Sia vs. Court of Appeals G.R. No.

102970, May 13, 1990

Contract of the use of a safety deposit box of a bank is not a deposit but a lease under Sec 72, A
of General Banking Act. Accordingly, it should have lost no time in notifying the petitioner in
order that the box could have been opened to retrieve the stamps, thus saving the same from
further deterioration and loss. The bank’s negligence aggravated the injury or damage to the
stamp collection..
Facts: Plaintiff Luzon Sia rented a safety deposit box of Security Bank and Trust Co. (Security
Bank) at its Binondo Branch wherein he placed his collection of stamps. The said safety deposit
box leased by the plaintiff was at the bottom or at the lowest level of the safety deposit boxes of
the defendant bank. During the floods that took place in 1985 and 1986, floodwater entered into
the defendant bank’s premises, seeped into the safety deposit box leased by the plaintiff and
caused, according damage to his stamps collection. Security Bank rejected the plaintiff’s claim
for compensation for his damaged stamps collection.
Sia, thereafter, instituted an action for damages against the defendant bank. Security Bank
contended that its contract with the Sia over safety deposit box was one of lease and not of
deposit and, therefore, governed by the lease agreement which should be the applicable law; the
destruction of the plaintiff’s stamps collection was due to a calamity beyond obligation on its
part to notify the plaintiff about the floodwaters that inundated its premises at Binondo branch
which allegedly seeped into the safety deposit box leased to the plaintiff. The trial court rendered
in favor of plaintiff Sia and ordered Sia to pay damages.
Issue: Whether or not the Bank is liable for negligence.
Held: Contract of the use of a safety deposit box of a bank is not a deposit but a lease. Section 72
of the General Banking Act [R.A. 337, as amended] pertinently provides: In addition to the
operations specifically authorized elsewhere in this Act, banking institutions other than building
and loan associations may perform the following services (a) Receive in custody funds,
documents, and valuable objects, and rent safety deposit boxes for the safequarding of such
effects.
As correctly held by the trial court, Security Bank was guilty of negligence. The bank’s
negligence aggravated the injury or damage to the stamp collection. SBTC was aware of the
floods of 1985 and 1986; it also knew that the floodwaters inundated the room where the safe
deposit box was located. In view thereof, it should have lost no time in notifying the petitioner in
order that the box could have been opened to retrieve the stamps, thus saving the same from
further deterioration and loss. In this respect, it failed to exercise the reasonable care and
prudence expected of a good father of a family, thereby becoming a party to the aggravation of
the injury or loss. Accordingly, the aforementioned fourth characteristic of a fortuitous event is
absent. Article 1170 of the Civil Code, which reads “Those who in the performance of their
obligation are guilty of fraud, negligence, or delay, and those who in any manner contravene the
tenor thereof, are liable for damages” is applicable. Hence, the petition was granted.
The provisions contended by Security Bank in the lease agreement which are meant to exempt
SBTC from any liability for damage, loss or destruction of the contents of the safety deposit box
which may arise from its own agents’ fraud, negligence or delay must be stricken down for being
contrary to law and public policy.
Transfield Philippines vs Luzon Hydro Electric Corp
The independent nature of the letter of credit may be: (a) independence in toto where the credit is
independent from the justification aspect and is a separate obligation from the underlying
agreement like for instance a typical standby; or (b) independence may be only as to the
justification aspect like in a commercial letter of credit or repayment standby, which is identical
with the same obligations under the underlying agreement. In both cases the payment may be
enjoined if in the light of the purpose of the credit the payment of the credit would constitute
fraudulent abuse of the credit.
Facts: Transfield Philippines (Transfield) entered into a turn-key contract with Luzon Hydro
Corp. (LHC).Under the contract, Transfield were to construct a hydro-electric plants in Benguet
and Ilocos. Transfield was given the sole responsibility for the design, construction,
commissioning, testing and completion of the Project. The contract provides for a period for
which the project is to be completed and also allows for the extension of the period provided that
the extension is based on justifiable grounds such as fortuitous event. In order to guarantee
performance by Transfield, two stand-by letters of credit were required to be opened. During the
construction of the plant, Transfield requested for extension of time citing typhoon and various
disputes delaying the construction. LHC did not give due course to the extension of the period
prayed for but referred the matter to arbitration committee. Because of the delay in the
construction of the plant, LHC called on the stand-by letters of credit because of default.
