still highly significant items to be weighed and determined such as the matter of valuation reserves. unjust or is tantamount to a denial of due process and equal protection clauses of the Constitution (Central Bank v. 265. discriminatory. L-50031-32. administrative due process does not mean that the other important principles may be dispensed with.162 SCRA 288). whimsical.

there can be no clearer explanation of the concept of insolvency than what the law itself states. as to justify its closure on January 25. surplus ." "combined capital accounts" and net worth after deducting valuation reserves from the capital. or loans regarded by the examiner as absolutely uncollectible or worthless. p." and "Net worth." 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. Unimpaired Capital and Surplus. Objections to Santiago report).. It is a basic accounting principle that assets are composed of liabilities and capital. 335). and undivided profits net of such valuation reserves as may be required by the Central Bank. 1985 cannot be given weight and finality as the report itself admits the inadequacy of its basis to support its conclusion.A. 267 p. the term "capital" includes common and preferred stock. 5. Sec. For loans classified as loss. valuation reserves of fifty per cent (50%) of the accounts should be recommended to be set up. surplus and unretained earnings. the manual provides that: 1. As to the concept of whether the bank is solvent or not. For doubtful loans. In the case of loan accounts. surplus." Hence. On the other hand. Harris. valuation reserves of one hundred percent (100%) of the accounts should be recommended to be set up (p. The second requirement provided in Section 29. when warranted. citing Sec. Central Bank examiners must recommend valuation reserves. "Combined capital accounts." which terms shall mean for the purposes of this Act. 29 of the Central Bank Act provides that insolvency under the Act. R. Firstly. 5 of RA 337 is misplaced. The foregoing criteria used by respondents in determining the financial condition of the bank is based on Section 5 of RA 337. 973. f. Treatise on the Law of Public Offices and Officers.. In the case at bar. 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. the total of the "unimpaired paid-in capital. to be set up or deducted against the corresponding asset account to determine the bank's true condition or net worth. 8. 265 before a bank may be closed is that the examination should disclose that the condition of the bank is one of insolvency. the conclusion arrived at by the respondent Board that the petitioner bank is in an illiquid financial position on January 23. In this case. such as for the purpose of closure on the ground of insolvency stated in Section 29 of the Central Bank Act. The following terms shall be held to be synonymous and interchangeable: . the standard of fairness mandated in the due process clause is not met. The term "assets" includes capital and surplus" (Exley v. to which practically all the questioned valuation reserves refer.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. and will be construed as conferring those powers which are expressly imposed or necessarily implied (Floyd Mechem. 302). it is clear from the law that a solvent bank is one in which its assets exceed its liabilities. 2. 970. 1985. the respondents contend that under the Central Bank Manual of Examination Procedures. the contention of the Central Bank that a bank's true financial condition is synonymous with the terms "unimpaired capital and surplus. 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. 126 Kan. known as the General Banking Act which states: Sec.. But express grants of power to public officers should be subjected to a strict interpretation.

reserves. 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. 5 of RA 337 but not the total financial condition of the bank.E. (Manual of Examination Procedures. 363. 302. a bank is solvent if the fair cash value of all its assets. the networth 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. would be totally unjust and unfair. Harris. loans.126 Kan. Further. discounts and advances. 360. realizable within a reasonable time by a reasonable prudent person. the result would merely be the networth or the unimpaired capital and surplus of the bank applying Sec. 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 leas than its liabilities. the insolvency of a bank occurs when the actual cash market value of its assets is insufficient to pay its liabilities. (Gillian v. due to head office. Stated in other words. p. Hence. the bank is insolvent. 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. 207 Ind. Llewellyn. respondents used its books which undoubtedly are not reflective of the actual cash or fair market value of its . Objections to Santiago report). 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. 2n 115. 9. 70 S. Objections to Santiago report). In arriving at the computation of realizable assets of petitioner bank. fixed assets and other property owned or acquired and other miscellaneous assets. Clearly. If valuation reserves would be deducted from these items. On the other hand. 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. 8. The amounts stated in the balance sheets or statements of condition including the computation of valuation reserves when justified. The format enumerates the items which will compose the assets and liabilities of a bank. liabilities are composed of demand deposits. would equal or exceed its total liabilities exclusive of stock liability. 9). 3-C). 48). 267 p. but if such fair cash value so realizable is not sufficient to pay such liabilities within a reasonable time. nature and changes in the assets and liabilities. Tiaoqui himself. Banks use statements of condition to reflect the amounts. borrowings. surplus and undivided profits. and this account is also referred to as valuation reserve (p. 194 N. Report of Examination on Department of Commercial and Savings Banks. based on respondents' submissions. p. manager's and certified checks. 973. other liabilities and deferred credits (Manual of Examination Procedure. The amount of loans. p. CB examiners must recommend valuation reserves. to be set up against the corresponding asset account (p. App. Assets include cash and those due from banks. and agencies. cashier's. are based however.W. on the assumption that the bank or company will continue in business indefinitely. Respondents acknowledge that under the said CB manual. as author of the report recommending the closure of petitioner bank admits that the valuation reserves should still be discussed with the petitioner bank in compliance with standard examination procedure. when warranted. 970. Hence. time and savings deposits.. for the Monetary 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. the statement of assets and liabilities is used in balance sheets.117). Mo. Secondly. not considering capital stock and surplus which are not liabilities for such purpose (Exley v. State. branches. 661). Alexander v. and therefore.

