Professional Documents
Culture Documents
Appeals from the COSLAP may not be brought directly before the
Supreme Court but must be elevated to the Court of Appeals but where the
assailed Resolution is void, the Supreme Court may entertain the petition
for certiorari notwithstanding the failure of the petitioner to appeal the
Resolution to the Court of Appeals. (Davao New Town Development
Corporation vs. Commission on the Settlement of Land Problems [COSLAP],
459 SCRA 491 [2005])
A petition under Rule 45 brings up for review errors of judgment while a
petition under Rule 65 concerns errors of jurisdiction amounting to lack or
excess of jurisdiction. (GCP-Manny Transport Services, Inc. vs. Principe, 474
SCRA 555 [2005])
o0o
* FIRST DIVISION.
** Formerly Equitable PCI Bank, Inc.
343
344
SUPREME COURT REPORTS ANNOTATED
345
primarily by deposits from the public. They plough back the bulk of said
deposits into the economy in the form of loans. Since banks deal with the
publics money, their viability depends largely on their ability to return
those deposits on demand. For this reason, banking is undeniably imbued
with public interest. Consequently, much importance is given to sound
lending practices and good corporate governance.
6 JAPRL failed to pay the value of trust receipt nos. 114505, 1000006285,
1000006305 and 1000006325. Id.
_______________
x x xx x xx x x
346
SUPREME COURT REPORTS ANNOTATED
Banco De Oro-EPCI, Inc. vs. JAPRL Development Corporation
1998, 1999 and 2000,4 petitioner Banco de Oro-EPCI, Inc. extended credit
facilities to it amounting to P230,000,0005 on March 28, 2003.
Respondents Rapid Forming Corporation (RFC) and Jose U. Arollado acted
as JAPRLs sureties.
Despite its seemingly strong financial position, JAPRL defaulted in the
payment of four trust receipts soon after the approval of its loan.6
Petitioner later learned from MRM Management, JAPRLs financial adviser,
that JAPRL had altered and falsified its financial statements. It allegedly
bloated its sales revenues to post a big income from operations for the
concerned fiscal years to project itself as a viable investment.7 The
information alarmed petitioner. Citing relevant provisions of the Trust
Receipt Agreement,8 it demanded
_______________
115612
17,742,002.53
9187128
116067
7,718,059.80
14913
1000006285 1,734.837.50
x x xx x xx x x
14927
1000006305 3,235,780.00
x x xx x xx x x
1000006325 2,809,031.24
14969
1000006330 3,739,312.50
LETTER OF CREDIT
14982
TRUST
14952
RECEIPT
1000006339 4,142,952.24
OUTSTANDING
15144
BALANCE
1000006532 7,080,696.00
9185863
15168
114505 P 4,818,784.50
1000006558 4,889,034.00
9186617
15181
115613
1000006571 5,104,317.50
10,002,405.35
9186263
348
115099
24,421,786.32
348
9188618
15340
15374
On August 30, 2003, JAPRL (and its subsidiary, RFC) filed a petition for
rehabilitation in the Regional Trial Court (RTC) of Quezon City, Branch 90
(Quezon City RTC).10 It disclosed that it had been experiencing a decline in
sales for the three preceding years and a staggering loss in 2002.11
1000006781 5,344,652.00
1000006749
8,974,180.00
15387
1000006801
10,545,120.00
_______________
1000006808 6,454,320.00
15186
1000006574
10,129,035.00
15207
1000006809
5,837,680.00
154131000006824
6,196,080.00
1000006599
7,183,010.00
TOTAL P194,493,388.98
15236
1000006646 6,730,310.00
15244
1000006648 3,481,760.00
15251
1000006652 6,353,342.50
15273
Id., p. 64.
10 Id., pp. 83-84.
11 Id., p. 63.
According to the affidavit of general financial condition executed by Peter
Paul Limson, concurrent chairman and chief executive officer of JAPRL and
RFC, both corporations have been suffering staggering losses since the
year 2000:
1000006670
10,781,095.00
15320
1000006723 9,043,803.00
2002
2000
SALES
JAPRL
2001
P210,570,962
P233,064,377
P303,661,262
RFC
284,828,246 294,940,656 248,013,118
PROFIT/LOSSES
JAPRL
(P14,536,976)
P 269,958
P 516,359
RFC
215,747
327,462
503,112
349
350
SUPREME COURT REPORTS ANNOTATED
Banco De Oro-EPCI, Inc. vs. JAPRL Development Corporation
12 See Interim Rules of Procedure on Corporate Rehabilitation (A.M. No. 008-10-SC), Sec. 6 which provides:
Section6.Stay Order.If the court finds the petition to be sufficient in
form and substance, it shall, not later than five (5) days from the filing of
14 Id., p. 127.
15 Annex F, id., pp. 61-71.
16 Id., p. 67.
17 Issued by Presiding Judge Cesar D. Santamaria. Dated September 23,
2003. Annex G, id., pp. 73-74.
18 Annex K, id., pp. 92-94.
19 Annex J, id., p. 91. It stated:
I HEREBY CERTIFY that on July 9, 2004 a copy of summons dated May 5,
2004 issued by the Honorable Court in connection with [Civil Case No. 03991], the undersigned served upon [JAPRL], 2/F Vasquez Madrigal Plaza, 51
Annapolis St., Greenhills, San Juan, Metro Manila, [RFC and Arollado]; thru
Ms. GRACE CANO, administrative assistant who acknowledged receipt as
evidenced by her signature at the original copy of summons.
351
351
Banco De Oro-EPCI, Inc. vs. JAPRL Development Corporation
14 of the Rules of Court20 contained an exclusive list of persons on whom
summons against a corporation must be served.21 An administrative
assistant was not one of them. Arollado, on the other hand, cited Section
6, Rule 14 thereof22 which mandated personal service of summons on an
individual defendant.23
The Makati RTC, in its October 10, 2005 order,24 noted that because
corporate officers are often busy, summonses to corporations are usually
received only by administrative assistants or secretaries of corporate
officers in the regular course of business. Hence, it denied the motion for
lack of merit.
Respondents moved for reconsideration25 but withdrew it before the
Makati RTC could resolve the matter.26
_______________
DULY SERVED.
City of Makati, 12 July 2004. (emphasis supplied)
20 Rules of Court, Rule 14, Sec. 11 provides:
Section11.Service upon domestic private juridical entity.When the
defendant is a corporation, partnership or association organized under the
laws of the Philippines with a juridical personality, service may be made on
the president, managing partner, general manager, corporate secretary,
treasurer, or in-house counsel. (emphasis supplied)
21 Annex K, Rollo, pp. 92-94. See Mason v. Court of Appeals, 459 Phil.
689, 698-699; 413 SCRA 303, 308 (2003).
22 Rules of Court, Sec. 6, Rule 14 provides:
Section6.Service in person on defendant.Whenever practicable, the
summons shall be served by handing a copy thereof to the defendant in
person, or if he refuses to receive and sign for it, by tendering it to him.
(emphasis supplied)
23 Rollo, p. 93.
352
352
On February 20, 2006, JAPRL (and its subsidiary, RFC) filed a petition for
rehabilitation in the RTC of Calamba, Laguna, Branch 34 (Calamba RTC).
Finding JAPRLs petition sufficient in form and in substance, the Calamba
RTC issued a stay order27 on March 13, 2006.
353
27 Issued by Judge Jesus A. Santiago. Dated September 11, 2006. Id., pp.
126-129.
1 day after the assailed order was issued by the Makati RTC,39 way past
the 60 days allowed by the Rules of
_______________
35 Supra note 2.
36 Supra note 3.
We withhold judgment for the moment on the July 7, 2006 order of the
Makati RTC suspending the proceedings in Civil Case No. 03-991 insofar as
JAPRL and RFC are concerned. Under the Interim Rules of Procedure on
Corporate Rehabilitation, a stay order defers all actions or claims against
the corporation seeking rehabilitation41 from the date of its issuance until
the dismissal of the petition or termination of the rehabilitation
proceedings.42
_______________
40 See Orosa v. Court of Appeals, 330 Phil. 67; 261 SCRA 376 (1996).
41 Philippine Airlines v. Kurangking, 438 Phil. 375, 381; 389 SCRA 588, 591
(2002).
42 Id.
See A.M. No. 00-8-10-SC, Sec. 11 provides:
Section11.Period of Stay Order.The stay order shall be effective from
the date of its issuance until the dismissal of the petition or termination of
the rehabilitation proceedings.
354
355
Court. For these reasons, the said petition should have been dismissed
outright by the CA.
355
x x xx x xx x x
354
43 Philippine Blooming Mills v. Court of Appeals, 459 Phil. 875, 892; 413
SCRA 445, 452 (2003) citing Traders Royal Bank v. Court of Appeals, G.R.
No. 78412, 26 September 1989, 177 SCRA 788, 792.
44 Gen. Banking Law, Sec. 2 provides:
Section2.Declaration of Policy.The State recognizes the vital role of
banks providing an environment conducive to the sustained development
of the national economy and the fiduciary nature of banking that requires
high standards of integrity and performance. In furtherance thereof, the
State shall promote a stable and efficient banking and financial system
that is globally competitive, dynamic and responsive to the demands of a
developing economy. (emphasis supplied)
45 Gen. Banking Law, Sec. 3.1.
46 Gen. Banking Law, Sec. 8.2.
47 Frederic Mishkin, The Economics of Money, Banking and Financial
Matters, 5th ed., pp. 231-238.
See also Vicente Valdepeas, Jr., The Bangko Sentral and The Philippine
Economy, pp. 123-124.
356
356
SUPREME COURT REPORTS ANNOTATED
Towards this end, a bank may demand from its credit applicants a
statement of their assets and liabilities and of their income and
expenditures and such information as may be prescribed by law or by rules
and regulations of the Monetary Board to enable the bank to properly
evaluate the credit application which includes the corresponding financial
statements submitted for taxation purposes to the Bureau of Internal
Revenue. Should such statements prove to be false or incorrect in any
material detail, the bank may terminate any loan or credit accommodation
granted on the basis of said statements and shall have the right to demand
immediate repayment or liquidation of the obligation.
In formulating the rules and regulations under this Section, the Monetary
Board shall recognize the peculiar characteristics of microfinancing, such
as cash flow-based lending to the basic sectors that are not covered by
traditional collateral. (emphasis supplied)
The Regional Trial Court of Makati City, Branch 145 is ordered to proceed
expeditiously with the trial of Civil Case No. 03-991 with regard to
respondent Jose U. Arollado, and the other respondents if warranted.
Under this provision, banks have the right to annul any credit
accommodation or loan, and demand the immediate payment thereof,
from borrowers proven to be guilty of fraud. Petitioner would then be
entitled to the immediate payment of P194,493,388.98 and other
appropriate damages.51
_______________
Finally, considering that respondents failed to pay the four trust receipts,
the Makati City Prosecutor should investigate whether or not there is
probable cause to indict respondents for violation of Section 13 of the Trust
Receipts Law.52
ACCORDINGLY, the petition is hereby GRANTED. The June 7, 2007 decision
and August 31, 2007 resolution of the Court of Appeals in CA-G.R. SP No.
95659 are REVERSED and SET ASIDE.
SO ORDERED.
Puno (C.J., Chairperson), Carpio and Leonardo-De Castro, JJ., concur.
Azcuna, J., On Official Leave.
Id., pp. 66-67.
52 Trust Receipts Law, Sec. 13 provides:
Section13.Penalty Clause.The failure of an entrustee to turn over the
proceeds of the sale of the goods, documents or instruments covered by a
trust receipt to the extent of the amount owing to the entruster or as
appears in the trust receipt or to return said goods, documents or
instruments if they were not sold or disposed of in accordance with terms
of the trust receipt shall constitute the crime of estafa, punishable under
the provisions of Article Three hundred and fifteen, paragraph one (b) of
Act Numbered Three thousand eight hundred and fifteen, as amended,
otherwise known as the Revised Penal Code. If the violation or offense is
58
SUPREME COURT REPORTS ANNOTATED
Republic vs. Security Credit and Acceptance Corp., et al.
No. L-20583. January 23, 1967.
REPUBLIC OF THE PHILIPPINES, petitioner, vs. SECURITY CREDIT AND
ACCEPTANCE CORPORATION, ROSENDO T. RESUELLO, PABLO TANJUTCO,
ARTURO SORIANO, RuBEN BELTRAN, BIENVENIDO V. ZAPA, PILAR G.
RESUELLO, RICARDO D. BALATBAT, JOSE SEBASTIAN and VITO TANJUTCO,
JR., respondents.
Banks; Nature of a bank; Accepting savings account deposits and lending
the amounts deposited constitute banking A bank is a moneyed institute
founded to facilitate the borrowing, lending and safekeeping of money and
to deal in notes, bills of exchange and credits. An investment company,
which lends out the money of its customers, collects the interest and
charges a commission to both lender and borrower, is a bank. Any person
engaged in the business carried on by banks of deposit, of discount, or of
circulation is doing a banking business, although but one of these functions
is exercised. A corporation. which accepted savings account deposits and
lent the money deposited to borrowers, engaged in banking, as the term is
used in Section 2 of the General Banking Act. It violated the law because it
did not secure any administrative authority to engage in banking.
Same; When corporation which engaged in illegal banking, may be
dissolved.A corporation, which misused its corporate funds and franchise
by engaging in illegal banking, may be dissolved. Its acts were willful, were
repeated 59,463 times and the continuance of its illegal operations causes
public injury owing to the number of persons affected thereby. A writ of quo
warranto for its dissolution is proper,
Courts; Supreme Court has concurrent jurisdiction with Court of First
Instance to issue writ of quo warranto.This Court is vested with original
jurisdiction, concurrently with the Courts of First Instance, to hear and
decide quo warranto
59
Rosendo T. Resuello
President & Chairman of
the Board
59
Pablo Tanjutco
Director
Arturo Soriano
Director
Ruben Beltran
Director
Bienvenido V. Zapa
Director & Vice-President
Pilar G. Resuello
60
NAME
POSITION
62
62
SUPREME COURT REPORTS ANNOTATED
Republic vs. Security Credit and Acceptance Corp., et al.
2.Soliciting and accepting savings deposits from the general public when
the companys articles of incorporation authorize it only to engage
primarily in financing agricultural, commercial and industrial projects, and
secondarily, in buying and selling stocks and bonds of any corporation,
thereby exceeding the scope of its powers and authority as granted under
its charter; consequently such acts are ultra-vires;
3.Soliciting subscriptions to the corporate shares of stock and accepting
deposits on account thereof, without prior registration and/or licensing of
such shares or securing exemption therefor, in violation of the Securities
Act; and
4. That being a private credit and financial institution, it should come
under the supervision of the Monetary Board of the Central Bank, by virtue
of the transfer of the authority, power, duties and functions of the
Secretary of Finance, Bank Commissioner and the defunct Bureau of
Banking, to the said Board, pursuant to Secs. 139 and 140 of Republic Act
265 and Secs. 88 and 89 of Republic Act 337." (Italics supplied.) that upon
examination and evaluation of the same records of the corporation, as well
as of other documents and pertinent papers obtained elsewhere, the
Superintendent of Banks, submitted to the Monetary Board of the Central
Bank a memorandum dated August 28, 1962, stating inter alia
11. Pursuant to the request for assistance by the Chief, Intelligence
Division, contained in his Memorandum to the Governor dated May 23,
1962 and in accordance with the written instructions of Governor Castillo
dated May 31, 1962, an examination of the books and records of the
Security Credit and Loans Organizations, Inc. seized by the combined MPD-
b. That out of the funds obtained from the public through the receipt of
deposits and/or the sale of securities, loans are made regularly to any
person by the Security Credit and Acceptance Corporation,
63
1. That
banking
Republic
violation
________________
3Sec. 2. Only duly authorized persons and entities may engage in the
lending of funds obtained from the public through the receipts of deposits
or the sale of bonds, securities, or obligations of any kind, and all entities
regularly conducting such operations shall be considered as banking
institutions and shall be sub
64
64
SUPREME COURT REPORTS ANNOTATED
Republic vs. Security Credit and Acceptance Corp., et al.
corporation was advised of the aforementioned resolution, but, this
notwithstanding, the corporation, as well as the members of its Board of
Directors and the officers of the corporation, have been and still are
performing the functions and activities which had been declared to
constitute illegal banking operations; that during the period from March 27,
ject to the provisions of this Act, of the General Bank Act, and of other
pertinent laws. The terms banking institution and bank, as used in this
Act, are synonymous and interchangeable and specially include banks,
banking institutions, commercial banks, savings banks, mortgage banks,
trust companies, building and loan associations, branches and agencies in
the Philippines of foreign banks, hereinafter called Philippine branches, and
all other corporations, companies, partnerships, and associations
performing banking functions in the Philippines.
Persons and entities which receive deposits only occasionally shall not be
considered as banks, but such persons and entities shall be subject to
regulation by the Monetary Board of the Central Bank; nevertheless in no
case may the Central Bank authorize the drawing of checks against
deposits not maintained in banks, or branches or agencies thereof.
The Monetary Board may similarly regulate the activities of persons and
entities which act as agents of banks.
Sec. 6. No person, association or corporation not conducting the business
of a commercial banking corporation, trust corporation, savings and
mortgage banks, or building and loan association, as defined in this Act,
shall advertise or hold itself out as being engaged in the business of such
bank, corporation or association, or use in connection with its business title
the word or words, bank, banking, banker, building and loan
association/ trust corporation, trust company, or words of similar import,
or solicit or receive deposits of money for deposit, disbursement,
safekeeping, or otherwise, or transact in any manner the business of any
such bank, corporation or association, without having first complied with
the provisions of this Act in so far as it relates to commercial banking
corporations, trust corporations, savings and mortgage banks, or building
and loan associations, as the case may be. For any violation of the
provisions of this section by a corporation, the officers and directors
thereof shall be jointly and severally liable. Any violation of the provisions
of this section shall be punished by a fine of five hundred pesos for each
day during which such violation is continued or repeated, and, in default of
the payment thereof, subsidiary imprisonment as prescribed by law.
65
66
65
Upon joint motion of both parties, on August 20, 1963, the Superintendent
of Banks of the Central Bank of the Philippines was appointed by this Court
receiver pendente lite of defendant corporation, and upon the filing of the
requisite bond, said officer assumed his functions as such receiver on
September 16, 1963.
In their answer, defendants admitted practically all of the allegations of
fact made in the petition. They, however, denied that defendants Tanjutco
(Pablo and Vito, Jr.), Soriano, Beltran, Zapa, Balatbat and Sebastian, are
directors of the corporation, as well as the validity of the opinion, ruling,
evaluation and conclusions, rendered, made and/or reached by the legal
counsel and the intelligence division of the Central Bank, the Securities
and Exchange Commission, and the Superintendent of Banks of the
Philippines, or in Resolution No. 1095 of the Monetary Board, or of Search
Warrant No. A-1019 of the Municipal Court of Manila, and of the search and
seizure made thereunder. By way of affirmative allegations, defendants
averred that,
67
66
VOL. 19, JANUARY 23, 1967
57
68
x x x a moneyed institute [Talmage vs. Pell, 7 N.Y. (3 Seld.) 328, 347, 348]
founded to facilitate the borrowing, lending and safe-keeping of money
(Smith vs. Kansas City Title & Trust Co., 41 S. Ct. 243, 255 U.S. 180, 210,
65 L. Ed. 577) and to deal, in notes, bills of exchange, and credits (State vs.
Cornings Sav. Bank, 115 N.W. 937, 139 lowa 338)." (Banks & Banking, by
Zellmann, Vol. I, p. 46).
Moreover, it has been held that:
An investment company which loans out the money of its customers,
collects the interest and charges a commission to both lender and
borrower, is a bank. (Western Investment Banking Co. vs. Murray, 56 P.
728, 730, 731; 6 Ariz. 215.)
x x x any person engaged in the business carried on by banks of deposit,
of discount, or of circulation is doing a banking business, although but one
of these functions is exercised. (MacLaren vs. State, 124 N.W. 667, 141
Wis. 577, 135 Am. S.R. 55, 18 Ann. Cas. 826; 9 C.J.S. 30.)
Accordingly, defendant corporation has violated the law by engaging in
banking without securing the administrative authority required in Republic
Act No. 337.
That the illegal transactions thus undertaken by defendant corporation
warrant its dissolution is apparent from the fact that the foregoing misuser
of the corporate funds and franchise affects the essence of its business,
that it is wilful and has been repeated 59,463 times, and that its
continuance inflicts injury upon the public, owing to the number of persons
affected thereby.
It is urged, however, that this case should be remanded to the Court of
First Instance of Manila upon the authority of Veraguth vs. Isabela Sugar
Co. (57 Phil. 266). In this connection, it should be noted that this Court is
Copyright 2011 Central Book Supply, Inc. All rights reserved. [Republic
vs. Security Credit and Acceptance Corp., et al., 19 SCRA 58(1967)]
* SECOND DIVISION.
** Petitioner Teodoro Baas should not have been included in the caption of
this case as his name was ordered excluded by the trial court on 23
October 1997 since he died during the pendency of the case thereat.
VOL. 343, OCTOBER 18, 2000
527
Baas vs. Asia Pacific Finance Corporation
G.R. No. 128703. October 18, 2000.*
TEODORO BAAS,** C.G. DIZON CONSTRUCTION, INC., and CENEN DIZON,
petitioners, vs. ASIA PACIFIC FINANCE CORPORATION,1 substituted by
INTERNATIONAL CORPORATE BANK now known as UNION BANK OF THE
PHILIPPINES, respondent.
Commercial Law; Banks and Banking; The transaction between petitioners
and respondent was one involving not a loan but purchase of receivables
at a discount, well within the purview of investing, reinvesting or trading
in securities which an investment company is authorized to perform and
does not constitute a violation of the General Banking Act.An investment
company refers to any issuer which is or holds itself out as being engaged
or proposes to engage primarily in the business of investing, reinvesting or
trading in securities. As defined in Sec. 2, par. (a), of the Revised Securities
Act, securities shall include x x x x commercial papers evidencing
indebtedness of any person, financial or non-financial entity, irrespective of
maturity, issued, endorsed, sold, transferred or in any manner conveyed to
another with or without recourse, such as promissory notes x x x x
Clearly, the transaction between petitioners and respondent was one
involving not a loan but purchase of receivables at a discount, well within
the purview of investing, reinvesting or trading in securities which an
investment company, like ASIA PACIFIC, is authorized to perform and does
not constitute a violation of the General Banking Act.
1 This case was originally titled Teodoro Baas, C.G. Dizon Construction,
Inc., and Cenen Dizon v. Court of Appeals and Asia Pacific Finance
Corporatio. The Court of Appeals, which was inadvertently made partyrespondent, was excluded on motion of petitioners since the court which
rendered the decision appealed from is not required to be joined as partyrespondent (Rule 45, 1997 Rules of Civil Procedure).
528
528
SUPREME COURT REPORTS ANNOTATED
Baas vs. Asia Pacific Finance Corporation
But here, the funds supposedly lent to petitioners have not been shown
to have been obtained from the public by way of deposits, hence, the
inapplicability of banking laws.
Civil Law; Contracts; Court finds the terms and conditions of the instrument
clear, free from any ambiguity, and expressive of the real intent and
agreement of the parties.On petitioners submission that the true
intention of the parties was to enter into a contract of loan, we have
examined the Promissory Note and failed to discern anything therein that
would support such theory. On the contrary, we find the terms and
conditions of the instrument clear, free from any ambiguity, and expressive
of the real intent and agreement of the parties.
Same; Same; Notarial documents are evidence of the facts in clear and
unequivocal manner therein expressed.The Deed of Chattel Mortgage
and Continuing Undertaking were duly acknowledged before a notary
public and, as such, have in their favor the presumption of regularity. To
contradict them there must be clear, convincing and more than merely
preponderant evidence. In the instant case, the records do not show even
a preponderance of evidence in favor of petitioners claim that the Deed of
Chattel Mortgage and Continuing Undertaking were never intended by the
parties to be legal, valid and binding. Notarial documents are evidence of
the facts in clear and unequivocal manner therein expressed.
PETITION for review on certiorari of a decision of the Court of Appeals.
C.G. DIZON CONSTRUCTION, INC. and CENEN DIZON in this petition for
review seek the reversal of the 24 July 1996 Decision of the Court of
Appeals dismissing their appeal for lack of merit and affirming in toto the
decision of the trial court holding them liable to Asia Pacific Finance
Corporation in the amount of
529
On 20 March 1981 Asia Pacific Finance Corporation (ASIA PACIFIC for short)
filed a complaint for a sum of money with prayer for a writ of replevin
against Teodoro Baas, C.G. Dizon Construction and Cenen Dizon.
Sometime in August 1980 Teodoro Banas executed a Promissory Note in
favor of C.G. Dizon Construction whereby for value received he promised to
pay to the order of C.G. Dizon Construction the sum of P390,000.00 in
installments of P32,500.00 every 25th day of the month starting from
September 25, 1980 up to August 25, 1981.3
Later, C.G. Dizon Construction endorsed with recourse the Promissory Note
to ASIA PACIFIC, and to secure payment thereof, C.G. Dizon Construction,
through its corporate officers, Cenen Dizon, President, and Juliette B. Dizon,
Vice President and Treasurer, executed a Deed of Chattel Mortgage
covering three (3) heavy equipment units of Caterpillar Bulldozer Crawler
Tractors with Model Nos. D8-14A, D8-2U and D8H in favor of ASIA PACIFIC.4
Moreover, Cenen Dizon executed on 25 August 1980 a Continuing
Undertaking wherein he bound himself to pay the obligation jointly and
severally with C.G. Dizon Construction.5
In compliance with the provisions of the Promissory Note, C.G. Dizon
Construction made the following installment payments to ASIA PACIFIC:
P32,500.00 on 25 September 1980, P32,500.00 on 27 October 1980 and
P65,000.00 on 27 February 1981, or a total of P130,000.00. Thereafter,
however, C.G. Dizon Construction defaulted in the payment of the
remaining installments, prompting ASIA PACIFIC to send a Statement of
Account to Cenen Dizon for the unpaid balance of P267,737.50 inclusive of
interests and charges, and P66,909.38 representing attorneys fees. As the
de_______________
3 Exh. A.
529
4 Exh. C.
5 Exh. D.
530
530
SUPREME COURT REPORTS ANNOTATED
531
mand was unheeded, ASIA PACIFIC sued Teodoro Banas, C.G. Dizon
Construction and Cenen Dizon.
value of the bulldozer crawler tractors was more than adequate to cover
their obligation to ASIA PACIFIC.
Meanwhile, on 21 April 1981 the trial court issued a writ of replevin against
defendant C.G. Dizon Construction for the surrender of the bulldozer
crawler tractors subject of the Deed of Chattel Mortgage. Of the three (3)
bulldozer crawler tractors, only two (2) were actually turned over by
defendantsD8-14A and D8-2Uwhich units were subsequently foreclosed
by ASIA PACIFIC to satisfy the obligation. D8-14A was sold for P120,000.00
and D8-2U for P60,000.00 both to ASIA PACIFIC as the highest bidder.
During the pendency of the case, defendant Teodoro Banas passed away,
and on motion of the remaining defendants, the trial court dismissed the
case against him. On the other hand, ASIA PACIFIC was substituted as
party plaintiff by International Corporate Bank after the disputed
Promissory Note was assigned and/or transferred by ASIA PACIFIC to
International Corporate Bank. Later, International Corporate Bank merged
with Union Bank of the Philippines. As the surviving entity after the merger,
and having succeeded to all the rights and interests of International
Corporate Bank in this case, Union Bank of the Philippines was substituted
as a party in lieu of International Corporate Bank.6
On 25 September 1992 the Regional Trial Court ruled in favor of ASIA
PACIFIC holding the defendants jointly and severally liable for the unpaid
balance of the obligation under the Promissory Note in the amount of
P87,637.50 at 14% interest per annum, and attorneys fees equivalent to
25% of the monetary award.7
On 24 July 1996 the Court of Appeals affirmed in toto the decision of the
trial court thus
_______________
532
FOR VALUE RECEIVED, I/We, hereby promise to pay to the order of C.G.
Dizon Construction, Inc. the sum of THREE HUNDRED NINETY THOUSAND
ONLY (P390,000.00), Philippine Currency in the following manner:
P32,500.00 due every 25th of the month starting from September 25, 1980
up to August 25, 1981.
_______________
10 RA 337.
534
534
SUPREME COURT REPORTS ANNOTATED
Baas vs. Asia Pacific Finance Corporation
I/We agree that if any of the said installments is not paid as and when it
respectively falls due, all the installments covered hereby and not paid as
yet shall forthwith become due and payable at the option of the holder of
this note with interest at the rate of 14% per annum on each unpaid
installment until fully paid.
If any amount due on this note is not paid at its maturity and this note is
placed in the hands of an attorney for collection, I/We agree to pay in
addition to the aggregate of the principal amount and interest due, a sum
equivalent to TEN PERCENT (10%) thereof as Attorneys fees, in case no
action is filed, otherwise, the sum will be equivalent to TWENTY FIVE (25%)
of the said principal amount and interest due x x x x
Makati, Metro Manila, August 25, 1980.
President
VP/Treasurer
Likewise, the Deed of Chattel Mortgage and Continuing Undertaking were
duly acknowledged before a notary public and, as such, have in their favor
the presumption of regularity. To contradict them there must be clear,
convincing and more than merely preponderant evidence. In the instant
case, the records do not show even a preponderance of evidence in favor
of petitioners claim that the Deed of Chattel Mortgage and Continuing
Undertaking were never intended by the parties to be legal, valid and
binding. Notarial documents are evidence of the facts in clear and
unequivocal manner therein expressed.11
Interestingly, petitioners assertions were based mainly on the self-serving
testimony of Cenen Dizon, and not on any other independent evidence. His
testimony is not only unconvincing, as found by the trial court and the
Court of Appeals, but also self-defeating in light of the documents
presented by respondent, i.e., Promissory Note, Deed of Chattel Mortgage
and Continuing Undertaking, the accuracy, correctness and due execution
of which were admitted by
_______________
12 Remalante v. Tibe, G.R. No. L-59514, 25 February 1988, 158 SCRA 138.
536
536
SUPREME COURT REPORTS ANNOTATED
Baas vs. Asia Pacific Finance Corporation
A:
There was no seizure order. Atty. Carag during that time said if I surrender
the two equipment, we might finally close a deal if the equipment would
come up to the balance of the loan. So I voluntarily surrendered, I pulled
them from the job site and returned them to APCOR x x x x
Q:
You mentioned a certain Atty. Carag, who is he?
A:
He was the former legal counsel of APCOR. They were handling cases. In
fact, I talked with Atty. Carag, we have a verbal agreement if I surrender
the equipment it might suffice to pay off the debt so I did just that (italics
ours).13
In other words, there was no binding and perfected contract between
petitioners and respondent regarding the settlement of the obligation, but
only a conditional one, a mere conjecture in fact, depending on whether
the value of the tractors to be surrendered would equal the balance of the
loan plus interests. And since the bulldozer crawler tractors were sold at
the foreclosure sale for only P180,000.00,14 which was not enough to
cover the unpaid balance of P267,637.50, petitioners are still liable for the
deficiency.
Barring therefore a showing that the findings complained of are totally
devoid of support in the records, or that they are so glaringly erroneous as
to constitute serious abuse of discretion, we see no valid reason to discard
them. More so in this case where the findings of both the trial court and the
appellate court coincide with each other on the matter.
With regard to the computation of petitioners liability, the records show
that petitioners actually paid to respondent a total sum of P130,000.00 in
addition to the P180,000.00 proceeds realized from the sale of the
bulldozer crawler tractors at public auction. Deducting these amounts from
the principal obligation of P390,000.00 leaves a balance of P80,000.00, to
537
15 See South Sea Surety and Insurance Co., Inc. v. Court of Appeals, G.R.
No. 102253, 2 June 1995, 244 SCRA 744.
538
538
SUPREME COURT REPORTS ANNOTATED
Baas vs. Asia Pacific Finance Corporation
Bank of the Philippines), P87,637.50 representing the unpaid balance on
the Promissory Note, with interest at fourteen percent (14%) per annum
computed from 20 March 1981 until fully paid, and fifteen percent (15%) of
the principal obligation and interests due by way of attorneys fees. Costs
against petitioners.
SO ORDERED.
Mendoza, Quisumbing, Buena and De Leon, Jr., JJ., concur.
Judgment affirmed.
Note.Where the terms of the instruments are clear and leave no doubt as
to their meaning, they should not be disturbed. (Tanguilig vs. Court of
Appeals, 266 SCRA 78 [1997])
o0o
539
Copyright 2011 Central Book Supply, Inc. All rights reserved. [Baas vs.
Asia Pacific Finance Corporation, 343 SCRA 527(2000)]
LAWPHIL
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 174134
proof of the pledge transaction, and even assuming that it is so, still, it is
not subject to tax since a documentary stamp tax is levied on the
document issued and not on the transaction.
The facts:
In a Pre-Assessment Notice dated July 7, 2003, petitioner was informed by
the BIR that it has an existing tax deficiency on its VAT and DST liabilities
for the year 2000. The deficiency assessment was at P541,102.79 for VAT
and P23,646.33 for DST.1 Petitioner protested the assessment for lack of
legal and factual bases.2
Petitioner subsequently received a Formal Assessment Notice on December
29, 2003, directing payment of VAT deficiency in the amount
of P541,102.79 and DST deficiency in the amount of P24,747.13, inclusive
of surcharge and interest.3 Petitioner filed a protest,4 which was denied by
Acting Regional Director Anselmo G. Adriano per Final Decision on Disputed
Assessment dated January 29, 2004.5
Petitioner then filed a petition for review with the Court of Tax Appeals
(CTA).6 In a Decision dated May 9, 2005, the 2nd Division of the CTA upheld
the deficiency assessment.7 Petitioner filed a motion for
reconsideration8which was denied in a Resolution dated October 7, 2005. 9
Petitioner appealed to the CTA En Banc which rendered a Decision dated
June 7, 2006, the dispositive portion of which reads as follows:
WHEREFORE, premises considered, the Petition for Review is hereby
DENIED for lack of merit. The assailed Decision dated May 9, 2005 and
Resolution dated October 7, 2005 are hereby AFFIRMED.
SO ORDERED.10
Petitioner sought reconsideration but this was denied by the
CTA En Banc per Resolution dated August 14, 2006.11
Hence, the present petition for review under Rule 45 of the Rules of Court
based on the following grounds:
I
THE HONORABLE COURT OF TAX APPEALS EN BANC GRAVELY ERRED IN
FINDING PETITIONER LIABLE FOR VAT.
II
In view of said ruling, the BIR issued Revenue Memorandum Circular No.
36-2004 dated June 16, 2004, canceling the previous lending investor's tax
assessments on pawnshops. Said Circular stated, inter alia:
In view of the said Supreme Court decision, all assessments on pawnshops
for percentage taxes as lending investors are hereby cancelled. This
Circular is being issued for the sole purpose of resolving the tax liability of
pawnshops to the 5% lending investors tax provided under the then
Section 116 of the NIRC of 1977, as amended, and shall not cover issues
relating to their other tax liabilities. All internal revenue officials are
enjoined from issuing assessments on pawnshops for percentage taxes on
lending investors, under the then Section 116 of the NIRC of 1977, as
amended.
For purposes of the gross receipt tax provided for under Republic Act No.
9294, the pawnshops are now subject thereof. This shall however, be
covered by another issuance.19
Revenue Memorandum Circular No. 37-2004 was issued on the same date
whereby pawnshop businesses were allowed to settle their VAT liabilities
for the tax years 1996-2002 pursuant to a memorandum of agreement
entered into by the Commissioner of Internal Revenue and the Chambers
of Pawnbrokers of the Philippines, Inc. The Circular likewise instructed all
revenue officers to ensure that "all VAT due from pawnshops beginning
January 1, 2003, including increments thereto, if any, are assessed and
collected from pawnshops under its jurisdiction."
In the interim, however, Congress passed Republic Act (R.A.) No. 9238 on
February 5, 2004 entitled, "An Act Amending Certain Sections of the
National Internal Revenue Code of 1997, as amended, by Excluding Several
Services from the Coverage of the Value-added Tax and Re-imposing the
Gross Receipts Tax on Banks and Non-bank Financial Intermediaries
Performing Quasi-banking Functions and Other Non-bank Financial
Intermediaries beginning January 01, 2004."20
Pending publication of R.A. No. 9238, the BIR issued Bank Bulletin No.
2004-01 on February 10, 2004 advising all banks and non-bank financial
intermediaries that they shall remain liable under the VAT system.
When R.A. No. 9238 took effect on February 16, 2004, the Department of
Finance issued Revenue Regulations No. 10-2004 dated October 18, 2004,
classifying pawnshops as Other Non-bank Financial Intermediaries. The BIR
then issued Revenue Memorandum Circular No. 73-2004 on November 25,
2004, prescribing the guidelines and policies on the assessment and
collection of 10% VAT for gross annual sales/receipts
exceeding P550,000.00 or 3% percentage tax for gross annual
sales/receipts not exceeding P550,000.00 of pawnshops prior to January 1,
2005.
In fine, prior to the EVAT Law, pawnshops were treated as lending investors
subject to lending investor's tax. Subsequently, with the Court's ruling
in Lhuillier, pawnshops were then treated as VAT-able enterprises under the
general classification of "sale or exchange of services" under Section
108(A) of the Tax Code of 1997, as amended. R.A. No. 9238 finally
classified pawnshops as Other Non-bank Financial Intermediaries.
The Court finds that pawnshops should have been treated as non-bank
financial intermediaries from the very beginning, subject to the appropriate
taxes provided by law, thus
Under the National Internal Revenue Code of 1977,21 pawnshops
should have been levied the 5% percentage tax on gross receipts
imposed on bank and non-bank financial intermediaries under
Section 119 (now Section 121 of the Tax Code of 1997);
With the imposition of the VAT under R.A. No. 7716 or the EVAT
Law,22 pawnshops should have been subjected to the 10% VAT
imposed on banks and non-bank financial intermediaries and
financial institutions under Section 102 of the Tax Code of 1977
(now Section 108 of the Tax Code of 1997);23
This was restated by R.A. No. 8241,24 which amended R.A. No.
7716, although the levy, collection and assessment of the 10% VAT
on services rendered by banks, non-bank financial intermediaries,
finance companies, and other financial intermediaries not
performing quasi-banking functions, were made effective January
1, 1998;25
R.A. No. 8424 or the Tax Reform Act of 199726 likewise imposed a
10% VAT under Section 108 but the levy, collection and
assessment thereof were again deferred until December 31,
1999;27
The levy, collection and assessment of the 10% VAT was further
deferred by R.A. No. 8761 until December 31, 2000, and by R.A.
No. 9010, until December 31, 2002;
With no further deferments given by law, the levy, collection and
assessment of the 10% VAT on banks, non-bank financial
intermediaries, finance companies, and other financial
intermediaries not performing quasi-banking functions were finally
made effective beginning January 1, 2003;
Finally, with the enactment of R.A. No. 9238, the services of
banks, non-bank financial intermediaries, finance companies, and
other financial intermediaries not performing quasi-banking
functions were specifically exempted from VAT,28 and the 0% to 5%
xxx
Non-bank financial intermediaries shall include the following:
(1) A person or entity licensed and/or registered with any government
regulatory body as a non-bank financial intermediary, such as investment
house, investment company, financing company, securities dealer/broker,
lending investor, pawnshop, money broker x x x. (Emphasis supplied)
Revenue Regulations No. 10-2004, in fact, recognized these bases, to wit:
SEC. 2. BASES OF QUALIFYING PAWNSHOPS AS NON-BANK FINANCIAL
INTERMEDIARIES. - Whereas, in relation to Sec. 2.3 of Rev. Regs No. 9-2004
defining "Non-bank Financial Intermediaries, the term "pawnshop" as
defined under Presidential Decree No. 114 which authorized its creation, to
be a person or entity engaged in the business of lending money, all fall
within the classification of Non-bank Financial Intermediaries and therefore,
covered by Sec. 4 of R.A. No. 9238.
This classification is equally supported by Subsection 4101Q.1 of the BSP
Manual of Regulations for Non-Bank Financial Intermediaries and reiterated
in BSP Circular No. 204-99, classifying pawnshops as one of Non-bank
Financial Intermediaries within the supervision of the Bangko Sentral ng
Pilipinas.
mark of pawner or his authorized agent; and (9) such other terms and
conditions as may be agreed upon between the pawnbroker and the
pawner. In addition, Central Bank Circular No. 445, prescribed a standard
form of pawn tickets with entries for the required details on its face and the
mandated terms and conditions of the pledge at the dorsal portion thereof.
Section 3 of the Pawnshop Regulation Act defines a pawn ticket as follows:
xxxx
True, the law does not consider said ticket as an evidence of security or
indebtedness. However, for purposes of taxation, the same pawn ticket is
proof of an exercise of a taxable privilege of concluding a contract of
pledge. At any rate, it is not said ticket that creates the pawnshops
obligation to pay DST but the exercise of the privilege to enter into a
contract of pledge. There is therefore no basis in petitioners assertion that
a DST is literally a tax on a document and that no tax may be imposed on a
pawn ticket.
The settled rule is that tax laws must be construed in favor of the taxpayer
and strictly against the government; and that a tax cannot be imposed
without clear and express words for that purpose. Taking our bearing from
the foregoing doctrines, we scrutinized Section 195 of the NIRC, but there
is no way that said provision may be interpreted in favor of petitioner.
Section 195 unqualifiedly subjects all pledges to DST. It states that "[o]n
every x x x pledge x x x there shall be collected a documentary stamp tax
x x x." It is clear, categorical, and needs no further interpretation or
construction. The explicit tenor thereof requires hardly anything than a
simple application.
xxxx
In the instant case, there is no law specifically and expressly exempting
pledges entered into by pawnshops from the payment of DST. Section 199
of the NIRC enumerated certain documents which are not subject to stamp
tax; but a pawnshop ticket is not one of them. Hence, petitioners nebulous
claim that it is not subject to DST is without merit. It cannot be overemphasized that tax exemption represents a loss of revenue to the
government and must, therefore, not rest on vague inference. Exemption
from taxation is never presumed. For tax exemption to be recognized, the
grant must be clear and express; it cannot be made to rest on doubtful
implications.
Under the principle of stare decisis et non quieta movere (follow past
precedents and do not disturb what has been settled), once a case has
been decided one way, any other case involving exactly the same point at
issue, as in the case at bar, should be decided in the same manner. 36
Footnotes
1
SO ORDERED.
MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice
WE CONCUR:
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson
MINITA V. CHICO-NAZARIO
Associate Justice
ANTONIO EDUARDO B.
NACHURA
Associate Justice
RUBEN T. REYES
Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of
the Courts Division.
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, and the Division
Chairpersons Attestation, it is hereby certified that the conclusions in the
above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Courts Division.
REYNATO S. PUNO
Chief Justice
10
Id. at 80.
11
12
Id. at 34.
15
16
G.R. No. 150947, July 15, 2003, 406 SCRA 178. Penned by Chief
Justice Hilario G. Davide, Jr. with the concurrence of Associate
Justices Jose Vitug, Consuelo Ynares-Santiago, Antonio T. Carpio
and Adolfo S. Azcuna.
17
18
Id. at 185.
19
ftp://ftp.bir.gov.ph/webadmin1/pdf/1887rmc36_04.pdf.
Republic Act (R.A.) No. 9238 lapsed into law on February 05,
2004 without the signature of the President, in accordance with
Article VI, Section 27 (1) of the Constitution.
20
28
21
22
The implementation of the VAT system under R.A. No. 7716 was
made effective January 1, 1996 (seeCommissioner of Internal
Revenue v. Philippine Global Communications, Inc., G.R. No.
144696, August 16, 2006, 499 SCRA 53).
23
24
25
xxxx
xxxx
(b) Services rendered by banks, non-bank financial
intermediaries, finance companies and other financial
intermediaries not performing quasi-banking functions;
29
x x x x:"
R.A. No. 8424 renamed the National Internal Revenue Code of
1977 to National Internal Revenue Code of 1997, or the Tax Code of
1997, and took effect on January 1, 1998.