However, the demand was objected by Transfield on the ground that there is still pending
arbitration on their request for extension of time.
Issue: Whether or not LHC can collect from the letters of credit despite the pending arbitration
case
Held: Transfield’s argument that any dispute must first be resolved by the parties, whether
through negotiations or arbitration, before the beneficiary is entitled to call on the letter of credit
in essence would convert the letter of credit into a mere guarantee.
The independent nature of the letter of credit may be: (a) independence in toto where the credit is
independent from the justification aspect and is a separate obligation from the underlying
agreement like for instance a typical standby; or (b) independence may be only as to the
justification aspect like in a commercial letter of credit or repayment standby, which is identical
with the same obligations under the underlying agreement. In both cases the payment may be
enjoined if in the light of the purpose of the credit the payment of the credit would constitute
fraudulent abuse of the credit.
Jurisprudence has laid down a clear distinction between a letter of credit and a guarantee in that
the settlement of a dispute between the parties is not a pre-requisite for the release of funds under
a letter of credit. In other words, the argument is incompatible with the very nature of the letter
of credit. If a letter of credit is drawable only after settlement of the dispute on the contract
entered into by the applicant and the beneficiary, there would be no practical and beneficial use
for letters of credit in commercial transactions.
The engagement of the issuing bank is to pay the seller or beneficiary of the credit once the draft
and the required documents are presented to it. The so-called “independence principle” assures
the seller or the beneficiary of prompt payment independent of any breach of the main contract
and precludes the issuing bank from determining whether the main contract is actually
accomplished or not. Under this principle, banks assume no liability or responsibility for the
form, sufficiency, accuracy, genuineness, falsification or legal effect of any documents, or for the
general and/or particular conditions stipulated in the documents or superimposed thereon, nor do
they assume any liability or responsibility for the description, quantity, weight, quality,
condition, packing, delivery, value or existence of the goods represented by any documents, or
for the good faith or acts and/or omissions, solvency, performance or standing of the consignor,
the carriers, or the insurers of the goods, or any other person whomsoever.
Facts:
G.R. No. 168332 KORUGA VS ARCENAS
Koruga is a minority stockholder of Banco Filipino
On August 20, 2003, she filed a complaint before the Makati RTC
Koruga's complaint alleged:

10. 1 Violation of Sections 31 to 34 of the Corporation Code ("Code") which prohibit self-
dealing and conflicts of interest of directors and officers

10.2 Right of a stockholder to inspect the records of a corporation (including financial

statements) under Sections 74 and 75 of the Code
10.3 Receivership and Creation of a Management Committee
On September 12, 2003, Arcenas, et al. filed their Answer raising, among others, the trial court's
lack of jurisdiction to take cognizance of the case. They also filed a Manifestation and Motion
seeking the dismissal of the case
In an Order dated October 18, 2004, the trial court denied the Manifestation and Motion
On February 9, 2005, the CA issued a 60-day TRO enjoining Judge Marella from conducting
further proceedings in the case.
On February 22, 2005, the RTC issued a Notice of Pre-trial[9] setting the case for pre-trial on
June 2 and 9, 2005. Arcenas, et al. filed a Manifestation and Motion[10] before the CA,
reiterating their application for a writ of... preliminary injunction. Thus, on April 18, 2005, the
CA issued the assailed Resolution, which reads in part:
(C)onsidering that the Temporary Restraining Order issued by this Court on February 9, 2005
expired on April 10, 2005, it is necessary that a writ of preliminary injunction be issued in order
not to render ineffectual whatever final resolution this Court may render... in this case, after the
petitioners shall have posted a bond
Dissatisfied, Koruga filed this Petition for Certiorari under Rule 65 of the Rules of Court.
Koruga alleged that the CA effectively gave due course to Arcenas, et al.'s petition when it
issued a writ of preliminary injunction without factual or legal basis
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 P50,000.00 bond.
G.R. No. 169053
In their Petition, Arcenas, et al. asked the Court to set aside the Decision[14] 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.
Issues:
Which body has jurisdiction over the Koruga Complaint, the RTC or the BSP?
Ruling:
We hold that it is the BSP that has jurisdiction over the case.
the acts complained of pertain to the conduct of Banco Filipino's banking business.
The law vests in the BSP the supervision over operations and activities of banks.