states that total liabilities of P5.540. there was no valid reason for the Valenzuela. examination concerns itself with review and appraisal. etc. while audit concerns itself with verification (CB Manual of Examination Procedures. the consolidated statement of condition of petitioner bank as of January 25.947.559. Since. the consolidated statement of condition thereof as of the aforesaid date shown in the Valenzuela. indicates that total liabilities of 4. p. Hence. This Court however.2 million allotted to valuation reserves will not be deducted from the assets. take a look at the figures presented by the Tiaoqui Report in concluding insolvency as of July 31. 1984 and at the figures presented by the CB authorized deputy receiver and by the Valenzuela. then an adjustment of the figures win show that the liabilities of P5. accounts. We will however. unsound and fraudulent banking practices by the granting of huge unsecured loans to several subsidiaries and related companies. when petitioner bank was under conservatorship no official of the bank was ever . 1984 up to January 25. Concerning the financial position of the bank as of January 25. 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. 29 of the Central Bank Act.2 million.522. 1985.1 million exceeds total assets of P4.84 million does not exceed the total assets of 4. Aurellano and Tiaoqui report to finally recommend the liquidation of petitioner bank instead of its rehabilitation. that this has any material bearing on the validity of the closure. Aurellano and Tiaoqui report on the receivership of petitioner bank.981. Based on the foregoing.834. 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. to determine the recording of all assets and liabilities.4 if the 612. This is not the proper procedure contemplated in Sec.assets. We take note of the exhaustive study and findings of the Cosico report on the petitioner bank's having engaged in unsafe. 1985. rules and regulations.981. Audit is a detailed inspection of the institution's books.1 million will not exceed the total assets which will amount to P5.2 million after deducting from the assets valuation reserves of P612. 1985 prepared by the Central Bank Authorized Deputy Receiver Artemio Cruz shows that total assets amounting to P4. Aurellano and Tiaoqui Report which recommended the liquidation of the bank by reason of insolvency as o January 25.15.836. the date of the closure of the bank. 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. The Tiaoqui report dated January 23. 1984. 1985. dated March 19. however.22 even exceeds total liabilities amounting to P4. vouchers.282. the quality and character of management and determines the institution's compliance with laws.1985. which was based on partial examination findings on the bank's condition as of July 31. General Instructions. 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.540.996.53 million. During the period from July 27. 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 latter is part of auditing which should not be confused with examination.282. Even the CB Manual of Examination Procedures does not confine examination of a bank solely with the determination of the books of the bank. Likewise." 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. ledgers. We do not see. 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. Section 34 of the RA 265. Examination appraises the soundness of the institution's assets. 5). 1985.

Resolution No. While such advances are outstanding. Carlota Valenzuela. however. the debtor institution may not expand the total volume of its loans or investments without the prior authorization of the Monetary Board. Section 90 of RA 265 provides two types of emergency loans that can be granted by the Central Bank to a financially distressed bank: Sec. VIII). 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. further.B. In periods of emergency or of imminent financial panic which directly threaten monetary and banking stability.prosecuted. 1984. 1990. suspended or removed for any participation in unsafe and unsound banking practices. 3316. or events which. The second situation on the other hand. and neither was the entire management of the bank replaced or substituted. On emergency loans and advances. This paved the way for the reopening of the bank on August 1. Rollo. for the purpose of assisting a bank in a precarious financial condition or under serious financial pressures brought about by unforeseen events.. 90. at its discretion. Provided. 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. the Central Bank may grant banking institutions extraordinary advances secured by any assets which are defined as acceptable by by a concurrent vote of at least five members of the Monetary Board. Finally. . WHEREAS. 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. 955 dated July 27. unsafe and fraudulent banking practices but the alleged insolvency position of the bank (TSN. Vol. could not be prevented by the bank concerned. In fact. That the Monetary Board has ascertained that the bank is not insolvent and has clearly realizable assets to secure the advances. the emergency or financial confusion involves the whole banking community and not one bank or institution only. likewise grant advances to banking institutions. 1984 after a self-imposed bank holiday on July 23. p.. in her testimony during the second referral hearing. WHEREAS. though foreseeable. Provided. even during normal periods. August 3. The Central Bank may. 1984. which may eventually threaten and gravely prejudice the stability of the banking system. provides for a situation where the Central Bank grants a loan to a bank with uncertain financial condition but not insolvent. . Here. 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 conservatorship by virtue of M. As alleged by the respondents. That a concurrent vote of at least five members of the Monetary Board is obtained. testified that the reason for petitioner bank's closure was not unsound. (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. CB Deputy Governor. the Central Bank is charged with the function of administering the banking system.

R. the Central Bank even granted financial support to the latter and placed it under conservatorship. Vol. the Central Bank and the Monetary Board should exercise strict supervision over Banco Filipino. We believe that the closure of the petitioner bank was arbitrary and committed with grave abuse of discretion. 35. p. Nos. Where notwithstanding knowledge of the irregularities and unsafe banking practices allegedly committed by the petitioner bank. 70054. In view of the foregoing premises. 35 dated July 27. 78766. p. 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. it may reflect on the Central Bank's own viability. No. SO ORDERED. 26. Emphasis ours). 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. 81304 and 90473 are DENIED. (M.WHEREAS. The petitions in G. L-29352. No. No. 41 SCRA 565). 3387. Nos. it is the desire of the Central Bank to rapidly diffuse the uncertainty that presently exists. .B. decision is hereby rendered as follows: 1. 2. and the petitions in G. Granting in gratia argumenti that the closure was based on justified grounds to protect the public. . 1984 cited in Respondents' Objections to Santiago Report. ACCORDINGLY. 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. which could not have occurred if the petitioner bank was not solvent. 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. p. 78767 and 78894 are GRANTED and the assailed order of the Central Bank and the Monetary Board dated January 25..R. 1971. creditors and the general public. 1985 is hereby ANNULLED AND SET ASIDE. 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. IX). Nothing therein shows that an extraordinary emergency situation exists affecting most banks. 25. depositors and the general public. Vol.. For one thing. 68878 and 81303. 77255-58. October 4. 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. not only as regards petitioner bank. The Central Bank and the Monetary Board are ordered to reorganize petitioner Banco Filipino Savings and Mortgage Bank and allow the latter to resume business in the Philippines under the comptrollership of both the Central Bank and the Monetary Board and under such conditions as may be prescribed by the latter in connection with its reorganization until such time that petitioner bank can continue in business with safety to its creditors. the fact that petitioner bank was suffering from serious financial problems should not automatically lead to its liquidation. 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. Min. Central Bank. The motion for reconsideration in G. Rollo. 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. IX. No. Rollo.R. such actuation means that petitioner bank could still be saved from its financial distress by adequate aid and management reform.