26
27
Section 2.
31
Section 3.1.
32
34
35
________________
* FIRST DIVISION
361
360
SUPREME COURT REPORTS ANNOTATED
Simex International (Manila), Inc. vs. Court of Appeals
G.R. No. 88013. March 19, 1990.*
SIMEX INTERNATIONAL (MANILA), INCORPORATED, petitioner, vs. THE
HONORABLE COURT OF APPEALS and TRADERS ROYAL BANK, respondents.
Civil Law; Moral damages; Moral damages are not awarded to penalize the
defendant but to compensate the plaintiff for injuries he may have
suffered.We agree that moral damages are not awarded to penalize the
defendant but to compensate the plaintiff for the injuries he may have
suffered. In the case at bar, the petitioner is seeking such damages for the
prejudice sustained by it as a result of the private respondents fault. The
respondent court said that the claimed losses are purely speculative and
are not supported by substantial evidence, but it failed to consider that the
amount of such losses need not be established with exactitude, precisely
because of their nature. Moral damages are not susceptible of pecuniary
estimation. Article 2216 of the Civil Code specifically provides that no
proof of pecuniary loss is necessary in order that moral, nominal,
temperate, liquidated or exemplary damages may be adjudicated. That is
why the determination of the amount to be awarded (except liquidated
damages) is left to the sound discretion of the court, according to the
circumstances of each case.
contemplated in the Civil Code that calls for the imposition of exemplary
damages.
PETITION to review the judgment of the Court of Appeals.
6. Check No. 215477 dated June 9, 1981, in favor of Sea-Land Services, Inc.
in the amount of P27,024.45:
7. Check No. 215412 dated June 10, 1981, in favor of Baguio Country Club
Corporation in the amount of P4,385.02: and
362
SUPREME COURT REPORTS ANNOTATED
8. Check No. 215480 dated June 9, 1981, in favor of Enriqueta Bayla in the
amount of P6,275.00.2
________________
The parties agree on the basic facts. The petitioner is a private corporation
engaged in the exportation of food products. It buys these products from
various local suppliers and then sells them abroad, particularly in the
United States, Canada and the Middle East. Most of its exports are
purchased by the petitioner on credit.
1 Rollo, p. 4.
363
363
Simex International (Manila), Inc. vs. Court of Appeals
sent on June 9, 1981, a letter of demand to the petitioner, threatening
prosecution if the dishonored check issued to it was not made good. It also
withheld delivery of the order made by the petitioner. Similar letters were
sent to the petitioner by the Malabon Long Life Trading, on June 15, 1981,
and by the G. and U. Enterprises, on June 10, 1981. Malabon also canceled
the petitioners credit line and demanded that future payments be made
by it in cash or certified check. Meantime, action on the pending orders of
the petitioner with the other suppliers whose checks were dishonored was
also deferred.
The petitioner complained to the respondent bank on June 10, 1981.3
Investigation disclosed that the sum of P100,000.00 deposited by the
petitioner on May 25, 1981, had not been credited to it. The error was
rectified on June 17, 1981, and the dishonored checks were paid after they
were re-deposited.4
In its letter dated June 20, 1981, the petitioner demanded reparation from
the respondent bank for its gross and wanton negligence. This demand
was not met. The petitioner then filed a complaint in the then Court of First
Instance of Rizal claiming from the private respondent moral damages in
the sum of P1,000,000.00 and exemplary damages in the sum of
P500,000.00, plus 25% attorneys fees, and costs.
After trial, Judge Johnico G. Serquia rendered judgment holding that moral
and exemplary damages were not called for under the circumstances.
However, observing that the plaintiffs right had been violated, he ordered
the defendant to pay nominal damages in the amount of P20,000.00 plus
P5,000.00 attorneys fees and costs.5 This decision was affirmed in toto by
the respondent court.6
The respondent court found with the trial court that the private respondent
was guilty of negligence but agreed that the petitioner was nevertheless
not entitled to moral damages. It said:
The essential ingredient of moral damages is proof of bad faith (De
Aparicio vs. Parogurga, 150 SCRA 280). Indeed, there was the
________________
3 Rollo, p. 6.
4 Ibid. , pp. 6-7.
5 Id., p. 24.
6 Victor, J., with Ejercito and Pe, JJ., concurring.
364
364
SUPREME COURT REPORTS ANNOTATED
Simex International (Manila), Inc. vs. Court of Appeals
omission by the defendant-appellee bank to credit appellants deposit of
P100,000.00 on May 25, 1981. But the bank rectified its records. It credited
the said amount in favor of plaintiff-appellant in less than a month. The
dishonored checks were eventually paid. These circumstances negate any
imputation or insinuation of malicious, fraudulent, wanton and gross bad
faith and negligence on the part of the defendant-appellant.
It is this ruling that is faulted in the petition now before us.
This Court has carefully examined the facts of this case and finds that it
cannot share some of the conclusions of the lower courts. It seems to us
that the negligence of the private respondent had been brushed off rather
lightly as if it were a minor infraction requiring no more than a slap on the
wrist. We feel it is not enough to say that the private respondent rectified
its records and credited the deposit in less than a month as if this were
sufficient repentance. The error should not have been committed in the
first place. The respondent bank has not even explained why it was
committed at all. It is true that the dishonored checks were, as the Court of
Appeals put it, eventually paid. However, this took almost a month when,
properly, the checks should have been paid immediately upon
presentment.
As the Court sees it, the initial carelessness of the respondent bank,
aggravated by the lack of promptitude in repairing its error, justifies the
grant of moral damages. This rather lackadaisical attitude toward the
complaining depositor constituted the gross negligence, if not wanton bad
faith, that the respondent court said had not been established by the
petitioner.
We also note that while stressing the rectification made by the respondent
bank, the decision practically ignored the prejudice suffered by the
petitioner. This was simply glossed over if not, indeed, disbelieved. The fact
is that the petitioners credit line was canceled and its orders were not
acted upon pending receipt of actual payment by the suppliers. Its
business declined. Its reputation was tarnished. Its standing was reduced in
the business community. All this was due to the fault of the respondent
bank which was undeniably remiss in its duty to the petitioner.
this rule is where the corporation has a good reputation that is debased,
resulting in its social humiliation.9
________________
365
8 Dee Hua Liong Electrical Equipment Corporation v. Reyes, 145 SCRA 713;
San Andres v. Court of Appeals, 116 SCRA 81.
365
366
366
SUPREME COURT REPORTS ANNOTATED
Simex International (Manila), Inc. vs. Court of Appeals
We shall recognize that the petitioner did suffer injury because of the
private respondents negligence that caused the dishonor of the checks
issued by it. The immediate consequence was that its prestige was
impaired because of the bouncing checks and confidence in it as a reliable
debtor was diminished. The private respondent makes much of the one
instance when the petitioner was sued in a collection case, but that did not
prove that it did not have a good reputation that could not be marred,
more so since that case was ultimately settled.10 It does not appear that,
as the private respondent would portray it, the petitioner is an unsavory
and disreputable entity that has no good name to protect.
Considering all this, we feel that the award of nominal damages in the sum
of P20,000.00 was not the proper relief to which the petitioner was
entitled. Under Article 2221 of the Civil Code, nominal damages are
adjudicated in order that a right of the plaintiff, which has been violated or
invaded by the defendant, may be vindicated or recognized, and not for
the purpose of indemnifying the plaintiff for any loss suffered by him. As
we have found that the petitioner has indeed incurred loss through the
fault of the private respondent, the proper remedy is the award to it of
moral damages, which we impose, in our discretion, in the same amount of
P20,000.00.
Now for the exemplary damages.
down to the last centavo, and as promptly as possible. This has to be done
if the account is to reflect at any given time the amount of money the
depositor can dispose of as he sees fit, confident that the bank will deliver
it as and to whomever he directs. A blunder on the part of the bank, such
as the dishonor of a check without good reason, can cause the depositor
not a little embarrassment if not also financial loss and perhaps even civil
and criminal litigation.
The point is that as a business affected with public interest and because of
the nature of its functions, the bank is under obligation to treat the
accounts of its depositors with meticulous care, always having in mind the
fiduciary nature of their relationship. In the case at bar, it is obvious that
the respondent bank was remiss in that duty and violated that relationship.
What is especially deplorable is that, having been informed of its error in
not crediting the deposit in question to the petitioner, the respondent bank
did not immediately correct it but did so only one week later or twentythree days after the deposit was made. It bears repeating that the record
does not contain any satisfactory explanation of why the error was made in
the first place and why it was not corrected immediately after its discovery.
Such ineptness comes under the concept of the wanton manner
contemplated in the Civil Code that calls for the
368
368
SUPREME COURT REPORTS ANNOTATED
United Coconut Planters Bank vs. Intermediate Appellate Court
imposition of exemplary damages.
After deliberating on this particular matter, the Court, in the exercise of its
discretion, hereby imposes upon the respondent bank exemplary damages
in the amount of P50,000.00, by way of example or correction for the
public good, in the words of the law. It is expected that this ruling will
serve as a warning and deterrent against the repetition of the ineptness
and indefference that has been displayed here, lest the confidence of the
public in the banking system be further impaired.
ACCORDINGLY, the appealed judgment is hereby MODIFIED and the private
respondent is ordered to pay the petitioner, in lieu of nominal damages,
moral damages in the amount of P20,000.00, and exemplary damages in
the amount of P50,000.00 plus the original award of attorneys fees in the
amount of P5,000.00, and costs.
SO ORDERED.
THIRD DIVISION
Present:
Petitioners,
YNARES-SANTIAGO,
Chairperson,
AUSTRIA-MARTINEZ,
- versus -
CARPIO MORALES,*
CHICO-NAZARIO, and
NACHURA, JJ.
LAWPHIL
Promulgated:
Respondents.
x------------------------------------------------x
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the
Rules of Court assailing the Decision1 of the Court of Appeals (CA) in CAG.R. CV No. 62404 promulgated on August 27, 2002, which affirmed with
modification the Decision of the Regional Trial Court (RTC) of Pasig City,
Branch 158, in Civil Case No. 65146 dated December 18, 1998.
The facts of the case, as summarized by the RTC, are as follows:
It appears from the plaintiffs' [petitioners] evidence that Arturo
[respondent] is the elder brother of Alice [petitioner] and Rosita
[petitioner], Benjamin [petitioner] and Patricia [petitioner] are Arturo's
nephew and niece. Arturo and his wife Evelyn [respondent] are residents of
the United States. In October 1993, Arturo leased from Dr. Borja a
condominium unit identified as Unit 28-C Gilmore Townhomes located at
Granada St., Quezon City. The lease was for the benefit of Benjamin who is
the occupant of the unit. The rentals were paid by Ignacio. The term of the
lease is for one (1) year and will expire on October 15, 1994. It appears
that Arturo was intending to renew the lease contract. As he had to leave
for the U.S., Arturo drew up a check, UCPB Check No. GRH-560239 and
wrote on it the name of the payee, Dr. Manuel Borja, but left blank the date
and amount. He signed the check. The check was intended as payment for
the renewal of the lease. The date and the amount were left blank because
Arturo does not know when it will be renewed and the new rate of the
lease. The check was left with Arturo's sister-in-law, who was instructed to
deliver or give it to Benjamin.
The check later came to the possession of Alice who felt that Arturo
cheated their sister in the amount of three million pesos (P3,000,000.00).
She believed that Arturo and Rosita had a joint "and/or" money market
placement in the amount of P3 million with the UCPB branch at Ortigas
Ave., San Juan and that Ignacio preterminated the placement and ran away
with it, which rightfully belonged to Rosita. Alice then inquired from UCPB
Greenhills branch if Arturo still has an account with them. On getting a
confirmation, she together with Rosita drew up a scheme to recover the P3
million from Arturo. Alice filled up the date of the check with "March 17,
1995" and the amount with "three million only." Alice got her driver,
Kudera, to stand as the payee of the check, Dr. Borja. Alice and Rosita
came to SBC2 Greenhills Branch together with a man (Kudera) who[m] they
introduced as Dr. Borja to the then Assistant Cashier Luis. After introducing
the said man as Dr. Borja, Rosita, Alice and the man who was later
identified as Kudera opened a Joint Savings Account No. 271-410554-7. As
initial deposit for the Joint Savings Account, Alice, Rosita and Kudera
deposited the check. No ID card was required of Mr. Kudera because it is an
internal policy of the bank that when a valued client opens an account, an
identification card is no longer required (TSN, April 21, 1997, pp. 15-16).
SBC also allowed the check to be deposited without the endorsement of
the impostor Kudera. SBC officials stamped on the dorsal portion of the
check "endorsement/lack of endorsement guaranteed" and sent the check
for clearing to the Philippine Clearing House Corporation.
On 21 March 1995, after the check had already been cleared by the drawer
bank UCPB, Rosita withdrew P1 million from Joint Savings Account and
deposited said amount to the current account of Alice with SBC Greenhills
Branch. On the same date, Alice caused the transfer of P2 million from the
Joint Savings Account to two (2) Investment Savings Account[s] in the
names of Alice, Rosita and/or Patricia. ...
On April 4, 1995, a day after Evelyn and Atty. Sanz inquired about the
identity of the persons and the circumstances surrounding the deposit and
withdrawal of the check, the three million pesos in the two investment
savings account[s] and in the current account just opened with SBC were
withdrawn by Alice and Rosita.3
On June 18, 1995, Arturo Ignacio, Jr. and Evelyn Ignacio (respondents) filed
a verified complaint for recovery of a sum of money and damages against
Security Bank and Trust Company (SBTC) and its officers, namely: Rene
Colin D. Gray, Manager; and Sonia Ortiz-Luis, Cashier. The complaint also
impleaded herein petitioner Benjamin A.I. Espiritu (Benjamin), a "John
Doe," representing himself as Manuel N. Borja; and a "Jane Doe."
On November 7, 1995, the complaint was amended by additionally
impleading herein petitioners Alice A.I. Sandejas (Alice), Rosita A.I. Cusi
(Rosita) and Patricia A.I. Sandejas (Patricia) as defendants who filed their
respective answers and counterclaims.
After trial, the RTC rendered judgment dated December 18, 1998 with the
following dispositive portion:
WHEREFORE, in view of the foregoing, judgment is rendered in favor of
plaintiffs as against defendants Security Bank and Trust Co., Rene Colin
Gray, Sonia Ortiz Luis, Alice A.I. Sandejas and Rosita A.I. Cusi, ordering
them to pay jointly and severally the plaintiffs the following amounts:
(1) P3,000,000.00 plus legal interest on it from March 17, 1995 until the
entire amount is fully paid;
Petitioners and SBTC, together with Gray and Ortiz-Luis, filed their
respective petitions for review before this Court.
However, the petition filed by SBTC, Gray and Ortiz-Luis, docketed as G.R.
No. 155038, was denied in a Resolution 7 issued by this Court on November
20, 2002, for their failure to properly verify the petition, submit a valid
certification of non-forum shopping, and attach to the petition the
duplicate original or certified true copy of the assailed CA Decision. Said
Resolution became final and executory on April 9, 2003. 8
On the other hand, the instant petition was given due course. Petitioners
enumerated the following grounds in support of their petition:
I. THE COURT OF APPEALS HAD DECIDED A QUESTION OF SUBSTANCE NOT
HERETOFORE DECIDED BY THIS COURT AND/OR HAD DECIDED IT IN A WAY
PROBABLY NOT IN ACCORD WITH EQUITY, THE LAW AND THE APPLICABLE
DECISIONS OF THIS COURT, SUCH AS:
(b) IN NOT HOLDING THAT THE ACT OF ROSITA AND ALICE IN FILLING OUT
THE BLANK PORTIONS OF THE CHECK TO RECOVER WHAT ARTURO, JR.
TOOK FROM AND DUE ROSITA, DID NOT GIVE RISE TO AN ACTIONABLE
TORT;
1. P3,000,000.00 plus legal interest computed from March 17, 1995 until
the entire amount is fully paid;
granting that the act of Rosita and Alice amounted to an actionable tort,
they could not be adjudged liable to return the amount to respondents or
to pay damages in their favor, because the civil law rule onpari
delicto dictates that, when both parties are at fault, neither of them could
expect positive relief from courts of justice and, instead, are left in the
state where they were at the time of the filing of the case.
Petitioners also contend that the CA erred in failing to award damages to
Patricia even if the appellate court sustained the trial court's finding that
she was not a party to the fraudulent acts committed by Rosita and Alice.
Petitioners argue that even if Patricia did not bother to know the details of
the cases against her and left everything to her mother, she did not even
know the nature of the case against her, or her superiors in the bank where
she worked did not know whether she was the plaintiff or defendant, these
were not reasons to deny her award of damages. The fact remains that she
had been maliciously dragged into the case, and that the suit had
adversely affected her work and caused her mental worries and anguish,
besmirched reputation, embarrassment and humiliation.
As to Benjamin, petitioners aver that the CA also erred in deleting the
award of damages and attorney's fees in his favor. Petitioners assert that
the trial court found that Benjamin suffered mental anguish, wounded
feelings and moral shock as a result of the filing of the present case. Citing
the credentials and social standing of Benjamin, petitioners claim that the
award of damages and attorney's fees in his favor should be increased.
Lastly, petitioners contend that the award of damages and attorney's fees
to respondents should be deleted for their failure to establish malice or bad
faith on the part of petitioners Alice and Rosita in recovering
the P3,000,000.00 which Arturo took from Rosita; and that it is Rosita who
is entitled to damages and attorney's fees for Arturo's failure and refusal to
give her share in the sale of her property in Morayta.
In their Memorandum, respondents simply contend that the issues raised
by petitioners are factual in nature and that the settled rule is that
questions of fact are not subject to review by the Supreme Court in a
petition for review on certiorari under Rule 45 of the Rules of Court. While
there are exceptions to this rule, respondents assert that petitioners failed
to show that the instant case falls under any of these exceptions.
The Courts Ruling
The Court finds the petition bereft of merit. There is no compelling reason
for the Court to disturb the findings of facts of the lower courts.
The trial court's findings are as follows: (1) Rosita failed to establish that
there is an agreement between her and Arturo that the latter will give her
one-third of the proceeds of the sale of the Morayta property; (2)
petitioners were not able to establish by clear and sufficient evidence that
the P3,000,000.00 which they took from Arturo when they encashed the
subject check was part of the proceeds of the sale of the Morayta property;
(3) Rosita's counterclaim is permissive and she failed to pay the full docket
and filing fees for her counterclaim.10
Petitioners challenge the findings of the RTC and insist that they should not
be held liable for encashing the subject check because Arturo defrauded
Rosita and that he committed deceitful acts which deprived her of her
rightful share in the sale of her building in Morayta; that the amount
of P3,000,000.00 represented by the check which they encashed formed
part of the proceeds of the said sale; that Alice and Rosita were merely
moved by their desire to recover from Arturo, Rosita's supposed share in
the sale of her property.
However, the Court agrees with respondents that only questions of law are
entertained in petitions for review on certiorari under Rule 45 of the Rules
of Court.11 The trial courts findings of fact, which the Court of Appeals
affirmed, are generally binding and conclusive upon this court. 12 There are
recognized exceptions to this rule, among which are: (1) the conclusion is
grounded on speculations, surmises or conjectures; (2) the inference is
manifestly mistaken, absurd or impossible; (3) there is grave abuse of
discretion; (4) the judgment is based on a misapprehension of facts; (5) the
findings of facts are conflicting; (6) there is no citation of specific evidence
on which the factual findings are based; (7) the finding of absence of facts
is contradicted by the presence of evidence on record; (8) the findings of
the CA are contrary to the findings of the trial court; (9) the CA manifestly
overlooked certain relevant and undisputed facts that, if properly
considered, would justify a different conclusion; (10) the findings of the CA
are beyond the issues of the case; and (11) such findings are contrary to
the admissions of both parties.13 In the instant case, petitioners failed to
demonstrate that their petition falls under any one of the above
exceptions.
Petitioners' assignments of errors boil down to the basic issue of whether
or not Alice and Rosita are justified in encashing the subject check given
the factual circumstances established in the present case.
Petitioners' posture is not sanctioned by law. If they truly believe that
Arturo took advantage of and violated the rights of Rosita, petitioners
should have sought redress from the courts and should not have simply
taken the law into their own hands. Our laws are replete with specific
remedies designed to provide relief for the violation of one's rights. In the
instant case, Rosita could have immediately filed an action for the
nullification of the sale of the building she owns in light of petitioners' claim
that the document bearing her conformity to the sale of the said building
was taken by Arturo from her without her knowledge and consent. Or, in
the alternative, as the CA correctly held, she could have brought a suit for
the collection of a sum of money to recover her share in the sale of her
property in Morayta. In a civilized society such as ours, the rule of law
should always prevail. To allow otherwise would be productive of nothing
but mischief, chaos and anarchy. As a lawyer, who has sworn to uphold the
rule of law, Rosita should know better. She must go to court for relief.
It is true that Article 151 of the Family Code requires that earnest efforts
towards a compromise be made before family members can institute suits
against each other. However, nothing in the law sanctions or allows the
commission of or resort to any extra-legal or illegal measure or remedy in
order for family members to avoid the filing of suits against another family
member for the enforcement or protection of their respective rights.
Petitioners invoke the rule of pari delicto to support their contention that
respondents do not deserve any relief from the courts.
The principle of pari delicto provides that when two parties are equally at
fault, the law leaves them as they are and denies recovery by either one of
them.14 Indeed, one who seeks equity and justice must come to court with
clean hands.15 However, in the present case, petitioners were not able to
establish that respondents are also at fault. Thus, the principle of pari
delictocannot apply.
In any case, the application of the pari delicto principle is not absolute, as
there are exceptions to its application.16 One of these exceptions is where
the application of the pari delicto rule would violate well-established public
policy.17 The prevention of lawlessness and the maintenance of peace and
order are established public policies. In the instant case, to deny
respondents relief on the ground of pari delicto would put a premium on
the illegal act of petitioners in taking from respondents what the former
claim to be rightfully theirs.
Petitioners also question the trial court's ruling that their counterclaim is
permissive. This Court has laid down the following tests to determine
whether a counterclaim is compulsory or not, to wit: (1) Are the issues of
fact or law raised by the claim and the counterclaim largely the same? (2)
Would res judicata bar a subsequent suit on defendants claims, absent the
compulsory counterclaim rule? (3) Will substantially the same evidence
support or refute plaintiffs claim as well as the defendants counterclaim?
and (4) Is there any logical relation between the claim and the
counterclaim, such that the conduct of separate trials of the respective
claims of the parties would entail a substantial duplication of effort and
time by the parties and the court?18
Tested against the above-mentioned criteria, this Court agrees with the
view of the RTC that Rosita's counterclaim for the recovery of her alleged
share in the sale of the Morayta property is permissive in nature. The
evidence needed to prove respondents' claim to recover the amount
of P3,000,000.00 from petitioners is different from that required to
establish Rosita's demands for the recovery of her alleged share in the sale
of the subject Morayta property. The recovery of respondents' claim is not
contingent or dependent upon the establishment of Rosita's counterclaim
such that conducting separate trials will not result in the substantial
duplication of the time and effort of the court and the parties.
In Sun Insurance Office, Ltd., (SIOL) v. Asuncion,19 this Court laid down the
rules on the payment of filing fees, to wit:
1. It is not simply the filing of the complaint or appropriate initiatory
pleading, but the payment of the prescribed docket fee, that vests a trial
court with jurisdiction over the subject-matter or nature of the action.
Where the filing of the initiatory pleading is not accompanied by payment
of the docket fee, the court may allow payment of the fee within a
reasonable time but in no case beyond the applicable prescriptive or
reglementary period.
2. The same rule applies to permissive counterclaims, third-party claims
and similar pleadings, which shall not be considered filed until and unless
the filing fee prescribed therefor is paid. The court may allow payment of
said fee within a reasonable time but also in no case beyond its applicable
prescriptive or reglementary period.
3. Where the trial court acquires jurisdiction over a claim by the filing of
the appropriate pleading and payment of the prescribed filing fee but,
subsequently, the judgment awards a claim not specified in the pleading,
or if specified the same has been left for determination by the court, the
additional filing fee therefor shall constitute a lien on the judgment. It shall
be the responsibility of the Clerk of Court or his duly authorized deputy to
enforce said lien and assess and collect the additional fee. 20
In order for the trial court to acquire jurisdiction over her permissive
counterclaim, Rosita is bound to pay the prescribed docket fees. 21 Since it
is not disputed that Rosita never paid the docket and filing fees, the RTC
did not acquire jurisdiction over her permissive counterclaim. Nonetheless,
the trial court ruled on the merits of Rosita's permissive counterclaim by
dismissing the same on the ground that she failed to establish that there is
a sharing agreement between her and Arturo with respect to the proceeds
of the sale of the subject Morayta property and that the amount
of P3,000,000.00 represented by the check which Rosita and Alice
encashed formed part of the proceeds of the said sale.
It is settled that any decision rendered without jurisdiction is a total nullity
and may be struck down at any time, even on appeal before this Court. 22
In the present case, considering that the trial court did not acquire
jurisdiction over the permissive counterclaim of Rosita, any proceeding
taken up by the trial court and any ruling or judgment rendered in relation
to such counterclaim is considered null and void. In effect, Rosita may file a
separate action against Arturo for recovery of a sum of money.
However, Rosita's claims for damages and attorney's fees are compulsory
as they necessarily arise as a result of the filing by respondents of their
complaint. Being compulsory in nature, payment of docket fees is not
required.23 Nonetheless, since petitioners are found to be liable to return to
respondents the amount of P3,000,000.00 as well as to pay moral and
exemplary damages and attorney's fees, it necessarily follows that Rosita's
counterclaim for damages and attorney's fees should be dismissed as
correctly done by the RTC and affirmed by the CA.
As to Patricia's entitlement to damages, this Court has held that while no
proof of pecuniary loss is necessary in order that moral damages may be
awarded, the amount of indemnity being left to the discretion of the court,
it is nevertheless essential that the claimant should satisfactorily show the
existence of the factual basis of damages and its causal connection to
defendants acts.24 This is so because moral damages, though incapable of
pecuniary estimation, are in the category of an award designed to
compensate the claimant for actual injury suffered and not to impose a
penalty on the wrongdoer.25 Moreover, additional facts must be pleaded
and proven to warrant the grant of moral damages under the Civil Code,
these being, social humiliation, wounded feelings, grave anxiety, etc. that
resulted from the act being complained of.26 In the present case, both the
RTC and the CA were not convinced that Patricia is entitled to damages.
Quoting the RTC, the CA held thus:
With respect to Patricia, she did not even bother to know the details of the
case against her, she left everything to the hands of her mother Alice. Her
attitude towards the case appears weird, she being a banker who seems so
concerned of her reputation.
Aside from the parties to this case, her immediate superiors in the BPI
knew that she is involved in a case. They did not however know whether
she is the plaintiff or the defendant in the case. Further, they did not know
the nature of the case that she is involved in. It appears that Patricia has
not suffered any of the injuries enumerated in Article 2217 of the Civil
Code, thus, she is not entitled to moral damages and attorney's fees. 27
This Court finds no cogent reason to depart from the above-quoted findings
as Patricia failed to satisfactorily show the existence of the factual basis for
granting her moral damages and the causal connection of such fact to the
act of respondents in filing a complaint against her.
In addition, and with respect to Benjamin, the Court agrees with the CA
that in the absence of a wrongful act or omission, or of fraud or bad faith,
moral damages cannot be awarded.28 The adverse result of an action does
not per se make the action wrongful, or the party liable for it.29 One may
err, but error alone is not a ground for granting such damages. 30 In the
absence of malice and bad faith, the mental anguish suffered by a person
for having been made a party in a civil case is not the kind of anxiety
which would warrant the award of moral damages.31
A resort to judicial processes is not, per se, evidence of ill will upon which a
claim for damages may be based.32
MINITA V. CHICO-NAZARIO
Associate Justice
Associate Justice
Id. at 520.
Id. at 539.
CA rollo, p. 542.
10
12
Id. at 703-704.
13
Id. at 704.
14
REYNATO S. PUNO
Chief Justice
17
Id.
Footnotes
*
19
20
Id. at 285.
21
Lopez v. David, Jr., G.R. No. 152145, March 30, 2004, 426 SCRA
535, 543.
22
23
41
Id. at 585.
42
43
Id.
Mahinay v. Velasquez, Jr., 464 Phil. 146, 149 (2004), citing Kierulf
v. Court of Appeals, 336 Phil. 414, 431-432 (1997).
24
27
CA rollo, p. 518.
29
Id at 294.
30
Id.
31
33
34
Id. at 478.
36
Id. at 274
37
Id.
38
Id. at 273.
39
Id.
Samson, Jr. v. Bank of the Philippine Islands, 453 Phil. 577, 585
(2003).
40
** Additional member per Special Order No. 558 dated January 15, 2009 in
lieu of Justice Presbitero J. Velasco, Jr. who is on official leave.
*** Additional member per Special Order No. 562 dated January 21, 2009 in
lieu of Justice Arturo D. Brion who is on leave.
* SECOND DIVISION.
408
SO ORDERED.
408
SUPREME COURT REPORTS ANNOTATED
Security Bank
Corporation
and
Trust
Company
vs.
Rizal
Commercial
Banking
that the questioned check issued by SBTC is not just an ordinary check but
a managers check. A managers check is one drawn by a banks manager
upon the bank itself. It stands on the same footing as a certified check,
which is deemed to have been accepted by the bank that certified it. As
the banks own check, a managers check becomes the primary obligation
of the bank and is accepted in advance by the act of its issuance. In this
case, RCBC, in immediately crediting the amount of P8 million to CMCs
account, relied on the integrity and honor of the check as it is regarded in
commercial transactions. Where the questioned check, which was payable
to Cash, appeared regular on its face, and the bank found nothing
unusual in the transaction, as the drawer usually issued checks in big
amounts made payable to cash, RCBC cannot be faulted in paying the
value of the questioned check.
Same; Same; The banking system has become an indispensable institution
in the modern world and plays a vital role in the economic life of every
civilized societyit is important that banks should guard against injury
attributable to negligence or bad faith on its part; The highest degree of
diligence is expected, and high standards of integrity and performance are
required of banks.In addition to the above-mentioned award of
compensatory damages, we also find merit in the need to award
exemplary damages in order to set an example for the public good. The
banking system has become an indispensable institution in the modern
world and plays a vital role in the economic life of every civilized society.
Whether as mere passive entities for the safe-keeping and saving of money
or as active instruments of business and commerce, banks have attained
an ubiquitous presence among the people, who have come to regard them
with respect and even gratitude and, above all, trust and confidence. In
this connection, it is important that banks should guard against injury
attributable to negligence or bad faith on its part. As repeatedly
emphasized, since the banking business is impressed with public interest,
the trust and confidence of the public in it is of paramount importance.
Consequently, the highest degree of diligence is expected, and high
standards of integrity and performance are required of it. SBTC having
failed in this respect, the award of exemplary damages to RCBC in the
amount of P50,000.00 is warranted.
409
409
Security Bank
Corporation
and
Trust
Company
vs.
Rizal
Commercial
Banking
3 Id., at p. 37.
410
_______________
410
4 Id.
Security Bank
Corporation
and
Trust
Company
vs.
Rizal
Commercial
Banking
check to RCBC. Thereafter, the check was returned back and forth between
the two banks, resulting in automatic debits and credits in each banks
clearing balance.4
On February 13, 1981, RCBC filed a complaint5 for damages against SBTC
with the then Court of First Instance of Rizal, Branch XXII. Said case was
docketed as Civil Case No. 1081 and later transferred to the Regional Trial
Court (RTC) of Makati City, Branch 143.
Meanwhile, following the rules of the Philippine Clearing House, RCBC and
SBTC stopped returning the checks to each other. By way of a temporary
arrangement pending resolution of the case, the P8-million check was
equally divided between, and credited to, RCBC and SBTC.6
On May 9, 2000, the RTC of Makati City, Branch 143, rendered a Decision7
in favor of RCBC. The dispositive portion of the decision reads:
PREMISES CONSIDERED, the Court renders judgment in favor of plaintiff
[RCBC] and finds defendant SBTC justly liable to [RCBC] and sentences
[SBTC] to pay [RCBC] the amount of:
1.PhP4,000,000.00 as and for actual damages;
2.PhP100,000.00 as and for attorneys fees; and,
3.the costs.
SO ORDERED.8
and
Trust
Company
vs.
Rizal
Commercial
Banking
IV.
THE HONORABLE COURT OF APPEALS ERRED GRAVELY IN FAILING TO
CONSIDER THAT PRIOR TO THE DEPOSIT OF THE CHECKS WORTH PhP53
MILLION, RCBC WAS HOLDING 43 CHECKS TOTALING P49,017,669.66
DRAWN BY CONTINENTAL MANUFACTURING CORPORATION AGAINST ITS
CURRENT ACCOUNT WHEN THE BALANCE OF THAT ACCOUNT WAS A MERE
P573.62.
_______________
VIII.
THE HONORABLE COURT OF APPEALS ERRED GRAVELY IN HOLDING THAT
SBTC WAITED FOR THREE (3) DAYS TO NOTIFY THE RCBC OF THE STOP
PAYMENT ORDER.
IX.
412
X.
412
413
Security Bank
Corporation
and
Trust
Company
vs.
Rizal
Commercial
Banking
V.
THE HONORABLE COURT OF APPEALS ERRED GRAVELY IN FAILING TO
CONSIDER THAT THE CHECKS DEPOSITED WITH RCBC THE PROCEEDS OF
Security Bank
Corporation
and
Trust
Company
vs.
Rizal
Commercial
Banking
XI.
414
414
XII.
Security Bank
Corporation
Simply stated, we find that in these consolidated petitions, the legal issues
for our resolution are: (1) Is SBTC liable to RCBC for the remaining P4
million? and (2) Is SBTC liable to pay for lost interest income on the
remaining P4 million, exemplary damages and attorneys fees?
RCBC avers that the managers check issued by SBTC is substantially as
good as the money it represents because by its peculiar character, its
issuance has the effect of an advance acceptance. RCBC claims that it is a
holder in due course when it credited the P8-million managers check to
CMCs account. Accordingly, RCBC asserts that SBTCs re-
and
Trust
Company
vs.
Rizal
Commercial
Banking
fusal to honor its obligation justifies RCBC claim for lost interest income,
exemplary damages and attorneys fees.
On the other hand, SBTC contends that RCBC violated Monetary Board
Resolution No. 2202 of the Central Bank of the Philippines mandating all
banks to verify the genuineness and validity of all checks before allowing
drawings of the same. SBTC insists that RCBC should bear the
consequences of allowing CMC to withdraw the amount of the check before
it was cleared.12
We shall rule on the issues seriatim.
At the outset, it must be noted that the questioned check issued by SBTC is
not just an ordinary check but a managers check. A managers check is
one drawn by a banks manager upon the bank itself. It stands on the same
footing as a certified check,13 which is deemed to have been accepted by
the bank that certified it.14 As the banks own check, a managers check
becomes the primary obligation of the bank and is accepted in advance by
the act of its issuance.15
In this case, RCBC, in immediately crediting the amount of P8 million to
CMCs account, relied on the integrity and honor of the check as it is
regarded in commercial transactions. Where the questioned check, which
was payable to Cash, appeared regular on its face, and the bank found
nothing unusual in the transaction, as the drawer usually issued
_______________
_______________
12 Id., at pp. 264-269.
10 Id., at pp. 256-258.
11 Id., at p. 178.
13 Equitable PCI Bank v. Ong, G.R. No. 156207, September 15, 2006, 502
SCRA 119, 132.
14 The Negotiable Instruments Law (Act No. 2031),
Moreover, neither Monetary Board Resolution No. 2202 nor the July 9, 1980
Memorandum alters the extraordinary nature of the managers check and
the relative rights of the parties thereto. SBTCs liability as drawer remains
the same by drawing the instrument, it admits the existence of the
payee and his then capacity to indorse; and engages that on
_______________
415
415
Security Bank
Corporation
and
Trust
Company
vs.
Rizal
Commercial
Banking
416
416
Thus, it is clear from the July 9, 1980 Memorandum that banks were given
the discretion to allow immediate drawings on uncollected deposits of
managers checks, among others. Consequently, RCBC, in allowing the
immediate withdrawal against the subject managers check, only exercised
a prerogative expressly granted to it by the Monetary Board.
and
Trust
Company
vs.
Rizal
Commercial
Banking
P4,000,000.00, with legal interest thereon at six percent (6%) per annum
from the time of filing of the complaint on February 13, 1981 to the date of
finality of this Decision; (2) exemplary damages of P50,000.00; and (3)
attorneys fees of P25,000.00.
No pronouncement as to costs.
SO ORDERED.
21 See Bank of the Philippine Islands v. Roxas, G.R. 16783, October 15,
2007, 536 SCRA 168, 172.
22 Civil Code, Art. 2208. In the absence of stipulation, attorneys fees and
expenses of litigation, other than judicial costs, cannot be recovered,
except:
(1)When exemplary damages are awarded;
xxxx
In all cases, the attorneys fees and expenses of litigation must be
reasonable.
417
Security Bank
Corporation
and
Trust
Company
vs.
Rizal
Commercial
Banking
*** Additional member in lieu of Associate Justice Arturo D. Brion who took
no part due to his being a former partner of one of the parties counsel.
it. SBTC having failed in this respect, the award of exemplary damages to
RCBC in the amount of P50,000.00 is warranted.21
Pursuant to current jurisprudence, with the finding of liability for exemplary
damages, attorneys fees in the amount of P25,000.0022 must also be
awarded against SBTC and in favor of RCBC.
WHEREFORE, the assailed Decision dated March 29, 2005 and Resolution
dated December 12, 2005 of the Court of Appeals in CA-G.R. CV No. 67387
is hereby AFFIRMED with MODIFICATION. Security Bank and Trust Company
is ordered to pay Rizal Commercial Banking Corporation: (1) the remaining
Copyright 2011 Central Book Supply, Inc. All rights reserved. [Security
Bank and Trust Company vs. Rizal Commercial Banking Corporation, 577
SCRA 407(2009)]
without legal excuse, to perform any promise which forms the whole or
part of the contract.
Banks and Banking; Loans; The business of a bank is one affected with
public interest, for which reason the bank should guard against loss due to
negligence or bad faith, and in approving the loan of an applicant, the bank
concerns itself with proper information regarding its debtors.The
business of a bank is one affected with public interest, for which reason the
bank should guard against loss due to negligence or bad faith. In approving
the loan of an applicant, the bank concerns itself with proper [information]
regarding its debtors. Any investigation previously conducted on the
property offered by petitioners as collateral did not preclude PNB from
considering new information on the same property as security for a
subsequent loan. The credit and property investigation for the original loan
of P3 million did not oblige PNB to grant and release any additional loan. At
the time the original P3 million credit line was approved, the title to the
property appeared to pertain exclusively to petitioners. By the time the
application for an increase was consid_______________
* FIRST DIVISION.
** Montalvo and Acierto were made parties to the petition in their capacity
as branch managers of PNB, Tabuk, Kalinga.
306
306
SUPREME COURT REPORTS ANNOTATED
Omengan vs. Philippine National Bank
PETITION for review on certiorari of the decision and resolution of the Court
of Appeals.
This petition for review on certiorari1 seeks a review and reversal of the
Court of Appeals (CA) decision2 and resolution3 in CA-G.R. CV No. 71302.
In October 1996, the Philippine National Bank (PNB) Tabuk (Kalinga) Branch
approved petitioners-spouses application for a revolving credit line of P3
million. The loan was secured by two residential lots in Tabuk, KalingaApayao covered by Transfer Certificate of Title (TCT) Nos. 12954 and
12112. The certificates of title, issued by the Registry of Deeds of the
Province of Kalinga-Apayao, were in the name of Edgar4 Omengan married
to Dinah Omengan.
The first P2.5 million was released by Branch Manager Henry Montalvo on
three separate dates. The release of the
Kalinga
7 November 1996
The Manager
Philippine National Bank
Tabuk Branch
Poblacion, Tabuk
Kalinga
_______________
Sir:
This refers to the land at Appas, Tabuk in the name of our brother, Edgar
Omengan, which was mortgaged to [the] Bank in the amount of Three
Million Pesos (P3,000,000.00), the sum of [P2.5 Million] had already been
released and received by our brother, Edgar.
_______________
_______________
308
6 Annex A, Rollo, p. 43.
308
309
309
The credit committee approved the increase of petitioners credit line (from
P3 million to P5 million), provided Edgars sisters gave their conformity.
Acierto informed petitioners of the conditional approval of their credit line.
The CA, however, on June 18, 2003, reversed and set aside the RTC
decision dated April 21, 2001.7
But petitioners failed to secure the consent of Edgars sisters; hence, PNB
put on hold the release of the additional P2 million.
On October 7, 1998, Edgar Omengan demanded the release of the P2
million. He claimed that the condition for its release was not part of his
credit line agreement with PNB because it was added without his consent.
PNB denied his request.
On March 3, 1999, petitioners filed a complaint for breach of contract and
damages against PNB with the Regional Trial Court (RTC), Branch 25 in
Tabuk, Kalinga. After trial, the court decided in favor of petitioners.
Accordingly, judgment is hereby rendered finding in favor of [petitioners.]
[PNB is ordered]:
Petitioners now contend that the CA erred when it did not sustain the
finding of breach of contract by the RTC.8
The existence of breach of contract is a factual matter not usually reviewed
in a petition filed under Rule 45. But since the RTC and the CA had
contradictory findings, we are constrained to rule on this issue.
Was there a breach of contract? There was none.
Breach of contract is defined as follows:
[It] is the failure without legal reason to comply with the terms of a
contract. It is also defined as the [f]ailure, without legal excuse, to
perform any promise which forms the whole or part of the contract.9
In this case, the parties agreed on a P3 million credit line. This sum was
completely released to petitioners who subsequently applied10 for an
increase in their credit line. This was conditionally approved by PNBs credit
committee. For all intents and purposes, petitioners sought an additional
loan.
The condition attached to the increase in credit line requiring petitioners to
acquire the conformity of Edgars sisters was never acknowledged and
accepted by petitioners. Thus, as to the additional loan, no meeting of the
minds actually occurred and no breach of contract could be attributed to
PNB. There was no perfected contract over the increase in credit line.
[T]he business of a bank is one affected with public interest, for which
reason the bank should guard against loss due to negligence or bad faith.
In approving the loan of an appli_______________
7 Id., at p. 47.
8 Petition, Rollo, pp. 17-33.
9 Cathay Pacific Airways, Ltd. v. Sps. Vasquez, 447 Phil. 306, 320; 399
SCRA 207, 219 (2003). Citations omitted.
10 Petition, Rollo, p. 15.
310
310
SUPREME COURT REPORTS ANNOTATED
311
cant, the bank concerns itself with proper [information] regarding its
debtors.11 Any investigation previously conducted on the property offered
by petitioners as collateral did not preclude PNB from considering new
information on the same property as security for a subsequent loan. The
credit and property investigation for the original loan of P3 million did not
oblige PNB to grant and release any additional loan. At the time the
original P3 million credit line was approved, the title to the property
appeared to pertain exclusively to petitioners. By the time the application
_______________
620
* FIRST DIVISION.
621
621
622
624
SUPREME COURT REPORTS ANNOTATED
625
Same; Same; The taking and collection of a check without the proper
indorsement amount to a conversion of the check by the bank.To begin
with, the irregularity appeared plainly on the face of the checks. Despite
the obvious lack of indorsement thereon, petitioner permitted the
encashment of these checks three times on three separate occasions. This
negates petitioners claim that it merely made a mistake in crediting the
value of the checks to Salazars account and instead bolsters the
conclusion of the CA that petitioner recognized Salazars claim of
with malice and bad faith, if the former suffered mental anguish, serious
anxiety, embarrassment and humiliation. Moral damages are not meant to
enrich a complainant at the expense of defendant. It is only intended to
alleviate the moral suffering she has undergone. The award of exemplary
damages is justified, on the other hand, when the acts of the bank are
attended by malice, bad faith or gross negligence. The award of reasonable
attorneys fees is proper where exemplary damages are awarded. It is
proper where depositors are compelled to litigate to protect their interest.
