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[G.R. No. L-21146. September 20, 1965.]

RURAL BANK ! LUCENA, "NC., pet#t#o$er, %&. 'N. !RANC"SC ARCA, (& )*+,e, Co*rt o- !#r&t "$&t($.e o-
/($#0(, Br($.1 " ($+ CEN2RAL BANK ! 2'E 3'"L"33"NES, re&po$+e$t&.
REYES, J. B. L., J p:
The Rural Bank of Lucena, Inc., a banking corporation organized under Republic ct !o. "#$, in%tituted an action
to collect da&age% and to en'oin the (entral Bank fro& enforcing Re%olution !o. )#* of it% +onetar, Board, finding that
the Rural Bank of Lucena -Lucena for %hort., through it% officer%, director%, and e&plo,ee%, had co&&itted act%
%ub%tantiall, pre'udicial to the /o0ern&ent, depo%itor%, and creditor%, and directing Lucena to reorganize it% board of
director%1 to refrain fro& granting or rene2ing loan%, or accept ne2 depo%it%, and not to i%%ue draft% or &ake di%bur%e&ent%
2ithout the appro0al of the %uper0i%ing (entral Bank e3a&iner%1 and threatening Lucena that it% &anage&ent 2ould be
taken o0er if the latter %hould fail to co&pl, 2ith the re%olution. fter i%%ue 'oined and trial of the ca%e, and 2hile the
litigation 2a% %till undecided b, the (ourt of 4ir%t In%tance, the +onetar, Board, ha0ing been infor&ed that the 5irector of
it% 5epart&ent of Rural Bank% reco&&ended the li6uidation of the Rural Bank of Lucena, adopted on 4ebruar, #, 7)8# it%
Re%olution !o. 7## -9etition, nne3 :(: . ;
:To re6ue%t the Solicitor /eneral, pur%uant to %ection #) of Republic ct !o. #8<, to file a petition in the proper court% for
the li6uidation of the affair% of the Rural Bank of Lucena, Inc.:
!otice 2a% gi0en b, (entral Bank official% on 4ebruar, 7$, 7)8# that the Lucena bank 2a% te&poraril, clo%ed
pending final deci%ion of the (ourt, and that bu%ine%% be tran%acted 2ith (entral Bank repre%entati0e% onl,.
T2o da,% later Lucena bank filed %uit to annul Re%olution 7## of the +onetar, Board -(a%e !o. 8="7. and en'oin
it% enforce&ent1 and on 4ebruar, 7= the court i%%ued e3 parte a 2rit of preli&inar, in'unction to %uch effect. >n the %a&e
da,, a deci%ion 2a% relea%ed en'oining enforce&ent of Re%olution !o. )#* of the +onetar, Board, for ha0ing been i%%ued
2ithout the prior hearing pre%cribed b, %ection 7$ of the Rural Bank ct, and ordering the (entral Bank to pa, 9<,$$$.$$
da&age% and co%t%. The (entral Bank appealed.
?pon the other hand, the court di%%ol0ed it% preli&inar, in'unction again%t the enforce&ent of Re%olution 7## of
the +onetar, Board. >ther than filing a &otion for recon%ideration -ulti&atel, denied on Januar, ), 7)8@. the Lucena bank
took no other %tep% to pro%ecute the ca%e it had filed.