Specifically, the BSP's supervisory and regulatory powers include:... conduct of examination to
determine compliance with laws and regulations if the circumstances so warrant as determined
by the Monetary Board;
Overseeing to ascertain that laws and Regulations are complied with;
Regular 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
Inquiring into the solvency and liquidity of the institution
Correlatively, the General Banking Law of 2000 specifically deals with loans contracted by bank
directors or officers, thus:
SECTION 36. Restriction on Bank Exposure to Directors, Officers, Stockholders and Their
Related Interests.
The Monetary Board may regulate the amount of loans, credit accommodations and guarantees
that may be extended, directly or indirectly, by a bank to its directors, officers, stockholders and
their related interests, as well as investments of such bank in enterprises owned or... controlled
by said directors, officers, stockholders and their related interests.
Furthermore, the authority to determine whether a bank is conducting business in an unsafe or
unsound manner is also vested in the Monetary Board.
Finally, the New Central Bank Act grants the Monetary Board the power to impose
administrative sanctions on the erring bank:
Section 37.
the Monetary Board may, at its discretion, impose upon... any bank or quasi-bank, their directors
and/or officers... or any commission of irregularities, and/or conducting business in an unsafe or
unsound manner as may be determined by the Monetary Board
Koruga's invocation of the provisions of the Corporation Code is misplaced. In an earlier case
with similar antecedents, we ruled that:
The Corporation Code, however, is a general law applying to all types of corporations, while the
New Central Bank Act regulates specifically banks and other financial institutions, including the
dissolution and liquidation thereof. As between a general and special... law, the latter shall
prevail - generalia specialibus non derogant.
Consequently, it is not the Interim Rules of Procedure on Intra-Corporate Controversies,[32] or
Rule 59 of the Rules of Civil Procedure on Receivership, that would apply to this case. Instead,
Sections 29 and 30 of the New Central Bank Act should be... followed
, viz.:
Section 30.
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.
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 appointment of a receiver under this section shall be vested exclusively with the Monetary
Board.
On the strength of these provisions, it is the Monetary Board that exercises exclusive jurisdiction
over proceedings for receivership of banks.
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.
the court's 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.
Sps. Larrobis v. Philippine Veterans Bank
Facts:
Petitioner spouses contracted a monetary loan with herein respondent bank secured by a REM
executed on their lot. Respondent bank then went bankrupt and was placed under
receivership/liquidation by the Central Bank. Sometime after, respondent bank sent a demand
letter for the amount of the insurance premiums advanced by it over the mortgaged property of
petitioners. More than 14 years from the time the loan became due and demandable, respondent
bank moved for the extrajudicial foreclosure of the mortgaged property and was sold to it as
being the lone bidder. Petitioners moved to declare the foreclosure null and void contending that
the respondent bank being placed under receivership did not interrupt the running of the
prescriptive period. RTC ruled in favor of respondents.
Issues:
(1) Whether or not foreclosure of mortgage is included in the acts prohibited during
receivership/liquidation proceedings.
(2) Whether or not the period within which the respondent bank was placed under receivership
and liquidation proceedings interrupted the running of the prescriptive period in bringing actions.
Ruling: NO.
(1) While it is true that foreclosure falls within the broad definition of “doing business,” it should
not be considered included, however, in the acts prohibited whenever banks are “prohibited from
doing business” during receivership and liquidation proceedings. This is consistent with the
purpose of receivership proceedings, i.e., to receive collectibles and preserve the assets of the
bank in substitution of its former management, and prevent the dissipation of its assets to the
detriment of the creditors of the bank.
There is also no truth to respondent’s claim that it could not continue doing business from the
time it was under receivership. As correctly pointed out by petitioner, respondent was even able
to send petitioners a demand letter, through Francisco Go, for the insurance premiums advanced
by respondent bank over the mortgaged property of petitioners. How it could send a demand
letter on unpaid insurance premiums and not foreclose the mortgage during the time it was
“prohibited from doing business” was not adequately explained by respondent.
(2) A close scrutiny of the Provident case shows that the Court arrived at said conclusion, which
is an exception to the general rule, due to the peculiar circumstances of Provident Savings Bank
at the time. The Superintendent of Banks, which was instructed to take charge of the assets of the
bank in the name of the Monetary Board, had no power to act as a receiver of the bank and carry
out the obligations specified in Sec. 29 of the Central Bank Act.
In this case, it is not disputed that Philippine Veterans Bank was placed under receivership by the
Monetary Board of the Central Bank pursuant to Section 29 of the Central Bank Act on
insolvency of banks. Unlike Provident Savings Bank, there was no legal prohibition imposed
upon herein respondent to deter its receiver and liquidator from performing their obligations
under the law. Thus, the ruling laid down in the Provident case cannot apply in the case at bar.
