BANGKO SENTRAL NG PILIPINAS Case flow:

MONETARY BOARD and CHUCHI

FONACIER, Petitioners, RTC – Ruled in favor of Respondents on the ground of lack of due
vs. process.
HON. NINA G. ANTONIO-VALENZUELA, in
her capacity as Regional Trial Court Judge of CA – Affirmed under the principle of transparency and fairness.
Manila, Branch 28 RURAL BANK OF
PARAÑAQUE, INC.; RURAL BANK OF SAN JOSE
(BATANGAS), INC.; RURAL BANK OF CARMEN
SC – Reversed.
(CEBU), INC.; PILIPINO RURAL BANK, INC.; Respondents were not able to establish entitlement to the
PHILIPPINE COUNTRYSIDE RURAL BANK, INC.; preliminary injunction granted by the RTC.
RURAL BANK OF CALATAGAN (BATANGAS),
INC. (now DYNAMIC RURAL BANK); RURAL
BANK OF DARBCI, INC.; RURAL BANK OF
KANANGA (LEYTE), INC. (now FIRST
INTERSTATE RURAL BANK); RURAL BANK OF
BISAYAS MINGLANILLA (now BANK OF EAST
ASIA); and SAN PABLO CITY DEVELOPMENT
BANK, INC., Respondents

G.R. No. 184778               October 2, 2009

VELASCO, JR., J.:

FACTS:
 After an examination on the books of the respondent banks conducted by petitioner BSP Supervision and
Examination Division (SED) Chuchi Fonacier, officer-in-charge, the latter provided list of findings/exceptions
containing deficiencies discovered during examination. Respondent banks were given 30 days to comply with the
remedial measures given by petitioner, which measure includes infusion of additional capital. Respondent banks
claim they have carried out said measures, but Fonacier sent letters to the Board of directors of respondent banks,
informing them that they failed to comply. Banks requested to be given time to obtain BSP approval to amend
their Articles of incorporation in order to seek investors. They also requested that the basis of the capital infusion
figures be disclosed and they noted that they were not given a copy of the Report of Examination (ROE). In
response, Fonacier reiterated the banks failure to comply the directive for additional capital infusion.

 Rural Bank of Pasig Inc. (RBPI), one of the respondent banks, filed a complaint for the nullification of the BSP
ROE with application for TRO and writ of preliminary injunction before the RTC against fonacier, enjoining
Fonacier from submitting the ROE or any similar report to the Monetary Board, alleging that the failure of
Fonacier to furnish the bank with a copy of ROE violated its right to due process. Respondent Hon. Judge Nina
Antonio-Valenzuela granted RBPI's request of preliminary injunction. Other respondent banks followed suit.

 RTC ruled that the banks were entitled to such preliminary injunction. It held that it had been the practice of SED
to provide a copy of ROEs to the banks before submission to the Monetary Board; the banks are entitled to ROE;
and the denial of such request was held to be a denial of the banks' right to due process.

 Petitioner filed petition for certiorari under Rule 65. CA ruled that RTC did not commit grave abuse of discretion.
It held that petitioner should have first filed a motion for reconsideration of the assailed orders. The CA also held
that the principles of fairness and transparency dictate that the respondent banks are entitled to be given copies of
the ROE

 A TRO was already issued by SC before this decision restraining CA and resondents from implementing and
enforcing the CA Decision. Because of this TRO, SED was able to submit their ROEs to the Monetary Board
(MB). MB prohibited banks from transacting business and placed them under receivership.

ISSUE(s): HELD:
1. W/N the RTC NO.
decision in its Secs. 29 and 30 of RA 7653 refer to the appointment of a conservator or a receiver for a bank,
issuance of which is a power of the MB for which they need the ROEs done by the supervising or examining
department. The writs of preliminary injunction issued by the trial court hinder the MB from
preliminary
fulfilling its function under the law. The actions of the MB under Secs. 29 and 30 of RA 7653
injunction enjoining "may not be restrained or set aside by the court except on petition for certiorari on the
SED from ground that the action taken was in excess of jurisdiction or with such grave abuse of
submitting ROE to discretion as to amount to lack or excess of jurisdiction." The writs of preliminary injunction
the Monetary Board order are precisely what cannot be done under the law by preventing the MB from taking action
proper. under either Sec. 29 or Sec. 30 of RA 7653.
 W/N MB may YES.
impose closure
upon a bank Under the law, the sanction of closure could be imposed upon a bank by the BSP even without
without notice and notice and hearing. The apparent lack of procedural due process would not result in the invalidity of
hearing. action by the MB. This was the ruling in Central Bank of the Philippines v. Court of Appeals:
This "close now, hear later" scheme is grounded on practical and legal considerations to
prevent unwarranted dissipation of the bank’s assets and as a valid exercise of police
power to protect the depositors, creditors, stockholders, and the general public.
In Rural Bank of San Miguel, Inc. v. Monetary Board, Bangko Sentral ng Pilipinas:
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

W/N Courts may NO.

prevent closure of
banks by the The respondent banks cannot—through seeking a writ of preliminary injunction by appealing to
Monetary Board lack of due process, in a roundabout manner— prevent their closure by the MB. Their remedy, as
through the stated, is a subsequent one, which will determine whether the closure of the bank was attended by
issuance of grave abuse of discretion. Judicial review enters the picture only after the MB has taken action; it
preliminary
cannot prevent such action by the MB. The threat of the imposition of sanctions, even that of
injunction.
closure, does not violate their right to due process, and cannot be the basis for a writ of preliminary
injunction.

NOTES:

Injunction; Preliminary Injunction; Requisites.—In Lim v. Court of Appeals, 482 SCRA 326, 331 (2006), it was stated:
The requisites for preliminary injunctive relief are:
(a) the invasion of right sought to be protected is material and substantial;
(b) the right of the complainant is clear and unmistakable; and
(c) there is an urgent and paramount necessity for the writ to prevent serious damage. As such, a writ of preliminary
injunction may be issued only upon clear showing of an actual existing right to be protected during the pendency of the
principal action. The twin requirements of a valid injunction are the existence of a right and its actual or threatened
violations. Thus, to be entitled to an injunctive writ, the right to be protected and the violation against that right must be
shown.

"close now, hear later" scheme - is grounded on practical and legal considerations to prevent unwarranted dissipation of
the bank’s assets and as a valid exercise of police power to protect the depositors, creditors, stockholders, and the general
public.

Legend: Prevailing party