There was sufficient justification. after a thorough assessment of whether or not BF is. Davide.A. Paras.. took no part. et al. based on that Bank's illiquidity. considering its inability to meet the heavy withdrawals by its depositors and to pay its liabilities as they fell due. Act No. JJ. hence. and can operate without loss to its many depositors and creditors. there was a finding in the Teodoro report that. Even assuming that the BF was not. to annul Monetary Board Resolution No. J. 75 dated January 25. Central Bank of the Philippines (CB).. J." is an original action for mandamus and certiorari filed in this Court by former officials of BF to annul the Monetary Board Resolution No.R. 68878 and 81303) have already been decided by this Court and are only awaiting the resolution of the motions for reconsideration filed therein.. indeed. the Monetary Board (MB). Jr. 70054 "Banco Filipino Savings and Mortgage Bank (BF) vs. Jr. can not be said to have been arbitrary or made in bad faith. of sufficient assets and capabilities with which to repay such huge indebtedness.. possessed. dissenting: I join Mme. as amended). In fact. That is also a ground for placing the bank under receivership. raise issues unrelated to the receivership and liquidation of said bank. as alleged. JJ. Aquino in her dissent and vote to deny the prayer. to forbid the bank from further engaging in banking.. petitioner prays that the assessment of the damages respondents should pay it be deferred and referred to commissioners. Separate Opinions MELENCIO-HERRERA. . as a first step. two of these cases (G. Justice Carolina G. C.Narvasa.J. without "administrative due process. petitioner respectfully prays that a writ of mandamus be issued commanding respondents immediately to furnish it copies of the reports of examination of BF employed by respondent Monetary Board to support its Resolution of January 25. Padilla. dissenting: Although these nine (9) Banco Filipino (BF) cases have been consolidated under one ponencia. pursuant to Section 29 of the Central Bank Act (Rep. therefore. The prayer of the petition reads: WHEREFORE. to have allowed it to continue in operation would have meant probable loss to depositors and creditors. 1985 and thereafter to afford it a hearing prior to any resolution that may be issued under Section 29 of R. GRIÑO-AQUINO. Gutierrez.. meanwhile annulling said Resolution of January 25. No. Feliciano.R. as it stoutly contends. and Nocon. reorganization or rehabilitation of BF is not within the competence of this Court to ordain but is better addressed to the Monetary Board and the Central Bank considering the latter's enormous infusion of capital into BF to the tune of approximately P3.5 Billion in total accommodations. 70054. The matter of reopening. No. Cruz. 265.R. 265. Only G. all of them except one. concur. So as to expedite proceedings. The closure of BF..". 1985 (ordering the closure of Banco Filipino [BF] and appointing Carlota Valenzuela as receiver of the bank) on the ground that the resolution was issued "without affording BF a hearing on the reports" on which the Monetary Board based its decision to close the bank. No. 1985 by writ of certiorari as made without or in excess ofjurisdiction or with grave abuse of discretion. Bidin and Regalado. in a literal state of insolvency at the time of the passage of said Resolution. 75 placing Banco Filipino (BF) under receivership. in G.

(p. "Pilar Development Corporation vs. 136. Br. 265). G. RTC. Court of Appeals. 07892) and "Pilar Development Corporation vs.Petitioner prays for such other remedy as the Court may deem just and equitable in the premises. 6. "Pilar Development Corporation. Court of appeals.. "Central Bank.R. 2. Executive Judge. No.R. The buyer's motion for reconsideration is awaiting resolution by this Court.8 million mortgage on Top Management's properties and the P18-67 million mortgage on Pilar Development properties. 1986 on the ground that "the functions of the liquidator. vs. 4. 08809 dismissing El Grande's petition for prohibition to prevent the foreclosure of BF's P8 million mortgage on El Grande's properties. Honorable Manuel Cosico. Court of Appeals" (formerly ACG. Intermediate Appellate Court and Celestina Pahimutang" involves the repossession by BF of a house and lot which the buyer (Pahimutang) claimed to have completely paid for on the installment plan. G." is an appeal from the Court of Appeals' decision in CA-G. Court of Appeals. March 4." (CA-G. Rollo I-) and the prayer of the Supplement to Petition reads: WHEREFORE. The appellate court's judgment for the buyer was reversed by this Court. 12368. include taking charge of the insolvent's assets and administering the same for the benefit of its creditors and of bringing suits and foreclosing mortgages in the name of the bank. The Court of Appeals dismissed the petitions on October 30. Court of Appeals. 87867. et al. "Top Management Programs Corporation and Pilar Development Corporation vs. SP No." dismissing the petition for certiorari against Judge Manuel Cosico. SP No. et al. No. 11-G. (p. 07503. SP No. 1827 and 1937 be annulled as unconstitutional. 81303. as receiver under Section 29 (R. "Banco Filipino Savings and Mortgage Bank vs. vs. SP No. 78894. Quezon City for Manila.) The other eight (8) cases merely involve transactions of BF with third persons and certain "related" corporations which had defaulted on their loans and sought to prohibit the extrajudicial foreclosure of the mortgages on their properties by the receiver of BF.R.A. for specific performance of certain developer contracts. RTC. G. et al. Judge Zoilo Aguinaldo.A. No. No. "Central Bank. An answer filed by Norberto Quisumbing and Associates. which also dismissed Metropolis' complaint in intervention on the ground that a stockholder (Metropolis) may not bring suit in the name of BF while the latter is under receivership. 1987 of the Court of Appeals in CA-G. February 28.R.R. 8.R.R. in addition to its prayer for mandamus and certiorari contained in its original petition. 72. 78894. et al." 3. petitioner respectfully prays that Sections 28-A and 29 of the Central Bank charter (R. Nos. vs. SP Nos.. Quezon City for Manila. Makati. et al. Rollo I. 1771. et al. as BF's .R. who dismissed the complaint filed by Pilar Development Corporation against BF. No. et al. 68878 "BF vs.R. "El Grande Corporation vs. "Metropolis Development Corporation vs. Honorable Zoilo Aguinaldo. without the authority of the receiver. 265) including its amendatory Presidential Decrees Nos. No.R. 77255-58.R.R. G. 1985. et al" dismissing the complaint of "BF" to annul the receivership. G. G. Cavite" (CA-G. No. for no suit may be brought or defended in the name of the bank except by its receiver. 0896264) is a consolidated petition for review of the Court of Appeals' joint decision dismissing the petitions for prohibition in which the petitioners seek to prevent the receiver/liquidator of BF from extrajudicially foreclosing the P4. et al. et al.R. 1985. These eight (8) cases are: 1. 07503 entitled.') is an appeal of the intervenor (Metropolis) from the same Court of Appeals' decision subject of G. 5. 78766." is an appeal of BFs old management (using the name of BF) from the decision of the Court of Appeals in CA-G." is an appeal from the decision dated October 22.