Cornista-Domingo v. NLRC
Facts:
Philippine Veterans Bank was placed under receivership and as a consequence, adopted a
retrenchment and reorganization program. The Union (Philippine Veterans Bank Employees
Union) challenged the legality of this program before the SC, and while the case is pending, the
Monetary Board ordered the liquidation of the Bank. The appointed liquidator, pursuant to its
vested authority, terminated all employees of the Bank and commenced payment of their
separation pay and benefits. Later, the SC in an en banc decision upheld the legality of the
termination of all the Bank’s employees.

Sometime after, Congress enacted a law authorizing the Central Bank to reopen the Bank. To
facilitate this, a Rehabilitation Committee was created and given power to select the workforce,
with hiring preference given to the veterans and their dependents. At this juncture, several former
employees of the Bank initiated series of cases claiming that the enactment of the law nullified
the liquidator’s termination of the employees. The Union also filed a petition claiming unfair
labor practice. While the case is pending, the Union and the Bank had agreed to enter into a
Compromise Agreement for the amicable settlement of their cases. However, petitioners
appealed on the ground that the Compromise Agreement is contrary to law and that they are
entitled to reinstatement. CA ruled that petitioners were not illegally dismissed thus foreclosing
their right of reinstatement and that the compromise agreement bound petitioners who even
voluntarily received payments from it.
Issues:
(1) Whether petitioners were entitled to reinstatement by virtue of law reopening the Bank; and
(2) Whether petitioners were bound by the Compromise Agreement.
*click here for the Corporation law issue*
Ruling:
(1) NO. The enactment of R.A. No. 7169 did not nullify Monetary Board Resolution which
earlier placed the Bank under liquidation and caused the termination of employment of the
petitioners. The Bank’s subsequent rehabilitation did not, by any test of reason, “revive” what
was already a dead relationship between the petitioners and the Bank. Neither did such
rehabilitation affect the Court’s pronouncement in Philippine Veterans Bank Employees Union-
NUBE v. Philippine Veterans Bank that the actions of the Monetary Board and its duly
appointed liquidator were valid and that the former employees’ claim for back wages must be
rejected as they were lawfully separated. Reinstatement is a relief accorded only to an employee
who was illegally dismissed. To reiterate, the forcible closure of the Bank by operation of law
permanently severed the employer-employee relationship between it and its employees when it
ceased operations. Thus, the claim for reinstatement and payment of back wages and other
benefits, having no leg to stand on, must necessarily fall.
(2) YES. A labor union’s function is to represent its members. It can file an action or enter into
compromise agreements on behalf of its members. Here, majority of the Bank’s employees
authorized the Union to enter into a compromise agreement with the Bank on their behalves.
Union members were bound by the resulting compromise agreement when they affixed their
signatures thereon, thereby giving their individual assent thereto, and when they accepted the
benefits due them under that agreement. As it is, the Compromise Agreement in question
detailed the amounts to be received by each employee. Petitioners and other employees of the
Bank knew exactly what they were ratifying when they affixed their signatures in the said
compromise agreement. Further, respondent Union is a closed shop union. For this reason, it was
the only one with legal authority to negotiate, transact, and enter into any agreement with the
Bank. The Compromise Agreement was ratified by 282 Union members representing a majority
of its entire 529 membership. The ratification of the Compromise Agreement by the majority of
the Union members necessarily binds the minority.
It is likewise noteworthy that 30 of the herein 37 petitioners already received payment under the
same Compromise Agreement. The acceptance by said petitioners of the benefits bars them from
repudiating the agreement. They cannot be allowed to adopt an inconsistent position at the
expense of the Bank. Petitioners cannot belatedly reject or repudiate their acts of accepting the
monetary consideration under the compromise agreement, to the prejudice of the Bank.
Rural Bank of San Miguel v. Monetary Board
Facts:
Petitioner bank was a domestic corporation engaged in banking. Respondent Monetary Board
issued a resolution prohibiting petitioner from doing business in the Philippines and placed it
under receivership with PDIC as its receiver. On the basis of reports prepared by the PDIC
stating that petitioner bank could not resume business, the Monetary Board directed PDIC to
proceed with the liquidation. Petitioner filed a special civil action for certiorari and prohibition
with the CA, contending that there was no complete examination conducted before the bank was
closed.