PETITION for review on certiorari of the decision and resolution of the Court
of Appeals.
The facts are stated in the opinion of the Court.
Justino M. Marquez, III for petitioner.
Abesamis, Medialdea & Abesamis for respondent A. Salazar.
This is a petition for review under Rule 45 of the Rules of Court seeking the
reversal of the Decision1 dated April 3, 1998, and the Resolution2 dated
November 9, 1998, of the Court of Appeals in CA-G.R. CV No. 42241.
The facts3 are as follows:
A.A. Salazar Construction and Engineering Services filed an action for a
sum of money with damages against herein petitioner Bank of the
Philippine Islands (BPI) on December 5, 1991 before Branch 156 of the
Regional Trial Court (RTC) of Pasig City. The complaint was later amended
by substitut_______________
demanded from the former payment of the amount of Two Hundred SixtySeven Thousand, Six Hundred Ninety-Two Pesos and Fifty Centavos
(P267,692.50) representing the aggregate value of three (3) checks, which
were allegedly payable to him, but which were deposited with the
petitioner bank to private respondent Salazars account (Account No. 02031187-67) without his knowledge and corresponding endorsement.
Accepting that Templonuevos claim was a valid one, petitioner BPI froze
Account No. 0201-0588-48 of A.A. Salazar and Construction and
Engineering Services, instead of Account No. 0203-1187-67 where the
checks were deposited, since this account was already closed by private
respondent Salazar or had an insufficient balance.
Private respondent Salazar was advised to settle the matter with
Templonuevo but they did not arrive at any settlement. As it appeared that
private respondent Salazar was not entitled to the funds represented by
the checks which were deposited and accepted for deposit, petitioner BPI
decided to debit the amount of P267,707.70 from her Account No.
02010588-48 and the sum of P267,692.50 was paid to Templonuevo by
means of a cashiers check. The difference between the value of the
checks (P267,692.50) and the amount actually debited from her account
(P267,707.70) represented bank charges in connection with the issuance of
a cashiers check to Templonuevo.
627
626
VOL. 512, JANUARY 25, 2007
626
SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Islands vs. Court of Appeals
ing the name of Annabelle A. Salazar as the real party in interest in place
of A.A. Salazar Construction and Engineering Services. Private respondent
Salazar prayed for the recovery of the amount of Two Hundred Sixty-Seven
Thousand, Seven Hundred Seven Pesos and Seventy Centavos
(P267,707.70) debited by petitioner BPI from her account. She likewise
prayed for damages and attorneys fees.
Petitioner BPI, in its answer, alleged that on August 31, 1991, Julio R.
Templonuevo, third-party defendant and herein also a private respondent,
627
Bank of the Philippine Islands vs. Court of Appeals
In the answer to the third-party complaint, private respondent
Templonuevo admitted the payment to him of P267,692.50 and argued
that said payment was to correct the malicious deposit made by private
respondent Salazar to her private account, and that petitioner banks
negligence and tolerance regarding the matter was violative of the primary
and ordinary rules of banking. He likewise contended that the debiting or
taking of the reimbursed amount from the account of private respondent
Salazar by petitioner BPI was a matter exclusively between said parties
and may be pursuant to banking rules and regulations, but did not in any
way affect him. The debiting from another account of private respondent
Salazar, considering that her other account was effectively closed, was not
his concern.
After trial, the RTC rendered a decision, the dispositive portion of which
reads thus:
WHEREFORE, premises considered, judgment is hereby rendered in favor
of the plaintiff [private respondent Salazar] and against the defendant
[petitioner BPI] and ordering the latter to pay as follows:
II.
6. Costs of suit.
The counterclaim is hereby ordered DISMISSED for lack of factual basis.
The third-party complaint [filed by petitioner] is hereby likewise ordered
DISMISSED for lack of merit.
Third-party defendants [i.e., private respondent Templonuevos]
counterclaim is hereby likewise DISMISSED for lack of factual basis.
628
628
_______________
On appeal, the Court of Appeals (CA) affirmed the decision of the RTC and
held that respondent Salazar was entitled to the proceeds of the three (3)
checks notwithstanding the lack of endorsement thereon by the payee.
The CA concluded that Salazar and Templonuevo had previously agreed
that the checks payable to JRT Construction and Trading5 actually belonged
to Salazar and would be deposited to her account, with petitioner
acquiescing to the arrangement.6
630
SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Islands vs. Court of Appeals
The Honorable Court erred in affirming the decision of the lower court
dismissing the third-party complaint of BPI.7
The issues center on the propriety of the deductions made by petitioner
from private respondent Salazars account. Stated otherwise, does a
collecting bank, over the objections of its depositor, have the authority to
withdraw unilaterally from such depositors account the amount it had
previously paid upon certain unendorsed order instruments deposited by
the depositor to another account that she later closed?
4. The debit of the amount from the account of A.A. Salazar Construction
and Engineering Services was proper even though the value of the checks
had been originally credited to the personal account of Salazar because
A.A. Salazar Construction and Engineering Services, an unincorporated
single proprietorship, had no separate and distinct personality from
Salazar.
_______________
(c) That despite the lack of endorsement of the designated payee upon
such checks, Salazar was able to deposit the checks in her personal
savings account with petitioner and encash the same;
xxx
(d) That petitioner accepted and paid the checks on three (3) separate
occasions over a span of eight months in 1990; and
632
xxx
631
632
SUPREME COURT REPORTS ANNOTATED
631
Petitioner concedes that when it credited the value of the checks to the
account of private respondent Salazar, it made a mistake because it failed
to notice the lack of endorsement thereon by the designated payee. The
CA, however, did not lend credence to this claim and concluded that
petitioners actions were deliberate, in view of its admission that the
mistake was committed three times on three separate occasions,
indicating acquiescence to the internal arrangement between Salazar and
Templonuevo. The CA explained thus:
It was quite apparent that the three checks which appellee Salazar
deposited were not indorsed. Three times she deposited them to her
account and three times the amounts borne by these checks were credited
to the same. And in those separate occasions, the bank did not return the
checks to her so that she could have them indorsed. Neither did the bank
question her as to why she was depositing the checks to her account
considering that she was not the payee thereof, thus allowing us to come
to the conclusion that defendant-appellant BPI was fully aware that the
proceeds of the three checks belong to appellee.
For if the bank was not privy to the agreement between Salazar and
Templonuevo, it is most unlikely that appellant BPI (or any bank for that
matter) would have accepted the checks for deposit on three separate
times nary any question. Banks are most finicky over accepting checks for
deposit without the corresponding indorsement by their payee. In fact,
they hesitate to accept indorsed checks for deposit if the depositor is not
one they know very well.11
The CA likewise sustained Salazars position that she received the checks
from Templonuevo pursuant to an internal arrangement between them,
ratiocinating as follows:
_______________
12 Id., at p. 107.
13 Madrigal v. Court of Appeals, G.R. No. 142944, April 15, 2005, 456 SCRA
247; Bernardo v. Court of Appeals, G.R. No. 101680, December 7, 1992,
216 SCRA 224; Remalante v. Tibe, G.R. No. L-59514, February 25, 1988,
158 SCRA 138.
14 Borromeo v. Sun, G.R. No. 75908, October 22, 1999, 317 SCRA 176.
634
633
Bank of the Philippine Islands vs. Court of Appeals
634
A prudent man knowing that payment is due him would have demanded
payment by his debtor from the moment the same became due and
demandable. More so if the sum involved runs in hundreds of thousand of
pesos. By and large, every person, at the very moment he learns that he
was deprived of a thing which rightfully belongs to him, would have
created a big fuss. He would not have waited for a year within which to do
so. It is most inconceivable that Templonuevo did not do this.12
title, to maintain legal action against the maker or acceptor or other party
liable to the transferor. The underlying premise of this provision, however,
is that a valid transfer of ownership of the negotiable instrument in
question has taken place.
Transferees in this situation do not enjoy the presumption of ownership in
favor of holders since they are neither payees nor indorsees of such
instruments. The weight of authority is that the mere possession of a
negotiable instrument does not in itself conclusively establish either the
right of the possessor to receive payment, or of the right of one who has
made payment to be discharged from liability. Thus, something more than
mere possession by persons who are not payees or indorsers of the
instrument is necessary to authorize payment to them in the absence of
any other facts from which the authority to receive payment may be
inferred.18
_______________
15 Paterno v. Paterno, G.R. No. 63680, March 23, 1990, 183 SCRA 630.
16 Arcaba v. Tabancura, 421 Phil. 1096; 370 SCRA 414 (2001); Martinez v.
Court of Appeals, G.R. No. 123547, May 21, 2001, 358 SCRA 38.
635
636
SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Islands vs. Court of Appeals
The CA and the trial court surmised that the subject checks belonged to
private respondent Salazar based on the pre-trial stipulation that
Templonuevo incurred a one-year delay in demanding reimbursement for
the proceeds of the same. To the Courts mind, however, such period of
delay is not of such unreasonable length as to estop Templonuevo from
asserting ownership over the checks especially considering that it was
readily apparent on the face of the instruments19 that these were crossed
checks.
In State Investment House v. IAC,20 the Court enumerated the effects of
crossing a check, thus: (1) that the check may not be encashed but only
deposited in the bank; (2) that the check may be negotiated only onceto
one who has an account with a bank; and (3) that the act of crossing the
check serves as a warning to the holder that the check has been issued for
a definite purpose so that such holder must inquire if the check has been
received pursuant to that purpose.
Thus, even if the delay in the demand for reimbursement is taken in
conjunction with Salazars possession of the checks, it cannot be said that
the presumption of ownership in Templonuevos favor as the designated
payee therein was sufficiently overcome. This is consistent with the
principle that if instruments payable to named payees or to their order
have not been indorsed in blank, only such payees or their indorsees can
be holders and entitled to receive payment in their own right.21
The presumption under Section 131(s) of the Rules of Court stating that a
negotiable instrument was given for a sufficient consideration will not inure
to the benefit of Salazar because the term given does not pertain merely
to a transfer of physical possession of the instrument. The phrase given or
indorsed in the context of a negotiable instrument refers to
_______________
637
638
VOL. 512, JANUARY 25, 2007
637
Bank of the Philippine Islands vs. Court of Appeals
the manner in which such instrument may be negotiated. Negotiable
instruments are negotiated by transfer to one person or another in such a
manner as to constitute the transferee the holder thereof. If payable to
bearer it is negotiated by delivery. If payable to order it is negotiated by
the indorsement completed by delivery.22 The present case involves
checks payable to order. Not being a payee or indorsee of the checks,
private respondent Salazar could not be a holder thereof.
638
SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Islands vs. Court of Appeals
cause both admittedly belonged to Salazar, the former being the account
of the sole proprietorship which had no separate and distinct personality
from her, and the latter being her personal account.
The right of set-off was explained in Associated Bank v. Tan:24
A bank generally has a right of set-off over the deposits therein for the
payment of any withdrawals on the part of a depositor. The right of a
collecting bank to debit a clients account for the value of a dishonored
check that has previously been credited has fairly been established by
jurisprudence. To begin with, Article 1980 of the Civil Code provides that
[f]ixed, savings, and current deposits of money in banks and similar
institutions shall be governed by the provisions concerning simple loan.
Hence, the relationship between banks and depositors has been held to be
that of creditor and debtor. Thus, legal compensation under Article 1278 of
the Civil Code may take place when all the requisites mentioned in Article
1279 are present, as follows:
(1) That each one of the obligors be bound principally, and that he be at
the same time a principal creditor of the other;
(2) That both debts consist in a sum of money, or if the things due are
consumable, they be of the same kind, and also of the same quality if the
latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy,
commenced by third persons and communicated in due time to the
debtor.
While, however, it is conceded that petitioner had the right of set-off over
the amount it paid to Templonuevo against the deposit of Salazar, the issue
of whether it acted judiciously is an entirely different matter.25 As
businesses affected with
639
Bank of the Philippine Islands vs. Court of Appeals
public interest, and because of the nature of their functions, banks are
under obligation to treat the accounts of their depositors with meticulous
care, always having in mind the fiduciary nature of their relationship.26 In
this regard, petitioner was clearly remiss in its duty to private respondent
Salazar as its depositor.
To begin with, the irregularity appeared plainly on the face of the checks.
Despite the obvious lack of indorsement thereon, petitioner permitted the
encashment of these checks three times on three separate occasions. This
negates petitioners claim that it merely made a mistake in crediting the
value of the checks to Salazars account and instead bolsters the
conclusion of the CA that petitioner recognized Salazars claim of
ownership of checks and acted deliberately in paying the same, contrary to
ordinary banking policy and practice. It must be emphasized that the law
imposes a duty of diligence on the collecting bank to scrutinize checks
deposited with it, for the purpose of determining their genuineness and
regularity. The collecting bank, being primarily engaged in banking, holds
itself out to the public as the expert on this field, and the law thus holds it
to a high standard of conduct.27 The taking and collection of a check
without the proper indorsement amount to a conversion of the check by
the bank.28
More importantly, however, solely upon the prompting of Templonuevo,
and with full knowledge of the brewing dispute between Salazar and
Templonuevo, petitioner debited the
_______________
_______________
26 Prudential Bank v. Court of Appeals, G.R. No. 125536, March 16, 2000,
328 SCRA 264; Simex International [Manila], Inc. v. Court of Appeals, G.R.
No. 88013, March 19, 1990, 183 SCRA 360; Bank of the Phil. Iskands v.
Intermediate Appellate Court, G.R. No. 69162, February 21, 1992, 206
SCRA 408.
639
28 Associated Bank v. Court of Appeals, G.R. No. 89802, May 7, 1992, 208
SCRA 465; City Trust Banking Corp. v. Intermediate Appellate Court, G.R.
No. 84281, May 27, 1994, 232 SCRA 559.
640
640
SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Islands vs. Court of Appeals
account held in the name of the sole proprietorship of Salazar without even
serving due notice upon her. This ran contrary to petitioners assurances to
private respondent Salazar that the account would remain untouched,
pending the resolution of the controversy between her and
Templonuevo.29 In this connection, the CA cited the letter dated
September 5, 1991 of Mr. Manuel Ablan, Senior Manager of petitioner
banks Pasig/Ortigas branch, to private respondent Salazar informing her
that her account had been frozen, thus:
From the tenor of the letter of Manuel Ablan, it is safe to conclude that
Account No. 0201-0588-48 will remain frozen or untouched until herein
[Salazar] has settled matters with Templonuevo. But, in an unexpected
move, in less than two weeks (eleven days to be precise) from the time
that letter was written, [petitioner] bank issued a cashiers check in the
name of Julio R. Templonuevo of the J.R.T. Construction and Trading for the
sum of P267,692.50 (Exhibit 8) and debited said amount from Ms.
Arcillas account No. 0201-0588-48 which was supposed to be frozen or
controlled. Such a move by BPI is, to Our minds, a clear case of negligence,
if not a fraudulent, wanton and reckless disregard of the right of its
depositor.
The records further bear out the fact that respondent Salazar had issued
several checks drawn against the account of A.A. Salazar Construction and
Engineering Services prior to any notice of deduction being served. The CA
sustained private respondent Salazars claim of damages in this regard:
The act of the bank in freezing and later debiting the amount of
P267,692.50 from the account of A.A. Salazar Construction and
Engineering Services caused plaintiff-appellee great damage and prejudice
particularly when she had already issued checks drawn against the said
account. As can be expected, the said checks bounced. To prove this,
plaintiff-appellee presented as exhibits photocopies of checks dated
September 8, 1991, October 28, 1991, and November 14, 1991 (Exhibits
D, E and F respectively).30
_______________
No costs.
_______________
642
SUPREME COURT REPORTS ANNOTATED
Manliclic vs. Calaunan
SO ORDERED.
Puno (C.J., Chairman), Sandoval-Gutierrez, Corona and Garcia, JJ.,
concur.
Petition partially granted, assailed decision and resolution modified.
Notes.The crossing of a check with the phrase Payees Account Only, is
a warning that the check should be deposited only in the account of the
payee. (Philippine Commercial International Bank vs. Court of Appeals, 350
SCRA 446 [2001])
A person to whom a crossed check was endorsed by the payee of said
check could not be considered a holder in due course. (Atrium
Management Corporation vs. Court of Appeals, 353 SCRA 23 [2001])
o0o
Copyright 2011 Central Book Supply, Inc. All rights reserved. [Bank of
the Philippine Islands vs. Court of Appeals, 512 SCRA 620(2007)]
Banks and Banking; Evidence; Bad Faith; Words and Phrases; A bank, in
suppressing the best evidence that could have bolstered its claim and
confirmed its innocence, the presumption arises that it withheld the same
for fraudulent purposes; Bad faith imports a dishonest purpose or some
moral obliquity or conscious doing of a wrong that partakes of the nature of
fraud.While petitioner may argue that simple negligence does not
warrant the award of moral damages, it nonetheless cannot insist that that
was all it was guilty of. It refused to produce the original copy of the
deposit slip which could have proven its claim that it did not receive
respondents missing check. Thus, in suppressing the best evidence that
could have bolstered its claim and confirmed its innocence, the
presumption
_______________
* FIRST DIVISION.
123
124
124
Appeals; The Supreme Court accords respect to the factual findings of the
trial court and, unless it overlooked substantial matters that would alter
the outcome of the case, the Court will not disturb such findings.The
Court stresses that it accords respect to the factual findings of the trial
court and, unless it overlooked substantial matters that would alter the
outcome of the case, this Court will not disturb such findings. We
meticulously reviewed the records of the case and found no reason to
deviate from the rule. Moreover, since the CA affirmed these findings on
appeal, they are final and conclusive on us. We therefore sustain the RTCs
and CAs findings that petitioner was indeed negligent and responsible for
respondents lost check.
CORONA, J.:
Same; Same; Same; The Court finds no compelling reason to disallow the
application of the provisions on common carriers in this case if only to
emphasize the fact that banking institutions have the duty to exercise the
highest degree of diligence when transacting with the public.In one case,
the Court did not hesitate to apply the doctrine of last clear chance
(commonly used in transportation laws involving common carriers) to a
banking transaction where it adjudged the bank responsible for the
encashment of a forged check. There, we enunciated that the degree of
diligence required of banks is more than that of a good father of a family in
keeping with their responsibility to exercise the necessary care and
prudence in handling their clients money. We find no compelling reason to
disallow the application of the provisions on common carriers to this case if
only to emphasize the fact that banking institutions (like petitioner) have
the duty to exercise the highest degree of diligence when trans-
125
Assailed in this petition for review by certiorari under Rule 45 of the Rules
of Court are the decision1 and resolution2 of the Court of Appeals (CA)
dated November 26, 2004 and March 1, 2005, respectively, in CA-G.R. CV
No. 58618,3 affirming the decision of the Regional Trial Court (RTC) of
Manila, Branch 31.4
_______________
125
126
126
PETITION for review on certiorari of the decision and resolution of the Court
of Appeals.
xxx
xxx
6 Rollo, p. 17.
128
8 Lipat v. Pacific Banking Corporation, 450 Phil. 410; 402 SCRA 339 (2003).
9 Bordalba v. Court of Appeals, 425 Phil. 407; 374 SCRA 555 (2002).
128
129
Petitioner filed a motion for reconsideration but the CA dismissed it. Hence,
this appeal.
129
Before us, petitioner faults the CA for upholding the RTC decision.
Petitioner argues that: (1) the findings of the RTC and the CA were not
supported by the evidence and records of the case; (2) the award of
damages in favor of respondents was unwarranted and (3) the application
by the RTC, as affirmed by the CA, of the provisions of the Civil Code on
common carriers to the instant case was erroneous.7
The petition must fail.
On the first issue, petitioner contends that the lower courts erred in finding
it negligent for the loss of the subject check. According to petitioner, the
fact that the check was deposited in Premier Bank affirmed its claim that it
did not receive the check.
At the outset, the Court stresses that it accords respect to the factual
findings of the trial court and, unless it overlooked substantial matters that
would alter the outcome of the case, this Court will not disturb such
findings.8 We meticulously reviewed the records of the case and found no
reason to deviate from the rule. Moreover, since the CA affirmed these
findings on appeal, they are final and conclusive on us.9 We therefore
sustain the RTCs and CAs findings that petitioner was indeed negligent
and responsible for respondents lost check.
On the issue of damages, petitioner argues that the moral and exemplary
damages awarded by the lower courts had no legal basis. For the award of
moral damages to stand, petitioner avers that respondents should have
proven the existence of bad faith by clear and convincing evidence.
According
_______________
10 Petitioners Memorandum, Rollo, p. 157.
7 Rollo, pp. 150-159.
_______________
14 Supra, at p. 5.
15 Id., Articles 1733, 1735 and 1756 of the Civil Code.
16 Canlas v. Asian Savings Bank, et al., 383 Phil. 315; 326 SCRA 415
(2000); see also Bank of the Philippine Islands v. Court of Appeals, G.R. No.
102383, 26 November 1992, 216 SCRA 51.
131
130
SUPREME COURT REPORTS ANNOTATED
Solidbank Corporation/Metropolitan Bank and Trust Company vs. Tan
On the last issue, we hold that the trial court did not commit any error. A
cursory reading of its decision reveals that it anchored its conclusion that
petitioner was negligent on Article 1173 of the Civil Code.14
Assuming arguendo that the trial court indeed used the provisions on
common carriers to pin down liability on petitioner, still we see no reason
to strike down the RTC and CA rulings on this ground alone.
In one case,16 the Court did not hesitate to apply the doctrine of last clear
chance (commonly used in transportation laws involving common carriers)
to a banking transaction where it adjudged the bank responsible for the
encashment of a forged check. There, we enunciated that the degree of
diligence required of banks is more than that of a good father of a family in
keeping with their responsibility to exercise the necessary care and
prudence in handling their clients money.
We find no compelling reason to disallow the application of the provisions
on common carriers to this case if only to emphasize the fact that banking
institutions (like petitioner) have the duty to exercise the highest degree of
diligence when transacting with the public. By the nature of their business,
_______________
728
SUPREME COURT REPORTS ANNOTATED
Bulos, Jr. vs. Yasuma
* THIRD DIVISION.
728
729
Bulos, Jr. vs. Yasuma
amended, and of Filipino-controlled domestic banks, the capital stock of
any rural bank shall be fully owned and held directly or indirectly by
citizens of the Philippines or corporations, associations or cooperatives
qualified under Philippine laws to own and hold such capital stock: x x x.
(Emphasis supplied.) Given the foregoing provision of law, this Court
agrees with the Court of Appeals that the respondent, being a foreigner, is
not qualified to own capital stock in the Rural Bank of Paraaque. This
renders the assignment of shares of stocks in the Rural Bank of Paraaque
in favor of respondent void. As previously stated, the assignment of the
shares of stocks in the rural bank was not accepted by the respondent
precisely because of the prohibition stated under Republic Act No. 7353,
which was explained to him by his counsel, the late Atty. Timario, Jr.
Usury Law; Interest; An interest rate of 4% per month or 48% per annum is
highly unconscionable and inordinate.In the face of all of the above, this
Court nevertheless sustains the assertion of the petitioner that the
imposition of 21% interest on the outstanding loan obligation of
P2,240,000.00 has no legal and factual bases. According to the promissory
note executed by Dr. Lim, and agreed to by all the parties, in case of the
borrowers failure to pay the loan obligation within the stipulated period,
the extended period shall be considered running monthly under the same
terms and rate of interest, which is 4% per month, until the principal has
been fully paid. Thus, the remaining balance of P2,240,000.00 is still
subject to the interest rate of 4% per month or 48% per annum. To our
mind such rate of interest is highly unconscionable and inordinate.
Same; Same; While the Usury Law has been suspended by Central Bank
Circular No. 905, s. 1982, effective on 1 January 1983, and parties to a loan
agreement have been given wide latitude to agree on any interest rate,
still stipulated interest rates are illegal if they are unconscionablenothing
in the said circular grants lenders carte blanche authority to raise interest
rates to levels which will either enslave their borrowers or lead to a
730
SUPREME COURT REPORTS ANNOTATED
Bulos, Jr. vs. Yasuma
excessive and unconscionable. Thereby, the Court, in the said case,
equitably reduced the rate of interest to 1% interest per month or 12%
interest per annum. The Court also held that while the Usury Law has been
suspended by Central Bank Circular No. 905, s. 1982, effective on 1
January 1983, and parties to a loan agreement have been given wide
latitude to agree on any interest rate, still stipulated interest rates are
illegal if they are unconscionable. Nothing in the said circular grants
lenders carte blanche authority to raise interest rates to levels which will
either enslave their borrowers or lead to a hemorrhaging of their assets.
Surely, it is more consonant with justice that the rate of interest in the
present case, which is 4% per month or 48% per annum, be reduced
equitably. We find, that the reduction of the interest rate by the trial court,
pegged at 21% per annum, was not proper.
Same; Same; Following established jurisprudence, the legal interest rate of
12% should apply, computed from the date of judicial demand.The
agreed interest rate of 4% per month or 48% per annum is unconscionable
and must be mitigated. Following established jurisprudence, the legal
interest rate of 12% should apply, computed from the date of judicial
demand, that is, 7 April 1990. The aforequoted paragraph 3 of the
guidelines is also appropriate herein, and a 12% interest per annum is
imposed on petitioners monetary liability to respondent from the date of
the finality of this Decision until it is fully paid.
Judgments; The general rule is that, where there is conflict between the
dispositive portion or the fallo and the body of a decision, the fallo controls,
a rule that rests on the theory that the fallo is the final order while the
opinion in the body is merely a statement ordering nothing.The general
rule is that, where there is conflict between the dispositive portion or the
fallo and the body of a decision, the fallo controls. This rule rests on the
theory that the fallo is the final order while the opinion in the body is
merely a statement ordering nothing. However, where the inevitable
conclusion from the body of the decision is so clear as to show that there
was a mistake in the dispositive portion, the body of the decision prevails.
In his complaint before the RTC, the respondent prayed for 20% of
P2,240,000.00 as attorneys fees. In the body of the RTC decision, the trial
court awarded outright respondents prayer for attorneys fees without any
discussion that it found the 20% respondent prayed for as excessive and
that it was reducing the percentage of the attor-
Case No. 90-1053; and (2) the Resolution4 of the Court of Appeals, dated
11 June 2004, which denied the petitioners Motion for Reconsideration.
Herein petitioner Honorio C. Bulos (petitioner) was one of the defendants in
a Complaint for collection of sum of money plus damages with prayer for a
writ of preliminary attachment, docketed as Civil Case No. 90-1053,
entitled, Koji Yasuma v. Ramon R. Lim, Honorio C. Bulos and Bede S.
Tabalingcos, filed with the RTC by herein respondent Koji Yasuma, a
Japanese national.
_______________
731
1 Rollo, pp. 31-55.
VOL. 527, JULY 17, 2007
731
Bulos, Jr. vs. Yasuma
neys fees to 10%. This court is more inclined to believe that the 10%
attorneys fees in the body of the RTC decision is merely a typographical
error. Consequently, the general rule applies to this case, and the 20%
attorneys fees ordered paid by the fallo of the RTC decision controls.
PETITION for review on certiorari of the decision and resolution of the Court
of Appeals.
732
SUPREME COURT REPORTS ANNOTATED
5 Id., at p. 81.
10 Id., at p. 115.
733
11 The petitioner, Dr. Lim and Atty. Tabalingcos are stockholders of the
Rural Bank of Paraaque. However, Dr. Lim later on decided not to join the
bank anymore.
734
733
Bulos, Jr. vs. Yasuma
he would talk first to the petitioner and Dr. Lim and he will then inform the
respondent of their response, but Atty. Tabalingcos never called back.
After painstaking efforts to collect the loan from the petitioner, Dr. Lim and
Atty. Tabalingcos, respondent requested Atty. Tabalingcos, who happened
to be his legal adviser at that time, to foreclose the Real Estate Mortgages
executed by the petitioner and Dr. Lim over their respective properties.
Atty. Tabalingcos failed to do so. Instead, he made a proposal to
734
SUPREME COURT REPORTS ANNOTATED
Bulos, Jr. vs. Yasuma
as Chairman of the Board of the said bank, issued a certification12 to the
effect that the respondent holds P1,250,000.00 worth of shares of stocks,
equivalent to 20% shareholdings in the Rural Bank of Paraaque. However,
during that time, the Rural Bank of Paraaque must first increase its
authorized capital stock subject to the approval of the Securities and
Exchange Commission (SEC) because the original shares had already been
fully subscribed and fully paid. Because of this and of the information
provided by his then counsel, the late Atty. Bayani M. Timario, Jr. (Atty.
Timario, Jr.), that a foreigner cannot be a stockholder of a rural bank, the
respondent absolutely refused to accept the shares of stocks and
demanded instead an outright payment of the loan obligation. As the
shares of stocks were already assigned to the respondent via a certification
issued by Atty. Tabalingcos, the latter then issued a check13 in the amount
of P2,240,000.00 to the order of the respondent, dated 25 December 1989,
to buy the said shares in behalf of an interested buyer. When the
respondent presented the check to the bank, it was dishonored for having
been drawn against insufficient funds.
Subsequently, the respondent sent a demand letter14 to each of the
borrowersthe petitioner, Dr. Lim and Atty. Tabalingcosfor the full
payment of their outstanding obligation; but, to no avail. This prompted
the respondent to file with the RTC a Complaint for Sum of Money with
Damages and with Prayer for a Writ of Preliminary Attachment against the
petitioner, Dr. Lim and Atty. Tabalingcos. On 23 April 1990, the trial court
issued an Order15 granting the writ of preliminary attachment applied for
by the respondent upon his filing of a bond fixed at P2,240,000.00. By
virtue of the said writ, several lots of the petitioner, and the house and lot
of Dr. Lim located in Quezon City, were attached. Petitioner
_______________
12 Rollo, p. 116.
13 Id., at p. 86.
14 Id., at pp. 87-93.
Aggrieved by the aforesaid Decision of the trial court, the petitioner, Dr.
Lim and Atty. Tabalingcos appealed to the
735
_______________
16 Id., at p. 122.
735
736
737
736
737
Court of Appeals. However, Atty. Tabalingcos did not file his appellants
brief. On 5 January 2004, the Court of Appeals rendered a Decision
affirming in toto the Decision of the trial court. The petitioner moved for its
reconsideration, but it was denied in a Resolution dated 11 June 2004
issued by the appellate court.
Hence, this petition by petitioner. However, Dr. Lim and Atty. Tabalingcos
did not appeal before this Court.
Petitioner submits the following issues for this Courts resolution:
I. Whether or not the obligation of petitioner to pay respondent has already
(sic) fully extinguished.
II. Whether or not the offer to purchase shares of stock of Rural Bank of
Paraaque amounting to P1,250,000.00 extinguished petitioner Bulos
obligation to pay the balance of the loan with (sic) respondent.
III. Whether or not petitioner Bulos is entitled to claim for damages.
IV. Whether or not [the] imposition of 21% interest on P2,240,000.00 and
20% of the said amount as attorneys fees has no legal and factual basis
(sic).
Petitioner argues that despite the partial payment made by him in the
amount P1,630,750.00, and in spite of the respondents unequivocal
admission of the same, still, the respondent did not deduct the said
amount from the total amount of the obligation due him. Instead, the
respondent continuously claimed the amount of P2,240,000.00 as of 25
December 1989, plus interest at the rate of 4% per month from 25
December 1989 when he filed his Complaint on 7 April 1990.
The petitioner likewise avers that his obligation to pay the balance of the
loan to the respondent had already been extinguished when he offered to
the respondent the shares of stocks of the Rural Bank of Paraaque
amounting to P1,250,000.00. Respondents assertion that he did not
accept the offer of the shares of stocks because of his nationality
19 Culaba v. Court of Appeals, G.R. No. 125862, 15 April 2004, 427 SCRA
721, 729.
20 Recognized exceptions to this rule are: (1) when the findings are
grounded entirely on speculation, surmises or conjectures; (2) when the
739
738
738
Appeals went beyond the issues of the case, or its findings are contrary to
the admissions of both the appellee and the appellant; (7) when the
findings are contrary to the trial court; (8) when the findings are
conclusions without citation of specific evidence on which they are based;
(9) when the facts set forth in the petition as well as in the petitioners
main and reply briefs are not disputed by the respondents; (10) when the
The defense of the petitioner that the offer he made to respondent of his
shares of stocks in Rural Bank of Paraaque amounting to P1,250,000.00
had already extinguished his obligation to pay the balance of the loan
stands on hollow ground.
_______________
Q:
Now, you have stated a while ago Mr. Witness, that the balance be paid by
shares of stocks and as a matter of fact the [respondent] has accepted that
preposition, what happened if any, afterwards?
A:
21 Coronel v. Capati, G.R. No. 157836, 26 May 2005, 459 SCRA 205, 213.
740
_______________
740
741
Given the foregoing provision of law, this Court agrees with the Court of
Appeals that the respondent, being a foreigner, is not qualified to own
capital stock in the Rural Bank of Paraaque. This renders the assignment
of shares of stocks in the Rural Bank of Paraaque in favor of respondent
void. As previously stated, the assignment of the shares of stocks in the
rural bank was not accepted by the respondent precisely because of the
prohibition stated under Republic Act No. 7353, which was explained22 to
him by his counsel, the late Atty. Timario, Jr.
Moreover, petitioner mentioned in his testimony before the trial court that
all the shares of stocks of the Rural Bank of Paraaque had already been
fully subscribed and, for shares to be made available, additional capital
should be infused and the SEC should approved the additional shares for
subscription. Here we quote that part of the petitioners testimony:
there
are
Q:
What are these Central Bank technicalities?
A:
Q:
742
A:
The only way for us, for the bank to issue additional shares of stocks
certificate is to wait for the approval of the increase of capitalization from
the [SEC] so that these assigned shares to [Atty.] Tabalingcos can be lodge.
742
Q:
same terms and rate of interest, which is 4% per month, until the principal
has been fully paid. Thus, the remaining balance of P2,240,000.00 is still
subject to the interest rate of 4% per month24 or 48% per annum. To our
mind such rate of interest is highly unconscionable and inordinate.
A:
We informed the [respondent] about that.
x x x x.
Q:
What was his reply if any?
A:
He started complaining and said, just return to me my money that is how
it all started.23
From the aforesaid testimony of the petitioner, it is highly impossible for
respondent to have acquired by assignment any shares of stocks in the
Rural Bank of Paraaque. Thus, the obligation of the petitioner to pay the
balance of the loan remains subsisting.
In the face of all of the above, this Court nevertheless sustains the
assertion of the petitioner that the imposition of 21% interest on the
outstanding loan obligation of P2,240,000.00 has no legal and factual
bases.
According to the promissory note executed by Dr. Lim, and agreed to by all
the parties, in case of the borrowers failure to pay the loan obligation
within the stipulated period, the extended period shall be considered
running monthly under the
_______________
In the case of Ruiz v. Court of Appeals,25 citing the cases of Medel v. Court
of Appeals,26 Garcia v. Court of Appeals,27 Spouses Bautista v. Pilar
Development Corporation 28 and the recent case of Spouses Solangon v.
Salazar,29 this Court considered the 3% interest per month or 36% interest
per annum as excessive and unconscionable. Thereby, the Court, in the
said case, equitably reduced the rate of interest to 1% interest per month
or 12% interest per annum. The Court also held that while the Usury Law
has been suspended by Central Bank Circular No. 905, s. 1982, effective on
1 January 1983, and parties to a loan agreement have been given wide
latitude to agree on any interest rate, still stipulated interest rates are
illegal if they are unconscionable. Nothing in the said circular grants
lenders carte blanche authority to raise interest rates to levels which will
either enslave their borrowers or lead to a hemorrhaging of their assets.30
Surely, it is
_______________
24 In the promissory note which was signed solely by Dr. Lim per
agreement among the petitioner, Dr. Lim and Atty. Tabalingcos, the
stipulated rate of interest was 4%. When the loan obligation became due
and demandable and the borrowers failed to pay on the agreed period they
sought extension of their loan obligation and promised to increase the rate
of interest to 5% to which the respondent agreed. But, when the
respondent filed his Complaint for collection of sum of money, the rate of
interest which he prayed for was 4% as what was stated in the promissory
note.
25 449 Phil. 419, 433-434; 401 SCRA 410, 421 (2003).
_______________
743
744
more consonant with justice that the rate of interest in the present case,
which is 4% per month or 48% per annum, be reduced equitably. We find,
that the reduction of the interest rate by the trial court, pegged at 21% per
annum, was not proper.
The general rule is that, where there is conflict between the dispositive
portion or the fallo and the body of a decision, the fallo controls. This rule
rests on the theory that the fallo is the final order while the opinion in the
body is merely a statement ordering nothing. However, where the
inevitable conclusion from the body of the decision is so clear as to show
that there was a mistake in the dispositive portion, the body
_______________
Ynares-Santiago
concur.
Petition partially
modification.
(Chairperson),
granted,
Austria-Martinez
judgment
and
and
resolution
Nachura,
affirmed
JJ.,
with
Notes.C.B. Circular No. 905 could not be properly invoked to justify the
escalation clauses requiring that the in_______________
33 Rollo, p. 163.
745
746
SUPREME COURT REPORTS ANNOTATED
Tondo Medical Center Employees Association vs. Court of Appeals
crease be within the limits allowed by law, such circular not being a grant
of specific authority. (Almeda vs. Court of Appeals, 256 SCRA 292 [1996])
A combined interest and penalty rate at 10% per month or 120% per
annum should be deemed iniquitous, unconscionable, and inordinate. (Dio
vs. Japor, 463 SCRA 170 [2005]) [Bulos, Jr. vs. Yasuma, 527 SCRA
727(2007)]
Note.The number and the location of the wounds inflicted upon the
victim were important indicia disproving self-defense. (People vs. Escarlos,
410 SCRA 463 [2008])
o0o
* THIRD DIVISION.
761
762
761
Act No. 8179 may be retroactively applied, since it creates for the first time
a substantive right in favor of natural-born citizens of the Philippines.
Francisco Jr. and Victor, however, overlooked the vital exception to the
exception. While it is true that a law creating new rights may be given
retroactive effect, the same can only be made possible if the new right
does not prejudice or impair any vested right.
Same; Same; A contract that violates the law is null and void ab initio and
vests no rights and creates no obligation; It produces no legal effect at all.
It would not matter that Gonzalez executed the Contract to Sell in favor
of Francisco Jr. prior to the Deed of Assignment in favor of Francisco III. As
established in the previous discussion, the Contract to Sell between
Gonzalez and Francisco Jr. was void and without force and effect for being
contrary to law. It intended to effect a transfer, which was prohibited by
Republic Act No. 7353. It is even irrelevant that the terms of said Contract
to Sell had been fully complied with and performed by the parties thereto,
and that a Deed of Absolute Sale was already executed by Gonzalez in
favor of Francisco Jr. A void agreement will not be rendered operative by
the parties alleged performance (partial or full) of their respective
prestations. A contract that violates the law is null and void ab initio and
vests no rights and creates no obligations. It produces no legal effect at all.
Same; Same; Damages; Exemplary Damages; In contracts and quasicontracts, exemplary damages may be awarded if the defendant acted in a
wanton, fraudulent, reckless, oppressive or malevolent manner.With
respect to the award of damages, the Court agrees in the findings of the
Court of Appeals that Francisco III failed to establish his entitlement to
moral damages in view of the absence of proof that he endured physical
suffering, mental anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation, or any similar injury. As
regards the grant of exemplary damages, we likewise uphold the ruling of
the appellate court that the same was not warranted under the
circumstances, as FRANCISCO III was not able to prove that he was entitled
to moral, temperate or compensatory damages. Exemplary damages are
762
SUPREME COURT REPORTS ANNOTATED
Nunga, Jr. vs. Nunga III
compensatory damages; but it is not necessary that he prove the
monetary value thereof.
PETITION for review on certiorari of the decision and resolution of the Court
of Appeals.
The facts are stated in the opinion of the Court.
Kho, Bustos, Malcontento, Argosino Law Offices for petitioners.
Quisumbing, Fernando & Javellana Law Offices for respondent.
CHICO-NAZARIO,J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the
Rules of Court assailing the Decision1 dated 31 January 2007 and
Resolution2 dated 4 June 2007 of the Court of Appeals in CA-G.R. CV No.
78424. The appellate court, in its assailed decision, reversed the Decision3
dated 25 October 2002 of the Regional Trial Court (RTC) of the City of San
Fernando, Pampanga, Branch 42, in Commercial Case No. 018, which
ordered the registration of the transfer of ownership of the disputed shares
of stock in the Rural Bank of Apalit, Inc. (RBA) in favor of petitioners; and in
its resolution, denied the Motion for Reconsideration of the aforementioned
decision.
Presented hereunder are the factual antecedents of the case.
1 Penned by Associate Justice Jose C. Reyes, Jr. with Associate Justices Jose
L. Sabio, Jr. and Myrna Dimaranan-Vidal, concurring; Rollo, pp. 8-26.
2 Rollo, p. 29.
WITNESSETH:
763
_______________
763
Nunga, Jr. vs. Nunga III
tioner Francisco Jr. was not present at the meeting, as he was then in the
United States of America where he is a naturalized citizen.
764
764
SUPREME COURT REPORTS ANNOTATED
Nunga, Jr. vs. Nunga III
Date of Issue
May, 1978
250
36
122
Jan., 1991
105
264
Feb., 1991
6 Rollo, p. 152.
152
487
Nov., 1993
765
166
Feb., 1994
181
525
July, 1994
213
336
That the VENDOR has offered to sell the abovestated (sic) shares of stocks
and the PURCHASER has agreed to purchase the same for a total
consideration of P200,000;
That it is hereby agreed that out of the total consideration or contract
price, the purchaser will pay the amount of FIFTY THOUSAND PESOS
(P50,000.00), receipt of which is herein acknowledged by the purchaser, at
the date and place below stated and the remaining balance of P150,000
will be paid in full on February, (sic) 28, 1996;
That it is further agreed that the VENDOR will execute an authorization in
favor of the herein purchaser or his representative, Victor D. Nunga[,] to
retrieve all the corresponding Stocks (sic) Certificates as above indicated
from the Apalit Rural Bank, Inc.
WHEREFORE, for and in consideration of the total amount of P200,000 (sic)
receipt in part of which is herein acknowledged in the amount of
P50,000.00, the vendor hereby agrees to sell, cede and transfer all the
above stated shares of stocks to the PURCHASER, his heirs[,] successors,
and assigns, absolutely free from any encumbrance and lien whatsoever.
IN WITNESS WHEREOF, I have hereunto set my signature this 19th day of
FEBRUARY, (sic) 1996, at Quezon City, Philippines.
(signed)
JESUS J. GONZALES
Vendor
On even date, Victor gave the initial payment of P50,000.00 to Gonzalez,
who duly acknowledged the same.6 In exchange, Gonzalez
_______________
Assignor
7 Id., at p. 108.
8 With respect to Stock Certificate No. 213, the same was not mentioned in
Gonzalez letter, so Firme initially refused to give it to Victor. Said
certificate was only delivered to the latter after the full payment of the
agreed purchase price. (Rollo, p. 457)
9 Rollo, p. 105.
766
The next day, on 28 February 1996, Francisco Jr. arrived from the United
States of America. He and Victor then promptly proceeded to the residence
of Gonzalez in order to pay the balance of P150,000.00 of the purchase
price stated in their Contract to Sell with Gonzalez. Gonzalez, however,
informed them that he already sold his shares of stock to Francisco III.12
After discussing the matter, Gonzalez was somehow convinced to accept
the balance of the purchase price and sign his name at the dorsal portion
of the stock certificates to endorse
766
SUPREME COURT REPORTS ANNOTATED
Nunga, Jr. vs. Nunga III
Date
At the same time the afore-quoted Deed was executed, Francisco III paid in
full the agreed purchase price of P300,000.00 using a BPI (Bank of the
Philippine Islands) Family Bank Check No. 0347505 issued in favor of
Gonzalez. An acknowledgment receipt signed by Gonzalez and witnessed
by his wife Cristina D. Gonzalez evidenced the payment.10 Since the stock
certificates covering the shares were already in Victors possession,
Gonzalez immediately wrote Victor a letter,11 demanding that Victor hand
over the said stock certificates to Francisco III, the supposed new owner of
the shares.