supposed counsel, virtually confessed judgment in favor of Pilar Development. On motion of the receiver, the answer was expunged and the complaint was dismissed. On a petition for certiorari in this Court, we held that: "As liquidator of BF by virtue of a valid appointment from the Central Bank, private respondent Carlota Valenzuela has the authority to direct the operation of the bank in substitution of the former management, which authority includes the retainer of counsel to represent it in bringing or resisting suits in connection with such liquidation and, in the case at bar, to take the proper steps to prevent collusion, to the prejudice of the legitimate creditors, between BF and the petitioners herein which appear to be owned and controlled by the same interest controlling BF" (p. 49, Rollo). The petitioners' motion for reconsideration of that decision is pending resolution. 7. G.R. No. 81304, "BF Homes Development Corporation vs. Court of Appeals, et al." is an appeal from the decision dated November 4, 1987 of the Court of Appeals in CA-G.R. CV No. 08565 affirming the trial court's order dismissing BF Homes' action to compel the Central Bank to restore the financing facilities of BF, because the plaintiff (BF Homes) has no cause of action against the CB. 8. G.R. No. 90473, "El Grande Development Corporation vs. Court of Appeals, et al.," is a petition to review the decision dated June 6, 1989 in CA-G.R. SP No. 08676 dismissing El Grande's petition for prohibition to stop foreclosure proceedings against it by the receiver of BF. As previously stated, G.R. No. 70054 "BF vs. Monetary Board, et al.," is an original special civil action for certiorari and mandamus filed in this Court by the old management of BF, through their counsel, N.J. Quisumbing & Associates, using the name of the bank and praying for the annulment of MB Resolution No. 75 which ordered the closure of BF and placed it under receivership. It is a "forum-shopping" case because it was filed here on February 28, 1985 three weeks after they had filed on February 2, 1985 Civil Case No. 9675 "Banco Filipino vs. Monetary Board, et al." in the Regional Trial Court of Makati, Br. 143 (presided over by Judge Zoilo Aguinaldo) for the same purpose of securing a declaration of the nullity of MB Resolution No. 75 dated January 25, 1985. On August 25, 1985, this Court ordered the transfer and consolidation of Civil Case No. 9676 (to annul the receivership) from Br. 143 to Br. 136 (Judge Manuel Cosico) of the Makati Regional Trial Court where Civil Case No. 8108 (to annul the conservatorship) and Civil Case No. 10183 (to annul the liquidation) of BF were and are still pending. All these three (3) cases were archived on June 30, 1988 by Judge Cosico pending the resolution of G.R. No. 70054 by this Court. Because of my previous participation, as a former member of the Court of Appeals, in the disposition of AC-G.R. No. 02617 (now G.R. No. 68878) and AC-G.R. SP No. 07503 (now G.R. Nos. 78767 and 78894), I am taking no part in G.R. Nos. 68878, 78767 and 78894. It may be mentioned in this connection that neither in AC-G.R. SP No. 02617, nor in AC-G.R. SP No. 07503, did the Court of Appeals rule on the constitutionality of Sections 28-A and 29 of Republic Act 265 (Central Bank Act), as amended, and the validity of MB Resolution No. 75, for those issues were not raised in the Court of Appeals. I concur with the ponencia insofar as it denies the motion for reconsideration in G.R. No. 81303, and dismisses the petitions for review in G.R. Nos. 77255-58, 78766, 81304, and 90473. I respectfully dissent from the majority opinion in G.R. No. 70054 annulling and setting aside MB Resolution No. 75 and ordering the respondents, Central Bank of the Philippines and the Monetary Board — to reorganize petitioner Banco Filipino Savings and Mortgage Bank, and allow the latter to resume business in the Philippines under the comptrollership of

both the Central Bank and the Monetary Board and under such conditions as may be prescribed by the latter until such time that petitioner bank can continue in business with safety to its creditors, depositors and the general public. for I believe that this Court has neither the authority nor the competence to determine whether or not, and under what conditions, BF should be reorganized and reopened. That decision should be made by the Central Bank and the Monetary Board, not by this Court. All that we may determine in this case is whether the actions of the Central Bank and the Monetary Board in closing BF and placing it under receivership were "plainly arbitrary and made in bad faith. Section 29 of Republic Act No. 265 provides: Section 29. Proceedings upon insolvency. — Whenever, upon examination by the head of the appropriate supervising and examining department or his examiners or agents into the condition of any banking institution, it shall be disclosed that the condition of the same is one of insolvency, or that its continuance in business would involve probable loss to its depositors or creditors, it shall be the duty of the department head concerned forthwith, in writing, to inform the Monetary Board of the facts, and the Board may, upon finding the statements of the department head to be true, forbid the institution to do business in the Philippines and shall designate an official of the Central Bank as receiver to immediately take charge of its assets and liabilities, as expeditiously as possible collect and gather all the assets and administer the same for the benefit of its creditors, exercising all the powers necessary for these purposes including, but not limited to, bringing suits and foreclosing mortgages in the name of the banking institution. The Monetary Board shall thereupon determine within sixty days whether the institution may be reorganized or otherwise placed in such a condition so that it may be permitted to resume business with safety to its depositors and creditors and the general public and shall prescribe the conditions under which such resumption of business shall take place as well as the time for fulfillment of such conditions. In such case, the expenses and fees in the collection and administration of the assets of the institution shall be determined by the Board and shall be paid to the Central Bank out of the assets of such banking institution. If the Monetary Board shall determine and confirm within the said period that the banking institution is insolvent or cannot resume business with safety to its depositors, creditors and the general public, it shall, if the public interest requires, order its liquidation, indicate the manner of its liquidation and approve a liquidation plan. The Central Bank shall, by the Solicitor General, file a petition in the Court of First Instance, reciting the proceedings which have been taken and praying the assistance of the court in the liquidation of the banking institutions. The court shall have jurisdiction in the same proceedings to adjudicate disputed claims against the bank and enforce individual liabilities of the stockholders and do all that is necessary to preserve the assets of the banking institution and to implement the liquidation plan approved by the Monetary Board. The Monetary Board shall designate an official of the Central Bank as liquidator who shall take over the functions of the receiver previously appointed by the Monetary Board under this section. The liquidator shall, with all convenient speed, convert the assets of the banking institution to money or sell, assign or otherwise dispose of the same to creditors and other parties for the