Issue:
Whether Section 30 of RA 7653 require a current and complete examination of the bank before it
can be closed and placed under receivership.
Ruling: NO.
Banco Filipino and other cases petitioners cite were decided using Section 29 of the old law.
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 under RA 265 was misplaced.
In RA 7653, only a “report of the head of the supervising or examining department” is necessary.
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.
In Re: Petition for Assistance in the Liquidation of the Rural Bank of Bokod v. BIR
Rural Bank of Bokod (RBBI) was placed under receivership following the special examination
conducted by the BSP wherein various loan irregularities were uncovered. It was later then
concluded that RBBI remained in insolvent financial condition and can no longer safely resume
into business hence its liquidation ordered. Subsequently, the Monetary Board transferred to
herein petitioner PDIC the receivership/liquidation of RBBI. PDIC then filed a Motion for
Approval of Project Distribution before the RTC. Respondent BIR manifested that PDIC should
first secure a tax clearance certificate before it could proceed with the dissolution of RBBI. RTC
ruled in favor of BIR.
Issue:
Whether or not a bank placed under receivership still needs to secure a tax clearance certificate
before its project of distribution of assets is approved.
Ruling: NO.
First, Section 52(C) of the Tax Code of 1997 and the BIR-SEC Regulations No. 1 regulate the
relations only as between the SEC and the BIR, making a certificate of tax clearance a prior
requirement before the SEC could approve the dissolution of a corporation. In Spec. Proc. No.
91-SP-0060 pending before the RTC, RBBI was placed under receivership and ordered
liquidated by the BSP, not the SEC; and the SEC is not even a party in the said case, although the
BIR is. This Court cannot find any basis to extend the SEC requirements for dissolution of a
corporation to the liquidation proceedings of RBBI before the RTC when the SEC is not even
involved therein.
Section 30 of the New Central Bank Act lays down the proceedings for receivership and
liquidation of a bank. The said provision is silent as regards the securing of a tax clearance from
the BIR. The omission, nonetheless, cannot compel this Court to apply by analogy the tax
clearance requirement of the SEC, as stated in Section 52(C) of the Tax Code of 1997 and BIR-
SEC Regulations No. 1, since, again, the dissolution of a corporation by the SEC is a totally
different proceeding from the receivership and liquidation of a bank by the BSP. This Court
cannot simply replace any reference by Section 52(C) of the Tax Code of 1997 and the
provisions of the BIR-SEC Regulations No. 1 to the “SEC” with the “BSP.” To do so would be
to read into the law and the regulations something that is simply not there, and would be
tantamount to judicial legislation.
It should be noted that there are substantial differences in the procedure for involuntary
dissolution and liquidation of a corporation under the Corporation Code, and that of a banking
corporation under the New Central Bank Act, so that the requirements in one cannot simply be
imposed in the other.
First Phil Int’l Bank v. CA
Facts:
The bank has been under conservatorship since 1984. It is the owner of 6 parcels of land. The
bank had an agreement with Demetria to purchase the said lands. The said agreement was made
by Demmetria with the Bank’s manager, Rivera. Thereafter they had a series of letters consisting
of offers and counter offers which was finally accepted. Later however, the Bank, through its
conservator, Encarnacion, sought the repudiation of the agreement as it is alleged that Rivera was
not authorized to enter such agreement. Hence no valid contract. Subsequently, Demetria sued
the bank. The bank favored the later.
Meanwhile, Henry Co, who holds 80% of the shares of stocks of said bank, filed a motion for
intervention with the trial court which was denied because the trial has been concluded and now
its on appeal. Henry Co filed a civil case against Ejercito as successor in interest of Demetria
seeking said sale to be unenforceable against bank.
Issue:
Whether or not the conservator may revoke a perfected and enforceable contract.
Ruling:
No, CBA merely gives the conservator power to revoke contracts that are existing law, deemed
to be defective, that is void, voidable, unenforceable or rescissible. The contract in this case is a
valid one. Hence he cannot simply repudiate valid obligations of the bank.
Furthermore, the conservator’s power must be related to the preservation of the assets of the
bank, the organization of the management thereof and the restoration of its viability. Such
powers cannot extend to the post-facto repudiation of a perfectly valid contract, otherwise they
would infringe the non-impairment clause of the Constitution. Hence, the conservator must
exercise his powers without violating such clause. If not, it would be a violation.