_______________
Shares Amount
May 24, 1969
4 (sic)
250
P 25,000.00
36
122
12,200.00
105
264
26,400.00
152
487
48,700.00
166
800.00
525
181
February 2, 1996
213
52,500.00
336
33,600.00
IN WITNESS WHEREOF, the ASSIGNOR have (sic) cause (sic) these presents
to be signed at Quezon City, this 27 day of February, 1996.
(signed)
JESUS J. GONZALE[Z]
10 Id., at p. 215.
11 Id., at p. 106.
12 Id., at p. 458.
767
This DEED OF ABSOLUTE SALE, executed this 28th day of February, 1996,
at SAN JUAN, M.M. by:
JESUS J. GONZALE[Z], of legal age, Filipino citizen, married to Cristina D.
Gonzale[z], residing at No. 10 2nd Ave., Crame, Quezon City, hereinafter
referred to as the VENDOR;
in favor of
768
WITNESSETH:
No. of Shares
Represented
Date of Issue
Journal Folio
No.
250
May, 1978
36
122
Jan., 1991
105
264
Feb., 1991
152
487
Nov., 1993
166
Feb., 1994
181
525
July, 1994
213
336
That Stock Certificate Nos. 5 and 36 respectively representing 250 and 122
shares of the Rural Bank of Apalit[,] Inc. were lost and is (sic) currently in
the process of reconstitution;
That the VENDOR has offered to sell the abovestated (sic) shares of stocks
and the PURCHASER has agreed to purchase the same.
_______________
JESUS J. GONZALE[Z]
Vendor
Incidentally, on that same day, Francisco III delivered to Firme the Deed of
Assignment which Gonzalez executed in his favor, and a copy of Gonzalezs
letter to Victor dated 27 February 1996 demanding the latter to surrender
the stock certificates in his possession to Francisco III. Accordingly, on 1
March 1996, Firme wrote Victor a letter14 requesting that the latter
immediately comply with the enclosed 27 February 1996 letter of
Gonzalez.
Victor refused to comply with Firmes request and instead demanded that
the sale of shares of stock by Gonzalez in favor of Francisco Jr. on 28
February 1996 be entered into the Corporate Book of Transfer of RBA.
Firme, in turn, rejected Victors demand, alleging that Francisco III already
bought Gonzalezs shares.15
Consequently, on 14 March 1996, Victor filed a Petition16 with the
Securities and Exchange Commission (SEC) against Francisco III and Firme,
which was docketed as SEC Case No. 03-96-5288. Victor prayed that the
SEC declare null and void the Stockholders Meeting held on 30 January
1996 for lack of the required majority quorum; as well as the votes cast for
the shares of the deceased stockholders, namely, Teodorico R. Nunga,
Carmencita N. Nunga and Jesus Enrico N. Nunga. Victor additionally
requested that the transfer of Gonzalezs RBA shareholdings to Francisco Jr.
be annotated on the RBA Corporate Transfer Book and new stock
certificates be issued in favor
_______________
14 Id., at p. 109.
15 Id., at p. 458.
16 Id., at pp. 88-93.
769
770
SUPREME COURT REPORTS ANNOTATED
Nunga, Jr. vs. Nunga III
After the parties submitted their respective Offers of Evidence, but before
the SEC could rule on the same, the cases were eventually turned over to
the RTC pursuant to Administrative Circular AM No. 00-11-0323 of the
Supreme Court dated 21 November 2000.24
_______________
To implement the provision of Sec. 5.2 of Republic Act No. 8799 (The
Securities Regulation Code), and in the interest of a speedy and efficient
administration of justice and subject to the guidelines hereinafter set forth,
the following branches of the Regional Trial Courts (RTC) are hereby
designated to try and decide Securities and Exchange Commission (SEC)
cases enumerated in Sec. 5 of P.D. No. 902-A (Reorganization of the
Securities and Exchange Commission), arising within their respective
territorial jurisdictions with respect to the National Capital Judicial Region
and within the respective provinces in the First to the Twelfth Judicial
Regions:
xxxx
THIRD JUDICIAL REGION
xxxx
Pampanga (San Fernando)
(26) Br. 42, Judge Pedro M. Sunga, Jr.
24 Francisco III filed his Offer of Documentary Evidence (Rollo, pp. 208214) on 6 January 1998, while petitioners filed their Formal Offer of Exhibits
(Rollo, pp. 175-180) on 17 April 1999. Thereafter, on 15 January 2001, SEC
Case No. 03-96-5292 was transferred to the RTC of Manila, Branch 46,
pursuant to Administrative Circular No. 00-11-03 of the Supreme Court.
The case was docketed as Civil Case No. 01-99651. SEC Case No. 03-965288, on the other hand, was transferred to the RTC of San Fernando,
Pampanga, Branch 42 and was docketed as Civil Case No. 01-101345.
Before the RTC of Manila, Branch 46, Francisco Jr. and Victor filed an
Omnibus Motion (Records, Vol. 1, pp. 229-230) on 26 September 2001,
praying that SEC Case No. 03-96-5288 be jointly tried with SEC Case No.
03-96-5292. This was, however, denied in an Order (Records, Vol. 1, p. 232)
dated 28 September 2001. On 5 November 2001, Victor filed a Motion for
Reconsideration (Records, Vol. 1, pp. 233-236) thereof. In an Order dated 8
November 2001, the RTC of Manila, Branch 46 transferred Civil Case No.
01-99651 to the RTC of San Fernando, Pampanga, Branch 42.
771
771
In the RTC, SEC Cases No. 03-96-5288 and No. 03-96-5292 were docketed
as Commercial Cases No. 001 and No. 018, respectively.
Francisco Jr. and Victor subsequently filed a Motion to Resolve their Formal
Offer of Exhibits, which the SEC was not able to act upon. In an Order25
dated 30 April 2002, the RTC admitted the formal offers of evidence in both
cases.
On 25 October 2002,26 the RTC promulgated its Decision. With respect to
Commercial Case No. 001, Victors Petition, the RTC ruled:
The Court, after a careful study on the evidences on record finds that
[herein petitioner Victor] failed to substantiate the allegation in the
petition. [Victor] failed to controvert the documentary evidences presented
by [herein respondent Francisco III] to wit: Minutes of the Stockholders
Meeting, showing the number of shares present in person or in proxy[;]
written Proxy in favor of Dwight N. Nunga in (sic) behalf of deceased
Teodorico R. Nunga by virtue of the Extrajudicial Settlement of estate in
(sic) behalf of Carmencita Noel Nunga proxy executed by Ma. Del Carmen
N. Leveriza in her capacity as the Judicial Administratrix duly appointed by
the RTC Branch 60, Makati[,] Metro Manila in Special Proceedings No. M146127; Affidavit of respondent Isabel C. Firme stating thereat the fact that
the certificate of stock delivered for registration in the Corporate Transfer
Book were mere xerox copies thus, the refusal. Thus further, proved
[Victors] lack of cause of action against [Francisco III] and as a result of
which damages on the part of [Francisco III] and Isabel C. Firme who were
constrained to hire the services of their counsel to protect their right (sic).
(Emphasis ours.)
As regards Commercial Case No. 018,28 Francisco IIIs Complaint, the RTC
decreed:
The Court[,] after a careful study on the aforementioned evidences (sic)
on record[,] finds and holds that [herein petitioner Francisco Jr.] has a
better right over the subject shares considering that the Contract to Sell
was executed prior to the Deed of Assignment presented by
_______________
772
SUPREME COURT REPORTS ANNOTATED
29 The Contract to Sell in favor of Francisco Jr. and Victor was notarized
only on 28 February 1996 (Records, Vol. I, p. 118) or one day after the
Deed of Assignment in favor of Francisco III was executed and notarized on
27 February 1996.
773
Stock Certificate Nos. 105, 152, 166, 181, 213, 5 and 36 duly endorsed by
Jesus [Gonzalez];
2)The [respondent Francisco III] to pay the [petitioners Victor and
Francisco Jr.] the amount of P100,000.00 [for] moral damages[;]
3)The amount of P100,000.00 [for] exemplary damages[;]
4)The amount of P50,000.00 [for] attorneys (sic) fees and the cost of
suit.30
Francisco III filed a Motion for Partial Reconsideration31 of the aforequoted
Decision, but it was denied by the RTC in an Order32 dated 31 January
2003. Thus, Francisco III filed with the RTC a Notice of Appeal.33 His appeal
before the Court of Appeals was docketed as CA-G.R. CV No. 78424.
Before the Court of Appeals, Francisco III argued that the RTC erred in: (1)
ruling that Francisco Jr. had a better right over the disputed shares of stock,
considering that the prior contract which he had entered into with
Gonzalez was a mere contract to sell; (2) finding that the Deed of
Assignment in Francisco IIIs favor was executed in bad faith, inasmuch as
it was not supported by any of the evidence presented by all the parties;
and (3) giving retroactive effect to Republic Act No. 8179,34 which grants
former natural born citizens (such as Francisco Jr.) equal investment rights
in rural banks of the Phil_______________
774
SUPREME COURT REPORTS ANNOTATED
775
x x x The fact that Republic Act No. 8179 expressly granted to former
natural-born citizens of the Philippines investment rights similar to those of
citizens of the Philippines bolsters the view that Republic Act No. 7353
indeed prohibited foreign nationals from owning shares of stock in rural
banks. Had it been necessarily implied from the provisions of Republic Act
No. 7353 that foreign nationals could own shares of stock in rural banks,
the legislature would not have wasted time and effort in inserting a new
provision granting to former natural-born citizens of the Philippines equal
investment rights in Republic Act No. 8179.
Furthermore, there is no merit in the assertion of FRANCISCO JR. and
VICTOR that Republic Act No. 8179 should be given a retroactive effect in
accordance with the following rule:
The principle that a new law shall not have retroactive effect only governs
rights arising from acts done under the rule of the former law; but if a right
be declared for the first time by a new law it shall take effect from the time
of such declaration, even though it has arisen from acts subject to the
former laws, provided that it does not prejudice another acquired right of
the same origin. x x x.
Republic Act No. 8179 cannot be applied retroactively insofar as the instant
case is concerned, as its application would prejudice the (sic) FRANCISCO
III who had acquired vested right over the shares of stock prior to the
effectivity of the said law. Such right was vested to him when the Deed of
Assignment was executed by Jesus in his favor on February 27, 1996.
Undoubtedly, FRANCISCO III had a better right over the shares of stock of
JESUS inasmuch as the validity of the Deed of Assignment was not affected
despite the prior execution of the Contract to Sell in favor of FRANCISCO JR.
on February 19, 1996. As previously adverted to, the said Contract, as well
as the Deed of Absolute Sale and the subsequent transfer of the shares of
stock to FRANCISCO JR., was null and void for violating a mandatory
provision of Republic Act No. 7353. x x x.35
The Court of Appeals, however, decided to award Francisco III only
attorneys fees and cost of suit, but not moral and exemplary damages:
776
SUPREME COURT REPORTS ANNOTATED
Nunga, Jr. vs. Nunga III
that he sustained mental anguish, serious anxiety, wounded feelings and
other emotional and mental sufferings by reason of the double sale. x x x.
Likewise, FRANCISCO III is not entitled to exemplary damages. x x x In the
instant case, FRANCISCO III failed to sufficiently prove his entitlement to
moral, temperate or compensatory damages. Hence, his claim for
exemplary damages must similarly fail.
However, as to his claim for attorneys fees and cost of suit, We find it to
be tenable as the records of the case clearly reveal that FRANCISCO III was
compelled to litigate or to incur expenses to protect his interest because of
the double sale. x x x. Under the circumstances obtaining in the instant
case, We deem that the award of P20,000.00 as attorneys fees is
reasonable.36
The fallo of the Court of Appeals Decision thus reads:
II.
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN HOLDING
THAT FRANCISCO III HAS A VESTED RIGHT TO THE SHARES OF STOCK OF
GONZALE[Z], WHICH WOULD BE IMPAIRED BY THE RETROACTIVE
APPLICATION OF REPUBLIC ACT NO. 8179?
III.
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED [IN]
AWARDING DAMAGES TO FRANCISCO III AND WITHDRAWING THE AWARD
OF NOMINAL DAMAGES TO PETITIONERS BY THE TRIAL COURT?
Essentially, the fundamental issue that this Court is called upon to resolve
is who among the parties to this case has a better right to the disputed
RBA shares of stock.
Francisco Jr. and Victor contend that the consummated sale of the RBA
shares of stock by Gonzalez to Francisco Jr. gives the latter a superior right
over the same, since the transaction complied with all the elements of a
valid sale. Contrary to the ruling of the Court of Appeals, Francisco Jr. and
Victor claim that there was no provision in Republic Act No. 7353, prior to
its amendment, which explicitly prohibited any transfer of shares to
individuals who were not Philippine citizens, or which declared such a
transfer void. Hence, there was an implied recognition by the legislature
that to declare the nullity of such acts would be more disadvantageous and
harmful to the purposes of the law. Moreover, Francisco Jr. and Victor
contend that the passage of Republic Act No. 8179, An Act to Further
Liberalize Foreign Investment, cured whatever legal infirmity there may
have been in the purchase by Francisco Jr. of the RBA shares of stock from
Gonzalez. As Republic Act No. 8179 expressly creates and declares for the
first time a substantive right, then it may be given retroactive effect. The
Deed of Assignment between Francisco III and Gonzalez did not
777
778
_______________
executed later in time, but the check issued for its payment was also never
encashed. There was, therefore, a total absence of consideration, making
the said contract between Francisco III and Gonzalez inexistent.
779
Even the subsequent enactment of Republic Act No. 8179 cannot benefit
Francisco Jr. It is true that under the Civil Code of the Philippines, laws shall
have no retroactive effect, unless the contrary is provided.41 But there are
settled exceptions to this general rule, such as when the statute is
CURATIVE or REMEDIAL in nature, or when it CREATES NEW RIGHTS.42
Francisco Jr. and Victor assert that, as an exception to the cardinal rule of
prospective application of laws, Republic Act No. 8179 may be retroactively
applied, since it creates for the first time a substantive right in favor of
natural-born citizens of the Philippines. Francisco Jr. and Victor, however,
overlooked the vital exception to the exception. While it is true that a law
creating new rights may be given retroactive effect, the same can only be
made possible if the new right does not prejudice or impair any vested
right.43
The Court upholds the finding of the Court of Appeals that Republic Act No.
8179 cannot be applied retroactively to the present case, as to do so would
prejudice the vested rights of Francisco III to the disputed RBA shares of
stock. Francisco III, who is undeniably a citizen of the Philippines, and who
is fully qualified to own shares of stock in a Philippine rural bank, had
acquired vested rights to the disputed RBA shares of stock by virtue of the
Deed of Assignment executed in his favor by Gonzalez.
It would not matter that Gonzalez executed the Contract to Sell in favor of
Francisco Jr. prior to the Deed of Assignment in favor of Francisco III. As
established in the previous discussion, the Contract to Sell between
Gonzalez and Francisco Jr. was void and without force and effect for being
contrary to law. It intended to effect a trans_______________
42 Frivaldo v. Commission on Elections, 327 Phil. 521, 556; 257 SCRA 727,
754 (1996).
43 Rattan Art & Decorations, Inc. v. Collector of Internal Revenue, 121 Phil.
605, 611; 13 SCRA 626, 632 (1965).
780
780
fer, which was prohibited by Republic Act No. 7353. It is even irrelevant
that the terms of said Contract to Sell had been fully complied with and
performed by the parties thereto, and that a Deed of Absolute Sale was
already executed by Gonzalez in favor of Francisco Jr. A void agreement will
not be rendered operative by the parties alleged performance (partial or
full) of their respective prestations. A contract that violates the law is null
and void ab initio and vests no rights and creates no obligations. It
produces no legal effect at all.44
781
With respect to the award of damages, the Court agrees in the findings of
the Court of Appeals that Francisco III failed to establish his entitlement to
moral damages in view of the absence of proof that he endured physical
suffering, mental anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation, or any similar injury.45
As regards the grant of exemplary damages, we likewise uphold the ruling
of the appellate court that the same was not warranted under the
circumstances, as FRANCISCO III was not able to prove that he was entitled
to moral, temperate or compensatory damages. Exemplary damages are
imposed by way of example or correction for the public good, in addition to
moral, temperate, liquidated or compensatory damages.46 In contracts
and quasi-contracts, exemplary damages may be awarded if the defendant
acted in a wanton, fraudulent, reckless, oppressive or malevolent
manner.47 It cannot, however, be considered as a matter of right; the
court has to decide whether or not such damages should be adjudicated.48
Before the court may consider an award for exemplary damages, the
plaintiff must first show that he is entitled to moral, temperate or
compensatory damages; but it is not necessary that he prove the
monetary value thereof.49
_______________
_______________
BELLOSILLO, J.:
AYALA CORPORATION issued on 23 December 1987 BPI Check No. 707802
for P33,226,685.69 payable to PAL Employees' Savings and Loan
Association, Inc. (PESALA). The check with the words "FOR PAYEE'S
ACCOUNT ONLY" written on its face was delivered in trust to Catalino Baez
in his capacity as President of PESALA. However, on the same date, Baez
and his co-officers Romeo Busuego and Renato Lim deposited the check in
their joint account with respondent Republic Planters Bank, Cubao Branch,
which was not an official depositary bank of PESALA. Later, Baez,
Busuego and Lim withdrew the amount and failed to account for it to
PESALA.
On 21 April 1992, aside from a criminal case for estafa against its officers
Baez, Busuego and Lim, PESALA sued Republic Planters Bank (RPB) for
the face value of the check and P500,000.00 as damages for allowing the
deposit and encashment of the check despite the fact that it was a crossed
check payable only to the account of PESALA, to its great prejudice and in
violation of banking laws in the country. 1
On 14 March 1994 RPB moved for leave to file a third-party complaint
against Catalino Baez, Romeo Busuego, Renato Lim and Alberto Barican,
the latter as manager of RPB, Cubao Branch, alleging that they were solely
and exclusively responsible for the loss of the value of the check through
their misrepresentation which led the bank to believe that they were
authorized to deposit and withdraw the amount. The motion was granted.
Meanwhile on 6 April 1994 PESALA and RPB (by then known as PNBRB) 2 forged a compromise agreement under which PNB-RB agreed to pay
PESALA P20,226,685.00. PESALA, in turn, undertook to assist PNB-RB in
prosecuting the third-party defendants for the liability assumed by the
bank.
On 13 April 1994 the trial court approved the compromise.
Upon the foregoing amicable settlement, third-party defendant Lim moved
to dismiss the third-party complaint on the ground that it could not stand
on its own after the termination of the main complaint by compromise
since the third-party complaint was but an incident and a continuation of
the main case. Third-party defendants Baez and Busuego, aside from
adopting the ground invoked by defendant Lim, likewise moved to dismiss
on grounds of lis pendens, forum shopping, lack of jurisdiction and cause of
action.
On 14 July 1994 the trial court deferred action on the motion to dismiss
anchored on grounds of lis pendens and forum shopping, but denied the
motion outright anchored on grounds of lack of jurisdiction and termination
of the principal complaint. 3 The motion of third-party defendants to
reconsider the order was denied on 27 October 1994 since the compromise
between plaintiff PESALA and third-party plaintiff PNB-RB did not operate
to automatically dismiss the third-party complaint as the latter was
actually independent of, and separate and distinct from, the plaintiff's
complaint. 4
On 1 December 1994 petitioners Baez and Busuego instituted a special
civil action for certiorari with the Court of Appeals imputing grave abuse of
discretion on the part of the trial court in issuing the Orders of 14 July and
27 October 1994 attaching duplicate original copies thereof. On 14
December 1994 the Special Fifth Division of the Court of Appeals, without
necessarily giving due course to the petition, ordered respondents to
comment thereon.5 However, on 31 January 1995, another Resolution 6 was
issued by the appellate court, this time through its Special Eleventh
Division, dismissing the petition for failure of petitioners to attach certified
true copies of the questioned orders as required under Sec. 2, par. (a), Rule
6, of the Revised Internal Rules of the Court of Appeals. The motion for
reconsideration was denied. 7 Hence, this petition.
Two issues are presented before us: whether respondent Court of Appeals
erred in dismissing the special civil action for certiorari for failure of
petitioners to attach certified true copies, as opposed to duplicate
originals, of the questioned orders; and whether the earlier dismissal (by
virtue of compromise) of the main complaint warrants the automatic
dismissal of the third-party complaint filed in consequence thereof.
On the procedural issue, petitioners do not deny their failure to attach
certified true copies of the questioned Orders dated 14 July and 27 October
1994. However they contend that the duplicate originals thereof which
they attached to their petition constitute sufficient compliance with the
requirements of Sec. 2, par. (a), Rule 6, of the Revised Internal Rules of the
Court of Appeals 8 since Revised Circular No. 1-88 issued by the Supreme
Court itself allows either a clearly legible duplicate original or certified true
copy of the assailed decision, judgment, resolution or order to be attached
to the petition. 9 Thus, petitioners posit that Sec. 2, par. (a), Rule 6, of the
Revised Internal Rules of the Court of Appeals should not be read in a
"myopic" manner but, rather, liberally consistent and in conjunction with
SC Revised Circular No. 1-88.
On the other hand, respondent PNB-RB argues that Revised Circular No. 188 cannot be successfully invoked by petitioners since it pertains only to
requirements for petitions filed with the Supreme Court, not with the Court
of Appeals. In the latter case, its Revised Internal Rules, which mandate
that certified true copies of the questioned order must be attached to a
petition in special civil actions for certiorari, apply.
We had occasion to rule that the submission of a duplicate copy of the
questioned order of the trial court (bearing its seal) in a petition
for certiorari constitutes substantial compliance with the rule requiring
submission of the certified copies of the orders complained of. 10 However,
a similar liberal construction cannot be applied in favor of petitioners since
courts suspend their own rules or except a case from them only when
substantial justice so warrants, as when the merit of a party's cause is
apparent and outweighs consideration of non-compliance with certain
formal requirements. 11 To reiterate, a similar relaxation of procedural rules
is not warranted in the case at bench due to the lack of merit of
petitioners' cause.
Petitioners argue that the third-party complaint filed against them by PNBRB should have been immediately dismissed in view of the prior dismissal
of the main complaint filed against PNB-RB by PESALA. Since jurisdiction of
the trial court over the main action has been terminated, its jurisdiction
over the third-party complaint necessarily ended as well since the latter is
but a continuation of, or ancillary to, the main action.
The above contention is devoid of merit. Petitioners liken a third-party
complaint to a cross-claim and then, by analogy, apply the ruling in Ruiz
Jr. v. Court of Appeals 12 where the Court said that the dismissal of the
complaint divested the cross-claimants of whatever appealable interest
they might have had before and made the cross-claim itself no longer
viable. 13
A third-party complaint is indeed similar to a cross-claim, except only with
respect to the persons against whom they are directed. 14 However, the
ruling in Ruiz cannot be successfully invoked by petitioners. In Ruiz we
declared that the dismissal of the main action rendered the cross-claim no
longer viable only because the main action was categorically dismissed for
lack of cause of action. Hence, since defendants could no longer be held
liable under the main complaint, no reason existed for them anymore to
sue their co-party under the cross-claim.
In sharp contrast thereto, the termination of the main action between
PESALA and PNB-RB was not due to any finding that it was bereft of any
basis. On the contrary, further proceedings were rendered unnecessary
only because defendant (third-party plaintiff) PNB-RB, to avoid a protracted
litigation, voluntarily admitted liability in the amount of P20,226,685.00.
Hence, the termination of the main action between PESALA and PNB-RB
could not have rendered lifeless the third-party complaint filed against
petitioners, as it did the cross-claim in Ruiz Jr. v.Court of Appeals, since it
involved a finding of liability on the part of PNB-RB even if it be by
compromise.
Petitioners allege that it would be an injustice to them if they should be
made to carry the burden of contribution or indemnity for the liability
voluntarily assumed by respondent PNB-RB in the compromise agreement
to which they were never parties. But no injustice will result. A continuation
of the proceedings with respect to the third-party complaint will not ipso
facto subject petitioners, as third-party defendants, to liability as it will only
provide the parties with the occasion to litigate their respective claims and
defenses. Petitioners' assertion that they are not liable for the obligation
voluntarily assumed by PNB-RB in the compromise is but a defense to
resist the third-party complaint which they can properly raise in the course
of the trial and prove by whatever evidence they may have on the matter.
WHEREFORE, the petition is DENIED. The questioned Resolutions of the
Court of Appeals dated 31 January and 22 February 1995 are AFFIRMED,
with costs against petitioners.
SO ORDERED.
Padilla, Vitug, Kapunan and Hermosisima, Jr., JJ., concur.
Footnotes
1 Docketed as Civil Case No. 92-60968, RTC-Br. 16, Manila.
2 Philippine National Bank-Republic Bank.
3 Rollo, pp. 74-75.
4 Id., p. 92.
5 Resolution penned by Justice Ricardo J. Francisco (now
Associate Justice of the Supreme Court) with Justices
Ramon A. Barcelona and Godardo A. Jacinto,
concurring; Rollo, p. 118.
6 Resolution penned by Associate Justice Pacita CanizaresNye with Justices Conchita Carpio-Morales and Bernardo LI.
Salas, concurring; Rollo, p. 159.
7 Resolution dated 22 February 1995; Id., pp. 160-161.
8 What should be Filed. The petition shall be filed in
seven (7) legible copies and a copy thereof shall be served
on each of the respondents, and must be accompanied by
a certified true copy of the decision or order complained
of and true copies of the pleadings and other pertinent
documents and papers (emphasis ours).
9 (3) Copies of judgment or resolution sought to be
reviewed. Petitions filed with the Supreme Court,
whether under Rule 45, Rule 65, R.A. No. 5440 or P.D. No.
1606 shall be accompanied by a clearly legible duplicate
original or certified true copy of the decision, judgment,
resolution or order subject thereof . . . .
10 Pizarro v. Court of Appeals, No. L-31979, 6 August 1980,
99 SCRA 72, 82.
11 Jose v. Court of Appeals, No. L-38581, 31 March 1976,
70 SCRA 257, 265; Alcaide v. Dela Merced, No. L-49028, 25
July 1981, 106 SCRA 41, 47; Maturan v. Araula, G.R. No.
57392, 30 January 1982, 111 SCRA 615, 618; Tan v.
Director of Forestry, No. L-24548, 27 October 1983, 125
SCRA 302, 317; Aznar III v. Bernard, G.R. No. 81190, 9 May
1988, 161 SCRA 276, 282-283; Yong Chan Kim v. People,
G.R. No. 84719, 10 August 1989, 176 SCRA 277, 285-286.
12 G.R. No. 101566, 17 August 1992, 212 SCRA 660.
13 Id., p. 664.
14 Regalado, Remedial Law Compendium, 1988 ed., vol. I,
p. 94.
* THIRD DIVISION.
50
50
G.R. No. 168332.June 19, 2009.*
ANA MARIA A. KORUGA, petitioner, vs. TEODORO O. ARCENAS, JR., ALBERT
C. AGUIRRE, CESAR S. PAGUIO, FRANCISCO A. RIVERA, and THE
HONORABLE COURT OF APPEALS, THIRD DIVISION, respondents.
G.R. No. 169053.June 19, 2009.*
TEODORO O. ARCENAS, JR., ALBERT C. AGUIRRE, CESAR S. PAGUIO, and
FRANCISCO A. RIVERA, petitioners, vs. HON. SIXTO MARELLA, JR., Presiding
Judge, Branch 138, Regional Trial Court of Makati City, and ANA MARIA A.
KORUGA, respondents.
Banks and Banking; General Banking Law of 2000 (R.A. No. 8971); New
Central Bank Act; Bangko Sentral ng Pilipinas (BSP); Jurisdiction; The law
52
SUPREME COURT REPORTS ANNOTATED
53
Koruga vs. Arcenas, Jr.
On September 12, 2003, Arcenas, et al. filed their Answer raising, among
others, the trial courts lack of jurisdiction to take cognizance of the case.
They also filed a Manifestation and Motion seeking the dismissal of the
case on the following grounds: (a) lack of jurisdiction over the subject
matter;
(g)The General Banking Law of 2000 and the New Central Bank Act.3
prohibited pleading under the Interim Rules, for which reason, no favorable
consideration can be given to the Manifestation and Motion of defendants,
Arcenas, et al.
SO ORDERED.11
_______________
_______________
4 CA Rollo, p. 48.
3 Rollo (G.R. No. 168332), pp. 7-9.
54
6 Id., at p. 50.
7 Id., at pp. 2-47.
54
The Court finds no merit to (sic) the claim that the instant case is a
nuisance or harassment suit.
11 Id., at p. 49.
55
They also averred that Koruga had admitted in the Petition that she never
asked for reconsideration of the CAs April 18, 2005 Resolution, contending
that the Petition did not raise pure questions of law as to constitute an
exception to the requirement of filing a Motion for Reconsideration before a
Petition for Certiorari is filed.
They, likewise, alleged that the Petition may have already been rendered
moot and academic by the July 20, 2005 CA Decision,13 which denied their
Petition, and held that the RTC did not commit grave abuse of discretion in
issuing the assailed orders, and thus ordered the RTC to proceed with the
trial of the case.
Meanwhile, on March 13, 2006, this Court issued a Resolution granting the
prayer for a TRO and enjoining the Presiding Judge of Makati RTC, Branch
138, from proceeding with the hearing of the case upon the filing by
Arcenas, et al. of a
_______________
12 Id., at p. 40.
13 Penned by Associate Justice Eugenio S. Labitoria, with Associate Justices
Eliezer R. delos Santos and Arturo D. Brion (now a member of this Court),
concurring; id., at pp. 259-277.
G.R. No. 169053 is a Petition for Review on Certiorari under Rule 45 of the
Rules of Court, with prayer for the issuance of a TRO and a writ of
preliminary injunction filed by Arcenas, et al.
In their Petition, Arcenas, et al. asked the Court to set aside the Decision14
dated July 20, 2005 of the CA in CA-G.R. SP No. 88422, which denied their
petition, having found no grave abuse of discretion on the part of the
Makati RTC. The CA said that the RTC Orders were interlocutory in nature
and, thus, may be assailed by certiorari or prohibition only when it is
shown that the court acted without or in excess of jurisdiction or with grave
abuse of discretion. It added that the Supreme Court frowns upon resort to
remedial measures against interlocutory orders.
Arcenas, et al. anchored their prayer on the following grounds: that, in
their Answer before the RTC, they had raised the issue of failure of the
court to acquire jurisdiction over them due to improper service of
summons; that the Koruga action is a nuisance or harassment suit; that
there is another case involving the same parties for the same cause
pending before the Monetary Board of the BSP, and this constituted forumshopping; and that jurisdiction over the subject matter of the case is
vested by law in the BSP.15
Arcenas, et al. assign the following errors:
_______________
56
14 Rollo (G.R. No. 169053), pp. 58-76.
56
SUPREME COURT REPORTS ANNOTATED
On the other hand, respondents Dr. Conrado P. Banzon and Gen. Ramon
Montao also filed their Comment on Korugas Petition, raising
substantially the same arguments as Arcenas, et al.
In view of that fact that the Petitioner is currently in the United States,
undersigned counsel is attaching a facsimile copy of the Verification and
Certification Against Forum-Shopping duly signed by the Petitioner and
notarized by Stephanie N. Goggin, a Notary Public for the Sate (sic) of
Washington. Upon arrival of the original copy of the Verification and
Certification as certified by the Office of the Philippine Consul, the
undersigned counsel shall immediately provide duplicate copies thereof to
the Honorable Court.17
Arcenas, et al. argue that Korugas petition should be dismissed for its
defective Verification and Certification Against Forum Shopping, since only
a facsimile of the same was attached to the Petition. They also claim that
the Verification and Certification Against Forum-Shopping, allegedly
executed in Seattle, Washington, was not authenticated in the
First, we resolve the prayer to nullify the CAs April 18, 2005 Resolution.
_______________
We hold that the Petition in G.R. No. 168332 has become moot and
academic. The writ of preliminary injunction being questioned had
effectively been dissolved by the CAs July 20, 2005 Decision. The
dispositive portion of the Decision reads in part:
_______________
58
SUPREME COURT REPORTS ANNOTATED
Koruga vs. Arcenas, Jr.
59
The case is REMANDED to the court a quo for further proceedings and to
resolve with deliberate dispatch the intra-corporate controversies and
determine whether there was actually a valid service of summons. If, after
hearing, such service is found to have been improper, then new summons
should be served forthwith.20
Accordingly, there is no necessity to restrain the implementation of the writ
of preliminary injunction issued by the CA on April 18, 2005, since it no
longer exists.
However, this Court finds that the CA erred in upholding the jurisdiction of,
and remanding the case to, the RTC.
The resolution of these petitions rests mainly on the determination of one
fundamental issue: Which body has jurisdiction over the Koruga Complaint,
the RTC or the BSP?
We hold that it is the BSP that has jurisdiction over the case.
A reexamination of the Complaint is in order.
Korugas Complaint charged defendants with violation of Sections 31 to 34
of the Corporation Code, prohibiting self-dealing and conflict of interest of
directors and officers; invoked her right to inspect the corporations records
under Sections 74 and 75 of the Corporation Code; and prayed for
Receivership and Creation of a Management Committee, pursuant to Rule
59 of the Rules of Civil Procedure, the Securities Regulation Code, the
Interim Rules of Procedure Governing Intra-Corporate Controversies, the
General Banking Law of 2000, and the New Central Bank Act. She accused
the directors and officers of Banco Filipino of engaging in unsafe, unsound,
and fraudulent banking practices, more particularly, acts that violate the
prohibition on self-dealing.
It is clear that the acts complained of pertain to the conduct of Banco
Filipinos banking business. A bank, as defined in the General Banking
Law,21 refers to an entity engaged in
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SUPREME COURT REPORTS ANNOTATED
Koruga vs. Arcenas, Jr.
the lending of funds obtained in the form of deposits.22 The banking
business is properly subject to reasonable regulation under the police
power of the state because of its nature and relation to the fiscal affairs of
the people and the revenues of the state. Banks are affected with public
interest because they receive funds from the general public in the form of
deposits. It is the Governments responsibility to see to it that the financial
interests of those who deal with banks and banking institutions, as
depositors or otherwise, are protected. In this country, that task is
delegated to the BSP, which pursuant to its Charter, is authorized to
administer the monetary, banking, and credit system of the Philippines. It
is further authorized to take the necessary steps against any banking
institution if its continued operation would cause prejudice to its
depositors, creditors and the general public as well.23
The law vests in the BSP the supervision over operations and activities of
banks. The New Central Bank Act provides:
Section25.Supervision and Examination.The Bangko Sentral shall
have supervision over, and conduct periodic or special examinations of,
banking institutions and quasi-banks, including their subsidiaries and
affiliates engaged in allied activities.24
Specifically, the BSPs supervisory and regulatory powers include:
_______________
62
61
Koruga vs. Arcenas, Jr.
4.2The conduct of examination to determine compliance with laws and
regulations if the circumstances so warrant as determined by the Monetary
Board;
4.3Overseeing to ascertain that laws and Regulations are complied with;
4.4Regular investigation which shall not be oftener than once a year from
the last date of examination to determine whether an institution is
conducting its business on a safe or sound basis: Provided, That the
deficiencies/irregularities found by or discovered by an audit shall be
immediately addressed;
4.5Inquiring into the solvency and liquidity of the institution (2-D); or
4.6Enforcing prompt corrective action.25
Koruga alleges that the dispute in the trial court involves the manner with
which the Directors (sic) have handled the Banks affairs, specifically the
fraudulent loans and dacion en pago authorized by the Directors in favor of
several dummy corporations known to have close ties and are indirectly
controlled by the Directors.26 Her allegations, then, call for the
examination of the allegedly questionable loans. Whether these loans are
covered by the prohibition on self-dealing is a matter for the BSP to
determine. These are not ordinary intra-corporate matters; rather, they
involve banking activities which are, by law, regulated and supervised by
the BSP. As the Court has previously held:
62
SUPREME COURT REPORTS ANNOTATED
Koruga vs. Arcenas, Jr.
loss to its depositors or creditors, forbid bank or non-bank financial
institution to do business in the Philippines; and shall designate an official
of the BSP or other competent person as receiver to immediately take
charge of its assets and liabilities.27
Correlatively, the General Banking Law of 2000 specifically deals with loans
contracted by bank directors or officers, thus:
SECTION36.Restriction on Bank Exposure to Directors, Officers,
Stockholders and Their Related Interests.No director or officer of any
bank shall, directly or indirectly, for himself or as the representative or
agent of others, borrow from such bank nor shall he become a guarantor,
indorser or surety for loans from such bank to others, or in any manner be
an obligor or incur any contractual liability to the bank except with the
written approval of the majority of all the directors of the bank, excluding
the director concerned: Provided, That such written approval shall not be
required for loans, other credit accommodations and advances granted to
officers under a fringe benefit plan approved by the Bangko Sentral. The
required approval shall be entered upon the records of the bank and a copy
of such entry shall be transmitted forthwith to the appropriate supervising
and examining department of the Bangko Sentral.
After due notice to the board of directors of the bank, the office of any
bank director or officer who violates the provisions of this Section may be
declared vacant and the director or officer shall be subject to the penal
provisions of the New Central Bank Act.
_______________
56.1. The act or omission has resulted or may result in material loss or
damage, or abnormal risk or danger to the safety, stability, liquidity or
solvency of the institution;
56.2. The act or omission has resulted or may result in material loss or
damage or abnormal risk to the institution's depositors, creditors,
investors, stockholders or to the Bangko Sentral or to the public in general;
63
_______________
28 Emphasis supplied.
63
64
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SUPREME COURT REPORTS ANNOTATED
Koruga vs. Arcenas, Jr.
56.3. The act or omission has caused any undue injury, or has given any
unwarranted benefits, advantage or preference to the bank or any party in
the discharge by the director or officer of his duties and responsibilities
through manifest partiality, evident bad faith or gross inexcusable
negligence; or
56.4. The act or omission involves entering into any contract or transaction
manifestly and grossly disadvantageous to the bank, quasi-bank or trust
entity, whether or not the director or officer profited or will profit thereby.
Whenever a bank, quasi-bank or trust entity persists in conducting its
business in an unsafe or unsound manner, the Monetary Board may,
without prejudice to the administrative sanctions provided in Section 37 of
the New Central Bank Act, take action under Section 30 of the same Act
and/or immediately exclude the erring bank from clearing, the provisions of
law to the contrary notwithstanding.
Finally, the New Central Bank Act grants the Monetary Board the power to
impose administrative sanctions on the erring bank:
Section37.Administrative Sanctions on Banks and Quasi-banks.
Without prejudice to the criminal sanctions against the culpable persons
provided in Sections 34, 35, and 36 of this Act, the Monetary Board may, at
its discretion, impose upon any bank or quasi-bank, their directors and/or
officers, for any willful violation of its charter or by-laws, willful delay in the
submission of reports or publications thereof as required by law, rules and
regulations; any refusal to permit examination into the affairs of the
institution; any willful making of a false or misleading statement to the
Board or the appropriate supervising and examining department or its
examiners; any willful failure or refusal to comply with, or violation of, any
banking law or any order, instruction or regulation issued by the Monetary
Board, or any order, instruction or ruling by the Governor; or any
commission of irregularities, and/or conducting business in an unsafe or
unsound manner as may be determined by the Monetary Board, the
following administrative sanctions, whenever applicable:
65
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SUPREME COURT REPORTS ANNOTATED
Koruga vs. Arcenas, Jr.
tee chaired by any Monetary Board member created for the purpose, upon
request made by the respondents within five (5) days from their receipt of
the order. If no such hearing is requested within said period, the order shall
be final. If a hearing is conducted, all issues shall be determined on the
basis of records, after which the Monetary Board may either reconsider or
make final its order.
The Governor is hereby authorized, at his discretion, to impose upon
banking institutions, for any failure to comply with the requirements of law,
Monetary Board regulations and policies, and/or instructions issued by the
Monetary Board or by the Governor, fines not in excess of Ten thousand
pesos (P10,000) a day for each violation, the imposition of which shall be
final and executory until reversed, modified or lifted by the Monetary Board
on appeal.29
Koruga also accused Arcenas, et al. of violation of the Corporation Codes
provisions on self-dealing and conflict of interest. She invoked Section 31 of
the Corporation Code, which defines the liability of directors, trustees, or
officers of a corporation for, among others, acquiring any personal or
pecuniary interest in conflict with their duty as directors or trustees, and
Section 32, which prescribes the conditions under which a contract of the
corporation with one or more of its directors or trusteesthe so-called
self-dealing directors30would be valid. She also alleged that Banco
Filipinos directors violated Sections 33 and 34 in approving the loans of
corporations with interlocking ownerships, i.e., owned, directed, or
managed by close associates of Albert C. Aguirre.
Sections 31 to 34 of the Corporation Code provide:
Section31.Liability of directors, trustees or officers.Directors or
trustees who wilfully and knowingly vote for or assent to patently unlawful
acts of the corporation or who are guilty of gross negligence or bad faith in
directing the affairs of the corporation or acquire any personal or pecuniary
interest in conflict with their duty
_______________
29 Emphasis supplied.
made at such meeting: Provided, however, That the contract is fair and
reasonable under the circumstances.
Section33.Contracts between corporations with interlocking directors.
Except in cases of fraud, and provided the contract is fair and reasonable
under the circumstances, a contract between two or more corporations
having interlocking directors shall not be invalidated on that ground alone:
Provided, That if the interest of the interlocking director in one corporation
is substantial and his interest in the other corporation or corporations is
merely nominal, he
68
68
69
be terminated should the Monetary Board, on the basis of the report of the
conservator or of its own findings, determine that the continuance in
business of the institution would involve probable loss to its depositors or
creditors, in which case the provisions of Section 30 shall apply.
Section30.Proceedings in Receivership and Liquidation.Whenever,
upon report of the head of the supervising or examining department, the
Monetary Board finds that a bank or quasi-bank:
(a)is unable to pay its liabilities as they become due in the ordinary
course of business: Provided, That this shall not include inability to pay
caused by extraordinary demands induced by financial panic in the
banking community;
(b)has insufficient realizable assets, as determined by the Bangko
Sentral, to meet its liabilities; or
(c)cannot continue in business without involving probable losses to its
depositors or creditors; or
(d)has willfully violated a cease and desist order under Section 37 that
has become final, involving acts or transactions which amount to fraud or a
dissipation of the assets of the institution; in which cases, the Monetary
Board may summarily and without need for prior hearing forbid
representing the majority of the capital stock within ten (10) days from
receipt by the board of directors of the institution of the order directing
receivership, liquidation or conservatorship.
The designation of a conservator under Section 29 of this Act or the
appointment of a receiver under this section shall be vested exclusively
with the Monetary Board. Furthermore, the designation of a conservator is
not a precondition to the designation of a receiver.33
On the strength of these provisions, it is the Monetary Board that exercises
exclusive jurisdiction over proceedings for receivership of banks.
Crystal clear in Section 30 is the provision that says the appointment of a
receiver under this section shall be vested exclusively with the Monetary
Board. The term exclusively connotes that only the Monetary Board can
resolve the issue of whether a bank is to be placed under receivership and,
upon an affirmative finding, it also has authority to appoint a receiver. This
is further affirmed by the fact that the law allows the Monetary Board to
take action summarily and without need for prior hearing.
And, as a clincher, the law explicitly provides that actions of the Monetary
Board taken under this section or under Section 29 of this Act shall be final
and executory, and may
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70
33 Emphasis supplied.
70
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SUPREME COURT REPORTS ANNOTATED
Koruga vs. Arcenas, Jr.
VOL. 590, JUNE 19, 2009
the institution from doing business in the Philippines and designate the
Philippine Deposit Insurance Corporation as receiver of the banking
institution.
xxxx
The actions of the Monetary Board taken under this section or under
Section 29 of this Act shall be final and executory, and may not be
restrained or set aside by the court except on petition for certiorari on the
ground that the action taken was in excess of jurisdiction or with such
grave abuse of discretion as to amount to lack or excess of jurisdiction. The
petition for certiorari may only be filed by the stockholders of record
71
Koruga vs. Arcenas, Jr.
not be restrained or set aside by the court except on a petition for
certiorari on the ground that the action taken was in excess of jurisdiction
or with such grave abuse of discretion as to amount to lack or excess of
jurisdiction.