purpose of paying the debts of such bank and he may, in the name of the banking institution, institute such actions as may be necessary in the appropriate court to collect and recover accounts and assets of the banking institution. The provisions of any law to the contrary notwithstanding, the actions of the Monetary Board under this section and the second paragraph of Section 34 of this Act shall be final and executory, and can be set aside by the court only if there is convincing proof that theaction is plainly arbitrary and made in bad faith. No restraining order or injunction shall be issued by the court enjoining the Central Bank from implementing its actions under this section and the second paragraph of Section 34 of this Act, unless there is convincing proof that the action of the Monetary Board is plainly arbitrary and made in bad faith and the petitioner or plaintiff files with the clerk or judge of the court in which the action is pending a bond executed in favor of the Central Bank, in an amount to be fixed by the court. The restraining order or injunction shall be refused or, if granted, shall be dissolved upon filing by the Central Bank of a bond, which shall be in the form of cash or Central Bank cashier's check, in an amount twice the amount of the bond of the petitioner or plaintiff, conditioned that it will paythe which the petitioner or plaintiff may suffer by the refusalor the dissolution of the injunction. The provisions of Rule 58 of the new Rules of Court insofar as they are applicable and not inconsistent with the provisions of this section shall govern the issuance and dissolution of the restraining order or injunction contemplated in this section. Insolvency, under this Act, shall be understood to mean the inability of a banking institution to pay its liabilities as they fall due in the usual and ordinary course of business, provided, however, that this shall not include the inability to pay of an otherwise non-insolvent bank caused by extra-ordinary demands induced by financial panic commonly evidenced by a run on the banks in the banking community. The determinative factor in the closure, receivership, and liquidation of a bank is the finding, upon examination by the SES of the Central Bank, that its condition "is one of insolvency, or that its continuance in business would involve probable loss to its depositors and creditors." (Sec. 29, R.A. 265.) It should be pointed out that insolvency is not the only statutory ground for the closure of a bank. The other ground is when "its continuance in business would involve probable loss to its depositors and creditors. Was BF insolvent i.e., unable to pay its liabilities as they fell due in the usual and ordinary course of business, on and for some time before January 25, 1985 when the Monetary Board issued Resolution No. 75 closing the bank and placing it under receivership? Would its continued operation involve probable loss to its depositors and creditors? The answer to both questions is yes. Both the conservator Gilberts Teodoro and the head of the SES (Supervision and Examination Sector) Ramon V. Tiaoqui opined that BF's continuance in business would cause probable loss to depositors and creditors. Tiaoqui further categorically found that BF was insolvent. Why was this so? The Teodoro and Tiaoqui reports as well as the report of the receivers, Carlota Valenzuela, Arnulfo B. Aurellano and Ramon V. Tiaoqui, showed that since the end of November 1983 BF had already been incurring "chronic reserve deficiencies' and experiencing severe liquidity problems. So much so, that it had become "a substantial borrower in the call loans market" and in June 1984 it obtained a P30 million emergency loan from the Central Bank. (p. 2, Receiver's Report.) Additional emergencyt loans (a total of P119.7 millions) were extended by

6% by end-May 1984. On July 27. dropped to P935 million at the end of November 1984 or a loss of P2. in violation of Section 37 of the General Banking Act (R. 1984. (p. 839 dated June 29. to about 8.1991). much below the statutory requirements of 24% for demand deposits/deposit substitutes and 14% for savings and time deposits.a.) 4. Tiaoqui Report). Teodoro hired financial consultants Messrs. Cosico Report). but expenses of about P17 million per month were required to maintain the bank's operation. an average monthly gain of P26 million during the first 5 months of 1984. 934 of July 27. Presumably to assure that the financial assistance would be properly used. Tiaoqui Report. 1984 (pp. Deposits had declined at the rate of P20 million during the month of December 1984. which were at P3. Gorres. Accumulated penalties on reserve deficiencies amounted to P37. 1983 to a high of P435.910 million. Estanislao resigned after two weeks for health reasons. Velayo and Company to make an asset evaluation. offered to "turn over the administration of the affairs of the bank" to the Central Bank (Aguirre's letter to Governor Jose Fernandez. On July 23. unable to meet heavy deposit withdrawals. Tiaoqui Report. Besides the conservatorship team.the Central Bank to BF that month (MB Res. 2.) 3. Jr. On January 9. 1984. Teodoro submitted his Report.4 millions (p. 1984. 8. A conservatorship team of 78 examiners and accountants was assigned at the bank to keep track of its activities and ascertain its financial condition (p. The Philippine Appraisal Company (PAC) appraised BFs real estate properties.3601 billions of the credit line were availed of by the end of 1984 exclusive of an overdraft of P932.. on January 23. Santillan. the Bank's average yield on assets of 16. (Tiaoqui Report. 1984 up to January 8. Tiaoqui Report). No.0 million during the week of November 21-25. Anthony Aguirre. 2. BF's management motu proprio. closed the bank and declared a bank holiday. 1985. On July 12. responding to BFs pleas for additional financial assistance. Deposit levels.3% p. the CB. and collaterals held. without obtaining the conformity of the Central Bank.9 million during the week of June 11-15. was insufficient to meet the average cost of . No. Deficiencies in average daily legal reserves rose from P63. granted BF a P3 billion credit line (MB Res. Casuela to make an analysis of BF's financial condition. Annex 7 of Manifestation dated May 3.A.337): 2 1.) 5. Based on the projected outlook. BF had been continually deficient in liquidity reserves (Teodoro Report). 6.4 million by July 31. This represented an average monthly loss of P485 million vs. 1985. the MB appointed Basilio Estanislao as conservator of the bank. The ratio of liquid assets to deposits and borrowings plunged from about 20% at end-1983.4122 billions (p. Tiaoqui Report).845 million at end-May l984 (its last "normal" month). The bank had been experiencing a severe drop in liquidity levels.1984). Three weeks later. P2. (pp. Total accommodations granted to BF amounted to P3. Teodoro Report.) 2. and Plorido P. He was succeeded by Gilberto Teodoro as conservator in August. BFs chairman. 1985. 2-3. Tirso G. Both reports showedthat. 2-3. acquired assets. and rose to P48 million by the end of 1984.1984. Tiaoqui also submitted his Report. 19. (p. 1984) to enable it to reopen and resume business on August 1. Teodoro also engaged the accounting firm of Sycip.

and some stockholders of BF.487 million were appraised by PAC to be worth only P1.a.) Here again BF violated the General Banking Act (R. committing as much as 52% of its peso deposits to its affiliates or "related accounts" to which it continued lending even when it was already suffering from liquidity stresses.3 million in the first five months of 1984 — and by another P105. (c) While P674 million in loans were supposedly guaranteed by the Home Financing Corporation (HFIC). deficient by P291 million. Around P18. 8. P49. (p. 337). Some of the loans were used to acquire preferred stocks of BF. (p.8 million were issued in the name of an entity other than the purchaser of the stocks. (pp. During the period of marked decline in liquidity levels the loan portfolio grew by P417.679 billion at the end of July 1984. BF overextended itself in lending to the real estate industry. hence. 4 10.5% p. Tiaoqui Report.196 million. were secured by collateral .4 million was paid out of the proceeds of loans to stockholders/ borrowers with relationship to the bank (Annex D).658 TCT's which BF evaluated to be worth P1. 1984. 5 Teodoro Report.9 million of preferred non-convertible stocks were issued. These helped to make otherwise delinquent loans appear "current" and deceptively "improved" the quality of the loan portfolio.) 11. An imprudently large proportion of assets were locked into longterm applications.a. 337).) 6.A. showed that: (a) 2. 2-3. and operating expenses of 4.2% of it channeled to companies whose stockholders. 56.) 9.882 million including accrued interest. Examination of the collaterals for the loan accounts of 63 major borrowers and 32 other selected borrowers as of July 31.) (d) Per SGV's report.funds of 19. (Tiaoqui Report. (Tiaoqui Report. (Teodoro Report. (Teodoro Report.A. directors and officers were related to the officers. 1983 and February 10. (Teodoro Report. About 85% or P42. loans totalling P1. 3 8. directors. the latter confirmed only P427 million. The loan portfolio stood at P3. as an accommodation for the direct maturing loans of some firms and as a way of payingoff loans of other borrower firms which have their own credit lines with the bank. Loans amounting to some P69. P247 million in loans were not guaranteed by HFC.) This was done in violation of Section 38 of the General Banking Act (R.l million in the next two months. (b) Other properties (collaterals) supposedly worth P711 million could not be evaluated by PAC because the details submitted by the bank were insufficient.8% p. Tiaoqui Report. Between September 17.) 12.) 7.3 million were granted simply to pay-off old loans including accrued interest. 1984.