>n the @7%t of +arch 7)8#, in0oking %ection #) of Republic ct #8<, the (entral Bank, a% li6uidator, petitioned the
(ourt of 4ir%t In%tance of +anila for a%%i%tance in the li6uidation of the Lucena bank -(i0il (a%e !o. <$$7).. ?pon &otion,
and after hearing the partie%, Judge rca i%%ued an interlocutor, order on +arch #*, 7)8@, the di%po%iti0e portion of 2hich i%
to the follo2ing effect -9etition, nne3 :5:.:
:The Rural Bank of Lucena, thru it% dul, authorized officer% or repre%entati0e%, i% hereb, ordered to turn o0er to the (entral
Bank, thru it% dul, authorized repre%entati0e, 2ithin a period of fi0e -<. da,% fro& receipt of cop, of thi% order, the ph,%ical
po%%e%%ion of all of %aid Rural Bank of LucenaA% a%%et%, propertie% and paper%. Should the Rural Bank of Lucena or it%
officer% fail to co&pl, 2ith the abo0e order 2ithin the period indicated herein, the (entral Bank, thru it% authorized
repre%entati0e%, i% hereb, authorized to take actual and ph,%ical po%%e%%ion of all %aid a%%et%, propertie% and paper% of the
Rural Bank of Lucena, dul, in0entoried in the pre%ence of the 9ro0incial 4i%cal, the 9ro0incial (o&&ander, the 9ro0incial
Trea%urer, and the 9ro0incial uditor of Buezon pro0ince or their dul, authorized repre%entati0e%.:
The Rural Bank of Lucena re%orted to thi% (ourt on certiorari, clai&ing that Judge rca gra0el, abu%ed hi%
di%cretion in %uch that there i% a conflict bet2een %ection 7$ -a% a&ended. of Republic ct !o. "#$ -Rural Bank% ct. and
%ection #) of Republic ct !o. #8< -(entral Bank ct..
Co! there i% a conflict bet2een %ection 7$ -a% a&ended. of Republic ct !o. "#$ -Rural Bank% ct. and %ection
#) of Republic ct !o. #8< -(entral Bank ct..
!>. There i% no irreconcilable conflict bet2een %ection 7$ -a% a&ended. of Republic ct !o. "#$ -Rural Bank%
ct. and %ection #) of Republic ct !o. #8< -(entral Bank ct.. Chat the for&er %ection authorized i% the take o0er of the
&anage&ent b, the (entral Bank, until the go0erning bod, of the offending Rural Bank i% recognized 2ith a 0ie2 to
a%%uring co&pliance b, it 2ith the la2% and regulation%. ?pon the other hand, %ection #) of the (entral Bank ct ha% in
0ie2 a &uch &ore dra%tic %tep, the li6uidation of a rural bank b, taking o0er it% a%%et% and con0erting the& into &one, to
pa, off it% creditor%.
Section #) of Republic ct !o. #8< -(entral Bank% ct. applie% to rural bank% organized under Republic ct "#$,
2hene0er the +onetar, Board %hould find that the rural bank affected i% in%ol0ent, or that it% continuance in bu%ine%% 2ould
in0ol0e probable lo%% to it% depo%itor% or creditor%, and that it can not re%u&e bu%ine%% 2ith %afet,.
?nder %ection 7$ of the Rural Bank% ct, the +onetar, Board &a, not take o0er the &anage&ent of a rural bank
2ithout gi0ing the latter a hearing i.e., an opportunit, to rebut the charge that it ha% contra0ened applicable la2%, rule% and
regulation% to the %ub%tantial pre'udice of the go0ern&ent, it% depo%itor% and creditor%. Such pre0iou% hearing i% no2here
re6uired b, %ection #) of the (entral Bank la2. +anife%tl,, 2hether a rural bankA% continuance in bu%ine%% 2ould in0ol0e
probable lo%% to it% client% or creditor%, and that it can not re%u&e bu%ine%% 2ith %afet,, i% a &atter of appreciation and
'udg&ent that the la2 entru%t% pri&aril, to the +onetar, Board. 4or thi% rea%on, the %tatute ha% pro0ided for a %ub%e6uent
'udicial re0ie2 of the +onetar, Board, in lieu of a pre0iou% hearing. Such re0ie2 &u%t be a%ked 2ithin ten da,% fro& notice
of the re%olution of the Board.
In ca%e 2here the (entral Bank, a% li6uidator, petition% the (ourt of 4ir%t In%tance for a%%i%tance in the li6uidation
of the affair% of the rural bank%, the court cannot in6uire into the &erit% of the ca%e before i%%uing an order re6uiring the
%urrender of the a%%et% and paper% of the rural bank. ?nder the fourth paragraph of %ection #) of Republic ct !o. #8<, the
role of the (ourt of 4ir%t In%tance i% confined to a%%i%ting and %uper0i%ing the li6uidation of the rural bank%.
I! DIEC >4 TEE 4>RE/>I!/, the 2rit applied for i% denied, 2ith co%t% again%t the petitioner Lucena Rural
Bank, Inc.

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