From the foregoing disquisition, there is no doubt that the RTC has no
jurisdiction to hear and decide a suit that seeks to place Banco Filipino
under receivership.
Koruga herself recognizes the BSPs power over the allegedly unlawful acts
of Banco Filipinos directors. The records of this case bear out that Koruga,
through her legal counsel, wrote the Monetary Board34 on April 21, 2003
to bring to its attention the acts she had enumerated in her complaint
before the RTC. The letter reads in part:
xxxx
On the other hand, the BSP, in its Answer before the RTC, said that it had
been looking into Banco Filipinos activities. An October 2002 Report of
Examination (ROE) prepared by the Supervision and Examination
Department (SED) noted certain dacion payments, out-of-the-ordinary
expenses, among other dealings. On July 24, 2003, the Monetary Board
passed Resolution No. 1034 furnishing Banco Filipino a copy of the ROE
with instructions for the bank to file its comment or explanation within 30
to 90 days under threat of being fined or of being subjected to other
remedial actions. The ROE, the BSP said, covers substantially the same
matters raised in Korugas complaint. At the time of the filing of Korugas
complaint on August 20, 2003, the period for Banco Filipino to submit its
explanation had not yet expired.38
We urge you to look into the matter in your capacity as regulators. Our
clients, a minority stockholders, (sic) and many depositors of Banco Filipino
are prejudiced by a failure to regulate, and taxpayers are prejudiced by
accommodations granted by the BSP to Banco Filipino.35
Thus, the courts jurisdiction could only have been invoked after the
Monetary Board had taken action on the matter and only on the ground
that the action taken was in excess of jurisdiction or with such grave abuse
of discretion as to amount to lack or excess of jurisdiction.
Finally, there is one other reason why Korugas complaint before the RTC
cannot prosper. Given her own admissionand the same is likewise
supported by evidencethat she is merely a minority stockholder of Banco
Filipino, she would not have the standing to question the Monetary Boards
action. Section 30 of the New Central Bank Act provides:
Banco Filipino and the current members of its Board of Directors should be
placed under investigation for violations of banking laws, the commission
of irregularities, and for conducting business in an unsafe or unsound
manner. They should likewise be placed under preventive suspension by
virtue of the powers granted to the Monetary Board under Section 37 of
the Central Bank Act. These blatant violations of banking laws should not
go by without penalty. They have put Banco Filipino, its depositors and
stockholders, and the entire banking system (sic) in jeopardy.
_______________
The petition for certiorari may only be filed by the stockholders of record
representing the majority of the capital stock within ten (10) days from
receipt by the board of directors of the institution of the order directing
receivership, liquidation or conservatorship.
_______________
36 Id., at p. 457.
72
72
73
* THIRD DIVISION.
750
750
SUPREME COURT REPORTS ANNOTATED
Catindig vs. People
tion to Dismiss is an interlocutory order, which neither terminates nor
finally disposes of a case, as it leaves something to be done by the court
before the case is finally decided on the merits. As such, the general rule is
that the denial of a Motion to Dismiss cannot be questioned in a special
civil action for certiorari, which is a remedy designed to correct errors of
jurisdiction and not errors of judgment. Neither can a denial of a Motion to
Dismiss be the subject of an appeal unless and until a final judgment or
order is rendered. In order to justify the grant of the extraordinary remedy
of certiorari, the denial of the Motion to Dismiss must have been tainted
with grave abuse of discretion amounting to lack or excess of jurisdiction.
Appeals; Certiorari; Where special circumstances clearly demonstrate the
inadequacy of an appeal, then the special civil action of certiorari may
exceptionally be allowed.There is grave abuse of discretion where a
power is exercised in an arbitrary, capricious, whimsical or despotic
manner by reason of passion or personal hostility, so patent and so gross
as to amount to evasion of positive duty or virtual refusal to perform a duty
enjoined by, or in contemplation of law. With the aforesaid definition, it
cannot be said that the trial court gravely abuse its discretion in finding
probable cause for the issuance of a warrant of arrest against the private
respondent and the other members of the Board of Directors of CWD, thus,
denying their Omnibus Motion. It bears emphasis that the trial court itself
carefully scrutinized the documents submitted by the parties and
personally evaluated the Resolution of the Ombudsman finding probable
cause for the filing of the Information against the private respondent and
the other members of the Board of Directors of CWD for violation of Section
3(e) of Republic Act No. 3019, as amended. After it was convinced that
probable cause exists to issue a warrant of arrest, it was only then that it
directed the issuance thereof. The aforesaid general rule, however, is not
absolute. Where special circumstances clearly demonstrate the inadequacy
of an appeal, then the special civil action of certiorari may exceptionally be
allowed. This Court categorically stated in Salonga v. Cruz Pao (134 SCRA
438 [1985]) that under certain situations, recourse to the extraordinary
legal remedies of certiorari, prohibition or mandamus to question the
752
753
753
Brocka v. Enrile [G.R. Nos. 69863-65, December 10, 1990, 192 SCRA 183,
188-189].
Same; While it is the function of the Ombudsman to determine whether or
not the petitioner should be subjected to the expense, rigors and
embarrassment of trial, he cannot do so arbitrarily.This is not the first
time that we are dismissing a case for want of probable cause. In Cabahug
v. People [426 Phil. 490, 510; 376 SCRA 113, 132 (2002)], we took
exception to the Ombudsmans determination of probable cause and
accordingly dismissed the case against the accused before the
Sandiganbayan. Therein, we observed: While it is the function of the
Ombudsman to determine whether or/not the petitioner should be
subjected to the expense, rigors and embarrassment of trial, he cannot do
so arbitrarily. This seemingly exclusive and unilateral authority of the Om754
Section 13, Rule 13 and Section 5, Rule 43, of the Rules of Procedure, as
proof that copy of the said Petition had been served on the adverse party;
(3) the Petition does not contain any explanation of why a personal service
upon therein private respondent (now petitioner) was not resorted to
pursuant to Section 11, Rule 13; and therein petitioners failed to furnish
the Ombudsman and the Office of the Solicitor General (OSG) with a copy
of their Petition. Clearly from the foregoing, the dismissal of CA-G.R. SP No.
92474 was based on sheer technicality. Since no judgment on the merits
was rendered after consideration of the evidence or stipulation submitted
by the parties at the trial of the case, it falls short of one of the essential
requisites of res judicata, that the judgment should be one on the merits.
PETITION for review on certiorari of the decision and resolution of the Court
of Appeals.
The facts are stated in the opinion of the Court.
Restituto M. Mendoza for petitioner.
754
755
755
756
SUPREME COURT REPORTS ANNOTATED
Catindig vs. People
sion pendente lite from their position as Chairman and members of the
Board of Directors of the Calamba Water Districts (CWD), respectively, for a
period of 60 days pursuant to Section 136 of Republic Act No. 3019, as
amended;7 and (2) Order dated 5 July 2006 denying the Motion for
Reconsideration of private respondent and his co-accused therein. In its
questioned Resolution, the Court of Appeals denied the Motion for
Reconsideration of petitioner Edgardo H. Catindig (Catindig).
During the examination, the COA audit team found that the Board of
Directors of CWD passed several resolutions granting benefits and
allowances to officers, employees and members of its Board of Directors in
the total amount of P15,455,490.14 supposedly without legal basis and
beyond the allowable limit. The said amount was divided as follows: (1)
P4,378,908.58 granted to the Board of Directors of CWD over and above
per diems without legal basis; (2) P10,620,587.68 granted to CWD officers
and employees without legal basis; and (3) P455,993.88 granted to CWD
officers and employees in amounts over the authorized limits.
The aforesaid findings of the COA audit team were embodied in its Report
No. 2002-06.8 The COA audit team explained therein that the functions of
the members of the Board of Directors of the Water Districts were limited
to policy-making, as clearly stated in Section 189 of Presidential Decree No.
198, as amended. Moreover, even the LWUA, in its Resolution No. 313,
Series of 1995, acknowledged that directors of Water Districts a not
organic personnel, and that their function is limited only to policy-making.
Also, Section 1310 of Presidential Decree No. 198, as amended,
categorically provides that each member of the Board of Directors of the
Water Districts is entitled only to receive per diem, and no director shall
receive other compensation for services to the district. Thus, the COA audit
team stated in its audit report that the compensation, benefits and
allowances amounting to
_______________
758
759
760
SUPREME COURT REPORTS ANNOTATED
Catindig vs. People
Criminal Case No. 13850-05-C,15 was raffled to Branch 35 of the RTC of
Calamba City; while the other Information, docketed as Criminal Case No.
13851-05-C16 was raffled to Branch 36 thereof.
The Information docketed as Criminal Case No. 13850-05-C, the subject of
this Petition, reads:
That on or about the period from 1993-2001, or sometime prior or
subsequent thereto, in the Municipality of Calamba, Province of Laguna,
Philippines, and within the jurisdiction of this Honorable Court, the abovenamed accused, [ATTY. FANDIO], VIVENCIO P. LEUS, SYLVIA V.
TANCANGCO, SEVERINO M. ARAMBULO, public officers, being members of
the Board of Directors of [CWD], while in the performance of their official
functions, committing the crime charged in relation to their office, and
taking advantage of the same, through manifest partiality, evident bad
faith or gross inexcusable negligence, did then and there willfully,
unlawfully and feloniously allow and grant unto themselves the total
amount of P4,378,908.00 as benefits consisting of directors fee, RATA,
extra and miscellaneous expense, mid-year productivity incentive,
anniversary incentive, 13th month pay, Christmas incentive, year-end
incentive, uniform allowance, medical and hospitalization, traveling and
per diem during official business and employers contribution to [Board of
Directors] share in the welfare/provident fund when in truth and in fact
they are not allowed by law because they are not organic personnel of the
water district whose functions are limited only to policy making and not in
the detailed management of the district, thereby causing undue injury to
the government in the aforestated amount.17 (Emphases supplied.)
Let a copy of this Order be furnished to the [CWD] for the implementation
of the suspension order.
The said [CWD] shall inform this Court of any action taken thereon within
ten (10) days from receipt thereof and its authorized official or duly
authorized representative shall advise this Court of the date of the actual
implementation of the suspension of the [private respondent and his coaccused therein] as well as the expiration of the sixtieth day hereof so that
the same may be lifted at the proper time.
Send a copy of this order to the Office of the City Prosecutor and Atty.
Brion, Jr.20 (Emphases supplied.)
_______________
761
18 Id., at pp. 374-382.
VOL. 600, SEPTEMBER 18, 2009
761
20 Id., at p. 401.
762
Dismiss for Lack of Probable Cause and Motion to Hold in Abeyance the
Issuance of Warrant of Arrest.18 Then, on 19 December 2005, they filed a
Supplemental Motion to their Omnibus Motion for Determination of the
Existence of Probable Cause, Motion to Dismiss for Lack of Probable Cause
and Motion to Hold in Abeyance the Issuance of Warrant of Arrest.19
762
On 24 May 2006, the RTC of Calamba City, Laguna, Branch 35, issued an
Order finding probable cause for the issuance of a warrant of arrest against
the private respondent and the other members of the Board of Directors of
CWD. The dispositive portion of the Order reads:
WHEREFORE, premises considered, let a warrant for the arrest of the
[herein private respondent and the other members of the Board of
Directors of CWD] be issued.
Likewise, pursuant to Section 13, R.A. [No.] 3019, [as amended], this Court
hereby orders the suspension pendente lite of [the private respondent and
the other members of the Board of Directors of CWD] from their position as
members of the Board of Directors, Calamba Water Districts for a period of
sixty (60) days, to take effect immediately upon receipt hereof.
setting aside the two Orders dated 24 May 2006 and 5 July 2006 of the
court a quo.
The Court of Appeals stated in its Decision that the employees and officers,
including the Board of Directors of the CWD, had received the disputed
allowances and benefits long before this Court declared as illegal such
payment of additional compensation; thus, it could be reasonably
concluded that private respondent and his co-accused in the case below
received the same in good faith. The Court of Appeals also elucidated that
in prosecuting cases involving violation of Section 3(e) of Republic Act No.
3019, as amended, the public officers must have acted with manifest
partiality, evident bad faith or gross inexcusable negligence in performing
their legal duties. In the absence of bad faith, private respondent and his
co-accused in the case below cannot be held liable for violation of Section
3(e) of Republic Act No. 3019, as amended.
Aggrieved, petitioner moved for a reconsideration of the aforesaid Decision
of the Court of Appeals, but the motion was denied by the appellate court
in its Resolution dated 14 May 2008.
Hence, this Petition with the following assignment of errors:
763
763
Catindig vs. People
764
B
THE COURT OF APPEALS ERRED AND GRAVELY ABUSED ITS DISCRETION
WHEN IT DID NOT OUTRIGHTLY DISMISS THE PETITION IN QUESTION SINCE
THE ISSUES RAISED THEREIN WERE SUBSTANTIALLY THE SAME IN CA-G.R.
SP NO. 92474, WHICH IT ALREADY FINALLY DISMISSED OUTRIGHTLY ON [28
II. Whether the Court of Appeals erred in not outrightly dismissing CA-G.R.
SP No. 96293 on the ground of res judicata.
The present Petition is not impressed with merit.
Petitioner argues that a Petition for Certiorari under Rule 65 of the 1997
Revised Rules of Civil Procedure, which was used by the private respondent
in challenging the Orders dated 24 May 2006 and 5 July 2006 of the court a
quo, is intended only to correct errors of jurisdiction and grave abuse of
discretion or excess of jurisdiction committed by the trial court. It cannot
be used to correct an error of judgment or simple abuse of discretion. Also,
it cannot be legally used for any other purpose. Petitioner, thus, holds that
the Court of Appeals erred when it ruled not only on the issue of grave
abuse of discretion but also on the merits of the case, that is, by ruling that
the private respondent and the other members of the Board of Directors of
CWD acted in good faith in receiving the disputed benefits and allowances
pursuant to LWUA Resolution No. 313.
At the outset, the Ombudsman recommended the filing of two Informations
with the RTC of Calamba City against the private respondent and the other
members of the Board of Directors of CWD for violation of Section 3(e) of
Republic Act No. 3019, as amended. One of the two Informations was
lodged before Branch 35 of the RTC of Calamba City, and is now the
subject of this Petition. After the Information was filed with the court a quo,
the private respondent and the other members of the Board of Directors of
CWD conversely filed an Omnibus Motion for Determination of the
Existence of Probable Cause, Motion to Dismiss for Lack of Probable Cause
and Motion to Hold in Abeyance the Issuance of Warrant of Arrest. In
resolving the said Omnibus Motion, the trial court issued an Order dated 24
May 2006 finding probable cause for the issuance of a warrant of arrest
against the private respondent and the other members of the Board of
Directors of CWD. The trial court, thus, directed the issuance of a
765
766
SUPREME COURT REPORTS ANNOTATED
Catindig vs. People
fusal to perform a duty enjoined by, or in contemplation of law.22
With the aforesaid definition, it cannot be said that the trial court gravely
abuse its discretion in finding probable cause for the issuance of a warrant
of arrest against the private respondent and the other members of the
Board of Directors of CWD, thus, denying their Omnibus Motion. It bears
emphasis that the trial court itself carefully scrutinized the documents
submitted by the parties and personally evaluated the Resolution of the
Ombudsman finding probable cause for the filing of the Information against
the private respondent and the other members of the Board of Directors of
CWD for violation of Section 3(e) of Republic Act No. 3019, as amended.
After it was convinced that probable cause exists to issue a warrant of
arrest, it was only then that it directed the issuance thereof.
22 Bayas v. Sandiganbayan, 440 Phil. 54, 71-72; 391 SCRA 415, 429
(2002).
23 G.R. No. L-59524, 18 February 1985, 134 SCRA 438, 448.
768
SUPREME COURT REPORTS ANNOTATED
Catindig vs. People
of water districts shall receive no other compensation other than the per
diem.
In Baybay Water District v. Commission on Audit,26 this Court made a
categorical pronouncement that Presidential Decree No. 198, as amended,
expressly prohibits the grant of compensation other than the payment of
per diems, to directors of water districts. The erroneous application and
enforcement of the law by public officers does not estop the Government
26 Id.
769
27Soriano v. Marcelo, G.R. No. 160772, 13 July 2009, 592 SCRA 394.
28 Id.
770
SUPREME COURT REPORTS ANNOTATED
771
It bears stressing that in granting those benefits and allowances, the Board
of Directors of CWD relied on Resolution No. 313, Series of 1995, as
amended by Resolution No. 39, Series of 1996, entitled Policy Guidelines
on Compensation and Other Benefits to Water District Board of Directors,
which was issued by the LWUA itself, the body that oversees and regulates
the operations of the local water districts. The benefits granted by the said
LWUA Resolution No. 313, Series of 1995, to the board of directors of water
districts are the following: rata, travel allowance, extraordinary and
miscellaneous expense, Christmas bonus, cash gift, uniform allowance, rice
allowance, medical/dental benefits and productivity incentive bonus.30
More so, at the time that the private respondent and the other members of
the Board of Directors of CWD passed the resolutions from 1993-2001
granting benefits and allowances, this Court had not yet decided Baybay
Water District v. Commission on Audit, which was promulgated only in
2002. Also, it was only in De Jesus v. Commission on Audit,31 applying
Baybay Water District v. Commission on Audit, that this Court declared that
LWUA Resolution No. 313, Series of 1995, which grants compensation and
other benefits to the members of the Board of Directors of Local Water
Districts, is not in conformity with Section 13 of Presidential Decree No.
198, as amended.
Therefore, in relying on LWUA Resolution No. 313, Series of 1995 in passing
several resolutions granting the disputed benefits and allowances, the
private respondent and the other
_______________
members of the Board of Director of CWD acted in good faith, as they were
of the honest belief that LWUA Board Resolution No. 313, as amended, was
valid.
Bad faith is never presumed, while good faith is always presumed; and the
chapter on Human Relations of the Civil Code directs every person, inter
alia, to observe good faith, which springs from the fountain of good
conscience.32
In the absence of manifest partiality, evident bad faith or inexcusable
negligence in passing several resolutions granting benefits and allowances,
there can be no probable cause to prosecute the private respondent and
the other members of the Board of Directors of CWD for violation of Section
3(e) of Republic Act No. 3019, as amended. Consequently, there was also
no probable cause for the issuance of a warrant of arrest against them.
Clearly, where the evidence patently demonstrates the innocence of the
accused, as in this case, this Court finds no reason to continue with his
prosecution; otherwise, persecution amounting to grave and manifest
injustice would be the inevitable result.33
In Principio v. Barrientos,34 petitioner therein filed a motion with the trial
court praying that its motion for reconsideration filed with the Ombudsman
be given due course and thereafter, rule that no probable cause exists. The
trial court denied the said motion of the petitioner, thus, affirming the
finding of probable cause. Petitioner filed a Petition for Certiorari with the
Court of Appeals, but it dismissed the petition and affirmed the RTC. On
appeal to this Court via a Petition for Review on Certiorari, this Court
ratiocinated that:
At the outset, we reiterate the fundamental principle that an order
denying a motion to quash is interlocutory and therefore not
30 Molen, Jr. v. Commission on Audit, 493 Phil. 874, 883; 453 SCRA 769,
781 (2005).
_______________
772
772
SUPREME COURT REPORTS ANNOTATED
spares her the expense, rigors and embarrassment of trial, but also
prevents needless waste of the courts time and saves the precious
resources of the government. (Emphases supplied.)
therein petitioners failed to furnish the Ombudsman and the Office of the
Solicitor General (OSG) with a copy of their Petition.
_______________
Thus, the Court of Appeals did not err in granting the Petition for Certiorari
of the private respondent and in pronounc774
35 Avisado v. Rumbaua, 406 Phil. 704, 716; 354 SCRA 245, 255 (2001).
[Catindig vs. People, 600 SCRA 749(2009)]
774
SUPREME COURT REPORTS ANNOTATED
Catindig vs. People
ing that he and the other members of the Board of Directors of CWD acted
in good faith.
Similarly, petitioner contends that the substantial facts and issues involved
in the Petition for Review in CA-G.R. SP No. 92474 were the same facts and
issues raised in the Petition for Certiorari in CA-G.R. SP No. 96293, the
subject of the present Petition. With the dismissal of the Petition for Review
in CA-G.R. SP No. 92474, which became final and executory on 29 March
2006, petitioner insists that the Court of Appeals should have also
dismissed outright the private respondents Petition for Certiorari in CAG.R. SP No. 96293 on the ground of res judicata.
Res judicata exists when the following elements are present: (a) the former
judgment must be final; (b) the court that rendered it had jurisdiction over
the parties and the subject matter; (c) it must be a judgment on the
merits; and (d) there must bebetween the first and the second actions
identity of parties, subject matter, and cause of action.35
Emphasis must be given to the fact that CA-G.R. No. 92474 was dismissed
based on pure technicalities and not on the merits, to wit: (1) therein
petitioners (now private respondents) counsels failed to indicate their
respective Integrated Bar of the Philippines (IBP) Official Receipt numbers,
in violation of Bar Matter No. 1132; (2) the Petition did not contain an
affidavit of service, as required by Section 13, Rule 13 and Section 5, Rule
43, of the Rules of Procedure, as proof that copy of the said Petition had
been served on the adverse party; (3) the Petition does not contain any
explanation of why a personal service upon therein private respondent
(now petitioner) was not resorted to pursuant to Section 11, Rule 13; and
Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank
of the Philippines
OF APPEALS, THE
Ex-Officio Sheriff
MORTGAGE BANK,
FELICIANO AND
* EN BANC.
768
769
768
769
________________
Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank
of the Philippines
involving the exercise of judgment or discretion, and findings of fact. But
when there is a grave abuse of discretion which is equivalent to a
capricious and whimsical exercise of judgment or where the power is
exercised in an arbitrary or despotic manner, then there is a justification
for the courts to set aside the administrative determination reached.
Commercial Law; Banks and Banking; Section 29 of Republic Act No. 265
known as the Central Bank Act provides the person designated as receiver
to immediately take charge of the banks assets and liabilities, administer
the same for the benefit of its creditors and represent the bank personally
or through counsel as he may retain in all actions or proceedings for or
against the institution and to bring and foreclose mortgages in the name of
the bank.Section 29 of the Republic Act No. 265, as amended, known as
the Central Bank Act, provides that when a bank is forbidden to do
business in the Philippines and placed under receivership, the person
designated as receiver shall immediately take charge of the banks assets
and liabilities, as expeditiously as possible, collect and gather all the assets
and administer the same for the benefit of its creditors, and represent the
bank personally or through counsel as he may retain in all actions or
proceedings for or against the institution, exercising all the powers
necessary for these purposes including, but not limited to, bringing and
foreclosing mortgages in the name of the bank. If the Monetary Board shall
later determine and confirm that the banking institution is insolvent or
cannot resume business with safety to depositors, creditors and the
general public, it shall, if public interest requires, order its liquidation and
appoint nu liquidator who shall take over and continue the functions of the
receiver previously appointed by Monetary Board. The liquidator may, in
the name of the bank and with the assistance of counsel as he may retain,
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.
Same; Same; Same; Pendency of G.R. No. 70054 did not diminish the
powers and authority of the designated liquidator to effectuate and carry
on the administration of the bank.When the issue on the validity of the
closure and receivership of Banco Filipino bank was raised in G.R. No.
70054, the pendency of the case did not diminish the powers and authority
of the designated liquidator to effectuate and carry on the administration
of the bank. In fact when We adopted a resolution on August 25, 1985 and
issued a restraining order to respondents Monetary Board and Central
Bank, We enjoined merely
770
770
SUPREME COURT REPORTS ANNOTATED
Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank
of the Philippines
further acts of liquidation. Such acts of liquidation, as explained in Sec. 29
of the Central Bank Act are those which constitute the conversion of the
assets of the banking institution to money or the sale, assignment or
disposition of the same to creditors and other parties for the purpose of
paying the debts of such institution. We did not prohibit however acts such
as receiving collectibles and receivables or paying off creditors claims and
other transactions pertaining to normal operations of a bank.
Same; Same; Same; In G.R. Nos. 68878, 7725568, 78766 and 90473, 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.
Clearly, in G.R. Nos. 68878, 7725568, 78766 and 90473, 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. In G.R.
No. 81303, 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. Similarly, in G.R. No. 81304, due to the aforestated
reasons, 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. The Central Bank possesses
those powers and functions only as provided for in Sec. 29 of the Central
Bank Act.
Same; Same; Same; Court held that the closure and receivership of
petitioner bank which was ordered by respondent Monetary Bank on
January 25, 1985 is null and void.While We recognize the actual closure
of Banco Filipino and the consequent legal effects thereof on its operations,
We cannot uphold the legality of its closure and thus, find the petitions in
G.R. Nos. 70054, 78767 and 78894 impressed with merit. We hold that the
closure and receivership of petitioner bank, which was ordered by
respondent Monetary Board on January 25, 1985, is null and void.
Same; Same; Same; The Monetary Board may order the cessation of
operation of a bank in the Philippines and place it under receivership upon
a finding of insolvency or when its continuance in business would involve
move to conclude prematurely that a bank is insolvent if the basis for such
conclusion is lacking and insufficient, especially if doubt exists as to
whether such bases or findings faithfully represent the real financial status
of the bank.
Same; Same; Same; Same; 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.We recognize the
fact that it is the responsibility of the Central Bank of the Philippines to
administer the monetary, banking and credit system of the country and
that its powers and functions shall be exercised by the Monetary Board
pursuant to Rep. Act No. 265, known as the Central Bank Act.
Consequently, the power and authority of the Monetary Board to close
banks and liquidate them thereafter when
Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank
of the Philippines
772
772
Same; Same; Same; Court has neither the authority nor the competence to
determine whether or not and under what conditions BF should be
reorganized and reopened.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
Same; Same; Same; Same; Dissenter does not find that the CBs Resolution
No. 75 ordering BF to cease banking operation and placing it under
receivership was plainly arbitrary and made in bad faith.In the light of
the results of the examination of BF by the Teodoro and Tiaoqui teams, I do
not find that the CBs Resolution No. 75 ordering BF to cease banking
operations and placing it under receivership was plainly arbitrary and
made in bad faith. The receivership was justified because BF was
insolvent and its continuance in business would cause loss to its depositors
and creditors.
PETITION to review the decision of the Court of Appeals.
774
774
SUPREME COURT REPORTS ANNOTATED
Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank
of the Philippines
The facts are stated in the opinion of the Court.
Panganiban, Benitez, Barinaga & Bautista Law Offices collaborating
counsel for petitioner.
Florencio T. Domingo, Jr. and Crisanto S. Cornejo for intervenors.
MEDIALDEA, J.:
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. Six (6) of these cases, namely, G.R. Nos. 68878, 77255
58, 78766, 81303, 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, 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.R. No. 70054. 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 On the other hand, the other three (3)
cases, namely, G.R. Nos. 70054, which is the main case, 78767 and 78894
all seek to annul and set aside M.B. Resolution No. 75 issued by
respondents Monetary Board and Central Bank on January 25, 1985.
The antecedent facts of each of the nine (9) cases are as follows:
G.R. No. 68878
This is a motion for reconsideration, filed by respondent Celestina
Pahimuntung, of the decision promulgated by this Court on April 8, 1986,
granting the petition for review on certiorari and reversing the questioned
decision of respondent appellate court, which annulled the writ of
possession issued by the trial court in favor of petitioner.
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
775
776
776
777
Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank
of the Philippines
ordered to designate a comptroller for Banco Filipino.
Subsequently, Top Management failed to pay its loan on the due date.
Hence, the law firm of Sycip, Salazar, et al. acting as counsel for Banco
Filipino under authority of Valenzuela as liquidator, applied for extrajudicial foreclosure of the mortgage over Top Managements properties.
Thus, 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,
1985.
On December 9, 1985, Top Management filed a petition for injunction and
prohibition with the respondent appellate court docketed as CA-G.R. SP No.
07892 seeking to enjoin the Regional Trial Court of Cavite, the ex-officio
sheriff of said court and Sycip, Salazar, et al. from proceeding with
foreclosure sale. Similarly, Pilar Development defaulted in the payment of
its loans. The law firm of Sycip, Salazar, et al. filed separate applications
with the ex-officio sheriff of the Regional Trial Court of Cavite for the extrajudicial foreclosure of mortgage over its properties.
Hence, 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.R. SP Nos. 0896264 seeking to enjoin the
same respondents from enforcing the foreclosure sale of its properties. CAG.R. SP Nos. 07892 and 0896264 were consolidated and jointly decided.
On October 30, 1986, the respondent appellate court rendered a decision
dismissing the aforementioned petitions.
Hence, this petition was filed by the petitioners Top Management and Pilar
Development alleging that Carlota Valenzuela, who was appointed by the
778
SUPREME COURT REPORTS ANNOTATED
Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank
of the Philippines
appears that the former management of Banco Filipino appointed
Quisumbing 6, Associates as counsel for Banco Filipino. On June 12,1986
the said law firm filed an answer for Banco Filipino which confessed
judgment against Banco Filipino.
On June 17, 1986, petitioner filed a second amended complaint. The
Central Bank and Carlota Valenzuela, thru the law firm Sycip, Salazar,
Hernandez and Gatmaitan filed an answer to the complaint.
On June 23, 1986, Sycip, et al., acting for all the defendants including
Banco Filipino moved that the answer filed by Quisumbing 6, Associates for
defendant Banco Filipino be expunged from the records. Despite opposition
from Quisumbing 6, Associates, the trial court granted the motion to
expunge in an order dated March 17, 1987. Petitioner Pilar Development
moved to reconsider the order but the motion was denied.
Petitioner Pilar Development filed with the respondent appellate court a
petition for certiorari and mandamus to annul the order of the trial court.
Corporation, Filipino Business Consultants, Tiu Family Group, LBH Inc. and
Anthony Aguirre.
Petitioner Bank had an approved emergency advance of P119.7 million
under M.B. Resolution No. 839 dated June 29, 1984. This was augmented
with a P3 billion credit line under M.B. Resolution No. 934 dated July 27,
1984.
When Banco Filipino was ordered closed and placed under receivership in
1985, the appointed liquidator of BF, thru its counsel Sycip, Salazar, et al.
applied with the ex-officio sheriff of the Regional Trial Court of Cavite for
the extrajudicial foreclosure of the mortgage constituted over petitioners
properties. On March 24, 1986, the ex-officio sheriff issued a notice of
extrajudicial foreclosure sale of the properties of petitioner.
On the same date, respondent Board issued M.B. Resolution No. 955
placing petitioner bank under conservatorship of Basilio Estanislao. He was
later replaced by Gilberto Teodoro as conservator on August 10, 1984. The
latter submitted a report dated January 8, 1985 to respondent Board on the
conservatorship of petitioner bank, which report shall hereinafter be
referred to as the Teodoro report.
Thus, 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.
Subsequently, another report dated January 23, 1985 was submitted to the
Monetary Board by Ramon Tiaoqui, Special Assistant to the Governor and
Head, SES Department II of the Central Bank, regarding the major findings
of examination on the financial condition of petitioner BF as of July 31,
1984. The report, which shall be referred to herein as the Tiaoqui Report
contained the following conclusion and recommendation:
All the foregoing provides sufficient justification for forbidding the bank
from engaging in banking.
780
780
SUPREME COURT REPORTS ANNOTATED
Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank
of the Philippines
operate as such under M.B. Resolution No. 223 dated February 14, 1963. It
commenced operations on July 9, 1964. It has eighty-nine (89) operating
branches, forty-six (46) of which are in Manila, with more than three (3)
million depositors.
As of July 31, 1984, the list of stockholders showed the major stockholders
to be: Metropolis Development Corporation, Apex Mortgage and Loans
781
Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank
of the Philippines
minister the same for the benefit of all the 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.
3. The Board of Directors and the principal officers from Senior Vice
Presidents, 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.
4. Refer to the Central Banks Legal Department and Office of Special
Investigation the report on the findings on Banco Filipino for investigation
and possible prosecution of directors, officers, and employees for activities
which led to its insolvent position. (pp. 6162, Rollo)
On January 25, 1985, the Monetary Board issued the assailed MB
Resolution No. 75 which ordered the closure of BF and which further
provides:
After considering the report dated January 8, 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, 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, 1985,
that the Banco Filipino Savings 6, Mortgage Bank is insolvent and that its
continuance in business would involve probable loss to its depositors and
creditors, and in pursuance of Sec. 29 of R.A. 265, as amended, the Board
decided:
1. To forbid Banco Filipino Savings and Mortgage Bank and all its branches
to do business in the Philippines;
2. To designate Mrs. Carlota P. Valenzuela, Deputy Governor as Receiver
who is hereby directly vested with jurisdiction and authority to immediately
take charge of the banks assets and liabilities, and 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
mortgagee in the name of the bank;
782
SUPREME COURT REPORTS ANNOTATED
Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank
of the Philippines
wise to assist the Receiver in carrying out the functions vested in the
Receiver by law or Monetary Board Resolutions;
4. 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, creditors and the general public; and
5. In consequence of the foregoing, to terminate the conservatorship over
Banco Filipino Savings and Mortgage Bank. (pp. 10- 11, Rollo, Vol. I)
On February 2, 1985, petitioner BF filed a complaint docketed as Civil Case
No. 9675 with the Regional Trial Court of Makati to set aside the action of
the Monetary Board placing BF under receivership.
On February 28, 1985, 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, 1985 as made without or in excess of
jurisdiction or with grave abuse of discretion, 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.A. 265, also known as Central Bank Act.
On March 19, 1985, Carlota Valenzuela, 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, in compliance with
the mandate of Sec. 29 of R.A. 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
recommendation:
liquidated.
The
report
contained
the
following
In view of the foregoing and considering that the condition of the banking
institution continues to be one of insolvency, i.e., its realizable assets are
insufficient to meet all its liabilities and that the bank cannot resume
business with safety to its depositors, other creditors and the general
public, it is recommended that:
1. Banco Filipino Savings 6, Mortgage Bank be liquidated pursuant to
paragraph 3, Sec. 29 of RA No. 265, as amended;
2. The Legal Department, through the Solicitor General, be au
783
Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank
of the Philippines
thorized to file in the proper court a petition for assistance in the
liquidation of the Bank;
3. The Statutory Receiver be designated as the Liquidator of said bank; and
4. Management be instructed to inform the stockholders of Banco Filipino
Savings 6, Mortgage Bank of the Monetary Boards decision to liquidate the
Bank. (p. 167, Rollo, Vol. I)
On July 23, 1985, 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. This Court issued a resolution on August 8, 1985 ordering the
issuance of the aforesaid temporary restraining order.
On August 20, 1985, the case was submitted for resolution.
In a resolution dated August 29, 1985, this Court Resolved to direct the
respondents Monetary Board and Central Bank to hold hearings at which
the petitioner should be heard, and to terminate such hearings and submit
its resolution within thirty (30) days. This Court further resolved to issue a
temporary restraining order enjoining the respondents from executing
784
SUPREME COURT REPORTS ANNOTATED
Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank
of the Philippines
istrative due process had been observed by the respondent Monetary
Board, may be expedited by Judge Manuel Cosico who now presides the
court vacated by Judge Ricardo Francisco, who was elevated to the Court of
Appeals, there being no legal impediment or justifiable reason to bar the
former from conducting such hearing. Hence, this Court directed Judge
Manuel Cosico to expedite the hearing and submit his report to this Court.
On February 20, 1988, 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 BF be upheld.
On October 21,1988, petitioner BF filed an urgent motion to reopen
hearing to which respondents filed their comment on December 16, 1988.
Petitioner filed their reply to respondents comment of January 11,1989.
After having deliberated on the grounds raised in the pleadings, this Court
in its resolution dated August 3, 1989 declared that its intention as
expressed in its resolution of August 29, 1985 had not been faithfully
adhered to by the herein petitioner and respondents. The aforementioned
resolution had ordered a hearing on the reports that Ied respondents to
order petitioners closure and its alleged preplanned liquidation. This Court
noted that during the referral hearing however, a different scheme was
followed. Respondents merely submitted to the commissioner their findings
on the examinations conducted on petitioner, affidavits of the private
respondents relative to the findings, 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, counteraffidavits of its officers and also documents to prove its claims. Although
the records disclose that both parties had not waived cross-examination of
their deponents, no such cross-examination has been conducted. The
reception of evidence in the form of affidavits was followed throughout,
until the commissioner submitted his report and recommendations to the
Court. This Court also held that the documents pertinent to the resolution
of the instant petition are the Teodoro Report, Tiaoqui Report, Valenzuela,
Aurellano and Tiaoqui Report and the supporting documents which were
785
786
786
SUPREME COURT REPORTS ANNOTATED
Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank
of the Philippines
not clearly es tablished;
2. That consequently, BFs closure on January 25, 1985, not having
satisfied the requirements prescribed under Sec. 29 of RA 265, as
amended, was null and void.
Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank
of the Philippines
788
SUPREME COURT REPORTS ANNOTATED
Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank
of the Philippines
receiver had not authorized anyone to file the action.
On March 22, 1985, the Monetary Board placed the bank under liquidation
and designated Valenzuela as liquidator and Aurellano and Tiaoqui as
deputy liquidators.
The Central Bank filed a supplemental motion to dismiss which was denied.
Hence, the latter filed a petition for certiorari with the respondent appellate
court to set aside the order of the trial court denying the motion to dismiss.
On March 17, 1986, the respondent appellate court granted the petition
and dismissed the complaint of Banco Filipino with the trial court
Thus, 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, without the authorization of the
CB-appointed receiver.
After deliberating on the pleadings in the following cases:
1. In G.R. No. 68878, the respondents motion for reconsideration;
2. In G.R. Nos. 7725558, the petition, comment, reply, rejoinder and surrejoinder;
3. In G.R. No. 78766, the petition, comment, reply and rejoinder;
4. In G.R. No. 81303, the petitioners motion for reconsideration;
5. In G.R. No. 81304, the petition, comment and reply;
6. Finally, in G.R. No. 90473, the petition, comment and reply,
We find the motions for reconsideration in G.R. Nos. 68878 and 81303 and
the petitions in G.R. Nos. 7725558, 78766, 81304 and 90473 devoid of
merit.
Section 29 of the Republic Act No. 265, as amended known as the Central
Bank Act, provides that when a bank is forbidden to do business in the
Philippines and placed under receivership, the person designated as
receiver shall immediately take charge of the banks assets and liabilities,
as expeditiously as possible, collect and gather all the assets and
administer the same for the benefit of its creditors, and represent the bank
personally or through counsel as he may retain in all actions or
proceedings for or against the institution, exercising all the powers
necessary for these purposes including, but not limited to, bringing and
foreclosing mortgages in the name of the bank. If the
789
against debtors of the bank by the liquidator are among the usual and
ordinary transactions pertaining to the administration of a bank. Neither
did Our order in the same resolution dated August 25, 1985 for the
designation by the Central Bank of a comptroller for Banco Filipino alter the
powers and functions of the liquidator insofar as the management of the
assets of the bank is concerned. The mere duty of the comptroller is to
supervise accounts and finances undertaken by the liquidator and to
determine the propriety of the latters expenditures incurred in behalf of
the bank. Notwithstanding this, the liquidator is still empowered under the
law to continue the functions of the
790
790
792
Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank
of the Philippines
793
ness 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 institution.
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, 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 which may, when warranted, involve disposition
of any or all assets in consideration for the assumption of equivalent
793
Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank
of the Philippines
tion, be exempt from any order of garnishment, levy, attachment, or
execution.
794
796
On December 17, 1984, this list of exceptions and findings was submitted
to the petitioner bank (p. 6, Tiaoqui Report). This was attached to the letter
dated December 17, 1984, of examiner-in-charge Dionisio Domingo of SES
Department II of the Central Bank to Teodoro Arcenas, president of
petitioner bank, which disclosed that the examination of the petitioner
bank as to its financial condition as of July 31, 1984 was not yet completed
or finished on December 17, 1984 when the Central Bank submitted the
partial list of findings of examination to the petitioner bank. The letter
reads:
Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank
of the Philippines
Clearly, Tiaoqui based his report on an incomplete examination of
petitioner bank and outrightly concluded therein that the latters financial
status was one of insolvency or illiquidity. He arrived at the said conclusion
from the following facts: that as of July 31, 1984, total capital accounts
consisting of paid-in capital and other capital accounts such as surplus,
surplus reserves and undivided profits aggregated P351.8 million; that
capital adjustments, however, wiped out the capital accounts and placed
the bank with a capital deficiency amounting to P334.956 million; 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 P600.4 million pursuant to the examination. 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 latters financial condition.
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. He stated:
The recommended valuation reserves as bases for determining the
financial status of the bank would need to be discussed with the bank,
consistent with standard examination procedure, for which the bank would
in turn reply. Also, the examination has not been officially terminated. (p. 7.
Tiaoqui report; p. 59, Rollo, Vol. I)
In his testimony in the second referral hearing before Justice Santiago,
Tiaoqui testified that on January 21, 1985, he met with officers of petitioner
bank to discuss the advanced findings and exceptions made by Mr. Dionisio
Domingo which covered 70%-80% of the banks loan portfolio; that at that
meeting, Fortunato Dizon (BFs Executive Vice President) said that as
regards the unsecured loans granted to various corporations, said
797
Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank
of the Philippines
that he however, did not wait anymore for a discussion of the
recommended valuation reserves and instead prepared his report two days
after January 21, 1985 (pp. 33133314, Rollo).
Records further show that the examination of petitioner bank was officially
terminated only when Central Bank Examinerin-charge Dionisio Domingo
submitted his final report of examination on March 4, 1985.
It is evident from the foregoing circumstances that the examination
contemplated in Sec. 29 of the CB Act as a mandatory requirement was not
completely and fully complied with. Despite the existence of the partial list
of findings in the examination of the bank, there were still highly significant
items to be weighed and determined such as the matter of valuation
reserves, before these can be considered in the financial condition of the
bank. It would be a drastic move to conclude prematurely that a bank is
insolvent if the basis for such conclusion is lacking and insufficient,
especially if doubt exists as to whether such bases or findings faithfully
represent the real financial status of the bank.
The actuation of the Monetary Board in closing petitioner bank on January
25, 1985 barely four days after a conference with the latter on the
examiners partial findings on its financial position is also violative of what
was provided in the CB Manual of Examination Procedures. Said manual
provides that only after the examination is concluded, should a pre-closing
conference led by the examiner-in-charge be held with the
officers/representatives of the institution on the findings/exception, 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
798
SUPREME COURT REPORTS ANNOTATED
Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank
of the Philippines
ant to Rep, Act No. 265, known as the Central Bank Act. Consequently, 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. Police power, however, may not be done arbitratrily or
unreasonably and could be set aside if it is either capricious,
discriminatory, whimsical, arbitrary, unjust or is tantamount to a denial of
due process and equal protection clauses of the Constitution (Central Bank
v. Court of Appeals, Nos. L-5003132, July 27, 1981, 106 SCRA 143).
In the instant case, the basic standards of substantial due process were not
observed. Time and again, We have held in several cases, that the
procedure of administrative tribunals must satisfy the fundamentals of fair
play and that their judgment should express a well-supported conclusion.
In the celebrated case of Ang Tibay v. Court of Industrial Relations, 69 Phil.
635, this Court laid down several cardinal primary rights which must be
respected in a proceeding before an administrative body.
However, as to the requirement of notice and hearing, Sec. 29 of RA 265
does not require a previous hearing before the Monetary Board implements
the closure of a bank, since its action is subject to judicial scrutiny as
provided for under the same law (Rural Bank of Bato v. IAC, G.R No. 65642,
October 15, 1984, Rural Bank v. Court of Appeals, G.R. 61689, June
20,1988,162 SCRA 288).