7% or P697. Tiaoqui believed that the principal cause of the bank's failure was that in violation of the General Banking Law and CB rules and regulations. in the light of the bank's worsening condition.54 billion. 1985.1 million exceeds total assets of P4. Of the latter. BF's major stockholders. 2. 5. the projected net loss would be P390. several of which showed distressed conditions.6% were classified as loss. the estimated net loss was P372. Tiaoqui Report. Tiaoqui submitted his report to the Monetary Board. Total liabilities of P5.e. e) Total loans and investment portfolio amounted to P3.) On January 23.7 million against the minimum capital required of P657.7% of the total accommodations of P2.482.2 million. b) For the twelve (12) months from November 1984.38%. Teodoro Report) c) Around 71. (p. companies owned or controlled by them of their relatives) had been "borrowing" huge chunks of the money of the depositors. has stated that the continuance of the bank in business would involve probable . Teodoro Report.worth only Pl. — a) For the eleven (11) months ended November 30.1 millions).282." He recommended "that the Monetary Board take a more effective and responsible action to protect the depositors and creditors .7 Million and would continue unabated. in his report to the Monetary Board dated January 8. of which P194. BF had been suffering heavy losses.8%. 7.2 millions and accumulated net loss of P48. Capital to risk assets ratio is negative 10.011. 5." (p.3% were adversely classified (Substandard — P1. Total capital account of P334.2 million by 6.0 millions or 5. owes P502 million to BF.0677 billions to the related/linked entities were adversely classified. Hence.657. BF Homes. His Conclusion and Recommendations were: The Conservator." (P..1 millions were clean loans or against PNs (promissory notes) of these entities.6 million (Annex F).6 Million. through their "related" companies: (i. directors and officers.1 millions or 42. Inc.4 millions. Tiaoqui Report. Close to 33. indicates one of insolvency. 1985..) d) The bank's financial condition as of date of examination. after setting up the additional valuation reserves of P612.914.6 millions and Loss — P371. 13. Accounts adversely classified included unmatured loan of Pl.3 millions (gross).2 millions.0% were past due and P1.947.. 52. Like Teodoro. (p.9 million) is deficient by P322. BFs unsecured exposure amounted to P586.) Teodoro's conclusion was that "the continuance of the bank in business would involve probable loss to its depositors and creditors.0 million to entities related with each other and to the bank. a related company which has filed with the SEC a petition for suspension of payments. Doubtful — P274. 1984.

Cesar A. then composed of: Chairman: Jose B. as listed in the attached Annex "A" be included in the watchlist of the Supervision and Examination Sector until such time that they shall have cleared themselves. Foregoing considered. Fernandez. 37. 75 closing BF and placing it under receivership. as amended. the following are recommended: 1.A. Jr. No. The examination findings as of July 31. Vicente B. 1984 as shown earlier. officers and employees for activities which led to its insolvent position. 3. the Monetary Board. 1985. 1985 of the Conservator for Banco Filipino Savings and Mortgage Bank that the continuance in business of the .A. Prime Minister & Concurrently Minister of Finance 2. 29 of R. 4. The Board of directors and the principal officers from Senior Vice President. (p. Annual Report 1985) issued Resolution No. and three weeks after it received Teodoro's Report." (pp. pursuant to Sec. Refer to the Central Banles Legal Department and Office of Special Investigation the report on the findings on Banco Filipino for investigation and possible prosecution of directors. Ongpin. Virata.loss to its depositors and creditors. 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. CB Governor Members: 1. Tiaoqui Report. 2. 265. Forbid the Banco Filipino Savings & Mortgage Bank to do business in the Philippines effective the beginning of office on January.. President of Filipinas Shell Petroleum Corp. as Receiver of Banco Filipino Savings & Mortgage Bank. Minister of Economic Planning & Director General of NEDA 4. Valdepeñas. Designate the Head of the Conservator Team at the bank. The MB Resolution reads as follows: After considering the report dated January 8. Jr. indicate one of insolvency and illiquidity and further confirms the above conclusion of the Conservator. to immediately take charge of the assets and liabilities. Roberto V. as expeditiously as possible collect and gather all the assets and administer the same for the benefit of all the creditors. Cesar E. 1985 or two days after the submission of Tiaoqui's Report. Minister of Trade & Industry & Chairman of Board of Investment 3. It has recommended that a more effective action be taken to protect depositors and creditors. Buenaventura. All the foregoing provides sufficient justification for forbidding the bank from further engaging in banking. 9-10.) On January 25.

To designate Mr. 126-127. they found that: 1.A.67 million from November 25. Carlota Valenzuela. Carlota P. 265. (pp. To forbid Banco Filipino Savings and Mortgage Bank and all its branches to do business in the Philippines. and 5. to terminate the conservatorship over Banco Filipino Savings and Mortgage Bank. and as expeditiously as possible collect and gather all the assets and administer the same for the benefit of its creditors. Receivers' Report). Rollo I. 1984. as Receiver who is hereby directly vested with jurisdiction and authority to immediately take charge of the bank's assets and liabilities. 4. 2nd paragraph of R. and Mr.09 million until July 27. the Board decided: 1. Supervision and Examination Sector (SES) Department II. submitted a report to the Monetary Board as required in Section 29. In consequence of the foregoing. To designate Mrs. 2 and 4. or be liquidated. exercising all the. BF had been suffering a capital deficiency of P336. For. as amended. the receiver. bringing suits and foreclosing mortgages in the name of the bank. 2.1985. Aurellano. and the deputy receivers. among other things. 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/credition and the general public. Its reserve . No. Deputy Governor. Special Assistant to the Governor and Head. Ramon V. the Monetary Board shall determine whether the bank may be reorganized and permitted to resume business. 2. The receivers recommended that BF be placed under litigation. Arnulfo B.) On March 19. 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 or Monetary Board resolutions. and after discussing and finding to be true the statements of the Special Assistant to the Governor and Head. 265 which provides that within sixty (60) days from date of the receivership.bank would involve probable loss to its depositors and creditors. Aurellano and Ramon V. Supervision and Examination Sector Department II. Tiaoqui. Arnulfo B. that the Banco Filipino Savings and Mortgage Bank is insolvent and that its continuance in business would involve probable loss to its depositors and creditors. Tiaoqui. as recited in his memorandum dated January 23. 1984.5 million as of July 31.powers necessary for these purposes including. Valenzuela. 1985. 3. rising to a peak of P338. 1984 (pp. but not limited to. Special Assistant to the Governor. and in pursuance of Section 29 of R. The bank's weekly reserve deficiencies averaged P146. 1983 up to March 16.A.