Abacus Real Estate Development v Manila Banking Corp G.R. No. 162270. April 06, 2005
Facts: Manila Banking Corporation (Manila Bank, for brevity), owns a 1,435-square meter
parcel of land located along Gil Puyat Avenue Extension, Makati City and covered by Transfer
Certificate of Title (TCT) No. 132935 of the Registry of Deeds of Makati. Prior to 1984, the
bank began constructing on said land a 14-storey building. Not long after, however, the bank
encountered financial difficulties that rendered it unable to finish construction of the building.
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. Manila
Bank’s then acting president, the late Vicente G. Puyat, in a bid to save the bank’s investment,
started scouting for possible investors who could finance the completion of the building earlier
mentioned.
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. Vicente G. Puyat accepted the Laureano
group’s 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.
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.
Issue: Whether or not Vicente Puyat, acting as president of Manila Bank, has the power to sell
the disputed properties.
Held: There can be no quibbling that respondent Manila Bank was under receivership, pursuant
to Central Bank’s MB Resolution No. 505 dated May 22, 1987, at the time the late Vicente G.
Puyat granted the “exclusive option to purchase” to the Laureano group of investors. Owing to
this defining reality, the appellate court was correct in declaring that Vicente G. Puyat was
without authority to grant the exclusive option to purchase the lot and building in question. The
invocation by the appellate court of the following pronouncement inVillanueva vs. Court of
Appeals was apropos, to say the least 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. 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 bank’s assets and property. Clearly then, the “exclusive option to purchase” granted by
Vicente G. Puyat was and still is unenforceable against Manila Bank.
Concededly, a contract unenforceable for lack of authority by one of the parties may be ratified
by the person in whose name the contract was executed. However, even assuming, in gratia
argumenti, that Atty. Renan Santos, Manila Bank’s receiver, approved the “exclusive option to
purchase” granted by Vicente G. Puyat, the same would still be of no force and effect.
Banco Filipino Savings and Mortgage Bank vs. Central Bank G.R. No. 70054
Facts: Top Management Programs Corporation and Pilar Development Corporation are
corporations engaged in the business of developing residential subdivisions.Top Management
and Pilar Development obtained several loans from Banco Filipino all secured by real estate
mortgage in their various properties in Cavite.
The Monetary Board by Ramon Tiaoqui, Special Assistant to the Governor and Head, SES
Department III submitted a report finding that the bank is insolvent and recommending the
appointment of a receiver. The Monetary Board, based on the Tiaoqui report, issued a
resolution finding Banco Filipino insolvent and placing it under receivership. Subsequently, the
Monetary Board issued another resolution placing the bank under liquidation and designated a
liquidator. By virtue of her authority as liquidator, Valenzuela appointed the law firm of Sycip,
Salazar, et al. to represent Banco Filipino in all litigations.
Banco Filipino filed the petition for certiorari questioning the validity of the resolutions issued
by the Monetary Board authorizing the receivership and liquidation of Banco Filipino.A
temporary restraining order was issued enjoining the respondents from executing further acts of
liquidation of the bank. However, acts and other transactions pertaining to normal operations of a
bank are not enjoined. Subsequently, Top Management and Pilar Development failed to pay their
loans on the due date. Hence, the law firm of Sycip, Salazar, et al. acting as counsel for Banco
Filipino under authority of the liquidator, applied for extra-judicial foreclosure of the mortgage
over Top Management and Pilar Development’s properties. Thus, the Ex-Officio Sheriff of the
Regional Trial Court of Cavite issued a notice of extra-judicial foreclosure sale of the properties.
Top Management and Pilar Development filed 2 separate petitions for injunction and prohibition
with the respondent appellate court 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
which were subsequently dismissed by the court. Hence this petition

Issue: 1) Whether or not the liquidator has the authority to prosecute as well as to defend suits
and to foreclose mortgages for and behalf of the bank while the issue on the validity of the
receivership and liquidation is still pending resolution.

2) Whether or not the closure of the bank based on the Tiaoqui report is correct.
Held:
1) Whether or not the liquidator has the authority to prosecute as well as to defend suits and to
foreclose mortgages for and behalf of the bank while the issue on the validity of the receivership
and liquidation is still pending resolution.