800
SUPREME COURT REPORTS ANNOTATED
Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank
of the Philippines
mine the financial condition of banks for purposes provided for by law,
such as for the purpose of closure on the ground of insolvency stated in
Section 29 of the Central Bank Act. But express grants of power to public
officers should be subjected to a strict interpretation, and will be construed
as conferring those powers which are expressly imposed or necessarily
implied (Floyd Mechem, Treatise on the Law of Public Offices and Officers,
p. 335).
In this case, there can be no clearer explanation of the concept of
insolvency than what the law itself states. Sec. 29 of the Central Bank Act
provides that insolvency under the Act, shall be understood to mean that
the realizable assets of a bank or a non-bank financial intermediary
802
SUPREME COURT REPORTS ANNOTATED
Banco Filipino Savings & Mortgage Bank us. Monetary Board, Central Bank
of the Philippines
The test of insolvency laid down in Section 29 of the Central Bank Act is
measured by determining whether the realizable assets of a bank are less
than its liabilities. Hence, a bank is solvent if the fair cash value of all its
assets, realizable within a reasonable time by a reasonable prudent
person, would equal or exceed its total liabilities exclusive of stock liability;
but if such fair cash value so realizable is not sufficient to pay such
liabilities within a reasonable time, the bank is insolvent. (Gillian v. State,
194 N.E. 360, 363, 207 Ind. 661). Stated in other words, the insolvency of a
bank occurs when the actual cash market value of its assets is insufficient
to pay its liabilities, not considering capital stock and surplus which are not
liabilities for such purpose (Exley v. Harris, 267 p. 970, 973, 126 Kan. 302;
Alexander v. Llewellyn, Mo. App., 70 S.W. 2n 115, 117).
In arriving at the computation of realizable assets of petitioner bank,
respondents used its books which undoubtedly are not reflective of the
actual cash or fair market value of its assets. This is not the proper
procedure contemplated in Sec. 29 of the Central Bank Act. Even the CB
Manual of Examination Procedures does not confine examination of a bank
solely with the determination of the books of the bank. The latter is part of
auditing which should not be confused with examination. Examination
appraises the soundness of the institutions assets, the quality and
character of management and determines the institutions compliance with
laws, rules and regulations. Audit is a detailed inspection of the
institutions books, accounts, vouchers, ledgers, etc. to determine the
recording of all assets and liabilities. Hence, examination concerns itself
with review and appraisal, while audit concerns itself with verification (CB
Manual of Examination Procedures, General Instructions, p. 5). This Court
however, 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. The proper determination of these
matters by using the actual cash value criteria belongs to the field of factfinding expertise of the Central Bank and the Monetary Board.
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, We
803
We take note of the exhaustive study and findings of the Cosico report on
the petitioner banks having engaged in unsafe, unsound and fraudulent
banking practices by the granting of huge unsecured loans to several
subsidiaries and related
804
803
Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank
of the Philippines
will however, 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, Aurellano and
804
SUPREME COURT REPORTS ANNOTATED
Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank
of the Philippines
companies, We do not see, however, that this has any material bearing on
the validity of the closure. Section 34 of the RA 265, 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. 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 banks
alleged activities, During the period from July 27, 1984 up to January 25,
1985, when petitioner bank was under conservatorship no official of the
bank was ever prosecuted, suspended or removed for any participation in
unsafe and unsound banking practices, and neither was the entire
management of the bank replaced or substituted. In fact, in her testimony
during the second referral hearing, Carlota Valenzuela, CB Deputy
Governor, testified that the reason for petitioner banks closure was not
unsound, unsafe and fraudulent banking practices but the alleged
insolvency position of the bank (TSN, August 3, 1990, p. 3315, Rollo, Vol.
VIII).
Finally, 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.B. Resolution No. 955 dated July 27,
1984. This paved the way for the reopening of the bank on August 1,1984
after a selfimposed bank holiday on July 23, 1984.
On emergency loans and advances, Section 90 of RA 265 provides two
types of emergency loans that can be granted by the Central Bank to a
financially distressed bank:
Sec. 90. x x x. In periods of emergency or of imminent financial panic
which directly threaten monetary and banking stability, the Central Bank
may grant banking institutions extraordinary advances secured by any
assets which are defined as acceptable security by a concurrent vote of at
least five members of the Monetary Board, While such advances are
outstanding, the debtor institution may not expand the total volume of its
loans or investments without the prior authorization of the Monetary
Board.
The Central Bank may, at its discretion, likewise grant advances to
banking institutions, even during normal periods, for the purpose of
assisting a bank in a precarious financial condition or under serious
805
806
Narvasa (C.J.), Gutierrez, Jr., Cruz, Bidin and Regalado, JJ., concur.
Melencio-Herrera, J., See dissent.
Paras, J., No part. Son is one of the lawyers.
Feliciano, J., No part. One of parties represented by my former firm.
Padilla, J., No part; former director of Bank of P.I. which at one time
negotiated for the acquisition of Banco Filipino.
Grio-Aquino, J., Please see my separate dissenting opinion.
Davide, Jr., J., No part as one of the counsels was a former partner in a
Cebu-based law firm.
808
SUPREME COURT REPORTS ANNOTATED
Banco Filipino Savings & Mortgage Bank vs, Monetary Board, Central Bank
of the Philippines
MELENCIO-HERRERA, J., Dissenting:
Although these nine (9) Banco Filipino (BF) cases have been consolidated
under one ponencia, all of them except one, raise issues unrelated to the
receivership and liquidation of said bank, In fact, two of these cases (G.R.
No. 68878 and 81303) have already been decided by this Court and are
only awaiting the resolution of the motions for reconsideration filed therein.
Only G.R. No, 70054 Banco Filipino Savings and Mortgage Bank (BF) vs.
the Monetary Board (MB), Central Bank of the Philippines (CB), et al.," is an
original action for mandamus and
809
I join Mme. Justice Carolina G. Aquino in her dissent and vote to deny the
prayer, in G.R. No. 70054, to annul Monetary Board Resolution No. 75
placing Banco Filipino (BF) under receivership.
Even assuming that the BF was not, as alleged, in a literal state of
insolvency at the time of the passage of said Resolution, there was a
finding in the Teodoro report that, based on that Banks illiquidity, to have
allowed it to continue in operation would have meant probable loss to
depositors and creditors. That is also a ground for placing the bank under
receivership, as a first step, pursuant to Section 29 of the Central Bank Act
(Rep. Act No. 265, as amended). The closure of BF, therefore, can not be
said to have been arbitrary or made in bad faith. There was sufficient
Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank
of the Philippines
certiorari filed in this Court by former officials of BF to annul the Monetary
Board Resolution No. 75 dated January 25, 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, hence, without administrative due process"1 The prayer of
the petition reads:
1 P. 3, Petition.
810
810
812
Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank
of the Philippines
Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank
of the Philippines
ings 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 6,
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. 9675 (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 28A 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. 7725558, 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
813
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
814
814
SUPREME COURT REPORTS ANNOTATED
Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank
of the Philippines
such banking institution.
If the Monetary Board shall determine and confirm within the said period
that the banking ins titution 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
816
SUPREME COURT REPORTS ANNOTATED
Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank
of the Philippines
Bank to BF that month (MB Res. No. 839 dated June 29,1984). On July
12,1984, BFs chairman, Anthony Aguirre, offered to turn over the
administration of the affairs of the bank to the Central Bank (Aguirres
letter to Governor Jose Fernandez, Annex 7 of Manifestation dated May 3,
1991). On July 23, 1984, unable to meet heavy deposit withdrawals, BFs
management motu proprio, without obtaining the conformity of the Central
Bank, closed the bank and declared a bank holiday. On July 27, 1984, the
Estanislao resigned after two weeks for health reasons. He was succeeded
by Gilberto Teodoro as conservator in August, 1984 up to January 8, 1985.
3. Deposit levels, which were at P3,845 million at end-May 1984 (its last
normal month), dropped to P935 million at the end of November 1984 or
a loss of P2,910 million. This represented an average monthly loss of P485
million vs. an average monthly gain of P26 million during the first 5 months
of 1984. (pp. 23, Tiaoqui Report.)
2 Sec. 37. All savings and mortgage banks shall maintain on deposit with
the Central Bank of the Philippines such reserves against their deposit
liabilities as the Monetary Board shall determine in accordance with the
pertinent provisions of the Central Bank Act.
817
4. Deposits had declined at the rate of P20 million during the month of
December 1984, but expenses of about P17 million per month were
required to maintain the banks operations. (p. 5, Teodoro Report.)
5. Based on the projected outlook, the Banks average yield on assets of
16.3% p.a., was insufficient to meet the average cost of funds of 19.5%
p.a. and operating expenses of 4.8% p.a. (p. 5 Teodoro Report.)
6. An imprudently large proportion of assets were locked into long-term
applications. (Teodoro Report)
7. BF overextended itself in lending to the real estate industry, 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. (Teodoro Report.) This was done in violation of Section 38
of the General Banking Act (R.A. 337).3
________________
been satisfied and its legal reserves have been restored to the required
minimum.
818
818
SUPREME COURT REPORTS ANNOTATED
Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank
of the Philippines
(b) Other properties (collaterals) supposedly worth P711 million could not
be evaluated by PAC because the details submitted by the bank were
insufficient;
(c) While P674 million in loans were supposedly guaranteed by the Home
Financing Corporation (HFC), the latter confirmed only P427 million. P247
million in loans were not guaranteed by HPC. (Teodoro Report.)
(d) Per SGVs report, loans totalling P1.882 million includ________________
8. During the period of marked decline in liquidity levels the loan portfolio
grew by P417.3 million in the first five months of 1984and by another
P105.1 million in the next two months. (pp. 23, Tiaoqui Report.)
9. The loan portfolio stood at P3.679 billion at the end of July 1984, 56.2%
of it channeled to companies whose stockholders, directors and officers
were related to the officers, directors, and some stockholders of BF. (p. 8,
Tiaoqui Report.) Here again BF violated the General Banking Act (R.A.
337).4
819
10. Some of the loans were used to acquire preferred stocks of BF. Between
September 17, 1983 and February 10,1984, P49.9 million of preferred nonconvertible stocks were issued. About 85% or P42.4 million was paid out of
the proceeds of loans to stockholders/ borrowers with relationship to the
bank (Annex D). Around P18.8 million were issued in the name of an entity
other than the purchaser of the stocks. (Tiaoqui Report.)
819
11. Loans amounting to some P69.3 million were granted simply to pay-off
old loans including accrued interest, as an accommodation for the direct
maturing loans of some firms and as a way of paying-off loans of other
borrower firms which have their own credit lines with the bank. These
helped to make otherwise delinquent loans appear current and
deceptively improved the quality of the loan portfolio. (Tiaoqui Report.)
Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank
of the Philippines
ing accrued interest, were secured by collateral worth only P1.54 billion.
Hence, BFs unsecured exposure amounted to P586.2 million. BF Homes,
Inc., a related company which has filed with the SEC a petition for
suspension of payments, owes P502 million to BF.
13. BF had been suffering heavy losses.
a) For the eleven (11) months ended November 30, 1984, the estimated
net loss was P372.6 Million;
b) For the twelve (12) months from November 1984, the projected net loss
would be P390.7 Million and would continue unabated; (p. 2, Teodoro
Report)
820
SUPREME COURT REPORTS ANNOTATED
Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank
of the Philippines
cipal cause of the banks failure was that in violation of the General
Banking Law and CB rules and regulations, BFs major stockholders,
directors and officers, through their related companies: (i.e. companies
owned or controlled by them of their relatives) had been borrowing huge
chunks of the money of the depositors. His Conclusion and
Recommendations were:
The Conservator, in his report to the Monetary Board dated January 8,
1985, has stated that the continuance of the bank in business would
Members:
1. Cesar E.A. Virata, Prime Minister 6, Concurrently Minister of Finance
2. Roberto V. Ongpin, Minister of Trade 6, Industry 6, Chairman of Board of
Investment
3. Vicente B. Valdepeas, Jr., Minister of Economic Planning 6, Director
General of NEDA
4. Cesar A. Buenaventura, President of Filipinas Shell Petroleum Corp. (p.
37, Annual Report 1985)
issued Resolution No. 75 closing BF and placing it under receivership. The
MB Resolution reads as follows:
After considering the report dated January 8, 1985 of the Conservator for
Banco Filipino Savings and Mortgage Bank that the continu-ance in
business of the bank would involve probable loss to its depositors and
creditors, 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, 1985, 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, and in pursuance of Section 29 of R.A. No. 265, as
amended, the Board decided:
1. To forbid Banco Filipino Savings and Mortgage Bank and all its branches
to do business in the Philippines;
2. To designate Mrs. Carlota P. Valenzuela, Deputy Governor, as Receiver
who is hereby directly vested with jurisdiction and authority to immediately
take charge of the banks assets and liabilities, and 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 bank;
3. To designate Mr. Arnulfo B. Aurellano, Special Assistant to the Governor,
and Mr. Ramon V. Tiaoqui, Special Assistant to the Governor and Head,
822
SUPREME COURT REPORTS ANNOTATED
Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank
of the Philippines
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;
4. 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/creditors and the general public; and
5. In consequence of the foregoing, to terminate the conservatorship over
Banco Filipino Savings and Mortgage Bank. (pp. 126127, Rollo l.)
On March 19, 1985, the receiver, Carlota Valenzuela, and the deputy
receivers, Arnulfo B. Aurellano and Ramon V. Tiaoqui, submitted a report to
the Monetary Board as required in Section 29, 2nd paragraph of R.A. 265
which provides that within sixty (60) days from date of the receivership,
the Monetary Board shall determine whether the bank may be reorganized
and permitted to resume business, or be liquidated. The receivers
recommended that BF be placed under litigation. For, among other things,
they found that:
1. BF had been suffering a capital deficiency of P336.5 million as of July 31,
1984 (pp. 2 and 4, Receivers Report).
2. The banks weekly reserve deficiencies averaged P1 46.67 million from
November 25, 1983 up to March 16,1984, rising to a peak of P338.09
million until July 27, 1984. Its reserve deficiencies against deposits and
deposit substitutes began on the week ending June 15, 1984 up to
December 7, 1984, with average daily reserve deficiencies of P2.98 million.
3. Estimated losses or unbooked valuation reserves for loans to entities
with relationships to certain stockholders/ directors and officers of the bank
unable to meet the heavy cash withdrawals of its depositors and pay its
liabilities to its creditors, the biggest of them being the Central Bank,
hence, the Monetary Board correctly found its condition to be one of
insolvency.
All the discussion in the Santiago Report concerning the banks assets and
liabilities as determinants of BFs solvency or insolvency is irrelevant and
inconsequential, for under Section 29 of Rep. Act. 265, a banks insolvency
is not determined by its excess of liabilities over assets, 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
824
824
Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank
of the Philippines
After BF was closed as of January 25, 1985, there were no collections from
loans granted to firms related to each other and to BF classified as
doubtful or loss, there were no substantial improvements on other loans
classified doubtful or loss; 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 P3,909.23, (millions) while the total liabilities amounted to
P5,159.44 (millions). Thus, BF remains insolvent with estimated deficiency
to creditors of P1,250.21 (millions),
Moreover, 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. (p. 8, Receivers Report.)
In the light of the results of the examination of BF by the Teodoro and
Tiaoqui teams, I do not find that the CBs Resolution No. 75 ordering BF to
cease banking operations and placing it under receivership was plainly
arbitrary and made in bad faith. The receivership was justified because BF
was insolvent and its continuance in business would cause loss to its
depositors and creditors. Insolvency, as defined in Rep. Act Act 265, means
the inability of a banking institution to pay its liabilities as they fall due in
the usual and ordinary course of business. Since June 1984, BF had been
(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, a copy of which was furnished
BF on December 17, 1984;
(3) A conference on the matter was held on January 21, 1985 with senior
officials of BF headed by EVP F. Dizon,. (pp. 1415, Cosico Report.) BF did
not formally protest against the CBs estimate of valuation reserves. 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.
(4) Subsequent events proved correct the SES classification of the loan
accounts as doubtful or loss because as of January 25, 1985 none of
the loans, except three, had been paid either partially or in full, even if
they had already matured (p. 53, Cosico Report).
825
bank was insolvent and could not continue in business without probable
loss to its depositors or creditors, and what had not been examined was
negligible and would not have materially altered the result. In any event,
the official termination of the examination with the submission by the Chief
Examiner of his report to the Monetary Board in March 1985, did not
contradict, but in fact confirmed, the findings in the Tiaoqui Report,
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, among others,
of maintaining monetary stability in the country (Sec. 2, Rep. Act 265). I do
not think it would be proper and advisable for this Court to interfere with
the CBs exercise of its prerogative and duty to discipline banks which have
persistently engaged in illegal, unsafe, 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. The damage to the banking
system and to the depositing public is bigger when the bank, like Banco
826
826
Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank
of the Philippines
Copyright 2011 Central Book Supply, Inc. All rights reserved. [Banco
Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank of the
Philippines, 204 SCRA 767(1991)]
592
SUPREME COURT REPORTS ANNOTATED
Perez vs. Monetary Board
No. L-23307. June 30, 1967.
DAMASO P. PEREZ and REPUBLIC BANK, ETC., ET AL., petitionersappellants, vs. MONETARY BOARD, THE SUPERINTENDENT OF BANKS,
CENTRAL BANK OF THE PHILIPPINES and SECRETARY OF JUSTICE,
respondents-appellees. AURORA R. RECTO, MIGUEL CANIZARES, LEON
ANCHETA, PABLO ROMAN, VICTORIA B. ROMAN and NORBERTO J.
QUISUMBING, intervenors-appellees.
Central Bank; No specific duty to prosecute violators of banking laws.
Although the Central Bank and its respondent officials may have the duty
under the Central Bank Act and the General Banking Law to cause the
prosecution of alleged violators of banking laws, yet, there is nothing in
said laws that imposes a clear and specific duty on the former to undertake
the actual prosecution of the latter.
Pleading and Practice; Interlocutory orders; Such orders may be set aside.
The order denying a motion to dismiss is interlocutory. The lower court
was not estopped to set it aside because purely interlocutory orders are
subject to alteration, modification or reversal before the rendition of the
final judgment on the merits,
APPEAL from an order of dismissal rendered by the Court of First Instance
of Manila.
Natalio M. Balboa, F. E. Evangelista and Severo Malvar for respondentappellee Central Bank.
Solicitor General Arturo A. Alafriz and Solicitor C. S. Gaddi for
respondent-appellee Secretary of Justice.
in the Court of First Instance of Manila on June 23, 1962, against the
Monetary Board, the Superintendent of Banks, the Central Bank and the
Secretary of Justice. His object was to compel these respondents to
prosecute, among others, Pablo Roman and several other Republic Bank
officials for violations of the General Banking Act (specifically secs. 76-78
and 83 thereof) and the Central Bank Act, and for falsification of public or
commercial documents in connection with certain alleged anomalous loans
amounting to P1,303,400.00 authorized by Roman and the other bank
officials.
Respondents assailed, in their respective answers, the propriety of
mandamus. The Secretary of Justice claimed that it was not their specific
duty to prosecute the persons denounced by Perez. The Central Bank and
its respondent officials, on the other hand, averred that they had already
done their duty under the law by referring to the special prosecutors of the
Department of Justice for criminal investigation and prosecution those
cases involving the alleged anomalous loans.1
On July 10, 1962, respondents moved for the dismissal of the petition for
lack of cause of action. Petitioners opposed. The lower court denied the
motion.
Subsequently, herein intervenors-appellees, as the incumbent directors of
the Board of the Republic Bank, filed a motion to intervene in the
proceedings. Petitioners opposed the motion but the lower court approved
the same.
On January 20,1964, the Monetary Board of the Central Bank passed
Resolution No. 81 granting the request of
_______________
594
2 See Annex "A" of petitioners-appellants' brief.
594
SUPREME COURT REPORTS ANNOTATED
3 I.e., that in their petition, pars. 6-10 and 12 specially, a cause of action
for mandamus is stated.
595
595
8 Gonzales vs. Court of First Instance, 63 Phil. 846; Dimaunahan vs. Hon.
Aranas, 74 Phil. 455; People vs. Natoza, L-8917, Dec. 24, 1956.
those alleged violators, yet We find nothing in said laws that imposes a
clear, specific duty on the former to do the actual prosecution of the latter.
The Central Bank is a government corporation created principally to
administer the monetary and banking system of the Republic,4 not a
prosecution agency5 like the f iscal's office. Being an artificial person, the
Central Bank is limited to its statutory powers and the nearest power to
which prosecution of violators of banking laws may be attributed is its
power to sue and be sued.6 But this corporate power of litigation evidently
refers to civil cases only.
The Central Bank and its respondent of f icials have already done all they
could, within the confines of their powers, to cause the prosecution of
those persons denounced by Perez. Annexes 5 to 7-C CBP of respondents'
answer and even petitioners' opposition to the first motion to dismiss7
show that the cases of the alleged anomalous loans had already been
referred by the Central Bank to the special prosecutors of the Department
of Justice for criminal investigation and prosecution. For respondents to do
the actual prosecuting themselves, as petitioners would have it, would be
tantamount to an ultra vires act already.
As for the Secretary of Justice, while he may have the power to prosecute
through the office of the Solicitor Generalcriminal cases, yet it is settled
rule that mandamus will not lie to compel a prosecuting officer to
prosecute a criminal case in court.8
Moreover, it does not appear from the law that only the Central Bank or its
respondent officials can cause the prosecution of alleged violations of
banking laws. Said violations constitute a public offense, the prosecution of
which is a matter of public interest and hence, anyoneeven private
individualscan denounce such violations before the prosecuting
authorities. Since Perez himself
_______________
596
596
SUPREME COURT REPORTS ANNOTATED
Esperat vs. Avila
could cause the filing of criminal complaints against those allegedly
involved in the anomalous loans, if any, then he has a plain, adequate and
speedy remedy in the ordinary course of law, which makes mandamus
against respondents improper.
But petitioners-appellants would insist that the impropriety of mandamus
could no longer be raised before the lower court for the second time since
it had already been invoked in a previous motion to dismiss which was
denied. This is untenable. The lower court was not estopped from changing
its opinion while it was under its jurisdiction to do so and on the same
ground of lack of cause of action raised before, because the former order
was purely interlocutory and thus remained constantly subject to
alteration, modification or reversal by it before the rendition of final
judgment on its merits.9
Wherefore, the order of dismissal appealed from is, as it is hereby,
affirmed. Costs against petitioner-appellant Perez. So ordered.
Concepcion, C J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez and
Castro, JJ., concur.
Order of dismissal affirmed.
Notes.See Republic Bank vs. Cuaderno, L-22399, March 30, 1967, 19
Supreme Court Reports Annotated 671 which is related to the foregoing
Perez case.
The rule that a private person may initiate the prosecution of public
offenses was followed in Hernandez vs. Albano, 59 O.G. 1910.
oOo
Copyright 2011 Central Book Supply, Inc. All rights reserved. [Perez vs.
Monetary Board, 20 SCRA 592(1967)]
CONCEPCION, C.J.:
508
Upon the filing of the petition herein and of the requisite bond, we issued,
on August 14, 1962, a writ of preliminary injunction restraining and
prohibiting respondents herein from enforcing the order above quoted.
508
The main respondent in this case, the First Mutual Savings and Loan
Organization, Inc.hereinafter referred to as the Organizationis a
registered non-stock corporation, the main purpose of which, according to
its Articles of Incorporation, dated February 14, 1961, is "to encourage x x
x and implement savings and thrift among its members, and to extend f
inancial assistance in the f orm of loans," to them. The Organization has
three (3) classes
509
510
510
SUPREME COURT REPORTS ANNOTATED
Central Bank vs. Morfe
Moreover, on April 23, 1962, the Governor of the Bank directed the
coordination of "the investigation and gathering of evidence on the
activities of the savings and loan associations which are operating contrary
to law." Soon thereafter, or on May 18, 1962, a member of the intelligence
division of the Bank filed with the Municipal Court of Manila a verified
application for a search warrant against the Organization, alleging that
"after close observation and personal investigation, the premises at No.
2745 Rizal Avenue, Manila"in which the offices of the Organization were
housed"are being used unlawfully," because said Organization is illegally
engaged in banking activities, "by receiving deposits of money for deposit,
disbursement, saf ekeeping or otherwise or transacts the business of a
savings and mortgage bank and/or building and loan association x x x
without having first complied with the provisions of Republic Act No. 337"
and that the articles, papers, or effects enumerated in a list attached to
said application, as Annex A thereof,3 are kept in said premises, and
"being- used or intended to be used in the commission of a felony, to wit:
violation of Sections 2 and 6 of Republic Act No. 337."4 Said articles,
papers or effects are described in the aforementioned Annex A, as follows:
"I. BOOKS OF ORIGINAL ENTRY
(1) General Journal
(2) Columnar Journal or Cash Book
(a) Cash Receipts Journal or Cash Receipt Book
(b) Cash Disbursements Journal or Cash Disbursement Book
"II. BOOKS OF FINAL ENTRY
"V. OTHERS
(2) By-Laws
_______________
3 P. 106, Rollo.
4 Annex 6 to Annex E, p. 105 of the Rollo.
511
(4) And other documents and articles which are being used or intended to
be used in unauthorized banking activities and operations contrary to law."
Upon the filing of said application, on May 18,1962, Hon. Roman Cancino,
as Judge of the said municipal court, issued the warrant above referred to,5
commanding the search of the aforesaid premises at No. 2745 Rizal
Avenue, Manila, and the seizure of the f oregoing articles, there being
"good and sufficient reasons to believe" upon examination, under oath, of
a detective of the Manila Police Department and said intelligence off icer of
the Bankthat the Organization has under its control, in the address given,
the aforementioned articles, which are the subject of the offense adverted
to above or intended to be used as means for the commission of said
offense.
Forthwith, or on the same date, the Organization commenced Civil Case
No. 50409 of the Court of First Instance of Manila, an original action for
"certiorari, prohibition, with writ of preliminary injunction and/or writ of
preliminary mandatory injunction," against said municipal court, the Sheriff
of Manila. the Manila Police Department, and the Bank, to annul the
aforementioned search warrant, upon the ground that, in issuing the same,
the municipal court had acted "with grave abuse of discretion, without
_______________
5 P. 107, Rollo.
512
512
513
and 6 of said Act.6 Yet respondent Judge found the searches and seizures
in question to be unreasonable, through the f ollowing process of
reasoning: the deposition given in support of the application for a search
warrant states that the deponent personally knows that the premises of
the Organization, at No. 2745 Rizal Avenue, Manila,7 were being used
_______________
6 "Section 2. Only duly authorized persons and entities may engage in the
lending of funds obtained from the public through the receipt of deposits or
the sale of bonds securities or obligations of any kind, and all entities
regularly conducting such operations shall be considered as banking
institutions and shall be subject to the provisions of this Act, of the Central
Bank Act, and of other pertinent laws. The terms 'banking institution' and
'bank,' as used in this Act, are synonymous and interchangeable and
specifically include banks, banking institutions. commercial banks. savings
banks, mortgage banks, trust companies, building and loan associations,
branches and agencies in the Philippines of foreign banks, hereinafter
called Philippine branches, and all other corporations, companies,
partnerships, and associations performing banking functions in the
Philippines.
"Persons and entities which receive deposits only occasionally shall not be
considered as banks, but such persons and entities shall be subject to
regulations by the Monetary Board of the Central Bank; nevertheless, in no
case may the Central Bank authorize the drawing of checks against
deposits not maintained in banks, or branches or agencies thereof.
"The Monetary Board may similarly regulate the activities of persons and
entities which act as agents of banks."
7 "Section 6. No person, association or corporation not conducting the
business of a commercial banking corporation, trust corporation, savings
and mortgage bank, or building and loan association, as defined in this Act,
shall advertise or hold itself out as being engaged in the business of such
bank, corporation or association, or use in connection with its business title
the word or words 'bank,' 'banking,' 'banker,' 'building and loan
association,' 'trust company,' or other words of similar import, or solicit or
receive deposits of money for deposit, disbursement, safekeeping, or
otherwise, or transact in any manner the business of any such bank,
the question whether or not "probable cause" exists is one which must be
decided in the light of the conditions obtaining in given situations.
514
_______________
514
SUPREME COURT REPORTS ANNOTATED
of five hundred pesos for each day during which such violation is continued
or repeated, and in default of the payment thereof, subsidiary
imprisonment as prescribed by law."
515
Referring particularly to the one at bar, it is not clear from the order
complained of whether respondent Judge opined that the above mentioned
statement of the deponentto the effect that the Organization was
engaged in the transactions mentioned in his depositiondeserved cre-
515
Central Bank vs. Morfe
Judge Cancino, who issued the warrant, on the credibility of said
statement, would not justify the conclusion that said municipal Judge had
committed a grave abuse of discretion, amounting to lack of jurisdiction or
excess of jurisdiction. Upon the other hand, the failure of the witness to
mention particular individuals does not necessarily prove that he had no
personal knowledge of specific illegal transactions of the Organization, for
the witness might be acquainted with specific transactions, even if the
names of the individuals concerned were unknown to him.
Again, the aforementioned order would seem to assume that an illegal
banking transaction, of the kind contemplated in the contested action of
the officers of the Bank, must always connote the existence of a "victim." If
this term is used to denote a party whose interests have been actually
injured, then the assumption is not necessarily justified. The law requiring
compliance with certain requirements bef ore anybody can engage in
banking obviously seeks to protect the public against actual, as well as
potential, injury. Similarly, we are not aware of any rule limiting the use of
warrants to papers or eff ects which cannot be secured otherwise. ,
however, in the light of the circumstances obtaining in this case, that the
Municipal Judge did not commit a grave abuse of discretion in finding that
there was probable cause that the Organization had violated Sections 2
and 6 of the aforesaid law and in issuing the warrant in question, and that,
accordingly, and in line with Alvarez vs. Court of First Instance (64 Phil. 33),
the search and seizure complained of have not been proven to be
unreasonable.
Wherefore, the order of respondent Judge dated July 2, 1962, and the writ
of preliminary mandatory injunction issued in compliance therewith are
hereby annulled, and the writ of preliminary injunction issued by this Court
on August 14, 1962, accordingly, made permanent, with costs against
respondent First Mutual Savings and Loan Organization, Inc. It is so
ordered.
Reyes, J.B.L., Makalintal, Bengzon, J.P., Zaldivar, Sanchez and Castro, JJ.,
concur.
Dizon, J., did not take part.
517
516
SUPREME COURT REPORTS ANNOTATED
Central Bank vs. Morfe
ments will readily show that anybody can be a depositor and thus be a
"participating member." In other words, the Organization is, in effect, open
to the "public" for deposit accounts, and the funds so raised may be lent by
the Organization. Moreover, the power to so dispose of said funds is placed
under the exclusive authority of the "founder members/' and "participating
members" are expressly denied the right to vote or be voted for, their
"privileges and benefits," if any, being limited to those which the board of
trustees may, in its discretion, determine from time to time. As a
consequence, the "membership" of the "participating members" is purely
nominal in nature. This situation is fraught, precisely, with the very
dangers or evils which Republic Act No. 337 seeks to f orestall, by exacting
compliance with the requirements of said Act, before the transactions in
question could be undertaken.
It is interesting to note, also, that the Organization does not seriously
contest the main facts, upon which the action of the Bank is based. The
principal issue raised by the Organization is predicated upon the theory
that the aforementioned transactions of the Organization do not amount to
"banking," as the term is used in Republic Act No. 337. We are satisfied,
Rural Bank of San Miguel, Inc. vs. Monetary Board, Bangko Sentral ng
Pilipinas
G.R. No. 150886. February 16, 2007.*
RURAL BANK OF SAN MIGUEL, INC. and HILARIO P. SORIANO, in his capacity
as majority stockholder in the Rural Bank of San Miguel, Inc., petitioners,
vs. MONETARY BOARD, BANGKO SENTRAL NG PILIPINAS and PHILIPPINE
DEPOSIT INSURANCE CORPORATION, respondents.
Banks and Banking; Statutory Construction; It is well-settled that the
closure of a bank may be considered as an exercise of police power; Action
of the Monetary Board (MB) on this matter is final and executory.It is
well-settled that the closure of a bank may be considered as an exercise of
police power. The action of the MB on this matter is final and executory.
Such exercise may nonetheless be subject to judicial inquiry and can be set
aside if found to be in excess of jurisdiction or with such grave abuse of
discretion as to amount to lack or excess of jurisdiction.
Same; Same; Petitioners reliance on Banco Filipino which was decided
under RA 265 was misplaced; In RA 7653, only a report of the head of the
supervising or examining department is necessary.Thus in Banco
Filipino, we ruled that an examination [conducted] by the head of the
appropriate supervising or examining department or his examiners or
agents into the condition of the bank is necessary before the MB can
order its closure. However, RA 265, including Section 29 thereof, was
expressly repealed by RA 7653 which took effect in 1993. Resolution No.
105 was issued on January 21, 2000. Hence, petitioners reliance on Banco
Filipino which was decided
_______________
* FIRST DIVISION.
155
Rural Bank of San Miguel, Inc. vs. Monetary Board, Bangko Sentral ng
Pilipinas
under RA 265 was misplaced. In RA 7653, only a report of the head of the
supervising or examining department is necessary. It is an established
rule in statutory construction that where the words of a statute are clear,
plain and free from ambiguity, it must be given its literal meaning and
applied without attempted interpretation.
Same; Same; Court cannot look for or impose another meaning on the
term report or to construe it as synonymous with examination; It is
clear from the words used in Section 30 that RA 7653 no longer requires
that an examination be made before the Monetary Board (MB) can issue a
closure order.This Court cannot look for or impose another meaning on
the term report or to construe it as synonymous with examination.
From the words used in Section 30, it is clear that RA 7653 no longer
requires that an examination be made before the MB can issue a closure
order. We cannot make it a requirement in the absence of legal basis.
Same; Same; The purpose of the law is to make the closure of a bank
summary and expeditious in order to protect public interest; Prior notice
and hearing are no longer required before a bank can be closed.Using
the literal meaning of report does not lead to absurdity, contradiction or
injustice. Neither does it defeat the intent of the legislators. The purpose of
the law is to make the closure of a bank summary and expeditious in order
to protect public interest. This is also why prior notice and hearing are no
longer required before a bank can be closed.
PETITION for review on certiorari of the decision and resolution of the Court
of Appeals.
The facts are stated in the opinion of the Court.
156
Rural Bank of San Miguel, Inc. vs. Monetary Board, Bangko Sentral ng
Pilipinas
CORONA, J.:
5 Id., p. 6.
157
158
xxx
xxx
x x x"6
6 Id., p. 93.
7 Docketed as Civil Case No. 66-M-2000; id., p. 187.
Rural Bank of San Miguel, Inc. vs. Monetary Board, Bangko Sentral ng
Pilipinas
After a year, or on November 29, 1999, the LBP informed the BSP of the
termination of the clearing facility of RBSM to take effect on December 29,
1999, in view of the clearing problems of RBSM.
On December 28, 1999, the MB approved the release of P26.189 [million]
which is the last tranche of the P375 million emergency loan for the sole
purpose of servicing and meeting the withdrawals of its depositors. Of the
P26.180 million, x x x P12.6 million xxx was not used to service
withdrawals [and] remains unaccounted for as admitted by [RBSMs
Treasury Officer and Officer-in-Charge of Treasury]. Instead of servicing
withdrawals of depositors, RBSM paid Forcecollect Professional Solution,
Inc. and Surecollect Professional, Inc., entities which are owned and
controlled by Hilario P. Soriano and other RBSM officers.
On January 4, 2000, RBSM declared a bank holiday. RBSM and all of its 15
branches were closed from doing business. Alarmed and disturbed by the
unilateral declaration of bank holiday, [BSP] wanted to examine the books
and records of RBSM but encountered problems.
Meanwhile, on November 10, 1999, RBSMs designated comptroller, Ms.
Zenaida Cabais of the BSP, submitted to the Department of Rural Banks,
BSP, a Comptrollership Report on her findings on the financial condition
and operations of the bank as of October 31, 1999. Another set of findings
was submitted by said comptroller [and] this second report reflected the
financial status of RBSM as of December 31, 1999.
The findings of the comptroller on the financial state of RBSM as of October
31, 1999 in comparison with the financial condition as of December 31,
1999 is summed up pertinently as follows:
FINANCIAL CONDITION OF RBSM
Capital Infusion
P5,000,000.00
159
Total obligations/
VOL. 516, FEBRUARY 16, 2007
159
Liabilities
P1,076,863,000.00
Rural Bank of San Miguel, Inc. vs. Monetary Board, Bangko Sentral ng
Pilipinas
1,009,898,000.00
Realizable Assets
898,588,000.00
796,930,000.00
Deficit
178,275,000.00
212,968,000.00
Cash on Hand
101,441.547.00
8,266,450.00
Required Capital Infusion
P252,120,000.00
160
was issued. This case essentially boils down to one core issue: whether
Section 30 of RA 7653 (also known as the New Central Bank Act) and
applicable jurisprudence require a current and complete examination of the
bank before it can be closed and placed under receivership.
Section 30 of RA 7653 provides:
SECTION 30. Proceedings in Receivership and Liquidation.Whenever,
upon report of the head of the supervising or examining department, the
Monetary Board finds that a bank or quasi-bank:
(a) is unable to pay its liabilities as they become due in the ordinary course
of business: Provided, That this shall not include inability to pay caused by
extraordinary demands induced by financial panic in the banking
community;
(b) has insufficient realizable assets, as determined by the [BSP] to meet
its liabilities; or
(c) cannot continue in business without involving probable losses to its
depositors or creditors; or
_______________
14 Id., p. 172.
15 Rural Bank of Buhi, Inc. v. Court of Appeals, G.R. No. L61689, 20 June
1988, 162 SCRA 288, 303.
Resolution No. 966 directing PDIC to proceed with the liquidation of RBSM
under Section 30 of RA 7653.14
17 Id.
161
(d) has willfully violated a cease and desist order under Section 37 that has
become final, involving acts or transactions which amount to fraud or a
dissipation of the assets of the institution; in which cases, the Monetary
Board may summarily and without need for prior hearing forbid the
institution from doing business in the Philippines and designate the
Philippine Deposit Insurance Corporation as receiver of the banking
institution.
"x x x
xxx
xxx
The actions of the Monetary Board taken under this section or under
Section 29 of this Act shall be final and executory, and may not be
restrained or set aside by the court except on petition for certiorari on the
ground that the action taken was in excess of jurisdiction or with such
grave abuse of discretion as to amount to lack or excess of jurisdiction. The
petition for certiorari may only be filed by the stockholders of record
representing the majority of the capital stock within ten (10) days from
receipt by the board of directors of the institution of the order directing
receivership, liquidation or conservatorship." (Emphasis supplied)
xxx
xxx
xxx
xxx
xxx
162
SUPREME COURT REPORTS ANNOTATED
Rural Bank of San Miguel, Inc. vs. Monetary Board, Bangko Sentral ng
Pilipinas
xxx
xxx
xxx
20 Id., p. 794.
163
22 Supra note 15, at p. 302; and Central Bank of the Philippines v. Court of
Appeals, G.R. No. 76118, 30 March 1993, 220 SCRA 536, 548.
164
163
Rural Bank of San Miguel, Inc. vs. Monetary Board, Bangko Sentral ng
Pilipinas
164
Rural Bank of San Miguel, Inc. vs. Monetary Board, Bangko Sentral ng
Pilipinas
condition of the bank23 is necessary before the MB can order its closure.
xxx
xxx
xxx
27 Id.
24 National Food Authority (NFA) v. Masada Security Agency, Inc., G.R. No.
163448, 8 March 2005, 453 SCRA 70, 79; Philippine National Bank v.
Garcia, Jr., G.R. No. 141246, 9 September 2002, 388 SCRA 485, 487, 491.
28 Ursua v. Court of Appeals, G.R. No. 112170, 10 April 1996, 256 SCRA
147, 152, citations omitted.
166
SUPREME COURT REPORTS ANNOTATED
Rural Bank of San Miguel, Inc. vs. Monetary Board, Bangko Sentral ng
Pilipinas
dom dictates. The lawmakers could have easily retained the word
examination (and in the process also preserved the jurisprudence
attached to it) but they did not and instead opted to use the word report.
The insistence on an examination is not sanctioned by RA 7653 and we
would be guilty of judicial legislation were we to make it a requirement
when such is not supported by the language of the law.
What is being raised here as grave abuse of discretion on the part of the
respondents was the lack of an examination and not the supposed
arbitrariness with which the conclusions of the director of the Department
of Rural Banks Supervision and Examination Sector had been reached in
the report which became the basis of Resolution No. 105.
The absence of an examination before the closure of RBSM did not mean
that there was no basis for the closure order. Needless to say, the decision
of the MB and BSP, like any other administrative body, must have
something to support itself and its findings of fact must be supported by
substantial evidence. But it is clear under RA 7653 that the basis need not
arise from an examination as required in the old law.
We thus rule that the MB had sufficient basis to arrive at a sound
conclusion that there were grounds that would justify RBSMs closure. It
relied on the report of Mr. Domo-ong, the head of the supervising or
examining department, with the findings that: (1) RBSM was unable to pay
its liabilities as they became due in the ordinary course of business and (2)
that it could not continue in business without incurring probable losses to
its depositors and creditors.30 The report was a 50-page memorandum
detailing the facts supporting those grounds, an extensive chronology of
events revealing the
_______________
_______________
167
31
_______________
* FIRST DIVISION
289
Same; Disputed claims refer to all claims, whether they be against the
assets of the insolvent bank, for specific performance, breach of contract,
damages, or whatever.Disputed claims refer to all claims, whether they
be against the assets of the insolvent bank, for specific performance,
breach of contract, damages, or whatever. Petitioners claim which
involved the payment of the two cashiers checks that were not honored by
Prime Savings Bank due to its closure falls within the ambit of a claim
against the assets of the insolvent bank. The issuance of the cashiers
checks by Prime Savings Bank to the petitioner created a debtor/creditor
relationship between them. This disputed claim should therefore be lodged
in the liquidation proceedings by the petitioner as creditor, since the
closure of Prime Savings Bank has rendered all claims subsisting at that
time moot which can best be threshed out by the liquidation court and not
the regular courts.
Same; In Central Bank of the Philippines v. Dela Cruz, 191 SCRA 346
(1990), we held that the actions of the Monetary Board in proceedings on
insolvency are explicitly declared by the law to be final and executory
they may not be set aside, or restrained, or enjoined by the courts, except
upon convincing proof that the action is plainly arbitrary and made in bad
faith.In Central Bank of the Philippines v. De la Cruz, 191 SCRA 346
(1990), we held that the actions of the Monetary Board in proceedings on
insolvency are explicitly declared by law to be final and executory. They
may not
290
290
over general creditors in the assets of the bank issuing the check, when it
fails before payment of the check.
292
YNARES-SANTIAGO, J.:
This Petition for Review on Certiorari under Rule 45 of the Rules of Court
seeks a reversal of the Decision1 of the Court of Appeals dated February
23, 2005 in CA-G.R. CV No. 77556 which reversed and set aside the
Decision2 of the Regional Trial Court of Santiago City, Branch 35, in Civil
Case No. 35_______________
292
SUPREME COURT REPORTS ANNOTATED
Miranda vs. Philippine Deposit Insurance Corporation
Same; Section 31 of the New Central Bank Act which provides that [I]n
case of liquidation of a bank or quasi-bank, after payment of the cost of
proceedings, including reasonable expenses and fees of the receiver to be
allowed by the court, the receiver shall pay the debts of such institutions,
under order of the court, in accordance with the rules on concurrence and
preference of credit as provided in the Civil Code, should apply.In the
distribution of assets of Prime Savings Bank, Section 31 of the New Central
Bank Act which provides that [i]n case of liquidation of a bank or quasibank, after payment of the cost of proceedings, including reasonable
expenses and fees of the receiver to be allowed by the court, the receiver
shall pay the debts of such institution, under order of the court, in
accordance with the rules on concurrence and preference of credit as
provided in the Civil Code, should apply.
PETITION for review on certiorari of the decision and resolution of the Court
of Appeals.