means 'the inability of a banking institution to pay its liabilities as they fall due in the usual and ordinary course of business. 3. 1984. Even if assets and liabilities were to be factored into a formula for determining whether or not BF was already insolvent on or before January 25.159. 8. the biggest of them being the Central Bank.478 billions. there were no collections from loans granted to firms related to each other and to BF classified as "doubtful" or "loss. Thus. (P. Receivers' Report. 1985 on account of unhooked penalties for deficiencies in legal reserves (P49. Cosico Report).5 millions. Estimated losses or "unhooked valuation reserves" for loans to entities with relationships to certain stockholder/directors and officers of the bank amounted to P600. emergency advance of P569. and its total liabilities were P4. While Aguirre's Report showed BF ahead with a net worth of P412. they will entirely wipe out the bank's entire capital account and leave a capital deficiency of P336.49 million from Central Bank. 1984. unhooked interest on overdrawings. Insolvency. 3-4. Since June 1984.23. All the discussion in the Santiago Report concerning the bank's assets and liabilities as determinants of BF's solvency or insolvency is irrelevant and inconsequential. . (pp. as defined in Rep.909. Act. put together. 1984 up to December 7.) The Receivers further noted that — After BF was closed as of January 25. BF remains insolvent with estimated deficiency to creditors of Pl.891 billions and confirm its insolvent condition to the tune of P187. Combined with other adjustments in the amount of P73. and additional valuation reserves of P124.) In the light of the results of the examination of BF by the Teodoro and Tiaoqui teams.deficiencies against deposits and deposit substitutes began on the week ending June 15.891 billions (not P6 billions) according to the Report signed and submitted to the CB by BF's own president.21 (millions)." there was no further increase in the value of assets owned/acquired supported by new appraisals and there was no infusion of additional capital such that the estimated realizable assets of BF remained at P3. The bank was already insolvent on July 31." The receivership was justified because BF was insolvent and its continuance in business would cause loss to its depositors and creditors. Act 265.98 million. (50% of face value of doubtful loans and 100% of face value of loss accounts) which BF had granted to its related/linked companies. but by its "inability to pay its liabilities as they fall due in the ordinary course of business" and it was abundantly shown that BF was unable to pay its liabilities to depositors for over a six-month-period before it was placed under receivership. said report did not make any provision for estimated valuation reserves amounting to P600.4 million as of January 26.961 millions.538 millions. 1985. the result would be no different.44 (millions). Moreover.5 million. with average daily reserve deficiencies of P2. BF had been unable to meet the heavy cash withdrawals of its depositors and pay its liabilities to its creditors.5 millions plus BF's admitted liabilities of P4. Receivers' Report. for under Section 29 of Rep.07 million). (millions) while the total liabilities amounted to P5. there were no efforts on the part of the stockholders of the bank to improve its financial condition and the possibility of rehabilitation has become more remote. I do not find that the CB's Resolution No. the Monetary Board correctly found its condition to be one of insolvency. 265.478 billions (p.5 million. The capital deficiency increased to P908. The estimated valuation reserves of P600. hence. The bank's assets as of the end of 1984 amounted to P4.2 million. 1985. would wipe out BFs realizable assets of P4.5 million." there were no substantial improvements on other loans classified "doubtful"or "loss.250. a bank's insolvency is not determined by its excess of liabilities over assets. 75 ordering BF to cease banking operations and placing it under receivership was "plainly arbitrary and made in bad faith. 58.

14-15. 1984. 53. The CB could not wait forever for BF to respond for the CB had to act with reasonable promptness to protect the depositors and creditors of BF because the bank continued to operate. (3) A conference on the matter washeld on January 2l. (pp. Santiago's argument that valuation reserves should not be considered because the matter was not discussed by Tiaoqui with BF officials is not well taken for: (1) The records of the defaulting debtors were in the possession of BF. a copy of which was furnished BF on December 1 7. unsafe. for instead of satisfying the depositors' demands for the withdrawal of their money.6 . pumping the hard-earned savings of 3 million depositors into the bank. the official termination of the examination with the submission by the Chief Examiner of his report to the Monetary Board in March 1985. I do not think it would be proper and advisable for this Court to interfere with the CB's exercise of its prerogative and duty to discipline banks which have persistently engaged in illegal. the findings in the Tiaoqui Report. Tiaoqui's admission that the examination of BF had "not yet been officially terminated" when he submitted his report on January 23.5 millions for "doubtful" and "loss" accounts was a proper factor to consider in the capital adjustments of BF and was in accordance with accounting rules. 1985 none of the loans. directors and major stockholders have neither repaid the Central Bank's P3. its officers. BF had no reason to go bankrupt if it were properly managed. Up to this time. 2.. 'plainly arbitrary and in bad faith. if the uncollectible loan accounts would be entered in the assets column as "receivables. (2) The "adversely classified" loans were in fact included in the List of Exceptions and Findings (of irregularities and violations of laws and CB rules and regulations) prepared by the SES. The recommended provision for valuation reserves of P600. the result would be a gravely distorted picture of the financial condition of BF. except three.BF's and Judge (now CA Justice) Consuelo Y.5 billions into the bank in its endeavor to save it. The damage to the banking system and to the depositing public is bigger when the bank." without a corresponding entry in the liabilities column for estimated losses or valuation reserves arising from their uncollectability. Dizon. but in fact confirmed." and what had not been examined was negligible and would not have materially altered the result. (4) Subsequent events proved correct the SES classification of the loan accounts as "doubtful" or "loss' because as of January 25. Act 265). Cosico Report). 1985 with senior officials of BF headed by EVP F. even if they had already matured (p. Cosico Report. 1985 did not make the action of the Monetary Board of closing the bank and appointing receivers for it. For. unsound and fraudulent banking practices causing tremendous losses and unimaginable anxiety and prejudice to depositors and creditors and generating widespread distrust and loss of confidence in the banking system. 46 of them in Metro Manila alone. With 89 branches nationwide. The responsibility of administering the Philippine monetary and banking systems is vested by law in the Central Bank whose duty it is to use the powers granted to it under the law to achieve the objective. But even this financial assistance was misused. Rep. is big. had been paid either partially or in full. like Banco Filipino. of maintaining monetary stability in the country (Sec. among others. The Central Bank had to infuse almost P3. In any event. BF's strange argument that it was not insolvent for otherwise the CB would not have given it financial assistance does not merit serious consideration for precisely BF needed financial assistance because it was insolvent." For what had been examined by the SES was more than enough to warrant a finding that the bank was "insolvent and could not continue in business without probable loss to its depositors or creditors. did not contradict.) BF did not formally protest against the CBs estimate of valuation reserves. BF channeled and diverted a substantial portion of the finds into the coffers of its related/linked companies.