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 bank’s 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 banking institution is
insolvent or cannot resume business safety to depositors, creditors and the general public, it
shall, public interest requires, order its liquidation and appoint a liquidator who shall take over
and continue the functions of receiver previously appointed by Monetary Board. The liquid for
may, in the name of the bank and with the assistance counsel as he may retain, institute such
actions as may necessary in the appropriate court to collect and recover a counts and assets of
such institution or defend any action ft against the institution.
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. The Court did not prohibit however acts a
as receiving collectibles and receivables or paying off credits claims and other transactions
pertaining to normal operate of a bank. There is no doubt that the prosecution of suits collection
and the foreclosure of mortgages against debtors the bank by the liquidator are among the usual
and ordinary transactions pertaining to the administration of a bank.
2) Whether or not the closure of the bank based on the Tiaoqui report is correct.
Clearly, Tiaoqui based his report on an incomplete examination of petitioner bank and outrightly
concluded therein that the latter’s financial status was one of insolvency or illiquidity. 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.
The test of insolvency laid down in Section 29 of the Central Bank Act is measured by
determining whether the realizable assets of a bank are leas than its liabilities. 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.
Examination appraises the soundness of the institution’s assets, the quality and character of
management and determines the institution’s compliance with laws, rules and regulations. Audit
is a detailed inspection of the institution’s 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.
Ong vs. Court of Appeals G.R. No. 112830
Facts: Jerry Ong filed with the Regional Trial Court of Quezon City a petition for the surrender
of 2 TCTs against Rural Bank of Olongapo, Inc. (RBO), represented by its liquidator Guillermo
G. Reyes, Jr. and deputy liquidator Abel Allanigue. The complaint stemed from 2 parcels of land
which was duly mortgaged by RBO in favor of petitioner to guarantee the payment of Omnibus
Finance, Inc., which is likewise now undergoing liquidation proceedings of its money market
obligations to petitioner. Omnibus Finance, Inc., not having seasonably settled its obligations to
petitioner, the latter proceeded to effect the extrajudicial foreclosure of said mortgages and the
city sheriff of TagaytayCity issued a certificate of sale in favor of petitioner which were duly
registered.
Respondents failed to seasonably redeem said parcels of land, for which reason, petitioner has
executed an affidavit of consolidation of ownership which has not been submitted to the Registry
of Deeds of Tagaytay City, in view of the fact that possession of the aforesaid titles or owner’s
duplicate certificates of title remains with the RBO. To date, petitioner has not been able to effect
the registration of said parcels of land in his name in view of the persistent refusal of
respondentsto surrender RBO’s copies of its owner’s certificates of title for the parcels of land
covered by the two TCTs.
Respondent RBO filed a motion to dismiss on the ground of res judicata and that it was
undergoing liquidation and it is the liquidation court which has exclusive jurisdiction to take
cognizance of petitioner’s claim. Trial court denied the motion to dismiss because it found that
the causes of action in the previous and present cases were different although it was silent on the
jurisdictional issue. RBO filed a motion for reconsideration but was similarly rejected. The Court
of Appeals, through a certiorari filed by RBO, annulled the challenged orders of the trial court
which sustained the jurisdiction of the trial court and denied reconsideration thereof. Moreover,
the trial judge was ordered to dismiss the civil case without prejudice to the right of petitioner to
file his claim in the liquidation proceedings pending before the
RegionalTrialCourtofOlongapoCity.
Issue: Whether or not the civil case against RBO may proceed independently from the
liquidation proceedings.
Held: Section 29, par. 3, of R.A. 265 as amended by P. D. 1827 provides –If the Monetary
Board shall determine and confirm within (sixty days) that the bank x x x is insolvent or cannot
resume business with safety to its depositors, 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[7] reciting the proceedings which have been taken and praying the assistance of
the court in the liquidation of such institution. The court shall have jurisdiction in the same
proceedings to adjudicate disputed claims against the bank x x x and enforce individual liabilities
of the stockholders and do all that is necessary to preserve the assets of such institution and to
implement the liquidation plan approved by the Monetary Board
All claims against the insolvent bank should be filed in the liquidation proceeding. The judicial
liquidation is intended to prevent multiplicity of actions against the insolvent bank. It is a
pragmatic arrangement designed to establish due process and orderliness in the liquidation of the
bank, to obviate the proliferation of litigations and to avoid injustice and arbitrariness. It is not
necessary that a claim be initially disputed in a court or agency before it is filed with the
liquidation court.