293
Petitioner deposited the two checks into her account in another bank on
the same day, however, Bangko Sentral ng Pilipinas (BSP) suspended the
clearing privileges of Prime Savings Bank effective 2:00 p.m. of June 3,
1999. The two checks of petitioner were returned to her unpaid.5
On June 4, 1999, Prime Savings Bank declared a bank holiday. On January
7, 2000, the BSP placed Prime Savings Bank under the receivership of the
Philippine Deposit Insurance Corporation (PDIC).6
Petitioner filed a civil action for sum of money in the Regional Trial Court of
Santiago City, Isabela to recover the funds from her unpaid checks against
Prime Savings Bank, PDIC and the BSP. Judgment on the pleadings was
rendered on March 1, 2001, the dispositive portion of which reads:
WHEREFORE, judgment is rendered against defendants namely: Philippine
Deposit Insurance Corporation, Bangko Sentral ng Pilipinas and Prime
Bank, to pay jointly and solidarily the amount of P5,502,000.00 to the
plaintiff.
SO ORDERED.7
_______________
to the right of petitioner to file her claim before the court designated to
adjudicate on claims against Prime Savings Bank. The dispositive portion of
the appellate courts decision dated February 23, 2005 thus reads:
WHEREFORE, the appeal is GRANTED and the decision appealed from is
REVERSED and SET ASIDE and the case is DISMISSED, without prejudice to
the right of Miranda to file her claim before the court designated to
adjudicate on claims against Prime Savings Bank.
SO ORDERED.8
Petitioners motion for reconsideration was denied,9 hence, this petition.
The issues presented by the petitioner before this Court can be
summarized as follows: (1) Whether the two cashiers checks operate as an
assignment of funds in the hands of the petitioner; (2) Whether the claim
lodged by the petitioner is a disputed claim under Section 30 of Republic
Act (R.A.) No. 7653, otherwise known as the New Central Bank Act, and
therefore, under the jurisdiction of the liquidation court; and (3) Whether
the respondents are solidarily liable to the petitioner.
_______________
5 Id., at p. 39.
6 Id.
8 Id., at p. 67.
7 Id., at p. 37.
9 Id., at p. 70.
294
294
SUPREME COURT REPORTS ANNOTATED
295
On appeal, the Court of Appeals reversed the trial court and ruled in favor
of the PDIC and BSP, dismissing the case against them, without prejudice
Petitioner next argues that the present claim is not a disputed claim in
contemplation of Section 30 of the New Central Bank Act. Since disputed
claims refer to all claims, whether they be against the assets of the
insolvent bank, for specific performance, breach of contract, or damages, it
is manifest that petitioners claim cannot fall within the purview of a
disputed claim because she is recovering assigned funds which are
segregated monies of Prime Savings Bank.11
Petitioner further states that by the mere issuance of the cashiers check,
the funds represented by the check are transferred from the credit of the
maker to that of the payee or holder. Hence, petitioner alleges that she
cannot be placed on the same footing with the ordinary creditors of the
bank because Section 30 of R.A. No. 7653 is for equality among creditors.
She avers that she is not a creditor thus is entitled to the immediate
payment of her claim, pursuant to Section 189 of the Negotiable
Instruments Law and existing jurisprudence. She argues that putting her on
equal footing with ordinary creditors, would contravene the provisions of
the Negotiable Instruments Law and would greatly diminish her rights as a
holder in due course of said two cashiers checks.12
Petitioner also argues that respondents PDIC and BSP contrary to Sections
185 and 189 of the Negotiable Instruments Law have caused damage to
the petitioner and should be held solidarily liable by indemnifying the
petitioner for the value of the two cashiers checks.13
Respondents, on the other hand, state that the mere issuance of the
cashiers checks did not operate as assignment of funds in favor of the
petitioner. They argue that even prior to the issuance of the cashiers
checks, the bank was already cash-strapped, which negates petitioners
claim that there
_______________
11 Id., at p. 15.
12 Id., at p. 16.
13 Id., at pp. 17-18.
296
14 Id., at p. 110.
15 Id., at p. 57.
16 Id., at pp. 100-101.
17 Id., at p. 107.
296
18 Id., at p. 111.
297
298
298
297
Prime Savings Bank, is not liable on the said crossed cashiers checks.19
Disputed claims refer to all claims, whether they be against the assets of
the insolvent bank, for specific performance, breach of contract, damages,
or whatever.22 Petitioners claim which involved the payment of the two
cashiers checks that were not honored by Prime Savings Bank due to its
closure falls within the ambit of a claim against the assets of the insolvent
bank. The issuance of the cashiers checks by Prime Savings Bank to the
petitioner created a debtor/creditor relationship between them. This
disputed claim should therefore be lodged in the liquidation proceedings by
the petitioner as creditor, since the closure of Prime Savings Bank has
rendered all claims subsisting at that time moot which can best be
threshed out by the liquidation court and not the regular courts.
Anent the first issue, the two cashiers checks issued by Prime Savings
Bank do not constitute an assignment of funds in the hands of the
petitioner as there were no funds to speak of in the first place. The bank
was financially insolvent for sometime, even before the issuance of the
checks on June 3, 1999. As the Court of Appeals correctly ruled, the
issuance of the cashiers checks to petitioner did not constitute an
assignment of funds, of which there was practically none at the time these
were issued, as the bank was in dire financial straits for some time.20
As regards the second issue, the claim lodged by the petitioner qualifies as
a disputed claim subject to the jurisdiction of the liquidation court. Regular
courts do not have jurisdiction over actions filed by claimants against an
insolvent bank, unless there is a clear showing that the action taken by the
BSP, through the Monetary Board in the closure of financial institutions was
in excess of jurisdiction, or with grave abuse of discretion.
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. Police power, however, is subject to judicial
inquiry. It may not be exercised arbitrarily or unreasonably and could be
set aside if it is either capricious, discriminatory, whimsical, arbitrary,
unjust, or is tantamount to a denial of due process and equal protection
clauses of the Constitution.21
_______________
19 Id., at p. 59.
20 Rollo, p. 65.
21 Banco Filipino Savings and Mortgage Bank v. Monetary Board, Central
Bank of the Philippines, G.R. Nos. 70054, 68878, 77255-58, 78766, 78767,
78894, 81303, 81304, 90473, December 11, 1991, 204 SCRA 767, 798.
22 Ong v. Court of Appeals, 323 Phil. 126, 131; 253 SCRA 105, 109 (1996).
23 R.A. No. 7653, Secs. 30 and 31. See also Central Bank of the Philippines
v. Court of Appeals, G.R. No. 76118, March 30, 1993, 220 SCRA 536, 543.
24 G.R. No. 59957, November 12, 1990, 191 SCRA 346, 354.
299
299
300
300
SUPREME COURT REPORTS ANNOTATED
Miranda vs. Philippine Deposit Insurance Corporation
through the Monetary Board was well within its discretion to exercise this
power granted by law to issue a resolution suspending the interbank
clearing privileges of Prime Savings Bank, having made a factual
determination that the bank had deficient cash reserves deposited before
the BSP. There is no showing that the BSP abused this discretionary power
conferred upon it by law.
In addition, co-respondent PDIC was impleaded as a party-litigant only in
its representative capacity as the receiver/ liquidator of Prime Savings
Bank. Both BSP and PDIC cannot therefore be held directly and solidarily
liable for the payment of the two cashiers checks. Sole liability rests with
Prime Savings Bank.
In the absence of fraud, the purchase of a cashiers check, like the
purchase of a draft on a correspondent bank, creates the relation of
creditor and debtor, not that of principal and agent, with the result that the
purchaser or holder thereof is not entitled to a preference over general
creditors in the assets of the bank issuing the check, when it fails before
payment of the check. However, in a situation involving the element of
fraud, where a cashiers check is purchased from a bank at a time when it
is insolvent, as its officers know or are bound to know by the exercise of
reasonable diligence, it has been held that the purchase is entitled to a
preference in the assets of the bank on its liquidation before the check is
paid.27
As correctly found by the Court of Appeals:
Prime Savings as a bank did not collapse overnight but was hemorrhaging
and in financial extremis for some time, a fact which could not have gone
unnoticed by the bank officers. They could not
_______________
SO ORDERED.
Panganiban (C.J., Chairperson), Austria-Martinez, Callejo, Sr. and ChicoNazario, JJ., concur.
Petition denied, judgment and resolution affirmed with modification.
_______________
xxxx
27 11 Am. Jur. 2d, 1146, pp. 237-238 (1997).
301
28 Rollo, p. 41.
302
302
SUPREME COURT REPORTS ANNOTATED
Office of the President vs. Buenaobra
Note.Under Section 28-A of the Central Bank Act, the Monetary Board
may place a bank under the control of a conservator when it finds that the
bank is continuously unable or unwilling to maintain a condition of
solvency or liquidity. (Producers Bank of the Philippines vs. National Labor
Relations Commission, 355 SCRA 489 [2001])
o0o
Copyright 2011 Central Book Supply, Inc. All rights reserved. [Miranda
vs. Philippine Deposit Insurance Corporation, 501 SCRA 288(2006)]
* SECOND DIVISION
144
144
145
145
PROVIDENT had established six (6) extension offices within the greater
Manila area.
PROVIDENT has an authorized capital of P10 million, divided into 100,000
shares of common stock with a par value of P100.00 each. At the time of
its incorporation, 25% of the
146
146
SUPREME COURT REPORTS ANNOTATED
Central Bank vs. Court of Appeals
stock was subscribed and paid for by its incorporators. There were
subsequent subscriptions received so that by the end of 1967 the total
paid up capital of the bank amounted to P6.7 million out of the aggregate
P7.5 million subscribed shares of stock. The herein private respondents,
Isidro E. Fernandez and Jesus R. Jayme, are the majority and controlling
stockholders thereof, holding 41% and 22%, respectively, of the total
subscribed capital stock of the bank.
A major portion of PROVIDENT's loanable funds was granted to directors,
officers and stockholders and their related interests and the bank was
cautioned to avoid concentration of credits and to adopt a policy where
loans would be granted to a larger number of borrowers who had no
financial interest in the bank.1
148
2 Id., p. 317.
148
SUPREME COURT REPORTS ANNOTATED
Central Bank vs. Court of Appeals
4. That the Fernandez and Jayme group shall execute a voting trust
agreement in favor of the Iglesia Ni Kristo group to subsist only until the
amendment to the Articles of Incorporation shall have been registered with
the Securities and Exchange Commission; and
5. That the Iglesia Ni Kristo group shall not foreclose mortgages securing
loans of various borrowers until after four years, provided that the schedule
150
150
SUPREME COURT REPORTS ANNOTATED
Central Bank vs. Court of Appeals
Corporation group have not come up with concrete and substantial
proposals towards the rehabilitation of the Provident Savings Bank, which
proposals were required of them in the conference held in September of
1971; and in pursuance of Section 29 of Republic Act No. 265, decided as
follows:
" 'a) To forbid the Provident Savings Bank to do business in the Philippines;
b) To instruct the Superintendent of Banks to take charge, in the name of
the Monetary Board, of the assets of the Provident Savings Bank;
c) To instruct the Superintendent of Banks to take such further action as
may be necessary pursuant to Section 29 of Republic Act No. 265; and
d) To refer the subject memoranda of the Superintendent of Banks and all
pertinent reports of the examiners of the Department of Supervision and
Examination to the Central Bank Legal Counsel for appropriate legal
action(s).' "10
Pursuant thereto, the Central Bank instructed its Legal Counsel on
September 25, 1972:
"1) To request the Solicitor General to file, pursuant to the last paragraph
of Section 29 of Republic Act No. 265, a petition in the Court of First
Instance reciting the proceedings which have been taken and praying the
assistance and supervision of the court in the liquidation of the affairs of
the Provident Savings Bank; and
2) To take such other action as may be appropriate and legal to safeguard
the interests of the Bank's creditors."11
Consequently, on September 28, 1972, Fernandez and Jayme filed a
petition for certiorari, prohibition and mandamus and/or specific
performance, with preliminary injunction, against the Central Bank and
Eagle Broadcasting Corporation, with the Court of First Instance of Manila,
docketed therein as Sp. Proc. No. 88415, to annul and set aside the said
Monetary Board Resolution No. 1766, dated September 15, 1972 and to
restrain the Central Bank from liquidating PRO________________
152
SUPREME COURT REPORTS ANNOTATED
Central Bank vs. Court of Appeals
On December 11, 1972, the Central Bank filed a Petition for Assistance and
Supervision in Liquidation of the Provident Savings Bank with the Court of
First Instance of Manila, docketed therein as Sp. Proc. No. 89219, entitled:
"In re: Liquidation of the Provident Savings Bank; Central Bank of the
Philippines, petitioner."13
Upon motion, the two cases were heard jointly,14 and on February 20,
1974, judgment was rendered, as follows:
The Central Bank and the Eagle Broadcasting Corporation,16 and after
appropriate proceedings, the herein respondent Court of Appeals rendered
the disputed decision on January 22, 1979, the dispositive portion of which
reads, as follows:
WHEREFORE, the writs prayed for in the amended petition, except the writ
of mandamus, are hereby granted, and Resolution No. 1766 dated
September 15, 1972 of the Monetary Board of respondent Central Bank
as well as any and all resolutions issued in pursuance thereof, are hereby
annulled and set aside; and said respondent Central Bank is ordered to
desist from liquidating PROVIDENT and is ordered to specifically perform its
1. The petitioner claims that the respondent Court of Appeals erred in not
applying Presidential Decree No. 1007, dated September 22, 1976, which
amended Section 29 of Republic Act No. 265 during the pendency of the
appeal. and should have dismissed the petition of Fernandez and Jayme in
view of the findings of the said appellate court that there is no clear proof
of gross and evident bad faith on the part of the petitioner and the Eagle
Broadcasting Corporation. In support of its contention, the petitioner
invokes the case of Lucas Ramirez vs. The Hon. Court of Appeals, et al. 18
Indeed, the appellate court, in reviewing a judgment on appeal, should
dispose of a question according to the law prevailing at the time of such
disposition and not according to the law prevailing at the time of the
rendition of the appealed judgment. Accordingly, Section 29 of Republic Act
No. 265, as amended by Presidential Decree No. 1007, should be applied.
153
153
154
154
The petition filed, however, should not be dismissed for while there may
not be gross and evident bad faith on the part of the Central Bank and
Eagle Broadcasting Corporation to sustain the award of damages to
Fernandez and Jayme, as ordered by the trial court, the action of the
155
At any rate, the fact that the directors, officers, and stockholders of
PROVIDENT had been extended loans by the bank which may have caused
its insolvency, is of little importance since these loans were already known
to and taken into consideration by the Central Bank when it decided in
1968 to allow PROVIDENT to continue in business. In the case of Ramos vs.
Central Bank,22 the Court said:
"The CB excuses itself by pleading that the OBM officers had resorted to
non-recording of time deposits in the Bank's books and
________________
156
SUPREME COURT REPORTS ANNOTATED
Central Bank vs. Court of Appeals
doctrine of 'promissory estoppel' is by no means new, although the name
has been adopted only in comparatively recent years. According to that
doctrine, an estoppel may arise from the making of a promise, even
though without consideration, if it was intended that the promise should be
relied upon and in fact it was relied upon, and if a refusal to enforce it
would be virtually to sanction the perpetration of fraud or would result in
other injustice. In this respect, the reliance by the promisee is generally
evidenced by action or forbearance on his part, and the idea has been
expressed that such action of forbearance would reasonably have been
expected by the promissor. Mere omission by the promisee to do whatever
the promissor pro mised to do has been held insufficient 'forbearance' to
give rise to a promissory estoppel.' (19 Am. Jur. loc cit.)."
3. Finally, the petitioner claims that the Court of Appeals erred in not
appreciating certain facts, mainly PROVIDENT's anomalous grant of
substantial loans to its own directors, officers, stockholders, and related
interests, which caused its insolvency, thereby rendering the remedy of
liquidation proper and rehabilitation improper.
The contention is without merit. We believe that the judgment complained
of is based upon substantial evidence and that the trial court had not
overlooked, nor misinterpreted certain facts and circumstances of weight
in making its findings, so that the respondent appellate court did not
commit any error in affirming the said judgment. Besides, the issue of
whether or not certain alleged facts should be appreciated is a question of
fact, not properly cognizable on appeal, since it involves an examination of
the probative value of the evidence presented by the parties.
22 Supra.
157
SO ORDERED.
Barredo (Chairman), Fernandez,* Abad Santos and De Castro, JJ., concur.
Decision affirmed.
Notes.Where a suit for recovery of a bank deposit was filed after the
bank has been declared insolvent by the Central Bank, a judgment in favor
of the depositor cannot be considered a preferred credit under Article
2244(14) (b) of the Civil Code. (Central Bank of the Philippines vs. Morfe,
63 SCRA 114). .
In escheat proceedings for reversion of bank deposits dormant for ten
years or more to the State, it is the depositors and
________________
Estoppel has its origin in equity and, being based on moral and natural
justice, finds applicability wherever and whenever the special
circumstances of the case so demand. (Castrillo vs. Court of Appeals, 10
SCRA 549; Beronilla vs. GSIS, 36 SCRA 44).
Estoppel cannot give validity to an act that is prohibited by law or is
against public policy. (Republic vs. Go Bon Lee, 1 SCRA 1166).
The rule that a grantee is estopped to deny the title of his grantor is
correct only if limited to the property actually conveyed and to the time of
conveyance. (Iriola vs. Felices, 30 SCRA 203).
Appellant is in estoppel to question the juridical personality of appellee or
its right to sue him where he entered into a contract with appellee and
took advantage of the benefits derived therefrom. (Mendoza vs. Rodriguez
& Co., 23 SCRA 767).
The doctrine of estoppel does not apply against the Government suing in
its capacity as sovereign or asserting governmental rights. (Republic vs.
PLDT, 26 SCRA 620; Republic vs. Philippine Rabbit Bus Lines, 32 SCRA 211).
o0o
158
159
158
SUPREME COURT REPORTS ANNOTATED
Central Bank vs. Court of Appeals
creditors who are the real parties in interest and not the bank in which the
deposits were made. Consequently, only said depositors and creditors and
not the bank concerned can move for dismissal of the escheat proceedings
on the ground of improper venue. (Republic vs. Court of First Instance, 68
SCRA 231).
The Central Bank has no obligation to pay the deposit of a depositor made
in a bank found insolvent. (Serrano vs. Central Bank of the Philippines, 96
SCRA 96).
Claims to recovery of time deposits from a distressed bank and recovery of
damages not proper in actions for mandamus and prohibition but should
be ventilated in the Court of First Instance. (Serrano us. Central Bank of the
Philippines, 96 SCRA 96).
Copyright 2011 Central Book Supply, Inc. All rights reserved. [Central
Bank vs. Court of Appeals, 106 SCRA 143(1981)]
_______________
395
Villanueva vs. Court of Appeals
G.R. No. 114870. May 26, 1995.*
MIGUELA R. VILLANUEVA, RICHARD R. VILLANUEVA, and MERCEDITA
VILLANUEVA-TIRADOS, petitioners, vs. COURT OF APPEALS, CENTRAL BANK
OF THE PHILIPPINES, ILDEFONSO C. ONG, and PHILIPPINE VETERANS BANK,
respondents.
* FIRST DIVISION.
396
396
SUPREME COURT REPORTS ANNOTATED
1 Annex A of Petition; Rollo, 33-38. Per Francisco, R., J., with the
concurrence of Guingona, S., and Verzola, E., JJ.
2 Entitled, Ildefonso C. Ong vs. Central Bank of the Philippines, et al.
398
SUPREME COURT REPORTS ANNOTATED
4 Rollo, 34-36.
5 Exhibit J, Annex N of Petition; Id., 91.
6 Exhibit K, Annex O, Id.; Id., 92.
7 Exhibit N, Annex R, Id.; Id., 94.
8 Exhibits O & Q, Annexes S & U of Petition; Rollo, 95, 97.
9 Exhibit Q.
399
400
400
SUPREME COURT REPORTS ANNOTATED
Villanueva vs. Court of Appeals
amended her claim to include her children, herein petitioners Mercedita
Villanueva-Tirados and Richard Villanueva.17
On 31 October 1991, the trial court rendered judgment18 holding that
while the board resolution approving Ongs 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 said right was no longer enforceable, as he failed to
exercise it within the prescribed 15-day period. As to Miguelas claim, 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, 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.
Nevertheless, the trial court allowed her to purchase the lots if only to
restore their status as conjugal properties. It further held that by reason of
estoppel, the transactions having been perpetrated by a responsible officer
of the PVB, and for reasons of equity, the PVB should not be allowed to
charge interest on the price of the lots; hence, the purchase price should
be the PVBs claim as of 29 August 1984 when it considered the sealed
bids, i.e., P110,416.20, which should be borne by Miguela Villanueva alone.
The dispositive portion of the decision of the trial court reads as follows:
WHEREFORE, judgment is hereby rendered as follows:
1. Setting aside the order of this court issued on June 15, 1989 under the
caption Civil Case No. 87-42550 entitled Ildefonso Ong vs. Central Bank of
the Phils., et al.;
2. Dismissing the claim of Ildefonso Ong over the two parcels of land
originally covered by TCT No. 438073 and 366364 in the names of Miguela
Villanueva and Celestino Villanueva, respectively which are now covered by
TCT No. 115631 and 115632 in the name of the PVB;
_______________
17 OR, 20.
18 Id., 241 et seq.; Annex D of Petition; Rollo, 63-71. Per Judge Benjamin
A.G. Vega.
401
20 Rollo, 38.
402
4. Ordering the Register of Deeds of Makati which has jurisdiction over the
two parcels of land in question to re-instate in his land records, TCT No.
438073 in the name of Miguela Villanueva and TCT No. 366364 in the
name of Celestino Villanueva who were the registered owners thereof, and
to cancel all subsequent titles emanating therefrom; and
5. Ordering the Liquidator to reconvey the two lots described in TCT No.
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 (P110,416.20) Pesos without interest and less
the amount deposited by the claimant, Miguela Villanueva in connection
with the bidding where she had participated and conducted by the PVB on
August 29, 1984.
Cost against Ildefonso Ong and the PVB.
SO ORDERED.19
Only Ong appealed the decision to the Court of Appeals. The appeal was
docketed as CA-G.R. CV No. 35890. In its decision of 27 January 1994, the
Court of Appeals reversed the decision of the trial court and ruled as
follows:
402
SUPREME COURT REPORTS ANNOTATED
Villanueva vs. Court of Appeals
to reckon the 15-day period prescribed under its resolution. It went further
to suggest that the Central Bank was in estoppel because it accepted
Ongs late payment of the balance. As to the petitioners claim, the Court
of Appeals stated:
The conclusion reached by the lower court favorable to Miguela Villanueva
is, as aptly pointed out by plaintiff-appellant, indeed confusing. While the
lower courts 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 Sebastiana factual finding which We conform to and
which Miguela Villanueva does not controvert in this appeal by not filing
her appellees brief, yet it ordered the reconveyance of the disputed lots to
Miguela Villanueva as the victorious party upon her payment of
P110,416.20. Would not estoppel defeat the claim of the party estopped? If
so, which in fact must be so, 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
Subsequently, 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. It then prayed that it be
dropped from this case or at least be substituted by the PVB, which is the
real party in interest.25
In its Manifestation and Entry of Appearance, 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.26
The petitioners did not object to the
_______________
21 Rollo, 36.
22 Annex B of Petition; Id., 39 et seq.
23 Annex C, Id.; Id., 61-62.
24 Id., 7 et seq.
25 Rollo, 106-107, 129-130.
On the other hand, Ong submits that his offer, though lower than Miguela
Villanuevas bid by P417.00, is much better, as the same is payable in
cash, while Villanuevas bid is payable in installment; 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, there being no
notice yet of the approval of his offer; and that he has a legal right to
compel the PVB or its liquidator to execute the corresponding deed of
conveyance.
There is no doubt that the approval of Ongs offer constitutes an
acceptance, the effect of which is to perfect the contract of sale upon
notice thereof to Ong.29 The peculiar circumstances in this case, however,
pose a legal obstacle to his claim of a better right and deny support to the
conclusion of the Court of Appeals.
26 Id., 136-137.
Ong did not receive any notice of the approval of his offer. 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
403
_______________
403
28 Id., 149.
29 Article 1475, Civil Code. Valencia vs. RFC, 103 Phil. 444 [1958]; Central
Bank of the Philippines vs. Court of Appeals, 63 SCRA 431
substitution.27
Later, in its Comment dated 10 October 1994, the PVB stated that it
submits to and shall abide by whatever judgment this Honorable Supreme
[1975].
404
404
SUPREME COURT REPORTS ANNOTATED
Villanueva vs. Court of Appeals
came to know of the approval.
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,
illiquid, and could not operate profitably, and that its continuance in
business would involve probable loss to its depositors and creditors. The
PVB was then prohibited from doing business in the Philippines, and the
receiver appointed was directed 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.
Under Article 1323 of the Civil Code, an offer becomes ineffective upon the
death, civil interdiction, insanity, or insolvency of either party before
acceptance is conveyed. 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. The contract is
not yet perfected at any time before acceptance is conveyed; hence, the
disappearance of either party or his loss of capacity before perfection
prevents the contractual tie from being formed.30
It has been said that where upon the insolvency of a bank a receiver
therefor is appointed, 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.31 Thus, the
appointment of a receiver operates to suspend the authority of the bank
and of its directors and officers over its property and effects, such authority
being reposed in the receiver, and in this respect, the receivership is
equivalent to an injunction to restrain the bank officers from intermeddling
with the property of the bank in any way.32
Section 29 of the Central Bank Act, as amended, provides thus:
_______________
30 ARTURO M. TOLENTINO, Civil Code of the Philippines, vol. IV, 463 [1985
ed.], citing 2-I Ruggiero 283 and 5 Salvat 34-35.
31 10 Am Jur 2d Banks, 764 [1963].
32 65 Am Jur 2d Receivers, 146 [1963].
405
before the banks acceptance of the offer came to his knowledge. Hence,
the purported contract of sale between them did not reach the stage of
perfection. Corollarily, he cannot invoke the resolution of the bank
approving his bid as basis for his alleged right to buy the disputed
properties.
Nor may the acceptance by an employee of the PVB of Ongs payment of
P100,000.00 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. 10902-84 dated 11/13/84, subject to the approval of
CB liquidator.33
33 OR, 8.
406
_______________
406
407
_______________
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.
Considering then that only Ong appealed the decision of the trial court, the
PVB and the Central Bank, as well as the petitioners, are deemed to have
fully and unqualifiedly accepted the judgment, which thus became final as
to them for their failure to appeal.
WHEREFORE, the instant petition is GRANTED and the challenged decision
of the Court of Appeals of 27 January 1994 in CA-G.R. CV No. 35890 is
hereby SET ASIDE. The decision of Branch 39 of the Regional Trial Court of
Manila of 31 October 1991 in Civil Case No. 87-42550 and Sp. Proc. No. 8532311 is hereby REINSTATED.
407
A Central Bank Circular cannot repeal a law as it is only a law that can
repeal another law. (Palanca vs. Court of Appeals, 238 SCRA 593 [1994])
o0o
Copyright 2011 Central Book Supply, Inc. All rights reserved. [Villanueva
vs. Court of Appeals, 244 SCRA 395(1995)]
_______________
* THIRD DIVISION.
97
98
Abacus Real
Corporation
Estate
Development
Center,
Inc.
vs.
Manila
Banking
98
SUPREME COURT REPORTS ANNOTATED
Abacus Real
Corporation
Estate
Development
Center,
Inc.
vs.
Manila
Banking
is to administer the assets for the benefit of the creditors of the bank.
Thus, the appointment of a receiver operates to suspend the authority of
the bank and of its directors and officers over its property and effects, such
authority being reposed in the receiver, and in this respect, the
receivership is equivalent to an injunction to restrain the bank officers from
intermeddling with the property of the bank in any way. With respondent
bank having been already placed under receivership, its officers, inclusive
of its acting president, Vicente G. Puyat, were no longer authorized to
transact business in connection with the banks assets and property.
Clearly then, the exclusive option to purchase granted by Vicente G.
Puyat was and still is unenforceable against Manila Bank.
Same; Same; The receiver only has authority to administer the properties
of the bank for the benefit of the creditors.The receiver appointed by the
Central Bank to take charge of the properties of Manila Bank only had
authority to administer the same for the benefit of its creditors. Granting or
approving an exclusive option to purchase is not an act of administration,
but an act of strict ownership, involving, as it does, the disposition of
property of the bank. Not being an act of administration, the so-called
approval by Atty. Renan Santos amounts to no approval at all, a bank
receiver not being authorized to do so on his own.
PETITION for review on certiorari of the decision and resolution of the Court
of Appeals.
Thru this appeal by way of a petition for review on certiorari under Rule 45
of the Rules of Court, petitioner Abacus Real Estate Development Center,
Inc. seeks to set aside the following issuances of the Court of Appeals in
CA-G.R. CV No. 64877, to wit:
99
1 Penned by Associate Justice Lucas B. Bersamin, with Associate Justices
Ruben T. Reyes and Elvi John S. Asuncion, concurring.
VOL. 455, APRIL 6, 2005
99
100
Abacus Real
Corporation
Estate
Development
Center,
Inc.
vs.
Manila
Banking
100
SUPREME COURT REPORTS ANNOTATED
Abacus Real
Corporation
Estate
Development
Center,
Inc.
vs.
Manila
Banking
In the interim, Manila Banks then acting president, the late Vicente G.
Puyat, in a bid to save the banks investment, started scouting for possible
investors who could finance the completion of the building earlier
mentioned. On August 18, 1989, a group of investors, represented by
Calixto Y. Laureano (hereafter referred to as Laureano group), wrote
Vicente G. Puyat offering to lease the building for ten (10) years and to
advance the cost to complete the same, with the advanced cost to be
amortized and offset against rental payments during the term of the lease.
Likewise, the letter-offer stated that in consideration of advancing the
construction cost, the group wanted to be given the exclusive option to
purchase the building and the lot on which it was constructed.
On May 22, 1987, the Central Bank of the Philippines, now Bangko Sentral
ng Pilipinas, ordered the closure of Manila Bank and placed it under
receivership, with Feliciano Miranda, Jr. being initially appointed as
Receiver. The legality of the closure was contested by the bank before the
proper court.
In a letter dated August 30, 1989, Vicente G. Puyat accepted the Laureano
groups offer and granted it an exclusive option to purchase the lot and
building for One Hundred Fifty Million Pesos (P150,000,000.00). Later, or on
October 31, 1989, the building was leased to MEQCO for a period of ten
(10) years pursuant to a contract of lease bearing that date. On March 1,
1990, MEQCO subleased the property to petitioner Abacus Real Estate
Development Center, Inc. (Abacus, for short), a corporation formed by the
Laureano group for the purpose, under identical provisions as that of the
October 31, 1989 lease contract between Manila Bank and MEQCO.
Civil Case No. 96-1638 and raffled to Branch 59 of the court, plaintiff
Abacus prayed for a judgment ordering Manila Bank, inter alia, to sell,
transfer and convey unto it for P150,000,000.00 the land and building in
dispute free from all liens and encumbrances, plus payment of damages
and attorneys fees.
The Laureano group was, however, unable to finish the building due to the
economic crisis brought about by the failed December 1989 coup attempt.
On account thereof, the Laureano group offered its rights in Abacus and its
exclusive option to purchase to Benjamin Bitanga (Bitanga hereinafter),
for
In an Order dated April 15, 1996, the trial court granted the motion to
dismiss filed by the Estate of Vicente G. Puyat, but denied that of Manila
Bank and directed the latter to file its answer.
101
Before plaintiff Abacus could adduce evidence but after pre-trial, defendant
Manila Bank filed a Motion for Partial
_______________
101
Abacus Real
Corporation
Subsequently, defendant Manila Bank, followed a month later by its codefendant Estate of Vicente G. Puyat, filed separate motions to dismiss the
complaint.
102
Estate
Development
Center,
Inc.
vs.
Manila
Banking
102
SUPREME COURT REPORTS ANNOTATED
Abacus Real
Corporation
Estate
Development
Center,
Inc.
vs.
Manila
Banking
covered by TCT No. 132935 of the Makati Registry of Deeds, situated along
Sen. Gil J. Puyat Ave. in Makati City, at the price of One Hundred Fifty
Million (P150,000.000.00) Pesos in accordance with the said exclusive
option to purchase, and to execute the appropriate deed of sale therefor in
favor of plaintiff;
2. Ordering the defendant [Manila Bank] to pay plaintiff the amount of Two
Million (P2,000,000.00) Pesos representing reasonable attorneys fees;
3. Ordering the DISMISSAL of defendants counterclaim, for lack of merit;
and
4. With costs against the defendant.
SO ORDERED.
Its motion for reconsideration of the aforementioned decision having been
denied by the trial court in its Order of Au-gust 17, 1999,5 Manila Bank
then went on to the Court of Appeals whereat its appellate recourse was
docketed as CA-G.R. CV No. 64877.
As stated at the threshold hereof, the Court of Appeals, in a decision dated
May 26, 2003,6 reversed and set aside the appealed decision of the trial
court, thus:
_______________
The Decision dated May 27, 1999 of the Regional Trial Court of Makati City,
Branch 59 is REVERSED and SET ASIDE.
Cost of the appeal to be paid by the appellee.
SO ORDERED.
On June 25, 2003, Abacus filed a Motion for Reconsideration, followed, with
leave of court, by an Amended Motion for Reconsideration. Pending
resolution of its motion for reconsideration, as amended, Abacus filed a
Motion to Dismiss Appeal,7 therein praying for the dismissal of Manila
Banks appeal from the RTC decision of May 27, 1999, contending that said
appeal was filed out of time.
In its Resolution of February 17, 2004,8 the appellate court denied Abacus
aforementioned motion for reconsideration.
Hence, this recourse by petitioner Abacus Real Estate Development Center,
Inc.
As we see it, two (2) issues commend themselves for the resolution of the
Court, namely:
WHETHER OR NOT RESPONDENT BANKS APPEAL TO THE COURT OF
APPEALS WAS FILED ON TIME; and
WHETHER OR NOT PETITIONER ABACUS HAS ACQUIRED THE RIGHT TO
PURCHASE THE LOT AND BUILDING IN QUESTION.
_______________
VOL. 455, APRIL 6, 2005
7 Rollo, pp. 1102-1112.
103
Abacus Real
Corporation
Estate
Development
Center,
Inc.
vs.
Manila
Banking
104
105
Abacus Real
Corporation
Abacus Real
Corporation
Estate
Development
Center,
Inc.
vs.
Manila
Banking
Estate
Development
Center,
Inc.
vs.
Manila
Banking
Firstly, the file copy of the motion for reconsideration contains the written
annotations Registry Receipt No. 1633 Makati P.O. 7-6-99 in its page 13.
The presence of the annotations proves that the motion for reconsideration
was truly filed by registered mail on July 6, 1999 through registry receipt
no. 1633.
105
Fifthly, since the appellant received the denial of the motion for
reconsideration on August 23, 1999, it had until August 25, 1999 within
which to perfect its appeal from the decision of the RTC because 2 days
remained in its reglementary period to appeal. It is not
106
106
107
Abacus Real
Corporation
Estate
Development
Center,
Inc.
vs.
Manila
Banking
VOL. 455, APRIL 6, 2005
disputed that the appellant filed its notice of appeal and paid the appellate
court docket fees on August 25, 1999.
107
Abacus Real
Corporation
Puyat had no authority to act for and represent Manila Bank, the latter
having been placed under receivership by the Central Bank at the time of
the granting of the exclusive option to purchase.
Estate
Development
Center,
Inc.
vs.
Manila
Banking
Clearly, the receiver appointed by the Central Bank to take charge of the
properties of Manila Bank only had authority to administer the same for the
benefit of its creditors. Granting or approving an exclusive option to
purchase is not an act of administration, but an act of strict ownership,
involving, as it does, the disposition of property of the bank. Not being an
act
_______________
108
108
SUPREME COURT REPORTS ANNOTATED
Abacus Real
Corporation
powers necessary for these purposes including, but not limited to, bringing
suits and foreclosing mortgages in the name of the banking institution.
(Emphasis supplied)
Estate
Development
Center,
109
Inc.
vs.
Manila
Banking
Renan Santos, during a lunch meeting held with Benjamin Bitanga in March
1990.
Abacus Real
Corporation
For sure, Congress itself has recognized that a bank receiver only has
powers of administration. Section 30 of the New Central Bank Act15
expressly provides that [t]he receiver shall immediately gather and take
charge of all the assets and liabilities of the institution, administer the
same for the benefit of its creditors, and exercise the general powers of a
receiver under the Revised Rules of Court but shall not, with the exception
of administrative expenditures, pay or commit any act that will involve the
transfer or disposition of any asset of the institution . . .
Estate
Development
Center,
Inc.
vs.
Manila
Banking
Copyright 2011 Central Book Supply, Inc. All rights reserved. [Abacus
Real Estate Development Center, Inc. vs. Manila Banking Corporation, 455
SCRA 97(2005)]
SO ORDERED.
Panganiban (Chairman),
Morales, JJ., concur.
Sandoval-Gutierrez,
Corona
and
Carpio-
110
SUPREME COURT REPORTS ANNOTATED
Montebon vs. Tanglao-Dacanay
ing its possible destruction or dissipation, if it were left in the possession of
any of the parties. (Commodities Storage & Ice Plant Corporation vs. Court
of Appeals, 274 SCRA 439 [1997])
Receivership, which is admittedly a harsh remedy, should be granted with
extreme caution, such as when properties of a partnership are in danger of
being damaged or lost on account of certain acts of the appointed
manager in liquidation. (Sy vs. Court of Appeals, 313 SCRA 328 [1999])
o0o
752
SUPREME COURT REPORTS ANNOTATED
Manalo vs. Court of Appeals
G.R. No. 141297. October 8, 2001.*
DOMINGO R. MANALO, petitioner, vs. COURT OF APPEALS (Special Twelfth
Division) and PAIC SAVINGS AND MORTGAGE BANK, respondents.
Banks and Banking; Insolvency; Liquidation Court; Jurisdiction; The
exclusive jurisdiction of the liquidation court pertains only to the
adjudication of claims against the bankit does not cover the reverse
situation where it is the bank which files a claim against another person or
legal entity.Petitioner apparently failed to appreciate the correct meaning
and import of the above-quoted law. The legal provision only finds
operation in cases where there are claims against an insolvent bank. In
fine, the exclusive jurisdiction of the liquidation court pertains only to the
adjudication of claims against the bank. It does not cover the reverse
situation where it is the bank which files a claim against another person or
legal entity.
Same; Same; Same; Same; The requirement that all claims against the
bank under liquidation be pursued in the liquidation proceedings filed by
the Central Bank is intended to prevent multiplicity of actions against the
insolvent bank and designed to establish due process and orderliness in
the liquidation of the bank.This interpretation of Section 29 becomes
more obvious in the light of its intent. The requirement that all claims
against the bank be pursued in the liquidation proceedings filed by the
Central Bank is intended to prevent multiplicity of actions against the
insolvent bank and designed to establish due process and orderliness in
the liquidation of the bank, to obviate the proliferation of litigations and to
avoid injustice and arbitrariness. The lawmaking body contemplated that
for convenience, only one court, if possible, should pass upon the claims
against the insolvent bank and that the liquidation court should assist the
Superintendents of Banks and regulate his operations.
Same; Foreclosure of Mortgage; Writs of Possession; Jurisdiction; Act 3135,
entitled An Act to Regulate the Sale of Property Under Special Powers
Inserted In or Annexed To Real Estate Mortgages, mandates that
jurisdiction over a Petition for Writ of Possession lies with the court of the
province, city, or municipality where the property subject thereof is
situated.To be sure, the liquidator took the proper course of action when
it applied for a writ in the Pasay City RTC. Act 3135, entitled An Act to
Regulate the Sale of Property Under Special Powers Inserted In or Annexed
To Real
______________
* FIRST DIVISION.
753
754
SUPREME COURT REPORTS ANNOTATED
Manalo vs. Court of Appeals
antecedent of the issue involved therein, and the cognizance of which
pertains to another tribunal.A prejudicial question is one which arises in a
case the resolution of which is a logical antecedent of the issue involved
therein, and the cognizance of which pertains to another tribunal. It
generally comes into play in a situation where a civil action and a criminal
action are both pending and there exists in the former an issue which must
be preemptively resolved before the criminal action may proceed, because
howsoever the issue raised in the civil action is resolved would be
determinative juris et de jure of the guilt or innocence of the accused in
the criminal case. The rationale behind the principle of prejudicial question
is to avoid two conflicting decisions.
Same; Same; A case where the issue is whether the purchaser in the
extrajudicial foreclosure proceedings, may be compelled to have the
property repurchased or resold to the mortgagors successor-in-interest
can proceed separately and take its own direction independent of another
case where the issue is whether the purchaser in the extrajudicial
foreclosure proceedings, is entitled to a writ of possession after the
statutory period for redemption has expired.At any rate, it taxes our
imagination why the questions raised in Case No. 98-0868 must be
considered determinative of Case No. 9011. The basic issue in the former is
whether the respondent, as the purchaser in the extrajudicial foreclosure
proceedings, may be compelled to have the property repurchased or resold
to a mortgagors successor-in-interest (petitioner); while that in the latter is
merely whether the respondent, as the purchaser in the extrajudicial
foreclosure proceedings, is entitled to a writ of possession after the
statutory period for redemption has expired. The two cases, assuming both
are pending, can proceed separately and take their own direction
independent of each other.
Same; Intervention; Words and Phrases; Intervention is a remedy by which
a third party, not originally impleaded in the proceedings, becomes a
litigant therein to enable him to protect or preserve a right or interest
which may be affected by such proceeding.Intervention is a remedy by
which a third party, not originally impleaded in the proceeding, becomes a
litigant therein to enable him to protect or preserve a right or interest
which may be affected by such proceeding. The pertinent provision is
Sales; It is axiomatic that one can not transmit what one does not have.
Being herself bereft of valid title and rights, Vargas can not legitimately
convey any to some other person. She could not have lawfully sold the
land to Angsico nor leased it to petitioner for her own account. It is
axiomatic that one can not transmit what one does not have. It ought to
follow that petitioner could not have acquired any right or interest from
Vargas.
PETITION for review on certiorari of a decision of the Court of Appeals.
756
SUPREME COURT REPORTS ANNOTATED
Manalo vs. Court of Appeals
of the Order is in essence a rendition of judgment within the purview of
Section 2, Rule 19.
Same; Same; Same; Same; After the consolidation of title in the buyers
name, for failure of the mortgagor to redeem, the writ of possession
becomes a matter of rightits issuance to a purchaser in an extrajudicial
foreclosure is merely a ministerial function.Allowing petitioner to
intervene, furthermore, will serve no other purpose but to unduly delay the
execution of the writ, to the prejudice of the respondent. This cannot be
countenanced considering that after the consolidation of title in the buyers
name, for failure of the mortgagor to redeem, the writ of possession
becomes a matter of right. Its issuance to a purchaser in an extrajudicial
foreclosure is merely a ministerial function. As such, the court neither
exercises its official discretion nor judgment. If only to stress the writs
ministerial character, we have, in previous cases, disallowed injunction to
prohibit its issuance, just as we have held that issuance of the same may
not be stayed by a pending action for annulment of mortgage or the
foreclosure itself.
This petition for certiorari seeks the review of the Decision of the Court of
Appeals in C A.-G.R. SP No. 50341 promulgated December 23, 1999, which
affirmed an Order issued by the Regional Trial Court, Branch 112, Pasay
City, in Civil Case No. 9011 dated December 9, 1998.
757
6 Rollo, p. 132.
7 Decision, CA-G.R. No. 44391, Annex 4, Comment; Rollo, pp 204-210.
8 Resolution, G.R. No. 130747, Annex 5, Comment; Rollo, p. 211.
758
SUPREME COURT REPORTS ANNOTATED
Manalo vs. Court of Appeals
759
11 Ibid.
12 Deed of Assignment and Transfer of Rights, Rollo, p. 136.
13 Order, Annex D, Petition; Rollo, p. 45.
760
760
SUPREME COURT REPORTS ANNOTATED
Manalo vs. Court of Appeals
0868 before another branch17 of the Pasay City RTC to compel PAIC Bank
to allow him to repurchase the subject property.