70054 for lack of merit. GUILLERMO G. the City Sheriff of Tagaytay City issued a Certificate of Sale in favor of . Jr. ii iii iv. 1529 against Rural Bank of Olongapo. DECISION BELLOSILLO.billion financial assistance.. February 1. The RBO was the owner in fee simple of two parcels of land including the improvements thereon situated in Tagaytay City x x x particularly described in TCT Nos. Inc. nor put up adequate collaterals therefor. Omnibus Finance. No... INC.D. 13769 and 13770 x x x 3. No. 112830. represented by its liquidator Guillermo G. COURT OF APPEALS and RURAL BANK OF OLONGAPO.517. vs. to make. respondents. which is likewise now undergoing liquidation proceedings of its money market obligations to petitioner in the principal amount of P863.. (RBO). [G. 1983 to guarantee the payment of Omnibus Finance. nor submitted a credible plan for the rehabilitation of the bank. WHEREFORE. the latter proceeded to effect the extrajudicial foreclosure of said mortgages. J.02 x x x 4. 1984. I vote to dismiss the petition for certiorari and mandamus in G. 13769 and 13770 pursuant to the provisions of Secs. represented by its Liquidator. and in effect risk more of the Government's money in the moribund bank? I respectfully submit that decision is for the Central Bank. J.R. not for this Court. petitioner. Inc. Romero. The petition averred inter alia that [2] [3] 2.R. and deputy liquidator Abel Allanigue. and Deputy Liquidator ABEL ALLANIGUE. REYES. concurs. 1996] JERRY ONG. What authority has this Court to require the Central Bank to reopen and rehabilitate the bank. not having seasonably settled its obligations to petitioner. JR. such that on March 23. Inc. Reyes. [1] On 5 February 1991 Jerry Ong filed with the Regional Trial Court of Quezon City a petition for the surrender of TCT Nos. Said parcels of land were duly mortgaged by RBO in favor of petitioner on December 29. 63(b) and 107 of 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.

and. Accordingly. consequently. which case was dismissed with finality on appeal before the Court of Appeals. pursuant to prevailing jurisprudence. To date. Still unpersuaded by respondent RBO’s arguments. 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. 13769 and 13770. 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. Respondents failed to seasonably redeem said parcels of land. 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. petitioner has executed an Affidavit of Consolidation of Ownership which. despite demand.petitioner xxx 5. respondent RBO contended that it was undergoing liquidation and. 1991 holding that: (a) subject parcels of land were sold to petitioner through public bidding on 23 March 1984 and. respondent RBO filed a motion for reconsideration but the same was similarly rejected in the order of June 11. as shown in the certified true copies of the aforementioned titles x x x 6. for which reason. it is the liquidation court which has exclusive jurisdiction to take cognizance of petitioner’s claim. to date. In a supplemental motion to dismiss. 18 of the Regional Trial Court of Tagaytay City. 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. [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. 7. said pieces of realty were no longer part of the assets of respondent RBO. to surrender RBO’s copies of its owner’s certificates of title for the parcels of land covered by TCT Nos. has not been submitted to the Registry of Deeds of Tagaytay City. in view of the fact that possession of the aforesaid titles or owner’s duplicate certificates of title remains with the RBO. the trial court denied reconsideration in its order of 18 September 1991 prompting the bank to elevate . (b) in the same token. Said Certificate of Sale x x x was duly registered with the Registry of Deeds of Tagaytay City on July 16. 1985.

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

as a receiver. The phrase “(T)he court shall have jurisdiction in the same proceedings to adjudicate disputed claims against the bank” appears to have misled petitioner. in the absence of certificates of title in the name of petitioner. Applying the aforequoted provision in Hernandez v. As far as those claimants are concerned. It is a pragmatic arrangement designed to establish due process and orderliness in the liquidation of the bank.. Inc. Petitioner must have overlooked the fact that since respondent RBO is insolvent other claimants not privy to their transaction may be involved. it would be necessary injustice to all concerned that a Court of First Instance (now Regional Trial Court) x x x assist and supervise the liquidation and x x x act as umpire or arbitrator in the allowance and disallowance of claims. all claims against the insolvent bank should be filed in the liquidation proceeding (italics supplied). i. this Court ruled – [8] The fact that the insolvent bank is forbidden to do business. 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. if possible. the term “disputed claim” in the provision simply connotes that – [n] the course of the liquidation. to obviate the proliferation of litigations and to avoid injustice and arbitrariness. Rural Bank of Lucena. As may be gleaned in theHernandez case. The lawmaking body contemplated that for convenience only one court.the bank x x x and enforce individual liabilities of the stockholders and do all that is necessary to preserve the assets of such institution and to implement the liquidation plan approved by the Monetary Board (italics supplied). contentious cases might arise wherein a full-dress hearing would be required and legal issues would have to be resolved. We explained therein the rationale behind the provision.. as far as lawful and practicable. for conversion into cash. and that its liquidation is undertaken with judicial intervention means that. should pass upon the claims against the insolvent bank and that the liquidation court should assist the Superintendent of Banks and regulate his operations. . Hence. that its assets are turned over to the Superintendent of Banks. 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. It is not necessary that a claim be initially disputed in a court or agency before it is filed with the liquidation court. subject lots still form part of the assets of the insolvent bank.e.

Br.A.. 73. concur. v vi vii viii ix x xi xii xiii xiv xv xvi xvii xviii xix xx . 170-0-85 before the Regional Trial Court of Olongapo City.On the basis of the Hernandez case as well as Sec. SO ORDERED. Jr. of R. much less in ordering the dismissal of Civil Case No. Br. 1827. did not have jurisdiction over the petition. 79. WHEREFORE. respondent Court of Appeals was correct in holding that the Regional Trial Court of Quezon City. and Hermosisima. par. JJ. without prejudice to petitioner’s right to file his claim in Sp. The decision of respondent Court of Appeals dated 12 February 1992 is AFFIRMED.D. 3. 29. Q-91-8019. 265 as amended by P.. Vitug. Kapunan. Proc. the petition is DENIED. Padilla (Chairman). Costs against petitioner. No.