PRODUCERS BANK vs. NLRC and PRODUCERS BANK EMPLOYEES ASSOC
DIGEST
FACTS: The present petition originated from a complaint filed by private respondent on 11
February 1988 with the Arbitration Branch, NLRC, charging petitioner with diminution of
benefits, non-compliance with Wage Order No. 6 and non-payment of holiday pay. In addition,
private respondent prayed for damages.
Labor arbiter dismissed the complaint for lack of merit. NLRC, however, granted all of private
respondent’s claims, except for damages. Petition filed a Motion for Partial Reconsideration,
which was denied by the NLRC. Hence, recourse to this Court.
Petitioner contends: that the NLRC gravely abused its discretion in ruling as it did for the
succeeding reasons stated: (1) it contravened the Supreme Court decision in Traders Royal Bank
v. NLRC, et al., G.R. No. 88168, promulgated on August 30, 1990, (2) its ruling is not justified
by law and Art. 100 of the Labor Code, (3) its ruling is contrary to the CBA, and (4) the so-
called “company practice invoked by it has no legal and moral bases” (4) petitioner, under
conservatorship and distressed, is exempted under Wage Order No. 6.
ISSUE: WON respondent is entitled for the payment of the above-mentioned monetary claims,
particularly BONUS.[Hindi ko na po sinama ung ibang issues]
Ruling: The granting of a bonus is a management prerogative, something given in addition to
what is ordinarily received by or strictly due the recipient.13 Thus, a bonus is not a demandable
and enforceable obligation,14 except when it is made part of the wage, salary or compensation of
the employee. However, an employer cannot be forced to distribute bonuses which it can no
longer afford to pay. To hold otherwise would be to penalize the employer for his past
generosity. Petitioner was not only experiencing a decline in its profits, but was reeling from
tremendous losses triggered by a bank-run which began in 1983. In such a depressed financial
condition, petitioner cannot be legally compelled to continue paying the same amount of bonuses
to its employees. Thus, the conservator was justified in reducing the mid-year and Christmas
bonuses of petitioner’s employees. To hold otherwise would be to defeat the reason for the
conservatorship which is to preserve the assets and restore the viability of the financially
precarious bank. Ultimately, it is to the employees’ advantage that the conservatorship achieve
its purposes for the alternative would be petitioner’s closure whereby employees would lose not
only their benefits, but their jobs as well.
Vivas v. Monetary Board
Facts:
Petitioner Vivas and his principals acquired the controlling interest in Rural Bank Faire, a bank
whose corporate life has already expired. BSP authorized extending the banks’ corporate life and
was later renamed to EuroCredit Community Bank (ECBI). Through a series of examinations
conducted by the BSP, the findings bore that ECBI was illiquid, insolvent, and was performing
transactions which are considered unsafe and unsound banking practices. Consequently ECBI
was placed under receivership. Petitioner contends that the implementation of the questioned
resolution was tainted with arbitrariness and bad faith, stressing that ECBI was placed under
receivership without due and prior hearing in violation of his and the bank’s right to due process.
Issue:
Whether or not ECBI was entitled to due and prior hearing before its being placed under
receivership.
Ruling: YES.
In the case of Bangko Sentral Ng Pilipinas Monetary Board v. Hon. Antonio-Valenzuela, the
Court reiterated the doctrine of “close now, hear later,” stating that it was justified as a measure
for the protection of the public interest. Thus:
The “close now, hear later” doctrine has already been justified as a measure for the protection of
the public interest. Swift action is called for on the part of the BSP when it finds that a bank is in
dire straits. Unless adequate and determined efforts are taken by the government against
distressed and mismanaged banks, public faith in the banking system is certain to deteriorate to
the prejudice of the national economy itself, not to mention the losses suffered by the bank
depositors, creditors, and stockholders, who all deserve the protection of the government.
In Rural Bank of Buhi, Inc. v. Court of Appeals, the Court also wrote that
x x x due process does not necessarily require a prior hearing; a hearing or an opportunity to be
heard may be subsequent to the closure. One can just imagine the dire consequences of a prior
hearing: bank runs would be the order of the day, resulting in panic and hysteria. In the process,
fortunes may be wiped out and disillusionment will run the gamut of the entire banking
community.
The doctrine is founded on practical and legal considerations to obviate unwarranted dissipation
of the bank’s assets and as a valid exercise of police power to protect the depositors, creditors,
stockholders, and the general public. Swift, adequate and determined actions must be taken
against financially distressed and mismanaged banks by government agencies lest the public
faith in the banking system deteriorate to the prejudice of the national economy.