On October 7, 1998, the court a quo denied the Motion to Quash and
Motion to Intervene filed respectively by Vargas and petitioner.18 A Motion
for Reconsideration and a Supplemental Motion for Reconsideration were
filed by the petitioner which, however, were similarly denied on December
9, 1998.
Petitioner then sought relief with the Court of Appeals, filing therein a
Petition for Certiorari. While this was awaiting resolution, he entered into
another lease agreement,19 this time with the respondent, represented by
its liquidator, over the same 450 sq. m. portion of the lot. The contract
fixed a period of one month beginning January 28, 1999, renewable for
another month at the exclusive option of the lessor, respondent PAIC Bank.
On December 23, 1999, the appellate court rendered the impugned
Decision, dismissing the petition, thus:
All told, WE find the Order, subject of the instant Petition for Certiorari and
Prohibition, to be not without rational bases and we observe that the court
a quo, in issuing its questioned Order, committed no grave abuse of
discretion amounting to lack of jurisdiction.
WHEREFORE, the Petition for Certiorari and Prohibition is hereby
DISMISSED and the assailed December 9, 1998 Order is AFFIRMED in all
respects.
SO ORDERED.20
Hence, this appeal, where petitioner raises and argues the following legal
issues:
I. Whether or not public respondent acted without or in excess of its
jurisdiction and/or was patently in error when it affirmed the denial of
petitioners motion for intervention, despite the fact that he has a legal
interest, being a lessee and an assignee of the property subject matter of
this case.
_______________
17 Branch 231.
I.
________________
762
SUPREME COURT REPORTS ANNOTATED
Manalo vs. Court of Appeals
763
_______________
28 Act 3135.
_______________
764
764
SUPREME COURT REPORTS ANNOTATED
Manalo vs. Court of Appeals
as where the elements of litis pendentia are present or where a final
judgment in one case will amount to res judicata in the other.30 Inasmuch
as the case at bar is the only one filed by the respondent for the issuance
of a writ of possession over the subject property, there is no occasion for
the doctrine to apply.
The argument is devoid of merit. A bank which had been ordered closed by
the monetary board retains its juridical personality which can sue and be
sued through its liquidator. The only limitation being that the prosecution
or defense of the action must be done through the liquidator.31 Otherwise,
no suit for or against an insolvent entity would prosper. In such situation,
banks in liquidation would lose what justly belongs to them through a mere
technicanty.32
II.
That the law allows a bank under liquidation to participate in an action can
be clearly inferred from the third paragraph of the same Section 29 of The
Central Bank Act earlier quoted, which authorizes or empowers a liquidator
to institute actions, thus:
x x x and he (liquidator) may in the name of the bank or non-bank
financial intermediary performing quasi-banking functions and with the
765
Manalo vs. Court of Appeals
action are both pending and there exists in the former an issue which must
be preemptively resolved before the criminal action may proceed, because
howsoever the issue raised in the civil action is resolved would be
determinative juris et de jure of the guilt or innocence of the accused in
the criminal case. The rationale behind the principle of prejudicial question
is to avoid two conflicting decisions.35
Here, aside from the fact that Civil Case No. 98-0868 and the present one
are both civil in nature and therefore no prejudicial question can arise from
the existence of the two actions,36 it is apparent that the former action
was instituted merely to frustrate the Courts ruling in the case at bar
granting the respondent the right to possess the subject property. It is but
a canny and preemptive maneuver on the part of the petitioner to delay, if
not prevent, the execution of a judgment adverse to his interests. It bears
stressing that the complaint for mandamus was filed only on May 7, 1998,
sixteen days after the lower court granted respondents petition and
thirteen days after it issued the writ. It cannot then possibly prejudice a
decided case.
_______________
writ of possession after the statutory period for redemption has expired.
The two cases, assuming both are pending, can proceed separately and
take their own direction independent of each other.
III.
Having disposed of the jurisdictional and procedural issues, we now come
to the merits of the case. Petitioner seeks intervention in this case by
virtue of the lease agreement and the deed of assignment executed in his
favor by the mortgagor (Vargas) and an alleged buyer (Angsico) of the
land, respectively. He posits that as a lessee and assignee in possession of
the foreclosed real estate, he automatically acquires interest over the
subject matter of the litigation. This interest is coupled with the fact that
he introduced improvements thereon, consisting of a one-storey building
which houses a karaoke-music restaurant, allegedly to the tune of fifteen
million pesos (P15,000,000.00). Enforcing the writ, he adds, without
hearing his side would be an injustice to him.
Intervention is a remedy by which a third party, not originally impleaded in
the proceeding, becomes a litigant therein to enable him to protect or
preserve a right or interest which may be affected by such proceeding.37
The pertinent provision is stated in Section 1, Rule 19 of the 1997 Rules of
Civil Procedure, thus:
Section 1. Who may intervene.A person who has a legal interest in the
matter in litigation, or in the success of either of the parties, or an interest
against both, or is so situated as to be adversely affected by a distribution
or other disposition of property in the custody of the court or
766
_______________
766
35 Ibid.
767
768
The period within which a person may intervene is also restricted. Section
2, Rule 19 of the 1997 Rules of Civil Procedure requires:
Section 2. Time to intervene.The motion to intervene may be filed at
any time before the rendition of judgment by the trial court, x x x
After the lapse of this period, it will not be warranted anymore. This is
because, basically, intervention is not an independent action but is
ancillary and supplemental to an existing litigation.43
_______________
768
_______________
44 Tarnate v. CA, 241 SCRA 254 (1995).
45 Vaca v. CA, 234 SCRA 146 (1994).
769
770
770
SUPREME COURT REPORTS ANNOTATED
Manalo vs. Court of Appeals
does not have.52 It ought to follow that petitioner could not have acquired
any right or interest from Vargas.
Withal, all is not lost for the petitioner. He can still fully protect his rights in
Civil Case No. 98-0868 or the complaint for mandamus he filed before
Branch 231 of the Pasay City RTC. There, he can ventilate his side to a
fuller extent as that would be the more appropriate venue for elucidating
whatever legal basis he alleges in compelling the respondent to sell to him
the currently disputed land.
IV.
This brings us to petitioners final point. He briefly asserts that his act of
entering into a lease contract with the respondent should not affect his
right to redeem the subject property.
The possible legal implication of the lease on the petitioners act of trying
to redeem the disputed lot is a question which, in our opinion, can best be
resolved in the mandamus complaint. Whether the agreement must be
52 See also Mathay v. CA, 295 SCRA 556 (1998), which held that [n]o one
can transfer a greater right to another than he himself has.
771
Copyright 2011 Central Book Supply, Inc. All rights reserved. [Manalo vs.
Court of Appeals, 366 SCRA 752(2001)]
* FIRST DIVISION.
355
354
SUPREME COURT REPORTS ANNOTATED
Aguilar vs. Manila Banking Corporation
G.R. No. 157911. September 19, 2006.*
SPOUSES MANUEL A. AGUILAR and YOLANDA C. AGUILAR, petitioners, vs.
THE MANILA BANKING CORPORATION, respondent.
Actions; Certiorari; Motions for Reconsideration; The filing of a motion for
reconsideration is a condition sine qua non to the institution of a special
civil action for certiorari.Prefatorily, the Court notes that the petition for
certiorari before the CA should have been dismissed outright since
petitioners failed to file a motion for reconsideration from the RTC Omnibus
Order dated May 24, 2002. Section 1 of Rule 65 of the 1997 Rules of Civil
Procedure provides: SECTION 1. Petition for certiorari.When any tribunal,
petition in the proper court, alleging the facts with certainty and praying
that judgment be rendered annulling or modifying the proceedings of such
tribunal, board or officer, and granting such incidental reliefs as law and
justice may require. . . . (Emphasis supplied) The plain and adequate
remedy referred to in the rule is a motion for reconsideration of the
assailed decision or order. The purpose for this requirement is to grant an
opportunity for the court or agency to correct any actual or perceived error
attributed to it by the re-examination of the legal and factual
circumstances of the case without the intervention of a higher court. Thus,
the filing of a motion for reconsideration is a condition sine qua non to the
institution of a special civil action for certiorari.
Same; Same; Same; Exceptions.While jurisprudence has recognized
several exceptions to the rule, such as: (a) where the order is a patent
nullity, as where the court a quo has no jurisdiction; (b) where the
questions raised in the certiorari proceedings have been duly raised and
passed upon by the lower court, or are the same as those raised and
passed upon in the lower court; (c) where there is an urgent necessity for
the resolution of the question and any further delay would prejudice the
interests of the Government or of the petitioner or the subject matter of
the action is perishable; (d) where, under the circumstances, a motion for
reconsideration would be useless; (e) where petitioner was deprived of due
process and there is extreme urgency for relief; (f) where, in a criminal
case, relief from an order of arrest is urgent and the granting of such relief
by the trial court is improbable; (g) where the proceedings in the lower
court are a nullity for lack of due process; (h) where the proceedings was
ex parte or in which the petitioner had no opportunity to object; and (i)
where the issue raised is one purely of law or where public interest is
involved, none of these exceptions apply here.
Same; Same; Same; Certiorari cannot be resorted to as a shield from the
adverse consequences of petitioners own omission to file the required
motion for reconsideration.The petitioners not only failed to explain their
failure to file a motion for reconsideration before the RTC, they also failed
to show sufficient justification for dispensing with the requirement. A
motion for reconsideration is not only expected to be but would actually
have provided an adequate and more speedy remedy than the petition for
certiorari. Certiorari cannot be
356
dismissed their petition for review on certiorari for violation of the rule on
hierarchy of courts and for failure to show special and important reasons or
exceptional and compelling circumstances that justify a disregard of the
rule. This Courts Resolution became final and executory on January 16,
2001. Thus, petitioners are bound thereby. The question of prescription has
been settled with finality and may no longer be resurrected by petitioners.
It is not subject to review or reversal in any court, even this Court.
Same; Motions for Reconsideration; Res Judicata; Law of the case does not
have the finality of the doctrine of res judicata, and applies only to that one
case, whereas res judicata forecloses parties or privies in one case by what
has been done in another case.The CA failed to consider this principle of
law of the case, which is totally different from the concept of res judicata.
In Padillo v. Court of Appeals, 371 SCRA 27 (2001), the Court distinguished
the two as follows: x x x Law of the case does not have the finality of the
doctrine of res judicata, and applies only to that one case, whereas res
357
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SUPREME COURT REPORTS ANNOTATED
357
Same; Same; Same; Words and Phrases; The principle of law of the case
means that whatever is once irrevocably established as the controlling
legal rule or decision between the same parties in the same case continues
to be the law of the case, whether correct on general principles or not, so
long as the facts on which such decision was predicated continue to be the
facts of the case before the court.Petitioners are barred from raising the
issue on the prescription of execution of the decision by mere motion
under the principle of the law of the case, which is the practice of courts
in refusing to reopen what has been decided. It means that whatever is
once irrevocably established as the controlling legal rule or decision
between the same parties in the same case continues to be the law of the
case, whether correct on general principles or not, so long as the facts on
which such decision was predicated continue to be the facts of the case
before the court. The law of the case on the issue of prescription of the
execution of the decision by mere motion or applicability of Section 6, Rule
39 of the Rules of Court has been settled in the Order dated March 20,
2000 of RTC Branch 165. Upon denial of petitioners motion for
reconsideration, they erroneously sought review with this Court which
judicata forecloses parties or privies in one case by what has been done in
another case. In the 1975 case of Comilang v. Court of Appeals (Fifth
Division.), a further distinction was made in this manner: The doctrine of
law of the case is akin to that of former adjudication, but is more limited in
its application. It relates entirely to questions of law, and is confined in its
operation to subsequent proceedings in the same case. The doctrine of res
judicata differs therefrom in that it is applicable to the conclusive
determination of issues of fact, although it may include questions of law,
and although it may apply to collateral proceedings in the same action or
general proceeding, it is generally concerned with the effect of an
adjudication in a wholly independent proceeding.
Same; Certiorari; Res Judicata; Res judicata or bar by prior judgment is a
doctrine which holds that a matter that has been adjudicated by a court of
competent jurisdiction must be deemed to have been finally and
conclusively settled if it arises in any subsequent litigation between the
same parties and for the same cause.To elucidate further, res judicata or
bar by prior judgment is a doctrine which holds that a matter that has been
adjudicated by a court of competent jurisdiction must be deemed to have
358
Motion with the same RTC Branch 165. However, they moved for the
inhibition of the presiding judge hearing the issue not only once, but twice,
both motions granted in their favor and the case was successively raffled
and assigned to two different branches of RTC Pasig, first to Branch 268
and then to Branch 167, which ruled against petitioners. Through the
motions for inhibition of the presiding judges and the assignment of the
case to different branches of the same court, petitioners sought to obtain
from one branch a ruling more favorable than the ruling of another branch.
They deliberately sought a friendly branch of the same court to grant them
the relief that they wanted, despite the finality of the resolution of one
branch on the matter. This is a permutation of forum shopping. It trifles
with the courts, abuses their processes, degrades the administration of
justice, and congests court dockets. Be it remembered that the grave evil
sought to be avoided by the rules against forum shopping is the rendition
by two competent tribunals of two separate, and contradictory decisions.
Unscrupulous party-litigants, taking advantage of a variety of competent
tribunals, may repeatedly try their luck in several different fora until a
favorable result is reached. This would make a complete mockery of the
judicial system.
Same; Pleadings and Practice; To consider an argument raised belatedly in
a pleading filed in the appellate court, especially in the executory stage of
the proceedings, would amount to trampling on the basic principles of fair
play, justice and due process.Petitioners are
359
opening that which has previously been decided. Both doctrines share the
policy consideration of putting an end to litigation. Thus, the principle of
forum shopping should apply by analogy to a case involving the principle
of law of the case.
359
Same; Same; The act of the petitioners of filing motions for inhibition of the
presiding judges and the assignment of the case to different branches of
the same court, seeking to obtain from one branch a ruling more favorable
than the ruling of another branch, deliberately seeking a friendly branch of
the same court to grant them the relief that they wanted, despite the
finality of the resolution of one branch on the matter, is a permutation of
forum shopping.Petitioners first raised before RTC Branch 165 the issue
of prescription of the execution of the decision by mere motion. Said RTC
Branch 165 ruled against petitioners and the courts order thereon became
final and executory. Petitioners raised the issue again in an Omnibus
collect debts owing to the bank, which debts form part of the assets of the
bank.It would be absurd to adopt petitioners position that they are not
obliged to pay interest on their obligation when respondent was placed
under receivership. When a bank is placed under receivership, it would
only not be able to do new business, that is, to grant new loans or to
accept new deposits. However, the receiver of the bank is in fact obliged to
collect debts owing to the bank, which debts form part of the assets of the
bank. Thus, petitioners obligation to pay interest subsists even when
respondent was placed under receivership. The respondents receivership
is an extraneous circumstance and has no effect on petitioners obligation.
Actions; Where a party did not pursue an issue after his motion was
denied, nor raise the same in his petition for review, he is deemed to have
abandoned his claim and he cannot be allowed to revive the issue as it is
offensive to basic rules of fair play, justice and due process.On the claim
of novation, petitioners raised it for the first time before RTC Branch 165 in
their Ex Parte Motion to Recall the Courts Order dated December 5, 1991
but they did not pursue the matter after their ex parte motion was denied.
They did not raise said issue in their motion for reconsideration or in their
first petition for review on certiorari with this Court in G.R. No. 144719.
Thus, they are deemed to have abandoned their claim of novation. They
cannot be allowed to revive the issue as it is offensive to basic rules of fair
play, justice and due process.
Novation; The established rule is that novation is never presumedit must
be clearly and unequivocally shown.The Court cannot see how novation
can take place considering that the surrounding circumstances negate the
same. The established rule is
360
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SUPREME COURT REPORTS ANNOTATED
lawyer must resist the whims and caprices of his client, and temper his
clients propensity to litigate. A lawyers oath to uphold the cause of justice
is superior to his duty to his client; its primacy is indisputable.
Same; Unjustified delay in the enforcement of a judgment sets at naught
the role of courts in disposing justiciable controversies with finality.Verily,
by the undue delay in the execution of a final judgment in their favor,
respondents have suffered an injustice. The Court views with disfavor the
unjustified delay in the enforcement of the final decision and orders in the
present case. Once a judgment becomes final and executory, the
prevailing party should not be denied the fruits of his victory by some
subterfuge devised by the losing party. Unjustified delay in the
enforcement of a judgment sets at naught the role of courts in disposing
justiciable controversies with finality.
PETITION for review on certiorari of the decision and resolution of the Court
of Appeals.
The sad and lamentable spectacle that this case presents, that is, the
execution of a final and executory decision forestalled by perpetual dilatory
tactics employed by a litigant, makes a blatant mockery of justice. The
Court cannot countenance, and in fact, condemns, the outrageous abuse of
the judicial process by Spouses Manuel A. Aguilar and Yolanda C. Aguilar
(petitioners) and their counsel.
Before the Court is a Petition for Review on Certiorari under Rule 45 of the
1997 Rules of Civil Procedure assailing the
362
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SUPREME COURT REPORTS ANNOTATED
3 Id., at p. 44.
363
5 Id., at p. 49.
6 Id., at p. 52.
7 Id., at p. 53.
363
8 Id.
364
4 Id., at p. 40.
364
SUPREME COURT REPORTS ANNOTATED
Aguilar vs. Manila Banking Corporation
January 24, 1990, RTC Branch 165 issued an Order granting the motion and
holding in abeyance the enforcement of the writ of execution until July 31,
1990.9 However, no settlement was reached by the parties during the
period.
One year and four months later, petitioners still failed to settle their
judgment debt. Consequently, respondent filed on December 2, 1991 a
Manifestation reiterating its motion for the issuance of a writ of
execution.10 On December 5, 1991, RTC Branch 165 issued an Order
granting the manifestation and directing the issuance of a writ of execution
to enforce the Decision dated January 30, 1987.11
To evade the implementation of the writ, petitioners filed on December 20,
1991 an Ex Parte Motion to Recall the Courts Order dated December 5,
1991 claiming that their obligation was novated by the Letter dated June 7,
1991 from respondents Statutory Receiver.12 In said letter, respondents
Statutory Receiver approved the purchase of the property on installment
basis over a three-year period at an interest rate of twelve per cent (12%)
with P481,265.00 due on September 30, 1991, P481,265.00 due on
September 30, 1992, and P724,064.79 due on September 30, 1993.13
On December 2, 1992, respondent filed a Manifestation and Motion for
Issuance of Alias Writ of Execution manifesting that the Letter dated June
7, 1991 did not novate the Decision dated January 30, 1987 but was a
mere accommodation of the petitioners request for a liberal mode of
payment of their account and petitioners still failed to comply with such
approved mode of payment.14
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10 Id., at p. 56.
several extensions of time to pay their account, filed dilatory motions and
pleadings and it would be a blatant injustice to allow them to profit from
the delays they deliberately caused to escape completely and absolutely
the satisfaction of their admitted and confessed obligation by sheer literal
adherence to technicality.18
11 Id., at p. 58.
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9 Id., at p. 55.
12 Id., at p. 59.
13 Id., at p. 61.
15 Id., at p. 246.
14 Id., at p. 240.
16 Id., at p. 62.
365
17 Id., at p. 72.
18 Id., at p. 68.
366
365
Aguilar vs. Manila Banking Corporation
366
Since the Resolution in G.R. No. 144719 became final and executory on
January 16, 2001, RTC Branch 165 issued a writ of execution on February
19, 2001 to enforce the Decision dated January 30, 1987.26 On February
23, 2001, the Sheriff issued a Notice for Compliance of the said writ.27
Undaunted by their previous setbacks, petitioners filed on March 6, 2001 in
RTC Branch 165 an Omnibus Motion to
_______________
19 Id., at p. 99.
20 Id., at p. 102.
21 Id., at p. 104.
On September 17, 2001 and January 4, 2002, respondent filed two Motions
to Resolve Pending Incidents.35 Despite the fact that Judge Manalastas has
not actively participated in the case since she has not acted on the
pending incidents,
24 CA Rollo, p. 106.
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22 Id., at p. 105.
25 Id., at p. 107.
26 Id., at p. 77.
28 Id., at p. 82.
27 Id., at p. 79.
29 Id., at p. 359.
367
30 Id., at p. 108.
31 Id., at p. 134.
32 Id., at p. 136.
367
33 Id., at p. 140.
34 Id., at p. 148.
On March 14, 2001, respondent filed an Ex Parte Motion for Order to Divest
Plaintiffs Title and to Direct the Register of Deeds to Transfer Title to
368
368
41 Id., at p. 426.
369
On March 22 and 26, 2002, both parties filed separate Urgent Motions to
Resolve the case.39 Subsequently, petitioners filed a Manifestation and
Motion that the Letter dated June 7, 1991 be marked as their exhibit.40
RTC Branch 167 in its Order dated April 30, 2002 admitted the exhibit over
the objections of respondent.41
On May 24, 2002, RTC Branch 167 rendered its Omnibus Order denying the
Omnibus Motion to quash the writ of execution and for consignation, as
well as the motion to cite petitioners in contempt and the ex parte motion
for an order to divest petitioners title to respondent. It held that there was
no novation because there was no incompatibility between the Letter
dated June 7, 1991 and the Decision dated January 30, 1987 with the
former only providing for a more liberal scheme of payment and grant of
reduced interest; that petitioners claim that respondents receivership and
the Letter dated June 7, 1991 are supervening events which rendered the
execution unjust and impossible is unavailing since there is nothing on
record to indicate that such circumstances resulted in unfairness and
injustice to petitioners if execution of judgment is carried out; that
petitioners claim that the judgment could no longer be executed by mere
motion after the five-year period had elapsed from its finality is specious
since any interruption or delay occasioned by petitioners will ex-
369
Aguilar vs. Manila Banking Corporation
tend the time within which the judgment may be executed by motion.42
No motion for reconsideration was filed by the petitioners. Accordingly, RTC
Branch 167 issued a Writ of Execution on July 4, 2002.43 On July 23, 2002,
the Sheriff issued the Notice for Compliance of the said writ.44
Petitioners filed on July 26, 2002 a petition for certiorari with the CA,
docketed as CA-G.R. SP No. 71849.45 They reiterated that the Decision
dated January 30, 1987 cannot be executed by mere motion filed on
February 1, 2000 since more than five years have elapsed.
On October 29, 2002, the CA denied the petition for certiorari.46 It held
that since the delays were occasioned by petitioners own initiative and for
their own advantage, the five-year period allowed for the enforcement of
the judgment by motion have been interrupted or suspended.
On November 13, 2002, petitioners filed a Motion for Reconsideration47
but the CA denied it in its Resolution dated April 29, 2003.48
Hence, the present petition anchored on the following grounds:
36 Id., at p. 168.
37 Id., at p. 170.
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_______________
38 Id., at p. 400.
39 Id., at pp. 171 and 175.
42 Id., at p. 32.
40 Id., at p. 424.
43 Id., at p. 35.
44 Id., at p. 39.
45 Id., at p. 2.
46 Supra note 1.
47 Id., at p. 507.
48 Supra note 2.
370
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SUPREME COURT REPORTS ANNOTATED
Aguilar vs. Manila Banking Corporation
2. THE HONORABLE COURT OF APPEALS ERRED IN NOT RECOGNIZING THAT
EVENTS AND CIRCUMSTANCES IN THIS CASE HAVE TRANSPIRED AFTER THE
DECISION HAD BECOME FINAL AND EXECUTORY THAT WARRANTS AND
CALLS FOR STAY OR PRECLUSION OF EXECUTION, CONSIDERING THAT THE
LETTER-APPROVAL OF THE STATUTORY RECEIVER OF RESPONDENT
PARTAKES OF AN EXCEPTION TO THE GENERAL RULE WHICH HAS BEEN
CONSISTENTLY UPHELD BY THIS HONORABLE SUPREME COURT.
3. THE HONORABLE COURT OF APPEALS ERRED IN NOT RECOGNIZING THAT
THE LETTER APPROVAL OF THE STATUTORY RECEIVER NOVATED THE
COMPROMISE AGREEMENT AND DECISION BASED ON COMPROMISE
AGREEMENT.
4. THE HONORABLE COURT OF APPEALS ERRED IN NOT RECOGNIZING THAT
THE EQUITIES OF THE CASE FAVOR HEREIN PETITIONERS.49
Anent the first ground, petitioners reiterate that under Section 6 of Rule 39,
Rules of Court, the execution of the judgment by mere motion was barred
by prescription, given that more than five years had lapsed since the
Decision dated January 30, 1987 became final and executory and they
cannot be faulted for the delay as they have done nothing that warrants
the conclusion that they employed unscrupulous machinations and dilatory
tactics.
As to the second ground, petitioners argue that respondents receivership
is a supervening event that rendered execution of the Decision dated
January 30, 1987 impossible, if not unjust; that since a bank under
adjudication on the merits, (b) was not rendered with jurisdiction over the
parties; and (c) involved different subject matters and causes of action.51
In the Resolution dated May 15, 2003, upon motion of petitioner, the Court
directed the parties to maintain the status quo until further orders from
this Court.52
_______________
_______________
50 Id., at p. 173.
51 Id., at p. 648.
52 Id., at p. 163.
372
372
54 S/G Luna v. National Labor Relations Commission, 336 Phil. 963, 969;
270 SCRA 227, 233 (1997); Villarama v. National Labor Relations
Commission, G.R. No. 106341, September 2, 1994, 236 SCRA 280, 287.
373
In the present case, the petitioners not only failed to explain their failure to
file a motion for reconsideration before the RTC, they also failed to show
sufficient justification for dispensing with the requirement. A motion for
reconsideration is not only expected to be but would actually have
provided an adequate and more speedy remedy than the petition for
certiorari.56 Certiorari cannot be resorted to as a shield
_______________
55 Tan, Jr. v. Sandiganbayan, 354 Phil. 463, 469-470; 292 SCRA 452, 457
(1998); Tan v. Court of Appeals, 341 Phil. 570, 576-578; 275 SCRA 568,
574-575 (1997).
56 Alcosero v. National Labor Relations Commission, 351 Phil. 368, 378;
288 SCRA 129, 137 (1998); Plaza v. Hon. Mencias and Filipinas Motor
Services, Inc., 116 Phil. 875, 879; 6 SCRA 562 (1962).
374
of Court has been settled in the Order dated March 20, 2000 of RTC Branch
165. Upon denial of petitioners motion for reconsideration, they
erroneously sought review with this Court which dismissed their petition for
review on certiorari for violation of the rule on hierarchy of courts and for
failure to show special and important reasons or exceptional and
compelling circumstances that justify a disregard of the rule.59 This
Courts Resolution became final and executory on January 16, 2001. Thus,
petitioners are bound thereby. The question of prescription has been
settled with finality and may no longer be resurrected
_______________
374
375
On the matter of forum shopping, while the Court has held that forum
shopping exists only where the elements of litis pendentia are present or
where a final judgment in one case will amount to res judicata in
another,64 it must be recalled that the doctrines of law of the case and res
judicata are founded on a public policy against reopening that which has
previously been decided.65 Both doctrines share the policy consideration
of putting an end to litigation.66 Thus, the principle of forum shopping
should apply by analogy to a case involving the principle of law of the
case.
Moreover, although forum shopping exists when, as a result of an adverse
opinion in one forum, a party seeks a favorable opinion, other than by
appeal or certiorari, in another, or when a party institutes two or more suits
in different courts, either simultaneously or successively, in order to ask
the courts to rule on the same or related causes and/or to grant the same
or substantially the same reliefs on the supposition that one or the other
court would make a favorable disposition or increase a partys chances of
obtaining a
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63 De la Cruz v. Joaquin, G.R. No. 162788, July 28, 2005, 464 SCRA 576,
589; Bardillon v. Barangay Masili of Calamba, Laguna, 450 Phil. 521, 529;
402 SCRA 440, 446 (2003).
376
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SUPREME COURT REPORTS ANNOTATED
Aguilar vs. Manila Banking Corporation
subject matter and the parties; (c) it must be a judgment or an order on
the merits; and (d) there must be, between the first and the second
actions, identity of parties, of subject matter and of cause of action.63 The
fourth requisite is wanting in the present case. There is only one case
involved. There is no second independent proceeding or subsequent
litigation between the parties. The present petition concerns subsequent
proceedings in the same case, with petitioners raising the same issue long
settled by a prior appeal.
involved, RTC Pasig City, but the issue of prescription was ultimately
resolved by two different branches thereofBranches 165 and 167.
Petitioners first raised before RTC Branch 165 the issue of prescription of
the execution of the decision by mere motion. Said RTC Branch 165 ruled
against petitioners and the courts order thereon became final and
executory. Petitioners raised the issue again in an Omnibus Motion with the
same RTC Branch 165. However, they moved for the inhibition of the
presiding judge hearing the issue not only once, but twice, both motions
granted in their favor and the case was successively raffled and assigned
to two different branches of RTC Pasig, first to Branch 268 and then to
Branch 167, which ruled against petitioners.
Through the motions for inhibition of the presiding judges and the
assignment of the case to different branches of the same court, petitioners
sought to obtain from one branch a ruling more favorable than the ruling of
another branch. They deliberately sought a friendly branch of the same
court to grant them the relief that they wanted, despite the finality of the
resolution of one branch on the matter. This is a permutation of forum
shopping. It trifles with the courts, abuses their processes, degrades the
administration of justice, and congests court dockets.68
Be it remembered that the grave evil sought to be avoided by the rules
against forum shopping is the rendition by two competent tribunals of two
separate, and contradictory decisions. Unscrupulous party-litigants, taking
advantage of a
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67 Villaluz v. Ligon, G.R. No. 143721, August 31, 2005, 468 SCRA 486, 499;
Top Rate Construction & Gen. Services, Inc. v. Paxton Development
Corporation, 457 Phil. 740, 748; 410 SCRA 604, 605-606 (2003).
378
SUPREME COURT REPORTS ANNOTATED
Aguilar vs. Manila Banking Corporation
69 Guaranteed Hotels, Inc. v. Baltao, G.R. No. 164338, January 17, 2005,
448 SCRA 738, 746; TF Ventures, Inc. v. Matsuura, G.R. No. 154177, June 9,
2004, 431 SCRA 526, 531.
70 Supra note 45.
379
73 Garcia v. Llamas, G.R. No. 154127, December 8, 2003, 417 SCRA 292,
294; Agro Conglomerates, Inc. v. Court of Appeals, 401 Phil. 644, 656; 348
SCRA 450, 459 (2000).
380
in RTC Branch 165 in their Omnibus Motion dated March 5, 2001, fourteen
years after respondent was placed under receivership and was ordered to
close operation in 1987. The belated invocation of such circumstance
speaks strongly of the staleness of their claim.
Besides, it would be absurd to adopt petitioners position that they are not
obliged to pay interest on their obligation when respondent was placed
under receivership. When a bank is placed under receivership, it would
only not be able to do new business, that is, to grant new loans or to
accept new deposits. However, the receiver of the bank is in fact obliged to
collect debts owing to the bank, which debts form part of the assets of the
bank.71 Thus, petitioners obligation to pay interest subsists even when
respondent was placed under receivership. The respondents receivership
is an extraneous circumstance and has no effect on petitioners obligation.
On the claim of novation, petitioners raised it for the first time before RTC
Branch 165 in their Ex Parte Motion to Recall the Courts Order dated
December 5, 199172 but they did not pursue the matter after their ex
parte motion was denied. They did not raise said issue in their motion for
reconsideration or in their first petition for review on certiorari with this
Court in G.R. No. 144719. Thus, they are deemed to have abandoned their
claim of novation. They cannot be allowed to revive the issue as it is
offensive to basic rules of fair play, justice and due process.
Moreover, the Court cannot see how novation can take place considering
that the surrounding circumstances negate the same. The established rule
is that novation is never presumed; it must be clearly and unequivocally
shown.73 Nova_______________
71 Provident Savings Bank v. Court of Appeals, G.R. No. 97218, May 17,
1993, 222 SCRA 125, 131-132.
72 Supra note 12.
380
SUPREME COURT REPORTS ANNOTATED
Aguilar vs. Manila Banking Corporation
tion will not be allowed unless it is clearly shown by express agreement, or
by acts of equal import. Thus, to effect an objective novation it is
imperative that the new obligation expressly declares that the old
obligation is thereby extinguished or that the new obligation be on every
point incompatible with the new one.74
In the present case, there is no clear intent of the parties to make the
Letter dated June 7, 1991 completely supersede and abolish the
Compromise Agreement adopted and approved by the RTC in its Decision
dated January 30, 1987. Petitioners were merely granted a more liberal
scheme of payment and reduced rate of interest but the conditions relating
to the consequences of default in payment remained, such that when
petitioners failed to comply with the approved mode of payment in the
Letter dated June 7, 1991, respondents were entitled to call for
enforcement of the Decision dated January 30, 1987 and eject petitioners
from the property. The well-settled rule is that, with respect to obligations
to pay a sum of money, the obligation is not novated by an instrument that
expressly recognizes the old, changes only the terms of payment, adds
other obligations not incompatible with the old ones, or the new contract
merely supplements the old one.75 Hence, there is no merit to petitioners
claim of novation.
Without a doubt, the present case is an instance where the due process
routine vigorously pursued by petitioners is but a clear-cut devise meant to
perpetually forestall execution of an otherwise final and executory
decision. Aside from clogging court dockets, the strategy is deplorably a
common course resorted to by losing litigants in the hope of evading
manifest
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76 Ferinion v. Sta. Romana, 123 Phil. 191, 195; 16 SCRA 370, 374-375
(1966).
381
77 Perez v. Lantin, 133 Phil. 219, 226; 24 SCRA 291, 298 (1968).
382
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SUPREME COURT REPORTS ANNOTATED
Aguilar vs. Manila Banking Corporation
Verily, by the undue delay in the execution of a final judgment in their
favor, respondents have suffered an injustice. The Court views with
disfavor the unjustified delay in the enforcement of the final decision and
orders in the present case. Once a judgment becomes final and executory,
the prevailing party should not be denied the fruits of his victory by some
subterfuge devised by the losing party.78 Unjustified delay in the
enforcement of a judgment sets at naught the role of courts in disposing
justiciable controversies with finality.
WHEREFORE, the present petition is DENIED. The assailed Decision and
Resolution of the Court of Appeals in CA-G.R. SP No. 71849 are AFFIRMED.
The status quo order issued by this Court on May 15, 2003 is LIFTED. The
Regional Trial Court, Branch 167, Pasig City, is directed to issue the
corresponding writ of execution and the Sheriff of the court is ordered to
enforce the same to its ultimate conclusion. Triple costs against petitioners.
SO ORDERED.
Panganiban (C.J., Chairperson), Ynares-Santiago, Callejo, Sr. and ChicoNazario, JJ., concur.
_______________
125
Copyright 2011 Central Book Supply, Inc. All rights reserved. [Aguilar vs.
Manila Banking Corporation, 502 SCRA 354(2006)]
* THIRD DIVISION.
reacted to private respondents offer to pay the loan (p. 39, Rollo). What
seems to have escaped respondent courts attention was the condition
imposed by petitioner that it will grant private respondents request if the
latter will also shoulder the obligation incurred by Lorenzo Guarin in his
capacity as president of the corporation (p. 37, Rollo). The consent of
petitioner to the substitution, as credit, was thus erroneously appreciated.
PETITION for certiorari of the decision of the Court of Appeals.
126
The facts are stated in the opinion of the Court.
126
SUPREME COURT REPORTS ANNOTATED
Provident Savings Bank vs. Court of Appeals
of prescription to foreclose.Consequently, when the closure of petitioner
was set aside in 1981, the period of ten years within which to foreclose
under Article 1142 of the New Civil Code began to run again and, therefore,
the action filed on August 21, 1986 to compel petitioner to release the
mortgage carried with it the mistaken notion that petitioners own suit for
foreclosure had prescribed. What exacerbates the situation is the letter of
private respondent requesting petitioner on August 6, 1986 that private
respondent be allowed to pay the loan secured by the mortgage as a result
of the Deed of Sale executed by the Guarins in his favor on July 10, 1986
(pp. 36-37, Rollo). In point of law, this written communication is
synonymous to an express acknowledgment of the obligation and had the
effect of interrupting the period of prescription for the second time (Article
1155, New Civil Code; Osmea vs. Rama, 14 Phil. 99 [1909]; 4 Tolentino,
supra at p. 50). And this piece of document necessarily estops private
respondent from setting up prescription vis-a-vis his unfounded supposition
that acknowledgment of the debt is of no moment because the right of
petitioner to foreclose had long prescribed in 1977 (p. 13, Petition; p. 7,
Comment; pp. 19 and 58, Rollo).
Civil Law; Novation; The conditional acceptance made by the petitioner as
to private respondents offer to assume the mortgage obligation negates
the existence of novation through substitution of debtors, when the latter
refused to comply with the condition imposed by the petitioner.Contrary
to respondent courts perception of the existence of novation, the evidence
at hand does not buttress a finding along this line from the mere fact that
petitioner supposedly did not question the substitution when the bank
P62,500.00, together with the interest, penalties, and bank charges due
thereon, and ordering defendant-appellant thereafter to: (1) release the
real estate mortgage executed by the spouses Lorenzo K. Guarin and
Liwayway J. Guarin in favor of defendant bank on 16 February 1967; (2)
return or surrender to plaintiff-appellant, as successor-in-interest of the
spouses Guarin, the latters Owners Duplicate of Title No. 177014; (3) pay
plaintiff-appellant P20,000.00 as and for attorneys fees; and, (4) pay the
costs of suit.
The established facts are:
On 16 February 1967, the spouses Lorenzo K. Guarin and Liwayway J.
Guarin (Guarins) obtained a loan from defendant-appellant in the amount
of P62,500.00, payable on or before 20 June 1967. As security for the loan,
they executed a real estate mortgage in favor of defendant-appellant over
a parcel of land covered by TCT No. 177014. (Exhs. C and D)
In September, 1972, defendant-appellant was placed under receivership by
the Central Bank of the Philippines until 27 July 1981 when the receivership
was set aside by the Honorable Supreme Court.
On 11 December 1984, Lorenzo K. Guarin, in reply to the letter of latters
counsel informing that the mortgaged property would be sold at public
auction on 27 December 1984, assured he and his wife had every intention
of paying their obligation and requesting for a recomputation of their
account and a postponement of the foreclosure sale. (Exh. 1)
On 10 February 1986, the Guarins received a Statement of
128
128
SUPREME COURT REPORTS ANNOTATED
Provident Savings Bank vs. Court of Appeals
Account from defendant-appellant showing two outstanding accounts as of
15 February 1986. One was the account of Lorenzo K. Guarin in the amount
of P591,088.80, and the other was the account of L.K. Guarin
Manufacturing Co., Inc. in the amount of P6,287,380.27. (Attachment to
Exh. 2)
To the question of whether petitioner can still foreclose the subject realty,
respondent court gave a negative response on account of the absence of
proof to indicate that the bank was precluded from collecting indebtedness
while it was under re130
130
SUPREME COURT REPORTS ANNOTATED
Provident Savings Bank vs. Court of Appeals
ceivership from September, 1972 until July 20, 1981. Thus, there was no
legal interruption of the prescriptive period to speak of, said respondent
court, which intervened between June 20, 1967, the date the mortgage
matured, and June 20, 1977 the last day within which petitioner could have
foreclosed the mortgage.
Respondent court did not also heed the suggestion of the petitioner bank
to interpret Wilson Chuas assumption of the mortgage on July 10, 1986 as
tantamount to an explicit acknowledgment that the obligation was
outstanding and had not yet prescribed.
As a result of these observations, respondent court reversed the decision
of the trial court insofar as it ordered Wilson Chua to pay the sum of
P591,088.80 to the bank and affirmed the other dispositions made by the
court of origin (p. 42, Rollo).
Following the unfavorable judgment, the bank filed a motion for
reconsideration and a motion for new trial premised on newly discovered
evidence relative to a statement of account unearthed by the banks
liaison officer from the loose folders on October 18, 1990 which it believed
to be of legal significance to the case. But respondent court was
unperturbed, observing that the vital piece of document could have been
located in the course of trial had the slightest degree of prudence been
exercised, considering that the statement of account sprouted the same
day the liaison officer was advised to take an inventory of the records (p.
45, Rollo ).
Hence, the petition at bar.
Consistent with its theory premised on fuerza mayor, petitioner insists that
it can not be blamed for not lifting a finger, so to speak, during the period
when it was enjoined by the Central Bank on September 15, 1972 from
transacting business until this Court affirmed on July 27, 1981 the decision
of the Court of Appeals annulling the proscription against petitioner in
Central Bank vs. Court of Appeals (106 SCRA 143 [1981]). We are not
unaware of the rule laid down in Teal Motor Co. vs. Court of First Instance of
Manila (51 Phil. 549 [1928]; Martin, Commentaries and Jurisprudence on
the Philippine Commercial Laws, 1986 Revised ed., p. 125) that the
appointment of a receiver does not dissolve the corporation nor does it
interfere with the exercise of its corporate rights. But this principle is, of
course, applicable to a situation where there is no restraint imposed on the
corporation, unlike in the case at bar where petitioner Provident Savings
131
132
Bank was specifically forbidden and immobilized from doing business in the
Philippines on September 15, 1972 through Monetary Board Resolution No.
1766 until 1981 when the decision in Central Bank vs. Court of Appeals
(supra, at p. 150) was rendered. The question which immediately crops up
is whether a foreclosure proceeding falls within the purview of the phrase
doing business. In Mentholatum Co., Inc., et al. vs. Mangaliman, et al. (72
Phil. 524 [1941]; Moreno, Philippine Law Dictionary, Second ed., 1972, p.
186), the term was construed by Justice Laurel to refer to:
securing such debts. This is not to ignore The Philippine Trust Co. vs. HSBC
(67 Phil. 204 [1939], for in that case, the Court simply rejected the
objections of certain creditors to the report of a receiver, that is, objections
that the receiver did not report the collections made before the beginning
of his receivership. It would follow that the bank is bound by the acts, or
failure to act, of the receiver. At the same time, the receiver is liable to the
bank for culpable or negligent failure to collect the assets of such bank and
to safeguard said assets.
Having arrived at the conclusion that a foreclosure is part of a banks
business activity which could not have been pursued by the receiver then
because of the circumstances discussed in the Central Bank case, we are
thus convinced that the prescriptive period was legally interrupted by
fuerza mayor in 1972 on account of the prohibition imposed by the
Monetary Board against petitioner from transacting business, until the
directive of the Board was nullified in 1981. Indeed, the period during
which the obligee was prevented by a caso fortuito from enforcing his right
is not reckoned against him (Article 1154, New Civil Code). When
prescription is interrupted, all the benefits acquired so far from the
possession cease and when prescription starts anew, it will be entirely a
new one. This concept should not be equated with suspension where the
past period is included in the computation being added to the period after
request if the latter will also shoulder the obligation incurred by Lorenzo
Guarin in his capacity as president of the corporation (p. 37, Rollo). The
consent of petitioner to the substitution, as creditor, was thus erroneously
appreciated.
133
Petition granted.
With the conclusions reached, we need not discuss the other issues raised
in the petition.
WHEREFORE, the petition is hereby GRANTED. The decision dated August
31, 1990, including the resolution dated February 6, 1991 of respondent
court are hereby set aside and another one entered dismissing Wilson
Chuas complaint. No special pronouncement is made as to costs.
Bidin, Davide, Jr. and Romero, JJ., concur.
Feliciano, J., In the result.
Note.Section 29 of Republic Act No. 265 known as the Central Bank Act
provides the person designated as receiver to immediately take charge of
the banks assets and liabilities, administer the same for the benefit of its
creditors and represent the bank personally or through counsel as he may
retain in all actions or proceedings for or against the institution and to
bring and foreclose mortgages in the name of the bank (Banco Filipino
Savings & Mortgage Bank vs. Monetary Board, Central Bank of the
Philippines, 204 SCRA 767).
o0o
134
Copyright 2011 Central Book Supply, Inc. All rights reserved. [Provident
Savings Bank vs. Court of Appeals, 222 SCRA 125(1993)]